20-F 1 oxford20f123104.txt 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, 2004 [_] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _______ to ________ 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, 2004: 20,581,100. 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 --- --- TABLE OF CONTENTS Page PART I Item 1. Identity of Directors, Senior Management and Advisers * Item 2. Offer Statistics and Expected Timetable * Item 3. Key Information 3 Selected Financial Data 3 Risk Factors 5 Item 4. Information on the Company 9 History and Development of the Company 9 Business Overview 10 Organizational Structure 16 Property, Plants and Equipment 16 Item 5. Operating and Financial Review and Prospects 17 Operating Results 17 Liquidity and Capital Resources 20 Research and Development 20 Trend Information 21 Safe harbor 21 Item 6. Directors, Senior Management and Employees 22 Directors and Senior Management 22 Compensation of Directors and Officers 22 Board Policies 23 Employees 23 Share Ownership 23 Item 7. Major Shareholders and Related Party Transactions 24 Major Shareholders 24 Related Party Transactions 24 Item 8. Financial Information 24 Consolidated Statements and Other Financial Information 24 Significant Changes 24 Item 9. The Offer and Listing 24 Item 10. Additional Information 25 Share Capital * Memorandum and articles of incorporation 25 Material Contracts 25 Exchange Controls 26 Taxation 26 Dividends and paying agents * Statements by experts * Documents on display 31 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 * Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds * Item 15. Controls and Procedures 31 Item 16A. Audit Committee Financial Expert 31 Item 16B. Code of Ethics 32 Item 16C. Principal Accountant Fees and Services 32 Item 17. Financial Statements 33 Item 18. Financial Statements 33 Item 19. Exhibits 34 SIGNATURES 35 CERTIFICATIONS 36 * Omitted pursuant to General Instruction E(b) of Form 20-F. 2
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 period from inception on October 13, 2000 through December 31, 2000 and for the years ended December 31, 2001, 2002, 2003 and 2004 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. From period of inception (October 13, 2000) through Year Ended Year Ended Year Ended Year Ended Year Ended Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2004 -------------------------------------------------------------------------------------- Statement of Operations Data: Total revenues $ 112,172 $ 401,793 $ 298,550 $ 439,157 Net Income/(Net Loss) (100,896) (2,117,900) (748,796) (331,127) Basic and diluted net loss per share - (0.1) (0.12) (0.04) (0.02) Weighted average number of Shares used in computing basic and Diluted net loss per share- 13,300,000 17,152,915 19,756,999 20,005,006 Balance Sheet Data: Cash and cash equivalents $ 0 $ 508 $ 637 $ 11,745 Total current assets 121,880 107,879 48,246 147,516 Total assets 187,578 523,488 57,121 157,309 Total current liabilities 176,865 525,774 780,366 1,126,698 Total liabilities 176,865 525,774 780,366 1,126,698 Total accumulated deficit (100,896) (2,218,796) (2,967,592) (3,298,719) Total stockholders' equity (deficit) 10,713 (2,286) (723,245) (969,389)
EXCHANGE RATES The following table sets out the exchange rates for the conversion of Canadian dollars into United States dollars. The exchange rates used are the closing rates provided by The Bank of Canada. The table lists the rate in effect at the end of the following periods, the average exchange rates (based on the average of the exchange rates on the last day of each month in such periods), and the range of high and low exchange rates for such periods. 3 Year ended December 31, -------------------------------------------------------------------------------- 2004 2003 2002 2001 -------------------------------------------------------------------------------- End of Period .83 .77 .63 .63 -------------------------------------------------------------------------------- Average for Period .81 .71 .63 .65 -------------------------------------------------------------------------------- High for Period .85 .78 .65 .67 -------------------------------------------------------------------------------- Low for Period .72 .64 .63 .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 2004 and 2005. The exchange rates used are the closing rates as provided by the Bank of Canada. ---------------------------------------------------- Month High Low ---------------------------------------------------- December 2004 .84 .81 ---------------------------------------------------- January 2005 .83 .81 ---------------------------------------------------- February 2005 .81 .80 ---------------------------------------------------- March 2005 .83 .80 ---------------------------------------------------- April 2005 .82 .80 ---------------------------------------------------- May 2005 .81 .79 ---------------------------------------------------- June 2005 .82 .80 ---------------------------------------------------- The exchange rate on December 31, 2004 for the conversion of United States dollars into Canadian dollars was $1.20 (CDN$1.00 = US$.083). As of June 30, 2005 the close rate of exchange for the conversion of United States dollars into Canadian dollars was $1.23 (CDN$1.00 = US$0.82). 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. 4 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 have entered the UV-free sunless tanning and private water labeling markets. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. The risks, expenses and difficulties that we expect to encounter include: o implementing an evolving and unpredictable business model that relies, in large part, on customer growth and word-of-mouth publicity among the targeted audiences; o building our corporate brand to attract purchasers, advertisers and affiliates, and our network brands to expand our audience; o increasing our product offerings on existing networks through internal development and affiliate partnerships; o developing and integrating new networks addressing our target audience and advertiser base; o diversifying our revenue sources by focusing on different business opportunities for a consumer market and by launching various marketing initiatives; o expanding our sales and marketing efforts to increase our affiliate and customer base and our reach within the consumables market audience; o attracting, retaining and motivating qualified personnel; and o responding to competitive developments. There can be no assurance that we will effectively address the risks we face, and the failure to do so could have a material adverse effect on our business, financial condition and results of operations. We have a History of Operating Losses and a Significant Accumulated Deficit, and we May Not Maintain Revenue or Achieve Profitability in the Future. 5 We have not been profitable since our inception in October 2000. We expect to continue to incur additional losses for the next fiscal year as a result of a high level of operating expenses, significant up-front expenditures, pursuing new initiatives for the Company and our marketing activities. While we have some revenues, we may never realize significant revenues from our core business or be profitable. Factors that will influence the timing and amount of our growth and profitability include: . the success of implementing our business plan; . obtaining the necessary funding to grow our business; and . our ability to expand, diversify and grow our business. Our Ability to Continue as a Going Concern We face significant challenges in shifting from the development stage to the commercialization of the products that we offer. Our business may fail if we do not achieve significant revenue growth or obtain sufficient funding. Our accountants have raised substantial doubts about our ability to continue as a going concern. