Item
1. Financial Statements
ELVICTOR
GROUP, INC.
Unaudited
Condensed Consolidated Balance Sheet
| |
June 30, 2022 | | |
December 31,
2021 Audited | |
ASSETS | |
| | |
| |
Current Assets | |
| | |
| |
Cash | |
$ | 454,797 | | |
| 308,526 | |
Accounts Receivable | |
| 463,953 | | |
| 427,482 | |
Other Receivables | |
| - | | |
| 59,631 | |
Other Receivables - Related Party | |
| 123,082 | | |
| 161,731 | |
Prepaid expenses and other current assets | |
| 39,469 | | |
| 2,469 | |
ROU Asset - Related Party | |
| 38,976 | | |
| 60,394 | |
Total Current Assets | |
| 1,120,277 | | |
| 1,020,233 | |
| |
| | | |
| | |
Non-current Assets | |
| | | |
| | |
ROU Asset - Related Party | |
| 9,158 | | |
| 22,953 | |
Intangible Assets, Net | |
| 291,049 | | |
| - | |
Office Equipment, net | |
| 16,503 | | |
| 10,619 | |
Total Non-current Assets | |
| 316,710 | | |
| 33,572 | |
| |
| | | |
| | |
Total Assets | |
$ | 1,436,987 | | |
| 1,053,805 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts Payable | |
$ | 30,279 | | |
| 78,322 | |
Trade Accounts Payable | |
| 119,447 | | |
| 88,253 | |
Trade Accounts Payable - Related Party | |
| 45,877 | | |
| 84,223 | |
Other Payables | |
| 370,143 | | |
| 206,200 | |
Lease Liability - Related Party | |
| 38,976 | | |
| 60,394 | |
Accrued and Other Liabilities | |
| 22,419 | | |
| 30,613 | |
Due to related party | |
| 7,894 | | |
| 40,098 | |
Total Current Liabilities | |
| 635,035 | | |
| 588,103 | |
| |
| | | |
| | |
Non-current Liabilities | |
| | | |
| | |
Lease Liability - Related Party | |
| 9,158 | | |
| 22,953 | |
Total Non-current Liabilities | |
| 9,158 | | |
| 22,953 | |
| |
| | | |
| | |
Stockholders’ Equity | |
| | | |
| | |
Common stock, par value $0.0001; 700,000,000 common shares authorized; 414,448,757 and 406,548,757 common shares issued and outstanding at June 30, 2022 and December 31, 2021 respectively | |
$ | 41,445 | | |
| 40,655 | |
Additional paid in capital | |
$ | 45,141,884 | | |
| 44,802,974 | |
Accumulated deficit | |
| (44,390,535 | ) | |
| (44,400,880 | ) |
Total Stockholders’ Equity | |
| 792,794 | | |
| 442,749 | |
| |
| | | |
| | |
Total Liabilities and Stockholders’ Equity | |
$ | 1,436,987 | | |
| 1,053,805 | |
The
accompanying notes are an integral part of these financial statements.
ELVICTOR
GROUP, INC.
