Attached files
| file | filename |
|---|---|
| EX-21 - LIST OF SUBSIDIARIES - EURO GROUP OF COMPANIES, INC. | eurogroupexhib21.htm |
| EX-31.1 - CERTIFICATION OF CEO PER SECTION 302 - EURO GROUP OF COMPANIES, INC. | eurogroupexhib311-123109.htm |
| EX-32.1 - CERTIFICATION OF CEO PER SECTION 906 - EURO GROUP OF COMPANIES, INC. | eurogroupexhib321-123109.htm |
| EX-32.2 - CERTIFICATION OF CFO PER SECTION 906 - EURO GROUP OF COMPANIES, INC. | eurogroupexhib322-123109.htm |
| EX-31.2 - CERTIFIACTION OF CFO PER SECTION 302 - EURO GROUP OF COMPANIES, INC. | eurogroupexhib312-123109.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2009
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from__________to_________
Commission File Number 000-29805
EURO GROUP OF COMPANIES, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 13-4070586
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(State or Other Jurisdiction of (I.R.S. Employer ID)
Incorporation or Organization) Identification No.)
10 Midland Avenue
Port Chester, New York 10573
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(Address of Principal Executive Offices) (Zip Code)
Previous name:
ICT Technologies, Inc.
Issuer's Telephone Number: (914) 937-3900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value .001 per share
Indicate by check mark if the registrant has (1) 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 for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |-| NO |X|
Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained herein, and none will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b.2 of the Exchange Act): Yes |-| NO |X|
The aggregate market value of the voting Common Stock held by non-affiliates of the issuer, based on the closing sales price of $0.03 per share, was $1,074,569 as of November 1, 2010 and no non-voting equity is issued.
As of November 1, 2010 115,766,793 shares of Common stock of the registrant were outstanding.
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Table of Contents
Page
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Item 9 Directors, Executive Officers, Promoters and Control Persons Compliance with Section 16(a) of the Exchange Act 12
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Introductory Comment - Use of Terminology
Throughout this Annual Report on Form 10-K, the terms the "Company," "we," "us" and "our" refers to Euro Group of Companies, Inc., f/k/a I.C.T. Technologies, Inc.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). To the extent that any statements made in this Form 10-K contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate" "expect," "hope,"
"intend," "may," "plan," "potential," "product," "seek," "should," "will," "would" and variations of such words. Forward-looking statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation: :
o Our ability to raise additional capital to sustain and develop operations and satisfy our existing contracts,
o Our ability to brand and market our "Eugro" and "Euro" family of products,
o Our ability to compete in the prepaid mobile telephone, wireless telecom hardware, sim chip or calling card businesses which will
require us to continually introduce, manufacture and sell new products and services at competitive prices,
o Our ability to successfully create a distributor network for our electronics products and to timely deliver flat screen television and
other merchandise from time to time,
o Our ability to successfully penetrate the motorcycle and motor scooter markets and to develop and maintain a sales distribution network,
o Our ability to maintain relationships with manufacturers in the People's Republic of China and elsewhere, and
o Our ability to attract and retain key personnel.
Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and Euro Group of Companies, Inc. (formerly ICT Technologies, Inc.) and its management undertake no obligation to update such forward-looking statements to reflect subsequent events or circumstances.
THE COMPANY
Euro Group of Companies, Inc., formerly ICT Technologies, Inc., (the "Company" or "Euro Group") was organized as a Delaware corporation on May 27, 1999, and is the successor by merger to a New York corporation formed on February 8, 1994. On November 5, 2007 the name of the Company was officially changed to "Euro Group of Companies, Inc.," and on November 9, 2007 the Company's stock symbol was changed to "EGCO".
BACKGROUND
The Company was originally incorporated under New York law in 1994, and became a Delaware corporation on May 27, 1999. In 2002 the Company acquired the business interests of Europhone, Inc., Eurokool, Inc., and Eurospeed, Inc. from an individual who owned 100% of the stock in these companies in an exchange of stock (the 2002 transaction). The terms of the 2002 Transaction were amended in April 2003 to include the contribution by this individual to the Company of 100% ownership interest in Europhone USA. Neither Eurospeed, Inc. nor Eurokool, Inc. had significant business operations at the time of the transaction. At the time of the 2002 Transaction, the acquired subsidiaries were subject to various distribution agreements relating to the sale of long distance and internet services and to the manufacture and distribution of air conditioners, motorcycles and mobile telephone services, which are described more fully below.
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Certain of these distribution arrangements have since been terminated as the Company decided to shift its focus to the sale of calling card services and sim chips and to establishing manufacturing arrangements for the sale of motor scooters.
As a result of the 2002 transaction and subsequent contribution of Europhone USA, Inc., the seller of the acquired businesses was issued 78,000,000 shares of the Company's common stock and became Chief Executive Officer and Chairman of the Board of Directors of the Company.
The Company's principal executive office is located at 10 Midland Avenue, Port Chester, New York 10573 and its telephone number is (914) 937-3900. Information about Euro Group of Companies, Inc. (formerly ICT Technologies, Inc.) May be found on its website at "www.eugro.com." Information found on the Euro Group of Companies, Inc. (formerly ICT Technologies) website should not be considered part of this annual report on Form 10-K and should not be relied upon in evaluating the Company.
Euro Group of Companies is a holding company whose subsidiary companies market and sell the "Euro", "Eurospeed" and "Eugro" families of products. The Company operates in three separate and distinct business areas - telecommunications products and services, transportation products, and consumer electronics.
PRODUCTS
TELECOMMUNICATIONS
The Company's Europhone subsidiary (Europhone USA LLC) is an MVNO (Mobile Virtual Network Operator) involved in the wholesale marketing of wireless hand sets, domestic
And international prepaid cellular services, domestic and international prepaid calling cards and Verizon "FiOS" services.
Mobile handsets and mobile air-time services: The Company's "Eugro" Mobile segment is a reseller of prepaid airtime on both GSM and CDMA mobile phones utilizing the Cingular and Verizon networks. Eugro Mobile offers 30 to 90 day alling plans covering local, domestic long distance and international calls. The Company also offers Dual Sim Chip handsets, which are unique GSM phones that provide access for two sims in one phone.
International Wireless Services: The Company's Eugro World Sim allows any tri-band GSM phone to be utilized in over 100 countries at low per minute rates.
Prepaid calling cards: The "Eugro” prepaid calling card is a USA outbound calling card, marketed as $2.00, $5.00 and $10.00 cards. The Company offers rates as low as $0.01 per minute. The Company's unlimited calling plan provides service to approximately 40 countries for a defined time period (typically one week or one month) at a fixed price, no matter how many calls are made.
Verizon "FiOS": The Company has signed a three year agreement with Verizon Communications as an authorized agent of Verizon's FiOS TV, FiOS Internet services, Verizon High Speed Internet, and voice services. Verizon FiOS is the brand name for the new services offered over Verizon's advanced fiber-optic broadband network. Verizon is the only major telecom company that is installing fiber-optic lines directly to customers' homes on a mass scale in the country.
TRANSPORTATION PRODUCTS
The Company's Eurospeed subsidiary imports and markets, to customers in the United States, South America, Europe and the Middle East, scooters, motorcycles, all-terrain vehicles (ATVs) and related products from contract manufacturers in the Peoples' Republic of China (China). The products we import to the United States have received DOT (Department of Transportation) and EPA (Environmental Protection Agency) certifications.
In 2007 the Company obtained a license from the United States National Highway Traffic Safety Administration to assemble motorcycles and scooters for street use in the United States, and received a proprietary Eurospeed VIN number to allow the sale of these vehicles. In 2007 the Company also obtained licenses, and a proprietary VIN number, to manufacture these products at select contract manufacturing plants in China.
