Edgar Filing: FACT CORP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ______________

Commission File Number 33-55254-01

FACT CORPORATION

(Name of small business issuer in its charter)

COLORADO	84-0888594
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1530-9^th Ave S.E., Calgary, Alberta Canada	T2G0T7
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (403) 693-8000

Securities registered under Section 12(b) of the Exchange Act:

Title of each class			Name of each exchange on which registered
None			None

Securities registered under Section 12(g) of the Exchange Act:

Class A Common Shares

(Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

[ ]

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.

Yes [ X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.

[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

State issuer's net revenues for its most recent fiscal year:

$800,329

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act):

$2,445,154 as of April 17, 2006

Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST 5 YEARS)

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

Yes [ ] No [ ]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

As of April 10, 2006, the Issuer had a total of 17,196,367 shares of Class A common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format (Check one): _________Yes

__________No

ITEM 1. DESCRIPTION OF BUSINESS.

(a)

Business Development

FACT Corporation was incorporated under the laws of the State of Colorado on August 3, 1982 and is referred to herein as either "FACT", "the Company", "we", "us" or "our". FACT Corporation predominantly operates in the functional food industry through its wholly owned subsidiary, Food and Culinary Technology Group Inc., (“FACT Group”) developing, licensing and supplying turnkey functional premixes to customers who manufacture, distribute, and market bakery and pasta products to consumers through a variety of conventional and alternative channels including retail, food service and specialty markets. On August 11, 2003, FACT Products acquired the rights to a shelf stable non-dairy whipped topping which it markets under the brand name “Aunt Lydia’s Italian Cremes”. Presently, the operations of FACT Products are suspended due to insufficient funding to be able to progress the business opportunity. The Company has also developed a line of home-use retail baking mixes under its Nutrition First™ brand for cookies, brownies and other products. During fiscal 2005 the Company commenced a test market for its home-use line of products via an online internet store at www.eatwellstaywell.net. Due to insufficient funds the Company was unable to continue with marketing and advertising efforts as proposed and the site has been discontinued pending a review of the business proposal upon receipt of additional funding.

As of the date of this filing, the Company has three (3) wholly-owned subsidiaries, Wall Street Investment Corp. ("WSIC"), Wall Street Real Estate Ltd., (“Wall Street”), and FACT Group. WSIC currently has no business operations. The Company had intended to dissolve or divest WSIC during the fiscal year 2005; however, this did not occur. The Company will look to complete a divestiture of WSIC during fiscal year 2006. Wall Street Real Estate Ltd. was incorporated in the Province of Alberta, Canada on July 23, 2002 for the purpose of holding commercial real estate assets. During fiscal 2005 Wall Street disposed of all of its assets and the Company intends to pursue a divestiture of this inactive subsidiary during fiscal 2006. FACT Group was incorporated in the State of Nevada on August 14, 2001 for the purpose of acquiring an interest in certain proprietary functional food formulations, and was acquired by the Company on November 7, 2001. FACT Group has a wholly owned subsidiary, FACT Products Inc., which was incorporated in the State of Nevada on November 5, 2001 as FACT Bread Company, Inc.

By the end of fiscal 2002, initial sales had commenced in FACT Group, and the Company determined there was enough merit to commence the divestiture of certain of the Company’s non-core assets. As a result during the fourth quarter of 2004, the Company distributed all of the outstanding shares of its operational oil and gas subsidiary, Capital Canada, to its shareholders in a stock dividend.

As the Company is a U.S. corporation all dollar amounts used herein refer to U.S. dollars unless otherwise stated.

(b) Business of Issuer

Current Operations

The Company presently undertakes all of its business operations indirectly through its wholly-owned subsidiaries. These operations include: operations in the food industry consisting of the sale of premixes and other food products to commercial customers. The Company continues to hold certain passive investments in public corporations for the purpose of capital appreciation. The Company's business is primarily focused on its operations in the functional foods industry. A discussion of each segment of the Company's current business operations is provided below. During fiscal 2005 the Company completed its mandate to divest all non-core operations and as such, successfully sold its commercial and residential real estate operations.

Functional Food Business

Through a share exchange agreement between the Company and the shareholders of FACT Group, completed in November 2001, the Company issued a total of 2,000,000 shares of its Class C common stock in consideration for all of the issued and outstanding shares of FACT Group, a company operating in the functional food business. The acquisition included certain proprietary formulas for functional dough and batter based products. The acquisition of FACT Group required that the formulations be held in escrow contingent upon the Company providing capitalization to FACT Group in the amount of $3 million and the payment of $2 million in royalties to certain of the shareholders of FACT Group. As a result of a settlement of a dispute with such certain shareholders, the formulas to the premixes and other intellectual property have been released to the Company. The requirement for funding of $3million is no longer included in the agreement and the plaintiffs returned all of their Class A common shares and their Class C common shares to the Company. Certain amounts due to the Plaintiffs for services rendered were forgiven. The purchase price for the intellectual property remains at $2 million, to be paid in the form of royalties based on pounds of product sold by FACT Group. FACT Group is obligated to pay the following minimum annual royalty payments:

2006 – $ 59,150

2007 – $ 76,895

2008 – $ 99,963

2009 – $129,953

2010 – $168,938

2011 – $219,620

2012 – $285,506

2013 - all remaining royalties become due and payable as one balloon payment.

FACT Group will also pay a maximum of $233,333 in additional income to two of the plaintiffs calculated on a monthly basis from September 1, 2003 through December 31, 2006 and payable from November 1, 2003 to February 28, 2007. Should the plaintiffs receive royalty payments of $150,000 or more in any one year then FACT Group shall have no responsibility to pay further additional income in that year to the two plaintiffs. During 2005 the Company paid the plaintiffs royalties totaling $46,511. As additional terms of the settlement, the plaintiffs are prohibited from competing with FACT Group for 5 years, must keep all trade secrets confidential and were required to provide training for FACT Group's new technical support personnel.

FACT Group holds the rights to certain formulations for the production of dough and batter based functional food products ranging from breads, bagels, pastas, and pizza shells, to sweet baked goods, snack bars and confectionery, as well as other foods derived from a dough, batter or mix. Commercial sales of premix commenced in November 2002. Presently, FACT Group sells its Nutrition First™ premixes and products to manufacturers, distributors and food service clients, who incorporate the premix into finished products to market and sell to the end consumer under their own retail brand/label, paying FACT Group a fee for each pound of premix purchased. FACT Group’s premixes enable customers to make claims on their end products pertaining to a variety of market positions including, reduced digestible carbohydrates, increased fiber, weight management benefits, and other tangible benefits. FACT Group has also entered into a licensing agreement with a North American bakery ingredient distributor that sells products containing FACT Group’s premixes under its own brand name. FACT Group receives a royalty for each pound of premix sold by such distributor. FACT Group is currently in negotiations with a number of potential new customers for the supply of functional premixes across various other product channels including snack bars, donuts, brownies, and at-home mixes for bread, muffins, cookies, cakes, brownies, pancakes, waffles and scones. FACT Group is also pursuing other methods to increase sales and distribution of its line of premixes and finished products. In January 2005 FACT Group launched an online store at www.eatwellstaywell.net where the consumer could directly purchase home-use versions of some of the more popular commercial bake mixes, including brownies, cookies, an all-purpose bake mix and other products. This line of retail size mixes was also marketed under the Company’s Nutrition First™ brand. The Company discontinued its retail distribution and the online store during fiscal 2005 due to insufficient funding to launch the proposed marketing campaign and to maintain the costs of the inventory and the online website. FACT Group is currently pursuing additional premix licensing agreements with large suppliers to the bakery industry. FACT Group has secured arrangements with two independent blending facilities in New Jersey and New York for the preparation of premix for use in end consumer products. Fiscal 2006 plans include expanding the Company’s commercial premix distribution base, seeking alternate channels to introduce the Company’s product lines, an advertising and marketing campaign to secure sales for the new on-line store (as funding will permit) and potential merger and acquisition opportunities with complimentary organizations operating in the functional foods segment.

Functional foods can be described as foods designed to deliver specific health benefits to the consumer, and whose inherent health benefits go beyond basic nutrition, including the prevention of disease and the promotion of wellness through nutrition. FACT Group’s vision is to be a competitive supplier of nutrition solutions to commercial customers so they can create food products with added health benefits, positioned as healthy alternative foods to serve as part of the North American consumer's everyday diet. FACT Group intends to become a leader in product development and a key ingredient/premix supplier to the functional foods industry. Primary areas of focus are consumers with the following concerns: diabetes, carbohydrate control, glucose management, weight management, heart disease and digestive health.

FACT Group formulations are not patented, but are trade secrets, as is common in the food industry, and will remain proprietary by way of stringent non-disclosure and confidentiality agreements executed with the blending facilities. Customers also execute confidentiality agreements and are serviced under premix supply agreements which do not allow access to FACT Group’s premix formulations in their entirety. FACT Group does not require any governmental approval for its existing line of products, and is currently in the process of trade marking its master brand “Nutrition First™”.

Sales from the premixes and other complimentary products in 2005 accounted for 89% of the Company’s total revenues. While the Company’s operating food subsidiaries were profitable for the first time in 2004, we were unable to achieve sufficient sales to reach profitability in fiscal 2005. This was predominantly a result of the Company’s inability to continue with sales of our shelf stable whipped topping product, a lack of financing to carry out 2005 marketing plans and the loss of certain customer accounts in 2005 due to their own financial constraints. The Company continues to consider its investment in FACT Group an investment in a developing business. FACT Group’s ability to continue to execute its business plan and achieve profitable operations will be impacted by numerous factors including the following: maintenance of existing customers and acquisition of new customers through supply and licensing agreements; acceptance of our customers’ end products by the retail consumer; acceptance of the Company’s branded products by the retail consumer; access to sufficient amounts of key ingredients for uninterrupted supply of our premixes to customers; protection of our proprietary formulations and continuing development of new commercial formulations; the onset of competitive products in the retail marketplace and ongoing financing to meet operational overhead until such time as FACT Group can consistently achieve sufficient sales to meet ongoing expenses and growth initiatives.

Competitive Business Conditions and our competitive position in the industry

FACT Group is presently operating in an emerging growth industry which experienced a rush of new competitors to the marketplace in fiscal 2003 and 2004. During 2004 and early 2005, the competitive landscape was further impacted with the failure of several of these emerging enterprises which, having entered the marketplace quickly, over-saturated the market with numerous line extensions and new product offerings, only to suffer poor consumer acceptance levels, resulting in diminished sales and ultimately, product failure. This phenomenon also extended to several larger, well established food companies that, in an effort to secure profitable segments of the market with rapid product introductions, experienced poor consumer take-off at the retail grocery level, resulting in a withdrawal of newly launched items. Additionally, various larger and smaller food companies with sales dependent on traditional bakery goods were adversely impacted by the quick introduction and rapid expansion of functional bakery products, in particular the “low carb” segment of this functional market, resulting in more commercial product failures, dramatic sales declines and overall instability in the bakery segment of the food industry. Larger food conglomerates entered the functional arena in late fiscal 2004 and early fiscal 2005 marketing products to cater to the mainstream interests of the consumer including increased fiber and reduced sugar product offerings. This foray into the industry has been particularly successful. The Company believes this market has now progressed to a more stable operating environment, and that our unique collection of product offerings will have enhanced sales potential now that the market has settled and consumer demands and preferences have been assessed.

While direct competitors with FACT Group are limited, we consider bakery ingredient suppliers offering high fiber, low glycemic or reduced digestible carbohydrate bakery premixes which can be incorporated into end-products and are marketed to manufacturers, food service and quick serve restaurants direct competitors. Now that FACT Group is also offering its own line of home-use baking mixes, competition will also exist from other branded and private label bakery mixes targeting the weight loss, glucose management and fiber enhancement segments of the market.

However, the segment of the functional foods industry in which we are operating, breads, grains and baked goods, accounts for approximately 40% of total sales in our segment of the food industry, allowing room for a vast competitive landscape. FACT Group has ample opportunity to secure a profitable segment of the market share. Presently we estimate there are between 10 and 15 organizations (excluding large food conglomerates that provide products catering to the fringe of the functional market) providing the industry products which may be considered similar to those marketed by FACT Group. Many of these companies are much larger and better financed than FACT Group.

Sources and availability of raw materials and the names of principal suppliers

FACT Group relies on the supply of several key ingredients from large food grade ingredient manufacturers, such as ADM and Sensus America, in order to supply our customers with our line of premixes and products. While FACT Group has entered into supply agreements with certain of these suppliers, we do not have volume agreements in place with respect to all of our key ingredients. Should there be a shortage of raw ingredients, FACT Group may not be able to adequately service its existing or future customers. FACT Group is constantly evaluating our formulations to ensure we have alternatives to these key ingredients in order to avoid any unexpected ingredient supply issues.

Dependence on one or a few major customers

FACT Group’s revenues for fiscal 2004, 2005 and to the date of this report rely heavily on sales made to a single customer. Western Bagel Baking Corporation of Van Nuys, California accounted for approximately 70% of premix sales to the end of fiscal 2004 and 82% to the end of fiscal 2005. As at the date of this report, FACT Group is actively working to successfully close additional client accounts that should assist in better diversifying our revenue base. It is anticipated that until such time as FACT Group establishes its products in the marketplace, it will remain reliant on a small number of key customers to drive sales.

Amount of time spent during each of the last two fiscal years on research and development activities and if applicable the extent to which the cost of such activities are borne by customers

During the past two fiscal years, FACT Group has reduced the time and resources from that previously spent commercializing its premixes for commercial sales. While there were new product additions in fiscal 2004, much of this work was completed in collaboration with one of FACT Group’s key distributors in order to keep expenditures to a minimum and also to draw from the experience of an extremely diverse product development team. Amounts expended by FACT Group in pursuit of such activities are borne exclusively by FACT Group.

Distribution Methods

FACT distributes its products directly to customers from its contracted warehouse space on the East and West coasts. FACT’s line of premixes is also distributed to clients through a licensing agreement under which a large North American bakery ingredient manufacturer has licensed FACT Group’s formulations to blend and sell under their own brand.

Need for Government approval of principal products

FACT Group uses only those raw ingredients which have already received government approval for use in food products. All our premixes contain GRAS (Generally Regarded As Safe) ingredients which have received Food and Drug Administration (FDA) approval as required.

