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 September 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 September 30, 2005:
237,569,367 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 | |||||||
September 30, 2005 | |||||||
(UNAUDITED) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Advances to affiliates | $ | 21,887 | |||||
Total current assets | 21,887 | ||||||
Property and equipment, net of accumulated depreciation | |||||||
of $36,091 | 27,431 | ||||||
Other assets: | |||||||
Security Deposits | 1,500 | ||||||
Intangible assets, net of accumulated | |||||||
amortization of $ 20,625 | 106,080 | ||||||
Total Assets | $ | 156,898 | |||||
LIABILITIES AND SHAREHOLDER'S EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 783,174 | |||||
Accrued expenses and other liabilities | 496,057 | ||||||
Notes payable and convertible debentures | 565,663 | ||||||
Capital lease obligations | 80,899 | ||||||
Deferred officer compensation | 472,282 | ||||||
Total current liabilities | 2,398,075 | ||||||
Long-term debt | |||||||
Notes Payable - shareholders | 325,066 | ||||||
Total Liabilities | 2,723,141 | ||||||
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, 237,569,367 issued and outstanding | 23,757 | ||||||
Additional paid in capital | 3,092,010 | ||||||
Retained (Deficit) | (5,857,010 | ) | |||||
Total shareholder's equity | (2,566,243 | ) | |||||
Total Liabilities and Shareholders' Equity | $ | 156,898 |
INVICTA GROUP INC. | ||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
(UNAUDITED) | ||||||||||
Three | Three | |||||||||
Months Ending | Months Ending | |||||||||
September 30, | September 30, | |||||||||
2004 | 2005 | |||||||||
Revenues earned | $ | 254,650 | $ | 16,608 | ||||||
Cost of sales | 4,825 | |||||||||
Gross profit | 249,825 | 16,608 | ||||||||
Selling, general, and administrative expenses | 639,774 | 142,243 | ||||||||
Net loss | $ | (389,949 | ) | $ | (125,634 | ) | ||||
Net loss per share weighted average share, basic | ||||||||||
and diluted | ($0.006 | ) | ($0.001 | ) | ||||||
Weighted average shares outstanding, basis and diluted | 60,567,999 | 224,318,542 |
INVICTA GROUP INC. | ||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
(UNAUDITED) | ||||||||||
Nine Months Ending | Nine Months Ending | |||||||||
September 30, | September 30, | |||||||||
2004 | 2005 | |||||||||
Revenues earned | $ | 631,956 | $ | 98,041 | ||||||
Cost of sales | 8,742 | 4,151 | ||||||||
Gross profit | 623,214 | 93,890 | ||||||||
Selling, general, and administrative expenses | 1,840,692 | 822,025 | ||||||||
Asset impairment charge | 1,023,753 | |||||||||
(Loss) from Operations | (2,241,231 | ) | (728,135 | ) | ||||||
Other income and (expense) | ||||||||||
Interest income | 566 | |||||||||
Sale of Intangible Assets | 10,000 | |||||||||
Net loss | $ | (2,241,231 | ) | $ | (717,569 | ) | ||||
Net loss per share weighted average share, basic | ||||||||||
and diluted | ($0.040 | ) | ($0.004 | ) | ||||||
Weighted average shares outstanding, basic and diluted | 56,670,165 | 187,661,798 |
INVICTA GROUP INC. | ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
(UNAUDITED) | ||||||||||
Nine Months Ending | Nine Months Ending | |||||||||
September 30, | September 30, | |||||||||
2004 | 2005 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | (2,241,231 | ) | $ | (717,569 | ) | ||||
Adjustments to reconcile net income to net | ||||||||||
cash provided by operating activities: | ||||||||||
Depreciation | 45,420 | 5,625 | ||||||||
Amortization | 10,575 | 12,375 | ||||||||
Asset impairment charge | 1,023,753 | |||||||||
Stock issued for services | 385,500 | 178,970 | ||||||||
Write off receivable from affiliate | 14,600 | |||||||||
Changes in assets and liabilities: | ||||||||||
Accounts receivable and prepaid expenses | (10,135 | ) | 12,990 | |||||||
Other assets | (163,091 | ) | 30,294 | |||||||
Accounts payable & accrued liabilities | 290,220 | 214,023 | ||||||||
(644,389 | ) | (263,292 | ) | |||||||
Cash flows used in investing activities: | ||||||||||
Capital asset expenditures | (26,789 | ) | (6,880 | ) | ||||||
Cash flows used in financing activities: | ||||||||||
Proceeds from long term debt | 350,305 | 104,500 | ||||||||
Proceeds from sale of comon stock | 589,595 | 181,937 | ||||||||
Payments on long term debt | (485,558 | ) | (161,737 | ) | ||||||
454,342 | 124,700 | |||||||||
Net change in cash and cash equivalents | (216,836 | ) | (145,472 | ) | ||||||
Cash and cash equivalents, beginning of period | 360,595 | 145,472 | ||||||||
Cash and cash equivalents, end of period | $ | 143,759 | $ | - | ||||||
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 | $ | 510,000 | ||||||||
Stock issued for deferred compensation payable | $ | 621,225 | $ | 175,000 | ||||||
Stock issued for stock subscriptions receivable | $ | 77,000 |
INVICTA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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 September 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 SEPTEMBER 30, 2005
Common Stock | Additional Paid | ||||||||||||
Shares | Amount | in Capital | Deficit | ||||||||||
Balance June 30, 2005 | 215,012,341 | $ | 21,501 | $ | 3,069,829 | $ | (5,731,376 | ) | |||||
Stock issued in exchange for payment | |||||||||||||
of convertible debentures | 22,557,026 | 2,256 | 22,181 | ||||||||||
Net loss for the nine months ended | |||||||||||||
September 30, 2005 | (125,634 | ) | |||||||||||
Balance September 30, 2005 | 237,569,367 | $ | 23,757 | $ | 3,092,010 | $ | (5,857,010 | ) |
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 September 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
SEPTEMBER 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
SEPTEMBER 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. SALE of CASINO RATED PLAYERS
The company sold subsidiary Casino Rated Players 9/30/2005 for 4 million shares of Casino Players Inc. stock. Casino Players filed a Registration 11/7/2005 with the SEC for approval to become a public company. Upon effective date, Casino Players Inc. will trade on the Pink Sheets and add value to Invicta’s Balance Sheet.