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The Company's Shanghai office sources and oversees transportation product production in China, and facilitates communication with the factories that the Company utilizes. In 2008 Eurospeed, Inc. appointed an Exclusive Distributor, American Motor Sports, LLC, for sales in the United States and Canada. The Distributor assembled a network of new car dealers, spanning seven states, who were eager to add additional higher margin products to their automobile offering. The Company’s strategy was to market through new-car dealers because they have a modern showroom, existing customers, and a full service capability that is not typical in the industry. The Company supported the marketing of transportation products with a comprehensive spare parts program and an industry-best limited three year parts and labor warranty on the products it offers. During calendar year 2008 Eurospeed, Inc. recognized sales of transportation products aggregating $ 1,597,312, of which amount $99,200 was attributable to international sales. In 2009 the Company’s Eurospeed subsidiary recognized sales of transportation products aggregating $95,019 to international customers
In September, 2008 Eurospeed Inc. received an order from American Motor Sports, LLC, our exclusive distributor for $1,036,601, accompanied by a deposit of $292,239 (or 28%) in cash. The Company agreed to extend payment terms for the balance, and commenced shipment in September of that product for which we received payment. We believe that the worldwide credit crisis in Fourth Quarter 2008 and the resulting curtailing of credit facilities, and the inability of our exclusive distributor and his dealers to access existing floor-planning lines of
credit contributed to the distributor's failure to fulfill the terms of sale for the September invoice.
In November 2008 the Distributor signed an "anticipatory breach" letter and agreed to relinquish all marketing rights to the product and allow its sale to any customer. As a result of this action, Eurospeed has re-assumed ownership of the inventory and reversed that portion of the sale transaction for which payment was not received.
In July 2009, after the term of the distribution agreement, and a contractual sixty day cure period, had expired, the Company terminated the exclusive distribution agreement for failure to meet certain pre-established unit sales quotas.
CONSUMER ELECTRONICS
The Company's Eurokool subsidiary was established to import and market split-wall air conditioners, electric power generators, laptop computers, MP-4 players, and Bluetooth communication devices from China, and Full High Definition flat-screen LCD televisions in sizes ranging from 22" to 52" to be purchased from manufacturers in Taiwan, China and Korea.
The company's state-of-the-art electronic products are made available through a network of proprietary relationships with Asian manufacturers, and will be sold through international distributors, sub-agents and affiliates. To date the Company has lacked the financial resources to implement this strategy
MANUFACTURING
To date the Company has owned and operated no manufacturing operations. Europhone purchases cellular phones from various mobile phone manufacturers approved by the carriers the Company utilizes. As an MVNO (Mobile Virtual Network Operator), Europhone is an authorized agent for AT&T and Verizon telephone calling service products.
The Eugro "World Sim" card is supplied by a contract manufacturer in Europe, and the worldwide calling services are provided by selected telecommunications carriers in Europe, such as Telefonica. Europhone is an authorized agent that purchases time in bulk from wholesale providers who own and operate "switches". The Company markets private label prepaid air time for home and mobile telephone use.
The Company's Eurospeed subsidiary has entered into contract manufacturing agreements with Qianjiang Motorcycles Group, Ltd. and other manufacturers in China for the manufacture of scooters, motorcycles and ATVs under the Eurospeed name. The Company's contract manufacturers of transportation products have secured all required Department of Transportation (DOT) and Environmental Protection Administration (EPA) permits and licenses to allow the sale of these products in the United States.
At such time as the marketing of these products begins, the Company's Eurokool subsidiary will utilize a number of contract manufacturers to produce its consumer electronic products.
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While the Company believes that there is a market for split-system air conditioners, the Company made no air-conditioner sales in 2008 or 2009 and the Company has no plan at this time to market and sell air-conditioner products in 2010.
COMPETITION
The Company faces competition from large, well-established, and well-funded companies in each of our product and service areas. Euro Group of Companies and its subsidiaries must rely on innovation and prompt response to changing market needs to obtain market share.
The Europhone business segment competes with many of the large telecommunications providers, including ATT, Cingular, Verizon and Sprint. The Company competes with them for both cellular time and prepaid calling services. The Company also competes with Virgin Mobile, Inc., Locus Communications, Inc., and Tracfone Wireless, Inc. and others with significant resources for sales of prepaid calling telephone time. The Company believes that it's long-distance and prepaid calling services are competitive based on price, although an
across-the-board decrease in telecommunication rates charged by the major carriers may increase pressure on operating margins.
The Eurospeed brand of transportation products is a relatively new and untried entry to the market for scooters, motorcycles and ATVs. The Company competes with such well known names as Honda, Suzuki, Kawasaki and Piaggio (a/k/a Vespa) by offering products of comparable quality at a very competitive price through our newly formed network of existing new car dealers. The Company currently has no distribution network in the United States.
The Eurokool subsidiary competes with such major competitors as GE, LG, Motorola, Samsung and Dell. For each of our consumer electronic products the Company expects to compete based on price and by being first to the market with innovative, new products.
MARKETING AND SALES
The Company currently has two employees (other than executive staff) involved in sales and marketing. The Company is aggressively seeking independent distributors to represent the sale of certain of its telecommunications products under exclusive and non-exclusive distribution arrangements.
Eurospeed products are being marketed internationally through select customers and distributors in Greece, Romania, Colombia and Croatia. For sales in the United States, Canada and Puerto Rico, the Company had entered an exclusive distribution Agreement with a Connecticut-based entity, American Motor sports, LLC (d/b/a Eurospeed USA, Inc.).The exclusive distribution agreement was terminated in 2009, and the Company has not yet entered into a successor agreement.
As of the end of 2008 the Company had identified the consumer electronics products that it will offer, and negotiated supply agreements with China based manufacturers for delivery of product. The Company has not yet established a distribution network for these products.
SEASONALITY
The Company has experienced no seasonality in the marketing of telecommunications products. For Eurospeed products, in much of the country, the peak marketing season is March through September, and it is expected that ATV and UTV (Utility vehicle) sales will not be affected by seasonality. Consumer electronics products have traditionally seen higher sales in calendar fourth quarter in the United States.
EMPLOYEES
The Company has five employees in the United States and has access to factory technical staff at an office in Shanghai, China. None of the Company's employees are represented by labor unions, and the Company considers its employee relations to be very good.
GOVERNMENT REGULATION
Motorcycles and Scooters
The motorcycles and scooters to be distributed by our Eurospeed subsidiary for sale in the United States are subject to certification by the U.S. Environmental Protection Agency ("EPA") for compliance with applicable emissions and noise standards, and by California regulatory authorities with respect to emissions, tailpipe, and evaporative emissions standards. Our motorcycle products are EPA certified to comply with these standards, which certifications must be renewed regularly. It is the responsibility of Eurospeed U.S.A, our
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exclusive distributor in the United States, to be registered in all states that require registration to distribute motor vehicles. The Company believes that these registrations have been secured for all states other then California, Alaska and Hawaii. We have also been granted a "VIN number" designation by the United States Department of Transportation to manufacture our motorcycles and scooters for all-road use, with a unique Eurospeed "VIN number," designated for all products. (See "United States Department of Transportation VIN Numbers," above.) We require USEPA certification of our products for products manufactured in China under our manufacturing license.
Certain states have minimum product and general liability and casualty insurance liability requirements before they grant authorization or certification to distributors, such as Eurospeed U.S.A., to sell motor vehicles and scooters. Without this insurance neither Eurospeed U.S.A. nor we, or any other distributor, is permitted to sell these vehicles to motor vehicle dealers in certain states. We have secured a products liability policy of $2 million with umbrella coverage of up to an additional $3 million at a cost of approximately $50,000 per year. While we believe that these policy limits will be sufficient initially in order to qualify us to do business, the insurance requirements that are imposed upon us may vary from state to state, and will increase if and as sales increase or as the products we offer increase in variety. Additionally, these insurance limits do not represent the maximum amounts of our actual potential liability and motor vehicle liability tort claims may exceed these claim amounts substantially. No assurance can be made that we will be able to satisfy each state's insurance coverage requirements or that we well be able to maintain the policy limits necessary from time to time in order to permit sales of our products in various jurisdictions that require such coverage and, if a liability arises, no assurance can be made that these insurance limits will be sufficient.
Air Conditioners
Approvals have been secured by our supplying manufacturers for the sale of all air conditioners in Europe (CE approval) and the Company has been granted Underwriter Laboratories (UL Listing) approvals for the sale of five models of air conditioners in the United States. See also "Environmental Regulation" below.
