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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 20-F
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[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE
SECURITIES EXCHANGE ACT OF 1934 or
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File No.: 0-29052
DTA HOLDING AKTIENGESELLSCHAFT
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FEDERAL REPUBLIC OF GERMANY
(JURISDICTION OF INCORPORATION OR ORGANIZATION)
C/O MFC CAPITAL PARTNERS AG, CHARLOTTENSTRASSE 59, D-10117, BERLIN
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
Securities registered or to be registered pursuant to
Section 12(b) of the Act: NONE
Securities registered or to be
registered pursuant to Section 12(g) of the Act:
American Depositary Receipts (evidencing American
Depositary Shares each representing One Ordinary Share)
(TITLE OF CLASS)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: NONE
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report:
750,000 ORDINARY SHARES
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the SECURITIES EXCHANGE ACT OF
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark which financial statement item the Registrant has
elected to follow. Item 17 [ ] Item 18 [X]
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DTA HOLDING AKTIENGESELLSCHAFT
FORM 20-F
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS................3
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE..............................3
ITEM 3. KEY INFORMATION......................................................3
Forward-Looking Statements...............................................3
Exchange Rates...........................................................4
Selected Financial Data..................................................5
Risk Factors.............................................................6
ITEM 4. INFORMATION ON THE COMPANY...........................................8
History and Development of the Company...................................8
Business Overview........................................................8
Description of Property..................................................9
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS........................10
Overview................................................................10
Results of Operations...................................................10
Liquidity and Capital Resources.........................................11
Effects of Inflation....................................................11
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..........................12
Supervisory and Management Boards.......................................12
Compensation............................................................13
Employees...............................................................13
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...................14
Major Shareholders......................................................14
Shareholder Distribution................................................14
Related Party Transactions..............................................14
ITEM 8. FINANCIAL INFORMATION...............................................15
Consolidated Statements and Other Financial Information.................15
Significant Changes.....................................................15
Legal Proceedings.......................................................15
Dividend Information....................................................15
ITEM 9. THE OFFER AND LISTING...............................................16
Markets and Price History...............................................16
ITEM 10. ADDITIONAL INFORMATION..............................................17
Memorandum and Articles of Association..................................17
Material Contracts......................................................18
Exchange Controls.......................................................18
Taxation................................................................18
Documents on Display....................................................24
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........24
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.............24
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES....................25
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS........................................25
ITEM 15. CONTROLS AND PROCEDURES............................................25
ITEM 16. RESERVED...........................................................25
PART III
ITEM 17. FINANCIAL STATEMENTS...............................................25
ITEM 18. FINANCIAL STATEMENTS...............................................25
ITEM 19. EXHIBITS...........................................................35
SIGNATURES...................................................................36
</Table>
2
IN THIS ANNUAL REPORT, PLEASE NOTE THE FOLLOWING:
o REFERENCES TO THE "COMPANY" OR "DTA" MEAN DTA HOLDING
AKTIENGESELLSCHAFT;
o ALL REFERENCES TO MONETARY AMOUNTS ARE IN EUROS, THE LAWFUL CURRENCY
ADOPTED BY MOST MEMBERS OF THE EUROPEAN UNION, UNLESS OTHERWISE
INDICATED;
o "(-EURO-)" REFERS TO EUROS; AND "DM" REFERS TO DEUTSCHMARKS, THE
LAWFUL CURRENCY OF GERMANY PRIOR TO THE FORMAL INTRODUCTION OF THE
EURO IN 2002; and
o THE INFORMATION SET FORTH IN THIS ANNUAL REPORT IS AS AT DECEMBER 31,
2002, UNLESS AN EARLIER OR LATER DATE IS INDICATED.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
FORWARD-LOOKING STATEMENTS
The statements in this annual report that are not based on historical facts
are called "forward-looking statements" within the meaning of the United States
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. These statements appear in a
number of different places in this annual report and can be identified by words
such as "estimates", "projects", "expects", "intends", "believes", "plans", or
their negatives or other comparable words. Also look for discussions of strategy
that involve risks and uncertainties. Forward-looking statements may include
statements regarding the outlook for the Company's future operations, forecasts
of future costs and expenditures, evaluation of market conditions, the outcome
of legal proceedings, the adequacy of reserves, or other business plans.
Investors are cautioned that any such forward-looking statements are not
guarantees and may involve risks and uncertainties. The Company's actual results
may differ materially from those in the forward-looking statements due to risks
facing the Company or due to actual facts differing from the assumptions
underlying the Company's predictions. Some of these risks and assumptions are
set forth under "Risk Factors" below and include, but are not limited to:
o general economic and business conditions, including changes in
interest rates;
o prices and other economic conditions;
o natural phenomena;
o actions by government authorities, including changes in government
regulation;
o uncertainties associated with legal proceedings;
o technological development;
o future decisions by management in response to changing conditions;
o the Company's ability to execute prospective business plans; and
o misjudgments in the course of preparing forward-looking statements.
Investors are advised that these cautionary remarks expressly qualify in
their entirety all forward-looking statements attributable to the Company or
persons acting on its behalf. Unless required by law, the Company does not
assume any obligation to update forward-looking statements based on
unanticipated events or changes in expectations. However, investors should
carefully review the reports and documents the Company files from time to time
with the Securities and Exchange Commission (the "SEC"), including its current
reports on Form 6-K.
3
<Page>
EXCHANGE RATES
Effective January 1, 2002, the German government officially adopted the
Euro in place of the Deutschmark as its legal currency. Accordingly, as of
January 1, 2002, the Company changed its reporting currency from the Deutschmark
to the Euro. The financial statements for the year ended December 31, 2002
included in this annual report are stated in Euros and the financial statements
and another financial information for prior years included in this annual report
have been restated in Euros. The rate for the conversion of the Deutschmark to
the Euro has been fixed at 1.95583 Deutschmarks per Euro.
The following table sets out exchange rates, based on the noon buying
rates in New York City for cable transfers in foreign currencies as certified
for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying
Rate") for the conversion of U.S. dollars to Euros in effect at the end of the
following periods, the average exchange rates during these periods (based on
daily Noon Buying Rates) and the range of high and low exchange rates for these
periods:
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
2002 2001 2000 1999 1998(1)
---------- -------- -------- -------- ---------
((-EURO-)/U.S.$)
End of period.................. 0.9536 1.1227 1.0646 0.9937 0.8521
High for period................ 1.1638 1.1945 1.2087 0.9984 0.9476
Low for period................. 0.9536 1.0487 0.9697 0.8422 0.8208
Average for period............. 1.0660 1.1219 1.0901 0.9430 0.9033
------------------------------
(1) As the Euro was introduced as of January 1, 1999, the exchange rates
for 1998 are based upon the conversion of Deutschmarks to Euros and
Euros to U.S. dollars. The rate for the conversion of Deutschmarks to
Euros has been fixed at (-EURO-)1=DM1.95583. The Noon Buying Rate for
the conversion of Euros to U.S. dollars at December 31, 1998 was
(-EURO-)1=U.S.$0.8519. The average rate of exchange (based on daily
Noon Buying Rates) for the conversions of Euros to U.S. dollars during
1998 was (-EURO-)1=U.S.$0.8909.
The following table sets out the range of high and low exchange rates for
the conversion of U.S. dollars to Euros for the following periods:
HIGH LOW
---- ---
2002
December................................... 1.0074 0.9537
2003
January.................................... 0.9652 0.9207
February................................... 0.9339 0.9195
March...................................... 0.9483 0.9040
April...................................... 0.9415 0.8945
May........................................ 0.8929 0.8437
June 1 to June 20.......................... 0.8609 0.8425
On June 25, 2003, the Noon Buying Rate for the conversion of Euros to U.S.
dollars was (-EURO-)1=U.S.$0.8627.
4
SELECTED FINANCIAL DATA
The following table sets forth selected financial information for each
of the Company's last five fiscal years. As of January 1, 2002, the Company
changed its reporting currency from the Deutschmark to the Euro. The
following selected financial information for periods prior to the year ended
December 31, 2002 has been restated in Euros and reclassified to conform with
the current year's presentation. The following selected financial data is
qualified in its entirety by, and should be read in conjunction with, the
more detailed financial statements and related notes contained in this annual
report and "Item 5. Operating and Financial Review and Prospects".
In April 2001, the Company sold all of its assets and had no income from
cable services contracts thereafter. In October 2002, the Company acquired a
17.23 acre property in Washington State, U.S.A. for a purchase price of
approximately U.S.$2.65 million ((-EURO-)2.74 million), comprised of a cash
payment of approximately U.S.$2.23 million ((-EURO-)2.30 million) and the
assumption U.S.$0.42 million ((-EURO-)0.44 million) in liabilities.
Accordingly, the selected financial data presented below for the fiscal years
ended December 31, 2002 and 2001 may not be comparable to the information
presented for prior periods.
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
2002 2001 2000(2) 1999(2) 1998
-------------- --------------- ---------------- --------------- ---------------
(in thousands of Euros, except per share amounts)
STATEMENT OF OPERATIONS DATA(1):
Revenues....................................(-EURO-) 15 (-EURO-)2,453 (-EURO-)1,511 (-EURO-) 966 (-EURO-) 718
Operating expenses.......................... 283 1,473 1,534 1,606 1,113
Income (loss) from continuing operations.... (162) 1,032 (101) (552) (312)
Income (loss) from continuing operations
per share................................ (0.22) 1.38 (0.14) (0.74) (0.41)
Net income (loss)........................... (162) 1,032 (101) (552) (312)
Net income (loss) per share................. (0.22) 1.38 (0.14) (0.74) (0.41)
Number of ordinary shares outstanding....... 750,000 750,000 750,000 750,000 750,000
AS AT DECEMBER 31,
---------------------------------------------------------------------------------------
2002 2001 2000(2) 1999(2) 1998
-------------- ---------------- --------------- --------------- ---------------
(in thousands of Euros)
BALANCE SHEET DATA:
Working capital.............................(-EURO-) 473 (-EURO-) 3,378 (-EURO-) 924 (-EURO-) 143 (-EURO-) 1,907
Total assets................................ 3,629 3,537 4,076 3,958 3,389
Net assets.................................. 3,216 3,378 2,346 2,447 2,999
Long-term debt.............................. - - 1,023 1,023 -
Shareholders' equity........................ 3,216 3,378 2,346 2,447 2,999
Capital stock............................... 1,917 1,917 1,917 1,917 1,917
Dividends................................... - - - - -
---------------------
(1) Per share amounts are the same on a basic and diluted basis.
(2) The Company acquired all of the shares of a company in 1999, which
were sold in 2000.
5
RISK FACTORS
The information set forth in this annual report and, in particular, the
following risk factors, any of which could have a materially adverse effect on
the results of operations and financial condition of the Company, should be
carefully considered in evaluating the Company and its business:
AVAILABILITY OF CAPITAL. The Company has a limited amount of capital. The
Company is in the process of identifying and evaluating opportunities for the
acquisition of interests in assets or businesses, which may require additional
capital. There can be no assurance that the Company will be able to raise such
additional funds or in sufficient amounts or on terms satisfactory to the
Company. In addition, there can be no assurance that, if the Company does
acquire a business or assets, it will have the required capital to operate the
business or assets in the foreseeable future. In that regard, the Company may
require substantial capital resources. There can be no assurance that the
necessary capital will be generated from internal cash flows or that the Company
will have access to credit facilities. The Company may be required to raise
additional funds through the sale of securities or issue of indebtedness. There
can be no assurance that any of these sources of funds would be available to the
Company, or if available, that they would be available in amounts sufficient to
meet its requirements or on terms satisfactory to the Company.
UNCERTAINTY OF FUTURE PROFITABILITY. The Company began operations in 1996
and did not make an operating profit prior to the sale of all of its assets in
2001. The Company sold all of its assets in April 2001 due to a significant
downturn in the telecommunications industry. The Company subsequently acquired
certain real property for development in October 2002. The Company is in the
process of identifying and evaluating opportunities for the acquisition of
interests in additional assets or businesses. However, there can be no assurance
that the assets the Company currently owns are viable, that the Company will be
able to acquire a viable business or assets or that it will be profitable in the
future or that profitability will be sustained. To the extent that the Company
cannot achieve sustained profitable operations, the Company could fail to timely
meet its obligations when they come due. In that event, if the Company's
creditors sought to satisfy amounts owed them, these actions could have a
materially adverse effect on the Company's results of operations and financial
condition.
