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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
or
[ ] 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: 333-102555
INVICTA GROUP, INC.
(Exact name of Registrant as specified in its charter)
Nevada 91-2051923
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1165 North Clark Street, Suite 410 Chicago, Illinois 60610
(Address of principal executive offices - Zip Code)
(312) 867-0033
(Registrant's telephone number, including area code)
2400 East Commercial Boulevard, Suite 618, Fort Lauderdale, FL 3308
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company X
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
No X
<page>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes
No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On November 7, 2008, 501,543,285 shares of the issuer's common stock were
outstanding.
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
MATTER OF FORWARD-LOOKING STATEMENTS
THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" THAT CAN BE IDENTIFIED BY
THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL,"
"SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS
OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY
THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER
THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO,
STATEMENTS REGARDING THE COMPANY'S MARKETING PLANS, GOALS, COMPETITIVE
CONDITIONS, REGULATIONS THAT AFFECT PUBLIC COMPANIES THAT HAVE NO EXISTING
BUSINESS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS.
NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT
THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED. ACTUAL EVENTS OR RESULTS MAY
DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS
OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS
SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS
DESCRIBED IN THIS FORM 10-Q FOR INVICTA GROUP, INC., INCLUDING, BUT NOT
LIMITED TO THE MATTERS SET FORTH IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT
LIMITED TO, THE RISK FACTORS AND UNCERTAINTIES SET FORTH IN ITEM 1A, RISKS
ASSOCIATED WITH A SMALL COMPANY THAT HAS ONLY A LIMITED HISTORY OF OPERATIONS,
OUR EXISTING WORKING CAPITAL DEFICIT, THE COMPARATIVELY LIMITED FINANCIAL
RESOURCES OF THE COMPANY, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER
ESTABLISHED COMPETITORS, ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED,
EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO
OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT
EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR
TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.
As used herein, the term "the Company," "we," "us," and "our" refer to
Invicta Group, Inc., a Nevada corporation, unless otherwise noted.
2
<page>
INVICTA GROUP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2008
(UNAUDITED)
<table>
<s> <c>
ASSETS
Current assets:
Cash and cash equivalents $29,905
Accounts receivable 32,099
Inventory 148,894
Other current assets 2,805
-------------
Total current assets 213,703
-------------
Other assets 10,000
-------------
Total assets $223,703
=============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities 135,028
Deferred revenue 37,022
Convertible debentures - Golden Gate 149,285
Convertible debentures - new 27,813
Derivative liability 237,500
Other notes payable 304,959
-------------
Total current liabilities 891,607
-------------
Shareholders' equity (deficit)
Preferred stock series G par value $.0001, 50,000,000 shares
authorized; 5,000,000 issued and outstanding 500
Preferred stock series H par value $.0001, 50,000,000 shares
authorized; 53,332 issued and outstanding 5
Common stock, par value $ .0001, 1,000,000,000 shares
authorized, 387,716,798 issued and outstanding 38,772
Additional paid in capital 9,732,427
Accumulated deficit (10,439,608)
-------------
Total shareholders' deficit (667,904)
-------------
Total liabilities and shareholders' deficit $223,703
=============
</table>
See accompanying notes to consolidated financial statements
3
<page>
INVICTA GROUP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
<table>
<s> <c> <c>
2008 2007
--------------- ---------------
Revenues earned $211,735 $3,460
Cost of sales 189,242
--------------- ---------------
Gross profit 22,492 3,460
Selling, general, and administrative expenses 195,481 331,611
--------------- ---------------
Income (loss) from operations before other income and expense (172,989) (328,151)
Other income and (expense)
Interest expense - related parties - (13,252)
Interest expense (57,635) (126,020)
Valuation allowance on acquired assets - -
--------------- ---------------
Net income (loss) before provision for income taxes (230,624) (467,423)
Provision for income taxes - -
--------------- ---------------
Net income (loss) $(230,624) $(467,423)
=============== ===============
Net income (loss) per share weighted average share, basic
and diluted ($0.00) ($1.52)
=============== ===============
Weighted average shares outstanding, basis and diluted 307,124,851 308,484
=============== ===============
</table>
See accompanying notes to consolidated financial statements
4
<page>
INVICTA GROUP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
<table>
<s> <c> <c>
2008 2007
--------------- ---------------
Revenues earned $238,459 $57,473
Cost of sales 189,242 -
--------------- ---------------
Gross profit 49,216 57,473
Selling, general, and administrative expenses 476,710 783,173.00
--------------- ---------------
Income (loss) from operations before other income and expense (427,494) (725,700)
Other income and (expense)
Interest expense - related parties (3,500) (15,383)
Interest expense (60,580) (222,594)
Valuation allowance on acquired assets (2,000,000) -
--------------- ---------------
Net income (loss) before provision for income taxes (2,491,574) (963,677)
Provision for income taxes - -
--------------- ---------------
Net income (loss) $(2,491,574) $(963,677)
=============== ===============
Net income (loss) per share weighted average share, basic
and diluted ($0.02) ($3.99)
=============== ===============
Weighted average shares outstanding, basis and diluted 139,580,211 241,803
=============== ===============
</table>
See accompanying notes to consolidated financial statements
5
<page>
INVICTA GROUP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
<table>
<s> <c> <c>
2008 2007
