DRAFT FOR DISCUSSION PURPOSES ONLY
As Filed with the Securities and Exchange Commission on February 21, 2002
File No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form F-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE BUCK A DAY COMPANY INC.
(Name of small business issuer in its charter)
Ontario, Canada 3571 Inapplicable
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
465 Davis Drive, Suite 226
Newmarket, Ontario L3Y 2P1
(905) 868-9477
(Address and telephone number of principal executive
offices and principal place of business)
CT Corporation System
111 Eighth Avenue
New York, New York 10011
(212) 247-2882
(Name, address and telephone number of agent for
service)
Copies to:
M. James Spitzer, Jr., Esq.
William S. Rosenstadt, Esq.
Spitzer & Feldman P.C.
405 Park Avenue
New York, New York 10022
Telephone No. (212) 888-6680
Facsimile No. (212) 838-7472
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the securities Act, check
the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement for the same offering.
[ ]_________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]_________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
=================================================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities Amount to Offering Aggregate Amount of
to be Registered be Registered Price Per Share Offering Price(1) Registration Fee
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Common Stock, no par
value(2) 3,000,000 $2.00 $6,000,000 $552
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Common Stock, no par
value(3) 600,000 $1.00 $600,000 $55
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Common Stock, no par
value(4) 3,000,000 $1.00 $3,000,000 $276
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Common Stock, no par
value(5) 500,000 $1.00 $500,000 $46
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Common Stock, no par
value(6) 22,522,974 $1.00 $22,522,974 $2,072
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Total 29,622,974 $3,001
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) 3,000,000 shares of Common Stock relate to the offering by The Buck A Day
Company Inc. on a "best efforts" basis, with no minimum.
(3) Reserved for issuance upon exercise of all 600,000 Class D warrants.
(4) Reserved for issuance upon exercise of all 3,000,000 Class E warrants.
(5) Reserved for issuance upon exercise of all 500,000 Class F warrants.
(6) Represents shares of Common Stock offered by the selling shareholders.
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Pursuant to Rule 416 of the Securities Act, this registration statement
also covers such indeterminate additional shares of Common Stock as may become
issuable as a result of stock splits, stock dividends or other similar events.
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We hereby amend this registration statement on such date or dates as may be
necessary to delay its effective date until we shall file a further amendment
which specifically states that this registration statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act or until
the registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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This prospectus relates to 29,622,974 shares of our Common Stock, of which
22,522,974 shares are owned, as of February 14, 2002, by the security holders
named in this prospectus under the caption "Selling Shareholders". The shares of
our Common Stock being offered by us may be offered or sold directly by
ourselves or we may use the services of participating brokers/dealers licensed
by the National Association of Securities Dealers, Inc., each of which will
receive a commission from the shares offered and sold by such participating
broker/dealer and accepted by us. 22,522,974 shares may be offered from time to
time by the selling shareholders through ordinary brokerage transactions on the
OTC Bulletin Board or on any securities exchange on which our Common Stock is or
becomes listed or traded, in negotiated transactions or otherwise, at prices and
at terms then prevailing or at prices related to the then current market price,
or in negotiated private transactions, or in a combination of these methods. Up
to 3,000,000 shares of our Common Stock are being sold by us, on a
self-underwritten, best efforts basis, with no minimum. Our offering will
commence on the date of this prospectus and will continue until the earlier of
February 22, 2004, all of the shares offered are sold, or we otherwise terminate
the offering.
We will bear all the costs and expenses associated with the preparation and
filing of this registration statement.
SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2002
PRELIMINARY PROSPECTUS
29,622,974 Shares
THE BUCK A DAY COMPANY INC.
Common Stock
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities in any state where the offer or sale is not permitted.
This prospectus relates to an offering of 29,622,974 shares of Common Stock
of The Buck A Day Company Inc., an Ontario corporation. We are offering to sell
3,000,000 shares of our Common Stock, which as of the date of this prospectus
have not been issued. Certain of our employees and/or shareholders, the selling
shareholders, are offering to sell 22,522,974 shares of our Common Stock. We
will not receive any of the proceeds from the sale of our shares of Common Stock
by the selling shareholders. An additional 600,000 shares of Common Stock,
3,000,000 shares of Common Stock and 500,000 shares of Common Stock underlying
our Class D, E and F warrants, respectively, are also being registered.
The shares of our Common Stock which will be offered and sold by us will be
offered and sold on a "best efforts" basis by using our officers, directors, or,
at our discretion, by participating broker/dealers licensed by the National
Association of Securities Dealers, Inc. There is no minimum investment
requirement and funds received by us from this offering will not be placed into
an escrow account.
The shares of our Common Stock offered by the selling shareholders have not
been registered for sale under the securities laws of any state as of the date
of this prospectus. Brokers or dealers effecting transactions in the shares of
our Common Stock should confirm the registration thereof under the securities
laws of the states in which transactions occur or the existence of any exemption
from registration. The selling shareholders may from time to time sell shares of
our Common Stock on the OTC Bulletin Board, on any other national securities
exchange or automated quotation system on which our Common Stock may be listed
or traded, in negotiated transactions or otherwise, at prices then prevailing or
related to the then current market price or at negotiated prices.
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Our principal executive offices are located at 465 Davis Drive, Suite 226,
Newmarket, Ontario L3Y 2P1, Canada. Our telephone number is (905) 868-9477.
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Our Common Stock being offered by this prospectus involves a high degree of
risk. You should read the "Risk Factors" section beginning on page 5 before you
decide to purchase any of our Common Stock.
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Neither the Securities and Exchange Commission nor any state commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
The date of this prospectus is February 22, 2002
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................5
A NOTE CONCERNING FORWARD-LOOKING STATEMENTS..................................10
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS....................................10
CURRENCY OF PRESENTATION......................................................11
DIVIDEND POLICY...............................................................11
CAPITALIZATION................................................................12
EXCHANGE RATES................................................................12
SELECTED FINANCIAL DATA.......................................................13
DILUTION......................................................................13
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................14
IMPACT OF THE "PENNY STOCK" RULES ON BUYING OR SELLING OUR COMMON STOCK.......14
PLAN OF DISTRIBUTION..........................................................15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.........................................................17
DESCRIPTION OF BUSINESS.......................................................19
MANAGEMENT....................................................................26
PRINCIPAL SHAREHOLDERS........................................................34
CERTAIN TRANSACTIONS..........................................................35
SELLING SHAREHOLDERS..........................................................35
DESCRIPTION OF SECURITIES.....................................................35
INCOME TAX CONSEQUENCES.......................................................39
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES....................................................43
LEGAL MATTERS.................................................................43
EXPERTS.......................................................................43
WHERE YOU CAN FIND MORE INFORMATION...........................................43
FINANCIAL STATEMENTS.........................................................F-1
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS..........................II-1
SIGNATURES..................................................................II-7
(i)
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. You should read the following summary together with the more
detailed information regarding The Buck A Day Company Inc. and our financial
statements and the related notes appearing elsewhere in this prospectus.
The Company
Our Business: Our principal business address is 465
Davis Drive, Suite 226, Newmarket,
Ontario L3Y 2P1, Canada. Our telephone
number is (905) 868-9477.
We are a marketing, tele-marketing and
financing company which was incorporated
on September 15, 1999 and commenced
operations in January 2000. The "Buck A
Day" branding is the basic premise of
our business model. Name brand products
are packaged by us so that the customer
can purchase them for as little as a
dollar ("buck") a day, with no down
payment.
We market and sell name brand electronic
and consumer products, primarily
computers, television sets and high-end
electronics and appliances, directly to
consumers and small businesses,
employing a multimedia approach. Sales
generated from television advertising
account for 80% of our gross sales. The
remaining 20% is generated through our
website. Business operations are
segregated into separate departments.
The start of the marketing process
begins with our in-house creative
department where television commercials
are written and produced. Our internal
advertising staff purchases all forms of
media. Leads generated from advertising
are then contacted by our telemarketing
staff. All warehousing and shipping
occurs directly from our 7,500 square
foot warehouse facility. A separate
customer service and technical
department is maintained to service the
customer.
In April 2000, credit facilities with
CitiFinancial Services of Canada Ltd.
(formerly Associates Financial Group), a
subsidiary of Citigroup, were
established to finance our "Buck A Day"
credit card program. CitiFinancial
underwrites the "Buck A Day" credit card
without recourse to us. Approved
applicants are extended a pre-determined
level of credit ranging from Cdn. $1,000
to Cdn. $10,000. As of December 2001,
CitiFinancial approved approximately
30-35% of all applications for "Buck A
Day" credit cards. We take no credit
risk. However, our
1
ability to finance is dependent on the
willingness of Citifinancial to approve
applicants.
As of December 1, 2001, we had
approximately eighty sales
representatives and twenty management
and administrative employees. We operate
two sales shifts, providing sales
coverage from 9:00 a.m. to 11:00 p.m.
(Eastern time) seven days per week.
For the first sixteen (16) months of our
operations, all IBM products and
peripherals were purchased through
Beamscope Canada Ltd. and Ingram Micro
both approved IBM distributors and
directly from IBM. However, we were
consistently plagued by shortages of
inventories and as a result, were often
forced to acquire products through
national retailers resulting in lower
than anticipated profit margins.
Continued inventory shortages led the
company to seek new sources of supply.
Negotiations with Compaq were concluded
and new commercials were produced.
Compaq offered the company an advance of
Cdn. $250,000 and an additional Cdn.
$750,000 line of credit for inventory
purchases in exchange for an exclusive
2-year marketing agreement. IBM then
negotiated a new agreement, which
provided the company with a marketing
allowance of Cdn. $350,000, a creative
budget of Cdn. $300,000 payable
semi-annually and through IBM's largest
wholesaler a credit facility of Cdn.
$750,000, guaranteed inventory supply of
an additional Cdn. $500,000 and annual
volume rebates of 1-3% on cumulative
purchases. On May 31, 2001, we entered
into an exclusive three-year
distribution agreement with IBM Canada
Ltd. We market IBM products in all
provinces across Canada. In the second
quarter of calendar 2002, a branch
office is scheduled to open in Montreal
to better service the Quebec market.
During the third quarter of 2002 the
company intends to open an office in
Niagra Falls or Buffalo, New York. The
reason for New York is its close
proximity to Toronto. Preliminary market
testing of our commercials in the U.S.
(Buffalo, Spokane & Seattle) has
indicated a strong consumer response
similar to that of the Canadian market.
Citigroup U.S. will provide us with the
same consumer financing in the United
States as is currently provided in
Canada.
2
Sales and Gross Margin
For the initial period of operation,
January 1 to July 31, 2000, sales were
$733,973 with a gross margin of $214,666
or 29%. For the year ended July 31,
2001, sales were $5,381,008 with a gross
margin of $1,585,046 or 29%. Poor
inventory supplies resulting in retail
store purchases to fulfill customer
orders caused the lower than expected
margins in these fiscal periods. The
anticipated margin is 35%.
Sales for the three-month period August
1, 2000 to October 31 2000, were
$1,281,419 with a gross margin of
$364,345 or 28%. Sales for the
three-month period August 1, 2001 to
October 31, 2001, were $ 4,143,314 with
a gross margin of $1,516,152 or 36%.
The improved gross margin was a direct
result of the three-year agreement with
IBM providing both timely inventory
supply and lines of credit.
In July and August 2001 the company
concluded a private stock offering for
net proceeds of $900,000. The company
utilized a significant part of the
additional investment to increase its
media expenditures resulting in a 223%
increase in sales for the quarter ended
October 31, 2001 over the same period in
the prior year.
During the period from November 1, 2001
through February 15, 2002, the Company
concluded a private stock offering for
net proceeds of $1,237,487. We utilized
a significant part of the additional
investment for working capital purposes
and upgrading warehouse space.
Province of Incorporation: We were incorporated in Ontario, Canada
on September 15, 1999.
The Offering:
Number of Shares We are offering 3,000,000 shares of our
Being Offered: Common Stock.
The selling shareholders intend to sell
22,522,974 shares of our Common Stock or
100% of their aggregate holdings.
Issuance of these shares to the selling
shareholders was exempt from the
registration and prospectus delivery
requirements of the Securities Act of
1933, as amended.
Number of Shares Outstanding
After the Offering: As of February 14 2002, 22,522,974
shares of our Common Stock are issued
and outstanding. In addition to the
Common Stock, we have 600,000 shares of
Class D
3
Warrants, 3,000,000 shares of Class E
Warrants issued and outstanding, and
500,000 shares of Class F warrants
issued and outstanding. If we sell all
of the 3,000,000 shares we are
registering, we will have 25,522,974
shares of our Common Stock issued and
outstanding after the offering,
exclusive of the shares reserved for
issuance underlying our Class D, E and F
Warrants.
Estimated Use of Proceeds: We intend to use substantially all of
the net proceeds from our sale of our
Common Stock for general corporate
purposes, including working capital and
expansion of sales and marketing
activities and for the expenses
associated with our planned expansion
into the United States in addition to
potential acquisitions of complementary
businesses. We will not receive any of
the proceeds from the sale of those
shares being offered by the selling
shareholders.
Risk Factors: For a discussion of the risks you should
consider before investing in our Common
Stock, read the "Risk Factors" section.
4
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before investing in our Common Stock.
Investing in our Common Stock involves a high degree of risk. Any of the
following risks could adversely affect our business, financial condition and
results of operations. The risks and uncertainties described below are not the
only ones we may face.
Risks Related To Our Business
Concentrated ownership of our common stock. Our officers, directors and
principal security holders own approximately 40% of our outstanding shares of
Common Stock. Such concentrated control allows these security holders to exert
significant influence in matters requiring approval of our stockholders. Edward
P. LaBuick, our Chairman of the Board and Chief Executive Officer is the father
of Dennis P. LaBuick, our President and a Director. Dennis P. LaBuick is married
to Patricia LaBuick our Sales Manager. Edward P. LaBuick and his wife, Faye
LaBuick collectively own 2,925,000 shares of Common Stock including options to
purchase an additional 952,500 shares of Common Stock. Dennis P. LaBuick and his
wife, Patricia LaBuick, collectively own 2,895,000 shares of Common Stock
including options to purchase an additional 897,500 shares of Common Stock. As a
result, assuming the registration of all 25,522,974 shares by us and the selling
shareholders, the LaBuick family members' aggregate holdings of our Common Stock
is 5,820,000 shares or 22.8% of the total issued and outstanding, exclusive of
any options to purchase shares of Common Stock. Further, Edward P. and Dennis P.
