SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 20-F
[_][ ] Registration Statement pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934;
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the fiscal year ended: December 31, 2005
[_]2007
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _______ to ________
[_][ ] Shell company report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 Date of event requiring this shell company report .
.
. . . . . . . . . . . . . . . . .
Commission file number: -------------______________
OXFORD INVESTMENTS HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Ontario, Canada
---------------
(Jurisdiction of incorporation or organization)
1315 Lawrence Avenue East
Suite 520
Toronto, Ontario
Canada M3A 3R3
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the
Exchange Act: None.
----
Securities registered or to be registered pursuant to Section 12(g) of the
Exchange Act: Title of Class: Common Stock, no par value
--------------------------
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None.
----
The number of outstanding shares of the issuer's common Stock as of December 31,
2005: 21,874,3502007: 39,744,810
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act
Yes [_][ ] No [X]
--- --
If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes [_][ ] No [X]
--- --
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):
Large accelerated filer [_] Accelerated filer [_] Non-accelerated
filer [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
--- --[ ]
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 [_][ ] Item 18 [X]
-------- -------
If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [_][ ] No [X]
--- --
2
TABLE OF CONTENTS
Page
FORWARD - LOOKING STATEMENTS 5
PART I
Item 1. Identity of Directors, Senior Management and Advisers *
Item 2. Offer Statistics and Expected Timetable ............. *
Item 3. Key Information .................................... 5
Selected Financial Data 5
Capitalization and Indebtedness 7
Reason for the Offer and Use of Proceeds 7
Risk Factors .............................. 7
Item 4. Information on the Company 12......................... 13
History and Development of the Company 1213
Business Overview 1214
Organizational Structure 1921
Property, Plants and Equipment 2021
Item 4A Unresolved Staff Comments 20.......................... 21
Item 5. Operating and Financial Review and Prospects 20....... 21
Operating Results 22
Liquidity and Capital Resources 2426
Research and Development 2527
Trend Information 2527
Off-balance sheet arrangements *
Tabular disclosure of contractual obligations *
Safe harbor 2627
Item 6. Directors, Senior Management and Employees 27......... 28
Directors and Senior Management 2728
Compensation of Directors and Officers 2729
Board Policies 2830
Employees 2831
Share Ownership 2831
Item 7. Major Shareholders and Related Party Transactions 28.. 32
Major Shareholders 2832
Related Party Transactions 2832
Item 8. Financial Information 29.............................. 33
Consolidated Statements and Other
Financial Information 2933
Significant Changes 2934
Item 9. The Offer and Listing 30.............................. 34
Item 10. Additional Information 31............................. 35
Share Capital *
Memorandum and articles of incorporation 3035
Material Contracts 3135
Exchange Controls 3136
Taxation 3136
Dividends and paying agents *
Statements by experts *
Documents on display 3740
Subsidiary Information *
Item 11. Quantitative and Qualitative Disclosures About Market Risk *
Item 12. Description of Securities Other Than Equity Securities *
3
PART II
Item 13. Defaults, Dividends Arrearages and Delinquencies ... *
3
Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds ................. *
Item 15. Controls and Procedures 37........................ 41
Item 16A. Audit Committee Financial Expert 38............... 41
Item 16B. Code of Ethics 38................................. 42
Item 16C. Principal Accountant Fees and Services 38......... 42
Item 16D. Exemptions from the Listing Standards for Audit Committees *
Item 16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchases ................ *
Item 17. Financial Statements 39........................... 42
Item 18. Financial Statements 39........................... 42
Item 19. Exhibits 40....................................... 44
SIGNATURES 41....................................................... 45
CERTIFICATIONS 42................................................... 46
* Omitted pursuant to General Instruction E(b) of Form 20-F.
4
FORWARD LOOKING STATEMENTS
Oxford Investments Holdings Inc., or the Company, desires to take advantage
of the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and is including this cautionary statement in connection with this safe
harbor legislation. This document and any other written or oral statements made
by us or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe", "expect", "anticipate", "intends", "estimate", "forecast", "project",
"plan", "potential", "will", "may", "should", "expect" and similar expressions
identify forward-looking statements. Please note in this annual report, "we",
"us", "our", "the Company", all refer to Oxford Investments Holdings Inc. and
its subsidiaries.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although we believe that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant uncertainties
and contingencies which are difficult or impossible to predict and are beyond
our control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.
In addition to these important factors and matters discussed elsewhere
herein, important factors that, in our view, could cause actual results to
differ materially from those discussed in the forward-looking statements include
the strength of world economies, fluctuations in currencies and interest rates,
general market conditions, changes in the Company's operating expenses, changes
in governmental rules and regulations or actions taken by regulatory
authorities, potential liability from pending or future litigation, general
domestic and international political conditions and other important factors
described from time to time in the reports filed by the Company with the
Securities and Exchange Commission.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2. Offer Statistics and Expected Timetable
Not Applicable.
Item 3. Key Information
A. Selected Financial Data
The following selected financial data for the years ended December 31,
2001, 2002, 2003, 2004, 2005, 2006 and 20052007 is derived from our audited consolidated
financial statements. The selected financial data, as well as the consolidated
financial statements and accompanying notes, are prepared in accordance with
accounting principles generally accepted in the United States. The Registrant
presents its consolidated financial statements in United States dollars. All
dollar amounts in this Form 20-F are in United States dollars, except where
otherwise indicated. You should read the following selected consolidated
financial data with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and
accompanying notes and other financial information included elsewhere in this
annual report.
5
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2005 ---------------------------------------------------------------------------------Dec. 31, 2006 Dec. 31, 2007
Statement of Operations Data:
- -----------------------------
Total revenues $ 401,793 $ 298,550.................... $ 439,157 $ 692,069 $ 163,889 $ 185,299 $ 6,132
Net Income/(Net Loss) (2,117,900) (748,796)............. (331,127) (139,368) (471,308) (961,889) (3,096,225)
Basic and diluted
net loss per share - (0.12) (0.04)............. (0.02) (0.01) (0.02) (0.04) (0.09)
Weighted average number of
Shares used in computing basic and
Diluted net loss per share- 17,152,915 19,756,999....... 20,018,107 20,958,721 21,765,254 23,368,008 33,640,665
Balance Sheet Data:
- -------------------
Cash and cash equivalents $ 508 $ 637.......... $ 11,745 $ 28,553 $ (13,697) $ 37,969 $ 0.00
Total current assets 107,879 48,246............... 147,516 286,095 58,290 90,855 9,434
Total assets 523,488 57,121....................... 157,309 292,883 62,727 94,321 13,895
Total current liabilities 525,774 780,366.......... 1,126,698 1,260,151 1,544,956 1,431,884 1,365,074
Total liabilities 525,774 780,366.................. 1,126,698 1,260,151 1,544,956 1,431,884 1,365,074
Total accumulated deficit (2,218,796) (2,967,592).......... (3,298,719) (3,438,087) (3,909,395) 4,871,284) (7,967,509)
Total stockholders' equity (deficit) (2,286) (723,245) (969,389) (967,268) (1,482,229) (1,337,563) (1,351,179)
EXCHANGE RATES
The following table sets out the exchange rates for the conversion of Canadian
dollars into United States dollars, expressed in United States dollars. The
exchange rates used are the closing rates provided by The Bank of Canada. The
table lists the rate in effect at the end of the following periods, the average
exchange rates (based on the average of the exchange rates on the last day of
each month in such periods), and the range of high and low exchange rates for
such periods.
Year ended December 31,
------------------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
-----------------------------------
End of Period 1.01 .86 .86 .83 .77
-----------------------------------
Average for Period .97 .87 .83 .81 .72
----------------------------------
High for Period 1.09 .91 .86 .85 .77
---------------------------------
Low for Period .84 .85 .80 .72 .64
---------------------------------
EXCHANGE RATES
The following table sets out the exchange rates for the conversion of
Canadian dollars into United States dollars. The exchange rates used are the
closing rates provided by The Bank of Canada. The table lists the rate in effect
at the end of the following periods, the average exchange rates (based on the
average of the exchange rates on the last day of each month in such periods),
and the range of high and low exchange rates for such periods.
Year ended December 31,
---------------------------------------------
2005 2004 2003 2002 2001
--------------------
End of Period
.86 .83 .77 .63 .63
--------------------
Average for Period
.83 .81 .71 .63 .65
--------------------
High for Period
.86 .85 .78 .65 .67
--------------------
Low for Period
.80 .72 .64 .63 .63
--------------------
6
The following table sets out the range of high and low exchange rates, for the
conversion of Canadian dollars into United States dollars for each of the
corresponding months during 20052007 and 2006.2008. The exchange rates used are the
closing rates as provided by the Bank of Canada.
6
- -------------------------------------------------
Month High Low
- -------------------------------------------------
December 2005 .86 .862007 1.02 0.98
- -------------------------------------------------
January 2006 .87 .862008 1.01 0.97
- -------------------------------------------------
February 2006 .87 .872008 1.03 0.98
- -------------------------------------------------
March 2006 .87 .862008 1.00 0.97
- -------------------------------------------------
April 2006 .88 .872008 1.00 0.97
- -------------------------------------------------
May 2006 .90 .902008 1.00 0.98
- -------------------------------------------------
The exchange rate on December 31, 20052007 for the conversion of United States
dollars into Canadian dollars was $1.16$1.01 (CDN$1.00 = US$0.86)1.01). As of May 31, 2006June 25,
2008 the close rate of exchange for the conversion of United States dollars into
Canadian dollars was $1.10$0.99 (CDN$1.00 = US$0.90)0.9867). The exchange rates used are
the nominal noon buyingexchange rates in New York City for cable transfers in foreign currencies, as certified for customs purposespublished by the Federal Reserve Bank of New York.Canada.
B. Capitalization and Indebtedness.
Not Applicable.
C. Reasons for the Offer and Use of the Proceeds.
Not Applicable.
D. Risk Factors.
The risks described below are not the only ones we face. Additional risks that
generally apply to publicly traded companies, that are not yet identified or
that are currently perceived as immaterial, may also impair our business
operations. Our business, operating results and financial condition could be
adversely affected by any of the following risks. You should refer to the other
information set forth in this document, including our financial statements and
the related notes.
This annual report also contains certain forward-looking statements that involve
risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "expects," "anticipates," "intends," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
annual report.
7
RISK FACTORS RELATED TO OUR BUSINESS
We Have a Limited Operating History so It May be Difficult for You to Evaluate
Our Business and Its Future Prospects
It may be difficult to evaluate our business and prospects because we have a
limited operating history. We were incorporated in October 2000 and we began
operations in November 2000. In our first two years of operations, we focused
our business on the Internet e-gaming market, however in early 2003, we expanded
our operations into the lifestyle consumables market. Through our subsidiaries
Celebrity Tan, Inc. and Ontario Private Water Labeling Ltd, we have entered the
UV-free sunless tanning and private water labeling markets. During 2006, we
entered into the stored-value credit/debit card market through our suite of
"FocusKard" products and our acquisition of ownership interests of companies in
China. Our prospects must be considered in light of the risks, expenses and
7
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. The
risks, expenses and difficulties that we expect to encounter include:
o implementing an evolving and unpredictable business model that relies,
in large part, on customer growth and word-of-mouth publicity among
the targeted audiences;
o building our corporate brand to attract purchasers, advertisers and
affiliates, and our network brands to expand our audience;
o increasing our product offerings on existing networks through internal
development and affiliate partnerships;
o developing and integrating new networks addressing our target audience
and advertisercustomer base;
o diversifying our revenue sources by focusing on different business
opportunities for a consumer market and by launching various marketing
initiatives;
o expanding our sales and marketing efforts to increase our affiliate
and customer base and our reach within the consumablesstored-value card market
audience;
o attracting, retaining and motivating qualified personnel; and
o responding to competitive developments.
There can be no assurance that we will effectively address the risks we face,
and the failure to do so could have a material adverse effect on our business,
financial condition and results of operations.
We have a History of Operating Losses and a Significant Accumulated Deficit, and
we May Not Maintain Revenue or Achieve Profitability in the Future.
We have not been profitable since our inception in October 2000. We
have an accumulated deficit of ($7,967,509). We expect to continue to incur
additional losses for the next fiscal year as a result of a high level of
operating expenses, significant up-front expenditures, pursuing new initiatives
for the Company and our marketing activities. While weWe have some
revenues, wehad to rely on raising
money through private placement of our stock to fund our ventures and
operations. We may never realize significant revenues from our core business or
be profitable. Factors that will influence the timing and amount of our growth
and profitability include:
.the. the success of implementing our business plan;
.obtaining. obtaining the necessary funding to grow our business; and
.our. our ability to expand, diversify and grow our business.
Our Ability to Continue as a Going Concern
We face significant challenges in shifting from the development stage
to the commercialization of the products that we offer. We have also changed our
business focus within the past year. Our business may fail if we do not achieve
significant revenue growth or obtain sufficient funding. Our accountants have
raised substantial doubts about our ability to continue as a going concern. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in such a transition, and there can be no assurance that
we will be successful or that we will ever achieve profitable operations.
Our Capital Resources Have Not Been Generated Primarily From Operations, We May
Be Dependent On Our Ability To Sell Additional Stock To Fund Continued
Operations.
To date, we have generated most of our cash flow from financing
activities. This has been primarily from sales of our common stock, and loans
from Michael Donaghy, our founder, President and Chief Executive Officer. We
have used a significant portion of the capital we raised to fund cash outflows
for operating and investing activities. Since we have not attained profitable
operations and are dependent upon obtaining financing to pursue our plan of
operations, there is no assurance that we will not require additional resources
in the future or that we will be able to obtain financing in the amount required
or terms satisfactory to us.
8
Our Rapid Growth May Strain Our Resources And Hinder Our Ability To Implement
Our Business Strategy
Our historical growth has placed, and any further growth is likely to
continue to place, a significant strain on our limited resources. If we fail to
manage our growth effectively, our business could be materially adversely
affected. Our ability to achieve and maintain profitability will depend on our
ability to manage our growth effectively, to implement and expand operational
and customer support systems and to hire personnel worldwide. We may not be able
to augment or improve existing computer systems and controls or implement new
systems and controls to respond to any future growth. In addition, future growth
may result in increased responsibilities for our management personnel, which may
limit their ability to effectively manage our business.
Operational Risks
Our revenue and operating results may fluctuate in future periods and
we may fail to meet expectations, which may cause the price of our common stock
to decline. As a result of our limited operating history and the emerging nature
of the markets in which we compete, we are unable to forecast our revenue with
precision. We anticipate that the results of our operations may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside our control. Factors that may affect our results of operations
include, but are not limited to:
o the addition or loss of customers for our tanning booths and spring
water private-labeling,FocusKard or stored-value
card suite of products, or our failure to add new customers;
o our ability and the ability of our customersaffiliates to attract and retain a
large retail audience for our products;
o our ability to attract and retain advertisers and sponsors;
o seasonal trendsour ability to successfully manage our relationships with our joint
venture partners, particularly in sunless tanningthe Asian market ;
o the amount and timing of expenditures for expansion of our operations,
including the acquisition of new affiliates, the hiring of new
employees, capital expenditures and related costs;
o our ability to continue to enhance, maintain and support our networks
and technology and avoid system downtime; and
o the introduction of new or enhanced offerings by our competitors.
Security And Privacy Breaches In Our Electronic Transactions May Damage Customer
Relations And Inhibit Our Growth.
Any failures in our security and privacy measures could have a material
adverse effect on our business, financial condition and results of operations.
We electronically transfer large sums of money and store personal information
about consumers, including bank account and credit card information, social
security numbers, and merchant account numbers. If we are unable to protect, or
consumers perceive that we are unable to protect, the security and privacy of
our electronic transactions, our growth and the growth of the electronic
commerce market in general could be materially adversely affected. A security or
privacy breach may:
o cause our customers to lose confidence in our services;
o deter consumers from using our services;
o harm our reputation;
o expose us to liability;
o increase our expenses from potential remediation costs; and
o decrease market acceptance of electronic commerce transactions.
While we believe that we utilize proven applications designed for
premium data security and integrity to process electronic transactions, there
can be no assurance that our use of these applications will be sufficient to
address changing market conditions or the security and privacy concerns of
existing and potential subscribers.
We Rely On Third Parties To Distribute Our FocusKard and Other Stored-Value
Products, Which May Not Result In Widespread Adoption.
9
In electronic commerce, we rely on our contracts with financial
services organizations, businesses, Internet portals and other third parties to
provide branding for our electronic commerce services and to market our services
to their customers. These contracts are an important source of the growth in
demand for our electronic commerce products. If any of these third parties
abandon, curtail or insufficiently increase their marketing efforts, it could
have a material adverse effect on our business, financial condition and results
of operations.
If We Do Not Respond To Rapid Technological Change Or Changes In The Industry
Standards, Our Products And Services Could Become Obsolete And We Could Lose Our
Existing And Future Customers.
If our competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our existing
product and service offerings, proprietary technology and systems may become
obsolete. Further, if we fail to adopt or develop new technologies or to adapt
our products and services to emerging industry standards, we may lose current
and future customers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic commerce
industry is changing rapidly. To remain competitive, we must continue to enhance
and improve the functionality and features of our products, services and
technologies.
Changes In Banking Regulations Could Hurt Our Business.
We have designed our systems and card programs to comply and work in
association with applicable banking rules and regulations. A change of those
rules and regulations could require us to dramatically alter our software
programs, the hardware upon which we operate and our implementation and
operation of stored value cards. Such changes could be costly or impractical and
we may not be able to modify our operations and technology to comply with
dramatic changes in banking regulations.
Changes In The Patriot Act Could Impede Our Ability To Circulate Cards That Can
Be Easily Loaded Or Issued.
Our current screening process is designed to comply with the United
States Patriot Act requirements that financial institutions know their
cardholders. If the Patriot Act or subsequent legislation increases the level of
scrutiny that we or our affiliated banks or the load or point of purchase
locations are required to adopt to know their customers, it may be costly or
impractical for us to continue to profitably issue and load cards for our
customers or even comply with new regulations.
If Major Banks Begin To Target The Sub-Prime Market, It Will Create Substantial
Competition For Us And Our Products And Services.
We operate among major financial institutions, providing products and
services designed to service the sub-prime credit market. Large and small banks
alike have traditionally not sought the typically unprofitable and undesirable
sub-prime market. This allows the symbiotic relationship between us and banks,
where the banks get access to the cumulative deposits of the cardholders,
without the trouble of administering thousands of very small individual accounts
of less reliable depositors. If banks decide to directly target the sub-prime
market before we are able to establish a strong foothold, we will not be able to
compete with established banks which have substantially greater resources.
Credit Card Fraud Or Computer Hacking Could Substantially Harm Us And Our
Operators.
As with any technology company, we are always at risk of computer
fraud, hacking or other electronic crime. While we believe that we have adopted
substantial systems to recognize and prevent computer fraud and hacking, the
relentlessness of hackers means no system is yet absolutely secure. Due to our
limited financial resources, any substantial computer crime and particularly an
electronic embezzlement, would adversely affect our ability to continue as a
going concern.
10
Internal Processing Errors Could Result If We Fail To Appropriately Deduct
Transactions From Customer Accounts.
In the event of a system failure that goes undetected for a substantial
period of time, we could allow transactions on blocked accounts, false
authorizations, fail to deduct charges from accounts or fail to detect
systematic fraud or abuse. Errors or failures of this nature could immediately
adversely impact us, our credibility and our financial standing.
Key Individual
Our future success will depend to a significant extent on the continued
services of senior management and other key personnel, particularly Michael
Donaghy, our founder, President and Chief Executive Officer. Any loss of a key
employee could have a detrimental effect on our business. Currently no key-man
insurance is in place with respect to Mr. Donaghy or any of our other personnel.
Our success is also dependent on our ability to attract, retain and
motivate highly skilled technical and other personnel. While we have been
successful in doing so thus far, there are a limited number of persons who
possess the necessary technical skills and understanding, thus competition for
their services is intense. A failure to recruit or retain personnel could have a
material adverse effect on our business, financial condition and results of
operations.
Protection and Enforcement of Intellectual Property Rights
We regard the protection of trademarks, copyrights and other
proprietary rights as important to our success and competitive position. We do
not have any patented technology that would prevent competitors from entering
our market. Although we seek to protect our trademarks, copyrights and other
proprietary rights through confidentiality and "non-compete" agreements and
common law precedents, these actions may be inadequate to protect them or to
prevent others from claiming violations of their patents, trademarks, copyrights
and other proprietary rights. As a result, third parties could claim
infringement by us with respect to current or future services.
9
We currently license and may in the future license certain technologies
from third parties, which may subject us to infringement actions based upon the
technologies licensed from these third parties. Any of these claims, with or
without merit, could subject us to costly litigation and divert the attention of
our technical and management personnel. These third party technology licenses
may not continue to be available to us on commercially reasonable terms. The
loss of the ability to use such technology could require us to obtain the rights
to use substitute technology, which could be more expensive or offer lower
quality or performance, and therefore have a material adverse effect on our
business.
Risks Associated With Foreign Operations
It is anticipated that substantially all of our revenue will be derived
from fees in foreign countries.
In addition, there are certain difficulties and risks inherent in doing
business internationally, including the burden of complying with multiple and
often conflicting regulatory requirements, foreign exchange controls, potential
restrictions or tariffs on gaming activities that may be imposed, potentially
adverse tax consequences and tax risks, as well as political and economic
instability. Changes in the political, regulatory and taxation structure of
jurisdictions in which we operate and in which our sub-licensee customers are
located could have a material adverse effect on our business, revenues,
operating results and financial condition.
Likewise, our ability to expand our business in certain countries,
including China, will require modification of our products, particularly
domestic language support. There can be no assurance that we will be able to
sustain or increase revenue derived from international operations or that we
will be able to penetrate linguistic, cultural or other barriers to new foreign
markets. The failure to sustain or increase revenue from international
operations could have a material adverse effect on our business, revenues,
operating results and financial condition.
Our financial results are reported in United States currency, which is
subject to fluctuations in respect of the currencies of the countries in which
we operate. Fluctuations in the exchange rate of the U.S. dollar and the
11
Canadian dollar could have a positive or negative effect on our reported
results. Given the constantly changing currency exposures and the substantial
volatility of currency exchange rates, we cannot predict the effect of exchange
rate fluctuations upon future operating results. There can be no assurance that
we will not experience currency losses in the future which could have a material
adverse effect on our business, revenues, operating results and financial
condition.
Uncertainty of Enforcement of U.S. Laws and Judgments against Foreign Persons
We and our wholly-owned subsidiaries through which we operate are
organized under the laws of the Province of Ontario, Canada and St. Johns,
Antigua, respectively; our executive offices are in Canada, our directors and
officers and certain of our advisers are residents of Canada, and a substantial
portion of our assets and assets of those persons are located outside the United
States. As a result, it may be difficult for you to initiate a lawsuit in the
United States against us or these non-U.S. residents, or to enforce any judgment
obtained in the United States against us or any of these persons.
Consequently, you may be deterred or prevented from pursuing remedies
under United States federal securities laws against us or other non-United
States residents.
We Currently Depend On the Sale of a few Products to Generate Most of Our
Revenue
We expect the sales of our tanning booths, tanning supplies and to a lesser
extent the sale of private-labeled spring water and sub-licensing of World
Gaming e-gaming softwarestored-value cards to constitute most of our
revenue for the foreseeable future. If customers do not purchase our products,
we do not currently offer any other products or services that would enable us to
generate revenue or to become profitable.
We May Not Have Sufficient Capital To Fund Our Operations And Additional Capital
May Not Be Available On Acceptable Terms if At All.
10
If we do not have sufficient capital to fund our operations, we may be
forced to discontinue product development, reduce our sales and marketing
efforts or forego attractive business opportunities. Any of these outcomes could
adversely impact our ability to respond to competitive pressures and could have
a material adverse effect on our business, financial condition and results of
operations.
Our Operating Results may be Impacted by Foreign Exchange Rates
Substantially all of our revenue is expected to be earned in U.S.
dollars. A significant portion of our expenses is incurred in Canadian dollars.
Changes in the value of the Canadian dollar relative to the U.S. dollar may
result in currency translation gains and losses and could adversely affect our
operating results. To date, foreign currency exposure has been minimal. However,
in the future we may consider hedging all or a significant portion of our annual
estimated Canadian dollar expenses to minimize our Canadian dollar exposure.
..
RISK FACTORS RELATED TO OWNING OUR STOCK
Control By Existing Shareholders; Anti-Takeover Effects
As of December 31, 2005,2007, Michael Donaghy, our sole director, indirectly
through his spouse, beneficially owned approximately 8,300,0008,775,000 shares or 37.94%22.08%
of our outstanding common shares. As a result, Mr. Donaghy can exert substantial
influence over us and influence most matters requiring shareholder approval,
including the election of directors, and thereby exercise significant control
over our affairs. The voting power of Mr. Donaghy under certain circumstances
could have the effect of delaying or preventing a change in our control, the
effect of which may be to deprive you of a control premium that might otherwise
be realized in connection with our acquisition.
12
No Established Public Trading Market
Our shares began trading on the Over the Counter Bulletin Board (OTCBB)
in May 2004, however, at present our shares are thinly traded, and there is no
assurance that a significant trading market will develop, or if developed, that
such market will be sustained.
Possible Volatility of Stock Price
Many factors could affect the market price of our common shares. These
factors include but are not limited to:
o Variations in our operating results;
o Variations in industry growth rates;
o Actual or anticipated announcements of technical innovations or new
products or product enhancements by us or our competitors;
o General economic conditions in the markets for our products and
services;
o Divergence of our operating results from analysts' expectations; and
o Changes in earnings estimates by research analysts.
