ITEM 1.
BUSINESS
History
We were organized under the laws of the Cayman Islands on March 10, 2006, and our wholly owned subsidiary, Aegean Earth S.A., was organized under the laws of Greece in July 2007. In February 2008, we acquired all of the outstanding equity securities of Aegean Earth S.A. from its shareholders. Prior to our acquisition of Aegean Earth S.A., we had not generated revenues and our business consisted solely of attempting to identify, investigate and conduct due diligence on potential businesses for acquisition.
We filed a registration statement on Form 10 with the Securities and Exchange Commission (the “Commission”) to register our ordinary shares under Section 12(g) of the Exchange Act and we file periodic reports with the Commission pursuant to the Exchange Act. Copies of such reports, along with our registration statement on Form 10 are available on the Commission’s web site. In January, 2008, our shareholders approved an amendment to our Memorandum and Articles of Association, which, among other things, changed our name from “Tiger Growth Corporation” to “Aegean Earth & Marine Corporation.”
Business Plan
Through our wholly owned subsidiary, Aegean Earth S.A., we intend to engage in the business of construction and development of real estate projects, roads, utility structures, commercial buildings, and other related facilities in Greece, the Mediterranean and Balkan countries and other parts of Southern and Eastern Europe, either alone or by forming joint ventures with other companies. We also intend to actively pursue the acquisition of complimentary construction companies to increase construction project opportunities and revenue. We are actively pursuing construction opportunities both in the private and public sectors throughout the Mediterranean, Middle East, and Northern Africa regions. We are also actively pursuing the acquisition of one company which we believe will be completed in the second or third quarter of 2008, provided, however, that no assurance can be given that such acquisition will be completed by then or at all.
We intend to take advantage of what we perceive to be increasing demand for construction in the Mediterranean and Balkan countries. We have entered into a consulting contract with Goritsas Panayotis, the former president of Empedos, S.A., a Greek construction company, who has over 25 years of experience in the construction industry, and has experience in performing a variety of types of construction projects, including highways, commercial buildings, bridges and tunnels, airports and marinas. In addition, one of our directors, Joseph Clancy, who is also the Managing Director of Aegean Earth S.A., has prior experience in the negotiation and development of construction projects in the residential, commercial, and industrial sectors over the past 30 years.
We believe that there is strong opportunity in construction in the Mediterranean and Balkan countries. In Greece, where Aegean Earth S.A. is headquartered, a number of governmental initiatives have been announced that we believe will increase potential construction and development in Greece. In 2007, the European Union announced that a series of infrastructure improvements have been planned, including the development of further upgrades of highways and the rail network, that are partially being financed by EUR24 billion funding which has been allocated to Greece from the European Union for the period from 2007 to 2013. We intend to focus a significant portion of our efforts to obtaining contracts and thereafter providing the construction and other services for these projects. The Greek government has made an effort to promote tourism, spending over $55 million in the promotion of tourism in 2006 alone, which resulted in an increase in tourism of over 10% in 2006 as compared to the previous year. We believe that past increases in tourism are likely to continue, and could result in the need for construction of additional tourism related facilities such as hotels and marinas, resulting in additional opportunities for us. In the surrounding states of Bulgaria and Romania, the European Union has designated over EUR22 billion in grant money for the purpose of structural improvements, primarily in the environmental and infrastructure areas. We are actively working with existing suppliers, managers, operators and property owners in pursuing this area of business. We have identified four (4) areas in which current market indicators support additional marina development which includes attendant commercial support facilities such as hotels, casinos, restaurants and luxury shopping areas.
We have entered into negotiations with the Municipality of Argostoli, in Greece, for the potential development of a tourist harbor, commercial marina, cruise ship docking area, and other commercial development surrounding the Argostoli harbor area. We will fund and prepare, either ourselves or through the use of a third party, a feasibility study to determine the scope and economic viability of the proposed project. After we have completed the feasibility study, if the Municipality decides to go forward with the project, we propose to enter into a joint venture with the Municipality to develop and manage the proposed project. Our role in the joint venture would be to manage the master planning, design, construction, and operation of the marina and the related amenities. Estimated revenues for this project range from $35-$60 million, depending on the results of the feasibility study, which will determine the size and scope of the project.
One of our intended methods of growth is through the acquisition of complimentary construction, engineering, or development companies in Greece and elsewhere in Europe. We have started the process of identifying a number of acquisition targets that will potentially allow it to generate immediate revenue through existing projects.
Government Regulation of Construction Industry in Greece
One of our initial focuses will be to obtain construction contracts to work on infrastructure projects for the Greek Government. In order to undertake public works projects or infrastructure projects for the Greek government, a construction company must be registered at the Ministry’s of Public Works and be classified as to the size and type of project it may undertake. There are seven classifications (which are referred to as “diplomas”), and construction companies in the seventh class are able to participate in any kind of project on its own or in joint venture. In order to receive a classification, a construction company must present a full dossier of its work experience as a construction company and the work experience of its technical engineering and operations personnel. A construction company must have a stated number of civil engineers, structural, mechanical and electrical engineers on staff with each individual having attained the appropriate diploma from an accredited university and each individual must have the requisite work experience in his or her career. After reviewing a construction company’s dossier of past projects and the experience of its personnel, the Ministry of Public Works will assign a classification accordingly. Lower classifications may prohibit a construction company from bidding on certain types of larger public and private projects.
We do not currently have a classification but intend to commence the process to obtain a classification as soon as possible, either through filing an initial application on our own behalf or by acquiring a construction company with the necessary licenses in a transaction structured so as to allow the target company to retain and utilize its licenses. In order to apply for a classification through the filing of an application on our own behalf, we will have to retain additional engineering and operations personnel. We expect that initially we would only qualify for a lower level classification and that the initial application process could take from six to nine months to complete, Prior to filing an application on our own behalf, we will seek to obtain a classification through the acquisition of construction company with the necessary classification. We believe that we may be able to obtain a higher classification through an acquisition than we could though filing of an initial application. If we are not successful in making an acquisition then we will commence the application process, which may result in the receipt of a lower level classification which would limit the types of projects that the Company may perform to smaller construction projects and could take between six and nine months.
In addition to the aforementioned Marina in Argostoli, we are also pursuing a number of other development projects. We are pursuing these projects with the intention of subcontracting the construction portions of these projects to third party subcontractors so that we can focus on the development portion of the projects. If we are awarded any of these projects and subsequently obtain a construction license, we may perform portions of the construction activities if the construction activities do not interfere with the development activities related to the projects.
Customers
We intend to focus our efforts on developing a customer base consisting of private, public and quasi public entities.
Competition
The real estate construction, engineering and development businesses in Greece and the Baltic Region are highly fragmented and is highly competitive. We estimate that there are over 2,000 construction companies in Greece, with approximately 20 traded on the Athens Stock Exchange. We believe that that the construction industry will continue to grow and that competition will increase substantially as more grant money from Greece, the European Union and/or other countries becomes available for infrastructure and development in the Mediterranean and Balkan countries. We are aware of a number of larger international construction companies along with well established local construction and engineering firms that are currently contemplating developments (and others that are actively engaged in construction) that we believe will be our direct competitors.
Some of the larger companies that we will be competing with include:
·
AKTOR S.A. and ELLINIKI TECHNODOMIKI S.A. which we believe to be one of, if not the largest, Greek construction company. ELLINIKI TECHNODOMIKI is acting as holding company for the group investments and AKTOR S.A. is the construction and contracting company of the group. The company has a number or projects throughout Greece, in which it will build and operate a project for a contractually agreed to number of years (typically between 20-99), and then transfer the ownership back to the municipality that commissioned the project.
·
J&P AVAX S.A. which we believe to be a Greek company of J & P which is one of the main European contractors. The company originates from Cyprus.
·
GEK - TERNA, a Greek company, which we believe is active in Greece and abroad in public infrastructure projects and private development projects. The company is also involved in energy projects.
·
MICHANIKI S.A., a Greek company having created a group industries around it mostly related to the construction business i.e. aluminum profile industry, wood construction related industry. The company works abroad, mainly in the Ukraine in development projects and recently has entered the Russian market.
·
ATHINA S.A., a Greek company with experience in buildings and marine works and a lot of works in the Middle East.
·
AEGEK S.A. a Greek company with experience in infrastructure works especially dams and tunnels.
·
VIOTER S.A., which we believe to be one of the smallest of the competitors listed herein which has experience in building works and serious involvement in development projects.
·
ATTIKAT S.A., a company involved in infrastructure works especially highways which recently sold a large part of its shares to GEK - TERNA S.A.
Each of the foregoing competitors have greater financial, personnel and other resources and more extensive experience in the development/engineering/construction business than the Company. See “Risk Factors.”
Employees
As of November 23, 2008, we had four employees, two of which are full time.
ITEM 1A.
ITEM 1A.
