Summary

As used throughout this report, the terms "DCI," the "Company," "we," "us," and "our" refer to DCI USA, Inc. We were incorporated on June 21, 2000, under the laws of the State of Delaware as Gavella Corp. As Gavella Corp., we engaged in two lines of business: owning and operating income producing real estate, and making investments in and providing consulting services to other businesses. On November 9, 2004, Direct Capital Investments, Ltd. (sometimes referred to herein as "Direct Capital"), purchased 31,500,000 newly-issued shares of our common stock ("Common Stock") representing approximately 90% of our capital stock outstanding on a fully-diluted basis. Commencing November 9, 2004 the Company changed its focus and was engaged in lending to and investing in a real estate related opportunity. On November 19, 2004, we changed our name to DCI USA, Inc.

On February 11, 2005, we filed with the Securities and Exchange Commission (the "SEC") an election to operate as a regulated business development company ("BDC") under the Investment Company Act of 1940 (the "1940 Act"). On December 5, 2005, Direct Capital voted by written consent to authorize the withdrawal of our election to be treated as a BDC. On February 22, 2006, we filed with the SEC a Notification of Withdrawal of Election to operate as a BDC. We had not achieved our goals of fully operating as a BDC and decided to cease operations as a BDC. We decided to become an operating company whose focus is to purchase or otherwise acquire real property, or other businesses, to be operated directly by us. In order to accomplish such change in business strategy, we will need significant additional financing which we may not be able to obtain.

As of December 31, 2005, substantially all of our assets consisted of the following notes receivable which are described in more detail below. We do not have any operating assets.

-------------------------------------------------------------------------------- Loans to: Note Value: -------------------------------------------------------------------------------- 231 Norman Ave LLC Real Estate- 12% Due 6/15/06 $600,000 -------------------------------------------------------------------------------- 231 Norman Ave LLC Real Estate- 12% Due 6/15/06 $770,000 -------------------------------------------------------------------------------- Bartram Holdings, Inc. Real Estate- 8% Due 7/05/15 $70,000 -------------------------------------------------------------------------------- Technology Spin Off A&C loan assignment Due $129,044* Systems LLC 9/13/07 -------------------------------------------------------------------------------- Total Investment $1,569,044 --------------------------------------------------------------------------------

*Net of discount of $20,956.

Our Business Prior to November 9, 2004

Prior to November 9, 2004, we had one wholly-owned subsidiary, Bartram Holdings, Inc. (sometimes referred to herein as "Bartram"). The primary asset of Bartram is an 80% indirect interest in the Spring Village Apartment Complex. Bartram owns 100% of Spring Village Holdings, Inc., which owns a 80% controlling interest in SVG Properties, L.P., a New Jersey limited partnership (the "Partnership"). The Partnership owns the 124-unit Spring Village apartment complex.

Change in Control on November 9, 2004

On November 9, 2004, Direct Capital purchased 31,500,000 shares of our Common Stock, which represented approximately 90% of our issued share capital on a fully diluted basis. Direct Capital is an Israeli company which is traded on the Tel Aviv Stock Exchange. In connection with such purchase we transferred to one of our shareholders 80% of our equity ownership in Bartram and retained the remaining 20%. The purchase price for such 31,500,000 shares was $900,000, consisting of: (1) an assignment to us of a promissory note made by 231 Norman Avenue, LLC, a New York limited liability company, to Direct Capital in the principal amount of $770,000; and (2) cash in the amount of $130,000, which amount we were to pay to Bartram after we received such amount from Direct Capital. Of such $130,000 cash portion, we received $100,000 from Direct Capital which was paid to Bartram. With respect to the remaining $30,000 due to us from Direct Capital, in 2005, we offset such amount against a loan obligation from us to Direct Capital. As of June 30, 2005, the Company sold its 20% ownership in Bartram back to Bartram (the "Bartram Repurchase") in consideration for a $70,000 principal amount promissory note made by Bartram and the forgiveness by Bartram of the Company's obligation to pay Bartram $30,000 upon receipt of such amount from Direct Capital.

As a result of the Bartram Repurchase, the Company no longer holds an ownership interest in Bartram and no longer has a right to nominate a board member to Bartram which it previously had. In connection with the Bartram Repurchase, Bartram issued to the Company options to purchase shares of Bartram common stock as follows: 3,000,000 shares at the exercise price of $.05 per share, such option expiring June 30, 2008; 1,000,000 shares at the exercise price of $.075 per share, such option expiring June 30, 2009; and 1,000,000 shares at the exercise price of $.10 per share, such option expiring June 30, 2010. Also in connection with the Bartram Repurchase, the Company issued to Bartram an option, expiring June 30, 2007, to purchase 300,000 shares of the Company's Common Stock at the exercise price per share equal to the per share asset value of the Company at the time of exercise but not less than $0.50 per share. Currently the Company attributes no value to the aforementioned options to purchase shares of Bartram.