LaBuick represent two of our four Board members and are in a position to exert
significant undue influence in matters requiring approval or authorization by
our Board. Although the LaBuick family members do not hold a majority of the
outstanding Common Stock, they are likely to be in a position to influence
significantly the election of some or all of the members of our Board of
Directors and the outcome of most corporate actions requiring stockholder
approval. See "Management"; "Principal Shareholders"; and "Certain
Transactions".
Need to raise additional capital in regards to our planned expansion into
the United States. We anticipate that we will need to raise additional capital
to further implement our planned marketing and sales efforts and our expansion
plans into the United States. There can be no assurances that such funds can be
raised or, if they can be raised the terms upon which such funds may be made
available to us. Our failure to raise additional capital will significantly
limit such efforts and may have a material adverse effect on us.
Ability to buy media cheaply. To a significant extent, our business plan
relies on our ability to purchase media placements at competitive rates. In the
event that we are unable to achieve our cost goals regarding such media
purchases, our margins may suffer significant narrowing.
No dividends. We do not anticipate paying cash dividends to the holders of
our Common Stock in the foreseeable future. Accordingly, investors must rely on
sale of their shares of Common Stock after price appreciation, which may never
occur, as the only way to realize on
5
their investment. Investors seeking cash dividends should not purchase our
shares of Common Stock.
Limited operating history. We commenced operation of our business in
January 2000. Although every member of our management team has extensive
experience, our company has a very limited operating history with which to
evaluate our business. You must consider the risks and difficulties frequently
encountered by companies in the early stages of development. These risks and
difficulties include our ability to:
o maintain and develop strategic relationships with business partners;
o offer compelling services and products; and
o promptly address the challenges faced by early stage, rapidly growing
companies which do not have an experience or performance base to draw
on.
Reliance on CitiFinancial. An integral part of our business is the ability
to sell products and services to individuals and small businesses. We rely
solely on CitiFinancial Services Canada Ltd. to approve all applications and
subsequently extend credit to the approved individuals. Our agreement with
CitiFinancial allows either party to terminate the agreement upon thirty (30)
days notice. In the event that CitiFinancial terminates such agreement and we
cannot agree with a suitable replacement for CitiFinancial within thirty (30)
days, our business may suffer irreparable harm. Furthermore, if at any time
CitiFinancial's approval rate of our applicants declines significantly, our
business may suffer a significant loss of revenue.
Reliance on IBM Canada. IBM Canada Ltd. is our sole and exclusive supplier
of computer equipment. Presently, sales of computers and peripherals account for
80% of our gross sales. Our supply agreement with IBM has a term of three (3)
years with the right to renew for an additional two (2) year period. Either
party, however, has the right to elect not to renew upon ninety (90) days prior
notice. If for any reason, IBM determines not to renew the supply agreement, it
could result in unanticipated costs and delays and have a negative impact on our
earnings.
Reliance on SuperCom. IBM Canada Ltd. is unable to provide us with direct
financing for the purchases of the IBM products. However, IBM Canada Ltd. has
arranged for us to purchase such equipment through SuperCom Canada Ltd., the
largest Canadian IBM wholesaler. SuperCom has extended a credit line to us on
behalf of IBM in the amount of Cdn. $750,000 in addition to warehousing in their
facilities an additional Cdn. $500,000 worth of IBM computer equipment on our
behalf. We purchase all IBM computer equipment through SuperCom. We have not
entered into a written agreement with SuperCom. Our oral understanding may be
terminated by SuperCom at any time and without any notice. If SuperCom
terminates such purchasing arrangement, we may be unable to promptly replace
SuperCom, which would result in our business suffering a material adverse
effect. Further, even if we were able to promptly replace SuperCom, we may not
be in a position to negotiate similar preferential terms with the new entity. As
a result, our earnings may be negatively affected.
6
Our ability to control significant growth. We are currently experiencing a
period of significant growth. As of December 31, 2001, we had approximately 100
employees, an increase of 420% from the 25 employees we had as of the same date
last year. We currently anticipate hiring an additional 50 employees during the
current fiscal year, most of them will be hired for our sales, marketing and
customer support teams. This growth has placed, and the future growth we
anticipate in our operations will continue to place, a significant strain on our
managerial, operational, financial and information systems resources. As part of
this growth, we may have to implement new operational and financial systems and
procedures and controls, expand our office facilities, train and manage new
employees. If we are unable to manage our growth effectively, we will be unable
to implement our growth strategy, upon which the success of our business
depends.
Competition. There exist a number of direct and indirect competitors that
have significantly greater resources and experience than us. Our sales and
marketing structure is not proprietary and many of our competitors sell similar
items. Further, entry into the marketplace by new competitors is relatively
easy. We consider our retailing competitors' businesses to be primarily price
driven; whereas, we have found our industry to be relatively unaffected by
pricing thresholds, which means that we are unable to substantially increase
market share purely through price adjustments. In Canada some of our biggest
competitors are IPC Canada, MDG Canada Ltd. and Dell Computer Corp. In the
United States some of our biggest competitors will be direct marketing computer
manufacturers such as Dell and Gateway Computer Corp. and nationwide electronic
retailers such as Best Buy and Circuit City. Furthermore, there are many online
electronics retailers, such as Amazon.com and Buy.com, who would directly
compete for our customers. All of the above are larger and better known and have
more resources for financing, advertising and marketing. We intend to compete
based on our ability to market and sell products to individuals who require
credit with no down payment and payments as low as a dollar a day.
Dependence on marketing growth. We primarily market our products and
services directly to customers by means of television and print media and, to a
lesser but increasing extent, through our internet website. We provide technical
support and other customer services primarily by means of telephone.
Accordingly, we are dependent on the growth of direct distribution channels in
order to have a growing market in which to sell our products and services. There
can be no assurance that worldwide direct marketing channels will grow or that
we would be able to establish a more significant presence in indirect channels
of distribution if it becomes necessary or desirable in the future.
Lack of consistency in our operating results. Our operating results have
varied and may continue to fluctuate from quarter to quarter and will depend on
numerous factors, including, but not limited to, customer demand and market
acceptance of our products, varying product mix and other factors. In addition,
we have operated without a material backlog so that net sales in a given quarter
are dependent on customer orders received in that quarter and operating
expenditures are primarily based on customer demand. As a result, if demand does
not meet our expectations in any given period, the sales shortfall may result in
an increased impact on operating results due to our inability to adjust
operating expenditures quickly enough to compensate for such shortfall. Our
business is sensitive to the spending patterns of our customers, which in turn
are subject to prevailing economic conditions and other factors beyond
7
our control. Our results of operations could be materially adversely affected by
changes in economic conditions or customer spending patterns for our products.
Anticipated expansion into the United States may strain our resources. We
intend to enter in a limited manner and in selected areas the United States
marketplace within the next six (6) months. We further expect to expend
significant resources related to such expansion and generate significant revenue
through such expansion. This growth strategy could place a considerable demand
on our management and our financial and operational resources. Our growth
strategy is subject to various risks, including uncertainties regarding the
ability to achieve similar application acceptance levels and our ability to
effectively service our new customers. We can give no assurance that we will
continue to control our growth at manageable levels or effectively, compete with
much larger companies that sell similar products directly to the public. If we
cannot successfully expand our business, we may not be able to sustain our
recent earnings growth over an extended period of time. Although certain members
of our management team have had significant experience marketing other products
in the United States we have limited experience selling products of our type in
such a marketplace and as a result, it may be difficult for us to successfully
market our business and sell our products there. In order to expand
internationally we may enter into relationships with foreign business partners.
We may experience difficulty in managing international operations because of
distance, as well as cultural differences, and there can be no assurance that we
or our future United States business associates will be able to successfully
market and operate our services there.
Regulatory risks in regards to CitiFinancial's lending practices. In the
event that legislation having a negative impact on our business is adopted, it
could have a material and adverse impact on our business operations. As is the
case with most businesses, we are subject to various governmental regulations,
including specifically in our case, regulations regarding consumer lending
transactions. Although we do not directly provide financing for our customers
any regulations restricting CitiFinancial's ability to extend credit to
applicants for a "Buck-A-Day" credit card may have an adverse effect on our
business. Federal and state consumer protection laws impose requirements on the
making and enforcement of consumer loans. Congress and the states may enact new
laws and amendments to existing laws to regulate further the credit card and
consumer credit industry or to reduce finance charges or other fees or charges
applicable to credit card accounts. Such laws, as well as any new laws or
rulings which may be adopted, may adversely affect CitiFinancial's ability to do
business with us. Although there is no comprehensive federal legislation
regulating our transactions, we cannot assure you that legislation will not be
enacted in the future. From time to time, legislation has been introduced in
Congress seeking to regulate our business. In addition, we cannot assure you
that the various legislatures in the states where we anticipate doing business
will not adopt new legislation or amend existing legislation that negatively
affects us.
Our dependence on certain key individuals. We depend on the services of
members of our executive staff, including Edward P. LaBuick, our Chairman and
Chief Executive Officer; Dennis P. LaBuick our founder, President and Chief
Operating Officer; Keith Kennedy our Vice President of Operations and Dan
LaRoche our Director of Marketing. The key management members have three year
exclusive employment contracts with the Company and may not be terminated by the
respective employee. There are existing company-paid life insurance policies on
Edward P. LaBuick and Dennis P. LaBuick each in the amount of $2,000,000, to
which The
8
Buck A Day Company Inc. is the beneficiary. There can be no assurances that
we would be able to retain qualified executive staff if they were to leave for
any reason. Therefore, the loss of the services of members of our executive
staff, including Edward P. LaBuick, could have a material adverse effect upon
us.
Risks Related To This Offering
Lack of an underwriter's due diligence. We are selling up to 3,000,000
shares of our Common Stock on a self-underwritten, "best efforts" basis. As a
result, purchasers of our Common Stock will not have the benefit of an
underwriter's due diligence, whose task is, among others, to confirm the
accuracy of the disclosures made in the prospectus. We are less likely to sell
the shares we are offering on a self-underwritten, "best efforts" basis than if
we were selling the shares through an underwriter.
Lack of an underwriter's sales efforts. By selling our stock on a
self-underwritten, "best efforts" basis, we will not be able to utilize the
services of an underwriter to offer or sell our securities for us in connection
with this offering. We will undertake our own best efforts to market and sell
the securities to the public. We have not set a minimum with respect to the
amount of our securities that we intend to sell. Even if a purchaser buys shares
of our Common Stock, we may not be able to sell any other additional shares
proposed for sale pursuant to this offering. If we do not raise a sufficient
amount of funds through this offering, we may not be able to adequately
contribute proceeds to development of our business and we may not be able to
successfully proceed with our plan of operations. This may cause significant
losses and our stockholders may lose all or a substantial portion of their
investment. See "Plan of Distribution".
Fluctuation of common stock. Future announcements concerning us or our
competitors, including strategic relationships with our or other suppliers, may
cause the market price of our Common Stock to fluctuate substantially for
reasons which may be unrelated to operating results. These fluctuations, as well
as general economic, political and market conditions, may have a material
adverse effect on the market price of our Common Stock.
Sales of common stock by selling shareholders may result in a decrease of
share price. 22,522,974 shares of Common Stock owned by the selling shareholders
will be registered by the Registration Statement of which this prospectus is a
part. The selling shareholders may sell some or all of their shares immediately
after they are registered. In the event that the selling shareholders sell some
or all of their shares, the price of our Common Stock could decrease
significantly. Conflicts of interests may occur between the selling
shareholders' duties to us and their interest in selling shares as they are all
employees of ours. See "Certain Transactions" and "Selling shareholders".
Selling shareholders may compete with us in selling common stock. Our
ability to raise additional capital through the sale of our stock may be harmed
by competing re-sales of our Common Stock by the selling shareholders. The price
of our Common Stock could fall if the selling shareholders sell substantial
amounts of our Common Stock. These sales may make it more difficult for us to
sell equity or equity-related securities in this offering or in the future at a
time and price that we deem appropriate because the selling shareholders may
offer to sell their shares of Common Stock to potential investors for less than
we do. Moreover, potential
9
investors may not be interested in purchasing shares of our Common Stock if the
selling shareholders are selling their shares of Common Stock.
Penny stock rules may have a restrictive effect on the trading of our
common stock. Because we may be subject to the "penny stock" rules, the level of
trading activity in our stock may be reduced. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules adopted by the Securities and Exchange Commission. Penny stocks,
like shares of our Common Stock, generally are equity securities with a price of
less than $5.00, other than securities registered on certain national securities
exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
broker-dealers who sell these securities to persons other than established
customers and "accredited investors" must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. Consequently, these
requirements may have the effect of reducing the level of trading activity, if
any, in the secondary market for a security subject to the penny stock rules,
and investors in our Common Stock may find it difficult to sell their shares.
A NOTE CONCERNING FORWARD-LOOKING STATEMENTS
You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates", "believes", "plans",
"expects", "future", "intends" and similar expressions to identify these
forward-looking statements. Prospective investors should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by The Buck A Day Company Inc. described in "Risk Factors" and
elsewhere in this prospectus.
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
All information in this prospectus reflects no exercise of employee stock
options, or warrants. However, we are registering 600,000 shares of Common
Stock, 3,000,000 shares of Common Stock and 500,000 shares of Common Stock for
issuance in the event that our Class D, E and F warrant holders choose to
exercise such warrants.
10
CURRENCY OF PRESENTATION
In this prospectus and unless otherwise stated, all references to "$" are
to the legal currency of the United States of America. Our financial statements
are prepared in United States of America dollars and presented in accordance
with U.S. GAAP for the fiscal year ended July 31, 2001 and the interim three
month period ended October 31, 2001. Any reference to "Cdn. $" are to the legal
currency of Canada. In this prospectus, any discrepancies in any table between
totals and the sums of amounts listed are due to rounding.
For historical information regarding rates of exchange between Canadian
dollars and U.S. dollars, please see "Exchange Rates."
USE OF PROCEEDS
We estimate that the net proceeds from our sale of 3,000,000 shares of our
Common Stock will be $5,900,000. We will not receive any of the proceeds of the
sale of Common Stock by the selling shareholders.
We expect to use substantially all of the net proceeds for general
corporate purposes, including working capital, expansion of sales and marketing
activities in Canada and expenses associated with our planned expansion into the
United States marketplace. The amounts we actually expend for working capital
and other purposes may vary significantly and will depend on a number of factors
including, but not limited to, the actual net proceeds received, the amount of
our future revenues and other factors described under "Risk Factors."
