U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the quarterly period ended June 30, 2005
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the transition period from _______ to _______
INVICTA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA | 91 205 1923 |
(State of incorporation) | (IRS Employer identification No.) |
9553 Harding Avenue, Miami Beach, Florida 33154
(Address of principal executive offices)
(954) 684-8288
(Issuer's telephone number)
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 [ ]
Number of shares of common stock outstanding as of June 30, 2005:
215,012,341 shares
Number of shares of Preferred Stock outstanding as of June 30, 2005:
175,000 shares
INDEX TO FORM 10-QSB | |
Page No. | |
PART I | |
1 | |
2-3 | |
4-5 | |
6-11 | |
12-14 | |
15 | |
15 | |
PART II | |
16 | |
16 | |
16 | |
16 | |
16 | |
17 |
PART I
ITEM 1. FINANCIAL STATEMENTS
INVICTA GROUP INC. | |||||||
CONSOLIDATED BALANCE SHEET | |||||||
June 30, 2005 | |||||||
(UNAUDITED) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 24,004 | |||||
Advances to affiliates | 21,907 | ||||||
Total current assets | 45,911 | ||||||
Property and equipment, net of accumulated depreciation | |||||||
of $34,216 | 29,306 | ||||||
Other assets: | |||||||
Security Deposits | 3,000 | ||||||
Intangible assets, net of accumulated | |||||||
amortization of $ 16,500 | 110,205 | ||||||
Total Assets | $ | 188,422 | |||||
LIABILITIES AND SHAREHOLDER'S EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 773,174 | |||||
Accrued expenses and other liabilities | 461,998 | ||||||
Notes payable and convertible debentures | 582,600 | ||||||
Capital lease obligations | 80,899 | ||||||
Deferred officer compensation | 423,031 | ||||||
Total current liabilities | 2,321,702 | ||||||
Long-term debt | |||||||
Notes Payable - shareholders | 331,766 | ||||||
Total Liabilities | 2,653,468 | ||||||
Shareholder's equity: | |||||||
Preferred stock par value $1 50,000,000 shares authorized; | |||||||
175,000 issued and outstanding | 175,000 | ||||||
Common stock, par value $ .0001, 1,000,000,000 shares | |||||||
authorized, 215,012,341 issued and outstanding | 21,501 | ||||||
Additional paid in capital | 3,069,829 | ||||||
Retained (Deficit) | (5,731,376 | ) | |||||
Total shareholder's equity | (2,465,046 | ) | |||||
Total Liabilities and Shareholders' Equity | $ | 188,422 |
INVICTA GROUP INC. | ||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
(UNAUDITED) | ||||||||||
Three | Three | |||||||||
Months Ending | Months Ending | |||||||||
June 30, | June 30, | |||||||||
2004 | 2005 | |||||||||
Revenues earned | $ | 248,877 | $ | 41,439 | ||||||
Cost of sales | 3,309 | 631 | ||||||||
Gross profit | 245,568 | 40,808 | ||||||||
Selling, general, and administrative expenses | 612,521 | 280,034 | ||||||||
(Loss) from Operations | (366,953 | ) | (239,226 | ) | ||||||
Other income and (expense) | ||||||||||
Interest income | 566 | |||||||||
Sale of Intangible Assets | 10,000 | |||||||||
Net loss | $ | (366,953 | ) | $ | (228,660 | ) | ||||
Net loss per share weighted average share, basic | ||||||||||
and diluted | ($0.007 | ) | ($0.001 | ) | ||||||
Weighted average shares outstanding, basis and diluted | 55,421,051 | 197,299,773 |
INVICTA GROUP INC. | ||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
(UNAUDITED) | ||||||||||
Six Months Ending | Six Months Ending | |||||||||
June 30, | June 30, | |||||||||
2004 | 2005 | |||||||||
Revenues earned | $ | 377,306 | $ | 81,433 | ||||||
Cost of sales | 3,917 | 4,151 | ||||||||
Gross profit | 373,389 | 77,282 | ||||||||
Selling, general, and administrative expenses | 1,200,918 | 679,783 | ||||||||
Asset impairment charge | 1,023,753 | |||||||||
(Loss) from Operations | (1,851,282 | ) | (602,501 | ) | ||||||
Other income and (expense) | ||||||||||
Interest income | 566 | |||||||||
Sale of Intangible Assets | 10,000 | |||||||||
