10QSB 1 ivga10qsb093006.txt 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 3rd Quarter ended September 30, 2006. OR [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to _________. Commission File Number: 333-102555 INVICTA GROUP INC. (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) Nevada 91-2051923 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2400 East Commercial Blvd. Suite 618 Ft. Lauderdale, FL 33308 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: 954-771-0650 Securities Registered Pursuant to Section 12(b) of the Act: Common Stock par value $.0001 per share Securities Registered Pursuant to Section 12(g) of the Act: None Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10- QSB or any amendment to this Form 10-QSB. [ X ] The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the average of the closing bid and ask price of the Common Stock on the OTC Bulletin Board system on November 2, 2006 of $.0007, was approximately $640,000. Shares of Common Stock held by each officer and director and by each person who may be deemed to be an affiliate have been excluded. The number of shares of common stock outstanding as of November 2, 2006 was 914,489,367. BACKGROUND OF CORPORATION Invicta Group Inc. is an Internet Media Company that offers a website known as Travel Hot Link www.travelhotlink.com. Travel Hot Link has a database of 25 million travel enthusiasts seeking discounted travel products: cruise vacations, airline tickets, hotel rooms car rentals, and packaged tours. Travel hot Link offers Travel Suppliers a media to reach awareness of their discounts. We offer advertisers a number of advertising options: a weekly Email to a 10 million travel enthusiasts promoting 10 - 15 discounted travel products; a Custom Email to 2 - 10M travel enthusiasts; Banner ads and website listings to our website. The company is in a competitive marketplace that has companies with more experience, branded names, strong sales forces, and better technology to reach the market. Invicta Group Inc's history started on 7/15/2002 as a private travel company that was specializing as an Airline Consolidator and Internet company selling airline tickets; doing business as Don't Pay Full Fare. Invicta became a public company in November 2003 and targeted an acquisition of an airline consolidator company that had over 12 years experience and multiple European airline contracts. The company was acquired in February 2004 and later found the seller was not interested in fulfilling his 5 year employment contract resulting in lost agreements with the company's largest airline suppliers. Invicta decided to leave the slim margin business of Airline Consolidator in April 2005 due to losses that could not be overcome. Invicta management spent the balance of 2005 developing a new business plan and began focusing on the Internet Media marketplace as the new frontier to market travel products online. Today, Invicta Group Inc. acts as the holding company of subsidiary Travel Hot Link. The attached information is an overview of the companies operations and financial status. 2 INDEX TO FORM 10-QSB Page No. PART I ITEM 1. Financial Statements 4 Balance Sheet 5 Statements of Operations 6 Statements of Cash Flows 7 Statement of Changes in Stockholders' Equity 8 Notes to Financial Statements 9 ITEM 2. Management's Discussion and Analysis 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. Exhibits 16 Signatures 17 3 PART I ITEM 1. FINANCIAL STATEMENTS 4 INVICTA GROUP INC. CONSOLIDATED BALANCE SHEET September 30, 2006 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 625 Accounts receivable 35,314 ------------- Total current assets 35,939 Property and equipment, net of accumulated depreciation of $43,591 19,730 Other assets: Security Deposits 1,500 Advances to affiliates 35,945 Intangible assets, net of accumulated amortization of $2,120 150,480 ------------- Total Assets $ 243,594 ============= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Notes payable and convertible debentures $ 653,024 Accounts payable and accrued liabilities 100,730 Accounts payable and accrued liabilities - discontinued operations 698,230 Accrued expenses and other liabilities 409,950 Accrued compensation - related parties 192,339 ------------- Total current liabilities 2,054,273 Long-term debt Notes Payable - shareholders 252,685 ------------- Total Liabilities 2,306,958 ------------- Shareholders' Equity (Deficit) Preferred stock series B par value $1.00 175,000 shares authorized; 175,000 issued and outstanding 175,000 Preferred stock