Accordingly, our management will retain broad discretion in the allocation of
the net process. A portion of the net proceeds may also be used to acquire or
invest in complimentary businesses, technologies, product lines or products. We
have no current plans or agreements or commitments with respect to any of these
transactions, and we are not currently engaged in any negotiations with respect
to any of these transactions.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our equity shares since
inception and do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance the
expansion of our business. Investors seeking cash dividends should not purchase
our shares of Common Stock.
Our Board of Directors may at any time by resolution declare a common stock
dividend so long as such dividend does not impair the capital of the company or
result in unequal treatment of any other holder of the same class of common
stock.
11
CAPITALIZATION
The following table sets forth our capitalization as of October 31, 2001
and the as adjusted capitalization which gives effect to the consummation of the
offering consisting of 3,000,000 common shares at $2.00 per share (for expected
net proceeds of $5,900,000), as if it occurred on October 31, 2001. This table
should be read in conjunction with the financial statements and related notes
included elsewhere in this prospectus.
October 31, 2001
Actual Pro Forma Pro Forma As
(1) Adjusted
Stockholders' Equity:
Common Stock, no par value, unlimited number of
shares authorized; 20,000,000 issued and
outstanding (actual) 22,522,974 shares issued
and outstanding (pro forma)(1) and 25,522,974
issued and outstanding (pro forma, as adjusted) $1,602,243 $2,839,730 $8,739,730
Accumulated other comprehensive income 43,802 43,802 43,802
Retained Earnings (deficit) (1,642,102) (1,642,102) (1,642,102)
---------- ---------- ----------
Total Stockholders' Equity 3,943 1,241,430 7,141,430
---------- ---------- ----------
Total Capitalization 3,943 1,241,430 7,141,430
========== ========== ==========
- ----------
(1) Give retroactive effect to the sale of 2,522,974 shares of common stock
during the period from November 1, 2001 to February 15, 2002 for net
proceeds of $1,237,487.
EXCHANGE RATES
For the fiscal year ended July 31, 2001 the average exchange rate
concerning the number of Canadian dollars for which one U.S. dollar could be
exchanged was 0.65. The aforementioned figures are based on the average of the
noon buying rate in the City of New York on the last day of each month during
the period for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York.
12
SELECTED FINANCIAL DATA
The following unaudited selected financial information concerning us,
other than the as adjusted balance sheet, has been derived from the financial
statements included elsewhere in this prospectus and should be read in
conjunction with and is qualified in its entirety by such financial statements
and notes therein. See "Financial Statements".
Statement of Operations Data:
Year Ended July 31, Three Months Ended October 31,
------------------- ------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Sales $ 5,381,008 $ 733,973 $ 4,143,314 $ 1,281,419
Cost of sales 3,795,962 519,307 2,627,162 917,074
Expenses 3,100,005 604,678 1,253,283 660,375
Net Income (loss) (1,514,959) (390,012) 262,869 (296,030)
Income (Loss) per share $(0.08) $(0.02) $0.01 $(0.01)
Weighted average number of
shares outstanding 20,000,000 20,000,000 20,000,000 20,000,000
Balance Sheet Data:
October 31, 2001
Actual Pro Forma (1) Pro Forma As
Adjusted(1)(2)
Working Capital (deficiency) $(270,024) $967,463 $6,867,463
Total Assets 1,458,374 2,695,861 8,595,861
Stockholders' Equity 3,943 1,241,430 7,141,430
- ----------
(1) Gives effect to the sale of 2,522,974 shares of Common Stock during the
period from November 1, 2001 to February 15, 2002 for net proceeds of
$1,237,487.
(2) As adjusted to give effect to the offering of 3,000,000 common shares at a
price of $2.00 per share for expected net proceeds of $5,900,000.
DILUTION
The issuance of further shares and the eligibility of issued shares for
resale will dilute our Common Stock and may lower the price of our Common Stock.
If you invest in our Common Stock, your interest will be diluted to the extent
of the difference between the price per share you pay for the Common Stock and
the pro forma as adjusted net tangible book value per share of our Common Stock
at the time of sale. We calculate net tangible book value per share by
calculating the total assets less intangible assets and total liabilities, and
dividing it by the number of outstanding shares of Common Stock.
The net tangible book value of our Common Stock as of October 31, 2001, was
$3,943, or approximately $0.00 per share. After giving retroactive effect to the
sale of 2,522,974 shares of Common Stock for net proceeds of $1,237,487 (the pro
forma transaction), the Company's net tangible book value increased to
$1,241,430 or $0.06 per share. After giving effect to the sale of 3,000,000
shares of our Common Stock at a price of $2.00 per share (which is expected to
yield net proceeds of $5,900,000), Pro Forma net tangible book value as adjusted
was $7,141,430 or $0.28 per share. The
13
result would be an immediate increase in net tangible book value per share of
$0.22 to existing stockholders and an immediate dilution to new investors of
$1.72 (86%) per share. "Dilution" is determined by subtracting net tangible book
value per share after the offering from the offering price to investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
Initial public offering price $2.00
Net tangible book value before offering (historical) $0.00
Increase attributable to Pro Forma transaction(1) $0.06
-----
Net tangible book value before giving effect to the offering 0.06
Increase attributable to new investors 0.22
-----
Pro Forma net tangible book value after the offering $0.28
-----
Dilution to new investors $1.72
=====
- ----------
(1) Gives effect to the sale of 2,522,974 shares of Common Stock during the
period from November 1, 2001 to February 15, 2002 for net proceeds of
$1,237,487.
In the future, we may issue additional shares, options and warrants, and we
may grant additional stock options to our employees, officers, directors, and
consultants under out stock option plan, all of which may further dilute our net
tangible book value.
22,522,974 shares of our Common Stock are concurrently being offered by the
selling shareholders, all of which may be sold in the open market, in privately
negotiated transactions or otherwise. We will not receive any proceeds from the
sale of such 22,522,974 shares of our Common Stock by the selling shareholders.
Sales of such shares of Common Stock by the selling shareholders or the
potential of such sales may have a material adverse effect on the market price
of the Common Stock offered hereby.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock is not quoted or traded on any public exchange. It is our
intent to apply for our Common Stock to be listed on the OTC Bulletin Board
operated by the NASDAQ Stock Market, Inc. during the time that this prospectus
is being reviewed by the Securities and Exchange Commission. Although there can
be no assurances, it is our intention to have such listing concurrent with the
effectiveness of this prospectus.
IMPACT OF THE "PENNY STOCK" RULES ON BUYING OR SELLING OUR COMMON STOCK
We anticipate that the initial trading in our Common Stock will be subject
to the "penny stock" rules. The Securities and Exchange Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share. These rules require that any
broker-dealer who recommends our securities to persons other than prior
customers and accredited investors, must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser's
written agreement to execute the transaction. In addition, unless an exception
is available, the broker-dealer must
14
deliver a disclosure schedule explaining the penny stock market and the risks
associated with trading in the penny stock market prior to any transaction.
Further, broker-dealers must disclose commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities they offer. The additional burdens imposed upon broker-dealers by
such requirements may discourage them from transactions in our Common Stock,
which could severely limit the market price and liquidity of our securities.
PLAN OF DISTRIBUTION
We are registering 3,000,000 shares of our Common Stock, which will be
offered and sold on a "best efforts" basis by us, using our officers, directors,
or, at our discretion, by participating broker/dealers licensed by the National
Association of Securities Dealers, Inc. There is no minimum investment
requirement and funds received by us from this offering will not be placed into
an escrow account. The offering price of the shares was arbitrarily determined
by us. The offering price of our Common Stock does not have any relationship to
our assets, book value, or earnings. We reserve the right to reject any
subscription in whole or in part, for any reason or for no reason.
In the event that we are listed on the OTC Bulletin Board, the selling
shareholders may sell our Common Stock on the OTC Bulletin Board, on the
over-the-counter market, or on any securities exchange on which our Common Stock
is or becomes listed or traded, in negotiated transactions or otherwise, at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated private transactions, or in a combination of
these methods. The shares will not be sold in an underwritten public offering.
Brokers-dealers engaged by the selling shareholders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from the selling shareholders (or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser) in amounts to be
negotiated. Broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for the selling
shareholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer's commitment to the selling shareholders.
Broker-dealers who acquire shares as principal may resell those shares from time
to time in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then-current market price or in negotiated
transactions and, in connection with such re-sales, may receive or pay
commissions.
The selling shareholders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act. Any profit on the sale of shares
by the selling shareholders and any commissions or discounts given to any such
broker-dealer may be deemed to be underwriting commissions or discounts. The
shares may also be sold pursuant to Rule 144 under the Securities Act of 1933,
as amended, beginning one (1) year after the shares were issued.
There can be no assurance that we will sell any or all of the offered
shares.
15
Under the Securities Exchange Act of 1934 and the regulations thereunder,
any person engaged in a distribution of the shares of our Common Stock offered
by this prospectus may not simultaneously engage in market making activities
with respect to our Common Stock during the applicable "cooling off" periods
prior to the commencement of such distribution. Also, the selling shareholders
are subject to applicable provisions that limit the timing of purchases and
sales of our Common Stock by the selling shareholders.
We have informed the selling shareholders that, during such time as they
may be engaged in a distribution of any of the shares we are registering by this
prospectus, they are required to comply with Regulation M. In general,
Regulation M precludes the selling shareholders, any affiliated purchasers and
any broker-dealer or other person who participates in a distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase, any security which is the subject of the distribution until the entire
distribution is complete. Regulation M defines a "distribution" as an offering
of securities that is distinguished from ordinary trading activities by the
magnitude of the offering and the presence of special selling efforts and
selling methods. Regulation M also defines a "distribution participant" as an
underwriter, prospective underwriter, broker, dealer, or other person who has
agreed to participate or who is participating in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our Common Stock to be more volatile than it
would otherwise be in the absence of these transactions. We have informed the
selling shareholders that stabilizing transactions permitted by Regulation M
allow bids to purchase our Common Stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. The selling
shareholders and distribution participants are required to consult with their
own legal counsel to ensure compliance with Regulation M.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OFOPERATIONS
We commenced operations in January 2000, marketing and selling brand name
electronic and consumer products, primarily computers, television sets and
high-end electronics and appliances, directly to consumers and small businesses
employing a multimedia approach. The "Buck A Day" branding is the basic premise
of our business model whereby a customer can purchase a product for as little as
a dollar a day (See "Description of Business").
The following discussion should be read in conjunction with our financial
statements and notes thereto contained elsewhere in this prospectus. This
discussion may contain forward looking statements that could involve risks and
uncertainties. For additional information see "Risk Factors".
RESULTS OF OPERATIONS:
Year Ended July 31, 2001 vs. Period From Inception, January 1, 2000 through July
31, 2000:
Sales for the year ended July 31, 2001 aggregated $5,381,008 as compared to
$733,973 for the period ended July 31, 2000, an increase of $4,647,035 or 633%.
The primary reasons for the increase was the consumer financing arrangement with
CitiFinacial Services and a direct purchasing agreement with suppliers of IBM
product in addition to a full year of operations for the period ended July 31,
2001 versus seven (7) months in our initial year of operations.
The gross margin on sales for the year ended July 31, 2001 was 29.5% as
compared to 29.2% for the seven-month period ended July 31, 2000. While margins
remained relatively stable between the periods, management believes that poor
inventory supplies caused margins to be lower than expected.
Operational costs increased from $604,678 to $3,100,005 when comparing the
initial seven months of operations for the period ended July 31, 2000 to the
year ended July 31, 2001. As a percentage of sales these costs decreased to
57.6% as compared to 82.4%. The primary reason for this decrease was the
increased sales mentioned above and the resulting economies of scale. Salaries
and commissions and media and printing costs represented 70.6% for the year
ended July 31, 2001 and 66.9% for the period ended July 31, 2000 of the
operational costs.
For the year ended July 31, 2001 we reflected a net loss of $1,514,959, due
to the lower than expected gross margin and significant operational costs
required. For the initial seven month period ended July 31, 2000, we reflected a
loss of $390,012 due to higher than anticipated initial start-up and inventory
costs combined with lower than expected sales.
17
Three Months Ended October 31, 2001 vs. Three Months Ended October 31, 2000:
Sales for the three months ended October 31, 2001 grew to $4,143,314 from
$1,281,419 for the corresponding period of the previous year, an increase of
223%. Management believes that the primary reason for this increase was a stable
low cost purchasing arrangement with IBM Corp. and additional credit facilities
with these suppliers. A private placement of Common Stock for $900,000
facilitated a major television advertising campaign that resulted in significant
leads and orders.
Gross profit margins for the three month period ended October 31, 2001 were
36.6% compared to 28.4% for the same period in the prior year. The 36.6% margin
realized for the October 2001 quarter, which is higher than experienced during
the prior periods, is more representative of management's expectations.
Cost of operations increased when comparing the three months ended October
31, 2001 to the three months ended October 31, 2000 from $660,375 to $1,253,283.
This increase was primarily due to our growth and the costs associated with the
223% increase in revenues. As a percentage of sales, operational costs decreased
to 30.2% for the three months ended October 31, 2001 from 51.5% for the same
period of the prior year due to the increased revenues described previously. For
both periods, salaries and commissions and media and printing costs dominated
operational cost and represented 71.8% for 2001 and 72.7% for 2000.
For the three months ended October 31, 2001 we reflected net income of
$262,869. For the three months ended October 31, 2000 we lost $296,030. This
increase in earnings (a net loss to a net profit) for the comparable periods,
was primarily the result of the 223% increase in revenues.
Liquidity and Capital Resources:
At July 31, 2001, we had cash of $316,427 and negative working capital of
$798,680. At October 31, 2001, we reflected cash of $304,789 and negative
working capital of $270,024. Our working capital deficiency improved by
$528,656. This improvement in working capital was a result of the cash financing
mentioned previously and increased gross profit margins. Increased revenues
combined with profitable operations for the quarter ended October 31, 2001
resulted in a lower working capital deficiency.
For the seven months ended July 31, 2000 we reflected positive cash of
$25,164 primarily due to proceeds from capital stock issued net of a loss and
additions to fixed assets. For the year ended July 31, 2001 the Company had an
increase in cash and cash equivalents of $291,263. This increase was primarily
due to advances and other loans received from shareholders net of a loss for the
period (which caused negative cash from operations) and purchases of fixed
assets.
For the three months ended October 31, 2001 we experienced a decrease in
cash of $11,638 as compared to an increase of $13,165 for the three months ended
October 31, 2000.
