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As filed with the Securities and Exchange Commission on
September 7, 2000
Registration No. 000-26377
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 4
to
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
OXIR INVESTMENTS, INC.
(Name of Small Business Issuer in its charter)
California 88-0397134
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3980 Howard Hughes Parkway, Suite 340, Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (702) 369-4260
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
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(Title of Class)
OXIR INVESTMENTS, INC.
FORM 10-SB
TABLE OF CONTENTS
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PART I Page No.
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ITEM 1. Description of Business...................................................................... 4
ITEM 2. Management's Discussion and Analysis or Plan of Operation.................................... 25
ITEM 3. Description of Property...................................................................... 32
ITEM 4. Security Ownership of Certain Beneficial Owners and Management............................... 33
ITEM 5. Directors, Executive Officers, Promoters and Control Persons................................. 34
ITEM 6. Executive Compensation....................................................................... 36
ITEM 7. Certain Relationships and Related Transactions............................................... 37
ITEM 8. Description of Securities.................................................................... 39
PART II
ITEM 1. Market Price of and Dividends on Registrant's
Common Equity and Other Shareholder Matters.................................................. 39
ITEM 2. Legal Proceedings............................................................................ 41
ITEM 3. Changes in and Disagreements with Accountants................................................ 41
ITEM 4. Recent Sales of Unregistered Securities...................................................... 41
ITEM 5. Indemnification of Directors and Officers.................................................... 43
PART F/S
Financial Statements.............................................................................................. F-1
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PART III
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ITEM 1. Index to Exhibits..........................................................................S-1
ITEM 2. Description of Exhibits....................................................................S-2
Signatures.........................................................................................................S-3
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FORM 10-SB
PART I
Except as otherwise indicated, the information in this Registration
Statement reflects the three (3) shares for one (1) share forward stock split of
the Common Stock on November 25, 1998.
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Oxir Investments, Inc. (the "Company") was incorporated in the State
of California on November 2, 1923 as Monte Regio Corporation with the stated
purpose of engaging in the business of real estate development. The Company
continued in that endeavor for several years then discontinued operations. On
March 1, 1972 the Company changed its name to Precision Resources, Inc. The
Company remained dormant with no business activity until September 1998. The
Company changed its name to Oxenuk, Inc. on November 11, 1998.
In November 1998, the Company consummated a merger with Oxir
Investments, Inc., a California corporation ("Oxir-Private"), which was formed
in order to pursue international investment opportunities in real estate,
technology, and industrial business, particularly in the United States and
Russia, and to introduce eastern European opportunities to the United States.
The Company was the surviving corporation of the merger. In association with the
merger, the Company changed its name to Oxir Investments, Inc.
In May 1999, Vassili I. Oxenuk, the President, Chief Executive
Officer, Director and principal stockholder of the Company, purchased Oxir
Financial Services, Ltd., a British Virgin Islands corporation ("OFS"), and Oxir
Investments, Ltd., a British Virgin Islands corporation ("OIL"). At the time of
the purchase by Mr. Oxenuk, OFS engaged exclusively in trading securities for
its own account and for its clients, and OIL engaged in real estate development
and investment in technological and industrial projects in Russia. On June 29,
1999, the Company purchased all of the issued and outstanding shares of each of
OFS and OIL from Mr. Oxenuk for 5,270,000 shares of the Company's common stock.
Upon the Company's purchase of OFS and OIL, each became a wholly-owned
subsidiary of the Company. OFS, OIL and the Company were under common control at
the time of the merger and, therefore, the acquisitions have been accounted for
at historical costs in a manner similar to a pooling of interests.
On August 2, 1999, Oxir Internet Solutions, Inc. ("OIS") was
incorporated under the laws of the State of Nevada as a majority owned (51%)
subsidiary of the Company, with the balance of 49% owned by management and
employees. OIS was formed to develop e-commerce in Russia.
In addition to OIS, OIL and OFS, the Company also owns 51% of the
outstanding stock of JSC "Oxir Consulting", which started its operations during
the first quarter of 2000. An additional 39% of JSC "Oxir Consulting" is owned
by OIS. JSC "Oxir Consulting" has entered into three contracts to provide
accounting services. In November 1999, OIS purchased "ISTAR-S," a
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Russian private company. "ISTAR-S" subsequently changed its name to OXIRIS.
OXIRIS is responsible for the purchase and resale of products, shipping and
customer service for the Company's on-line store. See Part I, Item 1,
"Description of Business - Internet Solutions." Additionally, the Company is
seeking final Russian registration of four other Russian subsidiaries: JSC "Oxir
Insurance", JSC "Oxir Fitness Club", "Oxir Imperial" and "Oxir Informtour." The
owners and the percentage ownership of JSC "Oxir Insurance Corporation" will be:
the Company (49%) and Mr. Oxenuk, the Company's President, Chief Executive
Officer, Director and principal stockholder (51%). "Oxir Fitness Club" and "Oxir
Imperial" will be wholly owned subsidiaries of OIL. The owners and the
percentage ownership of JSC "Oxir Informtour" will be: the Company (60%) and
OIS (40%). As of March 31, 2000, these subsidiaries had not instituted
operations.
Through its subsidiaries, the Company operates in three areas:
1. Through OIS, the Company is implementing an Internet shop and
web-hosting center in Moscow, Russia.
2. Through OFS, the Company offers a variety of financial services
such as asset management and financial consulting to its non-U.S. clients with
an emphasis on asset management. In addition to full-time financial management
services, the Company helps its clients to define their financial goals,
tolerance for market risks and investment objectives.
3. Through OIL, the Company is an active participant in a number of
real estate projects including the construction of a high-rise apartment complex
in Moscow, Russia.
INTERNET SOLUTIONS
Through OIS, the Company is providing Internet services consisting
of on-line sales (e-commerce), set-up and support, and web site hosting,
primarily to Russian clients. Additional services provided are on-line payment
systems, web-site advertising and promotion, and data security.
Based on the quarterly Gallup Media report dated October 1999 and
reports given during the Internet Marketing Fall 1999 conference in Moscow
(December 15-17, 1999), the number of Internet users in Russia is estimated at
between 2.5 and 3 million. In addition to the Russian-based market, management
believes that a viable market exits with the Russian speaking population
residing in the United States, Israel, Canada, Australia and a number of
European countries.
ONLINE SALES
OIS has developed and implemented an online sales system. The
Company's web site (http://www.oxiris.com) (the "Web Site") currently offers
books and audio-video products, software, household supplies and cleaning agents
and electronics to Russian-speaking consumers for sale. The Web Site was
launched in February 2000 and the Company has begun to create a customer base.
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As of July 21, 2000, OIS has written agreements with the following
book manufacturers and distributors: "Master Kniga" dated May 4, 2000; "Sparrk"
dated April 25, 2000; "Publishing House Infra-M" dated April 20, 2000; "Top
Kniga" dated February 10, 2000; "Publishing house Priboy" dated February 4,
2000; "Midiks" dated April 12, 2000; "Urist-Gardarika" dated April 17, 2000;
"Book Club Terra" dated April 17, 2000; "B.S.G.-Press" dated April 19, 2000; and
"Eksmo-Press" dated February 29, 2000, allowing the Company to offer products of
these entities on-line. The contracts provide for the delivery of books and
other goods, priced by the seller and payable in Russian rubles. The agreements
are subject to Russian law and disputes are to be settled by arbitration.
Similar agreements have been signed with video and audio distributors:
"Katakombus" dated May 29, 2000; "Yuliksis" dated May 25, 2000; "Video
Marketing" dated May 11, 2000; "Viking Video" dated April 24, 2000; "Savva Group
Entertainment Video" dated April 4, 2000; "Home Collection" dated April 14,
2000; "Varus Video" dated April 17, 2000 and "Kvadro-Traid" dated April 13,
2000. Additional agreements for the provision of household supplies and cleaning
agents and software were completed with "Perfume-Light" and "Laksti" on May 19,
2000 and July 13, 2000, respectively. The Company is seeking additional
agreements with publishing houses and merchandise wholesalers and manufacturers
in order to expand the types of products offered on the Web Site.
PAYMENT FOR GOODS AND SERVICES
The Company has contracted with CyberCash to provide confirmation of
credit card payments for goods and services purchased via the Web Site.
Confirmation or declination of a transaction is received within 40 seconds. Upon
approval of a transaction, the product is shipped to the purchaser. The Company
pays CyberCash a per transaction cost of 2.5% of the transaction, with a minimum
cost of $0.50 per transaction. Credit card payments are made in U.S. dollars.
The Company also accepts payment in Russian rubles. Ruble paying
customers have the following options:
- Pay cash to a courier on delivery. The online customer inputs
the desired time of delivery. As soon as the order is
completed, the Company contacts the courier, who contacts the
customer by either phone or e-mail to confirm the time of
delivery. The courier delivers the order, accepts the money
and leaves a receipt. The courier then remits the payment to
the Company. All couriers will be under contract to the
Company. See Part I, Item 1, "Description of Business -
Internet Solutions - Delivery of Goods."
- Prepayment made according to invoice. After completing an
order, the customer prints out an automatically generated
invoice and a money transfer form. The completed form is taken
to the Russian Savings Bank with branch offices throughout
Russia. The payment is sent by the bank to the Company
referenced with the customer's order number. As soon as the
money is received, the customer is sent the order by a choice
of either mail or courier.
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Under each of the plans listed above, the customers have the
capability to track their order status on-line. All shipping charges are paid by
the customers with the exception of Moscow deliveries that are delivered free of
charge.
The Company does not intend to convert ruble payments received from
Russian customers to U.S. Dollars. Instead, the Company intends to use all ruble
payments to pay Russian suppliers, to cover current expenses and to pay taxes
within the territory of the Russian Federation.
DELIVERY OF GOODS AND SERVICES
OIS delivers goods using several methods:
- Express Delivery provided by "United Parcel Service (Rus),"
pursuant to an agreement dated February 23, 2000, and "EMS
Garantpost" pursuant to an agreement dated April 2000. These
couriers provide express delivery, within one to eight days,
for goods delivered in Russia, the Commonwealth of Independent
States ("CIS"), the United States, Canada, and Israel.
- Traditional Delivery into foreign countries is provided by
the Department of Russian Federal Mail Service ("International
Postal Service"), pursuant to an agreement dated April 20,
2000. Delivery is usually within 15 days to CIS, and 21 days
to the United States, Canada and Israel. Delivery within the
Russian Federation is contracted through the Department of
Russian Federal Mail Service ("Moscow Postal Service"),
pursuant to an agreement dated April 19, 2000. Delivery is
usually within seven days throughout Russia.
For deliveries within the Moscow area, the Company has its own
delivery service. Deliveries within Moscow are made within 24 hours of complete
processing of an order.
Currently, product inventories are maintained by each of the product
suppliers. Each supplier provides the Company daily an accurate update of its
stock and the online store manager updates product availability on a daily
basis. The manager receives the orders placed online within 12 hours and then
fills the orders using a supplier priority system. If the main supplier does not
carry a particular item ordered, the manager will continue down a priority
supplier list until the order is complete. The items are then purchased from the
suppliers and delivered to the Company's sorting warehouse located in Moscow,
Russia. See Part I, Item 3, "Description of Property." The procurement process
varies depending on the type of product. For example, video and audio products
may be obtained from the supplier within 48 hours while certain literature
products take up to six days. When all items on an order are received by the
Company, they are packaged and shipped using the customer's selected delivery
method.
The Company currently sells movie titles in VHS format. The Company
expects that the majority of movie titles will be Western-produced movies dubbed
or subtitled in Russian, but less than 30 percent of the offered movie titles
are expected to be Russian productions. During the next year the Company expects
to add approximately 80 to 100 new movie titles monthly. The average price per
video will be 90 to 120 rubles (approximately $3.00 to $4.00), depending on the
film
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category. The price of the movies has been determined by agreements with the
Company's suppliers.
At present, the Web Site offers approximately 1200 audio CDs ranging
in price from $3 for economic versions of Russian productions to $15 for CDs
manufactured by Western standards.
The number of book titles currently for sale at the Web Site is
approximately 35,000. The prices vary according to type of literature. For
example, popular fiction titles sell for 40 to 100 rubles (approximately $1.40
to $4.00), while specialty titles such as technical multi-volume reference books
may be sold for up to 3000 rubles (approximately $105). OIS plans to increase
its book offerings to 40,000 in the future.
The assortment of household products, available on the Web Site
since May 2000, comprises a large number of home cleaning agents with an average
price of $4, home appliances and electronics ranging in price from $20 and up.
In June 2000, the Company launched two more departments dealing with
computer software and consumer electronics. The software products comprise 456
items with an average cost of $20; 89 items are offered in the consumer
electronics department.
The Company intends to create an opportunity for a variety of
Russian businesses to sell their goods over the Internet. Those businesses will
be welcome to use the Company's payment system. However, to reduce the risk of
loss due to charge backs and dishonest sellers, the Company intends to obtain
deposits from the business equal to two or three weeks of expected revenues.
WEB-HOSTING
Through its project known as "Webhosting.Russia"
(http://www.wh.ru), OIS intends to offer web-hosting services involving the
provision of web sites and/or servers to its clients. The Company's main web
site (http://www.oxiris.net) contains a link to Webhosting.Russia. The Company
plans to offer two types of services to its web-hosting clients: co-location and
virtual server.
CO-LOCATION
Under this approach, the client's equipment is used on the Company's
premises. The client defines the configuration of its server and the Company's
technical personnel provide support services and data backup. With this
alternative, the client does not have the expense of installing a high-speed
Internet connection at their location and maintaining its equipment. The Company
also provides uninterrupted power supply systems that protect the client's
servers in case of power failures. This option is important to clients who
expect a heavy volume of Internet traffic to their web site. The Company intends
to charge a fee of $200 per month for co-location services.
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VIRTUAL SERVER
A client who plans to implement a relatively small Internet web site
(i.e. several hundred megabytes of content without complex interactive features)
and expects a minor traffic load (less than 1,000 hits per day) may decide to
choose this option. Under this alternative, the client's web site is hosted on
the Company servers. The Company provides the database connectivity and also
supports a limited number of e-mail accounts.
The Company intends to charge a fee of $15 to $95 per month for
virtual site hosting. This fee structure is based on the cost to the Company of
web-hosting, including the costs of maintaining the servers, providing
connectivity and maintaining e-mail accounts. The Company's competitors in
Russia, such as Demos and Zenon, have prices starting at $15 and $20 per month,
respectively.
Virtual site owners have the option of using the WebSiteMaster
System, designed and developed by OIS, which allows them to administer their
web-sites by means of a regular browser. Using the WebSiteMaster, clients are
able to manage users and e-mail addresses and review the statistical data on the
site visitors. Using these data, the clients can plan their Internet activity,
such as advertising, and analyze the results.
