U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended:	June 30, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-17232

FACT CORPORATION

(Exact name of small business issuer as specified in its charter)



|COLORADO                                                       | 84-0888594                       
|-------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of
incorporation or organization) | (IRS Employer
Identification No.)

1530 9th Ave S.E.,

Calgary, Alberta Canada T2G 0T7

(Address of principal executive offices)

(403) 204-0260

(Issuer's telephone number)

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

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

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

2,007,983 shares of Class A common stock, no par value, as of August 19, 2003

2,000,000 shares of Class C common stock, no par value, as of August 19, 2003

Transitional Small Business Disclosure Format (check one):	Yes  No X

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the six month periods ended June 30, 2003 and 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2002.

|                                                     | Page   
|---------------------------------------------------- | -------
|                                                     |        
|Unaudited Consolidated Financial Statements          |        
|                                                     |        
|Balance Sheets                                       | 3      
|                                                     |        
|Statements of Operations                             | 4      
|                                                     |        
|Statements of Cash Flows                             | 5      
|                                                     |        
|Statements of Stockholders' Equity                   | 6 to 7 
|                                                     |        
|Notes to Unaudited Consolidated Financial Statements | 8 to 10

2





FACT CORPORATION

Consolidated Balance Sheets

|                                                                                                                           |   | June 30, 2003 |   | December 31, 2002
|-------------------------------------------------------------------------------------------------------------------------- | - | ------------- | - | -----------------
|                                                                                                                           |   | (Unaudited)   |   | Restated
(Note 1)
|ASSETS                                                                                                                    
|Current Assets                                                                                                             |   |               |   |                  
|Cash                                                                                                                       | $ | 31,313        | $ | 26,744           
|Inventory                                                                                                                  |   | 39,857        |   | 3,620            
|Accounts receivable                                                                                                        |   | 97,031        |   | 39,446           
|Accounts receivable (related party)                                                                                        |   | 48,560        |   | 29,351           
|Loans receivable                                                                                                           |   | 15,727        |   | -                
|Prepaid expenses and Deposits                                                                                              |   | 58,917        |   | 257,762          
|Total Current Assets                                                                                                       |   | 291,405       |   | 356,923          
|                                                                                                                           |   |               |   |                  
|Investment in Texas T Companies                                                                                            |   | 92,066        |   | 105,386          
|Investment in Terra Nostra Resources Ltd.                                                                                  |   | -             |   | 10               
|Property and Equipment                                                                                                     |   |               |   |                  
|Intellectual property                                                                                                      |   | 2,540,000     |   | 2,540,000        
|Oil & gas leases                                                                                                           |   | 10,095        |   | 76,919           
|Real Property (net of accumulated depreciation of $204,348 in 2003 and $140,068 in 2002)                                   |   | 2,571,160     |   | 2,227,970        
|Office equipment and computers (net of accumulated depreciation of $9,631 for 2003 and $6,241 in 2002)                     |   | 17,561        |   | 18,722           
|Total Property and Equipment                                                                                               |   | 5,230,892     |   | 4,863,611        
|Total Assets                                                                                                               | $ | 5,522,287     | $ | 5,325,930        
|                                                                                                                           |   |               |   |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                      
|                                                                                                                           |   |               |   |                  
|Current Liabilities                                                                                                        |   |               |   |                  
|Accounts payable                                                                                                           | $ | 432,507       | $ | 332,883          
|Accounts payable (related parties)                                                                                         |   | 267,629       |   | 230,325          
|Loans Payable (related parties)                                                                                            |   | 275,464       |   | 215,403          
|Loans payable                                                                                                              |   | 751,490       |   | 375,681          
|Current portion of long term debt and acquisition cost                                                                     |   | 217,998       |   | 208,082          
|Total Current Liabilities                                                                                                  |   | 1,945,088     |   | 1,362,374        
|                                                                                                                           |   |               |   |                  
|Long Term Liabilities                                                                                                      |   |               |   |                  
|Acquisition cost payable                                                                                                   |   | 1,828,560     |   | 1,849,790        
|Future Site Restoration                                                                                                    |   | -             |   | 1,640            
|Loans payable (related parties)                                                                                            |   | 712,345       |   | 678,796          
|Long-Term Debt                                                                                                             |   | 1,388,794     |   | 1,209,349        
|Total Liabilities                                                                                                          | $ | 5,874,787     | $ | 5,101,949        
|Commitments and contingencies                                                                                              |   |               |   |                  
|Stockholders' Equity                                                                                                       |   |               |   |                  
|Class A Common Stock - authorized 100,000,000 shares of no par value; 8,031,931 issued and outstanding as at June 30, 2003 |   | 6,831,894     |   | 6,708,630        
|Class C stock - authorized 2,000,000 shares of no par value;
	2,000,000 issued and outstanding as at June 30, 2003         |   | 540,000       |   | 540,000          
|Class A Common stock warrants                                                                                              |   | 276,254       |   | 338,498          
|Accumulated deficit                                                                                                        |   | (7,899,950)   |   | (7,191,033)      
|Accumulated other comprehensive (loss)                                                                                     |   | (100,698)     |   | (172,114)        
|Total Stockholders' Equity                                                                                                 |   | (352,500)     |   | 223,981          
|Total Liabilities and Stockholders' Equity                                                                                 | $ | 5,522,287     | $ | 5,325,930        

