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, 2007
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _______ to ________
[ ] Shell company report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 Date of event requiring this shell company report .
Commission file number: ______________
OXFORD INVESTMENTS HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Ontario, Canada
---------------
(Jurisdiction of incorporation or organization)
1315 Lawrence Avenue East
Suite 520
Toronto, Ontario
Canada M3A 3R3
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the
Exchange Act: None.
Securities registered or to be registered pursuant to Section 12(g) of the
Exchange Act: Title of Class: Common Stock, no par value
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None.
The number of outstanding shares of the issuer's common Stock as of December 31,
2007: 39,744,810
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act
Yes [ ] No [X]
If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):
Large accelerated filer Accelerated filer Non-accelerated
filer [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 [ ] Item 18 [X]
If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
2
TABLE OF CONTENTS
Page
FORWARD - LOOKING STATEMENTS 5
PART I
Item 1. Identity of Directors, Senior Management and Advisers *
Item 2. Offer Statistics and Expected Timetable ............. *
Item 3. Key Information .................................... 5
Selected Financial Data 5
Capitalization and Indebtedness 7
Reason for the Offer and Use of Proceeds 7
Risk Factors .............................. 7
Item 4. Information on the Company ......................... 13
History and Development of the Company 13
Business Overview 14
Organizational Structure 21
Property, Plants and Equipment 21
Item 4A Unresolved Staff Comments .......................... 21
Item 5. Operating and Financial Review and Prospects ....... 21
Operating Results 22
Liquidity and Capital Resources 26
Research and Development 27
Trend Information 27
Off-balance sheet arrangements *
Tabular disclosure of contractual obligations *
Safe harbor 27
Item 6. Directors, Senior Management and Employees ......... 28
Directors and Senior Management 28
Compensation of Directors and Officers 29
Board Policies 30
Employees 31
Share Ownership 31
Item 7. Major Shareholders and Related Party Transactions .. 32
Major Shareholders 32
Related Party Transactions 32
Item 8. Financial Information .............................. 33
Consolidated Statements and Other
Financial Information 33
Significant Changes 34
Item 9. The Offer and Listing .............................. 34
Item 10. Additional Information ............................. 35
Share Capital *
Memorandum and articles of incorporation 35
Material Contracts 35
Exchange Controls 36
Taxation 36
Dividends and paying agents *
Statements by experts *
Documents on display 40
Subsidiary Information *
Item 11. Quantitative and Qualitative Disclosures About Market Risk *
Item 12. Description of Securities Other Than Equity Securities *
PART II
Item 13. Defaults, Dividends Arrearages and Delinquencies ... *
3
Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds ................. *
Item 15. Controls and Procedures ........................ 41
Item 16A. Audit Committee Financial Expert ............... 41
Item 16B. Code of Ethics ................................. 42
Item 16C. Principal Accountant Fees and Services ......... 42
Item 16D. Exemptions from the Listing Standards for Audit Committees *
Item 16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchases ................ *
Item 17. Financial Statements ........................... 42
Item 18. Financial Statements ........................... 42
Item 19. Exhibits ....................................... 44
SIGNATURES ....................................................... 45
CERTIFICATIONS ................................................... 46
* Omitted pursuant to General Instruction E(b) of Form 20-F.
4
FORWARD LOOKING STATEMENTS
Oxford Investments Holdings Inc., or the Company, desires to take advantage
of the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and is including this cautionary statement in connection with this safe
harbor legislation. This document and any other written or oral statements made
by us or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe", "expect", "anticipate", "intends", "estimate", "forecast", "project",
"plan", "potential", "will", "may", "should", "expect" and similar expressions
identify forward-looking statements. Please note in this annual report, "we",
"us", "our", "the Company", all refer to Oxford Investments Holdings Inc. and
its subsidiaries.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although we believe that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant uncertainties
and contingencies which are difficult or impossible to predict and are beyond
our control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.
In addition to these important factors and matters discussed elsewhere
herein, important factors that, in our view, could cause actual results to
differ materially from those discussed in the forward-looking statements include
the strength of world economies, fluctuations in currencies and interest rates,
general market conditions, changes in the Company's operating expenses, changes
in governmental rules and regulations or actions taken by regulatory
authorities, potential liability from pending or future litigation, general
domestic and international political conditions and other important factors
described from time to time in the reports filed by the Company with the
Securities and Exchange Commission.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2. Offer Statistics and Expected Timetable
Not Applicable.
Item 3. Key Information
A. Selected Financial Data
The following selected financial data for the years ended December 31,
2003, 2004, 2005, 2006 and 2007 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, 2003 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2007
Statement of Operations Data:
- -----------------------------
Total revenues .................... $ 439,157 $ 692,069 $ 163,889 $ 185,299 $ 6,132
Net Income/(Net Loss) ............. (331,127) (139,368) (471,308) (961,889) (3,096,225)
Basic and diluted
net loss per share - ............. (0.02) (0.01) (0.02) (0.04) (0.09)
Weighted average number of
Shares used in computing basic and
Diluted net loss per share- ....... 20,018,107 20,958,721 21,765,254 23,368,008 33,640,665
Balance Sheet Data:
- -------------------
Cash and cash equivalents .......... $ 11,745 $ 28,553 $ (13,697) $ 37,969 $ 0.00
Total current assets ............... 147,516 286,095 58,290 90,855 9,434
Total assets ....................... 157,309 292,883 62,727 94,321 13,895
Total current liabilities .......... 1,126,698 1,260,151 1,544,956 1,431,884 1,365,074
Total liabilities .................. 1,126,698 1,260,151 1,544,956 1,431,884 1,365,074
Total accumulated deficit .......... (3,298,719) (3,438,087) (3,909,395) 4,871,284) (7,967,509)
Total stockholders' equity (deficit) (969,389) (967,268) (1,482,229) (1,337,563) (1,351,179)
EXCHANGE RATES
The following table sets out the exchange rates for the conversion of Canadian
dollars into United States dollars, expressed in United States dollars. The
exchange rates used are the closing rates provided by The Bank of Canada. The
table lists the rate in effect at the end of the following periods, the average
exchange rates (based on the average of the exchange rates on the last day of
each month in such periods), and the range of high and low exchange rates for
such periods.
Year ended December 31,
------------------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
-----------------------------------
End of Period 1.01 .86 .86 .83 .77
-----------------------------------
Average for Period .97 .87 .83 .81 .72
----------------------------------
High for Period 1.09 .91 .86 .85 .77
---------------------------------
Low for Period .84 .85 .80 .72 .64
---------------------------------
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 2007 and 2008. The exchange rates used are the
closing rates as provided by the Bank of Canada.
6
- -------------------------------------------------
Month High Low
- -------------------------------------------------
December 2007 1.02 0.98
- -------------------------------------------------
January 2008 1.01 0.97
- -------------------------------------------------
February 2008 1.03 0.98
- -------------------------------------------------
March 2008 1.00 0.97
- -------------------------------------------------
April 2008 1.00 0.97
- -------------------------------------------------
May 2008 1.00 0.98
- -------------------------------------------------
The exchange rate on December 31, 2007 for the conversion of United States
dollars into Canadian dollars was $1.01 (CDN$1.00 = US$1.01). As of June 25,
2008 the close rate of exchange for the conversion of United States dollars into
Canadian dollars was $0.99 (CDN$1.00 = US$0.9867). The exchange rates used are
the nominal noon exchange rates as published by the Bank of Canada.
B. Capitalization and Indebtedness.
Not Applicable.
C. Reasons for the Offer and Use of the Proceeds.
Not Applicable.
D. Risk Factors.
The risks described below are not the only ones we face. Additional risks that
generally apply to publicly traded companies, that are not yet identified or
that are currently perceived as immaterial, may also impair our business
operations. Our business, operating results and financial condition could be
adversely affected by any of the following risks. You should refer to the other
information set forth in this document, including our financial statements and
the related notes.
This annual report also contains certain forward-looking statements that involve
risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "expects," "anticipates," "intends," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
annual report.
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 entered the
UV-free sunless tanning and private water labeling markets. During 2006, we
entered into the stored-value credit/debit card market through our suite of
"FocusKard" products and our acquisition of ownership interests of companies in
China. Our prospects must be considered in light of the risks, expenses and
7
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. The
risks, expenses and difficulties that we expect to encounter include:
o implementing an evolving and unpredictable business model that relies,
in large part, on customer growth and word-of-mouth publicity among
the targeted audiences;
o building our corporate brand to attract purchasers, advertisers and
affiliates, and our network brands to expand our audience;
o increasing our product offerings on existing networks through internal
development and affiliate partnerships;
o developing and integrating new networks addressing our target audience
and customer 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 stored-value card market
audience;
o attracting, retaining and motivating qualified personnel; and
o responding to competitive developments.
There can be no assurance that we will effectively address the risks we face,
and the failure to do so could have a material adverse effect on our business,
financial condition and results of operations.
We have a History of Operating Losses and a Significant Accumulated Deficit, and
we May Not Maintain Revenue or Achieve Profitability in the Future.
We have not been profitable since our inception in October 2000. We
have an accumulated deficit of ($7,967,509). We expect to continue to incur
additional losses for the next fiscal year as a result of a high level of
operating expenses, significant up-front expenditures, pursuing new initiatives
for the Company and our marketing activities. We have had to rely on raising
money through private placement of our stock to fund our ventures and
operations. We may never realize significant revenues from our core business or
be profitable. Factors that will influence the timing and amount of our growth
and profitability include:
. the 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. We have also changed our
business focus within the past year. Our business may fail if we do not achieve
significant revenue growth or obtain sufficient funding. Our accountants have
raised substantial doubts about our ability to continue as a going concern. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in such a transition, and there can be no assurance that
we will be successful or that we will ever achieve profitable operations.
Our Capital Resources Have Not Been Generated Primarily From Operations, We May
Be Dependent On Our Ability To Sell Additional Stock To Fund Continued
Operations.
To date, we have generated most of our cash flow from financing
activities. This has been primarily from sales of our common stock, and loans
from Michael Donaghy, our founder, President and Chief Executive Officer. We
have used a significant portion of the capital we raised to fund cash outflows
for operating and investing activities. Since we have not attained profitable
operations and are dependent upon obtaining financing to pursue our plan of
operations, there is no assurance that we will not require additional resources
in the future or that we will be able to obtain financing in the amount required
or terms satisfactory to us.
8
Our Rapid Growth May Strain Our Resources And Hinder Our Ability To Implement
Our Business Strategy
Our historical growth has placed, and any further growth is likely to
continue to place, a significant strain on our limited resources. If we fail to
manage our growth effectively, our business could be materially adversely
affected. Our ability to achieve and maintain profitability will depend on our
ability to manage our growth effectively, to implement and expand operational
and customer support systems and to hire personnel worldwide. We may not be able
to augment or improve existing computer systems and controls or implement new
systems and controls to respond to any future growth. In addition, future growth
may result in increased responsibilities for our management personnel, which may
limit their ability to effectively manage our business.
Operational Risks
Our revenue and operating results may fluctuate in future periods and
we may fail to meet expectations, which may cause the price of our common stock
to decline. As a result of our limited operating history and the emerging nature
of the markets in which we compete, we are unable to forecast our revenue with
precision. We anticipate that the results of our operations may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside our control. Factors that may affect our results of operations
include, but are not limited to:
o the addition or loss of customers for our FocusKard or stored-value
card suite of products, or our failure to add new customers;
o our ability and the ability of our affiliates to attract and retain a
large retail audience for our products;
o our ability to attract and retain advertisers and sponsors;
o our ability to successfully manage our relationships with our joint
venture partners, particularly in the Asian market ;
o the amount and timing of expenditures for expansion of our operations,
including the acquisition of new affiliates, the hiring of new
employees, capital expenditures and related costs;
o our ability to continue to enhance, maintain and support our networks
and technology and avoid system downtime; and
o the introduction of new or enhanced offerings by our competitors.
Security And Privacy Breaches In Our Electronic Transactions May Damage Customer
Relations And Inhibit Our Growth.
Any failures in our security and privacy measures could have a material
adverse effect on our business, financial condition and results of operations.
We electronically transfer large sums of money and store personal information
about consumers, including bank account and credit card information, social
security numbers, and merchant account numbers. If we are unable to protect, or
consumers perceive that we are unable to protect, the security and privacy of
our electronic transactions, our growth and the growth of the electronic
commerce market in general could be materially adversely affected. A security or
privacy breach may:
o cause our customers to lose confidence in our services;
o deter consumers from using our services;
o harm our reputation;
o expose us to liability;
o increase our expenses from potential remediation costs; and
o decrease market acceptance of electronic commerce transactions.
While we believe that we utilize proven applications designed for
premium data security and integrity to process electronic transactions, there
can be no assurance that our use of these applications will be sufficient to
address changing market conditions or the security and privacy concerns of
existing and potential subscribers.
We Rely On Third Parties To Distribute Our FocusKard and Other Stored-Value
Products, Which May Not Result In Widespread Adoption.
9
In electronic commerce, we rely on our contracts with financial
services organizations, businesses, Internet portals and other third parties to
provide branding for our electronic commerce services and to market our services
to their customers. These contracts are an important source of the growth in
demand for our electronic commerce products. If any of these third parties
abandon, curtail or insufficiently increase their marketing efforts, it could
have a material adverse effect on our business, financial condition and results
of operations.
If We Do Not Respond To Rapid Technological Change Or Changes In The Industry
Standards, Our Products And Services Could Become Obsolete And We Could Lose Our
Existing And Future Customers.
If our competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our existing
product and service offerings, proprietary technology and systems may become
obsolete. Further, if we fail to adopt or develop new technologies or to adapt
our products and services to emerging industry standards, we may lose current
and future customers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic commerce
industry is changing rapidly. To remain competitive, we must continue to enhance
and improve the functionality and features of our products, services and
technologies.
Changes In Banking Regulations Could Hurt Our Business.
We have designed our systems and card programs to comply and work in
association with applicable banking rules and regulations. A change of those
rules and regulations could require us to dramatically alter our software
programs, the hardware upon which we operate and our implementation and
operation of stored value cards. Such changes could be costly or impractical and
we may not be able to modify our operations and technology to comply with
dramatic changes in banking regulations.
Changes In The Patriot Act Could Impede Our Ability To Circulate Cards That Can
Be Easily Loaded Or Issued.
Our current screening process is designed to comply with the United
States Patriot Act requirements that financial institutions know their
cardholders. If the Patriot Act or subsequent legislation increases the level of
scrutiny that we or our affiliated banks or the load or point of purchase
locations are required to adopt to know their customers, it may be costly or
impractical for us to continue to profitably issue and load cards for our
customers or even comply with new regulations.
If Major Banks Begin To Target The Sub-Prime Market, It Will Create Substantial
Competition For Us And Our Products And Services.
We operate among major financial institutions, providing products and
services designed to service the sub-prime credit market. Large and small banks
alike have traditionally not sought the typically unprofitable and undesirable
sub-prime market. This allows the symbiotic relationship between us and banks,
where the banks get access to the cumulative deposits of the cardholders,
without the trouble of administering thousands of very small individual accounts
of less reliable depositors. If banks decide to directly target the sub-prime
market before we are able to establish a strong foothold, we will not be able to
compete with established banks which have substantially greater resources.
Credit Card Fraud Or Computer Hacking Could Substantially Harm Us And Our
Operators.
As with any technology company, we are always at risk of computer
fraud, hacking or other electronic crime. While we believe that we have adopted
substantial systems to recognize and prevent computer fraud and hacking, the
relentlessness of hackers means no system is yet absolutely secure. Due to our
limited financial resources, any substantial computer crime and particularly an
electronic embezzlement, would adversely affect our ability to continue as a
going concern.
10
Internal Processing Errors Could Result If We Fail To Appropriately Deduct
Transactions From Customer Accounts.
In the event of a system failure that goes undetected for a substantial
period of time, we could allow transactions on blocked accounts, false
authorizations, fail to deduct charges from accounts or fail to detect
systematic fraud or abuse. Errors or failures of this nature could immediately
adversely impact us, our credibility and our financial standing.
Key Individual
Our future success will depend to a significant extent on the continued
services of senior management and other key personnel, particularly Michael
Donaghy, our founder, President and Chief Executive Officer. Any loss of a key
employee could have a detrimental effect on our business. Currently no key-man
insurance is in place with respect to Mr. Donaghy or any of our other personnel.
Our success is also dependent on our ability to attract, retain and
motivate highly skilled technical and other personnel. While we have been
successful in doing so thus far, there are a limited number of persons who
possess the necessary technical skills and understanding, thus competition for
their services is intense. A failure to recruit or retain personnel could have a
material adverse effect on our business, financial condition and results of
operations.