ENVIRONMENTAL REGULATION. The Company is subject to extensive
environmental laws and regulations. Because the Company owns real property,
various federal, state and local laws might impose liability on the Company for
the cost of removing or remediating various hazardous substances released on or
in the Company's property. The Company may incur substantial costs to comply
with current environmental requirements or new environmental laws that might be
adopted. In addition, the Company may discover currently unknown environmental
problems or conditions in the future and may incur substantial costs in
correcting such problems or conditions.
PROPERTY DEVELOPMENT IN WASHINGTON STATE, U.S.A. The development of real
property in the State of Washington, U.S.A. is subject to multiple layers of
government regulation, including state law and certain ordinances of the city
and county wherein the property is located. Environmental regulations at the
federal, state and local levels with regard to wetlands, stormwater retention
and discharge, wildlife, tree preservation, slopes and groundwater recharge have
greatly increased the cost and uncertainty related to the development of
property in the State of Washington, have lengthened the time necessary to
receive development permits and may materially adversely affect the operations
of the Company.
PROPERTY VALUES. The Company has real estate holdings which can be
difficult to sell or develop in unfavourable economic conditions and can have
unpredictable decreases in value. This could make it difficult for the Company
to limit its risk when economic conditions change. Zoning law changes and
changes in environmental protection laws, among other things, can also lower the
value of the Company's investments.
PROPERTY TAXES. Property taxes may increase and cause a decline in net
property values. The Company's property is subject to real property taxes. These
real property taxes may increase in the future as property tax rates change and
as the Company's property is assessed or reassessed by tax authorities. Such
increases could reduce the net amount earned by the Company on the sale of its
property.
LEGAL PROCEEDINGS. Although the Company is not currently subject to any
material legal proceedings, should legal proceedings be initiated against it in
the future, whether in connection with environmental matters or otherwise,
pursuant to which the Company is required to pay significant amounts under an
order issued in or to settle such a proceeding, the Company's results of
operations and financial condition would be materially adversely affected.
6
CONTROL OF COMPANY. One shareholder of the Company owns, directly or
indirectly, approximately 90.6% of the outstanding share capital of the Company.
This shareholder has the ability to influence all matters relating to the
Company, including the future direction of the Company, which may differ from
the direction that management of the Company may believe is in the best
interests of the Company and other shareholders and could materially adversely
affect the results of operations and financial condition of the Company.
DIVIDENDS. The Company has not paid any dividends in the past and does
not presently intend to pay any dividends in the future. It is not likely
that any dividends will be paid in the foreseeable future.
CONFLICTS OF INTEREST. The persons serving in the capacity of officers
or directors of the Company have existing responsibilities and may have
additional responsibilities to provide management and services to other
entities. As a result, conflicts of interest between the Company and the
other activities of those persons may occur from time to time. For example,
such persons may have conflicts of interest in allocating time, services and
functions between the other business ventures in which they may be or may
become involved and the Company's affairs.
ENFORCEMENT OF CIVIL LIABILITIES. The enforcement of civil liabilities
by investors under applicable U.S. federal and state laws may be adversely
affected because the Company is organized under the laws of Germany and most
of the persons serving in the capacity of its officers or directors are
non-residents of the U.S.
As a result, it may be difficult or impossible for U.S. investors to
effect service of process upon the Company or the persons serving in the
capacity of its officers or directors within the United States. It may also
be difficult to realize against the Company or the persons serving in the
capacity of its officers or directors in the United States, upon judgments of
U.S. courts for civil liabilities under applicable U.S. federal or state
laws. Courts in Germany or elsewhere may not enforce: (i) judgments of U.S.
courts obtained in actions against the Company or the persons serving in the
capacity of its officers or directors predicated upon the civil liability
provisions of applicable U.S. federal or state laws; and (ii) in original
actions, liabilities against the Company or its officers or directors
predicated upon such laws.
Under bankruptcy laws in the United States, courts typically have
jurisdiction over a debtor's property, wherever it is located, including
property situated in other countries. Courts outside of the United States may
not recognize the U.S. bankruptcy court's jurisdiction. Accordingly, a person
may have trouble administering a U.S. bankruptcy case involving a German debtor.
Any orders or judgments of a bankruptcy court in the United States may not be
enforceable.
OTHER RISKS. The Company's future results could be adversely affected by a
variety of other factors beyond its control, including, but not limited to:
o general economic and business conditions, including changes in
interest rates;
o prices and other economic conditions;
o natural phenomena;
o actions by government authorities, including changes in government
regulation;
o uncertainties associated with legal proceedings;
o future decisions by management in response to changing conditions;
and
o the Company's ability to execute prospective business plans.
7
ITEM 4. INFORMATION ON THE COMPANY
HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was incorporated pursuant to the laws of Germany on October
17, 1996 under the name "Digitale Telekabel AG". The Company changed its name
to "DTA Holding Aktiengesellschaft" effective December 2002. The Company's
principal office is currently located at Charlottenstrasse 59, D-10117,
Berlin and its telephone number is (011) 49-30-2094-5800.
The Company was engaged in the provision of certain cable services in
Germany. The Company acquired all of the shares of Goldstrass Antennentechnik
GmbH ("Goldstrass") in 1999 for (-EURO-)0.8 million (DM 1.6 million). The
Company also acquired certain cable services contracts in 1999 for
(-EURO-)1.2 million (DM 2.3 million).
In August 2000, the Company sold all of the shares of Goldstrass for an
aggregate amount of (-EURO-)2.1 million (DM 4.2 million) to a former
affiliate. At the end of 2000, the aggregate purchase price was adjusted to
(-EURO-)1.1 million (DM 2.1 million) as certain contracts held by Goldstrass
were not renewed. In addition, due to the downturn in the telecommunications
industry, the Company sold all of the Company's assets, including all cable
services contracts, to former affiliates for (-EURO-)3.8 million (DM 7.5
million) in April 2001. For additional information, see "Item 5. Operating
and Financial Review and Prospects".
In October 2002, the Company acquired a 17.23 acre property in
Washington State, U.S.A. from an affiliate for a purchase price of U.S.$2.65
million ((-EURO-)2.74 million), comprised of a cash payment of approximately
U.S.$2.23 million ((-EURO-)2.30 million) and the assumption of U.S.$0.42
million ((-EURO-)0.44 million) in liabilities. For information about the
property, see "Description of Property" below.
BUSINESS OVERVIEW
The Company is currently developing certain real property it holds in
the State of Washington, U.S.A. The Company is also in the process of
identifying and evaluating opportunities for the acquisition of interests in
additional assets or businesses.
The Company owns a 17.23 acre property in the city of Federal Way, in
King County, Washington, U.S.A. about 25 miles south of Seattle, Washington.
Approximately 2.14 acres of the property is wetland area and 15.09 acres is
being developed. The property is zoned for business park use. The Company
intends to develop all or a portion of the property, and may participate in
development joint venture arrangements as an interim step in the sale or
monetization of the property, and will continue development work on the
property to the extent necessary to protect or enhance its value.
The development of real property in the State of Washington is subject
to multiple layers of government regulation, including state law and certain
ordinances of the city and county wherein the property is located. The type
and intensity of development of real property in the State of Washington is
subject to the comprehensive plan and zoning designation of the property
within the city or county in which the property is located. Property
development is also affected by sensitive areas, such as wetlands, streams or
wildlife habitat located on the site. Both the local government and the Army
Corps of Engineers have jurisdiction over wetland areas. Upon delivery of a
development proposal, the appropriate government agency will examine the site
and delineate wetland areas. These areas must either be left undisturbed with
sufficient buffers for protection or a mitigation plan for the designated
areas must be approved. Due to the broad definition of wetlands, it is common
for undeveloped property in the western Washington area to have some wetlands
designated. Approximately 2.14 acres of the property owned by the Company is
designated as wetland area.
In 1990, the Washington State legislature passed the Growth Management
Act ("GMA") to "guide the development and adoption of comprehensive plans and
development regulations" in the State of Washington. The goal of the
comprehensive development plans is to, among other things, reduce the
development density in rural areas, encourage affordable housing and a
variety of housing densities, maintain and conserve natural resource
industries and lands and protect and enhance the environment and the
availability of water.
The Company was engaged in the provision of third party cable television
and radio programming services ("Cable Services") in Germany to multi-family
dwelling units through agreements with developers of new residential
buildings and operators of existing apartments and condominiums.
The Company offered developers and operators a means of providing Cable
Services to unit occupants through a "turn key operation", including, where
necessary, the design, construction and testing of a system capable of
receiving a signal either from a satellite or by transmission through the
Deutsche Telekom AG cable system. The Company entered into contracts to
provide Cable Services with developers and operators of the buildings to
which it provided Cable Services, which were typically for terms of 15
8
years. The Company's marketing efforts revolved around the personal contacts
of the management of the Company with developers and operators of
multi-family buildings in Germany.
The Company had entered into contracts to provide Cable Services in
respect of approximately 14,366 units as at December 31, 2000 (of which
approximately 9,870 units were receiving such services as at that date) and
contracts to provide Cable Services in respect of approximately 14,207 units
as at April 30, 2001 (of which approximately 9,884 units were receiving such
services as at that date).
The Company did not itself install the systems through which Cable
Services were provided. In the case of newly constructed buildings,
installation of a system was frequently performed by the developer. In
certain other cases, typically refurbishment projects, the Company contracted
with an independent construction company to install a system. The Company
provided a trained supervisor to assist with the implementation of the
project and supervise the actual construction to ensure that it met the
Company's standards. After installation of the system, the Company undertook
a joint protocol to ensure reception quality.
In the case of buildings in which the Company contracted with a
developer to install a system, the Company paid the developer a fee per unit
at the time that it first received payment from the unit occupants. The fee
was designed to fully reimburse the developer for the costs of installing the
system, but any excess costs were borne by the developer. Where outside
contractors were utilized to construct a system, the Company bore the full
costs of construction. The monthly fee paid by the unit occupants was
adjusted to amortize such amounts paid by the Company.
The Company was responsible for the maintenance and repair of the system
and, where a signal was received through the Deutsche Telekom AG cable
system, paid monthly fees to Deutsche Telekom AG. In those cases where a
signal was received through a satellite dish, the Company was also
responsible for maintenance of the satellite dish.
DESCRIPTION OF PROPERTY
The Company rents approximately 500 square feet of office space at
Charlottenstrasse 59, D-10117, Berlin, Germany.
FEDERAL WAY PROPERTY
The Company owns 17.23 acres of real property in the city of Federal
Way, in King County, Washington, U.S.A. about 25 miles south of Seattle,
Washington. The property is located along Pacific Highway South near
Interstate 5. Approximately 2.14 acres of the property is considered wetland
area and the remaining 15.09 acres is being developed. The property has been
zoned for business park use. The Company may develop all or a portion of the
property through partnerships, joint ventures or other economic association
with local developers. The property is currently being developed, including
infrastructure (roads, sewer and water services), preliminary permits, market
studies, feasibility studies and related activities. All utilities, including
water and sewer are available to the property, together with electricity and
telephone service.
9
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of the financial condition and
results of operations of the Company for the three years ended December 31,
2002 should be read in conjunction with the Company's audited financial
statements and related notes included in this annual report. Effective
January 1, 2002, the Company changed its reporting currency from the
Deutschmark to the Euro. Accordingly, the financial statements for the year
ended December 31, 2002 included in this annual report are stated in Euros.
The financial statements for periods prior to the year ended December 31,
2002 included in this annual report have been restated in Euros and
reclassified to conform to the current presentation. The following discussion
and analysis of the financial condition and results of operations of the
Company is based upon the restated financial statements for all prior periods.
OVERVIEW
The Company was engaged in the provision of certain Cable Services in
Germany. In 1999, the Company acquired all of the shares of Goldstrass for
(-EURO-)0.8 million (DM 1.6 million), as well as certain cable services
contracts for (-EURO-)1.2 million (DM 2.3 million). In August 2000, the
Company sold all of the shares of Goldstrass for (-EURO-)2.1 million (DM 4.2
million) to a wholly-owned subsidiary of Tele Columbus GmbH ("Tele
Columbus"), a former majority shareholder of the Company. The purchase price
was adjusted to (-EURO-)1.1 million (DM 2.1 million) at the end of 2000 as
certain contracts held by Goldstrass were not renewed.