Reliance on Third Party Telecommunications Providers
When we resell long distance telephone services, and prepaid mobile airtime, we rely on third party carriers to comply with applicable laws and regulations. We have no control over the manner in which these companies operate. Domestic or foreign regulatory, judicial, legislative or political entities may raise issues regarding the compliance of these companies with
applicable laws or regulations, or limit their ability to provide the services Euro Group of Companies (formerly ICT Technologies) resells.
Environmental Regulation
Federal, state and local authorities have environmental control requirements relating to both the motorcycle and air conditioner businesses. For instance, the EU regulates the types of refrigerants that are used in air conditioning units. The Company strives to ensure that its products comply with all applicable environmental regulations and standards.
Euro Group subcontracts manufacturing of both our motorcycle/scooter and electronic refrigeration and television products to companies in China and Korea. To the best of our knowledge, we believe that these manufacturing facilities are in compliance with applicable environmental regulations in the countries in which they are located. However, if such entities are not in compliance, or are unable to indemnify us, we may be subject to liability.
Environmental contingencies are not expected to have a material adverse effect on our results of operations.
State and Foreign Laws
Our products and services are distributed and/or accessible worldwide, which requires compliance with the laws of different jurisdictions. Because certain of our services are distributed and/or accessible worldwide, many jurisdictions may claim that we are required to comply with their laws. We believe that we have taken all appropriate regulatory actions required to conduct its business to date. Our failure to qualify to do business (or to have any of our subsidiaries qualify to do business) in a jurisdiction where we are required to do so could subject us to taxes and penalties and could result in the inability of Euro Group of Companies to enforce contracts in such jurisdictions.
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Intellectual Property and Other Proprietary Rights
We (or our respective subsidiaries, as the case may be) own registered trademarks for our Eurokool and Eurospeed and Europhone brands. Our "Eugro" mark has been in use by our Europhone subsidiary since 2006 and is owned by the Euro Group CEO, is trademarked and is copyright registered. Our success depends in part upon our ability to protect our trademarks, service mark, and trade secrets. Effective trademark, service mark, and trade secret protection may not be available in every country in which our products and services are made available, and thus, the steps that we take may be inadequate to protect our rights. In addition, no assurance can be made that our marks will not conflict with marks already used
by others. If we are unable to use our marks we will be adversely affected. We currently hold the Internet domain names "www.icttechnologies.com", "www.EurophoneUSA.com", "www.GoEurospeed.com", and "www.Eurokool.com". Euro Group also has the right to use the "www.Eugro.com" domain name which is owned by the Company's C.E.O.
We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or otherwise decrease the value of its trademarks and other proprietary rights. In addition, no assurance can be made that we will be granted trademark or trade name rights to the "Eugro World Sim" marks or, that such mark will not conflict with existing marks of other persons.
We have entered into confidentiality and assignment agreements with our employees and contractors, and non-disclosure agreements with parties with whom the Company conducts business. In addition, we negotiate confidentiality and non-circumvent provisions in our distribution agreements to the extent possible. We do this in order to limit access to, and prevent disclosure of, our proprietary information, or to prevent overlap of rights among our distributors and future distributors and with ourselves. There can be no assurance that these contractual arrangements or the other steps taken by us to protect our intellectual property will prove sufficient.
Insurance
The Company maintained a general commercial and products liability policy in the amount of $2,000,000, and an umbrella policy in the amount of $3,000,000. The policy has lapsed and will be renewed when the Company resumes marketing of transportation products and air-conditioners
We occupy 5,008 square feet of office space at 10 Midland Avenue, Port Chester, New York 10573 which we lease from Strobe Development Company of White Plains, New York. The lease is a five-year lease, commencing on May 12, 2008 and expiring on May 31, 2013. Rent for the first year was $26,292 and increases at the rate of 3% per year thereafter. Rent for the year ended May 2010 was $27,081. Under the terms of the lease Euro Group is also responsible for its pro-rata share of the real estate taxes, operating expenses and utilities. At lease expiration, the Company has an option to renew for an additional five years at 95% of Fair Market Value. We do not currently have renters or casualty insurance on this property, but do not believe that it is necessary as we do not maintain valuable assets at this location and do not own the property itself. We have no present plans to lease additional space unless, and until, our operations increase.
In the ordinary course of business, we are periodically a party to lawsuits and claims. At this time we cannot predict whether any pending litigation will, or may, have any effect on our results of operations or our future financial condition.
Not applicable.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Euro Group of Companies (formerly ICT Technologies) common stock trades on the "Pink Sheets" under the symbol "EGCO" (formerly ICTT). Our securities are thinly traded and previous prices are not necessarily indicative of future prices or reflect future sales. Trading in the common stock in the pink sheets has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual broker bids or offer prices and market conditions. Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions. Accordingly, a public market for these securities may not be deemed to exist at all times. The following table sets forth the per share range of high and low sales prices of our Common Stock for the periods indicated:
Fiscal Years:
High Low
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2009
Dec. 31, 2009 $0.18 $0.04
Sept. 30, 2009 0.19 0.07
Jun, 30, 2009 0.19 0.08
Mar. 31, 2009 0.32 0.07
2008
Dec. 31, 2008 $0.12 $0.07
Sept. 30, 2008 0.34 0.16
June 30, 2008 0.20 0.10
Mar. 31, 2008 0.15 0.15
As of December 31, 2009 there were approximately 352 record owners of our common stock.
DIVIDEND POLICY
We have never paid cash dividends on our common stock and management anticipates that the Company will retain its future earnings, if any, to finance the growth of our business.
Shares eligible for future sale could depress the price of our common stock, thus lowering the value of a buyer's investment. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for shares of our common stock.
Our revenues and operating results may fluctuate significantly from quarter to quarter, which can lead to significant volatility in the price and volume of our stock. In addition stock markets have experienced extreme price and volume volatility in recent years. This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons unrelated or disproportionate to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price
of our common stock.
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EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
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Number of Securities
Number of Securities Weighted-Average Remaining Available
to Be Issued upon Exercise Price of for Future Issuance
Plan Category Exercise of Outstanding Under Equity
Outstanding Options, Options, Warrants Compensation Plans
Warrants and Rights and Rights (Excluding
Securities Reflected
in Column (a))
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Equity compensation plans approved
by security holders (1) -0- n/a -0-
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Equity compensation plans not
approved by security holders (2) -0- n/a -0-
------------------------------ ------------------------ ----------------------------
Total -0- n/a -0-
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1) We do not have any equity compensation plans approved by the security holders.
2) We do not have any equity compensation plans not approved by the security holders.
Recent Sales of Unregistered Securities
During the three months ended December 31, 2009 the Company sold a total of 611,001 shares of unregistered common stock for $108,000, and issued 10,000 shares for legal consulting services valued at $1,500.
During the twelve months ended December 31, 2009 the Company sold a total of 733,501 shares of unregistered common stock for $164,500, and issued 1,060,000 Shares for consulting services valued at $95,000.
Subsequent to the end of 2009 the Company sold 1,847,000 shares of unregistered common stock for $94,700, and issued 50,000 shares of unregistered common stock in lieu of cash for consulting services.
In addition, in second quarter 2010 the Company issued 273,000 shares of unregistered common stock to nine stockholders of 546,000 shares subject to a “put” provision for their continued “forbearance”.
Management believes that these sales were exempt from registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) and Regulation D. No sales commissions or finders fees were paid in connection with such sales.
This Annual Report on Form 10-K contains forward-looking statements made as of the date hereof. We assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our Reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, including our reports on Forms 10-QSB and Current Reports on Form 8-K, each as amended. See "Forward Looking Statements" in the forepart of this Report for a non-exclusive list of risks and uncertainties that relate to the forward looking statements herein.