18
During the period of November 1, 2001 through February 15, 2002, subsequent
to the most current balance sheet date, we sold common stock in a private
offering and raised net proceeds of approximately $1,237,487. In addition, the
company is attempting to raise additional funds by selling up to 3,000,000
shares of common stock at a price of $2.00 per share in an offering to the
public.
It is anticipated that we will spend approximately $32,000 on larger
warehouse facilities, $227,000 on an automated telephone system in our Toronto
location and $32,000 in a Montreal location. Additional telemarketing and
computer equipment will cost approximately $122,000 and we expect to incur
$400,000 in capital expenditures to open an office in the United States.
We presently have no bank debt and have primarily funded operations through
the use of loans from shareholders and the initial capitalization from current
shareholders. We hope to be able to fund operations without incurring bank debt
but there are no assurances that we will be able to do so.
DESCRIPTION OF BUSINESS
History and Development
We were incorporated pursuant to the Business Corporation Act (Ontario) on
September 15, 1999 as 1375400 Ontario Limited. Our name was changed to The
Buck-A-Day Company Inc. on February 2, 2000. On November 13, 2001 our name was
changed to The Buck A Day Company Inc.
Our initial shareholders were members of the LaBuick family. In November
2000, A.R.T. International Inc., an Ontario corporation, acquired 200 shares of
common stock from the LaBuicks for Cdn. $470,000 which constituted 50% of our
issued and outstanding shares. On December 4, 2000, A.R.T. acquired the
remaining 50% of the issued and outstanding shares of Buck from the LaBuick
family thereby rendering Buck a wholly-owned subsidiary of A.R.T.
On January 11, 2001, Nadia Faye LaBuick, wife of Edward P. LaBuick, our
chairman, loaned Cdn. $212,500 to us. The terms of such loan required that
interest at a rate of 7% per annum with principal were due on demand and were
secured by all of our assets and registered pursuant to the applicable local
laws. Also on January 11, 2001, Dennis and Patricia LaBuick advanced Cdn.
$510,000 to us due payable on demand together with interest at the rate of 7%
per annum. This loan was also secured by our assets and registered pursuant to
the applicable local laws.
On or about July 7, 2001, 1483516 Ontario Limited, loaned $450,000 USD to
us. The terms of such loan required that interest at a rate of 7% per annum and
principal were due on demand and were secured by a first lien on all of our
assets. Nadia Faye LaBuick, Dennis LaBuick and Patricia LaBuick subordinated
their security interests in our assets to the security interest of 1483516
Ontario Limited. The 1483516 Ontario Limited Security Agreement
19
contained a provision that, subject to approval of A.R.T., the principal of the
debt was convertible into 3,000,000 units consisting of one share of our common
stock and one class B warrant to purchase one share of our common stock at a
price of $0.15 USD.
On August 1, 2001, we issued to A.R.T. 800,000 class C warrants to purchase
800,000 shares of our common stock exercisable at Cdn. $0.10 per share. Also on
August 1, we authorized conversion of the LaBuick family members' loans with
interest totaling Cdn. $710,000 into 7,100,000 shares of our common stock and
class A warrants for an additional 1,500,000 shares exercisable at $0.10 per
share.
On August 29, 2001, the LaBuick family members converted all of their loans
to us into 7,100,000 shares of our common stock and class A warrants for an
additional 1,500,000 shares. Also on that day, 148516 Ontario Limited converted
its loans to us into 3,000,000 shares of common stock and exercised all class B
warrants for an additional 3,000,000 shares of common stock.
On October 1, 2001, the LaBuick family members exercised all class A
warrants receiving 1,500,000 shares of our common stock and A.R.T. exercised all
class C warrants receiving 800,000 shares of our common stock.
As a result of the aforementioned conversion no class A, B or C warrants,
respectively, remain outstanding.
On December 1, 2001, we issued 600,000 Class D Warrants to Jennifer Doering
as compensation for services rendered by Ms. Doering in her capacity as a
business consultant to the company.
From September 1999 through February 2000, we focused on re-structuring our
ownership as well as debt reduction. As a result, we did not begin instituting
our business plan until February 2000, at which time we began a limited sales
and marketing campaign.
Business Model
The "Buck-A-Day" branding is the basic premise of our business model;
specifically that name brand products are packaged so that any customer can
purchase them for as little as a dollar ("buck") a day, with no down payment.
For the first sixteen (16) months of our operation, all IBM products and
peripherals were purchased through Beamscope Canada Ltd., Ingram Micro and
directly from IBM approved distributors. However, we were consistently plagued
by shortages of inventories; and as a result were often forced to acquire
products through national retailers resulting in lower than anticipated profit
margins. Continued inventory shortages led the company to seek new sources of
supply. Negotiations with Compaq were concluded and new commercials were
produced. Compaq offered the company an advance of Cdn. $250,000 and an
additional Cdn. $750,000 line
20
of credit for inventory purchases in exchange for an exclusive 2-year marketing
agreement. IBM then negotiated a new agreement, which provided the company with
a marketing allowance of Cdn. $350,000, a creative budget of Cdn. $300,000
payable semi-annually, credit facilities of Cdn. $750,000, guaranteed inventory
supply of an additional Cdn. $500,000 and annual volume rebates of 1-3% on
cumulative purchases. On May 31, 2001, we entered into an exclusive three-year
distribution agreement with IBM Canada Ltd. and did not enter into the proposed
agreement with Compaq. We market IBM products in all provinces across Canada. In
the second quarter of calendar 2002, a branch office is scheduled to open in
Montreal to better service the Quebec market.
In fiscal 2002 our advertising budget of approximately Cdn. $3 million will
enable us to air over 39,000 sixty second television commercials will air on
cable and local television stations across Canada promoting The Buck A Day
Company and its products.
Typical Revenue Producing Transaction. A Customer's first experience with
us is generally when they call our toll free number in response to one of our
marketing campaigns. Potential customers who call while our sales staff is
unavailable are routed to various third party call centers, who then forward to
us all relevant contact information which is then down-loaded to our data-base.
Our in-house sales staff uses its best efforts to return such calls within
twelve to twenty-four hours. Our arrangement with the various call centers
requires that we pay them a fee of $1.75 to $2.25 per lead generated from our
advertising efforts. As a point of clarity, our telemarketing efforts are solely
directed towards potential customers who initially contact us as a result of our
marketing campaigns.
Revenue Breakdown. As of December 31, 2001, our sales were generated in the
following manner: a) 75% from computer and peripheral items directly from
inquiries to our toll-free phone numbers; b) 20% from internet based orders; and
c) follow-up catalogue sales are responsible for 5% of our business. We
anticipate sales from our internet operations and catalogue sales to grow to
approximately 25% and 15%, respectively, of our total revenue stream.
Catalogue's of our most popular items are sent with every order and are also
sent to all customers on a biannual basis.
Our present marketplace is nationwide across Canada. The geographical
breakdown of our sales by province are as follows:
o Ontario 50%
o Alberta 15%
o British Columbia 15%
o Manitoba 5%
o Saskatchewan 5%
o Quebec 5%
o Atlantic Provinces 5%
21
Marketing Approach
Our management team has over 30 combined years of experience in purchasing
media time on television as well as in commercial production and television
marketing in both the United States and Canada. We market and sell name brand
electronic and consumer products, primarily computers, television sets and
high-end electronics and appliances, directly to consumers and small businesses,
utilizing a multimedia approach, which at the present time, is principally
through television advertising. Our television campaign utilizes toll free phone
numbers for direct consumer response while also promoting our website.
We intend to continue expanding our direct response marketing in the
calendar year 2002 and anticipate significant continued growth from Canadian
operations. In the second quarter of calendar year 2002, we anticipate opening a
branch office in Montreal, Quebec to service the burgeoning Quebec marketplace.
However, we anticipate using a significant portion of the proceeds from this
offering for expenses associated with our eventual expansion into the United
States market in the calendar year 2002.
Television commercials for all offers are aired on the following networks
and stations including: TWN (Weather), CMT, Discovery, Bravo, Space, Showcase,
OLN, Star, Much More Music, ATN, Comedy, APTN, CITV, ATV, CityTV, BCTV, CKVU.
Anticipated Additional Sources of Revenue.
Electrohome Television Offer. We began test marketing a promotion featuring
two televisions and a DVD player for a "buck" a day in November of 2001. As a
result of the strong response rate to the television ads, we believe that this
new product category will enjoy tremendous success. We will not be able to offer
the package nationwide in Canada until March 2002 as we will not have product
availability until then. Our initial forecasts are for this promotion to
generate sales of approximately 4,000 units with revenues of Cdn. $4.7 million
and an advertising budget of over Cdn. $500,000 over the next 4 months. Our
Electrohome promotion will include over 7,000 television spots of 60 seconds
each, on national cable and local TV stations across Canada.
Strategic Relationships
On May 31, 2001 we entered into a Business Partner Agreement with IBM
Canada Ltd. which provides us with a steady and secure supply of products from
IBM through its major distributor SuperCom Canada Ltd. with credit terms of Cdn.
$750,000 plus back-up inventory financing of an additional Cdn. $500,000. The
term of the IBM Agreement is for three (3) years with no renewal terms. Further,
IBM provided a marketing allowance of Cdn. $350,000 and a creative budget of
Cdn. $300,000 payable semi-annually. We are required to purchase a minimum of
10,000 units per year with direct volume rebates of 1-3% on cumulative
purchases. However, there is no ceiling on the amount of computer equipment we
may purchase from IBM in any given year. IBM and SuperCom retain a registered
purchase security interest on our inventory and accounts receivable in the
amount of Cdn. $750,000. Pursuant to such agreement we are responsible for all
aspects of selling, delivering the products to our customers.
CitiFinancial Services of Canada Ltd. Although we accept cash and credit
cards as payment for our products and services, most of our customers make their
purchases using the
22
Buck A Day credit card which is underwritten by CitiFinancial Services of Canada
Ltd. Potential customers apply for a Buck A Day credit card, which is either
approved or rejected solely by CitiFinancial. The approved applicants are
extended a pre-determined level of credit ranging from a minimum of Cdn. $1,000
to a maximum of Cdn. $10,000.
Lexmark Canada - Printers Only. Commencing January 1, 2002, Lexmark, a
leading manufacturer of computer peripheral products extended to us a Cdn.
$102,000 marketing assistance advance to sell their products exclusively to our
customers. In addition to the advance, we receive competitive pricing and
additional rebates on certain models.
Primus Telecommunications Canada Inc. On June 21, 2001, we entered into an
Internet Access Agreement with Primus Telecommunications Canada Inc., the
largest internet provider in Canada, whereby Primus provides each of our
customers who purchase a computer from us with 200 hours of free monthly
internet usage, one free email account and 20 megabytes of personal web space.
Pursuant to the Primus Agreement we agreed to purchase a minimum of 12,000
Primus Internet Packages (consisting of software, CD, user guide, control codes
and password to activate such internet account) during the first year or the
prior Agreement at a price of Cdn. $85.00 per package. The term of the Primus
Agreement was for six (6) months, however neither party has indicated that it
intends to terminate the Primus Agreement.
Expansion into the United States
We intend to enter the United States marketplace in a limited manner and in
select locations within the next six (6) months. We have tested our commercials
in the United States (Buffalo, Spokane and Seattle) and although we have not
converted any of our leads into sales, the consumer response is equivalent to
what we are presently enjoying in Canada. As a result of the purchase of
Associates Finance Group by the CitiFinancial Services division of Citigroup, we
are now in a position to provide financing to United States' customers on the
Buck A Day credit card plan. We anticipate opening our media buying,
telemarketing center and warehousing facilities in the State of New York during
the second quarter of calendar 2002.
We believe that our business model of providing alternative financing,
speedy delivery, name brand products and a thirty (30) day satisfaction or money
back guarantee makes the United States market an attractive one. A significant
market for our services exists in the United States as there is a large
population of individuals and small businesses unable to obtain sufficient
credit from any source, with which to purchase a computer or other electronic
devices. Through our partnership with CitiFinancial we have been able to
successfully arrange for more than 30% of applicants for the Buck A Day credit
card to be extended credit with which to make purchases from us.
Competition
General. We believe that the direct response marketing and sales of
consumer electronics and household convenience items is not as competitive as
electronics retailing. Retailers have significantly greater resources than we
have; however, their business seems to be more price-driven and less focused
than ours. Our sales and marketing structure is not proprietary, but highly
developed; therefore, although many of our competitors sell similar items
23
from competitive suppliers, we believe that we are able to better manage our
sales through careful formulation of our offers. In Canada some of our biggest
competitors are IPC Canada, MDG Canada Ltd. and Dell Computer Corp. In the
United States some of our biggest competitors will be direct marketing computer
manufacturers such as Dell and Gateway Computer Corp. and nationwide electronic
retailers such as Best Buy and Circuit City. Furthermore, there are many online
electronics retailers, such as Amazon.com and Buy.com, who would directly
compete for our customers. All of the above are larger and better known and have
more resources for financing, advertising and marketing. We intend to compete
based on our ability to market and sell products to individuals who require
credit with no down payment and payments as low as a dollar (or "buck") a day.
Canadian Computer and Electronics Retailers. There are three companies in
the marketplace who we consider competitors, Dell Computer Corp. and two
Canadian "clone" or "private label" manufacturers, IPC Canada and MDG Canada
Ltd.
IPC Canada has a nationwide customer base. They market themselves as a
discount computer manufacturer that sells direct to the consumer. IPC runs print
ads in major markets, but consumers may only purchase their products with cash
or third party credit cards.
MDG Canada Ltd. is also a Canadian "clone" or "private label" manufacturer.
In addition to their direct sales division, MDG maintains approximately
twenty-five retail outlets in the Southern Ontario market and they do not market
nationwide. MDG does offer "in-house" financing similar to our own using
Household Finance. In addition to their "in-house" financing, customers of MDG
may choose to purchase products through cash or third party credit card
transactions. Although they are better financed than ourselves, we consider our
name recognition to be superior.
Trademarks and Patents
On November 5, 2001, we filed a trademark application with the United
States Patent and Trademark Office covering our name and logo. As a result of
such filing we were granted a right of priority for any associated filings in
foreign countries which occur prior to May 5, 2002. Although we have not filed
any intellectual property applications in Canada, we expect to do so prior to
May 5, 2002.
Insurance
We currently carry a business insurance policy underwritten by The
Economical Insurance Group, which maintains Cdn. $2,000,000 of property
insurance for inventory and equipment and Cdn. $2,000,000 each for personal
injury liability and non-owned automotive liability.
