FACT, Inc. - Quarter Report: 2021 October (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: October 31, 2021

☐ 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: 333-223568

FACT, INC.

(f/ka Tiburon International Trading, Corp.)

(Exact name of registrant as specified in its charter)

2 Toronto Street, Suite 231 Toronto, Ontario M5C 2B5

(Address of principal executive offices) (Zip Code)

(437) 703-2482

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 preceding 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. 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). 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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ 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: 55,216,680 shares of common stock, $0.001 par value, as of December 28, 2021.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements”, as defined under United States federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. You should also refer to the section of our Annual report on Form 10-K entitled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us, or any other person, that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake to update any of the forward-looking statements after the date of this Quarterly Report, except to the extent required by applicable securities laws.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “FACT,” “Company,” “we,” “us,” and “our” in this document refer to Fact, Inc., a Nevada corporation, and, where appropriate, its subsidiaries.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FACT, INC.

INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

FACT, INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

The accompanying unaudited notes to the financials should be read in conjunction with these condensed financial statements.

FACT, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying unaudited notes to the financials should be read in conjunction with these condensed financial statements.

FACT, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

For the Three and Nine Months Ended October 31, 2021

For the Three and Nine Months Ended October 31, 2020

The accompanying unaudited notes to the financials should be read in conjunction with these condensed financial statements.

FACT, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying unaudited notes to the financials should be read in conjunction with these condensed financial statements.

FACT, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the unaudited interim financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. The accompanying unaudited interim financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K, for the year ended January 31, 2021, as filed with the SEC on September 24, 2021.

Use of Estimates

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Share-Based Compensation

ASC 718 “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

Equity-based payments to non-employees are measured at grant-date fair value of the equity instruments that the Company is obligated to issue when the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share based payment awards are measured at the grant date.

During the nine months ended October 31, 2021 and 2020, the Company recognized $675,000 and $0, respectively.

Basic and Diluted Net Loss Per Common Share

Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued.

For the nine months ended October 31, 2021, and 2020, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

 SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE

RECENT ISSUED ACCOUNTING PRONOUNCEMENTS

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company has adopted this standard on February 1, 2021.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

NOTE 2 – LIQUIDITY AND GOING CONCERN

The Company’s financial statements as of October 31, 2021 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.

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, significant shareholders and other sources 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.

COVID-19

The novel coronavirus (“COVID-19”) was first identified in late 2019. COVID-19 spread rapidly throughout the world and, in March 2020, the World Health Organization (“WHO”) characterized COVID-19 as a pandemic. COVID-19 is a pandemic of respiratory disease spreading from person-to-person that poses a serious public health risk. It has significantly disrupted supply chains and businesses around the world. The extent and duration of the COVID-19 impact on our operations and financial position is highly uncertain.

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.

NOTE 3 – CONVERTIBLE NOTES

On November 19, 2020, the Company entered a Securities Purchase Agreement (“SPA”) and Equity Purchase Agreement (“EPA”) with a third party. Pursuant to SPA, the Company issued a convertible note payable up to $730,000, bearing 10% annual interest and cash consideration up to $600,000 with maturity date of six months for each tranche payment. The note was originally to be convertible at the lesser of (i) $2.00 per share and (ii) 65% of the lowest traded price of the common stock as reported on the trading market during the 30 consecutive trading period. During the year ended January 31, 2021, the first tranche of $310,000 was issued and due on May 19, 2021. The Oasis note is currently past due as of issuance and incurred a penalty of $124,000 or 140% on the principal, recorded as interest expense. As of October 31, 2021, the Oasis note has $434,000 due, bearing interest at 24% per annum and is convertible at the lesser of (i) $2.00 per share and (ii) 60% of the lowest traded price of the common stock as reported on the trading market during the 30 consecutive trading period.