RISK FACTORS
This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not statements of historical facts, but rather reflect our current expectations or beliefs concerning future events and results. We generally use the words "believes," "expects," "intends," "plans," "anticipates," "likely," "will" and similar expressions to identify forward-looking statements. Such forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The risks, uncertainties and factors that could cause our results to differ materially from our expectations and beliefs include, but are not limited to, those factors set forth below:
·
changes in laws or regulations affecting our operations;
·
changes in our business tactics or strategies;
·
acquisitions of new operations;
·
changing market forces or contingencies that necessitate, in our judgment, changes in our plans, strategy or tactics; and
·
fluctuations in the investment markets or interest rates, which might materially affect our operations or financial condition.
We cannot assure you that the expectations or beliefs reflected in these forward-looking statements will prove correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Annual Report on Form 10-K.
Risks Related to our Business
We and our wholly owned subsidiary Aegean Earth S.A. are development-stage, start-up companies with no operating histories, which makes it difficult to evaluate our existing business and business prospects and increases the risk that the value of any investment in us will decline.
We were founded in March 2006 and Aegean Earth S.A. was founded in July 2007, therefore, we have a limited operating history upon which you can make an investment decision, or upon which you can evaluate our business. We have not generated revenue and will not be able to generate revenue unless and until we commence construction projects and/or acquire entities that are actively engaged in construction projects. For the fiscal year sended December 31, 2008 and 2007, we and Aegean Earth S.A. reported losses of $1,143,534 and $97,418, respectively. You should, therefore, consider us subject to the business risks associated with a new business. The likelihood of our success must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the formation and initial operations of a new business.
We will require additional capital to pursue our business plan.
We have financed our operations since our inception through funds raised in private placements. Through April 2008, we received approximately $6.0 million in gross proceeds in a private placement. We intend to utilize the financing to effectuate acquisitions and bid on smaller projects until revenues are generated and our operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including our ability to obtain material contracts and/or complete one or more strategic acquisitions. Accordingly, we expect to need to obtain additional private or public financing including debt or equity financing and there can be no
assurance that such financing will be available as needed or, if available, on terms favorable to us. Any additional equity financing may be dilutive to shareholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing ordinary shares. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. There can be no assurance that additional funds will be available when and if needed from any source or, if available, will be available on terms that are acceptable to us. We may be required to pursue sources of additional capital through various means, including joint venture projects and debt or equity financings. Future financings through equity investments are likely to be dilutive to existing shareholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our subsequent investors. Newly issued securities may include preferences, superior voting rights, or may be issued with warrants or other derivative securities, which themselves may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. Our ability to obtain needed financing may be impaired by such factors as the capital markets, the lack of a market for our ordinary shares, and our lack of profitability, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs, we may be required to reduce or cease operations.
Difficult conditions in the worldwide and European Economy may adversely affect the Company’s ability to complete acquisitions, receive additional financing, and may decrease the number of construction projects available for bid.
The difficult worldwide economic conditions may significantly decrease the Company’s ability to find and complete synergistic and accretive acquisitions, which is an integral part of our business plan. The lack of liquidity in the debt and equity markets may also negatively affect our ability to raise additional funds for acquisitions and to fund construction projects. Without additional financing, the Company may not have the ability to become bonded or purchase the necessary raw materials to complete any of its intended projects. Additionally, the number of potential projects available may significantly decrease if the global recession continues. All of these factors may have a material adverse effect on our financial condition and results of operations.
An integral part of our business plan involves acquisitions which may or may not be completed.
We intend to utilize acquisitions as part of our business strategy to enter into the construction market in Greece and abroad. These acquisitions may include the acquisition of operating licenses that are necessary for us to participate in certain types of projects. There can be no assurances that we will complete any acquisitions. If we fail to complete an acquisition, it could have a material adverse effect on our financial condition and results of operations.
We are not yet licensed by the Greek government to undertake construction projects in Greece and if we do not obtain a license we will not be able to engage in construction projects in Greece.
Construction companies must be licensed by the Greek government in order to engage in construction projects and we do not have such a license. Construction companies in Greece are classified into seven classes according to the size of the company and other criteria that determine the size of project that they may participate in. Construction companies with the highest classification are able to participate in projects of any size. We intend to obtain a license either through filing an initial application or by acquiring an existing company that has a license. If we are not able to obtain a license we will not be able to bid on and participate in construction projects in Greece, which would have a material adverse effect on our business. If we do obtain a license, but do not receive the highest classification, we will only be able to bid on and participate in projects of limited size, which could have an adverse effect on our business and results of operations.
Our future classification with the Greek government may limit the size of construction projects that we may be able to undertake.
Construction companies in Greece are classified into seven classes according to the size of the company and other criteria that determine the size of project that they may participate in. Construction companies with the highest classification are able to participate in projects of any size. We will attempt to obtain the highest classification of license, either through our own application or through acquisition. If we are not able to receive the
highest classification, we will only be able to bid on and participate in projects of limited size, which could have an adverse effect on our business. Further, if we were to not receive a license, it could have a material adverse effect on our business and results of operations.
Our success will be dependent upon our ability to successfully bid on and timely complete construction projects which involves a high degree of risk.
The construction business is subject to substantial risks, including, but not limited to, the ability to successfully bid on, and be awarded favorable potential construction projects. Further, if we are successful in bidding on construction projects, our ability to complete such construction projects are subject to a number of additional risks, including, but not limited to, availability and timely receipt of zoning and other regulatory approvals, available capital, available labor, compliance with local laws, and the ability to obtain financing on favorable terms. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent the start and/or the completion of construction activities once undertaken, any one of which could have a material adverse effect on our financial condition and results of operations.
The construction business is subject to a number of risks outside of our control.
The construction industry is highly cyclical by nature and future market conditions are uncertain. Factors beyond our control can affect our business. Factors which could adversely affect the construction industry, many of which will be beyond our control, include, but are not limited to:
·
the availability and cost of financing for our customers;
·
unfavorable interest rates and increases in inflation;
·
overbuilding or decreases in demand;
·
changes in national, regional and local economic conditions;
·
cost overruns, inclement weather, and labor and material shortages;
·
the impact of present or future environmental legislation, zoning laws and other regulations;
·
availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property;
·
increases in taxes or fees;
·
local law; and
·
available labor and negotiations with unions.
Although we have not commenced any construction projections to date, if we do, we may experience shortages of building supplies and labor, resulting mainly from circumstances beyond our control, which could cause delays and increase costs of completing construction projects, which may adversely affect our operating results.
Our ability to successfully complete construction projects may be affected by circumstances beyond our control, including:
·
shortages or increases in prices of construction materials;
·
natural disasters in the areas in which we operate;
·
work stoppages, labor disputes and shortages of qualified trades people, such as carpenters, roofers, electricians and plumbers;
·
lack of availability of adequate utility infrastructure and services; and
·
our need to rely on local subcontractors who may not be adequately capitalized or insured.
Any of these circumstances could give rise to delays in the start or completion of, or increase the cost of, a construction projects. We anticipate competing with other construction companies for labor as well as raw materials, who may be better financed than us. Increasing global demand for construction materials, as well as increases in fuel and commodity prices have resulted in significantly higher prices of most building materials, including lumber, drywall, steel, concrete, roofing materials, pipe and asphalt. In addition, local materials suppliers may limit the allocation of their products to their existing customers, which could cause us to have to obtain
materials from other suppliers, which could further increase our costs and in turn adversely affect our financial condition and results of operations.
Product liability litigation and claims that may arise in the ordinary course of our proposed business may be costly and could negatively impact our reputation, which could adversely affect our proposed business.
Our proposed construction business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims are ordinary in the construction industry and can be costly. Among the claims for which developers and builders have financial exposure are mold-related property damage and bodily injury claims. Damages awarded under these suits may include the costs of remediation, loss of property and health-related bodily injury. In response to increased litigation, insurance underwriters have attempted to limit their risk by excluding coverage for certain claims associated with pollution and product and workmanship defects. We may be at risk of loss for bodily injury claims in amounts that exceed available limits on our comprehensive general liability policies. In addition, the costs of insuring against construction defect and product liability claims, if applicable, are high and the amount of coverage offered by insurance companies is also currently limited. There can be no assurance we will be able to obtain insurance or if obtained, that the coverage will not be restricted and become more costly. If we are not able to obtain adequate insurance, we may experience losses that could negatively impact our proposed business.
We are subject to governmental regulations that may limit our operations, increase our expenses or subject us to liability.
We may be subject to Greek (as well as those of other countries where we do business and the European Economic Union) laws, ordinances and regulations concerning, among other things:
·
environmental matters, including the presence of hazardous or toxic substances;
·
wetland preservation;
·
health and safety;
·
zoning, land use and other entitlements;
·
building design, and
·
density levels.
In developing any project, we may be required to obtain the approval of numerous Greek governmental authorities (and others) regulating matters such as:
·
installation of utility services such as gas, electric, water and waste disposal;
·
the dedication of acreage for open space, parks and schools;
·
permitted land uses, and
·
the construction design, methods and materials used.
We may also at times not be in compliance with all regulatory requirements. If we are not in compliance with regulatory requirements, we may be subject to penalties or we may be forced to incur significant expenses to cure any noncompliance. In addition, some of our land we may acquire may not have received planning approvals or entitlements necessary for planned or future development. Failure to obtain entitlements necessary for development on a timely basis or to the extent desired would adversely affect our proposed business.
