ELVG 10-Q
Elvictor Group, Inc. (ELVG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
Commission file number
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| incorporation or organization) | Identification No.) | |
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N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the issuer (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
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Indicate by check mark whether the registrant
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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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| ☒ | Smaller reporting company | ||
| Emerging growth company |
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As of May 16, 2022 there were
ELVICTOR GROUP, INC.
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
ELVICTOR GROUP, INC
Unaudited Condensed Consolidated Balance Sheets
| March 31, 2022 | December, 31, (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | |||||||
| Accounts Receivable | ||||||||
| Other Receivables | ||||||||
| Other Receivables - Related Party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| ROU Asset - Related Party | ||||||||
| Total Current Assets | ||||||||
| Long-term Assets | ||||||||
| ROU Asset - Related Party | ||||||||
| Intangible Assets, net | - | |||||||
| Office Equipment, net | ||||||||
| Total Long-term Assets | ||||||||
| Total Assets | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | |||||||
| Trade Accounts Payable | ||||||||
| Trade Accounts Payable - Related Party | ||||||||
| Other Payables | ||||||||
| Lease Liability - Related Party | ||||||||
| Accrued and Other Liabilities | ||||||||
| Due to related party | ||||||||
| Total Current Liabilities | ||||||||
| Lon-Term Liabilities | ||||||||
| Lease Liability - Related Party | ||||||||
| Total Long-term Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, par value $ | $ | |||||||
| Additional paid in capital | $ | |||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | |||||||
The accompanying notes are an integral part of these financial statements.
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ELVICTOR GROUP, INC
Unaudited Condensed Consolidated Statement of Operations
| For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | |||||||
| Gross Revenue | $ | $ | ||||||
| Net Revenue | ||||||||
| Total Revenue | ||||||||
| Less: Cost of Revenue | ||||||||
| Cost of Revenue - Related Party | ||||||||
| Gross Profit | ||||||||
| Operating expenses | ||||||||
| Professional fees | ||||||||
| Professional fees - Related Party | ||||||||
| Salaries | ||||||||
| Rent -Related Party | ||||||||
| Depreciation and Amortization | - | |||||||
| Other general and administrative costs | ||||||||
| Total operating expenses | ||||||||
| Profit/ (Loss) from operations | ( | ) | ||||||
| Other Income (Expense) | ||||||||
| Other Income | ||||||||
| Total other income | ||||||||
| Net profit/(loss) before income tax | $ | ( | ) | $ | ||||
| Provision for income taxes | - | |||||||
| Net profit/ (loss) | $ | ( | ) | $ | ||||
| Net Profit/(Loss) Per Common Stock | ||||||||
| -basic and fully diluted | $ | $ | ||||||
| Weighted-average number of shares of common stock outstanding | ||||||||
| - basic and fully diluted | ||||||||
The accompanying notes are an integral part of these financial statements.
