Attached files
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, 2008
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from to
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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:
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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-KSB
or any amendment to this Form 10-KSB. |-|
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 $0.12 per share, was $ 4,035,474
as of November 2, 2009 and no non-voting equity is issued.
As of November 2, 2009 113,626,793 shares of Common stock of the registrant were
outstanding.
Table of Contents
Page
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Part I
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Item 1 Description of Business 1
Item 2 Description of Property 6
Item 3 Legal Proceedings 6
Item 4 Submission of matter to a Vote of Security Holders 6
Part II
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Item 5 Market for Common Equity and Related Stockholder Matters 7
Item 6 Management Discussion and Analysis of Plan of Operations 8
Item 7 Financial Statements F-1
Item 8a Controls and Procedures 11
Part III
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Item 9 Directors, Executive Officers, Promoters and Control
Persons Compliance with Section 16(a) of the Exchange Act 12
Item 10 Executive Compensation 13
Item 11 Security Ownership of Certain Beneficial Owners and
Management, and Related Matters 14
Item 12 Certain Relationships and Related Transactions 14
Item 13 Exhibits 14
Item 14 Principal Accountant Fees and Services 15
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Part I
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.
Item 1 Description of the Business
THE COMPANY
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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
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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.
1
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
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TELECOMMUNICATIONS
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The Company's Europhone subsidiary 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
calling 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.
Europhone USA markets Verizon's FiOS services along Euro Group's consumer
electronics products, such as the Eugro brand's family of state-of-the-art Full
HD Flat Screen televisions, laptops, digital cameras, blue tooth communication
devices and other accessories at highly trafficked mall locations and selected
retail stores in New Jersey and New York.
TRANSPORTATION PRODUCTS
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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. Eurospeed, Inc. has appointed an Exclusive Distributor,
American Motor Sports, LLC, for sales in the United States and Canada. The
Distributor has assembled a network of new car dealers, spanning seven states to
date, who are eager to add additional higher margin products to their automobile
offering. The Company has adopted a strategy 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 supports 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 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.
CONSUMER ELECTRONICS
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The Company's Eurokool subsidiary plans 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" 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.
MANUFACTURING
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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.
The Company's Eurokool subsidiary utilizes a number of contract manufacturers to
produce its consumer electronic products.
Eurokool purchases laptop computers, MP-4 players, digital cameras and Bluetooth
communication devices from selected manufacturers in China. The Company plans to
purchase air-conditioners of various types (split units that offer both cooling
and heat, window and floor units) from Guangdong Chigo Air Conditioning Co.,
Ltd. under a manufacturing agreement originally signed in 2002 and renewed for
an additional five years in January, 2007, Eurokool was appointed as the sole
agent for the distribution of Chigo products bearing both the "Chigo" and
"Eurokool" brand names in North, South, and Central America, and parts of
Europe, except that distribution is only permitted under the "Eurokool" brand
name in countries or regions where sales of Chigo branded products have already
taken place, namely China, Greece and certain other countries. Before sales of
air conditioners can commence in the United States, the Company will be required
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to obtain Underwriter's Laboratory and other regulatory approvals. The Company's
contact manufacturer, Chigo, obtained Underwriters Laboratory (UL) and other
regulatory approvals on five separate Chigo models allowing for sale of these
products in the United States.
While the Company believes that there is a market for split-system air
conditioners, the Company made no air-conditioner sales in 2008, and the Company
has no plan at this time to market and sell air-conditioner products in 2009.
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. To support our entry into
the competitive marketplace Eurospeed offers a limited threeyear product
warrantee, the abvailability of spare parts and new-car dealer service of the
products.
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 four 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 has entered an exclusive
distribution Agreement with a Connecticut-based entity, American Motor sports,
LLC (d/b/a Eurospeed USA,Inc.).The exclusive distributor is establishing a
network of new car dealers to sell and service Eurospeed products and
accessories in assigned territories. As an essential component of the strategy
to build the Eurospeed "brand" identity, the exclusive distributor and each
member of the national dealer network will be required to use the Eurospeed name
in the market, e.g., "Eurospeed of Tucson".
