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
[_] 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:
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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.
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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.
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The number of outstanding shares of the issuer's common Stock as of December 31,
2005: 21,874,350
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]
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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]
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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
History and Development of the Company 12
Business Overview 12
Organizational Structure 19
Property, Plants and Equipment 20
Item 4A Unresolved Staff Comments 20
Item 5. Operating and Financial Review and Prospects 20
Operating Results 22
Liquidity and Capital Resources 24
Research and Development 25
Trend Information 25
Off-balance sheet arrangements *
Tabular disclosure of contractual obligations *
Safe harbor 26
Item 6. Directors, Senior Management and Employees 27
Directors and Senior Management 27
Compensation of Directors and Officers 27
Board Policies 28
Employees 28
Share Ownership 28
Item 7. Major Shareholders and Related Party Transactions 28
Major Shareholders 28
Related Party Transactions 28
Item 8. Financial Information 29
Consolidated Statements and Other Financial Information 29
Significant Changes 29
Item 9. The Offer and Listing 30
Item 10. Additional Information 31
Share Capital *
Memorandum and articles of incorporation 30
Material Contracts 31
Exchange Controls 31
Taxation 31
Dividends and paying agents *
Statements by experts *
Documents on display 37
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 *
Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds *
Item 15. Controls and Procedures 37
Item 16A. Audit Committee Financial Expert 38
Item 16B. Code of Ethics 38
Item 16C. Principal Accountant Fees and Services 38
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
Item 18. Financial Statements 39
Item 19. Exhibits 40
SIGNATURES 41
CERTIFICATIONS 42
* 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 and 2005 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
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Statement of Operations Data:
- -----------------------------
Total revenues $ 401,793 $ 298,550 $ 439,157 $ 692,069 $ 163,889
Net Income/(Net Loss) (2,117,900) (748,796) (331,127) (139,368) (471,308)
Basic and diluted
net loss per share - (0.12) (0.04) (0.02) (0.01) (0.02)
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
Balance Sheet Data:
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Cash and cash equivalents $ 508 $ 637 $ 11,745 $ 28,553 $ 0.00
Total current assets 107,879 48,246 147,516 286,095 58,290
Total assets 523,488 57,121 157,309 292,883 62,727
Total current liabilities 525,774 780,366 1,126,698 1,260,151 1,544,956
Total liabilities 525,774 780,366 1,126,698 1,260,151 1,544,956
Total accumulated deficit (2,218,796) (2,967,592) (3,298,719) (3,438,087) (3,909,395)
Total stockholders' equity (deficit) (2,286) (723,245) (969,389) (967,268) (1,482,229)
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
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Average for Period
.83 .81 .71 .63 .65
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High for Period
.86 .85 .78 .65 .67
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Low for Period
.80 .72 .64 .63 .63
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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 2005 and 2006. The exchange rates used are the
closing rates as provided by the Bank of Canada.
- -------------------------------------------------
Month High Low
- -------------------------------------------------
December 2005 .86 .86
- -------------------------------------------------
January 2006 .87 .86
- -------------------------------------------------
February 2006 .87 .87
- -------------------------------------------------
March 2006 .87 .86
- -------------------------------------------------
April 2006 .88 .87
- -------------------------------------------------
May 2006 .90 .90
- -------------------------------------------------
The exchange rate on December 31, 2005 for the conversion of United States
dollars into Canadian dollars was $1.16 (CDN$1.00 = US$0.86). As of May 31, 2006
the close rate of exchange for the conversion of United States dollars into
Canadian dollars was $1.10 (CDN$1.00 = US$0.90). The exchange rates used are the
noon buying rates in New York City for cable transfers in foreign currencies, as
certified for customs purposes by the Federal Reserve Bank of New York.
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. Our prospects must
be considered in light of the risks, expenses and 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 advertiser 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 consumables 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 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 we have some
revenues, 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 success of implementing our business plan;
.obtaining the necessary funding to grow our business; and
.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. 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.
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, or our failure to add new customers;
o our ability and the ability of our customers to attract and retain a
large retail audience for our products;
o our ability to attract and retain advertisers and sponsors;
o seasonal trends in sunless tanning ;
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.