On April 26, 2001, the shareholders of the Company approved the sale of
all of the Company's assets, including all Cable Services contracts, for
(-EURO-)3.8 million (DM 7.5 million) to affiliates of Tele Columbus. The sale
was completed as of April 30, 2001. As a result, the Company had no income
from Cable Services contracts thereafter.
In October 2002, the Company acquired 17.23 acres of land located in the
city of Federal Way, in King County, Washington, U.S.A. for a purchase price
of approximately U.S.$2.65 million ((-EURO-)2.74 million), comprised of a
cash payment of approximately U.S.$2.23 million ((-EURO-)2.30 million) and
the assumption of U.S.$0.42 million ((-EURO-)0.44 million) in liabilities.
The Company is in the process of identifying and evaluating opportunities for
the acquisition of interests in assets or businesses.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001
Revenues for the year ended December 31, 2002 decreased to
(-EURO-)14,886 from (-EURO-)2.5 million in the year ended December 31, 2001,
primarily as a result of the sale of all of the Company's assets in April
2001.
Operating expenses for the year ended December 31, 2002 decreased to
(-EURO-)0.3 million from (-EURO-)1.5 million for the comparative period of
2001, primarily as a result of the sale by the Company of all of its assets
in April 2001, and consisted primarily of general and administrative expenses.
For the year ended December 31, 2002, the Company had interest income of
(-EURO-)0.1 million, compared to (-EURO-)60,015 for the year ended December
31, 2001, and interest expense of (-EURO-)171, compared to (-EURO-)7,671 for
the year ended December 31, 2001.
The Company had a net loss of (-EURO-)0.2 million ((-EURO-)0.22 per
share) for the year ended December 31, 2002, compared to net income of
(-EURO-)1.0 million (or (-EURO-)1.38 per share) for the comparative period
of 2001.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
Revenues for the year ended December 31, 2001 increased to
(-EURO-)2.5 million from (-EURO-)1.5 million in the year ended December 31,
2000, primarily as a result of the sale of all of the Company's assets in
April 2001. For the year ended December 31, 2001, the Company had revenues of
(-EURO-)0.5 million from Cable Services and (-EURO-)0.5 million of other
income, and recognized a gain of (-EURO-)1.5 million from the sale of
equipment. For the year ended December 31, 2000, the Company had revenues of
(-EURO-)1.2 million from Cable Services and (-EURO-)0.1 million of other
income, and recognized a gain of (-EURO-)0.2 million from the sale of the
shares of Goldstrass. At the time of the sale by the Company of its assets in
April 2001, the Company had entered into contracts to provide Cable Services
in respect of approximately 14,207 units (of which approximately 9,884 units
were receiving service on that date), compared to having entered into
contracts to provide Cable Services in respect of approximately 14,366 units
as at December 31, 2000 (of which approximately 9,870 units were receiving
service on that date).
10
Operating expenses were (-EURO-)1.5 million for each of the years ended
December 31, 2001 and 2000. For the year ended December 31, 2001, general and
administrative expenses were (-EURO-)1.4 million, compared to (-EURO-)1.2
million for the comparative period of 2000.
For the year ended December 31, 2001, the Company had interest income
of (-EURO-)60,015, compared to (-EURO-)16,353 for the year ended December 31,
2000. For the year ended December 31, 2001, the Company had interest expense
of (-EURO-)7,671, compared to (-EURO-)0.1 million for the year ended December
31, 2000.
The Company had net income of (-EURO-)1.0 million (or (-EURO-)1.38 per
share) for the year ended December 31, 2001, compared to a net loss of
(-EURO-)0.1 million (or (-EURO-)0.14 per share) for the comparative period of
2000.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2002, the Company had working capital of approximately
(-EURO-)0.5 million, compared to approximately (-EURO-)3.4 million at
December 31, 2001. At December 31, 2002, the Company had receivables of
(-EURO-)0.8 million from an affiliate, compared to (-EURO-)3.3 million at
December 31, 2001. At December 31, 2002, the Company had cash of
approximately (-EURO-)56,000, compared to approximately (-EURO-)60,000 at
December 31, 2001. The Company believes that its working capital is
sufficient for its present requirements.
OPERATING ACTIVITIES
Operating activities provided cash of (-EURO-)2.7 million in the year
ended December 31, 2002, primarily as a result of a decrease in receivables
from affiliated companies during the current period. In the year ended
December 31, 2001, operating activities used cash of (-EURO-)1.3 million,
primarily as a result of an increase in receivables from affiliated
companies. In the year ended December 31, 2002, an increase in other current
liabilities provided cash of (-EURO-)0.3 million, compared to a decrease in
same using cash of (-EURO-)0.2 million in the year ended December 31, 2001. A
decrease in other current assets provided cash of (-EURO-)0.1 million in the
year ended December 31, 2002, compared to an increase in the same using cash
of (-EURO-)0.1 million in the year ended December 31, 2001.
INVESTING ACTIVITIES
Investing activities used cash of (-EURO-)2.7 million in the year ended
December 31, 2002, primarily as a result of the purchase of property. In the
year ended December 31, 2001, investing activities provided cash of
(-EURO-)2.3 million, primarily as a result of the sale of equipment.
FINANCING ACTIVITIES
Financing activities did not use a material amount of cash in the year
ended December 31, 2002, compared to using (-EURO-)1.0 million in the year
ended December 31, 2001, primarily as a result of the repayment of
outstanding loans.
EFFECTS OF INFLATION
The Company's assets are not significantly affected by inflation.
However, the rate of inflation affects the Company's expenses, such as
compensation, office space leasing costs and communications charges. To the
extent inflation results in rising interest rates and has other adverse
effects on capital markets, it could adversely affect the Company's financial
position.
11
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
SUPERVISORY AND MANAGEMENT BOARDS
In accordance with the GERMAN STOCK CORPORATION ACT, the Company has a
Supervisory Board and a Management Board. Each board operates separately and
no person may simultaneously be a member of both boards.
SUPERVISORY BOARD
Pursuant to the Articles of Association of the Company, the Supervisory
Board of the Company is to be composed of three members. The members of the
Company's Supervisory Board are elected by the Company's shareholders at a
general meeting of the shareholders of the Company. In general, the term of
office of members of the Company's Supervisory Board expires at the end of
the shareholders' meeting at which the shareholders discharge the Supervisory
Board members in respect of the fourth financial year following the members'
commencement of tenure of office. The financial year in which the tenure of
office commences is not counted for this purpose. Any member of the
Supervisory Board may be removed by a majority of the votes cast by the
shareholders of the Company in a general meeting. The principal function of
the Supervisory Board is to appoint and to supervise the Management Board and
to approve the mid-term planning and certain matters which are not in the
ordinary course of business and are of fundamental importance to the Company.
Under normal circumstances, the Supervisory Board acts by a simple majority
vote. There is no compulsory retirement age for members of the Supervisory
Board.
The members of the Supervisory Board of the Company generally perform
the duties of an audit committee and are responsible for, among other things,
meeting with external auditors of the Company separate from the Management
Board of the Company and reviewing the annual report and reports with respect
to audit and accounting procedures. The Company does not have a Remuneration
Committee and the Company's executive compensation program is administered by
the Company's Supervisory Board.
The members of the Supervisory Board were elected at the annual meeting
of shareholders of the Company held in September 2002. The following provides
information relating to the members of the Company's Supervisory Board:
GREG ELDERKIN, age 39, is the Executive Vice President, a director and
the designated real estate broker at Pacific West Brokerage, Inc. Mr.
Elderkin has held these positions since 1989. In addition, Mr. Elderin is a
co-founder and director of SFG Funds, a private real estate lending
organization, and a director and Secretary of Cade Struktur Corporation.
SLOBODAN ANDJIC, age 58, has served as Vice President and a director of
Swiss Investment Group since 1998. Mr. Andjic is also a director and
President of Cade Struktur Corporation and a director, President and
Secretary of Banff Resources Ltd. He served as an advisor to the President of
Mercur and a director and coordinator of the Mercur group of companies from
1996 to 1998.
JOHN M. MUSACCHIO, age 55, has been the Chief Operating Officer, Chief
Financial Officer, Secretary and a director of Mymetics Corporation since May
2001. Mr. Musacchio is currently a Vice President of MFC Bancorp Ltd.
("MFC"). He has 25 years of industrial and professional service business
operating experience on an international scale, having held positions as
principal, director and officer in both private and publicly traded companies.
MANAGEMENT BOARD
The number of members of the Management Board is determined by the
Supervisory Board. Pursuant to the Articles of Association of the Company,
any two members of the Management Board or one member of the Management Board
and the holder of a procuration (a special power of attorney) may bind the
Company. Each member of the Management Board is appointed by the Supervisory
Board for a term of five years and is eligible for reappointment thereafter.
Under certain circumstances, such as a serious breach of duty or a vote of no
confidence by the shareholders of the Company at a general meeting, a member
of the Management Board may be removed by the Supervisory Board prior to the
expiration of his term. A member of the Management Board may not deal with,
or vote on, matters relating to proposals, arrangements or contracts between
himself and the Company and is under a duty to disclose all material
interests in all matters relating to proposals, arrangements or contracts
between the Company and third parties. The Management Board must report
regularly to the Supervisory Board, in particular, on proposed business
policy, budgets and strategy, profitability and on the current business of
the Company as well as on any exceptional matters which arise from time to
time.
12
The following provides information relating to the current member of
the Company's Management Board:
MICHAEL J. SMITH, age 55, has been the President and Chief Executive
Officer of MFC since 1996 and a director of MFC since 1986. Mr. Smith is also
a director, President and Chief Financial Officer of TriMaine Holdings, Inc.,
director, President and Secretary of both Drummond Financial Corporation and
Euro Trade & Forfaiting Inc., and director, President, Chief Executive
Officer and Chief Financial Officer of Cybernet Internet Services
International, Inc. Mr. Smith was one of the founding members of the Prentiss
Howard Group, a company organized in 1979 which assists domestic and
international companies with investments, mergers and acquisitions.
COMPENSATION
Members of the Supervisory Board of the Company do not receive
compensation for serving as such, but are reimbursed for reasonable expenses
incurred in attending Supervisory Board meetings. In 2002, none of the
members of the Company's Supervisory Board made a claim for the reimbursement
of expenses.
Members of the Management Board of the Company are paid salaries for
their services to the Company. In 2002, none of the members of the Management
Board of the Company received any compensation for services provided to the
Company.
The Company currently does not have and in the past has not had a
stock option or other compensatory plan for the purposes of compensating
persons for services to the Company.
No person that was a member of the Company's Supervisory Board or
Management Board in 2002 beneficially owned any shares in the capital of
the Company in 2002.
None of the current members of the Company's Supervisory Board or
Management Board beneficially own any shares in the capital of the Company.
MFC owns, directly or indirectly, approximately 90.6% of the outstanding
share capital of the Company. Certain members of the Company's Supervisory
Board and Management Board are also directors and/or officers of MFC, or its
subsidiaries, but disclaim beneficial ownership of shares in the capital of
the Company held by MFC as that power rests with the Board of Directors of
MFC.
EMPLOYEES
The Company had two employees as at December 31, 2001 and 2002 and
currently has two employees. As at December 31, 2000, the Company had four
employees. The Company was not a party to any collective bargaining
agreements with labour unions.
13
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
MAJOR SHAREHOLDERS
The following table sets forth information as at June 25, 2002 concerning
the ownership of the Company's American Depositary Receipts ("ADRs") (each of
which represents one of the Company's outstanding ordinary shares (the "Ordinary
Shares")) by each person known to the Company to be the direct and/or indirect
owner of 5% or more of the ADRs:
IDENTITY OF PERSON AMOUNT OWNED PERCENTAGE OF CLASS
--------------------------- ---------------------- -----------------------------
MFC Bancorp Ltd.(1)(2) 679,772 90.6%
---------------
(1) These securities are held by certain affiliates of MFC as
follows: Sutton Park International Limited owns 409,772
ADRs; MFC Merchant Bank S.A. owns 135,000 ADRs; Drummond
Financial Corporation owns 67,500 ADRs; and TriMaine
Holdings Inc. owns 67,500 ADRs.