Most Russian Internet traffic meets at one point, called M9-IX (a
point of mutual exchange of IP-traffic located on Moscow Intertown Phone Station
(MIPS-9)). The Company's Internet center will be connected to the M9-IX traffic
exchange node by fiber optic channel (single mode fiber, approximate length 3
kilometers) in the second quarter of 2000. As a result, the Company can offer
its clients a fast and reliable channel connection speed.
In April 2000, OIS began assigning its Internet-related contracts to
OXIRIS, a wholly owned subsidiary of the Company. See Part I, Item 1,
"Description of Business - Business Development."
EQUITY MARKET INVESTING AND ASSET MANAGEMENT
Through OFS, the Company manages funds of private and corporate
non-U.S. clients in the stock markets of the United States. Currently, the
majority of the Company's clients are concentrated in Russia. Neither the
Company nor OFS provide financial or investment advice to any citizen or
resident of the United States.
OFS has opened online trading accounts with Datek, Charles Schwab
and E-Trade. All trades conducted by the Company on behalf of itself and its
clients are directed through these brokers. The Company's only relationship with
these brokers is as a client. The Company has two principal types of accounts:
(i) one solely owned Company account with Datek Online; and (ii) two customers'
fund accounts with E-Trade and Charles Schwab. Direct satellite links to
information centers permit the Company's fund managers to obtain stock market
data on-line.
Currently, neither OFS nor the Company are licensed in the U.S. as
securities broker-dealers, agents, or investment advisors, and neither provides
any such services within the U.S. The
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Company anticipates that it will address this issue and apply for licensing in
the U.S. at some future date, although there can be no assurance that this will
occur. Until this process is completed the Company has no intention to provide
any form of financial services in the United States. In January 2000 the Company
adopted a policy of holding less that 40% of its total assets in the form of
securities.
For its own account, the Company's investment goal is to achieve
profits in a long-term perspective rather than in higher risk short-term
speculations. The Company's portfolio holdings are primarily in stocks of
American companies belonging to the high technology sector (including the
Internet), hardware and software products and telecommunications. The Company's
assets managers consider a variety of fundamental and technical investment
criteria in selecting the companies in which to invest. The Company's primary
trader is Michael Smirnov, the Company's Chief Financial Officer and a director,
who was certified as a trader with a Diploma of the First Category in 1994 by
the Ministry of Finance of the Russian Federation. Mr. Smirnov is the only
person trading for the Company.
For an individual client desiring to participate in online trading,
OFS provides the following services:
*Consultancy Services. OFS representatives consult clients about
problems that can arise in their relationships with online brokers. This
includes an explanation of the terms and conditions set forth in customer
agreements of online brokers and the risks associated with online trading. The
Company also assists clients in negotiating settlements of disputes and
conflicts with brokers. Additionally, the Company helps the clients choose
appropriate trading software and familiarizes them with the functional
capabilities of their chosen trading programs.
*Analytical Research. The Company offers recommendations to clients
regarding stock purchases and financial instruments.
*Portfolio Management. The Company also provides asset and portfolio
management for its clients. The following steps are followed to form a
portfolio:
(1) Obtaining an understanding of the risk tolerance of the client.
(2) Screening the market for stocks that have the characteristics that
meet the clients' needs.
(3) Establishing the following parameters of each prospective
investment:
- *The business should be understandable. Analysts must
know the business and the markets in which they compete.
- *The business should have favorable long-term prospects.
- *The business should have a good management history, in
the opinion of OFS's analysts.
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(4) Stock Evaluation. The Company uses traditional fundamental valuation
techniques in evaluating an investment.
RUSSIAN REAL ESTATE DEVELOPMENT PROJECT
The Company, through OIL, is an investor in a high-rise apartment
complex in Moscow, Russia (the "Project"). In 1994, 1995 and 1996, the Moscow
city government authorized a Russian construction company, "Kvartal 32-33", to
coordinate construction of five high-rise apartment buildings in two housing
blocks in Moscow. The goal of the Project is to provide modern housing,
comparable to European standards, by building high-rise apartment complexes
located at Leninski Prospect 116-1, Leninski Prospect 128-1, Leninski Prospect
98-1, Udaltzova Street 5-1, and Udaltzova Street 27-1.
The Project is being financed by private investors, including the
Company, "Kvartal 32-33," Zarubezhtsvetmet, a Russian exporter of non-ferrous
metal, DTD Trading House, a Nizhnevartovsk (Russia) oil company, and Kvazar, a
Russian publishing company. As of March 31, 2000, the Company has invested
$3,847,585 in the Project. The Company's investment is estimated by the
developer to be less than 10% of the total Project.
Management believes that the Company's return on investment will be
realized in two stages. During the first stage, OIL received unimproved space in
the building at Leninski Prospect 116-1. The Company intends to develop this
space into a fitness center offering a workout area, fitness bar, sauna, massage
parlor, tanning salon, beauty salon, restaurant and a liquor bar, to be operated
by OIL (the "Complex"). The Complex offers 741 square meters (7,974 square feet)
in area. The restaurant will be designed to host up to 40 people, the fitness
center will be designed to host 30 people and the salon will be designed to host
8 people.
OIL also received a five-bedroom apartment in Moscow measuring 267
square meters (2,820 square feet), which was used by the Company's President,
Chief Executive Officer, director and principal shareholder, Mr. Oxenuk. In
April 2000, Mr. Oxenuk agreed to pay the Company a total of $1,790,465, which
includes $563,300 (apartment appraisal cost), $50,000 (the cost of two
underground garages) and $ 1,177,165 (tenant improvement cost) over the next
fifteen years as compensation for the apartment. See Part I, Item 7,"Certain
Relationships and Related Transactions."
The second stage of the Project entails the completion of the
building, located at Leninski Prospect 128-1. It is expected to be completed in
the first quarter of 2001. A total of 1,290 square meters (13,890 square feet)
of undeveloped space in this building has been assigned to OIL by the developer.
This unimproved space consists of the following: (1) 440 square meters (4,812
square feet) on the first floor; (2) two one-bedroom apartments, each 105 square
meters (1,130 square feet); (3) two two-bedroom apartments, each 148 square
meters (1,590 square feet); and (4) two three- bedroom apartments of 163 and 175
square meters (1,755 and 1,880 square feet, respectively). The Company intends
to sell the apartments, although there can be no assurance that this will occur.
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MARKETING
TRADE SHOWS
In 1999, the Company participated in Russian business forums and
trade shows. The Company attended the 2nd Russian Conference "E-commerce "1999",
held November 11 and 12, 1999, in St. Petersburg, Russia. The Company also
attended the [email protected] -"real business in a new world," December
7, 1999 in Moscow, and the 3rd Conference "Internet Marketing, Fall 99" in
Moscow. In March 2000, the Company participated and co-sponsored the Fourth
Russian Internet Forum (RIF). The Company's officers presented three reports.
The thesis of all the reports can be found at the RIF web site (www.rif.ru). By
participating in shows and exhibitions, the Company intends to promote its
services and products to the Russian speaking community.
THE INTERNET
The Company has created an interactive web site
(http://www.oxir.com), containing information about its major lines of business.
The Web Site has links to the Company's current projects.
In order to determine the most effective way of reaching consumers,
the Company will initially use the Internet media to focus on banner
advertising. By the end of the second quarter 2000, the Company expects to
display banners in banner exchange nets, namely RLE (Russian Link Exchange) and
in the major Russian search engines such as Rambler, Yandex, Aport, Atrus, and
List.
PAPER PUBLICATIONS
The Company regularly places advertisements in such business guides
as Moscow Yellow Pages, Russian Yellow Pages, Stolitsa Kontakt!, Moscow-Address,
and Golden Business of Moscow. The Company employs a marketing strategy that
involves advertising in international and local publications such as "Global
Review", "The Economist", "Expert", "Banks and Technologies" , "Moya Moskva",
"Kompaniya", "Gorod Aeroport", "Transaero-flight UN", and "Moscow News." The
E-shop advertisement is published monthly in "Internet" and "Mir Internet".
Besides paid advertisements, non-commercial materials were published in Russian
newspapers and magazines, such as "Kompaniya", "Mir Internet", "Dengy",
"Kommersant-Vlast'" and newspapers: "Izvestia", "Segodnya", "Kommersant-Daily",
"Trud", "Vremya", "Moscow News", "Rossiyskaya Gazeta", "Komsomolskaya Pravda",
and "Ekonomika y zhizn'".
TELEVISION AND RADIO
In Sochi, Russia, a television program in the series "Business by
All Rules" featured the activities of the Company and Mr. Vassili Oxenuk, its
President, Chairman of the Board of Directors, Chief Executive Officer and
principal stockholder. The Company intends to advertise its e-commerce project
on CTC, a Russian television station, and plans to do radio advertising on
"Avtoradio-Narodnaya marka."
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OTHER MEDIA
The Company has entered into an agreement with Aeroflot Company
representing the interests of Aeroflot whereby Aeroflot will place the Oxir logo
and advertisements on air ticket envelopes for the first and business class
passengers for regular Aeroflot flights to major Russian cities and
international flights to the United States, Canada and Germany. The agreement is
for a period of three months during which Aeroflot will distribute 68,000 ticket
envelopes (14,000 within Russia; 10,000 on flights to Canada; 30,000 on flights
to USA; and 14,000 on flights to Germany). The Company has paid Aeroflot USD
$8,206.
The Company also uses advertisement billboards in strategic areas of
Moscow, including the major international airport in Russia, Sheremetievo.
The Company places monthly the advertisement of its services on
Moscow ATM receipts (128 automatic teller machines using the credit cards of all
the major Russian payment systems such as Visa, Master Card, American Express,
etc.) The circulation of the Company advertisements amounts to 800,000 receipts
monthly.
COMPETITION
The Company has many competitors in the areas of Internet access,
financial services and real estate development. Many of the Company's
competitors are larger, established companies with greater assets and financial
reserves than the Company. The Company's future success will partly depend on
its ability to compete with these businesses. Presently, there can be no
assurance that the Company will be able to compete with these businesses.
INTERNET
Those entities in direct competition with OIS's e-commerce business
in Russia are Ozon (http://www.o3.ru/), Mistral (http://www.mistral.ru), Books
of Russia (http://www.books.ru), Knorus (http://www.book.ru) and Y Sitina
(http://www.kvest.com). All of these companies offer products similar to those
offered by the Company and some have a history of up to three years.
Several online shops offer books, videotapes and CDs for Russian
speaking customers outside of Russia. They include Russian Shopping Club
(http://www.russianshopping.com), Sverdlov.com (http://www.sverdlov.com),
Kniga.com (http://www.kniga.com) and Dom Knigi (http:.www.domknigi.com). The
Company believes that these competitors have a limited selection of goods and
relatively high prices in comparison to the Company's site. The Company also
believes that it competes favorably with these other companies in its terms and
cost of delivery.
Because the Company's existing competitors are registered as Russian
businesses, they are unable to establish foreign merchant accounts which would
enable them to process credit card payments by respectable and reliable American
paying systems. As a result, they are forced to use credit card payment systems
developed in Russia (for instance, Assist). Management believes that its use of
the CyberCash processing system gives it an advantage over competitors because
CyberCash is the most widely know credit card processor on the Internet.
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The Company also plans to employ the traditional payment methods of
cash on delivery and wire transfers. In addition to providing a selection of
payment methods, the Company also offers a wide selection of products and
services and delivery options.
With these features the Web Site aims to attract Russian Internet
shoppers and retain their business as repeat customers. According to the
quarterly report published by Gallup Media in October 1999, and reports given
during the Internet Marketing Fall 1999 conference in Moscow (December 15-17,
1999), the number of Internet users in Russia is estimated at between 2.5 and 3
million. The majority of users (83%) is male and between the ages of 20 and 30
(67%). Based on market research conducted by OIS, Russian Internet users, who
responded to an on-line questionnaire, indicated the following preference for
payment methods: (1) cash on delivery (49%); (2) credit cards (44%); (3) bank
account transfers (17%); and (4) payment forward (13%). OIS has taken these
demographics into consideration in tailoring its online store contents and the
other choices it makes available to its customers.
FINANCIAL SERVICES
The principal competitors to OFS, the Company's financial services
subsidiary which provides financial services to Russian clients, are Interstock
(http://www.interstock.ru/), Global Market Online (http://www.activtrade.com),
Nat Invest Securities (http://www.natinvest.com), Internet Trading Group
(http://www.internettrading.ru) and Infoline (http://svn.edunet.ru/Stocks/).
Although the Company has a relatively short operating history, it believes it
can compete in the financial services business because of the experience and
expertise of its personnel in dealing in the Russian economy and knowledge of
the U.S. securities markets. The Company also offers smaller initial minimum
investments and is price competitive for its services.
REAL ESTATE
In the real estate development market in Moscow, Russia, the
Company's main competitors are Holding Conti, Golden Keys, Centre 2000 and MIAN.
These companies are promoting projects that are comparable to the Company's
Project. Holding Conti currently has a project named "Glebovo Complex" located
on Begovaya Street. The cost per square meter of this property is between USD
$2,200 and USD $2,500. Golden Keys has a complex located on 1 Minskaya Street.
Golden Keys' prices per square meter of this property range from USD $2,000 to
USD $2,800. Centre 2000's property on 11 Pozharski Pereulok is priced between
USD $2,300 and USD $2,700 per square meter. MIAN has three different properties.
The property located on 15/2 Krylatskie Hills sells for USD $1,500 to USD $2,350
per square meter. The cost per square meter of the property on 10/2 Obydenski
Pereulok starts at USD$2,300. The prices for the property on 29 Novy Arbat
Street start at USD$2,900 per square meter.
By comparison, the condominiums at 116-1 Leninski Prospect were sold
for USD $1,900, USD $2,100 and USD $2,150 per square meter. The condominiums in
128 Leninski Prospect, the Company's second project, are priced at construction
stage between USD $1,180 and USD $1,680 per square meter. In addition to price,
the Company's strategy is to stress the location of its projects; the amenities
provided to residents including full fitness and beauty facilities, restaurant,
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and day care, the security system, and the properties' modern technology
construction. Further, the Company's property has no structural bearing walls
within the buildings. This allows residents to determine the layout of their
unit.
DOING BUSINESS IN RUSSIA
Management believes that the Company has an advantage as a foreign
resident entity, which includes being subject to United States taxation instead
of Russian, a developed business network, and certain forms of both legal and
financial protection and guarantees from Russian and Moscow governments.