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
full 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 fifteen 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
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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
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
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the inability of Euro Group of Companies to enforce contracts in such
jurisdictions.
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, 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 maintains 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.
Item 2. Description of Property
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 is $26,292 and increases at
the rate of 3% per year thereafter. 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.
Item 3. Legal Proceedings
In the ordinary course of business, we are periodically a party to lawsuits
and claims. We do not believe that any resulting liability from existing legal
proceedings, individually or in the aggregate, will have a material adverse
effect on our results of operations or financial condition
Item 4. Submission of Matters to a Vote of Security Holders
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
-----------------------------
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
2007
Dec. 31, 2007 $0.20 $0.06
Sept. 30, 2007 0.23 0.10
June 30, 2007 0.20 0.06
Mar. 31, 2007 0.14 0.05
As of December 31, 2008 there were approximately 332 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)
--------------------------------------------------------------
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))
---------------------------------------------- ------------- ------------- -------------
Equity compensation plans approved
by security holders (1) -0- n/a -0-
------------- ------------- -------------
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, 2008 the Company sold a total of
674,000 shares of unregistered common stock for $143,500.
During the twelve months ended December 31, 2008 the Company sold a total of
3,945,000 shares of unregistered common stock for $1,155,500.
Subsequent to the end of 2008 the Company sold 738,501 shares of unregistered
common stock for $133,045, and issued 1,060,000 shares of unregistered common
stock in lieu of cash for consulting services.
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.
In February 2008 the Board of Directors issued five million shares of
common stock to the Company's Chief Executive Officer. Subsequent to the grant
the CEO determined that it would be in the best interest of the Company for him
to return the five million shares to the Company, and the shares were returned.
Item 6. Management's Discussion and Analysis or Plan of Operations
This Annual Report on Form 10-KSB 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.
The Company's exclusive distributor of Eurospeed Inc. products in the United
States, Canada and Puerto Rico, American Motor Sports, LLC, has negotiated
dealer agreements to date with select dealer franchises in different states.
Business Activities
For the twelve months ended December 31, 2008 the Company recognized revenues of
$2,657,933 compared to revenues of $113,645 for the twelve months ended December
31, 2007, an increase of $,2,544,288, or 2,239%. The increase in revenues year
over year is primarily attributable to higher sales of transportation products,
international and prepaid calling cards and commissions paid to the Company for
Verizon FiOS sales.
The Company recognized revenues from the sale of motor scooters of $ 1,365,652
in 2008 compared to $4,561 in 2007, and revenues from the sale of
telecommunications services in 2008 of $1,214,608 compared to $61,633 in 2007.
In 2008 the Company's Europhone USA, LLC subsidiary revenues included revenues
8
of $77,674 from commissions for the sale of Verizon FiOS services compared to
commission revenue of $18,983 in 2007. In calendar year 2007 Europhone also
recognized one-time revenue of $28,468 from the sale of olive-oil. 8 Cost of
sales for the twelve months ended December 31, 2008 was $1,749,887 compared to
$134,899 for the period ended December 31, 2007, an increase of $1,614,988, or
1,197%.
The Company experienced a gross profit of $908,046 for the twelve month period
ended December 31, 2008 compared to a gross loss of $21,254 for the twelve month
period ended December 31, 2007
For the twelve months ended December 31, 2008 selling, general and
administrative expenses were $2,481,677 compared to $1,263,556 for the twelve
months ended December 31, 2007, an increase of $1,218,121, or 96%.
The increase in selling, general and administrative expenses was primarily due
to an increase in bad debt expense ($587,667 in 2008 compared to $15,028 in
2007), higher salary and salary related expenses as the result of increased
staffing levels ($961,149 in 2008 compared to $656,509 in 2007), professional
fees and consulting expenses ($421,506 in 2008 compared to $248,198 in 2007),
higher travel and entertainment expenses($162,872 in 2008 compared to $72,940 in
2007), and increased insurance expense($103,825 in 2008 compared to $49,025 in
2007).