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 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
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 software 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, Michael Donaghy, our sole director, indirectly
through his spouse, beneficially owned approximately 8,300,000 shares or 37.94%
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.
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
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 four 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; Ontario Private Water Labeling Ltd.
incorporated under the laws of Ontario, Canada on May 28, 2003; and WebStar
Internet Solutions incorporated under the laws of Ontario, Canada on March 9,
2006. 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 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. The Company intends to
grow these segments of its business but is continuing to aggressively seek and
develop new business venture opportunities. The Company will maintain sales and
distribution control of its product lines once they are established in their
respective markets. On April 5, 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 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 industry to
the delivery of software solutions to that market. However, the Company intends
to use Egaming's gaming experience 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 this is the ability to offer
casino games 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 predicted 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
be 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
EGaming has an agreement with World Gaming Plc, the global leader in
internet gaming software development. While Egaming itself does not participate
in online gaming, it resells World Gaming e-gaming software products to clients
wishing to participate in the potential profits of the online gambling business.
EGaming 's also intends to enter into a distribution arrangement that
allows the Company to exploit 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 upgrading and expansion by casino operators.
13
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
markets 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 winnings to the location manager. This allows 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, to the live horseracing paramutual web
simulcasts, international lottery ticket brokerage and other live webcast
events. We intend to make this type 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 systems
for use by third-party corporations. The Company will establish relationships
with government and independent gaming organizations to get its land-based
gaming product line recognized, and promote benefits 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
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.
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 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.
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 '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.
Ontario Private Water Labeling Ltd.
- -----------------------------------
Ontario Private Water Labeling Ltd. ("OPWLL"), our wholly-owned subsidiary,
specializes in bottled water distribution and sales. Through an arrangement 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 associations with the entertainment industry, the Company will market
its water product for sale at venues such as concerts, theatre performances, and
sporting events, with the ultimate goal 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.
19
C. Organizational Structure
OXFORD INVESTMENTS HOLDINGS INC
--------------------
|
|
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| | | |
| | | |
- ---------------------- -------------- -------------- --------------
INTERNATIONAL EGAMING CELEBRITY TAN, ONTARIO PRIVATE WEBSTAR INTERNET
DEVELOPERS, INC. (100%) INC. (100%) WATER LABELLING, SOLUTIONS INC.
LTD. 100%) (100%)
- ---------------------- -------------- -------------- --------------
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 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.
20
Our consolidated financial statements are prepared in accordance 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
Our product revenue consists of 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, royalties and revenue sharing arrangements on
e-commerce transactions.
Revenue Recognition
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 and 2005. 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, 2005
- ------------------------------------
Revenues
--------
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% from the prior year and
e-gaming royalties accounted for 66% of revenue, an increase of 11% 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 or 0.02% 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.
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 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 used
$9,416 to repay 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.
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) 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), 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.
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 its operations through revenues from the sale
of its products, the Company will also require both internal and external
sources of liquidity.
To provide working capital for its operations and project development, the
Company may 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,
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, the Company believes that it will
need approximately CAD$360,000 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 2006 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, 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 Gaming 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)."
In the fiscal years2005, 2004, 2003, 2002 and 2001, the Company did not
have any research, development or patent expenses.
D. 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 gaming transactions globally and the
market audience for our UV free tanning and spring water distribution 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.
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
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. Specifically, we believe that our UV-free tanning booths and product
sales will increase as our brand name becomes more entrenched in the market and
as we focus on developing more partner distribution channels. In addition, we
anticipate that our gaming purchases and activity will continue to increase as
we focus on providing a wide variety of gaming opportunities. We expect such
increases to occur primarily as a result of a marketing plan and the development
of relationships with various land-based casinos. We expect to grow sales of our
Water Rocks(TM) through associations with the entertainment industry. The
Company will market its water product for sale at venues such as concerts,
theatre performances, and sporting events, with the ultimate goal of making its
branded water a status product available on the retail market.
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.
We are projecting positive cash flow for the fiscal year ending December
31, 2006, but anticipate increased expenses. 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 lines of business through
expanding our customer base and improving functionalities based on customer
needs, requests and requirements. In the event that we target an appropriate
acquisition or licensing candidate, which we currently have not, 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. At the date hereof, we have no firm commitments from
anyone to provide additional funding.