--------------- ---------------
Net income (loss) (2,491,574) $(963,677)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,750 5,625
Amortization 1,550 26,585
Stock issued for services 19,610 126,358
Valuation allowance on purchased asset 2,000,000 -
Amortization of debt discount 27,813 -
Changes in assets and liabilities:
Accounts receivable and prepaid expenses (32,099) -
Advances to affiliates - 19,386
Inventory (148,894) -
Other current assets (2,805) -
Other assets (8,500) (1,750)
Accounts payable and accrued liabilities 240,186 339,756
--------------- ---------------
Total funds provided by operating activities (390,963) (447,717)
--------------- ---------------
Capital asset expenditures - 1,173
Funds provided by financing activities
Proceeds from other notes payable 274,500 393,887
Proceeds from issuance of common stock 140,160 69,176
Proceeds from shareholder notes - 24,993
Payments on shareholder notes - (31,127)
Payments on long term debt - (17,005)
--------------- ---------------
Total funds provided by financing activities 414,660 439,924
--------------- ---------------
Net change in cash and cash equivalents 23,697 (6,620)
Cash and cash equivalents, beginning of period 6,209 12,960
--------------- ---------------
Cash and cash equivalents, end of period 29,905 $6,340
=============== ===============
Additional Cash Flow Information:
Cash paid during the period for:
Interest $4,954 $9,508
=============== ===============
Income taxes $- $-
=============== ===============
Non-Cash Activities:
Stock issued for redemption of Preferred B stock $- $175,000
=============== ===============
Stock issued for payment of accounts payable $- $38,096
=============== ===============
</table>
See accompanying notes to consolidated financial statements
6
<page>
INVICTA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
NOTE 1. BASIS OF PRESENTATION
ORGANIZATION AND CAPITALIZATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America for interim financial information. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. The preparation requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results may differ from these estimates. 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 nine month period ended September 30, 2008 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2008.
The financial statements include the accounts of the Company and its wholly-
owned subsidiary. All significant inter-company balances and transactions have
been eliminated.
Certain reclassifications have been made to the prior year financial
statements in order for them to be in conformity with the current year
presentation.
With the change in our management, on June 27, 2008, we have taken additional
steps to enhance our existing (or older) services and to the extent that we
are able, we have added three additional products. The three new products are
the following each of which utilizes a website:
(1) City Book Savings;
(2) Ticket Hotlink; and
(3) IMAGE San Diego.
With respect to our existing(or "older") services we have added the ability to
actually book all types of travel from our sites like travelhotlink.com with
different affiliate programs (Farebuzz, Expedia, hotels.com, hotwire, etc.)
and, wherever possible, our goal is to earn commissions by selling travel
services through our websites using these affiliate programs.
7
<page>
INVICTA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
We now offer our end users travel and entertainment ticket bookings for
hotels, airlines, car rental, cruise packages, sporting events, theater, and
concerts, while we offer our business clients an opportunity to advertise on
our websites, use our direct mailing product, or our promotions, and marketing
products.
SIGNIFICANT ACCOUNTING POLICIES:
In preparing our unaudited consolidated condensed financial statements and
accounting for the underlying transactions and balances reflected therein, we
have applied the significant accounting policies described in Note 1 to our
consolidated financial statements included in our Annual Report on Form 10-
KSB for the year ended December 31, 2007.
Revenue Recognition
The company recognizes revenue the following ways:
1. For Travel related products and services revenue is recognized when it
is purchased.
2. For City Book Savings products revenue is recognized when the marketing
books are printed.
3. For Ticket Hotlink revenue is recognized when the event the ticket
correlates to takes place.
4. For any event promotions or marketing revenue will be recognized when
the event occurs.
NOTE 2. INCOME PER SHARE
The Company presents "basic" and, if applicable, "diluted" earnings (loss) per
common share pursuant to the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") and certain other
financial accounting pronouncements. Basic earnings (loss) per common share
are calculated by dividing net income (loss) by the weighted average number of
common shares outstanding during each period. The calculation of diluted
earnings (loss) per common share is similar to that of basic earnings (loss)
per common share, except that the denominator is increased to include the
number of additional common shares that would have been outstanding if all
potentially dilutive common shares, such as those issuable upon the conversion
of debentures, were issued during the period.
NOTE 3: 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 approximately $10,353,677 since inception
and the Company had negative working capital of $677,904 at September 30,
2008. These factors raise doubt about the Company's ability to continue as a
going concern.
8
<page>
INVICTA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
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 the revenues created from their multiple products
and services.
In addition to the assumption regarding increased revenues, the Company's
management has raised approximately $274,500 during the three months ended
September 30, 2008 in funding from its securities purchase agreement with
Golden Gate Investors, Inc, along with additional investors buying convertible
notes. Invicta estimates it will need $300,000 additional funding for working
capital over the next twelve months.
Management feels that its increase revenues from all its products and
services, its equity and financing plans and the revenues from the new
products and services offered 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.