On January 8, 2021, the Company entered into a promissory note with MRVL Island Ventures LLC in the amount of $50,000. This note is payable on January 31^st, 2022. The Conversion price in effect of any conversion day shall be equal lowest price in effect of 75% of the lowers VWAP during the 15 days trading days immediately prior to the conversion date. The price shall be appropriately adjusted for stock splits, dividends, stock combination, reclassification or any similar transaction that proportionately increase or decrease the stock during this period. The interest rate is 8% per year which is payable in cash or kind payable on the maturity date. Late fees are assessed at 16% per annum at the discretion of MRVL management to waive any fees.

During the month March 2021, the Company issued three (3) convertible notes in the total of amount of $133,000. The term of the notes are 18 months, and annual interest rates are 8% (default rate is 18%). The Conversion price is a fixed $1.00.

On May 28, 2021, the Company issued a convertible note in amount of $8,500. The term of the notes are 12 months, and annual interest rates are 8% (default rate is 24%). The Conversion price in effect of any conversion day shall be equal lowest price in effect of 75% of the lowers VWAP during the 15 days trading days immediately prior to the conversion date.

The Company determined that the conversion features, in the convertible notes which have variable conversion prices, met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and therefore bifurcated the embedded conversion options once the notes become convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and amortized to interest expense over the term of the note.

The Company valued the conversion feature using the Black-Scholes Merton pricing model. The fair value of the derivative liability for all the notes that became convertible during the year ended January 31, 2021 amounted to $498,301, and $145,915 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $352,386 was recognized as a “day 1” derivative loss.

During the nine months ended October 31, 2021, the Company recorded interest expense of $74,428 and amortization of debt discount of $226,667.

NOTE 4 – DERIVATIVE LIABILITIES

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company accounts for warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes Merton pricing model to calculate the fair value as of October 31, 2021. The Black-Scholes Merton model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes Merton valuation model, except for the Oasis note that is in default and is calculated on a conversion liability with no duration.

For the nine months ended October 31, 2021, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 SCHEDULE OF ESTIMATED FAIR VALUE OF LIABILITIES MEASURED ON RECURRING BASIS

The following table summarizes the changes in the derivative liabilities during the nine months ended October 31, 2021:

 SCHEDULE OF CHANGES IN DERIVATIVE LIABILITIES

NOTE 5 – WARRANTS

During the year ended January 31, 2021, 291,775 warrants were granted for a period of five years from issuance, at a price of $1.10 per share. The intrinsic value at October 31, 2021 was $0. The Company values the warrants using the Black Scholes model, with appropriate assumptions for warrant life, stock value, risk free interest rate, and volatility.

A summary of activity during the nine months ended October 31, 2021 follows:

 SCHEDULE OF WARRANTS ACTIVITY

NOTE 6 – LOAN PAYABLE

On July 28, 2021, the Company issued a promissory note in amount of $21,000. The term of note is on demand, unsecured and without interest.

NOTE 7 – STOCKHOLDERS’ EQUITY

The Company has 150,000,000 shares of common stock authorized with a par value of $0.001 per share.

During the nine months ended October 31, 2021, the Company issued common stock as follows:

As of October 31, 2021 and January 31, 2021, the Company had 55,216,680 and 54,216,680 shares of common stock issued and outstanding, respectively.

NOTE 8 – RELATED PARTY TRANSACTIONS

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by officers, directors, or shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.

During the nine months ended October 31, 2021, Rutherglen Value Enhancements Inc (“Rutherglen”) invested $113,000 for convertible notes. Rutherglen is owned and managed by Brian McWilliams, a former employee and investor in FACT, Inc. During the nine months ended October 31,2021, the Company recorded accrued interest of $5,826.

For the nine months ended October 31, 2021, the Company’s accrued salary of $17,014, to a member of the Board of Directors.

During the three months ended October 31, 2021, the Company’s Chief Executive Officer advanced to the Company an amount of $33,737 by paying for expenses on behalf of the Company. As of October 31, 2021, the Company was obligated to the officer, for an unsecured, non-interest-bearing demand loan with a balance of $33,737.

