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, 2006 [ ] 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, 2006: 26,499,182 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, 2002, 2003, 2004, 2005 and 2006 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, 2002 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2006 ------------- ------------- ------------- ------------- ------------- Statement of Operations Data: Total revenues $ 298,550 $ 439,157 $ 692,069 $ 163,889 $ 185,299 Net Income/(Net Loss) (748,796) (331,127) (139,368) (471,308) (961,889) Basic and diluted net loss per share - (0.04) (0.02) (0.01) (0.02) (0.04) Weighted average number of Shares used in computing basic and Diluted net loss per share- 19,756,999 20,018,107 20,958,721 21,765,254 23,368,008 Balance Sheet Data: Cash and cash equivalents $ 637 $ 11,745 $ 28,553 $ (13,697) $ 37,969 Total current assets 48,246 147,516 286,095 58,290 90,855 Total assets 57,121 157,309 292,883 62,727 94,321 Total current liabilities 780,366 1,126,698 1,260,151 1,544,956 1,431,884 Total liabilities 780,366 1,126,698 1,260,151 1,544,956 1,431,884 Total accumulated deficit (2,967,592) (3,298,719) (3,438,087) (3,909,395) (4,871,284) Total stockholders' equity (deficit) (723,245) (969,389) (967,268) (1,482,229) (1,337,563)
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, -------------------------------------------------------------------------- 2006 2005 2004 2003 2002 -------------------- End of Period .86 .86 .83 .77 .63 -------------------- 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 2006 and 2007. The exchange rates used are the closing rates as provided by the Bank of Canada. 6 ------------------------------------------------- Month High Low ------------------------------------------------- December 2006 0.88 0.86 ------------------------------------------------- January 2007 0.86 0.85 ------------------------------------------------- February 2007 0.86 0.84 ------------------------------------------------- March 2007 0.87 0.85 ------------------------------------------------- April 2007 0.90 0.86 ------------------------------------------------- May 2007 0.93 0.90 ------------------------------------------------- The exchange rate on December 31, 2006 for the conversion of United States dollars into Canadian dollars was $0.86 (CDN$1.00 = US$0.86). As of June 22, 2007 the close rate of exchange for the conversion of United States dollars into Canadian dollars was $0.94 (CDN$1.00 = US$0.94). The exchange rates used are the noon buying rates in New York City for cable transfers in foreign currencies, as certified for customs purposes by the Federal Reserve Bank of New York. B. Capitalization and Indebtedness. Not Applicable. C. Reasons for the Offer and Use of the Proceeds. Not Applicable. D. Risk Factors. The risks described below are not the only ones we face. Additional risks that generally apply to publicly traded companies, that are not yet identified or that are currently perceived as immaterial, may also impair our business operations. Our business, operating results and financial condition could be adversely affected by any of the following risks. You should refer to the other information set forth in this document, including our financial statements and the related notes. This annual report also contains certain forward-looking statements that involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans" and similar expressions. Our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report. 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 7 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 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 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. While we have some revenues, we may never realize significant revenues from our core business or be profitable. Factors that will influence the timing and amount of our growth and profitability include: . the success of implementing our business plan; . obtaining the necessary funding to grow our business; and . our ability to expand, diversify and grow our business. Our Ability to Continue as a Going Concern We face significant challenges in shifting from the development stage to the commercialization of the products that we offer. Our business may fail if we do not achieve significant revenue growth or obtain sufficient funding. Our accountants have raised substantial doubts about our ability to continue as a going concern. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in such a transition, and there can be no assurance that we will be successful or that we will ever achieve profitable operations. 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 8 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. 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. 9 We Rely On Third Parties To Distribute Our FocusKard and Other Stored-Value Products, Which May Not Result In Widespread Adoption. 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 10 going concern. 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. 11 Our financial results are reported in United States currency, which is subject to fluctuations in respect of the currencies of the countries in which we operate. Fluctuations in the exchange rate of the U.S. dollar and the Canadian dollar could have a positive or negative effect on our reported results. Given the constantly changing currency exposures and the substantial volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. There can be no assurance that we will not experience currency losses in the future which could have a material adverse effect on our business, revenues, operating results and financial condition. Uncertainty of Enforcement of U.S. Laws and Judgments against Foreign Persons We and our wholly-owned subsidiaries through which we operate are organized under the laws of the Province of Ontario, Canada and St. Johns, Antigua, respectively; our executive offices are in Canada, our directors and officers and certain of our advisers are residents of Canada, and a substantial portion of our assets and assets of those persons are located outside the United States. As a result, it may be difficult for you to initiate a lawsuit in the United States against us or these non-U.S. residents, or to enforce any judgment obtained in the United States against us or any of these persons. Consequently, you may be deterred or prevented from pursuing remedies under United States federal securities laws against us or other non-United States residents. We Currently Depend On the Sale of a few Products to Generate Most of Our Revenue We expect the sales of our 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, 2006, Michael Donaghy, our sole director, indirectly through his spouse, beneficially owned approximately 8,300,000 shares or 31.32% 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 12 could have the effect of delaying or preventing a change in our control, the effect of which may be to deprive you of a control premium that might otherwise be realized in connection with our acquisition. No Established Public Trading Market Our shares began trading on the Over the Counter Bulletin Board (OTCBB) in May 2004, however, at present our shares are thinly traded, and there is no assurance that a significant trading market will develop, or if developed, that such market will be sustained. Possible Volatility of Stock Price Many factors could affect the market price of our common shares. These factors include but are not limited to: o Variations in our operating results; o Variations in industry growth rates; o Actual or anticipated announcements of technical innovations or new products or product enhancements by us or our competitors; o General economic conditions in the markets for our products and services; o Divergence of our operating results from analysts' expectations; and o Changes in earnings estimates by research analysts. In particular, the market prices of the shares of many companies in the technology and emerging growth sectors experience wide fluctuations that are often unrelated to the operating performance of such companies. When the market price of a company's stock drops significantly, shareholders often institute securities class action lawsuits against that company. Such a lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources. Any of these events could have a material adverse effect on our business, financial condition and results of operations. 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. 13 Item 4. Information on the Company A. History and Development of the Company The Company was incorporated under the laws of Ontario, Canada on October 13, 2000 as a holding company under the name International E Gaming Developers Ltd. On May 17, 2001 the Company changed its name to Oxford Software Developers Inc. and on December 16, 2003 it changed its name from Oxford Software Developers Inc. to Oxford Investments Holdings Inc. The Company operates its business through 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. Due to recent changes in United States law with respect to Internet gaming, we are no longer involved in Internet gaming activities. 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. 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. 14 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 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 15 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 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. 16 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. 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. 17 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. 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 18 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 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. 19 Additional income potential may be tapped through sales of the tanning product to salons, and through the launch of the "Celebrity Tan " bottled lotion for the retail market, for use when a full-body tan is not required. The Company expects to sell this retail product at existing booth locations, and through the Company 's existing Internet infrastructure. As this industry moves forward we anticipate both salon owners and the general public will recognize Celebrity Tan as the sunless tanning system of choice. The Company's goal is to secure its position as Number 1 in the industry by providing the "perfect tan ". Customers The Company maintains long-term relationships with its Celebrity Tan customers, many of whom are seeking significant market shares in their respective locations. The Company premises its marketing strategy on its ability to offer customers a package of services, including product planning and design tailored to the customers' needs, high-tech quality manufacturing, distribution and logistics setup and marketing strategies. Celebrity Tan has a strong in-house manufacturing team. The Company's on-staff equipment designer has a 23-year background in the use of air-driven spraying equipment, and has drawn upon this extensive expertise to develop what the Company believes is a distinctly superior product to others in the market. The Company's design specialists remain constantly apprised of technological innovations in UV-free spray booth equipment. The Company's presence in both the United States and its planned presence in Europe also enable its design personnel to offer significant sales and marketing advice in both markets. Although Celebrity Tan's products are sold under its own label and brand, it collaborates closely with its customers to manufacture and develop products. The design team prepares presentations for customers and with the customer's participation, develops and installs tanning booths that are relevant to the customer's specific needs. Celebrity Tan believes that the comprehensive nature of the services it offers is a major factor in the strength of its relationship with its customers. 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. 