Other Food Products

During fiscal 2003, FACT Group’s wholly owned subsidiary, FACT Products acquired the exclusive world-wide license to a line of imported, shelf stable, non-dairy whipped toppings which it markets under the brand name “Aunt Lydia’s Italian Cremes”.

The toppings are available in four flavors including, chocolate, strawberry, vanilla and mocha. The toppings are lower in fat, have no cholesterol and do not require refrigeration. The products are manufactured in Italy and exported to North America.

The distribution of these products was undertaken through FACT Products, a wholly owned subsidiary of FACT Group. FACT Products has been unsuccessful in getting these products to market due to technical product problems and insufficient funding to properly pursue a marketing plan. Presently, there is an amount claimed owing by the manufacturer of the product in the amount of $143,354. FACT Products is disputing the amount and is attempting to reach an agreement for credit back for product which was defective. Should FACT Products reach a settlement, it will be required to raise funding to be able to pay the settled amount. FACT Group has determined to spin off the operations of FACT Products to raise funds to be able to pay any settlement reached and for further product research, development and marketing. This spin-off should be undertaken during fiscal 2006.

Amount of time spent during each of the last two fiscal years on research and development activities and if applicable the extent to which the cost of such activities are borne by customers

The Company has not spent any time on research and development of the Aunt Lydia’s products, though during 2004 time was allocated to new packaging formats such as 36 unit shippers and 3 unit multi-packs to expand the product formats available to retail supermarkets and club stores.

Real Estate

The Company divested itself of all of its real estate assets during the fiscal year 2005.

Investments in Marketable and Non-Marketable Securities

During fiscal year 2005, the Company divested its interests in Texas T Minerals Inc. a public reporting Alberta corporation and its private subsidiary, Texas T Petroleum Ltd.. The Company originally made these investments with the intent of becoming more actively involved in the oil and gas industry, specifically through the commercialization of a proprietary and patented heavy oil upgrading technology under development by these companies. These companies divested their interest in this heavy oil upgrading technology in December 2001 (transaction closed March 2002) and are currently reviewing new business opportunities. As of December 31, 2004, the Company owned 89,775 shares of the public reporting company, which was recorded on the financial statements at $16,397 based on the quoted market price of the stock at that date. Prior to December 31, 2005 the Company divested all of its shares of the public reporting company for CAD$0.15 per share for total CAD proceeds of $13,466 (US$11,069). The Company recorded a loss of $7,417 with respect to the transaction.

During the year the Company also agreed with the other shareholders of the private company. Texas T Petroleum Ltd. to transfer its shares of the company to the remaining shareholders, on a pro rata basis in exchange for forgiveness of the Company’s current share of outstanding liabilities due and payable. The transaction resulted in the write down of the Company’s recorded interest in the private company in the total amount of $112,510.

The Company acquired an interest in shares in a second reporting corporation, Australian Oil & Gas during 2003 by way of settlement of a claim in bankruptcy relating to a lease for space in one of the Company’s rental properties. These securities remain on the books of the Company with a market value of $21,770.

During fiscal 2005 the Company acquired 500,000 shares of Capital Reserve Canada Limited, a public reporting issuer and formerly a wholly owned subsidiary of the Company, as part of an agreement with various third parties whereby the Company transferred all of its rights and interest in a convertible loan negotiated with Capital Reserve Canada Limited earlier in the year. Under the terms of the divestiture agreement, the Company will receive cash consideration totaling $400,000 and 500,000 free-trading shares of Capital Reserve Canada Limited. The fair value of the shares received and the value of the cash proceeds offset the total value of the convertible loan for financial reporting purposes resulting in a loss on the original investment of $266,944. The securities remain on the books of the Company with a market value of $250,000.

Investments in developing companies are highly speculative and the Company's ability to recover its investment will be impacted by numerous factors including the marketability and liquidity of the common shares of the companies, the companies' abilities to continue to operate their businesses and factors affecting the business environment in which the companies' operate. Presently the Company has no plans to make further investments of this nature.

Employees

The Company and its subsidiaries do not have any direct employees. All of the Company’s employees work on a contract basis. As of April 14, 2006, the Company and its subsidiaries had 1 full-time contract employee and 4 part-time contract employees providing various administrative and support services through consulting companies. The tasks and duties undertaken by employees include corporate management, legal counseling, administration, accounting, sales and marketing, and product development. The Company contracts with certain other consultants to provide product development services, sales support, marketing and advertising support, investor relations activities and property management as is required.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company presently leases office space at 1530-9th Ave S.E., Calgary, Alberta Canada, from which it carries on its operations and the operations of the Company’s subsidiaries. The lease is for a five year lease ending on July 31, 2006. There is no provision in the lease for renewal, however, the Company has been notified by the landlord that they will renew the lease for a further five years, should the Company wish to do so. The Company will make this determination after investigating other lease opportunities.

Under the terms of the lease the Company pays net rent of $5,716 ($6,912CDN) per annum until July 31, 2006 plus applicable taxes and operating costs.

The Company does not own any plants or properties or any real estate.

ITEM 3. LEGAL PROCEEDINGS.

The Company is not a party to any legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to our security holders for a vote during the fourth quarter of our fiscal year ending December 31, 2005.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)

The Company's common stock trades on the OTC/BB under the symbol "FCTOA". Following is a report of high and low bid prices for the last two fiscal years.

Year 2005	High	Low
4^th Quarter ended 12/31/05	0.41	0.20
3^rd Quarter ended 9/30/05	0.40	0.15
2^nd Quarter ended 6/30/05	0.72	0.38
1^st Quarter ended 3/31/05	0.85	0.43

Year 2004	High	Low
4^th Quarter ended 12/31/04	0.78	0.40
3^rd Quarter ended 9/30/04	0.90	0.59
2^nd Quarter ended 6/30/04	1.67	0.62
1^st Quarter ended 3/31/04	1.83	0.80

The information as provided above for the fiscal year 2005 was provided by Pink Sheets. The information as provided above for the fiscal year 2004 was provided by Yahoo Finance's website. The quotations provided herein may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

As of April 17, 2006, there were 11 market makers in the Company’s stock. The last available reported trade by the OTC/BB prior to the filing of this report was April 13, 2006 at $0.68.

As of April 10, 2006, there were 942 record holders of the Company’s Class A common stock.

During the last two fiscal years, no cash dividends have been declared on the Company's stock.

Securities Authorized for Issuance under Equity Compensation Plans

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance (c)
Equity Compensation plans approved by security holders⁽¹⁾	68,750	$4.00	2
Equity Compensation plans not approved by security holders	None	N/A	None
Total	68,750⁽²⁾	$4.00	2⁽²⁾

(1)

At the shareholders meeting held on July 17, 2003 the shareholders approved a 2003 stock option and stock award plan of up to 1,000,000 stock options whereby employees, officers, directors and/or consultants of the Corporation may be compensated through the granting of stock options and stock awards, the Plan will be for such number of shares that is equal to twenty percent (20%) of the Corporation’s total issued and outstanding shares as at the time that the Corporation adopts a formal written Plan; directors will be eligible for no more than 25% of the shares authorized under the Plan and executive officers will be eligible for no more than 25% of the shares authorized under the Plan. The Corporation has not yet adopted a formal written Plan and therefore any options to be set under the plan have not been included in the above disclosure.

(2)

The options as disclosed here relate to a stock option plan approved in 2001. The Company affected a 4 for 1 reverse split during 2003 and the numbers disclosed herein reflect the reverse split.

(b)

RECENT SALES OF UNREGISTERED SECURITIES

During the quarter ended December 31, 2005, we issued the following unregistered securities:

Date

Amount of Class A Common Shares

Issued To

Amount of Consideration

Type of Consideration

Exemption

10/1/2005

120,000

Hobson, Lorenze, Bowerstock & Associates

31,200

Services

Regulation D

The shares listed in the table above shown as having been sold were sold in compliance with the exemption from the registration requirements found in Rule 506 of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933. The Company paid no commissions or finders fees in connection with this offering. Neither the Company nor any person acting on its behalf offered or sold these securities by any form of general solicitation or general advertising. The shares sold are restricted securities and the certificates representing these shares have been affixed with a standard restrictive legend, which states that the securities cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom. Each purchaser represented to the Company that he was purchasing the securities for his own account and not for the account of any other persons. Each purchaser was provided with written disclosure that the securities have not been registered under the Securities Act of 1933 and therefore cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom.

During the quarter ended December 31, 2005, the Company reserved a total of 120,000 shares for issuance to Hobson, Lorenze, Bowerstock & Associates, however the shares have not yet been issued.

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

At present, based on current operations, the Company does not have sufficient cash and liquid assets to satisfy its cash requirements on a monthly basis. While the Company does generate income from sales of functional premixes on a monthly basis, these proceeds are not sufficient to meet the Company's current monthly overhead, which includes the on-going business of three operational subsidiaries. The Company will require approximately $2,760,000 to cover its anticipated overhead and operational needs, inclusive of inventory, for the upcoming twelve-month period. Revenues generated from operations are expected to contribute $2,630,000 in gross revenues and offset operational overhead by approximately $475,000. While the Company has projected gross revenues from its food operations of approximately $2,630,000 over the upcoming twelve months, such projections are subject to numerous factors that are beyond our control. Projected operational costs and overhead of $2,760,000 include $2,150,000 for inventory and premix costs associated with the Company’s functional foods business and $610,000 in general operating expenses relating to the Company and all of its existing subsidiaries. The Company may be required to raise approximately $400,000 to meet its projected costs should it not be successful in achieving its projected gross revenues. The Company expects that it will be able to obtain additional equity and/or debt financing to meet this need

The Company’s budget of $610,000 in general operating expenses includes the expenditure of approximately $144,000 over the next twelve months on ongoing product refinement, technical support, the development of second and third generation functional formulations, including amounts paid to employees and consultants retained for the purposes of providing research and development support.

Included in the cash requirements noted above of $2,760,000 over the next twelve months is an amount of $375,000 with respect to the operations of FACT Group, exclusive of inventory requirements and forecasted costs of goods sold. From the date of acquisition November 2001 to December 31, 2005, the Company has funded a total of $849,158 (net of associated interest charges) to FACT Group in respect of its ongoing operational expenses.

Should it be required, and if the Company is able to negotiate favorable terms, the Company may look to raise funds in excess of the current cash requirement by way of debt or equity financing in order to accelerate its growth. The Company is currently assessing strategic joint ventures with complementary businesses in order to enhance and support its current operational objectives.

The Company anticipates that its subsidiary FACT Group will hire an additional one to three employees during the upcoming twelve months should the functional foods business meet projected operational and revenue targets. The Company will also look to retain one additional employee to assist in corporate development and financial operations.

Management's Discussion and Analysis of Financial Condition and Results of Operations

IMPORTANT FACTORS THAT MIGHT AFFECT OUR BUSINESS, OUR RESULTS OF OPERATIONS AND OUR STOCK PRICE.

Although we believe that expectations that are expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct. Our actual results could be materially different from our expectations, due to a variety of factors, including the following:

FUNCTIONAL FOODS BUSINESS:

We may not be able to continue to profitably market formulations for our current functional premixes or commercialize products under development. Our branded line of home-use products available lat our on-line store may not receive consumer acceptance. Existing supply agreements with customers and ongoing expressions of interest from potential customers may not result in new or continuing supply or licensing agreements or generation of revenues in the time frame we envision.

While we have to date been able to secure supply and licensing contracts with recognized food industry clients, our products may not gain the necessary market acceptance from the end-of-the-line retail consumer in order to substantiate repeat sales to existing and/or future clients.

We may not be successful in educating the mainstream community as to the benefits of our products, even in partnership with larger, more experienced client firms and the proper resources.

We may not be able to secure favorable long-term agreements with our ingredient suppliers, and as a result may not be able to provide our clients product in a timely fashion and at the right price point.

Larger, more capitalized and more resourceful corporations have begun to introduce products into the marketplace in direct competition to our client's products, and our premixes, and we may not be able to successfully maintain or increase market share.

Even if we secure multiple clients and our products gain the requisite market acceptance, we may not be able to successfully expand our business to meet our projected growth, or respond effectively to the industry's demand for new products.

While our formulations will be protected under stringent non-disclosure and confidentiality agreements, that may not provide the Company adequate protection and others may be able to develop similar formulations.

INVESTMENTS IN MARKETABLE AND NON-MARKETABLE SECURITIES:

The Company has received equity in a public reporting Alberta corporation, Capital Reserve Canada Ltd. in settlement of certain loans receivable and a second U.S. public reporting corporation, Australian Oil and Gas as a settlement from one of its former creditors. The ability of the Company to recover its initial investment, realize a gain or recover value for the non-cash settlement of a liability is subject to numerous external factors including: the marketability of the acquired securities, the liquidity of the market for the securities, the ability of the corporations in which the Company has invested to continue to operate their businesses and achieve successful operations, and factors affecting the business environment of the corporations in which the Company is invested.

GENERAL OPERATIONS:

Despite the growth of the Company’s primary business over the past 24 months, the Company still has limited operating history and, therefore, little history on which to base any forecasts.

Although the Company has divested many of its non-core assets and investments, we still have investments which require liquidation, each of which are subject to substantial external risk factors which may affect the Company's ability to recognize value.

We have incurred substantial operating losses and risk never becoming profitable.

Shareholders will face substantial dilution of their equity ownership percentage if we have to issue additional shares to raise capital or make new acquisitions. The extent of potential dilution depends significantly on the market price of our outstanding shares and may cause significant dilution in the value of your investment.

While the Company anticipates we will have sufficient revenues from operations to continue to operate, there is no guarantee this will occur. The Company may be unable to obtain further financing prior to achieving profitable results.

Forward-looking statements included in this report speak only as of the filing date of this report and we do not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Overview

The Company is a development stage company with its primary operations in the food industry. We also have certain passive equity investments in marketable securities.

The following paragraphs provide an overview of the industry sector in which the Company will focus its resources, and in which we are currently developing our business directly and through certain wholly owned subsidiaries.