Unaudited
Condensed Consolidated Statement of Operations
| |
For the Three Months Ended June 30, 2022 | | |
For the Three Months Ended June 30, 2021 | | |
For the Six Months Ended June 30, 2022 | | |
For the Six Months Ended June 30, 2021 | |
| |
| | |
| | |
| | |
| |
Gross Revenue | |
$ | 517,063 | | |
$ | 564,380 | | |
$ | 1,006,431 | | |
$ | 1,060,872 | |
Net Revenue | |
| 105,120 | | |
| 52,742 | | |
| 208,924 | | |
| 112,480 | |
Total Revenue | |
| 622,183 | | |
| 617,122 | | |
| 1,215,355 | | |
| 1,173,352 | |
Less: Cost of Revenue | |
| 97,858 | | |
| 119,558 | | |
| 189,595 | | |
| 237,895 | |
Cost of Revenue - Related Party | |
| 21,830 | | |
| 138,440 | | |
| 61,770 | | |
| 313,718 | |
Gross Profit | |
| 502,495 | | |
| 359,124 | | |
| 963,990 | | |
| 621,739 | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Professional fees | |
| 138,311 | | |
| 45,468 | | |
| 290,631 | | |
| 141,036 | |
Professional fees - Related Party | |
| 13,184 | | |
| 3,941 | | |
| 25,634 | | |
| 11,941 | |
Salaries | |
| 278,013 | | |
| 136,930 | | |
| 511,169 | | |
| 229,954 | |
Rent -Related Party | |
| 14,388 | | |
| 12,843 | | |
| 29,542 | | |
| 31,126 | |
Depreciation and Amortization | |
| 6,232 | | |
| - | | |
| 12,446 | | |
| - | |
Other general and administrative costs | |
| 48,485 | | |
| 79,350 | | |
| 98,981 | | |
| 107,167 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 498,613 | | |
| 278,532 | | |
| 968,403 | | |
| 521,224 | |
| |
| | | |
| | | |
| | | |
| | |
Gain/(Loss) from operations | |
| 3,882 | | |
| 80,592 | | |
| (4,413 | ) | |
| 100,515 | |
Other Income (Expense) | |
| | | |
| | | |
| | | |
| | |
Loss from Conversion of Preferred Stock to Commons Stock | |
| - | | |
| (43,147,786 | ) | |
| - | | |
| (43,147,786 | ) |
Other Income | |
| 8,547 | | |
| 8,503 | | |
| 16,377 | | |
| 15,330 | |
Total other income/(expense) | |
| 8,547 | | |
| (43,139,282 | ) | |
| 16,377 | | |
| (43,132,455 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net profit/(loss) before income tax | |
$ | 12,429 | | |
$ | (43,058,691 | ) | |
$ | 11,964 | | |
$ | (43,031,941 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income taxes | |
| 1,619 | | |
| 3,610 | | |
| 1,619 | | |
| 5,450 | |
| |
| | | |
| | | |
| | | |
| | |
Net profit/(loss) | |
$ | 10,810 | | |
$ | (43,062,301 | ) | |
$ | 10,345 | | |
$ | (43,037,391 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Profit/(Loss) Per Common Stock | |
| | | |
| | | |
| | | |
| | |
- basic and fully diluted | |
$ | 0.00 | | |
$ | (0.11 | ) | |
$ | 0.00 | | |
$ | (0.21 | ) |
Weighted-average number of shares of common stock outstanding | |
| | | |
| | | |
| | | |
| | |
- basic and fully diluted | |
| 414,448,757 | | |
| 377,667,295 | | |
| 413,663,122 | | |
| 204,511,728 | |
The
accompanying notes are an integral part of these financial statements.
ELVICTOR
GROUP, INC.
Unaudited
Condensed Consolidated Statement of Cash Flows
| |
For the Six
Months Ended
June 30,
2022 | | |
For the Six
Months Ended
June 30,
2021 | |
Cash Flows from Operating Activities | |
| | |
| |
Net profit (loss) for the period | |
$ | 10,345 | | |
$ | (43,037,391 | ) |
Adjustments to reconcile net income to net cash provided by (used for) operating activities | |
| | | |
| | |
Depreciation | |
| 2,495 | | |
| 384 | |
Amortization | |
| 9,951 | | |
| - | |
Shares Issued for Services | |
| 38,700 | | |
| - | |
Loss on conversion of preferred stock to common stock | |
| - | | |
| 43,147,786 | |
Changes in assets and liabilities | |
| | | |
| | |
Accounts Receivable | |
| (36,471 | ) | |
| (149,749 | ) |
Other Receivables | |
| 59,632 | | |
| - | |
Other Receivables - Related Party | |
| 38,646 | | |
| (48,800 | ) |
Prepaid expenses and other current assets | |
| (37,000 | ) | |
| (35,000 | ) |
Accounts Payable | |
| (48,044 | ) | |
| 7,008 | |
Trade Accounts Payable | |
| 31,194 | | |
| 58,531 | |
Trade Accounts Payable - Related Party | |
| (38,345 | ) | |
| (4,895 | ) |
Other Payables | |
| 163,944 | | |
| 10,720 | |
Accrued and Other Liabilities | |