NOTE 4 - EQUITY
During the three months ended September 30, 2008 the Company issued
161,750,915 shares of common stock in accordance with the terms of the
convertible debenture agreement with Golden Gate in the form of warrant
exercise for total proceeds of $20,100. The Company relied upon the exemption
from registration contained in Section 4(2), as the recipients were deemed to
be sophisticated with regard to an investment in the Company.
Stock Options
A total of 7,765 stock options were granted to employees, non-employee
directors, officers, or consultants during the year ended December 31, 2004. A
total of 6,160,000 stock options were granted to employees, non-employee
directors, officers, or consultants during the nine months ended September 30,
2008 valued at $24,640.
At September 30, 2008, the Company had one stock based compensation plan,
which is described below. The Company accounts for the fair value of its
grants under this plan in accordance with FASB 123R. The compensation cost
that has been charged against income for this plan is $24,640 and $0 for the
nine months ended September 30, 2008 and 2007.
Stock options outstanding and exercisable at September 30, 2008 are as follows
9
<page>
INVICTA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
<table>
<s> <c> <c> <c>
Options Outstanding
Weighted Average Weighted Average
Range of Exercise Price Shares Outstanding Exercise Price Remaining Life
$12,500 to $.004 6,167,765 $.004 3.00
</table>
NOTE 5 - DEFERRED REVENUE
Deferred revenue consists of City Book Savings pre-sells advertising for
future direct mailing marketing books which are booked as deferred revenue
until the books are printed and mailed out.
NOTE 6 - DUE TO RELATED THIRD PARTY
Invicta group has hired IMAGE Worldwide as a management and marketing company
in an effort to help increase product awareness and reduce expenses. Invicta
rents space from IMAGE in Chicago (and maintains 1 office in Las Vegas),
leases some employees, purchases some supplies and inventory, and IT solution
services. IMAGE helps negotiate deals for printing, mailing, distribution,
supplies, labor, and other expenses to help reduce overall costs. Invicta has
pre-sold advertising for the City Book Savings direct mailing books to be
printed, mailed, and distributed in the fourth quarter and has pre-paid IMAGE
for printing, mailing, distributing expenses, along with some employee,
supplies, and inventory expenses. IMAGE Worldwide is a company that is
controlled by Invicta Group, Inc. CEO and president. Invicta Group, Inc. At
September 30, 2008 a total of $212,500 has been advanced to IMAGE Worldwide
all which has been expensed in connection with services provided.
NOTE 7 - CONVERTIBLE DEBENTURES - NEW
During the three months ended September 30, 2008, Invicta entered into an
agreement with various investors for funding. Invicta Group, Inc. issued
convertible debentures totaling $237,500.
In accordance with Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," ("FASB 133"),
we determined that the conversion feature of the convertible debentures meet
the criteria of an embedded derivative and therefore the conversion feature of
the debt needed to be bifurcated and accounted for as a derivative. Due to
provisions of the convertible debentures, the debt does not meet the
definition of "conventional convertible debt" because the number of shares
which may be issued upon the conversion of the debt is not fixed. Therefore,
the conversion feature fails to qualify for equity classification under EITF
00-19, and must be accounted for as a derivative liability. In accordance with
EITF No. 00-19, EITF No. 00-27, Application of Issue No. 98-5 to Certain
Convertible Instruments, the values assigned to both the debenture, conversion
feature and the warrants will be allocated based on their fair
10
<page>
INVICTA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
values utilizing the Black-Scholes valuation model. The amount allocated as a
discount on the convertible debentures for the value of the warrants and
conversion option will be amortized to interest expense, using the effective
interest method, over the term of the convertible debentures. The convertible
debentures are convertible into the number of our shares of common stock at a
price equal to the principal amount of the debentures being converted
multiplied (i) $0.06 or (ii) 100% of the average of the three lowest volume
weighted average prices during the 20 trading days prior to the holders
election to convert. Accordingly, there is in fact no limit on the number of
shares into which the debenture may be converted.
The $237,500 face amount of the new convertible debentures outstanding as of
September 30, 2008 was stripped of its conversion feature due to the
accounting for the conversion feature as a derivative, which was recorded
using the residual proceeds method, whereby any remaining proceeds after
allocating the proceeds to the conversion option would be attributed to the
debt. The beneficial conversion feature (an embedded derivative) included in
these convertible debentures resulted in an initial debt discount of $237,500.
At September 30, 2008, we revalued this derivative liability, For the nine
months ended September 30, 2008 the derivative liability remained at $237,500.
In accordance with EITF No. 00-19, EITF No. 00-27, Application of Issue No.
98-5 to Certain Convertible Instruments, the values assigned to both the
debenture and the conversion feature were allocated based on their fair
values. The amount allocated as a discount on the convertible debentures for
the value of the conversion feature will be amortized to interest expense,
using the effective interest method, over the term of the convertible
debentures. For the nine months ended September 30, 2008, amortization of the
discount on debenture amounted to $27,813 which is included in interest
expense.
The convertible debenture liability is as follows at September 30, 2008:
Convertible debentures payable $237,500
Less: unamortized discount on debentures (27,813)
Convertible debentures, net $209,687
NOTE 8 - INTERNAL CONTROLS
As directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), the
Securities and Exchange Commission adopted rules requiring small business
issuers, such as our company, to include a report of management on the
company's internal controls over financial reporting in their annual reports.