Functional Foods Industry

In 1989, Stephen DeFelice, chairman of the Foundation for Innovation in Medicine, first introduced the term, "nutraceutical" to describe foods with nutritional and pharmaceutical qualities. More recently the term "nutraceutical" has become commonly substituted for the term "functional". We believe that the most accurate description of “functional foods” are foods, similar in appearance to conventional foods that are consumed as part of a usual diet, which demonstrate physiological benefits and/or reduce the risk of chronic diseases beyond basic nutritional functions. To answer North America's appetite for health, many ingredient suppliers have developed functional ingredients for use in foods. In 2001 Mintel, a firm of industry analysts, suggested the market for functional foods in the US was approx $1.4 billion, with a global market at that time of approx $47 Billion. The trend indicates continuing growth and we see this as a particularly attractive niche – provided we can offer quality products as we grow and continue to secure market share.

We believe that the mainstream consumer is changing. We expect that as people learn more about the links between diet and health, and as the necessity for special needs diets is growing rapidly in North America, consumers will recognize the benefits offered by functional foods, and that they will continue to actively seek these products to include in their daily diets. We believe that the key is to offer consumers added health benefits in foods they already enjoy, and to make certain they taste good in order to establish repeat sales of functional products. Companies intending on competing in this sector must also be willing to make a commitment to provide the consumer with educational materials and information to help them make healthier choices.

FACT Group has developed a line of functional dough and batter based formulations in order to supply and license turnkey premixes providing health benefits to a variety of customers for the manufacture of finished products, including a variety of breads, bagels, pasta, pizza crust and sweet baked goods such as cookies, muffins, donuts and cakes. All our products have been specially formulated for manufacturers to complement their existing non-functional products and capture significant incremental revenue with no change to existing manufacturing processes. This product line was expanded in early 2005 with the introduction of a test market of our products at our online store at www.eatwellstaywell.net where we directly offered the consumer our line of home-use bake mixes under our Nutrition First™ brand. This site was discontinued during the year due to lack of financing.

Use of FACT Group’s proprietary premixes enable consumers and manufacturers to address numerous health conditions, including the following concerns:

. Weight Management/Control/Obesity

. Diabetes/Glucose Control

. Heart Disease

. Carbohydrate Management

. Digestive Health

. Dietary fiber enhancement

FACT Group estimates that a large number, perhaps as many as 60 million Americans, actively follow a specific dietary regimen at any time; that over 40 million Americans who suffer from some form of chronic digestive disorder; that 2 of every 5 Americans have high cholesterol; and that over 16 million Americans are diagnosed diabetics. Recent studies have indicated that obesity rivals heart disease as the number one cause of death in the United States. By eating products made with FACT Group’s functional premixes as a part of a regular daily diet, end consumers do not have to dramatically change their lifestyle in order to reap the benefits of reduced digestible carbohydrates, glucose management, increased fiber, reduced calories, low sodium, no added sugar and no cholesterol.

FACT Group’s products are developed keeping in mind that taste is important, and we believe that we must achieve good taste to ensure FACT Group’s success in the marketplace. Weight management, carbohydrate control and fiber enhancement solutions through healthy, functional foods is a large and growing segment of the overall food category and through sales of premix to manufacturers, who create a variety of food products, FACT Group hopes to be able to provide solutions to consumers in supermarkets, specialty health food stores, restaurants, foodservice distributors and convenience stores with minimal associated overhead.

The multiple benefits associated with the products created from FACT Group’s functional premixes should allow our commercial customers to position new functional products to suit their current market positioning, generate line extensions or create entirely new product lines with functional benefits.

In fiscal 2003, FACT Group entered into a licensing agreement with a major bakery ingredient distributor for the sale of premixes manufactured using our formulations, under the distributors own brand. Additionally, we have developed a line of snack bars using our functional premixes, which we hope to be able to bring to market during fiscal 2006 along with a renewed campaign to market our home-use line of bake mixes. The bars and retail size bake mixes can also be customized and marketed to our commercial clients.

FACT Group has made application to trademark its own symbol for brand recognition, Nutrition First™. FACT Group presently uses this trademark not only for its line of premixes available to manufacturers, but also on its own line of “home-use” products for sale directly to the consumer. Ultimately FACT Group is hopeful its trademark will stand as a symbol of quality ingredients on customers’ end packaging in support of the health benefit positions they intend to market, adding value, similar to the NutraSweet® swirl.

Present Situation

FACT Group is currently marketing and selling its functional premixes for breads, bagels, pasta and sweet goods products to independent manufactures and a major bakery ingredient distributor. FACT’s revenue stream is presently dependent on one key customer which accounts for approximately 85% of the Company’s total annual sales. The Company is in advanced negotiations with several potential clients for the provision of premixes and products across various new segments including snack bars, retail size mixes, sweet goods and new product formats.

The Company anticipates it will achieve gross sales of approximately $2,630,000 in fiscal 2005 from the sale of premix and products to the consumer, as well as existing and new customers across its various product categories.

In the event the Company is unable to achieve its targeted gross sales, the Company may seek to raise additional equity or debt capital of up to $400,000, which proceeds will be used to fund the operations of FACT Group including its 2005 marketing and advertising plans and to expand the product offering at its online store, www.eatwellstaywell.net. As at the date of this report the Company does not have commitments to provide these funds. The Company expects to realize funds during the current fiscal year to assist with its ongoing operations through the sale of certain real estate assets and other marketable securities presently under agreement for sale or targeted for divestiture. Should FACT Group achieve its forecasted sales of $2,630,000 million in fiscal 2005, it may still require additional funding for its operations. Exceeding our sales target should provide for profitability by the end of fiscal 2006.

Our products

Products currently being marketed by the Company include formulations for bread, bagels, fresh pasta and sweet baked goods, including ready-to-eat snack bars, which offer the consumer a combination of added health benefits including: no sugar, no cholesterol, reduced carbohydrates, low fat, high fiber and low sodium. The foundation or “core” of each of the end products is a dough or batter based system, the composition of which varies depending on the product type and flavor. The Company currently uses an independent blending facility located in New York state, to blend the dry ingredients forming our premix. Agreements with the blending facility allows FACT Group to maintain control over its proprietary formulations and ensure the formulations remain proprietary. The blend of dry ingredients for each product category, referred to as "premix", is then delivered to FACT Group’s customers for addition of the balance of ingredients, manufacturing of product and distribution. Products are distributed under the clients' brand or private label. Revenues are generated by way of a fixed cost per pound of premix sold to the customer. FACT Group also generates revenue through a licensing agreement with a major North American bakery ingredient distributor. This distributor pays FACT Group a royalty for each pound of premix sold under their own label. The distributor’s private label premix is manufactured using FACT Group’s proprietary formulations, Additionally, FACT Group intends to work towards securing private labeling agreements during fiscal 2006 for its line of ready-to-eat snack bars and other line extensions.

Targeted industry segments

Bread

The U.S. bread market is divided into 2 product categories: packaged branded bread i.e. (Wonder bread) and fresh bakery bread. Bakery breads are produced on site by supermarket in-store bakeries or by other retailers, including independent bakeries. FACT Group will focus their efforts on this premium segment. The majority of the growth in the bread market, which is 5%-6% per annum, has been in the fresh, gourmet (artisan) and boutique segments.

Sales of in-store or independent bakery breads has grown at a rate of 7% annually since 1993 and translates into a $5 billion industry. Sales of these premium breads are coming at the expense of packaged breads. Boutique bakery breads sales are experiencing an annual growth rate of 25% and are now exceeding $300 million for this segment. Of late, industry reports indicate a decline in overall bread sales of between 15% and 20%. Various industry authorities attribute this decline to the segment of the consumer population seeking controlled carbohydrate offerings. Recently, the market focus on whole grains by large food conglomerates has rejuvenated the regular bread aisle and packaged breads with consumers displaying an elevated interest in bread products perceived as “healthier offerings” which provide 100% whole wheat or “multigrain” products offering increased fiber in order to help consumers meet minimum servings under the US Recommended Daily allowance (“RDA”). FACT Group’s premixes for bread and bread-based products offer an alternative solution for manufacturers in the bread industry. FACT Group’s line of bread products are reduced in digestible carbohydrates and naturally high in fiber, making them suitable for controlled carbohydrate diets, those seeking increased fiber as well as other diet conscious consumers.

Pasta

The U.S. market in dry pasta sales are approximately $2.25 billion. With the addition of the food service contribution to pasta sales, the category jumps to over $5 billion in annual sales. The pasta category has also experienced a decline in sales in 2003, 2004 and 2005, which is believed to be associated with the trend towards “reduced carb” product offerings and the consumer’s increased desire to consume carbohydrate products which are also high in fiber..

Pasta is similar to bread from a formulation perspective and FACT Group’s proprietary mixes work in a similar fashion as they do in bread.

For pasta products, FACT Group provides functional benefits by creating a unique high fiber, reduced digestible carbohydrate formulation. While there are high fiber pastas on the market today, achieved by the addition of whole grains, FACT Group has taken a different approach to the market by not only improving the taste of high fiber pasta, but concurrently reducing net digestible carbohydrates using state of the art fibers clinically proven to have numerous health benefits. FACT Group sees opportunities for customers across the pasta category including dry and fresh pasta. Initially, customers will include smaller branded, private label and specialty manufacturers. FACT developed a line of reduced carb, high fiber pastas for distribution under the Quick Quisine label by one of our commercial clients under license from Atkins Nutritional Inc. in fiscal 2005. Unfortunately with the unexpected financial problems experienced by Atkins Nutritionals during fiscal 2005, the distribution of the product line did not come to fruition. The Company hopes to see this product launched at a later date and is working to introduce the product to other potential clients.

Sweet Goods

The ready baked sweet goods category represents some $13.8 billion in annual US sales. The key market elements include cookies at $7.1 billion and sweet goods such as muffins, brownies, etc. that are largely sold in the baked goods aisle at $3.7 billion. Some $3.1 billion of total sweet goods are sold as refrigerated/frozen items available chiefly in supermarkets.

FACT Group’s formulations can offer a wide range of traditional product offerings that are better for you. This category is mature and ripe for innovation as consumers are looking for answers to living a healthier lifestyle without sacrificing taste or quality. FACT Group has a number of product options available in this category including cookies, muffins, brownies, cakes, scones, donuts, pancakes and waffles. During late fiscal 2005 the Company entered into an arrangement to provide a local New Jersey bakery with a line of healthy alternative mixes for muffins as a replacement to the bakery’s existing product line. These products are distributed by a major weight loss company across North America. FACT hopes to provide line extensions for this manufacturer during fiscal 2006.

Portion Controlled/ Individually Wrapped/Ready-to-eat Convenience

Consumers’ lifestyles and time demands have driven dramatic growth in individually wrapped, ready-to-eat

snacking items. Individually wrapped cookies, brownies, muffins etc. are widely available from supermarkets, convenience stores and vending machines. These items are sold both individually packaged or in multi packs.

FACT Group is pursuing this rapidly growing format with potential customers in two market segments. One set of customers see the opportunity to build distribution of lower carbohydrate/high fiber individual products in the convenience store and vending channels. Another set of potential customers are focusing on the weight management aspect of portion controlled units that allow dieters to control calories and reduced carbohydrate/high fiber benefits while still enjoying full flavored taste. In fiscal 2004 developed an attractive line of reduced carbohydrate, high fiber snack bars fortified with 25% of the recommended daily allowance of 17 essential vitamins and minerals which it hopes to market during fiscal 2006. FACT has also been actively working on revised formulations for individually wrapped brownies and other products during fiscal 2005. .

The direct to consumer opportunity

With the rapidly growing market trend towards reduced carbohydrate/ increased fiber products, and a desire by the consumer to return to the kitchen, at-home retail sized mixes in this category have seen substantial growth. Additionally, the health conscious consumer is motivated to actively seek out products to suit their dietary needs. Subsequent to the close of fiscal 2004 FACT launched a test market for an online store at www.eatwellstaywell.net to take advantage of this attractive opportunity. At the site the Company sold a variety of bake at home mixes, including brownies, cookies, an all purpose bake mix and other fare under its Nutrition First brand from its internet store. The Company has developed a complete marketing and advertising plan for implementation but has been unable to continue with its plans due to lack of funding. The Company will revisit the expansion of its online store and retail bake mix line in fiscal 2006.

Key customer segments

Manufacturers

Distributors

Retailers and Food Service

Specialty/Health/Diet

Direct to Consumer

Other Food Products

During fiscal 2003 FACT Products Inc., a wholly owned subsidiary of FACT Group Inc., acquired a line of imported shelf stable, non-dairy whipped toppings known as Aunt Lydia’s Italian Crèmes. FACT Products has the exclusive worldwide rights to the Aunt Lydia’s brand crèmes and commenced marketing the product towards the end of fiscal 2004. The crèmes are unique in formulation and come in four flavors including vanilla, chocolate, strawberry and mocha, and do not require refrigeration to stay fresh. Though the Company executed multiple purchase orders from an East Coast retail supermarket chain during late fiscal 2004 and early fiscal 2005, the Company was not able to successfully market the product due to product performance issues and a lack of marketing dollars. The Company hopes to revisit this product during fiscal 2006 in order to determine if there is any merit in pursing further marketing efforts. Presently the Company has ceased all distribution of the product.

Milestones

NEAR TERM GOALS (2006)

The Company’s near term goals include a focus on the ongoing operation of our functional foods business. FACT Group intends to increase its presence in marketplace by continuing to provide premix to customers who will launch functional food products and further develop our corporate infrastructure. The Company is hoping to see improved sales of its premixes during fiscal 2006 to a wider array of commercial clients, as well as increased product diversification in the marketplace. Additionally, the Company will revisit its 2005 plans to direct resources towards an online store to market our own line of retail “at-home” mixes directly to the consumer. These marketing plans would call for promotional offers, and a focused internet and print advertising campaign to help establish recognition for our master brand, “Nutrition First™”. We also intend to expand our product offerings in the individually packaged serving size to appeal to a wider range of consumers.

FACT Group is aggressively pursuing additional supply and licensing arrangements with corporations established in the food industry for the manufacture, marketing and distribution of our line of functional premixes. It is the intent of the Company that additional customers will launch products containing our functional premixes throughout the year so that revenues generated from the functional food business will assist the Company in finally achieving profitability during fiscal 2006.

Presently the Company is in negotiation with several additional clients for the supply and licensing of our functional premixes for a variety of sweet baked goods and private label opportunities. The Company is hopeful it will finalize these negotiations throughout fiscal 2006.

To further enhance our ability to increase revenues in fiscal 2006 the Company may also look to complete strategic mergers or acquisitions with complimentary businesses. In this manner the Company may be able to access previously unavailable distribution channels in a more expedient manner.