Employees
We currently employ 80 sales representatives and 20 management and
administration employees. None of the employees are represented by a labor
union. We consider our relationship with our employees to be satisfactory.
24
Properties
On September 1, 2001, we signed four leases for a fifty-three (53) month
period for a total of 16,500 square feet of office and warehouse space in
Newmarket, Ontario at an aggregate rent of approximately Cdn. $404,518.
Although, such office space is sufficient for our present needs and presently we
believe that additional space is available, if our growth exceeds our
projections we may have to procure additional office space elsewhere.
Seasonality
Although we have been operational for less than two (2) years, we have
found our business to be seasonal in nature in that the first calendar quarter
of each year tends to be our strongest sales period. We have found that the
increased demand for media placements during the traditional Christmas holiday
season results in a significant increase in the costs of such placements and
thus prohibits us from procuring the quality and amount of placements we would
desire during that period. As a result, we have focused our media purchasing
efforts on the first quarter of the calendar year and have realized significant
sales gains during those periods.
Legal Proceedings
In July 2001, Beamscope Canada Inc., a supplier of hardware and software
commenced an action against us in the Superior Court of Justice claiming the sum
of Cdn. $250,000, plus interest and costs for unpaid accounts. On December 21,
2001 we settled the Beamscope lawsuit and paid them Cdn. $70,000 pursuant to the
terms of such settlement.
25
MANAGEMENT
The following table sets forth the name and, as of December 31, 2001, age
and position of each director and executive officer of our company.
Directors and Executive Officers
NAME AGE POSITION
---- --- --------
Edward P. LaBuick 59 Chief Executive Officer;
Chairman of the Board of Directors
Dennis P. LaBuick 39 Director; President
Keith Kennedy 38 Director; Vice President of Operations
John Mole 47 Director
George Slightham 53 Manager of Business Affairs
Kelly Murphy 36 Controller
Background of Executive Officers, Directors and Significant Employees
Edward P. LaBuick has served as the Chief Executive Officer and Chairman of
the Board of our company since September 1999. From 1998 to 1999, Mr. LaBuick
was a vice-president of Koolatron, a Canadian National television marketing
company. From 1992 through 1998, Mr. LaBuick was president of Quality Music and
Video Specialty Products, an entertainment and television marketing company. Mr.
LaBuick's primary responsibilities are in developing strategic relationships
with major suppliers, financial institutions and media providers. Mr. LaBuick is
the father of Mr. Dennis P. LaBuick, our President, and father-in-law to
Patricia LaBuick, our sales manager.
Dennis P. LaBuick has served as the President and as a Director of our
company since December 1999. From 1998 through 1999 Mr. LaBuick was a self
employed freelance director of television commercials and production. From 1996
to 1998, Mr. LaBuick was a vice president of television media for DCNL Inc., in
San Francisco, California, which was sold to Helen of Troy in 1998. Mr. LaBuick
has over fifteen (15) years of experience in direct response television, radio
and print advertising. Mr. LaBuick's primary responsibilities include media
planning and buying of short form direct-response commercials and informercials
as well as the writing and production for such matters. Mr. LaBuick is the son
of Mr. Edward P. LaBuick, our Chairman and the husband to Patricia LaBuick, our
sales manager.
Keith Kennedy has served as the Vice President of Operations and a Director
of our company since September 1999. From 1998 to 1999, Mr. Kennedy was the
Operations Manager of Koolatron, Inc., a television marketing company. From 1992
to 1998, Mr. Kennedy was the Operations Manager at Quality Music, Video &
Special Products, a national distribution company. Mr. Kennedy's primary
responsibilities are in staff and inventory management and general day to day
operational matters.
26
John Mole has been the President of Province Electric Supply Limited, a
wholesale distributor of electrical products serving the electrical contractor,
industrial, OEM, institutional and utility markets, from 1991 through the date
of this Prospectus. Mr. Mole has been a Director of our company since February
5, 2002.
George Slightham has served as the Manager of Business Affairs of our
company since July 2001. From 1995 through 2001, Mr. Slightham was a self
employed financial consultant. In 1972, Mr. Slightham received a degree in
Honors of Business Administration from the University of Western Ontario,
located in London, Ontario.
Dan LaRoche has served as the Marketing Manager of our company since
December 1999. From 1997 through 1999, Mr. LaRoche was employed by Interwood
Marketing, a national marketing company. Mr. LaRoche has twenty-five (25) years
of experience in direct response television, retail radio and print design and
advertising. Mr. LaRoche's primary responsibilities are in media planning and
buying of retail television and radio spots as well as production of short form
direct-response commercials and infomercials.
Kelly Murphy has been our controller since January 2000. From 1997 through
1999, Ms. Murphy was a self employed accountant.
Board of Directors and Committees
Our Articles of Association set the minimum number of directors at 1 and
the maximum at number of directors at 10. We currently have 4 directors.
Currently, our Board of Directors consists of Messrs. Edward P. LaBuick,
Dennis P. LaBuick, Keith Kennedy and John Mole. The Board of Directors has
appointed Messrs. Kennedy and Mole as the members of the Omnibus Committee to
administer the Stock Option Plan. However, our Board anticipates adding 1 member
within the next ninety (90) days, who will be a non-participating member of any
employee stock option plan and who shall be expected to serve as an additional
member of the Omnibus Committee. Although the Board of Directors anticipates
forming an audit committee, at present, it has not established any other
committees.
Compensation of Directors
We do not pay our Directors any fee in connection with their role as
members of our Board. Directors are reimbursed for travel and out-of-pocket
expenses in connection with their attendance at Board meetings.
Employment Agreements
On November 1, 2001, we entered into an Employment Agreement with Mr.
Edward P. LaBuick, our Chief Executive Officer and Chairman of the Board, for a
term of three (3) years commencing November 1, 2001, providing for an annual
salary of Cdn. $225,000 for the first year and, during each of the remaining
years, an amount equal to 110% of the immediately preceding year. In addition to
his annual salary, Mr. LaBuick has the right to participate in any share option
plan, share purchase plan, retirement plan or similar plan offer by our company,
to the extent authorized by our Board. Mr. LaBuick also has the right to have
the company pay for a car of its choosing including all expenses associated
therewith.
On November 1, 2001, we entered into an Employment Agreement with Mr.
Dennis P. LaBuick, our President and a Director, for a term of three (3) years
commencing November 1, 2001, providing for an annual salary of Cdn. $200,000 for
the first year and, during each of the remaining years, an amount equal to 110%
of the immediately preceding year. In addition to his annual salary, Mr. LaBuick
has the right to participate in any share option plan, share purchase plan,
retirement plan or similar plan offer by our company, to
27
the extent authorized by our Board. Mr. LaBuick also has the right to have the
company pay for a car of its choosing including all expenses associated
therewith.
On November 1, 2001, we entered into an Employment Agreement with Mr. Keith
Kennedy, our Vice President of Operations and a Director, for a term of three
(3) years commencing November 1, 2001, providing for an annual salary of Cdn.
$80,000 for the first year and, during each of the remaining years, an amount
equal to 110% of the immediately preceding year. In addition to his annual
salary, Mr. Kennedy has the right to participate in any share option plan, share
purchase plan, retirement plan or similar plan offer by our company, to the
extent authorized by our Board. Mr. Kennedy also has the right to have the
company pay for a car of its choosing including all expenses associated
therewith.
On November 1, 2001, we entered into an Employment Agreement with Mr.
George Slightham, our Manager of Business Affairs, for a term of three (3) years
commencing November 1, 2001, providing for an annual salary of Cdn. $125,000 for
the first year and, during each of the remaining years, an amount equal to 110%
of the immediately preceding year. Mr. Slightham also has the right to have the
company pay for a car of its choosing including all expenses associated
therewith.
Executive Compensation
For the fiscal year ended July 31, 2001, our aggregate cash compensation
payments to our executive officers and directors for services rendered in these
capacities was approximately Cdn. $385,000.
The following table sets forth all compensation we paid to each executive
officer whose total salary and bonus exceeded Cdn. $100,000 in the calendar
years indicated.
28
Summary Compensation Table
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION CALENDAR OTHER ANNUAL OTHER OPTIONS
YEAR SALARY ($) COMPENSATION GRANTED (#)
---- ---------- ------------ ----------
Edward P. LaBuick 2000 110,000 -- --
Chief Executive Officer and 2001 200,000 -- --
Chairman of the Board of
Directors
Dennis P. LaBuick; 2000 110,000 -- --
Director and President 2001 185,000 -- --
Keith Kennedy; 2000 50,000 -- --
Director and Vice President of 2001 80,000 -- --
Operations
Option Grants During Last Fiscal Year
The Company did not issue any options during the fiscal year ended July 31,
2001. However, on February 14, 2002, certain directors, officers, employees and
consultants were issued options to purchase an aggregate amount equal to
3,500,000 shares of Common Stock pursuant to the Company's Stock Option Plan.
The table below sets forth the executive officers that received options pursuant
to the Stock Option Plan.
Market Value
Common of Common
Share % of Total Shares
Under Options Underlying
options Granted in Exercise Options on
Granted Fiscal 2002 Price Date of Grant
Name (#) (%) ($/share) (1) ($) Expiration Date
- ---- ------- ----------- --------- ------------- ---------------
Edward P. LaBuick 952,500 27.2% $0.25 $0.25 February 13, 2005
Dennis P. LaBuick 897,500 25.6% $0.25 $0.25 February 13, 2005
Keith Kennedy 250,000 7.1% $0.25 $0.25 February 13, 2005
John Mole 50,000 1.4% $0.25 $0.25 February 13, 2005
29
(1) There was no public market for our common shares as of February 14, 2002.
Therefore, the amounts set forth in this column represent the fair market
value of each of our common shares as of that date, as determined by our
Board.
Options Exercised In Last Fiscal Year
No executive officers exercised any options during the fiscal year ended
July 31, 2001.
Summary of 2002 Stock Option Plan
Qualified directors, officers, employees, consultants and advisors of ours
and our subsidiaries are eligible to be granted (a) stock options ("Options"),
which may be designated as nonqualified stock options ("NQSOs") or incentive
stock options ("ISOs"), (b) stock appreciation rights ("SARs"), (c) restricted
stock awards ("Restricted Stock"), (d) performance awards ("Performance Awards")
or (e) other forms of stock-based incentive awards (collectively, the "Awards").
A director, officer, employee, consultant or advisor who has been granted an
Option is referred to herein as an "Optionee" and a director, officer, employee,
consultant or advisor who has been granted any other type of Award is referred
to herein as a "Participant."
The Omnibus Committee administers the Stock Option Plan and has full
discretion and exclusive power to (a) select the directors, officers, employees,
consultants and advisors who will participate in the Stock Option Plan and grant
Awards to such directors, officers, employees, consultants and advisors, (b)
determine the time at which such Awards shall be granted and any terms and
conditions with respect to such Awards as shall not be inconsistent with the
provisions of the Stock Option Plan, and (c) resolve all questions relating to
the administration of the Stock Option Plan. Members of the Omnibus Committee
receive no additional compensation for their services in connection with the
administration of the Stock Option Plan.
The Omnibus Committee may grant NQSOs or ISOs that are evidenced by stock
option agreements. A NQSO is a right to purchase a specific number of shares of
Common Stock during such time as the Omnibus Committee may determine, not to
exceed ten (10) years, at a price determined by the Omnibus Committee that,
unless deemed otherwise by the Omnibus Committee, is not less than the fair
market value of the Common Stock on the date the NQSO is granted. An ISO is an
Option that meets the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). No ISOs may be granted under the Stock Option
Plan to an employee who owns more than 10% of our outstanding voting stock ("Ten
Percent Stockholder") unless the option price is at least 110% of the fair
market value of the Common Stock at the date of grant and the ISO is not
exercisable more than five (5) years after it is granted. In the case of an
employee who is not a Ten Percent Stockholder, no ISO may be exercisable more
than ten (10) years after the date the ISO is granted and the exercise price of
the ISO shall not be less than the fair market value of the Common Stock on the
date the ISO is granted. Further, no employee may be granted ISOs that first
become exercisable during a calendar year for the purchase of Common Stock with
an aggregate fair market value (determined as of the date of grant of each ISO)
in excess of $100,000USD. An ISO (or any installment thereof) counts against the
annual limitation only in the year it first becomes exercisable.
30
The exercise price of the Common Stock subject to a NQSO or ISO may be paid
in cash or, at the discretion of the Omnibus Committee, by a promissory note or
by the tender of Common Stock owned by the Option holder or through a
combination thereof. The Omnibus Committee may provide for the exercise of
Options in installments and upon such terms, conditions and restrictions as it
may determine.
An SAR is a right granted to a Participant to receive, upon surrender of
the right, but without payment, an amount payable in cash. The amount payable
with respect to each SAR shall be based on the excess, if any, of the fair
market value of a share of Common Stock on the exercise date over the exercise
price of the SAR, which will not be less than the fair market value of the
Common Stock on the date the SAR is granted. In the case of an SAR granted in
tandem with an ISO to an employee who is a Ten Percent Stockholder, the exercise
price shall not be less than 110% of the fair market value of a share of Common
Stock on the date the SAR is granted.
Restricted Stock is Common Stock that is issued to a Participant at a price
determined by the Omnibus Committee, which price per share may not be less than
the par value of the Common Stock, and is subject to restrictions on transfer
and/or such other restrictions on incidents of ownership as the Omnibus
Committee may determine.
A Performance Award granted under the Stock Option Plan (a) may be
denominated or payable to the Participant in cash, Common Stock (including,
without limitation, Restricted Stock), other securities or other Awards and (b)
shall confer on the Participant the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Omnibus Committee shall establish. Subject to the terms of the
Stock Option Plan and any applicable Award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted and the amount of any payment or
transfer to be made pursuant to any Performance Award shall be determined by the
Omnibus Committee.
The Omnibus Committee may grant Awards under the Stock Option Plan that
provide the Participants with the right to purchase Common Stock or that are
valued by reference to the fair market value of the Common Stock (including, but
not limited to, phantom securities or dividend equivalents). Such Awards shall
be in a form determined by the Omnibus Committee (and may include terms
contingent upon a change of control of the company); provided that such Awards
shall not be inconsistent with the terms and purposes of the Stock Option Plan.
The Omnibus Committee determines the price of any such Award and may accept
any lawful consideration.
