U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the quarterly period ended June 30, 2004
[ ] 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)
(305) 866- 6525
(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 August 20, 2004: 61,322,279
shares
Number of shares of preferred stock outstanding as of August 20, 2004: None
INDEX TO FORM 10-QSB
Page No.
PART I
ITEM 1. Financial Statements
Balance Sheet 1
Statements of Operations 2-3
Statements of Cash Flows 4-5
Notes to Financial Statements 6-11
ITEM 2. Management's Discussion and Analysis 12-14
ITEM 3. Quantitative and Qualitative Disclosures on Market Risk 15
ITEM 4. Controls and Procedures 15
PART II
ITEM 1. Legal Proceedings 16
ITEM 2. Changes in Securities 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of Security Holders 16
ITEM 5. Other Information 16
ITEM 6. Exhibits 17
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVICTA GROUP INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
(UNAUDITED)
==============================================================================
ASSETS
Current assets:
Cash and cash equivalents $ 333,294
Prepaid Expenses 4,089
--------------
Total current assets 337,383
Property and equipment, net of accumulated depreciation
of $725,276 508,400
Other assets:
Surety Bond Deposit 71,410
Security Deposits 1,000
Intangible assets, net of accumulated
amortization of $ 95,074 684,803
--------------
Total Assets $ 1,602,996
==============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 771,007
Notes payable and convertible debentures 74,661
Deferred officer compensation 112,025
--------------
Total current liabilities 957,693
Long-term debt
Notes Payable - shareholders 324,031
Convertible Debenture 150,000
--------------
Total Liabilities 1,431,724
--------------
Shareholder's equity:
Preferred stock par value $.001 10,000,000 shares authorized;
none outstanding 0
Common stock, par value $ .001, 90,000,000 shares
authorized, 59,065,282 issued and outstanding 59,072
Additional paid in capital 3,284,771
Notes receivable related to stock sales and
Subscriptions Receivable (460,000)
Retained (Deficit) (2,712,571)
--------------
Total shareholder's equity 171,272
--------------
Total Liabilities and Shareholders' Equity $ 1,602,996
==============
INVICTA GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
==========================================================================================================
THREE THREE
MONTHS ENDING MONTHS ENDING
JUNE 30, JUNE 30,
2003 2004
------------ ------------
Revenues earned $ 10,337 $ 3,858,568
Cost of sales 3,613,000
------------ ------------
Gross profit 10,337 245,568
Selling, general, and administrative expenses 131,926 633,171
------------ ------------
NET LOSS $ (121,589) $ (387,603)
============ ============
Net loss per share weighted average share, basic and diluted $ (0.004) $ (0.007)
============ ============
Weighted average shares outstanding, basis and diluted 31,682,200 55,421,051
============ ============
INVICTA GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
==========================================================================================================
SIX SIX
MONTHS ENDING MONTHS ENDING
JUNE 30, JUNE 30,
2003 2004
------------ ------------
Revenues earned $ 13,426 $ 6,071,979
Cost of sales 5,698,590
------------ ------------
Gross profit 13,426 373,389
Selling, general, and administrative expenses 277,912 1,235,768
------------ ------------
NET LOSS $ (264,486) $ (862,379)
============ ============
Net loss per share weighted average share, basic and diluted $ (0.008) $ (0.016)
============ ============
Weighted average shares outstanding, basic and diluted 31,682,200 52,296,068
============ ============
INVICTA GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
==========================================================================================================
SIX SIX
MONTHS ENDING MONTHS ENDING
JUNE 30, JUNE 30,
2003 2004
------------ ------------
Cash flows from operating activities:
Net income $ (264,486) $ (862,379)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,500 39,890
Amortization 21,600 27,900
Stock issued for services 317,500
Changes in assets and liabilities:
Accounts receivable and prepaid expenses 27,624
Other assets (154,910)
Accounts payable & accrued liabilities 149,845 283,286
------------ ------------