The accompanying notes are an integral part of these unaudited financial statements

3

FACT CORPORATION

Consolidated Statements of Operations

(Unaudited)



|                                                             |   | For the Three Months Ended June 30, |   | For the Six Months Ended June 30,
|------------------------------------------------------------ | - | ----------------------------------- | - | ---------------------------------
|                                                             |   | 2003                                |   | 2002                             
|Revenues                                                     |   |                                     |   |                                  
|Petroleum & natural gas (net of royalties)                   | $ | 2,847                               | $ | 31,717                           
|Functional food premix                                       |   | 102,375                             |   | -                                
|Rental income                                                |   | 44,239                              |   | 69,408                           
|                                                             |   | 149,461                             |   | 101,125                          
|                                                             |   |                                     |   |                                  
|Costs and Expenses                                           |   |                                     |   |                                  
|Petroleum & natural gas related cost (including depletion)   |   | 5,477                               |   | 32,066                           
|Functional food premix                                       |   | 69,237                              |   | -                                
|Legal                                                        |   | 79,448                              |   | 25,516                           
|Consulting fees                                              |   | 77,855                              |   | 182,286                          
|Consulting fees settled by the issuance of shares            |   | 1                                   |   | -                                
|Depreciation and amortization                                |   | 19,396                              |   | 19,855                           
|Gain on disposition of assets                                |   | (34,811)                            |   | -                                
|Administrative expenses                                      |   | 42,498                              |   | 100,018                          
|Equity in loss of Texas T Petroleum Ltd.                     |   | 31,357                              |   | (118,805)                        
|                                                             |   | 290,458                             |   | 478,546                          
|(Loss) from operations                                       |   | (140,997)                           |   | (377,421)                        
|                                                             |   |                                     |   |                                  
|Other income and expenses                                    |   |                                     |   |                                  
|Other Income                                                 |   | -                                   |   | 1,130                            
|Interest income                                              |   | 19,222                              |   | 11,444                           
|Interest expense                                             |   | (99,134)                            |   | (41,994)                         
|                                                             |   | (79,912)                            |   | (29,420)                         
|                                                             |   |                                     |   |                                  
|Provision for income taxes                                   |   | -                                   |   | -                                
|                                                             |   |                                     |   |                                  
|Net (Loss)                                                   | $ | (220,909)                           | $ | (406,841)                        
|                                                             |   |                                     |   |                                  
|Net (Loss) per Common Share                                  | $ | (0.03)                              | $ | (0.06)                           
|                                                             |   |                                     |   |                                  
|Weighted Average Number of Common Shares Used in Calculation |   | 7,947,691                           |   | 6,971,480                        
|                                                             |   |                                     |   |                                  
|Other comprehensive income                                   |   |                                     |   |                                  
|Net loss                                                     | $ | (220,909)                           | $ | (406,841)                        
|Foreign currency translation adjustment                      |   | 38,272                              |   | 30,925                           
|Unrealized profit (loss) on marketable securities            |   | -                                   |   | 16,903                           
|Total other comprehensive income                             | $ | (187,637)                           | $ | (359,013)                        