26
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, has been our President,
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.
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, $125,000 for the fiscal years ended December 31, 2002, December 31, 2003,
December 31, 2004 and December 31, 2005, as the Company's President and Chief
Executive Officer. No other compensation was paid to our executive officers.
We do not presently pay any cash compensation to directors for serving on
our board, but we do reimburse directors for out-of-pocket expenses for
attending board meetings.
Executive Compensation
The following table sets forth the a summary of compensation earned during
the Company's last three fiscal years by the Company's directors and members of
its administrative, supervisory or management bodies and its subsidiaries for
services in all capacities to the company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Restricted Securities LTIP All Other
Name and Fiscal Cash Other Annual Stock Underlying Payouts Compensation
Principal position Year compensation Compensation Award(s) Options (#)
(US$) (US$)
Michael Donaghy 2005 $125,000 - - - - -
Director and
President & Chief 2004 $125,000 - - - - -
Executive Officer
2003 $125,000 - - - - -
C. Board Practices. While not required, the Company's director 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, the Company does not have separate audit or
compensation committees.
27
D. Employees. As of December 31, 2005, we had a total of five (5) employees
(four (4) full-time and one (1) 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.
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. As of December 31, 2005 there were 21,874,350 shares of common stock
outstanding.
Name and Address of Position with the Number of Shares
Beneficial Owner (1) Company Owned Percent
- -------------------- ------- ----- -------
Michael Donaghy (2) Chief Executive Officer 8,300,000 37.94%
CEDE & Co. N/A 13,288,762 60.75%
P.O. Box 222
Bowling Green Station
New York, NY 10274
All Officers and 8,300,000 37.94%
Directors as a Group
(1 Person)
(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.
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, the Company owed officers, directors and stockholders
$387,637, $540,923 and $544,447, respectively, for cash advances, consulting
fees and expenses paid on behalf of the Company. These related party loans are
uncollateralized, non-interest bearing and due on demand. The loan payable to
the director in the amount of $162,702 bears interest at a rate of five percent
(5%) per annum.
Approximately 33% of the Company's Egaming customers are represented by one
entity, which is owned and operated by a stockholder of the Company. This
related party currently has no accounts receivables included 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.
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.
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.
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.
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 OTCBB, it is
very thinly traded and as of December 31, 2005, 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 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
2006 (through June 27, 2006) $0.43 $0.04
May $0.13 $0.13
April $0.17 $0.15
March $0.08 $0.08
February $0.10 $0.04
January $0.06 $0.06
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,
2006 was $0.23.
Item 10. Additional Information
A. Share Capital.
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 president 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 30th
2008. 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.
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 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
- ------------------
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.
34
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 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, 2005 and does not believe that it will be a PFIC for the fiscal
year ending December 31, 2006. 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.
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 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 such controls and
procedures were reasonably designed to ensure that information required to be
disclosed by the Company in reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and
the circumvention or overriding of such controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives.
Changes in Internal Controls
No significant change has occurred in the Company's internal controls or in
other factors since the date of the evaluation that could significantly affect
these controls, nor have there been any corrective actions with regard to
significant deficiencies and material weaknesses in the Company's internal
controls.
37
Item 16A. Audit Committee Financial Expert
Since the Company has only one member on its Board of Directors, the
Company does not yet have an audit committee and 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 as soon as an appropriate individual is found.
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. during
the last two fiscal years:
2004 2005
Audit fees $16,691.00 $7,300.00
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
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. 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-1