Increased insurance risk could negatively affect our business.
Insurance and surety companies may take actions that could negatively affect our proposed business, including increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits, restricting coverages, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these would adversely affect our ability to obtain appropriate insurance coverage at reasonable costs which would have a material adverse effect on our proposed business.
Our future success depends on retaining our existing key employees. The loss of key employees could limit our ability to operate our business and execute our growth strategy, which could in turn adversely effect our ability to obtain construction contracts and/or cause a slower rate of growth.
Our future success is substantially dependent on the continued service of our executive officers and other key employees, particularly Joseph Clancy, one of our directors and also the Managing Director of Aegean Earth S.A. and Rizos Krikis, our Chief Financial Officer. Mr. Clancy and Mr. Krikis have experience in and knowledge of the construction industry in Greece and the loss of either or both of these individuals could have a material adverse impact on our ability to compete the construction industry in Greece. In addition, we do not have key-person insurance on any of our employees. No assurances can be given whether we will be able to employ and/or keep key executive officers to execute our business plan. The loss of the services of any of our executive officers, or other key employees could make it more difficult to successfully operate our business and pursue our growth strategy, which could have a material adverse effect on our results of operations.
The construction industry is highly competitive.
We believe we will be subjected to significant competition from other entities engaged in the business of commercial and infrastructure construction. Some of the world's most recognized construction and engineering firms operate in Greece and the surrounding countries. Many of these companies possess significantly greater financial, marketing and other resources than we do. Moreover, as (and if) additional governmental funding becomes available and if the construction business becomes more lucrative, other entities may elect to engage in such business, which entities would also then compete with the Company.
Risks related to doing business overseas.
Some of our Officers and Directors reside outside of the United States which could make it difficult to enforce potential civil liabilities and judgments.
Joseph Clancy, one of our directors, and Mr. Krikis, our Chief Financial Officer, are residents of countries other than the United States, and all of our assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal securities laws or state securities laws.
You may not be able to enforce your claims in the Cayman Islands or Greece.
We are a Cayman Islands corporation and Aegean Earth S.A. is a Greek company. We cannot assure you that a Cayman Islands or Greek court would deem the enforcement of foreign judgments requiring us to make payments outside of the Cayman Islands or Greece to be contrary to the Cayman Islands or Greek public policy and/or enforceable.
Risks Related to our Ordinary Shares
If we are a controlled foreign corporation, you may be subject to certain adverse U.S. federal income tax consequences, including having to include undistributed earnings in your gross income and/or not being able to take advantage of capital gains treatment in a sale of ordinary shares.
Under Section 951(a) of the Internal Revenue Code (the “Code”), each “United States shareholder” of a “controlled foreign corporation” (“CFC”) must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC’s “subpart F income,” even if no income is actually distributed to the “United States shareholder.” In addition, gain on the sale of stock in a CFC realized by a “United States shareholder” is treated as ordinary income, potentially eligible for the reduced tax rate applicable to certain dividends, to the extent of such shareholder’s proportionate share of the CFC’s undistributed earnings and profits accumulated during such shareholder’s holding period for the stock. Section 951(b) of the Code defines a “United States shareholder” as any U.S. corporation, citizen, resident or other U.S. person who owns (directly or through certain deemed ownership
rules) 10% or more of the total combined voting power of all classes of stock of a foreign corporation. In general, a foreign corporation is treated as a CFC only if such “United States shareholders” collectively own more than 50% of the total combined voting power or total value of the foreign corporation’s stock. Although the Company following this Offering does not expect to be a CFC, there can be no assurance that the Company will not become a CFC in the future. If the Company is treated as a CFC, the Company’s status as a CFC should have no adverse effect on any shareholder of the Company that is not a “United States shareholder.”
If we are considered a Passive Foreign Investment Company, you may be subject to certain adverse U.S federal income tax consequences, including subjecting US shareholders to additional taxes.
Special adverse U.S. federal income tax rules apply to U.S. holders of equity interests in a non-U.S. corporation classified as a “passive foreign investment company” (“PFIC”). These rules apply to direct and indirect distributions received by U.S. shareholders with respect to, and direct and indirect sales, exchanges and other dispositions, including pledges, of shares of stock of, a PFIC. A foreign corporation will be treated as a PFIC for any taxable year if at least 75% of its gross income (including a pro rata share of the gross income of any company in which the Company is considered to own twenty five (25) percent or more of the shares by value) for the taxable year is passive income or at least 50% of its gross assets (including a pro rata share of the assets of any company of which the Company is considered to own twenty five (25) percent or more of the shares by value) during the taxable year, based on a quarterly average of the assets by value, produce, or are held for the production of, passive income.
The Company believes that it will not be a PFIC for its current taxable year and does not anticipate becoming a PFIC in future taxable years. A foreign corporation’s status as a PFIC, however, is a factual determination that is made annually, and thus may be subject to change. If the Company were a PFIC in any taxable year, each U.S. holder, in the absence of an election by such holder to treat the Company as a “qualified electing fund” (a “QEF Election”) would, upon certain distributions by the Company or upon disposition of the Equity Shares (possibly including a disposition by way of gift or exchange in a corporate reorganization, or the grant of the stock as security for a loan) at a gain, be liable to pay U.S. federal income tax at the highest tax rate on ordinary income in effect for each period to which the income is allocated plus interest on the tax, as if the distribution or gain and deem recognized ratably over the U.S. holder’s holding period for the Equity Shares while the Company was a PFIC. Additionally, the Equity Shares of a decedent U.S. holder who failed to make a QEF Election will generally be denied the normally available step-up of the tax basis for such Equity Shares to fair market value at the date of death and, instead, would have a tax basis equal to the decedent’s tax basis, if lower, in the Equity Shares. U.S. holders should consult their tax advisers on the consequences of an investment in Equity Shares if the Company were treated as a PFIC.
We are authorized to issue up to 78,125,000 ordinary shares and 20,000,000 preference shares, which could reduce the proportionate ownership interests of current shareholders.
We are authorized to issue up to 78,125,000 ordinary shares and 20,000,000 preference shares. Our Board of Directors has the ability, without seeking stockholder approval, to issue additional ordinary shares and/or preference shares stock in the future for such consideration as our Board of Directors may consider sufficient. The issuance of additional ordinary shares and/or preference shares in the future will reduce the proportionate ownership and voting power of our ordinary shares held by existing stockholders. Further, our board of directors is empowered, without shareholder approval, to issue preference shares with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of ordinary shares. In the event of such issuance, the preference shares could be used as a method of discouraging, delaying or preventing a change in control of our company, which could have the effect of discouraging bids for our company and thereby prevent shareholders from receiving the maximum value for their shares.
There is presently no market for our Ordinary Shares.
There is no market for our ordinary shares or any of our other securities. Although we may in the future apply to have our ordinary shares quoted on the Pink Sheets, the Over-The-Counter Bulletin Board or another trading and/or quotation medium, there can be no assurance as to when or if our ordinary shares will become traded and/or quoted on any trading medium. Even if our ordinary shares are quoted on a trading medium, there can be no assurance that an active trading market will develop for such shares. If an active trading market does not develop or
continue, you will have limited liquidity and may be forced to hold your investment in the Company for an indefinite period of time.
If our Ordinary Shares are traded and/or quoted, we expect that the shares will be subject to the “penny stock” rules for the foreseeable future.
We expect that our ordinary shares, if traded and/or quoted, will be subject to the Commission’s “penny stock” rules. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for the ordinary shares. As long as our ordinary shares are subject to the penny stock rules, the holders of its shares may find it more difficult to sell their securities.
We have never declared or paid dividends on our ordinary shares and we do not currently anticipate paying any cash dividends in the foreseeable future.
We have never declared or paid dividends on our ordinary shares and we do not currently anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our business. Except for the rights of holders of the Series A Preference Shares to receive dividends, any future determination to pay dividends on our ordinary shares will be at the discretion of our board of directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions and other such factors as our board of directors may deem relevant.
The concentration of ownership of our ordinary shares with insiders and their affiliates is likely to limit the ability of other shareholders to influence corporate matters.
Approximately 74% of our outstanding ordinary shares are under the control of certain of our directors and executive officers and their affiliates. As a result, these persons will have the ability to exercise control over all matters requiring approval by our shareholders, including, but not limited to, the election of directors and approval of significant corporate transactions. This concentration of ownership might also have the effect of delaying or preventing a change in our control that might be viewed as beneficial by other shareholders or discouraging a potential acquirer from making an offer to shareholders to purchase their ordinary shares in order to gain control of us.
ITEM 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2
ITEM 2
PROPERTIES
We do not own or rent any property. We utilize the office space and equipment of our officer and directors at no cost.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
We are not party to any legal proceedings.
ITEM 4.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2008.
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)
Market information
Our ordinary shares have not been listed for trading on the OTC Bulletin Board or on any stock exchange.
(b)
Holders
As of December 31, 2008, there were approximately 492 record holders of 7,053,033 Ordinary Shares.