Protection and Enforcement of Intellectual Property Rights
We regard the protection of trademarks, copyrights and other
proprietary rights as important to our success and competitive position. We do
not have any patented technology that would prevent competitors from entering
our market. Although we seek to protect our trademarks, copyrights and other
proprietary rights through confidentiality and "non-compete" agreements and
common law precedents, these actions may be inadequate to protect them or to
prevent others from claiming violations of their patents, trademarks, copyrights
and other proprietary rights. As a result, third parties could claim
infringement by us with respect to current or future services.
We currently license and may in the future license certain technologies
from third parties, which may subject us to infringement actions based upon the
technologies licensed from these third parties. Any of these claims, with or
without merit, could subject us to costly litigation and divert the attention of
our technical and management personnel. These third party technology licenses
may not continue to be available to us on commercially reasonable terms. The
loss of the ability to use such technology could require us to obtain the rights
to use substitute technology, which could be more expensive or offer lower
quality or performance, and therefore have a material adverse effect on our
business.
Risks Associated With Foreign Operations
It is anticipated that substantially all of our revenue will be derived
from fees in foreign countries.
In addition, there are certain difficulties and risks inherent in doing
business internationally, including the burden of complying with multiple and
often conflicting regulatory requirements, foreign exchange controls, potential
restrictions or tariffs on gaming activities that may be imposed, potentially
adverse tax consequences and tax risks, as well as political and economic
instability. Changes in the political, regulatory and taxation structure of
jurisdictions in which we operate and in which our sub-licensee customers are
located could have a material adverse effect on our business, revenues,
operating results and financial condition.
Likewise, our ability to expand our business in certain countries,
including China, will require modification of our products, particularly
domestic language support. There can be no assurance that we will be able to
sustain or increase revenue derived from international operations or that we
will be able to penetrate linguistic, cultural or other barriers to new foreign
markets. The failure to sustain or increase revenue from international
operations could have a material adverse effect on our business, revenues,
operating results and financial condition.
Our financial results are reported in United States currency, which is
subject to fluctuations in respect of the currencies of the countries in which
we operate. Fluctuations in the exchange rate of the U.S. dollar and the
11
Canadian dollar could have a positive or negative effect on our reported
results. Given the constantly changing currency exposures and the substantial
volatility of currency exchange rates, we cannot predict the effect of exchange
rate fluctuations upon future operating results. There can be no assurance that
we will not experience currency losses in the future which could have a material
adverse effect on our business, revenues, operating results and financial
condition.
Uncertainty of Enforcement of U.S. Laws and Judgments against Foreign Persons
We and our wholly-owned subsidiaries through which we operate are
organized under the laws of the Province of Ontario, Canada and St. Johns,
Antigua, respectively; our executive offices are in Canada, our directors and
officers and certain of our advisers are residents of Canada, and a substantial
portion of our assets and assets of those persons are located outside the United
States. As a result, it may be difficult for you to initiate a lawsuit in the
United States against us or these non-U.S. residents, or to enforce any judgment
obtained in the United States against us or any of these persons.
Consequently, you may be deterred or prevented from pursuing remedies
under United States federal securities laws against us or other non-United
States residents.
We Currently Depend On the Sale of a few Products to Generate Most of Our
Revenue
We expect the sales of our stored-value cards to constitute most of our
revenue for the foreseeable future. If customers do not purchase our products,
we do not currently offer any other products or services that would enable us to
generate revenue or to become profitable.
We May Not Have Sufficient Capital To Fund Our Operations And Additional Capital
May Not Be Available On Acceptable Terms if At All.
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, 2007, Michael Donaghy, our sole director, indirectly
through his spouse, beneficially owned approximately 8,775,000 shares or 22.08%
of our outstanding common shares. As a result, Mr. Donaghy can exert substantial
influence over us and influence most matters requiring shareholder approval,
including the election of directors, and thereby exercise significant control
over our affairs. The voting power of Mr. Donaghy under certain circumstances
could have the effect of delaying or preventing a change in our control, the
effect of which may be to deprive you of a control premium that might otherwise
be realized in connection with our acquisition.
12
No Established Public Trading Market
Our shares began trading on the Over the Counter Bulletin Board (OTCBB)
in May 2004, however, at present our shares are thinly traded, and there is no
assurance that a significant trading market will develop, or if developed, that
such market will be sustained.
Possible Volatility of Stock Price
Many factors could affect the market price of our common shares. These
factors include but are not limited to:
o Variations in our operating results;
o Variations in industry growth rates;
o Actual or anticipated announcements of technical innovations or new
products or product enhancements by us or our competitors;
o General economic conditions in the markets for our products and
services;
o Divergence of our operating results from analysts' expectations; and
o Changes in earnings estimates by research analysts.
In particular, the market prices of the shares of many companies in the
technology and emerging growth sectors experience wide fluctuations that are
often unrelated to the operating performance of such companies. When the market
price of a company's stock drops significantly, shareholders often institute
securities class action lawsuits against that company. Such a lawsuit against us
could cause us to incur substantial costs and could divert the time and
attention of our management and other resources. Any of these events could have
a material adverse effect on our business, financial condition and results of
operations.
Our common stock trades in the over-the-counter market on the OTCBB. As
a result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the value of, our common stock. Because our common
stock is subject to federal securities rules affecting penny stock, the market
liquidity for our common stock may be adversely affected.
Our common stock could become subject to additional sales practice
requirements for low priced securities. Our common stock could become subject to
Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional
sales practice requirements on broker-dealers that sell our shares of common
stock to persons other than established customers and "accredited investors" or
individuals with net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses.
Rule 15g-9 requires a broker-dealer to make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. Consequently, the rule may affect the
ability of broker-dealers to sell our securities and may affect the ability of
our shareholders to sell any of our securities in the secondary market;
generally define a "penny stock" to be any non-Nasdaq equity security that has a
market price less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions; requires broker dealers to
deliver, prior to a transaction in a penny stock, a risk disclosure document
relating to the penny stock market.
Disclosure is also required to be made about compensation payable to
both the broker-dealer and the registered representative and current quotations
for the securities. In addition, the rule requires that broker dealers deliver
to customers monthly statements that disclose recent price information for the
penny stock held in the account and information on the limited market in penny
stocks.
Item 4. Information on the Company
13
A. History and Development of the Company
The Company was incorporated under the laws of Ontario, Canada on
October 13, 2000 as a holding company under the name International E Gaming
Developers Ltd. On May 17, 2001 the Company changed its name to Oxford Software
Developers Inc. and on December 16, 2003 it changed its name from Oxford
Software Developers Inc. to Oxford Investments Holdings Inc. The Company
operates its business through three wholly-owned subsidiaries International E
Gaming Developers, Inc. incorporated under the laws of Antigua and Barbuda,
British West Indies on November 3, 2000; Celebrity Tan, Inc. incorporated under
the laws of Ontario, Canada on May 28, 2003; and Ontario Private Water Labeling
Ltd. incorporated under the laws of Ontario, Canada on May 28, 2003.
During 2006, we reorganized our core business to become a provider of
stored value cards for a wide variety of markets. Our products and services are
aimed at capitalizing on the growing demand for stored value and re-loadable
ATM/prepaid card financial products. We believe stored value cards are a
fast-growing product segment in the financial services industry.
On or about December 18, 2006, we entered into a joint venture
arrangement with the Ko Ho Management Co. Ltd. of Hong Kong ("Ko Ho Group"). We
acquired a fifty percent (50%) equity interest in the Ko Ho Group, a company
wholly-owned by Mr. Benny Lee. The Ko Ho Group is an investment and management
company, specializing in company mergers and acquisitions, management and
marketing services in Asia Pacific with a focus in Hong Kong and China. To date
through our partnership with the Ko Ho Group, we have acquired an equity
interest in three Chinese companies, Arden Trading Company Ltd., Hongxin
Insurance Agency and Foshan Foshantong Information Technology Co., Ltd.
In this Annual Report, unless the context indicates otherwise, the term
"Company" refers to Oxford Investments Holdings Inc.
B. Business Overview
We were incorporated with the objective of capitalizing on the growth
of Internet gaming and entertainment - e-gaming. However, as a result of
persistent uncertainty in Internet gaming laws in various jurisdictions
worldwide, particularly in the United States, we felt that it was beneficial for
us to closely review our strategic planning as we move forward. As a result, we
did not renew our e-gaming license and in May 2003, we initiated two business
ventures to further diversify the Company's interests in the lifestyles
consumables market. The first initiative was the distribution of a private line
of UV-free tanning products and booths and the second initiative was the
distribution of private labeled bottled spring water.
Due to recent changes in United States law with respect to Internet
gaming, we are no longer involved in Internet gaming activities. The Company has
discontinued the business operations of Internet Gaming and private labeled
bottled spring water and has focused its core operations on the direct banking
and stored card value market. It has entered into the direct-banking and
payment-card solutions business by concentrating its business around its
"FocusKard" suite of products.
The Product and the Market
The "FocusKard" suite of products consists of an online-access account
represented by a stored-value card. Stored-value cards are a substitute for
cash, gift certificates, and check payments. Monetary value is added to the
stored-value account before the card is used, with the value either being funded
by the cardholder directly, or by the card program operator in commercial
applications.
Stored-value is believed to be the most rapidly growing segment in the
payment card industry. Its many applications include payroll products, gift-card
products, travel products, insurance products, membership products, student
products, and incentive/promotional products.
The Opportunity
14
The rapid expansion of e-commerce and online banking brings new
challenges to payment methods, such as the need to protect the individual's
financial information, and the ease of collection for online merchants. A
stored-value product such as the FocusKard expands the functionality of
electronic banking, allowing new and innovative payment methods that may limit
risk exposure on both sides of the transaction.
Product
FocusKard offers a complete payment solution with world-class service
at competitive rates. The Company's expertise in risk management,
authentication, and fraud detection has enabled us to develop a product backed
with technological protections such as redundant data centers, while giving
customers the security of a PIN and a zero-liability policy.
With superior customer and merchant support services available
twenty-four hours a day, seven days a week, the FocusKard is available in
various languages and currencies. Instant customer access to a real-time
paperless transaction statement is always available.
FocusKard's revolutionary payment methods are available as a customized
white-label solution to allow gift-card branding and other merchant
applications, thus providing a complete turnkey product for this type of
application.
The Strategy
The FocusKard platform is headlined by our e-wallet solution. This
product allows for instant internet transfers of funds between customer and
merchant and vice versa. The product is seamless and secure. Each user account
has a loadable credit card linked to their account enabling access to funds
through any point of sale (POS) or automatic teller machine (ATM) worldwide.
The programs currently underway for the "FocusKard" suite of products
involve the introduction of a payroll card and a direct-debit card. The
FocusKard payroll card offers employers and employees a check-free, easily
distributed, instant-access method to deal with the administration of wages and
employee compensation. The FocusKard direct-debit card is a consumer-loaded
prepaid card for equivalent-to-cash transactions with statement benefits, and is
ideal for online transactions, corporate expense cards, PIN-protected travel
currency, and gift cards.
This is only the beginning of the new vision of the FocusKard products
- - comprehensive direct-banking and payment-card solutions tailored to the
requirements of today's businesses. The goal is to continually develop
innovative electronic payment products that serve a broad range of markets and
are delivered on a stored-value platform technology.
Arden Trading Company Ltd.
On or about February 28, 2007, we acquired a fifty percent (50%) equity
interest in Arden Trading Company Ltd. of China through our partnership with the
Ko Ho Group.
Corporate Profile
Arden Trading Company Ltd specializes in the operation of customer
loyalty program redemption. The Company has been in business for two years and
has been profitable since its inception. Arden provides services to China
Construction Bank for the Province of Guangdong, processing bonus point
redemptions for the bank. Arden will expand these services into Shanghai and
Beijing during 2007.
Arden's services also include gift sourcing, catalogue production,
logistics, and call center customer support. It provides long-term outsourcing
services to businesses in its areas of expertise. The Company's clientele
15
include telecommunication operators, such as China Telecommunications; insurance
companies; and commercial banks, such as China Construction Bank.
The Product and The Market
The Province of Guangdong, which is situated in the southern part of
China mainland, covers an area of over 180,000 square kilometers (69,502 square
miles) and has a permanent population of approximately 74,730,000. Guangzhou
city is the main economic, communication, and cultural center of Guangdong with
numerous railway and highway networks and a labyrinth of waterways.
Arden provides bonus point fulfillment services to the China
Construction Bank for the Province of Guangdong. Customers are given an
opportunity to redeem their points for gifts offered in Arden's catalogue. Arden
is responsible for bonus points management services, receiving orders, acquiring
products to fullfill the orders, and shipping the product to the Bank's
customers.
Using Arden's services allows the Bank to offer an incentive program to
its customers, while the Bank's customers benefit by receiving valuable gift
items.
The Opportunity
The present economic boom in China provides a growing market for all types of
products and services. Arden plans to expand its geographical coverage area, in
addition to taking advantage of China's growing markets.
Product and Company Advantages
Arden has already developed a customer base in of several hundred
thousand consumers. The Company has positioned itself to expand its present
contract with China Construction Bank into all branches in the Provinces of
Guangdong, Shanghai, and Beijing.
The management team has years of experience in operating and managing
call center, logistics, telemarketing, and customer relations services
The Strategy
Arden charges a service fee to the China Construction Bank to manage
and fulfill the Bank's bonus points incentive program. Further income is
provided by markup on the wholesale value of gift items provided by Arden. As
the Company's customer base expands, bulk purchasing of gift items will reduce
the wholesale price charged to Arden, thus increasing the markup income per item
as well as the increasing in the number of fulfillment transactions.
Arden plans to develop an online catalogue of its gift items. The
ecommerce version of the gift catalogue provides additional cost-cutting and
income-generating opportunities for the Company. Catalogue printing costs will
be reduced as more users take advantage of the continually-updated online
catalogue, ordering procedures will become more automated, and additional
revenue can be generated through the sale of advertising space on the web site.
Oxford's partnership with Arden will allow Oxford to enter into the
loyalty and electronic payment market in China through Arden's present and
projected customer base, thus ensuring the successful introduction of the
FocusKard suite of payment solutions into the huge Chinese consumer card market.
Hongxin Insurance Agency
On or about March 14, 2007, we acquired a fifty percent (50%) equity
interest in Hongxin Insurance Agency of China through our partnership with the
Ko Ho Group.
16
Corporate Profile
Hongxin is an insurance agency selling insurance policies and financial
instruments for most major insurance companies in China since 2004. It is under
license issued by China Insurance Supervisory Committee to provide corporate and
individual insurance products, risk management, and consultation services. The
managing director of Hongxin, Mr. Ming-Wei Ye, as a FLMI of Loma (USA) has more
than 20 years of experience in professional management of banking, insurance,
and investment services.
The Product and The Market
Like Arden Trading Company Ltd., Hongxin serves the large market of the
Province of Guangdong in China. China's economic prosperity is resulting in an
increase in disposable income for an increasing segment of the population.
Hongxin's product offerings serve this increase in wealth by protecting the
value of property, through insurance; and by providing opportunities for
investment, such as mutual funds and other financial instruments.
The Opportunity
Hongxin has developed partnerships that provide the Company with a huge
customer base to which the Company can market its products and services. The
growing Chinese market welcomes access to the types of products and services
provided by Hongxin.
Product and Company Advantages
In addition to established relationships with some major enterprises,
Hongxin has established partnership relationships with some major banks in China
to provide insurance to their cardholders. Currently Hongxin is the designated
sole insurance agent for the cardholders of China Construction Bank (Guangdong
Branch)'s "Automotive Card". The "Automotive Card" is a roadside assistance and
automotive services program, and it offers a discount on automotive insurance
purchased through Hongxin.
Hongxin also has an agreement with the largest mail-ordering company in
China, which has more than 4 million clients, allowing Hongxin to market its
products and services to those clients.
Hongxin has had the foresight to become licensed in Thailand, and can
work within the regulated insurance business in that country.
The Strategy
Hongxin is setting up more branch offices, as well as a customer call
center, and telemarketing services division. These offices and divisions will
allow Hongxin to more aggressively promote its products to potential customers.
Those potential customers will initially be acquired through Hongxin's
present business agreements. Hongxin will approach the China Construction Bank's
"Automotive Card" members, and the 4 million clients of the largest
mail-ordering company in China with offers for property insurance and other
financial products, in addition to automotive insurance.
These financial products include the FocusKard suite of payment
solutions, which will thus be exposed to the huge market accessed by Hongxin.