However, an unstable Russian economy makes it difficult to predict the Company's
success.
Under Russian Federal law, an American company operating in Russia
is not subject to taxation in Russia on certain categories of income. Categories
of income which are tax exempt at their source include those not directly
connected with a non-resident company's commercial activity. This includes
interest received from bank deposits, loan or lease agreements and stock
dividends. A non-resident company may be exempted from tax on income received as
a result of the company's commercial activity in Russia if such activity is
indicated in the agreement between the United States and the Russian Federation
of June 17, 1992. Guarantees provided by the government to non-resident
companies are enumerated in Russian Federal law. Under this law non-resident
companies have the right to:
- Legal defense of foreign investors' activities in the Russian
Federation.
- Use of different forms of investments in the territory of the
Russian Federation.
- Assignment of rights and duties to third persons.
- Compensation in the event of property nationalization and
confiscation.
- Guarantee against an adverse change in legislation of the Russian
Federation.
- Appropriate settlement of disputes, which may arise in connection
with investments and business activity of a foreign investor in the
territory of the Russian Federation.
- Use in the territory of the Russian Federation and transfer abroad
of income, profits and other legally received funds.
- Free export from the Russian Federation property and information
initially brought into the country as foreign investment.
- Acquisition of securities.
- Participation in privatization.
- Utilization of land, natural resources, buildings and other real
property.
Many of the Company's competitors are subject to other Russian taxes
because they are Russian companies.
All of the Company's sales, reselling, web hosting, web design and
e-commerce in Russian is done by OXIRIS.
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PATENTS, TRADEMARKS AND LICENSING AGREEMENTS
The Company has filed a trademark for its logo in the Russian
Federation, but has not registered any trademarks in the United States.
Currently, the Company has no patent or licensing agreements except for standard
software license agreements with Oracle, Red Hat, Microsoft, CyberCash and
Apache Group, among others.
RESEARCH AND DEVELOPMENT
The Company develops its own software for the creation of web
applications. The Company also develops its own system to create Internet
stores. At present, five programmers, a systems analyst and a database
administrator are involved in this development process.
The application server is in itself a platform for the convenient
and effective creation of dynamic Internet sites such as online stores and
information portals. Currently the programs are developed on the Win32 and Linux
platforms. In the near future, the programs will be transferred to the Solaris
SPARC and Solaris Intel systems. Since the fall of 1999, the Company's Web Site
has been operating on the already developed software programs.
The system for creating online stores is composed of a web
application server and a database (Oracle 8), designed for the rapid launching
and effective operation of e-commerce web sites. The database consists of
catalogue modules, designed for the support of the store's online display, and
back-office operations such as client order processing, inventory support,
delivery and accounting preparation. At present, this is the system used to
operate the Web Site.
The Company also develops its own software for web-hosting
management. Presently, four programmers are involved in this development
process, primarily UNIX coding. The management systems, intended to simplify
clients' access to the information concerning audience of their sites and/or
content management, were launched in the fall of 1999. The development is
carried out with open source software, which is free from licensing fees like
Linux operation system and GCC C/C++ language compiler.
If in the future the Company acquires or becomes associated with a
business or entity that requires research and development of products, the
Company will allocate such funds as may be necessary for research activities. As
of the date hereof, the Company does not contemplate such activities in the
immediate future.
EMPLOYEES
As of June 30, 2000, the Company employs 105 people among the Moscow
(30 employees) and Sochi (4 employees) representative offices, Oxir Internet
Solutions, Inc. - Moscow representative office of the Nevada corporation (33
employees), OXIRIS (23 employees), Oxir Consulting (11 employees) and the Las
Vegas corporate office (4 employees). Three employees allocate their time
between more than one of the Company's divisions. In addition to its full-time
employees, the Company occasionally uses the services of consultants on a
contract basis.
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Because the Company acts as an investor in, rather than a developer
of, construction projects in Russia, it is not necessary for the Company to
maintain a staff for these projects. All construction and affiliated jobs
relating to the Project are carried out by the Project developer. The Project is
overseen by the Company's management.
Management intends to hire additional qualified employees only as
business conditions warrant and as funds are available. In such cases,
compensation to management will be consistent with prevailing wages for the
services rendered. The Company does not anticipate in the immediate future to
offer any employee a bonus, profit sharing or deferred compensation plan.
FACILITIES
The Company's principal place of business and corporate offices are
located at 3980 Howard Hughes Parkway, Suite 340, Las Vegas, Nevada 89109. The
facilities consist of approximately 1500 square feet of office space and is
leased for a term of five years at the rate of $4,158 per month. The Company
believes that its current principal offices are adequate for the immediate
future.
The Company uses as its Moscow representative office the facilities
acquired from OFS and OIL located at Nauchny Proezd 12 Office #28, Moscow,
Russia 117802. The facilities are leased for a term of one year. The lease
includes an automatic renewal of the lease term unless the Company otherwise
notifies the lessor. The facilities are leased at the rate of $15,184 per month
and consist of 790 square meters (8500 square feet).
The Company's Sochi representative office is located at Gagarina
Street 5, Sochi, Russia 354065. The facilities consist of approximately 1,076
square feet and are leased for a term of one year. The lease includes an
automatic renewal of the lease term unless the Company otherwise notifies the
lessor.
LITIGATION
There are presently no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or to which any of its
property is subject and, to the best of its knowledge, no such actions against
the Company are contemplated or threatened.
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS
An investment in the Company's common stock involves a high degree
of risk, including the risks described below. Each of these risks could
materially adversely affect the business, operating results and financial
condition of the Company.
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RISK FACTORS RELATING TO THE COMPANY GENERALLY
HIGH VOLATILITY OF RUSSIAN ECONOMY AND FOREIGN OPERATIONS
Much of the Company's business is being conducted either in Russia
or with Russian citizens. The Russian economic and political situations are
considered highly unstable and unpredictable. Management believes that worldwide
consumers generally have a low confidence level in Russian financial
institutions. Russia does not currently have a developed credit card system or a
highly developed telecommunications infrastructure. This may lead to overloaded
lines, slow speed of electronic traffic, and a potential for break-downs.
Renewed financial or political crisis in Russia could have a severely negative
impact on the Company's operations. Also, the state of technology of the Russian
telecommunications industry causes the Company to experience time delays and
added expenses. The Company's foreign operations are also subject to other risks
of doing business abroad, including fluctuations in the value of currencies
(which may affect demand for products priced in U.S. dollars and Russian rubles
as well as local labor and supply costs), import duties, changes to import and
export regulations (including quotas), possible restrictions on the repatriation
of capital and earnings, labor or civil unrest, long payment cycles, greater
difficulty in collecting accounts receivable and the burdens and cost of
compliance with a variety of foreign laws, changes in citizenship requirements
for purposes of doing business and government expropriation of operations and/or
assets. There can be no assurance that foreign governments will not adopt
regulations or take other actions that would have a direct or indirect adverse
impact on the business or market opportunities of the Company or that the
political, cultural or economic climate outside the United States will be
favorable to the Company's operations and growth strategy. Such actions or
developments could have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED OPERATING HISTORY
The Company has a limited operating history and is in the early
phases of operation. The Company's likelihood of success must be considered in
light of the many unforeseen costs, expenses, problems, difficulties and delays
frequently associated with new ventures. There can be no assurance that the
Company's business ventures will be successful or that it will be able to
attract and retain sufficient customers and clients to attain its goals. The
success of the Company will be affected by expenses, operational difficulties
and other factors frequently encountered in the development of a business
enterprise in a competitive environment, many of which may be beyond the
Company's control. See Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 1, "Description of
Business."
NO ASSURANCE OF PROFITABILITY
The Company anticipates that its operating expenses will increase
substantially as its business expands and there will be a greater need to
generate significantly more revenues to achieve profitability. There can be no
assurance that the Company will ever achieve significant revenues or profitable
operations. See Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes thereto appearing elsewhere in the Form 10-SB.
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Mr. Oxenuk, the Company's President, Chief Executive Officer,
Chairman of the Board of Directors and the principal stockholder, beneficially
owns approximately 59% of the Company's outstanding common stock as of February
28, 2000. As a result, Mr. Oxenuk possesses significant influence over the
Company on matters including the election of directors. This concentration of
share ownership may: (i) delay or prevent a change in control of the Company;
(ii) impede a merger, consolidation, takeover, or other business involving the
Company; or (iii) discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of the Company.
POSSIBLE DIFFICULTIES IN FUTURE FUNDING
In the past, the Company has financed much of its operations with
profits from its investments in the securities markets. It is unlikely that this
funding source will be sufficient to satisfy the Company's future, increasing
financing demands. Accordingly, the Company may have to seek funding from
outside sources. There can be no assurance that outside funding will be
available to the Company at the time and in the amount to satisfy the Company's
needs, or, that if such funds are available, they will be available on terms
favorable to the Company. The Company may also consider selling new securities,
either privately or publicly to raise funds. If the Company issues additional
shares of common stock, current shareholders may experience immediate and
substantial dilution in their ownership of Company shares. In the event the
Company issues securities or instruments other than common stock, it may be
required to issue such instruments with greater rights than that currently
possessed by holders of the Company's common stock.
ABSENCE OF PRIOR PUBLIC MARKET FOR THE COMMON STOCK
Prior to the effectiveness of this Registration Statement there has
been no public market of the Company's common stock. There is no assurance that
an active trading market will develop or be sustained.
COMPETITION
The Internet, financial services and real estate development
industries are characterized by intense competition. The Company will compete
with other e-commerce web sites, financial services and real estate development
companies in its targeting of Russian speaking customers. Based upon its
knowledge and assessment of these industries, the Company considers the
following to be its primary competitors in each industry:
<TABLE>
<CAPTION>
INDUSTRY COMPETITOR
<S> <C>
Financial Services Interstock (http://www.interstock.ru/)
Global Market Online (http://www.activtrade.com)
Nat Invest Securities (http://www.natinvest.com)
Internet Trading Group (http://www.internettrading.ru)
Infoline (http://svn.edunet.ru/stocks/)
</TABLE>
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<PAGE> 20
Internet Services Ozon (http://www.o3.ru/)
Mistral (http://www.mistral.ru)
Books of Russia (http://www.books.ru)
Knorus (http://www.book.ru)
Y Sitina (http://www.kvest.com
Web Hosting Rinet (http://www.rinet.ru)
CNT (http://www.cnt.ru)
Russian Express (http://www.express.ru)
Zenon N.S.P. (http://www.zenon.net)
Real Estate Development Holding Conti
Golden Keys
Centre 2000
Mian
Some of these competitors have substantially greater financial resources than
the Company. These entities generally may be able to accept more risk than the
Company prudently can manage, including risk with respect to the
creditworthiness of purchasers or risk related to geographic or other
concentration of investment.
RISKS RELATING TO OIS AND E-COMMERCE BUSINESS
MAINTENANCE OF RAPID TECHNOLOGY CHANGE
OIS, one of the Company's subsidiaries, operates the Web Site, which
engages in e-commerce offerings to Russian-speaking individuals on the Internet.
This is a fast growing and rapidly changing industry. Internet technology,
commercial applications and online users are constantly evolving. If the Company
is unable to respond to rapid changes involving the Internet and its technology,
the Company's business could be adversely affected.
DEPENDENCE UPON UNINTERRUPTED TECHNOLOGY FAILURES OPERATIONS
The Company's e-commerce business is dependent on the efficient and
uninterrupted operation of its computer and communication hardware and software
systems. System interruptions that cause the Company's web sites to be
unavailable or that reduce the ability to process transactions could materially
and adversely affect the Company's business, operating results and financial
conditions. Interruptions could result from natural disasters as well as power
loss, telecommunications failure and similar events. Although the Company has
experienced occasional short-term interruptions, none lasted more than an hour.
The Company is developing a disaster recovery plan to minimize these risks. In
the summer of 2000, the Company intends to purchase and install the powerful APC
Uninterrupted Power Supply system (UPS) Silcon DP300E/60, and in the fall of
2000, the Company will purchase and install the Wilson 60 diesel power
generator. This will decrease server down-time in case of a power failure.
Presently, the Company's server data is stored using RAID5 technology. Backup of
the Company's server data is
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performed regularly using high reliability HP SureStore DLT40 tape systems. The
Company is planning to purchase a reserve server to function as a back-up data
server in case the main server malfunctions.
SUSCEPTIBILITY TO ON-LINE SECURITY BREACHES
Online security breaches could negatively impact the Company's
e-commerce line of business. To protect confidential information, the Company
relies on encryption technology, which transforms information into code designed
to be unreadable by third parties. The Company also employs authentication
technology that uses passwords and other information to prevent unauthorized
persons from accessing a customer's information. If a person circumvents
existing security measures, that person could misappropriate confidential
information about the Company, its customers, or cause interruption in
operations. Security breaches that result in access to confidential information
also could damage the Company's reputation and expose the Company to a risk of
loss and liability.
Additionally, the Company may be required to make significant
expenditures and expend considerable effort and time to protect against security
breaches.
RISKS ASSOCIATED WITH USE OF DOMAIN NAMES
The Company owns the rights to various Web domain names, including
"Oxir.com", "Oxiris.com", "Oxiris.net" and "Oxiris.ru." Governmental agencies
typically regulate domain names. These regulations are subject to change. The
Company may be unable to prevent third parties from acquiring domain names that
are similar to, infringe upon or diminish the value of its trademarks and other
proprietary rights.
DEPENDENCE ON INCREASED USE OF THE INTERNET
The Company's future success will depend greatly on increased use of
the Internet by individuals and businesses for advertising, marketing, providing
services and conducting business. Commercial use of the Internet in Russia is
currently at an early stage of development and the future of the Internet in
Russia is not clear. In addition, it is not clear how effective advertising on
the Internet is in generating business as compared to more traditional types of
advertising such as print, television, and radio. Because a significant portion
of the Company's business depends on the success of OIS, its Internet
subsidiary, the Company's business will suffer if commercial use of the Internet
fails to grow in the future.
NECESSITY TO ESTABLISH AND MAINTAIN BRAND NAMES
The Company believes that establishing and maintaining brand names
is essential to expanding the Company's Internet business and attracting new
customers. The Company also believes that the importance of brand name
recognition will increase in the future because of the growing number of
Internet companies that will need to differentiate themselves. Promotion and
enhancement of the Company's brand names will depend largely on its ability to
provide
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consistently high-quality products and services. If the Company is unable to
provide high-quality products and services, the value of its brand name may
suffer.