The Omnibus Committee may at any time amend, suspend or terminate the Stock
Option Plan; provided, however, that (a) no change in any Awards previously
granted may be made without the consent of the holder thereof and (b) no
amendment (other than an amendment authorized to reflect any merger,
consolidation, reorganization or the like to which we are a party or any
reclassification, stock split, combination of shares or the like) may be made
increasing the aggregate number of shares of the Common Stock with respect to
which Awards may be granted
31
or changing the class of persons eligible to receive Awards, without the
approval of the holders of a majority of our outstanding voting shares.
In the event a Change in Control (as defined in the Stock Option Plan)
occurs, then, notwithstanding any provision of the Stock Option Plan or of any
provisions of any Award agreements entered into between any Optionee or
Participant and us to the contrary, all Awards that have not expired and which
are then held by any Optionee or Participant (or the person or persons to whom
any deceased Optionee's or Participant's rights have been transferred) shall, as
of such Change of Control, become fully and immediately vested and exercisable
and may be exercised for the remaining term of such Awards.
If we are a party to any merger, consolidation, reorganization or the like,
the Omnibus Committee has the power to substitute new Awards or have the Awards
be assumed by another corporation. In the event of a reclassification, stock
split, combination of shares or the like, the Omnibus Committee shall
conclusively determine the appropriate adjustments.
No Award granted under the Stock Option Plan may be sold, pledged, assigned
or transferred other than by will or the laws of descent and distribution, and
except in the case of the death or disability of an Optionee or a Participant,
Awards shall be exercisable during the lifetime of the Optionee or Participant
only by that individual.
No Awards may be granted under the Stock Option Plan on or after February
12, 2012, but Awards granted prior to such date may be exercised in accordance
with their terms.
The Stock Option Plan and all Award agreements shall be construed and
enforced in accordance with and governed by the laws of New York.
As of February 14, 2002, of the 3,500,000 shares of our Common Stock
reserved for issuance under the Stock Option Plan, options to acquire 3,500,000
shares of our Common Stock were granted under the Stock Option Plan.
Directors' and Officers' Indemnification
Under the Business Corporations Act, we are permitted to indemnify our
directors and officers and former directors and officers against costs and
expenses, including amounts paid to settle an action or satisfy a judgment in a
civil, criminal or administrative action or proceeding to which they are made
parties because of their position as directors or officers, including an action
against us. In order to be entitled to indemnification under this Act, the
director or officer must act honestly and in good faith with a view to our best
interests, and in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, the director or officer must have
reasonable grounds for believing that his or her conduct was lawful.
Under our by-laws, we may indemnify our current and former directors,
officers, employees and agents. Our by-laws also provide that, to the fullest
extent permitted by the Act, we are authorized to purchase and maintain
insurance on behalf of our and our subsidiaries' current and past directors,
officers, employees and agents against any liability incurred by them
32
in their duties. We believe that the provisions of our by-laws are necessary to
attract and retain qualified persons as directors and officers.
We recently terminated an employee for cause and issued a statement of
claim for more than Cdn.$1 million for the misappropriation of our property.
The defendant has issued a counter-claim against us which we feel is without
merit.
Currently, there is no pending litigation or proceeding where a current or
past director, officer or employee is seeking indemnification, nor are we aware
of any threatened litigation that may result in claims for indemnification.
Although we anticipate doing so within the next 120 days, presently we do not
maintain any form of liability insurance covering our directors and officers.
33
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the beneficial
ownership of shares of our Common Stock with respect to stockholders who were
known by us to be beneficial owners of more than 5% of our Common Stock as of
February 14, 2002, and our officers and directors, individually and as a group.
Unless otherwise indicated, the beneficial owner has sole voting and investment
power with respect to such shares of Common Stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with the Securities and Exchange
Commission rules, shares of our Common Stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within sixty (60) days of the date of the table are deemed
beneficially owned by the optionees. Subject to community property laws, where
applicable, the persons or entities named in the table above have sole voting
and investment power with respect to all shares of our Common Stock indicated as
beneficially owned by them. Percentage ownership is based on 22,522,974 shares
of Common Stock outstanding as of February 14, 2002 and 3,000,000 additional
shares of Common Stock to be issued in this offering. Percentage Ownership does
not reflect the shares of Common Stock underlying the Class D, E and F warrants,
or the options granted pursuant to the Company's Stock Option Plan.
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
------------------
NUMBER OF SHARES BEFORE THE AFTER THE
BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ---------------- ------------------ ---------- ---------
Edward P. LaBuick (1) 1,362,500 6.0% 5.3%
Dennis P. LaBuick (2) 1,347,500 5.9% 5.2%
A.R.T. International Inc. 2,000,000 8.8% 7.8%
All Executive Officers and
Directors as a Group (4 2,710,000 12.0% 9.1%
persons)(3)
- ----------
(1) This amount does not include 1,562,500 shares of Common Stock held by Nadia
Faye LaBuick, wife of Edward P. LaBuick, and the options to purchase
952,500 shares of Common Stock issued on February 14, 2002 pursuant to the
Company's Stock Option Plan.
(2) This amount does not include 1,547,500 shares of Common Stock held by
Patricia LaBuick, wife of Dennis P. LaBuick, and the options to purchase
897,500 shares of Common Stock issued on February 14, 2002 pursuant to the
Company's Stock Option Plan.
(3) This amount does not include Mr. Keith Kennedy's right to purchase 250,000
shares of Common Stock or Mr. John Mole's right to purchase 50,000 shares
of Common Stock.
34
SELLING SHAREHOLDERS
This prospectus will also be used for the offering of additional shares of
our Common Stock owned by the shareholders found below, the selling
shareholders. The selling shareholders may offer for sale up to 100% (22,522,974
shares) of their holdings in our Common Stock held in the aggregate by them. See
"Business" and "Certain Transactions". The selling shareholders may offer for
sale such shares of our Common Stock from time to time in the open market, in
privately negotiated transactions or otherwise. We will not receive any proceeds
from such sales. The resales of the securities by the selling shareholders are
subject to the prospectus delivery and other requirements of the Securities Act.
Assuming that we and the selling shareholders are able to sell all
22,522,974 shares of our Common Stock which are being offered by us and the
selling shareholders, the selling shareholders will retain 0 shares of our
Common Stock.
LIST OF SHAREHOLDERS OF THE BUCK A DAY COMPANY INC.
Date Requested: February 14, 2002
Employee Current
Subscriber Address "EMP" Holdings
- ---------------------------------------------------------------------------------------------------------------------------------
1413251 Ontario Inc. 50,000
1435031 Ontario Ltd. 248 Forest Hill Road, Toronto, ON M5P 2N5 250,000
1469403 Ontario Ltd. 60,000
1504426 Ontario Limited 181 University Ave., Suite 1410, Toronto, ON M5H 3M7 250,000
403266 Ontario Ltd c/o David & Carol Voyce, 663 Glen Crescent, 946,666
Orillia, ON L3V 6R2
760761 Ontario Ltd. 8 Vine Cres., Barrie, Ontario L4N 2B3 20,000
A.R.T. Intermational Inc. Unit 5- 7100 Warden Avenue, Markham ON L3R 8B8 EMP 2,000,000
Ambeau Thomas 64 Royal Oak Drive, Barrie, On L4N 7S5 333,334
Aravest Ltd. P.O. Box N-9645, Nassau, Bahamas 66,666
Beckley Mike 12 Chalmers Dr., Barrie, ON L4N 8A3 10,000
Belben Ted 8,000
Bradley Stephen 46 Gibson Lake Drive, Palgrave, On L0N 1P0 200,000
Clark Linda 146 McCraney St. West, Oakvilla, ON L6H 1H6 1,000
Corvese Steve 5254 Forest Hill Drive, Mississauga, Ontario 66,666
Crosbie Robert RR 1, Stn Main, Port Hope, On L1A 3V7 300,000
Dale Kerry 426 Eagle Street, Newmarket, ON L3Y 1K6 EMP 10,000
Deluca Judy 1227 Riverbank Way, Oakville, Ontario L6H 6X4 20,000
Demarinis Enzo 2000 Peak Place, Oakville, ON L3H 5T2 66,666
Demarinis Frank 584 Vaughan Mills, Woodbride, ON L1H 4H1 66,666
Demarinis Joe 1615 Amberlea Road, Pickering, ON L1V 5P3 20,000
Desroches Paul 1311 Ludbrook Court, Mississauga, On L5J 3P2 200,000
Dodd Family Trust c/o Norman Dodd, 656 Sunset Beach Road, 133,333
Richmond Hill, On L4E 3G2
Dodd Norman 656 Sunset Beach Road, Richmond Hill, On L4E 3G2 50,000
Doering Dennis 108 Marshall Street, Barrie, On L4N 4L5 33,333
Doering Jennifer 108 Marshall Street, Barrie, On L4N 4L5 250,000
Donaldson Peter Share High School, Royal Oak, MI 10,000
Donaldson Walt 1929 Ontario St., Windsor, ON N8Y 1N1 20,000
Durham Int'l Investments P.O. Box 1132 Lauraston House, Lower Collymore, 448,334
Bridgetown St. Michael, Barbados, WI
Garces Candy 44 Crew Avenue, Toronto, Ontario M4C 2V3 EMP 1,000,000
Gayford Tom RR # 4, Stouffville, 4093 Bloomington Road 100,000
Gilbert Eli 1227 Riverbank Way, Oakville, Ontario L6H 6X4 60,000
Gomes Heather 445 Maple Grove Ave., Bradford, ON L3Z 2V8 EMP 10,000
Gordon Colin 2373 Blackstone Cres., Ottawa, Ontrario K1B 4H3 7,000
Hendershot Walter 233 Inksetter Road, RR 1, Lynden, On L0R 1T0 50,000
Hochrein J.J. 5 Wells Street, Toronto, Ontario M5R 1N8 4,000
James Corinne Voyce 25,000
James Jacqueline Cadman 44 Barringham Drive, Oakville, ON L6J 4B2 200,000
Johnston Lyle 3,000
Kelln Larry 2554 Maid Marion Place, Mississauga, On L5K 2L9 100,000
Kennedy Keith 412 Queen Street, Apt. A, Newmarket, ON L3Y 2P2 EMP 500,000
Khonsari Homa 1 Garrett Cres., Barrie, Ontario L4M 4R7 266,666
Kisely Willy 539 Knowles Road, Kelowna, BC V1W 1H4 100,000
Korhonen Ed 2206 Pine Needle Row, Mississauga, Ontario L5C 1V3 100,000
Koska Lynnette 8 Hester Court, Thornhill, ON L3T 3K5 EMP 885,000
Ku Jim c/o Mark Twerdun, 1215 Riverbank Way, 206,666
Oakville, ON L6H 6X4
LaBuick Dennis 1936 St. John's Road, Newmarket, ON EMP 1,347,500
LaBuick Ed P.O. Box 7, 24345 Highway 48, Baldwin, Ontario L0E 1A0 EMP 1,362,500
LaBuick Nadia Faye P.O. Box 7, 24345 Highway 48, Baldwin, Ontario L0E 1A0 EMP 1,562,500
LaBuick Patricia 1936 St. John's Road, Newmarket, ON EMP 1,547,500
LaBuik Tillie 11719-135-B-ST, Edmonton, Alberta T5M 1L8 500,000
Lachine Ken 107-190 Robert Speck Pkwy., Mississauga, ON L4Z 3K3 5,000
Laroche Danny 151 Larkin Avenue, Markham, ON L3P 4Y4 EMP 12,500
Loeprich John 2070 - 10th Sideroad, Moffat, ON L0P 1J0 10,000
Long Wayne 207 Mapleview Drive E., Barrie, ON L4N 9H3 420,999
Mackenzie Phil 9 Amon Dr., R.R. 2, Sebright, ON L0K 1W0 40,000
Macmillan Isabel 2,000
Martin Marilyn 30,000
Matheson Jeff 1130 Oakery Woods Place, Oakville, ON L6M 2C1 40,000
Matheson Nicole 1130 Oakery Woods Place, Oakville, ON L6M 2C1 100,000
McCoy Jeff 10,000
Milne Eric 5,000
Minnaar Brenda 30 Brentwood Drive, Dundas, ON L9H 3N3 66,666
Mole John 1817 Will Scarlet Drive, Mississauga, On L4K 1L6 166,666
Murphy Kelly 44 Brown Street, Tottenham, ON L0G 1W0 EMP 12,500
Patterson Michael 2240 Halifax Dr., Suite 1009, Ottawa, ON K1G 2W8 50,000
Phillips Lisa 2362 Bankside Drive, Mississauga, ON L5M 6E3 33,333
Pollard Jeremy 8 Vine Crescent, Barrie, On L4N 2B3 250,000
Postance Michael 40,000
Powell Claire 13 Belmont Crescent, Midhurst, On L0L1X0 433,336
R.E. Walker Packaging Ltd. 25 Willow Landing Road, Midhurst, On L0L 1X1 333,336
Ramball Mary-Lee 4302 Vivian Road, Cedar Valley, ON L0G 1E0 EMP 5,000
Restorick Frank J. 1464 Jefferson Crescent,Oakville, ON L6H 3G6 20,333
Riddell Glenn 110 Garden Avenue, Ancaster, On L9G 2J7 150,000
Rose Glenda 10,000
Rosenstadt William c/o Spitzer Feldman P.C., 405 Park Avenue, NY, NY 10022 44,000
Rowe Andy 7,000
Rowe Dale 7,140
Samuel Lewis RR 1 GB 96, Lansdowne, On K0E 1L0 290,000
Sanders Leslie 40,000
Savaran Financial Inc. 157 Adelaide West, Ste. 176, Toronto, ON M5H 4E7 1,000,000
Shamess John R.R. # 1, Bradford, ON L3Z 2A4 24,000
Schmitz Peter 550 Westside road South, Kelowna, B.C. V1Z 3S2 100,000
Silver Mike 8 Highland Woods Court, London, Ontario W6C 5W9 12,000
Simmons Scott 304 Sumner Avenue, Oakville, On L6J 1S5 100,000
Slightham Phyllis 48 Quail Valley Road, Thornhill, ON L3T 4R2 100,000
Smyth William c/o Great War Memorial Hospital, 33 Drummond Street, 380,000
Perth, On L7H 2K1
Smyth William 218 Deborah Way, Barrie, On L4N 4N7 50,000
Smyth Steven 10,000
Staring Jamie 20 Kelly Place, Barrie, On L4N 8N2 125,000
Stewart Steve 4,000
Stone Perry 2,500
Spitzer, Jr. M. James c/o Spitzer Feldman P.C., 405 Park Avenue, NY, NY 10022 12,000
Straiton Ken c/o Mark Twerdun, TD Evergreen, 20 Milverton Drive, 333,335
Mississauga, ON L5R 3G2
Swiaty Dan 278 Cumberland Avenue, Hamilton, On L8M 2A1 6,000
Swiaty Terry 278 Cumberland Avenue, Hamilton, On L8M 2A1 34,000
Symons William R.R #5, Orangeville, On L9W 2Z2, Orillia, On L3V 6R2 20,000
Thorncliffe Industries Corp. 100 Roehampton Avenue, Toronto, ON M4P 1R3 815,000
Twerdun Helen & Walter 109-2240 Halifax Dr., Ottawa, Ontario 50,000
Twerdun Jill 250,000
Vallesi Julie 5345 Forest Ridge Dr., Mississauga, ON L5M 5B4 20,000
Via Trust The c/o Mark Twerdun, 1215 Riverbank Way, 250,000
Oakville, ON L6H 6X4
Voyce David & Carol 663 Glen Crescent, Orillia, On L3V 6R2 358,334
Walkey Bruce R.R. # 3 - 6900 Concession road, Everett, 4,000
Ontario L0M 1J0
----------
Total 22,522,974
See "Security Ownership of Certain Beneficial Owners" and "Certain
Relationships and Related Transactions".