In particular, the market prices of the shares of many companies in the
technology and emerging growth sectors experience wide fluctuations that are
often unrelated to the operating performance of such companies. When the market
price of a company's stock drops significantly, shareholders often institute
securities class action lawsuits against that company. Such a lawsuit against us
could cause us to incur substantial costs and could divert the time and
attention of our management and other resources. Any of these events could have
a material adverse effect on our business, financial condition and results of
operations.
11
Our common stock trades in the over-the-counter market on the OTCBB. As
a result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the value of, our common stock. Because our common
stock is subject to federal securities rules affecting penny stock, the market
liquidity for our common stock may be adversely affected.
Our common stock could become subject to additional sales practice
requirements for low priced securities. Our common stock could become subject to
Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional
sales practice requirements on broker-dealers that sell our shares of common
stock to persons other than established customers and "accredited investors" or
individuals with net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses.
Rule 15g-9 requires a broker-dealer to make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. Consequently, the rule may affect the
ability of broker-dealers to sell our securities and may affect the ability of
our shareholders to sell any of our securities in the secondary market;
generally define a "penny stock" to be any non-Nasdaq equity security that has a
market price less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions; requires broker dealers to
deliver, prior to a transaction in a penny stock, a risk disclosure document
relating to the penny stock market.
Disclosure is also required to be made about compensation payable to
both the broker-dealer and the registered representative and current quotations
for the securities. In addition, the rule requires that broker dealers deliver
to customers monthly statements that disclose recent price information for the
penny stock held in the account and information on the limited market in penny
stocks.
Item 4. Information on the Company
13
A. History and Development of the Company
The Company was incorporated under the laws of Ontario, Canada on
October 13, 2000 as a holding company under the name International E Gaming
Developers Ltd. On May 17, 2001 the Company changed its name to Oxford Software
Developers Inc. and on December 16, 2003 it changed its name from Oxford
Software Developers Inc. to Oxford Investments Holdings Inc. The Company
operates its business through fourthree wholly-owned subsidiaries International E
Gaming Developers, Inc. incorporated under the laws of Antigua and Barbuda,
British West Indies on November 3, 2000; Celebrity Tan, Inc. incorporated under
the laws of Ontario, Canada on May 28, 2003; and Ontario Private Water Labeling
Ltd. incorporated under the laws of Ontario, Canada on May 28, 2003;2003.
During 2006, we reorganized our core business to become a provider of
stored value cards for a wide variety of markets. Our products and WebStar
Internet Solutions incorporated underservices are
aimed at capitalizing on the lawsgrowing demand for stored value and re-loadable
ATM/prepaid card financial products. We believe stored value cards are a
fast-growing product segment in the financial services industry.
On or about December 18, 2006, we entered into a joint venture
arrangement with the Ko Ho Management Co. Ltd. of Ontario, Canada on March 9,
2006.Hong Kong ("Ko Ho Group"). We
acquired a fifty percent (50%) equity interest in the Ko Ho Group, a company
wholly-owned by Mr. Benny Lee. The Ko Ho Group is an investment and management
company, specializing in company mergers and acquisitions, management and
marketing services in Asia Pacific with a focus in Hong Kong and China. To date
through our partnership with the Ko Ho Group, we have acquired an equity
interest in three Chinese companies, Arden Trading Company Ltd., Hongxin
Insurance Agency and Foshan Foshantong Information Technology Co., Ltd.
In this Annual Report, unless the context indicates otherwise, the term
"Company" refers to Oxford Investments Holdings Inc.
B. Business Overview
We were incorporated with the objective of capitalizing on the growth
of Internet gaming and entertainment - e-gaming. However, as a result of
persistent uncertainty in Internet gaming laws in various jurisdictions
worldwide, particularly in the United States, we felt that it was beneficial for
us to closely review our strategic planning as we move forward. As a result, we
did not renew our e-gaming license and in May 2003, we initiated two business
ventures to further diversify the Company's interests in the lifestyles
consumables market. The first initiative iswas the distribution of a private line
of UV-free tanning products and booths and the second initiative iswas the
distribution of private labeled bottled spring water.
Due to recent changes in United States law with respect to Internet
gaming, we are no longer involved in Internet gaming activities. The Company intendshas
discontinued the business operations of Internet Gaming and private labeled
bottled spring water and has focused its core operations on the direct banking
and stored card value market. It has entered into the direct-banking and
payment-card solutions business by concentrating its business around its
"FocusKard" suite of products.
The Product and the Market
The "FocusKard" suite of products consists of an online-access account
represented by a stored-value card. Stored-value cards are a substitute for
cash, gift certificates, and check payments. Monetary value is added to growthe
stored-value account before the card is used, with the value either being funded
by the cardholder directly, or by the card program operator in commercial
applications.
Stored-value is believed to be the most rapidly growing segment in the
payment card industry. Its many applications include payroll products, gift-card
products, travel products, insurance products, membership products, student
products, and incentive/promotional products.
The Opportunity
14
The rapid expansion of e-commerce and online banking brings new
challenges to payment methods, such as the need to protect the individual's
financial information, and the ease of collection for online merchants. A
stored-value product such as the FocusKard expands the functionality of
electronic banking, allowing new and innovative payment methods that may limit
risk exposure on both sides of the transaction.
Product
FocusKard offers a complete payment solution with world-class service
at competitive rates. The Company's expertise in risk management,
authentication, and fraud detection has enabled us to develop a product backed
with technological protections such as redundant data centers, while giving
customers the security of a PIN and a zero-liability policy.
With superior customer and merchant support services available
twenty-four hours a day, seven days a week, the FocusKard is available in
various languages and currencies. Instant customer access to a real-time
paperless transaction statement is always available.
FocusKard's revolutionary payment methods are available as a customized
white-label solution to allow gift-card branding and other merchant
applications, thus providing a complete turnkey product for this type of
application.
The Strategy
The FocusKard platform is headlined by our e-wallet solution. This
product allows for instant internet transfers of funds between customer and
merchant and vice versa. The product is seamless and secure. Each user account
has a loadable credit card linked to their account enabling access to funds
through any point of sale (POS) or automatic teller machine (ATM) worldwide.
The programs currently underway for the "FocusKard" suite of products
involve the introduction of a payroll card and a direct-debit card. The
FocusKard payroll card offers employers and employees a check-free, easily
distributed, instant-access method to deal with the administration of wages and
employee compensation. The FocusKard direct-debit card is a consumer-loaded
prepaid card for equivalent-to-cash transactions with statement benefits, and is
ideal for online transactions, corporate expense cards, PIN-protected travel
currency, and gift cards.
This is only the beginning of the new vision of the FocusKard products
- - comprehensive direct-banking and payment-card solutions tailored to the
requirements of today's businesses. The goal is to continually develop
innovative electronic payment products that serve a broad range of markets and
are delivered on a stored-value platform technology.
Arden Trading Company Ltd.
On or about February 28, 2007, we acquired a fifty percent (50%) equity
interest in Arden Trading Company Ltd. of China through our partnership with the
Ko Ho Group.
Corporate Profile
Arden Trading Company Ltd specializes in the operation of customer
loyalty program redemption. The Company has been in business for two years and
has been profitable since its inception. Arden provides services to China
Construction Bank for the Province of Guangdong, processing bonus point
redemptions for the bank. Arden will expand these segmentsservices into Shanghai and
Beijing during 2007.
Arden's services also include gift sourcing, catalogue production,
logistics, and call center customer support. It provides long-term outsourcing
services to businesses in its areas of expertise. The Company's clientele
15
include telecommunication operators, such as China Telecommunications; insurance
companies; and commercial banks, such as China Construction Bank.
The Product and The Market
The Province of Guangdong, which is situated in the southern part of
China mainland, covers an area of over 180,000 square kilometers (69,502 square
miles) and has a permanent population of approximately 74,730,000. Guangzhou
city is the main economic, communication, and cultural center of Guangdong with
numerous railway and highway networks and a labyrinth of waterways.
Arden provides bonus point fulfillment services to the China
Construction Bank for the Province of Guangdong. Customers are given an
opportunity to redeem their points for gifts offered in Arden's catalogue. Arden
is responsible for bonus points management services, receiving orders, acquiring
products to fullfill the orders, and shipping the product to the Bank's
customers.
Using Arden's services allows the Bank to offer an incentive program to
its customers, while the Bank's customers benefit by receiving valuable gift
items.
The Opportunity
The present economic boom in China provides a growing market for all types of
products and services. Arden plans to expand its geographical coverage area, in
addition to taking advantage of China's growing markets.
Product and Company Advantages
Arden has already developed a customer base in of several hundred
thousand consumers. The Company has positioned itself to expand its present
contract with China Construction Bank into all branches in the Provinces of
Guangdong, Shanghai, and Beijing.
The management team has years of experience in operating and managing
call center, logistics, telemarketing, and customer relations services
The Strategy
Arden charges a service fee to the China Construction Bank to manage
and fulfill the Bank's bonus points incentive program. Further income is
provided by markup on the wholesale value of gift items provided by Arden. As
the Company's customer base expands, bulk purchasing of gift items will reduce
the wholesale price charged to Arden, thus increasing the markup income per item
as well as the increasing in the number of fulfillment transactions.
Arden plans to develop an online catalogue of its business butgift items. The
ecommerce version of the gift catalogue provides additional cost-cutting and
income-generating opportunities for the Company. Catalogue printing costs will
be reduced as more users take advantage of the continually-updated online
catalogue, ordering procedures will become more automated, and additional
revenue can be generated through the sale of advertising space on the web site.
Oxford's partnership with Arden will allow Oxford to enter into the
loyalty and electronic payment market in China through Arden's present and
projected customer base, thus ensuring the successful introduction of the
FocusKard suite of payment solutions into the huge Chinese consumer card market.
Hongxin Insurance Agency
On or about March 14, 2007, we acquired a fifty percent (50%) equity
interest in Hongxin Insurance Agency of China through our partnership with the
Ko Ho Group.
16
Corporate Profile
Hongxin is continuingan insurance agency selling insurance policies and financial
instruments for most major insurance companies in China since 2004. It is under
license issued by China Insurance Supervisory Committee to aggressively seekprovide corporate and
develop new business venture opportunities.individual insurance products, risk management, and consultation services. The
managing director of Hongxin, Mr. Ming-Wei Ye, as a FLMI of Loma (USA) has more
than 20 years of experience in professional management of banking, insurance,
and investment services.
The Product and The Market
Like Arden Trading Company will maintain salesLtd., Hongxin serves the large market of the
Province of Guangdong in China. China's economic prosperity is resulting in an
increase in disposable income for an increasing segment of the population.
Hongxin's product offerings serve this increase in wealth by protecting the
value of property, through insurance; and distribution control of its product lines once they are established in their
respective markets. On April 5, 2006,by providing opportunities for
investment, such as mutual funds and other financial instruments.
The Opportunity
Hongxin has developed partnerships that provide the Company acquired all ofwith a huge
customer base to which the assets
WebStar Internet Solutions, a company that delivers revolutionary online payment
solutions for companies that wish to accept payments through the Internet for
entertainment,Company can market its products and services. The
Company expects to brand its own line
of WebStar payment cards and also license the technology to other companies.
12
International E Gaming Developers, Inc.
- ---------------------------------------
International E Gaming Developers, Inc. ("Egaming"), is our wholly-owned
subsidiary through which we operate our gaming business. In April 2001, we
acquired the assets of Suchow Holdings Ltd., a Bahamian-based company that
provided back-end administrative software solutions for e-commerce driven
websites. In 2003, we did not renew our online gaming license since the Company
decided to no longer operate an online casino. Instead, International E Gaming
Developers, Inc. has limited its activities in the Internet gaming industrygrowing Chinese market welcomes access to the deliverytypes of software solutionsproducts and services
provided by Hongxin.
Product and Company Advantages
In addition to that market. However, the Company intendsestablished relationships with some major enterprises,
Hongxin has established partnership relationships with some major banks in China
to use Egaming's gaming experienceprovide insurance to expand into the land-based casino industry
through the distribution of land-based gaming kiosk and slot machine equipment
and technology.
Gaming Business Strategy
- ------------------------
A pioneer in the Internet gaming industry, International EGaming Developers
Inc. began building and selling online gaming web sites in 1999. Even though
Egaming no longer operates an online casino, it uses its unique combination of
experience and technical expertise to continue to derive revenue from reselling
gaming software and from providing consulting and maintenance services to the
site owners. EGaming's planned expansion into the land-based kiosk market will
exploit its extensive knowledge of the gaming industry and benefit from the vast
network of gaming contacts it has developed.
Gaming Market
- -------------
Legalized gambling is one of the fastest growing industries in the world.
The universal appeal of gambling provides a potential of huge returns to those
companies that can successfully tap into this developing market. Online casinos
have quickly increased in revenue volume, while the savings realized in real
estate, employee payroll, and operations costs make the Internet a
cost-effective distribution channel. Combined with thistheir cardholders. Currently Hongxin is the ability to offer
casino gamesdesignated
sole insurance agent for the cardholders of China Construction Bank (Guangdong
Branch)'s "Automotive Card". The "Automotive Card" is a roadside assistance and
sports wagering to customers anywhere in the world from the
convenience of their own home. All of this makes the outlook for this enterprise
fiscally bright, with some experts forecasting that growth will continue
exponentially for at least the next few years. However, due to the uncertainty
in Internet gaming laws in various jurisdictions worldwide, particularly in the
United States there can be no assurance that the online gaming market will grow
as predictedautomotive services program, and in fact the market may be negatively impacted if adverse laws
are enacted.
The addition of kiosk gaming systems to EGaming 's product line will allow
the Company to market to land-based gaming organizations worldwide. Studies have
shown that industry professionals overwhelmingly agree that, in the near future,
casinos will adopt coinless machines and that the ability for operators to
download new games instead of having to physically replace gaming machines will
beit offers a huge benefit to casino operations. The Gaming Systems kiosks to be marketed
by EGaming will include these features, making them a desirable alternative to
the machine games of the past. There can be no assurance, however, that the
kiosk gaming market will develop as anticipated or if developed that it will be
profitable.
EGaming Product Offerings
EGamingdiscount on automotive insurance
purchased through Hongxin.
Hongxin also has an agreement with World Gaming Plc, the global leaderlargest mail-ordering company in
internet gaming software development. While Egaming itself does not participateChina, which has more than 4 million clients, allowing Hongxin to market its
products and services to those clients.
Hongxin has had the foresight to become licensed in online gaming, it resells World Gaming e-gaming softwareThailand, and can
work within the regulated insurance business in that country.
The Strategy
Hongxin is setting up more branch offices, as well as a customer call
center, and telemarketing services division. These offices and divisions will
allow Hongxin to more aggressively promote its products to potential customers.
Those potential customers will initially be acquired through Hongxin's
present business agreements. Hongxin will approach the China Construction Bank's
"Automotive Card" members, and the 4 million clients wishingof the largest
mail-ordering company in China with offers for property insurance and other
financial products, in addition to participateautomotive insurance.
These financial products include the FocusKard suite of payment
solutions, which will thus be exposed to the huge market accessed by Hongxin.
Hongxin has further plans to build loyalty "gift" programs with
insurance companies and financial services companies, providing customers with a
further incentive to purchase Hongxin's products, and providing additional
revenues to Hongxin through markup on gift items.
17
Foshan Foshantong Information Technology Co., Ltd.
On or about April 7, 2007, we acquired a fifty percent (35%) equity
interest in Foshan Foshantong Information Technology Co., Ltd. through our
partnership with the Ko Ho Group.
Corporate Profile
Foshantong is a local government initiative to build the municipality
as an electronic payment model in the potential profitsPearl River Delta region and is the only
prepaid card authorized by the government to be issued by a non-bank entity in
the Foshan urban region. Citizens are encouraged to use this card for small
payment transactions. Foshantong is an electronic payment smart card program
used for public transportation and small payment transactions in the
municipality and is an accepted form of payments for many designated merchants
in the Foshan urban region.
The Product and the Market
The electronic purse of the online gambling business.
EGaming 's also intendscard can be built into many sub-brands
smart cards, such as student card, worker card, resident card, library card, or
transportation card and is expected to enterevolve into a distribution arrangement that
allowsan all around use card
similar to the Company to exploit"Octopus" card used for the movement toward coinless machines on gaming
floors throughout the world. The Company will move rapidly to secure a product
line recognized by gaming organizations worldwide, in order to be the kiosk of
choice for upgradingcomplete Hong Kong transportation
system and expansion by casino operators.
13
all general shopping transactions.
Product and Company Advantages
EGaming 's long-term involvement in the online gaming industry since its
beginnings has given the Company extensive experience in building, maintaining,
and marketing casino and sportsbook products. Each gaming presence EGaming
marketsStrategy
Wanzhi is designed to be visually enticing, highly functional, and easily
managed. The company 's clients benefit from expert guidance and direction every
step of the way.
The planned kiosk product lines feature a wide selection of smooth-working
versions of casino games that gaming patrons know and understand, with brilliant
3D graphics, full game speech and sound, transaction security, and management
reporting. User IDs and passwords remain in a database to keep customer account
information for the benefit of both the casino patron and the operator.
The gaming kiosk systems will feature player enhancements such as an
interactive multimedia touch screen, and built-in bill acceptor designed to
accept almost any type of currency. User IDs and passwords allow players to
access their account at any kiosk whenever they desire. The gaming kiosk system
will save the player's balance, and produce a bar-coded receipt so the player
can claim his winningsnow converting 300,000 existing card accounts to the
location manager. This allowsFoshantong Card program. The portfolio includes the kiosk to be
accessible 24 hours a day,7 days a week. The games themselves operate
independently within each kiosk, with transactions controlled through an
internal gaming server.
For the casino owner, the kiosks will feature fully-customizable graphics,
allowing branding of the machines for marketing and loyalty purposes. The
proprietary software is available separately from the cabinets, so owners can
upgrade, add, or delete games as they desire. Reporting tools can be customized
to suit the casino 's needs and control what will be visible on the gaming
terminal reports page for various levels of management access. Kiosks can be
monitored and managed anywhere through the Internet. Owners that have multiple
locations will be able to monitor individual accounts, separate locations, or
multiple locations simultaneously.
World Gaming Online Products
The Internet-based software and electronic commerce software products
licensed to us by World Gaming are used by sub-licensees to create "virtual
casinos." The software package transfers the "front end" information (i.e.,
playing cards, roulette wheel, dice numbers, etc.) between the user and a remote
server. The software package utilizes each user's computer to generate the
graphics of the virtual casino while the gaming server performs the "dealer"
function, generating the random numbers of playing cards, roulette numbers and
dice numbers, as applicable.
Among other things the software contains proprietary encryption features,
which allow secure transmission of data. Our software generally does not require
the transmission of graphical information over the Internet, which eliminates
the long waits which users of other software products experience while graphics
are redrawn as new hands are dealt. In addition, our proprietary Internet
software package permits our sub-licensees to offer multi-player games, a 3D
panoramic virtual casino floor and Internet browsing features and facilitates
inter-player chatting.
Enhanced technology and networks, and a flow of both improved and new
software products developed by and/or licensed from World Gaming will complement
a high level of marketing. This provides the gaming customer with the widest
diversity of gaming experiences. Venues offered range from currently available
casino games, sportsbooks and bingo,existing Foshan Education
One Card, Smart Cards issued to the live horseracing paramutual web
simulcasts, international lottery ticket brokeragestaff of Chigo Air-Conditioning
Manufacturing Co., Watson's loyalty cards, library membership cards and other live webcast
events. We intend to make this typeFoshan
residential district cards. Wanzhi shall provide 500 P.O.S. (point of diversified portfolio of gaming
experiences available to our sub-licensees and so to their customers.
EGaming Future Strategy
EGaming no longer has a license to operate its own casino but will continue
to use the resources it has developed in order to market turnkey gaming systemssale)
card-processing units for use by third-party corporations.Foshantong at merchant locations in addition to
the existing 500 units now placed with merchants. A bonus point based loyalty
card program and a gift card program are also being planned.
These programs may be named to Oxford's choice of a brand name.
Revenues are generated from initial card fees, the merchant transaction fees and
interest earned on the float (prepaid deposit). At the moment, a refundable
deposit of RMB 30 is charged for the card in addition to the initial deposit of
funds. The Company plans to abolish the deposit and replace it with a one-time
non-refundable fee of RMB 15, but in return cardholders will establish relationships
with governmentbe given goods and
independent gaming organizations to get its land-based
gaming product line recognized, and promote benefitsservices in excess of the kiosk 's gaming
systems in order to make it the gaming system of choice for upgrading and
expansion by casino operators.
14
The company may also derive revenue from reselling WorldGaming software to
parties that want to own and operate online casino web sites.
Government Gaming Licensing and Regulation and Related Risks
Our subsidiary EGaming although no longer an owner and operator of online
casinos, will resell World Gaming, Plc., online gaming software to various
third-party entities, which deploy such software for the purpose of conducting
interactive gaming casinos utilizing the Internet. These entities are licensed
to operate interactive casinos in the country where their gaming equipment is
physically located.
EGaming, from its offices in Antigua, provides consulting and maintenance
services to the site owners. . These entities operate their interactive casinos
from servers maintained by World Gaming through its subsidiary Starnet Systems
and located in Antigua.
A significant debate exists whether the laws of any country other than the
country where the computer gaming servers are physically located have
jurisdiction over the operations of the licensees of Starnet Systems. In
addition, a significant debate exists whether the laws of any country other than
the country where the computer gaming servers are physically located have
jurisdiction over the operations of companies, which perform services for the
licensees.
Our licensing agreement is with World Gaming Plc., which holds a gaming
license in the Country of Antigua and Barbuda. Our licensees each have the
responsibility to determine from which countries they will accept gaming
transactions and ensure that their own gaming license is maintained. All of our
licensees gaming transactions are accepted on servers located in Antigua and are
governed by the conditions of those licensees gaming licenses. No gaming
transactions are accepted or recorded by any subsidiary of the Company other
than those processed on our servers located in Antigua and licensed by the
government of Antigua and Barbuda under our subsidiary, EGaming.
Most countries and jurisdictions within countries have laws or regulations
restricting gaming activities. For example, in the United States, the Wire Act
contains provisions that make it a crime for anyone in the business of gaming to
use an interstate or international wire communication line to make wagers or to
transmit information assisting in the placing of wagers. Other United States
laws impacting gaming activities include the Interstate Horse Racing Act, the
Interstate Wagering Paraphernalia Act, the Travel Act, the Organized Crime
Control Act and the Patriot Act.
While we have been advised that e-gaming activities of Egaming do not
violate or are not subject to such laws and regulations, because there is very
little clear statutory and case law authority, this conclusion is not free from
doubt. We face the risk of either civil or criminal proceedings brought by
governmental or private litigants who disagree with our interpretation of laws
and regulations. Because there is little guiding authority, there is a risk that
we could lose such lawsuits or actions and be subject to significant damages or
civil or criminal penalties and fines. Such proceedings could also involve
substantial litigation expense, diversion of the attention of key executives,
injunctions or other prohibitions being invoked against our licensees or us and
our subsidiaries. The uncertainty surrounding regulation of the Internet gaming
could have a material adverse effect on our business, revenues, operating
results and financial condition.
Currently, the U.S. Justice Department has taken the view that all offshore
gaming funds are tainted, because all offshore gaming is illegal. This creates a
serious disincentive for non-U.S. banks to provide banking services to Internet
gaming operators, and thus negatively impacts our market of potential licensees.
MBNA, Bank of America, Chase Manhattan Bank and Citibank have announced that
they will decline authorization to Americans who try to use their credit cards
for online gaming.
We believe that if current laws or any future laws become applicable to
activities of our licensor, World Gaming, or our subsidiary that resell World
Gaming Software, such laws would have an adverse effect on our business,
revenues, operating results and financial condition
15
value.
Celebrity Tan, Inc.
- -------------------
Celebrity Tan, our wholly-owned subsidiary, entered the UV-free tanning
market in 2003, marketing a line of instant mist tanning booths and supplies.
The Company has developed a national network of sales agents to promote
Celebrity Tan booths to salons, health spas, fitness centers, and hotels across
Canada and in other countries, including Europe and the United States. In
addition to booth sales to salon owners internationally, the first year of
operation saw the set up of the Company's Ontario showroom and training facility
and other showrooms introduced during 2004.
Through its experience in marketing the Celebrity Tan booth product,
and through research into competing products, Celebrity Tan has developed
significant product improvements, which has led the Company to recently expand
its operations to include the manufacturing and development of the Celebrity Tan
UV-free mist tanning booth. We intend to discontinue the operations of Celebrity
Tan and sell the business as we focus our operations on the direct-banking and
payment-card solutions business concentrating around our "FocusKard" suite of
products.
The Product and Market
- ----------------------
Many people enjoy the healthy look of a beautiful golden brown tan. In
the past there has been a market for year-round tanning within salons. However,
with increased awareness of the potential of UV light to damage skin, some
18
people have begun to avoid conventional tanning methods. There is also a segment
of the population who has skin types that resist tanning using these
conventional methods.
Sunless tanning creams have been developed to serve this market, but
they are difficult to apply evenly, and require the assistance of another person
for hard-to-reach areas of the body. UV-free spray tanning using instant-tan
booths is the latest solution for this problem. Recent media exposure has
increased the awareness and demand for this service, and tanning studios are
increasingly considering providing UV-free tanning to their clients. Moving into
the areas of product development and manufacturing gives the Company the ability
to improve upon the existing tanning booths in the market. By ensuring that end
users have a satisfying result, the Company can ensure growth in this market,
and develop a brand with a reputation for quality results.