Hongxin has further plans to build loyalty "gift" programs with
insurance companies and financial services companies, providing customers with a
further incentive to purchase Hongxin's products, and providing additional
revenues to Hongxin through markup on gift items.
17
Foshan Foshantong Information Technology Co., Ltd.
On or about April 7, 2007, we acquired a fifty percent (35%) equity
interest in Foshan Foshantong Information Technology Co., Ltd. through our
partnership with the Ko Ho Group.
Corporate Profile
Foshantong is a local government initiative to build the municipality
as an electronic payment model in the Pearl River Delta region and is the only
prepaid card authorized by the government to be issued by a non-bank entity in
the Foshan urban region. Citizens are encouraged to use this card for small
payment transactions. Foshantong is an electronic payment smart card program
used for public transportation and small payment transactions in the
municipality and is an accepted form of payments for many designated merchants
in the Foshan urban region.
The Product and the Market
The electronic purse of the card can be built into many sub-brands
smart cards, such as student card, worker card, resident card, library card, or
transportation card and is expected to evolve into an all around use card
similar to the "Octopus" card used for the complete Hong Kong transportation
system and all general shopping transactions.
Product and Strategy
Wanzhi is now converting 300,000 existing card accounts to the
Foshantong Card program. The portfolio includes the existing Foshan Education
One Card, Smart Cards issued to the staff of Chigo Air-Conditioning
Manufacturing Co., Watson's loyalty cards, library membership cards and Foshan
residential district cards. Wanzhi shall provide 500 P.O.S. (point of sale)
card-processing units for use by Foshantong at merchant locations in addition to
the existing 500 units now placed with merchants. A bonus point based loyalty
card program and a gift card program are also being planned.
These programs may be named to Oxford's choice of a brand name.
Revenues are generated from initial card fees, the merchant transaction fees and
interest earned on the float (prepaid deposit). At the moment, a refundable
deposit of RMB 30 is charged for the card in addition to the initial deposit of
funds. The Company plans to abolish the deposit and replace it with a one-time
non-refundable fee of RMB 15, but in return cardholders will be given goods and
services in excess of such value.
Celebrity Tan, Inc.
- -------------------
Celebrity Tan, our wholly-owned subsidiary, entered the UV-free tanning
market in 2003, marketing a line of instant mist tanning booths and supplies.
The Company has developed a national network of sales agents to promote
Celebrity Tan booths to salons, health spas, fitness centers, and hotels across
Canada and in other countries, including Europe and the United States. In
addition to booth sales to salon owners internationally, the first year of
operation saw the set up of the Company's Ontario showroom and training facility
and other showrooms introduced during 2004.
Through its experience in marketing the Celebrity Tan booth product,
and through research into competing products, Celebrity Tan has developed
significant product improvements, which has led the Company to recently expand
its operations to include the manufacturing and development of the Celebrity Tan
UV-free mist tanning booth. We intend to discontinue the operations of Celebrity
Tan and sell the business as we focus our operations on the direct-banking and
payment-card solutions business concentrating around our "FocusKard" suite of
products.
The Product and Market
- ----------------------
Many people enjoy the healthy look of a beautiful golden brown tan. In
the past there has been a market for year-round tanning within salons. However,
with increased awareness of the potential of UV light to damage skin, some
18
people have begun to avoid conventional tanning methods. There is also a segment
of the population who has skin types that resist tanning using these
conventional methods.
Sunless tanning creams have been developed to serve this market, but
they are difficult to apply evenly, and require the assistance of another person
for hard-to-reach areas of the body. UV-free spray tanning using instant-tan
booths is the latest solution for this problem. Recent media exposure has
increased the awareness and demand for this service, and tanning studios are
increasingly considering providing UV-free tanning to their clients. Moving into
the areas of product development and manufacturing gives the Company the ability
to improve upon the existing tanning booths in the market. By ensuring that end
users have a satisfying result, the Company can ensure growth in this market,
and develop a brand with a reputation for quality results.
Being a relatively new cosmetic tanning service, the target market is
not yet fully aware of the availability and benefits of spray tanning. As market
awareness increases, we believe the demand for this service will also increase.
By developing and providing a superior product that addresses the needs of
salons and their customers, Celebrity Tan has gained a distinct advantage over
its competitors. Through continuing quality improvements and joint venture
arrangements, the Company hopes to make its booths the choice of both salon
owners and instant tanners alike.
The Company's new manufacturing division allows the Company to benefit
from the increased control over quality, production, and delivery times, while
gaining from production cost savings and tax advantages.
Product and Company Advantages
- ------------------------------
By participating in this early stage of the UV free spray tanning
market, both the Company and its customers expect to benefit from the growth in
the industry. The Celebrity Tan mist tanning booth is designed to offer an
upscale atmosphere, and has many features for spray consistency and
personalization, customer comfort and safety, and ease of maintenance. The booth
makes efficient use of the instant tanning product and can be installed in a
small space. The Celebrity Tan booth is more user friendly, and easier to
troubleshoot and maintain than any other booth on the market.
The Strategy
- ------------
In addition to promoting the Celebrity Tan instant tanning booths
through its sales representatives across Canada and in other countries, the
Company expects to embark on a direct sales campaign to about 30,000 existing
spa, esthetics, and fitness facilities in the upcoming year. Celebrity Tan has
begun an international magazine advertising campaign in order to further promote
brand recognition. The opening of Celebrity Tan 's manufacturing division will
enable the Company to provide superior quality control while allowing for the
development of improvements over existing booths in this market. The Company
will be better able to manage delivery times, and will have the ability to ship
the booth as components that will maximize the efficiency of assembly, while
allowing the Company to coordinate set-up and training personnel with delivery
times.
The cost reductions and tax benefits achieved by manufacturing the
Celebrity Tan booth will give the Company opportunities to provide booth
purchasers with more financing options. By increasing affordability to salons,
we will further promote sales and corporate branding. Producing a product that
is recognized for its quality will allow Celebrity Tan more opportunities in
promoting the sales to independent-run operations. With the knowledge gained
through previous experience with customers within the salon market, the Company
has the ability to provide training for future customers and assist with site
development using premium store design techniques developed specifically for the
Celebrity Tan brand.
Additional income potential may be tapped through sales of the tanning
product to salons, and through the launch of the "Celebrity Tan " bottled lotion
for the retail market, for use when a full-body tan is not required. The Company
expects to sell this retail product at existing booth locations, and through the
Company 's existing Internet infrastructure.
19
As this industry moves forward we anticipate both salon owners and the
general public will recognize Celebrity Tan as the sunless tanning system of
choice. The Company's goal is to secure its position as Number 1 in the industry
by providing the "perfect tan ".
Customers
The Company maintains long-term relationships with its Celebrity Tan
customers, many of whom are seeking significant market shares in their
respective locations. The Company premises its marketing strategy on its ability
to offer customers a package of services, including product planning and design
tailored to the customers' needs, high-tech quality manufacturing, distribution
and logistics setup and marketing strategies.
Celebrity Tan has a strong in-house manufacturing team. The Company's
on-staff equipment designer has a 23-year background in the use of air-driven
spraying equipment, and has drawn upon this extensive expertise to develop what
the Company believes is a distinctly superior product to others in the market.
The Company's design specialists remain constantly apprised of technological
innovations in UV-free spray booth equipment. The Company's presence in both the
United States and its planned presence in Europe also enable its design
personnel to offer significant sales and marketing advice in both markets.
Although Celebrity Tan's products are sold under its own label and brand, it
collaborates closely with its customers to manufacture and develop products. The
design team prepares presentations for customers and with the customer's
participation, develops and installs tanning booths that are relevant to the
customer's specific needs. Celebrity Tan believes that the comprehensive nature
of the services it offers is a major factor in the strength of its relationship
with its customers.
International E Gaming Developers, Inc.
- ---------------------------------------
International E Gaming Developers, Inc. ("Egaming"), is our
wholly-owned subsidiary through which we operated our gaming business. In April
2001, we acquired the assets of Suchow Holdings Ltd., a Bahamian-based company
that provided back-end administrative software solutions for e-commerce driven
websites. In 2003, we did not renew our online gaming license since the Company
decided to no longer operate an online casino. Due to recent changes in United
States law with respect to Internet gaming, we are no longer involved in
Internet gaming activities.
Ontario Private Water Labeling Ltd.
- -----------------------------------
Ontario Private Water Labeling Ltd. ("OPWLL"), our wholly-owned
subsidiary, specializes in bottled water distribution and sales. We have
discontinued operations of OPWLL as we focus our operations on the
direct-banking and payment-card solutions business concentrating around our
"FocusKard" suite of products.
Competition
The markets for the financial and stored-value card products and
services offered by us are intensely competitive. We compete with a variety of
companies in various segments of the financial service industry and its
competitors vary in size, scope and breadth of products and services they offer.
Certain segments of the financial services industry tend to be highly
fragmented, with numerous companies competing for market share. Highly
fragmented segments currently include financial account processing, customer
relationship management solutions, electronic funds transfer and card solutions.
We face a number of competitors in the debit card and payment market. We also
face substantial competition for the wholesale distribution of stored-value
cards.
Joint Venture with Serenity Investments Holdings Corp.
- ------------------------------------------------------
On July 19, 2007 the Company entered into a joint venture partnership
with Serenity Investments Holdings Corp., a British Virgin Islands corporation,
to obtain a Payment Processing Engine and an E-Wallet Platform that will provide
the technology for the backbone to the Company's FocusKard suite of payment
solutions.
20
C. Organizational Structure
OXFORD INVESTMENTS HOLDINGS INC
--------------------
|
|
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| | | |
| | | |
- ---------------------- -------------- -------------- --------------
INTERNATIONAL EGAMING CELEBRITY TAN, ONTARIO PRIVATE KO HO
DEVELOPERS, INC. (100%) INC. (100%) WATER LABELLING, GROUP
LTD. 100%) (50%)
- ---------------------- -------------- -------------- --------------
|
|
------------------------------------------------------------
| | |
| | |
- ---------------------- -------------- -------------------------------
ARDEN TRADING COMPANY HONGXIN INSURANCE FOSHAN FOSHANTONG INFORMATION
LTD. (50%) AGENCY (50%) TECHNOLOGY CO. LTD. (35%)
- ---------------------- -------------- -------------------------------
D. Property, Plants and Equipment
Our registered office and principal executive offices are located in
the City of Toronto, in the Province of Ontario, Canada, at 1315 Lawrence Avenue
East, Suite 520, Toronto, Canada M3A 3R3. The term of the lease is three years
beginning December 1, 2003, with rent of $3,500 per month.
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. Due to recent changes in
United States law with respect to Internet gaming, we are no longer involved in
Internet gaming activities. The Company has discontinued the business operations
of Internet Gaming and private labeled bottled spring water and has focused its
core operations on the direct banking and stored card value market. It has
entered into the direct-banking and payment-card solutions business by
concentrating its business around its "FocusKard" suite of products.
21
Our consolidated financial statements are prepared in accordance with U.S.
generally accepted accounting principles. Our functional currency is the
Canadian dollar. Our financial statements are reported in United States dollars.
Sources of Revenue
For 2007, we had minimal product revenue as our business model shifted to
direct-banking and payment-card solutions and away from the UV free Tanning
Booths and related supplies, bottled water and bottled water private labeling,
software sub-license fees and web site customization fees. Our services revenue
includes amounts derived from consulting fees.
Revenue Recognition
For product sales, the Company generally recognizes revenue at the time of
delivery of goods. Sales are reflected net of discounts and returns. For
services, revenue is recognized as services are provided. Revenue from
operations, advertising and royalties are recognized as earned. Our licensing
agreements contain multiple fee elements such as web customization, web hosting,
licensing and marketing fees. Fees are allocated to the various components based
on objective evidence of fair value, which includes the price charged as if the
element was sold separately. We recognize revenue when there is persuasive
evidence of an arrangement, such as a licensing agreement, when delivery has
occurred, when there is a fixed or determinable fee and when collectibility is
probable. When the fee is not fixed or determinable or when collectibility is
not assured, the revenue is recognized when received. As amounts are collected,
the appropriate revenue is recognized and deferred revenue is recorded for the
annual amortizable portion as described below.
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.
A. Operating Results
The following is management's discussion and analysis of the our
financial condition and results of its operations for the fiscal years ended
December 31, 2003, 2004, 2005, 2006 and 2007. Because we are an emerging company
and we have recently diversified our business operations, the comparisons
between our financial statements may not be meaningful and may not necessarily
be indicative of our future results of operation.
Fiscal Year Ended December 31, 2007
- -----------------------------------
Revenues
--------
22
For the fiscal year ended December 31, 2007, we reported a net loss of
$3,096,225 or $0.09 per share. Revenues amounted to $6,132 ($4886 from a
commission fee and $1246 for product sales).
Our revenue decreased by 97% over the comparable period from the prior
year. The decrease in revenue was a result of the discontinuation of e-gaming
business, private water branding business, and our UV-free tanning booth
business. Due to recent changes in United States law with respect to Internet
gaming, the Company has discontinued its e-gaming business and does not expect
to receive continued revenues from this source in the next fiscal year. There
continues to be a dramatic slow-down in the UV-Free tanning business and
therefore there was also a dramatic decrease of sales in UV-free tanning booths
and related products.
Cost of Revenues
----------------
Cost of revenues amounted to ($15,732) from $111,016 a decrease of
$126,748 or 115% from the comparable period from the prior year and consisted of
a recovery of ($25,745) from licensing fees relating to discontinued e-gaming
activities and product costs of $10,013 associated with the slowdown in the
manufacturing and distribution of our UV-free tanning booths and material,
e-gaming royalties and services, and gaming license expenses.
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$3,062,428 from $1,001,405, an increase of $2,061,023 or 206% and consisted
principally of advertising and marketing ($1,333,769), commissions and
subcontracts ($194,933),professional fees (comprised of accounting, audit and
legal) ($86,184), consulting fees ($1,279,368), rent ($48,410) other
administrative and communication expenses ($119,764).
The increase in SG&A expenses was due primarily to increased cost in
advertising, marketing and consulting due to the shift in our business plan away
from e-gaming, the UV-free tanning and the spring water branding business, to
the stored value card business and our partnerships in China. SG&A also
increased because of increased consulting costs in connection with our stored
value card business, business development, promotion and marketing.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2007, the Company had total current assets of $9,434
consisting of prepaid expenses.
Operations used $934,431 for the fiscal year ended December 31, 2007.
Funds used in operations primarily relate to the increased cost in stock-based
compensation, advertising, marketing and consulting due to the shift in our
business plan away from e-gaming, the UV-free tanning and the spring water
branding business, to the stored value card business and our expansion into new
markets. In addition, we had increased advertising and marketing costs relating
to our stored value card business.
Investing activities used $0.00 for the fiscal year ended December 31,
2007.
Financing activities provided $1,001,012 for the fiscal year ended
December 31, 2007. Funds provided by financing activities were from the sale of
8,350,628 shares of common stock. The Company used $35,368 to repay loans made
to the Company from related parties. The Company received $48,444 from related
parties.
We had no long-term debt at December 31, 2007.
Fiscal Year Ended December 31, 2006
- -----------------------------------
Revenues
--------
For the fiscal year ended December 31, 2006, we reported a net loss of
$961,889 or $0.04 per share. Revenues amounted to $185,299 of which $28,620 was
from the sale of UV-Free Tanning Booths and related supplies, $0.00 was from the
23
sale of spring water and $156,679 was from licensing and royalties from e-gaming
activities.
Our revenue increased by 13% over the comparable period from the prior
year. The increase in revenue was a result of greater than expected licensing
fees for software from e-gaming activities. Due to recent changes in United
States law with respect to Internet gaming, the Company has discontinued its
e-gaming business and does not expect to receive continued revenues from this
source in the next fiscal year. There continues to be a dramatic slow-down in
the UV-Free tanning business and therefore a decrease of sales in UV-free
tanning booths and related products. Our licensing fees increased by 100% over
the comparable period from the prior year and accounted for 36% of our revenue.
The sales from tanning booths and related products accounted for 15% of our
revenue, a decrease of 49% from the prior year and e-gaming royalties accounted
for 49% of revenue, a decrease of 16% over the prior year.
Cost of Revenues
----------------
Cost of revenues amounted to $111,016 from $141,423 a decrease of
$30,407 or 22% from the comparable period from the prior year and consisted
principally of lower costs associated with the slowdown in the manufacturing and
distribution of our UV-free tanning booths and material ($1,043), e-gaming
royalties and services ($17,641), and gaming license expenses ($92,332).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$1,001,405 from $473,495, an increase of $527,910 or 111% and consisted
principally of stock-based compensation ($507,662), advertising and marketing
($101,601), professional fees (comprised of accounting, audit and legal)
($69,311), consulting fees ($211,417), rent ($53,230) other administrative and
communication expenses ($58,184).