The following discussion relates to the results of our operations to date, and our financial condition:
General
In 2002 the Company acquired the assets and the business of Europhone USA, Inc. and Europhone, Inc., Eurokool, and Eurospeed, and assumed the manufacturing and distribution agreements for long distance calling cards and related activities, and for air-conditioners and scooters. The Company has since expanded the product offering to include prepaid calling cards and sim chips, cell phones, other transportation products, such as motorcycles and ATVs, and consumer electronics products. The Company's goal is, and has been, to build its "Eugro", "Eurospeed" and "Euro" brand names.
The Company is currently located in Port Chester, New York. The Company is an operating company whose subsidiaries operate its core business units: Europhone, Eurospeed and Eurokool.
To satisfy future sales of transportation products we plan to purchase motorcycles and scooters from contract manufacturers located in the Peoples' Republic of China ("PRC") with whom we have contracted to produce Eurospeed-branded products. The Company relies upon the continued ability of the Chinese manufacturers to provide such pricing, payment terms, product quality, and certification with USDOT and EPA to remain competitive.
Business Activities
For the twelve months ended December 31, 2009 the Company recognized revenues of $207,671 compared to revenues of $2,657,933 for the twelve months ended December 31, 2008, a decrease of $,2,450,262, or 92%. The decrease in revenues year over year is primarily attributable to significantly lower sales of transportation products, and significantly lower sales from the sale of international and prepaid calling cards and commissions paid to the Company for Verizon FiOS sales.
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The Company recognized revenues from the sale of motor scooters of $95,019 in 2009 compared to sales of $1,365,652 in 2008, and revenues from the sale of telecommunications services of $112,652 in 2009 compared to sales of $1,214,608 in 2008. In 2008 the Company's Europhone USA, LLC subsidiary revenues included revenues of $77,674 from commissions for the sale of Verizon FiOS services compared to no commission revenue in 2009.
Cost of sales for the twelve months ended December 31, 2009 was $199,991 compared to cost of sales of $1,749,887 for the twelve months ended December 31, 2008, a decrease of
$1.549,896, or 89%.
The Company experienced a gross profit of $7,681 for the twelve month period ended December 31, 2009 compared to gross profit of $908,046 for the twelve month period ended December 31, 2008
For the twelve months ended December 31, 2009 selling, general and administrative expenses were $831,709 compared to $2,481,677 for the twelve months ended December 31, 2008, a decrease of $1,649,968, or 66%.
The decrease in selling, general and administrative expenses was primarily due to a decrease in bad debt expense ($48,051 in 2009 compared to $587,667 in 2008), lower salary and salary related expenses as the result of reduced staffing levels ($426,194 in 2009 compared to $961,149 in 2008), reduced professional fees and consulting expenses ($46,425 in 2009 compared to $421,506 in 2008), and reduced travel and entertainment expenses($18,478 in 2009 compared to $162,872 in 2008).
In 2008, as earlier stated, the exclusive distributor for Eurospeed, Inc. failed to make payment in full for product ordered in September 2008. The Company exercised its contractual right to retake possession of that product for which it did not receive payment in full. As a result of this action the Company incurred freight and demurrage charges, which the exclusive distributor has agreed to pay, resulting in Other Income of approximately $232,000 as of December 31, 2008.
In 2009 the Company recognized additional interest expense of $107,667 attributable to 546,000 shares of common stock sold with a put feature.
Euro Group of Companies, Inc. generated a net loss of $1,140,968 for the twelve month period ended December 31, 2009 compared to a net loss of $1,482,646 for calendar year 2008.
Liquidity and Capital Resources
At December 31, 2009 the Company had a working capital deficiency of $1,608,139 and a stockholders' deficiency of $3,654,132. In addition the Company has suffered recurring losses from operations and has an accumulated deficit of approximately $9,790,481. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with respect to these matters include
restructuring its existing debt, raising additional capital through future issuances of stock and/or equity, and finding profitable markets for its products to generate sufficient cash to meet its business obligations. There can be no assurance, however, that the Company will be able to raise additional capital or to generate sufficient funds to continue the development of its product marketing plan and distribution network. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable
to continue as a going concern.
At December 31, 2009 loans payable to related parties were $2,177,168. These loans have been classified as Long-Term Liabilities at the request of the Chief Executive Officer who has agreed that repayment will not be demanded before 2011. The Company has also established lines of credit with the Ponce de Leon Federal Bank. As of December 31, 2009 the balance due on these lines of credit was $210,422. The Company's CEO has negotiated a suspension of interest on the outstanding amounts
As of December 31, 2009 the Company was in default of the payment terms of bank overdraft facilities aggregating $34,293. The CEO has negotiated a suspension of interest on the amounts due, and has provided a personal guarantee of repayment.
During 2008 the Company raised a total of $1,155,500 through the sale of a total of 3,945,000 shares of common stock. Of the shares sold, six shareholders who purchased 496,000 shares of common stock at a price of $0.25 per share have the right to "put" those shares back to the Company at a price of $0.50 per share. The stock that was sold is treated as a current liability and the $124,000 potential increase in the amount to be paid is treated as interest. Interest expense of $41,333 was taken in the fourth quarter 2008, and the balance of $82,667
was recognized in 2009.
In 2009 the Company raised a total of $164,500 through the sale of 733,501 shares of common stock. Of this total number of shares, three shareholders purchased a total of 50,000 shares with a “put” feature in first quarter 2009, and the $25,000 of appreciation promised was also treated as interest in 2009.
In 2009 the Company also issued 1,060,000 shares of common stock for consulting services valued at $95,000
In 2010 the Company issued 273,000 shares of common stock to these nine shareholders who purchased shares with a “put” feature for their forbearance until such time as the Company had the ability to repurchase their shares.
9
EURO GROUP OF COMPANIES, INC.
INDEX TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 2008 and 2009
Financial Statements- Unaudited
Consolidated Balance Sheets as of December 31, 2009 and 2008 F-2
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 F-3
Consolidated Statements of Changes in Stockholders Equity (Deficiency) for the years ended December 31, 2009 and 2008 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008 F-5
Notes to Consolidated Financial Statements F-6
10
The attached Financial Statements and the accompanying Notes to Financial Statements have not been audited.
F-1
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR YEARS ENDED DECEMBER 31, 2008 and 2009
December 31,
2009 2008
ASSETS
CURRENT ASSETS
Cash in banks $ 1,677 $ 1,849
Accounts receivable, less allowance for doubtful accounts of $197,025
And $147,597, respectively 69,918 139,478
Inventory 578,628 677,121
Deposits for future inventory purchases 127,697 104,993
Prepaid Expenses -- 57,828
------------------ ------------------
Total current assets 777,920 981,269
Property and equipment, less accumulated depreciation of $
and $115,215, respectively 112,845 111,699
Security deposits 14,330 25,154
------------------ ------------------
TOTAL ASSETS $ 905,095 $ 1,118,122
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Bank overdrafts $ 34,293 $ 34,293
Bank lines of credit 210,422 210,422
Accounts payable and accrued expenses 1,160,927 879,812
Payroll taxes and withholdings 653,417 485,612
Customer deposits -- --
Common stock subject to put feature (Note 10) 323,000 165,333
------------------ ------------------
Total current liabilities 2,382,059 1,775,472
LONG TERM LIABILITIES
Loans payable to related parties 2,177,168 2,065,314
------------------ ------------------
TOTAL LIABILITIES $ 4,559,227 $ 3,840,786
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $.001 par value, 10,000,000 shares authorized, 0 shares issued -- --
common stock, $.001 par value, 200,000,000 shares authorized; issued and
outstanding, 113,075,793 and 111,332,292 shares, respectively (exclusive of 113,076 111,332
546,000 shares subject to put feature)
Additional paid-in capital 6,048,273 5,840,517
Subscription receivable (25,000) (25,000)
Retained earnings (deficit) (9,790,481) (8,649,513)
(7,166,867)
------------------ ------------------
Total stockholders' equity (deficiency) (3,654,132) (2,722,664)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIENCY) $ 905,095 $ 1,118,122
------------------ ------------------
See notes to consolidated financial statements.