DESCRIPTION OF SECURITIES
General
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our Articles of
Incorporation, as amended, and By-laws, which are included as exhibits to the
registration statement of which this prospectus forms a part, and by the
applicable provisions of Ontario law.
35
We are authorized to issue an unlimited number of shares of Common Stock,
no par value per share, of which 22,522,974 shares were issued and outstanding
as of February 14, 2002.
Common Stock
Holders of shares of our Common Stock are entitled to share equally on a
per share basis in such dividends as may be declared by our Board of Directors
out of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of our Common Stock. Upon our liquidation,
dissolution or winding up, after payment of creditors and the holders of any of
our senior securities, if any, our assets will be divided pro rata on a per
share basis among the holders of the shares of our Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges or any sinking fund provisions with respect
to the Common Stock and the Common Stock is not subject to call. The holders of
Common Stock do not have any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one vote for each
share held at all stockholders' meetings for all purposes, including the
election of directors. The Common Stock does not have cumulative voting rights.
All of the issued and outstanding shares of Common Stock are fully paid,
validly issued and non-assessable.
Dividend
We have never declared or paid any cash dividends on our Common Stock. We
anticipate that any earnings will be retained for development and expansion of
our business and we do not anticipate paying any cash dividends in the near
future. Our Board of Directors has sole discretion to pay cash dividends with
respect to our Common Stock based on our financial condition, results of
operations, capital requirements, contractual obligations and other relevant
factors.
36
Class D Warrants
On December 1, 2001, we issued 600,000 Class D Warrants to Jennifer Doering
as compensation for services rendered by Ms. Doering in her capacity as a
business consultant to the company. The shares of Common Stock underlying the
Class D Warrants are currently being registered in connection with this
registration statement.
The following is a summary of the provisions of such warrants.
Each Class D Warrant entitles the holder to one share of Common Stock
(subject to certain adjustments) through December 1, 2002, at a price of $0.25
per share. A Class D Warrantholder may exercise the warrant by surrendering the
warrant certificate to us, together with a properly completed and signed
subscription, the payment of the exercise price and any transfer tax. A Class D
Warrantholder who exercise the warrant for less than all of the warrants
evidenced by the warrant certificate will receive a new warrant certificate for
the remaining number of warrants. Any shares issued pursuant to the Class D
Warrants will be restricted until such time that they are either registered
pursuant to an effective registration statement filed with the Securities and
Exchange Commission or are transferred in a transaction which is exempt from the
registration requirements of the Securities Act.
We have authorized and reserved for issuance a number of underlying shares
of Common Stock sufficient to provide for the exercise of the Class D Warrants.
When issued, each share of Common Stock will be fully paid and nonassessable.
A Class D Warrantholder does not have voting or other rights as a
shareholder of ours unless and until a Class D Warrant is properly exercised and
exchanged for shares. Further, the Class D Warrants have no redemption rights.
The exercise price and the number of shares of Common Stock issuable upon
the exercise of each Class D Warrant are subject to adjustment in the event of a
stock dividend, recapitalization, merger, consolidation or certain other events.
Class E Warrants
On August 29, 2001, we issued 3,000,000 Class E Warrants to several
investors pursuant to a private placement being conducted by the Company. The
shares of Common Stock underlying the Class E Warrants are currently being
registered in connection withthis registration statement.
The following is a summary of the provisions of such warrants.
Each Class E Warrant entitles the holder to one share of Common Stock
(subject to certain adjustments) through August 29, 2003, at a price of $1.00
per share. Class E Warrantholders may exercise the warrants by surrendering a
warrant certificate to us, together with a properly completed and signed
subscription, the payment of the exercise price and any transfer tax. Class E
Warrantholders who exercise the warrants for less than all of the warrants
evidenced by a warrant certificate will receive a new warrant certificate for
the remaining number of warrants. Any shares issued pursuant to the Class E
Warrants will be restricted until such time that they are either registered
pursuant to an effective registration statement filed with the Securities and
Exchange Commission or are transferred in a transaction which is exempt from the
registration requirements of the Securities Act.
37
We have authorized and reserved for issuance a number of underlying shares
of Common Stock sufficient to provide for the exercise of the Class E Warrants.
When issued, each share of Common Stock will be fully paid and nonassessable.
Class E Warrantholders do not have voting or other rights as shareholders
of ours unless and until Class E Warrants are properly exercised and exchanged
for shares. Further, Class E Warrants have no redemption rights.
The exercise price and the number of shares of Common Stock issuable upon
the exercise of the Class E Warrants are subject to adjustment in the event of a
stock dividend, recapitalization, merger, consolidation or certain other events.
Class F Warrants
On February 1, 2002, we issued 500,000 Class F Warrants to Mary Boswell
pursuant to an agreement under which Ms. Boswell provided services to the
Company without compensation. The shares of Common Stock underlying the Class F
warrants are currently being registered in connection with this Registration
Statement.
The following is a summary of the provisions of such warrants.
Each Class F Warrant entitles the holder to one share of Common Stock
(subject to certain adjustments) through December 31, 2002, at a price of $0.50
per share. The Class F Warrantholder may exercise the warrants by surrendering a
warrant certificate to us, together with a properly completed and signed
subscription, the payment of the exercise price and any transfer tax. If the
Class F Warrantholder exercises the warrants for less than all of the warrants
evidenced by a warrant certificate, then the Class F Warrantholder will receive
a new warrant certificate for the remaining number of warrants. Any shares
issued pursuant to the Class F Warrants will be restricted until such time that
they are either registered pursuant to an effective registration statement filed
with the Securities and Exchange Commission or are transferred in a transaction
which is exempt from the registration requirements of the Securities Act.
We have authorized and reserved for issuance a number of underlying shares
of Common Stock sufficient to provide for the exercise of the Class F Warrants.
When issued, each share of Common Stock will be fully paid and nonassessable.
The Class F Warrantholder does not have voting or other rights as a
shareholder of ours unless and until Class F Warrants are properly exercised and
exchanged for shares. Further, Class F Warrants have no redemption rights.
The exercise price and the number of shares of Common Stock issuable upon
the exercise of the Class F Warrants are subject to adjustment in the event of a
stock dividend, recapitalization, merger, consolidation or certain other events.
Transfer Agent and Registrar
We do not yet have a transfer agent and registrar for our Common Stock. We
anticipate retaining a transfer agent and registrar prior to the effectiveness
of this registration statement.
Shares Eligible for Future Resale
Upon completion of the offering, based upon the number of common shares
outstanding as of February 14, 2002, a total of 25,522,974 common shares will be
outstanding. All of the common shares sold in this offering will be freely
tradable without restriction under either the Securities Act, except for any
such shares which may be acquired by an affiliate of ours or a control person,
as those terms are defined in Rule 144 promulgated under the Securities Act of
1933 or applicable Canadian securities laws.
Resale Restrictions
All of our shares of Common Stock issued prior to this offering are
"restricted securities" as this term is defined under Rule 144, in that such
shares were issued in private transactions not involving a public offering and
may not be sold in the U.S. in the absence of registration other than in
accordance with Rule 144 under the Securities Act of 1933 or another exemption
from registration. In general, under Rule 144 as currently in effect, any of our
affiliates or any person (or persons whose shares are aggregated in accordance
with Rule 144) who has beneficially owned our common shares which are treated as
restricted securities for at least one (1) year would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of 1%
of our outstanding common shares (approximately 255,230 shares based upon the
number of common shares expected to be outstanding after the offering) or the
reported average weekly trading volume in our common shares during the four
weeks preceding the date on which notice of such sale was filed under Rule 144.
Sales under Rule 144 are also subject to manner of sale restrictions and notice
requirements and to the availability of current public information concerning
our company. In addition, affiliates of our company must comply with the
restrictions and requirements of Rule 144 (other than the one (1) year holding
period requirements) in order to sell common shares that are not restricted
securities (such as common shares acquired by affiliates in market
transactions). Furthermore, if a period of at least two (2) years has elapsed
from the date restricted securities were acquired from us or from one of our
affiliates, a holder of these restricted securities who is not an affiliate at
the time of the sale and
38
who has not been an affiliate for at least three (3) months prior to such sale
would be entitled to sell the shares immediately without regard to the volume,
manner of sale, notice and public information requirements of Rule 144.
Upon closing of this offering, we intend to file a registration statement
for the resale of the common shares that are authorized for issuance under our
existing and new stock option plans. We expect this registration statement to
become effective immediately upon filing. Shares issued pursuant to our stock
option plans to U.S. residents after the effective date of that registration
statement (other than shares issued to our affiliates and the employees
described below) generally will be freely tradable without restriction or
further registration under the Securities Act of 1933.
INCOME TAX CONSEQUENCES
In this section we summarize certain of the U.S. and Canadian federal
income tax considerations that may be relevant to purchasers of common shares in
this offering who:
o are U.S. persons within the meaning of the U.S. Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), including a
purchaser who, or that, is a citizen or resident of the U.S., a
corporation or partnership created or organized under the laws of the
U.S. or any political subdivision thereof or therein, an estate, the
income of which is subject to U.S. federal income tax regardless of
the source, or a trust if a court within the U.S. is able to exercise
primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control all substantial
decisions of the trust;
o for purposes of the Income Tax Act (Canada) (the "Income Tax Act") and
the Canada-U.S. Income Tax Convention (1980) (the "Convention"), are
resident in the U.S. and are not nor are deemed to be resident in
Canada; hold our common shares as capital assets for purposes of the
Internal Revenue Code and capital property for purposes of the Income
Tax Act; and
o deal at arm's length with us for purposes of the Income Tax Act and
the Internal Revenue Code.
For purposes of this discussion, we will refer to beneficial owners of
common shares who satisfy the above conditions as "Unconnected U.S.
Shareholders." Such persons do not include, and this summary does not apply to,
persons who are "financial institutions" as defined in Section 142.2 of the
Income Tax Act and non-resident insurers that carry on business in Canada and
elsewhere.
We will assume, for purposes of this discussion, that you are an
Unconnected U.S. Shareholder. The tax consequences to a purchaser of common
shares who is not an Unconnected U.S. Shareholder may differ substantially from
the tax consequences discussed in this section. This discussion does not purport
to deal with all aspects of U.S. or Canadian federal income taxation that may be
relevant to particular Unconnected U.S. Shareholders or to certain classes of
39
Unconnected U.S. Shareholders who are subject to special treatment under the
U.S. or Canadian federal income tax laws, including, but not limited to,
Unconnected U.S. Shareholders who own, actually or constructively, 10% or more
of the total combined voting power of all classes of our shares, financial
institutions, dealers in securities, banks, insurance companies, tax-exempt
organizations, broker-dealers, individual retirement and other tax-deferred
accounts, U.S. persons whose functional currency (as defined in Section 985 of
the Internal Revenue Code) is not the U.S. dollar, and Unconnected U.S.
Shareholders holding common shares as part of a "straddle", "hedge" or
"conversion transaction".
This discussion is based upon:
o the Income Tax Act and regulations under the Income Tax Act;
o the Internal Revenue Code and existing and proposed regulations under
the Internal Revenue Code;
o the Convention;
o the current administrative policies and practices published by Revenue
Canada;
o all specific proposals to amend the Income Tax Act and the regulations
under the Income Tax Act that have been publicly announced by the
Minister of Finance (Canada) prior to the date of this prospectus;
o the administrative rulings, practice and policies of the U.S. Internal
Revenue Service (the "IRS"); and
o applicable U.S. and Canadian judicial decisions,
all as of the date hereof and all of which are subject to change (possibly on a
retroactive basis) and differing interpretation. We do not discuss the potential
effects of any proposed legislation in the U.S. and do not take into account the
tax laws of the various provinces or territories of Canada or the tax laws of
the various state and local jurisdictions of the U.S. or foreign jurisdictions.
THIS DISCUSSION IS MERELY A GENERAL DESCRIPTION OF THE U.S. AND CANADIAN FEDERAL
INCOME TAX CONSIDERATIONS MATERIAL TO A PURCHASE OF COMMON SHARES AND IT IS NOT
INTENDED TO BE, NOR SHOULD IT BE CONSTRUED AS, LEGAL OR TAX ADVICE TO ANY PERSON
PURCHASING COMMON SHARES. THIS DISCUSSION DOES NOT DEAL WITH ALL POSSIBLE TAX
CONSEQUENCES RELATING TO AN INVESTMENT IN OUR COMMON SHARES. WE HAVE NOT TAKEN
INTO ACCOUNT YOUR PARTICULAR CIRCUMSTANCES AND DO NOT ADDRESS ALL CONSEQUENCES
TO YOU UNDER PROVISIONS OF U.S. OR CANADIAN INCOME TAX LAW. THEREFORE, YOU
SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES TO
YOU OF PURCHASING, OWNING AND DISPOSING OF COMMON SHARES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
40
AND ANY CHANGES IN APPLICABLE LAWS.