20 C. Organizational Structure OXFORD INVESTMENTS HOLDINGS INC -------------------- | | ------------------------------------------------------------ | | | | | | | | ---------------------- -------------- -------------- -------------- 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 registered office and principal executive offices of our Antigua subsidiary are located at No. 6 Temple Street, St. John's, Antigua, at our Antigua counsel's office, without any lease or charge. We lease 2000 square feet of office space at 1033 Toy Avenue, Unit 2, Pickering, Ontario, Canada from an unaffiliated party. The office space provides us with the necessary office and development space. The term of the lease is three years beginning December 1, 2003, with rent of $1,443 per month. . 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 21 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. 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 2006, our product revenue consists of UV free Tanning Booths and related supplies, bottled water and bottled water private labeling, software sub-license fees and web site customization fees. Our services revenue includes amounts derived from hosting fees, royalties and revenue sharing arrangements on e-commerce transactions. Revenue Recognition Our licensing agreements contain multiple fee elements such as web customization, web hosting, licensing and marketing fees. Fees are allocated to the various components based on objective evidence of fair value, which includes the price charged as if the element was sold separately. We recognize revenue when there is persuasive evidence of an arrangement, such as a licensing agreement, when delivery has occurred, when there is a fixed or determinable fee and when collectibility is probable. When the fee is not fixed or determinable or when collectibility is not assured, the revenue is recognized when received. As amounts are collected, the appropriate revenue is recognized and deferred revenue is recorded for the annual amortizable portion as described below. 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 and 2006. 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. 22 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 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 $94,321 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 $526,738 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. 23 We had no long-term debt at December 31, 2006. Fiscal Year Ended December 31, 2005 Revenues For the fiscal year ended December 31, 2005, we reported a net loss of $471,308 or $0.02 per share. Revenues amounted to $163,889 of which $56,248 was from the sale of UV-Free Tanning Booths and related supplies, $0.00 was from the sale of spring water and $107,641 was from royalties from e-gaming activities. Our revenue decreased by 76% over the comparable period from the prior year. The decrease in revenue was due to a dramatic slow-down in the UV-Free tanning business and therefore a decrease of sales in UV-free tanning booths and related products. The decrease also was a result of slower than expected royalties on e-gaming activities. Sales from tanning booths and related products accounted for 34% of our revenue, a decrease of 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 $8716 or 0.02% and consisted principally of payroll ($45,713), advertising and marketing ($8,146), professional fees (comprised of accounting, audit and legal) ($58,227), consulting fees ($171,147), bad debts ($82,600), rent ($50,968) other administrative and communication expenses ($56,694). SG&A expenses were due to our continuing investment into the UV-free tanning and the spring water branding business, increased corporate activity, business development, promotion and marketing. SG&A increased because of our increased marketing and manufacturing costs relating to the UV-free tanning business. Financial Condition, Liquidity and Capital Resources At December 31, 2005, the Company had total current assets of $58,290 consisting of cash and cash equivalents of $0.00, inventory of $17,154, receivables of $32,587 and prepaid expenses of $8,549. Operations used $45,054 for the fiscal year ended December 31, 2005. Funds used in operations primarily relate to the Company's manufacturing of UV-Free Tanning Booths and expansion into new markets. Investing activities used $0 for the fiscal year ended December 31, 2005. Financing activities provided $54,488 for the fiscal year ended December 31, 2005. Funds provided by financing activities were from the sale of 365,000 shares of common stock and from the advancement of a bank loan. The Company used $9,416 to repay loans made to the Company from related parties. We had no long-term debt at December 31, 2005. Fiscal Year Ended December 31, 2004 Revenues 24 For the fiscal year ended December 31, 2004, we reported a net loss of $139,368 or $0.01 per share. Revenues amounted to $692,069 of which $293,628 was from the sale of UV-Free Tanning Booths and related supplies, $2,508 was from the sale of spring water and $395,933 was from royalties from e-gaming activities. Our revenue increased by 57.6% over the comparable period from the prior year. The increase in revenue was mainly due to the Company's increase in sales in the UV-Free Tanning business and to a lesser extent spring water branding and sales. Sales from tanning booths and related products accounted for 42% of our revenue and spring water branding and sales accounted for 1% of revenue. Cost of Revenues Cost of revenues amounted to $350,251 from $321,388 an increase of $28,863 or 9% from the comparable period from the prior year and consisted principally of costs associated with the manufacturing and distribution of our UV-free tanning booths and material ($134,944), casino operations ($204,559), bottled spring water ($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. 25 Sales from tanning booths and related products accounted for 13% of our revenue and spring water branding and sales accounted for 0% of revenue. Cost of Revenues Cost of revenues amounted to $321,388 from $70,752 an increase of $250,636 or 354% from the comparable period from the prior year and consisted principally of costs associated with the manufacturing and distribution of our UV-free tanning booths and material ($41,067), casino operations ($209,345) and gaming license expenses ($70,976). Selling, General and Administrative Expense Selling, general and administrative expense ("SG&A") amounted to $428,687 from $641,249, a decrease of $212,562 or 33% and consisted principally of payroll ($74,854), advertising and marketing ($49,614), professional fees (comprised of accounting, audit and legal) ($73,906), consulting fees ($127,061), rent ($38,086) other administrative and communication expenses ($67,227). SG&A expenses were due to our entry into the UV-free tanning and the spring water branding business, increased corporate activity, business development, promotion and marketing. SG&A decreased significantly because decrease in consulting expenses and the professional accounting and legal expenses that was attributable to our efforts to register as a public company with the Securities & Exchange Commission. Financial Condition, Liquidity and Capital Resources At December 31, 2003, the Company had total current assets of $147,517 consisting of cash and cash equivalents of $11,746, inventory of $43,977, receivables of $3,721 and prepaid expenses of $88,073. Operations provided $1,369 for the fiscal year ended December 31, 2003. Funds used in operations primarily relate to the Company's expansion into new market. Investing activities used $1,684 for the fiscal year ended December 31, 2003. Funds used in investing activities consisted of purchases of equipment and software. Financing activities provided $187,727 for the fiscal year ended December 31, 2003. Funds provided by financing activities were from the sale of 796,500 shares of common stock. The Company used $63,345 to repay loans made to the Company from related parties. We had no long-term debt at December 31, 2003. B. Liquidity and Capital Resources 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 4,810,750 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 $1,080,655, before expenses, for working capital to fund our continuing operations and our joint venture acquisitions of Chinese companies. As of December 31, 2006 we had approximately $37,969 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 26 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, 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, 2007, 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 2007, 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 2006, 2005, 2004, 2003 and 2002, 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. 27 The Economy 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, 2007 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 28 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: 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 43, 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 57, 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 69, 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 29
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. 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 $125,000 for the fiscal years ended December 31, 2004, December 31, 2005 and December 31, 2006 as the Company's President and Chief Executive Officer. No other compensation was paid to our executive officers. We do not presently pay any cash compensation to directors for serving on our board, but we do reimburse directors for out-of-pocket expenses for attending board meetings. Executive Compensation The following table sets forth the a summary of compensation earned during the Company's last three fiscal years by the Company's directors and members of its administrative, supervisory or management bodies and its subsidiaries for services in all capacities to the company and its subsidiaries. SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards Payouts Restricted Securities LTIP All Other Name and Fiscal Cash Other Annual Stock Underlying Payouts Compensation Principal position Year compensation Compensation Award(s) Options (#) (US$) (US$) Michael Donaghy 2006 $ 125,000 -- -- 1,600,000 -- -- Director and President & Chief 2005 $ 125,000 -- -- -- -- -- Executive Officer 2004 $ 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. 30
D. Employees. As of December 31, 2006, we had a total of five (5) employees (four (4) full-time and one (1) part-time) in Toronto, Ontario. None of our employees are covered by any collective bargaining agreement. We believe that relations with our employees are good. E. Share Ownership. The following table sets forth information relating to the beneficial ownership of our common stock as of the date of this annual report by those persons who beneficially own more than 5% of our common stock and by all of our directors and executive officers as a group, as of June 25, 2007. As of December 31, 2006 there were 26,499,182 shares of common stock outstanding. Name and Address of Beneficial Position with the Company Number of Shares Owned Percent ------------------------------ ------------------------- ---------------------- ------- Owner (1) --------- Michael Donaghy (2) Director, President & 8,300,000 31.32% Chief Executive Officer Paul Bilewicz Director 0 * Hon. Doug Lewis Director 500,000 1.89% CEDE & Co. N/A 7,619,475 28.75% P.O. Box 222 Bowling Green Station New York, NY 10274 All Officers and Directors as a Group 8,300,000 34.68% (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, (currently 3,529,599 shares) 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 2,100,000 options issued under the Stock Option Plan. As of June 8, 2007 a total of 1,600,000 stock options have been exercised and a total of 500,000 stock options are outstanding. 31
The following table sets out stock option awards received by the Named Executive Officers during the year ended December 31, 2006. Option grants of Oxford Investments Holdings Inc. during 2006 Market Value of Underlying Securities Under % of Total Option Options on Date Name Options Grants in Year Exercise Price of Grant Expiration Date ---- ------- -------------- -------------- -------- --------------- Michael Donaghy 800,000 38 $ 0.15 NIL November 16, 2016
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, 2006, the aggregate value realized upon exercise and the number of unexercised options under the Stock Option Plan as at December 31, 2006. 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, 2006 is the difference between the exercise price of the options and the market value of the Company's common shares on December 31, 2006, which was $0.38 per share of the Company's common stock.