F-2
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 2008 and 2009
Year ended December 31,
------------------------------------
2009 2008
--------------- ---------------
Sales $ 236,712 $ 2,657,933
Cost of sales 171,963 1,749,887
--------------- ---------------
Gross profit (loss) 64,749 908,046
Selling, general and
administrative expenses 1,065,169 2,481,677
--------------- ---------------
Income/loss) from operations (1,000,420) (1,573,631)
Other income -- 231,660
Interest expense (140,548) (140,675)
--------------- ---------------
Net Income/(loss) (1,140,968) $ ( 1,482,646)
--------------- ---------------
Basic and diluted earnings (loss)
per common share $ (0.01) $ (0.01)
Weighted average shares outstanding,
basic and diluted 112,990,658 109,731,792
See notes to consolidated financial statements.
F-3
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR YEARS ENDED DECEMBER 31, 2008 and 2009
Additional Retained
Common Paid-in Subscription Earnings
Shares Par Value Capital Receivable (Deficit) Total
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at
December 31, 2007 107,883,292 107,884 4,812,465 (25,000) (7,166,867) (2,271,518)
Sale of Common
Stock 3,945,000 3,944 1,151,556 -- -- 1,155,500
Common stock subject to
put feature (Note 9) (496,000) (496) (123,504) -- -- (124,000)
Net loss for year
ended December 31,
2008 -- -- -- -- (1,482,646) (1,482,646)
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at December
31, 2008 111,332,292 $ 111,332 $ 5,840,517 $ (25,000) $ (8,649,513) $ (2,722,664)
========= ========= ========= ========= ========= =========
Sale of Common
Stock 733,501 734 163,766 -- -- 164,500
Common stock issued for
Consulting 1,060,000 1,060 93,940 -- -- 95,000
Common stock subject to
Put feature (Note 9) (50,000) (50) (49,500) -- -- (50,000)
Net loss for year
ended December 31, 2009 -- -- -- -- (1,140,968) (1,140,968)
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at December
31, 2009 113,165,794 $ 112,221 $ 6,048,273 $ (25,000) $ (9,790,481) $ (3,654,132)
See notes to consolidated financial statements.
F-4
EURO GROUP OF COMPANIES, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 2008 and 2009
Year ended December 31,
2009 2008
OPERATING ACTIVITIES
Net income(loss) $(1,140,968) $(1,482,646)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 23,365 20,832
Provision for bad debt 48,051 587,667
Stock Based Compensation 95,001 --
Interest expense on common stock subject to
put feature 107,667 41,333
Changes in operating assets and liabilities:
Receivables 69,560 ( 684,747)
Inventories 98,493 ( 501,889)
Deposits for future inventory purchases ( 22,704) ( 28,778)
Deposits and prepaid expenses ( 14,330) 179,987
Accounts payable and accrued expenses 281,115 694,234
Payroll taxes and withholdings 167,805 110,054
Customer deposits -- ( 54,960)
-------------- --------------
Net cash provided by (used in) operating
activities ( 286,945) (1,118,913)
-------------- --------------
INVESTING ACTIVITIES
Property and equipment additions 10,428 ( 83,631)
-------------- --------------
Net cash used in investing activities 10,428 ( 83,631)
FINANCING ACTIVITIES
Proceeds from sale of common stock 164,500 1,155,500
Payment on credit line -- ( 44,404)
Increase in loans payable to related parties 111,854 76,216
-------------- --------------
Net cash provided by financing activities 276,354 1,187,312
-------------- --------------
NET INCREASE(DECREASE) IN CASH ( 163) (15,232)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,849 17,081
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,677 $ 1,849
-------------- --------------
Supplemental disclosures of cash flow information:
Interest paid $ -- $ --
-------------- --------------
Income taxes paid $ -- $ --
-------------- --------------
See notes to consolidated financial statements.
F-5
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 and 2008
1. Organization and Business Operations
Euro Group of Companies, Inc.,(EGCO), (formerly ICT Technologies, Inc. ("ICTT") was incorporated in Delaware on May 27, 1999. Euro Group has five wholly owned subsidiaries; Europhone USA, Inc. ("FONE1"), a New York corporation incorporated on March 17, 2000; Europhone Inc. ("FONE2"), a New York corporation incorporated on May 24, 2001; Eurospeed, Inc. ("EUROSPEED"), a New York corporation incorporated on November 19, 2001, Eurokool, Inc. ("EUROKOOL"), a New York corporation incorporated on February 21, 2002; and Europhone USA, LLC ("EUROFONE"), a New York limited liability company formed on August 2, 2002.
Euro Group of Companies, Inc. (formerly ICT Technologies, Inc.) and its subsidiaries (collectively, the "Company") operate from their offices in Port Chester, New York. Euro Group of Companies acts as a holding company and its subsidiaries were formed to engage in the distribution of various products manufactured by unrelated third parties. In 2009 the Company had sales of prepaid calling services, cell phones, and motor scooters. In 2008 the Company had sales of motor scooters to its exclusive distributor in the United States, and to an account in Greece, and sales of telecommunications products.
2. Summary of Significant Accounting Policies
Principles of consolidation -- The consolidated financial statements include the accounts of EGCO and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Basis of presentation -- The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has experienced net losses since inception of $9,790,481 and, at December 31, 2008, the Company had a working capital deficiency of $1,608,139 and a stockholders' deficiency of $3,654,132 . These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company is seeking additional financing through sales of its common stock and/or debt, and has entered into certain supply and distribution agreements (see note (10)) to generate profitable operations. However, there is no assurance that the Company will
be successful in achieving these objectives. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Use of estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition -- The Company recognizes revenues in the period in which products are shipped to customers under a fixed and determinable amount arrangement with collectability reasonably assured.
Fair value of financial instruments -- The carrying value of the Company's financial instruments, consisting of cash in banks, accounts receivable, bank overdrafts, bank lines of credit, accounts payable and accrued expenses, payroll taxes and withholdings, customer deposits, and loans payable to related parties, approximate their fair values considering their short term nature and respective interest rates.
Cash and cash equivalents -- The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Inventories -- Inventories are carried at the lower of cost (first-in, first-out method) or market.
Property and equipment -- Property and equipment are stated at cost and consist of computers and equipment, computer software, furniture and fixtures, and leasehold improvements. These assets are depreciated on a straight-line
F-6
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 and 2008
basis over the estimated useful lives of the assets, ranging up to five years. Leasehold improvements are amortized over the estimated useful life of the assets or the term of the lease, whichever is shorter. Maintenance and repairs are expensed as incurred, expenditures for major renewals, replacements and improvements are capitalized.
Impairment of long-lived assets -- The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If this review indicates that the assets will not be recoverable based on the expected undiscounted net cash flows of the related asset, an impairment loss is recognized and the asset's carrying value is reduced to fair value.
Stock-based compensation -- Shares issued for services are expensed at the estimated fair value of the shares issued at the date of issuance. No stock options have been issued or are outstanding.
Income taxes -- Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Valuation allowances are established to reduce deferred income tax assets when management has not yet determined that future realization is more likely than not.
Earnings (loss) per common share -- Basic and diluted earnings (loss) per common share is calculated based upon the weighted average number of common shares outstanding. The Company did not have any common stock equivalents (such as stock options or convertible securities) outstanding during the periods presented.
F-7
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 and 2008
3. Inventory
Inventory consisted of:
December 31,
2009 2008
Cell phones $ 90,085 $ 90,085
Pre-paid calling cards 7,180 44,997
Televisions -- 12,310
Packaging supplies -- 27,840
Transportation products 480,163 500,014
------------ ------------
Total $ 577,428 $ 677,121
------------ ------------
4. Bank Overdrafts
At December 31, 2009 and 2008, bank overdrafts (inactive status) consisted of:
EGCO bank account overdraft facility $ 1,698
FONE1 bank account overdraft facility 32,595
-------------
Total $ 34,293
-------------
The overdraft facilities provide for interest at a rate of 9%. Repayment is past due and the bank has ceased accruing interest on the balances. The loans are personally guaranteed by the Company's chief executive officer.
5. Bank Lines of Credit
At December 31, 2009 and 2008, bank lines of credit (inactive status) consisted of:
2009 2008
------ ------
FONE1 line of credit account 210,422 210,422
------------ ------------
Total $ 210,422 $ 210,422
------------ ------------
F-8
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 and 2008
The lines of credit provide for interest at a rate of 9%. Repayment is past due and the bank has ceased accruing interest on the balances. The loans are personally guaranteed by the Company's chief executive officer.