Presently, we will become subject to compliance with SOX 404 for our fiscal
year ending December 31, 2009. The independent registered public accounting
firm auditing our financial statements must also attest to and report on
management's assessment of the effectiveness of our internal controls over
financial reporting as well as the operating effectiveness of our internal
11
<page>
INVICTA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
controls. We have yet to begin evaluating our internal control systems in
order to allow our management to report on, and our independent auditors
attest to, as presently required. During 2008 we expect to expend significant
resources in developing the necessary documentation and testing procedures
required by SOX 404. In the event we identify significant deficiencies or
material weaknesses in our internal controls that we cannot remedy in a timely
manner or we are unable to receive a positive attestation from our independent
auditors with respect to our internal controls, investors and others may lose
confidence in the reliability of our financial statements and our ability to
obtain financing as needed could suffer.
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS
In October 2008, the FASB issued FSP FAS 157-3, "Determining the Fair Value of
a Financial Asset When the Market for That Asset Is Not Active" ("FSP FAS 157-
3"). The purpose of FSP FAS 157-3 was to clarify the application of Statement
of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS
157"), for a market that is not active. It also allows for the use of
management's internal assumptions about future cash flows with appropriately
risk-adjusted discount rates when relevant observable market data does not
exist. FSP FAS 157-3 did not change the objective of SFAS 157 which is the
determination of the price that would be received in an orderly transaction
that is not a forced liquidation or distressed sale at the measurement date.
FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements had not been issued. Our adoption of FSP FAS 157-3 for
the period ended September 30, 2008 did not have a material effect on our
financial position, results of operations, cash flows or disclosures.
<page>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Background
Our company has historically developed and marketed products to the travel and
entertainment industry.
In recent years we have been focused on developing and marketing certain
websites for the travel and entertainment industries and thereby generate
advertising revenues from companies in the form of tile ads, banner ads, and
offer ads on our home pages and internal pages. We have also marketed email
newsletters to approximately 24 million people through dedicated and
newsletter emails. This business remains a core part of our strategy.
However, with the change in our management, on June 27 2008, we have taken
additional steps to enhance our existing services and to the extent that we
are able, we have added three additional products that may help us improve our
marketing abilities which may allow us an opportunity to increase our revenues
and profits. The three new products are the following each of which utilizes
a website:
(1) City Book Savings;
(2) Ticket Hotlink; and
(3) IMAGE San Diego.
With respect to our existing services we have added the ability to actually
book all types of travel from our sites like travelhotlink.com with different
affiliate programs (Farebuzz, Expedia, hotels.com, hotwire, etc.) and,
wherever possible, our goal is to earn commissions by selling travel services
through our websites using these affiliate programs.
With respect to our three new products, we are working to implement our
strategies for each of them.
City Book Savings
The first, City Book Savings is designed as a high-end f four-color glossy
direct mailing marketing book that we pre-sold advertising during the third
quarter 2008 and, if current market conditions allow, we plan to launch this
product in the fourth quarter 2008. Each book is a 4" x 6" perfect bound
hard cover book featuring magazine quality ads with incentives to some of the
most exclusive businesses in a city's most affluent areas. Our goal is to
market this product, City Book Savings, so that it achieves a 100% saturation
of local neighborhood markets via direct mailing.
Currently, Chicago is the first city where we have marketed the City Book
Savings product. However, if market conditions allow and if we are able, we
intend to market the City Book Savings in other metropolitan areas as well.
To the extent that we are able, we may seek to add advertising opportunities
on the CityBookSavings website as well. We view this venture as having
similarities to a mini magazine upscale coupon book with each quarterly coupon
book offerings of discount coupons for restaurants, automobile service
providers, clothing stores, lounges, health clubs, and the like. If we are
successful, we anticipate that we may be able to utilize the direct mailing of
these books to also cross-promote the marketing of travel services and our
travel-oriented web sites as well.
Initially and in an effort to develop our plans further, we plan to undertake
the offering of these coupon books in one zip code area initially. If these
are successful and if we are able, our plan is to saturate that geographic
market by mailing the "City Book Savings" book to every address in the zip
code and, as circumstances allow, we plan to enter other zip code market areas
depending on sales efforts in other zip code markets.
12
<page>
Tickethotlink.com
Tickethotlink.com is also a new division of our company that we launched in
September of 2008. This website and division offers additional ticket sales
where online users can search 1000's of venues for 100,000's of tickets for
sporting events, concerts, and other special events. To the extent that we
are able, we intend to crosspromote Tickethotlink.com with Travelhotlink.com
and the other hotlink sites. We anticipate that this internet website product
will be designed to offer travelers or anyone that comes to the site the
opportunity to buy tickets to any sporting event, concert, or special event
around the country. The software and associations we plan to use is designed
so as to allow us to market and sell tickets to potentially thousands of
events on consignment basis in exchange for commissions earned on ticket sales
originating or through our website.
IMAGE San Diego
Finally, IMAGE San Diego is a new division that we launched in September 2008.