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.
Euro Group of Companies, Inc. generated a net loss of $1,441,313 for calendar
year 2008 compared to a net loss of $1,326,697 for calendar year 2007.
Liquidity and Capital Resources
At December 31, 2008 the Company had a working capital deficiency of $628,870
and a stockholders deficiency of $2,557,331. In addition the Company has
suffered recurring losses from operations and has an accumulated deficit of
approximately $8,608,180. 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 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, 2008 loans payable to related parties were $2,065,314. These
loans have been reclassified to Long-Term Liabilities at the request of the
Chief Executive officer who has agreed that repayment will not be demanded
before 2010. The Company has also established lines of credit with the Ponce de
Leon Federal Bank. As of December 31, 2008 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, 2008 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.
In February 2008 the Company's Board of Directors awarded 5,000,000 shares of
common stock to the Company's Chief Executive Officer, as well as a
"non-dilution" provision that would have maintained the CEO's percentage share
of stock ownership in the Company. The Chief Executive Officer subsequently
determined that this was not in the best interest of the Company and he returned
the 5,000,000 shares to the Company and refused to accept the "non-dilution"
provision.
9
EURO GROUP OF COMPANIES, INC.
INDEX TO FINANCIAL STATEMENTS
Financial Statements
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets as of December 31, 2008 and 2007 F-2
Consolidated Statements of Operations for the years ended
December 31, 2008 and 2007 F-3
Consolidated Statements of Changes in Stockholders Equity
(Deficiency) for the years ended December 31, 2008 and 2007 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2008 and 2007 F-5
Notes to Consolidated Financial Statements F-6
10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Euro Group of Companies, Inc.
I have audited the accompanying consolidated balance sheets of Euro Group of
Companies, Inc. and subsidiaries (the Company) as of December 31, 2008 and 2007
and the related consolidated statements of operations, changes in stockholders'
equity (deficiency), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Euro Group of
Companies, Inc. and subsidiaries as of December 31, 2008 and 2007 and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements referred to above have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, the Company's
present financial situation raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to this matter are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Michael T. Studer CPA P.C.
-----------------------------------
Michael T. Studer CPA P.C.
Freeport, New York
November 13, 2009
F-1
Item 7 - Financial Statements
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash in banks $ 1,849 $ 17,081
Accounts receivable, less allowance for doubtful accounts of $147,597 139,478 42,398
and $45,085 respectively
Inventory 677,121 175,232
Deposits for future inventory purchases 104,993 76,215
Deposit with attorney in connection with contemplated
property acquisition (returned January 2008) -- 200,000
Prepaid Expenses 57,828 62,969
Total current assets 981,269 573,895
Property and equipment, less accumulated depreciation of $115,215
and $29,489, respectively 111,699 48,900
Security deposit - retail store 25,154 --
----------- -----------
TOTAL ASSETS $ 1,118,122 $ 622,795
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Bank overdrafts $ 34,293 $ 34,293
Bank lines of credit 210,422 254,826
Accounts payable and accrued expenses 879,812 185,578
Payroll taxes and withholdings 485,612 375,558
Customer deposits -- 54,960
----------- -----------
Total current liabilities 1,610,139 905,215
LONG TERM LIABILITIES
Loans payable to related parties 2,065,314 1,989,098
TOTAL LIABILITIES $ 3,675,453 $ 2,894,313
=========== ===========
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 111,828,292 and 107,883,292 shares, respectively 111,828 107,884
Additional paid-in capital 5,964,021 4,812,465
Subscription receivable (25,000) (25,000)
Retained earnings (deficit) (8,608,180) (7,166,867)
----------- -----------
Total stockholders' equity (deficiency) (2,557,331) (2,271,518)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIENCY) $ 1,118,122 $ 622,795
----------- -----------
See notes to consolidated financial statements.