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in such a transition, and there can be no assurance that we will be successful or that we will ever achieve profitable operations. Our Rapid Growth May Strain Our Resources And Hinder Our Ability To Implement Our Business Strategy Our historical growth has placed, and any further growth is likely to continue to place, a significant strain on our limited resources. If we fail to manage our growth effectively, our business could be materially adversely affected. Our ability to achieve and maintain profitability will depend on our ability to manage our growth effectively, to implement and expand operational and customer support systems and to hire personnel worldwide. We may not be able to augment or improve existing computer systems and controls or implement new systems and controls to respond to any future growth. In addition, future growth may result in increased responsibilities for our management personnel, which may limit their ability to effectively manage our business. Operational Risks Our revenue and operating results may fluctuate in future periods and we may fail to meet expectations, which may cause the price of our common stock to decline. As a result of our limited operating history and the emerging nature of the markets in which we compete, we are unable to forecast our revenue with precision. We anticipate that the results of our operations may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control. Factors that may affect our results of operations include, but are not limited to: o the addition or loss of customers for our tanning booths and spring water private-labeling, or our failure to add new customers; o our ability and the ability of our customers to attract and retain a large retail audience for our products; o our ability to attract and retain advertisers and sponsors; o seasonal trends in sunless tanning ; o the amount and timing of expenditures for expansion of our operations, including the acquisition of new affiliates, the hiring of new employees, capital expenditures and related costs; o our ability to continue to enhance, maintain and support our networks and technology and avoid system downtime; and o the introduction of new or enhanced offerings by our competitors. 6 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 will require modification of our products, particularly domestic language support. There can be no assurance that we will be able to sustain or increase revenue derived from international operations or that we will be able to penetrate linguistic, cultural or other barriers to new foreign markets. The failure to sustain or increase revenue from international operations could have a material adverse effect on our business, revenues, operating results and financial condition. Our financial results are reported in United States currency, which is subject to fluctuations in respect of the currencies of the countries in which we operate. Fluctuations in the exchange rate of the U.S. dollar and the Canadian dollar could have a positive or negative effect on our reported results. Given the constantly changing currency exposures and the substantial volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. There can be no assurance that we will not experience currency losses in the future which could have a material adverse effect on our business, revenues, operating results and financial condition. Uncertainty of Enforcement of U.S. Laws and Judgments against Foreign Persons We and our wholly-owned subsidiaries through which we operate are organized under the laws of the Province of Ontario, Canada and St. Johns, Antigua, respectively; our executive offices are in Canada, our directors and officers and certain of our advisers are residents of Canada, and a substantial 7 portion of our assets and assets of those persons are located outside the United States. As a result, it may be difficult for you to initiate a lawsuit in the United States against us or these non-U.S. residents, or to enforce any judgment obtained in the United States against us or any of these persons. Consequently, you may be deterred or prevented from pursuing remedies under United States federal securities laws against us or other non-United States residents. We Currently Depend On the Sale of a few Products to Generate Most of Our Revenue We expect the sales of our tanning booths, tanning supplies and to a lesser extent the sale of private-labeled spring water and sub-licensing of World Gaming e-gaming software to constitute most of our revenue for the foreseeable future. If customers do not purchase our products, we do not currently offer any other products or services that would enable us to generate revenue or to become profitable. We May Not Have Sufficient Capital To Fund Our Operations And Additional Capital May Not Be Available On Acceptable Terms if At All. 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, 2004, Michael Donaghy, our sole director, indirectly through his spouse, beneficially owned approximately 8,300,000 shares or 40.31% of our outstanding common shares. As a result, Mr. Donaghy can exert substantial influence over us and influence most matters requiring shareholder approval, including the election of directors, and thereby exercise significant control over our affairs. The voting power of Mr. Donaghy under certain circumstances could have the effect of delaying or preventing a change in our control, the effect of which may be to deprive you of a control premium that might otherwise be realized in connection with our acquisition. No Established Public Trading Market Our shares began trading on the Over the Counter Bulletin Board (OTCBB) in May 2004, however, at present our shares are thinly traded, and there is no assurance that a significant trading market will develop, or if developed, that such market will be sustained. Possible Volatility of Stock Price Many factors could affect the market price of our common shares. These factors include but are not limited to: 8 o Variations in our operating results; o Variations in industry growth rates; o Actual or anticipated announcements of technical innovations or new products or product enhancements by us or our competitors; o General economic conditions in the markets for our products and services; o Divergence of our operating results from analysts' expectations; and o Changes in earnings estimates by research analysts. In particular, the market prices of the shares of many companies in the technology and emerging growth sectors experience wide fluctuations that are often unrelated to the operating performance of such companies. When the market price of a company's stock drops significantly, shareholders often institute securities class action lawsuits against that company. Such a lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources. Any of these events could have a material adverse effect on our business, financial condition and results of operations. Our common stock trades in the over-the-counter market on the OTCBB. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the value of, our common stock. Because our common stock is subject to federal securities rules affecting penny stock, the market liquidity for our common stock may be adversely affected. Our common stock could become subject to additional sales practice requirements for low priced securities. Our common stock could become subject to Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker-dealers that sell our shares of common stock to persons other than established customers and "accredited investors" or individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses. Rule 15g-9 requires a broker-dealer to make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and may affect the ability of our shareholders to sell any of our securities in the secondary market; generally define a "penny stock" to be any non-Nasdaq equity security that has a market price less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions; requires broker dealers to deliver, prior to a transaction in a penny stock, a risk disclosure document relating to the penny stock market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. In addition, the rule requires that broker dealers deliver to customers monthly statements that disclose recent price information for the penny stock held in the account and information on the limited market in penny stocks. Item 4. Information on the Company 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. In this Annual Report, unless the context indicates otherwise, the term "Company" refers to Oxford Investments Holdings Inc. 9 B. Business Overview We were incorporated with the objective of capitalizing on the growth of Internet gaming and entertainment - e-gaming. However, as a result of persistent uncertainty in Internet gaming laws in various jurisdictions worldwide, particularly in the United States, we felt that it was beneficial for us to closely review our strategic planning as we move forward. As a result, we did not renew our e-gaming license and in May 2003, we initiated two business ventures to further diversify the Company's interests in the lifestyles consumables market. The first initiative is the distribution of a private line of UV-free tanning products and booths and the second initiative is the distribution of private labeled bottled spring water. The Company intends to grow these segments of its business but are continuing to aggressively seek and develop new business venture opportunities. The Company will maintain sales and distribution control of its product lines once they are established in their respective markets. International E Gaming Developers, Inc. --------------------------------------- International E Gaming Developers, Inc. ("Egaming"), is our wholly-owned subsidiary through which we operate our gaming business. In April 2001, we acquired the assets of Suchow Holdings Ltd., a Bahamian-based company