2
ELVICTOR GROUP, INC
Unaudited Condensed Consolidated Statement of Cash Flows
| For
the Three Months Ended March 31, 2022 | For
the Three Months Ended March 31, 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net profit/ (loss) for the period | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Shares Issued for Services | ||||||||
| Changes in assets and liabilities | ||||||||
| Accounts Receivable | ( | ) | ( | ) | ||||
| Other Receivables | ||||||||
| Other Receivables - Related Party | ( | ) | ||||||
| Accounts Payable | ( | ) | ||||||
| Trade Accounts Payable | ||||||||
| Trade Accounts Payable - Related Party | ( | ) | ||||||
| Other Payables | ||||||||
| Income Tax Payable | ||||||||
| Accrued and Other Liabilities | ( | ) | ||||||
| Net cash provided by (used for) operating activities | $ | $ | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Office Equipment | ( | ) | ||||||
| Net cash used for investing activities | $ | ( | ) | $ | ||||
| Cash Flows from Financing Activities | ||||||||
| Due to related party | ( | ) | ||||||
| Sale of common stock | ||||||||
| Net cash (used for) provided by financing activities | $ | ( | ) | $ | ||||
| Net Increase (Decrease) in Cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for: | ||||||||
| Income Taxes | $ | |||||||
| Supplemental Non-Cash Investing and Financing | ||||||||
| Transactions | ||||||||
| Common Stock issued to reduce convertible notes payable | $ | $ | ||||||
| Shares exchanged for Intangible Asset | ||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | ||||||||
The accompanying notes are an integral part of these financial statements
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ELVICTOR GROUP, INC
Unaudited Condensed Statement of the Changes in Shareholder’s Equity
| Three Month Period Ended March 31, 2022 | ||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | Subscription | Total Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Receivable | Equity | |||||||||||||||||||||||||
| Balance, January 1, 2022 | $ | - | ( | ) | ||||||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Shares exchanged for Intangible Asset | - | |||||||||||||||||||||||||||||||
| Net Loss for the three Months Ended March 31, 2022 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | - | - | ( | ) | |||||||||||||||||||||||||||
| Three Month Period Ended March 31, 2021 | ||||||||||||||||||||||||||||||||
| Balance, January 1, 2021 | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for cash | - | - | ||||||||||||||||||||||||||||||
| Shares issued for Convertible Bonds | - | - | - | |||||||||||||||||||||||||||||
| Net Income for the Three Months Ended March 31, 2021 | - | - | - | |||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | ( | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
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ELVICTOR GROUP, INC
(Formerly Thenablers, Inc)
Notes to the Financial Statements
NOTE 1 – DESCRIPTION OF BUSINESS
Elvictor Group, Inc. formerly known as Thenablers, Inc. (“Elvictor Group, Inc.” or the “Company”) was incorporated in the State of Nevada on November 3, 2017. With the change to the Elvictor name came the addition of the brand and new team in crew management in the shipping industry. The new management team comes from Elvictor (the Greece-based private entity founded in 1977, which is the predecessor to the company whose business became a part of the business of Thenablers in 2019, the “Elvictor Greece”) that has been active across various value-adding activities of the shipping sector, such as ship management, technical management, crewing & crew management. Its professional core of activities includes crew management, training and the creation of in-house software related to crew and ship matters, for the amelioration of all its operations, facilitating both its employees and those that depend on them. The Company aims to broaden its scope of activities, expanding on to new areas, while refining the existing ones. Placing prime importance on digitalization, the Company plans on the extensive use of Artificial Intelligence, through the application of Machine and Deep Learning, in concert with the integration of a wide array of cloud systems. The strategic growth of the Group on a horizontal and vertical manner throughout the shipping industry will be reinforced with technologically adept tools, containing know-how and experience. Working on a technologically oriented path, the Company is ideologically flexible and open to other avenues of international business for the successful and profitable diversification of its portfolio.
On December 13, 2019, pursuant to the approval of a majority of the voting interests for Thenablers, Inc., the Company filed a Certificate of Amendment with the Secretary of State for Nevada to change its name from “Thenablers, Inc.” to “Elvictor Group, Inc.”, to better reflect new business interests and to further apply for a corporate action with FINRA to have the name change approved and to change the symbol of the Company to “ELVG”.
Pursuant to the approval of that application to FINRA, and on February 27, 2020, the name of the Company was changed to Elvictor Group, Inc. on the OTC Markets, and the symbol for trading was changed to “ELVG”.
As of July 10, 2020, the Company founded a subsidiary in Vari, Greece to assist the management in facilitating the operations of the Company. Additionally, the Company has purchased Ultra Ship Management, a company incorporated in the Marshall Islands that is licensed to provide ship management services, who in turn established a subsidiary in Vari, Greece.
On January 17, 2022, the Company established the fully owned subsidiary ELVG Crew Management Ltd., incorporated in Cyprus, to facilitate its crew management operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING AND BENEFICIAL CONVERSION FEATURES POLICIES
Basis of Presentation
The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars, unless indicated otherwise. The Company believes that the disclosures in these financial statements are adequate and not misleading. In the opinion of management, the financial statements and notes contain all adjustments necessary for a fair presentation of the Company’s financial position as of March 31, 2022, and December 31, 2021, and statements of operations and cash flows for the three months ended March 31, 2022, and 2021.