(c)
Dividends
Historically, we have not paid any dividends to the holders of our ordinary shares and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.
(d)
Securities authorized for issuance under equity compensation plans
We do not have any compensation plans under which our securities have been authorized for issuance, however, we intend to develop a stock option plan during 2009.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from our audited financial statements appearing elsewhere herein.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Disclosure Regarding Forward Looking Statements
Disclosure Regarding Forward Looking Statements
Statements, other than historical facts, contained in this Quarterly Report on Form 10-Q, including statements of potential acquisitions and our strategies, plans and objectives, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Although we believe that our forward looking statements are based on reasonable assumptions, we caution that such statements are subject to a wide range of risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are important factors that could cause actual results to differ materially from the forward looking statements, which include, but are not limited to; the effect of existing and future laws, governmental regulations and the political and economic climate of the United States; the effect of derivative activities; conditions in the capital markets and those factors referred to or identified in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2007. We undertake no duty to update or revise these forward-looking statements.
When used in this Form 10-Q, the words, "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons.
Overview
We were formed on March 10, 2006 solely for the purpose of identifying and entering into a business combination with a privately held business or company, domiciled and operating in an emerging market. On February 29, 2008, we completed the acquisition of Aegean Earth S.A. pursuant to a share exchange agreement. Aegean Earth S.A. was formed in July 2007 for the purpose of engaging in the construction industry in Greece and surrounding Mediterranean countries. Prior to our acquisition of Aegean Earth S.A., we were a blank check company that had not yet realized revenue. Since the acquisition of Aegean Earth S.A., we have entered into negotiations for the construction of a number of construction projects in Greece and in northern Africa, but have not commenced any construction projects or entered into any binding agreements to perform a construction project.
Results of Operations
Comparison of the years ending December 31, 2008 and 2007
Because we acquired Aegean Earth at the end of February 2008, and prior thereto we did not have any business operations, we have not had any revenues during the years ending December 31, 2008 and 2007. Total operating expenses for the year ended December 31, 2008 were $834,632 compared with $94,135 for the year ended December 31, 2007. The increase is primarily related to legal and professional fees related to the acquisition of Aegean Earth S.A. and the addition of the operating activity in Aegean Earth S.A. Other expenses also increased from $3,283 in other expenses for the year ended December 31, 2007 to a net other expense of $308,902. This increase was caused by the devaluation of the euro versus the dollar during the third calendar quarter of 2008, which was off-set by $96,995 of interest income earned during the year ended December 31, 2008.
Liquidity and Capital Resources
As of December 31, 2008, we had working capital of $2.0 million and a cash balance of $2.0 million. We believe that we will be able to meet all of our funding needs in the next twelve months, including additional planned
acquisitions. No assurances can be given, however, that our business plan will succeed and that we will be not need to seek additional external financing.
Plan of Operation
During the next 12 months, our business will be focused on the development of Aegean Earth S.A.’s construction business in Greece and potential acquisitions of complimentary businesses. As such, we are currently in the development-stage of identifying and bidding on suitable construction projects. For the next 12 months, our Plan of Operation is as follows:
·
Focus on development of Aegean Earth S.A.’s construction business;
·
Work to take advantage of investments in infrastructure, primarily in Greece and the surrounding regions; and
·
Attempt to acquire at least one other construction company by the end of the first quarter of 2009.
We anticipate, but cannot assure, that we will have a number of potential projects in various stages of development by the end of 2009 or in the first half of 2009 and we hope to commence construction activities by the in 2010. Assuming that we obtain the necessary licenses and are able to commence construction activities by 2010, we hope to achieve profitability some time before 2011. Provided however, there can be no assurance that we will be able to commence construction activities or that we will achieve profitability during our anticipated time frames, if at all. We estimate that our total anticipated general and administrative and other fixed costs for the next twelve months will be approximately $500,000. We expect that such estimated costs will increase depending on the size and number of projects that we undertake. We anticipate utilizing project financing or deposit payments to fund the construction and development of the projects we undertake to the extent possible to mitigate the additional operating costs of undertaking construction and development projects. We also expect to utilize financing, either the sale of debt or equity securities to fund any acquisitions of construction companies that we undertake.
We have entered into negotiations with the Municipality of Argostoli, in Greece, for the potential development of a tourist harbor, commercial marina, cruise ship docking area, and other commercial development surrounding the Argostoli harbor area. We have agreed to fund and prepare a feasibility study, which will be performed by us or through a third party, to determine the scope and economic viability of the proposed project. We hope to conclude the feasibility during 2009. After we have concluded the feasibility study, if the proposed project is viable, and the Municipality decides to go forward with the project, we propose to enter into a joint venture with the Municipality to develop and manage the proposed project. Estimated revenues for this project range from $35-$60 million, depending on the results of the feasibility study, which will determine the size and scope of the project. Such estimated revenues are also dependent upon our securing necessary licenses in Greece to allow us to undertake the construction portion of this project. If we are unable to secure a construction license, or if we decide to subcontract the construction portion of this project, potential revenues from the project would be reduced by approximately $5-$10 million.
In addition to the foregoing, we are also engaged in negotiations for projects with parties other than the Municipality of Argostoli in the following areas:
·
The construction and development of additional marinas and surrounding areas;
·
The construction of a number of medical facilities in northern Africa;
·
Remediating a series of landfills in Greece and other countries in the Mediterranean;
·
The reforestation of the Peloponnese region in Southern Greece; and
·
Other residential and commercial construction and development projects.
We will also attempt to acquire at least one other construction company in Greece in order to acquire additional resources that will allow us to compete for a larger number of projects in varying areas of expertise and allow us to begin construction projects more rapidly. Specifically we will target companies that have experience in infrastructure, reforestation, and private projects.
Proposed Acquisitions
Part of our Plan of Operation is to attempt to grow our business through the acquisition of complimentary construction, engineering, or development companies in Greece and elsewhere in Europe. We have started the process of reviewing potential acquisition candidates and have identified a number of acquisition targets that will potentially allow us to generate immediate revenue through existing projects.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Income Taxes
Aegean Earth and Marine Corporation was registered as an Exempted Company in the Cayman Islands, and therefore, is not subject to Cayman Island income taxes for 20 years from the Date of Inception. While the Company has no intention of conducting any business activities in the United States, the Company would be subject to United States income taxes based on such activities that would occur in the United States.
The Company’s wholly-owned subsidiary, Aegean Earth, S.A. is subject to income and other taxes in Greece. The stuatory income tax rate in Greece is currently 25%. The Company has not incurred an income tax liability in Greece due to the net losses of the Company.
The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” This statement prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. In assessing the realization of deferred tax assets, management considers whether it is likely that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during periods in which those temporary differences become deductible.
Fair Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents, accounts payable and payables to an affiliate. We believe the fair value of our payable reflects its carrying amount.
The Company adopted SFAS No. 157, “Fair Value Measurements” (SFAS 157) effective January 1, 2008. SFAS 157 established a framework for measuring fair value in GAAP and clarified the definition of fair value within that framework. SFAS 157 does not require assets and liabilities that were previously recorded at cost to be recorded at fair value or for assets and liabilities that are already required to be disclosed at fair value, SFAS 157 introduced, or reiterated, a number of key concepts which form the foundation of the fair value measurement approach to be used for financial reporting purposes. The fair value of the Company’s financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). SFAS 157 also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:
Level 1-quoted prices in active markets for identical assets and liabilities.
Level 2-observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3-unobservable inputs.
The adoption of SFAS 157 did not have an effect on the Company’s financial condition or results of operations, but
SFAS 157 introduced new disclosures about how we value certain assets and liabilities. Much of the disclosure is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs. As of December 31, 2008, the Company did not have financial assets or liabilities that would require measurement on a recurring basis based on the guidance in SFAS 157.
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations - Revised 2007” (SFAS 141(R)). SFAS 141(R) provides guidance on improving the relevance, representational faithfulness, and comparability of information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141(R) applies to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management of the Company does not expect the adoption of this pronouncement to have a material impact on its financial statements.
In December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (SFAS 160), which establishes accounting and reporting standards to improve the relevance, comparability, and transparency of financial information in consolidated financial statements that include an outstanding noncontrolling interest in one or more subsidiaries. SFAS 160 is effective for fiscal years, and the interim periods within those fiscal years, beginning on or after December 15, 2008. Management of the Company does not expect the adoption of this pronouncement to have a material impact on its financial statements.
Effective January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115” (SFAS 159). SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement of certain financial assets and liabilities under an instrument-by-instrument election. Subsequent measurements for the financial assets and liabilities an entity elects to fair value will be recognized in the results of operations. SFAS 159 also establishes additional disclosure requirements. The Company did not elect the fair value option under SFAS 159 for any of its financial assets or liabilities upon adoption. The adoption of SFAS No. 159 did not have a material impact on the Company’s results of operations or financial position.
ITEM 7A.
ITEM 7A.
QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS
The financial statements of the Company, including the notes thereto and report of the independent auditors thereon, are included in this report as set forth in the “Index to Financial Statements.” See for Index to Financial Statements.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A(T).
