10KSB/A 1 ivit200610ksba041408.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 FORM 10-KSB/A [X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2006. OR [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to _______. Commission File Number: 333-102555 INVICTA GROUP INC. (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) Nevada 91-2051923 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2400 East Commercial Blvd. Suite 618 Ft. Lauderdale, FL 33308 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: (954) 771-0650 Securities Registered Pursuant to Section 12(b) of the Act: Common Stock par value $.0001 per share Securities Registered Pursuant to Section 12(g) of the Act: None Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ] 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- KSB or any amendment to this Form 10-KSB. [ 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 ] The issuer's revenues for its most recent fiscal year were approximately $138,823. 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 March 31, 2007 of $.01, was approximately $360,000. 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 March 31, 2007 was 36,968,488. 1 EXPLANATORY NOTE We are filing this Amendment No. 1 ("Amendment No. 1") to our Form 10-KSB for the fiscal year ended December 31, 2006, filed on April 12, 2007 to amend and restate our consolidated balance sheet as of December 31, 2006, our consolidated statements of operation, stockholders' equity, and cash flows for the year ended December 31, 2006. This Amendment No. 1 to the Original Filing amends: 1. The Management's Discussion and Analysis or Plan of Operation in Part II, Item 6, of this Amendment No. 1 to include a discussion of your critical accounting policies which addresses the following areas: * types of assumptions underlying the most significant and subjective estimates; * Sensitivity of those estimates to deviations of actual results from management's assumptions; and circumstances that have resulted in revised assumptions in the past. 2. The Financial Statements in Part II, Item 8 of this Amendment No. 1. 3. Our disclosures regarding the reverse stock split. 4. The valuation of our purchased data base to reduce by $150,000. For the convenience of the reader, this Amendment No. 1 sets forth our Original 10-KSB in its entirety, as amended by, and to reflect, the Amendment No. 1. No attempt has been made in this Amendment No.1 to update other disclosures presented in our Original 10-KSB, except as required to reflect the effects of the restatement. This Amendment No. 1 does not reflect events occurring after the filing of our Original 10-KSB, or modify or update those disclosures, including the exhibits to the Original 10-KSB affected by subsequent events except as applicable in our financial statement footnotes subsequent event disclosures. This Amendment No. 1 has been signed as of a current date and all certifications of our Chief Executive Officer and Chief Financial Officer are given as of a current date. Accordingly, this Amendment No. 1 should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the Original 10-KSB for the fiscal year ended December 31, 2006, including any amendments to those filings. FORWARD - LOOKING STATEMENTS AND IMPORTANT FACTORS AFFECTING FUTURE RESULTS Our disclosure and analysis in this report contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. They use words such as "anticipate", "believe", "expect", "estimate", "project", "intend", "plan", and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. 2 Any or all of our forward-looking statements in this report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Many factors mentioned in the following discussion - for example, product development, competition, and the availability of funding - are important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. We undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our 10-QSB, 8-K, and 10-KSB reports to the SEC. Also note that we provide the following cautionary discussion of risks, uncertainties, and possibly inaccurate assumptions relevant to our business. These are factors that we think could cause our actual results to differ materially from expected and historical results. Other factors besides those listed here could also adversely affect us. The information set forth in this Report on Form 10-KSB including, without limitation, that contained in Item 6, Management's Discussion and Analysis and Plan of Operation, contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this report. PART I Item 1. DESCRIPTION OF BUSINESS Invicta Group Inc. ("Invicta" or "IVGR") began its business in July 2000 by offering airline tickets and other travel-related products and services over the telephone and has expanded to offering travel products over the Internet. Invicta Group Inc. was a holding company that owned 6 subsidiaries in the Travel, Entertainment and Telecom Industries in 2004 and began to Spin-off and sell subsidiaries in 2005. IVGR has been unsuccessful generating profits from its subsidiaries in 2004 thru 2006. The company was under capitalized from the day it became a public company. Marketing dollars were not available to brand the subsidiaries, margins were too low, and the high cost of staffing call centers, versus generating sales on the internet, resulted in operational losses exceeding $1.5 million for the calendar year 2004. Losses in 2005 were $993,831 and losses in 2006 were $621,397. During 2006, management created a new business model and new subsidiary, and as a result, the company now focuses its business as an Internet Media Company offering Email broadcast services to travel enthusiasts seeking discounted travel. The company's name is Travel Hot Link (THL), and its website address is www.travelhotlink.com. 3 During 2006, Travel Hot Link generated revenues of $138,823 and reduced losses from the prior year to $621,397. The company continues to operate with little cash and has not had the opportunity to market the company aggressively. In 2007, Invicta will continue to focus management time on Travel Hot Link and look for strategic alliances that can generate profits. Subsequent events: By filing a Form 8-K on March 29, 2007, as amended March 30, 2007, which is incorporated herein by reference, Invicta provided disclosure of the purchase of Maupintour Inc. LLC, a Nevada corporation ("Maupintour") as of March 23, 2007. Item 2. DESCRIPTION OF PROPERTY The Travel Hot Link (THL) website: www.travelhotlink.com offers travel suppliers the opportunity to sell perishable inventory at a discount to travelers that are seeking a travel deal. The website offers several products in the travel industry and breaks them into categories: Hotels Car Rentals, Air Transportation, Cruises, and Travel Holiday Packages. THL will also promote a Weekly Newsletter that is Emailed to 10 million travel enthusiasts, who, if they like a travel Supplier offer, can purchase the offer online with a simple click. THL owns a database of 25 million Emails that are used for custom Emails campaigns or the Weekly Newsletter. Travel Suppliers will pay Travel Hot Link a flat advertising fee to send Emails to Travel Enthusiasts. Item 3. LEGAL PROCEEDINGS None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES. Market for the Shares: Invicta's common stock quoted on the OTC Bulletin Board under the trading symbol of "IVGR". Quotations began on October 26, 2003. The high and low bid quotations for Invicta between that date and the date hereof have been $.45 and $.0018 per share. Invicta's common stock is owned of record by approximately 2200 shareholders. Invicta's management team owns (1) 3,882,636 Options, with an exercise price of $.25, expiring 1/6/2009; and, (2) 175,000 Preferred Series B Shares and 480,000 Series C Shares, with total Preferred Stock valued at $655,000. Invicta has 36,968,488 common shares issued and outstanding as of March 31,2007. All shares are free trading except 9,054,973 owned by Invicta's directors and officers. 