The $70,000 principal amount promissory note issued by Bartram to the Company in connection with the Bartram Repurchase provides for simple interest accruing at 8% per year and a maturity date of July 5, 2015 on which date all principal and accrued interest are payable. The first interest payment on the $70,000 note is due on July 5, 2007, and no payments are permitted to be made under the $70,000 note prior to July 5, 2007. After July 5, 2007, interest is payable quarterly until the maturity date. Any payments due under the $70,000 note may be paid by Bartram by transferring to the Company shares of the Company's Common Stock held by Bartram. For this purpose, each share of the Company's Common Stock is to have a fixed value of $0.225 per share.

231 Norman Avenue

The Company holds two promissory notes made by 231 Norman Avenue, LLC ("Norman LLC"), an entity controlled by the former Chairman and CEO of the Company, one in the principal amount of $770,000 the other in the principal amount of $600,000. The $770,000 Note was originally made by Norman LLC to Direct Capital and was assigned by Direct Capital to the Company to satisfy $770,000 of the $900,000 purchase price for the 31,500,000 shares of the Company's newly-issued Common Stock acquired by Direct Capital. The $770,000 Note, which was due and payable on June 15, 2005 and extended to June 15, 2006, provides for quarterly payments of only interest at an annual interest rate of 12%.

On November 30, 2004, the Company lent $600,000 to Norman LLC. Interest on the $600,000 loan accrues at the rate of 12% per annum, and is payable every three months on the 25th day of the month. The outstanding principal and all accrued interest thereon is due and payable on June 15, 2006. The Company has the right to extend the maturity date of the $600,000 loan to Norman LLC to June 15, 2007.

The obligations of Norman LLC to the Company are secured by, among other collateral, a pledge of the membership interests owned by Norman LLC in 231 Norman Avenue Property Development, LLC ("Norman Property LLC"), which represented 30% of the outstanding ownership interests in Norman Property LLC as of March 7, 2005. In connection with the $600,000 loan and the $770,000 Note, the Company was issued options to purchase from Norman LLC its membership interests in Norman Property LLC. These options give the Company the right to purchase up to a total of 30% of the outstanding membership interests in Norman Property LLC for consideration equal to the aggregate outstanding amounts due and payable under the $600,000 loan and the $770,000 loan. One of these options allows the Company to purchase 12.5% of the Norman Property, LLC membership interests and may be exercised by the Company upon a default of the $600,000 loan obligation or at any time prior to payment in full of the $600,000 loan. The exercise price of such option is the outstanding amount then due and payable under the $600,000 loan. The other of these options allows the Company to purchase 17.5% of the Norman Property LLC membership interests and may be exercised by the Company upon a default of the $770,000 Note or at any time prior to the payment in full of the $770,000 Note. The exercise price of such option is the outstanding amount then due and payable under the $770,000 Note.

Norman Property LLC is a New York limited liability company which owns fee simple title to the real property located at 231 Norman Avenue, Brooklyn, New York. In March 2005 Norman Property LLC consummated a $10 million refinancing and construction loan with Washington Mutual with respect to the property at 231 Norman Avenue and received capital contributions from investors of $1.75 million. The project at 231 Norman Avenue is the conversion of the existing commercial use building into approximately 68 lofts to be sold as condominiums. It is anticipated that this project will be completed by the end of 2006.

Loan to Apros and Chay MB Ltd.

On September 16, 2005, the Company entered into an Assignment Agreement (the "Assignment") with Technology Spin Off Systems, LLC, a New York limited liability company ("TSOS"). Pursuant to the Assignment, the Company assigned to TSOS all of the Company's rights in the Apros and Chay Loan, described below.

The Company's rights under such Loan which were assigned to TSOS consisted of (i) the right to receive from Apros & Chay the aggregate principal amount of $155,000, with interest accruing at the rate of 10% annually, on December 13, 2005 (although the original principal amount of the Initial Loan was $96,000, $1,000 was sold by the Company to TSSS LLC as of March 17, 2005) and (ii) the Warrants to purchase 1,550,000 share of Apros & Chay at a purchase price of $0.10 per share; said warrants are exercisable until December 31, 2005, with the right of the Company to extend such time for an additional 6 months.

In consideration for the Assignment, TSOS agreed to pay the Company $250,000 as follows: (a) $50,000 in cash on the date of the Assignment; (b) $50,000 by paying on behalf of the Company the full amount due under a promissory note, dated June 28, 2005, in the principal amount of $50,000, made by the Company in favor of Gad Ichaki; and (c) $150,000 in cash by September 13, 2007, if, prior to September 13, 2007, Cornell Capital Partners, LP (sometimes referred to herein as "Cornell") terminated its security interest in the shares of Technoprises, LTD. If the Technoprises shares are not released from Cornell's lien by September 13, 2007, TSOS shall receive $100,000 worth of common shares of the Company at the then existing market value, but in no event less than net asset value.