ONLINE COMMERCE SECURITY RISKS
A significant barrier to online commerce and communications is the
secure transmission of confidential information over public networks. The
Company relies on CyberCash encryption and authentication technology as well on
encryption and authentication technology licensed from other companies (for
auxiliary operations) to provide the security and authentication necessary to
effect secure transmission of confidential information, such as customer credit
card numbers. There can be no assurance that advances in computer capabilities,
new discoveries in the filed of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms used by the Company
to protect customer transaction data. If any such compromise of the Company's
security were to occur, it could have a material adverse effect on the Company's
reputation, business, prospects, financial condition and results of operations.
A party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the Company's
operations. The Company may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of the Internet and other
online transactions and the privacy of users may also inhibit the growth of the
Internet and other online services generally, and the Web Site in particular,
especially as a means of conducting commercial transactions. To the extent that
the activities of the Company or third party contractors involve the storage or
transmission of proprietary information, such as credit card numbers, security
breaches could damage the Company's reputation and expose the Company to a risk
of loss or litigation and possible liability. There can be no assurance that the
Company's security measures will prevent security breaches or that failure to
prevent such security breaches will not have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
RISKS RELATING TO OFS AND SECURITIES TRADING
INHERENT RISKS ASSOCIATED WITH SECURITIES TRADING
The Company is actively involved in trading in various securities
markets and carries a substantial debt related to trading on margin. Equity and
other financial markets are typically volatile and the Company is subject to a
variety of market and economic risks. By trading in leveraged or margin
accounts, the Company's risk is increased. Margin rates can vary or increase
making it much more difficult for the Company to carry its margin debt. If the
equity in its margin account falls below set limits, the Company may be forced
to liquidate an investment which could cause substantial losses.
POSSIBILITY OF WIDE FLUCTUATIONS IN THE VALUE OF SOME
COMPANY ASSETS
A portion of the Company's assets include equity securities of both
publicly traded and privately owned companies. In particular, the Company owns a
significant number of shares of
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common stock in publicly traded companies. The market price and valuations of
the shares of these and other companies may fluctuate due to market conditions
and other conditions over which the Company has no control. Fluctuations in the
market price and valuations of the securities that the Company holds in other
companies may result in fluctuations of the market price of the Company's common
stock and may reduce the amount of working capital available to the Company.
RISKS OF BEING DEEMED AN INVESTMENT COMPANY
Because some of the Company's equity investments in other entities
or businesses may constitute investment securities, it is possible that the
Company might become subject to registration under the Investment Company Act of
1940 (the "1940 Act"). Generally, a company may be deemed to be an investment
company if it owns investment securities with a value exceeding 40% of its total
assets, subject to certain exclusions. Investment companies are subject to
registration under, and compliance with, the 1940 Act unless a particular
exclusion or "safe harbor" applies. If the Company were deemed to be an
investment company, it would become subject to the requirements of the 1940 Act.
As a consequence, it would be prohibited from engaging in business or issuing
its securities as it has in the past and might be subject to civil and criminal
penalties for noncompliance. In addition, certain of the Company's contracts
might be voidable, and a court-appointed receiver could take control of the
Company and liquidate its business.
Although the Company's investment securities currently comprise less
than 40% of its assets, fluctuations in the value of these securities or of the
Company's other assets may cause this limit to be exceeded. This would require
the Company to attempt to reduce its investment securities as a percentage of
its total assets. This reduction can be attempted in a number of ways, including
the disposition of investment securities and the acquisition of non-investment
security assets. If the Company sells its investment securities, it may sell
them sooner than it otherwise would. These sales may be at depressed prices and
the Company may never realize anticipated benefits from, or may incur losses on,
these investments. Some investments may not be sold due to contractual or legal
restrictions or the inability to locate a suitable buyer. Moreover, the Company
may incur tax liabilities when it sells assets. The Company may also be unable
to purchase additional investment securities that may be important to its
operating strategy. If the Company decides to acquire non- investment security
assets, it may not be able to identify and acquire suitable assets and
businesses.
RISKS OF INVESTING IN SMALL TO MEDIUM CAPITALIZATION COMPANIES
Investing in the securities of small to medium capitalization
companies involves greater risk and the possibility of greater portfolio price
volatility. Historically, small market capitalization stocks and stocks of
recently organized companies have been more volatile in price than the larger
market capitalization stocks included in the S&P 500 Index. Among the reasons
for the greater price volatility of these small company and unseasoned stocks
are the less certain growth prospects of smaller firms and the lower degree of
liquidity in the markets for such stocks.
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RISKS OF INVESTING IN FIXED INCOME SECURITIES
When interest rates decline, the market value of fixed income
securities tends to increase. Conversely, when interest rates increase, the
market value of fixed income securities tends to decline. Volatility of a
security's market value will differ depending upon the security's duration, the
issuer and the type of instrument. Investments in fixed income securities are
subject to the risk that the issuer could default on its obligations and the
Company could sustain losses on such investments.
RISK OF DERIVATIVE TRANSACTIONS
The Company's transactions, if any, in options, futures, options on
futures, swap transactions, structured securities and currency forward contracts
involve certain risks, including a possible lack of correlation between changes
in the value of hedging instruments and the portfolio assets being hedged, the
potential illiquidity of the markets for derivative instruments, the risks
arising from the margin requirements and related leverage factors associated
with such transactions. The use of these management techniques to seek to
increase total return may be regarded as a speculative practice and involves the
risk of loss if the Company is incorrect in its expectation of fluctuations in
securities prices, interest rates or currency prices.
RISKS RELATED TO OIL AND REAL ESTATE DEVELOPMENT
GENERAL RISKS
Real property investments are subject to varying degrees of risk.
The effective yields available from equity investments in real estate depend in
large part on the amount of income generated and expenses incurred. The
Company's income and ability to make distributions to its shareholders is
dependent upon the ability of its properties to generate income in excess of
operating expenses, debt service and necessary capital expenditures. Income from
multifamily and retail properties may be adversely affected by the general
economic climate, local real estate conditions (such as an oversupply of, or a
reduction in demand for, apartments and retail space), the attractiveness of the
properties to tenants and shoppers, the quality and philosophy of management,
the ability of the owner to provide adequate maintenance and (with respect to
the apartments) insurance, and increased operating costs (including real estate
taxes). In addition, income from properties and real estate values also are
affected by such factors as the costs of governmental regulation, including
zoning, tenants' rights and tax laws, the potential for liability under
applicable laws, interest rate levels and the availability of financing.
Although the Company intends to sell the apartments owned by it in the second
phase of the Project and to operate the Complex itself, there can be no
assurance that it will be able to do so. In that event, the Company's income
would be adversely affected if a significant number of tenants were unable to
pay rent or if apartments or retail space could not be rented on favorable
terms. Certain significant expenditures associated with each equity investment
in a property (such as mortgage payments, if any, real estate taxes and
maintenance costs) generally are not reduced when circumstances cause a
reduction in income from the property.
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ILLIQUIDITY OF REAL ESTATE
Real estate investments are relatively illiquid and, therefore, tend
to limit the ability of the Company to vary its portfolio promptly in response
to changes in economic or other conditions.
CHANGES IN LAWS
Increases in real estate taxes and income, service or transfer taxes
cannot always be passed through to tenants in the form of higher rents, and may
adversely affect the Company's funds from operations and its ability to make
distributions to its shareholders. Similarly, changes in laws increasing the
potential liability for environmental conditions existing on properties or
increasing the restrictions on environmental discharges or other conditions, as
well as changes in laws affecting construction and safety requirements, may
result in significant unanticipated expenditures, which would adversely affect
the Company's results of operations.
ACQUISITION OF PROPERTIES UNDER CONSTRUCTION
The Company is currently an investor in the Project, a Russian real
estate project under construction. To the extent that the Company invests in or
acquires property on which improvements are to be constructed or completed, the
Company may be subject to certain risks from the developer's inability to
control construction costs or to build in conformity with plans, specifications
and timetables. The developer's failure to perform its obligations may
necessitate legal action by the Company to rescind its investment in the
Project, to compel performance or to seek damages. Any such legal action would
result in increased costs to the Company. In any case in which improvements are
to be constructed or completed or in which a property is not yet in operation,
the Company will be subject to additional risk, including the risk of delay in
completion and in receipt of income from the use or sale of the property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in the Form 10-SB.
OVERVIEW
The Company continues to pursue strategic alternatives to maximize
the value of its portfolio of businesses. Some of these alternatives have
included, and will continue to include, selective acquisitions, establishment of
new projects and the launch of new subsidiaries. The Company has provided, and
may from time to time in the future provide, information to interested parties
regarding portions of its businesses for such purposes.
Financial information presented herein pertains to the Company as of
May 19, 1998 through its fiscal years ended June 30, 1999 and 1998 and for the
nine month period ended March 31, 2000. The Company has elected a fiscal year
ending June 30.
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RESULTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
Because the Company reinstated its operations only in November 1998,
there is no financial information for the previous fiscal year that ended June
30, 1998. For the fiscal year ended June 30, 1999, the Company had no revenue
from sales. During the fiscal year ended June 30, 1999, the Company's primary
business activity was managing funds for private and corporate clients in stock
and money markets and engaging in various trading activities for Company
accounts in the United States markets through OFS. For the fiscal year ended
June 30, 1999, trading activities resulted in the Company realizing a $1,694,087
gain on the sale of marketable securities and a net unrealized gain on
marketable securities of $1,725,464. During the fiscal year ended June 30, 1999,
the Company had general and administrative expenses of $474,583, consisting
primarily of $135,657 in operating expenses for the Las Vegas facilities,
$88,723 in professional services, $98,055 in salaries, $37,503 in housing
expenses, $35,266 in travel expenses, $19,810 in utilities, $15,800 in public
relations expenses and $9,575 in medical expenses. Also, the Company had
interest expenses of $84,900.
Income before taxes for the fiscal year ended June 30, 1999 was
$2,785,873, primarily generated by the Company's trading activities. The
Company's tax liability as of June 30, 1999 was $948,894, consisting of $398,760
in current income taxes due and $550,134 in deferred income taxes. Deferred
income taxes are based upon unrealized gains due to market appreciation of the
Company's marketable securities. For the fiscal year ended June 30, 1999, net
income was $1,836,979, or $.11 per share.
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE
THREE AND NINE MONTHS ENDED MARCH 31, 1999
Net loss for the three month (the "third quarter") and nine month
(the "first nine months") periods ended March 31, 2000 was $318,703 ($.06 per
share) and $519,301 ($.03 per share), respectively, compared to net income of
$26,214 ($.07 per share) and $1,060,733 ($.10 per share) for the third quarter
and first nine months of 1999, respectively. The Company did not recognize any
sales during the third quarter or the first nine months of 2000 or 1999. Rather,
its revenues consist of realized and unrealized gains on marketable securities.
The Company realized a 117% increase of the gain on the sale of marketable
securities of $845,920 for the third quarter of 2000 as compared to $389,325 for
the third quarter of 1999, and a 119% increase for the first nine months of 2000
from $764,800 for the first nine months of 1999 to $1,671,859 for the first nine
months of 2000. The Company's unrealized gain on marketable securities declined
85% to $27,740 in the third quarter of 2000 compared to $180,611 in
26
<PAGE> 27
the third quarter of 1999. For the first nine months of 2000, the unrealized
gain increased 53% to $2,192,063 compared to $1,430,986 for the first nine
months of 1999.
The $1,344,917 decrease in net income for the third quarter of 2000
is attributed primarily to the 710% increase in general and administrative
expenses from $245,875 in the third quarter of 1999 to $1,992,152 in the third
quarter of 2000. This increase was partially offset by the increase in net
realized gain on marketable securities. During the third quarter of 2000, total
costs and expenses increased 704% from the third quarter of 1999, primarily
attributed to the increase in general and administrative expenses due to
increased Company size and the 892% increase in depreciation expense due to
purchases of new property and equipment. The Company pays taxes in the British
Virgin Islands and United States.
The $1,580,034 decrease in net income for the first nine months of
2000 is attributed primarily to the 781% increase in general and administrative
expenses for the first nine months of 2000 from $484,406 in the first nine
months of 1999 to $4,267,072 in the first nine months of 2000. This increase was
partially offset by the 119% increase in net realized gain on marketable
securities from $764,800 in the first nine months of 1999 to $1,671,859 in the
first nine months of 2000. Also, net unrealized gain on marketable securities
increased 53% to $2,192,063 in the first nine months of 2000 from $1,430,986 in
the first nine months of 1999. During the first nine months of 2000, total costs
and expenses increased 770% compared to the first nine months of 1999.
Depreciation expense increased 906% due to purchases of new properties and
equipment, and rent expense increased 235% due to new spaces leased for business
operations.
Interest expense for the third quarter and first nine months of 2000
increased 85% and decreased by 23%, respectively, when compared to the third
quarter and first nine months of 1999, respectively. These changes reflect
interest paid on the Company's margin accounts.
A tax provision has been made for the third quarter of 2000 and the
fiscal year ending June 30, 2000 based on pre-tax capital gains.
27
<PAGE> 28
LIQUIDITY AND CAPITAL RESOURCES
The Company has satisfied its initial working capital needs from the
sale for cash of its common stock and from income generated by the Company's
trading activities. See Part II, Item 4, "Recent Sales of Unregistered
Securities." Total cash and cash equivalents at March 31, 2000 was $46,160
compared to $52,627 at June 30, 1999. Also at March 31, 2000, the Company had
$3,827,625 in investments in trading securities compared to $4,672,246 at June
30, 1999. The 18% decrease is due primarily to market decline.
Net cash used by operating activities for the third quarter of 2000
was $1,129,529 while net cash provided for the first nine months of 2000 was
$19,944, compared to $436,466 and $2,945,650 provided for the third quarter of
1999 and the first nine months of 1999, respectively. The 259% decrease during
the third quarter of 2000 is primarily attributed to the $1,318,703 net loss in
the third quarter of 2000 compared to the $26,214 net income in the third
quarter of 1999. The drastic decrease during the first nine months of 2000 is
primarily attributed to the decrease in net income and increase in depreciation
expense, as well as the issuance of stock for services valued at $300,000.
Offsetting the decrease in net cash provided for the first nine months of 2000
was the $304,790 increase in accrued liabilities in the first nine months of
2000 compared to an increase of $1,249,666 in the first nine months of 1999.
This was due to decrease in clients' funds payable for the Company managed
investment portfolio.
During the fiscal year ended June 30, 1999, the Company's net cash
used by investing activities was $1,548,483, attributed to the $1,977,764
increase in trading securities and $844,044 for the design and construction of
office facilities and the purchase of office equipment, and partially offset by
the $1,273,325 increase in margin account balance. Net cash provided by
investing activities for the third quarter of 2000 was $1,135,147 and cash used
in the first nine months of 2000 was $175,616. In comparison, cash used for the
third quarter and first nine months of 1999 was $425,497 and $3,243,687,
respectively. These results are primarily attributed to decrease in trading
securities in 2000.
