SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-30690
EUROTRUST A/S
(Translation of Company's name into English)
POPPELGARDVEJ 11-13
2860 SOBORG
DENMARK
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): N/A
NOTE: Regulation S-T Rule 101(b)(1) only permits the submission in
paper of a Form 6-K if submitted solely to provide an attached annual report to
security holders. Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): N/A
NOTE: Regulation S-T Rule 101(b)(7) only permits the submission in
paper of a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of
the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
YES [_] NO [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): N/A
EUROTRUST A/S ANNOUNCES THE
CLOSING OF THE ACQUISITION
OF
AKTIV GRUPPEN A/S
SUMMARY
-------
On November 29, 2005 EuroTrust A/S ("EuroTrust") entered into
agreements with each of the five holders of all of the outstanding shares of the
capital stock of Aktiv Gruppen A/S (the "Aktiv Gruppen Stock"), to acquire the
Aktiv Gruppen Stock in exchange for the issuance of a total of 21,700,000
ordinary shares of Euro Trust (the "Acquisition Agreements").
On December 23, 2005 the shareholders of EuroTrust approved the
acquisition of the AktivGruppen Stock and the issuance of the 21,700,000
ordinary shares of EuroTrust in payment for the Aktiv Gruppen Stock as provided
in the Acquisition Agreements.
EuroTrust will consummate the acquisition of the Aktiv Gruppen Stock on
April 17, 2006.
ACCOUNTING TREATMENT
--------------------
Upon completion of the acquisition, in accordance with United States
generally accepted accounting principles, the acquisition will be accounted for
as a reverse acquisition (i.e. as if Aktiv Gruppen acquired EuroTrust).
Therefore, the pre-acquisition financial statements of Aktiv Gruppen are treated
as the historical financial statements of the combined companies. The Euro-Trust
historical financial statements prior to the acquisition are disregarded. The
results of operations of EuroTrust will only be included in the financial
results from the date of the acquisition. In addition, beginning with the fiscal
year ended on June 30, 2006, EuroTrust will change its fiscal year end to June
30, which is the fiscal year end of Aktiv Gruppen.
FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS.
-------------------------------------------------------------------
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Historical financial statements for Aktiv Gruppen A/S
consisting of the financial statements and notes provided on pages F-1 through
F-31 of this Report.
FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2004 AND 2005
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2004 and 2005
Consolidated Statements of Operations for the years ended June
30, 2004 and 2005
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 2004 and 2005
Consolidated Statements of Comprehensive Income (Loss) for the
years ended June 30, 2004 and 2005
Consolidated Statements of Cash Flows for the years ended June
30, 2004 and 2005
Notes to Consolidated Financial Statements
(b) UNAUDITED PRO-FORMA FINANCIAL INFORMATION.
Unaudited pro forma financial information relating to the
Company and giving effect to the acquisition is provided on pages F-32 through
F-38 of this Report.
Unaudited Pro Forma Condensed Combined Financial Statements.
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
TABLE OF CONTENTS TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm..................... F-2
Consolidated Balance Sheets as of June 30, 2004 and 2005 ................... F-3
Consolidated Statements of Operations for the Years Ended June 30, 2004
and 2005 ................................................................. F-5
Consolidated Statements of Shareholders' Equity for the Years Ended
June 30, 2004 and 2005 ................................................... F-6
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended
June 30, 2004 and 2005.................................................... F-7
Consolidated Statements of Cash Flows for the Years Ended June 30, 2004
and 2005 ................................................................. F-8
Notes to Consolidated Financial Statements ................................. F-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Aktiv Gruppen Holdings A/S and Subsidiaries
We have audited the accompanying consolidated balance sheets of Aktiv
Gruppen Holdings A/S and Subsidiaries as of June 30, 2005 and 2004 and the
related consolidated statements of operations, comprehensive income,
shareholders' equity and cash flows for the years ended June 30, 2005 and 2004.
The financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal
controls over financial reporting. Our audit included consideration of internal
controls over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal controls over financial
reporting. 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.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Aktiv
Gruppen Holdings A/S and Subsidiaries at June 30, 2005 and 2004 and the
consolidated results of its operations and its cash flows for the years ended
June 30, 2005 and 2004, in conformity with accounting principles generally
accepted in the United States.
/s/ Gregory & Associates, LLC
December 16, 2005, except for Note 18 As to which the date is February 15, 2006
Salt Lake City, Utah
F-2
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA AND WHERE OTHERWISE INDICATED)
JUNE 30,
-------
2004 2005 2005
------- ------- -------
DKK DKK US$
ASSETS
Current assets:
Cash and cash equivalents 3,257 1,619 263
Restricted cash 74,412 80,998 13,144
Contracts receivable, net of allowances for doubtful
accounts of DKK 0 in 2004 and DKK 0 in 2005 28,463 34,220 5,553
Notes receivable and accrued interest related party 35,176 36,291 5,889
Construction in progress / Cost in excess of billing 217,252 233,838 37,947
Valued added tax receivables 1,702 8,310 1,349
Prepaid expenses and deposits 607 522 85
Other receivables 17,365 10,333 1,677
------- ------- -------
Total current assets 378,234 406,131 65,907
Marketable securities - available for sale 52 5,003 812
Mortgage deed receivables -- 8,471 1,374
Rent and other long term deposits 307 293 47
Equity method investment 5,835 5,872 952
Equipment, net 1,820 669 109
Windmills -- 99,239 16,104
Windmill Deposits -- 9,334 1,515
Property Held for Resale or future development 87,820 68,759 11,158
Property on Operating Lease, net 8,112 7,867 1,277
------- ------- -------
Total assets 482,180 611,638 99,255
======= ======= =======
DKK amounts have been converted into US$ at an exchange rate of US$1=DKK 6.1623.
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND WHERE OTHERWISE INDICATED)
JUNE 30,
--------
2004 2005 2005
-------- -------- --------
DKK DKK US$
LIABILITIES AND SHAREHOLDERS` EQUITY
Current liabilities:
Notes payable and other current debt obligations 282,930 402,758 65,358
Notes Payable and accrued interest, related party 1,501 -- --
Accounts payable, trade 30,453 62,255 10,103
Accounts payable, related parties -- 18 3
Accrued liabilities 11,575 34,866 5,658
Customer deposits 35,483 4,458 723
Income tax payable 209 2,223 361
Deferred Income Taxes Current 3,676 15,165 2,461
-------- -------- --------
Total current liabilities 365,827 521,743 84,667
-------- -------- --------
Long term liabilities:
Notes payable and other debt, long term 86,979 25,366 4,116
Asset Retirement Obligation -- 979 159
-------- -------- --------
Total long term liabilities 86,979 26,345 4,275
-------- -------- --------
Total Liabilities 452,806 548,088 88,942
-------- -------- --------
Minority interest in subsidiaries 2,878 -- --
-------- -------- --------
Shareholders' equity:
Common shares, par value DKK 100 (not in thousands)
10,000 shares authorized, 10,000 shares issued
and outstanding at June 30, 2004 and 2005 1,000 1,000 162
Additional paid-in capital 5,330 5,330 865
Retained Earnings 20,159 57,259 9,292
Cumulative other comprehensive income 7 (39) (6)
-------- -------- --------
Total shareholders' equity 26,496 63,550 10,313
-------- -------- --------
Total liabilities and shareholders' equity 482,180 611,638 99,255
======== ======== ========
DKK amounts have been converted into US$ at an exchange rate of $1=DKK 6.1623.
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND WHERE OTHERWISE INDICATED)
YEARS ENDED JUNE 30,
2004 2005 2005
---------- ---------- ----------
DKK DKK US$
Net sales 295,975 389,061 63,135
---------- ---------- ----------
Operating expenses:
Cost of sales 259,144 315,365 51,176
Selling and marketing 1,218 907 147
General and administrative 5,710 10,602 1,721
Depreciation 339 520 84
---------- ---------- ----------
Total operating expenses 266,411 327,394 53,128
---------- ---------- ----------
Operating income 29,564 61,667 10,007
Other income (expenses)
Interest income 593 1,252 203
Interest income - related party 175 1,050 171
Interest expense (2,251) (9,204) (1,494)
Loss on sale of fixed assets -- (384) (62)
Results of equity method investments -- 122 20
Other (expenses) income, net 98 (1,460) (237)
---------- ---------- ----------
Income before income taxes and minority interest 28,179 53,043 8,608
Income tax expense - current and deferred (7,823) (15,146) (2,458)
Minority interest in net income of subsidiaries (2,816) (797) (129)
---------- ---------- ----------
NET INCOME 17,540 37,100 6,021
========== ========== ==========
DKK amounts have been converted into US$ at an exchange rate of US$1=DKK 6.1623.
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED JUNE 30, 2004 AND 2005
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND WHERE OTHERWISE INDICATED)
COMMON COMMON ADDITIONAL OTHER COM-
SHARES SHARES PAID-IN PREHENSIVE RETAINED
OUTSTANDING AMOUNT CAPITAL INCOME EARNINGS TOTAL
------- ------- ------- ------- -------- ---------
DKK DKK DKK DKK DKK DKK
BALANCE AT JUNE 30, 2003 10,000 1,000 5,330 -- 2,619 8,949
Unrealized gain on marketable securities -- -- -- 7 -- 7
Net income -- -- -- -- 17,540 17,540
------- ------- ------- ------- -------- ---------
BALANCE AT JUNE 30, 2004 10,000 1,000 5,330 7 20,159 26,496
Unrealized loss on marketable securities -- -- -- (46) -- (46)
Net income -- -- -- -- 37,100 37,100
------- ------- ------- ------- -------- ---------
BALANCE AT JUNE 30, 2005 10,000 1,000 5,330 (39) 57,259 63,550
------- ------- ------- ------- -------- ---------
BALANCE AT JUNE 30, 2005 10,000 US$162 US$865 US$(6) US$9,292 US$10,313
------- ------- ------- ------- -------- ---------
DKK amounts have been converted into US$ at an exchange rate of $1=DKK 6.1623.