The accompanying notes are an integral part of these unaudited financial statements

4



FACT CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

|                                            | Six months ended
|------------------------------------------- | ----------------
|                                            | June 30, 2003   
|Cash From Operating Activities:             |                 
|(Loss) from continuing operations           | $               
|Reconciling adjustments                     |                 
|Depreciation and amortization               |                 
|Equity in Texas T Petroleum Ltd             |                 
|Services paid by Stock Issuance             |                 
|Changes in operating assets and liabilities |                 
|Accounts receivable                         |                 
|Prepaid expenses and deposits               |                 
|Inventory                                   |                 
|Gain of sale of oil and gas assets          |                 
|Gain on acquisition of oil and gas leases   |                 
|Accounts payable and accrued expenses       |                 
|Net Cash Flows From Operating Activities    |                 
|Cash From Investing Activities:             |                 

|Acquisition of property and equipment             |   | (10,095) |   | -       
|------------------------------------------------- | - | -------- | - | --------
|Proceeds from sale of oil and gas assets          |   | 112,080  |   | -       
|Proceeds from (payments to) loans receivable      |   | (15,727) |   | 32,885  
|Net Cash Flows From Investing Activities          |   | 86,258   |   | 32,885  
|Cash From Financing Activities:                   |   |          |   |         
|Loans payable                                     |   | 375,809  |   | (31,722)
|Repayment of long term debt                       |   | (13,952) |   | 38,772  
|Proceeds from loans payable (related parties)     |   | -        |   | 288,631 
|Proceeds from advances payable (related parties)  |   | 93,610   |   | -       
|Repayment of loan                                 |   | (37,360) |   | -       
|Sales of common stock (net of offering costs)     |   | 9,000    |   | 1,275   
|Investor deposits                                 |   | -        |   | 5,000   
|Capital contribution by an officer                |   | 2,428    |   | 3,834   
|Net Cash Flows From Financing Activities          |   | 429,535  |   | 305,790 
|Foreign currency translation adjustment           |   | 44,743   |   | 28,522  
|Net change in cash and cash equivalents           |   | 4,569    |   | (24,832)
|Cash at beginning of period                       |   | 26,744   |   | 30,590  
|Cash at end of period                             | $ | 31,313   | $ | 5,758   
|Supplemental disclosure of cash flow information: |   |          |   |         
|Interest paid                                     | $ | 200,751  | $ | 73,409  
|Income taxes paid                                 | $ | -        | $ | -       

The accompanying notes are an integral part of these unaudited financial statements