The accompanying financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements.
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Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Elvictor Group, Inc. as of March 31, 2022, and the results of the controlled subsidiaries in Vari Greece, the Marshall Islands and Cyprus for the three months then ended. Elvictor Group, Inc. and its subsidiaries together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”). The Company has adopted a December 31 fiscal year end.
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 reported amounts of assets and liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Company considers all cash on hand and in banks, certificates of deposit and other highly liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
For the three months ended March 31, 2022, the Company has operations of crew manning and management and has accounts receivable due from its customers in the shipping industry. Contracts receivable from crew manning in the shipping industry are based on contracted prices. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, individual credit evaluation and specific circumstances of the customer, and existing economic conditions. The Company does not have an allowance for doubtful accounts as of March 31, 2022. Normal contracts receivable is due 30 days after the issuance of the invoice, normally at the month’s end. Receivables past due more than 120 days are considered delinquent and they are included in the provision for doubtful account. There is no interest charged on past due accounts.
Property and Equipment
Property and equipment are stated at
cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The office equipment is depreciated
over
Intangible Assets
Intangible assets acquired are initially recognized at their fair value on the date of acquisition. Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, if any. These assets are being amortized over their useful life.
6
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606 upon the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue recognized from contracts with customers is disclosed separately from other sources of revenue. ASC 606 includes guidance on when revenue should be recognized on a Gross (Principal) or Net (Agent) basis.
Most of the Company’s revenues are recognized primarily under long-term contracts, including those for which revenues are based on either a fixed price, or cost-plus-fee basis, and primarily as performance obligations are satisfied. Professional services and other ancillary services are delivered, generally on a monthly basis and are separate and distinct deliverables. The Company’s performance obligation is generally satisfied on a monthly basis when its agency and related services are delivered.
The Company has the performance obligation to provide a crew for its customers, the shipping companies, and their ship managers. The Company utilizes its proprietary crew management platform to deliver crew management services to the ship owners. This crew management service is a monthly obligation that starts with the first stage of recruitment, to their transfer of crew to the vessel and continues to monitor the crew during the course of the contract until they disembark.
Revenue from crew manning services, agency fees and recruiting fees where Elvictor acts as a principal is recognized as gross revenue. When the company is acting as an agent, revenue is recognized as net revenue in the accounting period in which the services are rendered. Such revenues are from Allotment fees, communication, training fees, covid-19 fees, and other sundry fees. For all fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period. The accounting treatment for the reporting of revenues may vary materially between whether the revenue is reported on a Principal (Gross) or an Agent (Net) basis.
Stock-Based Compensation
The measurement and recognition of stock - based compensation expense is based on estimated fair values for all share-based awards made to employees and directors, including stock options and for non-employee equity transactions as per ASC 718 rules.
For transactions in which we obtain certain services of employees, directors, and consultants in exchange for an award of equity instruments, we measure the cost of the services based on the grant date fair value of the award. We recognize the cost over the vesting period.
7
Basic Income/ (Loss) Per Share
Basic income per share is calculated by dividing the Company’s net income/ (loss) applicable to common shareholders by the weighted average number of shares of common stock during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of March 31, 2022.
Recent Accounting Pronouncements
From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements. The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption.
Foreign Currency Translation
The Company considers the U.S. dollar to be its functional currency as it is the currency of the primary economic environment in which the Company operates. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities are translated at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are included in operations.
Subsequent Events
The Company has analyzed the transactions from March 31, 2022, to the date these financial statements were issued for subsequent event disclosure purposes.
NOTE 3 – RECEIVABLES
Trade receivables are amounts due from customers for services performed in the ordinary course of business.
Other receivables are mainly for the payments of items such as Home Allotments and Cash Advances to the crews where the Company collects funds from the shipping companies and then facilitates the payments to the crew on their behalf.