INTERMEDIATE TERM GOALS (2007-2008)

Building on our near-term plan for development, the Company hopes to experience substantial growth over the intermediate term. Our objectives include the following:

Growth for of our line of “at-home” products under our master brand, Nutrition First, for direct market to the end consumer via internet and other channels. Potential expansion of this line to include a unique off-shoot of products specially directed to the diabetic and glucose management markets.

Expand our client base to include supply and licensing partnerships with additional medium to large sized industry participants and certain major industry participants in the manufacturing, distribution, quick serve restaurant and food service channels. The Company will also pay special focus to the public school meal system in the hopes of locating a channel to provide healthier product offerings in local and national educational facilities;

Formation of an Asian and European division to market and launch products in international markets;

Ongoing successful education of retail consumers through public relations initiatives and mass media coverage;

Continue to develop and refine new lines of second and third generation functional products, perhaps to include a line of premixes for end products which would be marketed as supplements as opposed to food products;

These initiatives will require additional capitalization of an amount that is as yet undetermined, however, the Company believes it can achieve these goals provided funds can be made available through profits from ongoing premix and product sales, additional debt and/or equity financing, or conventional credit arrangements with major banking institutions.

LONG TERM GOALS (2008 AND BEYOND)

The Company intends to achieve successful market penetration in numerous segments of the functional foods industry, generating escalating positive cash flows on an annual basis so that the Company becomes a competitive leading participant in the industry. Management will look to have its first, second and third generation of functional premixes and other products widely distributed across Europe, Asia and North America with a view to expanding to other international markets, while continuing to supply premixes to various food manufacturers, distributors and major retailers under private label and other conventional arrangements.

Financial Outlook

The Company has completed the spin off of its operational oil and gas subsidiary during the final quarter of fiscal 2004 and therefore has no longer included this subsidiary in its consolidated balance sheets. Additionally, the Company successfully divested its commercial and residential real estate holdings in fiscal 2005 and therefore did not generate substantial revenues from those real estate operations during this current fiscal year. The Company also disposed of various passive investments during the year in order to streamline our day to day operations. Our 2006 mandate calls for the divestiture of all remaining passive investments as soon as practicable, which will provide the Company additional funds for ongoing working capital and the settlement of outstanding debts. The Company expects to focus on increasing the revenue stream generated by the supply and licensing of its commercial functional food premixes during fiscal 2006.

The Company may seek to raise approximately $400,000 dollars in the form of debt and/or equity financing in the near term to assist with growth objectives. As noted above, we will continue to look to divest those remaining passive assets not directly related to our core business of functional food products. This should provide the Company adequate resources to continue operations and establish increased cash flows to cover operational expenses and achieve profitability by the close of fiscal 2006. There is no assurance that the Company will be successful in raising this amount of capital or meeting its anticipated operational goals.

Results of Operations

Comparison of 2005 and 2004

For the years ended December 31, 2005 and 2004 the Company incurred operating losses of $1,216,588 and $265,323 respectively. Fiscal 2005 operations include a substantial decrease in revenues from $1,417,607 (2004) to $800,329 (2005). The decrease in revenues can be predominantly attributed to the cessation of sales of the Company’s whipped topping product line during early fiscal 2005 and the divestiture of the Company’s commercial real properties which terminated commercial rental income. These two events resulted in revenue in fiscal 2005 totaling $396,218. The Company’s sales of functional premixes also declined over the comparative fiscal years from $918,690 (2005) to $708,947 (2004) as a result of the loss of certain client accounts in late 2004 and early 2005 due to unexpected market conditions which impacted certain of the Company’s clients. Associated costs of goods sold relating to functional premix sales increased from $507,132 (2004) to $635,732 (2005). The costs of goods sold associated with the whipped topping products decreased over the comparative years from $224,854 (2004) to $154,170 (2005). Legal fees decreased substantially from $70,888 (2004) to $10,138 (2005), however consulting fees and services settled by the issuance of shares increased greatly from a combined total of $285,084 (2004) to $387,023 (2005). Associated administrative expenses also increased slightly from $315,052 (2004) to $399,977 (2005) due to increased warehousing, freight and other general office expenses. .

In fiscal 2004, there was a non-recurring, non-operating expense totaling $48,562 This expense reflects the movement in the value of assets held by a private corporation in which the Company holds an interest. During fiscal 2005 this asset was divested and the Company wrote down a total of $112,510 upon divestiture of its interest in this private corporation.

During fiscal 2005 the Company wrote down $266,944 as a result of an agreement reached with certain arms length third parties whereby the Company agreed to accept $400,000 cash and 500,000 shares of the common stock of Capital Reserve Canada Limited as consideration for assignment of the convertible note between the Company and Capital Reserve Canada. The Company has recorded the shares received as part of this transaction on its balance sheet at a value of $250,000 which amount represents the average market price of $0.50 per share. There was no comparable transaction during fiscal 2004.

During fiscal 2005 the Company wrote down an account receivable which it deemed to be uncollectible in the amount of $34,948. There was no comparable transaction during fiscal 2004.

During the fiscal year ended December 31 2005 the Company sold certain marketable securities and recorded a loss of $7,417 in respect of the transaction. There was no comparable transaction in fiscal 2004.

During the fiscal year ended December 31, 2005 the Company disposed of its commercial and residential real properties for a total gain of $572,944. There was no comparable activity in fiscal 2004.

Interest expenses and fees decreased in 2005 as the Company was able to retire various loans and mortgages upon the sale of its commercial real properties, and the associated debt serving obligations. Additionally the Company recorded a substantial increase in interest income as a result of certain convertible notes entered into between the Company and Capital Reserve Canada Limited. .

Net losses for the two completed fiscal years were $626,397 (2005) and $595,303 (2004) respectively,

Liquidity and Capital Resources

Summary of Working Capital and Stockholders' Equity

As of December 31, 2005, the Company had negative working capital of $1,165,256 and Stockholders' Equity of $68,558 compared with negative working capital of $3,610,886 and Stockholders' Equity of $40,142 as of December 31, 2004. The Company’s negative working capital has decreased as a result of the retirement of several current liabilities concurrent with the sale of the Company’s commercial real properties.

Liquidity

The Company anticipates it may require approximately $400,000 over the next twelve months to fully implement its existing business plan, which includes significant marketing efforts, the continued development and refinement of functional food formulations and products, a consumer awareness and public relations campaign, concepts for development, manufacturing and distribution of a line of our own master brand food products via the internet, expanded management resources and support staff, and other day to day operational activities. The Company may require additional funds over the next three years to assist in realizing its goals should it not achieve anticipated bench marks over the 2006, 2007 and 2008 fiscal years. The amount and timing of additional funds required can not be definitively stated as at the date of this report and will be dependent on a variety of factors. As of the filing of this report, the Company has been successful in raising funds required to meet our existing revenue shortfall for the funding of our operations. Funds have been raised through private loans, equity financing and conventional bank debt, as well as through the sale of certain active and passive investments. The Company anticipates revenues generated from its functional food business will greatly reduce the requirement for additional funding; however, we can not be certain the Company will be successful in achieving revenues from those operations. Furthermore the Company cannot be certain that we will be able to raise any additional capital to fund our ongoing operations.

Sources of Working Capital

During 2005 the Company's primary sources of working capital have come from revenues generated from our functional foods business, revenues generated by our commercial rental properties prior to their disposal and the net proceeds from:

$89,517 in the form of loans from related parties bearing interest at various rates;

$755,279 in proceeds from the sale of certain commercial real properties;

$11,069 from sale of certain marketable securities; and,

$50,000 from the proceeds of an agreement entered into regarding the assignment of a convertible note with Capital Reserve Canada Limited..

The Company is also aggressively pursuing the liquidation of its remaining passive investments..

Material Commitments for Capital Expenditures

Pursuant to a settlement agreement entered into between FACT LLC and Steven Schechter, Jennifer Flynn and Steven Capodicasa, FACT Group has an obligation to pay a total of $2,000,000 in royalty payments over 10 years and the amount of up to $233,333 in salary compensation to Flynn and Schechter.

Off Balance Sheet Arrangements

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

ITEM 7. FINANCIAL STATEMENTS

FACT CORPORATION

FINANCIAL STATEMENTS

AS AT THE FISCAL YEARS ENDED DECEMBER 31, 2005 and 2004

with

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

INDEX TO FINANCIAL STATEMENTS

FACT CORPORATION

FINANCIAL STATEMENTS

with

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

	Page

Report of Independent Registered Public Accounting Firm	F-2

Financial Statements:

Consolidated Balance Sheets	F-3 to F-4

Consolidated Statements of Operations	F-5

Consolidated Statements of Cash Flows	F-6 to F-7

Consolidated Statement of Stockholders’ Equity	F-8 to F-9

Notes to Financial Statements	F-10 to F-23

Report of Independent Registered Public Accounting Firm

Board of Directors

Fact Corporation

We have audited the accompanying consolidated balance sheets of Fact Corporation as of December 31, 2005 and December 31, 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2005 and December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fact Corporation as of December 31, 2005 and December 31, 2004 and the consolidated results of its operations, stockholders’ equity, and its cash flows for the years ended December 31, 2005 and December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1, the Company has limited working capital and continued operating losses, which raise substantial doubts about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Miller and McCollom

MILLER AND MCCOLLOM

Certified Public Accountants

4350 Wadsworth Boulevard, Suite 300

Wheat Ridge, Colorado 80033

April 17, 2006

FACT CORPORATION Consolidated Balance Sheets
	December 31,
	2005	2004
Current Assets
Cash	159,839	44,904
Inventory	50,188	314,457
Accounts receivable (Note 3)	767,336	79,233
Account receivable – Capital Reserve Canada Ltd.	-	325,559
Prepaid expenses and deposits	-	39,082
Total Current Assets	977,362	803,235

Investment in Texas T Companies (Note 5)	-	72,070
Investment in Capital Reserve Canada Ltd. (Note 16)	250,000	68
Investment in Australian Oil and Gas (Note 6)	21,770	7,265

Property and Equipment
Intellectual property (Note 2)	2,770,678	2,770,678
Real Property (net of accumulated depreciation of $363,967 in 2004) (Note 4)	-	2,754,876
Office equipment and computers (net of accumulated depreciation of $28,471for 2005 and $20,512 in 2004)	3,213	11,172
Total Property and Equipment	2,773,891	5,536,726

Total Assets	4,273,024	6,419,364


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses	587,065	621,220
Accounts payable (related parties)	316,165	244,300
Loans payable (related parties) (Note 7)	1,084,748	1,139,851
Loan payable (Note 8)	-	2,296,250
Current portion of long-term debt and acquisition cost	154,639	112,500
Total Current Liabilities	2,142,618	4,414,121

Long Term Liabilities
Acquisition cost payable (Note 2)	1,811,848	1,965,101
Total Liabilities	3,954,466	6,379,222
Commitments and contingencies

FACT CORPORATION Consolidated Balance Sheets
	December 31,
	2005	2004

Stockholders' Equity
Class A Common Stock - authorized 100,000,000 shares of no par value; 17,274,406 issued and outstanding as at December 31, 2005 and 16,836,367 at December 31, 2004 (Note 9)	8,733,095	8,119,630
Class A Common stock warrants	20,455	47,985
Accumulated deficit	(8,797,135)	(8,170,739)
Accumulated other comprehensive (loss)	112,143	43,266
Total Stockholders' Equity	68,558	40,142
Total Liabilities and Stockholders' Equity	4,023,024	6,419,364

FACT CORPORATION Consolidated Statements of Operations
	December 31,
	2005	2004
Revenues
Functional food premix	708,947	918,690
Italian Crème sales	4,326	274,206
Consulting income	382	11,700
Rental income	86,673	213,011
	800,329	1,417,607
Costs and Expenses
Functional food premix	635,732	507,132
Italian Crème costs	154,170	224,854
Impairment of inventory	-	134,176
Legal	10,138	70,888
Consulting fees	145,823	228,684
Consulting fees/services settled by the issue of shares	241,200	56,400
Depreciation and amortization	15,476	93,682
Other Administrative expenses	399,977	315,052
Write down accounts receivable	34,948	-
Write down investment in Capital Reserve Canada Limited	266,944	-
Write down of bad debt	-	3,500
Equity in loss of Texas T Petroleum Ltd	112,510	48,562
	2,016,917	1,682,930
(Loss) from operations	(1,216,588)	(265,323)

Other income and expenses
Other Income	-	35
Interest income	264,300	65,269
Interest expense	(239,635)	(395,631)
Loss on disposal of marketable securities	(7,417)	-
Gain on disposal of assets	572,944	347
	590,192	(329,980)
Provision for income taxes	-	-
Net (Loss)	(626,397)	(595,303)

Net (Loss) per Common Share	(0.04)	(0.04)

Weighted Average Number of Common Shares Used in Calculation	17,039,444	2,735,542

Other comprehensive income
Net loss	(626,397)	(595,303)
Foreign currency translation adjustment	(76,615)	86,568
Unrealized profit (loss) on marketable securities	8,258	22,134
Total other comprehensive income	(694,754)	(523,831)

FACT CORPORATION Consolidated Statements of Cash Flows
	December 31,
	2005	2004

Cash From Operating Activities:
Net (loss)	(626,397)	(595,303)
Reconciling adjustments
Depreciation, depletion and amortization	15,476	93,682
Gain (loss) disposal of assets	(583,854)	-
Write down bad debt	-	3,500
Equity in Texas T Petroleum Ltd	(50,648)	371
Adjustment to cash at beginning of period from disposition of Capital Reserve Canada Limited	-	3,920
Issuance of shares for settlement of services	241,200	56,400
Write down investment in Capital Reserve Canada	266,944	-
Write down uncollectible account	34,948	-
Write down investment in Texas T Petroleum Ltd.	112,510	-
(Gain) loss on sale of securities	7,417	(339)
Changes in operating assets and liabilities
Accounts receivable	(339,435)	36,575
Prepaid expenses and deposits	39,082	(12,570)
Inventory	264,269	(256,169)
Accounts payable and accrued expenses	37,710	269,056
Net Cash Flows From Operating Activities	(580,779)	(400,877)

Cash From Investing Activities:
Acquisition of property and equipment	(4,749)	(16,400)
Proceeds from disposal of real property	3,327,820	-
Acquisition of shares in Capital Reserve Canada Ltd.	(249,932)	(68)
Disposition oil and gas assets net accretion	-	6,959
Proceeds from sale of securities	11,069	9,714
Net Cash Flows From Investing Activities	3,084,207	205

Cash From Financing Activities:
Loan proceeds	-	427,599
Repayment of long term debt	-	(48,709)
Reduction to loans payable	(2,296,250)	(433,627)
Proceeds (Repayment) of related party loans	(55,103)	479,730
Acquisition cost payable	(111,114)	(95,127)
Sales of common stock (net of offering costs)	-	19,600
Capital contribution by an officer	22,368	6,916
Net Cash Flows From Financing Activities	(2,440,099)	356,382

Foreign currency translation adjustment	51,606	39,840

FACT CORPORATION Consolidated Statements of Cash Flows
		December 31,
		2005		2004
Net change in cash and cash equivalents	$	114,935	$	(4,449)
Cash at beginning of period		44,904		49,353
Cash at end of period	$	159,839	$	44,904

Supplemental disclosure of cash flow information:
Interest paid	$	239,635	$	395,631
Income taxes paid		-		-

Non-cash investing and financing transactions:
Recovery on disposition of Capital Canada (net of impairment of $325,000 (2004))	$	325,000	$	325,559
Recovery of value of shares of FACT Corporation previously eliminated due to cross ownership by Texas T Petroleum Ltd.	$	8,278	$	-
Return to treasury of common shares	$	(10,910)	$	-

FACT CORPORATION

Consolidated Statements of Shareholders’ Equity

Class A Common Stock

Class C Common Stock

Warrants

Accumulated Deficit

Accumulated Other Comprehensive Income (Loss)

Total Shareholders’ Equity

Amount

Balance at December 31, 2003

4,652,337

7,807,855

2,000,000

540,000

381,976

54,638

(8,195,307)

(60,396)

146,790

Stock issuances related to private placements

72,593

10,393

72,593

9,209

19,602

Capital Contribution by Officer

6,916

Elimination of shares of FACT Corporation held by Texas T Petroleum Ltd.