| (8,194 | ) | |
| 5,613 | |
Net cash provided by (used for) operating activities | |
$ | 186,853 | | |
$ | (45,793 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Office Equipment | |
| (8,378 | ) | |
| (4,829 | ) |
Net cash used for investing activities | |
$ | (8,378 | ) | |
$ | (4,829 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Due to related party | |
| (32,204 | ) | |
| 958 | |
Sale of common stock | |
| - | | |
| 111,833 | |
Net cash (used for) provided by financing activities | |
$ | (32,204 | ) | |
$ | 112,791 | |
| |
| | | |
| | |
Net Increase in Cash | |
| 146,271 | | |
| 62,169 | |
| |
| | | |
| | |
Cash at beginning of period | |
| 308,526 | | |
| 343,804 | |
Cash at end of period | |
$ | 454,797 | | |
$ | 405,973 | |
| |
| | | |
| | |
Supplemental Cash Flow Information: | |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Income Taxes | |
| - | | |
$ | 5,449 | |
| |
| | | |
| | |
Supplemental Non-Cash Investing and Financing | |
| | | |
| | |
Transactions | |
| | | |
| | |
Common Stock issued to reduce convertible notes payable | |
$ | - | | |
$ | 405,725 | |
Shares exchanged for Intangible Asset | |
| 301,000 | | |
| - | |
Right-of-use assets obtained in exchange for operating lease obligations | |
| - | | |
| 22,415 | |
The
accompanying notes are an integral part of these financial statements.
ELVICTOR
GROUP, INC.
Unaudited
Condensed Statement of the Changes in Shareholder’s Equity
| |
Six Month Period Ended June 30, 2022 | |
| |
Common Stock | | |
Preferred Stock | | |
Additional Paid-in | | |
Accumulated | | |
Subscription | | |
Total Shareholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Receivable | | |
Deficit | |
Balance, January 1, 2022 | |
$ | 406,548,757 | | |
| 40,655 | | |
| - | | |
| - | | |
| 44,802,974 | | |
| (44,400,880 | ) | |
| - | | |
| 442,749 | |
Shares issued for services | |
| 900,000 | | |
| 90 | | |
| - | | |
| - | | |
| 38,610 | | |
| - | | |
| - | | |
| 38,700 | |
Shares exchanged for Intangible Asset | |
| 7,000,000 | | |
| 700 | | |
| - | | |
| - | | |
| 300,300 | | |
| - | | |
| - | | |
| 301,000 | |
Net Loss for the three Months Ended March 31, 2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (465 | ) | |
| - | | |
| (465 | ) |
Balance, March 31, 2022 | |
$ | 414,448,757 | | |
| 41,445 | | |
| - | | |
| - | | |
| 45,141,884 | | |
| (44,401,345 | ) | |
| - | | |
| 781,984 | |
Net Profit for the three Months Ended June 30, 2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,810 | | |
| - | | |
| 10,810 | |
Balance, June 30, 2022 | |
$ | 414,448,757 | | |
| 41,445 | | |
| - | | |
| - | | |
| 45,141,884 | | |
| (44,390,535 | ) | |
| - | | |
| 792,794 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| Six Month Period Ended June 30, 2021 |
Balance, January 1, 2021 | |
$ | 26,384,673 | | |
| 2,637 | | |
| 80,000,000 | | |
| 8,000 | | |
| 1,167,646 | | |
| (1,236,140 | ) | |
| - | | |
| (57,857 | ) |
Shares issued for cash | |
| 1,016,665 | | |
| 102 | | |
| - | | |
| - | | |
| 111,731 | | |
| - | | |
| - | | |
| 111,833 | |
Shares issued for Convertible Bonds | |
| 3,688,419 | | |
| 370 | | |
| - | | |
| - | | |
| 405,357 | | |
| - | | |
| - | | |
| 405,727 | |
Net Profit for the Three Months Ended March 31, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 24,911 | | |
| - | | |
| 24,911 | |
Balance, March 31, 2021 | |
$ | 31,089,757 | | |
| 3,109 | | |
| 80,000,000 | | |
| 8,000 | | |
| 1,684,734 | | |
| (1,211,229 | ) | |
| - | | |
| 484,614 | |
Preferred Shares converted to Common | |
| 375,459,000 | | |
| 37,546 | | |
| (80,000,000 | ) | |
| (8,000 | ) | |
| 43,118,240 | | |
| - | | |
| - | | |
| 43,147,785 | |
Net Loss for the Three Months Ended June 30, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (43,062,301 | ) | |
| - | | |
| (43,062,301 | ) |
Balance, June 30, 2021 | |
$ | 406,548,757 | | |
| 40,655 | | |
| - | | |
| - | | |
| 44,802,974 | | |
| (44,273,530 | ) | |
| - | | |
| 570,099 | |
The
accompanying notes are an integral part of these financial statements.