4 Invicta has never paid cash dividends on its common stock. Invicta Group intends to keep future earnings, if any, to finance the expansion of its business, and it does not anticipate that any cash dividends will be paid in the foreseeable future. Invicta's future payment of dividends will depend on its earnings, capital requirements, expansion plans, financial condition and other relevant factors. The Board of Directors has the sole authority to declare dividends. There were no other sales of securities, including unregistered securities, in 2006. General Invicta Group is authorized by its Articles of Incorporation to issue 1,000,000,000 shares of common stock, par value $.0001 per share, and 50 million shares of preferred stock, par value $.0001 per share. Common Stock The company did a reverse split of 100 x 1 on 11/16/2006. A total of 36,968,488 shares of common stock are issued and outstanding as of 3/31/2007. Each of the common shares has the following rights: 1. To receive its equal share of dividends when the board of directors decides to declare them from Invicta's funds that can be legally used to pay dividends; 2. To receive its equal share of assets in a liquidation, dissolution or winding up of Invicta's affairs, after payment of all debts; and 3. To one vote on election of each director and each other matter submitted to a vote of stockholders. Stockholders do not have cumulative voting rights. The common stock does not carry a pre-emptive right to purchase additional common stock in the event Invicta issues more common stock or the right to convert into any other type of security Invicta may issue in the future. Invicta is not required to and has not set up any fund to repurchase its common stock, nor did it make any repurchases in 2006. The shares of common stock now outstanding are fully paid, duly authorized and are legal issued and are not assessable. Preferred Stock The board of directors is authorized to determine, without stockholder approval, the designations, rights, preferences, powers and limitations of Invicta's 50,000,000 shares of authorized preferred stock. Invicta has issued 655,000 preferred shares valued at $655,000. Common Stock Issued 2006 Invicta issued 825,979,433 common shares in 2006 and performed a Reverse Split of the common shares of 100 x 1. The total number of shares outstanding on 12/31/2006 was 10,655,488. Transfer Agent And Registrar The transfer agent and registrar for Invicta Group's common stock is Florida Atlantic Stock Transfer, 7130 Nob Hill Road, Tamarac, FL 33321. 5 Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. The following discussion and analysis should be read in conjunction with Invicta Group's consolidated financial statements included in this report. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Invicta Group, Inc. and its subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation. Impairment of Long-Lived Assets and Intangible Assets The Company makes reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable under SFAS No. 144. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Revenue Recognition The Company derives its revenue from the commissions earned from Travel suppliers, and on the direct sale of travel related products. Revenue is recognized upon the receipt of the commission, or for sale of direct travel products when the actual travel takes place. Advertising revenue for Travel Hot Link is recognized when the advertising campaign is complete. Income Per Share The Company has adopted SFAS 128, Earnings per Share issued by the Financial Accounting Standards Board. Basic net loss per share was computed based on the weighted average shares of common stock outstanding and excludes any potential dilution. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The most significant estimates included in the preparation of the financial statements are related to asset lives and accruals. Derivative Instruments In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which is required to be adopted in years beginning after June 15, 1999. SFAS 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company has not yet determined what the effect of SFAS 133 will be on earnings and the financial position of the Company, however, it believes that it has not to date engaged in significant transactions encompassed by the statement. 6 Income Taxes The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", effective January 3, 2001. Under SFAS, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. Results of Operations Revenues Revenues for the 4th Quarter were generated from Internet Media and Consumer travel packages. Internet Media Advertising revenues are flat fees charged to travel suppliers for media purchases on the website www.travelhotlink.com. The travel suppliers are seeking a medium for the last minute travelers that are seeking deep discounts and motivated 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 Consumer travel are realized as Gross Sales and are recognized when paid in full. Revenues for the year ended December 31, 2006 were $138,823 compared to revenues of $98,485 for the year ended December 31, 2005. The revenues in 2006 versus 2005 were generated from Internet Media Advertising and consumer travel packages versus the 2005 revenues, which were from airline commissions. Expenses The major components of expenses are general and administrative expenses. The year ended December 31, 2006 major expenses were: Payroll $289,494; Internet design $57,021; Professional fees $118,137; Interest Expense $48,784. Total General & Administrative expenses for the year were $655,673. Net Profit/Net Losses Net profit (loss) for the year ended December 31, 2006 was $(621,397) with income (loss) per share of ($0.09) compared to a net loss of $(993,831) with loss per share of ($0.497) for the year ended December 31, 2005. Funding Invicta has received equity funding advances from an Institutional Investor totaling $99,925 for the year 2006 and a balance due as of 12/31/2006 totaling $404,703. Payments are made with conversions of free trading stock based on the formula: the average of the three lowest days of stock Bid value within 20 days at the time of the conversion, at 25% discount. Liquidity As of December 31, 2006 and 2005, Invicta's current ratios were (.08%) and (.009%) 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, of which 38,918,332 shares were issued for consulting fees of $40,500, and 13,815,668 shares were issued for professionals fees of $14,000, and 50 million shares were issued to raise $43,000 in equity funds. The total number of common shares outstanding on 3/31/06 were 342,223,367. 