ITEM 9A(T).
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related
forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of December 31, 2008, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.
Management’s Report on Internal Control Over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
As of December 31, 2008, our management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).. Based on this assessment, management has determined that the Company's internal control over financial reporting was ineffective as of December 31, 2008. Management determined there was an insufficient number of personnel with appropriate technical accounting and SEC reporting expertise to adhere to certain control disciplines, and to evaluate and properly record certain non-routine and complex transactions. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2008 because of the material weakness described in the preceding paragraph. A material weakness in internal control over financial reporting is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
Changes in Internal Controls.
There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal controls.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth certain information about our directors and executive officers:
Name
Age
Position(s)
Frank DeLape
Executive Chairman and Director
Joseph Clancy
Director
Rizos Krikis
Chief Financial Officer
Frank DeLape. Executive Chairman and Director - Frank DeLape is one of our co-founders and was appointed a director and our Executive Chairman on February 29, 2008. Frank DeLape is also Chairman and CEO of Benchmark Equity Group, a company he founded in 1994. Prior to founding Benchmark, Mr. DeLape spent 11 years in executive management roles managing turnarounds for various companies. In that regard, he worked on behalf of such companies’ boards of directors or the sponsoring banks to recapitalize companies to return them to profitability or to maximize cash repayment through orderly liquidation. Benchmark provides private equity and debt financings from various funds as well as a syndicate of investors. Mr. DeLape was a founder and financier of Think New Ideas, a NASDAQ NMS listed company, which later sold for over $300 million. At Benchmark, Mr. DeLape has formed and been instrumental in the growth of eighteen companies. Of these, several have become NASDAQ listed, one listed on the American Stock Exchange, and three were sold, creating in total over several billion dollars in market value. From August 2001 through October 2005, Mr. DeLape was Chairman of the Board of the biotechnology company Isolagen, Inc. Over his four years as Chairman and a major shareholder of Isolagen, Mr. DeLape oversaw the listing of Isolagen on the American Stock Exchange, and raising over $194 million in debt and equity financings for the company. Mr. DeLape is a Director of Polymedix, Inc. since November 2005 and President, CEO and a director of Influmedix, Inc. since April 2006. Mr. DeLape is also a director of Anchor Funding Services since January 2007 and Uni-Pixel, Inc. Both such corporations file reports under the Exchange Act. The trading symbol for Uni-Pixel, Inc. on the NASD Bulletin Board is “UNXL”. Since March 2006, Mr. DeLape has also served as the Executive Chairman of Six Diamond Resorts International, a Cayman Islands company that he co-founded that files reports under the Exchange Act. Mr. DeLape is a controlling shareholder of Six Diamond Resorts International and in October 2007, he was appointed a director of Six Diamond Resorts International. Mr. DeLape is a member of the National Association of Corporate Directors. . See also, Certain Relationships and Related Party Transactions.
Joseph Clancy. Director - Mr. Clancy was appointed a director on February 29, 2008 and has served as a Managing Director of Aegean Earth S.A. since its inception in July 2007. Mr. Clancy is an experienced professional in both private equity and construction and development. Since June 2006, he has served as one of the National Representatives of Access America Investments in Greece and Cyprus. From February 2003 to May 2006, he served as a consultant/advisor for Vibrant Capital Corporation in New York, where he oversaw the implementation of a life settlement acquisition program to secure a bond issued under the securities laws of Luxembourg and also implemented two private placement programs of investments in conjunction with that asset class. Prior thereto, from January 2002 to February 2003 he served as a Director in Oriri Holdings, SA, of Oslo, Norway, where he oversaw the implementation of international marketing operations for content for mobile phones throughout the EU market. Mr. Clancy has also overseen the construction, master planning, and development of numerous properties, including an 800 acre mixed use area in Colorado. He has also served as the Chief Operating Officer of DiaChi Corporation and Prime Financial Services Group of London. Mr. Clancy graduated with a B.Sc. in Engineering from the United States Naval Academy in Annapolis, Maryland. He served as a Captain in the U.S. Marine Corps from 1963-1967 and was decorated for valor for his service in Vietnam.
Rizos Krikis. Chief Financial Officer- Mr. Krikis was appointed our Chief Financial Officer on February 29, 2008. Prior thereto, from 2004 to 2007, Mr. Krikis was Chief Financial Officer of Cosmotelco Telecommunications in Greece. Prior to joining Cosmotelco, Mr. Krikis was a senior manager for the Emporiki Private Equity and Venture Capital Fund, where he was responsible for the initial investment decision and ongoing monitoring of the Fund’s portfolio investment. Mr. Krikis has a number of years of experience in the financial industry and has served in multiple capacities both in industry and private equity. Mr. Krikis also was a consultant from the Greek Trade Commission in New York. He graduated with both his Bachelor’s and Master’s degrees in Business Administration from Baruch College in New York, and is fluent in both English and Greek.
Messrs Clancy and Krikis currently devote 50-60 hours, or 100% of their time to the Company. Upon the recruitment of additional management, it is intended that Mr. Clancy will devote approximately 50% of his time to the Company. Mr. DeLape devotes approximately 15 hours, or 30% of his time to the Company.
Election of Directors and Officers
Holders of our ordinary shares are entitled to one (1) vote for each share held on all matters submitted to a vote of the shareholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our Memorandum and Articles of Association.
Our Board of Directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that purpose. Each director shall hold office until the next annual meeting of shareholders and until the director’s successor is elected and qualified. If a vacancy on the Board of Directors, including a vacancy resulting from an increase in the number of directors then the shareholders may fill the vacancy at the next annual meeting or at a special meeting called for the purpose, or the Board of Directors may fill such vacancy.
Committees of the Board of Directors
Our board of directors has not appointed any committees.
Audit Committee and Code of Ethics
We have not formally appointed an audit committee, and therefore, our board of directors serves the function of an audit committee. We have not made a determination as to whether any of our directors would qualify as an audit committee financial expert. We have not yet adopted a code of ethics applicable to our chief executive officer and chief accounting officer, or persons performing those functions, because of the small number of persons involved in management.
Family Relationships
There are no family relationships among our officers or directors.
Legal Proceedings
Based on our inquiries of all of our officers and directors, we are not aware of any pending or threatened legal proceedings involving any of our officers or directors that would be material to an evaluation of our management.
Director Independence
Our board of directors reviewed the independence of the directors using the criteria established by the American Stock Exchange and has determined that none of our directors are independent based upon such criteria.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. Directors, executive officers and persons who own more than 10% of our common stock are required by Securities and Exchange Commission regulations to furnish to us copies of all Section 16(a) forms they file.
Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners are currently compliant.
Code of Ethics
We have not adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, because of the small number of persons involved in the management of the Company.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
We paid one of our executive officers, Mr. Rizos Krikis, $59,149 in salary and $10,148 in bonuses for the year ended December 31, 2008. None of our other executive officers or directors have received any compensation for the year ended December 31, 2008.
Employment Agreements
Although we have not entered into any employment agreements with our executive officers, we have orally agreed with Mr. Frank DeLape, our Executive Chairman, to issue to him stock options to purchase up to 250,000 ordinary shares. The terms of such options shall be determined at a future date by mutual agreement between us and Mr. DeLape.
Compensation of Directors
We have not paid our directors compensation for serving on our board of directors. Our Board of Directors may in the future decide to award the members of the Board of Directors cash or stock based consideration for their services to us, which awards, if granted shall be in the sole determination of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
Our Board of Directors does not have a compensation committee and the entire Board of Directors performs the functions of a compensation committee.
No member of our Board of Directors has a relationship that would constitute an interlocking relationship with our executive officers or directors or another entity.
Compensation Committee Report
Our Board of Directors does not have a compensation committee and the entire board of directors performs the functions of a compensation committee.
Our Board of Directors has reviewed and discussed the discussion and analysis of our compensation which appears above with management, and, based on such review and discussion, the board of directors determined that the above disclosure be included in this Annual Report on Form 10-K.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security ownership of certain beneficial owners.
The following table sets forth, as of April 15, 2009 the number of Ordinary Shares owned of record and beneficially by our executive officers, directors and persons who hold 5% or more of our outstanding Ordinary Shares.
(1)
Beneficial ownership is calculated based on an aggregate of 7,053,033 ordinary shares outstanding as of April 15, 2009 together with securities exercisable or convertible into ordinary shares within sixty days of April 15, 2009 for each shareholder. Beneficial ownership is determined in accordance with Rule 13d-3 of the SEC. The number of ordinary shares beneficially owned by a person includes ordinary shares issuable upon conversion of securities and subject to options or warrants held by that person that are currently convertible or exercisable or convertible or exercisable within 60 days of April 15, 2009. The ordinary shares issuable pursuant to those convertible securities, options or warrants are deemed outstanding for computing the percentage ownership of the person holding such options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person.
(2)
Unless otherwise specified, the address for the directors and named executive officers is c/o Nautilus Global Partners, 700 Gemini, Suite 100, Houston, TX 77027.