Consolidated Balance Sheet as at December 31, 2003, December 31, 2004
and December 31, 2005 ......................................................F-3
Consolidated Statements of Operations for the years ended December 31,
2003December 31, 2004 and December 31, 2005.................................F-4
Statement of Stockholders Equity for the year ended, December 31, 2003
December 31, 2004 and December 31, 2005.....................................F-5
Consolidated Statements of Cash Flows for the year ended
December 31, 2003, December 31, 2004 and December 31, 2005 .................F-6
Notes to Consolidated Financial Statements...................................F-7
39
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 Number
- ----------- ----------- ------
1.1 Articles of Incorporation........................................*
1.2 Bylaws...........................................................*
2.1 Specimen Stock Certificate.......................................*
4.1 Agreement with Starnet Systems International Inc.,
dated January 25, 2001.........................................*
4.2 Specimen Affiliate Sub-License Agreement.........................*
4.3 Asset Purchase Agreement with Suchow Holdings Ltd.
dated April 26, 2001...........................................*
4.4 Exhibits to Agreement with Starnet Systems International
Inc., dated January 25, 2001...................................*
4.5 Mutual Release with CCPC Biotech Inc. dated March 1, 2001........*
4.6 Sub-License Agreement between Starnet Systems N.V. and
International E-Gaming Developers N.V. dated
November 20, 2001..............................................*
4.7 Employment Agreement between Oxford Software Developers
Inc. and Michael Donaghy dated July 1, 2001....................*
4.8 Employment Agreement between Oxford Investments Holdings
Inc. and Victor DeLaet dated July 1, 2001......................*
4.9 Agreement between Oxford Software Developers Inc. and West
America Securities Corp. dated March 7, 2002...................*
4.10 Asset Purchase Agreement with Christopher Webster
dated April 5, 2006...........................................
8.1 List of 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.........................44
99.2 Certificate of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.........................45
* 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.
Financial Statement Schedules
None.
40
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, 2006 By: /S/Michael Donaghy
--------------------------------
Michael Donaghy, President/Chief
Executive Officer
41
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
42
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
43
OXFORD INVESTMENTS HOLDINGS INC.
Consolidated Financial Statements
December 31, 2005
OXFORD INVESTMENTS HOLDINGS INC.
INDEX
December 31, 2005
PAGE
2005 REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM F-1
2004 REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - Statement I F-3
Consolidated Statements of Operations - Statement II F-4
Consolidated Statements of Shareholders' Equity - Statement III F-5
Consolidated Statements of Cash Flows - Statement IV F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-7 - 23
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, 2005 and the consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. 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 audit 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 provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oxford Investments Holdings
Inc., as of December 31, 2004 and 2003, and the related statements of operations
and other comprehensive income (loss), stockholders' equity and its cash flows
for the year then ended 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 discussed in note 2 to the
financial statements, the Company has generated insufficient revenue 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
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding this issue are also discussed in Note 2.
The 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-2
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
- ------------------------------------------------ ----------- ----------- -----------
Commitments and contingent liabilities (note 18)
__________________________, Director
(The accompanying notes are an integral part of these financial statements.)
F-3
OXFORD INVESTMENTS HOLDINGS INC. Statement II
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Operations
For The Year Ended December 31, 2005
- -------------------------------------------------------------------------------------------
2005 2004 2003
- -------------------------------------------- ------------ ------------ ------------
REVENUES
Licenses $ -- $ -- $ 96,600
Services 107,641 395,933 284,023
Product 56,248 296,136 58,534
- -------------------------------------------- ------------ ------------ ------------
163,889 692,069 439,157
- -------------------------------------------- ------------ ------------ ------------
COST OF REVENUES
Licenses 40,641 9,549 70,976
Services 26,644 204,559 209,345
Product 74,138 136,143 41,067
- -------------------------------------------- ------------ ------------ ------------
141,423 350,251 321,388
- -------------------------------------------- ------------ ------------ ------------
GROSS PROFIT 22,466 341,818 117,769
- -------------------------------------------- ------------ ------------ ------------
SELLING EXPENSES
Advertising and marketing 8,146 43,958 49,614
Commissions and subcontracts 5,282 34,252 --
Consulting 34,263 33,579 7,115
Communications 26,183 12,545 14,399
Travel 4,986 16,742 4,044
- -------------------------------------------- ------------ ------------ ------------
78,860 141,076 75,172
- -------------------------------------------- ------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Bad debts 82,600 1,166 --
Consulting 136,884 161,190 119,946
Depreciation 2,477 3,465 2,504
General and office 10,692 1,769 44,219
Professional fees 58,227 93,660 73,906
Rent 50,968 46,128 38,086
Telephone 7,074 -- --
Wages and benefits 45,713 33,757 74,854
- -------------------------------------------- ------------ ------------ ------------
394,635 341,135 353,515
- -------------------------------------------- ------------ ------------ ------------
LOSS FROM OPERATIONS (451,029) (140,393) (310,918)
OTHER INCOME (EXPENSES)
Interest expense (20,279) (16,303) (20,209)
Debt forgiveness -- 17,328 --
- -------------------------------------------- ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (471,308) (139,368) (331,127)
PROVISION FOR INCOME TAXES -- -- --
- -------------------------------------------- ------------ ------------ ------------
NET LOSS FOR THE YEAR (471,308) (139,368) (331,127)
OTHER COMPREHENSIVE GAIN (LOSS)
Foreign currency translation gain (loss) (51,558) (82,999) (174,567)
- -------------------------------------------- ------------ ------------ ------------
COMPREHENSIVE LOSS $ (522,866) $ (222,367) $ (505,694)
- -------------------------------------------- ------------ ------------ ------------
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.02) $ (0.01) $ (0.02)
- -------------------------------------------- ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF BASIC AND
DILUTED COMMON SHARES OUTSTANDING 21,765,254 20,958,721 20,018,107
- -------------------------------------------- ------------ ------------ ------------
(The accompanying notes are an integral part of these financial statements.)