(2) Certain members of the Company's Supervisory Board and
Management Board are also directors and/or officers of MFC,
or its subsidiaries, but disclaim beneficial ownership of
shares in the capital of the Company held by MFC as that
power rests with the Board of Directors of MFC.
All holders of the Company's Ordinary Shares have identical voting rights.
SHAREHOLDER DISTRIBUTION
As at June 25, 2003, a total of 750,000 ADRs of the Company were
outstanding, representing all of the outstanding Ordinary Shares of the
Company. The ADRs are quoted for trading on the Nasdaq SmallCap Market. At
June 25, 2003, there were approximately 10 holders of record of the Company's
ADRs in the United States.
RELATED PARTY TRANSACTIONS
Other than as disclosed herein, to the best of the Company's knowledge,
there have been no material transactions since January 1, 2002 to which the
Company was or is a party and in which a member of the Company's Supervisory
Board or Management Board, any relative or spouse of any such person, or any
person owning, directly or indirectly, an interest in the Company's voting
power that gives it significant influence over the Company, has or will have
a direct or indirect material interest, nor were any of the members of the
Company's Supervisory Board or Management Board, any relatives or spouses of
such persons, or any individual owning, directly or indirectly, an interest
in the Company's voting power that gives it significant influence over the
Company, indebted to the Company during this period.
At the end of 2001, the Company became part of the cash treasury
management system of a subsidiary of MFC in respect of amounts owed to it by
MFC and its affiliates and the Company is paid interest pursuant thereto on
outstanding amounts of 3.5%.
In October 2002, the Company acquired 17.23 acres of land in Washington
State, U.S.A. from an affiliate for a purchase price of U.S.$2.65 million
((-EURO-)2.74 million), comprised of a cash payment of approximately
U.S.$2.23 million ((-EURO-)2.30 million) and the assumption of U.S.$0.42
million ((-EURO-)0.44 million) in liabilities, which reflected the fair
market value of the property at the time of its purchase.
14
ITEM 8. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See "Item 18. Financial Statements" for financial statements filed as
part of this annual report.
SIGNIFICANT CHANGES
Other than as described in this annual report, no significant changes
have occurred since the date of the financial statements provided in Item
18 below.
LEGAL PROCEEDINGS
The Company is not and has not in the recent past been a party to any
material legal proceedings.
DIVIDEND INFORMATION
The declaration, payment and amount of dividends are subject to
approval of the Supervisory Board and Management Board of the Company.
Dividends may be declared at a general meeting of shareholders. The
Company has not paid dividends on its Ordinary Shares since its
inception and does not anticipate paying dividends in the foreseeable
future. See "Item 10. Additional Information".
15
ITEM 9. THE OFFER AND LISTING
MARKETS AND PRICE HISTORY
The Company's ADRs are quoted for trading on the Nasdaq SmallCap Market
under the symbol "DTAGY". The following table sets forth the high and low
trading prices for the Company's ADRs for the periods indicated on the Nasdaq
SmallCap Market:
NASDAQ SMALLCAP MARKET
--------------------------------------------
HIGH LOW
------------------- -------------------
ANNUAL HIGHS AND LOWS
1997..................................................... U.S.$15.25 U.S.$6.25
1998..................................................... 13.75 5.50
1999..................................................... 11.00 3.25
2000..................................................... 8.50 3.25
2001..................................................... 7.50 1.50
2002..................................................... 10.89 2.12
QUARTERLY HIGHS AND LOWS
2001
First Quarter............................................ 7.50 5.50
Second Quarter........................................... 7.25 3.00
Third Quarter............................................ 4.20 2.35
Fourth Quarter........................................... 2.40 1.50
2002
First Quarter............................................ 10.89 2.12
Second Quarter........................................... 6.50 3.27
Third Quarter............................................ 10.00 3.50
Fourth Quarter........................................... 8.00 3.50
2003
First Quarter............................................ 6.55 5.50
MONTHLY HIGHS AND LOWS
2002
December................................................. 8.00 5.60
2003
January.................................................. 6.55 6.05
February................................................. 6.05 5.50
March.................................................... -- --
April.................................................... 6.50 6.50
May...................................................... 6.10 5.75
June 1 to 15............................................. 6.70 6.40
The Company's ADRs are issued and exchanged by the Bank of New York as
depositary (the "Depositary") under a Deposit Agreement among the Depositary,
the Company and all holders from time to time of such ADRs, at its office in
New York.
16
ITEM 10. ADDITIONAL INFORMATION
MEMORANDUM AND ARTICLES OF ASSOCIATION
The Company is organized under the laws of Germany and is registered in
the Commercial Register maintained by the local court in Hannover, Germany
and has been assigned the entry number HRB 59537.
Under the Articles of Association of the Company, the objects of the
Company are the purchase, foundation, administration and/or control of
companies and ventures, and the participation in those companies in Germany
and abroad. The Company may also establish subsidiaries at home and abroad,
and can do everything which helps to serve the objects of the Company.
Under German law, the Company's Supervisory Board members and Management
Board members owe a duty of loyalty and care to the Company. They must
exercise the standard-of-care of a prudent and diligent businessman and bear
the burden of proving that they did so if their actions are contested. Both
boards must consider the interests of the Company's shareholders and its
workers and, to some extent, the common interest. Those who violate their
duties may be held jointly and severally liable for any resulting damages,
unless their actions were validly approved by resolution at a shareholders'
meeting. Further, a Supervisory Board member may not receive a loan from the
Company unless approved by the Supervisory Board, and may not vote on a
matter that concerns ratification of his own acts or in which he has a
material interest. See "Item 6. Directors, Senior Management and Employees".
The Company is authorized to issue Ordinary Shares. At June 25, 2003,
there were 750,000 Ordinary Shares issued and outstanding. All of the issued
ordinary share capital of the Company is in bearer form and is freely
transferable. Although the Company currently believes that it knows the
identity of most holders of its Ordinary Shares, the holders of bearer shares
are not required to reveal their identity to the Company.
Each Ordinary Share entitles the holder thereof to one vote at a general
meeting of the shareholders of the Company, which must be held within 8
months of the Company's year end. Holders of the Ordinary Shares do not have
cumulative voting rights. Resolutions are passed at a general meeting of the
shareholders of the Company by a majority of the votes cast, unless a higher
vote is required by law. The GERMAN STOCK CORPORATION ACT and the Articles of
Association of the Company require that certain significant resolutions be
passed by a majority of the votes cast by at least 75% of the capital
represented at a general meeting of shareholders, including with respect to
certain capital increases, capital decreases, a dissolution of the Company, a
merger of the Company into or a consolidation of the Company with another
stock corporation, a transfer of substantially all of the Company's assets, a
change of the Company's corporate form, the elimination of preemptive rights,
the entering into of a control agreement by the Company, or an agreement to
transfer profits between entities.
There are no limitations on the rights of non-residents of Germany to
hold or vote the Ordinary Shares imposed under German law or the Articles of
Association of the Company.
A general meeting of the shareholders of the Company may be called by
the Management Board, the Supervisory Board or by shareholders holding in the
aggregate at least 5% in nominal value of the Company's issued share capital.
A special meeting must be convened if the Company incurs a loss in excess of
its stated capital. Notice of shareholder meetings must be published in the
Federal Gazette (Bundesanzeiger) in Germany at least one month prior to the
date of the general meeting. Neither the GERMAN STOCK CORPORATION ACT nor the
Articles of Association of the Company has any minimum quorum requirement
applicable to shareholder meetings.
Amendments of the Articles of Association of the Company may be proposed
either jointly by the Supervisory Board and the Management Board or by a
shareholder or group of shareholders holding a minimum of 5% of the
outstanding Ordinary Shares or holding shares with a nominal value of DM 1
million. A resolution amending the Articles of Association must be passed by
a majority of the votes cast and at least a majority of the nominal capital
represented at the meeting of shareholders at which the resolution is
considered unless the GERMAN STOCK CORPORATION ACT requires that the
resolution be passed by at least 75% of the nominal capital represented at
the meeting.
Holders of Ordinary Shares may be entitled to dividends. The
declaration, payment and amount of dividends are subject to approval of the
Supervisory Board and Management Board of the Company. Dividends may be
declared at an annual general meeting of shareholders.
The Supervisory Board and the Management Board must ratify the Company's
annual financial statements and recommend the disposition of all
unappropriated profits, including the amount of net profits of the Company
which will be distributed by way of
17
dividends among the holders of Ordinary Shares to the extent that
shareholders do not specify any other use at the Company's annual general
meeting.
Shareholders would present a dividend coupon to receive such dividends
at any time within a four year period which commences at the end of the year
during which the dividend is due. If a shareholder has presented a dividend
coupon to the Company for payment within such four year period, the statute
of limitations for enforcing the right to receive such dividend payment is
two years from the end of such four year period. When a shareholder has
presented the last outstanding dividend coupon in order to receive the
dividend payable in respect of that coupon, such shareholder is required to
submit to the Company the renewal coupon attached at the bottom of each sheet
of dividend coupons in order to obtain the next series of dividend coupons to
be issued by the Company.
In accordance with the GERMAN STOCK CORPORATION ACT, upon the
liquidation of the Company, any liquidation proceeds remaining after paying
all the Company's liabilities would be distributed among the holders of
Ordinary Shares in proportion to the total nominal value of the shares held
by each holder.
Under the GERMAN STOCK CORPORATION ACT, an existing shareholder in a
corporation has a preferential right to subscribe for issues by such
corporation of shares, debt instruments convertible into shares and
participating debt instruments in proportion to the shares held by such
shareholder in the capital of such corporation. The GERMAN STOCK CORPORATION
ACT provides that this preferential right may only be circumvented by a
shareholder resolution passed at the same time as the resolution authorizing
the capital increase. An affirmative vote of at least 75% of the votes cast
at a general meeting of shareholders is required in this regard.
The Articles of Association of the Company do not contain any specific
provisions that would have the effect of delaying, deferring or preventing a
change in control of the Company and that would only apply in the context of
a merger, acquisition or corporate restructuring involving the Company.
However, certain legislation in Germany may apply in the case of a change of
control of a company, including in connection with a take-over bid.
The Articles of Association of the Company do not require shareholders
to disclose their shareholdings. The German SECURITIES TRADING ACT, however,
requires holders of voting securities of a company whose shares are listed on
a stock exchange to notify the company of the number of shares they hold if
that number reaches, exceeds or falls below certain specified thresholds.
These thresholds are 5%, 10%, 25%, 50% and 75% of the company's outstanding
voting shares.
MATERIAL CONTRACTS
In October 2002, the Company acquired 17.23 acres of land pursuant to
an agreement with a wholly-owned subsidiary of MFC dated for reference August
26, 2002 for a purchase price of approximately U.S.$2.65 million
((-EURO-)2.74 million), comprised of a cash payment of approximately
U.S.$2.23 million ((-EURO-)2.30 million) and the assumption of U.S.$0.42
million ((-EURO-)0.44 million) in liabilities. The agreement contains terms
and conditions reasonably customary for agreements of this type.
EXCHANGE CONTROLS
At the present time, Germany does not restrict the export or import of
capital or the remittance of dividends or other payments to shareholders of
the Company who are not residents of Germany, except for investments in
certain countries and individuals subject to embargos. However, for
statistical purposes, every individual or corporation residing in Germany
(hereinafter a "Resident") must report to the Deutsche Bundesbank in Germany,
subject to certain exceptions, any payment received from or made to an
individual or a corporation resident outside of Germany (hereinafter a
"Non-resident") if such payment exceeds (-EURO-)12,500 (or the equivalent in
a foreign currency). In addition, Residents (other than financial
institutions) must report any claims against or any liabilities payable to
Non-residents if such claims or liabilities, in the aggregate, exceed
(-EURO-)1.5 million (or the equivalent in a foreign currency) during any one
month period.
Taxation
The following discussion is a summary of certain material tax
consequences generally applicable to U.S. investors under German and U.S.
Federal tax laws in connection with the ownership of the Company's Ordinary
Shares (or interest therein under an ADR). The summary is based on the tax
laws of the United States and Germany as in effect on the date of this annual
report, which laws are subject to change, possibly with retroactive effect.
This summary focuses primarily on tax considerations for a U.S. Holder.