7 Invicta issued 2nd Quarter common shares totaling 273,988,222, of which 5,000,000 shares were issued for Legal fees and the balance were issued for payments of advanced equity funding. The total number of common shares outstanding on 6/30/2006 were 616,211,589. Invicta issued 238,833,333 common shares in the 3rd Quarter, of which 108,333,333 were issued to an Institutional Investor for payment of $65,000, 128,500,000 were issued to 128,500,000 for $100,800 in funding, and 2,000,000 shares were issued to Consultants. The total number of common shares outstanding on 9/30/06 were 855,044,922. Invicta issued 150,353,900 common shares in the 4th Quarter to an Institutional Investor for $32,839 in payments on advances. The total number shares issued for the year were 825,979,433. Reverse Split of Common Shares On November 16, 2006, Invicta announced the company would complete a Reverse Split of its common shares. Invicta's Board of Directors voted to Reverse Split the common shares 100 x 1 (1 for 100). The current issued and outstanding shares as of November 15, 2006 were 974,489,367. The number of shares after the Reverse Spilt were 9,744,894; fractional shares were rounded up at 1/2 share increments. The total number of outstanding shares as of 12/31/2006 was 10,655,488. New Symbol for Invicta Group Inc. The company received a new symbol, IVGR, at the time of the Reverse Split, which it maintains to date. Acquisition of Email Database On November 27, 2006, Invicta acquired an Email database of 16,000,000 past travelers from Extraordinary Vacations Group Inc. ("EXVG") for 100,000 of Preferred Shares (Preferred D), convertible to 7,000,000 common shares and super voting power of 10,000,000 million votes. Invicta subsequently acquired Maupintour Inc. LLC, 100% owned by EXVG and its CEO, William Kerby, and Mr. Kerby also became a director of Invicta. See Subsequent Events in Item 1. Capital Resources Additional capital needs to be invested in the company to assure survival. Invicta will need a minimum of $300,000 cash in 2007 to assure survival. Invicta's source of working capital is the revenues from Travel Hot Link internet media sales. Management estimates a $30,000 cash shortfall a month for the next 6 months from the date of filing of this Form 10-QSB, and the company needs $100,000 to upgrade its technology and Email database. Item 7. FINANCIAL STATEMENTS. The Registrant's audited financial statements for the fiscal years ended December 31, 2005 and 2006 are attached to this annual report and begin on page F-1. 8 Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. Item 8A. CONTROLS AND PROCEDURES. Invicta's management is responsible for establishing and maintaining an adequate level of internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies and procedures that: - Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Invicta; - Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of Invicta are being made only in accordance with authorizations of management and directors of Invicta; and - Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Invicta's assets that could have a material effect on the consolidated 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 existing policies or procedures may deteriorate. In connection with the audit of Invicta's financial statements for the year ended December 31, 2006 (the "Evaluation Date"), Invicta's chief executive officer and chief financial officer conducted an evaluation of the effectiveness of Invicta'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 Evaluation Date, and have concluded that, as of the Evaluation Date, Invicta's disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by Invicta in the reports it submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to its chief executive officer and chief financial officer, in a manner that allowed for timely decisions regarding disclosure. There have been no changes in Invicta's internal control over financial reporting during the period ended December 31, 2006 that have materially affected or are reasonably likely to materially affect its internal control over financial reporting. Item 8B. OTHER INFORMATION. None. 9 Part III Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The following table includes the names, ages, positions held and terms of office of Invicta Group's directors and executive officers. NAME AGE POSITION DIRECTOR SINCE William G. Forhan 63 Chief Executive Officer, July 2002 President and Director Richard David Scott 59 Chief Operating Officer, inception Chief Financial Officer and Director Mercedes Henze 63 Vice President inception Secretary, Director
The stockholders of Invicta elect the directors at the annual meeting to serve for one year and until their successors are elected and qualify. Directors do not receive compensation for serving as directors. Officers are elected by the board of directors and their terms of office are, except as otherwise stated in employment contracts, at the discretion of the board of directors. As authorized by the Nevada Statutes, Invicta's Articles of Incorporation provide that none of Invicta's directors shall be personally liable to Invicta or Invicta's shareholders for monetary damages for breach of fiduciary duty as a director, except liability for: - any breach of the director's duty of loyalty to Invicta or its shareholders; - acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; - unlawful payments of dividends or unlawful stock redemptions or repurchases; and - any transaction from which the director derived an improper personal benefit. This provision limits Invicta's rights and the rights of its shareholders to recover monetary damages against a director for breach of the fiduciary duty of care except in the situations described above. This provision does not limit Invicta's rights or the rights of any shareholder to seek injunctive relief or rescission if a director breaches his duty of care. These provisions will not alter the liability of directors under federal securities laws. 10 Invicta is authorized by Nevada corporation law and its bylaws to indemnify its directors and officers against damages, which qualify, in the opinion of the disinterested members of the board, for indemnification. Invicta is authorized to purchase liability insurance to cover this indemnification. The Securities and Exchange Commission has informed Invicta that it is against public policy for Invicta to indemnify its directors and officers for liabilities arising under the Securities Act and that claims for indemnification for this type of liability is unenforceable. Compliance With Section 16(A) Of Securities Exchange Act Of 1934 Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our directors and officers, and persons who own more than ten percent of the Company's Common Stock, are required to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten-percent shareholders are required by regulation to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 2006, except as disclosed here, directors, officers and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements. Item 10. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE The following table presents the compensation earned by Invicta's Executive officers during the last five fiscal years. Cash Compensation Name and Position Year Paid Accrued William G. Forhan 2002 None $30,000 President and Chief 2003 None $90,000 Executive Officer 2004 $48,468 $71,539 2005 None $120,000 2006 None $120,000 Cash Compensation Name and Position Year Paid Accrued Richard David Scott 2002 None $120,000 Chief Operations and 2003 None $48,396 Chief Financial Officer 2004 $173,237 None 2005 $56,797 $63,203 2006 $117,865 $14,652 Mercedes Henze Vice President 2002 None $120,000 2003 None $48,396 2004 $82,269 $37,731 2005 $35,078 $24,922 2006 $10,000 None 11 Invicta has not paid any of the cash compensation reflected in the preceding table, which has been accrued, as reflected in the right hand column the table. In addition, Mr. Forhan and Mr. Scott each are due a monthly car allowance of $750. Each of the named executive officers is entitled to a salary of $120,000, prorated from date of employment, under his or her employment agreement. These executive officers are not entitled to and have not received any non-cash or any other compensation, bonuses or other forms of long term compensation. Invicta has not issued any stock options or stock appreciation rights to these executive officers, although they do have the opportunity to participate in the Incentive and Non-Qualified Stock Option Plan described below. Incentive and Non-Qualified Stock Option Plan The following table sets forth information about Invicta's 2002 Incentive and Non-Qualified Stock Option Plan approved by directors and stockholders on August 1, 2002. Shares remaining Shares issuable upon Weighted average exercise available exercise of outstanding price of outstanding for future issuance options options -------------------- ----------------------- ------------------------- Stockholder approved none none plan 5,000,000 Invicta does not have any equity compensation plan which has not been approved by stockholders. The 2002 plan is intended to assist Invicta in securing and retaining key employees, directors and consultants by allowing them to participate in its ownership and growth through the grant of incentive and non-qualified options, as well as direct stock grants. Under the 2002 plan, Invicta may grant incentive stock options only to key employees and employee directors. Invicta may grant non-qualified options and issue direct stock awards to its employees, officers, directors and consultants. The 2002 equity compensation plan is administered by its board of directors. Subject to the provisions of the 2002 plan, the board determines who receives options or grants, the number of shares of common stock that may be purchased under the options, the time and manner of exercise of options and exercise prices. The term of options granted under the stock option plan may not exceed ten years or five years for an incentive stock option granted to an optionee owning more than ten percent of Invicta's voting stock. The exercise price for incentive stock options will be equal to or greater than the fair market value of the shares of the common stock at the time granted. However, the incentive stock options granted to a ten percent holder of Invicta's voting stock are exercisable at a price equal to or greater than 110 percent of the fair market value of the common stock on the date of the grant. The exercise price for non-qualified options will be set by the board, in its discretion, but in no event will the exercise price be less than the par value for Invicta's common stock. The exercise price may be payable in cash or, with the approval of the board, by delivery of shares or by a combination of cash and shares. The board may also direct the issuance of shares of Invicta's common stock as awards under the 2002 plan. Absent registration under the Securities Act of 1933, as amended, or the availability of an exemption from registration, shares of common stock received as stock grants and upon exercise of options will be subject to restrictions on sale or transfer provided in the Federal securities laws. 12 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following tables set forth information known to Invicta, as of the date of this report, relating to the beneficial ownership of shares of common stock by: - Each person who is known by Invicta to be the beneficial owner of more than five percent of its outstanding common stock; - Each director; - Each executive officer; and - All executive officers and directors as a group. Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Invicta Inc., 2400 E. Commercial Blvd. # 618 Ft. Lauderdale, Florida 33308. Invicta believes that all persons named in the table have sole voting and investment power with respect to all shares of Common stock and Preferred shown as being owned by them. Name Shares Percentage William G. Forhan 130,500 1.2% Richard David Scott 88,737 0.83% Mercedes Henze 85,716 0.80% Officers and Directors As a group (3 persons). 304,953 2.83% Mr. Scott and Ms. Henze are married. The shares legally owned by one are treated as being beneficially owned by the other for purposes of Federal securities law, but have not been presented in this way in the table above in order to avoid possible confusion. Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. TRANSACTIONS BETWEEN INVICTA AND ITS MANAGEMENT Invicta has executed a promissory note to Mr. Forhan for a shareholder loan. The note did not bear interest until 1/2/2005, when it was in default. Interest of 7% started 1/2/2005 and is due along with principal balance in equal monthly installments over eighteen months commencing upon Invicta obtaining additional equity funding, of which there is no assurance. Invicta has sold Casino Rated Players Inc to Casino Players Inc as of 9/30/05. William Forhan is CEO of Casino Players Inc. and CEO of Invicta. Forhan did not represent Invicta when negotiations for completion of the sale. Forhan represented Casino Players Inc, and two Directors of Invicta represented Invicta's interest. Invicta received 4,000,000 of common shares of Casino Players Inc, and Casino Players acquired the Deferred Compensation of $43,000 from Invicta and the website of Casino Rated Players, a subsidiary. 13 Item 13. EXHIBITS (a) Exhibits: Exhibit No Description of Document ----------- ----------------------- 3.1(a) Articles of Incorporation of Invicta Group Inc.* 3.1(b) Articles of Amendment* 3.2 Bylaws* 10.1 2002 Equity Compensation Plan* 10.2 Employment Agreement between Invicta Group and William G. Forhan* 10.3 Employment Agreement between Invicta Group and R. David Scott* 10.4 Employment Agreement between Invicta Group and Mercedes Henze* 10.5 Lease for Ft. Lauderdale, Florida Office* 10.6 Stock Purchase Agreement for the Shares of Casino Rated Players. Inc.* Exhibit No Description of Document ----------- ----------------------- 10.8 Promissory Note to William G. Forhan* 31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * Indicates previously filed in a Registration on Form SB-2, Commission File No. 333-102555 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees Audit fees billed to the Company by Baum & Company, P.A. ("Joel Baum") for auditing the Company's annual consolidated financial statements for the fiscal years ended December 31, 2006 and December 31, 2005 were $12,500 and $12,500, respectively. Audit Related Fees None. Tax Fees None. All Other Fees All other fees, including tax services, billed by Baum & Company, P.A. with respect to the financial statements for the fiscal years ended December 31, 2006 and December 31, 2005 were $8,000 and $8,000, respectively. 14 Audit Committee Pre-Approval The Board of Directors of Invicta appointed Joel Baum & Co., P.A., Certified Public Accountants as independent public accountant of Invicta for the years 2005 and 2006 and approved all of the services described above in this Item 14. The Board of Directors has determined that the payments made to its independent certified public accountant for these services are compatible with maintaining such auditor's independence. The Board of Directors explicitly pre-approves all audit and non-audit services and all engagement fees and terms. The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was zero percent. 