5

|Balance at December 31, 2001                                            | 6,917,568 |   | 6,217,571 |  | 2,000,000 |   | 540,000 |  | 1,751,423 |   | 338,039  |   | (5,558,761) |   | (116,366) |   | 1,420,483  
|----------------------------------------------------------------------- | --------- | - | --------- |  | --------- | - | ------- |  | --------- | - | -------- | - | ----------- | - | --------- | - | -----------
|Sale of common stock                                                    | 1,700     |   | 816       |  | -         |   | -       |  | 1,700     |   | 459      |   | -           |   | -         |   | 1,275      
|Issue of shares for services                                            | 996,426   |   | 497,777   |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | 497,777    
|Capital Contribution by Officer                                         | -         |   | 16,691    |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | 16,691     
|Net Loss for the period                                                 | -         |   | -         |  | -         |   | -       |  | -         |   | -        |   | (1,632,272) |   | -         |   | (1,632,272)
|Foreign currency translation adjustment                                 | -         |   | -         |  | -         |   | -       |  | -         |   | -        |   | -           |   | 4,102     |   | 4,102      
|Unrealized loss on marketable securities                                | -         |   | -         |  | -         |   | -       |  | -         |   | -        |   | -           |   | (59,850)  |   | (59,850)   
|Elimination of shares of FACT Corporation held by Texas T Petroleum Ltd | (80,750)  |   | (24,225)  |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | (24,225)   
|Balance at December 31, 2002                                            | 7,834,944 | $ | 6,708,630 |  | 2,000,000 | $ | 540,000 |  | 1,753,123 | $ | 338,498  | $ | (7,191,033) | $ | (172,114) | $ | 223,981    
|Issue of shares for services                                            | 50,880    |   | 16,423    |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | 16,423     
|Issue of shares in part settlement of Acquisition Cost payable          | 42,857    |   | 15,000    |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | 15,000     
|                                                                        |           |   |           |  |           |   |         |  |           |   |          |   |             |   |           |   |            
|Issue of shares                                                         | 22,500    |   | 4,500     |  | -         |   | -       |  | 22,500    |   | 4,500    |   | -           |   | -         |   | 9,000      
|Capital Contribution by Officer                                         | -         |   | 2,428     |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | 2,428      
|Net Loss for the period                                                 | -         |   | -         |  | -         |   | -       |  | -         |   | -        |   | (708,918)   |   | -         |   | (708,918)  
|Foreign currency translation adjustment                                 | -         |   | -         |  | -         |   | -       |  | -         |   | -        |   | -           |   | 71,416    |   | 71,416     
|Elimination of shares of FACT Corporation held by Texas T Petroleum Ltd | -         |   | 18,170    |  | -         |   | -       |  | -         |   | -        |   | -           |   | -         |   | 18,170     
|Cancellation/expiration of 351,286 warrants                             |           |   | 66,744    |  |           |   |         |  | (351,286) |   | (66,744) |   |             |   |           |   |            
|Balance at
June 30,2003                                                 | 7,951,181 |   | 6,831,894 |  | 2,000,000 | $ | 540,000 |  | 1,424,337 | $ | 276,254  |   | (7,899,950) |   | (100,698) |   | (352,500)  



The accompanying notes are an integral part of these unaudited financial statements



7

FACT CORPORATION (formerly Capital Reserve Corporation)

Notes to the Unaudited Financial Statements

June 30, 2003

Note 1 - Management's Statement

The financial statements included herein have been prepared by FACT Corporation (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the December 31, 2002, audited financial statements and the accompanying notes included in the Annual Report on Form 10-KSB. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

The management of the Company believes that the accompanying unaudited financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations and cash flows for the periods presented.

Note 2 - Summary of Significant Accounting Policies

Organization and Operations

The Company was incorporated under the laws of the State of Colorado on August 3, 1982. At June 30, 2003, the Company has four wholly owned subsidiaries, Wall Street Real Estate Ltd., Wall Street Investments Corp., Capital Reserve Canada Limited and Food and Culinary Technology Group, Inc. ("FACT Group"). FACT Bread Company Inc. is a wholly owned subsidiary of FACT Group.

The Company and its subsidiary Wall Street Real Estate Ltd. own and lease real property in the City of Calgary, Alberta, Canada. The Company's subsidiary Capital Reserve Canada Limited owns a minority interest in a producing oil and gas property located in Colorado and oil and gas leases in Montana. The Company is currently in the process of spinning off its subsidiary, Capital Reserve Canada Limited. The Company's primary operations are the business of FACT Group in Freehold, New Jersey, including the supply and license of functional food formulations to various manufacturers, ingredient distributors and food service clients.