Being a relatively new cosmetic tanning service, the target market is
not yet fully aware of the availability and benefits of spray tanning. As market
awareness increases, we believe the demand for this service will also increase.
By developing and providing a superior product that addresses the needs of
salons and their customers, Celebrity Tan has gained a distinct advantage over
its competitors. Through continuing quality improvements and joint venture
arrangements, the Company hopes to make its booths the choice of both salon
owners and instant tanners alike.
The Company's new manufacturing division allows the Company to benefit
from the increased control over quality, production, and delivery times, while
gaining from production cost savings and tax advantages.
Product and Company Advantages
- ------------------------------
By participating in this early stage of the UV free spray tanning
market, both the Company and its customers expect to benefit from the growth in
the industry. The Celebrity Tan mist tanning booth is designed to offer an
upscale atmosphere, and has many features for spray consistency and
personalization, customer comfort and safety, and ease of maintenance. The booth
makes efficient use of the instant tanning product and can be installed in a
small space. The Celebrity Tan booth is more user friendly, and easier to
troubleshoot and maintain than any other booth on the market.
The Strategy
- ------------
In addition to promoting the Celebrity Tan instant tanning booths
through its sales representatives across Canada and in other countries, the
Company expects to embark on a direct sales campaign to about 30,000 existing
spa, esthetics, and fitness facilities in the upcoming year. Celebrity Tan has
begun an international magazine advertising campaign in order to further promote
brand recognition. The opening of Celebrity Tan 's manufacturing division will
enable 16
the Company to provide superior quality control while allowing for the
development of improvements over existing booths in this market. The Company
will be better able to manage delivery times, and will have the ability to ship
the booth as components that will maximize the efficiency of assembly, while
allowing the Company to coordinate set-up and training personnel with delivery
times.
The cost reductions and tax benefits achieved by manufacturing the
Celebrity Tan booth will give the Company opportunities to provide booth
purchasers with more financing options. By increasing affordability to salons,
we will further promote sales and corporate branding. Producing a product that
is recognized for its quality will allow Celebrity Tan more opportunities in
promoting the sales to independent-run operations. With the knowledge gained
through previous experience with customers within the salon market, the Company
has the ability to provide training for future customers and assist with site
development using premium store design techniques developed specifically for the
Celebrity Tan brand.
Additional income potential may be tapped through sales of the tanning
product to salons, and through the launch of the "Celebrity Tan " bottled lotion
for the retail market, for use when a full-body tan is not required. The Company
expects to sell this retail product at existing booth locations, and through the
Company 's existing Internet infrastructure.
19
As this industry moves forward we anticipate both salon owners and the
general public will recognize Celebrity Tan as the sunless tanning system of
choice. The Company 'sCompany's goal is to secure its position as Number 1 in the industry
by providing the "perfect tan ".
Customers
- ---------
The Company maintains long-term relationships with its Celebrity Tan
customers, many of whom are seeking significant market shares in their
respective locations. The Company premises its marketing strategy on its ability
to offer customers a package of services, including product planning and design
tailored to the customers' needs, high-tech quality manufacturing, distribution
and logistics setup and marketing strategies.
Celebrity Tan has a strong in-house manufacturing team. The Company's
on-staff equipment designer has a 23-year background in the use of air-driven
spraying equipment, and has drawn upon this extensive expertise to develop what
the Company believes is a distinctly superior product to others in the market.
The Company's design specialists remain constantly apprised of technological
innovations in UV-free spray booth equipment. The Company's presence in both the
United States and its planned presence in Europe also enable its design
personnel to offer significant sales and marketing advice in both markets.
Although Celebrity Tan's products are sold under its own label and brand, it
collaborates closely with its customers to manufacture and develop products. The
design team prepares presentations for customers and with the customer's
participation, develops and installs tanning booths that are relevant to the
customer's specific needs. Celebrity Tan believes that the comprehensive nature
of the services it offers is a major factor in the strength of its relationship
with its customers.
International E Gaming Developers, Inc.
- ---------------------------------------
International E Gaming Developers, Inc. ("Egaming"), is our
wholly-owned subsidiary through which we operated our gaming business. In April
2001, we acquired the assets of Suchow Holdings Ltd., a Bahamian-based company
that provided back-end administrative software solutions for e-commerce driven
websites. In 2003, we did not renew our online gaming license since the Company
decided to no longer operate an online casino. Due to recent changes in United
States law with respect to Internet gaming, we are no longer involved in
Internet gaming activities.
Ontario Private Water Labeling Ltd.
- -----------------------------------
Ontario Private Water Labeling Ltd. ("OPWLL"), our wholly-owned
subsidiary, specializes in bottled water distribution and sales. Through an arrangementWe have
discontinued operations of OPWLL as we focus our operations on the
direct-banking and payment-card solutions business concentrating around our
"FocusKard" suite of products.
Competition
The markets for the financial and stored-value card products and
services offered by us are intensely competitive. We compete with
an existing water-bottling company, OPWLL has set up a sales and distribution
facility through the Toronto office of the Company. The Company is developing
and branding its water products for global distribution and sales. These
corporate brands, which include the "Water Rocks " label, are being made
available for both wholesale and retail consumption. The Company is also
marketing a private label product for resellers who wish to carry store-branded
water.
The Product and Market
- ----------------------
People are increasingly using bottled water for its fresh taste,
convenience, and purity. OPLWLL 's water is obtained through a natural spring
located near Innisfil, Ontario. OPLWLL has a network of connections in the
17
entertainment and food service industries. By retailing the corporate brands
through these high-profile connections, the Company intends to develop
recognized brands that consumers will desire as status products.
Product and Company Advantages
- ------------------------------
The corporate brands, such as "Water Rocks(TM) ", are designed to create appeal
in specific markets. By targeting markets selectively, the various brands will
become recognized as the choice for their target groups. In April 2004, OPWLL
was granted a trademark in Canada for its product name "Water Rocks."
The Strategy
- ------------
OPWLL is branding its exclusive labels for a variety of
target markets.
Through associationscompanies in various segments of the financial service industry and its
competitors vary in size, scope and breadth of products and services they offer.
Certain segments of the financial services industry tend to be highly
fragmented, with numerous companies competing for market share. Highly
fragmented segments currently include financial account processing, customer
relationship management solutions, electronic funds transfer and card solutions.
We face a number of competitors in the entertainment industry,debit card and payment market. We also
face substantial competition for the wholesale distribution of stored-value
cards.
Joint Venture with Serenity Investments Holdings Corp.
- ------------------------------------------------------
On July 19, 2007 the Company entered into a joint venture partnership
with Serenity Investments Holdings Corp., a British Virgin Islands corporation,
to obtain a Payment Processing Engine and an E-Wallet Platform that will market
its water productprovide
the technology for sale at venues such as concerts, theatre performances, and
sporting events, with the ultimate goalbackbone to the Company's FocusKard suite of making its branded water a status
product available on the retail market. We will also approach both corporate and
retail clients who wish to brand their own label of water products and make
custom labeling available for promotional and charity events.
Business Strategy
Operating within the lifestyle consumables industry, we developed a
comprehensive business strategy designed to utilize our strengths and create a
sustainable competitive advantage. The rapid development of the Internet has
created opportunities to develop new, efficient and secure ways to deliver
business opportunity information and life-enhancing products to customers. We
intend to expand our market share of the UV-free tanning market, the spring
water private-labeling and branding market and become a leader in the land-based
gaming industry.
Initially, we will derive our revenue from the following sources:
o Manufacture and sale of UV-free spray tanning booths to customers and
partners;
o Sale of tanning supplies to tanning booth purchasers;
o Sale and private labeling of bottled water;
o Provision of marketing services, support maintenance and consulting
services to customers;
o Sale of gaming kiosk systems to land-based casino owners;
Specifically, our key strategic objectives are to:
o Expand and continually improve our sale of UV-free spray tanning booths;
o Develop an integrated network of UV-free spray tanning booth locations;
o Develop our role as a leading provider of UV-free spray tanning booth,
tanning services and related products;
o Expand geographically to other markets; and
o Selectively pursue opportunities that allow us to leverage our marketing
and sale competencies into other market segments.
We will employ a variety of strategies to achieve these objectives. These
strategies include:
o Rapidly expanding our presence through our Internet web site;
o Obtaining rapid sales and increasing market penetration via the in-house
manufacture and delivery of our UV-free spray tanning booths at a
substantial discount from the cost of purchasing them from third-party
manufacturers;
o Development and promotion of a solid marketable brand image;
o Promoting our brand name and driving sales by combining traditional offline
strategies, including public relations and print, with online marketing
vehicles;
o Negotiating strategic partnerships with relevant partners and expanding
into foreign markets; and
18
o Accessing our customer base to generate a rapidly growing and potentially
fertile source for marketing and promotional activities.
Sales and Marketing
The Company customizes its sales and marketing strategy according to
individual customers' geographic regions and based on the market segment. For
example, through Ontario Private Water Limited, the Company intends to approach
corporate and retail entities that wish to insert their own labels and use the
water as promotional or marketing tools. Additionally, the Company intends to
market its own line of bottled spring water to sell at concerts, sporting
events, and other venues.
With respect to Celebrity Tan, the Company has set up show-room facilities
and intends to set up more show-room type facilities to provide a model for
potential customers to experience the UV-free tanning process first hand.
The Company employs experienced personnel who maintain ongoing contact with
its customers and respond to customers' needs promptly and effectively.
WebStar Internet Solutions Inc.
- -------------------------------
WebStar Internet Solutions Inc. ("WebStar"), our wholly-owned subsidiary,
delivers revolutionary online payment
solutions for companies that wish to
accept payments through the Internet for entertainment, products and services.
The payment solution is unique in its provision of a secure "pay- in", "pay-
out" system integrated directly to online businesses, utilizing debit and credit
card platforms. The WebStar system provides an international solution because
its potential to provide a multicurrency system utilizing tier one banks. It
virtually eliminates decline transactions and charge-backs which have limited
the ease of online payments to date, particularly in the very popular gaming
industry.
The Product and Market
- ----------------------
Webstar will be operating its payment platform under the Trademark name
"FocusKard." FocusKard is a complete payment solution utilizing international
banking agreements and with our proprietary e-wallet. Our product will allow
persons to have an international prepaid loadable credit card. This card can be
accepted at any web based business approved by FocusKard as well as any
land-based merchant accepting the VISA brand.
Product and Company Advantages
- ------------------------------
The advantages of our product include the ability for merchants to guarantee no
charge-backs on high risk transactions as well as to make payouts to their
customers for incentive and loyalty purposes etc. Advantages for end- user
customers include guaranteed payment acceptance by all approved merchants. Other
advantages include the ability for a customer to have a credit card without
having a bank account or credit history.
Business Strategy
FocusKard will initially be introduced and implemented in the marketplace
through numerous vendors within the online gaming industry and other web-based
industries such as online pharmacies. Our non-gaming applications will initially
focus on international payroll and repatriation of monies.
19solutions.
20
C. Organizational Structure
OXFORD INVESTMENTS HOLDINGS INC
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- ---------------------- -------------- -------------- --------------
INTERNATIONAL EGAMING CELEBRITY TAN, ONTARIO PRIVATE WEBSTAR INTERNETKO HO
DEVELOPERS, INC. (100%) INC. (100%) WATER LABELLING, SOLUTIONS INC.GROUP
LTD. 100%) (100%(50%)
- ---------------------- -------------- -------------- --------------
|
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| | |
| | |
- ---------------------- -------------- -------------------------------
ARDEN TRADING COMPANY HONGXIN INSURANCE FOSHAN FOSHANTONG INFORMATION
LTD. (50%) AGENCY (50%) TECHNOLOGY CO. LTD. (35%)
- ---------------------- -------------- -------------------------------
D. Property, Plants and Equipment
Our registered office and principal executive offices are located in
the City of Toronto, in the Province of Ontario, Canada, at 1315 Lawrence Avenue
East, Suite 520, Toronto, Canada M3A 3R3. The registered office and principal
executive offices of our Antigua subsidiary are located at No. 6 Temple Street,
St. John's, Antigua, at our Antigua counsel's office, without any lease or
charge.
We lease 2000 square feet of office space at 1033 Toy Avenue, Unit 2,
Pickering, Ontario, Canada from an unaffiliated party. The office space provides
us with the necessary office and development space. The term of the lease is three years
beginning December 1, 2003, with rent of $1,443$3,500 per month. .
We occupy the office space at No. 6 Temple Street, St. John's Antigua,
without lease or charge, from our Antigua counsel. The office space provides us
with the necessary office and development space.
Item 4A. Unresolved Staff Comments
Not Applicable.
Item 5. Operating and Financial Review and Prospects
A. Operating Results
You should read the following discussion in conjunction with our consolidated
financial statements and the accompanying notes appearing elsewhere in this
annual report.
Overview
We were incorporated with the objective of capitalizing on the growth of
Internet gaming and entertainment - e-gaming. However, as a result of persistent
uncertainty in Internet gaming laws in various jurisdictions worldwide,
particularly in the United States, we felt that it was beneficial for us to
closely review our strategic planning as we move forward. As a result, we did
not renew our e-gaming license and in May 2003, we initiated two business
ventures to further diversify the Company's interests in the lifestyles
consumables market. The first initiative is the distribution of a private line
of UV-free tanning products and booths and the second initiative is the
distribution of private labeled bottled spring water. 20Due to recent changes in
United States law with respect to Internet gaming, we are no longer involved in
Internet gaming activities. The Company has discontinued the business operations
of Internet Gaming and private labeled bottled spring water and has focused its
core operations on the direct banking and stored card value market. It has
entered into the direct-banking and payment-card solutions business by
concentrating its business around its "FocusKard" suite of products.
21
Our consolidated financial statements are prepared in accordance with U.S.
generally accepted accounting principles. Our functional currency is the
Canadian dollar and our subsidiaries' are the United States dollar. Our financial statements are reported in United States dollars.
Sources of Revenue
OurFor 2007, we had minimal product revenue consists ofas our business model shifted to
direct-banking and payment-card solutions and away from the UV free Tanning
Booths and related supplies, bottled water and bottled water private labeling,
software sub-license fees and web site customization fees. Our services revenue
includes amounts derived from hosting fees,consulting fees.
Revenue Recognition
For product sales, the Company generally recognizes revenue at the time of
delivery of goods. Sales are reflected net of discounts and returns. For
services, revenue is recognized as services are provided. Revenue from
operations, advertising and royalties and revenue sharing arrangements on
e-commerce transactions.
Revenue Recognitionare recognized as earned. Our licensing
agreements contain multiple fee elements such as web customization, web hosting,
licensing and marketing fees. Fees are allocated to the various components based
on objective evidence of fair value, which includes the price charged as if the
element was sold separately. We recognize revenue when there is persuasive
evidence of an arrangement, such as a licensing agreement, when delivery has
occurred, when there is a fixed or determinable fee and when collectibility is
probable. When the fee is not fixed or determinable or when collectibility is
not assured, the revenue is recognized when received. As amounts are collected,
the appropriate revenue is recognized and deferred revenue is recorded for the
annual amortizable portion as described below.
Pursuant to our agreement with World Gaming, we are required to pay a
monthly royalty fee of 20% based on net monthly revenues.
Current Sources Of Revenue
UV-Free Tanning Booths and Related Products
We manufacture and sell UV-Free Tanning Booths and related supplies to our
customers. Revenue on such sales are recognized when the product is delivered
and installed at a customer's location. Revenue from the sale of related
products is recognized upon the sale and delivery of such products.
Spring Water
We provide private labeling and sell spring water. Revenue is recognized upon
the sale and delivery of the water to a customer.
License Fees
Our sub-licensees pay us up-front software licensing fees for the purchase of a
web site. Licensing fees for e-gaming web sites are deferred and recognized
throughout the first year of a sub-licensee's operation.
Web Site Customization Fees and Hosting Fees
Our existing customers require us, and our potential customers may require
us to customize, host and manage the server infrastructure and software platform
as part of the purchase of an e-gaming web site. Revenues from web site
customization fees are recognized as sold to third parties. We provide hosting
service for a monthly fee. The web hosting fees are deferred and recognized over
a twelve-month period. Revenue from the sale of software sub-licenses to our
related reseller is recognized upon sell through to the unrelated third parties.
Royalties/Marketing
We earn monthly royalties and advertising revenue from casino operations.
Revenue from casino operations, marketing and royalties are recognized monthly
as earned.
21
A. Operating Results
The following is management's discussion and analysis of the our
financial condition and results of its operations for the fiscal years ended
December 31, 2003, 2004, 2005, 2006 and 2005.2007. Because we are an emerging company
and we have recently diversified our business operations, the comparisons
between our financial statements may not be meaningful and may not necessarily
be indicative of our future results of operation.
Fiscal Year Ended December 31, 2007
- -----------------------------------
Revenues
--------
22
For the fiscal year ended December 31, 2007, we reported a net loss of
$3,096,225 or $0.09 per share. Revenues amounted to $6,132 ($4886 from a
commission fee and $1246 for product sales).
Our revenue decreased by 97% over the comparable period from the prior
year. The decrease in revenue was a result of the discontinuation of e-gaming
business, private water branding business, and our UV-free tanning booth
business. Due to recent changes in United States law with respect to Internet
gaming, the Company has discontinued its e-gaming business and does not expect
to receive continued revenues from this source in the next fiscal year. There
continues to be a dramatic slow-down in the UV-Free tanning business and
therefore there was also a dramatic decrease of sales in UV-free tanning booths
and related products.
Cost of Revenues
----------------
Cost of revenues amounted to ($15,732) from $111,016 a decrease of
$126,748 or 115% from the comparable period from the prior year and consisted of
a recovery of ($25,745) from licensing fees relating to discontinued e-gaming
activities and product costs of $10,013 associated with the slowdown in the
manufacturing and distribution of our UV-free tanning booths and material,
e-gaming royalties and services, and gaming license expenses.
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$3,062,428 from $1,001,405, an increase of $2,061,023 or 206% and consisted
principally of advertising and marketing ($1,333,769), commissions and
subcontracts ($194,933),professional fees (comprised of accounting, audit and
legal) ($86,184), consulting fees ($1,279,368), rent ($48,410) other
administrative and communication expenses ($119,764).
The increase in SG&A expenses was due primarily to increased cost in
advertising, marketing and consulting due to the shift in our business plan away
from e-gaming, the UV-free tanning and the spring water branding business, to
the stored value card business and our partnerships in China. SG&A also
increased because of increased consulting costs in connection with our stored
value card business, business development, promotion and marketing.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2007, the Company had total current assets of $9,434
consisting of prepaid expenses.
Operations used $934,431 for the fiscal year ended December 31, 2007.
Funds used in operations primarily relate to the increased cost in stock-based
compensation, advertising, marketing and consulting due to the shift in our
business plan away from e-gaming, the UV-free tanning and the spring water
branding business, to the stored value card business and our expansion into new
markets. In addition, we had increased advertising and marketing costs relating
to our stored value card business.
Investing activities used $0.00 for the fiscal year ended December 31,
2007.
Financing activities provided $1,001,012 for the fiscal year ended
December 31, 2007. Funds provided by financing activities were from the sale of
8,350,628 shares of common stock. The Company used $35,368 to repay loans made
to the Company from related parties. The Company received $48,444 from related
parties.
We had no long-term debt at December 31, 2007.
Fiscal Year Ended December 31, 2006
- -----------------------------------
Revenues
--------
For the fiscal year ended December 31, 2006, we reported a net loss of
$961,889 or $0.04 per share. Revenues amounted to $185,299 of which $28,620 was
from the sale of UV-Free Tanning Booths and related supplies, $0.00 was from the
23
sale of spring water and $156,679 was from licensing and royalties from e-gaming
activities.
Our revenue increased by 13% over the comparable period from the prior
year. The increase in revenue was a result of greater than expected licensing
fees for software from e-gaming activities. Due to recent changes in United
States law with respect to Internet gaming, the Company has discontinued its
e-gaming business and does not expect to receive continued revenues from this
source in the next fiscal year. There continues to be a dramatic slow-down in
the UV-Free tanning business and therefore a decrease of sales in UV-free
tanning booths and related products. Our licensing fees increased by 100% over
the comparable period from the prior year and accounted for 36% of our revenue.
The sales from tanning booths and related products accounted for 15% of our
revenue, a decrease of 49% from the prior year and e-gaming royalties accounted
for 49% of revenue, a decrease of 16% over the prior year.
Cost of Revenues
----------------
Cost of revenues amounted to $111,016 from $141,423 a decrease of
$30,407 or 22% from the comparable period from the prior year and consisted
principally of lower costs associated with the slowdown in the manufacturing and
distribution of our UV-free tanning booths and material ($1,043), e-gaming
royalties and services ($17,641), and gaming license expenses ($92,332).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$1,001,405 from $473,495, an increase of $527,910 or 111% and consisted
principally of stock-based compensation ($507,662), advertising and marketing
($101,601), professional fees (comprised of accounting, audit and legal)
($69,311), consulting fees ($211,417), rent ($53,230) other administrative and
communication expenses ($58,184).
The increase in SG&A expenses was due primarily to increased cost in
stock-based compensation, advertising, marketing and consulting due to the shift
in our business plan away from e-gaming, the UV-free tanning and the spring
water branding business, to the stored value card business. SG&A also increased
because of increased costs relating to private placement of our common shares to
raise money to fund our stored value card business, business development,
promotion and marketing.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2006, the Company had total current assets of $90,855
consisting of cash and cash equivalents of $37,969, inventory of $12,872,
receivables of $7,451 and prepaid expenses of $32,563.
Operations used $470,387 for the fiscal year ended December 31, 2006.
Funds used in operations primarily relate to the increased cost in stock-based
compensation, advertising, marketing and consulting due to the shift in our
business plan away from e-gaming, the UV-free tanning and the spring water
branding business, to the stored value card business and our expansion into new
markets. In addition, we had increased operational costs relating to the private
placement of our common shares to raise money to fund our stored value card
business
Investing activities used $0.00 for the fiscal year ended December 31,
2006.
Financing activities provided $513,041 for the fiscal year ended
December 31, 2006. Funds provided by financing activities were from the sale of
3,374,832 shares of common stock. The Company used $23,335 to repay loans made
to the Company from related parties.
We had no long-term debt at December 31, 2006.
Fiscal Year Ended December 31, 2005
- -----------------------------------------------------------------------
Revenues
--------
24
For the fiscal year ended December 31, 2005, we reported a net loss of
$471,308 or $0.02 per share. Revenues amounted to $163,889 of which $56,248 was
from the sale of UV-Free Tanning Booths and related supplies, $0.00 was from the
sale of spring water and $107,641 was from royalties from e-gaming activities.
Our revenue decreased by 76% over the comparable period from the prior
year. The decrease in revenue was due to a dramatic slow-down in the UV-Free
tanning business and therefore a decrease of sales in UV-free tanning booths and
related products. The decrease also was a result of slower than expected
royalties on e-gaming activities. Sales from tanning booths and related products
accounted for 34% of our revenue, a decrease of 8%81% from the prior year and
e-gaming royalties accounted for 66% of revenue, an increasedecrease of 11%73% over the
prior year.
Cost of Revenues
----------------
Cost of revenues amounted to $141,423 from $350,251 an decrease of
$208,828 or 60% from the comparable period from the prior year and consisted
principally of costs associated with the manufacturing and distribution of our
UV-free tanning booths and material ($74,138), casino operations ($26,644),
bottled spring water ($0.00) and gaming license expenses ($40,641).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$473,495 from $482,211, a decrease of $8716$8,716 or 0.02%2% and consisted principally of
payroll ($45,713), advertising and marketing ($8,146), professional fees
(comprised of accounting, audit and legal) ($58,227), consulting fees
($171,147), bad debts ($82,600), rent ($50,968) other administrative and
communication expenses ($56,694).
SG&A expenses were due to our continuing investment into the UV-free
tanning and the spring water branding business, increased corporate activity,
business development, promotion and marketing. SG&A increased because of our
increased marketing and manufacturing costs relating to the UV-free tanning
business.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2005, the Company had total current assets of $58,290
consisting of cash and cash equivalents of $0.00, inventory of $17,154,
receivables of $32,587 and prepaid expenses of $8549.$8,549.
Operations used $45,054 for the fiscal year ended December 31, 2005.
Funds used in operations primarily relate to the Company's manufacturing of
UV-Free Tanning Booths and expansion into new markets.
Investing activities used $0 for the fiscal year ended December 31,
2005.
Financing activities provided $54,488$51,684 for the fiscal year ended
December 31, 2005. Funds provided by financing activities were from the sale of
365,000 shares of common stock and from the advancement of a bank loan. The
Company usedreceived $9,416 to repayin loans made to the Company from related parties.
We had no long-term debt at December 31, 2005.
22
Fiscal Year Ended December 31, 2004
- -----------------------------------------------------------------------
Revenues
--------
For the fiscal year ended December 31, 2004, we reported a net loss of
$139,368 or $0.01 per share. Revenues amounted to $692,069 of which $293,628 was
from the sale of UV-Free Tanning Booths and related supplies, $2,508 was from
the sale of spring water and $395,933 was from royalties from e-gaming
activities.
25
Our revenue increased by 57.6% over the comparable period from the
prior year. The increase in revenue was mainly due to the Company's increase in
sales in the UV-Free Tanning business and to a lesser extent spring water
branding and sales. Sales from tanning booths and related products accounted for
42% of our revenue and spring water branding and sales accounted for 1% of
revenue.