During the fiscal year ended June 30, 1999, the Company's net cash
used by financing activities was $1,237,002, primarily attributed the $2,337,867
advance to OIL, which funds were used for investing in the Project. During this
period, the Company realized $1,103,000 from the issuance of common stock for
cash. Net
28
<PAGE> 29
cash used by financing activities in the third quarter of 2000 was $8,075 and
net cash provided in the first nine months of 2000 was $149,205, compared to net
cash provided of $0 and $350,000 for the third quarter and first nine months of
1999, respectively. This reflects the issuance of the Company's stock for
$600,000 cash during the nine months of 1999 and $250,000 in costs related to
the issuance.
At March 31, 2000 the Company had total assets of $8,827,781 and
stockholders' equity of $4,268,447. In comparison, at June 30, 1999, the Company
had total assets of $8,765,153 and total stockholders' equity of $4,335,748.
Working capital was ($478,130) at March 31, 2000, compared to $505,938 at June
30, 1999.
The Company anticipates meeting its working capital needs during the
next twelve months primarily with revenues from its operating and investing
activities or, if necessary, from the sale of securities or from borrowing.
Management has not entered into any arrangements or definitive agreements for
additional sales of securities, either through a private placement or a public
offering. There can be no assurance that the Company will be able to
successfully secure funds either from the sale of its securities or from loans,
or that such funds may be available on terms favorable to the Company. If the
Company's operations are not adequate to fund
29
<PAGE> 30
its operations and it is unable to secure financing from the sale of its
securities or from private lenders, the Company could experience a cash flow
shortage, which could curtail the Company's operations. There can be no
assurance that the Company will be able to obtain financing.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
PLAN OF OPERATION
During the next twelve months, the Company will continue to seek new
investment opportunities and continue to develop its existing projects. The
Complex has been divided by the Company into smaller sub-projects, including a
fitness center, restaurant/health bar and a beauty salon located in the
building. All of the sub-projects have equal priority and the Company is fully
responsible for all sub-projects. The beauty and fitness center will be under
construction until approximately March 2001 and are expected to be fully
operational by June 2001. The approximate cost of the Complex is $960,000,
allocated as follows: Fitness Center ($475,000), Restaurant ($255,000), and
Beauty Salon ($230,000).
It is anticipated that the Company's second real estate project will
be completed in the first quarter of 2001. The Company anticipates that its
total investment in this project will be approximately $2,200,000, which the
Company believes can be provided internally.
In February 2000, OIS finalized its programming and database
preparation for the launching of book, audio and video sales. The virtual
reality store is fully operational and is increasing the sales volume every
month. In addition to book, audio and video sales, the goods offered by OIS have
been expanded to include software, household supplies and cleaning agents and
electronics.
The Company does not anticipate making any significant capital
expenditures for office facilities or equipment. There are no current plans for
the Company to become engaged in manufacturing of any products. Management does
not anticipate hiring additional employees until warranted by business
conditions and availability of funds.
The Company anticipates meeting its working capital needs during the
next twelve months primarily with revenues from trading activities in its
marketable securities and possibly by interim financing to provide working
capital if necessary. Management has not entered into any arrangements or
definitive agreements for a private placement of securities and/or a public
offering. If the Company's operations are not adequate to fund its operations
and it is unable to secure financing from the sale of its securities or from
private lenders, the Company could experience
30
<PAGE> 31
losses which could curtail the Company's current operations and future projects.
The continuation of the Company as a going concern is directly dependent upon
the success of its future operations and ability to obtain additional financing.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which requires companies
to record derivatives as assets or liabilities, measured at fair market value.
Gains or losses resulting from changes in the values of those derivatives would
be accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Management believes the adoption of this
statement will have no material impact on the Company's financial statements.
INFLATION
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
YEAR 2000
The Year 2000 issue results from an industry-wide practice of
representing years with only two digits instead of four. Beginning in the Year
2000, date code fields need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates (2000 or 1900). As a
result, computer systems and/or software used by many companies needed to be
upgraded to comply with such Year 2000 requirements. Through March 31, 2000, the
Company has not experienced any significant problems associated with the Year
2000 issue. As of March 31, 2000, the Company has not been made aware of, nor
has it experienced, date related problems with any third-party software.
Although it appears that the Year 2000 issue will not have a significant adverse
effect on the Company, the Company continues to monitor the Year 2000 compliance
of its internal systems. Undetected errors in its internal systems that may be
discovered in the future could have a material adverse effect on its business,
operating results or financial condition.
RISK FACTORS AND FORWARD LOOKING STATEMENTS
This Registration Statement contains certain forward looking
statements. The Company wishes to advise readers that actual results may differ
materially from such forward-looking statements. Forward looking statements
involve substantial risks and uncertainties that could cause actual results to
differ materially from those expressed in or implied by the statements, and
which may be beyond the Company's control, including, but not limited to, the
following: the possible success of the Company's varied projects and
subsidiaries, the volatility of the financial markets in which the Company
invests, the ability of the Company to fund its current and future projects and
its ability to meet its cash and working capital needs, the industries in which
the Company operates, and other risks detailed in the Company's periodic report
filings with the Securities and Exchange Commission. Any statements contained in
this Registration
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<PAGE> 32
Statement that are not statements of historical fact may be deemed to be forward
looking statements. Without limiting the generality of the foregoing, words such
as "may," "will," "expect," "anticipate," "intend," "could," "estimate," or
"continue," or the negative or other variations thereof or comparable
terminology are intended to identify forward looking statements.
ITEM 3. DESCRIPTION OF PROPERTY
As of March 31, 2000, the Company has invested $3,261,706 into the
construction of the Project in Moscow. The Company has applied approximately
$1,069,460 from this investment to develop the Complex in one of the apartment
buildings constructed in the Project. There are no limitations on the ownership,
and no liens on, the property.
The Complex will include a workout area, fitness bar, sauna, massage
parlor, tanning salon, beauty salon, restaurant and a liquor bar. The floor
space is approximately 7,974 square feet. It is currently undergoing the initial
construction stage and is scheduled to open by December 2000.
The Company maintains a sorting warehouse located in Moscow, Russia
consisting of 66 square meters (2260 square feet) with a daily capacity of
15,000 items. The facility is leased for a term of one year with a right for
automatic renewal.
On April 1, 1999, the Company purchased a single-family house in Las
Vegas, Nevada for the price of $362,000 for Mr. Oxenuk and his family to occupy.
The Company paid $164,514 as a down payment with the balance mortgaged with
GreenPoint Mortgage Company. As of March 31, 2000, the Company has paid $1,369
and $206,631 is remaining to be paid on the mortgage principal. The mortgage is
secured by a first lien on the single-family home and surrounding property.
The Company's principal place of business and corporate offices are
located at 3980 Howard Hughes Parkway, Suite 340, Las Vegas, Nevada 89109. The
facility consists of approximately 1500 square feet of office space and is
leased for a term of five years at the rate of $4,158 per month. The Company
believes that its current principal offices are adequate for the immediate
future.
The Company uses as its Moscow representative office the facilities
acquired from OFS and OIL located at Nauchny Proezd 12, Office #28, Moscow,
Russia 117802. The facilities are leased for a term of one year. The lease
includes an automatic renewal of the lease term unless the Company otherwise
notifies the lessor. The facilities are leased at the rate of $15,184 per month
and consist of 790 square meters or 8500 square feet.
The Company's Sochi representative office is located at Gagarina
Street 5, Sochi, Russia 354065. The facilities consist of approximately 1,076
square feet and are leased for a term of one year. The lease includes an
automatic renewal of the lease term unless the Company otherwise notifies the
lessor.
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<PAGE> 33
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, to the best of the
Company's knowledge, as of March 31, 2000 with respect to each person known by
the Company to own beneficially more than 5% of the outstanding Common Stock,
each director and all directors and officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
------------------- -------------------- -----------
<S> <C> <C>
Vassili I. Oxenuk* 12,449,319 58.8%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
EC Venture Capital Ltd.(2) 5,000,000 23.6%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
Vladimir N. Kishenin (2) 5,000,000 23.6%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
Michael Y. Smirnov* 1,350,000 6.4%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
<S> <C> <C>
Kirill M. Mendelson* 270,000 1.3%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
Alexander Sarkisian, Ph.D.* 270,000 1.3%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
Inna Batrakova* 300,000 1.4%
3980 Howard Hughes Pkwy
Suite 340
Las Vegas, NV 89109
All directors and officers 14,639,319 69.1%
a group (5 persons)
</TABLE>
*Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the Company has
been advised that each person above has sole voting power over the
shares indicated above.
(1) Based upon 21,189,000 shares of Common Stock outstanding on March
31, 2000.
(2) Mr. Kishenin owns a controlling interest in EC Venture Capital Ltd.
and therefore may be deemed to be a beneficial owner of such shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Vassili I. Oxenuk 36 President, CEO, Chairman of the Board of Directors
Michael Y. Smirnov 33 Vice President, CFO and Director
Alexander Sarkisian, Ph.D. 52 Vice President
Kirill M. Mendelson 29 Secretary, Treasurer and Director
Inna Batrakova 25 Vice President of Communications and Director
</TABLE>
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
Directors will be elected at the annual meetings to
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<PAGE> 35
serve for one-year terms. There are no agreements with respect to the election
of directors. The Company has not compensated its directors for service on the
Board of Directors or any committee thereof. Any non-employee director of the
Company shall be reimbursed for expenses incurred for attendance at meetings of
the Board of Directors and any committee of the Board of Directors. The
Executive Committee of the Board of Directors, to the extent permitted under
California law, exercises all of the power and authority of the Board of
Directors in the management of the business and affairs of the Company between
meetings of the Board of Directors. Each executive officer is appointed by and
serves at the discretion of the Board of Directors.
None of the officers and/or directors of the Company are officers or
directors of any other publicly traded corporation, nor have any of the
directors, officers, affiliates or promoters of the Company filed any bankruptcy
petition, been convicted in or been the subject of any pending criminal
proceedings, or the subject or any order, judgment, or decree involving the
violation of any state or federal securities laws within the past five years.
The business experience of each of the persons listed above during
the past five years is as follows:
Vassili I. Oxenuk, President, Chief Executive Officer and Chairman of the Board
of Directors
Mr. Oxenuk is a graduate of the Moscow State University Mathematics
Boarding School for Gifted Children and the Mojaysky Military Academy in Russia,
from which he graduated with a Masters Degree in Informational Systems and
Mathematical Support. His career experiences include Analytical Researcher for
the Russian Central Military Intelligence Agency. From 1991 to 1995, Mr. Oxenuk
established OxMoSe Company ("OxMoSe") in Leipzig, Germany, which created a joint
venture in Russia for retail sales of consumer electronics, as well as
production lines for milk and soft drink bottling. In May 1998, Mr. Oxenuk
formed OXIR-Private, a California corporation, that subsequently merged with the
Company. Mr. Oxenuk is currently pursuing his Doctoral Degree in Business
Administration at Kennedy-Western University, a non accredited institution.
Michael Y. Smirnov, Vice President, Chief Financial Officer and Director
Mr. Smirnov graduated from the Mojaysky Military Academy in Russia
in 1989 with a Masters Degree in information systems mathematical support. His
experience includes Analytical Researcher for the Russian Central Military
Intelligence from 1989 to 1995 as well as investment and trading experience in
world equity markets. He was certified as a trader with a Diploma of the First
Category in 1994 by the Ministry of Finance of the Russian Federation. In 1995
he accepted a position as Financial Analyst Manager for OxMoSe. At the end of
1995, OxMoSe was dissolved and Mr. Smirnov transferred to an identical position
with OFS. Since the merger of the Company with Oxir-Private, Mr. Smirnov has
served the Company as Director, Chief Financial Officer, Vice President, and the
Company's sole trader. Presently, Mr. Smirnov is currently pursuing his Doctoral
Degree in Business Administration at Kennedy-Western University, a non
accredited institution.
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<PAGE> 36
Alexander Sarkisian, Ph.D., Vice President
Dr. Sarkisian has a Ph.D. in Economics and graduated from the Moscow
State Aviation Institute (Technical University), at which he is presently a
Professor of International Business. From 1986 through 1991, Dr. Sarkisian was
Vice President of economic affairs at the state scientific production
amalgamation Phazotron. Dr. Sarkisian was Vice President of the International
Association "International Dialog" from 1992 to 1994 and served as Chairman of
the Board of the Regionsotsbank, engaged in the collecting and processing
communal fees in Moscow, Russia from 1995 to 1998. Dr. Sarkisian presently
serves as the Chairman of the Board of: Stenholm Invest ApS, Denmark, a Danish
investment company (Chairman since 1997); Imkor (Chairman since 1994); and
ASPEKT Ltd (Chairman since 1991). Furthermore, Dr. Sarkisian conducts lectures
at the Moscow State Aviation Institute (Technical University), Military
Production Academy, and at the Courses of Crisis Management on the subject of
International Investment, Decision Making Theory and Management.
Kirill M. Mendelson, Secretary, Treasurer, Director
Mr. Mendelson attended the Moscow Medical Academy in Russia from
1988 to 1991. He received his BS with a minor in Business Administration from
the University of Nevada Las Vegas, NV in 1995. From June 1995 to March 1998, he
was Vice President of Marketing for Europe and Russia and Executive Director for
US Direct Inc., a Las Vegas, Nevada company engaged in pursuing business
opportunities in emerging markets. His responsibilities included consulting for
and negotiating contracts, joint ventures, and export and import trade in
Russia, Ukraine and the Baltic Republics. He joined Oxir-Private in September
1998.
Inna Batrakova, Vice President of Communications, Director
Ms. Batrakova graduated from the Pyatigorsk State Linguistic
University with majors in English and Psychology. Upon graduation Ms. Batrakova
was awarded her honors bachelor degree in Linguistics and Practical Psychology.
Ms. Batrakova also acquired a certified diploma of the Interpreter's faculty at
the same University. Currently Ms. Batrakova is pursuing her Masters Degree in
Business Administration at Kennedy-Western University, a non accredited
institution. Ms. Batrakova started her career with Oxir-Private in February 1997
and accepted the position of Administrative Assistant at its representative
office in Moscow. In November 1997, Ms. Batrakova was promoted to the position
of the Executive Administrative Assistant and, in December 1998, she became Vice
President of Communications. Presently her responsibilities include coordinating
corporate communications with the Company's clients, the media and other
business entities, as well as setting up a liaison structure for the
implementation of new marketing programs. She also directs and coordinates all
public communications for the Company, including soliciting media coverage and
media relationships, development of corporate brochures, newsletters and press
releases.