(3)
The address for Mr. Clancy is Tenarou, 49, PO Box 73050, Ano Glyfada, 165 62 Greece
(4)
Consists of 5,037,501 ordinary shares held by Access America Fund, LLP (“AAF”). Such amount does not include ordinary shares issuable upon conversion of the Series A Preference Shares owned by AAF as such Series A Preference Shares are not convertible within 60 days of April 15, 2009. Access America Investments LLC (“AAI”) is the general manager of AAF. Mr. DeLape is the Chairman of AAI and he is also the Chairman of Benchmark Equity Group which owns 41.7% of AAI. Accordingly, Mr. DeLape may be deemed to share indirect beneficial ownership of the ordinary shares held by AAF. Mr. DeLape, however, expressly disclaims beneficial ownership of such ordinary shares. Such amount also does not include 250,000 ordinary shares issuable upon the exercise of stock options, since such options have not yet been granted and are not exercisable within 60 days of April 15, 2009. The exercise terms of such options have not been determined.
(5)
Such amount does not include ordinary shares issuable upon conversion of the Series A Preference Shares owned by AAF as such Series A Preference Shares are not convertible within 60 days of April 15, 2009.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We acquired Aegean Earth S.A. pursuant to an Acquisition Agreement dated as of February 29, 2008 by and among us, Aegean Earth S.A., and Joseph Clancy and Konstantinos Polites for 500,000 of the Company’s ordinary shares. The Company valued the transaction at approximately $50,000 based on the latest third party transaction involving the Company’s ordinary shares for a purchase of the Company’s shares at $0.10 per share. At the time of the acquisition, Mr. Clancy was a controlling shareholder and a Manager of Aegean Earth S.A. and pursuant to the terms of the acquisition agreement, Mr. Clancy received 250,000 ordinary shares in exchange for his capital stock of Aegean Earth S.A. In April 2008, Mr. Clancy transferred 83,333 ordinary shares to PrimeLife Holdings, Ltd. Mr. Clancy is one of our directors and he is also the Manager of Aegean Earth S.A. Based on the prior transaction described above, the dollar value received for the transaction was approximated at $50,000, and the dollar value received by Mr. Clancy was approximated to be $25,000 based on the $0.10 per share prior transaction.
In December 2007, we made two loans to Aegean Earth S.A. evidenced by two promissory notes in the aggregate principal amount of $85,025. These notes bear interest at the rate of 6% per year and are payable on demand. These notes were written primarily to provide working capital to Aegean Earth S.A. prior to our contemplated acquisition of Aegean Earth S.A. One of our directors, Joseph Clancy, was a controlling shareholder and a Manager of Aegean Earth S.A. at the time of the loans.
Access America Fund (“AAF”) previously agreed to make loans to us up to $500,000. In May and November 2007, AAF loaned us $300,000, which are evidenced by promissory notes issued by us to AAF. We used the loans to provide working capital to Aegean Earth S.A. prior to the acquisition. The notes bear interest at the rate of 6% per annum, are payable on demand, and may be converted at any time and from time to time by the holder into an aggregate of approximately 2,500,000 ordinary shares. On April 21, 2008, these Notes were converted into 2,500,000 ordinary shares of the Company. The largest amount of principal outstanding on such loans was $300,000, and as a result of the conversion, as of April 21, 2008, there remaining outstanding principal balance of the loans was $0. Access America Investments LLC (“AAI”) is the general manager of AAF. Mr. Frank DeLape, our Executive Chairman and a director is the Chairman of AAI and he is also the Chairman of Benchmark Equity Group which owns 41.7% of AAI. Mr. Joseph Rozelle, who was our Chief Financial Officer and a director at the time the loans were made is the Chief Financial Officer of AAI.
In November 2007, we reimbursed AAI for $84,980 in due diligence related expenses that were incurred by AAI on behalf us relating to the potential acquisition of Aegean Earth, S.A.
We were founded in March 2006 by Nautilus Global Partners, LLC and Mid-Ocean Consulting Limited. Frank DeLape, our Executive Chairman and a director, is the owner, Chairman and CEO of Benchmark Equity Group, which owns 20% of the equity interests of Nautilus Global Partners and Mr. DeLape controls other entities that collectively own an additional 20% of the equity interests of Nautilus Global Partners. Accordingly, based on his ownership and management position with Benchmark Equity Group, Mr. DeLape may also be deemed to be a founder of our Company. In order to provide us with funds for our formation costs, in April 2006, we issued 1,000,000 ordinary shares (1,562,500 ordinary shares as adjusted for the split) to Nautilus Global Partners and 50,000 ordinary shares (78,125 ordinary shares as adjusted for the split) to Mid-Ocean Consulting Limited, for aggregate consideration of $1,050 at a purchase price of $.001 per share. In addition, Nautilus Global Partners funded a portion of the Company’s operating expenses, of which $9,866 remained outstanding as of March 31, 2008. At the time we received such funding, Joseph Rozelle, the President of Nautilus Global Partners was one of our directors.
Director Independence
Our Board of Directors does not believe that any of the directors qualifies as independent under the rules of any of the national securities exchanges.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
Audit fees include fees paid by the Company to its auditors in connection with the annual audit of the Company’s financial statements and the auditor’s review of the Company’s interim financial statements. The aggregate fees billed to the Company by PMB Helin Donovan LLP for audit services for the fiscal years ended December 31, 2008 and 2007 were $19,735 and $4,240, respectively.
Audit Related Fees
Audit related fees include fees paid by the Company to its auditors for services related to accounting consultations and internal control review. There were no audit-related fees paid by the Company for either of the fiscal years ended December 31, 2008 or 2007.
Tax Fees
Tax fees include fees paid by the Company to its auditors for corporate tax compliance and tax advisory services. There were no tax-related fees billed to the Company for either of the fiscal years ended December 31, 2008 or 2007.
All Other Fees
All other fees include fees paid by the Company to its auditors for all other services rendered by the auditor to the Company. There were no Fees for other services paid by the Company for years ended December 31, 2008 or 2007.
Pre-Approval of Services
We do not have an audit committee. As a result, our board of directors performs the duties of an audit committee. Our board of directors evaluates and approves in advance the scope and cost of the engagement of an auditor before the auditor renders the audit and non-audit services. We do not rely on pre-approval policies and procedures.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1)
Financial Statements:
The list of financial statements filed as part of this annual report is provided on page.
(a)(2)
Financial Statement Schedules
None
(a)(3) Exhibits:
Exhibit
Number
Description
3.1
Amended Memorandum and Articles of Association (1)
3.2
Memorandum of Association (1)
3.3
Articles of Association (1)
31.1
Certification of Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1)
Previously Filed
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 30, 2009
AEGEAN EARTH AND MARINE CORPORATION
By: /s/ Frank DeLape
Frank DeLape
Executive Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date: April 30, 2009
By: /s/ Frank DeLape
Name: Frank DeLape
Title: Executive Chairman
(Principal Executive Officer)
Date: April 30, 2009
By: /s/ Rizos Krikis
Name: Rizos Krikis
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: April 30, 2009
By: /s/ Joseph Clancy
Name: Joseph Clancy
Title: Director
Aegean Earth & Marine Corporation
(A Development Stage Company)
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Aegean Earth & Marine Corporation (the Company) (a development stage company) as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended and the cumulative period from inception (March 10, 2006) through December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aegean Earth & Marine Corporation as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years then ended and the cumulative period from inception (March 10, 2006) through December 31, 2008, in conformity with generally accepted accounting principles in the United States of America.
The accumulated deficit during the development stage for the period from date of inception (March 10, 2006) through December 31, 2008 is $1,266,814.
PMB Helin Donovan, LLP
April 30, 2009
Houston, Texas
Aegean Earth and Marine Corporation
(formerly Tiger Growth Corporation)
(A Development Stage Company)
Consolidated Balance Sheets
See accompanying notes to consolidated financial statements.
Aegean Earth & Marine Corporation
(formerly Tiger Growth Corporation)
(A Development Stage Company)
Consolidated Statements of Operations
See accompanying notes to consolidated financial statements.
Aegean Earth & Marine Corporation
(formerly Tiger Growth Corporation)
(A Development Stage Company)
Statement of Shareholders’ Equity
For the period from Inception (March 10, 2006) through December 31, 2008
See accompanying notes to consolidated financial statements.
Aegean Earth and Marine Corporation
(formerly Tiger Growth Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
See accompanying notes to consolidated financial statements.
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
NOTE 1 - Organization, Business and Operations
On March 10, 2006, Aegean Earth and Marine Corporation, formerly Tiger Growth Corporation (“we”, “us”, “our” or the "Company"), was formed in the Cayman Islands with the objective to acquire, or merge with, a foreign operating business. On February 29, 2008, the Company acquired Aegean Earth S.A., a Greek company formed with the intention of operating in the construction and development sectors in Greece and the surrounding areas.
Through our wholly owned subsidiary, Aegean Earth S.A., we intend to engage in the business of construction and development of real estate projects, roads, utility structures, commercial buildings, and other related facilities in Greece, the Mediterranean and Balkan countries and other parts of Southern and Eastern Europe, either alone or by forming joint ventures with other companies. We also intend to actively pursue the acquisition of complimentary construction companies to increase construction project opportunities and revenue. We are actively pursuing construction opportunities both in the private and public sectors throughout the Mediterranean, Middle East, and Northern Africa regions. We are also currently pursuing of acquisitions of other complimentary companies, provided, however, that no assurance can be given that any such acquisition will be completed.