F-4
OXFORD INVESTMENTS HOLDINGS INC. Statement III
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Shareholders' Equity (Deficit)
For The Year Ended December 31, 2005
- ----------------------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Other
Number Comprehensive Accumulated
of Shares Amount 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) (967,268)
Stock issued for approximately
$0.05 per share, $19,809
less expenses of $11,904 365,000 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)
- ---------------------------------- ------------- ------------- ------------- ------------- -------------
(The accompanying notes are an integral part of these financial statements.)
F-5
OXFORD INVESTMENTS HOLDINGS INC. Statement IV
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Cash Flows
For The Year Ended December 31, 2005
- --------------------------------------------------------------------------------------------
2005 2004 2003
- ------------------------------------------------------ --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(471,308) $(139,368) $(331,127)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation 2,477 3,465 2,504
Debt forgiveness -- (17,328) --
Change in assets and liabilities
Accounts receivable 126,592 (157,873) 14,487
Prepaid expenses and deposits 8,873 73,066 (58,672)
Inventory 63,787 (36,964) (43,977)
Accounts payable and accrued liabilities 224,525 147,695 222,799
Notes payable -- -- 3,458
Payable to related party -- -- 191,897
- ------------------------------------------------------ --------- --------- ---------
Net cash used by operating activities (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
Advances from bank loan 37,167 -- --
Payment of note payable -- (1,990) --
Cheques written in excess of common stock -- 8,600 (8,478)
Proceeds from sales of common stock, net 7,905 232,791 259,550
Shares cancelled -- (8,308) --
Payments on related party loans 9,416 (3,522) (63,345)
- ------------------------------------------------------ --------- --------- ---------
Net cash provided by financing activities 54,488 227,571 187,727
- ------------------------------------------------------ --------- --------- ---------
NET INCREASE IN CASH 9,434 100,264 187,412
FOREIGN CURRENCY TRANSLATION GAIN (LOSS) (51,684) (83,456) (176,304)
CASH, BEGINNING OF THE YEAR 28,553 11,745 637
- ------------------------------------------------------ --------- --------- ---------
CASH (BANK INDEBTEDNESS), END OF THE YEAR $ (13,697) $ 28,553 $ 11,745
- ------------------------------------------------------ --------- --------- ---------
Supplemental cash flow disclosures
Income taxes paid $ -- $ -- $ --
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 $ -- $ -- $ --
(The accompanying notes are an integral part of these financial statements.)
F-6
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
----------------------------------------
Oxford Investments Holdings Inc. (formerly, International E-Gaming
Developers Ltd.)(hereinafter "the Company") was originally incorporated
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 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), 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 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.
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 consolidated financial
statements. The consolidated financial statements are prepared in United
States dollars.
Basis of Preparation
The 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". All significant inter-company transactions and balances
have been eliminated upon consolidation.
Going Concern
These 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
period and there is negative working capital. The Company's ability to
realize its assets and discharge its liabilities in the normal course of
business is dependent upon continued support. 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 stated amounts of assets and liabilities be reflected on a
liquidation basis that could differ from 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. Actual results could
differ from those estimates.