The increase in SG&A expenses was due primarily to increased cost in
stock-based compensation, advertising, marketing and consulting due to the shift
in our business plan away from e-gaming, the UV-free tanning and the spring
water branding business, to the stored value card business. SG&A also increased
because of increased costs relating to private placement of our common shares to
raise money to fund our stored value card business, business development,
promotion and marketing.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2006, the Company had total current assets of $90,855
consisting of cash and cash equivalents of $37,969, inventory of $12,872,
receivables of $7,451 and prepaid expenses of $32,563.
Operations used $470,387 for the fiscal year ended December 31, 2006.
Funds used in operations primarily relate to the increased cost in stock-based
compensation, advertising, marketing and consulting due to the shift in our
business plan away from e-gaming, the UV-free tanning and the spring water
branding business, to the stored value card business and our expansion into new
markets. In addition, we had increased operational costs relating to the private
placement of our common shares to raise money to fund our stored value card
business
Investing activities used $0.00 for the fiscal year ended December 31,
2006.
Financing activities provided $513,041 for the fiscal year ended
December 31, 2006. Funds provided by financing activities were from the sale of
3,374,832 shares of common stock. The Company used $23,335 to repay loans made
to the Company from related parties.
We had no long-term debt at December 31, 2006.
Fiscal Year Ended December 31, 2005
- -----------------------------------
Revenues
--------
24
For the fiscal year ended December 31, 2005, we reported a net loss of
$471,308 or $0.02 per share. Revenues amounted to $163,889 of which $56,248 was
from the sale of UV-Free Tanning Booths and related supplies, $0.00 was from the
sale of spring water and $107,641 was from royalties from e-gaming activities.
Our revenue decreased by 76% over the comparable period from the prior
year. The decrease in revenue was due to a dramatic slow-down in the UV-Free
tanning business and therefore a decrease of sales in UV-free tanning booths and
related products. The decrease also was a result of slower than expected
royalties on e-gaming activities. Sales from tanning booths and related products
accounted for 34% of our revenue, a decrease of 81% from the prior year and
e-gaming royalties accounted for 66% of revenue, an decrease of 73% over the
prior year.
Cost of Revenues
----------------
Cost of revenues amounted to $141,423 from $350,251 an decrease of
$208,828 or 60% from the comparable period from the prior year and consisted
principally of costs associated with the manufacturing and distribution of our
UV-free tanning booths and material ($74,138), casino operations ($26,644),
bottled spring water ($0.00) and gaming license expenses ($40,641).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$473,495 from $482,211, a decrease of $8,716 or 2% and consisted principally of
payroll ($45,713), advertising and marketing ($8,146), professional fees
(comprised of accounting, audit and legal) ($58,227), consulting fees
($171,147), bad debts ($82,600), rent ($50,968) other administrative and
communication expenses ($56,694).
SG&A expenses were due to our continuing investment into the UV-free
tanning and the spring water branding business, increased corporate activity,
business development, promotion and marketing. SG&A increased because of our
increased marketing and manufacturing costs relating to the UV-free tanning
business.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2005, the Company had total current assets of $58,290
consisting of cash and cash equivalents of $0.00, inventory of $17,154,
receivables of $32,587 and prepaid expenses of $8,549.
Operations used $45,054 for the fiscal year ended December 31, 2005.
Funds used in operations primarily relate to the Company's manufacturing of
UV-Free Tanning Booths and expansion into new markets.
Investing activities used $0 for the fiscal year ended December 31,
2005.
Financing activities provided $51,684 for the fiscal year ended
December 31, 2005. Funds provided by financing activities were from the sale of
365,000 shares of common stock and from the advancement of a bank loan. The
Company received $9,416 in loans from related parties.
We had no long-term debt at December 31, 2005.
Fiscal Year Ended December 31, 2004
- -----------------------------------
Revenues
--------
For the fiscal year ended December 31, 2004, we reported a net loss of
$139,368 or $0.01 per share. Revenues amounted to $692,069 of which $293,628 was
from the sale of UV-Free Tanning Booths and related supplies, $2,508 was from
the sale of spring water and $395,933 was from royalties from e-gaming
activities.
25
Our revenue increased by 57.6% over the comparable period from the
prior year. The increase in revenue was mainly due to the Company's increase in
sales in the UV-Free Tanning business and to a lesser extent spring water
branding and sales. Sales from tanning booths and related products accounted for
42% of our revenue and spring water branding and sales accounted for 1% of
revenue.
Cost of Revenues
----------------
Cost of revenues amounted to $350,251 from $321,388 an increase of
$28,863 or 9% from the comparable period from the prior year and consisted
principally of costs associated with the manufacturing and distribution of our
UV-free tanning booths and material ($134,944), casino operations ($204,559),
bottled spring water ($1,200) and gaming license expenses ($9549).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$482,211 from $428,687, an increase of $53,524 or 12.5% and consisted
principally of payroll ($33,757), advertising and marketing ($43,958),
professional fees (comprised of accounting, audit and legal) ($81,978),
consulting fees ($194,769), rent ($46,128) other administrative and
communication expenses ($81,621).
SG&A expenses were due to our continuing investment into the UV-free
tanning and the spring water branding business, increased corporate activity,
business development, promotion and marketing. SG&A increased because of our
increased marketing and manufacturing costs relating to the UV-free tanning
business.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2004, the Company had total current assets of $286,095
consisting of cash and cash equivalents of $28,553, inventory of $80,941,
receivables of $159,179 and prepaid expenses of $17,422.
Operations used $127,307 for the fiscal year ended December 31, 2004.
Funds used in operations primarily relate to the Company's manufacturing of
UV-Free Tanning Booths and expansion into new markets.
Investing activities used $0 for the fiscal year ended December 31,
2004.
Financing activities provided $227,571 for the fiscal year ended
December 31, 2004. Funds provided by financing activities were from the sale of
952,750 shares of common stock. The Company used $3,522 to repay loans made to
the Company from related parties.
We had no long-term debt at December 31, 2004.
Fiscal Year Ended December 31, 2003
- -----------------------------------
Revenues
--------
For the fiscal year ended December 31, 2003, we reported a net loss of
$331,127 or $0.02 per share. Revenues amounted to $439,157 of which $58,534 was
from the sale of UV-Free Tanning Booths and related supplies, $0 was from the
sale of spring water, $ 96,600 was from the sale of software licenses and casino
operations, $11,419 was from advertising and marketing and $272,604 was from
royalties from e-gaming activities.
Our revenue increased by 47% over the comparable period from the prior
year. The increase in revenue was mainly due to the Company's entering into the
UV-Free Tanning business and to a lesser extent spring water branding and sales.
Sales from tanning booths and related products accounted for 13% of our revenue
and spring water branding and sales accounted for 0% of revenue.
26
Cost of Revenues
----------------
Cost of revenues amounted to $321,388 from $70,752 an increase of
$250,636 or 354% from the comparable period from the prior year and consisted
principally of costs associated with the manufacturing and distribution of our
UV-free tanning booths and material ($41,067), casino operations ($209,345) and
gaming license expenses ($70,976).
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative expense ("SG&A") amounted to
$428,687 from $641,249, a decrease of $212,562 or 33% and consisted principally
of payroll ($74,854), advertising and marketing ($49,614), professional fees
(comprised of accounting, audit and legal) ($73,906), consulting fees
($127,061), rent ($38,086) other administrative and communication expenses
($67,227).
SG&A expenses were due to our entry into the UV-free tanning and the
spring water branding business, increased corporate activity, business
development, promotion and marketing. SG&A decreased significantly because
decrease in consulting expenses and the professional accounting and legal
expenses that was attributable to our efforts to register as a public company
with the Securities & Exchange Commission.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
At December 31, 2003, the Company had total current assets of $147,517
consisting of cash and cash equivalents of $11,746, inventory of $43,977,
receivables of $3,721 and prepaid expenses of $88,073.
Operations provided $1,369 for the fiscal year ended December 31, 2003.
Funds used in operations primarily relate to the Company's expansion into new
market.
Investing activities used $1,684 for the fiscal year ended December 31,
2003. Funds used in investing activities consisted of purchases of equipment and
software.
Financing activities provided $187,727 for the fiscal year ended
December 31, 2003. Funds provided by financing activities were from the sale of
796,500 shares of common stock. The Company used $63,345 to repay loans made to
the Company from related parties.
We had no long-term debt at December 31, 2003.
B. Liquidity and Capital Resources
We have financed our operations from the issuance of equity securities
and, to a lesser extent, from non-interest bearing loans from our founder,
President and Chief Executive Officer Michael Donaghy.
From January 1, 2007 to present we have sold approximately 11,245,628
shares of our common shares through private placements with accredited
investors. The offering is being conducted pursuant to the exemption provided by
Rule 506 of Regulation D, under the Securities Act of 1933. We have raised
approximately $1,200,687, before expenses, for working capital to fund our
continuing operations and our joint venture acquisitions of Chinese companies.
As of December 31, 2007 we had approximately $0.00 of cash and cash
equivalents.
To provide working capital for its operations and project development,
the Company will 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
the Company's future capital requirements will be obtained. The Company's access
to capital is always dependent upon future financial market conditions,
27
especially those pertaining to early-stage companies. There can be no guarantee
that the Company will be successful in obtaining future financing, when
necessary, on economically acceptable terms.
For the year ended December 31, 2008, the Company believes that it will
need approximately CAD$1,000,000 of cash to cover administrative costs and
approximately CAD$60,000 for payment of lease properties. The Company
anticipates that it will pay for its 2007 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 2008, however, no assurances can be given that the Company will be
able to raise cash from additional financing efforts. If the Company is unable
to obtain sufficient funds from future financing, or from current revenues, the
Company may not be able to become profitable.
C. Research and development, patents and licenses, etc.
We are not involved in any research and development and have no
registered patents or licenses. In the fiscal years 2007, 2006, 2005, 2004 and
2003, the Company did not have any research, development or patent expenses.
D. Trend Information
In 2007, we intend to continue our tight cost control in order to
achieve the highest profitability possible. See Item 5A. "Operating and
Financial Review and Prospects - Results of Operation" for additional trend
information.
The Internet
The Internet continues to grow at a high rate in terms of the number of
users online, the total revenue being generated online and the speed at which
communications can be carried. All of these factors contribute to a parallel
growth in the number and value of stored value and payment card transactions
globally and the market audience for our stored value card business.
According to published reports, the popularity of the Internet and the
continuing increase in the on-line population has established it as one of the
fastest growing communications mediums in history, reaching an estimated 50
million users worldwide within only 5 years since its establishment for business
and personal use. Comparably, radio did not reach the same level of exposure for
38 years, television for 13 years and cable for 10 years. Today the Internet
reaches over one billion users worldwide.
The intense increase in Internet penetration is due to several major
factors, the first and foremost relating to PC penetration. Most PCs are
equipped with some form of Internet access, and most homes have telephone lines
or other forms of internet access. Once a PC is inside a home, the Internet is a
natural part of its use. Second, technology advances in personal computers for
the home and office, as well as those that help connection speed, encourage the
use of the Internet. Most product developments, such as computers that offer
Internet access by the touch of a button, make the Internet experience more
enjoyable and, therefore, consumers are drawn to it. Lastly, the content on the
Internet is self-enforcing. Advertising on the Internet directs consumers go to
other websites, thus extending the average time that users spend on the web.
North America has dominated the development of the Internet, but the greatest
growth potential is outside that region.
We expect these growth trends will have a positive impact on the
Company's sales and revenues. See "Forward Looking Information," below.
The Economy
28
We believe that significant opportunities exist in the economy in the
stored-value credit/debit card market. Specifically, we believe that our
FocusKard suite of product sales will increase as our brand name becomes more
entrenched in the market and as we focus on developing more partner distribution
channels, particularly with our joint acquisitions in China and other Asian
countries. In addition, we anticipate that our stored-card branding and
affiliation purchases and activity will continue to increase as we focus on
providing a wide variety of product opportunities to new customers. We expect
such increases to occur primarily as a result of our marketing plan and the
development of relationships with various companies with built-in distribution
channels; such as trade organizations and large companies.
E. Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
F. Tabular Disclosure of Contractual Obligations
The Company has no contractual obligations of the type required to be disclosed
in this section.
G. Safe harbor (Forward Looking Information)
We are projecting increased expenses.
We are projecting increased expenses for the fiscal year ending
December 31, 2008 as our stored-value card business grows. It is expected that
these expenses will be caused primarily by:
o Cost to start-up and operate new lines of business
o marketing costs
o costs for software and related applications
o startup, including personnel and office costs
o customer acquisition costs
o legal and accounting costs
We are in the emerging stage.
We have a limited operating history since our operations began in
November 2000. Consistent with other early-stage companies, expenditures are
heavily weighted in favor of our company branding, marketing, customer
acquisition and partnering affiliations. We realize that these expenditures are
necessary in order to compete for customers more effectively and to develop a
profitable company capable of surviving and prospering well into the future.
We expect to continue developing our stored-value credit/debit card
line of business through expanding our customer base and improving
functionalities based on customer needs, requests and requirements. In the event
that we target other appropriate acquisition or licensing candidates, we may
require additional funding to consummate such a relationship.
We do not currently have sufficient financial resources to meet the
funding requirements referenced above. Accordingly, we are currently seeking
funding from outside sources, including private placements of our common stock.
At the date hereof, we have no firm commitments from anyone to provide
additional funding.
Item 6. Directors, Senior Management and Employees
A. Directors and senior management. Set forth below are particulars
respecting our directors and executive officers as of June 24, 2006, and each
person's business experience:
29
Name Business Address Position
Michael Donaghy 1315 Lawrence Ave. East Chief Executive Officer,
Suite 520 President and Director
Toronto, Ontario
Canada M3A 3R3
Paul Bilewicz c/o 1315 Lawrence Ave. East Director
Suite 520
Toronto, Ontario
Canada M3A 3R3
Hon. Doug Lewis 77 Coldwater Street, East Director
Orillia, Ontario
Canada, L3V 1W6
Michael Donaghy, President. Mr. Donaghy, age 48, has been our
President, Chief Executive Officer and a member of our Board of Directors since
inception. From February 2000 to October 2000 he served as Interim President of
Zaurak Capital Corp., an e-gaming holding company. In 1999 he formed and was
named President and Chief Executive Officer of CyberGaming Inc., a company
engaged in the business of Internet e-gaming sub-licensing, website creation and
hosting. Mr. Donaghy resigned as President and CEO of CyberGaming Inc. in
September 2000, just prior to joining us. Mr. Donaghy is also President of
Citywebsites.com, a website design company, since March 1995.
Paul Bilewicz, Director. Mr. Bilewicz, age 58, has been a member of our
Board of Directors since April, 2007. From 2003 to present, he owns and operates
a Resort/ Retreat, Pretty River Valley Inn located in the Blue Mountain area in
central Ontario. Prior to that, from approximately 1996 to 2000 he was employed
with Glaxo Canada or its parent company GlaxoWellcome Plc. He was Chief
Information Officer at Glaxo Canada; he also assumed additional executive
responsibility for Finance, Human Resources and Business Process Re-engineering.
He was a member of the Glaxo Canada, Board of Directors. In 2000, he joined the
Royal Bank of Scotland in Edinburgh as Director of Systems Application
Development and Operations for Retail Banking. In 1996, he was appointed to the
position of Worldwide Director of Information Technology for the parent company,
GlaxoWellcome Plc and relocated to London, England. In that role he was
responsible for systems and networks globally for their manufacturing, research
and development and commercial operations, as well as being a member of the
Executive Committee of the US subsidiary. Mr. Bilewicz received a Bachelor of
Mathematics from the University of Waterloo in 1973 and also completed Executive
Programs at the Darden Graduate School of Business (University of Virginia),
Insead, in Fontainbleu, France and the Fuqua School of Business at Duke
University in North Carolina.
Doug Lewis, Director. The Honorable Doug Lewis, age 70, has been a
member of our Board of Directors since March, 2007. From September 2001 to
present, Mr. Lewis practices corporate and commercial law, negotiating and elder
law, including estate administration with a partnership he formed. Mr. Lewis
served as a lawyer member of the Ontario Consent and Capacity Board from October
2002 to October 2005. From 1993 until September 2001, Mr. Lewis pursued a number
of business interests, utilizing his experience in law, accounting, business and
government while serving as informal "House Counsel" for various companies.