Net loss | $ | (1,851,282 | ) | $ | (591,935 | ) | ||||
Net loss per share weighted average share, basic | ||||||||||
and diluted | ($0.035 | ) | ($0.003 | ) | ||||||
Weighted average shares outstanding, basic and diluted | 52,296,068 | 169,271,308 |
INVICTA GROUP INC. | ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
(UNAUDITED) | ||||||||||
Six Months Ending | Six Months Ending | |||||||||
June 30, | June 30, | |||||||||
2004 | 2005 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | (1,851,282 | ) | $ | (591,935 | ) | ||||
Adjustments to reconcile net income to net | ||||||||||
cash provided by operating activities: | ||||||||||
Depreciation | 26,490 | 3,750 | ||||||||
Amortization | 6,450 | 8,250 | ||||||||
Asset impairment charge | 1,023,753 | |||||||||
Stock issued for services | 317,500 | 178,970 | ||||||||
Changes in assets and liabilities: | ||||||||||
Accounts receivable and prepaid expenses | 12,970 | |||||||||
Other assets | (154,910 | ) | 28,794 | |||||||
Accounts payable & accrued liabilities | 283,286 | 120,713 | ||||||||
(348,713 | ) | (238,488 | ) | |||||||
Cash flows used in investing activities: | ||||||||||
Capital asset expenditures | (9,046 | ) | (6,880 | ) | ||||||
Cash flows used in financing activities: | ||||||||||
Proceeds from long term debt | 184,000 | 97,000 | ||||||||
Proceeds from sale of comon stock | 593,095 | 157,500 | ||||||||
Payments on long term debt | (446,637 | ) | (130,600 | ) | ||||||
330,458 | 123,900 | |||||||||
Net change in cash and cash equivalents | (27,301 | ) | (121,468 | ) | ||||||
Cash and cash equivalents, beginning of period | 360,595 | 145,472 | ||||||||
Cash and cash equivalents, end of period | $ | 333,294 | $ | 24,004 | ||||||
Additional Cash Flow Information: | ||||||||||
Cash paid during the period for: | ||||||||||
Interest (non capitalized) | $ | 1,896 | ||||||||
IncomeTaxes | $ | 0 | $ | 0 | ||||||
Non-Cash Activities: | ||||||||||
Stock issued for acquisitions | $ | 510 | ||||||||
Stock issued for deferred compensation payable | $ | 621,225 | $ | 175,000 | ||||||
Stock issued for stock subscriptions receivable | $ | 452,000 |
INVICTA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
UNAUDITED
NOTE A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 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 (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries’ annual report on Form 10-K for the year ended December 31, 2004.
NOTE B. CHANGES IN STOCKHOLDERS’ (DEFICIT) FOR THE THREE MONTHS ENDED JUNE 30, 2005
Common Stock | Additional Paid | ||||||||||||
Shares | Amount | in Capital | Deficit | ||||||||||
Balance March 30, 2005 | 171,380,561 | $ | 17,138 | $ | 2,988,068 | $ | (5,502,716 | ) | |||||
Stock issued for cash | 9,464,285 | 946 | 14,054 | ||||||||||
Stock issued for legal and | |||||||||||||
marketing services | 25,785,715 | 2,579 | 57,545 | ||||||||||
Stock issued in exchange for payment | |||||||||||||
of convertible debentures | 8,381,780 | 838 | 10,162 | ||||||||||
Net loss for the six months ended | |||||||||||||
June 30, 2005 | (228,660 | ) | |||||||||||
Balance June 30, 2005 | 215,012,341 | $ | 21,501 | $ | 3,069,829 | $ | (5,731,376 | ) |
NOTE C. INCOME PER SHARE
Basic net loss per share was computed based on the weighted average shares of common stock outstanding and excludes any potential dilution. Diluted net loss per share reflects the potential dilution from the exercise or conversion of all dilutive securities, such as convertible debentures, into common stock and stock purchase options. The Company’s outstanding convertible debentures and options are not included in the computation of basic or diluted net loss per share since they are anti-dilutive. At June 30, 2005 potentially dilutive securities consist of convertible debentures that could be converted into 433,666 common shares and options that could be converted into 3,882,656 common shares.