As of March 31, 2022, the Company has
trade accounts receivable of $
NOTE 4 – INTANGIBLE ASSETS
On November 15, 2021, the company entered
into an agreement to purchase the license software from Seatrix Software Production Single Member S.A. (“Seatrix”), a related
party company, for
The value of each share of common stock
was stated at $
8
NOTE 5 – RELATED PARTY TRANSACTIONS
The Company has related party transactions with companies that are owned or controlled by either Mr. Stavros Galanakis, the Vice-President and Chairman of the Board of Directors, and Mr. Konstantinos Galanakis, the CEO and Director.
The Company has entered into an agreement
in October 2020 with related party Elvictor Crew Management Services Ltd in Cyprus to provide human resources services as well as to perform
the running and management of the Company’s contracts with third parties and provide key personnel for these services. However,
this agreement has been terminated in the first quarter of 2022 since the formation of the new wholly owned Cypriot subsidiary. A total
amount of $
On September 11, 2020, the Company
entered into a Manning Agency Agreement with Elvictor Crew Management Service Ltd in Georgia. During the three months ended March 31,
2022, the latter provided manning services to the Company of $
On September 1, 2020, the Company signed
an agreement with Qualship Georgia Ltd for the latter to provide training of the qualified personnel. For the three months ended March
31, 2022, we incurred $
On September 11, 2020, the Company
entered into a Manning Agency Agreement with Elvictor Odessa. During the year ended March 31, 2022, the latter provided manning services
to the Company of $
NOTE 6 – LEASES
On July 10, 2020,
Then on October 1, 2021, the Company
entered into a second lease agreement with the wife of Mr. Stavros Galanakis for its new subsidiary in Vari, Greece for Ultra Ship Management.
Because
we generally do not have access to the rate implicit in the lease, we utilize our incremental borrowing rate as the discount rate. As
of March 31, 2022, the discount rate was
The Operating Lease Expense is as follows:
| For the three months ended | ||||
| March 31, 2022 | ||||
| Operating Lease expense | $ | |||
9
The following table summarizes information related to the lease:
| For the three months ended | ||||
| March 31, 2022 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Cash payments | $ | |||
NOTE 7 - OTHER PAYABLES
As part of one of the services in the
manning of a crew provided by the Company to the shipping companies is that the Company makes the bank transfers of the wages to the crew,
on the customer’s behalf. The shipping companies transfer the funds to the Company’s bank account and then the Company makes
each payment to indicated crew. In its capacity, the Company will show the balance of the funds received and not yet transferred to the
crew as Other Payables on the Balance Sheet. The amount of Other Accounts Payables for crew wages is $
The balance in Other Payables also
consist of $
NOTE 8 – STOCKHOLDERS’ EQUITY
Issuance of Common Stock
The Company has
On February 5, 2021, the Company issued
On April 8, 2021, the Company issued
exactly
Additionally, for the year ended December
31, 2021, the Company issued
On January 19, 2022, the Company issued
On January 19, 2022, the Company issued an aggregate
of
10
Issuance of Preferred Stock
On October 7, 2019, Elvictor Group, Inc. entered
into four separate Series A Convertible Preferred Stock Purchase Agreements (the “Series A Purchase Agreements”) pursuant
to which the Company issued
On April 8, 2021, the Company issued
NOTE 9 – COMMITMENTS AND CONTINGENCIES
On April 1, 2021,
On October 1, 2021,
NOTE 10 – INCOME TAXES
The Company has an overall net loss and, as a result, there exists doubt as to the ultimate realization of the deferred tax assets. Accordingly, a valuation allowance equal to the total deferred tax assets has been recorded.