Aggregate option exercises during 2006 and year end option values Unexercised options at Value of unexercised in-the-money December 31,2006 options at December 31, 2006 (C$) ---------------- ---------------------------------
Securities Aggregate value acquired at realized Name exercise ($) Exerciseable Unexerciseable Exerciseable Unexerciseable ---- -------- --- ------------ -------------- ------------ -------------- Michael Donaghy 800,000 $120,000.00 800,000 0 $184,000.00 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, 2007, the Company was indebted to its officers, directors and stockholders $269,708.00, for cash advances, consulting fees and expenses paid on behalf of the Company. These related party loans are uncollateralized, non-interest bearing and due on demand. The Company is indebted to a director in the amount of $137,296, bearing interest at 5% per annum, due upon demand. Interest for the year ended December 31, 2006 amounted to $16,122. 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 $3500.00 (CDN) and as of December 31, 2006, the Company owed the corporation $51,057 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. 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. 32 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. 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. Legal Proceedings The Company is not a party to any pending or ongoing material legal proceeding nor is the company aware of any threatened or anticipated material legal proceeding against it except as follows: In November 2004, 3084735 Nova Scotia Limited, a corporation organized under the laws of Nova Scotia, Canada filed an action against Mega Sun Inc., Celebrity Tan Inc. and Ray Zinck alleging breach of implied warranty, breach of contract, misrepresentation and sale of a defective product in connection with the sale of a tanning mist booth. The booth was manufactured by Mega Sun Inc., an entity unaffiliated with the Company or Celebrity Tan Inc., and sold to Nova Scotia Limited by Celebrity Tan Inc. through Ray Zinck, an independent salesperson. The action seeks damages in the amount of the purchase price of approximately US$30,000.00, plus interest and costs. Celebrity Tan filed a timely defense in response to the claim denying all allegations in the complaint and also filed a cross complaint against Mega Sun Inc. The action is currently in the pretrial stage and has been inactive for the past two years. While Celebrity Tan will vigorously defend this matter, the outcome of the litigation is not certain at this time. In June 2005, the Company and Michael Donaghy entered into a settlement agreement and undertaking with the Alberta Securities Commission. In the agreement, the Company and Mr. Donaghy acknowledged that they breached sections 75(1)(a) and 110(1) of the Securities Act, R.S.A. 2000, c. S-4 (the "Act") in connection with an alleged illegal distribution of the securities of the Company by an independent consultant hired by the Company to sell its securities. The Company and Mr. Donaghy relied on the accredited investor exemption of the Act to distribute the shares of the Company and also relied upon the expertise and experience of the sales consultant with which the Company had contracted. As part of the settlement, the Company agreed to pay the Commission Forty Two Thousand dollars ($42,000) and Mr. Donaghy agreed that all the exemptions contained in the Alberta Securities Act will not apply to him for two (2) years from the date of the agreement, except that he may trade in securities for his personal account through an agent that is a registered dealer. Dividend Policy The Company has not paid and does not plan to pay any cash dividends on its capital stock. The Company currently intends to retain any future earnings to fund growth, and therefore does not expect to pay any cash dividends in the foreseeable future. Item 9. The Offer and Listing Price History of Shares The Company's common shares are listed in the United States on the National Association of Securities Dealers OTC Bulletin Board, and began trading in May 2004 under the symbol OXIHF. Even though our stock is listed on the OTCBB, it is 33 very thinly traded and trading can be sporadic and as of December 31, 2006, 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 2007 $0.85 $0.34 May $0.65 $0.50 April $0.75 $0.51 March $0.76 $0.55 February $0.85 $0.55 January $0.62 $0.34 First Quarter $0.85 $0.34 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 22, 2007 was $0.53. Item 10. Additional Information A. Share Capital. Not Applicable B. Memorandum and articles of incorporation. Incorporated by reference from the Company's registration statement on Form 20-F filed on December 19, 2001. C. Material contracts. 34 The Company has employment agreements with its President as discussed more fully below. The Company entered into an employment agreement with Michael Donaghy dated July 1, 2001 to serve as our President and also as the general manager of our wholly-owned subsidiary International E Gaming Developers Inc. At the expiration, the Company and Mr. Donaghy signed an agreement to extend the terms of the employment agreement for an additional four (4) years until June 30th 2008. Mr. Donaghy is entitled to receive an annual salary of $125,000 plus customary vacation, medical, dental and life insurance benefits and reimbursement of certain business expenses. We may terminate the employment agreement for "cause" which includes, (i) failure by Mr. Donaghy to perform his duties in accordance with the employment agreement; (ii) Mr. Donaghy's conviction for a criminal offense involving fraud, misappropriation of monies, property or rights of the Company or an act of moral turpitude; (iii) Mr. Donaghy's willful malfeasance or willful gross misconduct; (iv) a breach of certain provisions of the employment agreement; and (v) for any reason permitted by law that would allow the Company to terminate the agreement without notice or for payment in lieu of notice. The Company may also terminate the employment agreement prior to the end of the term by payment to Mr. Donaghy of a lump sum equal to his compensation and benefits payable under the remaining term of the agreement. D. Exchange controls. The Company is an Ontario corporation. Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, royalties and other payments to non-resident holders of the Canadian securities. There are no limitations under the laws of Canada or in the controlling documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian." The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians. E. Taxation. Canadian Federal Income Tax Consequences The following is a brief summary of some of the principal Canadian federal income tax consequences to a U.S. Holder (as defined below) of the Company's common shares who deals at arm's length with and is not affiliated with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) and the Canada-United States Income Tax Convention, is at all relevant times resident or deemed to be resident in the United States and is not nor is deemed to be in Canada and does not carry on business in Canada. This summary is of a general nature only and is not, and should not be interpreted as, legal or tax advice to any particular U.S. Holder and no representation is made with respect to the Canadian income tax consequences to any particular person. Accordingly, U.S. Holders are advised to consult their own tax advisers with respect to their particular circumstances. Under the Income Tax Act (Canada) and pursuant to the Canada-United States Income Tax Convention, a U.S. Holder of common shares will be subject to a 15 percent withholding tax on dividends paid or credited or deemed by the Income Tax Act (Canada) to have been paid or credited on such shares. The withholding tax rate is 5 percent for 1999, 2000 and 2001, where the U.S. Holder is a corporation that beneficially owns at least 10 percent of the voting shares of the Company. 35 In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of the Company common shares unless (i) at any time in the five-year period immediately preceding the disposition, 25 percent or more of the shares of any class or series of the capital stock of the Company were owned (or were under option or subject to an interest in) by the U.S. Holder, by persons with whom the U.S. Holder did not deal at arm's length and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Canada-United States Income Tax Convention) situated in Canada. United States Federal Income Tax Consequences The following is a general discussion of certain possible U.S. federal income tax consequences, under current law, generally applicable to a U.S. Holder of common shares of the Company. This discussion is of a general nature only and does not take into account the particular facts and circumstances, with respect to U.S. federal income tax issues, of any particular U.S. Holder. This discussion does not cover any state, local or foreign tax consequences. (See "Taxation-- Canadian Federal Income Tax Consequences", above). The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal Revenue Service ("IRS") rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any U.S. Holder or prospective U.S. Holder of common shares of the Company, and no opinion or representation with respect to the U.S. federal income tax consequences to any such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders and prospective U.S. Holders of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, state, local and foreign tax consequences of purchasing, owning and disposing of common shares of the Company. U.S. Holders As used herein, a "U.S. Holder" means a holder of common shares of the Company who is (i) a citizen or individual resident of the U.S., (ii) a corporation or partnership created or organized in or under the laws of the U.S. or of any political subdivision thereof, (iii) an estate whose income is taxable in the U.S. irrespective of source or (iv) a trust subject to the primary supervision of a court within the U.S. and control of a U.S. fiduciary as described Section 7701(a)(30) of the Code. Persons Not Covered This summary does not address the U.S. federal income tax consequences to persons (including persons who are U.S. Holders) subject to special provisions of U.S. federal income tax law, including (i) tax-exempt organizations, (ii) qualified retirement plans, (iii) individual retirement accounts and other tax-deferred accounts, (iv) financial institutions, (v) insurance companies, (vi) real estate investment trusts, (vii) regulated investment companies, (viii) broker-dealers, (ix) persons or entities that have a "functional currency" other than the U.S. dollar, (x) persons subject to the alternative minimum tax, (xi) persons who own their common shares of the Company as part of a straddle, 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 36 U.S. Holders receiving distributions (including constructive distributions) with respect to common shares of the Company are required to include in gross income for U.S. federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder's U.S. federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's U.S. federal taxable income by those who itemize deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the extent that distributions from the Company exceed current or accumulated earnings and profits of the Company, such distributions will be treated first as a return of capital, to the extent of the U.S. Holder's adjusted basis in the common shares, and thereafter as gain from the sale or exchange of the common shares of the Company. (See more detailed discussion at "Disposition of Common Shares of the Company" below) In the case of foreign currency received as a distribution that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirements for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income. Dividends paid on the common shares of the Company generally will not be eligible for the "dividends received deduction" allowed to corporate shareholders receiving dividends from certain U.S. corporations. Under certain circumstances, a U.S. Holder that is a corporation and that owns shares representing at least 10% of the total voting power and the total value of the Company's outstanding shares may be entitled to a 70% deduction of the "U.S. source" portion of dividends received from the Company (unless the Company qualifies as a "Foreign Personal Holding Company" or a "Passive Foreign Investment Company" as defined below). The availability of the dividends received deduction is subject to several complex limitations which are beyond the scope of this discussion, and U.S. Holders of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the dividends received deduction. Certain information reporting and backup withholding rules may apply with respect to certain payments related to the Company's common shares. In particular, a payor or middleman within the U.S., or in certain cases outside the U.S., will be required to withhold 31% (which rate is scheduled for periodic adjustment) of any payments to a U.S. Holder of the Company's common shares of dividends on, or proceeds from the sale of, such common shares within the U.S., if a U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, the backup withholding tax requirements. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder's U.S. federal income tax liability, provided the required information is furnished to the IRS. U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the information reporting and backup withholding rules applicable to the Company's common shares. Foreign Tax Credit A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either receive a 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. 37 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. 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 38 income for such year is "foreign personal holding company income" as defined in Section 553 of the Code (e.g., dividends, interest, royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions), the Company may be treated as a "Foreign Personal Holding Company" ("FPHC") In that event, U.S. Holders of common shares of the Company would be required to include in gross income for such year their allocable portions of such "foreign personal holding company income" to the extent the Company does not actually distribute such income. The Company does not believe that it currently qualifies as a FPHC. However, there can be no assurance that the Company will not be considered a FPHC for the current or any future taxable year. Foreign Investment Company If (i) 50% or more of the total voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), and (ii) the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, the Company may be treated as a "Foreign Investment Company" ("FIC") as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gain. The Company does not believe that it currently qualifies as a FIC. However, there can be no assurance that the Company will not be considered a FIC for the current or any future taxable year. Controlled Foreign Corporation If more than 50% of the total voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly or indirectly, 10% or more of the total voting power of the Company's outstanding shares (each a "10% Shareholder"), the Company could be treated as a "Controlled Foreign Corporation" ("CFC") under Section 957 of the Code. The classification of the Company as a CFC would effect many complex results, including that 10% Shareholders of the Company would generally (i) be treated as having received a current distribution of the Company's "Subpart F income" and (ii) would also be subject to current U.S. federal income tax on their pro rata shares of the Company's earnings invested in "U.S. property." The foreign tax credit may reduce the U.S. federal income tax on these amounts for such 10% Shareholders (See more detailed discussion at "Foreign Tax Credit" above). In addition, under Section 1248 of the Code, gain from the sale or other taxable disposition of common shares of the Company by a U.S. Holder that is or was a 10% Shareholder at any time during the five-year period ending with the sale is treated as ordinary income to the extent of earnings and profits of the Company attributable to the common shares sold or exchanged. If the Company is classified as both a Passive Foreign Investment Company as described below and a CFC, the Company generally will not be treated as a Passive Foreign Investment Company with respect to 10% Shareholders. This rule generally will be effective for taxable years of 10% Shareholders beginning after 1997 and for taxable years of the Company ending with or within such taxable years of 10% Shareholders. 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 39 not formed in the U.S. and, for any taxable year, either (i) 75% or more of its gross income is "passive income" or (ii) the average percentage, by fair market value (or, if the corporation is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of "passive income" is 50% or more. "Passive income" includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. However, gains resulting from commodities transactions are generally excluded from the definition of passive income if "substantially all" of a merchant's, producer's or handler's business is as an active merchant, producer or handler of such commodities. For purposes of the PFIC income test and the assets test, if a foreign corporation owns (directly or indirectly) at least 25% by value of the stock of another corporation, such foreign corporation shall be treated as if it (a) held a proportionate share of the assets of such other corporation, and (b) received directly its proportionate share of the income of such other corporation. Also, for purposes of such PFIC tests, passive income does not include any interest, dividends, rents or royalties that are received or accrued from a "related" person to the extent such amount is properly allocable to the income of such related person which is not passive income. For these purposes, a person is related with respect to a foreign corporation if such person "controls" the foreign corporation or is controlled by the foreign corporation or by the same persons that control the foreign corporation. For these purposes, "control" means ownership, directly or indirectly, of stock possessing more than 50% of the total voting power of all classes of stock entitled to vote or of the total value of stock of a corporation. U.S. Holders owning common shares of a PFIC are subject to the highest rate of tax on ordinary income in effect for the applicable taxable year and to an interest charge based on the value of deferral of tax for the period during which the common shares of the PFIC are owned with respect to certain "excess distributions" on and dispositions of PFIC stock under Section 1291 of the Code. However, if the U.S. Holder makes a timely election to treat a PFIC as a qualified electing fund ("QEF") with respect to such shareholder's interest therein, the above-described rules generally will not apply. Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC's ordinary earnings and net capital gain regardless of whether such income or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to defer the payment of U.S. federal income tax on such income inclusions. In addition, subject to certain limitations, U.S. Holders owning, actually or constructively, marketable (as specifically defined) stock in a PFIC will be permitted to elect to mark that stock to market annually, rather than be subject to the tax regime of Section 1291 of Code as described above. Amounts included in or deducted from income under this alternative (and actual gains and losses realized upon disposition, subject to certain limitations) will be treated as ordinary gains or losses. The Company believes that it was not a PFIC for its fiscal year ended December 31, 2005 and does not believe that it will be a PFIC for the fiscal year ending December 31, 2006. There can be no assurance that the Company's determination concerning its PFIC status will not be challenged by the IRS, or that it will be able to satisfy record keeping requirements that will be imposed on QEFs in the event that it qualifies as a PFIC. The PFIC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the PFIC rules and how these rules may impact their U.S. federal income tax situation. F. Dividends and paying agents. Not Applicable. G. Statements by experts. Not Applicable H. Documents on display. Documents filed as exhibits to this annual report are described in Item 18(b). 40 I. Subsidiary Information There is no information relating to the Company's subsidiaries which must be provided in Canada and which is not otherwise called for by the body of generally accepted accounting principles used in preparing the financial statements. Item 11. Quantitative and Qualitative Disclosures About Market Risk Not Applicable. Item 12. Description of Securities Other Than Equity Securities Not Applicable. PART II Item 13. Defaults, Dividends Arrearages and Delinquencies Not Applicable. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Not Applicable. Item 15. Controls and Procedures Evaluation of Disclosure Controls and Procedures Based on the evaluation of the Company's disclosure controls and procedures in the 90 days prior to the date of this report, the Company's chief executive officer/ chief financial officer has determined that such controls and procedures were reasonably designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of such controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Changes in Internal Controls No significant change has occurred in the Company's internal controls or in other factors since the date of the evaluation that could significantly affect these controls, nor have there been any corrective actions with regard to significant deficiencies and material weaknesses in the Company's internal controls. Item 16A. Audit Committee Financial Expert The Company does not have a separate audit committee at this time because up until April 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 one to three, the Company intends to establish an audit committee. 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. 41 Item 16B. Code of Ethics The Company has adopted a code of ethics applicable to all employees and directors. A copy is available upon request to the Chief Executive Officer, Oxford Investments Holdings Inc., 1315 Lawrence Avenue East, Suite 520, Toronto, Ontario, Canada M3A 3R3 Item 16C. Principal Accountant Fees and Services The Company paid the following fees to Williams and Webster, P.S. and Danziger & Hochman, Chartered Accountants, respectively, during the following fiscal years: 2005 2006 Audit fees US$7,300.00 CDN$38,000.00 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 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: 42 Oxford Investments Holdings Inc. Sequential Consolidated Financial Statements Page Number --------------------------------- ----------- Auditors' Report.............................................................F-1 Consolidated Balance Sheet as at December 31, 2003, December 31, 2004 and December 31, 2005 ......................................................F-3 Consolidated Statements of Operations for the years ended December 31, 2003 December 31, 2004 and December 31, 2005.....................................F-4 Statement of Stockholders Equity for the year ended, December 31, 2003 December 31, 2004 and December 31, 2005.....................................F-5 Consolidated Statements of Cash Flows for the year ended December 31, 2003, December 31, 2004 and December 31, 2005 .................F-6 Notes to Consolidated Financial Statements...................................F-7 43 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.......................................