15 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 Date: April 8, 2008 William G. Forhan Chief Executive Officer and President By: /s/ Richard David Scott Date: April 8, 2008 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 Chief Executive Officer, April 8, 2008 /s/ William G. Forhan President and Director William G. Forhan /s/ Richard David Scott Chief Operating Officer, April 8, 2008 Richard David Scott Principal Accounting and Financial Officer and Director 16 Exhibit Index Exhibit No Description of Document ----------- ----------------------- 3.1(a) Articles of Incorporation of Invicta Group Inc.* 3.1(b) Articles of Amendment* 3.2 Bylaws* 10.1 2002 Equity Compensation Plan* 10.2 Employment Agreement between Invicta Group and William G. Forhan* 10.3 Employment Agreement between Invicta Group and R. David Scott* 10.4 Employment Agreement between Invicta Group and Mercedes Henze* 10.5 Lease for Ft. Lauderdale, Florida Office* 10.6 Stock Purchase Agreement for the Shares of Casino Rated Players. Inc.* Exhibit No Description of Document ----------- ----------------------- 10.8 Promissory Note to William G. Forhan* 31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * Indicates previously filed in a Registration on Form SB-2, Commission File No. 333-102555 17 Baum & Company, P.A. Certified Public Accountants 1515 University Dr. Suite 226 Coral Springs, FL. 33071 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Invicta Group Inc. We have audited the accompanying consolidated balance sheet of Invicta Group Inc. and subsidiaries (a Nevada Corporation) as of December 31, 2006, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 2006 and 2005. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. We conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Invicta Group Inc. and subsidiaries as of December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note P to the financial statements, the Company incurred significant losses from operations, and because of these losses, the Company has a working capital deficiency, which raises substantial doubts about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note P. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Baum & Company, P.A. Coral Springs, Florida April 10, 2007 F-1 INVICTA GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2006 ASSETS 2,006 Restated ------------ Current assets: Cash and cash equivalents $12,960 Accounts receivable ------------ Total current assets 12,960 Property and equipment, net of accumulated depreciation of $45,466 17,855 Other assets: Security Deposits 1,500 Advances to affiliates 36,853 Intangible assets, net of accumulated amortization of $9,750 98,280 ------------ Total Assets $167,448 ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Notes payable and convertible debentures $524,711 Accounts payable and accrued liabilities 98,475 Accounts payable and accrued liabilities - discontinued operations 698,230 Accrued expenses and other liabilities 531,541 Capital lease obligations 80,899 Accrued compensation - related parties 221,546 ------------ Total current liabilities 2,155,402 Long-term debt Notes Payable - shareholders 256,129 ------------ Total Liabilities 2,411,531 ------------ 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 Preferred stock series D par value $1.00 100,000 shares authorized; 100,000 issued and outstanding 100,000 Common stock, par value $ .0001, 1,000,000,000 shares authorized, 10,655,488 issued and outstanding 1,066 Additional paid in capital 3,753,223 Accumulated deficit (6,753,372) ------------ Total Shareholders' equity ( deficit) (2,244,083) ------------ Total Liabilities and Shareholders' Equity (deficit) $167,448 ------------
See accompanying notes to consolidated financial statements F-2 INVICTA GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 2006 2005 Restated ------------ ------------ Revenues earned $138,823 $94,334 Selling, general, and administrative expenses 606,918 952,862 ------------ ------------ Income (loss) from operations before other income and expense (468,095) (858,528) Other income and (expense) Interest income 183 566 Interest expense - related parties (18,025) Interest expense (32,210) (43,914) Asset impairment charge - (101,955) Gain on sale of assets 10,000 Beneficial interest expense (103,250) - ------------ ------------ Net income (loss) before provision for income taxes (621,397) (993,831) Provision for income taxes - - ------------ ------------ Net income (loss) $(621,397) $(993,831) ============ ============ Net income (loss) per share weighted average share, basic and diluted ($0.09) ($0.50) ============ ============ Weighted average shares outstanding, basis and diluted 6,949,549 1,998,399 ============ ============
See accompanying notes to consolidated financial statements F-3 INVICTA GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the Years Ended December 31, 2006 and 2005 2006 2005 Restated ------------ ------------ Cash flows from operating activities: Net income $(621,397) $(993,831) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,625 7,850 Amortization 2,120 16,500 Stock issued for services 71,000 224,894 Asset impairment charge 101,955 Database acquired in exchange for accounts receivable (52,600) 0 Beneficial interest expense on discounted stock sales 103,250 0 Loss on abandonment of assets 6,880 Elimination of subsidiary cash balance (2,771) Write off receivable from former subsidiary 21,888 Changes in assets and liabilities: Accounts receivable and prepaid expenses 0 12,990 Intercompany receivable 0 0 Other assets (10,000) 30,294 Accounts payable & accrued liabilities 176,398 285,784 ------------ ------------ (325,604) (287,567) ------------ ------------ Cash flows used in investing activities: Capital asset expenditures (7,029) (6,880) Cash flows used in financing activities: Proceeds from long term debt 265,000 131,500 Proceeds from sale of common stock 123,900 181,937 Payments on long term debt (42,010) (167,233) ------------ ------------ 346,890 146,204 ------------ ------------ Net change in cash and cash equivalents 14,257 (148,243) Cash and cash equivalents, beginning of period (1,297) 148,243 ------------ ------------ Cash and cash equivalents, end of period $12,960 $- ============ ============ Additional Cash Flow Information: Cash paid during the period for: Interest (non capitalized) $1,743 ============ ============ Income Taxes $0 $0 ============ ============