INVICTA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
UNAUDITED
NOTE D. ACCOUNTS PAYABLE - AIRPLAN ACQUISITION
As a result of the Company’s $500,000 stock payment for the purchase of Airplan, and guaranteeing the value of the stock price, the Company recorded a $360,000 accounts payable that represented the difference between the $500,000 purchase price, and the $140,000 value of the 500,000 shares issued at the date of acquisition. The purchase included a 5-year employment agreement with the seller as part of the purchase. Because of the seller’s resignation in November 2004, and the corresponding loss of business and eventual closing of the Airplan operation, the Company is disputing the balance due, and considering the purchase fully paid to the seller. The payable of $360,000 will be removed from the Company’s financial statements in the 4th quarter of 2005.
NOTE E. DEFERRED OFFICER’S COMPENSATION
In exchange for deferred compensation due to the officers of the corporation, the Company issued 175,000 shares of series B Convertible Preferred Stock at $1.00 per share reducing compensation due to the officers by $175,000.
Each share of the series B Preferred Stock is convertible into fifty (50) shares of the Corporation’s Common Stock. Holders of the series B Preferred Stock shall be entitled to one thousand votes for each share of Series B Preferred Stock held of record on all matters submitted to a vote of stockholders and may not cumulate their votes for the election of directors.
NOTE F. CAPITAL LEASE
The capital lease liability is for leased phone equipment for Aiplan that was to expire on March 31, 2005. Since the Company did not notify the lessor in writing of its intent to cancel the lease was automatically renewed for a period of two years. The lessor has confirmed receipt of a verbal cancellation notice, but is still contending no written cancellation was received. Because of this the Company is disputing this amount. Management has forwarded the Company’s current financial information to the lessor’s attorneys indicating that no assets exist to pay this liability, and since the operations of the Company have been ceased they have requested them to stop pursuing payment on this amount. Management plan to remove the liability effective December 31, 2005.
NOTE G. NOTES PAYABLE - SHAREHOLDERS
Note payable to shareholders, uncollateralized, payable on the first month after the Company has received $1,000,000 in equity funding in monthly installments of approximately $20,000. Invicta is in default on the payments to shareholders due to a cash flow shortage. Shareholder recognizes default status and will accept 7% interest on note from 1/2/05 until paid in full. The Company plans to begin these payments as soon as the necessary cash flow is available which management
INVICTA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
UNAUDITED
expects to be in 2006. Therefore, the entire balance of $ 276,977 is classified as long-term debt for 2004 and $344,146 for 2003. Invicta owes seller of Airplan, Inc. $60,000, but does not intend to pay due to termination of employment contract.
NOTE H. SPINOFF OF SUBSIDIARY - ISIP TELECOM, INC.
On July 2, 2004, Invicta Group, Inc.’s board of directors approved a spin-off of its subsidiary ISIP Telecom, Inc. Shareholders of record as of August 20, 2004 will receive 1 share of ISIP Telecom, Inc., for every 5 shares owned in Invicta Group, Inc. Invicta Group, Inc. will maintain a 25% ownership in ISIP Telecom, Inc.
All activities of ISIP Telecom commenced after the issuance of the stock to shareholders of Invicta Group, Inc., resulting in an allocation of 25% of the loss of $14,560 to the Invicta Group, Inc.
Invicta will officially spinoff ISIP at 12/31/04 year end and will be issued 6 million shares of restricted stock for payment of the Spin Off.
NOTE I. INCREASE IN CAPITAL STOCK
The Company adopted the Amendment to increase its authorized capital stock by authorizing an increase in Common Stock to 1 Billion shares of Common Stock and Preferred Stock to 50,000,000 shares. The majority stockholders of the Company as of February 8, 2005, have consented to the increase in authorized shares of Common Stock, which will became effective on February 28, 2005 (the "Effective Date").