Cost of Revenues
----------------
Cost of revenues amounted to $350,251 from $321,388 an increase of
$28,863 or 9% from the comparable period from the prior year and consisted
principally of costs associated with the manufacturing and distribution of our
UV-free tanning booths and material ($134,944), casino operations ($204,559),
bottled spring water ($1200)1,200) and gaming license expenses ($9549).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$482,211 from $428,687, an increase of $53,524 or 12.5% and consisted
principally of payroll ($33,757), advertising and marketing ($43,958),
professional fees (comprised of accounting, audit and legal) ($93,660)81,978),
consulting fees ($194,769), rent ($46,128) other administrative and
communication expenses ($81,621).
SG&A expenses were due to our continuing investment into the UV-free
tanning and the spring water branding business, increased corporate activity,
business development, promotion and marketing. SG&A increased because of our
increased marketing and manufacturing costs relating to the UV-free tanning
business.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2004, the Company had total current assets of $286,095
consisting of cash and cash equivalents of $28,553, inventory of $80,941,
receivables of $159,179 and prepaid expenses of $17,422.
Operations used $127,307 for the fiscal year ended December 31, 2004.
Funds used in operations primarily relate to the Company's manufacturing of
UV-Free Tanning Booths and expansion into new markets.
Investing activities used $0 for the fiscal year ended December 31,
2004.
Financing activities provided $227,571 for the fiscal year ended
December 31, 2004. Funds provided by financing activities were from the sale of
952,750 shares of common stock. The Company used $3,522 to repay loans made to
the Company from related parties.
We had no long-term debt at December 31, 2004.
Fiscal Year Ended December 31, 2003
- -----------------------------------------------------------------------
Revenues
--------
For the fiscal year ended December 31, 2003, we reported a net loss of
$331,127 or $0.02 per share. Revenues amounted to $439,157 of which $58,534 was
from the sale of UV-Free Tanning Booths and related supplies, $0 was from the
23
sale of spring water, $ 96,600 was from the sale of software licenses and casino
operations, $11,419 was from advertising and marketing and $272,604 was from
royalties from e-gaming activities.
Our revenue increased by 47% over the comparable period from the prior
year. The increase in revenue was mainly due to the Company's entering into the
UV-Free Tanning business and to a lesser extent spring water branding and sales.
Sales from tanning booths and related products accounted for 13% of our revenue
and spring water branding and sales accounted for 0% of revenue.
26
Cost of Revenues
----------------
Cost of revenues amounted to $321,388 from $70,752 an increase of
$250,636 or 354% from the comparable period from the prior year and consisted
principally of costs associated with the manufacturing and distribution of our
UV-free tanning booths and material ($41,067), casino operations ($209,345) and
gaming license expenses ($70,976).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$428,687 from $641,249, a decrease of $212,562 or 33% and consisted principally
of payroll ($74,854), advertising and marketing ($49,614), professional fees
(comprised of accounting, audit and legal) ($73,906), consulting fees
($127,061), rent ($38,086) other administrative and communication expenses
($67,227).
SG&A expenses were due to our entry into the UV-free tanning and the
spring water branding business, increased corporate activity, business
development, promotion and marketing. SG&A decreased significantly because
decrease in consulting expenses and the professional accounting and legal
expenses that was attributable to our efforts to register as a public company
with the Securities & Exchange Commission.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2003, the Company had total current assets of $147,517
consisting of cash and cash equivalents of $11,746, inventory of $43,977,
receivables of $3,721 and prepaid expenses of $88,073.
Operations provided $1,369 for the fiscal year ended December 31, 2003.
Funds used in operations primarily relate to the Company's expansion into new
market.
Investing activities used $1,684 for the fiscal year ended December 31,
2003. Funds used in investing activities consisted of purchases of equipment and
software.
Financing activities provided $187,727 for the fiscal year ended
December 31, 2003. Funds provided by financing activities were from the sale of
796,500 shares of common stock. The Company used $63,345 to repay loans made to
the Company from related parties.
We had no long-term debt at December 31, 2003.
B. Liquidity and Capital Resources
The Company will require additional liquidity over the next 12 months. Even
though the Company partially funds itsWe have financed our operations through revenues from the saleissuance of its products,equity securities
and, to a lesser extent, from non-interest bearing loans from our founder,
President and Chief Executive Officer Michael Donaghy.
From January 1, 2007 to present we have sold approximately 11,245,628
shares of our common shares through private placements with accredited
investors. The offering is being conducted pursuant to the Company will also require both internalexemption provided by
Rule 506 of Regulation D, under the Securities Act of 1933. We have raised
approximately $1,200,687, before expenses, for working capital to fund our
continuing operations and external
sourcesour joint venture acquisitions of liquidity.Chinese companies.
As of December 31, 2007 we had approximately $0.00 of cash and cash
equivalents.
To provide working capital for its operations and project development,
the Company maywill need to raise new funds. Traditionally, the Company has raised
capital through the issuance of common shares. In addition, from time to time in
the past, Michael Donaghy, the President of the Company, personally advanced
non-interest-bearing loans to the Company for the day-to-day operations of the
Company. It is contemplated that it will continue to raise capital primarily in
private placements through investors. No assurance, however, can be given that
24
the Company's future capital requirements will be obtained. The Company's access
to capital is always dependent upon future financial market conditions,
27
especially those pertaining to early-stage companies. There can be no guarantee
that the Company will be successful in obtaining future financing, when
necessary, on economically acceptable terms.
For the year ended December 31, 2006,2008, the Company believes that it will
need approximately CAD$360,0001,000,000 of cash to cover administrative costs and
approximately CAD$60,000 for payment of lease properties. The Company
anticipates that it will pay for its 20062007 administrative and operational costs
from existing working capital, from current revenue streams and from private
placements through investors. The Company believes it can raise sufficient
working capital to complete its anticipated expenditures during the remaining
portion of 2006,2008, however, no assurances can be given that the Company will be
able to raise cash from additional financing efforts. If the Company is unable
to obtain sufficient funds from future financing, or from current revenues, the
Company may not be able to become profitable.
C. Research and development, patents and licenses, etc.
On January 25, 2001, the Company entered into a software licensing
agreement with World GamingWe are not involved in any research and also paid World Gaming a one-time,
non-refundable software development fee for its own virtual casino. Pursuant to
the agreement with World Gaming, the Company is required to pay a monthly
royalty fee of 20% based on net monthly revenues. According to the agreement,
15% of the net monthly casino revenues must be spent on advertising and marketing per month. The term of the license agreement is for one year with
automatic one-year extensions. The license allows the Company to resell World
Gaming software.
In January, 2004 the Company's subsidiary Ontario Private Water Labelling
Limited was granted a trademark in Canada for its product name "Water
Rocks(TM)."have no
registered patents or licenses. In the fiscal years2005,years 2007, 2006, 2005, 2004 2003, 2002 and
2001,2003, the Company did not have any research, development or patent expenses.
D. Trend Information
In 2007, we intend to continue our tight cost control in order to
achieve the highest profitability possible. See Item 5A. "Operating and
Financial Review and Prospects - Results of Operation" for additional trend
information.
The Internet
The Internet continues to grow at a high rate in terms of the number of
users online, the total revenue being generated online and the speed at which
communications can be carried. All of these factors contribute to a parallel
growth in the number and value of online gamingstored value and payment card transactions
globally and the market audience for our UV free tanning and spring water distributionstored value card business.
According to published reports, the popularity of the Internet and the
continuing increase in the on-line population has established it as one of the
fastest growing communications mediums in history, reaching an estimated 50
million users worldwide within only 5 years since its establishment for business
and personal use. Comparably, radio did not reach the same level of exposure for
38 years, television for 13 years and cable for 10 years. Today the Internet
reaches over one billion users worldwide.
The intense increase in Internet penetration is due to several major
factors, the first and foremost relating to PC penetration. Most PCs are
equipped with some form of Internet access, and most homes have telephone lines
or other forms of internet access. Once a PC is inside a home, the Internet is a
natural part of its use. Second, technology advances in personal computers for
the home and office, as well as those that help connection speed, encourage the
use of the Internet. Most product developments, such as computers that offer
Internet access by the touch of a button, make the Internet experience more
enjoyable and, therefore, consumers are drawn to it. Lastly, the content on the
Internet is self-enforcing. Advertising on the Internet directs consumers go to
other websites, thus extending the average time that users spend on the web.
North America has dominated the development of the Internet, but the greatest
growth potential is outside that region.
25
We expect these growth trends will have a positive impact on the
Company's sales and revenues. See "Forward Looking Information," below.
The Economy
28
We believe that significant opportunities exist in the economy in the
lifestyle enrichment and consumables market, including gaming activities, UV
free tanning services and products and spring water branding, distribution and
sales.stored-value credit/debit card market. Specifically, we believe that our
UV-free tanning booths andFocusKard suite of product sales will increase as our brand name becomes more
entrenched in the market and as we focus on developing more partner distribution
channels.channels, particularly with our joint acquisitions in China and other Asian
countries. In addition, we anticipate that our gamingstored-card branding and
affiliation purchases and activity will continue to increase as we focus on
providing a wide variety of gaming opportunities.product opportunities to new customers. We expect
such increases to occur primarily as a result of aour marketing plan and the
development of relationships with various land-based casinos. We expect to grow sales of our
Water Rocks(TM) through associationscompanies with the entertainment industry. The
Company will market its water product for sale at venuesbuilt-in distribution
channels; such as concerts,
theatre performances,trade organizations and sporting events, with the ultimate goal of making its
branded water a status product available on the retail market.large companies.
E. Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
F. Tabular Disclosure of Contractual Obligations
The Company has no contractual obligations of the type required to be disclosed
in this section.
G. Safe harbor (Forward Looking Information)
We are projecting positive cash flow.increased expenses.
We are projecting positive cash flowincreased expenses for the fiscal year ending
December 31, 2006, but anticipate increased expenses.2008 as our stored-value card business grows. It is expected that
these expenses will be caused primarily by:
o Cost to start-up and operate new lines of business
o marketing costs
o costs for software and related applications
o startup, including personnel and office costs
o customer acquisition costs
o legal and accounting costs
We are in the emerging stage.
We have a limited operating history since our operations began in
November 2000. Consistent with other early-stage companies, expenditures are
heavily weighted in favor of our company branding, marketing, customer
acquisition and partnering affiliations. We realize that these expenditures are
necessary in order to compete for customers more effectively and to develop a
profitable company capable of surviving and prospering well into the future.
We expect to continue developing our three linesstored-value credit/debit card
line of business through expanding our customer base and improving
functionalities based on customer needs, requests and requirements. In the event
that we target another appropriate acquisition or licensing candidate, which we currently have not,candidates, we may
require additional funding to consummate such a relationship.
We do not currently have sufficient financial resources to meet the
funding requirements referenced above. Accordingly, we are currently seeking
funding from outside sources.sources, including private placements of our common stock.
At the date hereof, we have no firm commitments from anyone to provide
additional funding.
26Item 6. Directors, Senior Management and Employees
A. Directors and senior management. Set forth below are particulars
respecting our directors and executive officers as of June 24, 2006, and each
person's business experience:
29
Item 6. Directors, Senior Management and Employees
A. Directors and senior management. Set forth below are particulars respecting
our sole director and officer as of December 31, 2005, and his business
experience:
Name Business Address Position
---- ---------------- --------
Michael Donaghy 1315 Lawrence Ave. East Chief Executive Officer,
Suite 520 President and Director
Toronto, Ontario
Canada M3A 3R3
Michael Donaghy, President. Mr. Donaghy, age 42,Name Business Address Position
Michael Donaghy 1315 Lawrence Ave. East Chief Executive Officer,
Suite 520 President and Director
Toronto, Ontario
Canada M3A 3R3
Paul Bilewicz c/o 1315 Lawrence Ave. East Director
Suite 520
Toronto, Ontario
Canada M3A 3R3
Hon. Doug Lewis 77 Coldwater Street, East Director
Orillia, Ontario
Canada, L3V 1W6
Michael Donaghy, President. Mr. Donaghy, age 48, has been our
President, Chief Executive Officer and a member of our Board of Directors since
inception. From February 2000 to October 2000 he served as Interim President of
Zaurak Capital Corp., an e-gaming holding company. In 1999 he formed and was
named President and Chief Executive Officer of CyberGaming Inc., a company
engaged in the business of Internet e-gaming sub-licensing, website creation and
hosting. Mr. Donaghy resigned as President and CEO of CyberGaming Inc. in
September 2000, just prior to joining us. Mr. Donaghy is also President of
Citywebsites.com, a website design company, since March 1995.
Paul Bilewicz, Director. Mr. Bilewicz, age 58, has been a member of our
Board of Directors since April, 2007. From 2003 to present, he owns and operates
a Resort/ Retreat, Pretty River Valley Inn located in the Blue Mountain area in
central Ontario. Prior to that, from approximately 1996 to 2000 he was employed
with Glaxo Canada or its parent company GlaxoWellcome Plc. He was Chief
Information Officer at Glaxo Canada; he also assumed additional executive
responsibility for Finance, Human Resources and Business Process Re-engineering.
He was a member of the Glaxo Canada, Board of Directors. In 2000, he joined the
Royal Bank of Scotland in Edinburgh as Director of Systems Application
Development and Operations for Retail Banking. In 1996, he was appointed to the
position of Worldwide Director of Information Technology for the parent company,
GlaxoWellcome Plc and relocated to London, England. In that role he was
responsible for systems and networks globally for their manufacturing, research
and development and commercial operations, as well as being a member of the
Executive Committee of the US subsidiary. Mr. Bilewicz received a Bachelor of
Mathematics from the University of Waterloo in 1973 and also completed Executive
Programs at the Darden Graduate School of Business (University of Virginia),
Insead, in Fontainbleu, France and the Fuqua School of Business at Duke
University in North Carolina.
Doug Lewis, Director. The Honorable Doug Lewis, age 70, has been a
member of our Board of Directors since March, 2007. From September 2001 to
present, Mr. Lewis practices corporate and commercial law, negotiating and elder
law, including estate administration with a partnership he formed. Mr. Lewis
served as a lawyer member of the Ontario Consent and Capacity Board from October
2002 to October 2005. From 1993 until September 2001, Mr. Lewis pursued a number
of business interests, utilizing his experience in law, accounting, business and
government while serving as informal "House Counsel" for various companies.
Mr. Lewis has served in a number of positions in government, including
Parliamentary Secretary to the Secretary of the Treasury Board. In 1987, he was
appointed to the Cabinet by Prime Minister Brian Mulroney where he served as
Minister of State-Government House Leader. From 1988 to 1990, Mr. Lewis held the
positions of Government House Leader and Minister of Justice and Attorney
General of Canada. In 1990, he was appointed Minister of Transport and in 1991
he was appointed Solicitor General of Canada, a post he held until the Federal
election of 1993. In 1984, he was appointed a Queen's Counsel by the Province of
Ontario and by the Canadian Federal Government in 1992. Mr. Lewis maintained his
membership in the Law Society of Upper Canada during his years as a Member of
Parliament and returned to the practice of law in 2001.
30
In 1979, Mr. Lewis was elected to the House of Commons as the Member of
Parliament for the riding of Simcoe North and continued to so serve until
October 1993. In Opposition, Mr. Lewis served as Housing critic, Deputy House
Leader, House Leader and then, Chairman of the Public Accounts Committee.
After completing his degree as a Chartered Accountant, Mr. Lewis
attended Osgoode Hall Law School from 1964 to 1967 and was called to the Bar in
the Province of Ontario in 1969. Mr. Lewis trained as a Chartered Accountant,
received his degree from the Institute of Chartered Accountants of Ontario in
1962 and was named Fellow of the Institute of Chartered Accountants of Ontario
in 1982 for his service to the community and his profession.
B. Compensation. Mr. Donaghy received a salary of $6,800 during the fiscal
period ended December 31, 2000, $78,500 for the fiscal year ended December 31,
2001, $125,000 for the
fiscal years ended December 31, 2002,2005, December 31, 2003,
December 31, 20042006 and December 31, 2005,2007 as
the Company's President and Chief Executive Officer. No other compensation was
paid to our executive officers.
We do not presently pay any cash compensation to directors for serving
on our board, but we do reimburse directors for out-of-pocket expenses for
attending board meetings.
Executive Compensation
The following table sets forth the a summary of compensation earned
during the Company's last three fiscal years by the Company's directors and
members of its administrative, supervisory or management bodies and its
subsidiaries for services in all capacities to the company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Restricted Securities LTIP All Other
Name and Fiscal Cash Other Annual Stock Underlying Payouts Compensation
Principal position Year compensation Compensation Award(s) Options (#)
(US$) (US$)
Michael Donaghy 20052007 $125,000 - - - - -
Director and
President & Chief 20042006 $125,000 - - 1,600,000 - -
Executive Officer
2005 $125,000 - - - - -
Executive Officer
2003 $125,000Paul Bilewicz 2007 $ 0.00 - - - - -
Director
Hon. Doug Lewis 2007 $ 0.00 - - - - -
Director
C. Board Practices. While not required, each of the Company's directordirectors
is a resident of Canada and holds office until the Company's annual meeting or
until his successor is duly elected or appointed. Officers are appointed
annually by the Board of Directors to serve at the Board's will. The Company has
no contracts with any of its Directors that provide for payments upon
termination. With only one director on the Board, theThe Company does not have separate audit or compensation committees
because up until 2007 there was only one member on the Board of Directors.
However, since the Company has recently increased the size of the Board of
Directors from zero to three, the Company intends to establish separate audit
and compensation committees.
27
D. Employees. As of December 31, 2005,2007, we had a total of five (5)four (4)
employees (four (4)(two (2) full-time and one (1)two (2) part-time) in Toronto, Ontario. None of
our employees are covered by any collective bargaining agreement. We believe
that relations with our employees are good.
31
E. Share Ownership. The following table sets forth information relating
to the beneficial ownership of our common stock as of the date of this annual
report by those persons who beneficially own more than 5% of our common stock
and by all of our directors and executive officers as a group, as of June 25,
2006.2008. As of December 31, 20052007 there were 21,874,35039,744,810 shares of common stock
outstanding.
Name and Address of Position with the Number of
Shares
Beneficial Owner (1) Company Shares Owned Percent
- -------------------- ------- ----------------- -------
Michael Donaghy (2) Director, President & 8,775,000 22.08%
Chief Executive Officer
8,300,000 37.94%Paul Bilewicz Director 60,000 *
Hon. Doug Lewis Director 500,000 1.26%
CEDE & Co. N/A 13,288,762 60.75%10,184,725 25.63%
P.O. Box 222
Bowling Green Station
New York, NY 10274
All Officers and 8,300,000 37.94%9,335,000 23.49%
Directors as a Group
(1 Person)
(*) Owns less than one percent (1%) of the Company's common stock.
(1) All officer and director addresses are c/o the Company at 1315 Lawrence
Avenue East, Suite 520, Toronto, Canada M3A 3R3.
(2) Mr. Donaghy beneficially owns these shares indirectly through his spouse.
Stock Option Plan
- -----------------
At the Company's 2006 Annual Meeting, the shareholders adopted a
Non-Qualified Stock Option Plan for the Company (the "Stock Option Plan"). A
total of up to ten percent (10%) of the common shares of the Company,
outstanding from time to time, are reserved for the issuance of stock options
pursuant to the Stock Option Plan. Options may be issued to directors, key
personnel and consultants to the Company, its subsidiaries and affiliates. The
holders of options under all of the Stock Option Plan are responsible for all
personal tax consequences relating to the options. The exercise prices of the
options are based on the fair value of the Company's common shares at the time
of grant as determined by our board of directors. The current practice of our
board of directors is to grant options with exercise prices that equal 100% of
the closing price of our common shares on the applicable date of grant. There
are currently 2,350,000 options issued under the Stock Option Plan. As of
December 31, 2007 a total of 1,600,000 stock options have been exercised and a
total of 750,000 stock options are outstanding.
The following table sets out stock option awards received by the Named
Executive Officers during the year ended December 31, 2007.
32
Option grants of Oxford Investments Holdings Inc. during 2007
Market Value
of Underlying
Securities % of Total Option Exercise Options on
Name Under Options Grants in Year Price Date of Grant Expiration Date
- ---- ------------- -------------- ----- ------------- ---------------
Michael Donaghy 0 0 $ 0 NIL N/A
The following table shows, for each Named Executive Officer, the number
of common shares acquired through the exercise of options of the Company during
the year ended December 31, 2007, the aggregate value realized upon exercise and
the number of unexercised options under the Stock Option Plan as at December 31,
2007. The value realized upon exercise is the difference between the market
value of common shares on the exercise date and the exercise price of the
option. The value of unexercised in-the-money options at December 31, 2007 is
the difference between the exercise price of the options and the market value of
the Company's common shares on December 31, 2007, which was $0.09 per share of
the Company's common stock.
Aggregate option exercises during 2007 and year end option values
Value of unexercised
Aggregate Unexercised options at in-the-money options at
Securities value December 31, 2007 December 31, 2007 (C$)
acquired at realized ----------------- ----------------------
Name exercise ($) Exerciseable Unexerciseable Exerciseable Unexerciseable
- ---- -------- --- ------------ -------------- ------------ --------------
Michael Donaghy 800,000 $120,000.00 0 0 0 0
Item 7. Major Shareholders and Related Party Transactions
A. Major shareholders. The Company is not aware of any beneficial
owners of 5% or more of the Company's common stock other than those disclosed in
Item 6.E. above.
B. Related party transactions.
As of June 15, 2006,2008, the Company owedwas indebted to its officers,
directors and stockholders $387,637, $540,923$268,735, for cash advances, consulting fees and
$544,447,expenses paid on behalf of the Company. As at December 31, 2007, 2006 and 2005,
the Company was indebted to certain of its officers, directors and stockholders
$268,735, $407,004, and $387,637, respectively, for cash advances, consulting
feesservices and expenses paid on behalf of the Company. These related party loans
are uncollateralized, non-interest bearing and due on demand.
The loan payableCompany was indebted to thea director in the amount of $162,702 bears$43,962,
bearing interest at 5% per annum, due upon demand. The loan was repaid in fiscal
year 2007. Interest for the year ended December 31, 2007 amounted to $33,309.
The Company rents space in Toronto Ontario on a rate of five percent
(5%) per annum.
Approximately 33% of the Company's Egaming customers are represented by one
entity, whichmonth-to-month
agreement from a corporation that is owned and operatedcontrolled by a stockholderdirector. The monthly rent
is $3500(CDN). Rent expense for the year ended December 31, 2007 under this
lease amounted to $35,608. As of May 31, 2008, the Company. This
related party currently has no accounts receivables includedCompany owed the corporation
$21,000.00 in these financial
28
statements but had $497,000 of the contracts in place in 2001. In 2002, the
majority of the casino websites were closed down or taken over by the Company.back rent.
During November 2000, we issued to Mr. Donaghy 8,400,000 shares of
common stock at $0.0009 per share in exchange for office equipment with a
historical cost of $3,472 and expenses valued at $3,992, which represents his
historical cost.
33
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information. This annual
report on Form 20-F contains the financial information set forth under Item 18.
B. Significant Changes. In May 2003, the Company entered into two
initiatives to further diversify it's interests in the lifestyles consumables
market. The first is the distribution of a private line of UV-free tanning
booths and related products and the second is the distribution of private
labeled bottled spring water. In April 2006, the Company acquired all of the
assets WebStar Internet Solutions, a company that delivers revolutionary online
payment solutions for companies that wish to accept payments through the
Internet for entertainment, products and services. The Company has discontinued
its e-gaming, UV-free tanning, and private water branding businesses.
During 2006, the Company entered into the direct-banking and
payment-card solutions business by concentrating its business around its
"FocusKard" suite of products. On or about December 18, 2006, we entered into a
joint venture arrangement with the Ko Ho Management Co. Ltd. We acquired a fifty
percent (50%) equity interest in the Ko Ho Group of Hong Kong, a company
wholly-owned by Mr. Benny Lee. The Ko Ho Group is an investment and management
company, specializing in company mergers and acquisitions, management and
marketing services in Asia Pacific with a focus in Hong Kong and China. To date
through our partnership with the Ko Ho Group, we have acquired an equity
interest in three Chinese companies, Arden Trading Company Ltd., Hongxin
Insurance Agency and Foshan Foshantong Information Technology Co., Ltd.
On July 19, 2007 the Company entered into a joint venture partnership
with Serenity Investments Holdings Corp., a British Virgin Islands corporation,
to obtain a Payment Processing Engine and an E-Wallet Platform that will provide
the technology for the backbone to the Company's FocusKard suite of payment
solutions. The Company issued 1,500,000 common shares in connection with this
joint venture.
On March 20, 2008, the Board of Directors agreed that the directors
would accept 60,000 common stock of the Company, valued at $0.05 CDN a share as
consideration for directors' fees to the end of December, 2008. The directors
received these shares on March 20, 2008.
On March 20, 2008, the Board of Directors agreed that each director
would be granted an option to purchase 200,000 shares of the Company at the
price of $0.12 CDN each for serving as a Director in the year 2007. The options
expire March 2013.
Subsequent to December 31, 2007, the Company issued 1,975,000 common
shares for a total consideration of $102,308, cash.
Legal Proceedings
- -----------------
The Company is not a party to any pending or ongoing material legal
proceeding nor is the company aware of any threatened or anticipated material
legal proceeding against it except as follows:
In November 2004, 3084735 Nova Scotia Limited, a corporation organized
under the laws of Nova Scotia, Canada filed an action against Mega Sun Inc.,
Celebrity Tan Inc. and Ray Zinck alleging breach of implied warranty, breach of
contract, misrepresentation and sale of a defective product in connection with
the sale of a tanning mist booth. The booth was manufactured by Mega Sun Inc.,
an entity unaffiliated with the Company or Celebrity Tan Inc., and sold to Nova
Scotia Limited by Celebrity Tan Inc. through Ray Zinck, an independent
salesperson. The action seeks damages in the amount of the purchase price of
approximately US$30,000.00, plus interest and costs. Celebrity Tan filed a
timely defense in response to the claim denying all allegations in the complaint
and also filed a cross complaint against Mega Sun Inc. The action is currently
in the pretrial stage and has been inactive for the past year. While Celebrity
Tan will vigorously defend this matter, the outcome of the litigation is not
certain at this time.