(60,917) (348,713)
------------ ------------
Cash flows used in investing activities:
Capital asset expenditures (9,046)
Cash flows used in financing activities:
Proceeds from long term debt 147,496 184,000
Proceeds from sale of comon stock 800 593,095
Payments on long term debt (77,202) (446,637)
------------ ------------
71,094 330,458
------------ ------------
Net change in cash and cash equivalents 10,177 (27,301)
Cash and cash equivalents, beginning of period 4,528 360,595
------------ ------------
Cash and cash equivalents, end of period $ 14,705 $ 333,294
============ ============
ADDITIONAL CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest (non capitalized) $ 0 $ 1,896
============ ============
IncomeTaxes $ 0 $ 0
============ ============
NON-CASH ACTIVITIES:
Stock issued for acquisitions $ 0 $ 510,000
============ ============
Stock issued for deferred compensation payable $ 0 $ 621,225
============ ============
Stock issued for stock subscriptions receivable $ 0 $ 452,000
============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
- ----------
INVICTA GROUP INC. began its business operations in July 2001 with
advertising of discount air travel tickets in newspapers in South Florida, which
resulted in limited sales beginning in September of that year . See explanation
below of accounting treatment of reverse acquisition, which reflects no sales in
2001 based on the results of operations of Casino Rated Players. Although it
introduced its web site, www.dontpayfullfare.com in January 2002, ticket
-----------------------
sales have remained confined primarily to the telephone from inception to the
date hereof. In early 2002 Invicta Group initiated negotiations for the
acquisition of its wholly owned subsidiary, Casino Rated Players, which was
completed on July 15, 2002.
ACQUISITIONS
- ------------
CASINO RATED PLAYERS began its operations in July 2000, with sales of
airline tickets and tour packages. Casino Rated Players introduced its web site,
www.casinoratedplayers.com , in March 2001 but did not generate any
- --------------------------
commission revenues from casinos during that year. During 2001 and 2002, Casino
Rated Players revenues were derived almost entirely from sale of airline tickets
and general travel packages, and not from what was intended to be its primary
focus the sale of casino tour packages, which it has not had funding to
advertise. During 2002, Casino Rated Players earned approximately $1,800 in
casino commissions as a result of casino patrons who discovered
casinoratedplayers.com by doing their own web searches. Invicta Group intends to
begin marketing Casino Rated Players casino travel packages in the month of June
2004 and expects casino travel package products and casino player commissions to
become a significant part of its business.
The acquisition of Casino Rated Players by Invicta Group was treated as a
purchase in a reverse acquisition in which the subsidiary, Casino Rated Players,
is the survivor for accounting purposes, even though Invicta Group is the
survivor for legal purposes. Invicta Group issued 13,151,000 of its shares in
exchange for the issued and outstanding shares of Casino Rated Players held by
that company's stockholders and an additional one million shares to Mr. Forhan
in payment of $500,000 in accrued and unpaid compensation due to him from that
company; stock valued at $.50 per share. Mr. Forhan joined the management of
Invicta Group. Accordingly The results of operations prior to July 15, 2002
presented in the financial statements and discussed below are the results of
Casino Rated Players only, which commenced its business on January 27, 2000. The
following table presents information to assist the reader in understanding the
historical operations conducted by each of Invicta Group and Casino Rated
Players, separately, even though the information for Invicta Group prior to the
acquisition is excluded from the financial statements presented in this report
as a result of the reverse acquisition accounting treatment.
INVICTA GROUP CASINO RATED PLAYERS
-------------- ----------------------
2001 2002 2003 2001 2002 2003
---------- ---------- ---------- ---------- ---------- ----------
Revenues $ 0 $ 6,445 $ 7,806 $ 439,234* $ 1,800 $ 0
Gross profit $ 0 $ 6,445 $ 7,806 $ 33,315 $ 1,800 $ 0
* Primarily derived from sale of air travel and not the sale of casino
packages.