6. Payroll Taxes and Withholdings
Payroll taxes and withholdings consisted of:
December 31,
2009 2008
Federal social security and income tax $ 563,453 $ 433,770
New York State income tax 34,744 34,744
New York State unemployment insurance 6,501 --
Workers' Compensation and Disability
Insurance 15,189 15,786
Connecticut Withholding taxes 1,193 832
New Jersey Withholding taxes 197 480
-------------- --------------
Total $ 653,417 $ 485,612
-------------- --------------
The balances represent unpaid payroll taxes and withholdings for certain periods from October 2002 to December 2008 and estimated interest and penalties to December 31, 2009.
7. Loans Payable to Related Parties
Loans payable to related parties consisted of:
December 31,
2009 2008
Due to chief executive officer and affiliates $ 2,177,168 $ 2,065,314
--------------- ---------------
Total $ 2,177,168 $ 2,065,314
--------------- ---------------
The loans payable to related parties do not bear interest and were due on demand. In the three months ended December 31, 2009, the related parties agreed not to demand repayment of these loans until 2011 and, accordingly, the Company has classified these loans as long term liabilities at December 31, 2009.
8. Common Stock
In 2008 the Company sold a total of 3,945,000 restricted shares of its Common Stock in private placements at prices ranging from $0.07 to $0.50 per share resulting in gross proceeds of $1,155,500.
In 2009 the Company sold a total of 733,501 restricted shares of its common stock in private placements at prices ranging from $0.15 to $1.00 per share resulting in gross proceeds of $164,500. In addition the Company issued 1,060,000 shares of its common stock for consulting services valued at $95,000.
9. Common Stock Subject to Put Feature
Six shareholders who purchased 496,000 shares of common stock at a price per share of $0.25 in the fourth quarter 2008 have the right to "put" those shares of common stock back to the Company at a price per share of $0.50, at any time six months after the date of purchase. Accordingly, the Company has classified the proceeds from these sales as a current liability, and has excluded these shares from stockholders' equity(deficiency). The $124,000 potential increase in the amount to be paid is being expensed as interest expense over the six month period succeeding the respective purchases. An interest expense charge of $41,333 has been taken in the fourth quarter 2008, and the balance was recognized in 2009.In first quarter 2009 an additional three shareholders purchased a total of 50,000 shares of common stock at a price of $1.00 per share and have the right to “put” these shares back to the Company at a price of $1.50 per share. The proceeds from these sales have been classified as a current liability and the potential increase in the amount to be paid of $25,000 has been expensed as interest expense.
In 2010 these nine shareholders received an additional 273,000 shares of common stock as “forbearance” shares due to the Company’s inability to repurchase their
shares as agreed.
10. Income Taxes
EGCO files consolidated income tax returns with its subsidiaries for federal and state reporting purposes.
For the years ended December 31, 2009 and 2008, the provision for (benefit from) income taxes consisted of:
2009 2008
------ ------
Current:
Federal $ -- $ --
State -- --
Total current -- --
Deferred:
Federal (493,427) (459,917)
State (141,648) (130,028)
Valuation allowance 635,075 589,945
-------------- --------------
Total $ -- $ --
F-9
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 and 2008
A reconciliation of the U.S. federal statutory tax rate to the effective rates for the years ended December 31, 2009 and 2008 follows:
2009 2008
------ ------
Federal statutory tax rate 34.0% 34.0%
State income taxes, net of federal benefit 5.8 5.8
Change in valuation allowance (39.8) (39.8)
------- -------
Effective income tax rate 0.0% 0.0%
------- -------
11. Commitments and Contingencies
Lease
EGCO rents its office facilities in Port Chester, New York under a five-year lease Agreement expiring May 31, 2013 with Strobe Development Company of White Plains, New York. The lease agreement expiring May 31, 2013 provides for fixed minimum monthly rents ranging from $ 2,191 in the first year to $2,466 in year five. In addition to the fixed minimum monthly rent the Company is also responsible for its pro-rata share of real estate taxes payable, operating expenses and electric usage. In May 2008 the Company vacated its previous corporate office space at 181 Westchester Avenue and moved to new space at 10 Midland Avenue, Port Chester, New York. The previous space was occupied under a sub-lease agreement with OTI, a company owned by the Company's chief executive officer.
Rent expense for the years ended December 31, 2009 and 2008 was $80,498 and $101,078, respectively. At December 31, 2009, future minimum annual rent payments under non-cancellable operating leases are:
2010 27,532
2011 28,168
2012 29,016
2013 (through May 31) 12,330
-----------
Total $ 97,046
-----------
Manufacturing and Distribution Agreement
Pursuant to an agreement effective October 18, 2006 between a Chinese corporation (the "OEM Manufacturer"), a New Jersey corporation (the "Worldwide Importer and Distributor"), and EUROSPEED, Inc. (the "USA Distributor"), EUROSPEED was appointed exclusive distributor in North America of motorcycles and other transportation vehicles manufactured and sold by the Manufacturer and the Importer under trade names "EuroSpeed" and “EuroStrada”. The term of the agreement is five years from October 18, 2006 to October 17, 2011. The agreement is automatically renewed for an additional five years to October 17, 2016 unless either party gives 90 days prior written notice at the end of any two year period. If EUROSPEED purchases less than the minimum purchase quantities (25,000
F-10
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2009
units in year 1, 30,000 units in year 2, and an amount to be determined in year 3), Manufacturer and Importer have the right to terminate the agreement. Eurospeed, Inc. did not meet the minimum purchase thresholds in 2007, 2008 and 2009.
Exclusive Distribution Agreement
Pursuant to an agreement dated May 19, 2006, EUROSPEED appointed an Exclusive Distributor in North America and Israel of motorcycles and other transportation vehicles under the trade names "EuroSpeed" and "EuroStrada." The term of the agreement was five years from May 19, 2006 to May 18, 2011. The agreement was replaced by an agreement between EUROSPEED and American Motor Sports LLC, doing business as Eurospeed USA, dated March 3, 2008, that requires that the Exclusive Distributor purchase 10,000 transportation vehicles in Year 1, 20,000 vehicles in year 2, and 35,000 vehicles in Year 3. The exclusive distributor did not sell the minimum number of vehicles required by the agreement and the exclusive distribution agreement was terminated in July 2009.
Standby Letter of Credit
On November 2, 2006, EUROSPEED received a $250,000 irrevocable standby letter of credit issued by Eurospeed, USA's bank. The letter of credit was automatically renewed on November 2, 2007, and again in November, 2008. The Letter of Credit was cancelled upon termination of the Exclusive Distribution Agreement
12. Segment Information
The determination of the Company's business segments is based on how the company monitors and manages the performance of its operations. The Company's operating segments are strategic business units that offer different products and services. They are managed separately because each requires different marketing strategies, personnel skill sets and technology.
The Company allocates revenues, expenses, assets and liabilities to segments only where directly attributable. The unallocated corporate administration amounts are costs attributed to finance, corporate administration, human resources, legal and corporate services. Reconciling items represent elimination of inter-segment income and expense items, and are
included to reconcile segment data to the consolidated financial statements.
A summary of the Company's segments for the years ended December 31, 2009 and 2008 was as follows:
Telephone
products and Transportation Unallocated
services products Corporate
(Europhone) (Eurospeed) Administration Total
Segment Segment Amounts Amount
--------------- --------------- --------------- ---------------
Year Ended December 31, 2009
Total revenues $ 141,693 $ 95,019 $ -- $ 236,712
Income (loss) from Operations (431,548) (367,408) (341,742) ($1,140,968)
Depreciation expense 13,915 9,450 -- 23,365
Total assets 338,585 432,900 96,110 867,595
Year Ended December 31, 2008
Total revenues $ 1,292,282 $ 1,365,651 $ -- $ 2,657,933
Income (loss) from Operations (1,160,354) (401,667) (11,610) (1,573,631)
Depreciation expense 20,832 -- -- 20,832
Total assets 435,235 678,580 4,307 1,118,122
[End of Financial Statements]
13. Subsequent Events
a). In first quarter 2010 the Company sold 535,000 shares of unregistered common stock for proceeds of $48,500, and issued 50,000 shares of unregistered common stock in lieu of cash for marketing services.