F-2
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
--------------------------------
2008 2007
---- ----
Sales $ 2,657,933 $ 113,645
Cost of sales 1,749,887 134,899
------------- -------------
Gross profit (loss) 908,046 (21,254)
Selling, general and
administrative expenses 2,481,677 1,263,556
------------- -------------
Income/loss) from operations (1,573,631) (1,284,810)
Other Income 231,660 --
Interest expense (99,342) (41,887)
------------- -------------
Net Income/loss) $ (1,441,313) $ (1,326,697)
------------- -------------
Basic and diluted earnings (loss)
Per common share $ (0.01) $ (0.01)
Weighted average shares outstanding
basic and diluted 109,855,792 102,201,638
See notes to consolidated financial statements.
F-3
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 2007 AND 2008
Additional Retained
Common Paid-in Subscription Earnings
Shares Par Value Capital Receivable (Deficit) Total
----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 2006 97,197,384 $ 97,198 $ 3,270,546 $ -- $(5,840,170) $(2,472,426)
Common stock subscribed 100,000 100 24,900 (25,000) -- --
Sale of common stock 10,535,908 10,536 1,504,569 -- -- 1,515,105
Shares issued for
services 50,000 50 12,450 -- -- 12,500
Net loss for year ended
December 31, 2007 -- -- -- -- (1,726,697) (1,726,697)
Balance at 107,883,292 107,884 4,812,465 (25,000) (7,166,867) (2,271,518)
December 31, 2007
Sale of Common
Stock 3,945,000 3,944 1,151,556 -- -- 1,155,500
Net loss for year
ended December 31,
2008 -- -- -- -- (1,441,313) (1,441,313)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December
31, 2008 111,828,292 $ 111,828 $ 5,964,021 $ (25,000) $(8,608,180) $(2,557,331)
=========== =========== =========== =========== =========== ===========
See notes to consolidated financial statements.
F-4
EURO GROUP OF COMPANIES, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2008 2007
OPERATING ACTIVITIES
Net income(loss) $(1,441,313) $(1,326,697)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 20,832 14,688
Provision for bad debt 587,667 --
Stock Based Compensation -- 12,500
Changes in operating assets and liabilities:
Receivables (684,747) 130,290
Inventories (501,889) (128,609)
Deposits for future inventory purchases ( 28,778) --
Deposits and prepaid expenses 179,987 (262,684)
Accounts payable and accrued expenses 694,234 ( 9,247)
Payroll taxes and withholdings 110,054 187,927
Customer deposits (54,960) (11,600)
----------- -----------
Net cash provided by (used in) operating
activities (1,118,913) (1,393,432)
----------- -----------
INVESTING ACTIVITIES
Property and equipment additions ( 83,631) (22,908)
----------- -----------
Net cash used in investing activities ( 83,631) (22,908)
FINANCING ACTIVITIES
Proceeds from sale of common stock 1,155,500 1,515,105
Payment on credit line (44,404) --
Increase in loans payable to related parties 76,216 (154,513)
----------- -----------
Net cash provided by financing activities 1,187,312 1,360,592
----------- -----------
NET INCREASE(DECREASE) IN CASH (15,232) (55,748)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 17,081 72,829
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,849 $ 17,081
=========== ===========
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, 2008 and 2007
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 2007 the Company had sales of olive
oil, prepaid calling services, cell phones, TVs and motor scooters and youth
vehicles. 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 $8,608,180 and, at
December 31, 2008, the Company had a working capital deficiency of $628,870 and
a stockholders' deficiency of $2,557,331 . 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 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, 2008 and 2007
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.