Mr. Lewis has served in a number of positions in government, including
Parliamentary Secretary to the Secretary of the Treasury Board. In 1987, he was
appointed to the Cabinet by Prime Minister Brian Mulroney where he served as
Minister of State-Government House Leader. From 1988 to 1990, Mr. Lewis held the
positions of Government House Leader and Minister of Justice and Attorney
General of Canada. In 1990, he was appointed Minister of Transport and in 1991
he was appointed Solicitor General of Canada, a post he held until the Federal
election of 1993. In 1984, he was appointed a Queen's Counsel by the Province of
Ontario and by the Canadian Federal Government in 1992. Mr. Lewis maintained his
membership in the Law Society of Upper Canada during his years as a Member of
Parliament and returned to the practice of law in 2001.
30
In 1979, Mr. Lewis was elected to the House of Commons as the Member of
Parliament for the riding of Simcoe North and continued to so serve until
October 1993. In Opposition, Mr. Lewis served as Housing critic, Deputy House
Leader, House Leader and then, Chairman of the Public Accounts Committee.
After completing his degree as a Chartered Accountant, Mr. Lewis
attended Osgoode Hall Law School from 1964 to 1967 and was called to the Bar in
the Province of Ontario in 1969. Mr. Lewis trained as a Chartered Accountant,
received his degree from the Institute of Chartered Accountants of Ontario in
1962 and was named Fellow of the Institute of Chartered Accountants of Ontario
in 1982 for his service to the community and his profession.
B. Compensation. Mr. Donaghy received a salary of $125,000 for the
fiscal years ended December 31, 2005, December 31, 2006 and December 31, 2007 as
the Company's President and Chief Executive Officer. No other compensation was
paid to our executive officers.
We do not presently pay any cash compensation to directors for serving
on our board, but we do reimburse directors for out-of-pocket expenses for
attending board meetings.
Executive Compensation
The following table sets forth the a summary of compensation earned
during the Company's last three fiscal years by the Company's directors and
members of its administrative, supervisory or management bodies and its
subsidiaries for services in all capacities to the company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Restricted Securities LTIP All Other
Name and Fiscal Cash Other Annual Stock Underlying Payouts Compensation
Principal position Year compensation Compensation Award(s) Options (#)
(US$) (US$)
Michael Donaghy 2007 $125,000 - - - - -
Director and
President & Chief 2006 $125,000 - - 1,600,000 - -
Executive Officer
2005 $125,000 - - - - -
Paul Bilewicz 2007 $ 0.00 - - - - -
Director
Hon. Doug Lewis 2007 $ 0.00 - - - - -
Director
C. Board Practices. While not required, each of the Company's directors
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. The Company does not have separate audit or compensation committees
because up until 2007 there was only one member on the Board of Directors.
However, since the Company has recently increased the size of the Board of
Directors from zero to three, the Company intends to establish separate audit
and compensation committees.
D. Employees. As of December 31, 2007, we had a total of four (4)
employees (two (2) full-time and two (2) part-time) in Toronto, Ontario. None of
our employees are covered by any collective bargaining agreement. We believe
that relations with our employees are good.
31
E. Share Ownership. The following table sets forth information relating
to the beneficial ownership of our common stock as of the date of this annual
report by those persons who beneficially own more than 5% of our common stock
and by all of our directors and executive officers as a group, as of June 25,
2008. As of December 31, 2007 there were 39,744,810 shares of common stock
outstanding.
Name and Address of Position with the Number of
Beneficial Owner (1) Company Shares Owned Percent
- -------------------- ------- ------------ -------
Michael Donaghy (2) Director, President & 8,775,000 22.08%
Chief Executive Officer
Paul Bilewicz Director 60,000 *
Hon. Doug Lewis Director 500,000 1.26%
CEDE & Co. N/A 10,184,725 25.63%
P.O. Box 222
Bowling Green Station
New York, NY 10274
All Officers and 9,335,000 23.49%
Directors as a Group
(1 Person)
(*) Owns less than one percent (1%) of the Company's common stock.
(1) All officer and director addresses are c/o the Company at 1315 Lawrence
Avenue East, Suite 520, Toronto, Canada M3A 3R3.
(2) Mr. Donaghy beneficially owns these shares indirectly through his spouse.
Stock Option Plan
- -----------------
At the Company's 2006 Annual Meeting, the shareholders adopted a
Non-Qualified Stock Option Plan for the Company (the "Stock Option Plan"). A
total of up to ten percent (10%) of the common shares of the Company,
outstanding from time to time, are reserved for the issuance of stock options
pursuant to the Stock Option Plan. Options may be issued to directors, key
personnel and consultants to the Company, its subsidiaries and affiliates. The
holders of options under all of the Stock Option Plan are responsible for all
personal tax consequences relating to the options. The exercise prices of the
options are based on the fair value of the Company's common shares at the time
of grant as determined by our board of directors. The current practice of our
board of directors is to grant options with exercise prices that equal 100% of
the closing price of our common shares on the applicable date of grant. There
are currently 2,350,000 options issued under the Stock Option Plan. As of
December 31, 2007 a total of 1,600,000 stock options have been exercised and a
total of 750,000 stock options are outstanding.
The following table sets out stock option awards received by the Named
Executive Officers during the year ended December 31, 2007.
32
Option grants of Oxford Investments Holdings Inc. during 2007
Market Value
of Underlying
Securities % of Total Option Exercise Options on
Name Under Options Grants in Year Price Date of Grant Expiration Date
- ---- ------------- -------------- ----- ------------- ---------------
Michael Donaghy 0 0 $ 0 NIL N/A
The following table shows, for each Named Executive Officer, the number
of common shares acquired through the exercise of options of the Company during
the year ended December 31, 2007, the aggregate value realized upon exercise and
the number of unexercised options under the Stock Option Plan as at December 31,
2007. The value realized upon exercise is the difference between the market
value of common shares on the exercise date and the exercise price of the
option. The value of unexercised in-the-money options at December 31, 2007 is
the difference between the exercise price of the options and the market value of
the Company's common shares on December 31, 2007, which was $0.09 per share of
the Company's common stock.
Aggregate option exercises during 2007 and year end option values
Value of unexercised
Aggregate Unexercised options at in-the-money options at
Securities value December 31, 2007 December 31, 2007 (C$)
acquired at realized ----------------- ----------------------
Name exercise ($) Exerciseable Unexerciseable Exerciseable Unexerciseable
- ---- -------- --- ------------ -------------- ------------ --------------
Michael Donaghy 800,000 $120,000.00 0 0 0 0
Item 7. Major Shareholders and Related Party Transactions
A. Major shareholders. The Company is not aware of any beneficial
owners of 5% or more of the Company's common stock other than those disclosed in
Item 6.E. above.
B. Related party transactions.
As of June 15, 2008, the Company was indebted to its officers,
directors and stockholders $268,735, for cash advances, consulting fees and
expenses paid on behalf of the Company. As at December 31, 2007, 2006 and 2005,
the Company was indebted to certain of its officers, directors and stockholders
$268,735, $407,004, and $387,637, respectively, for cash advances, consulting
services and expenses paid on behalf of the Company. These related party loans
are uncollateralized, non-interest bearing and due on demand.
The Company was indebted to a director in the amount of $43,962,
bearing interest at 5% per annum, due upon demand. The loan was repaid in fiscal
year 2007. Interest for the year ended December 31, 2007 amounted to $33,309.
The Company rents space in Toronto Ontario on a month-to-month
agreement from a corporation that is controlled by a director. The monthly rent
is $3500(CDN). Rent expense for the year ended December 31, 2007 under this
lease amounted to $35,608. As of May 31, 2008, the Company owed the corporation
$21,000.00 in back rent.
During November 2000, we issued to Mr. Donaghy 8,400,000 shares of
common stock at $0.0009 per share in exchange for office equipment with a
historical cost of $3,472 and expenses valued at $3,992, which represents his
historical cost.
33
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information. This annual
report on Form 20-F contains the financial information set forth under Item 18.
B. Significant Changes. In May 2003, the Company entered into two
initiatives to further diversify it's interests in the lifestyles consumables
market. The first is the distribution of a private line of UV-free tanning
booths and related products and the second is the distribution of private
labeled bottled spring water. In April 2006, the Company acquired all of the
assets WebStar Internet Solutions, a company that delivers revolutionary online
payment solutions for companies that wish to accept payments through the
Internet for entertainment, products and services. The Company has discontinued
its e-gaming, UV-free tanning, and private water branding businesses.
During 2006, the Company entered into the direct-banking and
payment-card solutions business by concentrating its business around its
"FocusKard" suite of products. On or about December 18, 2006, we entered into a
joint venture arrangement with the Ko Ho Management Co. Ltd. We acquired a fifty
percent (50%) equity interest in the Ko Ho Group of Hong Kong, a company
wholly-owned by Mr. Benny Lee. The Ko Ho Group is an investment and management
company, specializing in company mergers and acquisitions, management and
marketing services in Asia Pacific with a focus in Hong Kong and China. To date
through our partnership with the Ko Ho Group, we have acquired an equity
interest in three Chinese companies, Arden Trading Company Ltd., Hongxin
Insurance Agency and Foshan Foshantong Information Technology Co., Ltd.
On July 19, 2007 the Company entered into a joint venture partnership
with Serenity Investments Holdings Corp., a British Virgin Islands corporation,
to obtain a Payment Processing Engine and an E-Wallet Platform that will provide
the technology for the backbone to the Company's FocusKard suite of payment
solutions. The Company issued 1,500,000 common shares in connection with this
joint venture.
On March 20, 2008, the Board of Directors agreed that the directors
would accept 60,000 common stock of the Company, valued at $0.05 CDN a share as
consideration for directors' fees to the end of December, 2008. The directors
received these shares on March 20, 2008.
On March 20, 2008, the Board of Directors agreed that each director
would be granted an option to purchase 200,000 shares of the Company at the
price of $0.12 CDN each for serving as a Director in the year 2007. The options
expire March 2013.
Subsequent to December 31, 2007, the Company issued 1,975,000 common
shares for a total consideration of $102,308, cash.
Legal Proceedings
The Company is not a party to any pending or ongoing material legal
proceeding nor is the company aware of any threatened or anticipated material
legal proceeding against it.
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.
Item 9. The Offer and Listing
Price History of Shares
The Company's common shares are listed in the United States on the
National Association of Securities Dealers OTC Bulletin Board, and began trading
in May 2004 under the symbol OXIHF. Even though our stock is listed on the
34
OTCBB, it is very thinly traded and trading can be sporadic and as of December
31, 2007, no active established market within or outside the United States
existed for our common stock.
The high and low sale prices for the common shares of the Company on
the OTC Bulletin Board for each of the last six months, each fiscal quarter in
each of the last two full financial years and subsequent period and each of the
last five full financial years are as follows:
OTC Bulletin Board
(United States Dollars)
High Low
2008
June (through June 25, 2008) $0.08 $0.05
May $0.16 $0.05
April $0.12 $0.06
March $0.20 $0.10
February $0.25 $0.07
January $0.15 $0.09
First Quarter $0.25 $0.07
2007 $0.65 $0.04
December $0.40 $0.06
Fourth Quarter $0.40 $0.06
Third Quarter $0.50 $0.35
Second Quarter $0.65 $0.38
First Quarter $0.10 $0.04
2006 $1.19 $0.04
December $0.40 $0.36
Fourth Quarter $0.40 $0.28
Third Quarter $1.19 $0.27
Second Quarter $0.50 $0.13
First Quarter $0.10 $0.04
2005 $0.15 $0.01
December $0.08 $0.06
Fourth Quarter $0.08 $0.06
Third Quarter $0.08 $0.01
Second Quarter $0.15 $0.02
First Quarter $0.15 $0.06
2004 $0.55 $0.10
Fourth Quarter $0.25 $0.10
Third Quarter $0.55 $0.20
Second Quarter $0.55 $0.10
The closing price of the Company's common shares on the OTCBB on June
24, 2008 was $0.05.
Item 10. Additional Information
A. Share Capital.
35
Not Applicable
B. Memorandum and articles of incorporation.
Incorporated by reference from the Company's registration statement on
Form 20-F filed on December 19, 2001.
C. Material contracts.
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 30,
2008. The agreement renews automatically on a year to year basis thereafter,
unless terminated by the parties. Mr. Donaghy is entitled to receive an annual
salary of $125,000 plus customary vacation, medical, dental and life insurance
benefits and reimbursement of certain business expenses. We may terminate the
employment agreement for "cause" which includes, (i) failure by Mr. Donaghy to
perform his duties in accordance with the employment agreement; (ii) Mr.
Donaghy's conviction for a criminal offense involving fraud, misappropriation of
monies, property or rights of the Company or an act of moral turpitude; (iii)
Mr. Donaghy's willful malfeasance or willful gross misconduct; (iv) a breach of
certain provisions of the employment agreement; and (v) for any reason permitted
by law that would allow the Company to terminate the agreement without notice or
for payment in lieu of notice.
The Company may also terminate the employment agreement prior to the
end of the term by payment to Mr. Donaghy of a lump sum equal to his
compensation and benefits payable under the remaining term of the agreement.
D. Exchange controls.
The Company is an Ontario corporation. Canada has no system of exchange
controls. There are no Canadian restrictions on the repatriation of capital or
earnings of a Canadian public company to non-resident investors. There are no
laws in Canada or exchange restrictions affecting the remittance of dividends,
profits, royalties and other payments to non-resident holders of the Canadian
securities.
There are no limitations under the laws of Canada or in the controlling
documents of the Company on the right of foreigners to hold or vote securities
of the Company, except that the Investment Canada Act may require review and
approval by the Minister of Industry (Canada) of certain acquisitions of
"control" of the Company by a "non-Canadian." The threshold for acquisitions of
control is generally defined as being one-third or more of the voting shares of
the Company. "Non-Canadian" generally means an individual who is not a Canadian
citizen, or a corporation, partnership, trust or joint venture that is
ultimately controlled by non-Canadians.
E. Taxation.
Canadian Federal Income Tax Consequences
The following is a brief summary of some of the principal Canadian
federal income tax consequences to a U.S. Holder (as defined below) of the
Company's common shares who deals at arm's length with and is not affiliated
with the Company, holds the shares as capital property and who, for the purposes
of the Income Tax Act (Canada) and the Canada-United States Income Tax
Convention, is at all relevant times resident or deemed to be resident in the
United States and is not nor is deemed to be in Canada and does not carry on
business in Canada.
36
This summary is of a general nature only and is not, and should not be
interpreted as, legal or tax advice to any particular U.S. Holder and no
representation is made with respect to the Canadian income tax consequences to
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, where the U.S. Holder is a corporation that
beneficially owns at least 10 percent of the voting shares of the Company.
In general, a U.S. Holder will not be subject to Canadian income tax on
capital gains arising on the disposition of the Company common shares unless (i)
at any time in the five-year period immediately preceding the disposition, 25
percent or more of the shares of any class or series of the capital stock of the
Company were owned (or were under option or subject to an interest in) by the
U.S. Holder, by persons with whom the U.S. Holder did not deal at arm's length
and (ii) the value of the common shares of the Company at the time of the
disposition derives principally from real property (as defined in the
Canada-United States Income Tax Convention) situated in Canada.
United States Federal Income Tax Consequences
The following is a general discussion of certain possible U.S. federal
income tax consequences, under current law, generally applicable to a U.S.
Holder of common shares of the Company. This discussion is of a general nature
only and does not take into account the particular facts and circumstances, with
respect to U.S. federal income tax issues, of any particular U.S. Holder. This
discussion does not cover any state, local or foreign tax consequences. (See
"Taxation-- Canadian Federal Income Tax Consequences", above).
The following discussion is based upon the sections of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published
Internal Revenue Service ("IRS") rulings, published administrative positions of
the IRS and court decisions that are currently applicable, any or all of which
could be materially and adversely changed, possibly on a retroactive basis, at
any time and which are subject to differing interpretations. This discussion
does not consider the potential effects, both adverse and beneficial, of any
proposed legislation which, if enacted, could be applied, possibly on a
retroactive basis, at any time.
This discussion is for general information only and it is not intended
to be, nor should it be construed to be, legal or tax advice to any U.S. Holder
or prospective U.S. Holder of common shares of the Company, and no opinion or
representation with respect to the U.S. federal income tax consequences to any
such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders
and prospective U.S. Holders of common shares of the Company should consult
their own financial advisor, legal counsel or accountant regarding the U.S.
federal, state, local and foreign tax consequences of purchasing, owning and
disposing of common shares of the Company.