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 Policy
In complying with the Financial Accounting Standards Board Statement titled
"Accounting for Impairment of long-lived Assets," the Company reviews its
long-lived assets quarterly to determine if any events or changes in
circumstances have transpired which indicate that the carrying value of its
assets may not be recoverable. The Company determines impairment by
comparing the undiscounted future cash flows estimated to be generated by
its assets to their respective carrying amounts. There was no impairment as
at December 31, 2005, 2004 or 2003.
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, their 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 translation of subsidiaries' financial
statements are included as a component of other comprehensive income (loss)
within 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-9
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
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
recognized as earned.
During the year ended December 31, 2004, the majority 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 owing 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 to all
voluntary changes in accounting principle and changes resulting from
adoption of a new accounting pronouncement that does not specify transition
requirements. 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 also requires that retrospective
application of a change in accounting principle be limited to the direct
effects of the change. Indirect effects of a change in accounting principle
should be recognized in the period of the accounting change. SFAS 154 is
effective for accounting 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. 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 flows of
the entity are expected 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-10
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In December 2004, the Financial Accounting Standards board issued Statement
of Financial Accounting Standards 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, "Accounting for
Real Estate Time-sharing Transactions." This statement also amends FASB
Statement No. 67, "Accounting for Costs and Initial Rental Operations of
Real Estate Projects," to state that the guidance for (a) incidental
operations 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 statement
is effective for financial statements for fiscal years beginning after June
15, 2005. Management believes the adoption of this statement will have no
impact on the financial statements of the Company.
In December 2004, the Financial Accounting Standards Board issued a
revision to Statement of Financial Accounting Standards No. 123R,
"Accounting for Stock Based Compensation." This statement supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and its related
implementation guidance. This statement establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services. 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 during fiscal years beginning after June 15, 2005. Management does
not believe the adoption of this statement will have any immediate material
impact on the Company.
F-11
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity"
(hereinafter "SFAS No. 150"). SFAS No. 150 establishes standards for
classifying and measuring certain financial instruments with
characteristics 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.
SFAS No. 150 is effective for financial statements entered into or modified
after May 31, 2003 and otherwise is effective at the beginning of the first
interim period beginning after June 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 Instruments 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. The adoption of SFAS No. 149
is not expected to have a material impact on the financial position or
results of operations of the Company.
In December 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" (hereinafter "SFAS No. 148").
SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the 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 annual
and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on
reported results. The provisions of the statement are effective for
financial statements for fiscal years ending after December 15, 2002. The
Company currently reports stock issued to employees under the rules of 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 and is effective for
activities after December 31, 2002. There has been no impact on the
Company's financial position or results of operations from adopting SFAS
No. 146.
F-12
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment 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 debt to be aggregated and,
if material, classified as an extraordinary item, net 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 does not believe that
the adoption will have a material effect on the 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 issued 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.
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
------------
International E-Gaming Developers Inc.
On November 3, 2000, the Company incorporated a wholly 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 year ended December 31, 2002, the Company took over all
operations of E-Gaming Inc.
International E-Gaming Developers NV
On November 8, 2001, 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 of Internet gaming sites. During the
year ended December 31, 2002, the Company took over all operations of
International E-Gaming Developers NV and dissolved the Company in 2003.
Ontario Private Water Labelling Limited
In 2003 the Company incorporated a wholly owned subsidiary, Ontario Private
Water Labelling Limited, under the laws of Canada. Through this subsidiary,
management intends to approach corporate and retail entities that wish to
use their own label on bottled 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.
Celebrity Tan Inc.
In 2003, the Company incorporated a wholly 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 intends to market through this subsidiary
its own line of sunless tanning products.
F-15
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
7. 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
-------- -------- --------
Office equipment $ 25,167 $ 24,363 $ 24,216
Computer hardware 1,713 1,658 --
Computer software 1,444 1,398 1,301
-------- -------- --------
Total cost 28,324 27,419 25,517
Accumulated depreciation (23,887) (20,631) (15,724)
-------- -------- --------
Net book value $ 4,437 $ 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. BANK LOAN
---------
The Company's subsidiary Celebrity Tan Inc. was advanced a $50,000 (CDN)
loan. The Company is required to make monthly principal payments of $800
(CDN) and monthly interest at the TD Canada Trust prime rate plus 1%. The
loan is due on demand.