that provided back-end administrative software solutions for e-commerce driven websites. In 2003, we did not renew our online gaming license since the Company decided to no longer operate an online casino. Instead, International E Gaming Developers, Inc. has limited its activities in the Internet gaming industry to the delivery of software solutions to that market. However, the Company intends to use Egaming's gaming experience to expand into the land-based casino industry through the distribution of land-based gaming kiosk and slot machine equipment and technology. Gaming Business Strategy ------------------------ A pioneer in the Internet gaming industry, International EGaming Developers Inc. began building and selling online gaming web sites in 1999. Even though Egaming no longer operates an online casino, it uses its unique combination of experience and technical expertise to continue to derive revenue from reselling gaming software and from providing consulting and maintenance services to the site owners. EGaming's planned expansion into the land-based kiosk market will exploit its extensive knowledge of the gaming industry and benefit from the vast network of gaming contacts it has developed. Gaming Market ------------- Legalized gambling is one of the fastest growing industries in the world. The universal appeal of gambling provides a potential of huge returns to those companies that can successfully tap into this developing market. Online casinos have quickly increased in revenue volume, while the savings realized in real estate, employee payroll, and operations costs make the Internet a cost-effective distribution channel. Combined with this is the ability to offer casino games and sports wagering to customers anywhere in the world from the convenience of their own home. All of this makes the outlook for this enterprise fiscally bright, with some experts forecasting that growth will continue exponentially for at least the next few years. However, due to the uncertainty in Internet gaming laws in various jurisdictions worldwide, particularly in the United States there can be no assurance that the online gaming market will grow as predicted and in fact the market may be negatively impacted if adverse laws are enacted. The addition of kiosk gaming systems to EGaming 's product line will allow the Company to market to land-based gaming organizations worldwide. Studies have shown that industry professionals overwhelmingly agree that, in the near future, casinos will adopt coinless machines and that the ability for operators to download new games instead of having to physically replace gaming machines will be a huge benefit to casino operations. The Gaming Systems kiosks 10 to be marketed by EGaming will include these features, making them a desirable alternative to the machine games of the past. There can be no assurance, however, that the kiosk gaming market will develop as anticipated or if developed that it will be profitable. EGaming Product Offerings EGaming has an agreement with World Gaming Plc, the global leader in internet gaming software development. While Egaming itself does not participate in online gaming, it resells World Gaming e-gaming software products to clients wishing to participate in the potential profits of the online gambling business. EGaming 's also intends to enter into a distribution arrangement that allows the Company to exploit the movement toward coinless machines on gaming floors throughout the world. The Company will move rapidly to secure a product line recognized by gaming organizations worldwide, in order to be the kiosk of choice for upgrading and expansion by casino operators. Product and Company Advantages EGaming 's long-term involvement in the online gaming industry since its beginnings has given the Company extensive experience in building, maintaining, and marketing casino and sportsbook products. Each gaming presence EGaming markets is designed to be visually enticing, highly functional, and easily managed. The company 's clients benefit from expert guidance and direction every step of the way. The planned kiosk product lines feature a wide selection of smooth-working versions of casino games that gaming patrons know and understand, with brilliant 3D graphics, full game speech and sound, transaction security, and management reporting. User IDs and passwords remain in a database to keep customer account information for the benefit of both the casino patron and the operator. The gaming kiosk systems will feature player enhancements such as an interactive multimedia touch screen, and built-in bill acceptor designed to accept almost any type of currency. User IDs and passwords allow players to access their account at any kiosk whenever they desire. The gaming kiosk system will save the player's balance, and produce a bar-coded receipt so the player can claim his winnings to the location manager. This allows the kiosk to be accessible 24 hours a day,7 days a week. The games themselves operate independently within each kiosk, with transactions controlled through an internal gaming server. For the casino owner, the kiosks will feature fully-customizable graphics, allowing branding of the machines for marketing and loyalty purposes. The proprietary software is available separately from the cabinets, so owners can upgrade, add, or delete games as they desire. Reporting tools can be customized to suit the casino 's needs and control what will be visible on the gaming terminal reports page for various levels of management access. Kiosks can be monitored and managed anywhere through the Internet. Owners that have multiple locations will be able to monitor individual accounts, separate locations, or multiple locations simultaneously. World Gaming Online Products The Internet-based software and electronic commerce software products licensed to us by World Gaming are used by sub-licensees to create "virtual casinos." The software package transfers the "front end" information (i.e., playing cards, roulette wheel, dice numbers, etc.) between the user and a remote server. The software package utilizes each user's computer to generate the graphics of the virtual casino while the gaming server performs the "dealer" function, generating the random numbers of playing cards, roulette numbers and dice numbers, as applicable. Among other things the software contains proprietary encryption features, which allow secure transmission of data. Our software generally does not require the transmission of graphical information over the Internet, which eliminates the long waits which users of other software products experience while graphics are redrawn as new hands are dealt. In addition, our proprietary Internet software package permits our sub-licensees to offer multi-player games, a 3D panoramic virtual casino floor and Internet browsing features and facilitates inter-player chatting. 11 Enhanced technology and networks, and a flow of both improved and new software products developed by and/or licensed from World Gaming will complement a high level of marketing. This provides the gaming customer with the widest diversity of gaming experiences. Venues offered range from currently available casino games, sportsbooks and bingo, to the live horseracing paramutual web simulcasts, international lottery ticket brokerage and other live webcast events. We intend to make this type of diversified portfolio of gaming experiences available to our sub-licensees and so to their customers. EGaming Future Strategy EGaming no longer has a license to operate its own casino but will continue to use the resources it has developed in order to market turnkey gaming systems for use by third-party corporations. The Company will establish relationships with government and independent gaming organizations to get its land-based gaming product line recognized, and promote benefits of the kiosk 's gaming systems in order to make it the gaming system of choice for upgrading and expansion by casino operators. The company may also derive revenue from reselling WorldGaming software to parties that want to own and operate online casino web sites. GOVERNMENT GAMING LICENSING AND REGULATION AND RELATED RISKS Our subsidiary EGaming although no longer an owner and operator of online casinos, will resell World Gaming, Plc., online gaming software to various third-party entities, which deploy such software for the purpose of conducting interactive gaming casinos utilizing the Internet. These entities are licensed to operate interactive casinos in the country where their gaming equipment is physically located. EGaming, from its offices in Antigua, provides consulting and maintenance services to the site owners. . These entities operate their interactive casinos from servers maintained by World Gaming through its subsidiary Starnet Systems and located in Antigua. A significant debate exists whether the laws of any country other than the country where the