On January 8, 2008, the Company amended its Memorandum and Articles of Association to increase its authorized share capital from 50,000,000 Ordinary Shares and 1,000,000 Preference Shares to 78,125,000 Ordinary Shares and 20,000,000 Preference Shares. In addition, our issued and outstanding Ordinary Shares increased from 1,281,500 Ordinary Shares immediately prior to the stock split to 2,002,691 Ordinary Shares immediately after the stock split. All share and per share data give effect to this split applied retroactively as if it occurred at the date of inception. The Company also changed its corporate name in January 2008 to Aegean Earth and Marine Corporation in anticipation of a proposed transaction.
On January 15, 2008, the Company designated 5 million of our Preference Shares as Series A Preference Shares. The Series A Preference Shares shall rank senior as to the payment of dividends and in liquidation as to the Ordinary Shares. The Series A Preference Shares have a stated value of $3.00 per share, which is subject to adjustment (the “Stated Value”). The Series A Preference Shares have the right to vote only with respect to matters relating to amendments of any of the preferences, rights or limitations of the Series A Preference Share or the issuance by the Company of Preference Shares having rights equal to and/or superior to the Series A Preference Shares.
On February 29, 2008, the Company acquired all of the outstanding capital stock of Aegean Earth, S.A., a company organized under the laws of Greece (“Aegean Earth”), from Joseph Clancy and Konstantinos Polites, the sole stockholders of Aegean Earth (the “Aegean Earth Shareholders”) pursuant to an Acquisition Agreement dated as of February 29, 2008 for 500,000 of the Company’s ordinary shares. Effective at the closing of the Acquisition (the “Acquisition Closing”) Aegean Earth became a wholly-owned subsidiary of the Company. The focus of Aegean Earth S.A. is to participate in the construction and development business for, among other projects, the direct contracting or joint venturing in the construction and development of real estate projects, roads, utility structures, commercial buildings, and other related facilities. Based on a prior transaction involving the sale of the Company’s ordinary shares, the Company values the purchase at $50,000.
Simultaneously with the Acquisition Closing, the Company in a private offering made solely to accredited investors sold 1,908,675 ordinary shares and 1,908,675 Series A Preference Shares for aggregate gross proceeds of approximately $5,726,025. On April 8, 2008 the Company sold an additional 91,667 Ordinary Shares and 91,667 Series A Preference Shares for aggregate gross proceeds of approximately $275,001. On April 21, 2008 the Company converted $300,000 in notes payable plus accrued interest into 2,500,000 of the Company’s ordinary shares. On July 11, 2008, the Company sold an additional 50,000 Ordinary Shares and 50,000 Series A Preference Shares for aggregate gross proceeds of approximately $150,000.
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
The Company, at its sole discretion, has undertaken a program to redeeming approximately $3.2 million of its redeemable Series A Preference Shares for cash, as the entirety of the proceeds are no longer needed to effectuate a previously contemplated acquisition that will not take place. As of December 31, 2008, the Company had redeemed 1,075,341 shares of the Series A Preference Shares for approximately $3.2 million.
Redeemable Preference Shares with Beneficial Conversion Features
Under EITF No. 00-27, “Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments,” the Company considered the effect of the redemption of the Series A preference shares in 2008. During 2008, the Company has attributed a beneficial conversion feature of $129,041 to the Series A preference shares redeemed based upon the difference between the relative fair value assigned at the time of issuance to the Series A preference shares and the ordinary shares. The amount attributable to the beneficial conversion feature has been recorded as a dividend to the holders of the Series A preference shares redeemed during the year ended December 31, 2008. Since the redemption of the Series A preference shares is at the sole discretion of the Company, the Company is not accreting the carrying value of the Series A preference shares to redemption value and will not do so until the Company elects to redeem additional Series A preference shares for cash.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
These financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles in the United State of America, whereby revenues are recognized in the period earned and expenses when incurred. The Company also follows Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting for Development Stage Enterprises” in preparing its financial statements.
Statement of Cash Flows
For purposes of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Loss Per Ordinary Share
Basic loss per ordinary share is based on the weighted effect of ordinary shares issued and outstanding, and is calculated by dividing net loss attributable to ordinary shares by the weighted average shares outstanding during the period. Diluted loss per ordinary share is calculated by dividing net loss attributable to ordinary shares by the weighted average number of ordinary shares used in the basic loss per share calculation plus the number of ordinary shares that would be issued assuming exercise or conversion of all potentially dilutive ordinary shares outstanding. The Company does not present diluted earnings per share for years in which it incurred net losses as the effect is antidilutive. At December 31, 2008, there were no potentially dilutive ordinary shares outstanding.
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
Stock Split
On January 8, 2008, the Company divided and increased the authorized ordinary share capital of the Company from 50,000,000 Ordinary Shares of $0.001 par value each to 78,125,000 Ordinary Shares of $0.00064 par value each by the division (split) of 50,000,000 Ordinary Shares of US$0.001 par value each into 78,125,000 Ordinary Shares of US$0.00064 par value each. This resulted in every shareholder as of January 8, 2008 receiving 100 Ordinary shares for every 64 Ordinary shares previously held. This was treated as a stock split for U.S. GAAP purposes, and all share and per share data is presented as if the division took place as of the date of inception, March 10, 2006. On January 8, 2008, the Company also divided and increased the authorized preference share capital of the Company from 1,000,000 Preference Shares of $0.001 par value each to 20,000,000 Preference Shares of $0.00064 par value by the division of 1,000,000 Preference Shares of US$0.001 par value each into 1,562,500 Preference Shares of US$0.00064 par value each, and the authorization of an additional 18,437,500 Preference Shares with a par value of US$0.00064 each.
Income Taxes
Aegean Earth and Marine Corporation was registered as an Exempted Company in the Cayman Islands, and therefore, is not subject to Cayman Island income taxes for 20 years from the Date of Inception. While the Company has no intention of conducting any business activities in the United States, the Company would be subject to United States income taxes based on such activities that would occur in the United States. The Company’s wholly owned subsidiary, Aegean Earth S.A. may be subject to income and other taxes in Greece. The statutory corporate income tax rate in Greece is 25%.
The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” This statement prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. In assessing the realization of deferred tax assets, management considers whether it is likely that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during periods in which those temporary differences become deductible.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, a note receivable from an affiliate, payables to an affiliate, and a note payable to an affiliate. The fair value of cash and cash equivalents approximates the recorded amounts because of the liquidity and short-term nature of these items. The fair value of the note receivable, and payable to an affiliate, and note payable approximate the recorded amounts.
The Company adopted SFAS No. 157 effective January 1, 2008. SFAS 157 established a framework for measuring fair value in GAAP and clarified the definition of fair value within that framework. SFAS 157 does not require assets and liabilities that were previously recorded at cost to be recorded at fair value or for assets and liabilities that are already required to be disclosed at fair value, SFAS 157 introduced, or reiterated, a number of key concepts which form the foundation of the fair value measurement approach to be used for financial reporting purposes. The fair value of the Company’s financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). SFAS 157 also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:
Level 1-quoted prices in active markets for identical assets and liabilities.
Level 2-observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3-unobservable inputs.
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
The adoption of FAS 157 did not have an effect on the Company’s financial condition or results of operations, but SFAS 157 introduced new disclosures about how we value certain assets and liabilities. Much of the disclosure is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs. As of December 31, 2008, the Company did not have financial assets or liabilities that would require measurement on a recurring basis based on the guidance in SFAS 157. At December 31, 2008 all financial assets consisted of cash and cash equivalents.
Foreign Currency Translations and Transactions
The Company uses the “Current rate method” to translate the financial statements of Aegean Earth, S.A. from EUR into U.S. Dollars, as required under the Statement of Financial Accounting Standard (“SFAS”) No. 52, "Foreign Currency Translation" issued by the Financial Accounting Standard Board (“FASB”). The Company's assets and liabilities are translated into U.S. Dollars using the rate of exchange prevailing at the balance sheet date. Additional paid-in capital is translated at the historical rate. Adjustments resulting from the translation of the Company's balance sheets from EUR into U.S. Dollars are recorded in stockholders' equity as part of accumulated comprehensive income. The statement of operations is translated at average rates during the reporting period. Gains or losses resulting from transactions in currencies other than the functional currencies are reflected in the statement of operations for the reporting periods.
Recently Issued Accounting Pronouncements
Effective January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115.” SFAS No. 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement of certain financial assets and liabilities under an instrument-by-instrument election. Subsequent measurements for the financial assets and liabilities an entity elects to fair value will be recognized in the results of operations. SFAS No. 159 also establishes additional disclosure requirements. The Company did not elect the fair value option under SFAS No. 159 for any of its financial assets or liabilities upon adoption. The adoption of SFAS No. 159 did not have a material impact on the Company’s results of operations or financial position.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations - Revised 2007. SFAS 141 R provides guidance on improving the relevance, representational faithfulness, and comparability of information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141R applies to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management is evaluating what effect the adoption of this pronouncement will have on its future financial statements, if any.