* 32.1 Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.............. 32.2 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. Financial Statement Schedules None. 44 Signatures The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. OXFORD INVESTMENTS HOLDINGS INC. Date: June 29, 2007 By: /S/Michael Donaghy ---------------------------- Michael Donaghy, President/ Chief Executive Officer 45 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 Registrant, including its consolidated a 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 affect the Registrant's ability to a record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this Annual Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /S/ Michael Donaghy ------------------- Michael Donaghy Chief Executive Officer Date: June 29, 2007 46 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 Registrant, including its consolidated a 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 affect the Registrant's ability to a record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this Annual Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /S/ Michael Donaghy ------------------- Michael Donaghy Chief Financial Officer Date: June 29, 2007 Page 47 OXFORD INVESTMENTS HOLDINGS INC. Consolidated Financial Statements December 31, 2006, 2005 and 2004 OXFORD INVESTMENTS HOLDINGS INC. INDEX December 31, 2006, 2005 and 2004 PAGE 2006 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1 2004 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets - Statement I 3 Consolidated Statements of Operations - Statement II 4 Consolidated Statements of Shareholders' Equity - Statement III 5 Consolidated Statements of Cash Flows - Statement IV 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7 - 24 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, 2006 and 2005 and the consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 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 consolidated 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, these consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended, 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 that raise substantial doubt about its ability to continue as a going concern. Management plans in regard to these matters are also discussed in note 4. The 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, Ontario June 8, 2007 Page 1 Board of Directors Oxford Investments Holdings Inc. North York, Ontario CANADA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have audited the accompanying balance sheet of Oxford Investments Holdings Inc., formerly Oxford Software Developers Inc., (an Ontario corporation) as of December 31, 2004, and the related statements of operations and other comprehensive income (loss), stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oxford Investments Holdings Inc., as of December 31, 2004 and 2003, and the related statements of operations and other comprehensive income (loss), stockholders' equity and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the financial statements, the Company has generated insufficient revenue to cover expenses and therefore has suffered recurring losses from operations resulting in an accumulated deficit of $3,438,087, at December 31, 2004. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding this issue are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Williams & Webster, P.S. ---------------------------- Williams & Webster, P.S. Certified Public Accountants Spokane, Washington September 29, 2005 Page 2
OXFORD INVESTMENTS HOLDINGS INC. Statement I (Formerly Oxford Software Developers, Inc.) Consolidated Balance Sheets As at December 31, 2006, 2005 and 2004 2006 2005 2004 ---------------------------------------------------------------------------------------- ASSETS CURRENT Cash $ 37,969 $ -- $ 28,553 Accounts receivable (note 5) 7,451 32,587 159,179 Inventory 12,872 17,154 80,941 Prepaid expenses and deposits 32,563 8,549 17,422 ---------------------------------------------------------------------------------------- 90,855 58,290 286,095 Property and equipment (note 7) 3,466 4,437 6,788 ---------------------------------------------------------------------------------------- 94,321 $ 62,727 $ 292,883 ======================================================================================== LIABILITIES CURRENT Bank indebtedness $ -- $ 13,697 $ -- Bank loan (note 8) 28,603 37,167 -- Accounts payable and accrued liabilities 841,865 943,753 719,228 Note payable (note 9) 154,412 -- -- Loan payable (note 10) 137,296 162,702 -- Loans payable (note 11) 269,708 387,637 540,923 ---------------------------------------------------------------------------------------- 1,431,884 1,544,956 1,260,151 ---------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY COMMON STOCK (note 14) 3,417,135 2,813,557 2,805,652 ADDITIONAL PAID-IN CAPITAL 507,662 -- -- ACCUMULATED DEFICIT ( 4,871,284) ( 3,909,395) ( 3,438,087) ACCUMULATED OTHER COMPREHENSIVE LOSS ( 391,076) ( 386,391) ( 334,833) ---------------------------------------------------------------------------------------- ( 1,337,563) ( 1,482,229) ( 967,268) ---------------------------------------------------------------------------------------- $ 94,321 $ 62,727 $ 292,883 ========================================================================================
Going concern and liquidity (notes 2 and 4) Risk concentrations (note 13) Commitments and contingencies (note 18) __________________________, Director (The accompanying notes are an integral part of these financial statements.) Page 3
OXFORD INVESTMENTS HOLDINGS INC. Statement II (Formerly Oxford Software Developers, Inc.) Consolidated Statements of Operations For The Years Ended December 31, 2006, 2005 and 2004 2006 2005 2004 -------------------------------------------------------------------------------------------- REVENUES Licenses $ 66,132 $ -- $ -- Services 90,547 107,641 395,933 Product 28,620 56,248 296,136 -------------------------------------------------------------------------------------------- 185,299 163,889 692,069 -------------------------------------------------------------------------------------------- COST OF REVENUES Licenses 92,332 40,641 9,549 Services 17,641 26,644 204,559 Product 1,043 74,138 136,143 -------------------------------------------------------------------------------------------- 111,016 141,423 350,251 -------------------------------------------------------------------------------------------- GROSS PROFIT 74,283 22,466 341,818 -------------------------------------------------------------------------------------------- SELLING EXPENSES Advertising and marketing 101,601 8,146 43,958 Commissions and subcontracts 42,633 5,282 34,252 Consulting 86,417 34,263 33,579 Communications 10,775 26,183 12,545 Travel 8,883 4,986 16,742 -------------------------------------------------------------------------------------------- 250,309 78,860 141,076 -------------------------------------------------------------------------------------------- GENERAL AND ADMINISTRATIVE EXPENSES Bad debts (recovery) ( 82,481) 82,600 1,166 Consulting (note 18 (d)) 125,000 136,884 161,190 Depreciation 971 2,477 3,465 General and office 34,848 10,692 1,769 Professional fees 69,311 58,227 93,660 Rent 53,230 50,968 46,128 Telephone 7,678 7,074 -- Wages and benefits 542,539 45,713 33,757 -------------------------------------------------------------------------------------------- 751,096 394,635 341,135 -------------------------------------------------------------------------------------------- LOSS FROM OPERATIONS ( 927,122) ( 451,029) ( 140,393) OTHER INCOME (EXPENSES) Interest expense ( 34,767) ( 20,279) ( 16,303) Debt forgiveness -- -- 17,328 -------------------------------------------------------------------------------------------- LOSS BEFORE INCOME TAXES ( 961,889) ( 471,308) ( 139,368) PROVISION FOR INCOME TAXES -- -- -- -------------------------------------------------------------------------------------------- NET LOSS FOR THE YEAR ( 961,889) ( 471,308) ( 139,368) OTHER COMPREHENSIVE GAIN (LOSS) Foreign currency translation gain (loss) ( 4,685) ( 51,558) ( 82,999) -------------------------------------------------------------------------------------------- COMPREHENSIVE LOSS ($ 966,574) ($ 522,866) ($ 222,367) ============================================================================================ BASIC AND DILUTED NET LOSS PER COMMON SHARE ($ 0.04) ($ 0.02) ($ 0.01) ============================================================================================ WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED COMMON SHARES OUTSTANDING 23,368,008 21,765,254 20,958,721 ============================================================================================
(The accompanying notes are an integral part of these financial statements.) Page 4
OXFORD INVESTMENTS HOLDINGS INC. Statement III (Formerly Oxford Software Developers, Inc.) Consolidated Statements of Shareholders' Equity (Deficit) For The Years Ended December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- Accumulated Common Stock Additional Other Number of Paid-In Comprehensive Accumulated Shares Amount Capital Income/Loss (Deficit) Total ----------- ----------- ----------- ----------- ----------- ----------- Balance, January 1, 2004 20,566,600 $ 2,581,164 $ -- ($ 251,834) ($3,298,719) ($ 969,389) Stock issued for approximately $0.47 per share, $445,684; less expenses of $212,893 952,750 232,791 -- -- -- 232,791 Shares cancelled ( 10,000) ( 8,303) -- -- -- ( 8,303) Other comprehensive loss -- -- -- ( 82,999) -- ( 82,999) Net loss for the year -- -- -- -- ( 139,368) ( 139,368) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2004 21,509,350 2,805,652 -- ( 334,833) (3,438,087) ( 967,268) Stock issued for approximately $0.05 per share, $19,809; less expenses of $11,904 365,000 7,905 -- -- -- 7,905 Other comprehensive loss -- -- -- ( 51,558) -- ( 51,558) Net loss for the year -- -- -- -- ( 471,308) ( 471,308) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2005 21,874,350 2,813,557 -- ( 386,391) (3,909,395) (1,482,229) Stock issued for approximately $0.17 per share, $724,785; less expenses of $200,560 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) ====================================================================================================================================
(The accompanying notes are an integral part of these financial statements.) Page 5