Future principal payments in U.S. dollars are as follows:
2006 $8,234
2007 $8,234
2008 $8,234
2009 $8,234
2010 $4,231
Interest expense for the period was $945.
9. NOTE PAYABLE
------------
On December 11, 2000, the Company signed a promissory note in the amount of
$25,000 (CDN) in connection with a letter of intent. (See Note 17). The
note is non-interest bearing, uncollateralized and is due on demand. As of
December 31, 2003, this loan was recorded at $19,318. During 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-16
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
10. LOANS PAYABLE - RELATED PARTIES
-------------------------------
On December 31, 2005, 2004, and 2003, the Company owed officers, directors
and stockholders $387,637, $540,923, and $544,447 respectively, for cash
advances, consulting fees and expenses paid on behalf of the Company. These
related party loans are uncollateralized, non-interest bearing and due on
demand.
11. LOAN PAYABLE - RELATED PARTY
----------------------------
The Company is indebted to the director of the Company in the amount of
$162,702, bearing interest at 5% and due upon demand. The interest for the
year was $13,908.
12. DEFERRED INCOME TAX ASSETS
--------------------------
At December 31, 2005, 2004 and 2003, the Company had net deferred tax
assets, calculated at an expected rate of 44%, of approximately $1,056,000,
$850,000 and $780,000 respectively, principally arising from net operating
loss carryforwards 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 was recorded at December 31, 2005, 2004
and 2003. The significant components of the deferred tax asset at December
31, 2005, 2004 and 2003 were as follows:
2005 2004 2003
Net operating loss carryforwards $ 2,401,000 $ 1,930,000 $ 1,790,000
=========== =========== ===========
Deferred tax asset $ 1,056,000 $ 850,000 $ 780,000
Deferred tax asset valuation allowance $(1,056,000) (850,000) $ (780,000)
At December 31, 2005, the Company had net operating loss carryforwards of
approximately $2,401,000. The Company recognized approximately $1,458,000
of 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 Accounts
The Company maintains five cash accounts at a Canadian bank. The Canadian
dollar accounts are insured up to a maximum of $100,000, and 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-17
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 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. COMMON STOCK
------------
The Company is authorized to issue an unlimited number of common shares
according to its original charter. The Company's shares have no stated 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, 2004 and 2003, the Company had 21,874,350, 21,509,350
and 20,566,600 shares issued and outstanding respectively.
The Company has not issued any options or warrants.
During the year ended December 31, 2003, the Company sold for cash 796,500
shares of common stock. This stock was sold for $1.00 Canadian (approximate
$0.77 U.S.) 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
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
14. COMMON STOCK (continued)
------------
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. RELATED PARTY TRANSACTION
-------------------------
The Company rented commercial space in Toronto, Ontario beginning in 2003
with a month-to-month agreement for rent for $3,500 (CDN). Rent expense for
the year ended December 31, 2005 was $37,608. Rent was paid to a
corporation that is controlled by the director. As at December 31, 2005,
the Company owed the corporation $39,025, which is recorded in accounts
payable.
16. 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 them 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 is the same as basic net income (loss) per share as there are 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 note for the sum received. While the companies mutually
withdrew from the letter of intent during March 2001, the related note
remains unpaid at December 31, 2003.
In April 2004, settlement for $2,500 CDN (approximately $1,990 U.S.) was
made and the balance was written off. See Note 9.
F-19
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2005
- --------------------------------------------------------------------------------
18. COMMITMENTS AND CONTINGENCIES
-----------------------------
Potential Lawsuit
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 $30,000, plus interest
and costs. Celebrity Tan Inc. 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. 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 Company has agreed to pay the Commission Forty Two thousand
dollars ($42,000 CDN) 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.
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 these 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. SUBSEQUENT EVENTS
-----------------
a) On April 5, 2006, the Company entered into 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. Webster as consideration for the acquisition of
the assets of WebStar. The transaction was completed on April 5, 2006.
b) The Company issued 133,332 common shares in the subsequent period for
a total consideration of $20,000 (CDN).
F-23