IMAGE San Diego is currently a marketing, media, and event planning division
and no revenues are currently generated by this division
When it becomes operational, we anticipate that IMAGE San Diego may allow us
to cross-promote our travel and ticketing services. If these efforts to
develop IMAGE San Diego are successful, we intend to establish a companion
website, IMAGEsandiego.com, and also develop a magazine to be titled as,Image
San Diego Magazine. These and other plans may change and are subject to our
continuing review of market conditions and the overall economy. Recent
economic developments have increased the level of uncertainty in our market
and in related industry segments. For these and other reasons cited in this
Form 10-Q, we may revise, reduce, or delay our plans in light of our
circumstances and our perception of market conditions.
While we believe that these business markets continue to offer revenue
opportunities for us, we continue to look for opportunities to improve and
further enhance the content and functionality of our websites and, at the same
time, to take whatever steps that we can to increase the amount of internet
traffic at these sites by crosspromoting our current sites and email lists
while we try to sell to more potential clients.
By launching these three new products and services and sharing all our
resources we believe that we may be better positioned in our markets which may
allow us to offer additional products and services to our rapidly growing
database and utilize the business model of sharing resources to cross-
promote, cross- market, and crosssell additional products and services. We
now offer our end users travel and entertainment ticket bookings for hotels,
airlines, car rental, cruise packages, sporting events, theater, and concerts,
while we offer our business clients an opportunity to advertise on our
websites, use our direct mailing product, or our promotions, and marketing
products.
We continue to assess and evaluate the marketing channels utilized in the
travel and entertainment industry. In so doing we may, as our financial
resources and opportunities allow, consider other possible acquisition
opportunities in the travel and entertainment industry. As market conditions
and our financial circumstances allow, we may also change and refine our
websites and the marketing efforts that we take which may serve to increase
our online traffic at our websites and overall database that may allow us to
offer other products and services in the future.
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Results of Operations for the Nine Months Ended September 30, 2008 Compared to
the Nine Months Ended September 30, 2007
Revenues for the nine months ended September 30, 2008 (the "First Nine Months
2008") were $ 238,459 compared with $57,473 for the nine months ended
September 30, 2007 (the "First Nine Months 2007").
This represents an increase of $180,986 or approximately 314.91% from the
First Nine Months 2007. . The increase is primarily the result of the
additional products and services that we added during the First Nine Months of
2008 and improvements that we made in the products that we offer. In
addition, additional revenues were generated by additional advertising and
marketing that we completed during the First Nine Months 2008 compared to the
First Nine Months 2007. While we believe that we may be able to achieve
further increases in our revenues in the future, we cannot assure you that our
efforts will be successful or that these increases represent any certain
future trend.
Operating expenses for the First Nine Months 2008 were $ 476,710 compared
with $ 783,173 for the First Nine Months 2007. This represents a decrease of
$306,463 from the $783,173 or a 39.13% decline from that recorded during the
First Nine Months 2007. The decrease is primarily due to the reduced expenses
that we realized as a result of closing one office (our office in Florida) and
the resulting reduction in staff and other associated expenses. At the same
time, we focused our resources on areas where we believe there may
opportunities to grow our revenues by adding additional products and services.
Net other income/expense was an expense of $2,064,080 for the First Nine Months
2008 which is attributed to a $2,000,000 valuation allowance on acquired
assets and interest expense, compared with net other expense of $237,977 for
the First Nine Months 2007. This represented an increase of $1,826103 or an
increase of about 767.34% above the First Nine Months 2007. The increase is
primarily attributable to the valuation allowance on acquired assets which we
believe is a non-recurring expense associated with our purchase of assets
The Net Loss for the First Nine Months 2008 was $2,491,574, compared with a
net loss of $963,677 for the First Nine Months 2007 . This represents a an
increase of $1,527,897 or about 158.55% from the net loss recorded during the
First Nine Months 2007. This increase in our Net Loss is primarily
attributable to the valuation allowance on acquired assets which we believe is
a non-recurring expense associated with our purchase of assets.
Results of Operations for the Three Months Ended September 30, 2008 Compared
to the Three Months Ended September 30, 2007
Revenues for the three months ended September 30, 2008 ("Third Quarter 2008")
were $ 211,735 compared with $3,460 for the three months ended September 30,
2007 ("Third Quarter 2007").
This represents an increase of $208,275 or an increase of about 6,019.51% from
the revenues we recorded in the Third Quarter 2007. The increase is due
primarily to our efforts in bringing in new management to add on additional
products and services which served to help increase our overall revenue.
While we are pleased with this dramatic increase, we do not anticipate that
this level of increase will continue as a trend. Any continued increases in
revenues will, in large part, be determined by our ability to successfully
implement our strategies and market conditions and the level of advertising
and marketing expenditures in the overall economy. Given current economic
uncertainties and reduced advertising expenditures in some sectors, the level
of our future revenues can not be predicted.
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Operating expenses for the Third Quarter 2008 were $195,481 compared with
$331,611 for the Third Quarter 2007. This represents a decrease of $136,130 or
a decrease of about 41.05% from the operating expenses we recorded in the
Third Quarter 2007. The decrease in operating expenses from Third Quarter 2007
to Third Quarter 2008 resulted primarily from additional variable costs which
increased with the increase in our revenues during this period off set by the
reduced expenses that we realized as a result of closing one office (our
office in Florida) and the resulting reduction in staff and other associated
expenses.