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND WHERE OTHERWISE INDICATED)
YEARS ENDED JUNE 30,
2004 2005 2005
------- ------- -------
DKK DKK US$
Net income 17,540 37,100 6,021
Unrealized investment gains (losses) , net of
taxes of DKK 0 in 2004 and 2005 7 (46) (7)
------- ------- -------
Comprehensive net income 17,547 37,054 6,014
======= ======= =======
DKK amounts have been converted into US$ at an exchange rate of US$1=DKK 6.1623.
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS AND WHERE OTHERWISE INDICATED)
YEARS ENDED JUNE 30
--------------------------------
2004 2005 2005
-------- -------- --------
DKK DKK USD
Cash flows from operating activities:
Net income 17,540 37,100 6,021
Adjustments to reconcile net income to
cash provided by (used in) operating activities:
Depreciation, amortization and write down 451 765 124
Loss on sale of fixed assets -- 384 62
Interest earned on notes receivable - related party (176) (1,050) (170)
Provisions for bad debt 200 45 7
Deferred tax 1,230 11,489 1,864
Minority interest 2,878 (2,878) (467)
Changes in operating assets and liabilities:
Accounts receivable (33,833) (5,238) (850)
Accounts receivable, related parties -- (65) (11)
VAT receivable 1,433 (3,343) (542)
Construction in progress / Cost in excess of billings (204,264) (16,586) (2,692)
Prepaid expenses (889) 347 56
Income tax payable 5,468 2,014 327
Other receivables (17,459) 7,086 1,150
Accounts payable 28,165 23,707 3,847
Accounts payable, related parties -- 18 3
Accrued liabilities 8,208 (4,800) (779)
Customer deposits 35,573 (31,109) (5,048)
-------- -------- --------
Cash (used in ) provided by operating activities (155,475) 17,886 2,902
======== ======== ========
Cash flows from investing activities:
Purchase of investments (5,880) (2,368) (384)
Proceeds from property held for resale 4,161 10,590 1,719
Deposits on the purchase of windmills -- (9,334) (1,515)
Cash acquired in business acquisitions -- 1,856 301
Notes receivable related party (35,000) -- --
Purchase of fixed assets (2,086) (240) (39)
Proceeds from sales of fixed assets -- 487 79
-------- -------- --------
Cash (used in) provided by investing activities: (38,805) 991 161
======== ======== ========
Cash flows from financing activities:
Net change in short and long-term borrowings 253,014 (12,494) (2,027)
Payment on notes payable related party (65) (1,435) (233)
Net change in restricted cash (55,636) (6,586) (1,069)
-------- -------- --------
Cash provided by (used in) financing activities: 197,313 (20,515) (3,329)
======== ======== ========
Effect of currency exchange rate changes on cash and cash equivalents -- -- --
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 3,033 (1,638) (266)
Cash and cash equivalents, beginning of period 224 3,257 529
-------- --------
Cash and cash equivalents, end of period 3,257 1,619 263
======== ======== ========
Cash paid for interest 1,111 1,098 6,844
======== ======== ========
Capitalized Interest 8,092 6,330 1,027
======== ======== ========
Cash paid for taxes 838 1,375 223
======== ======== ========
DKK amounts have been converted into US$ at an exchange rate of $1=DKK 6.1623.
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The terms "Aktiv Gruppen", "Company","us", "we" and "our" as used in
this report refer to Aktiv Gruppen Holding A/S. Through our ownership interest
in Aktiv Gruppen and our other subsidiaries, we own, acquire, and develop real
estate on nationwide basis in Denmark. During June 2005, we began investing in
wind energy turbines primarily located in Germany.
From Aktiv Gruppen's organization in October of 1997, through May of
2005 we operated as a single reportable segment of real estate development.
During June 30, 2005, with the investment in various renewable wind energy
projects we now consider the Company a hybrid, operating in two reportable
segments, Real Estate Development and Wind Energy.
Real Estate Development
Aktiv Gruppen real estate development segment, through various wholly
owned subsidiaries and corporate joint ventures, primarily develops homeowner
condominiums, complexes, single family homes, recreational homes and
multi-family rental complexes throughout Denmark. The development occurs as we:
1) seek out desirable locations for property development, 2) acquire permission
for resale of a finalized development project, 3) acquire the land or options to
purchase the land, 4) design the project in cooperation with outside architects
and engineers, 4) acquire governmental permission to build the project, 5)
pre-sell through local real estate agents a minimum number of units, requiring
purchasers to sign a binding sales contract and guarantee, 5) construct the
properties through outside construction contractors and 6) sell remaining units,
if any.
Aktiv Gruppen, within its real estate development segment, acquired
recreational property / timeshare units in Helsing0r, Denmark for resale. This
segment also owns and leases a 565 square meter office property in K0ge,
Denmark.
Wind Energy
During June 2005, the company acquired six operating windmills located
in windparks in Germany. The Company also holds a 25% equity interest in an
additional windmill in Germany. Each respective windmill or windpark has entered
into 20 year agreements with German electric utilities companies, to sell the
electricity generated. The agreements have fixed minimum prices. The
manufacturers have agreed to operate the windparks at a fixed percentage of
revenue. The Company generally acquires a lease for the land for periods of 20
years with two, five year options to extend the lease.
Aktiv Gruppen plans to continue to expand this segment through the
development and operation of windmill energy parks throughout Europe, where we
believe there is a strong consumer and government preference for renewable and
alternative non-polluting energy sources, resulting in attractive government
subsidies and tax benefits from accelerated depreciation. We expect this
political climate to persist in the near future.
F-9
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are prepared in accordance with
Generally Accepted Accounting Principles in the United States of America ("US
GAAP") and include the accounts of Aktiv Gruppen and its majority-owned
subsidiaries. All inter-company balances and transactions have been eliminated
in consolidation.
The following is a list of our significant operating subsidiaries and
their jurisdiction of incorporation and our ownership interest in those
subsidiaries at June 30, 2005:
COUNTRY OF INTEREST
SUBSIDIARY INCORPORATION OWNERSHIP
---------- ------------- ---------
Kronborg Byg ApS Denmark 100.0%
Ejendomsselskabet Parkhusene ApS Denmark 100.0%
Ejendomsselskabet Faergegardsvej, Vordingborg ApS Denmark 100.0%
Ejendomsselskabet Krohaven ApS Denmark 100.0%
Errits0 Bygade 79 ApS Denmark 100.0%
Vognmandsmarken ApS Denmark 100.0%
N0rrebjerg Boligpark ApS Denmark 100.0%
Ejendomsselskabet Guvern0rparken ApS Denmark 100.0%
Ejendomsselskabet Strandparken, Stege ApS Denmark 100.0%
Aktiv Wind ApS Denmark 100.0%
Ejendomsselskabet Kildevej, Helsinge ApS Denmark 100.0%
Ejendomsselskabet Kommandorparken, Solrod ApS Denmark 100.0%
Ejendomsselskabet Marienlyst Palae ApS Denmark 100.0%
Ejendomsselskabet Nyrad, Vordingborg ApS Denmark 100.0%
Ejendomsselskabet Soparken, Fredensborg ApS Denmark 100.0%
Ejendomsselskabet 0lbycentervej 65 ApS Denmark 100.0%
Kobenhavns Byejendomme A/S Denmark 100.0%
Ejendomsselskabet Hyltebjerg Alle ApS Denmark 100.0%
Sonderborg Havnefront ApS Denmark 100.0%
Ejendomsudviklingsselskabet af 2001 A/S Denmark 100.0%
Aktiv Boligopsparing ApS Denmark 100.0%
Alpen Holidays Ferienhauser GmbH Austria 100.0%
Delta Byg ApS Denmark 80.0%
Delta Houses SIA Latvia (2)
EWF Drei Funf GmbH & Co. KG Germany 100.0%
win:pro Invent Gmbh & Co. Neunte Wind KG Germany 100.0%
Aktiv Wind GmbH (1) Germany 100.0%
UPEG 8 Windpark GmbH & Co. KG Germany 100.0%
Birgter Windenergie GmbH & Co. KG Germany 100.0%
Paderwind GmbH & Co. KG Germany 100.0%
(1) Formerly known as Xytel Development & Administration eleven GmbH
(2) Delta Houses SIA is a wholly owned subsidiary of Delta Byg ApS
F-10
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
On January 15, 2003, the Company purchased 50% of
Ejendomsudviklingsselskabet af 2001 A/S from an entity controlled by a
shareholder of the Company for DKK 1 (not in thousands) and acquired an option
to purchase the remaining 50% plus the outstanding receivable for DKK 1 (not in
thousands), which the Company exercised January 15, 2005. The shares we acquired
in order to utilize the net operating loss carry forward in
Ejendomsudviklingsselskabet af 2001 A/S. At the time of acquisition, the Company
recorded contributed capital of DKK 4,850 in connection with the DKK 17.7
million (not in thousands) net operating loss carry forward. The Company has
been consolidated from January 15, 2003, as the Company had an effective 100%
controlling interest and right to profit and losses.