computer gaming servers are physically located have jurisdiction over the operations of the licensees of Starnet Systems. In addition, a significant debate exists whether the laws of any country other than the country where the computer gaming servers are physically located have jurisdiction over the operations of companies, which perform services for the licensees. Our licensing agreement is with World Gaming Plc., which holds a gaming license in the Country of Antigua and Barbuda. Our licensees each have the responsibility to determine from which countries they will accept gaming transactions and ensure that their own gaming license is maintained. All of our licensees gaming transactions are accepted on servers located in Antigua and are governed by the conditions of those licensees gaming licenses. No gaming transactions are accepted or recorded by any subsidiary of the Company other than those processed on our servers located in Antigua and licensed by the government of Antigua and Barbuda under our subsidiary, EGaming. Most countries and jurisdictions within countries have laws or regulations restricting gaming activities. For example, in the United States, the Wire Act contains provisions that make it a crime for anyone in the business of gaming to use an interstate or international wire communication line to make wagers or to transmit information assisting in the placing of wagers. Other United States laws impacting gaming activities include the Interstate Horse Racing Act, the Interstate Wagering Paraphernalia Act, the Travel Act, the Organized Crime Control Act and the Patriot Act. While we have been advised that e-gaming activities of Egaming do not violate or are not subject to such laws and regulations, because there is very little clear statutory and case law authority, this conclusion is not free from doubt. We face the risk of either civil or criminal proceedings brought by governmental or private litigants who disagree with our interpretation of laws 12 and regulations. Because there is little guiding authority, there is a risk that we could lose such lawsuits or actions and be subject to significant damages or civil or criminal penalties and fines. Such proceedings could also involve substantial litigation expense, diversion of the attention of key executives, injunctions or other prohibitions being invoked against our licensees or us and our subsidiaries. The uncertainty surrounding regulation of the Internet gaming could have a material adverse effect on our business, revenues, operating results and financial condition. Currently, the U.S. Justice Department has taken the view that all offshore gaming funds are tainted, because all offshore gaming is illegal. This creates a serious disincentive for non-U.S. banks to provide banking services to Internet gaming operators, and thus negatively impacts our market of potential licensees. MBNA, Bank of America, Chase Manhattan Bank and Citibank have announced that they will decline authorization to Americans who try to use their credit cards for online gaming. We believe that if current laws or any future laws become applicable to activities of our licensor, World Gaming, or our subsidiary that resell World Gaming Software, such laws would have an adverse effect on our business, revenues, operating results and financial condition Celebrity Tan, Inc. ------------------- Celebrity Tan, our wholly-owned subsidiary, entered the UV-free tanning market in 2003, marketing a line of instant mist tanning booths and supplies. The Company has developed a national network of sales agents to promote Celebrity Tan booths to salons, health spas, fitness centers, and hotels across Canada and in other countries, including Europe and the United States. In addition to booth sales to salon owners internationally, the first year of operation saw the set up of the Company 's Ontario showroom and training facility and other showrooms introduced during 2004. Through its experience in marketing the Celebrity Tan booth product, and through research into competing products, Celebrity Tan has developed significant product improvements, which has led the Company to recently expand its operations to include the manufacturing and development of the Celebrity Tan UV-free mist tanning booth. The Product and Market ---------------------- Many people enjoy the healthy look of a beautiful golden brown tan. In the past there has been a market for year-round tanning within salons. However, with increased awareness of the potential of UV light to damage skin, some people have begun to avoid conventional tanning methods. There is also a segment of the population who has skin types that resist tanning using these conventional methods. Sunless tanning creams have been developed to serve this market, but they are difficult to apply evenly, and require the assistance of another person for hard-to-reach areas of the body. UV-free spray tanning using instant-tan booths is the latest solution for this problem. Recent media exposure has increased the awareness and demand for this service, and tanning studios are increasingly considering providing UV-free tanning to their clients. Moving into the areas of product development and manufacturing gives the Company the ability to improve upon the existing tanning booths in the market. By ensuring that end users have a satisfying result, the Company can ensure growth in this market, and develop a brand with a reputation for quality results. Being a relatively new cosmetic tanning service, the target market is not yet fully aware of the availability and benefits of spray tanning. As market awareness increases, we believe the demand for this service will also increase. By developing and providing a superior product that addresses the needs of salons and their customers, Celebrity Tan has gained a distinct advantage over its competitors. Through continuing quality improvements and joint venture arrangements, the Company hopes to make its booths the choice of both salon owners and instant tanners alike. The Company's new manufacturing division allows the Company to benefit from the increased control over quality, production, and delivery times, while gaining from production cost savings and tax advantages. 13 Product and Company Advantages ------------------------------ By participating in this early stage of the UV free spray tanning market, both the Company and its customers expect to benefit from the growth in the industry. The Celebrity Tan mist tanning booth is designed to offer an upscale atmosphere, and has many features for spray consistency and personalization, customer comfort and safety, and ease of maintenance. The booth makes efficient use of the instant tanning product and can be installed in a small space. The Celebrity Tan booth is more user friendly, and easier to troubleshoot and maintain than any other booth on the market. The Strategy ------------ In addition to promoting the Celebrity Tan instant tanning booths through its sales representatives across Canada and in other countries, the Company expects to embark on a direct sales campaign to about 30,000 existing spa, esthetics, and fitness facilities in the upcoming year. Celebrity Tan has begun an international magazine advertising campaign in order to further promote brand recognition. The opening of Celebrity Tan 's manufacturing division will enable the Company to provide superior quality control while allowing for the development of improvements over existing booths in this market. The Company will be better able to manage delivery times, and will have the ability to ship the booth as components that will maximize the efficiency of assembly, while allowing the Company to coordinate set-up and training personnel with delivery times. The cost reductions and tax benefits achieved by manufacturing the Celebrity Tan booth will give the Company opportunities to provide booth purchasers with more financing options. By increasing affordability to salons, we will further promote sales and corporate branding. Producing a product that is recognized for its quality will allow Celebrity Tan more opportunities in promoting the sales to independent-run operations. With the knowledge gained through previous experience with customers within the salon market, the Company has the ability to provide training for future customers and assist with site development using premium store design techniques developed specifically for the Celebrity Tan brand. Additional income potential may be tapped through sales of the tanning product to salons, and through the launch of the "Celebrity Tan " bottled lotion for the retail market, for use when a full-body tan is not required. The Company expects to sell this retail product at existing booth locations, and through the Company 's existing Internet infrastructure. 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. 