ITEM 6. EXECUTIVE COMPENSATION
The Company has entered into an employment contract with its
President, Chief Executive Officer, and Chairman of the Board of Directors, Mr.
Oxenuk, and with Mr. Mendelson, its Secretary/Treasurer and
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<PAGE> 37
Director. Mr. Oxenuk's agreement provides that the Company will pay his monthly
personal expenses, which are not to exceed $120,000 per year. Payment is made
through Mr. Oxenuk's Citibank Visa and Citibank MasterCard accounts.
Additionally, the Company is to provide housing for Mr. Oxenuk and his family
and to pay all expenses related to the property. On April 1, 1999, the Company
purchased a single-family house in Las Vegas, Nevada for the price of $362,000
for Mr. Oxenuk and his family to occupy. The Company paid $164,514 as a down
payment with the balance mortgaged with GreenPoint Mortgage Company. From July
1, 1999 to March 31, 2000, the Company has paid $23,752 as compensation for Mr.
Oxenuk's housing costs and related expenses.
Mr. Mendelson's agreement provides that the Company will pay an
annual salary of $40,000. In addition, the Company issued to Mr. Mendelson
270,000 shares of the Company's common stock as a cost of the original merger.
The following table sets forth all cash compensation paid by the
Company for services rendered to the Company for the fiscal year ended June 30,
1999, to the Company's Chief Executive Officer. No executive officer of the
Company has earned a salary greater than $100,000 annually for the period
depicted.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other All
Annual Other
Name and Fiscal Compen- Compen-
Principal Position Year Salary(1) Bonus sation sation
-------------------- ---- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Vassili I. Oxenuk, 1999* $64,465 $ -0- $ -0- $169,742(2)
President, C.E.O 2000** $91,614 $ -0- $ -0- $ 23,752(3)
</TABLE>
-----------------
*From July 1, 1998 through June 30, 1999.
** From July 1, 1999 through March 31, 2000.
(1) Includes $64,465 and $91,614 for the fiscal year ended June 30, 1999 and
the nine month period ended March 31, 2000, respectively, consisting solely of
Mr. Oxenuk's monthly personal expenses charged to his Citibank Visa and
Mastercard accounts.
(2) Includes $164,514 paid by the Company as a down payment for a single family
home in Las Vegas, Nevada.
(3) Compensation for Mr. Oxenuk's housing costs and related expenses, including
mortgage payments, utilities and maintenance fees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions between the Company and any officer,
director, nominee for election as director, or any shareholder owning greater
than five percent (5%) of the Company's outstanding shares, nor any member of
the above referenced individuals' immediate family, except as set forth below.
In June 1999, the Company finalized two separate agreements to
acquire, through tax free exchange of shares, 100% of the issued and outstanding
shares of OFS, a British Virgin Islands corporation, and OIL, a British Virgin
Islands corporation, from Mr. Oxenuk, the Company's President, Chief Executive
Officer, Chairman of the Board of Directors and the principal shareholder. Under
the terms of the
37
<PAGE> 38
agreements, Mr. Oxenuk received an aggregate of 5,000,000 shares of the
Company's common stock. Mr. Oxenuk did not participate in the Company's Board of
Directors decision to make the acquisitions; however, the transactions were not
negotiated on an arms length basis. The Company did not receive an independent
valuation of either OFS or OIL.
Pursuant to Mr. Oxenuk's employment agreement, on April 1, 1999, the
Company purchased a single-family house in Las Vegas, Nevada for the price of
$362,000 for Mr. Oxenuk and his family to occupy. The Company paid $164,514 as a
down payment with the balance mortgaged with GreenPoint Mortgage Company. As of
March 31, 2000, for a period of nine months, the Company has paid $23,752 as
compensation for Mr. Oxenuk's housing costs and related expenses, including
mortgage payments, utilities and maintenance fees. The amount due on the
mortgage principal as of March 31, 2000 was $206,631. See Part I, Item 6,
"Executive Compensation."
On January 4, 1999, the Company issued 1,350,000 shares of common
stock to Mr. Smirnov, the Company's Vice President, Chief Financial Officer and
Director, in exchange for 27 publicly traded stocks, most of which are listed on
the New York Stock Exchange or the Nasdaq National Stock Market. The value of
the securities at the time of transfer was $1,201,812. This transaction was
valued at predecessor cost, at $.70 per share, or an aggregate of $939,764. On
the same date, the Company issued 270,000 shares of common stock to Mr.
Mendelson, the Company's Secretary/Treasurer and Director. No value was assigned
to the transaction because the shares were treated as stock issuance costs and
were deemed founders shares in connection with the Company's merger in November
1998.
Also on January 4, 1999, the Company issued 600,000 shares to Mr.
Oxenuk in exchange for $600,000. On June 29, 1999, Mr. Oxenuk transferred
300,000 shares to Ms. Batrakova, Vice President of Communications and Director,
as a gift.
In March 1999, 270,000 shares were issued to Mr. Sarkisian, the
Company's Vice President, for services related to Mr. Sarkisian's employment by
the Company.
OIL received a five-bedroom apartment in Moscow measuring 267
square meters (2,820 square feet), which was used by Mr. Oxenuk. On April 2000,
Mr. Oxenuk agreed to pay the Company a total of $1,790,465, which includes
$563,300 (apartment appraisal cost), $50,000 (cost of two underground garages)
and $1,177,165 (tenant improvement cost) over the next fifteen years as
compensation for the apartment.
The Company's officers and directors are subject to the doctrine of
corporate opportunities only insofar as it applies to business opportunities in
which the Company has indicated an interest, either through its proposed
business plan or by way of an express statement of interest contained in the
Company's minutes. If directors are presented with business opportunities that
may conflict with business interests identified by the Company, such
opportunities must be promptly disclosed to the Board of Directors and made
available to the Company. In the event the Board shall reject an opportunity so
presented, any of the Company's officers and directors may avail themselves of
such an opportunity. Every effort will be made to resolve any conflicts that may
arise in favor of the Company. There can be no assurance, however, that these
efforts will be successful.
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<PAGE> 39
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common
Stock, no par value, of which 21,189,000 shares are issued and outstanding as of
March 31, 2000. On November 25, 1998, the Company effected a forward stock split
of its then issued and outstanding shares of Common Stock on a three (3) shares
for one (1) share basis. All references to the Company's Common Stock herein are
in post-split shares. All shares of Common Stock have equal rights and
privileges with respect to voting, liquidation and dividend rights. Each share
of Common Stock entitles the holder thereof to: (i) one non-cumulative vote for
each share held of record on all matters submitted to a vote of the
stockholders; (ii) participate equally and to receive any and all such dividends
as may be declared by the Board of Directors out of funds legally available
therefore; and (iii) participate pro rata in any distribution of assets
available for distribution upon liquidation of the Company. Stockholders of the
Company have no preemptive rights to acquire additional shares of Common Stock
or any other securities. The Common Stock is not subject to redemption and
carries no subscription or conversion rights. All outstanding shares of Common
Stock are fully paid and non-assessable.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
Prior to the filing of this Registration Statement, no shares of the
Company's Common Stock have been registered with the Securities and Exchange
Commission (the "Commission") or any state securities agency of authority. There
is currently no public trading market for the Company's securities and the
Company is not aware of a prior trading market. In 1972, the Company engaged in
an intrastate exempt offering in California. The shares offered pursuant to that
offering were restricted but such restrictions have expired. Accordingly, upon
the effectiveness of this Registration Statement, the Company's common stock may
be publicly traded.
Although the Company intends to submit its application to the OTC
Bulletin Board contemporaneously with the filing of this Registration Statement,
the Company does not anticipate its shares to be traded in the public market
until this Registration Statement becomes effective. Except for the application
to the OTC Bulletin Board, there are no plans, proposals, arrangements or
understandings with any person concerning the development of a trading market in
any of the Company's securities. Because to date there has been no trading
market for the Company's Common Stock, historical price information is being
omitted.
In the event a public market for the Company's shares does develop,
the ability of an individual shareholder to trade his shares in a particular
state may be subject to various rules and regulations of that state. A number of
states require that an issuer's securities be registered in that state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to register its
securities in any particular state. Further, most likely the Company's shares
will be subject to the provisions of Section 15(g) and Rule 15g-9
39
<PAGE> 40
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject to certain
exceptions. Rule 3a51-1 provides that any equity security is considered to be a
penny stock unless that security is: registered and traded on a national
securities exchange meeting specified criteria set by the Commission; authorized
for quotation on The Nasdaq Stock Market; issued by a registered investment
company; excluded from the definition on the basis of price (at least $5.00 per
share) or the issuer's net tangible assets; or exempted from the definition by
the Commission. If the Company's shares are deemed to be a penny stock, trading
in the shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established
customers and accredited investors, generally persons with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such securities and must
have received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in the Company's Common Stock and may affect the
ability of shareholders to sell their shares.
As of March 31, 2000 there were 181 holders of record of the
Company's Common Stock. As of March 31, 2000, the Company has issued and
outstanding 21,189,000 shares of common stock. Of this total, approximately
19,945,578 shares were deemed "restricted securities" as defined by the Exchange
Act and certificates representing such shares bear an appropriate restrictive
legend.
Of the Company's total outstanding shares, upon the effectiveness of
this Registration Statement, approximately 1,244,622 shares may be sold,
transferred or otherwise traded in the public market without restriction, unless
held by an affiliate or controlling shareholder of the Company. None of these
shares have been identified as being held by affiliates.
Of the total remaining outstanding shares, upon the effectiveness of
this Registration Statement, approximately 14,845,978 became eligible to be sold
pursuant to Rule 144 subject to the volume and other limitations set forth under
Rule 144 as of June 30, 2000.
40
<PAGE> 41
In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned restricted
shares of the Company for at least one year, including any person who may be
deemed to be an "affiliate" of the Company (as the term "affiliate" is defined
under the Exchange Act), is entitled to sell, within any three-month period, an
amount of shares that does not exceed the greater of (i) the average weekly
trading volume in the Company's Common Stock, as reported through the automated
quotation system of a registered securities association, during the four
calendar weeks preceding such sale or (ii) 1% of the shares then outstanding. A
person who is not deemed to be an "affiliate" of the Company and has not been an
affiliate for the most recent three months, and who has held restricted shares
for at least two years would be entitled to sell such shares without regard to
the resale limitations of Rule 144.
DIVIDEND POLICY
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that it will pay
cash dividends or make distributions in the foreseeable future. The Company
currently intends to retain and invest future earnings to finance its
operations.
ITEM 2. LEGAL PROCEEDINGS
There are presently no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or to which any of its
property is subject and, to the best of its knowledge, no such actions against
the Company are contemplated or threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in or disagreements with accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1999, the Company issued shares of its Common Stock in
two private placements to the following investors in the following amounts:
<TABLE>
<CAPTION>
Name No. of Shares Purchase Price Month Purchased
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Galina Blinnikova 1,200 $ 6,000 January 1999
----------------------------------------------------------------------------------------------------------------------------------
Rita Grigorieva 2,400 $ 12,000 January 1999
----------------------------------------------------------------------------------------------------------------------------------
Evgeniy Shapochnikov 4,000 $ 20,000 January 1999
----------------------------------------------------------------------------------------------------------------------------------
Valise Ltd. 90,000 $450,000 January 1999
----------------------------------------------------------------------------------------------------------------------------------
Realty Las Vegas, Inc. 2,000 $ 10,000 February 1999
----------------------------------------------------------------------------------------------------------------------------------
VAM Investment, Ltd 30,000 $150,000 March 2000
----------------------------------------------------------------------------------------------------------------------------------
VAM Investment, Ltd. 8,000 $ 40,000 March 2000
----------------------------------------------------------------------------------------------------------------------------------
TOTAL: 137,600 $688,000
---------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 42
The private placements were conducted pursuant to Rule 504. To the
best knowledge of the Company, the investors were either accredited investors or
had a preexisting personal or business relationship with Mr. Oxenuk and/or the
Company. The Company determined that each person was sophisticated and capable
of assuming the risks of investing in the Company or had a preexisting
relationship with Mr. Oxenuk and/or the Company by obtaining a completed
purchaser questionnaire from each purchaser and the Company's preexisting
knowledge of such purchaser. The proceeds from the issuances were used for
general corporate operating purposes and investments. The offering was conducted
by the Company. The Company did not use an underwriter in connection with the
offering. The purchasers were the only persons contacted in association with the
offering. No general solicitation or general advertising was made. The Company
presented each purchaser with a private placement memorandum summarizing the
Company and the risks involved in any investment. The Company presented each of
the offerees with the information required to be delivered pursuant to Rule 502
promulgated pursuant to Regulation D because the private placement memorandum
provided information regarding its business and financial information sufficient
to permit the offeree to assess the risks of such an investment equivalent to
that presented in a registration statement.
On January 4, 1999, the Company issued 1,350,000 shares of common
stock to Mr. Smirnov, the Company's Vice President, Chief Financial Officer and
Director, in exchange for certain trading securities. These securities consisted
of 27 publicly traded stocks, most of which are listed on the New York Stock
Exchange or the Nasdaq National Stock Market. The value of the securities at the
time of transfer was $1,201,812. This transaction was valued at predecessor
cost, at $.70 per share, or an aggregate of $939,764. See Part I, Item 7,
"Certain Relationships and Related Transactions." On the same date, the Company
issued 270,000 shares of common stock to Mr. Mendelson, the Company's
Secretary/Treasurer and Director, pursuant to the terms of Mr. Mendelson's
employment agreement. See Part I, Item 6, "Executive Compensation." No value was
assigned to the transaction because the shares were treated as stock issuance
costs and were deemed founders shares in connection with the Company's merger in
November 1998.
Also on January 4, 1999, the Company issued 600,000 shares to Mr.
Oxenuk, the Company's President, Chief Executive Officer, Chairman of the Board
of Directors and its principal shareholder, for $600,000. The shares were
subsequently returned to the Company and, on June 29, 1999, the Company reissued
the shares: 300,000 to Mr. Oxenuk and 300,000 to Ms. Batrakova, the Company's
Vice President of Communications and Director.
42
<PAGE> 43
In March 1999, 270,000 shares were issued to Mr. Sarkisian, the
Company's Vice President, for services related to Mr. Sarkisian's employment by
the Company.
In September 1999, the Company issued 60,000 shares to First Liberty
Investments, Inc. as part of its compensation for providing consulting and
investment banking services to the Company. The shares were valued at $5.00 per
share. In January 2000, the Company repurchased 1,200 shares from a shareholder
for $6,000. The shares were retired.