On January 15, 2003, the Company purchased 50% of K0benhavns
Byejendomme A/S from an entity controlled by a shareholder of the Company for
DKK 1 (not in thousands) and acquired an option to purchase the remaining 50%
plus the outstanding receivable payable for DKK 1 (not in thousands), which the
Company exercised June 17, 2004. The shares were acquired in order to utilize
the net operating loss carry forward in K0benhavns Byejendomme A/S. At the time
of acquisition, the Company recorded contributed capital of DKK 480 in
connection with the DKK 1.7 million (not in thousands) net operating loss carry
forward. The Company has been consolidated from the January 15, 2003, as the
Company had an effective 100% controlling interest and right to profit and
losses.
During 2003, Aktiv Gruppen organized the subsidiary Aktiv
Boligopsparing ApS and distributed a 20% interest to each of 4 individuals for
DKK 26 receivables from each of the individuals. These interests were reacquired
from these individuals from during 2004 and 2005 in connection with collection
of the receivables. The Company consolidated Aktiv Boligopsparing ApS as a 100%
owned subsidiary as required by Financial Accounting Standards Board (FASB)
Interpretation No. 46R as receipt for the equity interest was no received and
there was no obligation of the minority holders to share in the losses.
On August 26, 2003, the Company sold a 50% interest in
Ejendomsselskabet Hyltebjerg Alle ApS ("Hyltebjerg") in connection with the
development of the underlying property. The Company consolidated Hyltebjerg as
required by Financial Accounting Standards Board (FASB) Interpretation No. 46R
as the Company has significant influence over the operations of Hyltebjerg and
contributed a majority of Hyltebjergs underlying equity. On February 14, 2005,
the Company reacquired the 50% interest for DKK 100, after distributing DKK
3,600 for the proportionate share of earnings attributable to the minority
owner. For the years ended June 30, 2004 and 2005 the Company recorded DKK 2,816
and DKK 797 for the 50% interest in the net income of Hyltebjerg attributable to
the minority owner.
REPORTING CURRENCY
The consolidated financial statements are stated in Danish Kroner
("DKK"), the currency of the country in which the Company and its major
subsidiaries are incorporated and operate. Balance sheet accounts of foreign
subsidiaries are translated into DKK at the year-end exchange rate and items in
the statement of operations are translated at the average exchange rate.
Resulting translation adjustments are recorded to other accumulated
comprehensive income, a separate component of shareholders' equity.
Translation adjustments arising from inter-company financing of a
long-term investment nature are accounted for similarly. Some transactions of
the Company and its subsidiaries are made in currencies other than the reporting
currency. Gains and losses from these transactions are included in the statement
of operations as foreign currency transaction gains and losses.
F-11
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INFORMATION EXPRESSED IN US DOLLARS
Translation of DKK amounts into US Dollar amounts is included solely
for the convenience of the reader and has been made at the rate of DKK 6.1623 to
one US Dollar, the approximate exchange rate at June 30, 2005. Such translation
should not be construed as a representation that the DKK amounts could be
converted into US Dollars at that or any other rate.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Estimates are used when accounting for items and matters such as the
percentage of completion on long term contracts, the allowance for uncollectible
accounts, amortization, asset valuations, impairment assessments, taxes,
guarantees and contingencies. Management bases its estimates on historical
experience and on other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and short-term deposits with
maturities of less than three months at the time of purchase.
RESTRICTED CASH
Restricted cash as of June 30, 2005 and 2004, includes customer deposit
construction credits and bank deposits which are held as collateral for the
underling mortgage and construction loans.
MARKETABLE SECURITIES - AVAILABLE FOR SALE
The Company accounts for investments in Marketable securities in
accordance with Statement of Financial Accounting Standard. (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". Under SFAS
115 the Company's investments in public companies are classified as
"available-for-sale". The Company uses the average cost method on a security by
security basis in determining gains and losses on marketable securities. These
investments are carried at fair value based on quoted market prices. We review
the marketable equity holdings in publicly traded companies on a regular basis
to determine if any of the marketable securities have experienced
another-than-temporary decline in its fair value. We consider the investee
company's cash position, earnings and revenue outlook, stock price performance
over the past six months, liquidity and management, among other factors, when
reviewing the marketable equity securities. If it is determined that an
other-than-temporary decline in fair value exists in a marketable equity
security, we record an investment loss in the consolidated statement of
operations. Marketable securities are classified as current if the Company has
the ability or intention of selling the security within 12 months.
F-12
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
EQUITY METHOD INVESTMENTS
Investments in corporate joint ventures, non-public companies or public
companies in which we are a significant shareholder but less than majority, are
included in long-term investments in the consolidated balance sheets and are
accounted for under the cost method if our percentage ownership is 20% or less
or the equity method if our ownership is in excess of 20% but less than 50% and
in which we do not have significant ability to influence management. For these
non-quoted investments, we regularly review the assumptions underlying the
operating performance and cash flow forecasts based on information requested
from these privately held companies. Generally, this information may be more
limited, may not be as timely as and may be less accurate than information
available from publicly traded companies. Assessing each investment's carrying
value requires significant judgment by management. If it is determined that
there is an other-than-temporary decline in the fair value of a non-public
equity security, we write-down the investment to its fair value and record the
related write-down as an investment loss in the consolidated statement of
operations.
As of June 30, 2005 investments in non consolidated entities included:
AGH Nordan Invest A/S Denmark 50.0%
Ejendomsselskabet Toftevej A/S Denmark 43.36%
Windpark Timpberg GmbH & Co Zehnte Wind KG Germany 25.00%
TRADE & OTHER ACCOUNTS RECEIVABLE
Trade accounts receivable are recorded at the amount invoiced to
customers and they do not bear interest. The allowance for doubtful accounts is
the Company's best estimate of amount of probable losses resulting from the
inability of our customers to make required payments. We regularly review the
adequacy of our accounts receivable allowance after considering the size of the
accounts receivable balance, each customer's expected ability to pay and our
collection history with each customer. We review significant invoices that are
past due to determine if an allowance is appropriate based on the risk category
using the factors described above. No allowance for doubtful accounts has been
recorded on receivables for the years ended June 30, 2005 and 2004. During the
years ended June 30, 2005 and 2004 the company had bad debt expense of DKK 200
and DKK 45, respectively. The Company's policy for putting the loan on
non-accrual status and to record an allowance for doubtful accounts is based
upon management's best estimate of amount of probable losses resulting from the
purchaser inability to make required payments.
MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable represent a note received from the sale of
real estate owned by the Company. All of the loans are secured by First Deeds of
Trust in real property and are carried at unpaid principal. The Company monitors
the recoverability of its loans and notes receivable. Interest on mortgage loans
is recognized as revenue as it accrues during the period the loan is
outstanding. Mortgage loans receivable are evaluated periodically for
impairment. If it becomes evident that the borrower is unable to meet its debt
service obligations and cannot satisfy its payments using sources other than
sales or operations of the property securing the loan, such loan will be
considered impaired. In that event, interest income on impaired loans will cease
to accrue and the recorded amount will be reduced to the fair value of the
collateral securing it.
F-13
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PROPERTIES HELD FOR SALE OR FUTURE DEVELOPMENT
Real estate inventory held for current sale or future development
includes land, land development and carrying costs, including real estate taxes
and assessments, management fees and other directly related costs incurred. It
also includes the non-refundable deposits on land for future development. Costs
are allocated to individual projects and units based on the specific
identification or relative sales value method. Real estate inventory held for
current sale and land held for future development is carried at the lower of
cost or fair market value. Impairment is recognized when estimated expected
future cash flows (undiscounted and without interest charges) are less than the
carrying amount of the project. Due to uncertainties inherent in the valuation
process and in the economy, it is reasonably possible that the actual sales
values and profits of the Company's inventory of land held for current sale and
future development could be materially different than current expectations. To
the extent that impairment has occurred, the excess of the carrying amount of
such property over its estimated fair value, less estimated selling costs, will
be charged to operations. As of June 30, 2004 and 2005, the Company's management
believed that there was no impairment on the carrying value of real estate.
PROPERTY ON OPERATING LEASE
Property on operating lease is stated at cost, net of accumulated
depreciation, unless circumstances indicate that cost, net of accumulated
depreciation, cannot be recovered from estimated future undiscounted cash flows,
in which case, the carrying value of the property is reduced to its estimated
fair value. Due to uncertainties inherent in the valuation process and in the
economy, it is reasonably possible that the actual results of operating and
disposing of the Company's property could be materially different than current
expectations. At June 30, 2004 and 2005, the Company's management believed that
there was no impairment on the carrying value of the property. Depreciation of
the building and improvements is provided using the straight line method over 30
years the estimated useful lives of the respective assets.
EQUIPMENT, NET
Equipment, furniture and fixtures, automobiles and leasehold
improvements are carried at cost less accumulated depreciation.
Equipment, furniture and fixtures and automobiles are depreciated on a
straight-line basis over the expected useful lives of between three and ten
years. Leasehold improvements are amortized over the shorter of their expected
lives, which is ten years or the term of the leases.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 144, long-lived assets, such as equipment,
and purchased intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Circumstances which could trigger a review
include, but are not limited to: significant decreases in the market price of
the asset; significant adverse changes in the business climate or legal factors;
current period cash flow or operating losses combined with a history of losses
or a forecast of continuing losses associated with the use of the asset; and
current expectation that the asset will more likely than not be sold or disposed
of significantly before the end of its estimated useful life.
