U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the fiscal year ended March 31, 2006.
OR
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to _________.
Commission File Number: 333-102555
INVICTA GROUP INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Nevada | 91-2051923 |
(STATE OR OTHER JURISDICTION OF | (IRS EMPLOYER |
INCORPORATION OR ORGANIZATION) | IDENTIFICATION NO.) |
2400 East Commercial Blvd. Suite 618
Ft. Lauderdale, FL 33308
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: 954-771-0650
Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock par value $.0001per share
Securities Registered Pursuant to Section 12(g) of the Act: None
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No
Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-QSB or any amendment to this Form 10-QSB. [ X ]
The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the average of the closing bid and ask price of the Common Stock on the OTC Bulletin Board system on May 1, 2006 of $.0002, was approximately $938,000. Shares of Common Stock held by each officer and director and by each person who may be deemed to be an affiliate have been excluded.
The number of shares of common stock outstanding as of May 1, 2006 was 469,445,589
INDEX TO FORM 10-QSB | |
Page No. | |
PART I | |
ITEM 1. Financial Statements | |
3 | |
5 | |
6 | |
Statement of Changes in Stockholders' Equity | |
10-12 | |
12 | |
ITEM 4. Controls and Procedures | 12 |
PART II | |
ITEM 1. Legal Proceedings | 13 |
ITEM 2. Changes in Securities | 13 |
ITEM 3. Defaults Upon Senior Securities | 13 |
13 | |
ITEM 5. Exhibits | 13 |
Signatures | 14 |
INVICTA GROUP INC. | ||||
CONSOLIDATED BALANCE SHEET | ||||
March 31, 2006 | ||||
UNAUDITED | ||||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 43,803 | ||
Total current assets | 43,803 | |||
Property and equipment, net of accumulated depreciation | ||||
of $ 37,966 | 16,451 | |||
Other assets: | ||||
Security Deposits | 1,500 | |||
Total other assets | 1,500 | |||
Total Assets | $ | 61,754 | ||
LIABILITIES AND SHAREHOLDERS' (DEFICIT) | ||||
Current liabilities: | ||||
Accounts payable and accrued liabilities | $ | 788,874 | ||
Accrued expenses and other liabilities | 406,159 | |||
Notes payable and convertible debentures | 745,127 | |||
Capital lease obligations | 80,899 | |||
Deferred officer compensation | 268,675 | |||
Total current liabilities | 2,289,734 | |||
Long-term debt | ||||
Notes Payable - shareholders | 250,310 | |||
Total Liabilities | 2,540,044 | |||
Shareholders' (Deficit): | ||||
Preferred stock series B par value $1.00; 175,000 shares | ||||
authorized; 175,000 outstanding | 175,000 | |||
Preferred stock C par value $ 1.00; 330,000 shares | ||||
authorized; 330,000 outstanding | 330,000 | |||
Common stock, par value $.0001, 1,000,000,000 shares | ||||
authorized, 342,223,367 issued and outstanding | 34,222 | |||
Additional paid in capital | 3,268,926 | |||
Retained Earnings (Deficit) | (6,286,438 | ) | ||
Total Shareholders' (Deficit) | (2,478,290 | ) | ||
Total Liabilities and Shareholders' Deficit | $ | 61,754 |
INVICTA GROUP, INC. | |||||||
CONSOLIDATED STATEMENT OF OPERATIONS | |||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 | |||||||
UNAUDITED | |||||||
2006 | 2005 | ||||||
Revenues | $ | 25,061 | $ | 39,994 | |||
Cost of sales | 3,520 | ||||||
Gross Profit | 25,061 | 36,474 | |||||
Selling, general, and administrative expenses | 178,227 | 399,749 | |||||
Operating loss | (153,166 | ) | (363,275 | ) | |||
Net loss | (153,166 | ) | (363,275 | ) | |||
Basic and diluted loss per common share | ($0.000 | ) | ($0.003 | ) | |||
Weighted average common shares outstanding | 315,936,367 | 140,830,305 |
INVICTA GROUP, INC. | ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 | ||||||||||