U.S. Holders
- ------------
As used herein, a "U.S. Holder" means a holder of common shares of the
Company who is (i) a citizen or individual resident of the U.S., (ii) a
corporation or partnership created or organized in or under the laws of the U.S.
or of any political subdivision thereof, (iii) an estate whose income is taxable
in the U.S. irrespective of source or (iv) a trust subject to the primary
supervision of a court within the U.S. and control of a U.S. fiduciary as
described Section 7701(a)(30) of the Code.
Persons Not Covered
- -------------------
This summary does not address the U.S. federal income tax consequences
to persons (including persons who are U.S. Holders) subject to special
provisions of U.S. federal income tax law, including (i) tax-exempt
organizations, (ii) qualified retirement plans, (iii) individual retirement
accounts and other tax-deferred accounts, (iv) financial institutions, (v)
insurance companies, (vi) real estate investment trusts, (vii) regulated
37
investment companies, (viii) broker-dealers, (ix) persons or entities that have
a "functional currency" other than the U.S. dollar, (x) persons subject to the
alternative minimum tax, (xi) persons who own their common shares of the Company
as part of a straddle, hedging, conversion transaction, constructive sale or
other arrangement involving more than one position, (xii) persons who acquired
their common shares of the Company through the exercise of employee stock
options or otherwise as compensation for services, (xiii) persons that own an
interest in an entity that owns common shares of the Company, (xiv) persons who
own, exercise or dispose of any options, warrants or other rights to acquire
common shares of the Company, or (xv) persons who own their common shares of the
Company other than as a capital asset within the meaning of Section 1221 of the
Code.
Distribution on Common Shares of the Company
- --------------------------------------------
U.S. Holders receiving distributions (including constructive
distributions) with respect to common shares of the Company are required to
include in gross income for U.S. federal income tax purposes the gross amount of
such distributions, equal to the U.S. dollar value of such distributions on the
date of receipt (based on the exchange rate on such date), to the extent that
the Company has current or accumulated earnings and profits, without reduction
for any Canadian income tax withheld from such distributions. Such Canadian tax
withheld may be credited, subject to certain limitations, against the U.S.
Holder's U.S. federal income tax liability or, alternatively, may be deducted in
computing the U.S. Holder's U.S. federal taxable income by those who itemize
deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the
extent that distributions from the Company exceed current or accumulated
earnings and profits of the Company, such distributions will be treated first as
a return of capital, to the extent of the U.S. Holder's adjusted basis in the
common shares, and thereafter as gain from the sale or exchange of the common
shares of the Company. (See more detailed discussion at "Disposition of Common
Shares of the Company" below)
In the case of foreign currency received as a distribution that is not
converted by the recipient into U.S. dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, to the extent that there are no expenses associated with the transaction
that meet the requirements for deductibility as a trade or business expense
(other than travel expenses in connection with a business trip) or as an expense
for the production of income.
Dividends paid on the common shares of the Company generally will not
be eligible for the "dividends received deduction" allowed to corporate
shareholders receiving dividends from certain U.S. corporations. Under certain
circumstances, a U.S. Holder that is a corporation and that owns shares
representing at least 10% of the total voting power and the total value of the
Company's outstanding shares may be entitled to a 70% deduction of the "U.S.
source" portion of dividends received from the Company (unless the Company
qualifies as a "Foreign Personal Holding Company" or a "Passive Foreign
Investment Company" as defined below). The availability of the dividends
received deduction is subject to several complex limitations which are beyond
the scope of this discussion, and U.S. Holders of common shares of the Company
should consult their own financial advisor, legal counsel or accountant
regarding the dividends received deduction.
Certain information reporting and backup withholding rules may apply
with respect to certain payments related to the Company's common shares. In
particular, a payor or middleman within the U.S., or in certain cases outside
the U.S., will be required to withhold 31% (which rate is scheduled for periodic
adjustment) of any payments to a U.S. Holder of the Company's common shares of
dividends on, or proceeds from the sale of, such common shares within the U.S.,
if a U.S. Holder fails to furnish its correct taxpayer identification number or
otherwise fails to comply with, or establish an exemption from, the backup
withholding tax requirements. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a refund or a credit against the U.S.
Holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS. U.S. Holders should consult their own financial advisor,
legal counsel or accountant regarding the information reporting and backup
withholding rules applicable to the Company's common shares.
Foreign Tax Credit
- ------------------
38
A U.S. Holder who pays (or has withheld from distributions) Canadian or
other foreign income tax with respect to the ownership of common shares of the
Company may be entitled, at the option of the U.S. Holder, to either receive a
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.
39
Other Considerations for U.S. Holders
- -------------------------------------
In the following circumstances, the above sections of this discussion
may not describe the U.S. federal income tax consequences to U.S. Holders
resulting from the ownership and disposition of common shares of the Company:
Foreign Personal Holding Company
- --------------------------------
If at any time during a taxable year (i) more than 50% of the total
voting power or the total value of the Company's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the U.S. and (ii) 60% (or 50% in certain cases) or more of the
Company's gross income for such year is "foreign personal holding company
income" as defined in Section 553 of the Code (e.g., dividends, interest,
royalties, certain gains from the sale of stock and securities, and certain
gains from commodities transactions), the Company may be treated as a "Foreign
Personal Holding Company" ("FPHC") In that event, U.S. Holders of common shares
of the Company would be required to include in gross income for such year their
allocable portions of such "foreign personal holding company income" to the
extent the Company does not actually distribute such income.
The Company does not believe that it currently qualifies as a FPHC.
However, there can be no assurance that the Company will not be considered a
FPHC for the current or any future taxable year.
Foreign Investment Company
- --------------------------
If (i) 50% or more of the total voting power or the total value of the
Company's outstanding shares is owned, directly or indirectly, by citizens or
residents of the U.S., U.S. partnerships or corporations, or U.S. estates or
trusts (as defined by the Code Section 7701(a)(30)), and (ii) the Company is
found to be engaged primarily in the business of investing, reinvesting, or
trading in securities, commodities, or any interest therein, the Company may be
treated as a "Foreign Investment Company" ("FIC") as defined in Section 1246 of
the Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging common shares of the Company to be treated as ordinary income rather
than capital gain.
The Company does not believe that it currently qualifies as a FIC.
However, there can be no assurance that the Company will not be considered a FIC
for the current or any future taxable year.
Controlled Foreign Corporation
- ------------------------------
If more than 50% of the total voting power or the total value of the
Company's outstanding shares is owned, directly or indirectly, by citizens or
residents of the U.S., U.S. partnerships or corporations, or U.S. estates or
trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly
or indirectly, 10% or more of the total voting power of the Company's
outstanding shares (each a "10% Shareholder"), the Company could be treated as a
"Controlled Foreign Corporation" ("CFC") under Section 957 of the Code.
The classification of the Company as a CFC would effect many complex
results, including that 10% Shareholders of the Company would generally (i) be
treated as having received a current distribution of the Company's "Subpart F
income" and (ii) would also be subject to current U.S. federal income tax on
their pro rata shares of the Company's earnings invested in "U.S. property." The
foreign tax credit may reduce the U.S. federal income tax on these amounts for
such 10% Shareholders (See more detailed discussion at "Foreign Tax Credit"
above). In addition, under Section 1248 of the Code, gain from the sale or other
taxable disposition of common shares of the Company by a U.S. Holder that is or
was a 10% Shareholder at any time during the five-year period ending with the
sale is treated as ordinary income to the extent of earnings and profits of the
Company attributable to the common shares sold or exchanged.
If the Company is classified as both a Passive Foreign Investment
Company as described below and a CFC, the Company generally will not be treated
as a Passive Foreign Investment Company with respect to 10% Shareholders. This
40
rule generally will be effective for taxable years of 10% Shareholders beginning
after 1997 and for taxable years of the Company ending with or within such
taxable years of 10% Shareholders.
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, 2007 and does not believe that it will be a PFIC for the fiscal
year ending December 31, 2008. There can be no assurance that the Company's
determination concerning its PFIC status will not be challenged by the IRS, or
that it will be able to satisfy record keeping requirements that will be imposed
on QEFs in the event that it qualifies as a PFIC.
The PFIC rules are very complicated, and U.S. Holders should consult
their own financial advisor, legal counsel or accountant regarding the PFIC
rules and how these rules may impact their U.S. federal income tax situation.
41
F. Dividends and paying agents.
Not Applicable.
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
"Disclosure controls and procedures": are controls and other procedures
that are designed to ensure that information required to be disclosed by us in
the reports we file with the Securities and Exchange Commission is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms and that the information is accumulated and communicated
to our management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
The Company has developed and implemented a disclosure controls and procedures
policy with a view to promoting consistent disclosure controls and procedures
practices.
We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as defined in SEC Rule
13a-15(e) as of the end of the fiscal year covered by this Annual Report on Form
20-F. This evaluation was carried out under the supervision and with the
participation of our management, including our Chief Executive Officer and our
Acting Chief Financial Officer. Based upon that evaluation, our Chief Executive
Officer and our Acting Chief Financial Officer concluded that our disclosure
controls and procedures are effective. There was no changes in our internal
control over financial reporting during the year ended December 31, 2007 that
42
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
We recognize that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their
objectives and our management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Projections of
any evaluation of effectiveness to future periods are also subject to the risk
that controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies or procedures may deteriorate. In
addition, internal controls over financial reporting remains an evolving concept
and, as acknowledged by the SEC in both its rule-making and concept releases as
well as its "Final Report of the Committee on Smaller Public Companies" released
in April 2006, no definitive industry definition or guidance for management
currently exists as to what constitutes adequate internal controls for smaller
public companies like us. Accordingly, in light of the continuing SEC dialog as
to what constitutes effective control procedures for smaller public companies,
our controls and procedures are subject to on-going review and revision by our
management.
Changes in Internal Controls
There have been no changes in our internal control over financial
reporting identified in connection with the evaluation described above that
occurred during the period covered by this annual report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Item 16A. Audit Committee Financial Expert
The Company does not have a separate audit committee at this time. The
Company intends to establish an audit committee in the future. The Company
therefore does not have an "audit committee financial expert." The Board is
currently endeavoring to establish an audit committee with such a candidate and
intends to do so as soon as an appropriate individual is identified.
Item 16B. Code of Ethics
The Company has adopted a code of ethics applicable to all employees
and directors. A copy is available upon request to the Chief Executive Officer,
Oxford Investments Holdings Inc., 1315 Lawrence Avenue East, Suite 520, Toronto,
Ontario, Canada M3A 3R3
Item 16C. Principal Accountant Fees and Services
The Company paid the following fees to Danziger & Hochman, Chartered
Accountants, respectively, during the following fiscal years:
2006 2007
Audit fees CDN$38,000.00 CDN$35,000.00
Other Fees -0- -0-
Total ======= =======
Audit fees consist of audit work performed in the preparation of
financial statements and services that are normally provided in connection with
statutory and regulatory filings.
POLICY ON PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT AUDITORS
43
Since the Company does not yet have an audit committee, the Board
approves in advance all audit services and all non-audit services provided by
the independent auditors based on a policy adopted by the Board.
Under the policy, proposed services either (i) may be pre-approved by
the Board without consideration of specific case-by-case services as "general
pre-approval"; or (ii) require the specific pre-approval of the Board as
"specific pre-approval". These services are subject to annual review by the
Board.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
Not applicable.
PART III
Item 17. Financial Statements
Financial Statements. The consolidated financial statements set forth
under Item 18 are included as part of this annual report.
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
- --------------------------------- -----------
Report of Independent Registered Public Accounting Firm .....................F-1
Consolidated Balance Sheet as at December 31, 2006
and December 31, 2007 ......................................................F-2
Consolidated Statements of Operations for the years ended December 31, 2005
December 31, 2006 and December 31, 2007.....................................F-3
Consolidated Statement of Shareholders' Deficiency for the year ended,
December 31, 2005 December 31, 2006 and December 31, 2007..................F-4
Consolidated Statements of Cash Flows for the year ended
December 31, 2005, December 31, 2006 and December 31, 2007 .................F-5
Notes to Consolidated Financial Statements...................................F-6
44
Item 19. Exhibits
Exhibits and Exhibit Index. The following Exhibits are filed as part of this
Annual Report and incorporated herein by reference to the extent applicable.
Exhibit Index
Exhibit No. Description Page 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............................**
4.11 Oxford Investments Holdings Inc. Non-Qualified
Stock Option Plan.............................***
4.12 Oxford Investments Holdings Inc. Non-Qualified
Stock Option Agreement....................... ***
4.13 Joint Venture Agreement between the Ko Ho Group
and Oxford Investments Holdings Inc. .........***
4.14 Share Purchase Agreement between Ko Ho Group and
Arden Trading Company Ltd. and All the
Shareholders dated February 28, 2007..........***
4.15 Share Purchase Agreement between Ko Ho Group
and Hongxin Insurance Agency of China and All
the Shareholders dated March 14, 2007........ ***
4.16 Agreement for Cooperation between Foshan Wanzhi
S&T Company Ltd. and Ko Ho Management Ltd.
dated May 7, 2007.............................***
8.1 List of Subsidiaries..............................*
99.1 Certificate of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002....
99.2 Certificate of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002....
* Incorporated by reference from the Company's annual report on Form
20-F filed on June 28, 2002 or the Company's registration statement on Form 20-F
filed on December 19, 2001.
** Incorporated by reference from the Company's annual report on Form
20-F filed on June 30, 2006.
*** Incorporated by reference from the Company's annual report on Form
20-F filed on July 02, 2007.
Financial Statement Schedules
None.
45
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 30, 2008 By: /S/Michael Donaghy
-------------------------------------
Michael Donaghy, President/
Chief Executive Officer
46
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 30, 2008
47
Certification by Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Michael Donaghy, certify that:
1. I have reviewed this Annual Report on Form 20-F of Oxford Investments
Holdings Inc. (the "Registrant");
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this Annual Report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the a Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely a affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
By: /S/ Michael Donaghy
-------------------
Michael Donaghy
Chief Financial Officer
Date: June 30, 2008
48
OXFORD INVESTMENTS HOLDINGS INC.
Consolidated Financial Statements
December 31, 2007, 2006 and 2005
OXFORD INVESTMENTS HOLDINGS INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007, 2006 and 2005
Index
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - Statement I 2
Consolidated Statements of Operations - Statement II 3
Consolidated Statements of Shareholders' Deficiency - Statement III 4
Consolidated Statements of Cash Flows - Statement IV 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6 - 19
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, 2007 and 2006 and the accompanying
consolidated statements of operations, shareholders' deficiency and cash flows
for the years ended December 31, 2007, 2006 and 2005. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as at
December 31, 2007 and 2006 and the results of its operations and its cash flows
for the years ended December 31, 2007, 2006 and 2005 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As more fully discussed in note 2, the Company
has incurred operating losses and must continue to fund negative working capital
which raises substantial doubt about its ability to continue as a going concern.
Management plans in regard to these matters are also discussed in note 2. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Danziger Hochman Partners LLP
Danziger Hochman Partners LLP
Toronto, Canada
June 19, 2008
Page 1
OXFORD INVESTMENTS HOLDINGS INC. Statement I
(Formerly Oxford Software Developers, Inc.)
Consolidated Balance Sheets
As at December 31, 2007 and 2006
- -----------------------------------------------------------------------------
2007 2006
- -----------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ -- $ 37,969
Accounts receivable -- 7,451
Inventory -- 12,872
Prepaid expenses and deposits 9,434 2,563
- -----------------------------------------------------------------------------
9,434 90,855
PROPERTY AND EQUIPMENT 4,461 3,466
- -----------------------------------------------------------------------------
$ 13,895 $ 94,321
=============================================================================
LIABILITIES
CURRENT
Bank indebtedness $ 2,412 $ --
Bank loan 23,539 28,603
Accounts payable and accrued liabilities 883,339 841,865
Notes payable 187,049 154,412
Loan payable -- 137,296
Loans payable 268,735 269,708
- -----------------------------------------------------------------------------
1,365,074 1,431,884
- -----------------------------------------------------------------------------
SHAREHOLDERS' DEFICIENCY
COMMON STOCK 6,407,601 3,417,135
ADDITIONAL PAID-IN CAPITAL 917,333 507,662
PREPAID SHARE SUBSCRIPTION (156,000) --
ACCUMULATED DEFICIT (7,967,509) (4,871,284)
ACCUMULATED OTHER COMPREHENSIVE LOSS (552,604) (391,076)
- -----------------------------------------------------------------------------
(1,351,179) (1,337,563)
- -----------------------------------------------------------------------------
$ 13,895 $ 94,321
=============================================================================
Going concern and liquidity
Contingencies
/s/ Michael Donaghy, Director
(The accompanying notes are an integral part of these financial statements.)