Note 3 -Loans Payable (related parties)

Loans Payable from various related parties have the following terms at June 30, 2003 and December 31, 2002 respectively:

|Repayment terms  |  | Interest rate             |   | June 30, 2003 |   | Dec.31, 2002
|---------------- |  | ------------------------- | - | ------------- | - | ------------
|Within 12 months |  | 10%                       | $ | 154,926       | $ | 125,821     
|Within 12 months |  | 20%                       |   | 31,180        |   | 1,544       
|Demand           |  | Bank of Canada prime + 1% |   | 17,055        |   | 7,835       
|Demand           |  | US prime + 1%             |   | 44,922        |   | 43,853      
|Demand           |  | Bank of America prime +2% |   | 11,895        |   | 21,532      
|Demand           |  | 10%                       |   | 15,276        |   | 14,608      
|No terms         |  | None                      |   | 210           |   | 210         
|                 |  |                           | $ | 275,464       | $ | 215,403     

8

Note 3 -Loans Payable (related parties) Cont'd

Loans payable to related parties included in Long Term Liabilities includes an amount due of $712,345 which is secured by a third charge on the Company's commercial properties, as well as the Company's accounts receivable and investments. The loan is convertible into the Company's common stock at the rate of $0.40 until maturity, December 31, 2004. Interest on the debenture is accrued at a rate of 18% p.a., and is payable monthly on the last day of each month until maturity, at which time principal and all accrued and

unpaid interest shall be due and payable. If the shares underlying the debenture are registered by the Company with the SEC in an effective registration statement and the market price of the Company's Class A Common Stock exceeds $1.00 for a ten (10) period of time, the balance of this debenture and all accrued and unpaid interest thereon will automatically convert into shares of Class A Common Stock.



Note 4 - Disposal of Oil & Gas leases

Pursuant to an agreement dated May 16, 2003, the Company's subsidiary, Capital Reserve Canada Limited disposed of its oil and gas leases. The consideration was agreed at for $150,000 CDN ($112,080), plus the forgiveness of certainoutstanding operating expenses.



Note 5 - Other Events

On August 14, 2003, FACT Corp. reached a settlement with the Plaintiffs in the legal matter pending in the Superior Court of the State of New Jersey. As a result of this settlement, the formulas to the pre-mixes and other intellectual property are immediately being released to FACT Corp. The purchase price for the intellectual property remains at $2 million, to be paid in the form of royalties on a per pound of product sold by FACT Group. FACT Group will pay a maximum of $207,500 in additional income to two of the plaintiffs over the next 3 and 1/2 years, commencing in November 2003. The Plaintiffs will be prohibited from competing with FACT Group for 5 years, must keep all trade secrets confidential and provide training for FACT Group's new technical support personnel.



The Company held its annual general meeting on July 17, 2003. The shareholders approved a reverse split of the Company's issued and outstanding shares of Class A Common Stock on the basis of one (1) Class A Common stock for every four (4) Class A Common Stock shares held by each shareholder. The Shareholders also approved the 2003 stock option and stock award plan (the "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.



9

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

FORWARD-LOOKING STATEMENTS

Certain information in this report, including the following discussion, may include forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. The Company intends the disclosure in these sections and throughout this report on Form 10-QSB to be covered by the safe harbor provisions for forward-looking statements. All statements regarding the Company's expected financial position and operating results, its business strategy, its financing plans, and the outcome of any contingencies are forward-looking statements. These statements can sometimes by identified by the Company's use of words such as "may", "believe", "plan", "will", "anticipate", "estimate", "expect", "intend", and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions.

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 premix as well as rental income 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 is in the process of divesting its interests in its third subsidiary, Capital Reserve Canada Ltd ("Capital Canada"). The Company will require approximately $1.0 million to cover its anticipated overhead and operational needs for the upcoming twelve month period. During the upcoming 12 months, revenues generated from existing operations are expected to offset operational overhead by approximately $840,000, including projected net revenues of $294,000 from the functional food business and net revenue of $530,000 from a pending acquisition in the food arena. While the Company has projected net revenues from its foods operations of approximately $824,000 over the upcoming twelve months, there is no guarantee these projections will be achieved. Therefore, the Company may be required to raise up to an additional $1.0 million to meet its projected costs. The Company expects that it will be able to obtain additional equity and/or debt financing to meet this need.