The Company had federal net operating
loss carry forwards for tax purposes of approximately $
NOTE 11 – SUBSEQUENT EVENT
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to March 31, 2022, through May 16, 2022, the date these financial statements were issued, and has determined that there are no material subsequent events to these financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,” refers to the business of Elvictor Group, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Organizational Overview
Together with our wholly owned crew management subsidiaries, Elvictor is a crewing and crew management company responsible for sourcing, recruitment, selection, deployment, scheduling, training, and on-going management of seafarers. Our services also include administrative functions related to crew management services, including payroll services, travel arrangements, and verifying the insurance coverage information of all onboarded seafarers. Our Company benefits from over 65 years of combined experience in various value adding activities of the shipping sector such as ship management, technical management, ship agency, crewing and crew management of Mr. Stavros Galanakis and Mr. Konstantinos Galanakis.
Through the crew management platform developed by our affiliate, Seatrix, our personnel can collaborate with many different cultures in many different time zones with ever rising complexities, presenting a uniform service level to our principals, regardless of the point of origin of the crew. This innovation allows us to hire junior operators, who after a short training procedure are able to serve our principals with high quality standards, helping Elvictor be cost effective while maintaining the highest possible service level.
We currently manage over 2,500 seafarers of seven different nationalities who are aboard seven different ship types. On any one day, we manage over 250 seafarers traveling worldwide while processing over 500 multilingual applicants daily, supporting our clients.
The Company intends to expand the services it offers by also providing ship management services. In furtherance thereof, we acquired Ultra Shipmanagement from Mr. Stavros Galanakis and Mr. Konstantinos Galanakis, which has received its Det Norske Veritas AS approved Interim Document of Compliance provided under the authority granted by the Government of the Republic of the Marshall Islands, and specialized personnel has also been employed by the Company. The Interim Document of Compliance is the license required for a ship management company to start providing its services.
12
Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business
The shipping industry is currently experiencing historical uncertainty in sustainability logistics and daily operations as a result of the COVID-19 pandemic, geopolitical tensions and the war between Russia and Ukraine. Additionally, shortages of crew members have also been created due to aging crew members leaving the maritime business. As a result of the foregoing, competition in crew resources is becoming stiffer and more unpredictable resulting in higher wage demands by crew members. These wage demands, accompanied by incentive compensation requested by crew members, are increasing vessel operating expenses. The impact of global inflation has also added to these increases. Additionally, smaller contract durations are requested and timely changes in ports, increasing the costs of changing crews and the costs and volume of such logistics.
To address these issues, we are implementing short and long-term strategies based on proactive scheduling and recruitment, with the help of our cloud-based system and intelligent metrics that have been developed in-house to monitor the “trends and fashions” of the maritime industry. Our goal is to build new pools of seafarers by accelerating promotions, cadetship programs, and the employment of more cadets onboard. These cadets are scheduled to be promoted to junior officers in the near future, generating a new breed of officers to address the global shortage and maintain crews at reasonable costs. We have also developed interactive screens through HTML5 links to communicate with seafarers and to keep crews updated, monitor their welfare and provide better services to them. We also intend to upgrade our cloud-based system during the second quarter of 2022, to elevate logistics intelligence, allowing us to handle growth and recruitment volumes more efficiently. While we believe that these actions will help address many of these issues, if we are unable to effectively do so, the shortage of crew members and significant increase in expenses could have a materially adverse impact on our business.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our consolidated financial statements. Those material accounting estimates that we believe are the most critical to an investor’s understanding of our financial results and condition are discussed immediately below and are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management to determine the appropriate assumptions to be used in the determination of certain estimates.
Basis of Presentation
The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in U.S. dollars, unless indicated otherwise. The Company believes that the disclosures in these financial statements are adequate and not misleading. In the opinion of management, the financial statements and notes contain all adjustments necessary for a fair presentation of the Company’s financial position as of March 31, 2022 and 2021 and statements of operations and cash flows for the three-month periods ended March 31, 2022 and 2021.
The accompanying financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements.
Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Elvictor Group, Inc. as of March 31, 2022 and 2021 and the results of controlled subsidiaries for the year then ended. Elvictor Group, Inc. and its subsidiaries together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity using consistent accounting policies.
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Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”). The Company has adopted a December 31 fiscal year end.