Page 2
OXFORD INVESTMENTS HOLDINGS INC. Statement II
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Operations
For the Years Ended December 31, 2007, 2006 and 2005
- -------------------------------------------------------------------------------------------
2007 2006 2005
- -------------------------------------------------------------------------------------------
REVENUES
Licenses $ -- $ 66,132 $ --
Services 4,886 90,547 107,641
Products 1,246 28,620 56,248
- -------------------------------------------------------------------------------------------
6,132 185,299 163,889
- -------------------------------------------------------------------------------------------
COST OF REVENUES
Licenses (recovery) (25,745) 92,332 40,641
Services -- 17,641 26,644
Products 10,013 1,043 74,138
- -------------------------------------------------------------------------------------------
(15,732) 111,016 141,423
- -------------------------------------------------------------------------------------------
GROSS PROFIT 21,864 74,283 22,466
- -------------------------------------------------------------------------------------------
SELLING EXPENSES
Advertising and marketing 1,333,769 101,601 8,146
Commissions and subcontracts 194,933 42,633 5,282
Consulting 1,154,368 86,417 34,263
Communications 9,304 10,775 26,183
Travel 9,520 8,883 4,986
- -------------------------------------------------------------------------------------------
2,701,894 250,309 78,860
- -------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Bad debts (recovery) 7,013 (82,481) 82,600
Consulting 125,000 125,000 136,884
Depreciation 1,000 971 2,477
General and office 83,812 34,848 10,692
Professional fees 86,184 69,311 58,227
Rent 48,410 53,230 50,968
Telephone 9,115 7,678 7,074
Wages and benefits -- 542,539 45,713
- -------------------------------------------------------------------------------------------
360,534 751,096 394,635
- -------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS before the undernoted (3,040,564) (927,122) (451,029)
OTHER EXPENSES - Interest (55,661) (34,767) (20,279)
- -------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (3,096,225) (961,889) (471,308)
- -------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES -- -- --
- -------------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (3,096,225) (961,889) (471,308)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation loss - net (161,528) (4,685) (51,558)
- -------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE YEAR $ (3,257,753) $ (966,574) $ (522,866)
===========================================================================================
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.09) $ (0.04) $ (0.02)
===========================================================================================
WEIGHTED AVERAGE NUMBER OF BASIC AND
DILUTED COMMON SHARES OUTSTANDING 33,640,665 23,368,008 21,765,254
===========================================================================================
(The accompanying notes are an integral part of these financial statements.)
Page 3
OXFORD INVESTMENTS HOLDINGS INC.
Statement III
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Shareholders' Deficiency
For the Years Ended December 31, 2007, 2006 and 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Additional Prepaid Other
Number of Paid-In Share Comprehensive Accumulated
Shares Amount Capital Subscription Income/Loss (Deficit) Total
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004 21,509,350 $ 2,805,652 $ -- $ -- $ (334,833) $(3,438,087) $ (967,268)
Stock issued for cash - net 365,000 7,905 -- -- -- -- 7,905
Other comprehensive loss -- -- -- -- (51,558) -- (51,558)
Net loss for the year -- -- -- -- -- (471,308) (471,308)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 21,874,350 2,813,557 -- -- (386,391) (3,909,395) (1,482,229)
Stock issued for cash - net 3,374,832 404,225 -- -- -- -- 404,225
Stock issued for services 450,000 79,353 -- -- -- -- 79,353
Stock options issued -- -- 507,662 -- -- -- 507,662
Stock options exercised - net 800,000 120,000 -- -- -- -- 120,000
Other comprehensive loss -- -- -- -- (4,685) -- (4,685)
Net loss for the year -- -- -- -- -- (961,889) (961,889)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 26,499,182 3,417,135 507,662 -- ($ 391,076) ($4,871,284) (1,337,563)
Stock issued for cash - net 8,350,628 990,588 -- -- -- -- 990,588
Stock issued for services 3,502,774 1,666,197 -- -- -- -- 1,666,197
Prepaid share subscription 400,000 156,000 -- (156,000) -- -- --
Stock issued for extinguishment
of debt 192,226 75,753 -- -- -- -- 75,753
Stock options issued -- -- 409,671 -- -- -- 409,671
Stock options exercised - net 800,000 101,928 -- -- -- -- 101,928
Other comprehensive loss -- -- -- -- (161,528) -- (161,528)
Net loss for the year -- -- -- -- -- (3,096,225) (3,096,225)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 39,744,810 $ 6,407,601 $ 917,333 $ (156,000) $ (552,604) $(7,967,509) $(1,351,179)
====================================================================================================================================
(The accompanying notes are an integral part of these financial statements.)
Page 4
OXFORD INVESTMENTS HOLDINGS INC. Statement IV
(Formerly Oxford Software Developers, Inc.)
Consolidated Statements of Cash Flows
For The Years Ended December 31, 2007, 2006 and 2005
- -------------------------------------------------------------------------------------------------------------------
2007 2006 2005
- ---------------------------------------------------------------------------- ---------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(3,096,225) $ (961,889) $ (471,308)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation 1,000 971 2,477
Stock-based compensation 409,671 507,662 --
Shares issued for services 1,666,197 79,353 --
Changes in non-cash working capital items:
Accounts receivable 7,451 25,136 126,592
Prepaid expenses and deposits 23,129 (24,014) 8,873
Inventory 12,872 4,282 63,787
Accounts payable and accrued liabilities 41,474 (101,888) 224,525
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (934,431) (470,387) (45,054)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings (repayments) under bank indebtedness - net 2,412 (13,697) 13,697
Advances (repayments) from bank loan - net (5,064) (8,564) 37,167
Advances under notes payable -- 154,412 --
Repayment of related party loan (35,368) -- --
Proceeds from issuance of common stock - net 990,588 404,225 7,905
Advances under (repayments on) loans payable - net 48,444 (23,335) 9,416
- -----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,001,012 513,041 68,185
- -----------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION LOSS (104,550) (4,685) (51,684)
- -----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (37,969) 37,969 (28,553)
CASH, BEGINNING OF THE YEAR 37,969 -- 28,553
- -----------------------------------------------------------------------------------------------------------
CASH, END OF THE YEAR $ -- $ 37,969 $ --
===========================================================================================================
Supplemental cash flow information:
Interest paid $ 55,662 $ 26,876 $ 14,853
Capital stock issued upon reduction of related party loan $ 101,928 $ 120,000 $ --
Capital stock issued upon reduction of related party loan2 $ 75,753 $ -- $ --
Shares to be issued to extinguish debt $ 156,000 $ -- $ --
(The accompanying notes are an integral part of these financial statements.)
Page 5
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
----------------------------------------
Oxford Investments Holdings Inc. (formerly International E-Gaming
Developers Ltd.) ("the Company") was incorporated on October 13, 2000,
under the laws of the Province of Ontario, Canada. On May 17, 2001, the
Company changed its name to Oxford Software Developers Inc. and then
changed its name to Oxford Investments Holdings Inc. on December 18, 2003.
On November 3, 2000, the Company incorporated its wholly owned subsidiary,
International E-Gaming Developers Inc. ("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 ("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. The business of
Ontario Private Water Labelling Limited has been discontinued, and its net
assets and results of operations are not material to the accompanying
financial statements.
Due to changes in United States law, the Company is no longer involved in
Internet gaming activities. During the fourth quarter of fiscal 2006, the
Company changed its focus to become a provider of stored value cards
catering to a wide variety of markets. These products and services are
aimed at capitalizing on stored-value and reloadable prepaid card financial
products.
On November 30, 2006, the Company entered into a joint venture agreement
with Ko Ho Management Ltd. ("Ko Ho"), a Hong Kong-based company, with the
goal of acquiring business operations in the People's Republic of China.
Under the terms of this agreement, the Company acquired a 50% interest in
Ko Ho via the issuance of 250,000 common shares of the Company and the
financing of certain working capital expenses of Ko Ho in the amount of
$60,000 over the course of the following 10 months. Under the terms of the
joint venture agreement, the Company has agreed to issue up to an
additional 1,000,000 common shares and provide additional financing to a
maximum of $250,000 for Ko Ho to acquire an existing Chinese corporation.
In addition, the Company has agreed to issue a further 250,000 common
shares should certain specified performance goals of Ko Ho be met, and to
pay certain professional fees and e-commerce service fees of Ko Ho.
Through its partnership with Ko Ho, the Company has acquired an equity
interest in three Chinese companies, Arden Trading Company Ltd., Hongxin
Insurance Agency and Foshan Foshantong Information Technology Co., Ltd.
Page 6
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)
----------------------------------------
In February 2007, the Company acquired a 50% equity interest in Arden
Trading Company Ltd. ("Arden") of China through our partnership with Ko Ho.
Arden specializes in the operation of customer loyalty redemption programs.
Arden's services include processing bonus point redemptions, gift sourcing,
catalogue production, logistics, and call center customer support. It
provides long-term outsourcing services to businesses in its areas of
expertise.
In March 2007, the Company acquired a 50% equity interest in Hongxin
Insurance Agency of China ("Hongxin") through its partnership with Ko Ho.
Hongxin is an insurance agency selling insurance policies and financial
instruments to major insurance companies in China since 2004. It is under
license issued by China Insurance Supervisory Committee to provide
corporate and individual insurance products, risk management, and
consultation services.
In April 2007, the Company acquired a 35% equity interest in Foshan
Foshantong Information Technology Co., Ltd. ("Foshantong") through its
partnership with Ko Ho. Foshantong provides electronic payment smart card
programs for public transportation and small payment transactions.
In July 2007, the Company entered into a joint venture partnership with
Serenity Investments Holdings Corp. ("Serenity"), a British Virgin Islands
corporation, to obtain a payment processing engine and an E-Wallet platform
that will provide the technology for the backbone to the Company's
"FocusKard" suite of payment solutions. The Company issued 1,500,000 common
shares in connection with this joint venture.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The Company's accounting and reporting policies conform to accounting
principles generally accepted in the United States of America, and have
been consistently applied in the preparation of the accompanying
consolidated financial statements. These consolidated financial statements
have been prepared in United States dollars.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Oxford Investments Holdings Inc. and its wholly-owned subsidiaries
Celebrity Tan Inc., International E-Gaming Developers Inc. and Ontario
Private Water Labelling Limited, the latter of which is inactive. (See Note
4.) All significant inter-company transactions and balances have been
eliminated.
The Company's investments in Ko Ho, Arden, Hongxin, Foshantong and Serenity
have been presented in the accompanying consolidated financial statements
as advertising and marketing and consulting expenses. The purpose of these
investments was to facilitate entry into target markets in the People's
Republic of China by funding the marketing activities of these entities.
Management believes that the Company has no further obligations or
contingencies in respect of these entities (unless otherwise disclosed in
note 1), will not earn any revenues from the activities of these entities,
and that these investments do not meet the criteria for consolidation under
SFAS No. 46(R), "Consolidation of Variable Interest Entities."
Page 7
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Going Concern
The accompanying consolidated financial statements have been prepared on a
going concern basis and do not include any adjustments to the measurement
and classification of the recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern. The Company has experienced losses in the
three reporting periods and has a working capital deficiency of $1,355,640.
During the years ended December 31, 2007, 2006 and 2005, the Company
incurred comprehensive net losses of $3,257,753, $966,574 and $522,866,
respectively, and cash used in operations was $934,431, $470,387, and
$45,054, respectively. The Company financed its operations via the sale of
common stock, through bank loans and through the issuance of debt. The
Company's ability to realize its assets and discharge its liabilities in
the normal course of business is dependent upon continued support of its
creditors and shareholders, securing new sources of capital and financing,
and the establishment of operations that provide the Company with positive
cash flows. The Company is currently attempting to obtain additional
financing from its existing shareholders and other strategic investors to
continue its operations. However, there can be no assurance that the
Company will obtain additional funds from these sources.
These conditions cause substantial doubt about the Company's ability to
continue as a going concern. A failure to continue as a going concern would
require that the stated amounts of assets and liabilities be reflected on a
liquidation basis that could differ from the current presentation on the
going concern basis.
Use of Estimates
The preparation of 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 financial statements and the reported amounts of revenues and
expenses during the year. Financial statement items subject to significant
management judgment include revenue recognition; the valuation of accounts
receivable; the completeness of accounts payable and accrued liabilities
and loans and notes payable; the valuation of share compensation expense;
and, future income tax assets. While management believes that the estimates
and assumptions are reasonable and appropriate in the circumstances, actual
results may differ.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation of property and equipment is provided annually on a declining
balance basis over the estimated useful lives of the assets, except for
current year additions on which 1/2 of the rates is applicable. The
declining balance rates are as follows:
Computer hardware 30% declining balance
Computer software 100% declining balance
Office equipment 20% declining balance
Page 8
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with SFAS
No. 123(R) ("SFAS 123(R)"), "Share-Based Payment", which replaced SFAS No.
123 "Accounting for Stock-Based Compensation," and superseded APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Under SFAS 123(R), the
Company recognizes compensation costs related to share-based payment
transactions in the financial statements based on the fair value of the
equity (or liability) instruments issued over the period that an employee
is expected to provide service in exchange for the award, based on the
vesting terms of the specific compensation awards. Stock issued to
non-employees is valued based on the fair value of the services received or
the fair value of the stock given up.
Advertising Expenses
The Company expenses advertising costs as incurred. The Company's
advertising and marketing expenses for the years ended December 31, 2007,
2006 and 2005 are presented in the accompanying consolidated financial
statements.
Provision for Doubtful Accounts and Bad Debt Expense
Provision for losses on trade accounts receivable is made in amounts
required to maintain an adequate allowance to cover anticipated bad debts.
Accounts receivable are charged against the allowance when it is determined
by the Company that payment will not be received. Receivables are shown net
of an allowance for bad debts. Accounts receivable are presented net of an
allowance for doubtful accounts of $Nil (2006 - $8,951).
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," the Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell. The Company has not recorded an impairment loss as at December 31,
2007.
Inventories
Inventories are stated at the lower of cost or market on a first-in,
first-out basis.
Foreign Currency Translation
The Company considers the functional currency to be the local currency and,
accordingly, its financial information translated into U.S. dollars using
exchange rates in effect at year-end for assets and liabilities and average
exchange rates during each reporting period for the results of operations.
Adjustments resulting from the translation of the functional currency and
of subsidiaries' financial statements are included as a component of other
comprehensive loss within the statements of shareholders' deficiency.
Page 9
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Reclassifications
Certain prior year amounts were reclassified to conform to current year's
basis of presentation. These reclassifications did not result in any
changes to the Company's accumulated deficit or net losses.
Revenue Recognition
The Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101") as modified by Securities and Exchange
Commission Staff Accounting Bulletin No. 104. Under SAB 101, revenue is
recognized at the point of passage to the customer of title and risk of
loss, there is persuasive evidence of an arrangement, the sales price is
determinable, and collection of the resulting receivable is reasonably
assured for property. For product sales, the Company generally recognizes
revenue at the time of delivery of goods. Sales are reflected net of
discounts and returns. For services, revenue is recognized as services are
provided. Revenue from casino operations, advertising and royalties (which
ceased in 2006) were recognized when earned.
Comprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and presentation of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by 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. SFAS 130 requires that items be
included in other comprehensive income according to their nature, including
certain foreign currency items, changes in the fair value of derivative
financial instruments and unrealized gains and losses on certain debt and
equity securities.
The Company's other comprehensive loss comprises foreign currency
translation adjustments arising upon translation of the Company's Canadian
operating currency to its United States reporting currency.
Page 10
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS
-------------------------
Recently Adopted Accounting Standards
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 163, "Accounting for Financial Guarantee Insurance Contracts - An
interpretation of FASB Statement No. 60". SFAS 163 requires that an
insurance enterprise recognize a claim liability prior to an event of
default when there is evidence that credit deterioration has occurred in an
insured financial obligation. It also clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim
liabilities, and requires expanded disclosures about financial guarantee
insurance contracts. It is effective for financial statements issued for
fiscal years beginning after December 15, 2008, except for some disclosures
about the Company's insurance risk-management activities. SFAS 163 requires
that disclosures about risk-management activities be effective for the
first period beginning after issuance. Except for those disclosures,
earlier application is not permitted. The Company is currently evaluating
the impact of SFAS No. 163 on its financial statements, and the adoption of
this statement is not expected to have a material effect on the Company's
financial statements.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles." SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with generally accepted accounting
principles in the United States. It is effective 60 days following the
SEC's approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles". The Company is currently
evaluating the impact of SFAS No. 162 on its financial statements, and the
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
In March 2008, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 161, "Disclosures about Derivative Instruments and Hedging
Activities - an amendment to FASB Statement No. 133". SFAS 161 is intended
to improve financial standards for derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance and cash flows. Entities are required to provide enhanced
disclosures about: how and why an entity uses derivative instruments; how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations; and how derivative
instruments and related hedged items affect an entity's financial position,
financial performance and cash flows. It is effective for financial
statements issued for fiscal years beginning after November 15, 2008, with
early adoption encouraged. The Company is currently evaluating the impact
of SFAS No. 161 on its financial statements, and the adoption of this
statement is not expected to have a material effect on the Company's
financial statements.