3. Inventory
Inventory consisted of:
December 31,
2008 2007
Cell phones $ 90,085 $ 90,085
Pre-paid calling cards 46,872 44,997
Televisions 12,310 12,310
Packaging supplies 27,840 27,840
Transportation products 500,014 --
-------- --------
Total $677,121 $175,232
-------- --------
4. Bank Overdrafts
At December 31, 2008 and 2007, 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, 2008 and 2007, bank lines of credit (inactive status)
consisted of:
2008 2007
---- ----
EGCO line of credit account $ -- $ 17,069
EGCO line of credit account -- 16,279
FONE1 line of credit account 210,422 210,422
FONE1 line of credit account -- 11,056
------------ ------------
Total $ 210,422 $ 254,826
F-7
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007
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,
2008 2007
---- ----
Federal social security and income tax $ 433,770 $ 325,122
New York State income tax 34,744 27,800
New York State unemployment insurance -- 3,322
Workers' Compensation and Disability
Insurance 15,786 19,314
Connecticut Withholding taxes 832 --
New Jersey Withholding taxes 480 --
--------- ---------
Total $ 485,612 $ 375,558
--------- ---------
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, 2008. The Company has asked the Internal Revenue Service to
consider a revised installment schedule to pay its federal liability but has not
reached such an agreement.
7. Loans Payable to Related Parties
Loans payable to related parties consisted of:
December 31,
2008 2007
---- ----
Due chief executive officer and affiliates $2,065,314 $1,747,652
Due chief financial officer -- 241,446
---------- ----------
Total $2,065,314 $1,989,098
---------- ----------
The loans payable to related parties do not bear interest and were due on
demand. In the three months ended December 31, 2008, the related parties agreed
not to demand repayment of these loans until 2010 and, accordingly, the Company
has classified these loans as long term liabilities at December 31, 2008.
8. Common Stock
In 2007 the Company sold a total of 10,535,908 restricted shares of its
Common stock in private placements at prices ranging from $0.10 to $0.25 per
share resulting in gross proceeds of $1,515,105
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.
9. Income Taxes
EGCO files consolidated income tax returns with its subsidiaries for
federal and state reporting purposes.
For the years ended December 31, 2008 and 2007, the provision for (benefit
from) income taxes consisted of:
2008 2007
---- ----
Current:
Federal $ -- $ --
State -- --
Total current -- --
Deferred:
Federal (446,807) (411,541)
State (129,718) (116,351)
Valuation allowance 576,525 527,892
--------- ---------
Total $ -- $ --
F-8
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007
A reconciliation of the U.S. federal statutory tax rate to the effective rates
for the years ended December 31, 2008 and 2007 follows:
2008 2007
---- ----
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%
At December 31, 2008 and 2007, the deferred income tax asset consisted of:
December 31,
------------
2008 2007
---- ----
Net operating loss carry-forward $2,781,077 $2,238,054
Valuation allowance (2,781,077) (2,238,054)
Deferred tax asset -- --
Based on management's present assessment, the Company has not yet
determined it to be more likely than not that a deferred tax asset of $2,781,077
attributable to the future utilization of the net operating loss carry-forward
of $6,987,630 will be realized. Accordingly, the Company has provided a 100%
allowance against the deferred tax asset in the financial statements. The
Company will continue to review this valuation allowance and make adjustments as
appropriate. The net operating loss carry-forward expires $1,115,296 in 2022;
$1,734,552 in 2023; $834,731 in 2024; $108,711 in 2025; $426,330 in 2026;
$1,326,697 in 2027, and $1,441,313 in 2028.
Current tax laws limit the amount of loss available to be offset against future
taxable income when a substantial change in ownership occurs. Therefore, the
amount available to offset future taxable income may be limited.
10. 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, 2008 and 2007 was
$101,078 and $49,471 respectively. At December 31, 2008, future minimum annual
rent payments under non-cancellable operating leases are:
2009 $26,556
2010 27,532
2011 28,168
2012 29,016
2013 (through May 31) 12,330
Total $123,602
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-9
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007
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 and 2008.
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
distribution agreement was terminated in July 2009 (see Note 12).
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.
11. 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, 2008
and 2007 was as follows:
Telephone
products and Transportation Unallocated
services products Corporate
(Europhone) (Eurospeed) Administration Total
Segment Segment Amounts Amount
----------- ----------- ----------- -----------
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
Year Ended December 31, 2007
----------------------------
Total revenues $ 109,084 4,561 -- $ 113,645
Income (loss) from Operations (736,722) (306,653) (241,435) ($1,284,810)
Depreciation expense 14,688 -- -- 14,688
Total assets 256,178 260,507 106,110 622,795
12. Subsequent Events
i. In first quarter 2009 the Company sold 611,001 shares of unregistered
common stock for proceeds of $86,045, and issued 50,000 shares of
unregistered common stock in lieu of cash for international marketing
services.