In the 4^th quarter of 2020, Kryptos Art Technologies, Inc, a majority shareholder in FACT, Inc, entered into a contract with SRAX on behalf of Fact, Inc. The contract was signed by Brian McWilliams who was CEO of FACT, Inc at the time and the owner of Kryptos Art Technologies. SRAX is an operating system and investor relations platform that allows you to track the buying and selling of your publicly traded stock to give you insights across marketing channels. It allows you to target investors and present shareholders to increase your capital. The cost of the platform was $900,000 which was payable in FACT, Inc stock. The system became functional in March of 2021 and shall remain in place until March 2022. FACT, Inc plans to approach SRAX in March of 2022 to negotiate a reduced fee or credit for the platform fees for 2022-2023.

NOTE 9 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events from October 31, 2021 through the date these financial statements were issued and determined the following events require disclosure:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 January 31, 2021, as filed with the Securities and Exchange Commission on September 24, 2021.

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, 1/50^th 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.

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 July 31, 2022.

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 first quarter ending April 30, 2022, with the hope that the product may launch in the Company’s second quarter ending July 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 nine months ended October 31, 2021 and 2020 were $0 and $0, respectively.

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.

Three months ended October 31, 2021 compared to three months ended October 31, 2020:

The following summary of our operations should be read in conjunction with our unaudited financial statements for the three months ended October 31, 2021 and 2020.

During the three months ended October 31, 2021 and 2020, we did not have any revenues.

Our financial statements report a net loss of $823,829 for the three months ended October 31, 2021 compared to a net loss of $2,660 for the three months ended October 31, 2020.

Our operating expenses for the three months ended October 31, 2021 were $274,819 compared to $2,660 for the three months ended October 31, 2020. For the three months ended October 31, 2021, operating expenses consists of professional fees of $29,735 and general and administrative expenses of $245,084. General and administrative expenses increased primarily in 2021 due to amortization deferred stock compensation of $225,000 related to the issuance of common shares for services at valued of $900,000 and salary of $20,000. These expenses largely relate to increased activity in the development of the Company’s products.

For the three months ended October 31, 2020, operating expenses consisted of general and administrative expenses of $2,660.

Our other expenses for the three months ended October 31, 2021 was $549,010 compared to $0 for the three months ended October 31, 2020. For the three months ended October 31, 2021, other expenses consist of interest expense of $44,065 (including amortization debt discount of $13,949) and loss of change in fair value of derivative liability of $504,945. These debt expenses arise from new debt incurred during 2021.

Nine months ended October 31, 2021 compared to Nine months ended October 31, 2020:

The following summary of our operations should be read in conjunction with our unaudited financial statements for the nine months ended October 31, 2021 and 2020.

During the nine months ended October 31, 2021 and 2020, we did not have any revenues.

Our financial statements report a net loss of $2,294,729 for the nine months ended October 31, 2021 compared to a net loss of $8,467 for the nine months ended October 31, 2020.

Our operating expenses for the nine months ended October 31, 2021 were $1,002,549 compared to $8,467 for the nine months ended October 31, 2020. For the nine months ended October 31, 2021, operating expenses consists of professional fees of $101,270, advertising and marketing of $146,000 and general and administrative expenses of $755,279. General and administrative expenses increased primarily in 2021 due to amortization deferred stock compensation of $675,000 related to the issuance of common shares for services at valued of $900,000 and salary of $79,373.

For the nine months ended October 31, 2020, operating expenses consisted of general and administrative expenses of $8,467.

Our other expenses for the nine months ended October 31, 2021 were $1,292,180 compared to $0 for the nine months ended October 31, 2020. For the nine months ended October 31, 2021, other expenses consist of interest expense of $425,095 (including amortization of debt discount of $226,667) and loss of change in fair value of derivative liability of $867,085. These expenses are a result of the Company’s increased activities in developing its products.