7,205

Foreign currency translation adjustment

86,568

Unrealized loss on marketable securities

(15,096)

Cancellation/expiry of warrants

15,861

(13,758)

(15,861)

Conversion of Class C shares to Class A common shares at ratio of 6 for 1

12,000,000

540,000

(2,000,000)

(540,000)

Stock issuances related to services

91,250

56,400

Distribution of CCRL to shareholder (less impairment of recoverability)

(325,000)

619,870

32,191

327,061

Net loss for the period ended December 31, 2004

(595,303)

FACT CORPORATION

Consolidated Statements of Shareholders’ Equity

Class A Common Stock

Class C Common Stock

Warrants

Accumulated Deficit

Accumulated Other Comprehensive Income (Loss)

Total Shareholders’ Equity

Amount

Balance at December 31, 2004

16,816,180

8,119,630

440,811

47,985

(8,170,739)

43,267

40,143

Stock issuances related to services

480,000

241,200

Capital Contribution by Officer

22,368

Re-addition of shares of FACT Corporation held by Texas T Petroleum Ltd. upon divestiture of interest in Texas T Petroleum Ltd.

20,187

8,278

Reverse impairment due to distribution of CRCL shares

325,000

Foreign currency translation adjustment

60,618

Unrealized gain on marketable securities

8,258

Return of shares for cancellation

(41,961)

(10,910)

Cancellation/expiry of warrants

27,530

(270,000)

(27,530)

Net loss for the period ended December 31, 2005

(626,397)

Balance at December 31, 2005

17,274,406

8,733,095

165,186

20,455

(8,797,135)

112,143

68,558

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 1- Summary of Significant Accounting Policies

This summary of significant accounting policies of FACT Corporation (the “Company”) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.

Organization

The Company was incorporated under the laws of the State of Colorado on August 3, 1982 as Capital Reserve Corporation for the purpose of operating as a financial services holding company. The Company commenced operations soliciting various life, accident and health insurance policies in three states in the U.S. until October 1994 when it could no longer meet certain requirements to continue operations. The Company carried out various other operations between 1995 and the close of fiscal 1998, all of which operations had ceased by early 1999.

In 1999, the Company's principal place of business moved to Canada. In December 1999, the Company formed a wholly owned subsidiary, Capital Reserve Canada Limited, an Alberta corporation ("Capital Canada"), to locate and acquire producing oil and gas assets in Canada. This subsidiary was divested in fiscal 2004 by way of a distribution of shares to the shareholders of the Company.

On November 7, 2001 the Company entered into a Share Exchange Agreement with the shareholders of Food and Culinary Technology Group Inc. (“FACT”), a Nevada corporation, whereby all of the issued and outstanding shares of FACT were exchanged for 2,000,000 shares of the Company’s Class C common stock. (Note 2)

On February 8, 2002, the Company changed its name to FACT Corporation.

On July 23, 2002 the Company formed a wholly owned subsidiary, Wall Street Real Estate Limited (“WSRE”), an Alberta corporation. WSRE purchased from the Company, certain commercial real estate located at 1528-1530 9^th Avenue S.E., Calgary, Alberta, Canada. This commercial property was divested during fiscal 2005.

As of December 31, 2005, the Company has three wholly owned subsidiaries, Wall Street Investments Corporation (WSIC) (dormant Colorado corporation), FACT and WSRE. FACT Products Inc. (formerly FACT Bread Company Inc.), a Nevada corporation, was incorporated in November 2001 and is a wholly owned subsidiary of FACT.

Operations

Real Property

As at the fiscal year ended December 31, 2004 the Company owned three real properties located in the City of Calgary; two of which were commercial buildings and the other, residential. The commercial properties were sold during the fiscal year ended December 31, 2005 and the residential property was divested according to the terms of an option agreement entered into in fiscal 2000 (Note15). As at the fiscal year ended December 31, 2005, the Company no longer owns any real property.

Functional Food Business

The Company entered the functional food industry in November 2001 with the acquisition of FACT. During the year ended December 31, 2002 the Company commenced sales of its functional food formulations. The majority of revenues for the current fiscal year were derived from these ongoing operations in the food industry. The Company continues to pursue further commercial supply and licensing contracts for its existing line of functional food formulations, premixes and products.

Use of Estimates in the preparation of the financial statements

The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation

As a result of the distribution of Capital Canada in 2004 (note 16), the consolidated financial statements for 2004 include the Company and its remaining wholly owned subsidiaries FACT, WSRE and FACT Products Inc. All significant inter-company accounts and transactions have been eliminated.

Depreciation

Depreciation has been provided in amounts sufficient to relate the costs of depreciable assets to operations over their estimated useful lives principally on the straight-line method from two to five years for office equipment and computers and over 25 years for buildings.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

Currency

The functional currency of the Company's Canadian subsidiaries is the Canadian dollar. The functional currency of FACT and FACT Products Inc. is the United States Dollar. The Company translates amounts into United States dollars using the current rate method. Under this method, assets and liabilities are translated to United States dollars at current exchange rates and income statement accounts are translated at the average rates prevailing during the period. Related translation adjustments are reported as other comprehensive income, a component of stockholders’ equity.

(Loss) Per Share

(Loss) per share of common stock is computed by dividing the net loss by the weighted average number of common shares (including both Class A and c) outstanding during the year. Fully diluted earnings per share are not presented because they are anti-dilutive.

Inventory

The company’s inventory consists of functional premix food products and shelf stable non-dairy whipped toppings is valued at the lesser of cost or net realizable value using the average cost method.

Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 107 (“SFAS 107”), Disclosure About Fair Value of Financial Instruments. SFAS 107 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company’s accounts receivable, prepaid expenses and other current expenses, and the current portions of notes payable approximate their estimated fair values due to their short-term maturities. The fair market value of long term debt can not be determined due to a lack of comparability of similar market instruments.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Valuation of Long-Lived Assets

The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operating cash flows on a basis consistent with accounting principles generally accepted in the United States of America.

Income taxes

The Company records deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) 109, "Accounting for Income Taxes." The statement requires recognition of deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Revenue recognition

Revenues are recognized in accordance with SEC Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." Under SAB 101, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collectibility is reasonably assured. Revenue for food products is recognized when the Company has concluded arrangements with customers and the product is shipped. The Company has not experienced any material expense in satisfying warranties and returns. Rental income from real estate properties is recognized on a monthly basis in accordance with lease provisions unless the Company determines that collection is unlikely. The Company recognizes oil and gas sales upon delivery to the purchaser using the sales method.

Other

The Company has selected December 31 as its year-end.

The Company expenses advertising costs as incurred and the total amounts for 2005 and 2004 were minimal.

The Company paid no cash dividends in 2005 or 2004.

Reclassifications

Certain reclassifications have been made to previously reported statements to conform to the Company’s current financial statement format.

Basis of Presentation – Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has insufficient working capital and is sustaining losses, and therefore may be forced to discontinue operations. This fact raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to raise additional capital to complete its business plan.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 2 – Acquisition of Food and Culinary Technology Group Inc. (“FACT”), Intellectual Property, and Issuance of Class C Common Stock

On November 20, 2001, the Company acquired all of the issued and outstanding shares of FACT in exchange for 2,000,000 shares of the Company’s Class C common stock. The acquisition is treated as a purchase that is valued at $0.65 per share or $1,350,000, consisting principally of certain intellectual property, formulas, patent rights and other intangible assets. The excess of the amounts paid, over the fair value of the net assets acquired (which were nominal), is allocated to the intangible assets of $1,350,000. Since 60% of the FACT common stock acquired was from a related party, who had no verifiable historical cost for their shares, the portion of the intangible assets acquired attributable to the related party of $810,000 has not been included in the accompanying balance sheet. The remaining portion, $540,000 is attributable to parties who were not related parties. Management believes that the amount allocated to intangible assets represents fair value of the assets acquired. The per share value attributed to the Class C common shares is $0.65 per share, which is the same as the market price of the Class A shares on the date of acquisition.

The 2,000,000 shares of the Company’s Class C common stock that it issued on November 20, 2001, to acquire all of the shares of FACT, are convertible into a total of 12,000,000 shares of the Company’s Class A common stock. As of February 11, 2004, all of the holders of the Company’s Class C common stock elected to convert all of their shares into shares of Class A common stock. During the second quarter of fiscal 2004, the Class C common stock was canceled and a total of 12,000,000 shares of Class A common stock were issued.

Prior to the acquisition, FACT had entered into an agreement to acquire certain intellectual property, formulas, patent rights and other intangible assets (the “Intellectual Property”) owned by F.A.C.T. Group LLC, a New Jersey limited liability company (the “LLC”), for $2,000,000 to be paid in cash pursuant to terms described herein and by the issuance of shares of FACT’s common stock.

In August 2003, the Company and the member owners of LLC entered into a Settlement Agreement to resolve certain disputes and claims that had arisen between the parties. As a result, the parties agreed that the following consideration would be paid in connection with the acquisition of the Intellectual Property:

a. Royalty payments shall be paid to the LLC calculated on the sale of bakery and pasta products at a rate of $0.05 per pound of premix sold until a total of $2,000,000 has been paid.

FACT is obligated to make minimum royalty payments each year. In year 2005, the minimum amount of royalty payments to be paid is $45,500. For each subsequent year, the minimum amount increases by 30% Amounts for the next 10 years are as follows:

2005 – $ 45,500

2006 – $ 59,150

2007 – $ 76,895

2008 – $ 99,963

2009 – $129,953

2010 – $168,938

2011 – $219,620

2012 – $285,506

Upon reaching year 10, all remaining royalties become due and payable.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2004 and 2003

Note 2 – Acquisition of Food and Culinary Technology Group Inc. (“FACT”), Intellectual Property, and Issuance of Class C Common Stock – Cont’d.

c. An additional royalty payment of $20,000 was made to the LLC in 2003.

d. Additional consideration of $233,333 to be paid to two (2) of the LLC’s member owners in monthly payments over the period of time commencing on September 1, 2003 through December 2006. Such amount will be decreased in the event that such member owners personally earn more than a certain amount in any of the stated years or if the amount of royalty payments is in excess of $150,000 in any year. At the close of fiscal 2003 the Company recorded a liability of $227,878 to reflect the estimated future payments under this agreement and added this amount to the carrying value of the intangible asset.

Statements of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” addresses financial accounting and reporting: (1) at the date of acquisition of goodwill and intangible assets apart from goodwill acquired other than in a business combination and (2) all goodwill and intangible assets apart from goodwill subsequent to their acquisition. A principal requirement of this statement is to determine the useful lives of intangible assets and amortize or not amortize the intangible assets accordingly. Intangible assets apart from goodwill with finite lives are to be amortized over their useful lives to their residual value, if any, whereas goodwill and intangible assets apart from goodwill with indefinite lives are not to be amortized. Another principal requirement of this statement relates to impairment of intangible assets. This statement, in its entirety, became effective for the Company on January 1, 2002. Certain provisions of the statement were effective July 1, 2001 since the intangible assets were acquired after that date. Management believes that currently the intangible assets have an indefinite useful life, but expects that once significant commercial operations commence using the intangible assets, an estimated useful life will be determinable and the intangible assets will be amortized.

Note 3 – Accounts Receivable

The following schedule provides an analysis of the Company’s accounts receivable:

		2005		2004
Withholding tax recoverable on sale of real property ^(a)	$	276,291	$	-
Trade receivables		141,045		79,233
Proceeds from sale of Capital Reserve Canada Limited note receivables ^(b)		350,000		-
	$	767,336	$	79,233

(a)

During the year the Company successfully concluded the sale of its two commercial properties located in Calgary, Alberta, Canada (Note 4). The balance due to the Company after retirement of all underlying mortgages and loans secured by the two properties was reduced by a recoverable tax hold-back of CDN$310,000 (US$276,291). The Company is taking the appropriate actions to secure the release of this amount, which is presently withheld for tax purposes by the Canadian tax authorities. Management expects to realize these proceeds during fiscal 2006.

