U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 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 September 30, 2004: 63,722,279 shares Number of shares of preferred stock outstanding as of September 30, 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 ITEM 1. FINANCIAL STATEMENTS INVICTA GROUP INC. CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2004 (UNAUDITED) ============================================================================== ASSETS 2004 ------------ CURRENT ASSETS: - ---------------- Cash and cash equivalents $143,759 Accounts Receivable 10,135 Prepaid Expenses 7,270 ------------ TOTAL CURRENT ASSETS 161,164 Property and equipment, net of accumulated depreciation of $730,807 120,613 OTHER ASSETS: Surety Bond Deposit 71,410 Security Deposits 1,000 Intangible assets, net of accumulated amortization of $ 4,125 83,375 ------------ TOTAL ASSETS $437,562 ============ LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ $1,075,941 Notes payable and convertible debentures 99,127 Deferred officer compensation 174,025 ------------ TOTAL CURRENT LIABILITIES 1,349,093 ------------ LONG TERM DEBT Notes Payable - shareholders 296,149 Convertible Debenture 280,800 ------------ TOTAL LIABILITIES 1,926,042 ------------ SHAREHOLDERS EQUITY: Preferred stock par value $.001 10,000,000 shares authorized; none outstanding 0 Common stock, par value $ .001, 200,000,000 shares authorized, 63,722,279 issued and outstanding 63,597 Additional paid in capital 2,634,746 Notes receivable related to stock sales and Subscriptions Receivable (110,000) Retained (Deficit) (4,076,823) ------------ TOTAL STOCKHOLDERS' EQUITY (1,488,480) ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 437,562 ============ INVICTA GROUP INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) ========================================================================================================== THREE THREE MONTHS ENDING MONTHS ENDING SEPTEMBER 30, SEPTEMBER 30, 2003 2004 ------------ ------------ REVENUES: - --------- Revenues earned $ 1,480 $ 254,650 Cost of sales 4,825 ------------ ------------ GROSS PROFIT 1,480 249,825 Selling, general, and administrative expenses 147,191 639,774 ------------ ------------ NET LOSS $ (145,711) $ (389,949) ============ ============ Net loss per share weighted average, basic and diluted $ (0.005) $ (0.006) ============ ============ Weighted average shares outstanding, basis and diluted 31,732,200 60,567,999 ============ ========== INVICTA GROUP INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) ========================================================================================================== NINE NINE MONTHS ENDING MONTHS ENDING SEPTEMBER 30, SEPTEMBER 30, 2003 2004 ------------ ------------ Revenues earned $ 14,906 $ 631,956 Cost of sales 8,742 ------------ ------------ GROSS PROFIT 14,906 623,214 Selling, general, and administrative expenses 425,103 1,840,692 Asset impairment charge 1,023,753 ------------ ------------ NET LOSS $ (410,197) $ (2,241,231) ============ ============ Net loss per share weighted average, basic and diluted $ (0.013) $ (0.040) ============ ============ Weighted average shares outstanding, basic and diluted 31,732,200 56,670,165 ============ ============ INVICTA GROUP INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 ========================================================================================================== 2004 2003 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: - ----------------------------------------- Net income $ (410,197) $ (2,241,231) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 6,000 45,420 Amortization 32,400 10,575 Asset impairment charge 1,023,753 Stock issued for services 385,500 Write off of receivable from affiliate 14,600 Changes in assets and liabilities: Accounts receivable and prepaid expenses 24,310 (10,135) Other assets (163,091) Accounts payable & accrued liabilities 231,545 290,220 ------------ ------------ (115,942) (644,389) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES :---------------------------------------- Capital asset expenditures (600) (26,789) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long term debt 196,103 350,305 Proceeds from sale of comon stock 800 589,595 Payments on long term debt (77,202) (485,558) ------------ ------------ 119,701 454,342 ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,159 (216,836) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 4,528 360,595 ------------ ------------ END OF THE PERIOD $ 7,687 $ 143,759 ============ ============ 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 $ 77,000 ============ ============ See accompanying notes to consolidated financial statements INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (UNAUDITED) ITEM A. - -------- 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 nine and three month period ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. 