ISIP TELECOM GROUP .was acquired January 9, 2004 for 100,000 shares of
--------------------
restricted shares of Invicta valued at $.10/share. ISIP provides the ability to
make telephone calls worldwide using the internet, receiving clear reception at
low rates. The platform is based on Cisco Powered network with a robust platform
specifically designed to accommodate the delivery of IP-based communication
services, includes long distance, IP phone and enhanced services.
February 25, 2004 ISIP announced a strategic technology partner, Oronoco
Networks Inc. ISIP VoIP services will be offered to Oronoco's 35,000 database
customers.
April 29,2004 ISIP Telecom, announced it had finalized its interface with its
"IPhone" a USB connected telephone, and is ready to start marketing its products
in North and South America.
ISIP's intention is to market to the 25,000 travel agents that Invicta has in
its opt in data base through our subsidiary Airplan. Invicta has already
mentioned the VoIP services, to several members of the travel industry, and they
are keen to have the opportunity to market this inexpensive worldwide phone
service The retail price of the phone is $49.99, which will include the USB
telephone and 200 long distance minutes to select cities in the world. The phone
and service can be purchased online, and a listing of USA and International
rates: www.isiptelecom.com
-------------------
AIRPLAN INC was acquired February 18,2004 for $500,000 in Invicta stock and
-----------
acceptance of $440,000 debt; the shares issued were 1 million. If the value of
the stock is not $500,000 by February 18, 2005 Invicta will issue additional
shares .Established in 1989, Airplan is a leading international Airline Ticket
Consolidator serving: Europe, Asia, The Middle East, Africa and Australasian
areas. Revenues in 2003 exceeded $7 million. Airplan has over 6,500 customers
(travel agents) that buy airline tickets online 24/7. The management is lead by
John Latimer, a 20 year veteran in the airline consolidator industry, John will
remain as President of Airplan and report to David Scott, COO of Invicta Group
Inc.
March 19,2004 Airplan announced the expansion into South America after signing
contracts with two of South America's largest airlines. The contracts will be
added to Airplan Inc.'s inventory of travel products on behalf of their 6,500
travel agents.TAM BRAZILIAN is South America's second largest airline servicing
routes throughout Brazil, North America and the world. TAM currently operates an
impressive fleet of 53 state-of-the-art airbus aircraft - the most modern fleet
in operation in the industry today. AEROLINEAS ARGENTINAS services South America
and the world, with routes to/from Asia, North America, Europe, and Australasia.
Airplan is one of the leading wholesale sellers of discount tickets for
international leisure travel. Offering more than 2 million non-published
airfares on more than 27 major airlines, Airplan sells directly to travel agents
through its Call Center. Invicta intends to expand sales of discounted airline
tickets to the travel agents (aka B2B) as well as immediately commence sales to
the general public (aka B2C). Additionally, we foresee that opening two
retail/wholesale offices, one in Los Angeles as the Pacific Rim gateway and the
other in Miami as the Latin America gateway; within six months of acquisition
will greatly expand the Company's abilities to generate significantly more
business across all time zones.
Within six months of the acquisition, the Company intends to add a full catalog
of domestic and international fares to Airplan's existing fare database. This
will broaden the range of airline offerings to the Company's clients.
Within the first 12 months, the combined Company will sell its non-published
fares through the internet fortified by a dynamic interface with the call
centers that will allow the Company to increase margins significantly.
Additionally, the Company will have the resources and the requisite
relationships to broaden the product-lines to generate revenue streams outside
airline fares, such as: insurance, auto rental rates, hotels rates, and cruises.
The acquisition activity for the 6 months ended June 30, 2004 is summarized in
the following table. Property, plant and equipment of approximately $534,000
will be depreciated on a straight-line basis over a 5 year life. Purchased
intangible assets of approximately $535,000 will be amortized on a straight-line
basis over lives ranging from 5 to 10 years (weighted average life of 8.8
years).