None of the issuances of shares set forth above were registered with
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
because the transactions were believed to be exempt from such registration
pursuant to the exemptions provided by Section 4(2) of the Securities Act and/or
Regulation D promulgated thereunder.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the provisions of the California General Corporation
Law (the "Code"), the Company has the power to indemnify any person who was or
is a party, or is threatened to be made a party to any proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was an agent of the corporation. This indemnification shall be
against any expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding, if such person acted
in good faith and in a manner such person reasonably believed to be in the best
interests of the Company and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of such person was unlawful.
The term "agent" means any person who is or was a director, officer,
employee or other agent of the Company, or is or was serving at the request of
the Company as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the Company or of another enterprise at
the request of such predecessor corporation. The term "expenses" includes,
without limitation, attorneys' fees and any expenses of establishing a right to
indemnification under the Code.
This indemnification does not apply to an action by or in the right
of the Company to procure a judgment in its favor. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably
believed to be in the best interests of the corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
43
<PAGE> 44
No indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Company in the performance of such person's duty to the Company, unless and only
to the extent that the court in which such proceeding is or was pending shall
determine upon application that, in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for the expenses
which such court shall determine. No indemnification shall be made for amounts
paid in settling or otherwise disposing of a threatened or pending action, with
or without court approval, or for expenses incurred in defending a threatened or
pending action which is settled or otherwise disposed of without court approval.
To the extent that an agent of the Company has been successful on
the merits in defense of any proceeding referred to above, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Otherwise, indemnification shall be made only if authorized in the specific
case, upon a determination that indemnification is proper in the circumstances,
by the majority vote of the Board of Directors, or by the court in which such
proceeding is or was pending.
Expenses incurred in defending any proceeding may be advanced by the
Company prior to the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the agent to repay such amount unless it shall be
determined ultimately that the agent is entitled to be indemnified as authorized
by the Code.
The Code also permits a corporation to purchase and maintain
insurance on behalf of any agent of the corporation against any liability
asserted against or incurred by the agent in such capacity or arising out of the
agent's status as such whether or not the corporation would have the power to
indemnify the agent against such liability under the provisions of the Code.
Presently, the Company does not carry such insurance.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act, and
is therefore unenforceable.
TRANSFER AGENT
The Company has designated Pacific Stock Transfer Company, P.O. Box
93385, Las Vegas, Nevada 89193, as its transfer agent.
44
<PAGE> 45
PART F/S
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 1999
F-1
<PAGE> 46
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors' Report............................................................................ 3
Consolidated Balance Sheets............................................................................. 4
Consolidated Income Statements.......................................................................... 6
Consolidated Statements of Stockholders' Equity......................................................... 7
Consolidated Statements of Cash Flows................................................................... 8
Notes to the Consolidated Financial Statements......................................................... 10
</TABLE>
F-2
<PAGE> 47
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
OXIR Investments, Inc. and Subsidiaries
(A Development Stage Company)
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of OXIR Investments,
Inc. and Subsidiaries (a development stage company) as of June 30, 1999 and the
related consolidated statements of income, stockholders' equity and cash flows
for the year ended June 30, 1999 and from inception on May 19, 1998 through June
30, 1999 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the financial position of OXIR Investments,
Inc. and Subsidiaries (a development stage company) as of June 30, 1999 and the
results of its operations and its cash flows for the year ended June 30, 1999
and from inception on May 19, 1998 through June 30, 1999 and 1998, in conformity
with generally accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
September 29, 1999
F-3
<PAGE> 48
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------------ -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 86,160 $ 52,627
Investment in trading securities (Note 3) 3,827,625 4,672,246
Prepaid expenses 3,969 3,978
------------------ -----------------
Total Current Assets 3,917,754 4,728,851
------------------ -----------------
PROPERTY AND EQUIPMENT (Note 4) 4,635,027 4,013,222
------------------ -----------------
OTHER ASSETS
Investment 300,000 -
Related party receivable - 8,080
Deposits 15,000 15,000
------------------ -----------------
Total Other Assets 315,000 23,080
------------------ -----------------
TOTAL ASSETS $ 8,867,781 $ 8,765,153
================== =================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 49
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------------ -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 10,143 $ 39,121
Margin account (Note 6) 2,157,367 1,981,464
Client funds payable (Note 9) 1,556,921 1,252,131
Provision for income taxes (Note 7) 82,373 398,760
Deferred tax liability (Note 7) 547,530 550,134
Current portion - mortgage payable (Note 8) 1,550 1,303
------------------ -----------------
Total Current Liabilities 4,355,884 4,222,913
------------------ -----------------
LONG-TERM LIABILITY
Mortgage payable (Note 8) 203,450 206,492
------------------ -----------------
Total Long-Term Liability 203,450 206,492
------------------ -----------------
Total Liabilities 4,559,334 4,429,405
------------------ -----------------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of no
par value, 21,189,000 and 21,090,600 shares issued
and outstanding, respectively 2,990,769 2,498,769
Retained earnings 1,317,678 1,836,979
------------------ -----------------
Total Stockholders' Equity 4,308,447 4,335,748
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,867,781 $ 8,765,153
================== =================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 50
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Income Statements
<TABLE>
<CAPTION>
From
Inception on
For the May 19,
Nine Months Ended For the 1998 Through
March 31, Year Ended ----------------------------------
--------------------------------- June 30, June 30, March 31,
2000 1999 1999 1998 2000
------------- --------------- -------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
SALES $ - $ - $ - $ - $ -
COST OF GOODS SOLD - - - - -
------------- --------------- -------------- -------------- ---------------
GROSS MARGIN - - - - -
------------- --------------- -------------- -------------- ---------------
COSTS AND EXPENSES
Depreciation expense 274,335 27,261 40,175 - 314,510
Rent expense 56,134 16,766 34,148 - 90,282
General and administrative 4,267,072 484,406 474,583 - 4,741,655
------------- --------------- -------------- -------------- ---------------
Total Costs and Expenses 4,597,541 528,433 548,906 - 5,146,447
------------- --------------- -------------- -------------- ---------------
Net Loss From Operations (4,597,541) (528,433) (548,906) - (5,146,447)
------------- --------------- -------------- -------------- ---------------
OTHER INCOME (EXPENSE)
Interest expense (104,673) (135,470) (84,900) - (189,573)
Realized gain on sale of
marketable securities 1,671,859 764,800 1,694,087 - 3,365,946
Net unrealized gain on
marketable securities 2,192,063 1,530,986 1,725,464 - 3,917,527
Dividends - - 128 - 128
------------- --------------- -------------- -------------- ---------------
Total Other Income
(Expense) 3,759,249 2,160,316 3,334,779 - 7,094,028
------------- --------------- -------------- -------------- ---------------
INCOME (LOSS) BEFORE
TAXES (838,292) 1,631,883 2,785,873 - 1,947,581
------------- --------------- -------------- -------------- ---------------
INCOME TAX EXPENSE
(BENEFIT) (Note 7) 318,991 (571,150) (948,894) - (629,903)
------------- --------------- -------------- -------------- ---------------
NET INCOME (LOSS) $ (519,301) $ 1,060,733 $ 1,836,979 $ - $ 1,317,678
============= =============== ============== ============== ===============
BASIC INCOME (LOSS) PER
SHARE $ (0.02) $ 0.10 $ 0.11 $ -
============= =============== ============== ==============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 21,153,484 10,200,490 16,648,300 13,500,000
============= =============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 51
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
--------------------------------------- Retained
Shares Amount Earnings
------------------ ----------------- -----------------
<S> <C> <C> <C>
Balance at inception - $ - $ -
Net income from inception on May 19,
1998 through June 30, 1998 - - -
------------------ ----------------- -----------------
Balance, June 30, 1998 - - -
Shares issued to founders at
predecessor cost of $0.00 per share 13,770,000 - -
Shares issued for trading securities
at $0.70 per share 1,350,000 939,764 -
Common stock issued for cash at
$1.00 per share 600,000 600,000 -
Stock issuance costs - (250,000) -
Common stock issued for cash
at $5.00 per share 100,600 503,000 -
Common stock issued for related
party acquisitions, recorded at
predecessor cost 5,270,000 706,005 -
Net income for the year ended
June 30, 1999 - - 1,836,979
------------------ ----------------- -----------------
Balance, June 30, 1999 21,090,600 2,498,769 1,836,979
Common stock issued for services
at $5.00 per share (unaudited) 60,000 300,000 -
Common stock issued for cash at
$5.00 per share (unaudited) 31,600 158,000 -
Retired shares (unaudited) (1,200) (6,000) -
Common stock issued for cash at $5.00
per share (unaudited) 8,000 40,000 -
Net loss for the nine months ended
March 31, 2000 (unaudited) - - (519,301)
------------------ ----------------- -----------------
Balance, March 31, 2000 (unaudited) 21,189,000 $ 2,990,769 $ 1,317,678
================== ================= =================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE> 52
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
For the May 19,
Nine Months Ended For the 1998 Through
March 31, Year Ended -------------------------------
---------------------------------- June 30, June 30, March 31,
2000 1999 1999 1998 2000
-------------- --------------- ------------ ----------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (519,301) $ 1,060,733 $ 1,836,979 $ - $ 1,317,678
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense 274,335 27,261 40,175 - 314,510
Stock issued for services 300,000 - - - 300,000
Changes in assets and liabilities:
(Increase) decrease in prepaid
expenses 9 - (3,978) - (3,969)
(Increase) in related party receivables - - (8,080) - (8,080)
(Increase) in deposits - - (15,000) - (15,000)
Increase (decrease) in accounts
payable (20,898) 36,840 32,382 - 11,482
Increase in accrued liabilities 304,790 1,249,666 6,740 - 311,530
Increase (decrease) in provision
for income taxes (318,991) 571,150 948,894 - 629,903
-------------- --------------- ------------ ----------- --------------
Net Cash Provided by Operating
Activities 19,944 2,945,650 2,838,112 - 2,858,054
-------------- --------------- ------------ ----------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Investment in bank (300,000) - - - (300,000)
(Increase) in trading securities 844,621 (2,560,890) (1,977,764) - (1,133,141)
Increase in margin account 175,903 1,246,800 1,273,325 - 1,449,228
Purchase of property and equipment (896,140) (1,929,597) (844,044) - (1,740,184)
-------------- --------------- ------------ ----------- --------------
Net Cash (Used) by Investing
Activities (175,616) (3,243,687) (1,548,483) - (1,724,097)
-------------- --------------- ------------ ----------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Retirement of common stock (6,000) - - - (6,000)
Proceeds from notes payable - - 208,000 - 208,000
Payments on notes payable (2,795) - (205) - (3,000)
Stock issuance costs - (250,000) (250,000) - (250,000)
Common stock issued for cash 198,000 600,000 1,103,000 - 1,301,000
Advances to related parties - - (2,337,867) - (2,337,867)
Cash from subsidiaries - - 40,070 - 40,070
-------------- --------------- ------------ ----------- --------------
Net Cash Provided (Used) by
Financing Activities $ 189,205 $ 350,000 (1,237,002) - $ (1,047,797)
-------------- --------------- ------------ ----------- --------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
<PAGE> 53
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception on
For the May 19,
Nine Months Ended For the 1998 Through
March 31, Year Ended --------------------------------
-------------------------------- June 30, June 30, March 31,
2000 1999 1999 1998 2000
--------------- ---------------- --------------- --------------- ---------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 33,533 $ 51,963 $ 52,627 $ - $ 86,160
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 52,627 - - - -
--------------- ---------------- --------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 86,160 $ 51,963 $ 52,627 $ - $ 86,160
=============== ================ =============== =============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ 98,277 $ 38,950 $ 78,160 $ - $ 176,437
Income taxes $ - $ - $ - $ - $ -
Schedule of Non-Cash Activities:
Common stock issued for services $ 300,000 $ - $ - $ - $ 300,000
Common stock issued for trading
securities $ - $ 939,764 $ - $ - $ 939,764
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-9
<PAGE> 54
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Oxir Investments, Inc. a California corporation, was incorporated on
November 2, 1923 as Monte Regio Corporation with the stated purpose to
engage in the business of real estate development. The Company
continued in that endeavor for several years then discontinued
operations. On March 1, 1972, the Company changed its name to
Precision Resources, Inc. The Company remained dormant with no
business activity until September 1998. The Company changed its name
to Oxenuk, Inc. after reinstating business operations on November 11,
1998, and again changed it name to OXIR Investments, Inc. on November
25, 1998.
In 1998, Oxenuk, Inc. initiated negotiations to merge with Oxir
Investments, Inc., a private California company incorporated on May
19, 1998 (Oxir). The merger was consummated on November 25, 1998, at
which time Oxenuk, Inc., the surviving corporation, adopted the name
of Oxir Investments, Inc. Under the terms of the merger, Oxir was
dissolved.
Oxir was originally founded for the purpose of pursuing investment
opportunities in real estate, technology and industrial businesses in
the United States and internationally, particularly in Russia.
On June 29, 1999, the Company executed an agreement to acquire,
through a tax free exchange of shares, 100% of the issued and
outstanding shares of OXIR Financial Services, Ltd. (OFS), a British
Virgin Islands corporation, incorporated on March 30, 1995. OFS is
actively involved in trading activities in the equity markets.
On June 29, 1999, the Company executed an agreement to acquire,
through a tax free exchange of shares, 100% of the issued and
outstanding shares of OXIR Investment, Ltd. (OIL), a British Virgin
Islands corporation, incorporated on May 5, 1997. OIL is involved in
direct investment activities, such as real estate development projects
in Russia.
Oxenuk, Inc., OFS and OIL were all acquired from a significant
shareholder of the Company. Accordingly, they were recorded at his
cost in the financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a fiscal year ending
June 30.
b. Basic Income Per Share
The computation of basic income per share of common stock is based on
the weighted average number of shares outstanding during the period of
the financial statements.
F-10
<PAGE> 55
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Financial Instruments
The following methods and assumptions were used by the Company to
estimate the fair values of financial instruments as disclosed herein:
Cash and equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents.
Investment securities: For trading securities, the carrying amounts
approximate fair value, which is based on quoted market prices.
d. Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to unrealized gains on trading
securities for financial and income tax reporting. The deferred tax
liability represents the future tax return consequences of those
differences, which will either be taxable or deductible when the
securities are sold.
e. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
f. Property and Equipment
Property and equipment are recorded at cost. Major additions and
improvements are capitalized. Minor replacements, maintenance and
repairs that do not increase the useful life of the assets are
expensed as incurred. Depreciation of property and equipment is
determined using the straight-line method over the expected useful
lives of the assets as follows:
<TABLE>
<CAPTION>
Description Useful Lives
--------------------------- ------------------
<S> <C>
Buildings 29.5 years
Leasehold improvements 10 years
Furniture, fixtures and equipment 7 years
Automobiles 5 years
Computer equipment 5 years
</TABLE>
F-11
<PAGE> 56
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Deposits
The Company has given a refundable deposit on its office lease. This
deposit is in the form of a 5-year certificate of deposit bearing
interest at 5.4%. The interest is for the benefit of the Company.
h. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
i. Concentrations of Risk
Trading Securities
The Company purchases trading securities using a margin account. The
securities purchased are subject to market swings and valuations.