F-14
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated undiscounted future cash flows, an impairment charge
is recognized by the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Assets to be disposed of would be separately
presented in the balance sheet and reported at the lower of the carrying amount
or fair value less costs to sell, and would no longer be depreciated. The
depreciable basis of assets that are impaired and continue in use is their
respective fair values.
REVENUE RECOGNITION LONG TERM CONTRACT
Real estate development
Long term contracts - Revenues from real estate development contracts
are recognized on the percentage-of-completion method, measured by the
percentage of projects construction costs incurred to date to estimated total
projects construction costs for each contract multiplied by the ratio of the
number of units sold over the total number of units on a project by project
basis. This method is used because management considers costs incurred to be the
best available measure of progress on contracts in process and the revenue
earned.
Construction costs of projects under contract include all direct
material and labor costs and those indirect costs related to contract
performance. Directly related selling, general, and administrative costs and
interest are capitalized and included in cost of sales charged to expense as
incurred. Provisions for estimated losses on the incomplete contracts are made
in the period in which such losses are determined. Changes in estimated
profitability are recognized in the period in which the revisions are
determined. The aggregate of costs incurred and income recognized on incomplete
contracts in excess of billings on uncompleted contracts is shown as a current
asset. The aggregate of billings in excess of related costs incurred and income
recognized would be shown as a current liability.
Property on Operating Lease - All leases are classified as operating leases and
minimum rents are recognized on a straight-line basis over the lease terms,
commencing on the date that possession is taken by the tenant. Tenant
reimbursements for real estate taxes, common area maintenance and other
recoverable costs are recognized in the period that the expenses are incurred.
Lease termination fees, which are included in other income in the accompanying
consolidated and combined statements of operations, are recognized when the
related leases are cancelled and we have no continuing obligation to provide
services to such former tenants.
WIND ENERGY
The Company recognizes revenue from the generation of electricity in
accordance with the terms of the individual windmill or windpark contracts with
the German electric utility companies. These contracts contain a 20 year fixed
floor price to be paid per kilowatt hour delivered. Revenue is recognized upon
delivery of the electricity and collection is probable.
F-15
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
ADVERTISING COSTS
Advertising costs are expensed as incurred. In the consolidated
statements of operation advertising costs directly related to specific real
estate projects are included in cost of sales.
INCOME TAXES
The Company utilizes the asset and liability method to account for
income taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and to operating loss carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The Company records a valuation allowance to reduce deferred tax assets to an
amount for which realization is more likely than not.
CONCENTRATION OF CREDIT RISK
Cash and cash equivalents are, for the most part, maintained with
several major financial institutions in Scandinavia. These balances are insured
up to DKK 300 per account. The Company had DKK 2,466 and DKK 600 in excess of
insured amounts in its bank accounts at June 30, 2004 and 2005.
A majority of the company current real estate development are located within
Denmark.
All of the Company's windmills are located in Germany.
ASSET RETIREMENT OBLIGATIONS
The Company's windmills are located on property leased from third
parties. We are obligated to remove the windmill upon expiration. We account for
these estimated obligations in accordance with Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143)
and Financial Accounting Standards Board (FASB) Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations". SFAS No. 143 requires
the accrual of the present value of the future estimated asset retirement
obligations at installation, with offsetting amounts booked as additions to
property & equipment. The estimated obligation is accreted to expense over the
estimated life of the assets for the increase in the present value of the
obligation.
F-16
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123R, "Share-Based Payment" (SFAS No. 123R), which is a revision
of FASB Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS No.
123). SFAS No. 123R supersedes Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and amends FASB Statement No. 95,
"Statement of Cash Flows." The revision requires companies to measure and
recognize compensation expense for all share-based payments to employees,
including grants of employee stock options, in the financial statements based on
the fair value at the date of the grant. SFAS No. 123R permits companies to
adopt its requirements using either the modified prospective method or the
modified retrospective method. Under the modified prospective method,
compensation cost is recognized beginning with the effective date for all
share-based payments granted after the effective date and for all awards granted
to employees prior to the effective date of SFAS No. 123R that remain unvested
on the effective date. The modified retrospective method includes the
requirements of the modified prospective method, but also permits entities to
restate either all prior periods presented or prior interim periods of the year
of adoption for the impact of adopting this standard. The Company will apply the
modified prospective method upon adoption. In April 2005, the Securities and
Exchange Commission announced it would provide for phased-in implementation of
SFAS No. 123R. As a result, SFAS No. 123R is effective for the first interim or
annual reporting period of the registrant's first fiscal year beginning on or
after December 15, 2005. SFAS No. 123R also requires the benefits of tax
deductions in excess of recognized compensation costs to be reported as
financing cash flow, rather than as an operating cash flow as required under
current literature. This requirement will reduce net operating cash flows and
increase net financing cash flows in periods after adoption. The Company
believes this reclassification will not have a material impact on its
Consolidated Statements of Cash Flows.
In December 2004, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 153, "Exchanges of Non-monetary Assets." This Statement
amends Opinion 29 to eliminate the exception for non-monetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. The provisions of
this Statement are effective for non-monetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. Earlier application is permitted
for non-monetary asset exchanges occurring in fiscal periods beginning after
December 16, 2004. The provisions of this Statement should be applied
prospectively. The adoption of this pronouncement did not have a material effect
on the Company's financial statements.
In May 2005, the FASB issued FASB 154, "Accounting Changes and Error
Corrections," a replacement of APB Opinion No. 20 and FASB statement No. 3,
"Reporting Accounting Changes in Interim Financial Statements." This statement
changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. This statement is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005.
F-17
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
2. MARKETABLE SECURITIES
The following is a summary of available-for-sale investments held as
long-term assets (in DKK):
GROSS GROSS
UNREALIZED UNREALIZED FAIR MATURITY
COST GAINS LOSSES VALUE DATE
---------- ---------- ---------- ---------- ----------
June 30, 2004:
Shares in Forstaedernes Bank 45 7 -- 52 n/a
---------- ---------- ---------- ---------- ----------
Total 45 7 -- 52
---------- ---------- ---------- ---------- ----------
June 30, 2005:
Shares in Forstaedernes Bank 50 49 -- 99 n/a
Bonds in Dexia Dannevirke 3,000 -- (88) 2,912 1-25-2016
Nordnet-Euro 1,318 -- -- 1,318 n/a
Nordnet-Medium 674 -- -- 674 n/a
---------- ---------- ---------- ---------- ----------
Total short-term investments 5,042 49 (88) 5,003
---------- ---------- ---------- ---------- ----------
The unrealized loss on the available-for-sale investment securities is
included in other cumulative comprehensive income during 2004 and 2005. The
bonds held in Dexia Dannervirke and investments in Nordnet-Euro and
Nordnet-Medium are held as collateral for notes payable.
3. CONTRACT RECEIVABLES
Contract receivables consist of the following at June 30, 2004 and 2005:
2004 2005
---------- ----------
Contracts in progress -- --
Completed contracts 28,463 34,220
---------- ----------
28,463 34,220
Less allowance for doubtful accounts -- --
---------- ----------
28,463 34,220
========== ==========
4. PLANT AND EQUIPMENT
Property, plant and equipment include the following (in DKK):
JUNE 30,
Estimated -------
Life 2004 2005
---------------------------------
Furniture and fixtures 3 to 5 years 480 525
Automobiles 5 years 1,700 627
Leasehold improvements 3 years 10 -
---------------- ----------------
2,190 1,152
Less accumulated depreciation
and amortization (370) (483)
---------------- ----------------
Net plant and equipment 1,820 669
================ ================
Depreciation expense 339 520
================ ================
F-18
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
5. WINDMILLS
Windmills include the following (in DKK):
JUNE 30,
Estimated -------
Life 2004 2005
---------------------------------
Windmills 25 years
-- 99,239
--------------- ---------------
-- 99,239
Less accumulated depreciation
and amortization -- --
--------------- ---------------
Net property, plant and equipment -- 99,239
=============== ===============
Depreciation expense -- --
=============== ===============
The windmills are held as collateral on notes payable (See Note 11). No
depreciation was record during 2005 as the windmills were purchased at the end
of June.
6. PROPERTY ON OPERATING LEASE
The Company is a lessor of a 565 square meter building in K0ge, Denmark.
The lease calls for monthly rentals to be received of approximately DKK 52
and expires January 15, 2009.
Minimum future rental to be received on the non-cancelable lease as of June
30, 2005 for each of the next five years and in the aggregate are as
follows:
DKK
----------
June 30, 2006 627
June 30, 2007 633
June 30, 2008 639
June 30, 2009 335
June 30, 2010 --
Thereafter --
----------
Total Minimum Lease Payments 2,234
----------
F-19
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
Property underlying an operating lease consists of the following:
JUNE 30,
------------------------
2004 2005
---------- ----------
Land 870 870
Building 7,354 7,354
---------- ----------
8,224 8,224
Less accumulated depreciation (112) (357)
---------- ----------
Net property on operating lease 8,112 7,867
========== ==========
Depreciation (included in cost of sales) 112 245
========== ==========
The land and building are held as collateral on a note payable for
Ejendomsselskabet Olbycentervej 65 ApS (See Note 11).