3 Months Ended
March 31, 2004 Activity
Assets (Liabilities) ISIP Telecom, Total
At Fair Value Inc. Airplan, Inc. Activity
- -------------------------- ------------- ------------ ----------
Cash and other current assets $ - $ 362,925 $ 362,925
Property, plant equipment - net - 534,112 534,112
Purchased intangible assets 10,000 525,078 535,078
Accounts payable and other current
liabilities - (922,115) (922,115)
------------- ------------ ----------
Net Assets Acquired $ 10,000 $ 500,000 $ 510,000
============= ============ ==========
Fair values were determined by management's estimates without independent
appraisal
NEW SUBSIDIARY START UP
- --------------------------
LAS VEGAS EXCITEMENT INC. March 15, 2004/ Invicta Group Inc. announced the
-------------------------
opening of its Las Vegas office. Invicta is setting up a inbound tour operation
which will offer Las Vegas rooms, car rentals, air transportation, show tickets,
limos, sightseeing tours and free rooms to casino qualified players;
reservations can be made by phone or on the internet 24/7.The name of the newest
subsidiary is "Las Vegas Excitement Inc." and can be found online at
www.lasvegasexcitement.com. April 5, 2004 Las Vegas Excitement Inc. announced it
- --------------------------
has entered into services agreements with 18 hotels in Las Vegas to provide
hotel rooms for its packages to this exciting city. Las Vegas Excitement has
also entered into arrangements with various sightseeing and tour operators who
will provide tours by air, and motor coach and private limousines to the various
sites in and around Las Vegas
REGISTRATIONS APPROVED:
- ------------------------
Invicta filed a post effective amendment SB-2 Registration issuance of
12,000,000 shares of common stock, par value $.001. The SB-2 Registration became
effective on February 5, 2004. The selling price of the stock was $.11 per share
with a 10% increase or 10% decrease ($.10 - $.12 per share). The equity funds
will be used for Invicta's working capital.
REGISTRATIONS PENDING:
- -----------------------
IVGA filed a Registration for equity funding 5/25/04, and responded to the
SEC comments 7/20/04 and await further comments before becoming effective.
Invicta Group, Inc. announced on June 7, 2004, it had entered into an agreement
to obtain up to $3.3 million in institutional funding. In connection with this
funding, IVGA has issued the investor a debenture in the amount of $300,000 and
a warrant to purchase 3,000,000 shares of common stock of IVGA that have an
exercise price of $1.00 per share. Upon each conversion of the debenture, the
investor is required to exercise a portion of the warrant. The conversion price
of the convertible debenture is based on the trading price of IVGA's common
stock.
SHARES ISSUED 2ST QUARTER:
- -----------------------------
IVGA issued 7,305,000 shares from April 1,2004 to June 30,2004. The total
shares outstanding 6/30/04 are 59,197,279. The shares issued were all common
stock, and were a combination of restricted and free trading:
ISSUED SHARES:
1) 7,075,000 SB-2 shares were sold, netting $707,500 for working capital
2) 1,300,000 S-8 shares were issued: 900,000 for consulting fees; 400,000 for
legal
3) 100,000 Restricted Shares were issued for the acquisition of ISIP Telecom
Inc.
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 for the quarter ended June 2004 were $3,858,568 as compared to
revenues of $10,337 for the Quarter ended June 30, 2003. The revenues in both
periods were derived principally from the sale of airline tickets. The primary
reason for the increase in 2004 over 2003 was the acquisition of Airplan Inc.
Revenues of Airplan are driven principally by marketing to their 6,500 travel
agents with Fax and Email communication of international airline seats on sale.
Airplan also markets print ads in travel trade publications' generating new
clients and revenues. Their revenues are generated from their B-2-B website and
their call center is located in Pittsburgh, PA.