In June 2005, the Company and Michael Donaghy entered into a settlement
agreement and undertaking with the Alberta Securities Commission. In the
agreement, the Company and Mr. Donaghy acknowledged that they breached sections
75(1)(a) and 110(1) of the Securities Act, R.S.A. 2000, c. S-4 (the "Act") in
connection with an alleged illegal distribution of the securities of the Company
by an independent consultant hired by the Company to sell its securities. The
Company and Mr. Donaghy relied on the accredited investor exemption of the Act
to distribute the shares of the Company and also relied upon the expertise and
experience of the sales consultant with which the Company had contracted. As
part of the settlement, the Company agreed to pay the Commission Forty Two
Thousand dollars ($42,000) and Mr. Donaghy agreed that all the exemptions
contained in the Alberta Securities Act will not apply to him for two (2) years
from the date of the agreement, except that he may trade in securities for his
personal account through an agent that is a registered dealer.it.
Dividend Policy
- ---------------
The Company has not paid and does not plan to pay any cash dividends on
its capital stock. The Company currently intends to retain any future earnings
to fund growth, and therefore does not expect to pay any cash dividends in the
foreseeable future.
29
Item 9. The Offer and Listing
Price History of Shares
The Company's common shares are listed in the United States on the
National Association of Securities Dealers OTC Bulletin Board, and began trading
in May 2004 under the symbol OXIHF. Even though our stock is listed on the
34
OTCBB, it is very thinly traded and trading can be sporadic and as of December
31, 2005,2007, no active established market within or outside the United States
existed for our common stock.
The high and low sale prices for the common shares of the Company on
the OTC Bulletin Board for each of the last six months, each fiscal quarter in
each of the last two full financial years and subsequent period and each of the
last five full financial years are as follows:
OTC Bulletin Board
(United States Dollars)
High Low
20062008
June (through June 27, 2006) $0.4325, 2008) $0.08 $0.05
May $0.16 $0.05
April $0.12 $0.06
March $0.20 $0.10
February $0.25 $0.07
January $0.15 $0.09
First Quarter $0.25 $0.07
2007 $0.65 $0.04
May $0.13 $0.13
April $0.17 $0.15
March $0.08 $0.08
FebruaryDecember $0.40 $0.06
Fourth Quarter $0.40 $0.06
Third Quarter $0.50 $0.35
Second Quarter $0.65 $0.38
First Quarter $0.10 $0.04
January $0.06 $0.062006 $1.19 $0.04
December $0.40 $0.36
Fourth Quarter $0.40 $0.28
Third Quarter $1.19 $0.27
Second Quarter $0.50 $0.13
First Quarter $0.10 $0.04
2005 $0.15 $0.01
December $0.08 $0.06
Fourth Quarter $0.08 $0.06
Third Quarter $0.08 $0.01
Second Quarter $0.15 $0.02
First Quarter $0.15 $0.06
2004 $0.55 $0.10
Fourth Quarter $0.25 $0.10
Third Quarter $0.55 $0.20
Second Quarter $0.55 $0.10
The closing price of the Company's common shares on the OTCBB on June
27,
200624, 2008 was $0.23.$0.05.
Item 10. Additional Information
A. Share Capital.
35
Not Applicable
B. Memorandum and articles of incorporation.
Incorporated by reference from the Company's registration statement on
Form 20-F filed on December 19, 2001.
C. Material contracts.
30
On January 25, 2001, the Company entered into a software licensing
agreement with World Gaming and also paid World Gaming a one-time,
non-refundable software development fee of $100,000 for its own virtual casino.
Pursuant to the agreement with World Gaming, the Company is required to pay a
monthly royalty fee of 20% based on net monthly revenues. According to the
agreement, a minimum of 15% of the previous month's net monthly casino revenues
must be spent on advertising and marketing per month. The term of the license
agreement is for one year with automatic indefinite one-year extensions. The
World Gaming license allows the Company to assign sub-licenses.
The Company has employment agreements with its presidentPresident as discussed
more fully below.
The Company entered into an employment agreement with Michael Donaghy
dated July 1, 2001 to serve as our President and also as the general manager of
our wholly-owned subsidiary International E Gaming Developers Inc. At the
expiration, the Company and Mr. Donaghy signed an agreement to extend the terms
of the employment agreement for an additional four (4) years until June 30th30,
2008. The agreement renews automatically on a year to year basis thereafter,
unless terminated by the parties. Mr. Donaghy is entitled to receive an annual
salary of $125,000 plus customary vacation, medical, dental and life insurance
benefits and reimbursement of certain business expenses. We may terminate the
employment agreement for "cause" which includes, (i) failure by Mr. Donaghy to
perform his duties in accordance with the employment agreement; (ii) Mr.
Donaghy's conviction for a criminal offense involving fraud, misappropriation of
monies, property or rights of the Company or an act of moral turpitude; (iii)
Mr. Donaghy's willful malfeasance or willful gross misconduct; (iv) a breach of
certain provisions of the employment agreement; and (v) for any reason permitted
by law that would allow the Company to terminate the agreement without notice or
for payment in lieu of notice.
The Company may also terminate the employment agreement prior to the
end of the term by payment to Mr. Donaghy of a lump sum equal to his
compensation and benefits payable under the remaining term of the agreement.
D. Exchange controls.
The Company is an Ontario corporation. Canada has no system of exchange
controls. There are no Canadian restrictions on the repatriation of capital or
earnings of a Canadian public company to non-resident investors. There are no
laws in Canada or exchange restrictions affecting the remittance of dividends,
profits, royalties and other payments to non-resident holders of the Canadian
securities.
There are no limitations under the laws of Canada or in the controlling
documents of the Company on the right of foreigners to hold or vote securities
of the Company, except that the Investment Canada Act may require review and
approval by the Minister of Industry (Canada) of certain acquisitions of
"control" of the Company by a "non-Canadian." The threshold for acquisitions of
control is generally defined as being one-third or more of the voting shares of
the Company. "Non-Canadian" generally means an individual who is not a Canadian
citizen, or a corporation, partnership, trust or joint venture that is
ultimately controlled by non-Canadians.
E. Taxation.
Canadian Federal Income Tax Consequences
The following is a brief summary of some of the principal Canadian
federal income tax consequences to a U.S. Holder (as defined below) of the
Company's common shares who deals at arm's length with and is not affiliated
with the Company, holds the shares as capital property and who, for the purposes
of the Income Tax Act (Canada) and the Canada-United States Income Tax
Convention, is at all relevant times resident or deemed to be resident in the
United States and is not nor is deemed to be in Canada and does not carry on
business in Canada.
36
This summary is of a general nature only and is not, and should not be
interpreted as, legal or tax advice to any particular U.S. Holder and no
representation is made with respect to the Canadian income tax consequences to
31
any particular person. Accordingly, U.S. Holders are advised to consult their
own tax advisers with respect to their particular circumstances.
Under the Income Tax Act (Canada) and pursuant to the Canada-United
States Income Tax Convention, a U.S. Holder of common shares will be subject to
a 15 percent withholding tax on dividends paid or credited or deemed by the
Income Tax Act (Canada) to have been paid or credited on such shares. The
withholding tax rate is 5 percent, for 1999, 2000 and 2001, where the U.S. Holder is a corporation that
beneficially owns at least 10 percent of the voting shares of the Company.
In general, a U.S. Holder will not be subject to Canadian income tax on
capital gains arising on the disposition of the Company common shares unless (i)
at any time in the five-year period immediately preceding the disposition, 25
percent or more of the shares of any class or series of the capital stock of the
Company were owned (or were under option or subject to an interest in) by the
U.S. Holder, by persons with whom the U.S. Holder did not deal at arm's length
and (ii) the value of the common shares of the Company at the time of the
disposition derives principally from real property (as defined in the
Canada-United States Income Tax Convention) situated in Canada.
United States Federal Income Tax Consequences
The following is a general discussion of certain possible U.S. federal
income tax consequences, under current law, generally applicable to a U.S.
Holder of common shares of the Company. This discussion is of a general nature
only and does not take into account the particular facts and circumstances, with
respect to U.S. federal income tax issues, of any particular U.S. Holder. This
discussion does not cover any state, local or foreign tax consequences. (See
"Taxation-- Canadian Federal Income Tax Consequences", above).
The following discussion is based upon the sections of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published
Internal Revenue Service ("IRS") rulings, published administrative positions of
the IRS and court decisions that are currently applicable, any or all of which
could be materially and adversely changed, possibly on a retroactive basis, at
any time and which are subject to differing interpretations. This discussion
does not consider the potential effects, both adverse and beneficial, of any
proposed legislation which, if enacted, could be applied, possibly on a
retroactive basis, at any time.
This discussion is for general information only and it is not intended
to be, nor should it be construed to be, legal or tax advice to any U.S. Holder
or prospective U.S. Holder of common shares of the Company, and no opinion or
representation with respect to the U.S. federal income tax consequences to any
such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders
and prospective U.S. Holders of common shares of the Company should consult
their own financial advisor, legal counsel or accountant regarding the U.S.
federal, state, local and foreign tax consequences of purchasing, owning and
disposing of common shares of the Company.
U.S. Holders
- ------------
As used herein, a "U.S. Holder" means a holder of common shares of the
Company who is (i) a citizen or individual resident of the U.S., (ii) a
corporation or partnership created or organized in or under the laws of the U.S.
or of any political subdivision thereof, (iii) an estate whose income is taxable
in the U.S. irrespective of source or (iv) a trust subject to the primary
supervision of a court within the U.S. and control of a U.S. fiduciary as
described Section 7701(a)(30) of the Code.
Persons Not Covered
- -------------------
This summary does not address the U.S. federal income tax consequences
to persons (including persons who are U.S. Holders) subject to special
provisions of U.S. federal income tax law, including (i) tax-exempt
organizations, (ii) qualified retirement plans, (iii) individual retirement
accounts and other tax-deferred accounts, (iv) financial institutions, (v)
insurance companies, (vi) real estate investment trusts, (vii) regulated
37
investment companies, (viii) broker-dealers, (ix) persons or entities that have
a "functional currency" other than the U.S. dollar, (x) persons subject to the
alternative minimum tax, (xi) persons who own their common shares of the Company
as part of a straddle,
32
hedging, conversion transaction, constructive sale or
other arrangement involving more than one position, (xii) persons who acquired
their common shares of the Company through the exercise of employee stock
options or otherwise as compensation for services, (xiii) persons that own an
interest in an entity that owns common shares of the Company, (xiv) persons who
own, exercise or dispose of any options, warrants or other rights to acquire
common shares of the Company, or (xv) persons who own their common shares of the
Company other than as a capital asset within the meaning of Section 1221 of the
Code.
Distribution on Common Shares of the Company
- --------------------------------------------
U.S. Holders receiving distributions (including constructive
distributions) with respect to common shares of the Company are required to
include in gross income for U.S. federal income tax purposes the gross amount of
such distributions, equal to the U.S. dollar value of such distributions on the
date of receipt (based on the exchange rate on such date), to the extent that
the Company has current or accumulated earnings and profits, without reduction
for any Canadian income tax withheld from such distributions. Such Canadian tax
withheld may be credited, subject to certain limitations, against the U.S.
Holder's U.S. federal income tax liability or, alternatively, may be deducted in
computing the U.S. Holder's U.S. federal taxable income by those who itemize
deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the
extent that distributions from the Company exceed current or accumulated
earnings and profits of the Company, such distributions will be treated first as
a return of capital, to the extent of the U.S. Holder's adjusted basis in the
common shares, and thereafter as gain from the sale or exchange of the common
shares of the Company. (See more detailed discussion at "Disposition of Common
Shares of the Company" below)
In the case of foreign currency received as a distribution that is not
converted by the recipient into U.S. dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, to the extent that there are no expenses associated with the transaction
that meet the requirements for deductibility as a trade or business expense
(other than travel expenses in connection with a business trip) or as an expense
for the production of income.
Dividends paid on the common shares of the Company generally will not
be eligible for the "dividends received deduction" allowed to corporate
shareholders receiving dividends from certain U.S. corporations. Under certain
circumstances, a U.S. Holder that is a corporation and that owns shares
representing at least 10% of the total voting power and the total value of the
Company's outstanding shares may be entitled to a 70% deduction of the "U.S.
source" portion of dividends received from the Company (unless the Company
qualifies as a "Foreign Personal Holding Company" or a "Passive Foreign
Investment Company" as defined below). The availability of the dividends
received deduction is subject to several complex limitations which are beyond
the scope of this discussion, and U.S. Holders of common shares of the Company
should consult their own financial advisor, legal counsel or accountant
regarding the dividends received deduction.
Certain information reporting and backup withholding rules may apply
with respect to certain payments related to the Company's common shares. In
particular, a payor or middleman within the U.S., or in certain cases outside
the U.S., will be required to withhold 31% (which rate is scheduled for periodic
adjustment) of any payments to a U.S. Holder of the Company's common shares of
dividends on, or proceeds from the sale of, such common shares within the U.S.,
if a U.S. Holder fails to furnish its correct taxpayer identification number or
otherwise fails to comply with, or establish an exemption from, the backup
withholding tax requirements. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a refund or a credit against the U.S.
Holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS. U.S. Holders should consult their own financial advisor,
legal counsel or accountant regarding the information reporting and backup
withholding rules applicable to the Company's common shares.
Foreign Tax Credit
- ------------------
38
A U.S. Holder who pays (or has withheld from distributions) Canadian or
other foreign income tax with respect to the ownership of common shares of the
Company may be entitled, at the option of the U.S. Holder, to either receive a
33
deduction or a tax credit for U.S. federal income tax purposes with respect to
such foreign tax paid or withheld. Generally, it will be more advantageous to
claim a credit because a credit reduces U.S. federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income
subject to U.S. federal income tax. This election is made on a year-by-year
basis and applies to all foreign taxes paid by (or withheld from distributions
to) the U.S. Holder during that year.
There are significant and complex limitations that apply to the foreign
tax credit, among which is the general limitation that the credit cannot exceed
the proportionate share of the U.S. Holder's U.S. income tax liability that the
U.S. Holder's "foreign source" income bears to his or its worldwide taxable
income. In applying this limitation, the various items of income and deduction
must be classified as either "foreign source" or "U.S. source." Complex rules
govern this classification process. In addition, this limitation is calculated
separately with respect to specific classes of income such as "passive income,"
"high withholding tax interest," "financial services income," "shipping income,"
and certain other classifications of income. Dividends distributed by the
Company will generally constitute "foreign source" income, and will be
classified as "passive income" or, in the case of certain U.S. Holders,
"financial services income" for these purposes.
In addition, U.S. Holders that are corporations and that own 10% or
more of the voting stock of the Company may be entitled to an "indirect" foreign
tax credit under Section 902 of the Code with respect to the payment of
dividends by the Company under certain circumstances and subject to complex
rules and limitations. The availability of the foreign tax credit and the
application of the limitations with respect to the foreign tax credit are fact
specific, and each U.S. Holder of common shares of the Company should consult
their own financial advisor, legal counsel or accountant regarding the foreign
tax credit rules.
Disposition of Common Shares of the Company
- -------------------------------------------
A U.S. Holder will recognize gain or loss upon the sale or other
taxable disposition of common shares of the Company equal to the difference, if
any, between (i) the amount of cash plus the fair market value of any property
received, and (ii) the shareholder's tax basis in the common shares of the
Company. This gain or loss will be capital gain or loss if the common shares are
a capital asset in the hands of the U.S. Holder, which will be long-term capital
gain or loss if the common shares of the Company are held for more than one
year.
Preferential tax rates apply to long-term capital gains of U.S. Holders
that are individuals, estates or trusts. Deductions for net capital losses are
subject to significant limitations. For U.S. Holders that are not corporations,
any unused portion of such net capital loss may be carried over to be used in
later tax years until such net capital loss is thereby exhausted. For U.S.
Holders that are corporations (other than corporations subject to Subchapter S
of the Code), an unused net capital loss may be carried back three years and
carried forward five years from the loss year to be offset against capital gains
until such net capital loss is thereby exhausted.
Currency Exchange Gains or Losses
- ---------------------------------
U.S. holders generally are required to calculate their taxable incomes
in United States dollars. Accordingly, a U.S. holder who purchases common shares
of the Company with Canadian dollars will be required to determine the tax basis
of such shares in United States dollars based on the exchange rate prevailing on
the settlement date of the purchase (and may be required to recognize the
unrealized gain or loss, if any, in the Canadian currency surrendered in the
purchase transaction). Similarly, a U.S. holder receiving dividends or sales
proceeds from common shares of the Company in Canadian dollars will be required
to compute the dividend income or the amount realized on the sale, as the case
may be, in United States dollars based on the exchange rate prevailing at the
time of receipt in the case of dividends and on the settlement date in the case
of sales on an established securities exchange. Gain or loss, if any, recognized
on a disposition of Canadian currency in connection with the described
transactions generally will be treated as ordinary gain or loss.
3439
Other Considerations for U.S. Holders
- -------------------------------------
In the following circumstances, the above sections of this discussion
may not describe the U.S. federal income tax consequences to U.S. Holders
resulting from the ownership and disposition of common shares of the Company:
Foreign Personal Holding Company
- --------------------------------
If at any time during a taxable year (i) more than 50% of the total
voting power or the total value of the Company's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the U.S. and (ii) 60% (or 50% in certain cases) or more of the
Company's gross income for such year is "foreign personal holding company
income" as defined in Section 553 of the Code (e.g., dividends, interest,
royalties, certain gains from the sale of stock and securities, and certain
gains from commodities transactions), the Company may be treated as a "Foreign
Personal Holding Company" ("FPHC") In that event, U.S. Holders of common shares
of the Company would be required to include in gross income for such year their
allocable portions of such "foreign personal holding company income" to the
extent the Company does not actually distribute such income.
The Company does not believe that it currently qualifies as a FPHC.
However, there can be no assurance that the Company will not be considered a
FPHC for the current or any future taxable year.
Foreign Investment Company
- --------------------------
If (i) 50% or more of the total voting power or the total value of the
Company's outstanding shares is owned, directly or indirectly, by citizens or
residents of the U.S., U.S. partnerships or corporations, or U.S. estates or
trusts (as defined by the Code Section 7701(a)(30)), and (ii) the Company is
found to be engaged primarily in the business of investing, reinvesting, or
trading in securities, commodities, or any interest therein, the Company may be
treated as a "Foreign Investment Company" ("FIC") as defined in Section 1246 of
the Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging common shares of the Company to be treated as ordinary income rather
than capital gain.
The Company does not believe that it currently qualifies as a FIC.
However, there can be no assurance that the Company will not be considered a FIC
for the current or any future taxable year.
Controlled Foreign Corporation
- ------------------------------
If more than 50% of the total voting power or the total value of the
Company's outstanding shares is owned, directly or indirectly, by citizens or
residents of the U.S., U.S. partnerships or corporations, or U.S. estates or
trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly
or indirectly, 10% or more of the total voting power of the Company's
outstanding shares (each a "10% Shareholder"), the Company could be treated as a
"Controlled Foreign Corporation" ("CFC") under Section 957 of the Code.
The classification of the Company as a CFC would effect many complex
results, including that 10% Shareholders of the Company would generally (i) be
treated as having received a current distribution of the Company's "Subpart F
income" and (ii) would also be subject to current U.S. federal income tax on
their pro rata shares of the Company's earnings invested in "U.S. property." The
foreign tax credit may reduce the U.S. federal income tax on these amounts for
such 10% Shareholders (See more detailed discussion at "Foreign Tax Credit"
above). In addition, under Section 1248 of the Code, gain from the sale or other
taxable disposition of common shares of the Company by a U.S. Holder that is or
was a 10% Shareholder at any time during the five-year period ending with the
sale is treated as ordinary income to the extent of earnings and profits of the
Company attributable to the common shares sold or exchanged.
If the Company is classified as both a Passive Foreign Investment
Company as described below and a CFC, the Company generally will not be treated
as a Passive Foreign Investment Company with respect to 10% Shareholders. This
40
rule generally will be effective for taxable years of 10% Shareholders beginning
after 1997 and for taxable years of the Company ending with or within such
taxable years of 10% Shareholders.
35
The Company does not believe that it currently qualifies as a CFC.
However, there can be no assurance that the Company will not be considered a CFC
for the current or any future taxable year. The CFC rules are very complicated,
and U.S. Holders should consult their own financial advisor, legal counsel or
accountant regarding the CFC rules and how these rules may impact their U.S.
federal income tax situation.
Passive Foreign Investment Company
- ----------------------------------
The Code contains rules governing "Passive Foreign Investment
Companies" ("PFIC") which can have significant tax effects on U.S. Holders of
foreign corporations. Section 1297 of the Code defines a PFIC as a corporation
that is not formed in the U.S. and, for any taxable year, either (i) 75% or more
of its gross income is "passive income" or (ii) the average percentage, by fair
market value (or, if the corporation is not publicly traded and either is a
controlled foreign corporation or makes an election, by adjusted tax basis), of
its assets that produce or are held for the production of "passive income" is
50% or more. "Passive income" includes, for example, dividends, interest,
certain rents and royalties, certain gains from the sale of stock and
securities, and certain gains from commodities transactions. However, gains
resulting from commodities transactions are generally excluded from the
definition of passive income if "substantially all" of a merchant's, producer's
or handler's business is as an active merchant, producer or handler of such
commodities.
For purposes of the PFIC income test and the assets test, if a foreign
corporation owns (directly or indirectly) at least 25% by value of the stock of
another corporation, such foreign corporation shall be treated as if it (a) held
a proportionate share of the assets of such other corporation, and (b) received
directly its proportionate share of the income of such other corporation. Also,
for purposes of such PFIC tests, passive income does not include any interest,
dividends, rents or royalties that are received or accrued from a "related"
person to the extent such amount is properly allocable to the income of such
related person which is not passive income. For these purposes, a person is
related with respect to a foreign corporation if such person "controls" the
foreign corporation or is controlled by the foreign corporation or by the same
persons that control the foreign corporation. For these purposes, "control"
means ownership, directly or indirectly, of stock possessing more than 50% of
the total voting power of all classes of stock entitled to vote or of the total
value of stock of a corporation.
U.S. Holders owning common shares of a PFIC are subject to the highest
rate of tax on ordinary income in effect for the applicable taxable year and to
an interest charge based on the value of deferral of tax for the period during
which the common shares of the PFIC are owned with respect to certain "excess
distributions" on and dispositions of PFIC stock under Section 1291 of the Code.
However, if the U.S. Holder makes a timely election to treat a PFIC as a
qualified electing fund ("QEF") with respect to such shareholder's interest
therein, the above-described rules generally will not apply. Instead, the
electing U.S. Holder would include annually in his gross income his pro rata
share of the PFIC's ordinary earnings and net capital gain regardless of whether
such income or gain was actually distributed. A U.S. Holder of a QEF can,
however, elect to defer the payment of U.S. federal income tax on such income
inclusions. In addition, subject to certain limitations, U.S. Holders owning,
actually or constructively, marketable (as specifically defined) stock in a PFIC
will be permitted to elect to mark that stock to market annually, rather than be
subject to the tax regime of Section 1291 of Code as described above. Amounts
included in or deducted from income under this alternative (and actual gains and
losses realized upon disposition, subject to certain limitations) will be
treated as ordinary gains or losses.
The Company believes that it was not a PFIC for its fiscal year ended
December 31, 20052007 and does not believe that it will be a PFIC for the fiscal
year ending December 31, 2006.2008. There can be no assurance that the Company's
determination concerning its PFIC status will not be challenged by the IRS, or
that it will be able to satisfy record keeping requirements that will be imposed
on QEFs in the event that it qualifies as a PFIC.
The PFIC rules are very complicated, and U.S. Holders should consult
their own financial advisor, legal counsel or accountant regarding the PFIC
rules and how these rules may impact their U.S. federal income tax situation.
41
F. Dividends and paying agents.
Not Applicable.
36
G. Statements by experts.
Not Applicable
H. Documents on display.
Documents filed as exhibits to this annual report are described in Item
18(b).
I. Subsidiary Information
There is no information relating to the Company's subsidiaries which
must be provided in Canada and which is not otherwise called for by the body of
generally accepted accounting principles used in preparing the financial
statements.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 12. Description of Securities Other Than Equity Securities
Not Applicable.
PART II
Item 13. Defaults, Dividends Arrearages and Delinquencies
Not Applicable.
Item 14. Material Modifications to the Rights of Security Holders and
Use of Proceeds
Not Applicable.
Item 15. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on the evaluation of the Company's disclosure"Disclosure controls and procedures
in the 90 days prior to the date of this report, the Company's chief executive
officer/ chief financial officer has determined that suchprocedures": are controls and other procedures
were reasonablythat are designed to ensure that information required to be disclosed by us in
the Company in reports it files or submits underwe file with the Securities and Exchange ActCommission is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms ofand that the Securitiesinformation is accumulated and Exchange Commission.
There are inherent limitationscommunicated
to the effectiveness of any system ofour management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
The Company has developed and implemented a disclosure controls and procedures
including the possibility of human error and
the circumvention or overriding of such controls and procedures. Accordingly,
even effectivepolicy with a view to promoting consistent disclosure controls and procedures
practices.