(b)

During the year, the Company reached an agreement with various third parties whereby it transferred all of its rights and interest in a convertible loan due from former subsidiary Capital Reserve Canada Limited (Note 17). Under the terms of the agreement, the Company will receive cash consideration totaling $400,000 and 500,000 free-trading shares of Capital Reserve Canada Limited. The cash proceeds are to be received over 120 days in five installments, including two $50,000 payments and three payments of $100,000 each. Prior to the end of the year the Company received the initial $50,000 payment and the free trading shares.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 4 – Investment in Real Properties

The following schedule provides an analysis of the Company’s investment in real property as of December 31:

		2005		2004
Land	$	-	$	680,838
Buildings		-		1,761,319
Residential property		-		676,686
	$	-	$	3,118,843
Less: Accumulated depreciation		-		(363,967)
	$	-	$	2,754,876

During the fiscal year ended December 31, 2005 the Company divested all of its real properties.

(a)

Commercial properties: The completed transactions involved purchase agreements with two unrelated buyers for combined gross proceeds of CDN$3,525,000. After commissions and fees of approximately CDN$130,000, the sale proceeds were used to retire outstanding mortgages against the two properties held by Standard Life and the Alberta Treasury Branches totaling CDN$2,235,000. The CDN$1,160,000 balance due the Company was reduced by a recoverable tax hold-back of CDN$310,000. The Company is taking the appropriate actions to secure the release of the CDN$310,000 presently withheld for tax purposes by the Canadian tax authorities. Management expects to realize these proceeds during fiscal 2005. The divestiture of the properties resulted in a net gain of $758,973.

(b)

Residential property: Under the terms of a trust agreement entered into in fiscal 2000 between the Company and Mr. Scott Lawler (See Note 15), a member of the Company’s board of directors, Mr. Lawler elected his option to acquire a residential property acquired in fiscal 2000 by the Company for his personal use. Under the terms of the agreement Mr. Lawler was responsible for mortgage payments, improvements to the property and taxes during the term of his use of the property. Additionally under the agreement, Mr. Lawler had the option to acquire the property by (1) assuming the mortgage, (2) acquiring a new mortgage or (3) paying out the remaining balance of the mortgage. As part of his election to acquire the property, Mr. Lawler has returned to treasury a total of 41,961 common shares issued to Mr. Lawler in fiscal 2000 in consideration for proceeds provided to the Company as a down payment for the property. As a result of Mr. Lawler’s election to acquire the property, a mortgage in the amount of CDN$454,882 was retired during the year and the Company has recorded a loss on the disposition of $186,029 including a gain of $10,910 attributed to the return of the shares.

The net result of the disposition of the Company’s real properties has resulted in a net gain of $572,944 as reported on the Company’s financial statements.

Note 5 - Investment in Texas T Companies (Texas T Resources, Inc and Texas T Petroleum Limited)

During the year 2000, the Company agreed with Texas T Resources Inc. ("Resources") (a public reporting Alberta corporation) to fund a portion of the acquisition of a heavy oil upgrading technology by Resources' majority owned subsidiary, Texas T Petroleum Ltd., (“Petroleum”) (a private Colorado company). Petroleum would acquire a 50% interest in Carbon Resources Limited, a Cyprus company, which holds the rights to the heavy oil upgrading technology known as "CPJ".

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 5 - Investment in Texas T Companies (Texas T Resources, Inc and Texas T Petroleum Limited) – Cont’d

On August 1, 2000, in consideration of cash proceeds advanced to Resources for the development of the upgrading technology, the Company entered into a private placement agreement with Resources for the purchase of 2,000,000 units at $0.0677 per unit (each unit comprised of one common share and one share purchase warrant entitling the Company to purchase one additional share at $0.0880 for a period of two years from the date of issue).

Subsequently in the fiscal year 2000, the Company also completed a private placement with Petroleum, and acquired 2,000,000 Units at $0.50 per unit (each unit comprised of one share and one share purchase warrant entitling the Company to purchase one additional share at $1.00 per share for a period of two years from the date of issue). On March 6, 2001, Petroleum completed a reverse split of its share capital at the rate of 10:1, which resulted in the Company's shareholdings in Petroleum being reduced from 2,000,000 Units to 200,000 Units. The Company's percentage ownership of Petroleum remained constant following the reverse split.

On July 3, 2001, the Company completed a Stock Exchange Agreement with an unrelated third party where the Company exchanged 652,252 units of Resources for 106,101 common shares of Petroleum.

In accordance with the Statement of Financial Accounting Standards No. 115 (SFAS 115), investments and securities may be classified as (1) Securities held-to-maturity, (2) Trading Securities or (3) Securities available for sale. The Company considers these securities to be Securities available for sale, and, in accordance with SFAS 115, are valued at fair value with unrealized gains or losses recorded in stockholders' equity.

As of December 31, 2004, the Company owned 89,775 shares of Resources, which was recorded at $16,397 based on the quoted market price of the stock at that date. During the fiscal year ended December 31, 2005 the Company divested all of its shares of Resources for CAD$0.15 per share for total CAD proceeds of $13,466 (US$11,069). The Company recorded a loss of $7,417 with respect to the transaction.

During the year the Company also agreed with the other shareholders of Texas T Petroleum Ltd. to transfer its shares of Texas T Petroleum Ltd. to the remaining shareholders, on a pro rata basis in exchange for forgiveness of the Company’s current share of outstanding liabilities due and payable. The transaction has resulted in the write down of the Company’s recorded interest in Texas T Petroleum Ltd. in the total amount of $112,510.

The Company held no interest in the Texas T companies at the year ended December 31, 2005.

Note 6 – Investment in Australian Oil and Gas Corporation

Australian Oil and Gas Corporation, (formerly Synergy Technologies Corporation) a former leaseholder at one of the Company’s commercial properties, filed for protection under Chapter 11 of the US Bankruptcy Courts in fiscal 2002 and completed a re-organization plan in fiscal 2003. At the time of filing for bankruptcy, Australian Oil and Gas was indebted to the Company in the amount of $222,627, which amount included past due lease payments, lease rejection costs as allowable under the US Bankruptcy Act and associated legal fees. As part of the reorganization, during fiscal 2003 the Company received cash proceeds in the amount of $5,489 and common stock in the amount of 0.862999 of one share of Australian Oil and Gas for every dollar amount of the Company’s claim, amounting to 174,988 shares of the common stock of Australian Oil and Gas with a fair market value of $1,801 at the time of receipt. As of December 31, 2005, the Company owns 174,988 shares of Australian Oil and Gas which has been recorded at $21,770 based on the quoted market price of the stock at that date.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 7 – Loans Payable (related parties)

Loans Payable from various related parties have the following terms at December 31:

Repayment terms	Interest rate		2005		2004
Demand	10%		147,309		84,774
Demand	10%		17,940		-
No terms	None		-		12,025
Due within 2 years	18%		613,666		782,764
Demand	10%		305,832		260,288
		$	1,084,748	$	1,139,851

The loan payable of $613,666 is secured by liens on the Company's accounts receivable and investments and bears interest at a rate of 18% p.a., maturing on December 31, 2007. Interest is accrued monthly until maturity, at which time principal and all accrued and unpaid interest becomes due and payable.

Note 8 – Loans Payable

The Company’s subsidiary, Wall Street Real Estate Ltd., has a loan of $356,987 (CDN$462,000), payable on demand with ATB Financial (“ATB”). The loan is secured by a mortgage on real estate located at 1528-1530, 9^th Avenue S.E., Calgary, Alberta, Canada and bears interest at the Prime Lending rate of the ATB (6.25% as of December 31, 2004) plus 2%, payable on the last day of each month. The loan had a balance outstanding of $346,614 as at December 31, 2004. This loan was retired in full during fiscal 2005 concurrent with the sale of the underlying real estate.

The Company had a loan of $386,350 (CDN$500,000) with Access Mortgage Corporation Limited which became due and payable on February 1, 2004. The loan was secured by a second mortgage on the real estate located at 1528-1530, 9^th Avenue S.E., Calgary, Alberta, Canada and was subject to interest at a rate of 1.5% per month, payable on the first day of each month. The Company prepaid the interest in the total amount of $69,543 (CDN$90,000) at the time the mortgage was obtained in fiscal 2003. During fiscal 2004 the Company negotiated an extension of this loan for a period of 30 days, during which time it negotiated a new mortgage with a different lender in the total amount of $427,599 (CAD$515,000). Proceeds from the new loan were used to retire the original loan in full. The new loan was granted on March 17, 2004 from Securus Financial, an unrelated third party. The loan is secured by a second mortgage on the real estate located at 335 25^th Street S.E., Calgary, Alberta, Canada and bears interest at a rate of 13% per annum. The Company paid a commitment fee of $11,938 (CDN $15,450) to Securus with respect to the transaction. The loan becomes due and payable on September 30, 2005. This loan was retired in full concurrent with the sale of the commercial property located at 335 25^th Street SE.

The Company has a real estate mortgage on the commercial property located at 335 25^th Street SE, Calgary, Alberta with a five year term that is amortized over 15 years at an interest rate of 8.6% with Standard Life. On September 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing rate. As of December 31, 2004 the mortgage balance was $1,103,076 (CDN$1,328,543). This loan was retired in full concurrent with the sale of the commercial property in the first quarter of fiscal 2005..

The Company assumed a variable interest rate real estate mortgage on a residential property from the ATB in the amount of $440,606 (CDN$570,217) amortized over 25 years, due and payable on May 1, 2005. As of December 31, 2004 the mortgage balance was $395,951 (CDN$476,883). On May 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing rate. The Company renewed the mortgage prior to its expiry for an additional term, and the loan was retired in full concurrent with the transfer of the underlying property.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 9 – Common stock

During the year ended December 31, 2005 the Company had the following transactions:

A total of 360,000 common shares were issued as payment for services rendered by unrelated third parties. A further 120,000 common share were reserved for issuance for services rendered prior to year end, but not yet issued as of the date of this report. A total of 480,000 common shares were valued at $241,200 for a weighted price per share of $0.5025 based on the market price of the shares at the time of issue.

A total of 41,961 shares were returned to the Company for cancellation by an officer and director of the Company as part of the terms of an agreement entered into in 2000. (See Note X). The canceled shares were valued at $10,910 based on the market price of the stock at the time of the transaction. The shares were not yet canceled as at the year ended December 31, 2005.

During the year ended December 31, 2004, the Company had the following transactions:

The Company converted its 2,000,000 Class C common shares into 12,000,000 Class A common shares. The conversion ratio was at 6 for 1.

The Company sold 72,593 Units to private investors for total proceeds of $19,600, with each Unit consisting of one common share and one share purchase warrants entitling the holder to acquire an additional common share for a period of two years at $0.34 per share.

A total of 90,250 common shares were issued as payment for services rendered by unrelated parties. The common shares were valued at $56,400 for a weighted price per share of $0.85.

Note 10– Stock-Based Compensation

Issuance of stock options

During the year ended December 31, 2001, the Company adopted a stock option and stock award plan effective April 1, 2001. The plan allows the Board of Directors, or its appointed administrator, to grant stock awards or stock options to employees, directors, and consultants, in a quantity not to exceed 1,000,000 shares and subject other provisions of the plan. Characteristics of the options, including vesting, execution price, and expiration, are determined by the Board of Directors. During 2001, the Company granted non-qualified stock options to directors, employees and consultants for 650,000 shares of Class A common stock. No options were issued during 2002. During 2003, the Company canceled a total of 600,000 of the options previously granted to officers, directors, employees and consultants and obtained shareholder approval for a 2003 Stock Option and Award Plan (the “Plan”). Under the 2003 Plan 1,000,000 shares may be issued to employees, officers, directors and/or consultants. On August 26, 2003 the Board of Directors set the exercise price for stock options granted under the 2003 Plan at $0.41 per share, which price represents 110% of the closing price of the Company’s shares on that date. There were no options granted during the year ended December 31, 2005.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 10– Stock-Based Compensation – Cont’d.

The following is a table of outstanding options and changes during 2005 and 2004:

			Employee Options	Non-employee Options	Weighted Average Exercise Price
Options Outstanding, December 31, 2002			112,500	50,000	4.00
	Options granted:				4.00
		Employees	—	—	—
		Non-employees	—	6,250	4.00
	Options exercised		—	—	—
	Options canceled		(100,000)	—	—
Subtotal			12,500	56,250	4.00
Options Outstanding, December 31, 2005, 2004 and 2003			12,500	56,250	4.00

Options granted consist of:

Year and Exercise price relative to fair value of underlying stock		Weighted average fair value at grant date	Weighted average exercise price

Years ending December 31, 2003:
	Exercise price exceeds fair value:	1.52	4.00

If not previously exercised or canceled, options outstanding at December 31, 2005 will expire as follows:

	Range of Exercise			Weighted Average
	Prices		Number of	Exercise
	High	Low	Shares	Price
Year Ending December 31,2006	4.00	4.00	68,750	4.00
			68,750	4.00

As permitted by FASB Statement No. 123, the company applies the methods of APB 25 and related interpretations in accounting for stock options issued to employees. Accordingly, no compensation cost was recognized for grants of employee options because all were issued with exercise prices less than the fair value of the underlying stock at the grant date. If compensation cost had been determined based on the estimated fair value (using methods consistent with FASB Statement No. 123) of the options at grant date, the Company’s net income and earnings per share would have been replaced with the following amounts:

	Year Ended December 31, 2004		Year Ended December 31, 2003
	As Reported	Pro forma	As Reported	Pro forma
Net loss:	626,397	626,397	595,303	595,303
Net loss per share:	(.04)	(.04)	(.04)	(.04)

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 11– Warrants

The Company had outstanding warrants to purchase 165,186 and 440,811 shares of its’ Class A common stock at December 31, 2005 and 2004, respectively, at prices ranging from $0.25 to $6.00 per share.

The following schedule shows the warrants outstanding and changes made during the years ending December 31, 2005 and 2004:

	Number		Weighted Average Exercise Price


Warrants outstanding December 31, 2003	381,976	$	0.43

Changes during the year 2004:
Issued	72,593		0.34
Expired	(13,758)		6.00

Warrants outstanding December 31, 2004	440,811		0.32

Changes during the year 2005:
Issued	-		-
Expired	275,625		0.31

Warrants outstanding December 31, 2005	165,186	$	0.34

Warrants outstanding at December 31, 2005 expire as follows:

Year

Number of shares

2006

165,186

Where appropriate an allocation has been made in the consolidated statements of stockholders’ equity between common stock and common stock warrants to give effect to the estimated fair value of the common stock warrants.