series C par value $1.00 480,000 shares authorized; 480,000 issued and outstanding 480,000 Common stock, par value $ .0001, 1,000,000,000 shares authorized, 855,044,922 issued and outstanding 85,504 Additional paid in capital 3,613,046 Accumulated deficit (6,416,914) ------------- Total Shareholders' equity ( deficit) (2,063,364) ------------- Total Liabilities and Shareholders' Equity (deficit) $ 243,594 ============= 5 INVICTA GROUP INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Three Months Ending Months Ending September 30, September 30, 2005 2006 -------------- -------------- Revenues earned $ 16,608 $ 129,840 Selling, general, and administrative expenses 130,876 159,918 -------------- -------------- Income (loss) from operations before other income and expense (114,268) (30,078) Other income and (expense) Interest expense - related parties (4,750) (4,359) Interest expense (6,616) (6,391) -------------- -------------- Net income (loss) before provision for income taxes (125,634) (40,828) Provision for income taxes 0 0 -------------- -------------- Net income (loss) $ (125,634) $ (40,828) ============== ============== Net income (loss) per share weighted average share, basic and diluted ($0.001) ($0.000) ============== ============== Weighted average shares outstanding, basis and diluted 224,318,542 838,936,516 ============== ============== 6 INVICTA GROUP INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Nine Nine Months Ending Months Ending September 30, September 30, 2005 2006 -------------- -------------- Revenues earned $ 98,041 $ 206,601 Selling, general, and administrative expenses 793,612 463,080 -------------- -------------- (Loss) from operations before other income and expense (695,571) (256,479) Other income and (expense) Interest income 566 183 Interest expense - related parties (14,250) (13,475) Interest expense (18,314) (13,871) Sale of Intangible Assets 10,000 -------------- -------------- Net (loss) before provision for income taxes (717,569) (283,642) Provision for income taxes 0 0 -------------- -------------- Net loss $ (717,569) $ (283,642) ============== ============== Net loss per share weighted average share, basic and diluted ($0.004) ($0.000) ============== ============== Weighted average shares outstanding, basic and diluted 187,661,798 594,963,346 ============== ============== 7 INVICTA GROUP INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Nine Nine Months Ending Months Ending September 30, September 30, 2005 2006 -------------- -------------- Cash flows from operating activities: Net income $ (717,569) $ (283,642) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,625 5,625 Amortization 12,375 2,120 Stock issued for services 178,970 68,000 Database acquired in exchange for accounts receivable (142,600) Changes in assets and liabilities: Accounts receivable and prepaid expenses 12,990 (71,258) Other assets 30,294 (10,000) Accounts payable & accrued liabilities 214,023 93,816 -------------- -------------- (263,292) (337,939) -------------- -------------- Cash flows used in investing activities: Capital asset expenditures (6,880) (7,029) Cash flows used in financing activities: Proceeds from long term debt 104,500 265,000 Proceeds from sale of common stock 181,937 123,900 Payments on long term debt (161,737) (42,010) -------------- -------------- 124,700 346,890 -------------- -------------- Net change in cash and cash equivalents (145,472) 1,922 Cash and cash equivalents, beginning of period 145,472 (1,297) -------------- -------------- Cash and cash equivalents, end of period $ - $ 625 ============== ============== Additional Cash Flow Information: Cash paid during the period for: Interest (non capitalized) ============== ============== Income Taxes $ 0 $ 0 ============== ============== Non-Cash Activities: ============== ============== Stock issued for deferred compensation payable $ 175,000 ============== ============== Stock issued for payments on convertible debentures $ 301,002 ============== ============== Preferred stock issued for deferred compensation payable $ 150,000 ============== 8 INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 UNAUDITED NOTE A. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 31, 2005. NOTE B. REVENUE RECOGNITION The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition." We recognize advertising revenues in the period in which the ad is displayed. The revenues are advertising revenues, consisting of fixed fees paid by travel suppliers to advertise their discounted travel products on our website: travelhotlink.com. The majority of revenues are derived from barter exchanges. NOTE C. GOING CONCERN The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses of $6,416,000 since inception and the Company had negative working capital of $2,015,000 at September 30, 2006. These factors raise substantial doubt about the Company's ability to continue as a going concern. During the next 12 months, management believes that it will be able to generate cash sufficient to support its operations. Management believes that it can generate this cash and ultimately profits from advertising revenues on its website travelhotlink.com. Travel Hot Link has no involvement with the reservation; its revenues are generated from the Travel Supplier that advertises its travel products online. It is estimated that Travel Hot Link will reach a potential 40 million travel enthusiasts that are seeking travel bargains online. In addition to the assumption regarding increased revenues, in the 1st quarter of 2006, the Company's management has raised $245,000 in equity funding in 2006 from its securities purchase agreement with Golden Gate Investors, Inc. 9 INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 UNAUDITED Management feels that its increase revenues from its Travel Hot Link web- site, its equity and financing plans will provide the working capital to allow it to continue as a going concern, however, there can be no assurances the Company will be successful in its efforts to secure additional equity funding, financing or attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern. NOTE D. CHANGES IN STOCKHOLDERS' (DEFICIT) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 Common Stock Additional Paid Shares Amount in Capital Deficit ----------------------------------------------- Balance December 31, 2005 239,569,367 $ 23,957 $3,181,691 $(6,133,272) Stock issued for cash 157,141,000 15,714 108,186 Stock issued for legal and marketing services 67,779,000 6,778 61,222 Stock issued in exchange for payment of convertible debentures 390,555,555 39,055 261,947 Net loss for the nine months ended September 30, 2006 (283,642) ----------------------------------------------- Balance September 30, 2006 855,044,922 $ 85,504 $3,613,046 $(6,416,914) =============================================== NOTE E. 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, 2006 potentially dilutive securities consist of convertible debentures that could be converted into 450,000 common shares and options that could be converted into 3,882,656 common shares. 10 INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 UNAUDITED NOTE F. CUSTOMER DATABASE The Company's customer database acquired for advertising and marketing is being amortized over a 5-year period. The Company begins computing amortization in the first month of the first quarter following the acquisition of the customer database. At September 30, 2006 the Company amortized expense of $2,120 for the 3rd quarter. The Customer Database is a collection of Email addresses of Travel Enthusiasts that have Opted -In for Emails to be sent to them via the Internet. The Company sends 10M Emails a week promoting discounted travel products, to the database, that can be purchased online via a link to the Travel Supplier's booking engine. NOTE G. NOTES PAYABLE - SHAREHOLDERS Note payable to shareholders, uncollateralized, payable on the first month after the Company has received $1,000,000 in equity funding in monthly installments of approximately $20,000. Invicta is in default on the payments to shareholders due to a cash flow shortage. Shareholder recognizes default status and will accept 7% interest on note from 1/2/05 until paid in full. The Company plans to begin these payments as soon as the necessary cash flow is available which management expects to be in 2006. Therefore, the entire balance of $ 239,210 is classified as long-term debt for 2006 and $269,466 for 2005. Invicta owes seller of Airplan, Inc. $60,000, but does not intend to pay due to termination of employment contract. NOTE H. RELOCATION OF CORPORATE OFFICE Effective May 1, 2006, the Company has moved its headquarters from its office in Miami to a new office location in Ft. Lauderdale. The Company will lease its office space under a five-year, non-cancelable operating lease for approximately $3700 per month. Obligations under the non-cancelable operating leases are as follow: Year ending December 31, 2006 $ 11,100 2007 46,000 2008 48,400 2009 50,800 Thereafter 56,800 --------- $ 213,100 11 INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 