We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as defined in SEC Rule
13a-15(e) as of the end of the fiscal year covered by this Annual Report on Form
20-F. This evaluation was carried out under the supervision and with the
participation of our management, including our Chief Executive Officer and our
Acting Chief Financial Officer. Based upon that evaluation, our Chief Executive
Officer and our Acting Chief Financial Officer concluded that our disclosure
controls and procedures are effective. There was no changes in our internal
control over financial reporting during the year ended December 31, 2007 that
42
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
We recognize that any controls and procedures, no matter how well
designed and operated, can provide only provide reasonable assurance of achieving their
objectives and our management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Projections of
any evaluation of effectiveness to future periods are also subject to the risk
that controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies or procedures may deteriorate. In
addition, internal controls over financial reporting remains an evolving concept
and, as acknowledged by the SEC in both its rule-making and concept releases as
well as its "Final Report of the Committee on Smaller Public Companies" released
in April 2006, no definitive industry definition or guidance for management
currently exists as to what constitutes adequate internal controls for smaller
public companies like us. Accordingly, in light of the continuing SEC dialog as
to what constitutes effective control objectives.procedures for smaller public companies,
our controls and procedures are subject to on-going review and revision by our
management.
Changes in Internal Controls
No significant change has occurredThere have been no changes in the Company'sour internal controls orcontrol over financial
reporting identified in other factors since the date ofconnection with the evaluation described above that
could significantlyoccurred during the period covered by this annual report that has materially
affected, or is reasonably likely to materially affect, these controls, nor have there been any corrective actions with regard to
significant deficiencies and material weaknesses in the Company'sour internal controls.
37
control
over financial reporting.
Item 16A. Audit Committee Financial Expert
Since the Company has only one member on its Board of Directors, theThe Company does not yet have a separate audit committee at this time. The
Company intends to establish an audit committee andin the future. The Company
therefore does not have an "audit committee financial expert." The Board is
currently endeavoring to increase the members of its Board and establish an audit committee with such a candidate and
intends to do so as soon as an appropriate individual is found.identified.
Item 16B. Code of Ethics
The Company has adopted a code of ethics applicable to all employees
and directors. A copy is available upon request to the Chief Executive Officer,
Oxford Investments Holdings Inc., 1315 Lawrence Avenue East, Suite 520, Toronto,
Ontario, Canada M3A 3R3
Item 16C. Principal Accountant Fees and Services
The Company paid the following fees to Williams and Webster, P.S.Danziger & Hochman, Chartered
Accountants, respectively, during the last twofollowing fiscal years:
2004 20052006 2007
Audit fees $16,691.00 $7,300.00CDN$38,000.00 CDN$35,000.00
Other Fees -0- -0-
Total ========== ================ =======
Audit fees consist of audit work performed in the preparation of
financial statements and services that are normally provided in connection with
statutory and regulatory filings.
POLICY ON PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT AUDITORS
43
Since the Company does not yet have an audit committee, the Board
approves in advance all audit services and all non-audit services provided by
the independent auditors based on a policy adopted by the Board.
Under the policy, proposed services either (i) may be pre-approved by
the Board without consideration of specific case-by-case services as "general
pre-approval"; or (ii) require the specific pre-approval of the Board as
"specific pre-approval". These services are subject to annual review by the
Board.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
Not applicable.
PART III
Item 17. Financial Statements
Financial Statements. The consolidated financial statements set forth
under Item 18 are included as part of this annual report.
38
Item 18.18.. Financial Statements
The following auditors' reports and consolidated financial statements
are included in this Form 20-F:
Oxford Investments Holdings Inc. Sequential
Consolidated Financial Statements Page Number
- --------------------------------- -----------
Auditors' Report .......................................................F-1of Independent Registered Public Accounting Firm .....................F-1
Consolidated Balance Sheet as at December 31, 2003, December 31, 20042006
and December 31, 2005 ......................................................F-32007 ......................................................F-2
Consolidated Statements of Operations for the years ended December 31, 2003December2005
December 31, 20042006 and December 31, 2005.................................F-42007.....................................F-3
Consolidated Statement of Stockholders EquityShareholders' Deficiency for the year ended,
December 31, 20032005 December 31, 20042006 and December 31, 2005.....................................F-52007..................F-4
Consolidated Statements of Cash Flows for the year ended
December 31, 2003,2005, December 31, 20042006 and December 31, 2005 .................F-62007 .................F-5
Notes to Consolidated Financial Statements...................................F-7
39Statements...................................F-6
44
Item 19. Exhibits
Exhibits and Exhibit Index. The following Exhibits are filed as part of this
Annual Report and incorporated herein by reference to the extent applicable.
Exhibit Index
Page
Exhibit No. Description Page Number
- ----------- ----------- -----------------
1.1 Articles of Incorporation........................................Incorporation.........................*
1.2 Bylaws...........................................................Bylaws............................................*
2.1 Specimen Stock Certificate.......................................Certificate........................*
4.1 Agreement with Starnet Systems International Inc.,
dated January 25, 2001.........................................2001..........................*
4.2 Specimen Affiliate Sub-License Agreement.........................Agreement..........*
4.3 Asset Purchase Agreement with Suchow Holdings Ltd.
dated April 26, 2001...........................................2001............................*
4.4 Exhibits to Agreement with Starnet Systems
International Inc., dated January 25, 2001...................................2001......*
4.5 Mutual Release with CCPC Biotech Inc. dated
March 1, 2001........2001...................................*
4.6 Sub-License Agreement between Starnet Systems N.V.
and International E-Gaming Developers N.V.
dated November 20, 2001..............................................2001.........................*
4.7 Employment Agreement between Oxford Software
Developers Inc. and Michael Donaghy
dated July 1, 2001....................2001..............................*
4.8 Employment Agreement between Oxford Investments
Holdings Inc. and Victor DeLaet dated
July 1, 2001......................2001....................................*
4.9 Agreement between Oxford Software Developers Inc.
and West America Securities Corp. dated
March 7, 2002...................2002...................................*
4.10 Asset Purchase Agreement with Christopher Webster
dated April 5, 2006...........................................2006............................**
4.11 Oxford Investments Holdings Inc. Non-Qualified
Stock Option Plan.............................***
4.12 Oxford Investments Holdings Inc. Non-Qualified
Stock Option Agreement....................... ***
4.13 Joint Venture Agreement between the Ko Ho Group
and Oxford Investments Holdings Inc. .........***
4.14 Share Purchase Agreement between Ko Ho Group and
Arden Trading Company Ltd. and All the
Shareholders dated February 28, 2007..........***
4.15 Share Purchase Agreement between Ko Ho Group
and Hongxin Insurance Agency of China and All
the Shareholders dated March 14, 2007........ ***
4.16 Agreement for Cooperation between Foshan Wanzhi
S&T Company Ltd. and Ko Ho Management Ltd.
dated May 7, 2007.............................***
8.1 List of Subsidiaries.............................................Subsidiaries..............................*
23.1 Consent of Danziger & Hochman., Chartered Accountants...........
99.1 Certificate of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.........................442002....
99.2 Certificate of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.........................452002....
* Incorporated by reference from the Company's annual report on Form
20-F filed on June 28, 2002 or the Company's registration statement on Form 20-F
filed on December 19, 2001.
** Incorporated by reference from the Company's annual report on Form
20-F filed on June 30, 2006.
*** Incorporated by reference from the Company's annual report on Form
20-F filed on July 02, 2007.
Financial Statement Schedules
None.
4045
Signatures
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
OXFORD INVESTMENTS HOLDINGS INC.
Date: June 29, 200630, 2008 By: /S/Michael Donaghy
---------------------------------------------------------------------
Michael Donaghy, President/Chief Executive Officer
4146
Certification by Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Michael Donaghy, certify that:
1. I have reviewed this Annual Report on Form 20-F of Oxford Investments
Holdings Inc. (the "Registrant");
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this Annual Report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the a Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely a affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
By: /S/ Michael Donaghy
------------------------------------------
Michael Donaghy
Chief Executive Officer
Date: June 29, 2006
4230, 2008
47
Certification by Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Michael Donaghy, certify that:
1. I have reviewed this Annual Report on Form 20-F of Oxford Investments
Holdings Inc. (the "Registrant");
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this Annual Report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the a Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely a affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
By: /S/ Michael Donaghy
------------------------------------------
Michael Donaghy
Chief Financial Officer
Date: June 29, 2006
4330, 2008
48
OXFORD INVESTMENTS HOLDINGS INC.
Consolidated Financial Statements
December 31, 2007, 2006 and 2005
OXFORD INVESTMENTS HOLDINGS INC.
INDEXCONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007, 2006 and 2005
Index
PAGE
2005
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM F-1
2004 REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM F-21
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - Statement I F-32
Consolidated Statements of Operations - Statement II F-43
Consolidated Statements of Shareholders' EquityDeficiency - Statement III F-54
Consolidated Statements of Cash Flows - Statement IV F-65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-76 - 2319
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of:
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
We have audited the accompanying consolidated balance sheets of OXFORD
INVESTMENTS HOLDINGS INC. as at December 31, 20052007 and 2006 and the accompanying
consolidated statements of operations, shareholders' equitydeficiency and cash flows
for the year then
ended.years ended December 31, 2007, 2006 and 2005. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
The Company's consolidated
financial statements for the years ended December 31, 2004 and 2003 were audited
by other auditors whose report dated September 29, 2005 expressed an unqualified
opinion of those financial statements.
We conducted our auditaudits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2005
and the results of its operations and their cash flows for the year then ended,
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As more fully discussed in note 2
to the consolidated financial statements, the company has incurred operating
losses and must continue to fund negative working capital that raise substantial
doubt about its ability to continue as a going concern. Management plans in
regard to these matters are also discussed in note 4. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Toronto, Ontario
June 22, 2006 Chartered Accountants
F-1
Board of Directors
Oxford Investments Holdings Inc.
North York, Ontario
CANADA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Oxford Investments Holdings
Inc., formerly Oxford Software Developers Inc., (an Ontario corporation) as of
December 31, 2004 and 2003, and the related statements of operations and other
comprehensive income (loss), stockholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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. 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 audit providesaudits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Oxford Investments Holdings
Inc.,the Company as ofat
December 31, 20042007 and 2003,2006 and the related statementsresults of its operations
and other comprehensive income (loss), stockholders' equity and its cash flows
for the year thenyears ended December 31, 2007, 2006 and 2005 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As more fully discussed in note 2, to the
financial statements, the Company
has generated insufficient revenueincurred operating losses and must continue to cover
expenses and therefore has suffered recurring losses from operations resulting
in an accumulated deficit of $3,438,087, at December 31, 2004. These conditions
raisefund negative working capital
which raises substantial doubt about the Company'sits ability to continue as a going concern.
Management'sManagement plans regarding this issuein regard to these matters are also discussed in Notenote 2. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
September 29, 2005
F-2Danziger Hochman Partners LLP
Danziger Hochman Partners LLP
Toronto, Canada
June 19, 2008
Page 1
OXFORD INVESTMENTS HOLDINGS INC. Statement I
(Formerly Oxford Software Developers, Inc.)
Consolidated Balance Sheets
As at December 31, 2005
- --------------------------------------------------------------------------------------------
2005 2004 2003
- ------------------------------------------------ ----------- ----------- -----------
ASSETS
CURRENT
Cash $ -- $ 28,553 $ 11,745
Accounts receivable (note 5) 32,587 159,179 1,306
Inventory 17,154 80,941 43,977
Prepaid expenses and deposits 8,549 17,422 90,488
- ------------------------------------------------ ----------- ----------- -----------
58,290 286,095 147,516
Other
Property and equipment (note 7) 4,437 6,788 9,793
- ------------------------------------------------ ----------- ----------- -----------
$ 62,727 $ 292,883 $ 157,309
- ------------------------------------------------ ----------- ----------- -----------
LIABILITIES
CURRENT
Bank indebtedness $ 13,697 $ -- $ --
Bank loan (note 8) 37,167 -- --
Accounts payable and accrued liabilities 943,753 719,228 562,933
Loan payable (note 11) 162,702 -- --
Note payable (note 9) -- -- 19,318
Loans payable (note 10) 387,637 540,923 544,447
- ------------------------------------------------ ----------- ----------- -----------
1,544,956 1,260,151 1,126,698
- ------------------------------------------------ ----------- ----------- -----------
SHAREHOLDERS' EQUITY
COMMON STOCK (note 14) 2,813,557 2,805,652 2,581,164
ACCUMULATED DEFICIT (3,909,395) (3,438,087) (3,298,719)
ACCUMULATED OTHER COMPREHENSIVE
LOSS (386,391) (334,833) (251,834)
- ------------------------------------------------ ----------- ----------- -----------
(1,482,229) (967,268) (969,389)
- ------------------------------------------------ ----------- ----------- -----------
$ 62,727 $ 292,883 $ 157,309
- ------------------------------------------------ ----------- ----------- -----------
CommitmentsOXFORD INVESTMENTS HOLDINGS INC. Statement I
(Formerly Oxford Software Developers, Inc.)
Consolidated Balance Sheets
As at December 31, 2007 and contingent2006
- -----------------------------------------------------------------------------
2007 2006
- -----------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ -- $ 37,969
Accounts receivable -- 7,451
Inventory -- 12,872
Prepaid expenses and deposits 9,434 2,563
- -----------------------------------------------------------------------------
9,434 90,855
PROPERTY AND EQUIPMENT 4,461 3,466
- -----------------------------------------------------------------------------
$ 13,895 $ 94,321
=============================================================================
LIABILITIES
CURRENT
Bank indebtedness $ 2,412 $ --
Bank loan 23,539 28,603
Accounts payable and accrued liabilities (note 18)
__________________________,883,339 841,865
Notes payable 187,049 154,412
Loan payable -- 137,296
Loans payable 268,735 269,708
- -----------------------------------------------------------------------------
1,365,074 1,431,884
- -----------------------------------------------------------------------------
SHAREHOLDERS' DEFICIENCY
COMMON STOCK 6,407,601 3,417,135
ADDITIONAL PAID-IN CAPITAL 917,333 507,662
PREPAID SHARE SUBSCRIPTION (156,000) --
ACCUMULATED DEFICIT (7,967,509) (4,871,284)
ACCUMULATED OTHER COMPREHENSIVE LOSS (552,604) (391,076)
- -----------------------------------------------------------------------------
(1,351,179) (1,337,563)
- -----------------------------------------------------------------------------
$ 13,895 $ 94,321
=============================================================================
Going concern and liquidity
Contingencies
/s/ Michael Donaghy, Director
(The accompanying notes are an integral part of these financial statements.)
F-3Page 2
OXFORD INVESTMENTS HOLDINGS INC. Statement II
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Operations
For The Yearthe Years Ended December 31, 2007, 2006 and 2005
- -------------------------------------------------------------------------------------------
2007 2006 2005
2004 2003
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
REVENUES
Licenses $ -- $ 66,132 $ --
$ 96,600
Services 4,886 90,547 107,641
395,933 284,023
ProductProducts 1,246 28,620 56,248
296,136 58,534
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
6,132 185,299 163,889
692,069 439,157
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
COST OF REVENUES
Licenses (recovery) (25,745) 92,332 40,641
9,549 70,976
Services -- 17,641 26,644
204,559 209,345
ProductProducts 10,013 1,043 74,138
136,143 41,067
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
(15,732) 111,016 141,423
350,251 321,388
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
GROSS PROFIT 21,864 74,283 22,466
341,818 117,769
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
SELLING EXPENSES
Advertising and marketing 1,333,769 101,601 8,146 43,958 49,614
Commissions and subcontracts 194,933 42,633 5,282
34,252 --
Consulting 1,154,368 86,417 34,263
33,579 7,115
Communications 9,304 10,775 26,183
12,545 14,399
Travel 9,520 8,883 4,986
16,742 4,044
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
2,701,894 250,309 78,860
141,076 75,172
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Bad debts (recovery) 7,013 (82,481) 82,600
1,166 --
Consulting 125,000 125,000 136,884
161,190 119,946
Depreciation 1,000 971 2,477 3,465 2,504
General and office 83,812 34,848 10,692 1,769 44,219
Professional fees 86,184 69,311 58,227
93,660 73,906
Rent 48,410 53,230 50,968
46,128 38,086
Telephone 9,115 7,678 7,074 -- --
Wages and benefits -- 542,539 45,713
33,757 74,854
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
360,534 751,096 394,635
341,135 353,515
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS before the undernoted (3,040,564) (927,122) (451,029)
(140,393) (310,918)
OTHER INCOME (EXPENSES)EXPENSES - Interest expense(55,661) (34,767) (20,279)
(16,303) (20,209)
Debt forgiveness -- 17,328 --
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (3,096,225) (961,889) (471,308)
(139,368) (331,127)- -------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES -- -- --
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (3,096,225) (961,889) (471,308) (139,368) (331,127)
OTHER COMPREHENSIVE GAININCOME (LOSS)
Foreign currency translation gain (loss)loss - net (161,528) (4,685) (51,558)
(82,999) (174,567)
- -------------------------------------------- ------------ ------------ -------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE YEAR $ (3,257,753) $ (966,574) $ (522,866)
$ (222,367) $ (505,694)
- -------------------------------------------- ------------ ------------ ------------===========================================================================================
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.02)(0.09) $ (0.01)(0.04) $ (0.02)
- -------------------------------------------- ------------ ------------ ------------===========================================================================================
WEIGHTED AVERAGE NUMBER OF BASIC AND
DILUTED COMMON SHARES OUTSTANDING 33,640,665 23,368,008 21,765,254
20,958,721 20,018,107
- -------------------------------------------- ------------ ------------ ------------
(The accompanying notes are an integral part of these financial statements.)
F-4===========================================================================================
(The accompanying notes are an integral part of these financial statements.)
Page 3
OXFORD INVESTMENTS HOLDINGS INC.
Statement III
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Shareholders' Equity (Deficit)Deficiency
For The Yearthe Years Ended December 31, 2007, 2006 and 2005
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Additional Prepaid Other
Number of Paid-In Share Comprehensive Accumulated
of Shares Amount Capital Subscription Income/Loss (Deficit) Total
====================================================================================================================================
- ---------------------------------- ------------- ------------- ------------- ------------- -------------
Balance, January 1, 2003 19,770,100 2,321,614 $ (77,267) $ (2,967,592) $ (723,245)
Stock issued for approximately
$0.77 per share, $615,455 less
expenses of $355,905 796,500 259,550 -- -- 259,550
Other comprehensive loss -- -- (174,567) -- (174,567)
Net loss for the year
-- -- -- (331,127) (331,127)
- ---------------------------------- ------------- ------------- ------------- ------------- -------------
Balance, December 31, 2003 20,566,600 2,581,164 (251,834) (3,298,719) (969,389)
Stock issued for approximately
$0.47 per share, $445,684;
less expenses of $220,927 952,750 232,791 -- -- 232,791
Shares cancelled (10,000) (8,303) -- -- (8,303)
Other comprehensive loss -- -- (82,999) -- (82,999)
Net loss for the year -- -- -- (139,368) (139,368)
- ---------------------------------- ------------- ------------- ------------- ------------- -------------------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004 21,509,350 $ 2,805,652 $ -- $ -- $ (334,833) (3,438,087)$(3,438,087) $ (967,268)
Stock issued for approximately
$0.05 per share, $19,809
less expenses of $11,904cash - net 365,000 7,905 -- -- -- -- 7,905
Other comprehensive loss -- -- -- -- (51,558) -- (51,558)
Net loss for the year -- -- -- -- -- (471,308) (471,308)
- ---------------------------------- ------------- ------------- ------------- ------------- -------------------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 21,874,350 2,813,557 -- -- (386,391) (3,909,395) (1,482,229)
Stock issued for cash - net 3,374,832 404,225 -- -- -- -- 404,225
Stock issued for services 450,000 79,353 -- -- -- -- 79,353
Stock options issued -- -- 507,662 -- -- -- 507,662
Stock options exercised - net 800,000 120,000 -- -- -- -- 120,000
Other comprehensive loss -- -- -- -- (4,685) -- (4,685)
Net loss for the year -- -- -- -- -- (961,889) (961,889)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 26,499,182 3,417,135 507,662 -- ($ 391,076) ($4,871,284) (1,337,563)
Stock issued for cash - net 8,350,628 990,588 -- -- -- -- 990,588
Stock issued for services 3,502,774 1,666,197 -- -- -- -- 1,666,197
Prepaid share subscription 400,000 156,000 -- (156,000) -- -- --
Stock issued for extinguishment
of debt 192,226 75,753 -- -- -- -- 75,753
Stock options issued -- -- 409,671 -- -- -- 409,671
Stock options exercised - net 800,000 101,928 -- -- -- -- 101,928
Other comprehensive loss -- -- -- -- (161,528) -- (161,528)
Net loss for the year -- -- -- -- -- (3,096,225) (3,096,225)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 39,744,810 $ 2,813,5576,407,601 $ (386,391)917,333 $ (3,909,395)(156,000) $ (1,482,229)
- ---------------------------------- ------------- ------------- ------------- ------------- -------------
(The accompanying notes are an integral part of these financial statements.)
F-5(552,604) $(7,967,509) $(1,351,179)
====================================================================================================================================
(The accompanying notes are an integral part of these financial statements.)
Page 4
OXFORD INVESTMENTS HOLDINGS INC. Statement IV
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Cash Flows
For The YearYears Ended December 31, 2007, 2006 and 2005
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2007 2006 2005
2004 2003
- ------------------------------------------------------ --------- --------- ---------
---------------------------------------------------------------------------- ---------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(471,308) $(139,368) $(331,127)$(3,096,225) $ (961,889) $ (471,308)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation 1,000 971 2,477
3,465 2,504
Debt forgivenessStock-based compensation 409,671 507,662 --
(17,328)Shares issued for services 1,666,197 79,353 --
ChangeChanges in assets and liabilitiesnon-cash working capital items:
Accounts receivable 7,451 25,136 126,592 (157,873) 14,487
Prepaid expenses and deposits 23,129 (24,014) 8,873
73,066 (58,672)
Inventory 12,872 4,282 63,787 (36,964) (43,977)
Accounts payable and accrued liabilities 41,474 (101,888) 224,525
147,695 222,799
Notes payable -- -- 3,458
Payable to related party -- -- 191,897
- ------------------------------------------------------ --------- --------- --------------------------------------------------------------------------------------------------------------------
Net cash used byin operating activities (934,431) (470,387) (45,054)
(127,307) 1,369
- ------------------------------------------------------ --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment -- -- (1,542)
Purchase of software -- -- (142)
- ------------------------------------------------------ --------- --------- ---------
Net cash used by investing activities -- -- (1,684)
- ------------------------------------------------------ --------- --------- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings (repayments) under bank indebtedness - net 2,412 (13,697) 13,697
Advances (repayments) from bank loan - net (5,064) (8,564) 37,167
Advances under notes payable -- 154,412 --
Repayment of related party loan (35,368) -- --
Payment of note payable -- (1,990) --
Cheques written in excessProceeds from issuance of common stock -- 8,600 (8,478)
Proceeds from sales of common stock,- net 990,588 404,225 7,905
232,791 259,550
Shares cancelled -- (8,308) --
Payments on related partyAdvances under (repayments on) loans payable - net 48,444 (23,335) 9,416
(3,522) (63,345)
- ------------------------------------------------------ --------- --------- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 54,488 227,571 187,7271,001,012 513,041 68,185
- ------------------------------------------------------ --------- --------- ---------
NET INCREASE IN CASH 9,434 100,264 187,412-----------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION GAIN (LOSS)LOSS (104,550) (4,685) (51,684)
(83,456) (176,304)- -----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (37,969) 37,969 (28,553)
CASH, BEGINNING OF THE YEAR 37,969 -- 28,553
11,745 637
- ------------------------------------------------------ --------- --------- --------------------------------------------------------------------------------------------------------------------
CASH, (BANK INDEBTEDNESS), END OF THE YEAR $ (13,697)-- $ 28,55337,969 $ 11,745
- ------------------------------------------------------ --------- --------- -----------
===========================================================================================================
Supplemental cash flow disclosures
Income taxesinformation:
Interest paid $ 55,662 $ 26,876 $ 14,853
Capital stock issued upon reduction of related party loan $ 101,928 $ 120,000 $ --
Capital stock issued upon reduction of related party loan2 $ 75,753 $ -- $ --
Shares to be issued to extinguish debt $ --
Interest paid $ 14,853 $ -- $ --
Non-cash investing and financing activities
Stock issued in exchange for assets $ -- $ -- $ --
Stock issued in payment of expense $ -- $ -- $ --
Stock subscriptions paid by customer deposits $ -- $ -- $ --
Stock issued for subscriptions $ --156,000 $ -- $ --
(The accompanying notes are an integral part of these financial statements.)
F-6Page 5
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
----------------------------------------
Oxford Investments Holdings Inc. (formerly International E-Gaming
Developers Ltd.)(hereinafter "the ("the Company") was originally incorporated on October 13, 2000,
under the laws of the Province of Ontario, Canada. On May 17, 2001, the
Company changed its name to Oxford Software Developers Inc. and then
changed its name to Oxford Investments Holdings Inc. on December 18, 2003.
On November 3, 2000, the Company incorporated its wholly owned subsidiary,
International E-Gaming Developers Inc. (hereinafter "E-Gaming("E-Gaming Inc.") under the laws of
Antigua and Barbuda. E-Gaming Inc. has been primarily engaged in the
operation and marketing of internet gaming sites.