Note 12 – Related Party Transactions

During the year ended December 31, 2005, the Company entered into a loan agreement in the total amount of $250,000 with respect to amounts previously advanced from International Securities Group Inc., which is owned by a member of the Company’s Board of Directors, W. Scott Lawler. As at the year ended December 31, 2005 a total of $293,405 was due to International Securities Group Inc., including interest accrued during the most recently completed fiscal year totaling $27,545 calculated at 10% per annum.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 13– Recent Accounting Pronouncements

In December 2004, the FASB issued Statement No. 123(R) (revised 2004) (“FAS 123(R)”). In addition, in March 2005 the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin Topic 14, “Share-Based Payment” (SAB 107) which provides interpretations regarding the interaction between FAS 123(R) and certain SEC rules and regulations and provided the staff’s views regarding the valuation of share-based payment arrangements for public companies. FAS 123(R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, including stock option awards. FAS 123(R) revises FASB Statement No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25. FAS 123(R) will require us to measure the cost of employee services received in exchange for stock option awards based on the grant-date fair value of such awards. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award, which is usually the vesting period. We will report such costs as part of our general and administrative expenses. FAS 123(R) will be effective for us as of the beginning of the first annual reporting period that begins after December 15, 2005, which will be our fiscal year ending July 31, 2007. We will recognize the cumulative effect of initially applying this statement as of the effective date. Currently, the cumulative effect of initially applying FAS 123(R) has not been determined and is subject to change depending on future events.

In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“FAS 154”), which changes the requirements for the accounting for and reporting of a change in accounting principle, requires retrospective application to prior periods’ financial statements of changes in accounting principle and carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not expect the adoption of FAS 154 to affect future reporting or disclosures.

In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, "Accounting for Servicing of Financial Assets--an amendment of FASB Statement No. 140." This statement requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain specified situations. This statement is effective for fiscal years beginning after September 15, 2006, with early adoption permitted as of the beginning of an entity's fiscal year. Management believes the adoption of this statement will have no impact on the Company's financial condition or results of operations at December 31, 2005.

Note 14 – Income Taxes

As of December 31, 2004 the Company had approximately $5,634,700 of net operating loss carryover that expires between 2021 and 2023. The Company had deferred tax assets of approximately $1,660,309 relating to the net operating loss carryover. A valuation allowance has been provided for the total amount since the amounts, if any, of future revenues necessary to be able to utilize the carryover, are uncertain. A reconciliation of income taxes computed using the statutory federal income tax compared to the effective tax rate is as follows:

	2005		2004
Federal tax computed at the expected statutory rate	(35.0)	%	(35.0)	%
State income tax, net of federal tax benefit	(3.0)		(3.0)
Estimated foreign income taxes	(3.6)		(3.6)
Net change in valuation allowance	41.0		41.0

Income tax expense - effective rate	00.0	%	00.0	%

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 14 – Income Taxes – Cont’d.

Because of the 50% change in ownership rules of the Internal Revenue Code, certain prior net operating loss carryforwards are no longer available from periods before 2001. Carryover of net operating losses available may also be restricted due to future changes in ownership.

Note 15 – Segment reporting

The Company’s operations are classified into two reportable segments that provide different products or services. Separate management of each segment is required because each business unit is subject to different marketing, operations, and technology strategies.

The leasing segment derives its revenue from rental of real estate. The foods segment derives its income from the sale of functional food premixes, royalties received on the license of functional food formulations and product development consulting services. During fiscal 2005 the Company divested all of its commercial real estate assets and there the leasing segment was discontinued at the time of the divestiture.

There are no inter-segment sales.

		Foods		Leasing		All Other		Total

Revenue	$	713,656	$	86,673	$	¾	$	800,329
Loss from operations	$	(1,038,961)	$	(412,431)	$	¾	$	(1,451,391)
Interest income	$	¾	$	264,300	$	¾	$	264,300
Interest expenses	$	(97,068)	$	(142,567)	$	¾	$	(239,635)
Depreciation & amortization	$	13,969	$	1,507	$	¾	$	15,476
Income tax expense	$	¾	$	¾	$	¾	$	¾
Assets	$	2,772,963	$	¾	$	929	$	2,773,892
Expenditure on long-lived assets	$	¾	$	¾	$	¾	$	¾

Note 16 – Consulting Agreement (Related party)

On April 24, 2000, the Company entered into a Consulting Agreement with its former President and a current member of its Board of Directors, Mr. W. Scott Lawler, pursuant to which Mr. Lawler agreed to relocate to Calgary, Alberta, Canada, to work at the Company's facilities in Calgary and devote more substantial time to the operations of the Company. The term of the Consulting Agreement is two (2) years, with an option on Mr. Lawler's part to extend for one (1) additional year. Upon the conclusion of the Consulting Agreement, the Company and Mr. Lawler agreed to an extension to the original agreement for a period of one (1) year. Mr. Lawler’s consulting agreement calls for an annual salary of $75,000.00, with automatic salary increases of ten percent (10%) at the end of each year. In addition, under the terms of the agreement Mr. Lawler is to receive a stock option package should the Company implement a stock option plan during the term of his contract. In March 2001 the shareholders of the Company approved a stock option and award plan, and effective September 10, 2001, Mr. Lawler was granted 200,000 stock options for exercise at $1.00 per share for a period of five years from the grant date. During the current fiscal year, the 200,000 options previously granted to Mr. Lawler were canceled.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 16 – Consulting Agreement (Related party) – Cont’d

As a further inducement for Mr. Lawler to move to Calgary on the Company's behalf, the Company purchased a home for

Mr. Lawler's use. The purchase price of the home was $629,750 (CDN$815,000).

The Company assumed a variable interest rate mortgage from Alberta Treasury Branches in the amount of $440,607 (CDN$570,217), amortized over 25 years, due and payable on May 1, 2005. The monthly payments of principal and interest, property taxes and all other payments are to be paid by Mr. Lawler. Title to the property is in the name of the Company. Mr. Lawler provided funds to the Company in the amount of $167,842 to pay for the down payment and all closing costs associated with the purchase in the form of a subscription for shares of Capital Reserve's common stock at the purchase price of $1.00 per share.

If and when the property is sold, the Company will receive any and all gains (and/or losses) from such sale, less the cost of any approved improvements to the property paid for by Mr. Lawler. However, Mr. Lawler has the option of acquiring title to the property (and thus all resulting gains or losses) by (a) assuming or paying off the Company's mortgage; and (b) surrendering to the Company the 167,842 shares of common stock obtained from the Company. During the year the Company completed a 4 for 1 reverse split of its common stock reducing the number of shares for surrender to 41,961.

Mr. Lawler elected his option to this property in fiscal 2000. As a result of Mr. Lawler’s election to acquire the property, a mortgage in the amount of CDN$454,882 was retired during the year and the Company has recorded a loss on the disposition of $186,029 including a gain of $10,910 attributed to the return of the shares.

Note 17- Distribution of Capital Canada

By the end of fiscal 2002, initial sales had commenced in FACT Group, and the Company determined there was enough merit to commence the divestiture of certain of the Company’s non-core assets. As a result the Company decided to spin-off its operating oil and gas subsidiary, Capital Canada, to its shareholders, subject to the filing and approval of a 20-F registration statement with the SEC, which was first filed by Capital Canada on July 11, 2003. During the final quarter of fiscal 2004, the spin-off became effective and the Company ceased to consolidate the financial records for Capital Canada for purposes of financial reporting. The Company’s board of directors continues to share a director in common with Capital Reserve Canada Limited.

On July 1, 2005, the Company agreed to enter into a convertible loan with Capital Reserve Canada Limited. in the principal amount of $662,059 convertible for a period of two years from July 1, 2005 at $0.05 per share. The Company agreed to accrue interest on the loan back to the initial date of the loan which was March 1, 2000 at the rate of Bank of America prime plus 1% compounded annually. Accrued interest as at the date of this report is reflected on the Company’s income statement. During the fiscal year ended December 31, 2004, the gross amount of the loan was reduced by $325,000 to reflect management’s assessment of amounts recoverable. If not converted the note plus accrued interest will be due on June 30, 2007.

During November 2005, the Company reached an agreement with various third parties whereby it transferred all of its rights and interest in the above-noted convertible loan. Under the terms of the agreement, the Company will receive cash consideration totaling $400,000 and 500,000 free-trading shares of Capital Reserve Canada Limited. The cash proceeds are to be received over 120 days in five installments, including two $50,000 payments and three payments of $100,000 each. Prior to the end of the year the Company received the initial $50,000 payment and the free trading shares. As a result the Company recorded the total value of the convertible loan including all interest applicable under the agreement on its balance sheet. The fair value of the shares received and the value of the cash proceeds offset the total value of the loan resulting in a loss on the original investment of $266,944.

FACT Corporation

Notes to Financial Statements

Years Ended December 31, 2005 and 2004

Note 18 – Subsequent Events

Subsequent to the fiscal year ended December 31, 2005 the Company received the balance of proceeds due and payable regarding the assignment of the Company’s interest in a convertible note due from Capital Reserve Canada Limited (Note 17). An amount of $350,000 included in the accounts receivable as at year end was retired in full.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable

ITEM 8A. CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and acting Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our President and acting Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of period covered by this report. Based upon the foregoing, our President and our acting Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting identified in connection with the evaluation referred to in the immediately preceding paragraph that occurred during our last fiscal quarter that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

Not Applicable

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The following table sets forth the names and ages of all directors and executive officers of FACT as of the date of this report, indicating all positions and offices with FACT and its subsidiaries held by each such person:

NAME	AGE	POSITION
Jacqueline Danforth	34	President, Secretary, Treasurer and Director of FACT Corporation, Secretary-Treasurer and Director of Food and Culinary Technology Group Inc., Secretary-Treasurer and Director of FACT Products Inc., President and Director of Wall Street Investment Corp., President, Secretary, Treasurer and a Director of Wall Street Real Estate Ltd.
W. Scott Lawler	44	Director of FACT Corporation, Director of Capital Reserve Canada Limited, Director of Food and Culinary Technology Group Inc., Director of FACT Products Inc., Secretary and Director of Wall Street Investment Corp.. and a Director of Wall Street Real Estate Ltd.
Paul Litwack	51	Director of FACT Corporation, Director of Food and Culinary Technology Group, Inc.
Dr. Brian Raines	68	Director of FACT Corporation

The Company’s directors are elected by the holders of FACT's common stock. Cumulative voting for directors is not permitted. The management group of the Company gave notice of and held the last Shareholders' Annual Meeting on January 28, 2005. The term of office of directors of FACT ends at the next annual meeting of FACT's shareholders or when their successors are elected and qualified. The annual meeting of shareholders is specified in FACT's bylaws to be held within six months from the Company's fiscal year end or within 15 months from the date of the last annual meeting. The term of office of each officer of FACT ends at the next annual meeting of our Board of Directors, expected to take place immediately after the next annual meeting of shareholders, or when his successor is elected and qualifies. Except as otherwise indicated below, no organization by which any officer or director previously has been employed is an affiliate, parent, or subsidiary of FACT.

JACQUELINE R. DANFORTH, Ms. Danforth has been a member of the Board of Directors and the President of FACT Corporation since August 7, 2001. Ms. Danforth has been a director and Secretary-Treasurer of Food and Culinary Technology Group Inc. since its acquisition by the Company, November 7, 2001, and President since July 22, 2002. Ms. Danforth was also named Secretary-Treasurer and appointed to the Board of Directors of FACT Products Inc. on November 5, 2001, and has been President and a director of Wall Street Investment Corp since its re-instatement November 15, 2001. Ms. Danforth became the President, Secretary and Treasurer, as well as a director of Wall Street Real Estate Ltd. upon its incorporation on July 23, 2002. Over the past ten years, Ms. Danforth has worked for both private and publicly traded companies, providing management and direction. She has extensive experience in start up operations, and her range of experience with publicly traded corporations listed on both Canadian and US exchanges includes all aspects of public reporting, corporate finance and shareholder communications. She has worked in a broad range of industry sectors including natural resources and technology. Prior to her position at FACT Corporation, Ms. Danforth was Vice President, Secretary/Treasurer and a member of the Board of Directors of Synergy Technologies Corporation, from December 1997 to June 2001. Ms. Danforth continues to provide consulting services to other private and public corporations on a limited basis, and sits as a director on several private and public boards. She is Canadian-born and educated, well traveled and currently resides in the United States. She is the President and sole director of Argonaut Management Group, Inc., her private consulting company.

W. SCOTT LAWLER, Mr. Lawler became a director of FACT Corporation on November 1, 1999 and served as President of FACT from November 1, 1999 to August 7, 2001, a director of Capital Reserve Canada Limited since its inception on December 8, 1999, a Director of Wall Street Investment Corp since November 1, 1999, a Director of Food and Culinary Technology Group Inc. since August 15, 2001, and a director of FACT Products Inc. since November 5, 2001. Mr. Lawler is an attorney and is admitted in the State of California.. Mr. Lawler received a Bachelor's Degree in business management in 1984 from Brigham Young University and his Juris Doctorate degree from U.S.C. Law Center in 1988. Mr. Lawler was admitted to the California State Bar in 1988. Mr. Lawler has been the principal of Lawler & Associates, specializing in corporate and securities matters, since 1995. Mr. Lawler is currently the President and sole shareholder of International Securities Group, Inc., a private consulting company.

DR. BRIAN RAINES, Dr. Raines was appointed to the Board of directors of FACT in January 2003. Dr. Raines is also the Director of Science for FACT Group and has spent 40 years in various scientific and technical positions in the food industry. From 1998 to present, Dr. Raines has served as a consultant, providing basic scientific research adaptation in the specific area of nutraceuticals and functional foods. From 1990 to 1998 (retirement), Dr. Raines served as Vice President of Technical Services for Unilever Canada/Lipton. From 1980 to 1990, Dr. Raines served as Director of Research and Quality Control for Unilever/Lawry’s Foods, Los Angeles. Prior to this he served in various technical management positions for Mars Inc., Berthelet and Leger. Dr. Raines is an active member of the Canadian Institute of Food Science and Technology and is currently serving as International Liasion. He is a past National President and Chair of the Toronto section. He is also a member of the Scientific Advisory Board of The National Institute of Nutrition. Dr. Raines has chaired various committees of the Institute of Food Technologies/USA and was awarded the distinguished service award for the Q.A. Division in 1992. Dr. Raines has a B.Sc. from Concordia Montreal and a Ph.D. from North Carolina State University. He is also a Fellow of the Canadian Institute of Food Science.