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 reported amounts of assets and liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Accounts Receivable
For the three-month periods ended March 31, 2022 and 2021, the Company had operations of crew manning and management and had accounts receivable due from its customers in the shipping industry. Contracts receivable from crew manning in the shipping industry are based on contracted prices. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, individual credit valuation and specific circumstances of the customer and existing economic conditions. Normal contracts receivable are due 30 days after the issuance of the invoice, normally at the month’s end. Receivables past due more than 120 days are considered delinquent and they are included in the provision for doubtful accounts. There is no interest charged on past due accounts.
The Company does not have an allowance for doubtful accounts as of March 31, 2022 or 2021.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Beneficial Conversion Features
The Company issued convertible bonds that resulted in a beneficial conversion feature. A beneficial conversion feature arises when the conversion price of a convertible instrument is below the per share fair value of the underlying stock into which it is convertible. The holder realizes a benefit to the extent of the price difference and the issuer of the convertible instrument realizes a cost based on the theory that the intrinsic value of the price difference represents an additional financing cost.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 606 upon the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue recognized from contracts with customers is disclosed separately from other sources of revenue. ASC 606 includes guidance on when revenue should be recognized on a Gross (Principal) or Net (Agent) basis. ASC 6060 includes guidance.
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Most of the Company’s revenues are recognized primarily under long-term contracts, including those for which revenues are based on either a fixed price, or cost-plus-fee basis, and primarily as performance obligations are satisfied. Revenue from crew manning services where Elvictor acts as a principle is recognized as gross revenue and when acting as an agent, revenue is recognized as net revenue in the accounting period in which the services are rendered. For all fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period. The accounting treatment for the reporting of revenues may vary materially between whether the revenue is reported on a Principal (Gross) or an Agent (Net) basis.
The measurement and recognition of stock-based compensation expense is based on estimated fair values for all share-based awards made to employees and directors, including stock options and for non-employee equity transactions as per ASC 718 rules.
For transactions in which we obtain certain services of employees, directors, and consultants in exchange for an award of equity instruments, we measure the cost of the services based on the grant date fair value of the award. We recognize the cost over the vesting period
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net profit (loss) applicable to common shareholders by the weighted average number of shares of common stock during the period. Diluted earnings per share is calculated by dividing the Company’s net income (loss) applicable to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were no such common stock equivalents outstanding as of March 31, 2022.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
Subsequent Events
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to March 31, 2022, through May 16, 2022, the date these financial statements were issued, and has determined that there are no material subsequent events to these financial statements.
Plan of Operations
In order to meet business goals, we must (a) execute effectively our current business of crew management; and (b) continue to focus on new business development in order to acquire new agreements.
In order to raise sufficient funds to proceed with the implementation of our business plan, we may have to find alternative sources of funds, like a second public offering, a private placement of securities, or loans from third parties (such as banks or other institutional lenders). Equity financing could result in additional dilution to then existing shareholders. If we are unable to meet our needs for cash from either the money that we raise from private placements, or possible alternative sources, then we may be unable to continue to maintain, develop or expand our operations.
We incurred revenues of $556,230 for the three-month period ended March 31, 2021 while for the three-month period ended March 31, 2022 we increased our revenues to $593,172. We believe consistent growth in our shipping crew management operations is key to the success of our Company.
In the second quarter of 2021, we entered into an exclusive Software License Agreement with Seatrix Software Production Single Member S.A. in order to have the rights to use crew software that facilitates our operations. Thereafter in the fourth quarter of 2021 the Company signed a new Software License Agreement, effective on January 1, 2022, that granted the perpetual exclusive and non-transferable license in exchange of shares of common stock. Through this agreement we are entitled to use the crew management platform and our personnel can collaborate with many different cultures in many different time zones with ever rising complexities, presenting a uniform service level to our principals regardless of the point of origin of the crew.