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 a 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, “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.
In
January 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 June 30, 2022, and December 31, 2021, the statements of operations
for the three and six months ended June 30, 2022, and 2021 and the statement of cash flows for the six months ended June 30, 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 June
30, 2022, and the results of the controlled subsidiaries in Vari Greece, the Marshall Islands and Cyprus for the six 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 six months ended June 30, 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 June 30, 2022. Normal contracts receivables 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 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 three years.
Intangible
Assets
Intangible
assets acquired are initially recognized at their fair value at the acquisition date. 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.
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.
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 common shares 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 June 30, 2022.
Recent
Accounting Pronouncements
In March
2020, the Financial Accounting Standards Board issued ASU 2020-03 “Codification Improvements to Financial Instruments”
which modifies the measurement of expected credit losses of certain financial instruments. This ASU is effective for fiscal years and
interim periods within those years beginning after December 15, 2022. Management is currently assessing the impact of ASU 2020-03, but
it is not expected to have a material impact on the Company’s consolidated financial statements.
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 June 30, 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 June 30, 2022, the Company has trade accounts receivable of $463,953 and other receivables of $123,082.
NOTE
4 – INTANGIBLE ASSETS, Net
On
November 15, 2021, the Company entered into an agreement to purchase the license software from Seatrix Software Production Single Member
S.A, a related party company, for 7,000,000 restricted common shares. Under this agreement Seatrix grants to the company an exclusive
and non-transferable license to use their artificial intelligence software managing shipping crews. The term of this agreement began
on January 1, 2022.
The
value of each common share was stated at $0.0430, the FMV that the shares were trading as of January 1, 2021. The total value of $301,000
will be amortized over 15 years. Intangible assets are measured initially at cost. After initial
recognition, an entity usually measures an intangible asset at cost less accumulated amortization.
As
of June 30, 2022, the Company recorded accumulated amortization of $9,951.
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 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 $20,000 has been accrued for the related party Elvictor Crew Management Services Ltd.
as of June 30, 2022, for cost of services sold, included in the Cost of Revenue- Related Party. As of June 30, 2022, the Company has
other receivables - related party of $62,800 from Elvictor Crew Management Ltd. Cyprus.
On
September 11, 2020, the Company entered into a Manning Agency Agreement with Elvictor Crew Management Service Ltd. in Georgia. During
the six months ended June 30, 2022, the latter provided manning services to the Company of $124,801, included in the Cost of Revenue
– Related Party and Net Revenue, while as of June 30, 2022, the Company had a liability of $28,445.
On
September 1, 2020, the Company signed an agreement with Qualiship Georgia Ltd. for the latter to provide training of the qualified personnel.
For the six months ended June 30, 2022, we incurred $87,642 in Cost of Goods Sold that offset Net Revenue, and the amount due to Qualiship
Georgia Ltd. as of June 30, 2022, was $17,313 included under Trade Accounts Payable – Related Party.
On
September 11, 2020, the Company entered into a Manning Agency Agreement with Elvictor Odessa. During the six months ended June 30, 2022,
Elvictor Odessa provided manning services to the Company of $13,160, included in the Cost of Revenue – Related Party and Net Revenue,
while as of June 30, 2022, the Company had zero liability.