For this purpose, a "U.S. Holder" is any citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in
or under the laws of the United States
18
or any political subdivision thereof, or an estate or trust the income of
which is subject to U.S. Federal income taxation regardless of its source
(each a "U.S. Person") as well as any other person to the extent that income
attributable to an American Depositary Share ("ADS") (which are evidenced by
the ADRs and each of which represents one Ordinary Share) is effectively
connected with the conduct by that person of a trade or business within the
United States. A "Non-U.S. Holder" is any beneficial owner of an ADS other
than a U.S. Holder. A Non-U.S. Holder will be subject to tax rules differing
significantly from those summarized below for U.S. Holders and therefore is
strongly urged to consult its tax adviser regarding any U.S. Federal income
tax considerations applicable to it.
This summary deals only with an ADS held by an initial purchaser as a
capital asset. Moreover, it does not discuss all of the tax consequences that
may be relevant to a particular purchaser in light of that person's
particular circumstances or to a purchaser that is subject to special rules,
like an insurance company, a securities or currency dealer, a financial
institution, a regulated investment company, real estate investment trust or
real estate mortgage investment conduit or a person who holds an ADS as part
of a "straddle" or "conversion transaction" or whose functional currency is
not the U.S. dollar. This summary therefore does not purport to be a
comprehensive description of all tax considerations that may be relevant to a
decision to purchase an ADS. Accordingly, each prospective investor is urged
to consult its tax adviser regarding the U.S. Federal, state and local,
German and other tax consequences incident to an investment in an ADS.
This summary also is based in part on representations by the Depositary
and assumes that each obligation under the Deposit Agreement and any related
agreement will be performed in accordance with its terms.
GERMAN TAXATION
TAXATION OF DIVIDENDS
AMOUNT OF TAX. Under new German tax law, a 20 percent tax is imposed on
profits distributed as dividends. German corporations are required to
withhold from a dividend paid to a resident or non-resident shareholder a
German tax in an amount equal to 20 percent of the gross amount of the
dividend. Pursuant to the income tax treaty between the United States and
Germany (the "Treaty"), a person entitled to the benefits of the Treaty (a
"Treaty Holder") can obtain a partial refund of this tax. The amount of the
refund depends on whether the U.S. Holder is a corporation that owns at least
ten percent of the voting stock of the German corporation (a "Direct
Investor"). For this purpose, a Treaty Holder generally means a resident of
the United States within the meaning of the Treaty whose holding of an ADS is
not part of either a permanent establishment in Germany through which that
person carries on business in Germany or a fixed base in Germany from which
that person performs independent personal services in Germany.
In the case of a Treaty Holder other than a Direct Investor, a portion
of the German withholding tax is refunded pursuant to the Treaty to reduce
the withholding tax to 15 percent of the gross amount of the dividend. Thus,
for each $100 of gross dividend paid by the Company to a Treaty Holder, other
than a Direct Investor, the dividend, after partial refund of the 20 percent
withholding tax pursuant to the Treaty, will be subject to a German
withholding tax of $15.
In the case of a Direct Investor, the Treaty reduces the 20 percent
German withholding tax to five percent. A Direct Investor, therefore, may
apply for a refund of German withholding tax in the amount of 15 percent of
the gross amount of a distribution.
Since January 1, 1998, a 5.5 percent surtax has been levied on the
German withholding tax imposed on distributions paid by a German resident
company. The surtax amounts to 1.1 percent (5.5 percent x 20 percent) of the
gross amount of a distribution. Since the Treaty reduces the German
withholding tax rate, a Treaty Holder is entitled to a full refund of this
surtax.
Pursuant to the Treaty, the refund of German tax (including the surtax)
is not granted where the ADS (i) is part of the business property of a
permanent establishment located in Germany or (ii) is part of the assets of a
fixed base of an individual located in Germany and used for the performance
of independent personal services.
REFUND PROCEDURES. To claim the five percent refund, the reduction of
the German withholding tax from 20 percent to 15 percent (five percent for a
Direct Investor) and the refund of the 5.5 percent German surtax, a Treaty
Holder must submit a claim for refund to the German tax authorities (either
directly or, as described below, through the Depositary), with the original
bank voucher (or a certified copy thereof) issued by the paying entity
documenting the tax withheld. The claim for refund must be submitted within
four years from the end of the calendar year in which the dividend is
received. Claims for refunds are made on a special German claim for refund
form filed at Bundesamt fur Finanzen, Friedhofstrasse 1, 53225 Bonn-Beuel,
Germany. These forms may be obtained from the German tax authorities at that
same address, from the Embassy of the Federal Republic of Germany, 4645
Reservoir Road, N.W., Washington, D.C. 20007 - 1998, or from the Office of
International Operations, Internal Revenue Service, 1325 K Street, N.W.,
Washington, D.C. 20225, Attention: Taxpayer Service Division, Room 900.
19
A Treaty Holder also must submit to the German tax authorities a
certification of its last filed U.S. Federal income tax return. Certification
is obtained from the office of the Director of the Internal Revenue Service
Center, Philadelphia, Pennsylvania, Foreign Certificate Request, P.O. Box
16347, Philadelphia, PA 19114-0447. Requests for certification are to be made
in writing and must include the Treaty Holder's name, social security number
or employer identification number, tax return form number, and tax period for
which certification is requested. The Internal Revenue Service will send the
certification (IRS Form 6166) directly to German tax authorities. This
certification is valid for three years and need only be resubmitted in a
fourth year in the event of a subsequent application for refund.
In accordance with arrangements under the Deposit Agreement, the
Depositary (or a custodian as its designated agent) will hold the Ordinary
Shares, receive and distribute dividends to the Treaty Holders, and perform
administrative functions necessary to obtain the five percent refund, the
reduction in German withholding tax and the refund of the German surtax.
These arrangements are provided by the German tax authorities and may be
amended or revoked at any time in the future.
The Depositary will prepare the German claim for refund forms on behalf
of the Treaty Holders and file them with the German tax authorities. In order
for the Depositary to file the claim for refund forms, the Depositary will
prepare and mail to each Treaty Holder, which the Treaty Holders will be
requested to sign and return to the Depositary, (i) a statement authorizing
the Depositary to perform these procedures and agreeing that the German tax
authorities may inform the Internal Revenue Service of any refunds of German
taxes and (ii), as applicable, a written request for certification of filing
a U.S. tax return (IRS Form 6166). The Depositary will attach the signed
statement and the certified credit advice issued by the paying agency
documenting the dividend paid and the tax withheld to the claim for refund
form and file them with the German tax authorities. The Depositary will also
file the signed request for certification with the appropriate Internal
Revenue Service Center.
To the extent a Treaty Holder holds an ADS registered with a broker
participating in the Depositary Trust Company, it is expected that the broker
will assist the Depositary in performing the procedures described above and,
in particular, prepare and forward the German claim for refund form together
with the required documentation to the Depositary. The Depositary then will
file the German claim for refund form and any attachments thereto with the
German tax authorities. The German tax authorities will issue the refund,
which will be denominated in German Marks, in the name of the Depositary. The
Depositary will convert the refund to dollars and issue a corresponding
refund check to the broker. The broker, in turn, will remit a corresponding
refund amount to the Treaty Holder holding the ADS registered with that
broker.
TAXATION OF CAPITAL GAINS
Pursuant to the Treaty, a U.S. Holder who is not a resident of Germany
for German tax purposes will not be liable for German tax on capital gains
realized or accrued on the sale or other disposition of an ADS representing
stock of a German resident company unless the ADS (i) is part of the business
property of a permanent establishment located in Germany or (ii) is part of
the assets of a fixed base of an individual located in Germany and used for
the performance of independent personal services.
GIFT AND INHERITANCE TAXES
The estate tax treaty between the United States and Germany provides
that an individual whose domicile is determined to be in the United States
for purposes of that treaty will not be subject to German inheritance and
gift tax on the individual's death or making of a gift unless the ADS (i) is
part of the business property of a permanent establishment located in Germany
or (ii) is part of the assets of a fixed base of an individual located in
Germany and used for the performance of independent personal services. An
individual's domicile in the United States, however, does not prevent
imposition of German inheritance and gift tax with respect to an heir, donee
or other beneficiary who is domiciled in Germany at the time the individual
died or the gift was made.
The United States-Germany estate tax treaty also provides a credit
against U.S. Federal estate and gift tax liabilities for the amount of
inheritance and gift tax paid to Germany, subject to certain limitations, in
a case where the ADS is subject to German inheritance or gift tax and U.S.
Federal estate or gift tax.
GERMAN CAPITAL TAX
The Treaty provides that a person resident in the United States for
purposes of the Treaty will not be subject to German capital tax with respect to
an ADS unless the ADS (i) is part of the business property of a permanent
establishment located in Germany or (ii) is part of the assets of a fixed base
of an individual located in Germany and used for the performance of independent
personal services.
OTHER GERMAN TAXES
There are no German transfer, stamp or other similar taxes that would
apply to a U.S. Holder who purchases or sells an ADS.
20
UNITED STATES FEDERAL INCOME TAXATION
For U.S. Federal income tax purposes, a beneficial owner of an ADS will
be treated as the owner of the Ordinary Share underlying an ADS.
U.S. HOLDERS
TAXATION OF DIVIDENDS. Subject to the discussion below of the
consequences of the Company being treated as a passive foreign investment
company, the gross amount of a distribution by the Company, before deduction
of depository fees and withholding taxes, will constitute foreign source
dividend income for U.S. Federal income tax purposes to the extent the
distribution is paid from current or accumulated earnings and profits of the
Company, as determined for U.S. Federal income tax purposes. To the extent,
if any, that the amount of any distribution exceeds the Company's current and
accumulated earnings and profits, it will reduce the U.S. Holder's tax basis
in his ADS to the extent thereof. If a distribution exceeds that tax basis,
the excess will be treated as a capital gain from the sale or exchange of the
ADS and will be U.S. source gain for foreign tax credit limitation purposes.
A distribution by the Company will not qualify for the dividends received
deduction allowed to a U.S. corporation.
The amount of any distribution paid in German Marks will equal the U.S.
dollar value of the German Marks received calculated by reference to the
exchange rate in effect on the date the distribution is received by the
Depositary, regardless of whether the German Marks are converted into U.S.
dollars. Gain or loss, if any, realized on a sale or other disposition of the
German Marks will be ordinary income or loss. The amount of any distribution
of property other than cash generally will be the fair market value of that
property on the date of distribution.
Specified miscellaneous itemized deductions, like the depository fee,
are deductible by an individual, estate or trust only to the extent that, in
the aggregate, they exceed two percent of adjusted gross income. In addition,
most itemized deductions, including miscellaneous itemized deductions,
otherwise allowable to an individual whose adjusted gross income exceeds a
specified threshold amount, indexed for inflation, of $137,300 in 2002 (or
$68,650 in the case of a married taxpayer filing a separate return) will be
reduced by the lesser of (i) three percent of the excess of adjusted gross
income over the specified threshold amount and (ii) 80 percent of the amount
of itemized deductions otherwise allowable for that taxable year. In
addition, a non-corporate U.S. Holder subject to the alternative minimum tax
may not deduct miscellaneous itemized deductions in determining alternative
minimum taxable income. These limitations may cause the taxable income with
respect to an ADS to exceed the net cash distributions related to that income
in the case of a U.S. Holder that is an individual, trust or estate.
Subject to certain limitations, German tax withheld from a dividend
distribution will be eligible for credit against the U.S. Holder's federal
income tax liability. The limitation on foreign taxes eligible for credit is
calculated separately with respect to specific classes of income. For this
purpose, a dividend paid by the Company with respect to an ADS generally will
constitute "passive income" or, in the case of certain U.S. Holders,
"financial services income". In addition, a Direct Investor is allowed a
foreign tax credit for the portion of the total income taxes paid by the
Company attributable to the distributed profits, subject to the general
limitations of U.S. Federal income tax law. In the case of a Treaty Holder,
German tax withheld in excess of the rate provided in the Treaty will not be
eligible for credit against the Treaty Holder's U.S. Federal income tax until
that Treaty Holder exhausts all effective and practical remedies to recover
the excess withholding, including the seeking of competent authority
assistance from the U.S. Internal Revenue Service. See "German Taxation -
Taxation of Dividends" for a description of the procedures a Treaty Holder
can use to service the Treaty rate for withholding on dividends paid by the
Company.