The Company's operational plans call for the expenditure of approximately $290,000 over the next twelve months on ongoing food product refinement, technical support, development of second and third generation functional formulations, and a direct marketing program, including salaries paid to employees and consultants retained for the purposes of providing research and development support. The Company does not intend to participate in any further development of its existing oil and gas properties and has commenced the spin off of Capital Canada, which it expects will be concluded during the third quarter of 2003. In addition the Company intends to divest its real estate assets and equity investments in order to focus on the management and operation of its developing foods business. In the event the Company does divest these other assets, funds derived from the sales will reduce our requirement to raise additional capital. It is impossible to determine the exact impact a sale of one or all of these assets would have on the current cash requirement.

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 is currently negotiating the acquisition of an operating business in the food sector to further enhance its' existing revenue stream. The acquisition is expected to include one product line with existing purchase orders from U.S. retailers totaling gross sales of approximately $150,000. The Company expects to close this transaction during the quarter ended September 30, 2003. Revenues are expected to

10

commence during the fourth quarter of the current fiscal year with anticipated gross margins of between 25% and 30%.

Results of Operations

Comparison of quarters ended June 30, 2003 and 2002

For the six month periods ended June 30, 2003 and 2002 the Company incurred operating losses of $544,128 and $466,302 respectively. June 30, 2003 losses include a substantial increase in legal fees from $46,141 (2002) to $101,276 due to certain legal proceedings with respect to the operations of FACT Group. There was also a substantial increase in administrative expenses for the respective periods which increased to $249,968 (2003) from $189,649 (2002) due to the Company's commencement of a program to increase corporate exposure and attract additional investment from new and existing shareholders in the first quarter of 2003 and additional administrative functions associated with operating the Company's subsidiaries. During the six months ended June 30, 2003, the Company generated revenues from sales of petroleum and natural gas, rental income, and sales of functional food premixes totaling $255,023. Revenues for the same six months in 2002 were limited to sales of petroleum and natural gas and rental income totaling $176,522. Revenues from sales of petroleum and natural gas during the six months ended June 30, 2003 of $26,689 were substantially decreased compared to $41,893 over the six months ended June 30, 2002. This decrease was due to the Company's divestiture of its primary oil and gas revenue generating property with the effective date for the sale being the April production month. Associated production costs were substantially decreased over the respective six month periods from $47,456 (2002) to $17,491 (2003). Rental income also decreased over the comparative six month periods from $134,629 (2002) to $88,834 (2003) as a result of a vacancy in one of the Company's commercial real estate properties. Functional food premix sales were substantially increased during the six month period ended June 30, 2003 totaling $139,500 versus no sales during the same six months in fiscal 2002.

Other income and expenses reflect a substantial increase in interest expenses over the comparative periods from $73,409 (2002) to $200,751 (2003). Interest expenses increased in the six months ended June 30, 2003 as a result of funds obtained during the period through conventional mortgages and loans from private investors to meet a shortfall from its operations.

During the fiscal year ended December 31, 2002 there were certain extraordinary expenses recorded which substantially increased the operating loss for the year. There have been no such similar events during the six months ended June 30, 2003.

Net losses for the two completed periods ended June 30, 2003 and 2002 were $708,918 (2003) and $647,242 (2002) respectively.

Liquidity and Capital Resources

Summary of Working Capital and Stockholders' Equity

As of June 30, 2003, the Company had negative working capital of $1,653,683 and negative Stockholders' Equity of $352,490 compared with negative working capital of $1,005,451 and Stockholders' Equity of $223,981 as of December 31, 2002. The Company's working capital has been decreased as a result of the addition to current liabilities of additional loans. Stockholders' Equity declined predominantly as a result of the operating losses for the period. Additionally, the Company was unable to obtain additional capital investment in amounts sufficient to fund operating losses and cash used as described in our financial statements.

11

Financing activities during the six month period resulted in an increase to loans payable of $469,419 from figures reported at the year ended December 31, 2002 as a result of a second mortgage obtained on certain of the Company's commercial real estate properties and other smaller related party loans. Accounts payable and accrued liabilities increased over the comparative six month periods for the quarters ended June 30, 2003 and 2002 as a result of additional expenses incurred from certain legal proceedings and certain consulting contracts entered into by the Company.