In second quarter 2010 the Company sold 1,312,000 shares of unregistered common stock for proceeds of $46.200. and issued 273,000 shares of unregistered common stock to nine shareholders who purchased shares of common stock with a “put” feature for their “forbearance” in demanding payment.
F-11
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009 and 2008
b) Subsequent to the end of 2009 the Company received notice of the following:
|
(i)
|
On January 24, 2010 the Company received notice of a judgment entered against Europhone USA LLC
in the Supreme Court of the State of New York, County of Westchester,
|
In favor of American Pack Systems, Inc. in the amount of $11,018.04
|
(ii)
|
In May 2010 judgments in the amounts of $45,565.74 and $20,030.00 were
|
entered in the Supreme Court of the State of New York, County of Queens
on behalf of Bridge Side Development, LLC against Europhone USA LLC and Eurospeed Inc.
|
c)
|
During the 2010 calendar year the Company was served notice of the following
|
legal actions:
|
(i)
|
On May 3, 2010, the Company was served notice of a suit initiated by
|
Taizhou Zhongneng Import and Export in US District Court in the Southern
District of New York. Plaintiff is seeking an aggregate sum of $485,504.22 stemming from
a breach of contract claim. The Company is currently negotiating a possible settlement with Plaintiff.
|
(ii)
|
In July 2010, the Company was served notice of two Small Claims Suits
|
being brought forth by Zimmer Limited in the State of South Dakota,
County of Minnehaha. On the 27thof October a partial judgment was rendered in
plaintiff’s favor in the amount of $4,572.69. Plaintiff continues to seek an aggregate of $23,443.00 for Balances Due.
The Company has retained counsel in South Dakota to issue its denials and defend itself in the pending litigation.
|
(iii)
|
In September 2010, the Company was served with a demand for
|
Arbitration brought by Michael Sauer for an alleged breach of
Employment Contract. The Company has retained counsel to represent
them in the Arbitration and believes the outcome will be in its favor.
|
(iv)
|
In October 2010, the Company, as Judgment Debtor, in the amount of
|
$100, 851.08, was served with an order to Show Cause and Restraining
Order arising from a judgment against the Company in favor of Plaintiffs,
The Magna Group, Inc. and Magna Productions, LLC.
|
(v)
|
In October 2010, the Company was served notice of a Breach of Contract
|
Suit being initiated by Plaintiff The Barberino Brothers, Inc. in the State of
Connecticut. The Company is currently seeking counsel to appear on its behalf
to have the complaint dismissed on legal grounds.
As of the date of this filing, the Company is aware of no other threatened or pending litigation.
--------------------------------------------------------------------------------
F-12
Evaluation of Disclosure Controls and Procedures
As of the end of the fiscal quarter ended December 31, 2009, an evaluation was performed under the supervision of and with the participation of the Company's Principal Executive Officer, and the Company's Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures.
Based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15e of the Securities Exchange Act of 1934, as amended) and as required by paragraph (b) of Rule 13-a-15 or Rule 15d-15e as of December 31, 2008, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange Commissions rules and forms. Our Principal Executive Officer and Principal Financial Officer also concluded that as of December 31, 2008 our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure. Our disclosure controls are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of the control system will be met.
Management Report on Internal Control over Financial Reporting
Company management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance
11
regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with the authorization of the management and Board of Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Under the supervision and with the participation of management, we have assessed our internal control over financial reporting as of December 31, 2009, which was the end of our fiscal year. Management based its assessment on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, segmentation of responsibilities, process documentation, accounting policies and our overall control environment. This assessment is supported by testing and monitoring performed by our finance
organization.
Based on their assessment, despite the inherent issue of segregation of duties in a small company, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year ended December 31, 2009 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
Changes in Internal Controls
During the three month period ended December 31, 2009 there were no changes that occurred in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15-e that has materially affected, or is reasonably likely to materially affect our internal controls over financial reporting.
Item 9 - Directors, Executive Officers, Promoters and Control Persons' Compliance with Section 16(a) of the Exchange Act.
The names, ages, positions and offices held by each of our officers and directors are shown on the following table.
Name Age Position
-------------------- ------ -------------------------------------------------------
Vasilios Koutsobinas 56 Chairman, Chief Executive Officer
Andrew Eracleous 81 Chief Financial Officer, Director
Paul Kotrotsios 54 Director
Georgia Dumas 42 Director
Anna Aspras 42 Director
Anastasios Koutsombinas* 36 President, European Operations
Kenneth Downey 48 Director
Stephen R. Bellis 50 Director
* Mr. Koutsombinas resigned as a member of the Board effective December 31, 2009.
Vasilios Koutsobinas has served as the Chairman and Chief Executive Officer of ICT Technologies, Inc. since May 2002. Prior to joining ICT Technologies (and simultaneously with his service to ICT Technologies), Mr. Koutsobinas had served as chief executive officer of the Eurogroup of Companies, which included several subsidiaries contributed to ICT Technologies in the 2002 Transaction as well as Europhone USA, since March 17, 2000. Mr. Koutsobinas has over 25 years of
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experience in the import/export field which he engaged in through private companies of his own. In addition, he served as President of Uncle Bill's, Inc., a private corporation in the restaurant business from approximately 1997 to 2001.
Andrew Eracleous has served as the Chief Financial Officer of Euro Group of Companies, since November 2002. For the past 50 years, Mr. Eracleous has been an accountant in private practice.
Paul Kotrotsios is the founder and publisher of Hellenic News of America, a monthly Greek-American publication. He holds a Bachelor of Science degree in Economics from the Graduate Industrial School of Thessaloniki University, Greece and a Master's Degree in Business Administration from Saint Joseph's University in Philadelphia, Pennsylvania.
Georgia Dumas is presently the Director of Operations of Global Star LLC of Hasbrouck Heights in New Jersey. She manages all functions related to business development, operations, production, marketing and distribution of Greek television and radio services. She has had extensive experience in the media and publication industries. She studied at New York University and obtained her Bachelor of Science degree in International Marketing and Economics from William Paterson University of New Jersey.
Anna Aspras joined the Board in 2008, and previously served as President of Operations of Euro Group. She holds a Degree in Administrative Assistance from Westchester College, and has extensive experience as a business owner. She joined Europhone in 1994, and has managed all functions related to business development, operations, marketing and distribution of Europhone telecommunication products and services.
Anastasios Koutsombinas joined the Board in 2008, and has served as President of European Operations since 2001, overseeing the Company's activities in Europe and China. Mr. Koutsombinas holds a degree in Economics from the University of Athens. Mr. Koutsombinas resigned from the Board effective December 31, 2009.
Kenneth Downey joined the Board in 2008. He is one of the founders and serves as Chief Executive Officer of Westwood Associates/ Parcel Port. Mr. Downey holds a Bachelor of Science in Marketing from Villanova University.
Stehen R. Bellis joined the Board in 2008. Mr. Bellis is an attorney and Partner at The Pellegrino Law Firm, one of the oldest law firms in New Haven, Connecticut. He leads the firm's trial practice group, handling products liabilities lawsuits, wrongful death actions, commercial litigation, and medical malpractice cases. He tries jury cases throughout the State of Connecticut, and has argued cases at the Connecticut Appellate and Supreme Court, as well as the United States District Court and United States Court of Appeals. He is admitted
as qualified as an attorney and counselor of the Supreme Court of the United States. Mr. Bellis is a member of the Connecticut and American Bar Associations, the Connecticut Trial Lawyers Association, and the Association of Trial Lawyers of America. Attorney Bellis graduated from Boston University in 1981, and from the Catholic University Law School in Washington, DC in 1984. He was a member of the Law Review and was commencement Speaker.