A U.S. Holder generally will not be subject to U.S. Federal income tax
with respect to a pro rata distribution by the Company of Ordinary Shares to
its shareholders, except with respect to the receipt of cash from the
disposition of a fractional share. Accordingly, such a distribution generally
will not give rise to U.S. Federal income tax against which German
withholding tax, if any, may be credited. Any German withholding tax
generally will be creditable against a U.S. Holder's U.S. Federal income tax
liability, subject to the limitations described in the preceding paragraph,
although the distribution may constitute "general limitation income" rather
than "passive income" or "financial services income".
TAXATION OF CAPITAL GAINS. Subject to the discussion below of the
consequences of the Company being treated as a passive foreign investment
company, a U.S. Holder will recognize capital gain or loss for U.S. Federal
income tax purposes on a sale or other disposition of an ADS in an amount
equal to the difference between the amount realized and the U.S. Holder's tax
basis in the ADS. That gain or loss will be long-term capital gain or loss if
the U.S. Holder's holding period for the ADS exceeds one year. The gain, if
any, generally will be U.S. source income. A U.S. Holder should consult his
own tax adviser with respect to his ability to credit German withholding tax,
if any, on gain from a sale of an ADS against his U.S. Federal income tax
liability.
21
The source of any loss recognized by a U.S. Holder on a sale or other
disposition of an ADS is not entirely clear. Under proposed Treasury
regulations, a loss recognized by a U.S. Holder on a disposition of an ADS
would depend on whether the U.S. Holder owns (actually and constructively)
less than ten percent, by vote and value, of the Company's stock. If the U.S.
Holder owns less than ten percent, the loss generally would be a foreign
source loss. If the U.S. Holder owns at least ten percent of the Company's
stock, the loss generally will be determined by reference to the residence of
the U.S. Holder or, in certain cases, by reference to an office or other
fixed place of business to which the loss is attributable. A U.S. Holder is
advised to consult its tax adviser regarding the treatment of a loss for U.S.
Federal income tax purposes.
An exchange, deposit or withdrawal by a U.S. Holder of an Ordinary
Share in exchange for ADSs, or vice versa, will not be subject to any U.S.
Federal income tax.
PERSONAL HOLDING COMPANY AND FOREIGN PERSONAL HOLDING COMPANY. The
Company would be a personal holding company ("PHC") for U.S. Federal income
tax purposes if, in general, at least 60 percent of its adjusted ordinary
gross income for the taxable year is personal holding company income ("PHCI")
and if at any time during the last half of the taxable year five or fewer
individuals, regardless of citizenship or residency, own more than 50
percent, by value, of the Company's stock, including stock owned both
directly and constructively. If the Company were a PHC, it would be subject
to a 15 percent personal holding company tax for 2003 (38.6 percent for 2002)
on its undistributed U.S. source income, if any.
The Company would be a foreign personal holding company ("LFPHC") for
U.S. Federal income tax purposes if at least 60 percent of its gross income
for a taxable year is foreign personal holding company income ("FPHCI") and
if at any time during the taxable year five or fewer U.S. citizens or
individual residents own more than 50 percent, by vote or value, of the
Company's stock, including stock owned both constructively and directly. If
the Company were an FPHC, a U. S. Holder would be required to include in
gross income its proportionate share of the Company's undistributed income.
It is expected that substantially all of the Company's income in any
taxable year will consist of service income which is not PHCI or FPHCI.
Accordingly, it is not anticipated that the Company will be a PHC or FPHC.
PASSIVE FOREIGN INVESTMENT COMPANY. It is possible that for one or more
years the Company will satisfy the requirements to be a PFIC for U.S. Federal
income tax purposes. A non-U.S. corporation qualifies as a PFIC if in any
taxable year either (i) 50 percent or more of the average value of its assets
consists of assets that produce, or that are held for the production of,
passive income or (ii) 75 percent or more of its gross income is passive
income. Passive income generally includes dividends, interest and other types
of investment income. The Internal Revenue Service takes the position that
cash, including any asset that may be characterized as the working capital of
an active business, that produces passive income is a passive asset for
purposes of the PFIC rules.
Based on the foregoing rules, the Company may satisfy the requirements
to be a PFIC in one or more taxable years if, for example, the Company's
investment of the proceeds of this offering in assets treated as passive
assets causes the average of the Company's passive assets to equal or exceed
50 percent of the average value of the Company's total assets for that year.
A "start-up exception" to the general rule defining a PFIC permits a
corporation not to be treated as a PFIC for the first taxable year the
corporation has gross income if it is established to the satisfaction of the
Secretary of the Treasury that the corporation will not be a PFIC for either
of the two succeeding years and the corporation in fact is not a PFIC for
either of those two years. The start-up-exception, however, does not apply if
any predecessor of the corporation was a PFIC. There is no precise definition
of predecessor for purposes of the PFIC rules. Deutsche Telekabel AG LL. may
qualify as a predecessor of the Company for that purpose. Moreover, Deutsche
Telekabel AG LL. may have qualified as a PFIC for one or more years. In that
event, the Company would not qualify for the start-up-exception and
therefore, if the Company satisfies the requirements to be a PFIC, would be a
PFIC.
If the Company qualifies as a PFIC at any time while a U.S. Person holds
an ADS, the U.S. Person, other than a U.S. Person that makes the QEF Election
described below, would be liable to pay additional taxes upon disposition of
an ADS or upon receipt of an excess distribution on an ADS. An excess
distribution is a distribution in respect of an ADS in any taxable year that
exceeds 125 percent of the average amount of distributions the U.S Person
received in respect of the ADS in the three preceding taxable years (or, if
shorter, the U.S. Person's holding period for the ADS before the current
taxable year), excluding for this purpose amounts treated as excess
distributions in those years. A disposition of an ADS may be taxable for
purposes of the PFIC rules even though it otherwise would not give rise to
the recognition of gain, including, for example, a gift, transfer at death,
an otherwise tax-free exchange or spin-off, a direct or indirect pledge of
the ADS or termination of the U.S. Person's status as a U.S. citizen or
resident. In addition, special foreign currency exchange rules apply to
determine the amount of an excess distribution.
Upon a disposition of an ADS or an excess distribution, a U.S. Person
would be required to pay, in respect of the gain and the excess distribution,
tax at the highest rate of individual or corporate tax, as the case may be
(without taking into account any deductions), as if the gain or excess
distribution had been recognized ratably over the U.S. Person's holding
period for the ADS (treating, however, any amounts otherwise attributable to
any years before the Company was or becomes a PFIC as attributable to the
year the distribution is received). In addition, the U.S. Person would be
liable for interest on the amount of those additional taxes as if
22
they had been payable in respect of the prior years to which they relate.
Those results in respect of amounts that are not attributable to the year the
distribution is received arise regardless of the amount of the Company's
earnings and profits, which are allocated proportionately between excess
distributions and the non-excess portion of distributions.
Because the Company may be treated as a PFIC, each U.S. Person should
consider whether to elect to treat the Company as a qualified electing fund
(a "QEF Election"). If a QEF Election is made, the tax treatment described
above will not apply. Instead, an electing U.S. Person will be required to
include in gross income currently its proportionate share of the Company's
ordinary earnings, if any, as ordinary income and a pro rata share of the
Company's net capital gains, if any, as long-term capital gain, regardless of
whether the Company makes any distribution to the U.S. Person. If a U.S.
Person makes a QEF Election for the first year in which the Company is a PFIC
and that U.S. Person owns an ADS, the U.S. Person will be required to include
its share of the Company's income as described above only for taxable years
in which the Company satisfies the requirements to be a PFIC and not in other
taxable years. In addition, unless the Company is a foreign personal holding
company (as described above), a U.S. Person that has made a QEF Election
could make an annual election to defer the payment of tax on the amounts to
be included in income pursuant to the QEF Election, although the Internal
Revenue Service may require the posting of a bond in order to make this
election. Payment is deferred until the earliest of various specified events.
Interest is payable with deferred payments. A QEF Election would not cause
losses of the Company, if any, to flow through to the Company's shareholders.
If a U.S. Person makes a QEF Election but does not make it for the first
year in which the Company is a PFIC and that U.S. Person owns an ADS but
makes that election for a later year, the tax consequences will be materially
different from and less favorable than if the election had been made for that
first year. It may be possible, however, for a U.S. Person to make other
elections, which require the recognition of income or gain, that will reduce
those differences.
The Company, at the request of any U.S. Person that wishes to make a QEF
Election, will determine whether it is a PFIC for 1997 or any subsequent year
and will comply with the applicable information reporting requirements. A
prospective investor should consult its tax adviser regarding the
eligibility, manner and advisability of making a QEF election as well as the
elections to include income or gain in gross income.
NON-U.S. HOLDERS
A Non-U.S. Holder of an ADS generally will not be subject to U.S.
Federal income or withholding tax on any dividend paid on the ADS. A Non-U.S.
holder of an ADS generally will not be subject to U.S. Federal income or
withholding tax on any gain realized on a sale or other disposition of the
ADS unless the Non-U.S. Holder is an individual present in the United States
for 183 days or more in the taxable year of the sale and certain other
conditions are met.
UNITED STATES BACKUP WITHHOLDING AND INFORMATION REPORTING. U.S.
information reporting requirements may apply to the payment of a dividend on
an ADS (i) made by mail or wire transfer to an address or account in the
United States, (ii) made by a paying agent, nominee, custodian, broker or
other agent or intermediary (each, an "Agent") in the United States or (iii)
made outside the United States by an Agent that is a U.S. Person or "United
States-related person" (defined below). However, the U.S. information
reporting requirements do not apply to a holder of a share of common stock
who is not a U.S. Person (a "Non-U.S. Person") or that is a corporation or
other exempt recipient. A holder may be required to establish its exemption
to the Agent, unless the Agent is outside the United States and has
sufficient documentary evidence in its files of the holder's status as a
Non-U.S. Person. Under Treasury regulations currently in effect, the backup
withholding rules do not apply to payments of dividends by a corporation,
like the Company, that is a foreign corporation. The U.S. Treasury
Department, however, is considering whether to extend the backup withholding
rules to those payments.
Upon a sale of an ADS by a holder to or through the U.S. office of a
broker, the entire sales price generally will be subject to information
reporting and to the backup withholding rules unless the holder either
certifies its status as a Non-U.S. Person under penalties of perjury or
otherwise establishes an exemption. Under the backup withholding rules, a
broker is required to withhold 31 percent of the sales proceeds of a
non-exempt holder that has not provided its taxpayer identification number
and in certain other circumstances. A sale of an ADS to or through a Non-U.S.
office of a broker generally will not be subject to backup withholding or
information reporting. However, information reporting (but not the backup
withholding rules) may apply to a sale to or through a Non-U.S. branch of a
U.S. broker or a Non-U.S. office of a broker that is a "United States-related
person", unless, in either case, the holder establishes an exemption or the
broker has documentary evidence in its files of the holder's status as a
Non-U.S. Person.
For purposes of these rules, a "United States-related person" is either
a controlled foreign corporation for U.S. Federal income tax purposes or a
Non-U.S. Person 50 percent or more of whose gross income from all sources
over a specified three year period is effectively connected with a U.S. trade
or business.
Any amounts withheld under the backup withholding rules from a payment
to a holder will be refunded or credited against any U.S. Federal income tax
liability of the holder, provided the required information is furnished to
the U.S. Internal Revenue Service.
23
The backup withholding rules have not been issued in final form and
therefore are potentially subject to change.
Acquisition by a U.S. Person of ownership (directly or through ownership
of ADSs) of 10 percent or more of the Company's Ordinary Shares will trigger
certain reporting requirements for the acquiring shareholder. The
requirements are satisfied by filing IRS Form 5471 with the shareholder's
U.S. tax return.
ESTATE AND GIFT TAXATION. An ADS or Ordinary Share generally will be
subject to U.S. Federal estate or gift taxation only if the decedent or
donor, as the case may be, is a citizen or individual resident of the United
States. If the Company is a PFIC, the tax basis of an ADS or Ordinary Share
may not change upon the death of the holder to the fair market value of the
ADS or Ordinary Share on the date of the holder's death, as otherwise would
be the case.
DOCUMENTS ON DISPLAY
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. In accordance with these
requirements, the Company files reports and other information with the SEC.