14 Ontario Private Water Labeling Ltd. ----------------------------------- Ontario Private Water Labeling Ltd. ("OPWLL"), our wholly-owned subsidiary, specializes in bottled water distribution and sales. Through an arrangement with an existing water-bottling company, OPWLL has set up a sales and distribution facility through the Toronto office of the Company. The Company is developing and branding its water products for global distribution and sales. These corporate brands, which include the "Water Rocks " label, are being made available for both wholesale and retail consumption. The Company is also marketing a private label product for resellers who wish to carry store-branded water. The Product and Market ---------------------- People are increasingly using bottled water for its fresh taste, convenience, and purity. OPLWLL 's water is obtained through a natural spring located near Innisfil, Ontario. OPLWLL has a network of connections in the entertainment and food service industries. By retailing the corporate brands through these high-profile connections, the Company intends to develop recognized brands that consumers will desire as status products. Product and Company Advantages ------------------------------ The corporate brands, such as "Water Rocks(TM) ", are designed to create appeal in specific markets. By targeting markets selectively, the various brands will become recognized as the choice for their target groups. In April 2004, OPWLL was granted a trademark in Canada for its product name "Water Rocks." The Strategy ------------ OPWLL is branding its exclusive labels for a variety of target markets. Through associations with the entertainment industry, the Company will market its water product for sale at venues such as concerts, theatre performances, and sporting events, with the ultimate goal of making its branded water a status product available on the retail market. We will also approach both corporate and retail clients who wish to brand their own label of water products and make custom labeling available for promotional and charity events. Business Strategy Operating within the lifestyle consumables industry, we developed a comprehensive business strategy designed to utilize our strengths and create a sustainable competitive advantage. The rapid development of the Internet has created opportunities to develop new, efficient and secure ways to deliver business opportunity information and life-enhancing products to customers. We intend to expand our market share of the UV-free tanning market, the spring water private-labeling and branding market and become a leader in the land-based gaming industry. Initially, we will derive our revenue from the following sources: o Manufacture and sale of UV-free spray tanning booths to customers and partners; o Sale of tanning supplies to tanning booth purchasers; o Sale and private labeling of bottled water; o Provision of marketing services, support maintenance and consulting services to customers; o Sale of gaming kiosk systems to land-based casino owners; Specifically, our key strategic objectives are to: o Expand and continually improve our sale of UV-free spray tanning booths; o Develop an integrated network of UV-free spray tanning booth locations; o Develop our role as a leading provider of UV-free spray tanning booth, tanning services and related products; o Expand geographically to other markets; and o Selectively pursue opportunities that allow us to leverage our marketing and sale competencies into other market segments. 15 We will employ a variety of strategies to achieve these objectives. These strategies include: o Rapidly expanding our presence through our Internet web site; o Obtaining rapid sales and increasing market penetration via the in-house manufacture and delivery of our UV-free spray tanning booths at a substantial discount from the cost of purchasing them from third-party manufacturers; o Development and promotion of a solid marketable brand image; o Promoting our brand name and driving sales by combining traditional offline strategies, including public relations and print, with online marketing vehicles; o Negotiating strategic partnerships with relevant partners and expanding into foreign markets; and o Accessing our customer base to generate a rapidly growing and potentially fertile source for marketing and promotional activities. Sales And Marketing The Company customizes its sales and marketing strategy according to individual customers' geographic regions and based on the market segment. For example, through Ontario Private Water Limited, the Company intends to approach corporate and retail entities that wish to insert their own labels and use the water as promotional or marketing tools. Additionally, the Company intends to market its own line of bottled spring water to sell at concerts, sporting events, and other venues. With respect to Celebrity Tan, the Company has set up show-room facilities and intends to set up more show-room type facilities to provide a model for potential customers to experience the UV-free tanning process first hand. The Company employs experienced personnel who maintain ongoing contact with its customers and respond to customers' needs promptly and effectively. C. Organizational Structure OXFORD INVESTMENTS HOLDINGS INC ------------------------------- | | ------------------------------------------------------------- | | | | | | ----------------------- -------------- --------------------------- INTERNATIONAL EGAMING CELEBRITY TAN, ONTARIO PRIVATE DEVELOPERS, INC. (100%) INC. (100%) WATER LABELLING, LTD. 100%) ----------------------- -------------- --------------------------- D. Property, Plants and Equipment Our registered office and principal executive offices are located in the City of Toronto, in the Province of Ontario, Canada, at 1315 Lawrence Avenue East, Suite 520, Toronto, Canada M3A 3R3. The registered office and principal executive offices of our Antigua subsidiary are located at No. 6 Temple Street, St. John's, Antigua, at our Antigua counsel's office, without any lease or charge. 16 We lease 2000 square feet of office space at 1033 Toy Avenue, Unit 2, Pickering, Ontario, Canada from an unaffiliated party. The office space provides us with the necessary office and development space. The term of the lease is three years beginning December 1, 2003, with rent of $1,443 per month. . We occupy the office space at No. 6 Temple Street, St. John's Antigua, without lease or charge, from our Antigua counsel. The office space provides us with the necessary office and development space. Item 5. Operating and Financial Review and Prospects A. Operating Results You should read the following discussion in conjunction with our consolidated financial statements and the accompanying notes appearing elsewhere in this annual report. Overview We were incorporated with the objective of capitalizing on the growth of Internet gaming and entertainment - e-gaming. However, as a result of persistent uncertainty in Internet gaming laws in various jurisdictions worldwide, particularly in the United States, we felt that it was beneficial for us to closely review our strategic planning as we move forward. As a result, we did not renew our e-gaming license and in May 2003, we initiated two business ventures to further diversify the Company's interests in the lifestyles consumables market. The first initiative is the distribution of a private line of UV-free tanning products and booths and the second initiative is the distribution of private labeled bottled spring water. The period from inception on October 20, 2000 to December 31, 2000 is not comparable to the fiscal year ended December 31, 2001 because we were just starting to engage in the operation and management of Internet gaming sites in 2000. Our consolidated financial statements are prepared in accordance U.S. generally accepted accounting principles. Our functional currency is the Canadian dollar and our subsidiaries' are the United States dollar. Our financial statements are reported in United States dollars. Sources of Revenue Our product revenue consists of UV free Tanning Booths and related supplies, bottled water and bottled water private labeling, software sub-license fees and web site customization fees. Our services revenue include amounts derived from hosting fees, royalties and revenue sharing arrangements on e-commerce transactions. Revenue Recognition Our licensing agreements contain multiple fee elements such as web customization, web hosting, licensing and marketing fees. Fees are allocated to the various components based on objective evidence of fair value, which includes the price charged as if the element was sold separately. We recognize revenue when there is persuasive evidence of an arrangement, such as a licensing agreement, when delivery has occurred, when there is a fixed or determinable fee and when collectibility is probable. When the fee is not fixed or determinable or when collectibility is not assured, the revenue