On November 8, 2001, the Company incorporated a wholly owned subsidiary,
International E-Gaming Developers NV (hereinafter "E-Gaming NV)("E-Gaming NV"), a limited liability
company, under the laws of Curacao, Netherlands Antilles, to engage in the
operation of games of chance on the international market via service lines.
E-Gaming NV was dissolved in 2003.
In May 2003, the Company incorporated two wholly ownedwholly-owned subsidiaries,
Ontario Private Water Labelling Limited and Celebrity Tan Inc., under the
laws of Canada to engage in the production and sale of bottled water and to
market UV-free tanning products and booths, respectively. The business of
Ontario Private Water Labelling Limited has been discontinued, and its net
assets and results of operations are not material to the accompanying
financial statements.
Due to changes in United States law, the Company is no longer involved in
Internet gaming activities. During the fourth quarter of fiscal 2006, the
Company changed its focus to become a provider of stored value cards
catering to a wide variety of markets. These products and services are
aimed at capitalizing on stored-value and reloadable prepaid card financial
products.
On November 30, 2006, the Company entered into a joint venture agreement
with Ko Ho Management Ltd. ("Ko Ho"), a Hong Kong-based company, with the
goal of acquiring business operations in the People's Republic of China.
Under the terms of this agreement, the Company acquired a 50% interest in
Ko Ho via the issuance of 250,000 common shares of the Company and the
financing of certain working capital expenses of Ko Ho in the amount of
$60,000 over the course of the following 10 months. Under the terms of the
joint venture agreement, the Company has agreed to issue up to an
additional 1,000,000 common shares and provide additional financing to a
maximum of $250,000 for Ko Ho to acquire an existing Chinese corporation.
In addition, the Company has agreed to issue a further 250,000 common
shares should certain specified performance goals of Ko Ho be met, and to
pay certain professional fees and e-commerce service fees of Ko Ho.
Through its partnership with Ko Ho, the Company has acquired an equity
interest in three Chinese companies, Arden Trading Company Ltd., Hongxin
Insurance Agency and Foshan Foshantong Information Technology Co., Ltd.
Page 6
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)
----------------------------------------
In February 2007, the Company acquired a 50% equity interest in Arden
Trading Company Ltd. ("Arden") of China through our partnership with Ko Ho.
Arden specializes in the operation of customer loyalty redemption programs.
Arden's services include processing bonus point redemptions, gift sourcing,
catalogue production, logistics, and call center customer support. It
provides long-term outsourcing services to businesses in its areas of
expertise.
In March 2007, the Company acquired a 50% equity interest in Hongxin
Insurance Agency of China ("Hongxin") through its partnership with Ko Ho.
Hongxin is an insurance agency selling insurance policies and financial
instruments to major insurance companies in China since 2004. It is under
license issued by China Insurance Supervisory Committee to provide
corporate and individual insurance products, risk management, and
consultation services.
In April 2007, the Company acquired a 35% equity interest in Foshan
Foshantong Information Technology Co., Ltd. ("Foshantong") through its
partnership with Ko Ho. Foshantong provides electronic payment smart card
programs for public transportation and small payment transactions.
In July 2007, the Company entered into a joint venture partnership with
Serenity Investments Holdings Corp. ("Serenity"), a British Virgin Islands
corporation, to obtain a payment processing engine and an E-Wallet platform
that will provide the technology for the backbone to the Company's
"FocusKard" suite of payment solutions. The Company issued 1,500,000 common
shares in connection with this joint venture.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The Company's accounting and reporting policies conform to accounting
principles generally accepted in the United States of America, and have
been consistently applied in the preparation of the accompanying
consolidated financial statements. TheThese consolidated financial statements
arehave been prepared in United States dollars.
Basis of PreparationPresentation
The accompanying consolidated financial statements include the accounts of
Oxford Investments Holdings Inc. and its wholly-owned subsidiaries
Celebrity Tan Inc., Ontario Private Labelling Limited and International E-Gaming Developers Inc. The consolidated entities will hereinafter be referred to
as "the Company".and Ontario
Private Water Labelling Limited, the latter of which is inactive. (See Note
4.) All significant inter-company transactions and balances have been
eliminated upon consolidation.eliminated.
The Company's investments in Ko Ho, Arden, Hongxin, Foshantong and Serenity
have been presented in the accompanying consolidated financial statements
as advertising and marketing and consulting expenses. The purpose of these
investments was to facilitate entry into target markets in the People's
Republic of China by funding the marketing activities of these entities.
Management believes that the Company has no further obligations or
contingencies in respect of these entities (unless otherwise disclosed in
note 1), will not earn any revenues from the activities of these entities,
and that these investments do not meet the criteria for consolidation under
SFAS No. 46(R), "Consolidation of Variable Interest Entities."
Page 7
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Going Concern
TheseThe accompanying consolidated financial statements have been prepared on a
going concern basis and do not include any adjustments to the measurement
and classification of the recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern. The Company has experienced losses in the
periodthree reporting periods and there is negativehas a working capital.capital deficiency of $1,355,640.
During the years ended December 31, 2007, 2006 and 2005, the Company
incurred comprehensive net losses of $3,257,753, $966,574 and $522,866,
respectively, and cash used in operations was $934,431, $470,387, and
$45,054, respectively. The Company financed its operations via the sale of
common stock, through bank loans and through the issuance of debt. The
Company's ability to realize its assets and discharge its liabilities in
the normal course of business is dependent upon continued support.support of its
creditors and shareholders, securing new sources of capital and financing,
and the establishment of operations that provide the Company with positive
cash flows. The Company is currently attempting to obtain additional
financing from its existing shareholders and other strategic investors to
continue its operations. However, there can be no assurance that the
Company will obtain additional funds from these sources.
These conditions cause substantial doubt about the Company's ability to
continue as a going concern. A failure to continue as a going concern would
require that the stated amounts of assets and liabilities be reflected on a
liquidation basis that could differ from the current presentation on the
going concern basis.
F-7
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Fair Value of Financial Instruments
The Company's estimate of the fair value of cash, bank indebtedness,
accounts receivable, accounts payable and accrued liabilities, loans
payable and bank loan approximates their carrying value.
Income Taxes
The Company accounts for its income taxes under the liability method
specified by SFAS No. 109, "Accounting for Income Taxes". Deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities as measured by
the effective tax rates which will be in effect when these differences
reverse. A valuation allowance is recorded against deferred tax assets if
management does not believe the Company has met the "more likely than not"
standard imposed by SFAS No. 109 to allow recognition of such an asset.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation of property and equipment is provided annually on a declining
basis over the estimated useful life of the asset, except for current year
additions on which 1/2 of the rates are applicable. The declining balance
rates are as follows:
Computer hardware 30% declining balance
Computer software 100% declining balance
Office equipment 20% declining balance
Comprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners or distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized
under the current accounting standards as a component of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income is displayed
in the statement of shareholder's equity and in the consolidated balance
sheet as a component of shareholder's equity.
F-8
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Use of Estimates
The preparation of consolidated financial statements in conformity with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues and
expenses during the year. ActualFinancial statement items subject to significant
management judgment include revenue recognition; the valuation of accounts
receivable; the completeness of accounts payable and accrued liabilities
and loans and notes payable; the valuation of share compensation expense;
and, future income tax assets. While management believes that the estimates
and assumptions are reasonable and appropriate in the circumstances, actual
results could
differ from those estimates.may differ.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation of property and equipment is provided annually on a declining
balance basis over the estimated useful lives of the assets, except for
current year additions on which 1/2 of the rates is applicable. The
declining balance rates are as follows:
Computer hardware 30% declining balance
Computer software 100% declining balance
Office equipment 20% declining balance
Page 8
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with SFAS
No. 123(R) ("SFAS 123(R)"), "Share-Based Payment", which replaced SFAS No.
123 "Accounting for Stock-Based Compensation," and superseded APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Under SFAS 123(R), the
Company recognizes compensation costs related to share-based payment
transactions in the financial statements based on the fair value of the
equity (or liability) instruments issued over the period that an employee
is expected to provide service in exchange for the award, based on the
vesting terms of the specific compensation awards. Stock issued to
non-employees is valued based on the fair value of the services received or
the fair value of the stock given up.
Advertising Expenses
The Company expenses advertising costs as incurred. The Company's
advertising and marketing expenses for the years ended December 31, 2007,
2006 and 2005 are presented in the accompanying consolidated financial
statements.
Provision for Doubtful Accounts and Bad Debt Expense
Provision for losses on trade accounts receivable is made in amounts
required to maintain an adequate allowance to cover anticipated bad debts.
Accounts receivable are charged against the allowance when it is determined
by the Company that payment will not be received. Receivables are shown net
of an allowance for bad debts. Impaired Asset PolicyAccounts receivable are presented net of an
allowance for doubtful accounts of $Nil (2006 - $8,951).
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
In complyingaccordance with the Financial Accounting Standards Board Statement titledSFAS No. 144, "Accounting for the Impairment or Disposal
of long-livedLong-Lived Assets," the Company reviews its long-lived assets quarterly to determine if anyfor
impairment whenever events or changes in circumstances have transpired which indicate that the
carrying valueamount of its
assetsan asset may not be recoverable. The Company determines impairmentRecoverability of
assets to be held and used is measured by comparinga comparison of the undiscountedcarrying
amount of an asset to future net cash flows estimatedexpected to be generated by itsthe
asset. If such assets are considered to their respectivebe impaired, the impairment to be
recognized is measured by the amount by which the carrying amounts. There was noamount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell. The Company has not recorded an impairment loss as at December 31,
2005, 2004 or 2003.2007.
Inventories
Inventories are stated at the lower of cost or market on a first-in,
first-out basis.
Foreign Currency Translation
The Company considers the functional currency to be the local currency and,
accordingly, theirits financial information translated into U.S. dollars using
exchange rates in effect at year-end for assets and liabilities and average
exchange rates during each reporting period for the results of operations.
Adjustments resulting from the translation of the functional currency and
of subsidiaries' financial statements are included as a component of other
comprehensive income (loss)loss within the statements of shareholders' equity.
Reclassifications
Certain prior year amounts were reclassified to conform to current year
presentation. These reclassifications did not result in any changes to the
Company's accumulated deficit or net losses.
F-9deficiency.
Page 9
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Reclassifications
Certain prior year amounts were reclassified to conform to current year's
basis of presentation. These reclassifications did not result in any
changes to the Company's accumulated deficit or net losses.
Revenue Recognition
The Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101") as modified by Securities and Exchange
Commission Staff Accounting Bulletin No. 104. Under SAB 101, revenue is
recognized at the point of passage to the customer of title and risk of
loss, there is persuasive evidence of an arrangement, the sales price is
determinable, and collection of the resulting receivable is reasonably
assured for property. For product sales, the Company generally recognizes
revenue at the time of delivery of goods. Sales are reflected net of
discounts and returns. For services, revenue is recognized as services are
provided. Revenue from casino operations, advertising and royalties are(which
ceased in 2006) were recognized aswhen earned.
During the year ended December 31, 2004, the majorityComprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and presentation of the casinos
involved in previous Company contracts were no longer operating or had been
taken over by the Company. These entities have no balance owingcomprehensive
income, its components and accumulated balances. Comprehensive income is
defined to the
Company.
3. ACCOUNTING PRONOUNCEMENTS
-------------------------
In May 2005, the FASB issued SFAS 154, which replaces APB Opinion No. 20,
"Accounting Changes", and FASB Statement No. 3, "Reporting Accounting
Changes in Interim Financial Statements". The statement applies toinclude all
voluntary changes in accounting principle and changesequity except those resulting from
adoption of a new accounting pronouncement that does not specify transition
requirements.investments by or distributions to owners. Among other disclosures, SFAS
154 requires retrospective application to prior periods'
financial statements for changes in accounting principle unless it is
impracticable to determine either the period-specific effects or the
cumulative effect of the change. SFAS 154 alsoNo. 130 requires that retrospective
application of a change in accounting principle be limitedall items that are required to the direct
effects of the change. Indirect effects of a change in accounting principle
should be recognized under
the current accounting standards as a component of comprehensive income be
reported in a financial statement that is displayed with the period of the accounting change.same
prominence as other financial statements. SFAS 154 is
effective for accounting130 requires that items be
included in other comprehensive income according to their nature, including
certain foreign currency items, changes and corrections of errors made in fiscal
years beginning after December 15, 2005 with early implementation permitted
for accounting changes and corrections of errors made in fiscal years
beginning after the date this statement is issued. SFAS 154 is effective
for us beginning January 1, 2006 and will be applied when applicable.
In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 153. This statement addresses the
/measurement of exchanges of nonmonetary assets. The guidance in APB
Opinion No. 29, "Accounting for Nonmonetary Transactions," is based on the
principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged.derivative
financial instruments and unrealized gains and losses on certain debt and
equity securities.
The guidance in that opinion,
however, included certain exceptions to that principle. This statement
amends Opinion 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flowsCompany's other comprehensive loss comprises foreign currency
translation adjustments arising upon translation of the entity are expectedCompany's Canadian
operating currency to change significantly as a result of the
exchange. This statement is effective for financial statements for fiscal
years beginning after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges incurred during fiscal years beginning after
the date of this statement is issued. Management believes the adoption of
this statement will not impact on the financial statements of the Company.
F-10its United States reporting currency.
Page 10
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS
(continued)
-------------------------
Recently Adopted Accounting Standards
In December 2004,May 2008, the Financial Accounting Standards boardBoard ("FASB") issued Statement
of Financial Accounting StandardsSFAS
No. 152, which amends FASB statement No.
66, " Accounting for Sales of Real Estate," to reference the financial
accounting and reporting guidance for real estate time-sharing transactions
that is provided in AICPA Statement of Position (SOP) 04-2,163, "Accounting for Real Estate Time-sharing Transactions." This statement also amendsFinancial Guarantee Insurance Contracts - An
interpretation of FASB Statement No. 67, "Accounting60". SFAS 163 requires that an
insurance enterprise recognize a claim liability prior to an event of
default when there is evidence that credit deterioration has occurred in an
insured financial obligation. It also clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement to be used to account for Costspremium revenue and Initial Rental Operations of
Real Estate Projects," to state that the guidance for (a) incidental
operationsclaim
liabilities, and (b) costs incurred to sell real estate projects does not
apply to real estate time-sharing transactions. The accounting for those
operations and costs is subject to the guidance in SOP 04-2. This statementrequires expanded disclosures about financial guarantee
insurance contracts. It is effective for financial statements issued for
fiscal years beginning after JuneDecember 15, 2005. Management believes2008, except for some disclosures
about the Company's insurance risk-management activities. SFAS 163 requires
that disclosures about risk-management activities be effective for the
first period beginning after issuance. Except for those disclosures,
earlier application is not permitted. The Company is currently evaluating
the impact of SFAS No. 163 on its financial statements, and the adoption of
this statement willis not expected to have no
impacta material effect on the Company's
financial statements.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles." SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with generally accepted accounting
principles in the Company.United States. It is effective 60 days following the
SEC's approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles". The Company is currently
evaluating the impact of SFAS No. 162 on its financial statements, and the
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
In December 2004,March 2008, the Financial Accounting Standards Board ("FASB") issued
a
revisionSFAS No. 161, "Disclosures about Derivative Instruments and Hedging
Activities - an amendment to FASB Statement of Financial Accounting Standards No. 123R,
"Accounting133". SFAS 161 is intended
to improve financial standards for Stock Based Compensation." This statement supersedes APB
Opinion No. 25, "Accountingderivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance and cash flows. Entities are required to provide enhanced
disclosures about: how and why an entity uses derivative instruments; how
derivative instruments and related hedged items are accounted for Stock Issued to Employees,"under
Statement 133 and its related implementation guidance. This statement establishes standards for the
accounting for transactions in whichinterpretations; and how derivative
instruments and related hedged items affect an entity exchanges its equity
instruments for goods or services.entity's financial position,
financial performance and cash flows. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. This statement focuses
primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. This statement does
not change the accounting guidance for share-based payment transactions
with parties other than employees provided in Statement of Financial
Accounting Standards No. 123. This statement does not address the
accounting for employee share ownership plans, which are subject to AICPA
Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans." The Company has not yet determined the impact to its
financial statements from the adoption of this statement.
In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs - an
amendment of ARB No. 43, Chapter 4." This statement amends the guidance in
ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and
wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously
stated that "... under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs may be so
abnormal as to require treatment as current period charges..." This
statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In
addition, this statement requires that allocation of fixed production
overheads to the costs of conversion be based on the normal capacity of the
production facilities. This statement is effective for inventory costs
incurred duringfinancial
statements issued for fiscal years beginning after JuneNovember 15, 2005. Management does
not believe2008, with
early adoption encouraged. The Company is currently evaluating the impact
of SFAS No. 161 on its financial statements, and the adoption of this
statement willis not expected to have any immediatea material impacteffect on the Company.
F-11Company's
financial statements.
In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of ARB No. 51." SFAS 160
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent's ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary
is deconsolidated. The Statement also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interest of the parent and the interest of the noncontrolling
owners. SFAS 160 is effective for fiscal years beginning after December 15,
2008. Determination of the ultimate effect of this pronouncement will
depend on the Company's structure at the date of adoption.
Page 11
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In May 2003,December 2007, the Financial Accounting Standards BoardFASB issued SFAS No. 141(R), "Business Combinations"
("SFAS 141R"), replacing SFAS No. 141, "Business Combinations.". This
Statement retains the fundamental requirements in Statement 141 that the
acquisition method of Financial Accounting Standardsaccounting (which Statement 141 called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement also establishes
principles and requirements for how the acquirer: a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination
or a gain from a bargain purchase and c) determines what information to
disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. This Statement clarifies
that acquirers will be required to expense costs related to any
acquisitions. SFAS No. 150,141R will apply prospectively to business
combinations for which the acquisition date is on or after fiscal years
beginning December 15, 2008. Early adoption is prohibited. Determination of
the ultimate effect of this pronouncement will depend on the Company's
structure at the date of adoption.
In June 2007, the Emerging Issues Task Force ("EITF") ratified its
conclusion on EITF Issue No. 06-11 "Accounting for Certain Financial
Instrumentsthe Income Tax Benefits
of Dividends on Share-Based Payment Awards" ("EITF 06-11"). EITF 06-11
provides that tax benefits associated with Characteristicsdividends on share-based payment
awards be recorded as a component of Both Liabilitiesadditional paid-in capital. EITF 06-11
is effective, on a prospective basis, for fiscal years beginning after
December 15, 2007. The Company is currently evaluating the impact that the
adoption of EITF 06-11 will have on its financial position, results of
operations and Equity"
(hereinafter "SFAS No. 150").cash flows.
In February 2007, the FASB issued SFAS No. 150 establishes standards159, "The Fair Value Option for
classifyingFinancial Assets and measuring certainFinancial Liabilities - Including an amendment of FASB
Statement No. 115," ("SFAS 159") which permits entities to choose to
measure many financial instruments with
characteristicsand certain other items at fair value at
specified election dates. A business entity is required to report
unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. This statement
is expected to expand the use of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial
position. Previously, many of those instruments were classified as equity.fair value measurement. SFAS No. 150159 is
effective for financial statements entered into or modified
after May 31, 2003 and otherwise is effective at the beginning of the first
interim periodissued for fiscal years beginning after
JuneNovember 15, 2003. The Company has determined
that the adoption of this statement will not impact the Company's financial
statements.
In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments2007, and Hedging Activities" (hereinafter "SFAS No.
149"). SFAS No. 149 amends and clarifies the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This statement is effective
for contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003.interim periods within those fiscal years. The
adoption of SFAS No. 149159 is not expected to have a material impact on the
Company's financial position, or
results of operations ofoperation or cash flows.
In September 2006, the Company.
In December 2002, the Financial Accounting Standards BoardFASB issued Statement
of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" (hereinafter "SFAS No. 148"). SFAS No. 148 amends 157, "Fair Value Measurements."
("SFAS No. 123, "Accounting157") The Statement provides guidance for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to theusing fair value based method of accounting for stock-based
employee compensation. In addition, the statement amends the disclosure
requirements of SFAS No. 123 to
require prominent disclosure in both annualmeasure assets and interim financial statementsliabilities. The Statement also expands disclosures
about the method of accounting for
stock-based employee compensationextent to which companies measure assets and liabilities at fair
value, the information used to measure fair value, and the effect of fair
value measurement on earnings. This Statement applies under other
accounting pronouncements that require or permit fair value measurements.
This Statement does not expand the method used on
reported results. The provisionsuse of fair value measurements in any
new circumstances. Under this Statement, fair value refers to the statement are effective for
financial statements for fiscal years ending after December 15, 2002. The
Company currently reports stock issuedprice
that would be received to employees undersell an asset or paid to transfer a liability in
an orderly transaction between market participants in the rules ofmarket in which
the entity transacts. SFAS 123. Accordingly, there is no change in disclosure requirements due to SFAS
148.
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" (hereinafter "SFAS No. 146"). SFAS No.
146 addresses significant issues regarding the recognition, measurement,
and reporting of costs associated with exit and disposal activities,
including restructuring activities. SFAS No. 146 also addresses recognition
of certain costs related to terminating a contract that is not a capital
lease, costs to consolidate facilities or relocate employees, and
termination benefits provided to employees that are involuntarily
terminated under the terms of a one-time benefit arrangement that is not an
ongoing benefit arrangement or an individual deferred-compensation
contract. SFAS No. 146 was issued in June 2002 and157 is effective for activities after December 31, 2002. There has been nothe Company for fair value
measurements and disclosures made by the Company in its fiscal year
beginning in the 2008 fiscal year. The adoption of SFAS 157 is not expected
to have a material impact on the Company's financial position, or results of
operations from adopting SFAS
No. 146.
F-12operation or cash flows.
Page 12
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In April 2002,June 2006, the Financial Accounting Standards BoardFASB issued Statement of
Financial Accounting StandardsFASB Interpretation No. 145, "Rescission48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statements No. 4, 44109"
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing a two-step method of first evaluating whether a tax position
has met a more likely than not recognition threshold and, 64, Amendmentsecond, measuring
that tax position to determine the amount of FASB Statement No. 13, and Technical
Corrections" (hereinafter "SFAS No. 145"), which updates, clarifies and
simplifies existing accounting pronouncements. FASB No. 4, which required
all gains and losses from the extinguishment of debtbenefit to be aggregatedrecognized in the
financial statements. FIN 48 provides guidance on the presentation of such
positions within a classified statement of financial position as well as on
derecognition, interest and if material, classified as an extraordinary item, netpenalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The adoption of related tax effect
was rescinded. As a result, FASB No. 64, which amended FASB No. 4, was
rescinded, as it was no longer necessary. FASB No. 44, Accounting for
Intangible Assets of Motor Carriers, established the accounting
requirements for the effects of transition to the provisions of the Motor
Carrier Act of 1980. Since the transition has been completed, FASB No. 44
is no longer necessary and has been rescinded. SFAS No. 145 amended FASB
No. 13 to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. The Company adopted SFAS No. 145 and doesthis statement did not believe that
the adoption will have a
material effect on the Company's reported financial statements of the
Company.
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, including Indirect Guarantees of Indebtedness of Others"
(hereinafter "FIN 45"). FIN 45 requires a company, at the time it issues a
guarantee, to recognize an initial liability for the fair value of
obligations assumed under the guarantee and elaborates on existing
disclosure requirements related to guarantees and warranties. The initial
recognition requirements of FIN 45 are effective for guarantees issuedposition or
modified after December 31, 2002 and do not have an impact on the financial
statements of the Company. The Company does not anticipate issuing any
guarantees which would be required to be recognized as a liability under
the provisions of FIN 45 and thus does not expect the adoption of this
interpretation to have an impact on its results of
operations or financial
position.
Derivative Instruments
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", which is
effective for the Company as of January 1, 2001. These standards establish
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. They require that an entity recognize all derivatives as either
assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value.
If certain conditions are met, a derivative may be specifically designated
as a hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of
change.
F-13
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
Derivative Instruments (continued)
Historically, the Company has not entered into derivatives contracts to
hedge existing risks or for speculative purposes.
At December 31, 2005, 2004 and 2003, the Company has not engaged in any
transactions that would be considered derivative instruments or hedging
activities.
Segment Information Segment Information
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
(hereinafter "SFAS No. 131") during the year ended December 31, 2000. SFAS
No. 131 established standards for reporting information about operating
segments in annual financial statements and requires selected information
about operating segments in interim financial reports issued to
stockholders. It also established standards for related disclosures about
products and services and geographic areas. Operating segments are defined
as components of an enterprise about which separate financial information
is available, evaluated regularly by the chief operating decision makers,
or a decision making group, in deciding how to allocate resources and in
assessing performance. The adoption of SFAS No. 131 did not affect the
Company's results of operations or financial position, but did affect the
disclosure of segment information as reported in Note 19.operations.
4. LIQUIDITY
---------
During the years ended December 31, 2005, 2004 and 2003, the Company
incurred net losses of $522,866, $222,367 and $505,694 respectively, and
cash used in operations was $45,054, $127,307 and ($1,369) respectively.
The Company financed their operations using sales of their common stock,
bank loans and other loans.
Management plans to seek additional capital from new equity securities
issuances which would provide funds needed to increase liquidity, fund
internal growth and fully implement its business plan.
5. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable are stated net of an allowance for doubtful accounts of
$29,819; (2004 - $nil, 2003 - $Nil).
F-14
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
6. SUBSIDIARIES ------------AND DISCONTINUED OPERATIONS
----------------------------------------
International E-Gaming Developers Inc.