In second quarter 2009 the Company sold 27,500 shares of unregistered
common stock for proceeds of $27,500, and issued 1,000,000 shares of
unregistered common stock in lieu of cash for marketing services.
F-10
EURO GROUP OF COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007
In third quarter 2009 the Company sold 50,000 shares of unregistered
common stock for proceeds of $10,000.
In fourth quarter 2009 the Company sold 50,000 shares of unregistered
common stock for proceeds of $18,000, and issued 10,000 shares of
unregistered common stock in lieu of cash for legal services.
ii. In July 2009 Europhone USA, LLC, the Company's telecommunications
subsidiary, entered an Agreement with New York based Reliance
Communications International, Inc., an affiliate of Reliance
Communications, India's leading integrated telecom company, and a
member of the Anit Dhurabhai Ambani Group, for the marketing and sale
of Europhone's mobile roaming services and products. The Agreement is
for a term of one year and is renewable upon the mutual agreement of
the parties.
iii. On July 16, 2009 Eurospeed Inc. terminated the Exclusive Distribution
Agreement with American Motor Sports, Inc. (d/b/a Eurospeed USA,
LLC)for its failure to meet the "minimum purchase obligation" of ten
thousand (10,000)vehicles in the first twelve months of the Agreement,
and the statutory grace period of ninety (90) days to compensate the
deficiency, and for other defaults and breaches of the Agreement.
Eurospeed Inc. and American Motor Sports are currently attempting to
negotiate a non-exclusive distribution agreement. Eurospeed, Inc.
exercised its contractual right to retake possession of the products
for which payment in full was not received.
iv. In September, 2009 Aris Constantinides resigned from his position as
President of Euro Group and as a member of the Board of Directors of
the Company.
The Company has evaluated subsequent events through the filing date of
this Form 10-K and has determined that there were no additional
subsequent events to recognize or disclose in these financial
statements.
[End of Audited Financial Statements]
F-11
--------------------------------------------------------------------------------
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 8a - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the fiscal quarter ended December 31, 2008, 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
11
assurance 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, 2008, 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, 2008 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.
During the second quarter of 2008, as part of their ongoing assessment of the
Company's internal financial controls, the Chief Executive Officer and Chief
Financial Officer determined that due to the inherent issue of segregation of
duties in a small company, there was a material weakness in the Company's
financial control organization.
As an affirmative response to this recognized deficiency in our financial
controls, the Company has retained the services of Tichy and Ioanides, CPA (the
outside financial consultants) to review all internal reporting performed by our
internal accounting staff on a monthly basis, and to provide an additional level
of review to all financial reporting. The results of management's assessment,
and the addition of Tichy and Ioanides, CPA, was reviewed with, and approved by,
the Company's Board of Directors.
Changes in Internal Controls
During the three month period ended December 31, 2008 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.
Part III
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 55 Chairman, Chief Executive Officer
Aris Constantinides 62 President
Andrew Eracleous 80 Chief Financial Officer, Director
Paul Kotrotsios 53 Director
Georgia Dumas 41 Director
Anna Aspras 41 President of Operations
Anastasios Koutsombinas 35 President, European Operations
Kenneth Downey 47 Director
Stephen R. Bellis 49 Director
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
12
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.
Aris Constantinides was appointed President of the Company on July 19,
2007. Prior to that and since 1985 he had founded and was President of, Quintex
Communications (QC) an Audiovox Corporation subsidiary. QC was a master Agent
for Nynex Mobile. In 2005 with the sale of Audiovox Communications Corp. (ACC)
to UTStarcom Inc., QC was part of the sale and he still was President of the QC.
Between 1974 and 1985 he held various positions, namely a Senior Auditor for CPC
International/Best Foods, in Englewood Cliffs, NJ, and founded and operated
Constant Sound Inc. a mobile electronics distributor located in St. James, NY.