See accompanying notes to consolidated financial statements F-4 INVICTA GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) For the Years Ended December 31, 2006 and 2005 Common Stock Additional Paid Shares $ in capital Deficit ------------ ------------ ------------ ------------ Balance December 31, 2004 1,141,558 $114 $2,754,747 ($5,143,147) Issuance of Common Stock for cash from February 7, 2005 thru March 23, 2005 @ $ .002 per share 111,590 11 22,489 Retained earnings adjustment for ISIP 3,706 Issuance of Common Stock for cash from 94,643 9 14,991 April 1, 2005 thru May 18, 2005 @ $ .0018 and .0015 per share Issuance of Common Stock in exchange for legal, marketing and consultation fees at the fair value of the services provided. 436,662 44 178,925 Issuance of Common Stock for the payment on convertible debentures exercised. 591,241 59 232,259 Common stock issues for services on December 15, 2005 @ $.001 per share 20,000 2 1,998 Net loss for the period ended December 31, 2005 (993,831) ------------ ------------ ------------ ------------ Balance December 31, 2005 2,395,694 $239 $3,205,409 ($6,133,272) ============ ============ ============ ============ Issuance of Common Stock for cash from April 5, 2006 thru June15, 2006 @ $ .0013 per share 367,660 37 29,563 Issuance of Common Stock in exchange for legal, marketing and consultation fees at the fair value of the services provided. 677,790 68 67,932 Issuance of Common Stock for cash from July 20, 2006 thru September 5, 2006 @ $ .0008 per share 1,203,750 121 94,179 Issuance of Common Stock for the payment on convertible debentures exercised. 5,156,098 516 333,300 Issuance of Common Stock for cash on October 6, 2006 @ $.026 per share 341,273 34 9,891 Common stock issues for legal services on November 10 , 2006 @ $.0003 per share 100,000 10 2,990 Issuance of Common Stock for cash on December 13, 2006 @ $.024 per share 413,223 41 9,959 Beneficial interest expense on discounted stock sales 103,250 Net loss for the period ended December 31, 2006 (470,100) ------------ ------------ ------------ ------------ Balance December 31, 2006 10,655,488 $1,066 $3,856,473 ($6,603,372) ============ ============ ============ ============
See accompanying notes to consolidated financial statements F-5 INVICTA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE A: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Organization The Company was incorporated in Nevada on June 1, 2000 for the purpose of engaging in the travel industry. On July 15, 2002 the Company acquired all of the common stock of Casino Rated Players, Inc. and the transaction was accounted for as a reverse acquisition. 2. Principles of Consolidation The consolidated financial statements include the accounts of Invicta Group, Inc. and its subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation. 3. Impairment of Long-Lived Assets and Intangible Assets The Company makes reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable under SFAS No. 144. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. During 2005, the Company identified certain web-site development cost, and purchased software with a cost of $126,705 and a net book value of $101,955 that required an adjustment for impairment in the amount of $101,955. 4. Revenue Recognition The Company derives its revenue from the commissions earned from Travel suppliers, and on the direct sale of travel related products. Revenue is recognized upon the receipt of the commission, or for sale of direct travel products when the actual travel takes place. Advertising revenue for Travel Hot Link is recognized when the advertising campaign is complete. 5. Income Per Share The Company has adopted SFAS 128, Earnings per Share issued by the Financial Accounting Standards Board. 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. The Company's of basic or diluted net loss per share since they are anti-dilutive. At December 31, 2006 potentially dilutive securities consist of Convertible debentures that could be converted into 25,310,248 common shares. F-6 6. Cash For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 7. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The most significant estimates included in the preparation of the financial statements are related to asset lives and accruals. 8. Financial Instruments The Company's short-term financial instruments consist of cash and cash equivalents, notes payable and accounts payable. The carrying amounts of these financial instruments approximates fair value because of their short- term maturities. Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash. During the period the Company did not maintain cash deposits at financial institutions in excess of the $100,000 limit covered by the Federal Deposit Insurance Corporation. The Company does not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial instruments. 9. Stock-Based Compensation The Company adopted Statement of Financial Accounting Standard No. 123 (FAS 123), Accounting for Stock-Based Compensation beginning with the Company's existence. Upon adoption of FAS 123, the Company continued to measure compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to Employees. The Company did not pay any stock-based compensation during the period presented. 10. Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all items that are to be recognized under accounting standards as components of comprehensive income to be reported in the financial statements. To date, the Company has not engaged in transactions which would result in any significant difference between its reported net loss and comprehensive net loss as defined in the statement. 11. Costs of Computer Software In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides authoritative guidance on when internal-use software costs should be capitalized and when these costs should be expenses as incurred. Effective January 3, 2001, the Company adopted SOP 98-1, however, the Company has not incurred costs to date which would require evaluation in accordance with the SOP. F-7 12. Segments Effective January 3, 2001, the Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. The adoption of SFAS 13 did not affect results of operations or financial position. 13. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of plant and equipment is computed principally by the straight-line method based upon the estimated useful lives of the assets, which range as follows: Office furniture and equipment - 5-7 years Computer equipment - 5 years 14. Pensions and Other Post-Retirement Benefits Effective January 3, 2001, the Company adopted the provisions of SFAS No. 132, Employers' Disclosures about Pensions and other Post-Retirement Benefits ("SFAS 132"). SFAS 132 supersedes the disclosure requirements in SFAS No. 87, Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for Post-Retirement Benefits Other Than Pensions. The overall objective of SFAS 132 is to improve and standardize disclosures about pensions and other post-retirement benefits and to make the required information more understandable. The adoption of SFAS 132 did not affect results of operations or financial position. The Company has not initiated benefit plans to date which would require disclosure under the statement. 15. Derivative Instruments In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which is required to be adopted in years beginning after June 15, 1999. SFAS 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company has not yet determined what the effect of SFAS 133 will be on earnings and the financial position of the Company, however, it believes that it has not to date engaged in significant transactions encompassed by the statement. F-8 16. Advertising Cost Advertising costs generally will be charged to operations in the year incurred. Advertising expense approximated $19,756 for 2006 and $48,285 for 2005. 17. Environmental Cleanup Matters The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernable. The Company determines its liability on a site-by-site basis and records a liability at the time when it is probable and can be reasonably estimated. 