OXFORD INVESTMENTS HOLDINGS INC. Statement IV (Formerly Oxford Software Developers, Inc.) Consolidated Statements of Cash Flows For The Years-` Ended December 31, 2006, 2005 and 2004 ------------------------------------------------------------------------------------------------------------- 2006 2005 2004 ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the year ($961,889) ($471,308) ($139,368) Adjustments to reconcile net loss to net cash used by operating activities Depreciation 971 2,477 3,465 Debt forgiveness -- -- (17,328) Stock-based compensation (note 14) 507,662 -- -- Shares issued for services (note 14) 79,353 -- -- Changes in non-cash working capital items: Accounts receivable 25,136 126,592 (157,873) Prepaid expenses and deposits (24,014) 8,873 73,066 Inventory 4,282 63,787 ( 36,964) Accounts payable and accrued liabilities (101,888) 224,525 147,695 ------------------------------------------------------------------------------------------------------------- Net cash used by operating activities (470,387) (45,054) (127,307) ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayments) under bank indebtedness - net (13,697) 13,697 -- Advances (repayment) from bank loan - net (8,564) 37,167 -- Advances (repayment) of note payable - net 154,412 -- (1,990) Cheques written in excess of common stock -- -- 8,600 Proceeds from issuance of common stock 404,225 7,905 232,791 Purchase and cancellation of common stock -- -- (8,308) Advances from (payments on) loans payable - net (23,335) 9,416 (3,522) ------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 513,041 68,185 227,571 ------------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH 42,654 23,131 100,264 FOREIGN CURRENCY TRANSLATION LOSS (4,685) (51,684) (83,456) CASH, BEGINNING OF THE YEAR -- 28,553 11,745 ------------------------------------------------------------------------------------------------------------- CASH, END OF THE YEAR $ 37,969 $ -- $ 28,553 ============================================================================================================= Supplemental cash flow information: Interest paid $ 26,876 $ 14,853 $ -- Non-cash financing activities: Capital stock issued upon reduction of related party loan (note 14) $ 120,000 $ -- $ --
(The accompanying notes are an integral part of these financial statements.) Page 6 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 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. (hereinafter "E-Gaming Inc.") under the laws of Antigua and Barbuda. E-Gaming Inc. has been primarily engaged in the operation and marketing of internet gaming sites. On November 8, 2001, the Company incorporated a wholly owned subsidiary, International E-Gaming Developers NV (hereinafter "E-Gaming NV"), a limited liability company, under the laws of Curacao, Netherlands Antilles, to engage in the operation of games of chance on the international market via service lines. E-Gaming NV was dissolved in 2003. In May 2003, the Company incorporated two wholly owned subsidiaries, Ontario Private Water Labelling Limited and Celebrity Tan Inc., under the laws of Canada to engage in the production and sale of bottled water and to market UV-free tanning products and booths, respectively. 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 re-loadable 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. Page 7 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company's accounting and reporting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the consolidated financial statements. The consolidated financial statements are prepared in United States dollars. Basis of Presentation The consolidated financial statements include the accounts of Oxford Investments Holdings Inc. and its wholly-owned subsidiaries Celebrity Tan Inc., Ontario Private Labelling Limited and International E-Gaming Developers Inc. The consolidated entity is hereinafter referred to as "the Company." All significant inter-company transactions and balances have been eliminated upon consolidation. Going Concern These consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the measurement and classification of the recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has experienced losses in the period and there is negative working capital. The Company's ability to realize its assets and discharge its liabilities in the normal course of business is dependent upon continued support. The Company is currently attempting to obtain additional financing from its existing shareholders and other strategic investors to continue its operations. However, there can be no assurance that the Company will obtain additional funds from these sources. These conditions cause substantial doubt about the Company's ability to continue as a going concern. A failure to continue as a going concern would require that stated amounts of assets and liabilities be reflected on a liquidation basis that could differ from the going concern basis. 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, such as: foreign currency items, minimum liability pension adjustments, change in the fair value of derivative financial instruments and unrealized gains and losses on certain debt and equity securities. Comprehensive income is displayed in the statement of shareholders' equity and in the consolidated balance sheet as a component of shareholders' equity. 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 8 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value of Financial Instruments The Company's estimate of the fair value of cash, bank indebtedness, accounts receivable, bank loan, accounts payable and accrued liabilities and loans and note payable approximates carrying value because of the short maturity of these instruments. Income Taxes The Company accounts for its income taxes under the liability method specified by SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the effective tax rates which will be in effect when these differences reverse. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS No. 109 to allow recognition of such an asset. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation of property and equipment is provided annually on a declining 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 Stock-Based Compensation The Company accounts for its 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 stock 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, 2006, 2005 and 2004 are presented in the accompanying financial statements. Page 9 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Use of Estimates The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates. Provision for Doubtful Accounts and Bad Debt Expense Provision for losses on trade accounts receivable is made in amounts required to maintain an adequate allowance to cover anticipated bad debts. Accounts receivable are charged against the allowance when it is determined by the Company that payment will not be received. Receivables are shown net of an allowance for bad debts. Asset Impairment In complying with the Financial Accounting Standards Board Statement titled "Accounting for Impairment of long-lived Assets," the Company reviews its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts. There was no impairment as at December 31, 2006, 2005 or 2004. Inventories Inventories are stated at the lower of cost or market on a first-in, first-out basis. Foreign Currency Translation The Company considers the functional currency to be the local currency and, accordingly, their financial information translated into U.S. dollars using exchange rates in effect at year-end for assets and liabilities and average exchange rates during each reporting period for the results of operations. Adjustments resulting from the translation of the functional currency and of subsidiaries' financial statements are included as a component of other comprehensive income (loss) within shareholders' equity. Page 10 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Reclassifications Certain prior year amounts were reclassified to conform to current year presentation. These reclassifications did not result in any changes to the Company's accumulated deficit or net losses. Revenue Recognition The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101") as modified by Securities and Exchange Commission Staff Accounting Bulletin No. 104. Under SAB 101, revenue is recognized at the point of passage to the customer of title and risk of loss, there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured for property. For product sales, the Company generally recognizes revenue at the time of delivery of goods. Sales are reflected net of discounts and returns. For services, revenue is recognized as services are provided. Revenue from casino operations, advertising and royalties are recognized as earned. During the year ended December 31, 2004, the majority of the casinos involved in previous Company contracts were no longer operating or had been taken over by the Company. These entities have no balance owing to the Company. 3. ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Standards In February 2007, the FASB issued FAS 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. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)." (SFAS 158") SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to (a) recognize the overfunded or underfunded status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the year but are not recognized as components of net periodic benefit cost pursuant to SFAS 87, "Employers' Accounting for Pensions", or SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", (c) measure defined benefit plan assets and obligations as of the date of the employer's fiscal year-end, and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. SFAS 158 is effective for the Company's fiscal year ending September 30, 2007. The adoption of SFAS 158 is not expected to have a material impact on the Company's financial position, results of operation or cash flows. Page 11 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 3. ACCOUNTING PRONOUNCEMENTS (continued) Recently Adopted Accounting Standards (continued) In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement." ("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 on October 1, 2008. 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. In July 2006, the FASB issued FIN. 48, "Accounting for Uncertainty in Income Taxes (an interpretation of FASB Statement No. 109), ("FIN 48") which is effective for fiscal years beginning after December 15, 2006. This interpretation was issued to clarify the accounting for uncertainty in income taxes recognized in the financial statements by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is currently evaluating the potential impact of FIN 48, but it is not expected to have a material impact on the Company's financial position, results of operations or cash flows. In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets ("SFAS No. 156"), which amends FASB Statement No. 140 ("SFAS No. 140"). SFAS 156 may be adopted as early as January 1, 2006, for calendar year-end entities, provided that no interim financial statements have been issued. Those not choosing to early adopt are required to apply the provisions as of the beginning of the first fiscal year that begins after September 15, 2006 (e.g., January 1, 2007, for calendar year-end entities). The intention of the new statement is to simplify accounting for separately recognized servicing assets and liabilities, such as those common with mortgage securitization activities, as well as to simplify efforts to obtain hedge-like accounting. Specifically, the FASB said FAS No. 156 permits a servicer using derivative financial instruments to report both the derivative financial instrument and related servicing asset or liability by using a consistent measurement attribute, or fair value. The adoption of SFAS 156 is not expected to have a material impact on the Company's financial position, results of operations or cash flows. Page 12 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 3. ACCOUNTING PRONOUNCEMENTS (continued) Recently Adopted Accounting Standards (continued) In May 