We recorded Net other income and expense of $57,635 for the Third Quarter 2008
compared with net other expense of $139,272 for the Third Quarter 2007, a
decrease of $81,637 or a decrease of about 58.62%. The decrease is largely
attributable to a decrease in interest expense.
The net loss for the Third Quarter 2008 was $230,624 compared with a net loss
of $467,423 for the Third Quarter 2007, which represents a decrease of
$236,799 or a decline of about 50.66%.
The decline was principally the result of management efforts to evaluate our
existing product lines, marketing channels, and cost structures. While we are
pleased with our improved operating performance during the Third Quarter 2008
and we do not certain that these cost reductions can be continued, we are
fully aware that we need to consistently review and carefully evaluate our
plans and strategies to ensure that our product offerings meet with consumer
acceptance.
Liquidity and Capital Resources
We had a working capital deficit of $677,904 as of September 30, 2008. Our
working capital deficit (defined as the amount by which Total Current
Liabilities exceeded Total Current Assets) presents serious and significant
risks to our liquidity and our overall ability to meet our financial
obligations. This deficit also directly and adversely impacts our ability to
meet commitments to vendors and, indirectly, on our ability to meet our
obligations to our customers. To that extent, we face serious limitations on
our ability to implement our business plan but more critically, we are
constrained by these serious financial difficulties.
We are taking steps to limit capital expenditures and, as circumstances and
opportunities allow, to restrict operating expenditures so as to ensure that
proposed expenditures are fully evaluated. To the extent that we are able to
do so and as market conditions
On a going-forward basis, we anticipate that we may need to raise significant
additional equity or debt capital to reduce our working capital deficit. While
we have had discussions with persons who may have an interest and an ability
to provide us with additional equity or debt capital, we have not received any
commitment from any of these persons at this time. As a result, there can be
no assurance that we will receive any equity or debt capital or if any
additional capital is obtained, that we will obtain a sufficient amount of
additional equity or debt capital on a timely basis or that the terms of such
additional capital that we receive will be reasonable in light of our existing
circumstances. For these and other reasons, there can be no assurance that our
existing shareholders will not incur substantial, immediate, and permanent
dilution of their existing investment.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our operations and our securities are subject to a number of substantial
risks, including those described below. If any of these or other risks
actually occur, our business, financial condition and operating results, as
well as the trading price or value of our common stock could be materially
adversely affected. No attempt has been made to rank these risks in the order
of their likelihood or potential harm. In addition to those general risks
enumerated elsewhere in the document, any purchaser of the Company's common
stock should also consider the following risk factors:
Risks Related to the Company's Operations
We require additional funding which may not be available. If we are unable to
obtain necessary financing on acceptable terms, we may have to curtail our
current or planned operations.
We require additional funding to implement our business plan. Advertising,
marketing, and promotional efforts to increase the stature and traffic volume
to our web sites will require significant financial expenditures and likely
lead to losses and negative cash flow for a some time period. If we are not
successful in obtaining additional capital, we may have to curtail some or all
operations or postpone plans indefinitely.
We have limited management and limited staff resources to manage our business.
We have one officer and one director, Paul Sorkin and we have no present plans
to increase our management and staff at the present time. While we believe
that this policy is prudent and appropriate in our circumstances, the lack of
additional officers, directors, and additional support staff serves to limit
our ability to conduct in-depth evaluations of our business, our strategy, our
competitive environment, and other critical aspects of our business. As a
result, we may not be successful in correctly identifying competitive and
industry trends or, for that matter, in developing strategies that will
respond effectively to the ever-changing competitive environment.
We have no "key man" life insurance on the life of Paul Sorkin .
Currently, we maintain no "key man" life insurance on the life of Paul Sorkin
and we have no plans to purchase any such insurance in the future. In the
event that Mr. Sorkin becomes ill or incapacitated or in the event of his
death, we may be exposed to significant and protracted losses.
We have a serious working capital deficit.
As of September 30, 2008, we had a working capital deficit of $677,904
(defined as the amount by which Total Current Liabilities exceed Total Current
Assets). This deficit presents serious and significant risks to our liquidity
and our overall ability to meet our financial obligations. This deficit also
directly and adversely impacts our ability to meet commitments to vendors
and, indirectly, on our ability to meet our obligations to our customers. To
that extent, we face serious limitations on our ability to implement our
business plan, but more critically, we are constrained and without additional
equity or debt capital, we may face serious financial difficulties. Thus,
although we are taking steps to limit capital and operating expenditures and
we are hopeful that we may be successful in raising additional equity or debt
capital, there can be no assurance that we will be successful in reducing or
eliminating our working capital deficit or if we do so, that we can do so on a
timely basis at a cost that is reasonable in light of our current
circumstances.
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Risks Related to the Company's Common Stock
Our Common Stock is traded on a limited and sporadic basis and the price of
our Common Stock is much lower than that of other common stocks of other
smaller public companies.
Our Common Stock is traded on the Electronic Bulletin Board only on a limited
and sporadic basis. To the extent that we are able we will take steps that
may allow the stock to achieve greater liquidity and tradability in the
market, our stock price is trading level is much lower than that of other
smaller public companies. This will likely continue to limit the
attractiveness of our Common Stock and also limit the interest that investors
and the overall market may have in our Common Stock. For these and other
reasons, we cannot assure you that our stock will ever increase in value.