8. REAL ESTATE INVENTORY HELD FOR CURRENT SALE
Real estate held for current sale consisted of the following:
JUNE 30,
------------------------
2004 2005
---------- ----------
Recreational condominiums 83,970 64,673
Land 3,850 4,086
---------- ----------
87,820 68,759
========== ==========
The land and building are held as collateral on a note payable for
Ejendomsselskabet Marienlyst Palae ApS and Alpen Holidays Ferienhauser GmbH
(See Note 11).
9. BUSINESS ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS
ACQUISITIONS DURING 2004/05
---------------------------
On February 14, 2005, Aktiv Gruppen purchased the remaining 50% of
Ejendomsselskabet Hyltebjerg Alle ApS, from JNP Holding ApS and thereby became
the 100% of Ejendomsselskabet Hyltebjerg Alle ApS. The purchase price was DKK
100. No goodwill was recorded in connection with the purchase. The shares were
acquired in order to ensure that the project was properly finalized.
On December 21, 2004, the Company purchased 100% of Aktiv Wind GmbH,
from European Wind Farms A/S. The purchase price was DKK 1,212. No goodwill was
recorded in connection with the purchase. Aktiv Wind GmbH serves as the general
(unlimited) partner in the German KG's (partnerships). On May 4, 2005, the
Company acquired a 100% interest in EWF Drei Funf GmbH & Co. KG for Euro 2 or
DKK 14 through which the Company has constructed two windmills.
During 2005, the company purchased four windmills through the purchase
of four German partnerships. The following table summarizes the terms of the
acquisition and the estimated fair values of the assets acquired and the
liabilities assumed at the date of acquisition (in DKK):
F-20
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
9. BUSINESS ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS -
CONTINUED
WIN:PRO
INVENT UPEG 8 BIRGTER
EWF DREI GMBH WIND- WIND- PADER-
FUNF & CO. PARK ENERGIE WIND
GMBH NEUNTE GMBH GMBH GMBH AKTIV
& CO. WIND & CO. & CO. & CO. WIND
ENTITY ACQUIRED KG KG KG KG KG APS
-------- -------- -------- -------- -------- ------------
Percentage Ownership Acquired 100% 100% 100% 100% 100% 100%
Purchase Price Paid in DKK 14 3,552 21,832 16,893 16,893 1,212
Date of Acquisition May 04, June 29, June 29, June 29, June 29, December 21,
2005 2005 2005 2005 2005 2004
-------- -------- -------- -------- -------- -----------
Currents asset -- 1,090 1,301 2,710 1,246 215
Windmills -- 17,448 22,051 17,062 17,062 1,002
Goodwill -- -- -- -- -- --
-------- -------- -------- -------- -------- -----------
Total assets acquired -- 18,538 23,352 19,772 18,308 1,217
======== ======== ======== ======== ======== ===========
Current Liabilities -- 125 1,301 2,710 1,246 --
Long-term debt -- 14,688 -- -- -- --
Asset Retirement Obligation -- 173 219 169 169 5
-------- -------- -------- -------- -------- -----------
Total liabilities assumed -- 14,986 1,520 2,879 1,415 5
-------- -------- -------- -------- -------- -----------
Net assets acquired -- 3,552 21,832 16,893 16,893 1,212
======== ======== ======== ======== ======== ===========
The following proforma combined condensed results of Aktiv Gruppen
Holdings A/S, win:pro Invent Gmbh & Co. Neunte Wind, UPEG 8 Windpark GmbH & Co.
KG, Birgter Windenergie GmbH & Co. KG, and Paderwind GmbH & Co. KG as if the
Company had purchased these entities at the beginning of the repective periods:
YEARS ENDED JUNE 30,
2004 2005 2005
-------- -------- --------
DKK DKK USD
Net sales 297,596 395,294 64,147
Operating expenses 279,120 356,437 57,841
-------- -------- --------
Net income 18,476 38,857 6,306
======== ======== ========
ACQUISITIONS DURING 2003/2004
On October 09, 2003, Aktiv Gruppen purchased the remaining 50% of
N0rrebjerg Boligpark ApS, from Proconex ApS and thereby became the 100% owner of
N0rrebjerg Boligpark ApS. The purchase price was DKK 357. No goodwill was
recorded in connection with the purchase. The shares were acquired in order to
develop a new project within the company and use tax net operating loss
carryforwards..
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash equivalents and restricted cash,
receivables, marketable securities, long-term investments, line of credit and
long-term debt, payables and lease obligations approximates the carrying amount,
which is the amount for which the instrument could be exchanged in a current
transaction between willing parties. Information about each instrument follows:
F-21
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The carrying amount of cash, cash equivalents and restricted cash
approximates their fair value as of June 30, 2004 and 2005, because of the short
term maturities of those instruments.
ACCOUNTS RECEIVABLE, RECEIVABLES FROM RELATED PARTIES, VAT RECEIVABLE AND OTHER
RECEIVABLES
The carrying amounts of accounts receivable, receivables from related
parties, VAT receivable and other receivables approximate their fair value as of
June 30, 2004 and 2005 because of the expected short term collection of those
instruments.
MORTGAGE DEED AND NOTES RECEIVABLE
The carrying amount of notes receivable approximates their fair value
as of June 30, 2004 and 2005 because the interest rates approximate the rate of
similar instruments as of June 30, 2004 and 2005.
MARKETABLE SECURITIES
The fair values of investment securities are estimated based on quoted
market prices as of June 30, 2004 and 2005 and are stated at fair value.
LINE OF CREDIT AND LONG-TERM DEBT
The fair values of the Company's line of credit and long-term debt as
of June 30, 2004 and 2005 approximate recorded values as of June 30, 2004 and
2005, based on similar current rates offered to the Company for debt of the same
remaining maturities.
ACCOUNTS PAYABLE, ACCOUNTS PAYABLE - RELATED PARTIES AND ACCRUED LIABILITIES
The carrying amount of accounts payable and accounts payable - related
party approximates fair value as of June 30, 2004 and 2005, because of the short
term maturity of those instruments.
11. NOTES PAYABLE, LINES OF CREDIT AND OTHER DEBT OBLIGATIONS
Notes payable, lines of credit and other debt obligations relate primarily to
the funding of development projects and windmill acquisitions. These notes
payable are collateralized by underlying development project or windmills.
Interest rates vary from 3.7 percent, to 8 percent and are generally tied to the
EUR LIBOR (2.35 percent at June 30, 2005) plus a specified percentage. One loan
of DKK 5 accrues interest at a rate of 16.75 percent as of June 30, 2005.
Construction loans are payable upon delivery of the project. Windmill and
mortgage loans payment terms are generally bi-annual and monthly, respectively,
over ten to twenty years. The remaining loans vary from on demand, to balloon
payment to monthly instalments.
The construction loans are all classified as current because the
contractual due date is the sooner of the date the underlying project is sold or
the original payment date as stipulated in the note payable. In addition, the
related construction in progress / cost in excess of billings is also classified
as current.
F-22
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
11. NOTES PAYABLE, LINES OF CREDIT AND OTHER DEBT OBLIGATIONS - CONTINUED
The balances of notes payable at June 30, 2005 consisted of the
following:
INTEREST RATE JUNE 30,
AT JUNE 30, ---------------------------
2005 2004 2005
---------------- ------------ ------------
Kronborg Byg ApS
Construction loan 4.45-5.75% 8,828 10,638
Aktiv Gruppen Holding A/S --
Vehicle Loans 4.5% 1,604 1,213
Other Loans 3.70-4.75% 181 5,199
Ejendomsselskabet Parkhusene ApS
Construction loan 6.25% 47,000 131,409
Ejendomsselskabet Faergegardsvej, Vordingborg ApS
Construction loan 4.15% 4,000 4,000
Ejendomsselskabet Krohaven ApS
Construction loan 4.00-7.00% 35,957 --
Erritso Bygade 79 ApS
Construction loan 16.75% 34 5
Vognmandsmarken ApS
Construction loan 6.15% 30,105 --
Ejendomsselskabet Guvernorparken
Construction loan 5.50% 11 12,000
Ejendomsselskabet Strandparken, Stege ApS
Construction loan 4.00-4.85% 11,464 --
Ejendomsselskabet Kildevej, Helsinge ApS
Construction loan 5.50% -- 13,930
Ejendomsselskabet Kommandorparken, Solrod ApS
Construction loan 5.50% 64 17,305
Ejendomsselskabet Marienlyst Palae ApS
Line of Credit(1) 5.5% 80,000 103,000
Other loans 5.5- 6.25% 39,560 256
Ejendomsselskabet Soparken, Fredensborg ApS
Construction loan 5.50% 8,147 --
Ejendomsselskabet Nyrad, Vordingborg ApS
Construction loan 6.15% 757 8,546
Ejendomsselskabet Olbycentervej 65 ApS
Mortgage loan 4.00-5.00% 3,730 7,055
K0benhavns Byejendomme A/S
Construction loan 7.00% 3,599 --
Ejendomsselskabet Hyltebjerg Alle ApS
Line of credit (2) 5.50% -- 17,305
Construction loans 2.0- 5.5% 71,749 --
Ejendomsudviklingsselskabet af 2001 A/S
Construction loan 8.00% 22,780 17,268
Alpen Holidays Ferienhauser GmbH
Mortgage loan 5.50% 339 943
Delta Byg ApS
Line of Credit 5.75% -- 523
F-23
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
11. NOTES PAYABLE, LINES OF CREDIT AND OTHER DEBT OBLIGATIONS - CONTINUED
INTEREST RATE JUNE 30,
AT JUNE 30, ---------------------------
2005 2004 2005
---------------- ------------ ------------
Aktiv Wind ApS 4.35% -- 21,138
Equipment loan (Windmill)
win:pro Invent Gmbh & Co. Neunte Wind KG
Equipment loan (Windmill) 4.75-5.27% -- 14,688
UPEG 8 Windpark GmbH & Co. KG
Equipment loan (Windmill) 4.75% -- 12,851
Birgter Windenergie GmbH & Co. KG
Equipment loan (Windmill) 5.00% -- 14,469
Paderwind GmbH & Co. KG
Equipment loan (Windmill) 5.00% -- 14,383
------------- -------------
369,909 428,124
Less long term (86,979) (25,366)
------------- -------------
Short term 282,930 402,758
------------- -------------
(1) The Company maintains revolving credit agreements in the aggregate
amount of DKK 80,000 and DKK 103,000 at June 30, 2004 and 2005, respectively
with all amounts used. The agreements expire June 30, 2007.