UNAUDITED | ||||||||||
2006 | 2005 | |||||||||
Cash flows from operating activities: | ||||||||||
Net (Loss) | $ | (153,166 | ) | $ | (363,275 | ) | ||||
Adjustments to reconcile net income to net | ||||||||||
cash provided by operating activities: | ||||||||||
Depreciation | 1,875 | 1,875 | ||||||||
Amortization | 4,125 | |||||||||
Stock issued for services | 59,500 | 118,845 | ||||||||
Changes in assets and liabilities: | ||||||||||
Accounts receivable and prepaid expenses | 13,142 | |||||||||
Other assets | (31,966 | ) | ||||||||
Accounts payable and accrued expenses | (7,848 | ) | 74,668 | |||||||
Net Cash (Used) by Operating Activities | $ | (99,639 | ) | $ | (182,586 | ) | ||||
Cash flows used in investing activities: | ||||||||||
Capital asset expenditures | $ | (3,990 | ) | |||||||
Net Cash (used in ) Investing Activities | 0 | (3,990 | ) | |||||||
Cash flows from financing activities: | ||||||||||
Proceeds from long term debt | $ | 175,000 | $ | 75,000 | ||||||
Proceeds from sale of common stock | 131,500 | |||||||||
Payments on long term debt | (30,261 | ) | (119,600 | ) | ||||||
Net Cash provided by Financing Activities | $ | 144,739 | $ | 86,900 | ||||||
Net change in cash and cash equivalents | 45,100 | (99,676 | ) | |||||||
Cash and cash equivalents, beginning of period | (1,297 | ) | 145,472 | |||||||
Cash and cash equivalents, end of year | $ | 43,803 | $ | 45,796 | ||||||
Additional Cash Flow Information: | ||||||||||
Cash paid during the period for: | ||||||||||
Interest (non capitalized) | $ | 23,474 | $ | 6,672 | ||||||
Income Taxes | $ | - | $ | - | ||||||
Non-Cash Activities: | ||||||||||
Stock issued for deferred compensation payable | 175,000 | |||||||||
Stock issued for payment of convertible debenture | 43,000 |
INVICTA GROUP INC. | |||||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) | |||||||||||||
For the Quarter Ended March 31, 2006 | |||||||||||||
Common Stock | Additional Paid | ||||||||||||
Shares | $ | in capital | Deficit | ||||||||||
Balance December 31, 2005 | 239,569,367 | $ | 23,957 | $ | 3,181,691 | ($6,133,272 | ) | ||||||
Stock issued for cash | |||||||||||||
Stock issued for services | 52,654,000 | 5,265 | 49,235 | ||||||||||
Issuance of Common Stock for the payment | |||||||||||||
on convertible debentures exercised. | 50,000,000 | 5,000 | 38,000 | ||||||||||
Retained earnings adjustment for ISIP | |||||||||||||
Net loss for the period ended | |||||||||||||
March 31, 2006 | (153,166 | ) | |||||||||||
Balance March 31, 2006 | 342,223,367 | $ | 34,222 | $ | 3,268,926 | ($6,286,438 | ) |
INVICTA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
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 March 31, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006.
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, 2005.
NOTE B. CHANGES IN STOCKHOLDERS’ (DEFICIT) FOR THE THREE MONTHS ENDED MARCH 31, 2006
Common Stock | Additional Paid | ||||||||||||
Shares | Amount | in Capital | Deficit | ||||||||||
Balance December 31, 2005 | 239,569,367 | $ | 23,957 | $ | 3,181,691 | $ | (6,133,272 | ) | |||||
Stock issued for cash | |||||||||||||
Stock issued for legal and | |||||||||||||
marketing services | 52,654,000 | 5,265 | 49,235 | ||||||||||
Stock issued in exchange for payment | |||||||||||||
of convertible debentures | 50,000,000 | 5,000 | 38,000 | ||||||||||
Net loss for the three months ended | |||||||||||||
March 31, 2006 | (153,166 | ) | |||||||||||
Balance March 31, 2006 | 342,223,367 | $ | 34,222 | $ | 3,268,926 | $ | (6,286,438 | ) |
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 March 31, 2006 potentially dilutive securities consist of convertible debentures that could be converted into 450,000 common shares and options that could be converted into 3,882,656 common shares.