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Results of Operations
Revenues
For the three-month periods ended March 31, 2022 and March 31, 2021, we generated $593,172 and $556,230 in total revenue, respectively, representing an increase in total revenue of $36,942 between the two periods, or approximately 6.6%. The increase in total revenue is primarily due to an increase of $44,066 (73.8%) in net revenue (i.e. revenue that we receive as an agent in connection with our providing onboarding services to crew management clients) from $59,738 for the three-month period ended March 31, 2021 to $103,804 for the same period in 2022. This was partially offset by a decrease in gross revenue from $496,492 in the three-month period ended March 31, 2021 to $489,368 for the same period in 2022, or 1.4%. In addition, we acquired Ultra Shipmanagement in the Marshall Islands, which is now our wholly owned subsidiary, to begin ship management, increase revenues and adding another layer to our vertical service line.
Operating Expenses
For the three-month periods ended March 31, 2022 and March 31, 2021, we incurred $469,091 and $242,697, respectively in total operating expenses, representing an increase in total operating expenses between the two periods of $227,094, or approximately 93.6%. The increase in operating expenses in 2022 is primarily due to (i) an increase of $140,131 (150.6%) in salaries payable to our employees from $93,024 for the three-month period ended March 31, 2021 to $253,155 for the same period in 2022, as a result of increases in salaries payable to management and an increase in the number of employees, some of which are performing functions previously performed by third party professionals or subcontractors, (ii) an increase of $56,751 (59.4%) in professional fees from $95,569 for the three-month period ended March 31, 2022 to $152,320 for the same period in 2022, as a result of legal and public relations fees and (iii) an increase of $22,677 in general and administrative costs from $27,821 (81.5%) for the three-month period ended March 31, 2022 to $50,498 for the same period in 2022, which was attributable to various utilities expenses ..
Net Loss and Gross Profit
For the three-month periods ended March 31, 2022 and March 31, 2021, we incurred a net loss of $465 and a profit of $24,912, respectively, representing a decrease in net profit of $25,377 between the two periods, or approximately 101.9%. This reduction in net profit to a net loss for the three-month period ended March 31, 2022, is due primarily to the increase in operating expenses described above, which was partially offset by an increase in gross profit to $461,495 for the three-month period ended March 31, 2022 from $262,615 for the same period in 2021, an increase of $198,880 or 75.7%.
Liquidity, Capital Resources, and Off-Balance Sheet Arrangements
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital surplus during the three-month period ended March 31, 2022 of $473,313 compared to the surplus of $432,130 for the three-month period ended March 31, 2021, which is calculated as current assets minus current liabilities.
Cash flows for the three-month period ended March 31, 2022
Net cash flow provided by operating activities was $29,275 for the period ended March 31, 2021, compared to $48,192 used in operating activities during the March 31, 2021 period. This decrease was directly attributable to the cash received from related party receivables.
Net cash flow used in investing activities was $3,265, mainly deriving from the purchase of office equipment, and $0 for the three-month periods ended March 31, 2022 and March 31, 2021, respectively.
Net cash provided by financing activities was $37,680 for the three-month period ended March 31, 2022, deriving mainly from the related parties, and $111,833 for the three-month period ended March 31, 2021.
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Cash Requirements
We believe our cash and cash equivalents, together with anticipated cash flow from operations will be sufficient to meet our working capital, and capital expenditure requirements for at least the next twelve months. We will require additional capital to implement our business development and fund our operations. In the event that our plans or assumptions change, we may need to raise additional capital sooner than expected.
Since the commencement of our crew management business, we have funded our operations primarily through equity financings and we expect that we will continue to fund our business through equity and debt financing, either alone or through strategic alliances. Additional funding may not be available on favorable terms, if at all, which could harm our business plans, financial condition and operating results. We intend to continue to fund our business by way of equity or debt financing along with the revenues that can support the Company. If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.
Contractual Obligations
The Company leases its office space in Vari, Greece under a non-cancelable operating lease that was entered into on July 10, 2020 and most recently amended on April 1, 2021. The lease requires monthly rental payments, included by year in the table below, which escalate during the lease term and expires on December 31, 2022. Furthermore, on October 1, 2021, the Company entered into a second lease agreement for its subsidiary Ultra Shipmanagement that requires monthly rental payments and expire on September 30, 2024. Both contractual obligations to make future payments are included in the table below while the difference between straight-line rent expense and rent paid is immaterial as of March 31, 2022.
| Year Ending December 31, | Operating Leases | |||
| 2022 (remaining) | 49,812.30 | |||
| 2023 | 19,924.92 | |||
| 2024 | 14,943.69 | |||
| Total | 84,680.91 | |||
Rent expense for the three months ended March 31, 2022 and 2021 amounted to $15,154 and $18,283, respectively.