NOTE
6 – LEASES
On
July 10, 2020, the Company entered into a rental lease agreement with the wife of Mr. Stavros Galanakis for its subsidiary in Vari, Greece.
The term of the lease is from July 10, 2020, to December 31, 2021, with a fixed monthly rental payment of 5,000€. Then on April
1, 2021, the rental lease agreement was modified with the new term beginning as of April 1, 2021, and ending on December 31, 2022, with
a fixed monthly rental payment of 3,500€.
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. The term of the lease is from October 1, 2021, to September 30, 2024, with a fixed monthly rental
of 1,000€.
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 June 30, 2022, the discount rate was 2.85%.
The
Operating Lease Expense is as follows:
| |
For the three
months ended | | |
For the year ended | |
| |
June 30,
2022 | | |
June 30,
2022 | |
Operating Lease expense | |
$ | 14,388 | | |
$ | 29,542 | |
The
following table summarizes information related to the lease:
| |
For the three
months ended | | |
For the year ended | |
| |
June 30,
2022 | | |
June 30,
2022 | |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
| |
Cash payments | |
$ | 14,388 | | |
$ | 29,542 | |
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 Payables for crew wages is $164,753
as of June 30, 2022.
The
balance in Other Accounts Payables also consist of $178,716 in Other Creditors and $26,674 in Payroll and Sales Tax Payable as of June
30, 2022.
NOTE
8 – STOCKHOLDERS’ EQUITY
Issuance
of Common Stock
The
Company has 700,000,000, $0.0001 par value shares of common stock authorized. On June 30, 2022, and December 31, 2021, there were 414,448,757
and 26,384,673 common shares issued and outstanding, respectively.
On
February 5, 2021, the Company issued 3,668,419 shares of common stock for convertible notes payable of $405,725.
On
April 8, 2021, the Company issued exactly 375,459,000 shares of common stock to the holders of the Series A Preferred Stock pursuant
to the Settlement Agreement, dated July 7, 2020. Specifically, exactly 217,310,305 shares of restricted common stock were issued to Mr.
Konstantinos Galanakis, and 156,271,400 shares of restricted common were issued to Mr. Stavros Galanakis, and 1,877,295 shares of restricted
common were issued to Mr. Theofanis Anastasiadis. As a result, there are no shares of Series A Preferred Stock issued and outstanding.
Additionally,
for the year ended December 31, 2021, the Company issued 1,016,665 shares of common stock for cash proceeds of $111,833.
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.
Issuance
of Preferred Stock
On
October 7, 2019, Elvictor Group, Inc. entered into four separate “Series A Convertible Preferred Stock Purchase Agreements”
for exactly 80,000,000 shares of a newly designated Series A Preferred Stock, in exchange for an aggregate purchase price of $30,000.00
pursuant to Regulation S of the Securities Act of 1933, as amended. Per the terms of the Agreements, these shares may not be converted
for one year after they are issued and shall automatically convert exactly 18 months after the issuance of each share into a number of
shares of Common Stock to be determined based on the Company’s performance. The holders of Series A Preferred Stock shall be entitled
to vote with the shares of the Company’s Common Stock on any vote in which holders of the Common Stock are entitled to vote and
shall have voting rights equal to exactly one vote per share of Series A Preferred Stock.
On
April 8, 2021, the Company issued exactly 375,459,000 shares of common stock to the holders of the Series A Preferred Stock pursuant
to the Settlement Agreement, dated July 7, 2020. As a result, there are no shares of Series A Preferred Stock issued and outstanding
as of June 30, 2022.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
The
Company entered in a long-term rental lease agreement for offices of its subsidiary branch in Vari, Greece for the period commencing
from July 10, 2020, through December 31, 2021, in the amount of 5,000€ per month, the first month July was adjusted for the shortened
period. The lessor, Mrs. Aikaterini Galanakis, is the wife of the Company’s president, Mr. Stavros Galanakis.