On November 3, 2000, the Company incorporated a wholly ownedwholly-owned subsidiary,
International E-Gaming Developers, Inc. under the laws of Antigua and
Barbuda as an international business corporation. E-Gaming Inc. was
incorporated to engage in Internet gaming, including international betting,
gaming, sports betting and bookmaking activities along with wagers on
sporting events taking place outside the Caribbean Community region from
residents of countries outside the Caribbean Community region. E-Gaming Inc. was primarily
engaged in the operation and marketing of Internet gaming sites. During the
2002 fiscal year, ended December 31, 2002, the Company took overassumed all of the operations of E-Gaming
Inc. International E-Gaming Developers NV
On November 8, 2001,Due to changes in United States law, the Company incorporated a wholly owned subsidiary,
International E-Gaming Developers NV (hereinafter "E-Gaming NV"), a limited
liability company, under the laws of Curacao, Netherlands Antilles.
E-Gaming NV was incorporated to engage in the operation of games of chance
in the international market via service lines. E-Gaming NV is primarily
engaged in the operation and marketing ofceased its Internet
gaming sites. Duringactivities during the year ended December 31, 2002,fourth quarter of fiscal 2006. Management is
of the Company took over allopinion that the net assets and results of operations of International E-Gaming Developers NVthe
Company's gaming operations are not material to the accompanying
consolidated financial statements. Accordingly, the financial statements do
not present the assets, liabilities and dissolved the Company in 2003.results of operations of these
activities separately as discontinued operations.
Ontario Private Water Labelling Limited
In 2003 the Company incorporated a wholly ownedwholly-owned subsidiary, Ontario Private
Water Labelling Limited, under the laws of Canada. Through this subsidiary,
management intendsintended to approach corporate and retail entities that wish to
use their own label on bottled water as promotional or marketing tools.
Additionally, the Company intendsintended to market its own line of bottled spring
water to sell at concerts, sporting events, and other venues. The business
of Ontario Private Water Labelling Limited has been discontinued, and its
net assets and results of operations are not material to the accompanying
consolidated financial statements. Accordingly, the financial statements do
not present the assets, liabilities and results of operations of Ontario
Private Water Labelling Limited separately as discontinued operations.
Page 13
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
4. SUBSIDIARIES AND DISCONTINUED OPERATIONS (continued)
----------------------------------------
Celebrity Tan Inc.
In 2003, the Company incorporated a wholly ownedwholly-owned subsidiary, Celebrity Tan
Inc. under the laws of Canada. Celebrity Tan Inc. was incorporated to
engage in the building and distribution of UV-free tanning stalls. These
stand-up tanning booths spray a fine mist of sunless tanning solution onto
the customer. The Company also intendsintended to market through this subsidiary
its own line of sunless tanning products. F-15The business of Celebrity Tan
Inc. has been discontinued, and its net assets and results of operations
are not material to the accompanying financial statements. Accordingly, the
financial statements do not present the assets, liabilities and results of
operations of Celebrity Tan Inc. separately as discontinued operations.
Summarized financial information as a result of discontinued operations is
as follows:
December 31, December 31,
2007 2006
--------- ---------
Cash $ 320 $ 128
Accounts receivable -- 7,451
Inventory -- 12,872
Prepaid expenses and deposits 9,434 32,563
--------- ---------
Total Assets $ 9,754 $ 53,014
--------- ---------
Bank loan $ 23,539 $ 28,603
Accounts payable and accrued liabilities 575,893 450,815
--------- ---------
Total liabilities $ 599,432 $ 479,418
--------- ---------
December 31, December 31, December 31,
2007 2006 2005
--------- --------- ---------
Revenues $ 1,246 $ 113,204 $ 163,889
Cost of revenues 10,013 (120,446) 141,423
--------- --------- ---------
Gross profit (loss) $ (8,767) $ 233,650 $ 22,466
Operating expenses 25,781 343,178 356,890
--------- --------- ---------
Loss from discontinued operations $ (34,548) $(109,528) $(334,424)
--------- --------- ---------
Page 14
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
7.5. PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost. Depreciation is provided using
the declining balance method over the estimated useful lives of the assets
ranging from 20% to 100%.
The following is a summary of property and equipment and accumulated
depreciation:
2005 2004 2003
-------- -------- --------2007 2006
------- -------
Office equipment $ 25,167 $ 24,363 $ 24,216$29,601 $25,167
Computer hardware 3,452 1,713 1,658 --
Computer software -- 1,444
1,398 1,301
-------- -------- --------------- -------
Total cost 33,053 28,324
27,419 25,517
AccumulatedLess: accumulated depreciation (23,887) (20,631) (15,724)
-------- -------- --------28,592 24,858
------- -------
Net book value $ 4,4374,461 $ 6,788 $ 9,793
======== ======== ========
Depreciation expense for the years ended December 31, 2005, 2004 and 2003
was $2,477, $3,465 and $2,504 respectively.
8.3,466
======= =======
6. BANK LOAN
---------
During fiscal 2004, The Company's wholly-owned subsidiary, Celebrity Tan
Inc. was advanced, received the proceeds of a $50,000 (CDN)CDN loan. The Companyloan is required to makerepayable in
monthly principal payments of $800
(CDN) and monthly$833 CDN plus interest at the TD Canada Trust prime rate plus 1%. The
loan is unsecured and due on demand. Due to the demand feature, the
liability is presented in the accompanying consolidated financial
statements as current.
Future principal payments in U.S. dollars are as follows:
2006 $8,234
2007 $8,234
2008 $8,234$10,088
2009 $8,234$10,088
2010 $4,231
Interest expense for$ 3,363
7. NOTES PAYABLE
-------------
The notes are due to an arm's-length third party, bear interest at 12% per
annum, payable monthly, and are unsecured and repayable upon demand. Due to
the period was $945.
9. NOTE PAYABLE
------------
On December 11, 2000, the Company signed a promissory notedemand features, these notes are presented in the amount of
$25,000 (CDN) in connection withaccompanying
consolidated financial statements as current liabilities.
8. LOAN PAYABLE - RELATED PARTY
- -- ----------------------------
The Company was indebted to a letter of intent. (See Note 17).director. The note is non-interest bearing, uncollateralizedloan bore interest at 5% per
annum and is due on demand. As of
December 31, 2003, thiswas unsecured. The loan was recorded at $19,318. Duringrepaid during fiscal 2007 through
the issuance of stock for $101,928 and payment of cash of $35,368.
Interest for the year ended December 31, 2004 the Company terminated the letter of intent and after
paying $1,990, wrote off the remaining balance as forgiveness of debt and
is included in the "Other Income and Expense" section of the consolidated
statements of operations.
F-162007 amounted to $33,309 (2006 -
$16,122).
Page 15
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
10.9. LOANS PAYABLE - RELATED PARTIES
-------------------------------
OnAs at December 31, 2005, 2004, and 2003,2007, the Company owedwas indebted to certain of its
officers, directors and stockholders $387,637, $540,923, and $544,447 respectively,in the amount of $268,735 for cash
advances, consulting feesservices and expenses paid on behalf of the Company.
These related party loans are uncollateralized,unsecured, non-interest bearing and due onrepayable upon demand.
11. LOAN PAYABLE - RELATED PARTY
----------------------------
The Company is indebtedDue to the director of the Companydemand features, these loans are presented in the amount of
$162,702, bearing interest at 5% and due upon demand. The interest for the
year was $13,908.
12.accompanying
consolidated financial statements as current liabilities.
10. DEFERRED INCOME TAX ASSETS
--------------------------TAXES
At December 31, 2005, 20042007, 2006 and 2003,2005, the Company had net deferred tax
assets, calculated at an expected rate of 44%33% (36% 2006 and 2005), of
approximately $1,056,000,
$850,000$1,461,000, $994,000, and $780,000$864,000, respectively, principally
arising from net operating loss carryforwardscarry forwards for income tax purposes. As
management of the Company cannot determine that it is more likely than not
that the Company will realize the benefit of the net deferred tax asset, a
valuation allowance equal to the net deferred tax asset washas been recorded
at December 31, 2007, 2006 and 2005.
A reconciliation of combined federal and provincial corporate income taxes
at the Company's effective tax rate of 33% (2006 and 2005 2004
and 2003.- 36%) is as
follows:
2007 2006 2005
----------- ----------- -----------
Net loss before income taxes $(3,096,225) $ (961,889) $ (471,308)
=========== =========== ===========
Income taxes at statutory rates $(1,022,000) $ (348,000) $ (170,000)
Tax effect of expenses not deductible for
income tax purposes:
Stock-based compensation $ 135,000 183,000 --
Shares issued for services $ 550,000 28,500 --
----------- ----------- -----------
(337,000) (136,500) (170,000)
Change in valuation allowance 337,000 136,500 170,000
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
The significant components of the deferred tax asset at December 31, 2005, 20042007,
2006 and 20032005 were as follows:
2007 2006 2005
2004 2003
----------- ----------- -----------
Net operating loss carryforwardscarry forwards $ 2,401,0004,427,000 $ 1,930,0002,761,000 $ 1,790,0002,401,000
=========== =========== ===========
Deferred tax asset $ 1,056,0001,461,000 $ 850,000994,000 $ 780,000864,000
Deferred tax asset valuation allowance $(1,056,000) (850,000)$(1,461,000) $ (780,000)(994,000) $ (864,000)
At December 31, 2005,2007, the Company had net operating loss carryforwardslosses for income tax
purposes carried forward of approximately $2,401,000. The Company recognized approximately $1,458,000
of$4,427,000. These losses from issuance of restricted common stock and stock options for
services in prior fiscal years, which are not deductible for tax purposes
and are not included in the above calculation of net operating loss or
deferred tax assets. The change in the allowance account from December 31,
2003 to December 31, 2004 was $70,000 and the change in the allowance
account from December 31, 2004 to December 31, 2005 was $206,000.
The operating losses will begin to expire in
2008 through to 2015.
13. CONCENTRATIONS
--------------
Bank Accounts2027. The Company maintains five cash accounts at a Canadian bank. The Canadian
dollar accounts are insured up to a maximumultimate realization of $100,000, andfuture tax assets is dependent
upon the United
States dollar accounts are not insured. At December 31, 2005, 2004, and
2003, approximately $0, $0, and $400 were exposed to risk, respectively.
F-17generation of future taxable income.
Page 16
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
13. CONCENTRATIONS (continued)
--------------
Customers
Approximately 42% of the Company's sublicense agreements are represented by
one entity, which, in turn, resold the agreements to unrelated third
parties. This entity is owned and operated by a stockholder of the Company.
Licenses
The Company's license to gaming software is issued by World Gaming pursuant
to a gaming license issued by Antigua during 2001 and Curacao beginning in
November 2001. World Gaming is one of the few primary developers and
operators of casino and other gaming software in the world. During the
years ended December 31, 2005, 2004, and 2003, 100% of the Company's
revenue from Internet gaming software was attributable to the World Gaming
relationship. As part of the licensing agreement with World Gaming, the
Company has the right to sublicense its software. Because World Gaming is
the Company's sole licensor, the loss of the World Gaming relationship
could have a material adverse effect on the Company's revenues, operating
results and financial condition. Although the Company expects to diversify
risks associated with dependence on World Gaming by entering into
arrangements with additional licensors or developing and licensing its own
software to various licensees, there can be no assurance that such
diversification will be successful or that the Company will be able to
reduce its dependence on one or a small group of licensors.
14.11. COMMON STOCK
------------
The Company is authorized to issue an unlimited number of voting, common
shares according to its original charter. The Company's shares have no statedwithout par value. Each share of common stock is entitled to one vote at the
shareholders' meetings. Shares may be transferred with the consent of a
majority of the directors or the shareholders through resolution or by a
signed instrument.
In its original articles of incorporation, the Company
limited the number of shareholders to not more than fifty non-employee
individuals and any invitation to the public to subscribe for or purchase
securities of the Company was prohibited. On September 13, 2001, the
Company amended its articles of incorporation to lift the shareholder and
invitation restrictions.
On December 31, 2005, 20042007, 2006 and 2003,2005, the Company had 21,874,350, 21,509,35039,744,810; 26,499,182
and 20,566,60021,874,350 shares issued and outstanding, respectively. The Company has
not issued any options or warrants.
During the year ended December 31, 2003,2007, the Company issued 250,000 options
to one related individual and 250,000 options each to two arm's-length
individuals. The option have exercise price of $0.15 CDN - $0.71 US, and
vesting periods of immediately to one year from date of issuance. These
options expire at dates between April 2009 and June 2117. The fair value of
the options granted was $409,671 and was calculated using the Black-Scholes
option pricing model using the following assumptions:
Expected volatility: 254% -260%
Risk free interest rate: 4.5%
Expected life: 2 years
Dividend yield: 0%
At December 31, 2007, 750,000 options remained outstanding.
On October 31, 2006, the Company issued 1,600,000 options to a director at
an exercise price of $0.15 CDN vesting immediately, and a term of 10 years.
The fair value of the options granted was $507,662 and was calculated using
the Black-Scholes option pricing model using the following assumptions:
Expected volatility: 265%
Risk free interest rate: 4.5%
Expected life: 2 years
Dividend yield: 0%
During the year ended December 31, 2007, 800,000 options were exercised at
$0.15CDN per share. As payment for these options, the Company reduced the
amount of its outstanding liability to this director by $101,928. (See note
8.)
During the year ended December 31, 2006, 800,000 options were exercised at
$0.15 CDN per share. As payment for these options, the Company reduced the
amount of its outstanding liability to this director by $120,000.
During the year ended December 31, 2007, the Company sold for cash
796,5008,350,628 shares of common stock. This stock was sold for $1.00 Canadian (approximate
$0.77 U.S.)$1,650,503, cash,
less commissions of $355,905.
During the year ended December 31, 2004, the Company sold for cash 942,750
shares of common stock. This stock was sold for approximately $0.56 per
share or a total of $536,451 CDN (approximately $0.47 per share or $445,684
U.S.), less commissions of $220,927.
Also during the year ended December 31, 2004, the Company cancelled 10,000
shares of common stock that is sold for $10,000 CDN (approximately $8,303
U.S.) in 2004.
F-18$659,915.
Page 17
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
14.11. COMMON STOCK (continued)
------------
The Company also issued 842,774 shares of common stock during the 2007
fiscal year for services provided by non-employees and 2,660,000 shares of
common stock pursuant to the establishment of the Company's joint venture
agreement. These shares were valued at a total of $1,666,197.
During the year ended December 31, 2006, the Company sold for cash
3,374,832 shares of common stock. This stock was sold for $724,785 less
commissions of $200,560.
The Company also issued 200,000 common shares during the 2006 fiscal year
for services provided by non-employees and 250,000 common shares were
issued pursuant to the establishment of the Company's joint venture
agreement. These shares were valued at a total of $79,353.
During the year ended December 31, 2005, the Company sold for cash 365,000
shares of common stock. This stock was sold for approximately $0.05 per
share or a total of $23,095 CDN (approximately $0.05 per share or $19,809,
U.S.), less commissions
of $11,904.
15.12. RELATED PARTY TRANSACTION
-------------------------TRANSACTIONS
--------------------------
The Company rented commercialrents space in Toronto, Ontario beginning in 2003
withCanada, from a corporation controlled
by a director of the Company, under a month-to-month agreement for rent forat $3,500
(CDN).CDN per month. Rent expense for the year ended December 31, 2007 under this
lease amounted to $35,608 (2006 and 2005 was $37,608. Rent was paid- $38,847 and $37,608,
respectively). See also notes 8 and 9.
Related party transactions are recorded at the exchange amount established
and agreed to a
corporation that is controlled bybetween related parties and are in the director. As at December 31, 2005,
the Company owed the corporation $39,025, which is recorded in accounts
payable.
16.normal course of
business.
13. INCOME (LOSS) PER SHARE
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted average number of shares outstanding during the
period. The weighted average number of shares is calculated by taking the
number of shares outstanding and weighting themthese shares by the amount of
time that they were outstanding. Diluted earnings per share is computed by
dividing the net income (loss) adjusted for interest expense on convertible
debt by the weighted average number of basic shares outstanding increased
by the number of shares that would be outstanding assuming conversion of
any stock options, warrants, and convertible debt. Diluted net income
(loss) per share for the year ended December 31, 2005 is the same as basic
net income (loss) per share as there arewere no common stock equivalents
outstanding. 17. LETTER OF INTENT
----------------
On December 4, 2000, the Company signed a letter of intent with a company
listed on the Canadian Exchange. As a result of this agreement, the Company
received $25,000 Canadian ($15,860 U.S.) and issued an uncollateralized
demand promissory noteDiluted net income (loss) per share for the sum received. While the companies mutually
withdrew from the letter of intent during March 2001, the related note
remains unpaid attwo most recent
years ended December 31 2003.
In April 2004, settlement for $2,500 CDN (approximately $1,990 U.S.) was
made andhas not been presented as the balance was written off. See Note 9.
F-19effect would be
anti-dilutive.
Page 18
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
18. COMMITMENTS AND14. CONTINGENCIES
-----------------------------
Potential Lawsuit-------------
In November 2004, 3084735 Nova Scotia Limited, a Canadian corporation organized
under the Laws of Nova Scotia, Canada, filed an action against Mega Sun
Inc., Celebrity Tan Inc. and Ray Zinckan independent salesperson alleging breach of
implied warranty, breach of contract, misrepresentation and sale of a
defective product in connection with the sale of a tanning mist booth. The
booth was manufactured by Mega Sun Inc., an entity unaffiliated with the
Company or Celebrity Tan Inc., and sold to Nova Scotia Limitedthe plaintiff by Celebrity Tan
Inc., through Ray Zinck, anthe independent salesperson. The action seeks damages in the
amount of the purchase price of approximately $30,000, plus$50,000, including interest
and costs.costs at December 31, 2006. Celebrity Tan Inc. has filed a timely defense in
response to the claim, denying all allegations in the complaint, and has
also filed a cross complaint against Mega Sun Inc. The action is currently
in the pretrial stage. While Celebrity Tan Inc. will vigorously defend this
matter, the outcome of the litigation is not certain at this time. Offer To Settle
In June 2005, the Company and its Director, Michael Donaghy, entered into a
settlement agreement and undertaking with the Alberta Securities
Commission. In the agreement, the Company and Mr. Donaghy acknowledged that
they breached sections 75(1)(a) and 110(1) of the Securities Act, R.S.A.
2000, c. S-4 (the "Act") in connection with an alleged illegal distribution
of the securities of the Company by an independent consultant hired by the
Company to sell its securities. The Company and Mr. Donaghy relied on the
accredited investor exemption of the Act to distribute the shares of the
Company and also relied upon the expertise and experience of the sales
consultant with which the Company had contracted. As part of the
settlement, the CompanyNo
accrual for this litigation has agreed to pay the Commission Forty Two thousand
dollars ($42,000 CDN) and Mr. Donaghy agreed that all the exemptions
containedbeen made in the Alberta Securities Act will not apply to him for two (2)
years from the date of the agreement, except that he may trade in
securities for his personal account through an agent that is a registered
dealer.
Uncertainty as to the Legal Status of Internet Gaming
The Company, its software licensees and its sub-licensees are subject to
applicable laws in the jurisdictions in which they operate. Due to the
relatively recent development of casino gaming over the Internet, there are
limited direct regulations that deal with this application and there is
uncertainty in certain jurisdictions as to the legal status of gaming over
the Internet. Currently, the United States does not have federal
legislation regulating Internet gambling, however, there have been several
bills introduced to prohibit or restrict Internet gaming. There can be no
assurance whether any such bill will become law in the future, the effects
of which are uncertain.
F-20
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
18. COMMITMENTS AND CONTINGENCIES (continued)
-----------------------------
During the year ended December 31, 2003, the United States House of
Representatives Financial Services committee introduced two resolutions
regarding Internet gambling and the United States Senate Banking, Housing,
and Urban Affairs committee introduced one bill of the same nature. The
Senate bill and one of the House resolutions call for the prohibition of
monetary banking transactions over the internet to gaming sites. This would
make any payments to an online casino that take place through wires, credit
cards, or debit cards illegal in the United States. The second House
resolution calls for the formation of commission to study Internet gambling
licensing and regulation. As of the date of theseaccompanying financial
statements,
none of the proposals has been finalized.
Computer Security
The Company operates in an industry, which is vulnerable to attacks upon
its computer operating security. The risks to the Company's operations are
significant and will require continued monitoring to minimize the effects
of any possible attacks from outside.
Dependence on Key Licensor and Licensees
The original term of the Company's license agreement with World Gaming was
for one year. In November 2001, the Company signed a five-year license
agreement with World Gaming. The terms of the underlying license or
sublicense agreements vary, although averaging ten-year terms and providing
for automatic renewal periods of ten years. There is a risk that the
Company's license agreement with World Gaming or the license or sublicense
agreements with licensees (or sub-licensees, as the case may be) will not
be renewed or will otherwise be terminated in accordance with the terms of
such agreements. In addition, in the event that a licensee or sub-licensee
chooses to operate a different casino, there can be no assurances that such
new casino will be operated using the Company's software.
The trademarks or trade names under which all of the Company's licensees
operate are the property of the respective licensees. Although the Company
is generally entitled to continued operation of a casino on termination of
a license or sublicense agreement, in certain cases this entitlement is
limited and it generally does not include the operation of the casino under
the existing name. A change in the name of the casino may lead to a loss of
goodwill, as various methods needed to direct a customer to the new site
cannot be completely relied upon.
Office Lease
The Company's wholly owned subsidiary, Celebrity Tan Inc. leased corporate
office space located in Toronto, Ontario on December 1, 2003 for a period
of 36 months. Lease payments are currently $1,349 Canadian (approximately
$1,113 U.S.) per month. Total payments for the year ended December 31, 2005
were $16,187 CDN (approximately $13,360 U.S.). The lease expires on
December 31, 2006, future payments in 2006 are $13,884.
F-21
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
19. SEGMENT INFORMATION
-------------------
As described in Note 2, the Company adopted SFAS No. 131 in its fiscal year
2000. The Company's operations are classified into three principal
reporting segments that provide different products or services. Separate
management of each section is required because each business unit is
subject to different marketing, production, and technology strategies.
Segment information (after intercompany eliminations) is as follows:
2005 2004 2003
--------- --------- ---------
Revenues:
Oxford Software Developers, Inc. $ 107,641 $ 391,176 $ 380,623
Ontario Private Water Labelling Limited -- 2,508 --
Celebrity Tan Inc. 56,248 301,565 58,534
--------- --------- ---------
Total Revenues $ 163,889 $ 695,249 $ 439,157
========= ========= =========
Operating Income (Loss):
Oxford Software Developers, Inc. $(309,437) $(117,178) $(169,120)
Ontario Private Water Labelling Limited (4,923) (2,149) 128
Celebrity Tan Inc. (136,669) (26,821) (34,858)
--------- --------- ---------
Net Loss $(451,029) $(146,148) $(203,850)
========= ========= =========
Identifiable Assets:
Oxford Software Developers, Inc. $ 28,421 $ 101,766 $ 100,601
Ontario Private Water Labelling Limited -- 9,008 114
Celebrity Tan Inc. 34,306 176,980 56,595
--------- --------- ---------
Total Identifiable Assets $ 62,727 $ 287,754 $ 157,310
========= ========= =========
Depreciation
Oxford Software Developers, Inc. $ (2,477) $ (3,465) $ (2,504)
Ontario Private Water Labelling Limited (--) (--) (--)
Celebrity Tan Inc. (--) (--) (--)
--------- --------- ---------
Total Depreciation $ (2,477) $ (3,465) $ (2,504)
========= ========= =========
All of the Company's assets are held in Canada at December 31, 2005.
Oxford's reportable segments are strategic business units that offer
different products or services. They are managed separately because each
business requires different technology and marketing strategies.
F-22
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
20.statements.
15. SUBSEQUENT EVENTS
-----------------
a) On April 5, 2006,March 20, 2008, the Board of Directors agreed that the directors
would accept 60,000 common stock of the Company, entered intovalued at $0.05 CDN a
definitive agreement with
Christopher Webster for the acquisition of all of the assets of
WebStar Internet Solutions ("WebStar"), a company wholly-owned by Mr.
Webster. The Company issued 1,000,000 shares of its common stock with
no par value to Mr. Webstershare as consideration for directors' fees to the acquisitionend of December,
2008. The directors received these shares on March 20, 2008.
b) On March 20, 2008, the Board of Directors agreed that each director
would be granted an option to purchase 200,000 shares of the assetsCompany at
the price of WebStar.$0.12 CDN each for serving as a Director in the year 2007.
The transaction was completed on April 5, 2006.
b) Theoptions expire March 2013.
c) Subsequent to December 31, 2007, the Company issued 133,3321,975,000 common
shares in the subsequent period for a total consideration of $20,000 (CDN).
F-23$102,308, cash.
16. FINANCIAL INSTRUMENTS
---------------------
The Company's financial instruments comprise accounts receivable, bank
indebtedness and bank loan, accounts payable and accrued liabilities and
loans and notes payable. In management's opinion, the fair value of these
instruments approximates carrying value due to their short maturities.
Currency Risk The Company is exposed to certain currency risks that the
value of certain financial instruments will fluctuate due to changes in
foreign exchange rates. Historically, the Company has not entered into
derivatives contracts to hedge existing risks or for speculative purposes.
Interest Rate Risk The Company is exposed to interest rate risk arising
from fluctuations in interest rates on its short-term borrowings and other
obligations. The Company's borrowing and obligations loans bear interest at
fixed and variable rates. Management is of the opinion that the Company is
not exposed to significant interest rate risks in respect of these
instruments as these resemble rates available in the current market for
debt of similar terms and maturities, except for debt with related parties.