18. Business Concentrations As indicated in Note A-4, the Company derives its revenue from commissions earned from travel suppliers and the direct sale of travel related products and, therefore, the Company is subject to the economic conditions of the travel market place. Changes in this industry may significantly affect management's estimates and the Company's performance. 19. Income Taxes The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", effective January 3, 2001. Under SFAS, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. 20. Gains and Losses from Extinguishment of Debt In May 2002, the FASB issued Statement of Financial Accounting Standards No. 145 "Reporting Gains and Losses from Extinguishment of Debt", which rescinded SFAS No. 4, No. 44 and No. 64 and amended SFAS No. 13. The new standard addresses the income statement classification of gains or losses from the extinguishment of debt and criteria for classification as extraordinary items. The new standard became effective for fiscal years beginning after May 15, 2002. The Company adopted this pronouncement on May 1, 2003. The adoption of this pronouncement is not expected to have a material impact on the Company's results of operations or financial position. 21. Guarantor's Accounting In November 2002 the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45 requires certain guarantees to be recorded at fair value, instead of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement No. 5 Accounting for Contingencies. FIN 45 also requires a guarantor to make significant new disclosures, even when the likelihood of making any payments under the guarantee is remote. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company adopted the disclosure provisions of FIN 45 effective December 31, 2002 and its adoption is not expected to have a material impact on the Company's results of operations or financial position. F-9 22. Consolidation of Variable Interest Entities In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities". FIN 46 clarifies the application of existing accounting pronouncements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of FIN 46 will be immediately effective for all variable interests in variable interest entities created after January 31, 2003, and the Company will need to apply its provisions to any existing variable interests in variable interest entities by no later than December 31, 2004. The Company does not believe that FIN 46 will have a significant impact on the Company's financial statements. 23. Start-Up and Organization Costs Start-up and organization costs are accounted for under the provisions of the American Institute of Certified Public Accountants' Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up Activities". Adopted by the Company at its inception, SOP 98-5 provides guidance on the financial reporting of start-up and organization costs and requires such costs to be expensed as incurred. The Company's adoption of SOP 98-5 will not have a significant effect on its financial position or results of operation. NOTE B: CONVERTIBLE DEBENTURES PAYABLE Principal balances outstanding and details of notes payable are summarized as follows: 2006 2005 1. 10% convertible debenture, payable December 31, 2004. The note is convertible into company stock @ $.10 per share. The debenture was renewed during February, 2004. The terms of the renewal indicate that interest of 10% will be paid annually, the debenture is convertible into common stock @ $.10 per share and the term of the debenture is January 28, 2005. The debenture was not paid on December 31, 2003 as the holder requested the term to be extended. $10,000 $10,000 F-10 2. 10% convertible debenture, payable December 31, 2003. The notes are convertible into company stock @ $.30 per share. 25,000 39,600 3. 7% convertible debenture, payable July 1, 2004. The debenture is Convertible into company stock @ $.50 per share 10,000 10,000 4. Invicta entered into an agreement With Golden Gate Investors, Inc. for institutional funding. Invicta Group, Inc. issued multiple convertible debentures equaling $855,800 and a warrant to purchase 3,000,000 additional shares at $1.00/share 404,711 488,527 5. Invicta acquired Airplan, Inc. on February 17, 2004 and assumed a Shareholder loan to the owner of $60,000 60,000 60,000 6. 15% convertible debenture, payable January 26, 2007. The notes are convertible into company stock @ $.06 per share. 15,000 ----------- Total Convertible Debentures Payable $524,711 $608,127 ========================= NOTE C: INCOME TAXES PAYABLE The provision for income taxes consists of the following: 2006 2005 Current -0- -0- Deferred -0- -0- Tax Benefit of Net Operating Loss Carryforward -0- -0- Total -0- -0- Deferred income taxes arise primarily due to temporary differences in recognizing certain revenues and expenses for tax purposes, the required use of extended lives for calculation of depreciation for tax purposes, and the expected use of tax loss carryforwards in future periods. The components of the net deferred tax asset at December 31, 2005, and 2006 are as follows: F-11 2006 2005 Net operating loss carryforwards $5,416,900 $5,049,900 Total deferred tax assets $5,416,900 $5,049,900 Less valuation allowance (5,416,900) (5,049,900) Net deferred tax assets -0- -0- A valuation allowance is provided to reduce the deferred tax assets to a level which, more likely than not, will be realized. The net deferred assets reflect management's assessment of the amount which will be realized from future taxable earnings or alternative tax strategies. At December 31, 2006, the Company had approximately $5,416,900 of federal and state net operating loss carryforwards available to offset future taxable income. The state loss carryforwards are available indefinitely. The federal net operating loss carryforwards will expire as follows: 2020 $238,400 2021 195,800 2022 669,400 2023 442,300 2024 2,934,000 2025 570,000 2026 367,000 Total $5,416,900 Total Federal tax expense for the years ended December 31, 2005 and 2006 differed from the amount computed by applying the U.S. federal income tax rate of 34% to income (loss) from continuing operations before income tax for the following reasons: NOTE D: CONVERTIBLE DEBENTURE - GOLDEN GATE Effective April 27, 2004, Invicta entered into an agreement with Golden Gate Investors for institutional funding. Invicta Group, Inc, issued multiple convertible debentures and Warrants equaling $855,800 and a warrant to purchase 3,000,000 additional shares at $1.00 per share. The convertible debentures are convertible into the number of our shares of common stock equal to the principal amount of the debentures being converted multiplied by 11, less the product of the conversion price multiplied by ten times the dollar amount of the debenture and the entire foregoing result is then divided by the conversion price. The conversion price for the convertible debenture is 75% of the of the average of the three lowest volume weighted average prices during the 20 trading days prior to the conversion. Accordingly, there is in fact no limit on the number of shares into which the debenture may be converted. However, we are not obligated to accept a conversion in the event that the conversion price is less than $.05 per share. During 2006, the Company received additional advances of approximately $99,925 and issued 5,910,402 shares resulting in a reduction of the debenture of $183,741. The outstanding balance at 12/31/06 is a total of $404,711: Prepaid Warrant $187,478 and Debenture balance is $217,233. Golden Gate Investors, Inc. has contractually agreed to restrict its ability to convert or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by them and their affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of common stock. F-12 Golden Gate is charging an interest rate of 7.75% annually for prepayments to the debenture. NOTE E: NOTES PAYABLE - SHAREHOLDERS Notes 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. The Company plans to begin these payments as soon as the necessary cash flow is available which management expects to be in 2007. Therefore, the entire balance of $ 256,129 is classified as long-term debt for 2005 and $280,570 for 2005. Interest is being accrued at 7% annually. NOTE F: RELATED PARTY TRANSACTIONS 1. Notes Payable Shareholder's See Note C - Notes Payable - Shareholders which describes certain related party transactions for 2006 and 2005. 