Then
as of April 1, 2021, the Company terminated the lease and entered into a new the lease for the period of commencing from April 1, 2021,
to December 31, 2022, with a monthly in the amount of 3,500€ per month. 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. The term of the lease
is from October 1, 2021, to September 30, 2024 with a fixed monthly rental of 1,000€.
NOTE
10 – INCOME TAXES
The
Company’s 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 $670,000 on December 31, 2021, and approximately
$590,000 on June 30, 2022, which may be available to offset future taxable income. Utilization of the net operating loss carry forwards
may be subject to substantial annual limitations due to the ownership change limitations provided by Section 381 of the Internal Revenue
Code of 1986, as amended. The annual limitation may result in the expiration of net operating loss carry forwards before utilization.
The
provision for income taxes consists of the following:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Current: | |
| | |
| |
Federal | |
$ | - | | |
$ | - | |
State | |
| - | | |
| - | |
Foreign | |
| 1,619 | | |
| 3,142 | |
Total current tax provision | |
$ | 1,619 | | |
$ | 3,142 | |
Deferred: | |
| | | |
| | |
Federal | |
| - | | |
| - | |
State | |
| - | | |
| - | |
Foreign | |
| - | | |
| - | |
Total deferred benefit | |
| - | | |
| - | |
Total provision (benefit) for income tax | |
$ | 1,619 | | |
$ | 3,142 | |
NOTE
11 – SUBSEQUENT EVENT
In
accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to June 30, 2022, through the date of this filing
of these financial statements and has determined that there are no material subsequent events to these financial statements.
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.
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 are also in the process of designing an upgrade to our cloud-based system
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 June 30, 2022 and 2021 and statements of operations and cash flows for the three-month and six-month periods ended June
30, 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 June 30, 2022 and 2021 and the results of controlled
subsidiaries for the period 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
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 six-month periods ended June 30, 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 June 30, 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.
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 June 30, 2022.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards
Board issued ASU 2020-03 “Codification Improvements to Financial Instruments” which modifies the measurement of
expected credit losses of certain financial instruments. This ASU is effective for fiscal years and interim periods within those years
beginning after December 15, 2022. Management is currently assessing the impact of ASU 2020-03, but it is not expected
to have a material impact on the Company’s consolidated financial statements.
Subsequent Events
In accordance with SFAS 165 (ASC 855-10) the Company
has analyzed its operations subsequent to June 30, 2022, through August 15, 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 $1,173,352 for the six-month
period ended June 30, 2021 while for the six-month period ended June 30, 2022 we increased our revenues to $1,215,355. Accordingly, for
the three-month period ended June 30, 2021 we recognized revenues of $617,122 and increased revenues to $622,183 for the same period ended
June 30, 2022, 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.
Results of Operations
Revenues
For the six-month periods ended June 30, 2022
and June 30, 2021, we generated $1,215,355 and $1,173,352 in total revenue, respectively, representing an increase in total revenue of
$42,003 between the two periods, or approximately 4%. The increase in total revenue between these two periods is primarily due to an increase
in net revenue we received as an agent in connection with our providing onboarding services to crew management clients.
For the three-month periods ended June 30, 2022
and June 30, 2021, we generated $622,183 and $617,122 in total revenue, respectively, representing an increase in total revenue of $5,061
between the two periods, or approximately 1%. The increase in total revenue between these two periods is primarily due to an increase
in net revenue we received as an agent in connection with our providing onboarding services to crew management clients.
Operating Expenses
For the six-month periods ended June 30, 2022
and June 30, 2021, we incurred $968,403 and $521,224, respectively in total operating expenses, representing an increase in total operating
expenses between the two periods of $447,179,or approximately 86%. The increase in operating expenses between the two periods is primarily
due to (i) an increase of $281,214 (122.3%) in salaries payable to our employees from $229,954 for the six-month period ended June 30,
2021 to $511,169 for the same period in 2022, as a result of increases in salaries payable to management and an increase in the number
of employees, (ii) an increase of $149,595 (106.1%) in professional fees from $141,036 for the six-month period ended June 30, 2021 to
$290,631 for the same period in 2022, as a result of legal and public relations fees.