Outlook
The outbreak of COVID-19 has adversely affected both our and our clients’ operations. During the pandemic there were cases where crews were likely to be unable to travel to join a vessel or be repatriated following the completion of their contract due to travel restrictions creating several challenges in our operations. Additionally, specialized staff such as inspectors were often restricted from accessing vessels and thus conducting the legally required inspections (safety, environmental, training, etc.), supplies were often difficult to reach the vessels and support from head offices could be of lower quality since a large part of the staff was working remotely. The Company was able to continue to operate with minor interruptions although the vast majority of our staff worked remotely from the beginning of the pandemic. However, in the future similar epidemics, pandemics or outbreaks may impact our business due to closures or restrictions requested or mandated by governmental authorities, disruption to supply chains and workforce, reduction of demand for our services, and credit losses when customers and other counterparties fail to satisfy their obligations to us, among other factors.
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The shipping industry and especially the crew management segments will likely continue to face increasing pressures, further due to the ongoing COVID-19 crisis, as well as due to the war in Ukraine. According to the International Chamber of Shipping (the “ICS”), which represents approximately 80% of the worlds’ merchant fleet, Ukrainian and Russian seafarers make up 14.5% of the global shipping workforce, with 198,123 Russian seafarers and 76,442 Ukrainians.
The management team of Elvictor is assessing alternative plans to mitigate potential challenges arising from the ongoing war in the Ukraine, among other things.
The demand for our services depends on the demand for maritime shipping services which are subject to normal economic cycles affecting the general economy including the effect of increased inflation. Inflationary pressures may result to important increases to our operating costs that we may not be able to fully transfer to our clients thus affecting our profitability. Additionally, increase in operating costs of our clients may lead to delays in payments for our services and accumulation of bad debt, although as a Company we closely monitor their credit behavior to avoid such incidents. Additionally, significant deteriorations of economic conditions over a prolonged period could produce a material adverse effect on the demand for our services.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by the SEC Rules 13a-15(b) and 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in internal controls over financial reporting (as described below).
To address these material weaknesses, management engaged financial consultants, performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
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A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that as of March 31, 2022 our internal controls over financial reporting were not effective at the reasonable assurance level:
1. We do not have sufficient written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of the Sarbanes-Oxley Act which is applicable to us for the quarter ended March 31, 2022. Management evaluated the impact of our failure to have sufficient written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
We have taken steps to remediate some of the weaknesses described above and we are in discussions with the risk advisory departments of reputable accounting firms to assist us in the COSO framework documentation and testing of the internal controls. We intend to continue to address these weaknesses as resources permit, including the employment of new qualified employees.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
Not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 19, 2022, the Company issued 7,000,000 restricted shares of common stock to Seatrix Software Production Single Member S.A., a Company owned and controlled by Mr. Konstantinos Galanakis, pursuant to the Software License Agreement signed on November 15, 2021, for the exclusive and non-transferable license to use the Licensor’s artificial intelligence software in connection with the managing of shipping crews.
On January 19, 2022, the Company issued an aggregate of 900,000 shares of common stock to certain directors and former directors for past services provided to the Company.
The issuances of shares of common stock during the first quarter of 2022 were each undertaken in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.
Other than as described above, there were no sales of unregistered equity securities during the first quarter of 2022.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ELVICTOR GROUP, INC. | ||
| Dated: May 16, 2022 | By: | /s/ Konstantinos Galanakis |
| Konstantinos Galanakis | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Dated: May 16, 2022 | By: | /s/ Aikaterini Bokou |
| Aikaterini Bokou | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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