Foreign Operations
The Company intends to conduct activities in Russia, a country with a
developing economy. Russia has experienced recently, or is
experiencing currently, economic or political instability.
Hyperinflation, volatile exchange rates and rapid political and legal
change, often accompanied by military insurrection, have been common
in this and certain other emerging markets in which the Company may
conduct operations. The Company may be materially adversely affected
by possible political or economic instability in Russia. The risks
include, but are not limited to terrorism, military repression,
expropriation, changing fiscal regimes, extreme fluctuations in
currency exchange rates, high rates of inflation and the absence of
industrial and economic infrastructure. Changes in investment policies
or shifts in the prevailing political climate in which the Company
conducts business activities could adversely affect the Company's
business. Operations may be affected in varying degrees by government
regulations with respect to production restrictions, price controls,
export controls, income and other taxes, expropriation of property,
maintenance of claims, environmental legislation, labor, welfare
benefit policies, land use, land claims of local residents, water use
and mine safety. The effect of these factors cannot be accurately
predicted.
Margin Account
The Company maintains a margin account which balance of $1,981,464 is
42% of the trading securities balance of $4,672,246. In the event of a
market turndown, the value of the trading securities may not be
sufficient to pay off the margin account.
F-12
<PAGE> 57
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Change in Accounting Principle
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
and Statement of Financial Accounting Standards No. 129 "Disclosures
of Information About an Entity's Capital Structure." SFAS No. 128
provides a different method of calculating earnings per share than was
previously used in accordance with APB Opinion No. 15, "Earning Per
Share." SFAS No. 128 provides for the calculation of "Basic" and
"Dilutive" earnings per share. Basic earnings per share includes no
dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of
an entity, similar to fully diluted earnings per share. SFAS No. 129
establishes standards for disclosing information about an entity's
capital structure. SFAS No. 128 and SFAS No. 129 are effective for
financial statements issued for periods ending after December 15,
1997. In fiscal 1998, the Company adopted SFAS No. 128, which did not
have a material impact on the Company's financial statements. The
implementation of SFAS No. 129 did not have a material effect on the
Company's financial statements.
The Financial Accounting Standards Board has also issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 130
establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income
is defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to
be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that
displays with the same prominence as other financial statements. SFAS
No. 131 supersedes SFAS No. 14 "Financial Reporting for Segments of a
Business Enterprise." SFAS No. 131 establishes standards on the way
that public companies report financial information about operating
segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosure regarding products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments as components of a
company about which separate financial information is available that
is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS No. 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. Implementation of SFAS
No. 130 and 131 did not have a material effect on the Company's
financial statements.
F-13
<PAGE> 58
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Change in Accounting Principle (Continued)
In February 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 132.
"Employers' Disclosures about Pensions and other Postretirement
Benefits" which standardizes the disclosure requirements for pensions
and other Postretirement benefits and requires additional information
on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis. SFAS No. 132 is effective for
years beginning after December 15, 1997 and requires comparative
information for earlier years to be restated, unless such information
is not readily available. The adoption of this statement had no
material impact on the Company's financial statement.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value.
Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must
be highly effective in achieving offsetting changes in fair value or
cash flows. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. Management believes the
adoption of this statement will have no material impact on the
Company's financial statements.
k. Principles of Consolidation
The consolidated financial statements include the accounts of OXIR
Financial Services, Ltd., OXIR Investment, Ltd. and OXIR Investments,
Inc. All significant intercompany accounts and transactions have been
eliminated.
l. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements include
all of the adjustments which, in the opinion of management, are
necessary for a fair presentation. Such adjustments are of a normal
recurring nature.
NOTE 3 - INVESTMENT IN TRADING SECURITIES
The Company has a diverse portfolio of investments in marketable
equity securities. Management determines the appropriate
classification of the securities at the time they are acquired and
evaluates the appropriateness of such classifications at each balance
sheet date. All securities owned are held for resale in anticipation
of short-term fluctuations in market prices, and are therefore
classified as trading securities. Trading securities, consisting
primarily of actively traded equity securities, are stated at fair
value. Realized and unrealized gains and losses are included in
income.
F-14
<PAGE> 59
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 3 - INVESTMENT IN TRADING SECURITIES (Continued)
A summary of investment earnings recognized as other income during the
period from July 1, 1998 through June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Trading Securities
------------------
<S> <C>
Realized gains (losses), net $ 1,694,087
Unrealized gains (losses), net 1,725,464
-----------------
$ 3,419,551
=================
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1999 consisted of the following:
<TABLE>
<S> <C>
Construction in progress $ 3,261,706
Leasehold improvements 94,216
Furniture and fixtures 230,680
Automobiles 35,240
Equipment 171,956
House 320,000
-------------
Total 4,113,798
Less accumulated depreciation (100,576)
-------------
Property and Equipment - Net $ 4,013,222
=============
</TABLE>
Depreciation expense for the year ended June 30, 1999 was $40,175.
NOTE 5 - COMMITMENTS
a. Employment Agreement
The Company has entered into an Employment Agreement with an officer
which requires payment of an annual salary of $60,000 per year. The
Company has also agreed to pay a death benefit to the officer's estate
in the amount of $60,000 in the event of his death. If the contract is
terminated, the Company has agreed to pay the officer $20,000.
b. Lease Agreement
The Company has leased an office space under a 60-month operating
lease. The Company has placed a $10,000 deposit in a Citibank CD which
becomes refundable at the end of the lease term of 60 months. Accrued
interest on the CD is for the benefit of the Company. The rent to be
paid under the terms of the lease described above is summarized as
follows:
F-15
<PAGE> 60
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 5 - COMMITMENTS (Continued)
<TABLE>
<CAPTION>
During the Year
Ended
June 30, Amount
--------------------------- -------------------
<S> <C> <C>
2000 $ 45,589
2001 45,589
2002 45,589
2003 45,589
2004 20,892
-------------------
Total due $ 203,248
===================
</TABLE>
NOTE 6 - MARGIN ACCOUNT
The Company buys and sells equity securities using a margin account.
In the course of buying and selling the securities, the Company has
incurred a liability to the brokerage firm. The balance of $1,981,464
carries an interest rate of 6.75% and is collateralized by the
securities held in the account.
NOTE 7 - INCOME TAX MATTERS
The net deferred tax liability consisted of the following components
as of June 30, 1999:
<TABLE>
<CAPTION>
1999
-----------------
<S> <C>
Deferred tax assets $ -
Deferred tax liabilities relating to:
Net unrealized gains on trading securities (550,134)
-----------------
Net deferred tax liability $ (550,134)
=================
</TABLE>
The components giving rise to the net deferred tax liability
described above have been included in the accompanying balance
sheet as of June 30, 1999 as follows:
<TABLE>
<CAPTION>
1999
-----------------
<S> <C>
Current assets $ -
Current liabilities (550,134)
-----------------
$ (550,134)
=================
</TABLE>
Realization of deferred tax assets is dependent upon sufficient future
taxable income during the period that deductible temporary differences
are expected to be available to reduce taxable income.
F-16
<PAGE> 61
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 7 - INCOME TAX MATTERS (Continued)
The provision for income taxes from inception on May 19, 1998 through
June 30, 1999 consisted of the following:
<TABLE>
<CAPTION>
1999
-----------------
<S> <C>
Current income taxes $ 398,760
Deferred income taxes 550,134
-----------------
Income tax expense $ 948,894
=================
</TABLE>
NOTE 8 - MORTGAGE PAYABLE
The Company had the following long-term debt at June 30, 1999:
<TABLE>
<S> <C>
Mortgage payable to Greenpoint Mortgage, bearing interest
at 9.50%, requiring monthly payments of $1,749, due
April 2029, secured by residential property. $ 207,795
------------
Less current portion (1,303)
------------
Long-Term Debt $ 206,492
============
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
2000 $ 1,303
2001 1,432
2002 1,575
2003 1,731
2004 1,903
Thereafter 199,851
------------
$ 207,795
============
</TABLE>
NOTE 9 - CLIENT FUNDS PAYABLE
Certain parties related to shareholders of the Company have
invested funds with the Company in a trading account. The value
of the funds due back these parties is $1,252,131. Funds are
invested per agreement whereby the investor agrees to pay a
commission to the Company according to the performance level of
the investments. Invested funds are held for an indefinite period
according to the terms of the individual contracts. These funds
are unsecured and hold no guarantee either expressed or implied
by the Company.
F-17
<PAGE> 62
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Proforma Income Statement
March 31, 2000 and June 30, 1999
(Unaudited)
NOTE 10 - CONSOLIDATED PROFORMA INCOME STATEMENT
On June 29, 1999, the Company closed on an acquisition agreement
attaining 100% of the outstanding capital stock of OXIR Investments
Limited (OIL) and OXIR Financial Services Limited (OFS), both British
Virgin Islands companies and related to the Company through common
ownership. Pursuant to this agreement, the Company issued 5,000,000
shares of its authorized but previously unissued common stock to the
related party. All said shares issued are deemed "restricted
securities" as defined by Rule 144 of the Securities Act of 1933 as
amended and are exempt from registration. The following is an
unaudited proforma consolidated income statement, an audited
consolidated balance sheet has been included in the main body of the
financial statements.
<TABLE>
<CAPTION>
Proforma
OXIR OXIR OXIR Adjustments
Investments Investments Financial Increase Proforma
Inc. Ltd. Services, Ltd. (Decrease) Consolidated
-------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
SALES $ - $ - $ - $ - $ -
COSTS OF GOODS SOLD - - - - -
-------------- -------------- -------------- ------------- --------------
GROSS MARGIN - - - - -
-------------- -------------- -------------- ------------- --------------
COSTS AND EXPENSES
Depreciation expense 40,175 23,782 27,695 - 91,652
Rent expense 34,148 12,000 12,000 - 58,148
General and administrative 474,583 24,837 115,056 - 614,476
-------------- -------------- -------------- ------------- --------------
Total Costs and Expenses 548,906 60,619 154,751 - 764,276
-------------- -------------- -------------- ------------- --------------
Net Loss From Operations (548,906) (60,619) (154,751) - (764,276)
-------------- -------------- -------------- ------------- --------------
OTHER INCOME (EXPENSE)
Interest expense (84,900) (45,212) - - (130,112)
Commissions - 41,638 41,638 - 83,276
Realized gain on sale of
marketable securities 1,694,087 259,173 - - 1,953,260
Net unrealized gain on
marketable securities 1,725,464 428,416 - - 2,153,880
Dividends 128 2,132 - - 2,260
-------------- -------------- -------------- ------------- --------------
Total Other Income (Expense) 3,334,779 686,147 41,638 - 4,062,564
INCOME (LOSS) BEFORE TAXES 2,785,873 625,528 (113,113) - 3,298,288
-------------- -------------- -------------- ------------- --------------
INCOME TAX (BENEFIT) (948,894) - - - (948,894)
-------------- -------------- -------------- ------------- -------------
NET INCOME (LOSS) $ 1,836,979 $ 625,528 $ (113,113) $ - $ 2,349,394
============== ============== ============== ============= ==============
</TABLE>
F-18
<PAGE> 63
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and June 30, 1999
NOTE 11 - SUBSEQUENT EVENTS
Purchase of Shares in Russian Bank
On August 11, 1999, the Company purchased 5% of the shares of stock of
EURPZAPSIBBANK, Ltd., a commerce bank in the Russian Federation for
$300,000. The investment will be accounted for at the lower of cost or
market.
Formation of OIS
On August 2, 1999, the Company incorporated OXIR Internet Solutions,
Inc. (OIS) which was previously an internal project of the Company.
OIS was formed primarily for the purpose of engaging in the marketing
and sale of products and services over the internet or some other
medium. Upon incorporation, the Company owned 100% of the issued and
outstanding shares of OIS.
F-19
<PAGE> 64
PART III
ITEM 1. Index to Exhibits
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
----------- ------------
<S> <C>
3.1 Articles of Incorporation and Amendments
3.2 By-Laws of Registrant
4. See Exhibit No. 3.1, Articles of Incorporation and amendments thereto
10.1 Agreement of Merger
10.2 Employment Agreement with Kirill Mendelson (Revised)
10.3 Employment Agreement with Vassili Oxenuk
10.4 Purchase and Sale Agreement with B.S.G. Press Company Limited
10.5 Contract on Provision of Express Port Services with EMS Garantpost
10.6 Purchase and Sale Agreement with Home Collection Company Limited
10.7 Purchase and Sale Contract with ZAO Izdatelskii dom Priboy
10.8 Contract with ZAO Izdatelstvo Exmo-Press
10.9 Sale and Purchase Agreement with Jurist-Gardarika
10.10 Purchase and Sale Agreement with Midix
10.11 Agreement with Moscow Post Office
10.12 Purchase and Sale Agreement with Quadro Trade Company Limited
10.13 Purchase and Sale Agreement with Savva Group Entertainment
Video Company Limited
10.14 Sale and Purchase Agreement with Terra Knizhniv Club
10.15 Contract on Delivery of Printed Production with Top Kniga
10.16 Agreement on Provision of Express Delivery Transport and Expedition
Services with United Parcel Services
10.17 Contract with Varus Video
10.18 Contract with Yuliksis
10.19 Contract with Publishing House INFRA-M
10.20 Contract with Katakombus
10.21 Contract with Laksti
10.22 Contract with Master-Kniga
10.23 Contract with Perfume-Light
10.24 Contract with Sparrk
10.25 Contract with Viking Video
10.26 Contract with Amrus Trading Company
</TABLE>
S-1
<PAGE> 65
<TABLE>
<S> <C>
10.27 Contract with Video Marketing
21.1 Subsidiaries
27.1 Financial Data Schedule*
</TABLE>
*Filed herewith
Item 2. Description of Exhibits
See Part III, Item 1, "Index to Exhibits."
S-2
<PAGE> 66
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly organized.
OXIR INVESTMENTS, INC.
(Registrant)
Date: September 7, 2000 By: /s/ Vassili I. Oxenuk
--------------------------
Vassili I. Oxenuk
President and Chief
Executive Officer
S-3