In December 2007, the FASB also issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, which establishes accounting and reporting standards to improve the relevance, comparability, and transparency of financial information in its consolidated financial statements that include an outstanding noncontrolling interest in one or more subsidiaries. SFAS 160 is effective for fiscal years, and the interim periods within those fiscal years, beginning on or after December 15, 2008. Management of the Company does not expect the adoption of this pronouncement to have a material impact on its consolidated financial statements.
NOTE 3 - Liquidity and Capital Resources
The Company has no revenues for the period from inception through December 31, 2008. Throughout the year the Company raised approximately $6.2 million in a private placement for a potential acquisition and for the operations of the Company. As this acquisition did not take place, the Company began a redemption program for its preference shares, and had redeemed approximately $3.2 million in preference shares as of December 31, 2008. The Company believes that this will be sufficient for the next 12 months to achieve its business objectives. There can be no assurances that the Company will ever consummate another business combination; achieve or sustain profitability or
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
positive cash flows from its operations, reduce expenses or sell additional ordinary shares.
NOTE 4 - Note Receivable - Affiliate
In December 2007, the Company entered into two notes receivable with Aegean Earth, S.A., a Greek Company, for $85,025. These notes bear interest at the rate of 6% per year and are payable on demand. These notes were written primarily to provide working capital to Aegean Earth S.A. prior to a contemplated acquisition of Aegean Earth S.A. and funding from additional investors. In February 29, 2008, the Company acquired all of the outstanding shares of Aegean Earth S.A.
NOTE 5 - Payable to Affiliate and Accounts Payable
The Company has a payable to affiliate of $9,866 and $6,497 to a Founder of the Company as of December 31, 2008 and December 31, 2007, respectively. The payable is non-interest bearing and payable on demand. As of December 31, 2008 and December 31, 2007, the Company also has accounts payable related to the general and administrative expenses for $78,952 and $4,448, respectively.
NOTE 6 - Other Related Party Transactions
During 2008 Aegean Earth S.A. retained the services of Ergo Systems S.A. to provide general consulting and additional services. Ergo Systems S.A. is owned by one of the founders of Aegean Earth S.A. and one of the shareholders of the Company. As of December 31, 2008, the Company has incurred approximately $77,000 in consulting fees since the acquisition of Aegean Earth S.A.
NOTE 7 - Ordinary Shares
On April 10, 2006, the Company was capitalized with 1,640,625 shares of its restricted ordinary shares issued at par value of $0.00064 per share, for consideration of $1,050 to its founding shareholders. These shares, along with a payable issued to the founder of $5,548, were the basis of the funding of the Company’s $6,598 in formation costs. On May 31, 2006, the Company sold 277,610 shares of its restricted ordinary shares for $35,500. The restricted ordinary shares were sold to 355 offshore private investors pursuant to a Private Placement Offering in lots of 782 shares each at $0.1279 per share. On July 18, 2006, the Company sold an additional 84,456 shares of its restricted ordinary shares for $10,800. The restricted ordinary shares were sold to 108 offshore private investors pursuant to a Private Placement Offering in lots of 782 shares each at $0.1279 per share. No underwriting discounts or commissions were paid with respect to such sales. On February 29, 2008, the Company issued 1,908,675 ordinary shares in conjunction with its raising of approximately $5.7 million in financing. On April 8, 2008 the Company sold an additional 91,667 Ordinary Shares for aggregate gross proceeds of approximately $275,001. On April 21, 2008 the Company converted $300,000 in notes payable plus accrued interest into 2,500,000 of the Company’s ordinary shares. On July 11, 2008 the Company sold an additional 50,000 Ordinary Shares for aggregate gross proceeds of approximately $150,000.
NOTE 8 - Preference Shares
At formation, the Company was authorized to issue 1,562,500 shares of preference shares with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. In January 2008, the Company increased the number of authorized preference shares to 20 million, and designated 5,000,000 as Series A Preference Shares. On February 29, 2008, the Company issued 1,908,675 Series A Preference Shares in conjunction with its raising of approximately $5.7 million in financing. On April 8, 2008 the Company sold an additional 91,667 Series A Preference Shares for aggregate gross proceeds of approximately $275,001. On July 11, 2008 the Company sold an additional 50,000 Series A Preference Shares for aggregate gross proceeds of approximately $150,000. The Company, at its sole discretion, has undertaken a program to redeeming approximately $3.2 million of its redeemable Series A Preference Shares for cash, as the entirety of the proceeds are no longer needed to effectuate a previously contemplated acquisition that will not take place. As of December 31,
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
2008, the Company had redeemed 1,075,341 shares of the Series A Preference Shares for approximately $3.2 million.
The Series A Preference Shares rank senior as to the payment of dividends and in liquidation to the ordinary shares. The Series A Preference Shares have a stated value of $3.00 per share, which is subject to adjustment (the “Stated Value”). The Series A Preference Shares have the right to vote only with respect to matters relating to amendments of any of the preferences, rights or limitations of the Series A Preference Share or the issuance by the Company of Preference Shares having rights equal to and/or superior to the Series A Preference Shares. Each Series A Preference Share may be redeemed by us at our sole option at any time and from time to time commencing six months after the date of issuance (the “Redemption Date”) at a redemption price equal to the sum of (i) the Stated Value, and (ii) all accrued but unpaid dividends thereon.
Unredeemed Series A Preference Shares are eligible to be converted into ordinary shares (the “Conversion Shares”) at the then applicable Conversion Ratio (as defined below) thirty months after the date of issuance. Each Series A Preference Share is convertible into six (6) ordinary shares (the “Conversion Ratio”), with each date of conversion being referred to as the “Conversion Date”. Upon conversion, all accrued and unpaid (undeclared) dividends on the Series A Preference Shares through the Conversion Date shall be paid in additional ordinary shares as if such dividends had been paid in additional shares of Series A Preference Shares rounded up to the nearest whole number, and then automatically converted into additional ordinary shares at the then applicable Conversion Ratio. The Conversion Ratio is subject to adjustment in the event of share splits, share dividends, combinations, reclassifications and the like and to weighted average anti-dilution protection for sales of ordinary shares at a purchase price below $0.50 per share.
Each Series A Preference Share accrues dividends at the rate of six (6%) percent per annum of the Stated Value ($0.18 per share per annum) and is payable on the Redemption Date. Dividends payable will be prorated from the date each Series A Preference Share was issued based on the number of days each such Series A Preference Share was outstanding. Dividends on the Series A Preference Shares are cumulative. No dividends or other distributions may be paid or otherwise made with respect to the ordinary shares and no ordinary shares may be repurchased by the Company during any fiscal year of the Company until dividends on the Series A Preference Shares have been declared, paid or set apart during that fiscal year. In addition, the Company reserves the right to declare and pay optional dividends to the holders of Series A Preference Shares in such amounts, form (securities and/or cash) and at such time as determined by the Company’ s Board of Directors.
The Series A Preference Shares have a liquidation preference over the ordinary shares equal to the then stated value, plus all accrued but unpaid dividends.
NOTE 9 - Business Combination
On February 29, 2008, the Company acquired all of the outstanding capital stock of Aegean Earth, S.A., a company organized under the laws of Greece pursuant to an Acquisition Agreement dated as of February 29, 2008 for 500,000 of the Company’s ordinary shares. Effective at the closing of the Acquisition, Aegean Earth S.A. became a wholly-owned subsidiary of the Company. Based on a prior transaction involving the sale of the Company’s ordinary shares, the Company values the purchase at $50,000 plus the elimination of the note receivable plus accrued interest, resulting in a total purchase price of $135,986.
The Merger has been accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standard (SFAS) No. 141, “Business Combinations.” After considering all the relevant factors in determining the acquiring enterprise, including, but not limited to, relative voting rights, composition of the board of directors and senior management, and the relative size of the companies, the merger was deemed an acquisition and the Company was treated as the “acquiring” company for accounting and financial reporting purposes.
Aegean Earth & Marine Corporation
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
A summary of the components of the estimated purchase price for the acquisition, is as follows:
The fair value of Company’s common stock was estimated by management of the Company.
The purchase price was allocated based on a determination of the value of the tangible and intangible assets acquired and liabilities assumed. The goodwill recorded as a result of the acquisition will not be amortized, but will be included in the Company’s annual review of goodwill for impairment. The following represents the allocation of the purchase price to the acquired assets and liabilities of Aegean Earth, SA. This allocation was based on the fair value of the assets and liabilities of Aegean Earth S.A. as of February 29, 2008. The excess of the purchase price over the fair value of net identifiable assets acquired is reflected as goodwill:
NOTE 10 - Commitments and Contingencies
The Company may become subject to various claims and litigation. The Company vigorously defends its legal position when these matters arise. The Company is not a party to, nor the subject of, any material pending legal proceeding nor to the knowledge of the Company, are any such legal proceedings threatened against the Company.