2. Asset sale of Casino Rated Players The Company sold its wholly owned subsidiary Casino Rated Players, Inc. to Casino Players, Inc on September 30, 2005. William Forhan is CEO of Casino Players and Invicta. In exchange for all of the assets of Casino Rated Players, Invicta received 4 million shares of the new Company's common stock, and the new Company assumed the $43,000 of Deferred Compensation owed by Casino Rated Players. NOTE G: WARRANTS AND OPTIONS On January 6, 2004 as part of the Company's agreement with its officer regarding their deferred compensation, the Company granted options to its officers for 3,882,656 shares of the Company's common stock. The exercise price of the options are $.25, and are for a period of 5 years. Additionally, see Note B - Convertible Debentures Payable which may be converted into additional shares of common stock. NOTE H: EMPLOYMENT AGREEMENTS AND DEFERRED OFFICER'S COMPENSATION The Company entered into employment agreements with its Chief Executive Officer and Chief Operating Officer for the period July 23, 2002 until August 1, 2004. The agreements are automatically renewed each year. The annual base salary of each officer will be $120,000. Each officer will be paid for equity funding equal to 5% of funding. F-13 The Company has accrued for each officers' salaries in deferred officers' compensation with balances of: 2006 2005 $221,546 $253,028 NOTE I: LEASES The Company subleases office space for its Ft Lauderdale operations under a five-year, non-cancelable operating lease at a monthly rate of $1950 per month. Rent expense for 2006 and 2005 approximated $12,800, and $18,200 respectively. Obligations under the non-cancelable operating leases are as follow: Year ending December 31, 2007 $23,000 2008 24,200 2009 25,400 2010 28,400 Thereafter 14,200 ------------ $115,200 NOTE J: SALE OF CASINO RATED PLAYERS, INC. On September 30, 2005, the Company sold the assets of its wholly owned subsidiary Casino Rated Players, Inc., to a newly formed entity Casino Players, Inc. for 4 million shares of Casino Players Inc. common stock. In addition to the stock received, Casino Players, Inc. also assumed the deferred compensation liability of $43,000. The Company anticipates the new formed entity to become a public traded company thereby increasing the value of the shares held. NOTE K: DEFERRED COMPENSATION ELIMINATED THROUGH THE ISSUANCE OF PREFERRED STOCK 1. On January 20, 2005 the Company authorized but un-issued 175,000 Series B Preferred Stock for $175,000 Deferred Compensation. The stock is valued at $1 per share and convertible into 50 shares of common stock 2. On December 20, 2005 the Company announced that its management team converted $330,000 of Deferred Compensation to 330,000 shares of Preferred C Stock, conversion valued at market price $1.00 per share; no options were offered. 3. On September 29, 2006 the Company's Chief Operating Officer and Chief Executive Officer converted $75,000 each of deferred compensation for 150,000 shares of Preferred C stock. NOTE L: INCREASE OF AUTHORIZED SHARES AND PAR VALUE. On February 14, 2005 Invicta provided notice to shareholders increasing authorized shares. The action, by consent of a majority of the shareholders increases the outstanding Common Stock of the company to 1,000,000,000 shares. It also increases the Preferred Stock to 50,000,000 shares. With respect to the Amendment, the Board of Directors of the Company (the "Board") has approved, and the shareholders owning a majority of the issued and outstanding voting shares outstanding as of February 8, 2005, have consented in writing to the Amendment. F-14 The Company also change it common stock par value from $.001 to $.0001. All presented period have been adjusted to reflect this par value change. NOTE M: REVERSE SPLIT OF THE COMPANY'S COMMON STOCK Effective November 16, 2006, the Company completed a reverse split of its common stock. The Company issued 1 share valued at $.05 for each 100 shares of the Company's outstanding stock. The value was based on 100 times the current share price. NOTE N: CREATION OF SERIES D CONVERTIBLE PREFERRED STOCK On October 27, 2006, the board of directors authorized convertible preferred D stock. The stock has a par value of .0001. Each share of the preferred stock is convertible into 70 shares of the Company's common stock. NOTE O: PURCHASE OF CUSTOMER DATATBASE On December 20, 2006, the Company purchased an e-mail data base approximating 16,500,000 e-mail address. The Company issued its Series D convertible preferred stock as payment for the database. The purchase is valued at $100,000. The database will be amortized over a 5-year period. NOTE P: GOING CONCERN Invicta Group Inc. improved Revenues and decreased loses in 2006 but did not reach profitability. The Company has been unsuccessful generating profits since inception. The company has been under capitalized from the day it became a public company. Marketing dollars were not available to brand the subsidiaries, margins were too low, and the high cost of staffing call centers, versus generating sales on the internet, resulted in losses every year. Losses were $631,397 for the calendar year 2006 as compared to losses of $993,831 in 2005. The Company changed its business model in 2006 to an internet media Company, starting a new division called Travel Hot Link. Travel Hot Link sells advertising to travel supplier's online, generating revenues from advertising income on its website: www.travelhotlink.com Travel Hot Link offers discounted travel to an Email database of 40 million travel enthusiasts that are seeking travel bargains online. The traveler selects the travel supplier it desires by clicking on to its web address, linking the traveler and supplier together to complete the purchase. Travel Hot Link has no involvement with the reservation; its revenues are generated from the Travel Supplier that advertises its travel products online. The Company has created the Travel Hot Link website and will need to hire staff to generate revenues. Additional funding will be necessary to accomplish this objective. F-15 The new business model and new division offers The Company the opportunity for survival and additional funding should provide the working capital resources to generate a profit in 2007. Management believes a profitable company will increase stock value and assure survival. NOTE Q: BENEFICIAL INTEREST The company recognizes additional interest expense equivalent to the stock issued at a discount to market when converted to pay corporate debt. F-16