is recognized when received. As amounts are collected, the appropriate revenue is recognized and deferred revenue is recorded for the annual amortizable portion as described below. Pursuant to our agreement with World Gaming, we are required to pay a monthly royalty fee of 20% based on net monthly revenues. Current Sources Of Revenue UV-Free Tanning Booths and Related Products 17 We manufacture and sell UV-Free Tanning Booths and related supplies to our customers. Revenue on such sales are recognized when the product is delivered and installed at a customer's location. Revenue from the sale of related products is recognized upon the sale and delivery of such products. Spring Water We provide private labeling and sell spring water. Revenue is recognized upon the sale and delivery of the water to a customer. License Fees Our sub-licensees pay us up-front software licensing fees for the purchase of a web site. Licensing fees for e-gaming web sites are deferred and recognized throughout the first year of a sub-licensee's operation. Web Site Customization Fees and Hosting Fees Our existing customers require us, and our potential customers may require us to customize, host and manage the server infrastructure and software platform as part of the purchase of an e-gaming web site. Revenues from web site customization fees are recognized as sold to third parties. We provide hosting service for a monthly fee. The web hosting fees are deferred and recognized over a twelve-month period. Revenue from the sale of software sub-licenses to our related reseller is recognized upon sell through to the unrelated third parties. Royalties/Marketing We earn monthly royalties and advertising revenue from casino operations. Revenue from casino operations, marketing and royalties are recognized monthly as earned. A. Operating Results The following is management's discussion and analysis of the our financial condition and results of its operations from the date of inception on October 13, 2000 to December 31, 2000 and for the fiscal years ended December 31, 2001, 2002, 2003 and 2004. Because we are an emerging company and we have recently diversified our business operations, the comparisons between our financial statements may not be meaningful and may not necessarily be indicative of our future results of operation. Fiscal Year Ended December 31, 2004* ------------------------------------- * To be filed amendment. Fiscal Year Ended December 31, 2003 ------------------------------------ Revenues -------- For the fiscal year ended December 31, 2003, we reported a net loss of $331,127 or $0.02 per share. Revenues amounted to $439,157 of which $58,534 was from the sale of UV-Free Tanning Booths and related supplies, $0 was from the sale of spring water, $ 96,600 was from the sale of software licenses and casino operations, $11,419 was from advertising and marketing and $272,604 was from royalties from e-gaming activities. Our revenue increased by 47% over the comparable period from the prior year. The increase in revenue was mainly due to the Company's entering into the UV-Free Tanning business and to a lesser extent spring water branding and sales. Sales from tanning booths and related products accounted for 13% of our revenue and spring water branding and sales accounted for 0% of revenue. 18 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 used $7,108 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 $206,096 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. Fiscal Year Ended December 31, 2002 ------------------------------------ Revenues -------- For the fiscal year ended December 31, 2002, we reported a net loss of $748,796 or $0.04 per share. Revenues amounted to $298,550, of which $171,551 was from the sale of software licenses and casino operations, $112,776 was from advertising and marketing and $8,223 was from royalties from e-gaming activities. Cost of Revenues ---------------- Cost of revenues amounted to $70,752 for the same period and consisted principally of casino operations ($62,850) and gaming license expenses ($7,902). Selling, General and Administrative Expense ------------------------------------------- Selling, general and administrative expense ("SG&A") amounted to $641,249 and consisted principally of consulting fees ($152,413), professional fees (comprised of accounting, audit and legal) ($191,743) other administrative and communication expenses ($297,093). 19 SG&A expenses were due to our increased corporate activity, business development, sub-licensee acquisition, promotion and marketing. Professional accounting and legal expenses were attributable to our efforts to register as a public company with the Securities & Exchange Commission. Financial Condition, Liquidity and Capital Resources ---------------------------------------------------- At December 31, 2002, the Company had total current assets of $48,246 consisting principally of cash and cash equivalents of $637, receivables of $15,793 and prepaid license fees of 30,949. Operations used $185,653 for the fiscal year ended December 31, 2002. Funds used in operations primarily relate to professional fees regarding the registering of the company with the Securities and Exchange Commission. Investing activities used $3,617 for the fiscal year ended December 31, 2002, funds used in investing activities consisted of purchases of equipment. Financing activities provided $188,300 for the fiscal year ended December 31, 2002. Funds provided by financing activities were from loans made to the Company from related parties and from the sale of 17,000 shares of common stock. We had no long-term debt at December 31, 2002. B. Liquidity and Capital Resources The Company will require additional liquidity over the next 12 months. Even though the Company partially funds its operations through revenues from the sale of its products, the Company will also require both internal and external sources of liquidity. To provide working capital for its operations and project development, the Company may need to raise new funds. Traditionally, the Company has raised capital through the issuance of common shares. In addition, from time to time in the past, Michael Donaghy, the President of the Company, personally advanced non-interest-bearing loans to the Company for the day-to-day operations of the Company. It is contemplated that it will continue to raise capital primarily in private placements through investors. No assurance, however, can be given that 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, 2004, the Company believes that it will need approximately CAD$360,000 of cash to cover administrative costs and approximately CAD$60,000 for payment of lease properties. The Company anticipates that it will pay for its 2004 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 2004, however, no assurances can be given that the Company will be able to raise cash from additional financing efforts. If the Company is unable to obtain sufficient funds from future financing, or from current revenues, the Company may not be able to become profitable. C. Research and development, patents and licenses, etc. On January 25, 2001, the Company entered into a software licensing agreement with World Gaming and also paid World Gaming a one-time, non-refundable software development fee for its own virtual casino. Pursuant to the agreement with World Gaming, the Company is required to pay a monthly royalty fee of 20% based on net monthly revenues. According to the agreement, 15% of the net monthly casino revenues must be spent on advertising and marketing per month. The term of the license agreement is for one year with automatic one-year extensions. The license allows the Company to resell World Gaming software. 