The Company has recorded a discount of $21,456 on the $150,000 amount due in September 2007 to reflect the present value of the funds to be received. The discount will be amortized on a straight-line basis to interest income over the life of the loan.

On December 13, 2004, the Company entered into a Loan Agreement (the "Initial Loan") with Apros and Chay MB Ltd., an Israeli private merchant banking company ("Apros and Chay") which is affiliated with Adam Ofek, who was then our President, Chief Financial Officer and a director. Pursuant to the terms of such Loan Agreement, the Company lent Apros and Chay $96,000. Interest accrued at the rate of 10%.

In connection with the Apros and Chay loan, the Company received a warrant to purchase 960,000 shares of Apros and Chay at a purchase price of $0.10 per share. The warrants were exercisable until December 13, 2005, but the Company had the right to extend the exercise period for an additional 6 months. The value of these warrants had been deemed to be immaterial.

On April 6, 2005, the Company informed Apros and Chay that the Company's loan to Apros and Chay was in default. The default occurred as a result of the change in management of Apros and Chay.

As of December 31, 2004, the Company entered into a Modification Agreement (the "Modification Agreement," together with the Initial Loan, the "Loan") with Apros and Chay and Direct Capital regarding the aggregate sum of $60,000 which was lent by Direct Capital to Apros and Chay. Pursuant to the Modification Agreement, Direct Capital assigned to the Company the right to receive such $60,000 from Apros and Chay. Interest accrued on such $60,000 at the annual rate of 10%.

Our Financing Arrangements with Cornell Capital Partners, LP

A. Standby Equity Distribution Agreement

On December 6, 2004, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, L.P. Pursuant to the Standby Equity Distribution Agreement, we may, at our discretion, periodically sell to Cornell Capital Partners, L.P. shares of Common Stock for a total purchase price of up to $5,000,000. For each share of Common Stock purchased under the Standby Equity Distribution Agreement, Cornell Capital Partners, L.P. will pay 97% of the lowest volume weighted average price of the Common Stock during the five consecutive trading days immediately following the notice date. In addition, we will pay Cornell Capital Partners, L.P. a cash fee equal to 5% of each advance.

Upon execution of the Standby Equity Distribution Agreement, we issued 200,000 shares of our Series A Preferred Stock to Cornell Capital Partners, L.P. as a commitment fee. Holders of our Series A Preferred Stock are entitled to receive an annual 5% dividend payable semi-annually. The 5% dividend may be paid in either cash or shares of our Common Stock in the discretion of our Board of Directors. In the event of a dissolution and liquidation of our business, the Series A Preferred Stock ranks senior to our Common Stock and to all other classes of equity securities that may be outstanding which by their terms do not rank senior to the Series A Preferred Stock, and the Series A Preferred Stock is subordinate and ranks junior to all debt. We have the right to redeem the Series A Preferred Stock at a price of $1 per share plus an annual premium of 5%. The Series A Preferred Stock is convertible into shares of our Common Stock at conversion ration equal to the lesser of: (a) $1, or (b) $1 and all accrued but unpaid dividends divided by the average closing bid price of our Common Stock as quoted by Bloomberg L.P. for 20 trading days immediately preceding the conversion notice date.

In addition, we engaged Newbridge Securities Corporation, a registered broker-dealer, to advise us in connection with the Standby Equity Distribution Agreement. For its services, we agreed to issue Newbridge Securities Corporation 166,667 shares of our Common Stock.

B. Secured Convertible Debenture

On December 6, 2004, we entered into a Securities Purchase Agreement whereby we issued a $250,000 principal amount convertible debenture to Cornell Capital Partners, L.P. and we agreed to register under the Securities Act of 1933 the shares into which such convertible debenture could be converted.

In consideration for issuing the $250,000 principal amount convertible debenture, Cornell Capital Partners paid us net proceeds of $180,000 in cash. The outstanding $250,000 principal amount convertible debenture bears interest at 8%, matures two years from the date of issuance, and is convertible into our common stock, at the holder's option, at the lower of: (a) $.074, or (b) 77% of the lowest daily volume weighted average price for the five days immediately prior to conversion. We have the right to redeem a portion of all of the outstanding debenture at a price equal to $0.072 per share. To secure prompt and complete payment and performance of all the obligations under the Securities Purchase Agreement and all related agreements, we granted Cornell Capital Partners, L.P. a security interest in all our assets. In addition, Apros and Chay, Ltd. pledged to Cornell Capital Partners all of its shares (a total of 48,500,000 shares) in Technoprises Ltd., an Israeli company.