INVICTA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
UNAUDITED
NOTE D. 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.
NOTE E. 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 expects to be in 2006. Therefore, the entire balance of $ 250 310 is classified as long-term debt for 2006 and $327,766 for 2005. Invicta owes seller of Airplan, Inc. $60,000, but does not intend to pay due to termination of employment contract.
NOTE F. 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 G. SUBSEQUENT EVENT – LEASE COMMITMENT
Effective May 1, 2006, the Company has moved its headquarters from its office in Miami to a new office location in Ft. Lauderdale.
The Company will lease its office space under a five-year, non-cancelable operating lease for approximately $3700 per month.
Obligations under the non-cancelable operating leases are as follow:
Year ending December 31,
2006 $ 29,600
2007 46,000
2008 48,400
2009 50,800
Thereafter 56,800
$231,600
NOTE H. 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 $6,281,438 since inception and the Company had negative working capital of $2,240,931 at March 31, 2006. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
During the next 12 months, management believes that it will be able to generate cash sufficient to support its operations. Management believes that it can generate this cash and ultimately profits from advertising revenues on its website travelhotlink.com. Travel Hot Link has no involvement with the reservation; its revenues are generated from the Travel Supplier that advertises its travel products online. It is estimated that Travel Hot Link will reach a potential 40 million travel enthusiasts that are seeking travel bargains online.
In addition to the assumption regarding increased revenues, in the 1st quarter of 2006, the Company’s management has raised $175,000 in equity funding in 2006 from its securities purchase agreement with Golden Gate Investors, Inc.
Management feels that its increase revenues from its Travel Hot Link web-site, 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’s Discussion and Analysis or Plan of Operation.
BACKGROUND
Invicta Group Inc. began its business operations as a private company in July 2001 with advertising of discount air line tickets in newspapers in South Florida; the goal was to create a website called Don’t Pay Full Fare and sell airline tickets, car rentals and hotel rooms online via www.dontpayfullfare.com Invicta marketing and website awareness started 9/11/2001 and Invicta earned limited sales throughout the year due to limited funding and small revenues and fear of terrorism.
August of 2003 Invicta was approved as a public company by the Securities & Exchange Commission and trading was approved by the NASD Oct 2003. Invicta raised equity funding by selling stock via a Self Registration and used the money for an acquisition of an airline consolidator that was burdened with debt but had airline contracts to sell European destinations. Invicta management felt a capital infusion and expanded routes would make the company profitable in 2004. The results in 10 months was the departure of key management in November, resulting in lost airline contracts, reduced revenues and losses totaling $625,110. The losses used all of Invicta’s working capital as management tried to turn around the company. Invicta absorbed more losses in the first 5 months of 2005 and decided it had to reduce operations to the two Start Up subsidiaries operating as internet companies serving B-2-C; and change the business model of the company.
New Business Model 2006
During 2005 management created the new business model and new subsidiary. The company will focus as an Internet Media Company offering Email broadcast services to travel enthusiasts seeking discounted travel. The company’s name is Travel Hot Link (THL), and its website address is www.travelhotlink.com . Invicta did not have working capital to kick off the marketing of Travel Hot Link and it did not generate revenues from THL in 2005.
CURRENT OPERATIONS STATUS
Invicta completed a SB-2 Offering registering 500 million shares of free trading stock to be sold as equity funding. The company needs working capital to survive and begin marketing its new business plan as an internet media company. The amount of money received is relative to the stock price of IVGA, if the stock price averages one and a half cent ($.015), the company will receive $2.8 million equity funding.