In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of ARB No. 51." SFAS 160
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent's ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary
is deconsolidated. The Statement also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interest of the parent and the interest of the noncontrolling
owners. SFAS 160 is effective for fiscal years beginning after December 15,
2008. Determination of the ultimate effect of this pronouncement will
depend on the Company's structure at the date of adoption.
Page 11
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations"
("SFAS 141R"), replacing SFAS No. 141, "Business Combinations.". This
Statement retains the fundamental requirements in Statement 141 that the
acquisition method of accounting (which Statement 141 called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement also establishes
principles and requirements for how the acquirer: a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination
or a gain from a bargain purchase and c) determines what information to
disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. This Statement clarifies
that acquirers will be required to expense costs related to any
acquisitions. SFAS No. 141R will apply prospectively to business
combinations for which the acquisition date is on or after fiscal years
beginning December 15, 2008. Early adoption is prohibited. Determination of
the ultimate effect of this pronouncement will depend on the Company's
structure at the date of adoption.
In June 2007, the Emerging Issues Task Force ("EITF") ratified its
conclusion on EITF Issue No. 06-11 "Accounting for the Income Tax Benefits
of Dividends on Share-Based Payment Awards" ("EITF 06-11"). EITF 06-11
provides that tax benefits associated with dividends on share-based payment
awards be recorded as a component of additional paid-in capital. EITF 06-11
is effective, on a prospective basis, for fiscal years beginning after
December 15, 2007. The Company is currently evaluating the impact that the
adoption of EITF 06-11 will have on its financial position, results of
operations and cash flows.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115," ("SFAS 159") which permits entities to choose to
measure many financial instruments and certain other items at fair value at
specified election dates. A business entity is required to report
unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. This statement
is expected to expand the use of fair value measurement. SFAS 159 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The
adoption of SFAS 159 is not expected to have a material impact on the
Company's financial position, results of operation or cash flows.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements."
("SFAS 157") The Statement provides guidance for using fair value to
measure assets and liabilities. The Statement also expands disclosures
about the extent to which companies measure assets and liabilities at fair
value, the information used to measure fair value, and the effect of fair
value measurement on earnings. This Statement applies under other
accounting pronouncements that require or permit fair value measurements.
This Statement does not expand the use of fair value measurements in any
new circumstances. Under this Statement, fair value refers to the price
that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants in the market in which
the entity transacts. SFAS 157 is effective for the Company for fair value
measurements and disclosures made by the Company in its fiscal year
beginning in the 2008 fiscal year. The adoption of SFAS 157 is not expected
to have a material impact on the Company's financial position, results of
operation or cash flows.
Page 12
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
3. ACCOUNTING PRONOUNCEMENTS (continued)
-------------------------
In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109"
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing a two-step method of first evaluating whether a tax position
has met a more likely than not recognition threshold and, second, measuring
that tax position to determine the amount of benefit to be recognized in the
financial statements. FIN 48 provides guidance on the presentation of such
positions within a classified statement of financial position as well as on
derecognition, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The adoption of this statement did not have a
material effect on the Company's reported financial position or results of
operations.
4. SUBSIDIARIES AND DISCONTINUED OPERATIONS
----------------------------------------
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 region. E-Gaming Inc. was primarily
engaged in the operation and marketing of Internet gaming sites. During the
2002 fiscal year, the Company assumed all of the operations of E-Gaming
Inc. Due to changes in United States law, the Company ceased its Internet
gaming activities during the fourth quarter of fiscal 2006. Management is
of the opinion that the net assets and results of operations of the
Company's gaming operations are not material to the accompanying
consolidated financial statements. Accordingly, the financial statements do
not present the assets, liabilities and results of operations of these
activities separately as discontinued operations.
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 intended to approach corporate and retail entities that wish to
use their own label on bottled water as promotional or marketing tools.
Additionally, the Company intended to market its own line of bottled spring
water to sell at concerts, sporting events, and other venues. The business
of Ontario Private Water Labelling Limited has been discontinued, and its
net assets and results of operations are not material to the accompanying
consolidated financial statements. Accordingly, the financial statements do
not present the assets, liabilities and results of operations of Ontario
Private Water Labelling Limited separately as discontinued operations.
Page 13
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
4. SUBSIDIARIES AND DISCONTINUED OPERATIONS (continued)
----------------------------------------
Celebrity Tan Inc.
In 2003, the Company incorporated a wholly-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 intended to market through this subsidiary
its own line of sunless tanning products. The business of Celebrity Tan
Inc. has been discontinued, and its net assets and results of operations
are not material to the accompanying financial statements. Accordingly, the
financial statements do not present the assets, liabilities and results of
operations of Celebrity Tan Inc. separately as discontinued operations.
Summarized financial information as a result of discontinued operations is
as follows:
December 31, December 31,
2007 2006
--------- ---------
Cash $ 320 $ 128
Accounts receivable -- 7,451
Inventory -- 12,872
Prepaid expenses and deposits 9,434 32,563
--------- ---------
Total Assets $ 9,754 $ 53,014
--------- ---------
Bank loan $ 23,539 $ 28,603
Accounts payable and accrued liabilities 575,893 450,815
--------- ---------
Total liabilities $ 599,432 $ 479,418
--------- ---------
December 31, December 31, December 31,
2007 2006 2005
--------- --------- ---------
Revenues $ 1,246 $ 113,204 $ 163,889
Cost of revenues 10,013 (120,446) 141,423
--------- --------- ---------
Gross profit (loss) $ (8,767) $ 233,650 $ 22,466
Operating expenses 25,781 343,178 356,890
--------- --------- ---------
Loss from discontinued operations $ (34,548) $(109,528) $(334,424)
--------- --------- ---------
Page 14
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost. Depreciation is provided using
the declining balance method over the estimated useful lives of the assets
ranging from 20% to 100%.
The following is a summary of property and equipment and accumulated
depreciation:
2007 2006
------- -------
Office equipment $29,601 $25,167
Computer hardware 3,452 1,713
Computer software -- 1,444
------- -------
Total cost 33,053 28,324
Less: accumulated depreciation 28,592 24,858
------- -------
Net book value $ 4,461 $ 3,466
======= =======
6. BANK LOAN
---------
During fiscal 2004, The Company's wholly-owned subsidiary, Celebrity Tan
Inc., received the proceeds of a $50,000 CDN loan. The loan is repayable in
monthly principal payments of $833 CDN plus interest at prime plus 1%. The
loan is unsecured and due on demand. Due to the demand feature, the
liability is presented in the accompanying consolidated financial
statements as current.
Future principal payments in U.S. dollars are as follows:
2008 $10,088
2009 $10,088
2010 $ 3,363
7. NOTES PAYABLE
-------------
The notes are due to an arm's-length third party, bear interest at 12% per
annum, payable monthly, and are unsecured and repayable upon demand. Due to
the demand features, these notes are presented in the accompanying
consolidated financial statements as current liabilities.
8. LOAN PAYABLE - RELATED PARTY
- -- ----------------------------
The Company was indebted to a director. The loan bore interest at 5% per
annum and was unsecured. The loan was repaid during fiscal 2007 through
the issuance of stock for $101,928 and payment of cash of $35,368.
Interest for the year ended December 31, 2007 amounted to $33,309 (2006 -
$16,122).
Page 15
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
9. LOANS PAYABLE - RELATED PARTIES
As at December 31, 2007, the Company was indebted to certain of its
officers, directors and stockholders in the amount of $268,735 for cash
advances, consulting services and expenses paid on behalf of the Company.
These loans are unsecured, non-interest bearing and repayable upon demand.
Due to the demand features, these loans are presented in the accompanying
consolidated financial statements as current liabilities.
10. DEFERRED INCOME TAXES
At December 31, 2007, 2006 and 2005, the Company had net deferred tax
assets, calculated at an expected rate of 33% (36% 2006 and 2005), of
approximately $1,461,000, $994,000, and $864,000, respectively, principally
arising from net operating loss carry forwards for income tax purposes. As
management of the Company cannot determine that it is more likely than not
that the Company will realize the benefit of the net deferred tax asset, a
valuation allowance equal to the net deferred tax asset has been recorded
at December 31, 2007, 2006 and 2005.
A reconciliation of combined federal and provincial corporate income taxes
at the Company's effective tax rate of 33% (2006 and 2005 - 36%) is as
follows:
2007 2006 2005
----------- ----------- -----------
Net loss before income taxes $(3,096,225) $ (961,889) $ (471,308)
=========== =========== ===========
Income taxes at statutory rates $(1,022,000) $ (348,000) $ (170,000)
Tax effect of expenses not deductible for
income tax purposes:
Stock-based compensation $ 135,000 183,000 --
Shares issued for services $ 550,000 28,500 --
----------- ----------- -----------
(337,000) (136,500) (170,000)
Change in valuation allowance 337,000 136,500 170,000
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
The significant components of the deferred tax asset at December 31, 2007,
2006 and 2005 were as follows:
2007 2006 2005
----------- ----------- -----------
Net operating loss carry forwards $ 4,427,000 $ 2,761,000 $ 2,401,000
=========== =========== ===========
Deferred tax asset $ 1,461,000 $ 994,000 $ 864,000
Deferred tax asset valuation allowance $(1,461,000) $ (994,000) $ (864,000)
At December 31, 2007, the Company had net operating losses for income tax
purposes carried forward of approximately $4,427,000. These losses expire in
2008 through to 2027. The ultimate realization of future tax assets is dependent
upon the generation of future taxable income.
Page 16
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
11. COMMON STOCK
------------
The Company is authorized to issue an unlimited number of voting, common
shares without par value. Shares may be transferred with the consent of a
majority of the directors or the shareholders through resolution or by a
signed instrument.
On December 31, 2007, 2006 and 2005, the Company had 39,744,810; 26,499,182
and 21,874,350 shares issued and outstanding, respectively. The Company has
not issued any warrants.
During the year ended December 31, 2007, the Company issued 250,000 options
to one related individual and 250,000 options each to two arm's-length
individuals. The option have exercise price of $0.15 CDN - $0.71 US, and
vesting periods of immediately to one year from date of issuance. These
options expire at dates between April 2009 and June 2117. The fair value of
the options granted was $409,671 and was calculated using the Black-Scholes
option pricing model using the following assumptions:
Expected volatility: 254% -260%
Risk free interest rate: 4.5%
Expected life: 2 years
Dividend yield: 0%
At December 31, 2007, 750,000 options remained outstanding.
On October 31, 2006, the Company issued 1,600,000 options to a director at
an exercise price of $0.15 CDN vesting immediately, and a term of 10 years.
The fair value of the options granted was $507,662 and was calculated using
the Black-Scholes option pricing model using the following assumptions:
Expected volatility: 265%
Risk free interest rate: 4.5%
Expected life: 2 years
Dividend yield: 0%
During the year ended December 31, 2007, 800,000 options were exercised at
$0.15CDN per share. As payment for these options, the Company reduced the
amount of its outstanding liability to this director by $101,928. (See note
8.)
During the year ended December 31, 2006, 800,000 options were exercised at
$0.15 CDN per share. As payment for these options, the Company reduced the
amount of its outstanding liability to this director by $120,000.
During the year ended December 31, 2007, the Company sold for cash
8,350,628 shares of common stock. This stock was sold $1,650,503, cash,
less commissions of $659,915.
Page 17
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
11. COMMON STOCK (continued)
------------
The Company also issued 842,774 shares of common stock during the 2007
fiscal year for services provided by non-employees and 2,660,000 shares of
common stock pursuant to the establishment of the Company's joint venture
agreement. These shares were valued at a total of $1,666,197.
During the year ended December 31, 2006, the Company sold for cash
3,374,832 shares of common stock. This stock was sold for $724,785 less
commissions of $200,560.
The Company also issued 200,000 common shares during the 2006 fiscal year
for services provided by non-employees and 250,000 common shares were
issued pursuant to the establishment of the Company's joint venture
agreement. These shares were valued at a total of $79,353.
During the year ended December 31, 2005, the Company sold for cash 365,000
shares of common stock. This stock was sold for $19,809, less commissions
of $11,904.
12. RELATED PARTY TRANSACTIONS
--------------------------
The Company rents space in Toronto, Canada, from a corporation controlled
by a director of the Company, under a month-to-month agreement at $3,500
CDN per month. Rent expense for the year ended December 31, 2007 under this
lease amounted to $35,608 (2006 and 2005 - $38,847 and $37,608,
respectively). See also notes 8 and 9.
Related party transactions are recorded at the exchange amount established
and agreed to between related parties and are in the normal course of
business.
13. INCOME (LOSS) PER SHARE
-----------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted average number of shares outstanding during the
period. The weighted average number of shares is calculated by taking the
number of shares outstanding and weighting these shares by the amount of
time that they were outstanding. Diluted earnings per share is computed by
dividing the net income (loss) adjusted for interest expense on convertible
debt by the weighted average number of basic shares outstanding increased
by the number of shares that would be outstanding assuming conversion of
any stock options, warrants, and convertible debt. Diluted net income
(loss) per share for the year ended December 31, 2005 is the same as basic
net income (loss) per share as there were no common stock equivalents
outstanding. Diluted net income (loss) per share for the two most recent
years ended December 31 has not been presented as the effect would be
anti-dilutive.
Page 18
OXFORD INVESTMENTS HOLDINGS INC.
(Formerly Oxford Software Developers, Inc.)
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
- --------------------------------------------------------------------------------
14. CONTINGENCIES
-------------
In November 2004, a Canadian corporation filed an action against Mega Sun
Inc., Celebrity Tan Inc. and an independent salesperson alleging breach of
implied warranty, breach of contract, misrepresentation and sale of a
defective product in connection with the sale of a tanning mist booth. The
booth was manufactured by Mega Sun Inc., an entity unaffiliated with the
Company or Celebrity Tan Inc., and sold to the plaintiff by Celebrity Tan
Inc., through the independent salesperson. The action seeks damages in the
amount of the purchase price of approximately $50,000, including interest
and costs at December 31, 2006. Celebrity Tan Inc. has filed a defense in
response to the claim, denying all allegations in the complaint, and has
also filed a cross complaint against Mega Sun Inc. The action is currently
in the pretrial stage. While Celebrity Tan Inc. will vigorously defend this
matter, the outcome of the litigation is not certain at this time. No
accrual for this litigation has been made in the accompanying financial
statements.
15. SUBSEQUENT EVENTS
-----------------
a) On March 20, 2008, the Board of Directors agreed that the directors
would accept 60,000 common stock of the Company, valued at $0.05 CDN a
share as consideration for directors' fees to the end of December,
2008. The directors received these shares on March 20, 2008.
b) On March 20, 2008, the Board of Directors agreed that each director
would be granted an option to purchase 200,000 shares of the Company at
the price of $0.12 CDN each for serving as a Director in the year 2007.
The options expire March 2013.
c) Subsequent to December 31, 2007, the Company issued 1,975,000 common
shares for a total consideration of $102,308, cash.
16. FINANCIAL INSTRUMENTS
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The Company's financial instruments comprise accounts receivable, bank
indebtedness and bank loan, accounts payable and accrued liabilities and
loans and notes payable. In management's opinion, the fair value of these
instruments approximates carrying value due to their short maturities.
Currency Risk The Company is exposed to certain currency risks that the
value of certain financial instruments will fluctuate due to changes in
foreign exchange rates. Historically, the Company has not entered into
derivatives contracts to hedge existing risks or for speculative purposes.
Interest Rate Risk The Company is exposed to interest rate risk arising
from fluctuations in interest rates on its short-term borrowings and other
obligations. The Company's borrowing and obligations loans bear interest at
fixed and variable rates. Management is of the opinion that the Company is
not exposed to significant interest rate risks in respect of these
instruments as these resemble rates available in the current market for
debt of similar terms and maturities, except for debt with related parties.