These materials, including this annual report, may be inspected and copied at
the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the SEC's regional offices at 175 West
Jackson Boulevard, Suite 900, Chicago, Illinois 60604, and 233 Broadway, New
York, New York 10279. Copies of the materials may be obtained from the
principal office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. The public may obtain information on the operation of
the SEC's public reference facilities by calling the SEC in the United States
at 1-800-SEC-0330. The SEC also maintains a website at http://www.sec.gov
that contains reports and other information regarding registrants that
electronically file with the SEC.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not subject to any material market risk.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
24
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of its
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on this evaluation, the Company's principal
executive officer and principal financial officer concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information required to be included in the Company's
periodic reports on file with the SEC. It should be noted that the design of
any system of controls is based in part upon certain assumptions about the
likelihood of certain events, and there can be no assurance that any design
will succeed in achieving its stated goals under all future conditions,
regardless of how remote. In addition, the Company reviewed its internal
controls, and there have been no significant changes in its internal controls
or in other factors that could significantly affect those controls subsequent
to the date of their last evaluation.
ITEM 16. RESERVED
PART III
ITEM 17. FINANCIAL STATEMENTS
See "Item 18. Financial Statements" for financial statements filed as
part of this annual report.
ITEM 18. FINANCIAL STATEMENTS
1. Independent Auditors' Report.
2. Balance Sheets as at December 31, 2002 and 2001 (audited).
3. Statements of Operations for the Years Ended December 31, 2002, 2001
and 2000 (audited).
4. Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 2002, 2001 and 2000 (audited).
5. Statements of Cash Flows for the Years Ended December 31, 2002, 2001
and 2000 (audited).
6. Notes to Financial Statements.
25
REPORT OF INDEPENDENT AUDITORS
INTRODUCTION
We have audited the accompanying balance sheet of DTA Holding Aktiengesellschaft
as of December 31, 2002 and 2001, and the related statements of operations,
changes in stockholders' equity, and cash flows for 2002, 2001 and 2000. 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.
SCOPE
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
OPINION
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DTA Holding Aktiengesellschaft
as of December 31, 2002 and 2001, and the results of its operations and cash
flows for the years 2002, 2001 and 2000, in conformity with accounting
principles generally accepted in the United States.
Amsterdam, the Netherlands, July 14, 2003
MAZARS PAARDEKOOPER HOFFMAN
/s/ Drs. R.P. Krouwer RA
26
DTA HOLDING AKTIENGESELLSCHAFT
BALANCE SHEETS
AS AT AS AT
DECEMBER 31, 2002 DECEMBER 31, 2001
---------------------- --------------------
ASSETS
CURRENT ASSETS:
Cash (-EURO-) 56,318 (-EURO-) 59,543
Tax refund receivable 7,396 61,094
Receivables from affiliated companies 759,315 3,250,893
Other current assets 63,115 165,738
---------------------- ---------------------
TOTAL CURRENTS ASSETS 886,144 3,537,268
---------------------- ---------------------
PROPERTY:
Land 2,742,470 -
Less: accumulated depreciation - -
---------------------- ---------------------
PROPERTY- NET 2,742,470 -
---------------------- ---------------------
TOTAL FIXED ASSETS 2,742,470 -
---------------------- ---------------------
TOTAL ASSETS (-EURO-) 3,628,614 (-EURO-) 3,537,268
====================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable (-EURO-) 17,230 (-EURO-) 28,555
Bank overdraft - 841
Tax liabilities 4,312 103,411
Payable to affiliated companies 10,000 -
Other payables 381,161 26,075
---------------------- ---------------------
TOTAL CURRENT LIABILITIES 412,703 158,882
---------------------- ---------------------
STOCKHOLDERS' EQUITY:
Capital stock, 750,000
ordinary shares authorized 750,000
Capital subscribed 1,917,345 1,917,345
Additional paid-in capital 2,225,497 2,225,497
Accumulated deficit (764,456) (1,796,900)
Net income (loss) (162,475) 1,032,444
---------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 3,215,911 3,378,386
---------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (-EURO-) 3,628,614 (-EURO-) 3,537,268
====================== =====================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
27
DTA HOLDING AKTIENGESELLSCHAFT
STATEMENTS OF OPERATIONS
JANUARY 1, 2002 TO JANUARY 1, 2001 TO JANUARY 1, 2000 TO
DECEMBER 31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2000
--------------------- --------------------- ---------------------
REVENUES:
Sales (-EURO-) - (-EURO-) 488,034 (-EURO-) 1,197,105
Gain on sale of an affiliated company - - 229,181
Gain on sale of equipment - 1,469,500 7,424
Other income 14,866 495,201 77,725
--------------------- --------------------- ---------------------
TOTAL REVENUES 14,866 2,452,735 1,511,435
--------------------- --------------------- ---------------------
OPERATING EXPENSES:
General and administrative 282,561 1,350,415 1,210,618
Advertising and marketing expense - - 174
Depreciation expense - 122,221 323,513
--------------------- --------------------- ---------------------
TOTAL OPERATING EXPENSES 282,561 1,472,636 1,534,305
--------------------- --------------------- ---------------------
LOSS BEFORE INTEREST AND INCOME TAX (267,695) 980,099 (22,871)
--------------------- --------------------- ---------------------
Interest income 105,391 60,015 16,353
Interest expense (171) (7,671) (94,859)
--------------------- --------------------- ---------------------
LOSS BEFORE INCOME TAX (162,475) 1,032,444 (101,377)
INCOME TAX - - -
NET INCOME (LOSS) (-EURO-) (162,475) (-EURO-) 1,032,444 (-EURO-) (101,377)
===================== ===================== =====================
NET INCOME (LOSS) PER ORDINARY SHARE (-EURO-) (0.22) (-EURO-) 1.38 (-EURO-) (0.14)
===================== ===================== =====================
NUMBER OF ORDINARY SHARES 750,000 750,000 750,000
===================== ===================== =====================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
DTA HOLDING AKTIENGESELLSCHAFT
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
CAPITAL STOCK
------------------------------------ RETAINED TOTAL
NUMBER OF ADDITIONAL PAID-IN EARNINGS STOCKHOLDERS
ORDINARY SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
--------------- ----------------- ------------------- ------------------- ------------------
BALANCE - DECEMBER 31, 1999 750,000 (-EURO-)1,917,345 (-EURO-) 2,225,497 (-EURO-)(1,695,523) (-EURO-)2,447,319
=============== ================= =================== =================== ==================
Net loss - (-EURO-) - (-EURO-) - (-EURO-) (101,377) (-EURO-) (101,377)
--------------- ----------------- ------------------- ------------------- ------------------
BALANCE - DECEMBER 31, 2000 750,000 (-EURO-)1,917,345 (-EURO-) 2,225,497 (-EURO-)(1,796,900) (-EURO-)2,345,942
=============== ================= =================== =================== ==================
Net profit - (-EURO-) - (-EURO-) - (-EURO-) 1,032,444 (-EURO-)1,032,444
--------------- ----------------- ------------------- ------------------- ------------------
BALANCE - DECEMBER 31, 2001 750,000 (-EURO-)1,917,345 (-EURO-) 2,225,497 (-EURO-) (764,456) (-EURO-)3,378,386
=============== ================= =================== =================== ==================
Net loss - (-EURO-) - (-EURO-) - (-EURO-) (162,475) (-EURO-) (162,475)
--------------- ----------------- ------------------- ------------------- ------------------
BALANCE - DECEMBER 31, 2002 750,000 (-EURO-)1,917,345 (-EURO-) 2,225,497 (-EURO-) (926,931) (-EURO-)3,215,911
=============== ================= =================== =================== ==================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
29
DTA HOLDING AKTIENGESELLSCHAFT
STATEMENTS OF CASH FLOWS
JANUARY 1, 2002 TO JANUARY 1, 2001 TO JANUARY 1, 2000 TO
DECEMBER 31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2000
-------------------- --------------------- ---------------------
OPERATING ACTIVITIES:
Net income (loss) (-EURO-) (162,475) (-EURO-) 1,032,444 (-EURO-) (101,377)
-------------------- --------------------- ---------------------
Adjustment to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation - 122,221 323,513
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in:
Accounts receivable - 95,275 (85,135)
Prepaid expenses - 10,526 104,175
Tax refund receivable 53,698 10,507 12,115
Other current assets 102,623 (126,723) 66,072
Receivables from affiliated companies 2,491,578 (1,869,559) (1,331,888)
Increase (decrease) in:
Accounts payable (11,325) (174,954) (12,757)
Accrued expenses - (20,189) 20,189
Payable to affiliated companies 10,000 (114,236) 114,236
Other current liabilities 255,988 (239,503) 135,597
-------------------- --------------------- ---------------------
Total adjustments 2,902,562 (2,306,635) (653,883)
-------------------- --------------------- ---------------------
NET CASH-- OPERATING ACTIVITIES - FORWARD 2,740,087 (1,274,192) (755,260)
-------------------- --------------------- ---------------------
INVESTING ACTIVITIES:
Purchase of property, equipment and intangible assets (2,742,470) (10,455) (480,697)
Sale and disposal of equipment and intangible assets - 2,332,484 129,116
Cable network in progress - - 91,649
Sale of an affiliated company - - 818,967
-------------------- --------------------- ---------------------
NET CASH-- INVESTING ACTIVITIES-- FORWARD (2,742,470) 2,322,029 559,035
-------------------- --------------------- ---------------------
FINANCING ACTIVITIES:
Bank overdraft (842) 842 (38,633)
Loans - (1,022,584) -
-------------------- --------------------- ---------------------
NET CASH-- FINANCING ACTIVITIES-- FORWARDED (842) (1,021,742) (38,633)
NET CASH-- OPERATING ACTIVITIES-- FORWARDED 2,740,087 (1,274,192) (755,260)
NET CASH-- INVESTING ACTIVITIES-- FORWARDED (2,742,470) 2,322,029 559,035
NET CASH-- FINANCING ACTIVITIES-- FORWARDED (842) (1,021,742) (38,633)
-------------------- --------------------- ---------------------
NET INCREASE (DECREASE) IN CASH (3,225) 26,095 (234,858)
CASH-- BEGINNING OF PERIODS 59,543 33,448 268,306
-------------------- --------------------- ---------------------
CASH-- END OF PERIODS (-EURO-) 56,318 (-EURO-) 59,543 (-EURO-) 33,448
==================== ===================== =====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for the periods:
Interest (-EURO-) 171 (-EURO-) 7,621 (-EURO-) 94,859
Income taxes - - -
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
DTA HOLDING AG
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND NATURE OF OPERATIONS
The company, Digitale Telekabel AG started operations on July 8, 1996.
The Company was founded under the laws of the Federal republic of Germany as
a stock corporation, an Aktiengesellschaft (an "AG"), on October 17, 1996.
Under applicable German law, the corporation, upon formal approval succeeded
to all rights and obligations arising during the pre-incorporation period.
The Company is located in Hannover, Germany. The Company used to be a
development stage company until 1998.
The Company was engaged in the provision of cable services to multifamily
dwelling units in Germany through agreements with developers of new residential
units and operators of existing apartments or condominiums. The Company offered
developers and operators a means of providing cable services to unit occupants
through a "turn key operation," including, where necessary, the design,
construction and testing of a system capable of the receipt of a signal either
from a satellite or transmission through the Deutsche Telekom AG cable.
On 26th of April 2001 the annual shareholders" meeting decided unanimously to
sell all of its assets to Tele Columbus GmbH and its subsidiaries for the price
of DM 7,479,000. The sale was completed end of April 2001. Following this sale
the Company has no income from cable service contracts from May 1, 2001.
On 24th of September 2002 the annual shareholders' meeting decided
unanimously to change the name to "DTA Holding AG" and change the quality of
shares from "Nennbetragsaktien"(ordinary shares with nominal value) to
"Stuckaktien" (ordinary shares without nominal value). In the same meeting the
management board got the option to enlarge the capital issued with an amount of
(-EURO-) 958,672.
In October 2002, the Company acquired 17.23 acres of land located in the city of
Federal Way, in King County, Washington, U.S.A. for a purchase price of
approximately U.S.$2.65 million ((-EURO-)2.74 million), comprised of a cash
payment of the approximately U.S.$2.23 million and the assumption of U.S.$0.42
million in liabilities. The Company is in the process of identifying and
evaluating opportunities for the acquisition of interests in assets or
businesses
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and the date of financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION - The Company's functional currency is the (-EURO-)
("Euro").