Invicta moved offices from Miami to 2400 E. Commercial Blvd. St # 618, Ft Lauderdale, FL. on May 1st to increase employment pool and have more space to build the company. The lease in Miami was completed and the new office space started 5/1/2006 for a term of 5 years.
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 March 31, 2006 were $25,061as compared to revenues of $36,474 for the quarter ended March 31, 2005. The primary reason for the decrease in 2006 versus 2005 was the loss of airline contracts and shortage of working capital to market IVGA subsidiaries. The companies management are also providing consulting services to public companies and receiving fees for services; the fees are added to the company’s revenue.
Expenses
The major components of general and administrative expenses for three months ended March 31, 2006 are Payroll $61,000; Professional fees $31,567, consulting $40,500 the total G&A expenses for the quarter were $179,523.
Net Losses
Net loss for the quarter ended March 31, 2006 was ($153,166); loss per share: ($0.0004) compared to a net loss of ($363,275); loss per share ($0.003) for the quarter ended March 31, 2005.
Airplan Inc Liability
Invicta has a liability to the seller of Airplan Inc, a subsidiary of Invicta, totaling $400,000. The amount represents $340,000 for the purchase and $60,000 shareholder loan that was on the Balance Sheet acquired. Invicta does not plan to pay this liability due to the seller defaulting on a signed 5 year employment agreement causing the failure of the business. The seller departed after 7 months, resulting in the loss of airline contracts that represented over 50% of the companies revenue. Invicta has not heard from the Seller and has not proceeded with any legal action against the Seller to date.
Funding
1st Quarter 2006, the Company received additional equity advances of approximately $175,000 and issued 50 million shares. Invicta has received advances as of 3/31/06 totaling $625,527: Prepaid Warrant balance is $380,045 and Debenture balance is $245,482.
Liquidity
As of March 31, 2006 and 2005, Invicta Group's current ratios were (.027%) and( .029%) respectively. Invicta Group has not generated sufficient revenue in any period to carry its costs of operations, but had a positive cash flow of $45,100 for the 1st Quarter 3/31/ 2006 due to equity funding and increased Debenture loans. Invicta has derived its liquidity principally from the sale of stock.
Common Stock Issued 2006
Invicta issued 102,734,000 common shares in the 1st Quarter of 2006; 38,918,332 shares were issued for $40,500 consulting, 13,815,668 were issued for professionals fees of $14,000 and 50 million shares were issued to raise $43,000 equity funds. The total number of shares outstanding on 3/31/2006 were 342,223,367
Capital Resources
Invicta needs additional capital invested in the company to assure survival; without new equity funding the company cannot survive. Invicta has negotiated equity funding from an Institutional Investor; Golden Gate Investors Inc. and approval of the SB-2 Offering provides Invicta’s Treasury with 500 Million free trading shares as collateral. The equity funding amount is based on the stock price less 25% discount of the stock’s Bid price over the last 20 days; less current advances. IVGA could receive $2.8 Million equity funding if the stock price averages $.015 per share conversion rate and $3.57 Million if conversion price averages $.020 per share. Invicta’s management believes Invicta needs to raise an additional $250,000 equity funding for capital resources.
ITEM 3. Quantitative & Qualitative Disclosures on Market Risks
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 December 31, 2005, (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
ITEM 1. Legal Proceedings
None at this time
ITEM 2. Changes in Securities
None at this time
ITEM 3. Defaults Upon Senior Securities
None at this time
Item 4. Submission of Matters to a Vote of Security Holders.
None at this time
ITEM 5. Exhibits
None at this time
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. | ||
| | |
By: | /s/ William G. Forhan | |
William G. Forhan Chief Executive Officer and President |
| | |
By: | /s/ Richard David Scott | |
Richard David Scott Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE | TITLE | DATE |
/s/ William G. Forhan | Chief Executive Officer, | May 11, 2006 |
William G. Forhan | President and Director | |
/s/ Richard David Scott | Chief Operating Officer, | May 11, 2006 |
Richard David Scott | Principal Accounting and | |
Financial Officer and Director |
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