COST OF REVENUES:
- -------------------
Revenues are the gross sales earned from airline tickets and travel
products, and the cost of revenues are the net fares charged by the airlines and
travel suppliers. The net fare cost for 2nd quarter 2004 was 93.7% of revenues.
The competitive market place and airlines fare price wars has decreased gross
operating profits margins from 9% to 6%. Management will seek to add new travel
products: hotels, cruise, tour packages, and car rental services in an effort to
increase margins and enhance revenues.
EXPENSES:
- ---------
The major components of selling, general and administrative expenses for
three months ended June 30, 2004 are professional fees $40,633, payroll of
$245,705, marketing cost $67,583, start up expense of the new subsidiary Las
Vegas Excitement Inc. totaling $67,583 . The total G&A expenses for the period
were $629,171.
NET LOSSES:
- ------------
Net loss increased for the 2nd quarter ended June 30, 2004 to $387,603;
loss per share: ($0.007) compared to a net loss of $121,589; loss per share
($0.004) for the 2nd quarter June 30, 2003. The increase in loss was principally
due to professional fees, marketing expense, start up expense of subsidiary Las
Vegas Excitement Inc. and gross margin decrease of 3% on airline tickets vs.
same period 2003. Competition from the airlines and air consolidators has
resulted in aggressive pricing in an effort to capture business and increase
market share.
PRO FORMA INFORMATION FOR ACQUISITIONS:
Six Months Ended
June 30, June 30
2004 2003
---------- ----------
Gross Revenues $8,802,843 $4,903,966
Net Income (Loss) (918,043) (475,031)
Earnings (Loss) Per Share (.018) (.015)
LIQUIDITY:
- ----------
At June 30, 2004 and 2003, Invicta Group's current ratios are .352% and
..04% respectively. Invicta Group has not generated sufficient revenue in any
period to carry its costs of operations, realizing a negative cash flow from
operations of $348,713 for 6 months 2004 compared to a negative cash flow of
$60,917 for June 30, 2003. Invicta Group has derived its liquidity principally
from a loan from Mr. Forhan in the amount of $320,671 in 2000, the sale of its
common stock of Invicta Group Inc. and Casino Rated Players for an aggregate of
$493,700 in 2000 thru 2002, $76,800 raised in 2003 from the sale of common
stock, deferred executive compensation of $668,250 through December 31, 2003;
and $1,121,500 equity funding from the sale of 11,275,000 shares of common stock
in the first and second quarter of 2004.
Invicta Group owes $297,403 to Mr. Forhan for loan repayments. Invicta
Group will not make payments to Mr. Forhan until it has obtained more than
$1 million from the sale of its shares; and has sufficient cash flow to
operate IVGA.
CAPITAL RESOURCES:
- -------------------
Invicta Group has substantially all the capital resources required to
conduct its core business, consisting of its five web sites and search engine
for air fares, casino players, cruise and tour packages, and travel related
services, such as rental cars and lodging accommodations. Invicta Group
anticipates $50,000 is needed for capital resources in 2004. Invicta will use
the equity funding generated from pending SB-2 Registration to invest up to
$50,000 in capital resources, expand its marketing activities with $150,000, and
$200,000 to add personnel. IVGA will use the balance of funding to target
acquisitions of airline consolidators, tour operators, casino representative
companies and working capital.
ITEM 3. 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.
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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
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
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits and Index of Exhibits
31.1(a) and (b)
Rule 13a-14(a)/15d-14(a) Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 and 32.2
Section 1350 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K.
On June 30, 2004, the Company filed a current report on form 8-K in
connection with the acquisition of all of the assets of Jamaican Travel
Specialist, Inc.
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: August 24, 2004
/s/ WILLIAM FORHAN
--------------------
WILLIAM G. FORHAN
Chief Executive Officer
Date: August 24, 2004
/s/ David Scott
-----------------
David Scott
Chief Operating Officer