2005, the FASB issued SFAS 154, which replaces APB Opinion No. 20, "Accounting Changes", and FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements". The statement applies to all voluntary changes in accounting principle and changes resulting from adoption of a new accounting pronouncement that does not specify transition requirements. SFAS 154 requires retrospective application to prior periods' financial statements for changes in accounting principle unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 with early implementation permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this statement is issued. The adoption of SFAS 154 has not had a material impact on the Company's financial position, results of operations or cash flows. In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153. This statement addresses the /measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, "Accounting for Nonmonetary Transactions," is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that opinion, however, included certain exceptions to that principle. This statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date of this statement is issued. The adoption of SFAS 153 has not had a material impact on the Company's financial position, results of operations or cash flows. In December 2004, the Financial Accounting Standards board issued Statement of Financial Accounting Standards No. 152, which amends FASB statement No. 66, " Accounting for Sales of Real Estate," to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-sharing Transactions." This statement also amends FASB Statement No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects," to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This statement is effective for financial statements for fiscal years beginning after June 15, 2005. The adoption of SFAS 152 has not had a material impact on the Company's financial position, results of operations or cash flows. Page 13 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 3. ACCOUNTING PRONOUNCEMENTS (continued) In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4." This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "... under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges..." This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of this standard has not had a material impact on the Company's financial position, results of operations or cash flows. Derivative Instruments The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", which is effective for the Company as of January 1, 2001. These standards establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes. At December 31, 2006, 2005 and 2004, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities. Page 14 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 3. ACCOUNTING PRONOUNCEMENTS (continued) Segment Information Segment Information The Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), during the year ended December 31, 2000. SFAS 131 established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available, evaluated regularly by the chief operating decision makers, or a decision making group, in deciding how to allocate resources and in assessing performance. The adoption of SFAS 131 did not affect the Company's results of operations or financial position, but did affect the disclosure of segment information as reported in note 19. 4. LIQUIDITY During the years ended December 31, 2006, 2005 and 2004, the Company incurred comprehensive net losses of $966,574, $522,866 and $222,367 respectively, and cash used in operations was $470,387, $45,054, and $127,307 respectively. The Company financed its operations using sales of their common stock, bank loans and other loans. Management plans to seek additional capital from new equity securities issuances which would provide funds needed to increase liquidity, fund internal growth and fully implement its business plan. (See notes 20 (c) and (d).) 5. ACCOUNTS RECEIVABLE Accounts receivable are stated net of an allowance for doubtful accounts of $8,951 (2005 - $29,819; 2004 - $Nil). 6. SUBSIDIARIES International E-Gaming Developers Inc. On November 3, 2000, the Company incorporated a wholly-owned subsidiary, International E-Gaming Developers, Inc. under the laws of Antigua and Barbuda as an international business corporation. E-Gaming Inc. was incorporated to engage in Internet gaming, including international betting, gaming, sports betting and bookmaking activities along with wagers on sporting events taking place outside the Caribbean Community region from residents of countries outside the Caribbean Community region. E-Gaming Inc. was primarily engaged in the operation and marketing of Internet gaming sites. During the year ended December 31, 2002, the Company took assumed all operations of E-Gaming Inc. Page 15 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 6. SUBSIDIARIES (continued) International E-Gaming Developers NV On November 8, 2001, the Company incorporated a wholly owned subsidiary, International E-Gaming Developers NV (hereinafter "E-Gaming NV"), a limited liability company, under the laws of Curacao, Netherlands Antilles. E-Gaming NV was incorporated to engage in the operation of games of chance in the international market via service lines. E-Gaming NV is primarily engaged in the operation and marketing of Internet gaming sites. During the year ended December 31, 2002, the Company assumed all operations of International E-Gaming Developers NV and dissolved the Company in 2003. Ontario Private Water Labelling Limited In 2003 the Company incorporated a wholly owned subsidiary, Ontario Private Water Labelling Limited, under the laws of Canada. Through this subsidiary, management intends to approach corporate and retail entities that wish to use their own label on bottled water as promotional or marketing tools. Additionally, the Company 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 financial statements. Celebrity Tan Inc. In 2003, the Company incorporated a wholly owned subsidiary, Celebrity Tan Inc. under the laws of Canada. Celebrity Tan Inc. was incorporated to engage in the building and distribution of UV-free tanning stalls. These stand-up tanning booths spray a fine mist of sunless tanning solution onto the customer. The Company also intends to market through this subsidiary its own line of sunless tanning products. 7. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Depreciation is provided using the declining balance method over the estimated useful lives of the assets ranging from 20% to 100%. The following is a summary of property and equipment and accumulated depreciation: 2006 2005 2004 ---- ---- ---- Office equipment $25,167 $25,167 $24,363 Computer hardware 1,713 1,713 1,658 Computer software 1,444 1,444 1,398 --------- --------- --------- Total cost 28,324 28,324 27,419 Accumulated depreciation ( 24,858) ( 23,887) ( 20,631) -------- -------- -------- Net book value $ 3,466 $ 4,437 $ 6,788 ======== ======== ======== Depreciation expense for the years ended December 31, 2006, 2005 and 2004 were $971, $2,477 and $3,465 respectively. Page 16 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 8. BANK LOAN The Company's subsidiary, Celebrity Tan Inc., was advanced a $50,000 (CDN) loan. The loan is repayable in monthly principal payments of $833 (CDN) plus interest at the TD Canada Trust rate of prime plus 1%. The loan is due on demand. Due to its demand feature, the liability is presented on the accompanying financial statement as current. Future principal payments in U.S. dollars are as follows: 2007 $8,600 2008 $8,600 2009 $8,600 2010 $2,803 9. NOTES PAYABLE The notes are payable to an arm's length party, bear interest at 12% per annum, payable monthly, and are unsecured and repayable upon demand. 10. LOAN PAYABLE - RELATED PARTY The Company is indebted to a director in the amount of $137,296. The loan bears interest at 5% per annum and is unsecured and repayable upon demand. Interest for the year ended December 31, 2006 amounted to $16,122 (2005 - $13,908). (See note 20 (d).) 11. LOANS PAYABLE - RELATED PARTIES As at December 31, 2006, 2005 and 2004, the Company was indebted to certain of its officers, directors and stockholders $269,708, $387,637 and $540,923, respectively, for cash advances, consulting services and expenses paid on behalf of the Company. These loans are unsecured, non-interest bearing and repayable upon demand. Page 17
OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 12. DEFERRED INCOME TAXES At December 31, 2006, 2005 and 2004, the Company had net deferred tax assets, calculated at an expected rate of 36%, of approximately $994,000, $864,000 and $694,000, respectively, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been recorded at December 31, 2006, 2005 and 2004. A reconciliation of combined federal and provincial corporate income taxes at the Company's effective tax rate of 36% (2005 and 2004 - 36%) is as follows: 2006 2005 2004 ------------ ------------ ------------ Net loss before income taxes $( 961,889) $( 471,308) $( 139,368) ============ =========== ========== Income taxes at statutory rates $( 348,000) $( 170,000) $( 50,200) Tax effect of expenses not deductible for income tax purposes: Stock based compensation $ 183,000 - - Shares issued for services $ 28,500 - - ------------ ------------ ------------ ( 136,500) ( 170,000) ( 50,200) Change in valuation allowance 136,500 170,000 50,200 ------------ ------------ ------------ $ - $ - $ - ============ ============ ============
The significant components of the deferred tax asset at December 31, 2006, 2005 and 2004 were as follows:
2006 2005 2004 ---------- ---------- ---------- Net operating loss carryforwards $2,761,000 $2,401,000 $1,930,000 ========== ========== ========== Deferred tax asset $ 994,000 $ 864,000 $ 694,000 Deferred tax asset valuation allowance $( 994,000) $( 864,000) ($ 694,000)
At December 31, 2006, the Company had net operating losses carried forward of approximately $2,761,000. These losses expire in 2008 through to 2016. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during future periods. Page 18 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 13. RISK CONCENTRATIONS Customers During the year ended December 31, 2006, approximately 32% of the value of the Company's sublicense agreements was represented by one entity, which, in turn, resold the agreements to unrelated third parties. This entity is owned and operated by a stockholder of the Company. Also, during the 2006 fiscal year, approximately 36% of the Company's licensing fee revenue was presented by one third-party entity. Due to a change in United States law, the Company is no longer involved in Internet gaming activities. Licenses The Company's license to gaming software was issued by World Gaming pursuant to a gaming license issued by Antigua during 2001 and Curacao beginning in November 2001. World Gaming was one of the few primary developers and operators of casino and other gaming software in the world. During the years ended December 31, 2006, 2005, and 2004, 100% of the Company's revenue from Internet gaming software was attributable to the World Gaming relationship. As part of the licensing agreement with World Gaming, the Company had the right to sublicense its software. Because World Gaming was the Company's sole licensor, the loss of the World Gaming relationship would have been expected to have a material adverse effect on the Company's revenues, operating results and financial condition. During 2006, new anti-gaming legislation was enacted in the United States. World Gaming has ceased operations and, for these reasons, the Company is no longer in the Internet gaming business. The Company has discontinued all of its US-based gaming-related operations by its 2006 fiscal year end. All gaming-related websites were taken offline, all gaming-related services offerings were ceased, and all transactional systems directly related to gaming operations were closed. As Internet gaming and operations associated with World Gaming do not constitute the entirety of the Company's Internet commerce operations, the Company's Internet gaming net assets, operations and cash flows from these activities have not been presented in the accompanying financial statements as separately discontinued operations. Page 19 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 14. COMMON STOCK The Company is authorized to issue an unlimited number of common shares according to its original charter. The Company's shares have no stated par value. Each share of common stock is entitled to one vote at the shareholders' meetings. Shares may be transferred with the consent of a majority of the directors or the shareholders through resolution or by a signed instrument. In its original articles of incorporation, the Company limited the number of shareholders to not more than fifty non-employee individuals and any invitation to the public to subscribe for or purchase securities of the Company was prohibited. On September 13, 2001, the Company amended its articles of incorporation to lift the shareholder and invitation restrictions. On December 31, 2006, 2005 and 2004, the Company had 26,499,182, 21,874,350 and 21,509,350 shares issued and outstanding respectively. The Company has not issued any warrants. On October 31, 2006, the Company issued 1,600,000 options to a director at an exercise price of $0.15 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, 2006, 800,000 options were exercised at $0.15 per share. As payment for these options, the Company reduced the amount of its outstanding liability to this director by $120,000. At December 31, 2006, 800,000 options remained outstanding. (See note 20 (d).) During the year ended December 31, 2006, the Company sold for cash 3,374,832 shares of common stock. This stock was sold for approximately $0.17 per share or a total of $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. (See note 1). These shares were valued at a total of $79,353. During the year ended December 31, 2005, the Company sold for cash 365,000 shares of common stock. This stock was sold for approximately $0.05 per share or a total of $23,095 CDN (approximately $0.05 per share or $19,809 U.S.), less commissions of $11,904U.S. During the year ended December 31, 2004, the Company sold for cash 952,750 shares of common stock. This stock was sold for approximately $0.56 per share or a total of $536,451 CDN (approximately $0.47 per share or $445,684 U.S.), less commissions of $212,893 U.S Also during the year ended December 31, 2004, the Company cancelled 10,000 shares of common stock that it had sold for $10,000 CDN (approximately $8,303 U.S.) in 2004. Page 20 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 15. RELATED PARTY TRANSACTION The Company rented commercial space in Toronto, Ontario, beginning in 2003, with a month-to-month agreement for rent for $3,500 CDN. Rent expense for the year ended December 31, 2006 under this lease amounted to $38,847 (2005 and 2004 - $37,608 and $38,847, respectively). Rent was paid to a corporation that is controlled by a director of the Company. As at December 31, 2006, the Company owed the corporation $51,057, which is recorded in accounts payable. All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business. 16. INCOME (LOSS) PER SHARE Basic earnings (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares outstanding during the period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share is computed by dividing the net income (loss) adjusted for interest expense on convertible debt by the weighted average number of basic shares outstanding increased by the number of shares that would be outstanding assuming conversion of any stock options, warrants, and convertible debt. Diluted net income (loss) per share for the years ended December 31, 2005 and 2004 is the same as basic net income (loss) per share as there are no common stock equivalents outstanding. Diluted net income (loss) per share for the year ended December 31, 2006 has not been presented as the effect would be anti-dilutive. 17. LETTER OF INTENT On December 4, 2000, the Company signed a letter of intent with a company listed on the Canadian Exchange. As a result of this agreement, the Company received $25,000 Canadian ($15,860 U.S.) and issued an uncollateralized demand promissory note for the sum received. While the companies mutually withdrew from the letter of intent during March 2001, the related note remains unpaid at December 31, 2003. In April 2004, settlement for $2,500 CDN (approximately $1,990 U.S.) was made and the balance was written off. 18. COMMITMENTS AND CONTINGENCIES (a) Potential Litigation In November 2004, 3084735 Nova Scotia Limited, a corporation organized under the Laws of the Province of Nova Scotia, 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 Nova Scotia Limited 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 timely defense in response to the claim, denying all allegations in the complaint, and has also filed a cross complaint against Mega Sun Inc. The action is currently in the pretrial stage. While Celebrity Tan Inc. will vigorously defend this matter, the outcome of the litigation is not certain at this time. No accrual for this litigation has been made in the accompanying financial statements. Page 21 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 18. COMMITMENTS AND CONTINGENCIES (continued) (b) Offer to Settle In June 2005, the Company and its director, Michael Donaghy, entered into a settlement agreement and undertaking with the Alberta Securities Commission. In the agreement, the Company and Mr. Donaghy acknowledged breach of sections 75(1)(a) and 110(1) of the Securities Act, R.S.A. 2000, c. S-4 (the "Act") in connection with an alleged illegal distribution of the securities of the Company by an independent consultant hired by the Company to sell its securities. The Company and Mr. Donaghy relied on the accredited investor exemption of the Act to distribute the shares of the Company, and also relied upon the expertise and experience of the sales consultant. As part of the settlement, the Company agreed to pay the Commission $42,000 CDN and Mr. Donaghy agreed that all the exemptions contained in the Alberta Securities Act will not apply to him for two (2) years from the date of the agreement, except that he may trade in securities for his personal account through an agent that is a registered dealer. (c) Computer Security The Company operates in an industry which is vulnerable to attacks upon its computer operating security. The risks to the Company's operations are significant and will require continued monitoring to minimize the effects of any possible attacks. (d) Consulting Contract The Company has entered into a contract for consulting services with a director. This contract has been renewed to June 2008 at $125,000 per annum. (e) Office Lease The Company's wholly owned subsidiary, Celebrity Tan Inc., entered into a lease for its office space, located in Toronto, Ontario on December 1, 2003. Lease payments are currently $1,349 Canadian (approximately $1,113 U.S.) per month. Total payments for the year ended December 31, 2006 were $16,312 CDN (approximately $14,383 U.S.). The lease expired on November 30, 2006, and the company continues to lease the premises on a month-to-month basis. Page 22
OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 19. SEGMENT INFORMATION As described in Note 2, the Company adopted SFAS No. 131 in its fiscal year 2000. The Company's operations are classified into three principal reporting segments that provide different products or services. Separate management of each section is required because each business unit is subject to different marketing, production, and technology strategies. Segment information (after intercompany eliminations) is as follows: 2006 2005 2004 --------- --------- --------- Revenues: Oxford Software Developers, Inc. $ 156,679 $ 107,641 $ 387,996 Ontario Private Water Labelling Limited -- -- 2,508 Celebrity Tan Inc. 28,620 56,248 301,565 --------- --------- --------- Total Revenues $ 185,299 $ 163,889 $ 692,069 ========= ========= ========= Operating Income (Loss): Oxford Software Developers, Inc. ($894,754) ($309,437) ($117,178) Ontario Private Water Labelling Limited 176 (4,923) 128 Celebrity Tan Inc. (32,544) (136,669) (26,821) --------- --------- --------- Net Loss ($927,122) ($451,029) ($143,871) ========= ========= ========= Identifiable Assets: Oxford Software Developers, Inc. $ 76,574 $ 28,421 $ 101,766 Ontario Private Water Labelling Limited -- -- 9,008 Celebrity Tan Inc. 17,747 34,306 171,831 --------- --------- --------- Total Identifiable Assets $ 94,321 $ 62,727 $ 292,883 ========= ========= ========= Depreciation Oxford Software Developers, Inc. ($ 971) ($ 2,477) ($ 3,465) Ontario Private Water Labelling Limited (--) (--) (--) Celebrity Tan Inc. (--) (--) (--) --------- --------- --------- Total Depreciation ($ 971) ($ 2,477) ($ 3,465) ========= ========= =========
All of the Company's assets were held in Canada at December 31, 2006, 2005 and 2004 The Company's reportable segments are strategic business units that offer different products or services. The segments are managed separately because each business requires different technology and marketing strategies. Page 23 OXFORD INVESTMENTS HOLDINGS INC. (Formerly Oxford Software Developers, Inc.) Notes to Consolidated Financial Statements December 31, 2006, 2005 and 2004 -------------------------------------------------------------------------------- 20. SUBSEQUENT EVENTS a) On January 5, 2007, the Company granted 250,000 options to an arm's length company for services provided with an exercise price of $0.15. The options expire no later than 10 years from the date of grant. As at June 8, 2007, these options had not been exercised. b) On January 5, 2007, the Company granted 250,000 options to a consultant with an exercise price of $0.15. The options expire no later than 10 years from the date of grant. As at June 8, 2007, these options had not been exercised. c) Subsequent to December 31, 2006, the Company issued 4,810,750 common shares for a total consideration of $1,080,655, cash. d) In January 2007, the 800,000 stock options that were outstanding at December 31, 2006 were exercised by a director of the Company for proceeds of $120,000. (See note 14.) As payment for these options, the Company reduced the amount of its outstanding liability to this directory by the same amount. e) On February 28, 2007, the Company acquired 50% of Arden Trading Company Ltd. of China through Oxford's JV partner, Ko Ho Management Ltd ("Ko Ho"). The Company paid RMB 750,000 ($96,923 U.S.) and issued 250,000 common shares. f) On March 14, 2007, the Company acquired 50% of Guangzhou Hongxin Insurance Agency Co. ("Hongxin"), a company operating in the People's Republic of China, through the Company's JV partner, the Ko Ho Management Ltd ("Ko Ho"). The Company issued 160,000 common shares to persons designated by Hongxin. g) On April 2, 2007, the Company acquired 35% of Foshan Foshantong Information Technology Co Ltd. ("Foshan") from Wanzhi Electron S & T Co. Ltd. ("Wanzhi") through the Company's JV partner, Ko Ho. As consideration, Ko-Ho will inject RMB 2,000,000 into Foshan and the Company will issue 750,000 common shares.