The Company was unable to obtain additional capital investment in amounts sufficient to fund operating losses and cash used as described in our financial statements for the period ended June 30, 2003.

Liquidity

The Company anticipates it will require approximately $1.0 million 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 2003, 2004 and 2005 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. 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 the three months ended June 30, 2003 the Company's primary sources of working capital have come from revenues generated from our operating oil and gas properties, commercial rental properties and sales of functional premix, as well as the net proceeds from:

- $371,350 in the form of an institutional loan for a period of twelve months, bearing interest at a rate of 18% per annum;
- $9,000 from the sales of shares of the Company's common stock; and,
- $98,069 in the form of loans payable from related and arms' length parties at various interest rates and with various repayment terms.

The Company is actively pursuing the divestiture of its real estate and completion of a spin-off of its operational subsidiary, Capital Canada, as well as the liquidation of all marketable and non-marketable securities. On March 6, 2003 the Company announced the pending distribution of all of the issued and outstanding shares of its wholly owned subsidiary, Capital Canada, to the existing shareholders of the Company on the basis of one (1) share of Capital Canada for every five (5) shares of the Company. Holders of the Company's Class C common stock do not have the right to participate in this distribution. As of March 31, 2003 Capital Canada is in debt to the Company in the amount of $658,578, the repayment of which amount, and any subsequent amounts to the date of the spin-off, will be recorded as account receivable on the balance sheet of the Company, repayment of which will be negotiated by the Boards of the Company and Capital Canada, once Capital Canada has an independent Board of Directors in place.

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The Company anticipates this transaction will close during the second quarter of fiscal 2003, and that repayment terms for the amount due can be finalized at that time. The Company will look to establish the most aggressive repayment plan available during negotiation with Capital Canada's independent Board. Additionally, concurrent with the spin off of Capital Canada, the Company will lose certain incremental income from two real estate leases entered into between Capital Canada and two third parties, which income is currently realized through consolidation of Capital Canada's operations for purposes of Fact's financial reporting. The Company does not expect this loss in incremental income to greatly impact its financial position.

Pursuant to an agreement dated May 16, 2003, the Company's subsidiary, Capital Reserve Canada Limited disposed of its oil and gas leases. The consideration has been provisionally agreed at for $150,000 CDN (US $112,080) plus forgiveness of certain operating expenses.

Report of Management's Responsibility

The Company's sole executive officer, Ms. Jacqueline Danforth, who serves as the Company's principal executive officer and principal accounting officer, has implemented the Company's disclosure controls and procedures to ensure that material information relating to the Company is made known to Ms. Danforth. Ms. Danforth has evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date (the "Evaluation Date") of this quarterly report.

Based on such evaluation, Ms. Danforth has concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting her on a timely basis to material information relating to the Company that is required to be included in our reports filed or submitted under the Securities Exchange Act of 1934. Moreover, there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of such recent evaluation.

Prior to the filing date of this quarterly report, the Company had not adopted a complete set of written policies, controls and procedures. The Company is now developing such written document and expects that in the process of such undertaking it will discover internal control policies and practices that the Company should implement and follow that are not part of its current practice.



PART II - OTHER INFORMATION

ITEM 1. 	LEGAL PROCEEDINGS

In June 2003, the Company and its subsidiary Food and Culinary Technology Group Inc. ("FACT Group") were served with a verified complaint filed in the Superior Court of New Jersey in Monmouth County (docket # MON C-164-03) by Steven Schechter, Jennifer Flynn, Steven Capidocasa and G.A.C.T. Group LLC, a New Jersey limited liability company owned by the individual plaintiffs. The complaint sought various remedies including the return of the formulas on which FACT Group has created its functional food pre-mixes. On August 14, 2003, FACT Corp. reached a settlement with the Plaintiffs in the legal matter pending in the Superior Court of the State of New Jersey. As a result of this settlement, the formulas to the pre-mixes and other intellectual property are immediately being released to FACT Corp. The purchase price for the intellectual property remains at $2 million, to be paid in the form of royalties on a per pound of product sold by FACT Group. FACT Group will pay a maximum of $207,500 in additional income to two of the plaintiffs over the next 3 and 1/2 years, commencing in November 2003. The Plaintiffs will be prohibited from competing with FACT Group for 5 years, must keep all trade secrets confidential and provide training for FACT Group's new technical support personnel.