20 In January, 2004 the Company's subsidiary Ontario Private Water Labelling Limited was granted a trademark in Canada for its product name "Water Rocks(TM)." In the fiscal years 2004, 2003, 2002 and 2001, the Company did not have any research, development or patent expenses. D. Trend Information The Internet The Internet continues to grow at a high rate in terms of the number of users online, the total revenue being generated online and the speed at which communications can be carried. All of these factors contribute to a parallel growth in the number and value of online gaming transactions globally and the market audience for our UV free tanning and spring water distribution business. According to published reports, the popularity of the Internet and the continuing increase in the on-line population has established it as one of the fastest growing communications mediums in history, reaching an estimated 50 million users worldwide within only 5 years since its establishment for business and personal use. Comparably, radio did not reach the same level of exposure for 38 years, television for 13 years and cable for 10 years. The intense increase in Internet penetration is due to several major factors, the first and foremost relating to PC penetration. Most PCs are equipped with some form of Internet access, and most homes have telephone lines or other forms of internet access. Once a PC is inside a home, the Internet is a natural part of its use. Second, technology advances in personal computers for the home and office, as well as those that help connection speed, encourage the use of the Internet. Most product developments, such as computers that offer Internet access by the touch of a button, make the Internet experience more enjoyable and, therefore, consumers are drawn to it. Lastly, the content on the Internet is self-enforcing. Advertising on the Internet directs consumers go to other websites, thus extending the average time that users spend on the web. North America has dominated the development of the Internet, but the greatest growth potential is outside that region. We expect these growth trends will have a positive impact on the Company's sales and revenues. See "Forward Looking Information," below. The Economy We believe that significant opportunities exist in the economy in the lifestyle enrichment and consumables market, including gaming activities, UV free tanning services and products and spring water branding, distribution and sales. Specifically, we believe that our UV-free tanning booths and product sales will increase as our brand name becomes more entrenched in the market and as we focus on developing more partner distribution channels. In addition, we anticipate that our gaming purchases and activity will continue to increase as we focus on providing a wide variety of gaming opportunities. We expect such increases to occur primarily as a result of a marketing plan and the development of relationships with various land-based casinos. We expect to grow sales of our Water Rocks(TM) through associations with the entertainment industry. The Company will market its water product for sale at venues such as concerts, theatre performances, and sporting events, with the ultimate goal of making its branded water a status product available on the retail market. G. Safe harbor (Forward Looking Information) We are projecting positive cash flow. We are projecting positive cash flow for the fiscal year ending December 31, 2004, but anticipate increased expenses. It is expected that these expenses will be caused primarily by: 21 o Cost to start-up and operate new lines of business o marketing costs o costs for software and related applications o startup, including personnel and office costs o customer acquisition costs o legal and accounting costs We are in the emerging stage. We have a limited operating history since our operations began in November 2000. Consistent with other early-stage companies, expenditures are heavily weighted in favor of our company branding, marketing, customer acquisition and partnering affiliations. We realize that these expenditures are necessary in order to compete for customers more effectively and to develop a profitable company capable of surviving and prospering well into the future. We expect to continue developing our three lines of business through expanding our customer base and improving functionalities based on customer needs, requests and requirements. In the event that we target an appropriate acquisition or licensing candidate, which we currently have not, we may require additional funding to consummate such a relationship. We do not currently have sufficient financial resources to meet the funding requirements referenced above. Accordingly, we are currently seeking funding from outside sources. At the date hereof, we have no firm commitments from anyone to provide additional funding. Item 6. Directors, Senior Management and Employees A. Directors and senior management. Set forth below are particulars respecting our sole director and officer as of December 31, 2004, and his business experience: Name Business Address Position ---- ---------------- -------- Michael Donaghy 1315 Lawrence Ave. East Chief Executive Officer, Suite 520 President and Director Toronto, Ontario Canada M3A 3R3 Michael Donaghy, President. Mr. Donaghy, age 42, has been our President, since inception. From February 2000 to October 2000 he served as Interim President of Zaurak Capital Corp., an e-gaming holding company. In 1999 he formed and was named President and Chief Executive Officer of CyberGaming Inc., a company engaged in the business of Internet e-gaming sub-licensing, website creation and hosting. Mr. Donaghy resigned as President and CEO of CyberGaming Inc. in September 2000, just prior to joining us. Mr. Donaghy is also President of Citywebsites.com, a website design company, since March 1995. B. Compensation. Mr. Donaghy received a salary of $6,800 during the fiscal period ended December 31, 2000, $78,500 for the fiscal year ended December 31, 2001, $125,000 for the fiscal year ended December 31, 2002, $125,000 for the fiscal year ended December 31, 2003 and $125,000 for the fiscal year ended December 31, 2004, as the Company's President and Chief Executive Officer. No other compensation was paid to our executive officers. We do not presently pay any cash compensation to directors for serving on our board, but we do reimburse directors for out-of-pocket expenses for attending board meetings. Executive Compensation The following table sets forth the aggregate cash compensation paid for the past fiscal year. 22
SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards Payouts Restricted Securities LTIP All Other Name and Fiscal Cash Other Annual Stock Underlying Payouts Compensation Principal position Year compensation Compensation Award(s) Options (#) (US$) (US$) Michael Donaghy 2004 $125,000 - - - - - Director and President & Chief Executive Officer
C. Board Practices. While not required, the Company's director is a resident of Canada and holds office until the Company's annual meeting or until his successor is duly elected or appointed. Officers are appointed annually by the Board of Directors to serve at the Board's will. The Company has no contracts with any of its Directors that provide for payments upon termination. With only one director on the Board, the Company does not have separate audit or compensation committees. D. Employees. As of December 31, 2004, we had a total of fourteen (14) employees (eleven (11) full-time and three (3) 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 July 13, 2005. Name and Address of Position with Number of Beneficial Owner (1) the Company Shares Owned Percent -------------------- ------------- ------------ ------- Michael Donaghy (2) Chief Executive Officer 8,300,000 37.94% CEDE & Co. N/A 4,500,195 20.57% P.O. Box 222 Bowling Green Station New York, NY 10274 All Officers and Directors 8,300,000 37.94% as a Group (1 Person) (1) All officer and director addresses are c/o the Company at 1315 Lawrence Avenue East, Suite 520, Toronto, Canada M3A 3R3. (2) Mr. Donaghy beneficially owns these shares indirectly through his spouse. 23 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, 2004, the Company owed officers, directors and stockholders $398,629 and $415,027, respectively, for cash advances, consulting fees and expenses paid on behalf of the Company. These related party loans are uncollateralized, non-interest bearing and due on demand. Approximately 33% of the Company's Egaming customers are represented by one entity, which is owned and operated by a stockholder of the Company. This related party currently has no accounts receivables included in these financial statements but had $497,000 of the contracts in place in 2001. In 2002, the majority of the casino websites were closed down or taken over by the Company. During November 2000, we issued to Mr. Donaghy 8,400,000 shares of common stock at $0.0009 per share in exchange for office equipment with a historical cost of $3,472 and expenses valued at $3,992, which represents his historical cost. Item 8. Financial Information A. Consolidated Statements and Other Financial Information. This annual report on Form 20-F contains the financial information set forth under Item 18. B. Significant Changes. In May 2003, the Company entered into two initiatives to further diversify it's interests in the lifestyles consumables market. The first is the distribution of a private line of UV-free tanning booths and related products and the second is the distribution of private labeled bottled spring water. . Legal Proceedings ----------------- The Company is not a party to any pending or ongoing material legal proceeding nor is the company aware of any threatened or anticipated material legal proceeding against it. Dividend Policy --------------- The Company has not paid and does not plan to pay any cash dividends on its capital stock. The Company currently intends to retain any future earnings to fund growth, and therefore does not expect to pay any cash dividends in the foreseeable future. Item 9. The Offer and Listing Price History of Shares The Company's common shares are listed in the United States on the National Association of Securities Dealers OTC Bulletin Board, under the symbol OXIHF. Even though our stock is listed on the OTCBB, it is very thinly traded and as of December 31, 2004, no active established market within or outside the United States existed for our common stock. 