NOTE J. GOING CONCERN
The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has incurred losses of $5,731,376 since inception and the Company had negative working capital of $2,241,025 at June 30, 2005. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems. During the next 12 months, management does not believe that it will be able to generate cash sufficient to support its operations. As a result, the Company’s ability to continue as a going concern is contingent upon its ability to secure equity funding, financing and to attain profitability. Management has raised $93,000 in equity funding in 2005 and it has entered into a securities purchase agreement with Golden Gate Investors, Inc. in connection with the sale of (i) $300,000 in convertible debentures and (ii) warrants to buy
3,000,000 shares of our common stock. In addition, management plans to continue to look for acquisitions to enhance profitability. Management feels the synergy of the subsidiaries will create profitability in the future.
Management feels that its equity and financing plans will provide the working capital to allow it to continue as a going concern, however, there can be no assurances the Company will be successful in its efforts to secure additional equity funding, financing or attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
2nd Quarter 2005
Background
Invicta Group Inc. has a management team experienced in the Travel and Gaming Industries. Invicta began its business operations in July 2001 with advertising International discounted airline tickets online and in local newspapers, with the goal to become a public company and raise the funds needed to upgrade the website, brand the name, and implement the business plan. Invicta became a public company August 16, 2003, and began trading OTCBB 11/6/03. Invicta began its business plan Jan 2, 2004: January 8th acquired a VoIP Telecom company, February 17th Invicta acquired an Air Consolidator company, March 15th announced the opening of our Las Vegas office and start-up subsidiary Las Vegas Excitement, and August 15th started a cruise agency named Cruise Excitement. The company was under capitalized through out 2004; Invicta Registered 113,625,000 shares of stock to be sold in an effort to raise working capital. The company raised $1,503,595, not enough money to brand the subsidiaries successfully. The financial results for 2004 showed Sales exceeding $10 million, Revenues of $734,402 and Operating Losses of $1,970,734. The company also wrote off all of the Intangible Assets of $1,322,221 totaling losses for 2004 at $3,292,955.
Current Operations
Invicta losses have continued and shortage of working capital has forced the company to close operations of all subsidiaries except Casino Rated Players. Invicta sold its air consolidator company’s 800 phone number and sales staff to an investment banking company 4/26/2005. Airplan continued loosing money and its customer base diminished as cash flow problems haunted the company and commissions could not be paid timely to travel agents. Airplan’s cash flow problems created increasing payables to travel agents resulting in a decrease of customer loyalty and a death spiral of lost revenues.
Invicta’s cash shortage has left the company without advertising dollars to invest in its other subsidiaries, and the lack of phone calls and sales has created additional cash flow problems. Invicta has laid off all employees and management continues to work on the creation of the new business model: an Internet media company that Emails 40 million travel enthusiasts travel discounts: www.travelhotlink.com
Spinoff of ISIP Telecom Inc.
Invicta has received 6 million shares of ISIP Telecom Inc. on May 11, 2005 as payment of the Spinoff of the company. Invicta announced the Spinoff of subsidiary ISIP on 7/8/2004, offering a dividend to Invicta shareholders of record 8/20/2004; receiving 1 share of ISIP for every 5 owned in Invicta. ISIP issued 12,164,457 shares to Invicta shareholders on 10/11/2004. ISIP intends to file a registration with the SEC to become a public company in the near future. The stock received from ISIP will be added to Invicta’s Balance Sheet when ISIP becomes public and starts trading on the Pink Sheets or OTCBB.
New Business Model
Travel Hot Link is the future of IVGA. Travel Hot Link is an online media company that will offer discounted travel products on the Internet: cruises, airline tickets, hotels, holiday packages, and car rentals. The traveler will buy the advertised product online via a link to the travel advertisers website. Invicta is creating a new website: www.travelhotlink.com Invicta Group Inc (IVGA) announced the signing of an exclusive marketing agreement that offers Invicta Group 40 million Emails of double opt-in travel enthusiasts that are seeking travel discounts online. Invicta will use the database to market its Internet media company TRAVEL HOT LINK…reaching 40 million Internet viewers monthly.
Shares Issued in 2nd Quarter 2005
IVGA issued 43,631,780 shares, from April 1, 2005 to June 30, 2005
1) | 17,846,065 shares funding for working capital…………..$26,000 |
2) | 25,785,715 shares were issued for professional fees… $60,124 |
Shares outstanding 6/30/2005 total 215,012,341
The following discussion and analysis should be read in conjunction with
Invicta Group's consolidated financial statements included in this report.