UNAUDITED NOTE I. STRATEGIC ALLIANCES The company entered into 2 strategic alliances, in an effort to increase revenues, profits and customer loyalty. Effective July 1, the Company entered into an agreement with ZDirect, Inc. an electronic customer relationship management company that creates profiles of e-mail databases. The company database will be broken down via state and personal interests (golfer, cruiser, gambler etc.). ZDirect will be managing Travel Hot Link's Email database daily. On July 11, the Company signed an agreement with IQWARE, Inc. IQWARE will be a reseller of Travel Hot Link's internet media to the 500 hoteliers that use the IQWARE software for i NOTE J. DEFERRED COMPENSATION CONVERSION Senior Management converted $150,000 of Deferred Compensation into 150,000 Preferred C Stock; valued at $1.00 per share. The total Preferred C Shares issued has increased to 480,000 shares, effective 9/29/200 NOTE K. AMENDING AUTHORIZED SHARES The Company announced that it was increasing its authorized common shares from 1,000,000,000 to 5,000,000,000 effective September 14, 2006. The company completed the necessary filings to amend the articles of incorporation, but to date has not actually filed them with the state of Nevada. NOTE L. CAPITAL TRANSACTIONS Invicta Registered 100 million shares as S-8 stock on 7/18/2006. The stock was issued to consultants for services and options. Invicta issued 238,833,333 shares in the 3rd Qtr: 108,333,333 were issued to Institutional Investor for payment of $65,000; 128,500,000 were issued for $100,800 funding and 2,000,000 shares were issued to Consultants. The average value of the stock was $.0007. The total number of outstanding shares at 9/30/2006 was 855,044,922.Invicta issued 102,734,000 common shares in the 1st Quarter of 2006; 38,918,332 shares were issued for $40,500 consulting, 13,815,668 were issued for professionals fees of $14,000 and 50 million shares were issued to raise $43,000 equity funds at an average of $.0009. Invicta issued 2nd Quarter shares totaling 273,988,222; 5 million were for Legal fees and the balance were for payments of advanced equity funding at an average value of $.0008. The total number of shares outstanding on 6/30/2006 were 616,211,589; increased to 855,044,922 September 30,2006. 12 INVICTA GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 UNAUDITED NOTE M. SUBSEQUENT EVENTS - LETTER OF INTENT TO ACQUIRE EMARKETING COMPANY A letter of intent was signed October 30, 2006 for the Company to acquire an EMarketing Company that is selling an Email database of 70 million addresses, in exchange for 100,000 shares of Preferred D Stock. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS 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 advertising flat fees charged to travel suppliers for media purchase on our website www.travelhotlink.com . The travel suppliers are seeking a media for the last minute travelers that are seeking deep discounts to motivate them to travel now; their goal is to advertise online and receive a discounted rate for their perishable products (car rentals, airline seats, hotels rooms, cruise cabins and packaged tours). Revenues for the quarter ended September 30, 2006 were $129,840 compared to revenues of $16,608 for the quarter ended September 30, 2005. The revenues in 2006 versus 2005 were generated from Internet Media Advertising vs. 2005 revenues were from airline commissions. Revenues for nine months 2005 were $98,041 and nine months 2006 were $206,601. Expenses The major components of expenses are general and administrative expenses. The three months ended September 30, 2006 major expenses were: Payroll $66,335; Internet design $27,907; Professional fees $35,301; the total G&A expenses for the quarter were $163,759. Net Profit/Net Losses Net profit for the quarter ended September 30, 2006 was $(40,828); income per share: ($0.000) compared to a net loss of ($125,634); loss per share ($0.001) for the quarter ended September 30, 2005. The nine months losses were ($283,642); loss per share ($0.000 ) for June 30, 2006 and ($717,569): loss per share ($0.004) for nine months 2005. Airplan Inc Liability Invicta has a liability to the seller of Airplan Inc, a subsidiary of Invicta, totaling $400,000. The amount represents $340,000 for the purchase and $60,000 shareholder loan that was on the Balance Sheet acquired. Invicta does not plan to pay this liability due to the seller defaulting on a signed 5 year employment agreement causing the failure of the business. The seller departed after 7 months, resulting in the loss of airline contracts that represented over 50% of the companies revenue. Invicta has not heard from the Seller and neither party has proceeded with any legal action to date. Funding 3rd Quarter 2006, the Company received additional equity advances of $25,00; and $100,800 from the sale of IVGA stock totaling 128,500,000 shares. Invicta has received equity funding advances from an Institutional Investor totaling $437,525 as of 9/30/2006: Prepaid Warrant balance is $215,498 and Debenture balance is $222,027. 