VALUE ADDED TAX REFUND RECEIVABLE - A VAT refund receivable is recorded as a
current asset when more VAT has been paid for purchases than it was received on
revenues. A refund is due the Company from the tax authorities, for this
difference.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Depreciation is provided for in
amounts sufficient to relate the cost of depreciable assets to operations over
their estimated service lives. The straight-line method of depreciation is
followed for financial reporting purposes. The useful lives are as follows :
Property 50 Years
Machinery and equipment 4 - 10 Years
Software 3 Years
Expenditures for renewals and improvements that significantly add to productive
capacity or extend the useful life of an asset are capitalized. The costs of
software used in business operations are capitalized and amortized over their
expected useful lives. Expenditures for maintenance and repairs are charged to
operations when incurred. When assets are sold or retired, the cost of the asset
and the related accumulated depreciation are eliminated from the accounts and
any gain or loss is recognized.
IMPAIRMENT - The property of the Company is reviewed on an annual basis as to
whether their carrying value has become impaired, pursuant to guidance
established in Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets". Management considers assets to be
impaired if the carrying value exceeds the future projected undiscounted net
cash flows from related operations. If impairment is deemed to exist, the assets
will be depreciated to fair value or projected discounted net
31
DTA HOLDING AG
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
cash flows from related operations. Management also re-evaluates the periods of
amortization to determine whether subsequent events and circumstances warrant
revised estimates of useful lives. As of December 31, 2002, management expects
these assets to be fully recoverable , based on a recent external appraisal
report..
NET PROFIT (LOSS) PER ORDINARY SHARE - Net profit (loss)per ordinary share is
based on the 750,000 ordinary shares issued for the year ended December 31,
2002, 2001 and 2000, respectively. Shares issued within a one year period prior
to a public offering (See Note 4) are treated as outstanding for all reported
periods.
REVENUE RECOGNITION - Upon completion of an installation, the Company recognized
revenues as capable service was rendered, through the life of the contracts. The
Company estimated the time between the signing of an individual contract and the
first cash receipt from that contract to be twelve to fifteen months.
CASH AND CASH EQUIVALENTS - The Company considers highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents. The
Company had no cash equivalents as of December 31, 2002. The Company holds cash
accounts at several German banking institutions. All German banks have created a
guaranteed fund for deposit accounts. This fund significantly reduced cash
credit risk.
ACCOUNTS RECEIVABLES - The accounts receivables are presented net of a valuation
allowance. As of December 31, 2002 and 2001, there was no valuation allowance.
(3) DESCRIPTION OF SECURITIES
The capital stock of the Company (also referred to as the share capital)
consists of ordinary shares. All of the issued ordinary share capital of the
Company is in bearer form and is freely transferable. Generally, the share
capital of the Company may be increased in consideration of contributions in
cash or in property by a resolution passed at a general meeting of the
stockholders of the Company, and/or by a majority of the votes cast, as long as
such votes represent 75% or more of the capital represented in connection with
the vote taken on such resolution.
Each ordinary share entitles the holder thereof to one vote at general meetings
of the stockholders of the Company. Holders of the ordinary shares do not have
cumulative voting rights. Resolutions are passed at the general meeting of the
stockholders of the Company by a majority of the votes cast, unless a higher
vote is required by law. The German Stock Corporation Law and the Articles of
Association require that the following significant resolutions be passed by a
majority of the votes cast and at least 75% of the capital represented in
connection with the vote taken on such resolution: (i) certain capital
increases, (ii) capital decreases, (iii) a dissolution of the Company, (iv) a
merger of the Company into or a consolidation of the Company with another stock
corporation , (v) a transfer of all of the Company's assets, (vi) a change of
the Company's corporate form and (vii) the elimination of preemptive rights.
Under the German Stock Corporation Law, an existing stockholder in a stock
corporation has a preferential right to subscribe for issues by such corporation
of shares, debt instruments convertible into shares and participating debt
instruments in proportion to the shares held by such stockholder in existing
capital of such corporation.
Holders of ordinary shares are entitled to receive dividends. The declaration,
payment and amount of dividends on the ordinary shares are subject to the
approval of the Supervisory Board and Board of Management of the Company.
Dividends are declared at an annual general meeting of stockholders, which must
be held within eight months from the end of a fiscal year, and are paid once a
year. The Company has not paid or declared any dividends since inception.
Under German law, a minimum reserve of 10% of the par value of the ordinary
shares must be maintained in a reserve and may not be paid out in the form of a
dividend. As of December 31, 2002, there was no reserve. However, German law
permits dividends from current or prior earnings only if the aggregate of
retained earnings and additional paid in capital is positive.
(4) CAPITAL TRANSACTIONS
On July 8, 1996, the Company authorized the issuance of 400,000 shares of
capital stock at a par value of (-EURO-) 2,56 (DM 5) per ordinary share.
In September 1996, (-EURO-)255,646 (DM 500,000) was paid toward the purchase of
the 400,000 issued shares of capital stock. The remaining amount owing on those
shares was paid by December 9, 1996.
32
DTA HOLDING AG
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On November 6, 1996, the Company authorized the issuance of 350,000 additional
shares of capital stock. On that same date, the Board of Management of the
Company was authorized to increases capital stock by an additional 50,000 shares
in the future. In December 1996, approximately (-EURO-) 223,690 (DM 437,500) was
paid into the capital of the Company towards the purchase of the additional
350,000 shares.
In January 1997, the Company completed an initial public offering ("IPO" or the
"Offering") of 334,960 ordinary shares at a price of approximately (-EURO-)10,90
(DM 21,32) per share from which it received gross proceeds of approximately
(-EURO-) 3,081,809 (DM 6,027,494).
(5) COMMITMENTS
OPERATING LEASE - The Company leased office space located in Frankfurt, Germany,
pursuant to the terms of a ten year lease. In April 2001 it was decided to move
the Company's headquarter to Hannover. The office location in Frankfurt has been
subrented by rental agreements expiring June 2002. The lease of the office
location in Frankfurt ended in 2002.
(6) RELATED PARTY TRANSACTIONS
At end of 2001, the Company became part of the cash treasury management of the
MFC Bancorp Ltd. group. The interest in this system is 3.5 % per annum.
In October 2002, the Company acquired from an affiliated company 17.23 acres of
land located in the city of Federal Way, in King County, Washington for a
purchase price of approximately U.S.$2.65 million ((-EURO-)2.74 million). The
Company is in the process of identifying and evaluating opportunities for the
acquisition of interests in assets or businesses
(7) INCOME TAXES
The provision for federal and state income taxes consists of the following:
DECEMBER 31, DECEMBER 30, DECEMBER 31,
2002 2001 2000
Federal Currently Payable Euro -- --
Local Currently Payable Euro -- -- --
------------------- ----------------- ---------------
TOTALS -- -- --
=================== ================= ===============
The Company adopted Statement of Financial Accounting Standards ("SFAS") Nor.
109, "Accounting for Income Taxes", effective July 8 1996. SFAS No. 109 requires
the establishment of deferred tax assets for all deductible temporary
differences and operating loss carryforwards and deferred tax liabilities for
all taxable differences.
The Company had no taxable temporary differences which would have resulted in
material deferred tax liabilities at December 31, 2002 and 2001. Deductible
temporary differences consists primarily of operating loss carryforwards. The
Company has net operating loss carryforwards for tax purposes of approximately
(-EURO-) 1,483,522 as of December 31, 2002, which have no expiration date under
German tax law. The deferred tax asset attributable to operating loss
carryforwards amounted to approximately (-EURO-)528,418 at December 31, 2002.
Because of the Company's losses in recent periods, however and due to the fact,
that more than 90 % of the shares were sold, a valuation allowance has been set
up to fully provide for the deferred tax asset established for utilization of
the Company's tax loss carryforwards
(8) NEW PRONOUNCEMENTS
In April 2002, the FASB approved SFAS No. 145, "Rescission of FASB Statements
No. 4, No. 44 and No. 64, Amendment of SFAS No. 13, and Technical Corrections".
SFAS No. 145 rescinds previous accounting guidance, which required all gains and
losses from extinguishment of debt be classified as an extraordinary item. Under
FASB No. 145 classification of debt extinguishment depends on the facts and
circumstances of the transaction. SFAS No. 145 is effective for fiscal years
beginning after May 15, 2002.
33
DTA HOLDING AG
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"), which is effective for exit or
disposal activities that are initiated after December 31, 2002. SFAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. A company's
commitment to an exit plan, by itself, does not create a liability. SFAS 146
also establishes that fair value is the objective for initial measurement of the
liability.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions" ("SFAS 147"), which is effective on or after October 1,
2002. SFAS 147 is an amendment of SFAS 72 and 144 and FASB Interpretation No. 9.
SFAS 147 provides guidance on the application of the purchase method to
acquisitions of financial institutions. In addition it includes in its scope
long-term customer-relationship intangible assets of financial institutions,
which will be subject to the undiscounted cash flow recoverability test and
impairment loss recognition and measurement provisions as pronounced in SFAS
144.
In December 2002, the FASB issued SFAS No. 148, "Accounting for stock based
Compensation" ("SFAS 148"). SFAS 148 is an amendment of SFAS 123 and provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. Furthermore SFAS 148
requires prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results.
In April 2003, the FASB issued SFAS No. 149, "Amendment of FASB Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 provides additional
guidance on financial accounting of financial instruments and on hedge
accounting. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003 with some exceptions and for hedging relationships
designated after June 30, 2003.
In May 2003, the FASB issued SFAS No. 150, " Accounting for Certain Financial
Instruments with characteristics of both liabilities and equity". SFAS 150
establishes standards for the classification of financial statements either as
liability or as equity. SFAS No. 150 will be effective for financial instruments
entered into or modified after May 31, 2003 or the first interim period after
June 15, 2003.
The Company does not expect above mentioned statements to have a material impact
on its financial statements.
(9) DIFFERENCES BETWEEN GERMAN GAAP AND U.S. GAAP
The U.S. GAAP applied in the preparation of the consolidated financial
statements differ in some respects from those generally accepted German
accounting principles (German GAAP).
Under German GAAP the expenses relating to the IPO of (-EURO-) 556.591 (DM
1.088.598) are part of the German statement of operations.
In 2002 the Company used an amount of (-EURO-) 1.483.522 of the additional paid
in capital to settle this amount with the accumulated deficit. The additional
paid capital according to the German GAAP amount to (-EURO-) 1,298,566. at year
end.
For the same reason the additional paid in capital according to the German GAAP
amounts to 2.782.089 (DM 5,441,293) in 2001, 2002, 2000 and 1999.
34
ITEM 19. EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Deposit Agreement between Digitale Telekabel
AG and The Bank of New York dated as of
December 30, 1996. Incorporated by reference
to the the Registration Statement on Form F-6
dated September 27, 1999, as amended, filed
with the SEC.
10.1 Asset Purchase Agreement between Digitale Telekabel AG
and Logan Federal Way Inc. dated for reference
August 26, 2002.
10.2 Independent Auditors' Consent of Mazars Paardekooper
Hoffman.
99.1 Certification of Periodic Report.
35
SIGNATURES
Pursuant to the requirements of Section 12 of the SECURITIES EXCHANGE ACT
OF 1934, the registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
Dated this 15th day of July, 2003.
DTA HOLDING AKTIENGESELLSCHAFT
By: /s/ Michael J. Smith
------------------------------
Michael J. Smith
Member of Management Board
36
CERTIFICATION
I, Michael J. Smith, Principal Executive Officer and Principal Financial
Officer of DTA Holding Aktiengesellschaft, certify that:
1. I have reviewed this annual report on Form 20-F of DTA Holding
Aktiengesellschaft;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
July 15, 2003
/s/ Michael J. Smith
- -------------------------------------
Michael J. Smith
Principal Executive Officer and
Principal Financial Officer
37
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Deposit Agreement between Digitale Telekabel
AG and The Bank of New York dated as of
December 30, 1996. Incorporated by reference
to the the Registration Statement on Form F-6
dated September 27, 1999, as amended, filed
with the SEC.
10.1 Asset Purchase Agreement between Digitale Telekabel AG
and Logan Federal Way Inc. dated for reference
August 26, 2002.
10.2 Independent Auditors' Consent of Mazars Paardekooper
Hoffman.
99.1 Certification of Periodic Report.