Results of Operations
Revenues
Revenues are net commission and fees, there is no cost of sale. Revenues for the Quarter ended June 30, 2005 were $41,439 as compared to revenues of $248,877 for the Quarter ended June 30, 2004. The six month comparisons were: Revenues for six months ending 6/30/2005 were $81,433 compared to $377,306 for six months ending 6/30/2004. The primary reason for the decrease in 2005 over 2004 was the lost airline contracts from Airplan Inc.
Expenses
The major components of general and administrative expenses for three months ended June 30, 2005: Payroll was $116,351 vs. $245,705 in 2004; Marketing $22,315 vs. $67,583 in 2004; Professional fees were $50,125 vs. $31,000 in 2004. The total G&A expenses for the three months were $280,034 compared to $612,521 three month period in 2004. The six month G&A expenses for 6/30/2005 were $679,803 compared to $1,200,918 for six months 2004.
Net Losses
Net loss for the Quarter ended June 30, 2005 were ($228,660); loss per share was ($0.001) compared to a net loss of ($366,953) June 30,2004 and loss per share ($0.007) for the Quarter ended June 30, 2004. The six month losses 6/30/2005 were ($591,935) versus losses of ($1,851,282) for the same period 2004; loss per share ($.003) six months 2005 vs. ($.035) in 2004.
Funding
Invicta raised $26,000 in 2nd Quarter 2005 from the sale of stock.
Liquidity
As of June 30, 2005 and June 30, 2004, Invicta Group's current ratios were (0.019) and (0.013) respectively. Invicta Group has not generated sufficient revenue in any period to carry its costs of operations. Invicta Group has derived its liquidity principally from the sale of stock in 2005. Invicta is in default of Debentures totaling $59,600; funds are not available for payments.
Capital Resources
Invicta Group Inc. anticipates $300,000 is needed for capital resources in 2005, to continue updating the new website : www.travelhotlink.com
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
We do not have any material risk with respect to changes in foreign currency exchange rates, commodities prices or interest rates. We do not believe that we have any other relevant market risk with respect to the categories intended to be discussed in this item of this report.
ITEM 4. CONTROLS AND PROCEDURES
Invicta Group's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of Invicta Group's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, (the "Evaluation Date"), have concluded that, as of the Evaluation Date, Invicta Group's disclosure controls and procedures were effective to ensure the timely collection, evaluation, and disclosure of information relating to Invicta Group that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated under the Act. There were no significant changes in Invicta Group's internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Invicta received on 1/15/05 a law suit from the owners of Jamaican Travel Services claiming a Breach of Purchase and Employment Contract with Invicta. Invicta entered a Purchase Agreement with Jamaican Travel 6/12/04 and rescinded the Agreement due to lack of due diligence information on 8/22/04. Invicta and its officers are being sued. Invicta has hired legal counsel in California to defend the allegations. A trial date has not been set. The Company expects a trial date in late 2005 or early 2006.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
May 11, 2005 Invicta received 6 million shares of ISIP Telecom Inc. (Spinoff subsidiary) representing 25% ownership of ISIP. ISIP plan is to become a public OTCBB company, the stock of ISIP will be added to IVGA Balance Sheet.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Item 1.01 | Entry into a material Definitive Agreement. Filed April 20,2005 |
Invicta Group Inc. and its wholly owned subsidiary ISIP Telecom Inc. have reached and agreement for a purchased of VoIP Inc. VoIP Inc. sales volume for last year was $1.1 million and its pre tax profits exceeded $100,000. VoIP Inc. is a Delaware Corporation established in 2002 and headquartered in Southern California. VoIP Inc. specializes in selling equipment to the VoIP market including hardware and software, and is one of the largest resellers of Cisco products in the telecommunication marketplace.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INVICTA GROUP INC. (Registrant) | ||
| | |
Date: October 22, 2005 | By: | /s/ WILLIAM FORHAN |
WILLIAM FORHAN Chief Executive Officer |
| | |
Date: October 22, 2005 | By: | /s/ David Scott |
David Scott Chief Operating Officer |
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