14 Liquidity September 30, 2006 and 2005, Invicta Group's current ratios were (.16%) and (.065%) respectively. Invicta Group has not generated sufficient revenue in any period, to carry its costs of operations. Invicta has derived its liquidity principally from the sale of stock. Common Stock Issued 2006 Invicta issued 102,734,000 common shares in the 1st Quarter of 2006; 38,918,332 shares were issued for $40,500 consulting, 13,815,668 were issued for professionals fees of $14,000 and 50 million shares were issued to raise $43,000 equity funds. Invicta issued 2nd Quarter shares totaling 273,988,222; 5 million were for Legal fees and the balance were for payments of advanced equity funding. The total number of shares outstanding on 6/30/2006 were 616,211,589. Invicta issued 238,833,333 shares in the 3rd Qtr: 108,333,333 were issued to Institutional Investor for payment of $65,000; 128,500,000 were issued for $100,800 funding and 2,000,000 shares were issued to Consultants. The total number of outstanding shares at 9/30/2006 was 855,044,922. Capital Resources Invicta needs additional capital invested in the company to assure survival. Invicta will need to increase revenues to a minimum of $45,000 per month to have positive cash flow and assure survival. Invicta source of working capital is generation of revenues form Travel Hot Link media sales and the sale of common stock. Management estimates a $20,000 cash shortfall a month for the next 6 months. ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ON MARKET RISKS We do not have any material risk with respect to changes in foreign currency exchange rates, commodities prices or interest rates. We do not believe that we have any other relevant market risk with respect to the categories intended to be discussed in this item of this report. ITEM 4. CONTROLS AND PROCEDURES Invicta Group's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of Invicta Group's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of December 31, 2005, (the "Evaluation Date"), have concluded that, as of the Evaluation Date, Invicta Group's disclosure controls and procedures were effective to ensure the timely collection, evaluation, and disclosure of information relating to Invicta Group that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated under the Act. There were no significant changes in Invicta Group's internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date. 15 PART II ITEM 1. LEGAL PROCEEDINGS None at this time ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None at this time ITEM 3. DEFAULTS UPON SENIOR SECURITIES None at this time ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Management approved that the Articles of Incorporation be amended from 1 Billion to 5 Billion shares on September 12, 2006. This was done without a Shareholder Meeting as management controls 65.33% of the votes and did not request a proxy from shareholders, under Nevada Statutes Section 78.315 and 78.320. The company filed a Definitive Proxy Statement with a Schedule 14C Information Proxy Statement. Management has not notified the State of Nevada regarding increasing shares as of November 6, 2006. ITEM 5. OTHER INFORMATION We hereby incorporate by reference the Registrant's Schedule 14C Definitive Information Proxy Statement filed on September 25, 2006 and the Registrant's Form 8-K that disclosed a Waiver of Meeting of the Shareholders filed on September 14, 2006, both at SEC file no. 333-102555. See Part II, Item 4, above. ITEM 6. EXHIBITS 23.1 Consent of Accountant 31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INVICTA GROUP INC. By: /s/ William G. Forhan William G. Forhan Chief Executive Officer and President By: /s/ Richard David Scott Richard David Scott Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ William G. Forhan Chief Executive Officer, November 14, 2006 William G. Forhan President and Director /s/ Richard David Scott Chief Operating Officer, November 14, 2006 Richard David Scott Principal Accounting and Financial Officer and Director 17