Between 1970 through 1974, Aris Constantinides was a Senior Accountant in the
audit department of Price Waterhouse's New York office. Mr. Constantinides
received a B.S. in accounting from the New York Institute of Technology in 1970
and an MBA from Pace University in 1985.
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 has served as President of
Operations of Euro Group since 2007. 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.
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.
12
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 2008.
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, 2008, 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.
Item 10. Executive Compensation
The following Summary Compensation Table sets forth, for the three years
ended December 31, 2008, 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 2008 125,000 0 0 125,000
CEO
" " 2007 125,000 0 0 125,000
" " 2006 25,800 0 0 25,800
13
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.
In a meeting of the Euro Group of Companies, Inc. held at the Company's
corporate offices on February 11, 2008 the members of the Board, with the
Chairman and CEO abstaining, unanimously voted to award the CEO five million
shares of Euro Group common stock and voted to award "non-dilution rights" to
the CEO, which would have had the effect of preserving his ownership percentage
of the Company's common stock at 72.3% of the outstanding common stock of the
Company. The Chairman and CEO determined that this was not in the best interest
of the Company and returned the five million shares to the Company and refused
to accept the non-dilution provision.
DIRECTOR COMPENSATION
There were payments of $12,000 to each of four "outside" directors in 2008.
Outside directors receive $2,000 for each board meeting they attend, and
employee directors receive no compensation for their board service.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of December 31,
2008, 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.
# of Common Percent of
Name and Address Shares Owned Class Owned
---------------- ------------ -----------
Vasilios Koutsobinas 6,600,000 5.9%
Andrew Eracleous 939,500 .9%
Aris Constantinides 0 --
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.
Item 12. Certain Relationships and Related Transactions
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 2010, totaled $2,020,910 at December 31, 2008 and does not bear interest.
The Company rented its previous corporate office facilities in Port Chester, New
York under a sub-lease agreement with Olympic Telecom, Inc, a corporation
controlled by the Company's chief executive officer. The term of the sub-lease
agreement, which as amended provided for monthly rents ranging from $3,360 to
$3,886, commenced in February 1, 2005 and was terminated in December 2008.
14
Item 13. Exhibits and Reports on Form 8-K
(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
Item 14 Principal Accounting Fees and Services
The audit fees for the years ended December 31, 2008 and 2007 were $ 27,500 and
$27,000. All services provided by the principal accountants were approved by the
Board of Directors.
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. is responsible for performing
an independent audit of our financial statements and issuing a report on such
financial statements. Our board of directors' responsibility is to monitor and
oversee these processes.
15
Our board reviewed the audited financial statements of our company for the year
ended December 31, 2008 and met with both other members of management and the
independent auditors, separately and together, to discuss such financial
statements. Our board also received written disclosures and a letter from our
auditors regarding their independence from us, as required by Independence
Standards Board Standard No. 1, and discussed with the auditors their
independence with respect to all services that our auditors rendered to us. Our
board also discussed with the auditors any matters required to be discussed by
Statement on Auditing Standards No. 61. Based upon these reviews and
discussions, our board authorized and directed that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2008.
Audit-Related Fees
There were no additional audit-related fees in 2008 and 2007.
Tax Fees
There were no fees paid for tax services relating to the years ended December
31, 2008 and 2007.
16
Signatures
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 13, 2009 /s/ Vasilios Koutsobinas
-----------------------------------
Vasilios Koutsobinas
Chief Executive Officer
Director
(Principal Executive Officer)
November 13, 2009 /s/ Andrew Eracleous
-----------------------------------
Andrew Eracleous
Chief Financial Officer
Director
(Principal Financial and
Accounting Officer)
November 13, 2009 /s/ Anna Aspras
------------------------------------
Anna Aspras
President of Operations
Director
November 13, 2009 /s/ Paul Kotrotsios
------------------------------------
Paul Kotrotsios
Director
November 13, 2009 /s/ Georgia Dumas
------------------------------------
Georgia Dumas
Director
17