NOTE K. 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 $5,857,010 since inception and the Company had negative working capital of $2,331,442 at September 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 $101,500 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
3rd 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’s revenues have ceased due to continued shortage of working captal. The lack of working capital has forced the company to close operations of all subsidiaries except Casino Rated Players. Invicta’s cash shortage has left the company without advertising dollars to invest in its other subsidiaries. The company 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
Sale of Casino Rated Players.
Invicta has sold its subsidiary Casino Rated Players for 4 million shares of Casino Players Inc. on 9/30/2005. Casino Players filed a Registration with the SEC on November 8, 2005 to become a public company The stock received from Casino Players Inc. will be added to Invicta’s Balance Sheet when it becomes public and starts trading on the Pink Sheets.
New Business Model
The future of IVGA. Is Travel Hot Link , 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 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. The business plan has not kicked off, and will be on hold until th company is current with financial filings with the SEC. IVGA will file for OTCBB trading approval and seek equity funding to restart the company.
Shares Issued in 3rd Quarter 2005
IVGA issued 22,557,026 shares, from July 1, 2005 to September 30, 2005
1) | 22,557,026 shares funding for working capital…………..$24,437 |
Shares outstanding 9/30/2005 total 237,569,367
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 September 30, 2005 were $16,608 compared to revenues of $254,650 for the Quarter ended September 30, 2004. The nine month comparisons were: Revenues for nine months ending 9/30/2005 were $98,041 compared to $631,956 for nine months ending 9/30/2004. 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 September 30, 2005 vs. September 30,004: Payroll was $87,000 vs. 252,461; Marketing $2,500 vs. $132,000; Professional fees were $31,000 vs. $31,500. The total G&A expenses for the three months 9/30/2005 were $142,242 compared to $639,774 three month period in 2004. The nine month G&A expenses for 9/30/2005 were $822,025 compared to $1,840,692 for nine months 2004.
Net Losses
Net losses for the Quarter ended September 30, 2005 were ($125,634); loss per share was ($0.001) compared to a net loss of ($389,9491) September 30,2004 and loss per share ($0.006) for the Quarter ended September 30, 2004. The nine month losses 9/30/2005 were ($717,569) versus losses of ($2,241,231) for the same period 2004; loss per share ($.004) nine months 2005 vs. ($.040) in 2004.
Funding
Invicta raised $24,437 in 3rd Quarter 2005 from the sale of stock.
Liquidity
As of September 30, 2005 and September 30, 2004, Invicta Group's current ratios were (0.009) 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
Filed September 19,2005
Invicta has changed, effective September 19, 2005, its Certifying Accountant from Larry Wolfe, C.P.A. to Baum and Company, P.A. The change in accountants was recommended and approved by the audit committee of the Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Filed September 19, 2005
Item 4.01. Change in Registrant’s Certifying Accountant
Registrant has changed, effective September 19, 2005, its Certifying Accountant from Larry Wolfe, C.P.A. to Baum and Company, P.A. The change in accountants was recommended and approved by the audit committee of the Board of Directors.
The principal accountant's reports on the financial statements of the Registrant since their engagement contained no adverse opinion or a disclaimer of opinion, nor was qualified or modified as to uncertainty, audit scope, or accounting principles, except for the expression of substantial doubt about the Registrant’s ability to continue as a going concern.
During the two most recent fiscal years and all subsequent interim periods preceding its resignation, there were no disagreements with Larry Wolfe, C. P. A. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Larry Wolfe, C. P. A. would have caused it to make reference to the subject matter of the disagreements in connection with its report.
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 21, 2005 | By: | /s/ WILLIAM FORHAN |
WILLIAM FORHAN Chief Executive Officer |
| | |
Date: October 21, 2005 | By: | /s/ David Scott |
David Scott Chief Operating Officer |
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