We have issued and outstanding a significant number of Common Stock Purchase
Warrants and Options and shares of Preferred Stock. These securities will
dilute and limit the rights and influence of the holders of our Common Stock.
As a result of our past financing activities, our past compensation
arrangements with our officers, and the recent acquisition of the "City Book
Savings" assets from Image Worldwide, Inc., we have outstanding 5,000,000
shares of our Series G Preferred Stock (each with 1,000 votes per share),
53,332 shares of our Series H Preferred Stock, together with 5,000,000 Common
Stock Purchase Warrants, and 6,160,000 Common Stock Purchase Options. These
outstanding securities together with any shares of our Common Stock that are
issued upon conversion of the $320,671 Promissory Note previously issued to a
former director, William G. Forhan (and which has been assigned) together with
the amounts we owe to Golden Gate Investors, may result in a large increase in
our Common Stock, further dilution to our existing stockholders, and a further
diminution in the extent of control and influence that our existing
stockholders have over the Company's affairs.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. The term "disclosure controls and procedures," as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act
of 1934, as amended ("Exchange Act"), means controls and other procedures of a
company that are designed to ensure that information required to be disclosed
by the company in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures also include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company's management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate, to allow timely decisions regarding
required disclosure. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded as of September 30, 2008, that our
disclosure controls and procedures are effective to a reasonable assurance
level of achieving such objectives. However, it should be noted that the
design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.
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Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. The internal controls for the Company are provided by executive
management's review and approval of all transactions. Our internal control
over financial reporting also includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with U.S. GAAP,
and that our receipts and expenditures are being made only in accordance with
the authorization of our management; and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over
financial reporting as of December 31, 2007. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework. Management's assessment included an evaluation of the design of
our internal control over financial reporting and testing of the operational
effectiveness of these controls.
Based on this assessment, management has concluded that as of December 31,
2007, our internal control over financial reporting was effective to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during
our fiscal quarter ended September 30, 2008 that have materially affected, or
are reasonably likely to materially affect, our internal control over
financial reporting.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
In General. The purchase of shares of our common stock is very speculative and
involves a very high degree of risk. As a small company, our business
organization and structure all involve elements of risk. In many instances,
these risks arise from factors over which we will have little or no control.
Some adverse events may be more likely than others and the consequence of some
adverse events may be greater than others. No attempt has been made to rank
risks in the order of their likelihood or potential harm.
1) The market price of our common stock may fluctuate significantly.
The market price of our common shares may fluctuate significantly in
response to factors, many of which are beyond our control, such as:
* the announcement of new technologies by us or our competitors;
* quarterly variations in our and our competitors' results of operations;
* changes in earnings estimates or recommendations by securities
analysts;
* developments in our industry;
* general market conditions and other factors, including factors unrelated
to our own operating performance;
* changing regulatory exposure, laws, rules and regulations which may
change; and
* tax incentives and other changes in the tax code.
Further, the stock market in general has recently experienced extreme
price and volume fluctuations. Continued market fluctuations could result in
extreme volatility in the price of our common shares, which could cause a
decline in the value of our common shares. You should also be aware that price
volatility might be worse if the trading volume of our common shares is low.
2) Trading of our common stock is limited.
Our Common Stock is traded only on the Bulletin Board. Trading in our
stock has historically been limited and sporadic with no continuous trading
market over any long or extended period of time. This has adversely effected
the liquidity of our common stock, not only in terms of the number of
securities that can be bought and sold at a given price, but also through
delays in the timing of transactions and reduction in security analysts' and
the media's coverage of us. This may result in lower prices for our common
stock than might otherwise be obtained and could also result in a larger
spread between the bid and asked prices for our common stock. There will
likely be only limited liquidity and investors will not likely have the
ability to purchase or sell our common stock in any significant quantities.
This too will sharply limit interest by individual and institutional
investors.
3) Limited Financial Resources and Future Dilution
We are a small company and we have limited financial resources. While
we believe that we have some growth opportunities, we cannot assure you that
we will be successful in obtaining additional financial resources to meet our
financial needs or, we are successful in doing so, that we can obtain such
financial resources on terms that are reasonable in light of our current
financial circumstances. Further, the existing debt securities that we have
issued, including, but not limited to the note previously issued to William G.
Forhan (and later assigned to Falcon Financial) and the convertible debt
issued to an institutional investor will result in our issuance of additional
shares of our Common Stock which will further dilute our existing
stockholders.
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4) Control by Image Worldwide, Inc.
As a result of the Agreement with Image Worldwide, Inc., on June 27,
2008 control over our Company passed to Image Worldwide, Inc., a Colorado
corporation. The Chief Executive Officer of Image Worldwide, Inc. is Paul
Sorkin who is also currently our President, Chief Executive Officer and
Chairman of the Board. Since Image Worldwide, Inc. owns 5,000,000 shares of
our newly-designated Series G Preferred Stock and each share has the right to
1,000 voting rights and to vote and on all matters submitted to the holders of
our Common Stock, they effectively hold 91.19% of the outstanding voting
rights . On this basis, persons who acquire our common stock have no real
ability to have any influence or control over the Company, its affairs, or its
future direction.