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ITEM 2.	CHANGES IN SECURITIES

Not Applicable



ITEM 3.	DEFAULT UPON SENIOR SECURITIES

Not Applicable

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



The annual meeting of Shareholders was held on July 17, 2003, at which the following items were voted upon:

1. Setting the number of members of the Board of Directors at four (4).

|Voting Results | For       | Against | Abstain
|-------------- | --------- | ------- | -------
|               | 6,471,454 | 0       | 0      

2. The following directors were elected to the Board of Directors to hold such position until the next annual meeting of the shareholders or until their successor is duly elected and qualified:

|Voting Results      | For       | Against | Abstain
|------------------- | --------- | ------- | -------
|Jacqueline Danforth | 6,471,454 | 0       | 0      
|W. Scott Lawler     | 6,471,454 | 0       | 0      
|Paul Litwack        | 6,471,454 | 0       | 0      
|Dr. Brain Raines    | 6,471,454 | 0       | 0      

3. The shareholders ratified the appointment of Miller & McCollom as our auditors for fiscal year 2003.

|Voting Results | For       | Against | Abstain
|-------------- | --------- | ------- | -------
|               | 6,471,454 | 0       | 0      

4. The shareholders approved a reverse split of the Company's issued and outstanding shares of Class A Common Stock on the basis of one (1) Class A Common stock for every four (4) Class A Common Stock shares held by each shareholder

|Voting Results | For       | Against | Abstain
|-------------- | --------- | ------- | -------
|               | 6,471,454 | 0       | 0      



5. The Shareholders approved the 2003 stock option and stock award plan (the "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.

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|Voting Results | For       | Against | Abstain
|-------------- | --------- | ------- | -------
|               | 6,471,454 | 0       | 0      

ITEM 5.	OTHER INFORMATION

Not Applicable

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K

1. Exhibits and Index of Exhibits - see Exhibit Index below

b. 	Reports on Form 8-K: None.



SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FACT CORPORATION

Date: August 19, 2003

By:/s/ Jacqueline Danforth_____Name: Jacqueline DanforthTitle: President and Director



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(a) 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 the Registrant's Quarterly Report on Form 10QSB for the period ended September 30, 2002.               
|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 the Registrant's Quarterly Report on Form 10QSB for the period ended September 30, 2002.               
|10.1                  | Management Agreement with Mr. Loder                                                                                                       | 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, 1998 
|10.2                  | Lease Agreement dated January 15, 2000 by and between Capital Reserve Canada Limited and 319835 Alberta Ltd.                              | Incorporated by reference to Exhibit 10.14 previously filed with Capital Reserve Corporation's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999
|10.3                  | Purchase and Sale Agreement dated March 1, 2000 by and between Capital Reserve Canada Limited and Stone Canyon Resources Limited          | 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, 1999 
|10.4                  | Consulting Agreement dated April 24, 2000 by and between Capital Reserve Corporation and W. Scott Lawler                                  | 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, 2000.
|10.5                  | Share Exchange Agreement dated November 20, 2001 by and between Capital Reserve Corporation, Food and Culinary Technology Group, Inc. and | 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.              
|10.6                  | Lease and Option to Purchase Agreement dated by and between Capital Reserve Corporation and 5 Crowns Investment Corp.                     | 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.              
|31                    | Rule 13a - 14(a)/15d-14(a)
Certification                                                                                                  | Filed herewith                                                                                                                                                         
|32                    | Section 1350 Certification                                                                                                                | Filed herewith                                                                                                                                                         

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