Board of Directors Committees
The Company does not currently have a standing audit, nominating or compensation committee of the Board. Vasilios Koutsobinas, and the other directors, perform the functions of audit, nominating and compensation committees and also participate in the consideration of Director nominees. When additional independent members of the Board of Directors are appointed or elected, the Board will consider creating audit, compensation and nominating committees. In addition, because Euro Group is not an issuer listed on a national securities
exchange or listed in an automated inter-dealer quotation system of a national securities association, we are not required to have an audit committee. Although we hope to have an audit committee established at some time in the near future, we have not done so yet.
Since we have not established such a committee, we have not identified any member of such a committee as a financial expert.
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Advisory Board
The Company does not currently have an Advisory Board.
Director Independence
Our current directors are not considered independent directors as defined by any national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934 or by any national securities association registered pursuant to Section 15A(a) of the Securities Exchange Act of 1934.
Meetings of the Board of Directors
The Board of Directors of Euro Group of Companies held six regular meetings during 2009.
Family Relationships
The Chairman of the Board and CEO and the President of European Operations are father and son.
Involvement in Certain Legal Proceedings
Except as set forth herein, no officer or director of the Company has, during the last five years: (i) been convicted in or is currently subject to a pending a criminal proceeding; (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) has any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy of for the two years prior
thereto.
Code of Ethics
The Board of Directors of Euro Group of Companies, Inc. adopted a Code of Ethics as described in Item 406 of Regulation S-B, and filed as an Exhibit hereto. The Code of Ethics applies to each of our directors and officers, including the chief financial officer and chief executive officer, and all of the Company's other employees and consultants.
Section 16(a) Beneficial Ownership Reporting Compliance
Since January 1, 2009, no reports under Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") were not filed or were not timely filed by officers, directors or beneficial owners of more than ten percent of any class of the Company's equity securities registered pursuant to Section 12 of the Exchange Act: To the Company's knowledge, no officer, director or beneficial owner of more than ten percent of any class of the Company's equity securities registered pursuant to Section 12 of the Exchange Act or any other person subject to Section 16 of the Exchange Act with respect to the Company, failed to file on a timely basis reports required by Section 16(a) of the Exchange Act subsequent to January 1, 2008.
The following Summary Compensation Table sets forth, for the three years ended December 31, 2009, the compensation for services in all capacities earned by all persons serving as the Company's Chief Executive Officer during the past three years and any other executive officer whose total annual salary, bonus and other annual compensation may have exceeded $100,000 during that time (the "Named Executive Officers").
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
All
Name and Principal Other Annual
Position Salary Bonus Compensation Total
Year $ $ $ $
--------------------------------------------------------------------------------------------
Vasilios Koutsobinas 2009 125,000 0 0 125,000
CEO
" " 2008 125,000 0 0 125,000
" " 2007 125,000 0 0 125,000
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Euro Group of Companies, Inc. does not maintain a stock option program, and has granted no restricted stock awards and maintains no long-term incentive programs.
None of the named Executive Officers has a written employment contract with Euro Group of Companies.
DIRECTOR COMPENSATION
There were no payments made to "outside" directors in 2009. Outside directors normally receive $2,000 for each board meeting they attend, and employee directors receive no compensation for their board service.
The following table sets forth certain information, as of December 31, 2009, with respect to the beneficial ownership of shares of Common Stock by (i) each person known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) the Named Executive Officer and (iv) all executive officers and directors of the Company as a group.
Name and Address # of Common Percent of
_________________ Shares Owned Class Owned
Vasilios Koutsobinas 6,600,000 5.9%
Andrew Eracleous 939,500 .9%
Paul Kotrotsios 0 --
Georgia Dumas 0 --
Anna Aspras 50,000 --
Anastasios Koutsombinas 0 --
Kenneth Downey 1,316,667 1.2%
Stephen R. Bellis 160,000 .1%
VK Funding LLC 70,881,675 63.4%
Directors and Control
Persons as a Group 79,947,842 71.5%
(1) Beneficial ownership has been determined pursuant to Rule 13-d of the
Exchange Act.
Since the close of the 2002 Transaction, the working capital requirements of the Company have been largely satisfied through the sale of restricted common stock through private placement and loans to the Company from the chief executive officer and principal stockholder of Euro Group of Companies, Inc. (formerly ICT Technologies, Inc.) This indebtedness, for which repayment cannot be demanded until 2011, totaled $2,177,168 at December 31, 2009 and does not bear interest.
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(a) Exhibits
Number Description of Exhibits
--------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3.1 Certificate of Amendment of Certificate of Incorporation of ICT Technologies, Inc.*
3.2 Bylaws of ICT Technologies, Inc.**
10.1 Amended and Restated Share Acquisition and Voting Agreement dated as of May 9, 2002 and executed April 30, 2003 by and among Europhone USA,
Inc., Vasilios Koutsobinas and Joshua Shainberg***
10.2 Amendment to the Amended and Restated Share Acquisition and Voting Agreement***
10.3 Agreement with Parallel No Limit, Inc. ****
21 List of Subsidiaries.
31.1 Certification of the Company's Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act.
31.2 Certification of the Company's Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act.
32.1 Certification of the Company's Chief Executive Officer pursuant to Section 906 of Sarbanes Oxley Act.
32.2 Certification of the Company's Chief Financial Officer pursuant to Section 906 of Sarbanes Oxley Act.
* Incorporated by reference to Exhibit 3(iii) from the Company's Form 10-KSB for the annual period ended December 31, 2001, filed on April 29, 2002.
** Incorporated by reference from the Company's Form 10-SB12G, filed with the Securities and Exchange Commission on March 6, 2000.
*** Incorporated by reference to Exhibit 10.1 from the Company's Form 8-K/A, dated May 9, 2002.
**** Incorporated by reference to Exhibit 10.1 from the Company's Form 8-K, dated April 23, 2007.
(a) Reports on Form 8-K
None
Number Description of Filings
8.01 Other Matters
The audit fees for the year ended December 31, 2008 was $27,500. All services provided by the principal accountants were approved by the Board of Directors. The Company did not utilize the services of an independent certifying accounting firm for 2009.
Audit Committee Approval
We do not have an audit committee of our board of directors. We believe that each member of our board has the expertise and experience to adequately serve our stockholders' interests while serving as directors. Since we are not required to maintain an audit committee and our full board acts in the capacity of an audit committee, we have not elected to designate any member of our board as an "audit committee financial expert."
Board of Directors Approval of Audit-Related Activities
Management is responsible for the preparation and integrity of our financial statements, as well as establishing appropriate internal controls and financial reporting processes. Michael T. Studer CPA, P. C. was responsible for performing an independent audit of our financial statements for 2008 and issuing a report on such financial statements. Our board of directors' responsibility is to monitor and oversee these processes. The Company’s size and number of shareholders no longer requires the preparation of audited financial statements
Our board reviewed the unaudited financial statements of our company for the year ended December 31, 2009 and met with members of management to discuss such financial
statements. Based upon these reviews and discussions, our board authorized and directed that the unaudited financial statements be included in our Annual Report
on Form 10-K for the year ended December 31, 2009.
Audit-Related Fees
There were no additional audit-related fees in 2009 and 2008.
Tax Fees
There were no fees paid for tax services relating to the years ended December
31, 2009 and 2008.
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly appointed.
Euro Group of Companies, Inc.
November 19, 2010 /s/ Vasilios Koutsobinas
-----------------------------------
Vasilios Koutsobinas
Chief Executive Officer
Director
(Principal Executive Officer)
November 19, 2010 /s/ Andrew Eracleous
-----------------------------------
Andrew Eracleous
Chief Financial Officer
Director
(Principal Financial and Accounting Officer)
November 19, 2010 /s/ Anna Aspras
------------------------------------
Anna Aspras
Director
November 19, 2010 /s/ Stephen Bellis
------------------------------------
Stephen Bellis
Director
November 19, 2010 /s/ Kenneth Downey
--------------------------------------
Kenneth Downey
Director
November 19, 2010 /s/ Georgia Dumas
----------------------------------
Georgia Dumas
Director
November 19, 2010 /s/ Paul Kotrotsios
------------------------------------
Paul Kotrotsios
Director
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