5) Limited Management, Lack of Key Man Life Insurance, & Limited Internal
Evaluation of Business Strategy.
Our sole officer and director is Paul Sorkin. We have no other officers or
directors. While we believe that our current management structure is suitable
to our needs and the requirements of our business, we have no present plans to
increase our executive management in the near future. We also do not have and
have no present plans to obtain, any key man life insurance on the life of
Paul Sorkin. In the event of his disability or death, we may be exposed to
significant and protracted costs and expenses in obtaining appropriate and
suitable managerial resources. Finally, because we are primarily dependent
upon Paul Sorkin, our business strategy is largely dependent upon decisions
and evaluations made by him.
6) Outstanding Debt, Convertible Debt, Options and Warrants
We have a significant amount of debt owed to our creditors and as a
result of the acquisition of the Assets from Image Worldwide, Inc. we
anticipate that holders of our convertible debt and holders of certain common
stock purchase options and warrants will likely exercise their right to
acquire shares of our Common Stock. In the case of the holders of our debt and
convertible debt, we anticipate that these holders will exercise their rights
and seek to avail themselves of their right to claim the exemption provided by
Rule 144 of the Securities Act of 1933 ("Rule 144"). In that event, it is
likely that there may be significant re-sales of our Common Stock and this may
limit or depress the price of our Common Stock. Further, a large portion of
our outstanding Common Stock are "restricted securities" and may be sold only
in compliance with Rule 144 adopted under the Securities Act of 1933 or other
applicable exemptions from registration. Rule 144 provides that a non-
Affiliate person holding restricted securities for a period of six months may
have the restricted legend removed Possible or actual sales of our by present
shareholders under Rule 144 may have a depressive effect on the price of the
Company's Common Stock in any market which may develop.
7) Risks of Low Priced Stocks.
Our common stock has only limited and sporadic trading on the Bulletin Board.
As a result and due to the limited and sporadic trading market, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, our Common Stock. In the absence of a security being quoted
on NASDAQ, or the Company having $2,000,000 in net tangible assets, trading in
the Common Stock is covered by Rule 3a51-1 promulgated under the Securities
Exchange Act of 1934 for non-NASDAQ and non-exchange listed securities.
Under this rule, broker/dealers who recommend such securities to persons other
than established customers and accredited investors (generally institutions
with assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with
their spouse) must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale.
Securities are also exempt from this rule if the market price is at least
$5.00 per share, or for warrants, if the warrants have an exercise price of at
least $5.00 per share. The Securities Enforcement and Penny Stock Reform Act
of 1990 requires additional disclosure related to the market for penny stocks
and for trades in any stock defined as a penny stock. The Commission has
recently adopted regulations under such Act which define a penny stock to be
any NASDAQ or non-NASDAQ equity security that has a market price or exercise
price of less than $5.00 per share and allow for the enforcement against
violators of the proposed rules.
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In addition, unless exempt, the rules require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule prepared by the
Commission explaining important concepts involving the penny stock market, the
nature of such market, terms used in such market, the broker/dealer's duties
to the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the customer's rights and remedies
in case of fraud or abuse in the sale.
Disclosure also must be made about commissions payable to both the
broker/dealer and the registered representative, current quotations for the
securities, and if the broker/dealer is the sole market-maker, the
broker/dealer must disclose this fact and its control over the market.
Finally, monthly statements must be sent disclosing recent price information
for the penny stock held in the account and information on the limited market
in penny stocks. While many NASDAQ stocks are covered by the proposed
definition of penny stock, transactions in NASDAQ stock are exempt from all
but the sole market-maker provision for (i) issuers who have $2,000,000 in
tangible assets ($5,000,000 if the issuer has not been in continuous operation
for three years), (ii) transactions in which the customer is an institutional
accredited investor and (iii) transactions that are not recommended by the
broker/dealer. In addition, transactions in a NASDAQ security directly with
the NASDAQ market-maker for such securities, are subject only to the sole
market-maker disclosure, and the disclosure with regard to commissions to be
paid to the broker/dealer and the registered representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raised its requirements
for continued listing so that any issuer with less then $2,000,000 in net
tangible assets or stockholder's equity would be subject to delisting. These
criteria are more stringent than the proposed increased in NASDAQ's
maintenance requirements.
The Company's securities are subject to the above rules on penny stocks and
the market liquidity for the Company's securities could be severely affected
by limiting the ability of broker/dealers to sell the Company's securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended September 30, 2008 the Company issued
161,750,915 shares of common stock in accordance with the terms of the
convertible debenture agreement with Golden Gate in the form of warrant
exercise for total proceeds of $20,100. The Company relied upon the exemption
from registration contained in Section 4(2), as the recipients were deemed to
be sophisticated with regard to an investment in the Company.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits.
Exhibit
31.1 Rule 13a-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a) Certification of Chief Financial Officer
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32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief
Financial Officer
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.
INVICTA GROUP, INC.
Date: November 19, 2008 BY: /s/ Paul Sorkin
PAUL SORKIN
Chief Executive Officer
Date: November 19, 2008 BY: /s/ Paul Sorkin
PAUL SORKIN
Chief Financial Officer
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