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, 2003. NOTE B. CHANGES IN STOCKHOLDERS' (DEFICIT) FOR THE NINE MONTHS ENDED SEPTEMBER ---------------------------------------------------------------------- 30, 2004 - --------- Common Stock Additional Paid Shares Amount in capital Deficit ---------- ------------ --------------- ------------- Balance December 31, 2003 34,629,970 $ 34,637 $ 815,386 $ (1,850,192) Stock issued for cash 11,105,000 11,105 680,490 Stock issued for legal, consulting and marketing services 8,640,000 8,640 341,860 Stock issued for intangible assets 350,000 350 34,650 Stock issued for acquisitions 1,100,000 1,100 148,900 Stock issued to officers in exchange for prior years deferred compensation 7,765,312 7,765 613,460 Net loss for the nine months ended September 30, 2004 (2,241,231) ---------- ------------ --------------- ------------- Balance September 30, 2004 63,590,282 $ 63,597 $ 2,634,746 (4,076,823) ========== ============ =============== ============= NOTE C. INCOME PER SHARE ------------------ Basic net loss per share was computed based on the weighted average shares of common stock outstanding and excludes any potential dilution. Diluted net loss per share reflects the potential dilution from the exercise or conversion of all dilutive securities, such as convertible debentures, into common stock and stock purchase options. The Company's outstanding convertible debentures and options are not included in the computation of basic or diluted net loss per share since they are anti-dilutive. At September 30, 2004 potentially dilutive securities consist of convertible debentures that could be converted into 433,666 common shares and options that could be converted into 3,882,656 common shares. INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (UNAUDITED) NOTE D. ACQUISITIONS ------------ ISIP Telecom, Inc. - -------------------- On January 8, 2004, the Company used the purchase method to acquire all of the common stock of ISIP Telecom, Inc., a Florida Corporation formed in 2003, in exchange for 100,000 restricted shares of the Company's common stock with a value of $.10 per share resulting in a total purchase price of $10,000. ISIP Telecom is a voice over internet protocol telecommunications company that will market long distance services over the internet to worldwide telephones and will be sold to the travel industry. The customers of ISIP pay a monthly fee in advance with no potential for refunds for a certain amount of long distance minutes. Revenue is recognized upon the receipt of funds for the long distance minutes purchased as there are no refunds. At the end of any accounting period, unearned revenues, if any, will be adjusted for. The Company's 2004 consolidated results include the operations of ISIP Telecom, Inc. from the date of acquisition. Airplan, Inc. - -------------- On February 18, 2004, the Company acquired all of the outstanding capital stock of Airplan, Inc., a Pennsylvania Corporation organized in 1989, for 1,000,000 shares of the Company's common stock of which 700,000 shares are restricted. Additionally, the Company will guarantee the value of the stock given as consideration to be at least $500,000 at 180 days after closing the transaction. If the value of the stock is less than $500,000, then additional shares will be issued based on the current market value to a total of $500,000. Airplan, Inc. is involved in the wholesale and retail travel industry. Clients of Airplan make a booking and send payment by credit card or check. A ticket is produced from the booking information. Revenue is recognized upon the receipt of the client's payment and a ticket is produced for the client's booking. Sales for published and unpublished fares are recorded on a net basis. The acquisition was accounted for as a purchase of a wholly-owned subsidiary and the results of its operations were included in the consolidated results of the Company from the date of acquisition. In addition, the selling shareholders have a 5 year Earn Out Agreement offering an earn out of 10% of EBITDA of Airplan, Inc. for each of the fiscal years ending December 31, 2004 through December 31, 2008 which will be accounted for as compensation for services. The acquisition activity for the nine months ended September 30, 2004 is summarized in the following table. Property, plant and equipment of approximately $134,000 will be depreciated on a straight-line basis over a 5 year life. All goodwill acquired has been written off during the quarter ending March 31, 2004 as an impairment loss. Nine Months Ended September 30, 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 - 134,112 134,112 Purchased goodwill 10,000 925,078 935,078 INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (UNAUDITED) 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. The unaudited pro forma information for the nine months ended September 30, 2004 and 2003 assumes the acquisitions occurred as of the beginning of each respective year, after giving effect to certain adjustments, including amortization and depreciation based upon the adjustments to the fair values of intangibles and property, plant and equipment acquired. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations that may occur in the future or that would have occurred had the acquisitions been effected at the beginning of each period presented. Pro Forma Information for Acquisitions: Nine Months Ended Sept. 30, Sept. 30, 2004 2003 ----------- ---------- Gross Revenues $ 746,834 $ 564,562 Net Income (Loss) (2,257,895) (689,785) Earnings (Loss) Per Share (.040) (.021) NOTE E. INTANGIBLE ASSETS ------------------ Intangible assets consist of software and software enhancements purchased for use in regards to the Company's web-site and search capabilities. The Company will amortize this software ratably over a 5-year period beginning July 1, 2004. NOTE F. AMOUNTS PAYABLE FROM PURCHASE OF AIRPLAN --------------------------------------------- Included in accounts payable and accrued liabilities is a payable of $360,000 resulting from the purchase of Airplan. The payable is a result of the difference in the purchase price of $500,000 and the $140,000 value of the 1,000,000 shares of stock issued at the time of the purchase. The Company has guaranteed the stock value to .50 per share, and must issued additional shares to compensate the sellers for any shortfall in the value of the stock as of February 18, 2005. INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (UNAUDITED) NOTE G. DEFERRED OFFICER'S COMPENSATION AND STOCK OPTIONS ------------------------------------------------------ On January 6, 2004, the Company entered into an agreement with its officers to issue restricted common stock and options in lieu of the deferred salary owed to the officers. The board approved and authorized the issuance of 7,765,313 shares of its common stock, and granted options for and additional 3,882,656 shares, in exchange for approximately $621,000 of deferred compensation. The stock issued is restricted for one year. The exercise price of the options are $.25, and are for a period of 5 years. 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 $4,062,223 since inception and the Company had negative working capital of $1,173,329 at September 30, 2004. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. During the next 12 months, management does not believe that it will be able to generate cash sufficient to support its operations. As a result, the Company's ability to continue as a going concern is contingent upon its ability to secure equity funding, financing and to attain profitability. Management has raised over $690,000 in equity funding in 2004 and it has entered into a securities purchase agreement with Golden Gate Investors, Inc. in connection with the sale of (i) $300,000 in convertible debentures and (ii) warrants to buy 3,000,000 shares of our common stock. In addition, management plans to continue to look for acquisitions to enhance profitability. Management feels the synergy of the subsidiaries will create profitability in the future. Management feels that its equity and financing plans will provide the working capital to allow it to continue as a going concern, however, there can be no assurances the Company will be successful in its efforts to secure additional equity funding, financing or attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern. NOTE I. RESTATEMENT OF QUARTERLY REPORTS ----------------------------------- The Company has amended its prior quarterly filings for the quarter ended March 31, 2004, and June 30, 2004 as follows: Quarter ending March 31, 2004. Originally filed on May 17, 2004. First amendment filed on June 17, 2004 to include the term "unaudited" on the financial statement headings. Second amendment filed on October 14, 2004 recognizing revenue on a net basis instead of on the gross method of reporting. INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (UNAUDITED) Quarter ending June 30, 2004. Originally filed on August 24, 2004. First amendment filed on August 26, 2004 to include the footnotes inadvertently omitted in the original filing. Second amendment filed on October 14, 2004 recognizing revenue on a net basis instead of on the gross method of reporting. NOTE J. OTHER MATTERS -------------- Airplan Stock Value Guarantee: On September 2, 2004, the Company entered into an agreement for an extension of time to guarantee the stock value for the 1,000,000 shares issued for the purchase of Airplan. The Company had agreed to guarantee a value of .50 per share within 180 days of the original transaction or issue additional shares to compensate the sellers to a value of .50 per share. The extension is valid through February 18, 2005. ISIP Telecom Spinoff: On July 2, 2004, Invicta Group, Inc.'s board of directors approved a spin-off of its subsidiary ISIP Telecom, Inc. Shareholders of record as of August 20, 2004 will receive 1 share of ISIP Telecom, Inc., for every 5 shares owned in Invicta Group, Inc. Invicta Group, Inc. will maintain a 25% ownership in ISIP Telecom, Inc. NOTE K. SUBSEQUENT EVENTS ------------------ Equity Investment: On October 15, 2004, the Company received $50,000 as a prepayment to its SB-2 Registration. SB-2 Approval: On November 5, 2004, the Company received its approval for its SB-2 registration becoming effective as of November 5, 2004. The Registration will allow the Company the company to raise $3.3 million dollars over the next 24 months in exchange of issuing free trading shares. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS 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 (initial date was 8/18/2004, revised on 9/2/2004 to 2/18/2005) Invicta will issue additional shares totaling $500,000; the number shares will be determined by the average stock price of IVGA February 7-18, 2005. Established in 1989, Airplan is a leading international Airline Ticket Consolidator serving: Europe, Asia, The Middle East, Africa and Australasian areas. Net revenues in 2003 were $629,390 derived from gross sales of $7,849,047. 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). 9 Months Ended Sept 30, 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 - 134,112 134,112 Purchased intangible assets 10,000 925,078 935,078 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 were used for Invicta's working capital. REGISTRATIONS PENDING: - ----------------------- IVGA filed a Registration for equity funding 5/25/04, and responded to the SEC comments 10/21/04 and await 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 3RD QUARTER: - ----------------------------- IVGA issued 4,525,000 shares from July 1,2004 to September 30,2004. The total shares outstanding 9/30/04 are 63,772,279. The shares issued were all common stock, and free trading: ISSUED SHARES: 1) 200,000 S-8 shares were issued to two Advisory Directors for one year's service on the IVGA Advisory Board. 2) 3,975,000 S-8 shares were issued: 3,250,000 for consulting fees; 725,000 for legal fees 3) 100,000 shares were issued for the acquisition of ISIP Telecom Inc. 4) 250,000 shares were SB-2 shares that IVGA received $25,000 equity funding. The following discussion and analysis should be read in conjunction with Invicta Group's consolidated financial statements included in this report. RESULTS OF OPERATIONS: - ------------------------ REVENUES: - --------- Revenues are net commission and fees, there is no cost of sale. Revenues for the quarter ended September 30, 2004 were $254,650 as compared to revenues of $1,480 for the Quarter ended September 30, 2003. The revenues in both periods were derived principally from the commission and fees earned from the sale of airline tickets. The primary reason for the increase in 2004 over 2003 was the acquisition of Airplan Inc. on 2/18/04. Revenues for 9 months of 2004 totaled $631,956 versus $14,906 for 9 months 2003. 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 net commission and fees from airline tickets and travel products. Net recognition of revenues eliminates cost of revenues. EXPENSES: - --------- The major components of selling, general and administrative expenses for three months ended September 30, 2004 are professional fees $53,469, payroll of $252,461, marketing cost $132,000 . The total G&A expenses for the period were $625,174. NET LOSSES: - ------------ Net loss for the 3rd quarter ended September 30, 2004 was ($389,949); loss per share: ($0.007) compared to a net loss of ($145,711); loss per share ($0.004) for the 3rd quarter September 30, 2003. The loss was principally due to marketing expenses of IVGA and its subsidiaries. PRO FORMA INFORMATION FOR ACQUISITIONS: Nine Months Ended September 30, September 30 2004 2003 ------------ ------------ Net Revenues $ 494,829 $ 439,470 Net Income (Loss) $ (1,910,403) $ (475,031) Earnings (Loss) Per Share (.037) (.015) FUNDING: - -------- Invicta raised $25,000 in the 3rd Quarter from private investors issuing a Promissory Note maturing December 31,2004; paying interest at 12% annually, and offering 5 warrants for every dollar loaned to the company (exercise price 5 cents, 12 months to exercise from time of loan); total warrants issued are 125,000. Invicta raised $25,000 with sale of 250,000 shares of SB-2 stock at $.10 per share. Invicta raised $130,800 from a Convertible Debenture, payable in free trading stock from current SB-2 Registration filed with SEC. LIQUIDITY: - ---------- At September 30, 2004 and 2003, Invicta Group's current ratios were .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 $216,836 for 9 months 2004 compared to a positive cash flow of $3,159 for September 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 for an aggregate of $570,500 from 2000 - 2003. 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 $25,000 is needed for capital resources in 2004. Invicta will use the equity funding generated from pending SB-2 Registration to invest up to $25,000 in capital resources, expand its marketing activities with $ 70,000, and $50,000 to add personnel. IVGA will use the balance of funding for 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 August 24, 2004, the Company has amended its current report originally filed on June 30, 2004, in connection with its decision to unwind the acquisition of the assets of the Jamaican Travel Specialist, Inc. The Company has decided to unwind the acquisition of the Jamaican, due to unresolved questions pertaining to the financial diligence performed by the Company. 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: November 15, 2004 /s/ WILLIAM FORHAN -------------------- WILLIAM FORHAN Chief Executive Officer Date: November 15, 2004 /s/ David Scott -------------------- David Scott Chief Operating Officer