(2) The Company maintains revolving credit agreements in the aggregate
amount of DKK 13,555 and DKK 3,700 at June 30, 2005 with all amounts used. The
agreements expire January 30, 2006.
Maturities of debt obligations payable at June 30, 2005 are as follows:
Year ending December 31,
------------------------
2006 $ 402,758
2007 8,646
2008 1,296
2009 1,302
2010 1,307
Thereafter 12,815
--------------
$ 428,124
==============
12. OPERATING LEASES
The Company also has non-cancelable operating leases, primarily for
office space, that expire over the next four years. These leases generally
contain renewal options for one year and require the Company to pay all
executory costs such as maintenance and insurance. Expenses under operating
leases amounted to DKK 145 and DKK 444 in the years ended June 30, 2004 and
2005, respectively.
The Company also leases the underlying land upon which the windmills
are constructed, expiring beginning in the year 2023 through 2025, the leases
further allow for option to extend the lease for one or two, five year periods.
Lease expense under land operating leases amounted to DKK 0 and DKK 0 for the
years ended June 30, 2004 and 2005 as the windmills were purchased at the end of
June, 2005.
F-24
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
12. OPERATING LEASES - CONTINUED
Future minimum lease payments under non-cancelable operating leases
with initial or remaining lease terms in excess of one year, as of June 30, 2005
are:
OPERATING LEASES
----------------
Year ending June 30:
2006 1,052
2007 835
2008 811
2009 655
2010 376
2011 6,729
----------------
Total minimum lease payments 10,458
================
13. RELATED PARTY TRANSACTIONS
NOTES AND ACCRUED INTEREST RECEIVABLES
During 2004, the Company loaned to companies controlled by each of the
five 20% shareholders of the Aktiv Gruppen DKK 7,000 each. The notes accrue
interest a rate of 3% per annum, payable on demand and are secured by marketable
securities held by the controlled companies. At June 30, 2004 and 2005 notes and
accrued interest receivable related parties consisted of the following:
JUNE 30,
---------------
2004 2005
------ ------
Dansk Anlaegsinvest ApS 7,035 7,245
JL Forsikringsformidling ApS 7,035 7,245
AO Holding ApS 7,035 7,245
Synerco ApS 7,035 7,245
Salt-Con ApS 7,035 7,245
Other employee receivables -- 66
------ ------
35,175 36,291
====== ======
The notes receivables related party are held as collateral on a note
payable to Ejendomsselskabet Marienlyst Palae ApS (See Note 11). Subsequent to
the year ended June 30, 2005, all of the amounts receivable have been collected.
F-25
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
13. RELATED PARTY TRANSACTIONS - CONTINUED
NOTES PAYABLE
During 2003, companies controlled by each of the five 20% shareholders
of the Aktiv Gruppen loaned DKK 300 each to the Company. The note accrued
interest at a rate of 3% per annum. The notes were repaid with related accrued
interest of DKK 66 (payments of DKK 65 during October 2003 and DKK 1,501 during
July 2004).
During 2004, the company purchased four automobiles from shareholders
and officers of the Company or entities controlled by shareholders and officers.
Also during 2004, the company sold five recreational home to companies
controlled by shareholders and officers of the Company.
The Chairman of the board of directors of Aktiv Gruppen was also a
partner of Interlex Lawyers until December 31, 2005. The Company paid DKK 754
and DKK 1,976 to Interlex Lawyers for legal services during June 30, 2004 and
2005, respectively. The total outstanding payables due to Interlex Lawyers as at
June 30, 2004 and June 30, 2005 were DKK 28 and DKK 587, respectively.
14. INCOME TAXES
The Company and each of its wholly owned Danish subsidiaries file
aconsolidated tax return. The Company's foreign or non wholly owned subsidiaries
file separate tax returns in each of the countries of incorporation. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of June 30, 2004 and 2005 are
as follows (in DKK):
JUNE 30,
----------------------
2004 2005
-------- --------
DEFERRED TAX ASSETS
Net operating loss carry forwards 4,072 1,980
Provisions 190 180
-------- --------
Total deferred tax assets 4,262 2,160
----- -----
-------- --------
Less: Valuation allowance -- --
-------- --------
DEFERRED TAX ASSETS 4,262 2,160
-------- --------
DEFERRED TAX LIABILITIES
Tax value of fixed assets in excess of
book value of fixed assets (321) (6,925)
Construction in Progress (7,617) (10,371)
Other -- (29)
-------- --------
DEFERRED TAX LIABILITY (7,938) (17,325)
======== ========
======== ========
NET DEFERRED TAX LIABILITY (3,676) (15,165)
======== ========
The recognized net tax liabilities as of June 30, 2004 and 2005 are
related to temporary timing differences between the book and fiscal values of
assets.
F-26
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
14. INCOME TAXES - CONTINUED
The Company assessed the realization of the deferred tax assets based
on available evidence, both positive and negative, to determine whether it is
more likely than not that all or a portion of the deferred tax assets will be
realized. The conclusion as to whether it is more likely than not that some
portion of these assets will not be realized takes into consideration the future
earnings potential determined through the use of internal forecasts, the carry
forward period associated with the deferred tax assets and the nature of the
income that can be used to realize the deferred tax assets. To the extent that
the Company determines it is more than likely not that all or a portion of the
deferred tax assets will not be realized, a valuation allowance is recorded.
At June 30, 2005, the company had tax loss carry-forwards of DKK 7,072 available
in Denmark, which according to current Danish law has no expiration. The
accumulated tax loss carry forwards cannot be used by all group companies as not
all of companies are jointly taxed.
For financial reporting purposes, income before income taxes is as
follows (in DKK):
2004 2005
-------- --------
Pretax income:
Denmark 25,103 54,720
Austria 259 (1,254)
Latvia -- (1,220)
-------- --------
25,362 52,246
======== ========
Significant components of the provision
for income taxes are:
Current: Denmark 2,433 3,657
Others -- --
-------- --------
2,433 3,657
-------- --------
Deferred: Denmark 5,390 8,847
Others -- 2,642
-------- --------
5,390 11,489
-------- --------
Total: 7,823 15,146
======== ========
The reconciliation of income tax computed at the Danish statutory tax
rate to income tax expense is:
2004 2005
---- ----
Danish income tax rate ......................................... 30% 28%
Effect of change in tax rate on net deferred tax liabilities ... 0% (1)%
Non - deductible permanent differences ......................... 0% 2%
Other .......................................................... (2)% 0%
Reported income tax expense .................................... 28% 29%
F-27
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
15. COMMITMENTS
LETTERS OF CREDIT
The Company has unused letters of credit / bank guarantees totaling DKK
124,525 and DKK 160,358 at June 30, 2004 and 2005, respectively. The letters of
credit / guarantees are required in connection with warranties the Company offer
on certain aspects of the construction and materials in developed projects in
accordance with Danish law. The letters of credit/ guarantees normally cover a
period of approximately five years. The estimated future warranty liability at
June 30, 2004 and 2005 was DKK 0 and DKK 0, as the Company acquires letters of
credit / guarantees from the underlying contractors and suppliers which offset
the letters of credit issued by the Company.
ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations for windmill held, and changes to the
obligation for the years ended June 30, 2004 and 2005 consists of the following:
JUNE 30,
---------------
2004 2005
Balance at the beginning of the year: -- --
Obligation on acquired assets -- 978
Obligations paid or sale of the asset Accretion expense:
Current year accretion expense -- --
Revisions to estimate -- --
Balance at the end of the year: -- 978
------ ------
16. LITIGATION
During 2005, the Company recorded a provision of DKK 1,500 for claims
arising from the cancellation of the contract with the constructor of Rodvig
Hytte og Feriecenter. The Company cancelled the contract due to considerable
delays and defects with the construction of the project. At October 31, 2005 the
High Court ordered the company to pay approx. DKK 1,500, but the Company
appealed immediately to the Supreme Court. The final settlement has to wait the
judgment of the Supreme Court.
The Company is from time to time involved in routine legal and
administrative proceedings and claims of various types. While any proceedings or
claim contains an element of uncertainty, Management does not expect them to
have a material affect on our results of operations or financial position.