Liquidity and Capital Resources

The following table provides selected financial data about our company as of October 31, 2021 and January 31, 2021.

Working Capital

Stockholders’ deficit was $2,191,954 as of October 31, 2021 compared to stockholders’ deficit of $652,245 as of January 31, 2021. The increase in current liabilities is primarily due to an increase of convertible notes, loan payable, loan from related party and an increase in derivative liability.

Cash Flows

Operating Activities

We have not generated positive cash flows from operating activities. For the nine months ended October 31, 2021, net cash flows used in operating activities was $252,270 consisting of a net loss of 2,294,729 reduced by amortization of debt discount of $226,667, amortization deferred stock compensation of $675,000, net change in working capital of $273,707, and loss of change in fair value of derivative liability of $867,085. The loss on derivative liability was due to the increase of the liability primarily from the drop on stock price at October 31, 2021 as compared to January 31, 2021

For the nine months ended October 31, 2020, net cash flows used in operating activities was $7,917, consisting of a net loss of $8,467, reduced by depreciation of $300 and disposal of asset of $250.

Investing Activities

The Company did not use any funds for investing activities during the nine months ended October 31, 2021 and 2020.

Financing Activities

For nine months ended October 31, 2021, net cash provided by financing activities was $242,520, consisting of issuance common stock of $80,020, issuance convertible notes of $141,500 and issuance promissory note of $21,000.

For nine months ended October 31,2020, net cash provided by financing activities was $7,900, consisting of loan from related party of $7,900.

Critical Accounting Policies

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and make various assumptions, which management believes to be reasonable under the circumstances, which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The notes to our condensed financial statements contained herein contain a summary of our significant accounting policies. We consider the following accounting policies critical to the understanding of the results of our operations:

Convertible Financial Instruments

The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument.

Derivative financial instruments - Derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement, or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses classification of its common stock purchase warrants and derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

Share-Based Compensation

ASC 718 “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

Equity-based payments to non-employees are measured at grant-date fair value of the equity instruments that the Company is obligated to issue when the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share based payment awards are measured at the grant date

Off- Balance Sheet Arrangements

The Company currently does not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e)) as of October 31, 2021, the end of the period covered by this Quarterly Report on Form 10-Q.

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer (Principal Financial and Accounting Officer) concluded that, as of October 31, 2021, our internal control over financial reporting was not effective as of the end of the period covered to ensure that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to the Company’s management, including its principal executive officer and its principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer, and our Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure.

During 2020, we identified material weaknesses in our internal control over financial reporting, which were disclosed in our annual report on Form 10-K filed with the SEC on September 24, 2021.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter, (i.e., the nine months ended October 31, 2021), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 19, 2021, the Company issued to MSW PROJECTS LTD 50,000 shares of Common Stock.

On February 9, 2021, the Company issued to MSW PROJECTS LTD 100,000 shares of Common Stock.

On March 24, 2021, the Company issued to SRAX INC 900,000 shares of Common Stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission this Form 10-Q, including exhibits. You may read and copy all or any portion of the registration statement or any reports, statements or other information in the files at SEC’s Public Reference Room located at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.

You can request copies of these documents upon payment of a duplicating fee by writing to the Commission. You may call the Commission at 1-800-SEC-0330 for further information on the operation of its public reference room. Our filings, including the registration statement, will also be available to you on the website maintained by the Commission at http://www.sec.gov.

We intend to furnish our stockholders with annual reports which will be filed electronically with the SEC containing financial statements audited by our independent auditors, and to make available to our stockholders quarterly reports for the first three quarters of each year containing unaudited interim financial statements.

Our website is located at http://www.factsecured.com. The Company’s website and the information to be contained on that site, or connected to that site, is not part of or incorporated by reference into this filing.

ITEM 6. EXHIBITS

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.

Date: December 29, 2021