24 The high and low prices expressed in United States dollars quoted on the OTC Bulletin Board for the last twelve months are as follows: OTC Bulletin Board (United States Dollars) Period High Low June 2005 0.05 0.05 May 2005 0.03 0.02 April 2005 0.15 0.15 March 2005 0.15 0.15 February 2005 0.10 0.10 January 2005 0.13 0.06 December 2004 0.15 0.07 November 2004 0.30 .020 October 2004 0.20 0.20 September 2004 0.20 0.20 August 2004 0.43 0.20 July 2004 0.55 0.45 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. On January 25, 2001, the Company entered into a software licensing agreement with World Gaming and also paid World Gaming a one-time, non-refundable software development fee of $100,000 for its own virtual casino. Pursuant to the agreement with World Gaming, the Company is required to pay a monthly royalty fee of 20% based on net monthly revenues. According to the agreement, a minimum of 15% of the previous month's net monthly casino revenues must be spent on advertising and marketing per month. The term of the license agreement is for one year with automatic indefinite one-year extensions. The World Gaming license allows the Company to assign sub-licenses. The Company has employment agreements with its president as discussed more fully below. The Company entered into a three -year 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. 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, 25 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. 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. 26 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 -------------------------------------------- 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) 27 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 30% (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. 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 28 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. Other Considerations for U.S. Holders ------------------------------------- In the following circumstances, the above sections of this discussion may not describe the U.S. federal income tax consequences to U.S. Holders resulting from the ownership and disposition of common shares of the Company: Foreign Personal Holding Company -------------------------------- If at any time during a taxable year (i) more than 50% of the total voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the U.S. and (ii) 60% (or 50% in certain cases) or more of the Company's gross income for such year is "foreign personal holding company income" as defined in Section 553 of the Code (e.g., dividends, interest, royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions), the Company may be treated as a "Foreign Personal Holding Company" ("FPHC") In that event, U.S. Holders of common shares of the Company would be required to include in gross income for such year their allocable portions of such "foreign personal holding company income" to the extent the Company does not actually distribute such income. The Company does not believe that it currently qualifies as a FPHC. However, there can be no assurance that the Company will not be considered a FPHC for the current or any future taxable year. Foreign Investment Company -------------------------- If (i) 50% or more of the total voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), and (ii) the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, the Company may be treated as a "Foreign Investment Company" ("FIC") as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gain. The Company does not believe that it currently qualifies as a FIC. However, there can be no assurance that the Company will not be considered a FIC for the current or any future taxable year. Controlled Foreign Corporation ------------------------------ If more than 50% of the total voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or 29 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 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 30 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, 2003 and does not believe that it will be a PFIC for the fiscal year ending December 31, 2004. 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). 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. 31 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 Since the Company has only one member on its Board of Directors, the Company does not yet have an audit committee and therefore does not have an "audit committee financial expert." The Board is currently endeavoring to increase the members of its Board and establish an audit committee with such a candidate and intends to as soon as an appropriate individual is found. Item 16B. Code of Ethics The Company has adopted a code of ethics applicable to all employees and directors. A copy is available upon request to the Chief Executive Officer, Oxford Investments Holdings Inc., 1315 Lawrence Avenue East, Suite 520, Toronto, Ontario, Canada M3A 3R3 Item 16C. Principal Accountant Fees and Services The Company paid the following fees to Williams and Webster, P.S. during the last two fiscal years: 2002 2003 2004 Audit fees $42,719.00 $23,865.00 $ Other Fees 11,259.00 5,355.00 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. 32 PART III Item 17. Financial Statements Financial Statements. The consolidated financial statements set forth under Item 18 are included as part of this annual report. Item 18.. Financial Statements The following auditors' reports and consolidated financial statements are included in this Form 20-F: Oxford Investments Holdings Inc. Sequential Consolidated Financial Statements Page Number --------------------------------- ----------- Auditors' Report.........................................................F-1* Consolidated Balance Sheet as at December 31, 2001, December 31, 2002, December 31, 2003 and December 31, 2004...........................F-3* Consolidated Statements of Operations for the years ended December 31, 2001, December 31, 2002 December 31, 2003 and December 31, 2004....................................................................F-4* Statement of Stockholders Equity for the year ended, December 31, 2001, December 31, 2002 December 31, 2003 and December 31, 2004.........F-5* Consolidated Statements of Cash Flows for the year ended December 31, 2001 December 31, 2002, December 31, 2003 and December 31, 2004 ........F-6* Notes to Consolidated Financial Statements...............................F-7* * The Auditors' Report, Financial Statements and Notes for the fiscal year ended December 31, 2004 will be filed by amendment. 33 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.......* 8.1 List of Subsidiaries......................................* 23.1 Consent of Williams & Webster, P.S., Certified Public Accountants............................................ 99.1 Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002...........38 99.2 Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002...........39 * Incorporated by reference from the Company's annual report on Form 20-F filed on June 28, 2002. Financial Statement Schedules None. 34 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: July 15, 2004 By: /S/Michael Donaghy -------------------------------- Michael Donaghy, President/ Chief Executive Officer 35 Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Michael Donaghy, certify that: 1. I have reviewed this Annual Report on Form 20-F of Oxford Investments Holdings Inc. (the "Registrant"); 2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the a Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Annual Report (the "Evaluation Date"); and c) presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely a affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this Annual Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /S/ Michael Donaghy ----------------------- Michael Donaghy Chief Executive Officer Date: July 15, 2005 36 Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Michael Donaghy, certify that: 1. I have reviewed this Annual Report on Form 20-F of Oxford Investments Holdings Inc. (the "Registrant"); 2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the a Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Annual Report (the "Evaluation Date"); and c) presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely a affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this Annual Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /S/ Michael Donaghy ----------------------- Michael Donaghy Chief Financial Officer Date: July 15, 2005 37