17. SEGMENT REPORTING
The Company's Chief Operating Decision-maker, as defined in SFAS No. 131, is
considered to be Aktiv Gruppen Holding's CEO. The Chief Operating Decision-maker
reviews separate consolidated financial information for the Real Estate
Development Segment and the Wind Energy Segment. Each of the Company's business
segments are managed separately because they offer and distribute distinct
services to different customer segments. The Company therefore considers that it
has two reportable segments under SFAS 131. Revenues are generated in the
country in which the property is located. During the periods presented all sales
were derived from real estate development in Denmark.
F-28
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
17. SEGMENT REPORTING - CONTINUED
The Chief Operating Decision-maker evaluates performance and allocates
resources based on profit or loss from operations before interest, gains and
losses on the Company's investment portfolio, and income taxes. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. There were no inter - segment
transactions during the periods presented.
The segmented data are as follows:
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
F-29
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
17. SEGMENT REPORTING - CONTINUED
YEARS ENDED JUNE 30,
2004 2005 2005
-------- -------- --------
DKK DKK USD
REAL ESTATE DEVELOPMENT:
Net sales 295,975 389,061 63,135
Operating expenses:
Cost of sales 259,144 315,365 51,176
Selling and marketing 1,218 907 147
General and administrative 5,710 9,692 1,573
Depreciation (excluding DKK112 and
DKK245 included in cost of sales) 339 520 84
-------- -------- --------
Total operating expenses 266,411 326,484 52,980
-------- -------- --------
Operating income (loss) 29,564 62,577 10,155
-------- -------- --------
Other income (expense) (1,385) (8,746) (1,419)
-------- -------- --------
Income tax (expense) benefit (7,823) (18,069) (2,932)
-------- -------- --------
Net Income 20,356 35,762 5,804
-------- -------- --------
Capital expenditure 2,086 240 39
-------- -------- --------
Total assets 482,180 503,065 81,636
-------- -------- --------
WIND ENERGY
Net sales -- -- --
Operating expenses:
Cost of sales -- -- --
Selling and marketing -- -- --
General and administrative -- 910 148
Depreciation -- -- --
-------- -------- --------
Total operating expenses -- 910 148
-------- -------- --------
Operating income (loss) -- (910) (148)
-------- -------- --------
Other income (expense) -- 122 20
-------- -------- --------
Income tax (expense) benefit -- 2,923 474
-------- -------- --------
Net Income -- 2,135 346
-------- -------- --------
Capital expenditure including deposits -- 108,573 17,619
-------- -------- --------
Total assets -- 108,573 17,619
-------- -------- --------
CONSOLIDATED
Net sales 295,975 389,061 63,135
Operating expenses:
Cost of sales 259,144 315,365 51,176
Selling and marketing 1,218 907 147
General and administrative 5,710 10,602 1,721
Depreciation 339 520 84
-------- -------- --------
Total operating expenses 266,411 327,394 53,128
-------- -------- --------
Operating income (loss) 29,564 61,667 10,007
-------- -------- --------
Other income (expense) (1,385) (8,624) (1,399)
-------- -------- --------
Income tax (expense) benefit (7,823) (15,146) (2,458)
-------- -------- --------
Net Income 20,356 37,897 6,150
-------- --------
--------
Capital expenditure including deposits 2,086 108,813 17,658
-------- -------- --------
Total assets 482,180 611,638 99,255
-------- -------- --------
DKK amounts have been converted into US$ at an exchange rate of $1=DKK 6.1623.
F-30
AKTIV GRUPPEN HOLDING A/S AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DKK AND US$ AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
AND WHERE OTHERWISE INDICATED)
17. SEGMENT REPORTING - CONTINUED
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Real Estate Development:
During 2005 the Company sold DKK 8,471 in property held for resale on
mortgage deed receivables.
During 2004 the Company purchased DKK 91,981 of property held for
resale through short and long term borrowing. The Company sold DKK 8,224 of the
property on mortgage receivables.
Wind Energy:
During 2005, the Company acquired DKK 99,239 in windmills by purchasing
the following German partnerships: EWF Drei Funf GmbH & Co. KG, Win:pro Invent
Gmbh & Co. Neunte Wind KG, Aktiv Wind GmbH, UPEG 8 Windpark GmbH & Co., KG
Birgter Windenergie GmbH & Co and KG Paderwind GmbH & Co. KG.
18. SUBSEQUENT EVENTS
AGH Nordan Investment A/S, a 50 percent owned subsidiary, acquired two
Norwegian companies, Bygg og Eiendomsutvikling S0r AS and Topdalsfjorden
Utikling AS for approximately DKK 18,600 as of January 1, 2006, of which 50%
depends on the actual result for the years 2006, 2007 and 2008. The purpose of
the purchase is to get into Norway, where the company sees fine opportunities
and also to spread their risk by not being represented in only one country
within the real estate segment.
As of November 14, 2005 the Company changed both their CEO and their
Chairman of the Board. The previous Chairman of the Board, Peter Juul, became
new CEO of the company and the previous CEO, Bo Kristensen, became the new
Chairman of the Board.
During 2006, the Company has increased their investment in windmills,
through the acquisition of a majority ownership in 15 additional windmills in
Germany for a net purchase price of approximately DKK 179,523. The Company also
disposed of UPEG 8 Windpark GmbH & Co. KG, Birgter Windenergie GmbH & Co. KG and
Paderwind GmbH & Co. KG, which owns three windmills in western Germany with a
net book value of DKK 55,618.
On April 17, 2006, Aktiv Gruppen Holdings A/S and subsidiaries will be
acquired by EuroTrust A/S through the issuance of 21,700,000 shares of EuroTrust
A/S for all 10,000 issued and outstanding shares of Aktiv Gruppen Holdings A.S.
The merger was accounted for as a recapitalization of the Aktiv Gruppen Holdings
A/S, wherein Aktiv Gruppen Holdings A.S became a 100% owned subsidiary of the
EuroTrust A/S.
F-31
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited proforma condensed combined balance sheet
aggregates the balance sheet of EuroTrust A/S and Subsidiaries ("PARENT") as of
June 30, 2005 and the balance sheet of Aktiv Gruppen Holdings A/S and
Subsidiaries ("SUBSIDIARIES") as of June 30, 2005 accounting for the transaction
as a recapitalization of the SUBSIDIARY with the issuance of shares for the net
assets of PARENT (a reverse acquisition) and using the assumptions described in
the following notes, giving effect to the transaction, as if the transaction had
occurred as of June 30, 2005. The transaction will be completed April 17, 2006.
The following unaudited proforma condensed combined statement of
operations reflects the results of operations of EuroTrust A/S and Subsidiaries
for the twelve month periods ended June 30, 2005 and 2004 and the results of
operations of Aktiv Gruppen Holdings A/S and Subsidiaries for the years ended
June 30, 2005 and 2004 as if the transaction had occurred as of the July 1,
2003.
The proforma condensed combined financial statements should be read in
conjunction with the separate consolidated financial statements and related
notes thereto of EuroTrust A/S and Subsidiaries and Aktiv Gruppen Holdings A/S
and Subsidiaries. These proforma condensed combined financial statements are not
necessarily indicative of the combined financial position, had the acquisition
occurred on the date indicated above, or the combined results of operations
which might have existed for the periods indicated or the results of operations
as they may be in the future.
F-32
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Aktiv Gruppen EuroTrust
Holding A/S A/S
(UNAUDITED) June 30, June 30, Proforma
2005 2005 Increase Proforma
(subsidiary) (parent) (Decrease) Combined
---------- ---------- ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents 1,619 7,954 -- 9,573
Restricted cash 80,998 3,006 -- 84,004
Debt securities, available for sale -- 13,000 -- 13,000
Contracts receivable, net of allowances for doubtful accounts 34,220 17,128 -- 51,348
Notes receivable and accrued interest related party 36,291 -- -- 36,291
Construction in progress / Cost in excess of billing 233,838 -- -- 233,838
Notes receivable, current -- 2,200 -- 2,200
Broadcasting programming rights, current -- 2,928 -- 2,928
Valued added tax receivables 8,310 141 -- 8,451
Prepaid expenses and deposits 522 2,659 -- 3,181
Other receivables 10,333 5,493 -- 15,826
Current assets of discontinued operations -- 1,140 -- 1,140
---------- ---------- ---------- ----------
Total current assets 406.131 55,649 -- 461,780
Marketable securities - available for sale 5,003 -- -- 5,003
Mortgage deed receivables 8,471 -- -- 8,471
Notes receivable, net of current portion -- 8,250 -- 8,250
Broadcasting programming rights, net of current portion -- 1,431 -- 1,431
Rent and other long term deposits 293 2,361 -- 2,654
Other receivables, long term -- 535 -- 535
Equity method investment 5,872 1,638 -- 7,510
Property, plant and equipment, net 669 69,511 -- 70,180
Windmills 99,239 -- -- 99,239
Windmill Deposits 9,334 -- -- 9,334
Goodwill -- 24,613 -- 24,613
Deferred tax assets, net of current portion -- 3,715 -- 3,715
Property Held for Resale 68,759 -- -- 68,759
Property on Operating Lease, net 7,867 -- -- 7,867
---------- ---------- ---------- ----------
Total assets 611,638 167,703 -- 779,341
========== ========== ========== ==========
F-33
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Aktiv Gruppen EuroTrust
Holding A/S A/S
(UNAUDITED) June 30, June 30, Proforma
2005 2005 Increase Proforma
(subsidiary) (parent) (Decrease) Combined
---------- ---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS` EQUITY
Current liabilities:
Notes payable and other current debt obligations 402,758 13,271 -- 416,029
Lease obligations, current portion -- 1,244 -- 1,244
Accounts payable, trade 62,255 13,257 -- 75,512
Accounts payable, related parties 18 -- -- 18
Accrued liabilities 34,866 11,570 -- 46,436
Customer deposits 4,458 -- -- 4,458
Equipment purchase obligation, current -- 12,152 -- 12,152
Income tax payable 2,223 -- -- 2,223
Deferred Income Taxes - Current 15,165 -- -- 15,165
Current liabilities of discontinued operations -- 894 -- 894
---------- ---------- ---------- ----------
Total current liabilities 521,743 52,388 -- 574,131
Long term liabilities:
Notes payable and other debt, long term 25,366 10,175 -- 35,541
Asset Retirement Obligation 979 -- -- 979
---------- ---------- ---------- ----------
Total long term liabilities 26,345 10,175 -- 36,520
Minority interest in subsidiaries -- 16 -- 16
Shareholders' equity:
Common shares 1,000 41,719 [A] 161,750 204,469
Additional paid-in capital 5,330 525,702 [A] (624,047) (93,015)
Accumulated deficit 57,259 (462,297)[A] 462,297 57,259
Accumulative other comprehensive income (39) -- -- (39)
---------- ---------- ---------- ----------
Total shareholders' equity 63,550 105,124 -- 168,674
---------- ---------- ---------- ----------
Total liabilities and shareholders' equity 611,638 167,703 -- 779,341
========== ========== ========== ==========
See Notes To Unaudited Proforma Condensed Combined Financial Statements.