For the three-month periods ended June 30, 2022
and June 30, 2021, we incurred $498,613 and $278,532, respectively in total operating expenses, representing an increase in total operating
expenses between the two periods of $220,081, or approximately 79%. The increase in operating expenses in 2022 is primarily due to (i)
an increase of $141,084 (103.0%) in salaries payable to our employees from $136,930 for the three-month period ended June 30, 2021 to
$278,013 for the same period in 2022, as a result of increases in salaries payable to management and an increase in the number of employees,
(ii) an increase of $92,843 (204.2%) in professional fees from $45,468 for the three-month period ended June 30, 2021 to $138,311 for
the same period in 2022, as a result of legal and public relations fees.
Net Loss and Gross Profit
For the six-month periods ended June 30, 2022
and June 30, 2021, we incurred a net profit of $10,345, after provision for income taxes, and a loss of $43,037,391, after provision for
income taxes, respectively, representing an increase in net profit of $43,047,736 between the two periods, or approximately 100%. This
increase in net profit, after provision for income taxes, for the six-month period ended June 30, 2022 compared to a net loss, after provision
for income taxes, for the same period in 2022 is due to the $43,147,786 loss recognition resulting from the non-cash conversion of the
preferred shares outstanding to common shares, which was partially offset by a decrease of $104,928, or 104.4%, in gain from operations
to a loss of $4,413 for the six-month period ended June 30, 2022 from a gain of $100,515 for the same period in 2021. This decrease in
gain from operations is attributable to the increased operating expenses described above, despite the fact that the gross profit increased
by $342,251, or 55%, from $621,739 for the six-month period ended June 30, 2021 to $963,990 for the same period in 2022.
For the three-month periods ended June 30, 2022
and June 30, 2021, we incurred a net profit of $10,810, after provision for income taxes, and a loss of $43,062,301, after provision for
income taxes, respectively, representing an increase in net profit of $43,073,111 between the two periods, or approximately 100%. This
increase in net profit, after provision for income taxes, for the three-month period ended June 30, 2022 compared to a net loss, after
provision for income taxes, for the same period in 2022 is due to the $43,147,786 loss recognition resulting from the non-cash conversion
of the preferred shares outstanding to common shares ,which was partially offset by a decrease of $76,709, or 95.2%, in gain from operations
to a gain of $3,882 for the three-month period ended June 30, 2022 from a gain of $80,592 for the same period in 2021. This decrease in
gain from operations is attributable to the increased operating expenses described above, despite the fact that the gross profit increased
by $143,371, or 39.9%, from $359,124 for the three-month period ended June 30, 2021 to $502,495 for the same period in 2022.
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 six-month period ended June
30, 2022 of $485,242 compared to the surplus of $432,130 for the six-month period ended June 30, 2021, which is calculated as current
assets minus current liabilities.
Cash flows for the six-month period ended June
30, 2022
Net cash flow provided by operating activities
was $186,853 for the period ended June 30, 2022, compared to $45,793 used in operating activities during the June 30, 2021 period. This
change was directly attributable to the cash received from our customers but not yet transferred to the crew for wages
Net cash flow used in investing activities was
$8,378, mainly deriving from the purchase of office equipment, and $4,829 for the six-month periods ended June 30, 2022 and June 30, 2021,
respectively.
Net cash used for financing activities was $32,204,
for the six-month period ended June 30, 2022, due to payments to related parties. For the same period ended June 30, 2021 net cash provided
by financing activities was $112,791.
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 June 30, 2022.
Year Ending December 31, | |
Operating Leases | |
2022 (remaining) | |
| 28,350 | |
2023 | |
| 12,600 | |
2024 | |
| 7,700 | |
Total | |
| 48,650 | |
Rent expense for the six-months ended June
30, 2022 and 2021 amounted to $29,542 and $31,126, respectively.
Rent expense for the three-months ended June
30, 2022 and 2021 amounted to $14,388 and $12,843, 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.
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.