PAUL LITWACK, Mr. Litwack was appointed to the Board of Directors of FACT Corporation and FACT Group Inc. in January 2003. Mr. Litwack joined DA-TECH CORPORATION, an electronic manuFACTuring services company in 1999 and currently serves as Chairman and Chief Executive Officer. During the five years prior to joining DA-TECH, Mr. Litwack was Chief Executive Officer of Frankford Chocolate & Candy Company. From 1990 to 1993, Mr. Litwack was with Northfield Foods Inc. as vice President – Marketing/Sales and General Manager of their Ashe County Division. Prior to that, Mr. Litwack served as the Director of New Products and then the Director of Frozen Desserts for Kraft General Foods’ Dairy Products Division. Mr. Litwack earned a BS in Engineering from Brown University in 1976 and an MBA from the Wharton School of Finance and Commerce in 1978.

None of our executive officers or directors have been involved in any bankruptcy proceedings within the last five years, been convicted in or has pending any criminal proceeding, been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or been found to have violated any federal, state or provincial securities or commodities laws.

Section 16(a) Beneficial Ownership Reporting Compliance

The following represents each officer, director and beneficial owner of more than 10% of our securities who did not file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year or prior fiscal years; no such persons is known by the Company to have failed to file any such reports.

Name	Reporting Person	Form 3/# of transactions	Form 4/# of transactions	Form 5/# of transactions
Jacqueline Danforth	President and Member of the Board of Directors	N/A	N/A	N/A
W. Scott Lawler	Member of the Board of Directors	N/A	1/4	N/A
Dr. Brian Raines	Member of the Board of Directors	1/1	1/2	N/A
Paul Litwack	Member of the Board of Directors	1/0	1/1	N/A

Audit Committee

The Board of Directors presently does not have an audit committee. The Board of Directors performs the same functions as an audit committee. Since there are only two independent members of the Board it is not feasible at this time to have an audit committee.

Code of Ethics

As of the date of this report, the Company has not adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Company had previously targeted the second quarter of fiscal year 2005 to review and finalize the adoption of a code of ethics. This did not occur. The Company intends to review and finalize the adoption of a code of ethics at such time as it concludes a merger or acquisition and commences business operations. Upon adoption, the Company will file a copy of its code of ethics with the Securities and Exchange Commission as an exhibit to its annual report for period during which the code of ethics is adopted.

ITEM 10. EXECUTIVE COMPENSATION.

The following table sets forth information for the individuals who served as the senior executive officer of the Company during any portion of the last 3 fiscal years. No disclosure need be provided for any executive officer, other than the CEO, whose total annual salary and bonus for the last completed fiscal year did not exceed $100,000. Accordingly, no other executive officers of the Company are included in the table.

There were no stock options granted to officers or directors of the Company during the fiscal year ended December 31, 2005.

ANNUAL COMPENSATION					LONG TERM COMPENSATION
					AWARDS		PAYOUTS
Name and Principal Position	Year	Salary	Bonus	Other Annual Compensation	Restricted Stock Awards	Securities Under-lying Options/ SARS	LTIP Pay-outs	All Other Compensation
Jacqueline Danforth, President	2005	$82,500⁽¹⁾	-0-	-0-	-0-	-0-	-0-	-0-
Jacqueline Danforth, President	2004	$82,500⁽¹⁾	-0-	-0-	-0-	-0-	-0-	-0-
Jacqueline Danforth, President	2003	$82,500⁽¹⁾	-0-	-0-	-0-	50,000	-0-	-0-

(1)

For 2005 Ms. Danforth received payments of $42,000 and the balance of $40,500 was accrued. For 2004 Ms. Danforth received payments of $41,256 and the balance of $41,244 was accrued. For 2003, Ms. Danforth received payments of $17,500 and the balance of 65,000 was accrued. The balances due will be paid at the direction of the Board of Directors. Ms. Danforth was granted 50,000 incentive stock options on September 10, 2001. These options were cancelled during 2003. The Company does not pay non-officer directors for their services as such, nor does it pay any director's fees for attendance at meetings. Directors are reimbursed for any expenses incurred by them in their performance as directors.

Options

Stock Options and Stock Award Plans

At the Company’s Annual Shareholders Meeting held on July 17, 2003, the shareholders approved a new stock option plan whereby employees, officers, directors and/or consultants of the Company may be compensated through the granting of stock options and stock awards; the plan will be for such number of shares that is equal to twenty percent (20%) of the Company’s total issued and outstanding shares as at the time that the Company adopts a formal written plan but no more than 1,000,000 Class A common shares; directors will be eligible for no more than 25% of the shares authorized under the plan and executive officers will be eligible for no more than 25% of the shares authorized under the plan. On August 26, 2003 the Board of Directors set the exercise price for stock options granted under the 2003 Plan at $0.41 per share, which price represents 110% of the closing price of the Company’s shares on that date. As of the date of this financial statement, no securities have been issued under this plan.

Compensation of Directors

The Company has made no arrangements for the remuneration of its directors, except that they will be entitled to receive reimbursement for actual, demonstrable out-of-pocket expenses, including travel expenses, if any, made on the Company’s behalf. No remuneration has been paid to the Company’s officers or directors for services to date.

Employment Contracts and Termination of Employment and Change –in –Control Arrangements

The Company does not have any employments contracts with any of its executive officers and has not termination of employment or change in control arrangements with any of its executive officers.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information, as of April 10, 2006, with respect to the beneficial ownership of FACT's common stock by each person known by FACT to be the beneficial owner of more than 5% of the outstanding common stock and the outstanding preferred stock, by each of FACT's officers and directors, and by the officers and directors of FACT as a group. Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable officers and directors have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.

TITLE OF CLASS	BENFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNER	PERCENT OF CLASS⁽¹⁾
Class A Common	W. Scott Lawler, director of FACT Corporation, director of Capital Reserve Canada Limited, director of Food and Culinary Technology Group, Inc., director of FACT Products Inc., Director of Wall Street Real Estate Ltd. and Secretary and a director of Wall Street Investment Corp. c/o 1530-9^th Ave S.E. Calgary, Alberta, Canada T2G OT7	124,319 Class A common shares held directly 4,998,231 Class A common shares held in the name of International Securities Group Inc.⁽²⁾	29.79%
Class A Common	Jacqueline R. Danforth, President, Secretary, Treasurer and director of FACT Corporation; President, director and Secretary of Food and Culinary Technology Group, Inc., director of FACT Products Inc., President, Secretary, Treasurer and director of Wall Street Real Estate Ltd. and President and director of Wall Street Investment Corp ⁽⁹⁾ c/o 1530-9^th Ave S.E. Calgary, Alberta, Canada T2G OT7	118,410 Class A common shares directly and 300,369 shares are held indirectly in the name of Argonaut Management Group Inc.⁽³⁾	2.44%
Class A Common	Dr. Brian Raines, director of FACT Corporation ⁽⁴⁾	960,000 Class A common shares held in the name of Food Information Services Inc. ⁽⁵⁾	5.58%
Class A Common	Paul Litwack, director of FACT Corporation and Food and Culinary Technology Group Inc. ⁽⁶⁾	360,000 Class A common shares	2.09%
Class A Common	All Officers and Directors as a group	7,105,059 Class A Common shares	39.9%
Class A Common	Daniel Koyich 1451 Acadia Dr.S.E., Calgary, AB T2J 5B1	1,010,000 Class A common shares	5.87%
Class A Common	Thomas Ringoir R.R. Site 32, Box 2, Calgary, Alberta T3Z 3K	1,000,000 Class A common shares	5.81%

(1)Based on 17,196,367 shares of Class A common stock outstanding.

(2) Mr. Lawler is the beneficial owner of International Securities Group Inc.

(3) Ms. Danforth is the beneficial owner of Argonaut Management Group Inc.

(4) Dr. Raines will receive incentive stock options for 100,000 shares under the Company’s 2003 Stock Option and Stock Award Plan. The stock options have not yet been issued.

(5) Food Information Services Inc. is a Florida corporation owned by Dr. Raines.

(6) Mr. Litwack will receive incentive stock options for 100,000 shares under the Company’s 2003 Stock Option and Stock Award Plan. The stock options have not yet been issued.

Changes in Control

The Company entered into a Fourth Amendment to the Share Exchange and an Amended and Restated Shareholders Agreement on February 2, 2004 with shareholders of its Class C common stock. The purpose of these amendments was to amend the terms of the conversion of the Class C common shares into Class A common shares. As a result of these amendments, the Class A common stock has been converted into 12,000,000 shares of Class A common stock. Under the terms of the Amended and Restated Shareholders Agreement (the “Agreement”) Blue Hole Holdings and Investments Ltd. was granted an option to acquire up to 4,800,000 Class A common shares from certain of the shareholders who were a party to the Agreement for a period of three years from February 2, 2004. The exercise of the option could cause a change in control of the Company if all 4,800,000 shares are exercised, as they would represent 28.7% percent of the present 16, 745,117 shares issued and outstanding as of the date of this filing. The sole officer and director of Blue Hole Holdings and Investments Ltd. is Mark Hulse.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Ultimate Resort Destinations Inc., a Nevada corporation, holds a Secured Convertible Debenture issued to it by the Company in the total amount of $650,000 dated December 31, 2002 and originally maturing on December 31, 2004. During the month of December 2004, the Company renegotiated the terms of the Debenture with the lender to extend the note for a period up to an additional 12 months, or December 31, 2005. Interest will continue to accrue at a rate of 18% per annum, and shall accrue until maturity, at which time the principal and all accrued and unpaid interest shall become due and payable. During fiscal year ended December 31, 2005, the Company paid an amount of $200,905 which was applied first to interest and then to principal. At December 31, 2005, the debenture was renegotiated to extend the term for a further two years to December 31, 2007. Subsequent to the fiscal year ended December 31, 2005, the Company paid down an amount of $27,476 against interest and $181,785 against principal on the debenture and the debenture holder agreed to a reduction in the interest rate to 10% per annum. As at the date of this report, the sole director and officer of Ultimate Resort Destinations Inc. is Mr. Clifford Larry Winsor who is Ms. Danforth’s stepfather.

On April 13, 2004, the Company instructed International Securities Group Inc. (“ISG”) to transfer a total of 360,000 Class A common shares to Paul Litwack from the shares held in trust by ISG to be distributed at the direction of the Company to those parties who shall be determined to have provided or to provide ongoing services to the Company or FACT Group as recommended by the Board of Directors of Corp and approved by ISG. Mr. Litwack is a director of the Company and FACT Group.

During the year, the Company entered into a loan agreement in the total amount of $250,000 with respect to amounts previously advanced, with International Securities Group Inc., which is owned by a member of the Company’s Board of Directors, W. Scott Lawler. The loan is at an interest rate of 10% per annum and has so specific terms of repayment.

ITEM 13. EXHIBITS.

Exhibits:

REGULATION S-B NUMBER	EXHIBIT	REFERENCE
3.1	Articles of Incorporation, as amended	Incorporated by reference to the Exhibits previously filed with Capital Reserve Corporation’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1990
3.2	Amended Bylaws	Incorporated by reference to the Exhibits previously filed with Capital Reserve Corporation’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994
3.3	Articles of Amendment to Articles of Incorporation, filed with the State of Colorado Secretary of State on November 26, 2001	Incorporated by reference to the Exhibits previously filed with FACT Corporation’s Annual Report for Form 10-KSB for the fiscal year ended December 31, 2002 herewith
3.4	Articles of Amendment to Articles of Incorporation, filed with the State of Colorado Secretary of State on February 8, 2002	Incorporated by reference to the Exhibits previously filed with FACT Corporation’s Annual Report for Form 10-KSB for the fiscal year ended December 31, 2002 herewith

10.5	Share Exchange Agreement dated November 20, 2001 by and between Capital Reserve Corporation, Food and Culinary Technology Group, Inc. and Shareholders of Food and Culinary Technology Group, Inc.	Incorporated by reference to the Exhibits previously filed with the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001.
10.7	Fourth Amendment to the Share Exchange Agreement dated February 2, 2004.	Incorporated by reference to the Exhibits previously filed with the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003.
10.8	Amended and Restated Shareholders Agreement dated February 2, 2004	Incorporated by reference to the Exhibits previously filed with the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003.
10.9	Mortgage between FACT Corporation and 948783 Alberta Inc. dated March 17, 2004	Incorporated by reference to the Exhibits previously filed with the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003.

10.10

Offer to Purchase between FACT Corporation and Calfrac Well Services Ltd. dated December 21, 2004

Incorporated by reference to the Exhibits previously filed with the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004.

10.11

Removal of Conditions and Amending Agreement dated February 25, 2005 between FACT Corporation and Calfrac Well Services Ltd.

Incorporated by reference to the Exhibits previously filed with the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004.

31	Section 302 Certification- Chief Executive Officer		Filed herewith
32	Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Filed herewith

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the year ended December 31, 2005 and December 31, 2004:

Services	2005	2004
Audit fees	$15,000	$15,600
Audit related fees	-0-	-0-
Tax fees	-0-	-0-
Total fees	$15,000¹	$15,600

1. These fees are estimates only based on last years fees. The Company has not yet received final invoices.

Audit fees consist of fees for the audit of the Company's annual financial statements or the financial statements of the Company’s subsidiaries or services that are normally provided in connection with the statutory and regulatory filings of the annual financial statements.

Audit-related services include the review of the Company's financial statements and quarterly reports that are not reported as Audit fees.

Tax fees included tax planning and various taxation matters.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FACT CORPORATION

By:/s/ Jacqueline R. Danforth
Name: Jacqueline R. Danforth
Title: President. Principal Executive, Financial and Accounting Officer
Date: April 17, 2006

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated, who constitute the entire board of directors:

By:/s/ Jacqueline R. Danforth
Name: Jacqueline R. Danforth
Title: President and Member of the Board of Directors
Date: April 17, 2006

By:/s/ W. Scott Lawler
Name: W. Scott Lawler
Title: Member of the Board of Directors
Date: April 17, 2006

By:/s/ Dr. Brian Raines

Name: Dr. Brian Raines

Title: Member of the Board of Directors
Date: April 17, 2006

By:/s/ Paul Litwack

Name: Paul Litwack
Title: Member of the Board of Directors
Date: April 17, 2006