On March 1, 2005, we received from Cornell net proceeds of $220,000 in consideration of our issuance of another 8% Secured Convertible Debenture in the original principal amount of $250,000. The debenture has a term of two years, accrues interest at 8% and is convertible into our Common Stock at a price per share equal to the lesser of (a) $0.36, 123% of the daily volume weighted average price of our Common Stock on March 22, 2005, or (b) 77% of the lowest daily volume weighted average price for the five days immediately prior to conversion. We have the right to redeem a portion or all of the outstanding debenture at a price equal to $0.35, 120% of the daily volume weighted average price of our Common Stock on March 22, 2005.

Currently, management does not believe that the Company will exercise its rights under the Standby Equity Distribution Agreement and intends to seek to negotiate with Cornell for the right to satisfy the debentures due Cornell by issuing shares of the Company's Common Stock to Cornell.

Employees

We currently do not have any employees other than our officers.

Risk Factors

The reader should carefully consider each of the risks described below. If any of the following risks develop into actual events, our business, financial condition or results of operations could be materially adversely affected and the trading price of the Common Stock could decline significantly.

We Are No Longer A BDC

We are no longer a business development company and our plan of operations is not clearly defined. We intend to invest in real estate opportunities but whether we actually do so will depend upon opportunities that become available to us and the availability of adequate financing. We cannot be sure that attractive investment opportunities will become available to us or that we will have the funds to make such investments if they do become available.

Our Common Stock May Be Affected By Limited Trading Volume and May Fluctuate Significantly

Prior to this offering, there has been a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our stockholders' ability to sell our common stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly reduce the price of our stock.

Our Common Stock is Quoted on the Over-the-Counter Bulletin Board, Which May Make it More Difficult For Investors to Resell Their Shares Due to Suitability Requirements

Our common stock is currently quoted on the OTC Bulletin Board (the "OTCBB") where we expect it to remain for the foreseeable future. Broker-dealers often decline to trade in OTCBB stocks given that the market for such securities is often limited, the stocks are more volatile and the risks to investors are greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for to sell our shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.

Delaware Law and Certain Provisions of Our Charter May Inhibit a Takeover of Our Company That Stockholders May Consider Favorable

Provisions of Delaware law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.

Our Largest Stockholder Has the Ability to Exercise Significant Influence Over Matters Submitted for Stockholder Approval and His Interests May Differ From Other Stockholders

Jonathan Ilan Ofir, our Chairman and CEO, owns 28,350,000 shares of our Common Stock and has the option to purchase an additional 3,150,000 shares from Direct Capital. He has beneficial ownership of approximately 87% of our outstanding Common Stock as of March 21, 2006. Mr. Ofir, therefore, has the ability to appoint our Board of Directors. Accordingly, Mr. Ofir may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our Board for approval, including issuing common and preferred stock, and appointing officers, which could have a material impact on mergers, acquisitions, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of Mr. Ofir may differ from the interests of the other stockholders.

Our Investments May Not Generate Sufficient Income to Cover Our Operations

Currently, our only assets are those represented by the promissory notes discussed above, including our right to acquire a 30% interest in 231 Norman Avenue Property Development, LLC. Although we anticipate receiving net proceeds from these assets sufficient to satisfy our obligations, there is no assurance as to when or whether these proceeds will be received. Even if we receive proceeds sufficient to satisfy our obligations, upon the sale or the liquidation of Norman Property LLC we will have no ongoing business operations. We intend to use the net proceeds derived from our current holdings and such additional funds as we may raise through the issuance of debt or equity securities to acquire real estate or other businesses. There can be no assurance that we will be successful in our efforts to acquire any real estate or operating business or, if acquired, that any such business or project will prove to be profitable.

The Sale or Availability for Future Sale of Substantial Amounts of our Common Stock could Adversely Affect our Stock Price

As of March 21, 2006, there were 36,125,035 shares of our Common Stock outstanding. We are authorized to issue up to a total of 100,000,000 shares of Common Stock and 1,000,000 shares of blank check preferred stock of which 200,000 shares of Series A Preferred are outstanding. Additional issuances, including the rights and preferences of the preferred shares, do not require stockholder approval. The sale or availability for sale of substantial amounts of our Common Stock, in the public market could adversely affect the market price of our Common Stock. As a result of our contractual agreement to register $5,000,000 of shares of Common Stock on behalf of Cornell Capital and the shares of Common Stock underlying two convertible debentures and 200,000 shares of Series A Preferred Stock held by Cornell, there are a significant amount of shares which we have to issue to Cornell. We cannot predict the actual number of shares of Common Stock that will be issued to Cornell pursuant to these convertible debentures and the Series A Preferred Stock held by Cornell. The purchase price of the shares to be issued upon conversion of the convertible debentures and the Series A Preferred Stock will fluctuate based on prevailing market conditions.