F-34
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
AS OF JUNE 30, 2005
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Aktiv Gruppen EuroTrust
Holding A/S A/S
(UNAUDITED) June 30, June 30, Proforma
2005 2005 Increase Proforma
(subsidiary) (parent) (Decrease) Combined
---------- ---------- ---------- ----------
Net sales 389,061 94,055 -- 483,116
---------- ---------- ---------- ----------
Operating expenses:
Cost of sales (exclusive of depreciation shown separately below) 315,365 65,336 -- 380,701
Selling and marketing 907 18,049 -- 18,956
General and administrative 10,602 20,736 -- 31,338
General and administrative - related parties -- 571 -- 571
Depreciation 520 11,868 -- 12,388
Goodwill impairment -- 914 -- 914
---------- ---------- ---------- ----------
Total operating expenses 327,394 117,474 -- 444,868
---------- ---------- ---------- ----------
Operating income (loss) 61,667 (23,419) -- 38,248
Other income (expenses)
Interest income 1,252 286 -- 1,538
Interest income - related party 1,050 -- -- 1,050
Interest expense (9,204) (1,670) -- (10,874)
Loss on sale of fixed assets (384) -- -- (384)
Foreign exchange gain (loss), net -- (444) -- (444)
Gains from divestitures -- 14,438 -- 14,438
Write-down of long term investments & marketable
securities -- (14,942) -- (14,942)
Results of equity method investments 122 138 -- 260
Other (expenses) income, net (1,460) (1,355) -- (2,815)
---------- ---------- ---------- ----------
Income(loss) from continuing operations before income taxes
and minority interest 53,043 (26,968) -- 26,075
Income tax expense (15,146) 3,209 -- (11,937)
Minority interest in net income (loss) of subsidiaries (797) 49 -- (748)
---------- ---------- ---------- ----------
(Loss) income from continuing operations 37,100 (23,710) -- 13,390
Gain (loss) from operations of discontinued internet
segment components net of tax, 0 in 2005 -- (169) -- (169)
Gain (loss) from disposal of discontinued print/on line Media
division and internet segment components net of tax, 0 in 2005 -- 20,553 -- 20,553
---------- ---------- ---------- ----------
NET (LOSS) INCOME 37,100 (3,326) -- 33,774
==========
Proforma net earnings from continuing operations 0.50
==========
Proforma net earnings from discontinued operations 0.76
==========
Proforma earnings per common share 1.26
==========
See Notes To Unaudited Proforma Condensed Combined Financial Statements.
F-35
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
AS OF JUNE 30, 2004
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Aktiv Gruppen EuroTrust
Holding A/S A/S
(UNAUDITED) June 30, June 30, Proforma
2005 2005 Increase Proforma
(subsidiary) (parent) (Decrease) Combined
---------- ---------- ---------- ----------
Net revenue 295,975 101,580 -- 397,555
Operating expenses:
Cost of sales (exclusive of depreciation shown separately below) 259,144 63,633 -- 322,777
Selling and marketing 1,218 17,140 -- 18,358
Selling and marketing - related parties -- 420 -- 420
General and administrative 5,710 23,480 -- 29,190
General and administrative - related parties -- 704 -- 704
Depreciation 339 6,925 -- 7,264
---------- ---------- ---------- ----------
Total operating expenses 266,411 112,302 -- 378,713
---------- ---------- ---------- ----------
Operating income (loss) 29,564 (10,722) -- 18,842
Other income (expenses)
Interest income 593 186 -- 779
Interest income - related party 175 -- -- 175
Interest expense (2,251) (485) -- (2,736)
Foreign exchange gain (loss), net -- (258) -- (258)
Gains from divestitures -- 268 -- 268
Write-down of long term investments & marketable securities -- (196) -- (196)
Other (expenses) income, net 98 4,227 4,325
---------- ---------- ---------- ----------
(Loss) income from continuing operations before income taxes
and minority interest 28,179 (6,980) -- 21,199
Income tax expense (7,823) 1,491 -- (6,332)
Minority interest in net income (loss) of subsidiaries (2,816) 165 -- (2,651)
---------- ---------- ---------- ----------
(Loss) income from continuing operations 17,540 (5,324) -- 12,216
Gain (loss) from operations of discontinued internet
segment components net of tax, 0 in 2004 -- (7,185) -- (7,185)
Gain (loss) from disposal of discontinued print/on line Media
division and internet segment components net of tax, 0 in 2004 -- 73,111 -- 73,111
---------- ---------- ---------- ----------
NET (LOSS) INCOME 17,540 60,602 -- 78,142
========== ========== ========== ==========
Proforma net earnings from continuing operations 0.46
==========
Proforma net earnings from discontinued operations 2.47
==========
Proforma net earnings per common share 2.93
==========
See Notes To Unaudited Proforma Condensed Combined Financial Statements.
F-36
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
NOTES TO THE UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 - EUROTRUST A/S AND SUBSIDIARES
EuroTrust A/S and its subsidiaries (the "Company") engage in providing
production and broadcasting services and operating the Danish cable channel DK4.
The Company previously provided Internet security products and services in
Scandinavia. These operations were sold during 2003 and 2004.
The Company operated in two reportable service-based segments from 2002
through 2005: the Production and Broadcasting Segment and the Internet Security
Product and Services Segment.
NOTE 2 - AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
Aktiv Gruppen Holding A/S and its subsidiaries, own acquire, and
develop real estate on a national basis in Denmark. During June 2005, we began
investing in wind energy turbines primarily located in Germany.
From Aktiv Gruppen Holding A/S's organization in October of 1997,
through May of 2005 we operated as a single reportable segment of real estate
development. During June 30, 2005, with the investment in various renewable wind
energy projects, we now consider the Company a hybrid, operating in two
reportable segments, Real Estate Development and Wind Energy.
NOTE 3 PROFORMA ADJUSTMENTS
On April 17, 2006, EuroTrust A/S will acquire all 10,000 issued and
outstanding shares of Aktiv Gruppen Holdings A/S through the issuance of
21,700,000 shares of EuroTrust A/S. The merger was accounted for as a
recapitalization of the Subsidiary, wherein Subsidiary became a 100% owned
subsidiary of the Parent.
Proforma adjustments on the attached financial statements include the following:
[A] To record the acquisition of a 100% interest in the SUBSIDIARY by the
PARENT through the issuance of 21,700,000 shares of common stock of
the PARENT for 10,000 shares of the SUBSIDIARY and eliminate the
accumulated deficit of PARENT prior to the date of the acquisition.
The ownership interests of the former owners of SUBSIDIARY in the
combined enterprise will be greater than the ongoing shareholders of
PARENT and, accordingly, the management of SUBSIDIARY will assume
operating control of the combined enterprise. Consequently, the
acquisition is accounted for as the recapitalization of SUBSIDIARY,
wherein SUBSIDIARY purchased the assets of PARENT and accounted for
the transaction as a "Reverse Purchase" for accounting purposes.
F-37
EUROTRUST A/S AND SUBSIDIARIES
AND
AKTIV GRUPPEN HOLDINGS A/S AND SUBSIDIARES
NOTES TO THE UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 4 - PROFORMA EARNINGS (LOSS) PER SHARE
The proforma earnings (loss) per share is computed based on the
weighted average number of common shares outstanding during the period plus the
estimated shares issued in the acquisition had the acquisition occurred at the
beginning of the periods presented (not in thousands).
For the Twelve For the Twelve
Months Ended Months Ended
June 30, 2004 June 30, 2005
-------------- --------------
Weighted average number of common
shares outstanding during the periods 4,980,232 5,003,571
-------------- --------------
Shares issued in acquisition 21,700,000 21,700,000
-------------- --------------
Proforma weighted average number of common shares
outstanding during the period used in income
per share after purchase (denominator) 26,680,232 26,703,571
-------------- --------------
Subsequent to June 30, 2005, the PARENT issued 980,277 common shares
for cash upon exercise of options.
F-38