U.S. Federal Income Tax Considerations
You generally will be required to include the U.S. dollar value of any
dividend distribution which you receive on the common shares in ordinary income
to the extent of our current and accumulated earnings and profits, as determined
under U.S. federal income tax principles. The U.S. dollar value of any
distribution received in Canadian dollars will be determined based on the spot
exchange rate for the date of receipt. The amount of the distribution required
to be included in gross income will be determined without reduction for Canadian
withholding tax. Therefore, in the event that the distribution is subject to
Canadian withholding tax, you generally will be required to report gross income
in an amount greater than the cash received. To the extent any dividend
distribution paid by us exceeds our current and accumulated earnings and
profits, your pro rata share of the excess amount will be treated first as a
return of capital up to your adjusted tax basis in our common shares (with a
corresponding reduction in basis), and then as a gain from the sale or exchange
of the common shares. Unconnected U.S. Shareholders should consult their tax
advisors regarding the tax treatment of foreign currency gain or loss, if any,
on Canadian dollars received. Dividends paid by us on our common shares
generally will not be eligible for the "dividends received" deduction.
Subject to certain conditions and limitations, you may be entitled to claim
a credit for U.S. federal income tax purposes in an amount equal to the U.S.
dollar value of any Canadian taxes withheld on any distributions that we make.
Alternatively, you may in some circumstances claim a deduction for the amount of
Canadian tax withheld in a taxable year, but only if you do not elect to claim a
foreign tax credit in respect of any foreign taxes paid by you in that year. In
general, the amount of allowable foreign tax credits in any year cannot exceed
your regular U.S. federal income tax liability for the year attributable to
certain foreign source income. Because distributions in excess of our current
and accumulated earnings and profits generally will not give rise to foreign
source income, you may be unable to claim a foreign tax credit in respect of
Canadian withholding tax imposed on the excess amount unless, subject to
applicable limitations, you have other foreign source income. However,
limitations on the use of foreign tax credits generally will not apply to an
electing individual Unconnected U.S. Shareholder whose creditable foreign taxes
during a tax year do not exceed $300 ($600 for joint filers) if such
individual's gross income for the tax year from non-U.S. sources consists solely
of certain items of "passive income" reported on a "payee statement" furnished
to the Unconnected U.S. Shareholder. In addition, an Unconnected U.S.
Shareholder will be denied a foreign tax credit with respect to taxes withheld
from dividends received on the common shares to the extent such Unconnected U.S.
Shareholder has not held the common shares for a minimum period or to the extent
such Unconnected U.S. Shareholder is under an obligation to make certain related
payments with respect to substantially similar or related property. The rules
relating to foreign tax credits are extremely complex and the availability of a
foreign tax credit depends on numerous factors. You should consult your own tax
advisor concerning the application of the U.S. foreign tax credit rules to your
particular situation.
You generally will recognize gain or loss on the sale, exchange or other
disposition of your common shares in an amount equal to the difference, if any,
between the amount realized on the sale, exchange or disposition and your
adjusted tax basis in the common shares. Any gain
41
or loss you recognize upon the sale, exchange or disposition of common shares
held as capital assets generally will be long-term or short-term capital gain or
loss, depending on whether the shares have been held by you for more than one
(1) year. Gain or loss resulting from a sale, exchange or disposition of the
common shares generally will be U.S. source for U.S. foreign tax credit purposes
unless it is attributable to an office or other fixed place of business outside
the U.S. and other conditions are met.
Dividend payments with respect to the common shares and proceeds from the
sale, exchange or disposition of common shares may be subject to information
reporting to the IRS and possible U.S. backup withholding tax at a rate of 31%.
Backup withholding will not apply, however, to an Unconnected U.S. Shareholder
who furnishes a correct taxpayer identification number and makes any other
required certification or who is otherwise exempt from backup withholding.
Generally, an Unconnected U.S. Shareholder will provide such certification on
IRS Form W-9. Amounts withheld under the backup withholding rules may be
credited against a holder's tax liability, and a holder may obtain a refund of
any excess amounts withheld under the backup withholding rules by timely filing
the appropriate form for refund with the IRS.
Canadian Federal Income Tax Considerations
In this section, we summarize the material anticipated Canadian federal
income tax considerations relevant to your purchase of common shares. This
section will only apply if you do not use or hold and are not deemed to use or
hold the common shares in, or in the course of, carrying on a business in Canada
for the purposes of the Income Tax Act.
Under the Income Tax Act, as an Unconnected U.S. Shareholder, you will
generally be exempt from Canadian tax on a capital gain realized on an actual or
deemed disposition of the common shares unless you, persons with whom you did
not deal at arm's length for the purposes of the Income Tax Act, or you and such
persons owned or had interests in or rights to acquire 25% or more of our issued
common shares of any class of the capital stock of our company at any time
during the five (5) year period immediately preceding the disposition or deemed
disposition. Where a capital gain realized on a disposition or deemed
disposition of our common shares is subject to tax under the Income Tax Act, the
Convention will exempt the capital gain from Canadian tax if, on the disposition
of our shares, the value of our common shares is not derived principally from
real property situated in Canada. This relief under the Convention may not be
available if you had a permanent establishment or fixed base available in Canada
during the twelve (12) months immediately preceding the disposition of the
shares.
Dividends paid, credited or deemed to have been paid or credited on the
shares to Unconnected U.S. Shareholders will generally be subject to a Canadian
withholding tax at a rate of 25% under the Income Tax Act. Under the Convention,
the rate of withholding tax generally applicable to Unconnected U.S.
Shareholders who beneficially own the dividends is reduced to 15%. In the case
of Unconnected U.S. Shareholders that are companies that beneficially own at
least 10% of our voting shares, the rate of withholding tax on dividends is
reduced to 5%.
The Canadian federal government does not currently impose any estate taxes
or succession duties, however, if you die, there is generally a deemed
disposition of the common shares held at that time for proceeds of disposition
equal to the fair market value of the shares
42
immediately before your death. Capital gains realized on the deemed disposition,
if any, will generally have the income tax consequences described above.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that we will indemnify our officers
and directors for costs and expenses incurred in connection with the defense of
actions, suits, or proceedings against them on account of their being or having
been directors or officers of The Buck A Day Company Inc., absent a finding of
negligence or misconduct in the performance of their duties.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers or persons controlling The Buck A
Day Company Inc. pursuant to the foregoing provisions, we have 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 unenforceable.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for The
Buck A Day Company Inc. by Bussin & Bussin, Toronto, Ontario. Spitzer & Feldman
P.C., New York, is acting as our U.S. legal counsel with respect to the
offering.
EXPERTS
Certain of the financial statements of The Buck A Day Company Inc. included
in this prospectus and elsewhere in this registration statement, to the extent
and for the periods indicated in their reports, have been audited by Stephen
Diamond, Chartered Accountant, our independent certified public accountants,
whose reports thereon appear elsewhere herein and in the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
You should only rely upon the information included in or incorporated by
reference into this prospectus, the exhibits to the prospectus or in any
prospectus supplement that is delivered to you. We have not authorized anyone to
provide you with additional or different information. You should not assume that
the information included in or incorporated by reference into this prospectus or
any prospectus supplement is accurate as of any date later than the date on the
front of the prospectus or prospectus supplement.
We have not authorized any person to provide you with information different
from that contained or incorporated by reference in this prospectus. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our Common Stock.
43
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report F-1
Financial Statements:
Balance Sheets as of July 31, 2001 and 2000 and October 31,2001
(unaudited) F-2
Statements of Operations for the Year ended July 31, 2001 and
from inception, January 1, 2000 to July 31, 2000 and the
three months ended October 31, 2001 and 2000 (unaudited) F-3
Statement of Changes in Shareholders' Equity for the Year ended
July 31, 2001 and from inception, January 1, 2000 to
July 31, 2000 and the three months ended October 31, 2001
and 2000 (unaudited) F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 - F-10
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
The Buck A Day Company Inc.
Newmarket, Ontario, Canada
I have audited the balance sheets of THE BUCK A DAY COMPANY INC. as at July 31,
2001 and 2000 and the statements of operations, changes in shareholders' equity
and cash flows for the year ended July 31, 2001 and from inception, January 1,
2000 through July 31, 2000. These statements are the responsibility of the
company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that I plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In my opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at July 31, 2001 and 2000 and
the results of its operations and changes in its cash flows for the year ended
July 31, 2001 and from inception, January 1, 2000 through July 31, 2000 in
accordance with accounting principles generally accepted in the United States of
America.
North York, Ontario "Stephen Diamond"
September 15, 2001 Chartered Accountant
F-1
THE BUCK A DAY COMPANY INC.
BALANCE SHEETS
(IN UNITED STATES DOLLARS)
October 31,
As at July 31, As at July 31, 2001
2001 2000 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 316,427 $ 25,164 $ 304,789
Accounts receivable
(Net of an allowance for doubtful accounts
of $ - and $ - for 2001 and 2000) 126,621 39,628 357,407
Prepaid expenses 49,377 84,317 228,580
Inventory 122,037 12,117 235,286
Loan to Shareholder -- -- 58,345
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 614,462 161,226 1,184,407
FIXED ASSETS
(Net of accumulated depreciation)(Note 2) 191,647 90,255 273,967
- ---------------------------------------------------------------------------------------------------------------------
$ 806,109 $ 251,481 $ 1,458,374
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities
(Notes 4 and 8) $ 1,184,277 $ 286,093 $ 1,454,431
Deferred marketing revenue (Note 5) 228,865 -- --
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,413,142 286,093 1,454,431
- ---------------------------------------------------------------------------------------------------------------------
LONG TERM LIABILITIES
Advances from shareholders' (Note 3) 834,976 33,825 --
Provincial sales tax payable (Note 4) 79,319 -- --
- ---------------------------------------------------------------------------------------------------------------------
914,295 33,825 --
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,327,437 319,918 1,454,431
- ---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 5, 8, 10 and 11)
SHAREHOLDERS' DEFICIENCY:
Capital Stock
No par value, unlimited number of common
shares authorized July 31, 2001 - 400,
July 31, 2000-200, October 31, 2001- 20,000,000
shares issued and outstanding (Note 6) 354,250 305,500 1,602,243
Accumulated other comprehensive income (Note 7) 29,393 16,075 43,802
Accumulated Deficit (1,904,971) (390,012) (1,642,102)
- ---------------------------------------------------------------------------------------------------------------------
(1,521,328) (68,437) 3,943
- ---------------------------------------------------------------------------------------------------------------------
$ 806,109 $ 251,481 $ 1,458,374
=====================================================================================================================
See accompanying notes.
F-2
THE BUCK A DAY COMPANY INC.
STATEMENTS OF OPERATIONS
(IN UNITED STATES DOLLARS)
3 MONTHS 3 MONTHS
INCEPTION, ENDED ENDED
JANUARY 1, OCTOBER 31, OCTOBER 31,
THE YEAR ENDED 2000 TO 2001 2000
FOR JULY 31, 2001 JULY 31, 2000 (UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
REVENUE
Sales $ 5,381,008 $ 733,973 $ 4,143,314 $ 1,281,419
Cost of sales (3,795,962) (519,307) (2,627,162) (917,074)
- ------------------------------------------------------------------------------------------------------------------------
Gross Profit 1,585,046 214,666 1,516,152 364,345
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Amortization 22,326 9,283 12,200 4,565
Automobile and travel 54,887 17,193 22,952 10,766
Bad debts 38,440 -- 855 --
Communication costs 77,776 37,763 37,232 34,402
Consulting fees 104,656 796 8,433 2,298
Interest and bank charges 11,937 2,438 4,688 1,926
Media and printing costs 1,114,561 186,847 315,053 262,578
Office expenses 32,870 31,270 40,168 30,542
Outside answering 184,218 2,550 92,050 20,808
Postage and courier 159,266 18,099 57,778 29,308
Professional fees 63,399 14,647 18,473 --
Rent and utilities 67,585 32,106 20,724 16,686
Repairs and maintenance 23,547 6,945 4,510 6,223
Salaries and commissions 1,075,467 217,738 584,522 217,756
Telemarketing salaries 69,070 27,003 33,645 22,517
- ------------------------------------------------------------------------------------------------------------------------
3,100,005 604,678 1,253,283 660,375
- ------------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME (Note 9) $ (1,514,959) $ (390,012) $ 262,869 $ (296,030)
========================================================================================================================
Basic and diluted earnings (loss)
per share $ (.08) $ (.02) $ .01 $ (.01)
========================================================================================================================
Weighted average shares
outstanding 20,000,000 20,000,000 20,000,000 20,000,000
========================================================================================================================
See accompanying notes.
F-3
THE BUCK A DAY COMPANY INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN UNITED STATES DOLLARS)
Accumulated
Comprehensive
Foreign Currency
Number of Capital Translation Accumulated
Shares Stock Adjustment Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2000 -- $ -- $ -- $ -- $ --
Issued for Cash 200 305,500 -- -- 305,500
Net Loss -- -- -- (390,012) (390,012)
Foreign currency translation
adjustment (Note 7) -- -- 16,075 -- 16,075
- ------------------------------------------------------------------------------------------------------------------------------------
Balance July 31, 2000 200 305,500 16,075 (390,012) (68,437)
Issued for cash 200 48,750 -- -- 48,750
Net Loss -- -- -- (1,514,959) (1,514,959)
Foreign currency translation
adjustment (Note 7) -- -- 13,318 -- 13,318
- ------------------------------------------------------------------------------------------------------------------------------------
Balance July 31, 2001 400 354,250 29,393 (1,904,971) (1,521,328)
Issued for cash 19,999,600 1,247,993 -- -- 1,247,993
Net income for the three
months ended October 31,
2001 (Unaudited) -- -- -- 262,869 262,869
Foreign currency translation
adjustment (Note 7) -- -- 14,409 -- 14,409
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 2001
(Unaudited) 20,000,000 $ 1,602,243 $ 43,802 $ (1,642,102) $ 3,943
====================================================================================================================================
See accompanying notes.
F-4
THE BUCK A DAY COMPANY INC.
STATEMENTS OF CASH FLOWS
(IN UNITED STATES DOLLARS)
3 MONTHS 3 MONTHS
INCEPTION, ENDED ENDED
JANUARY 1, OCTOBER 31, OCTOBER 31,
THE YEAR ENDED 2000 TO 2001 2000
FOR JULY 31, 2001 JULY 31, 2000 (UNAUDITED) (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
Cash Used in Operating Activities
Net loss $ (1,514,959) $ (390,012) $ 262,869 $ (296,030)
Amortization 22,326 9,283 12,200 4,565
- ---------------------------------------------------------------------------------------------------------------------
(1,492,633) (380,729) 275,069 (291,465)
- ---------------------------------------------------------------------------------------------------------------------
Accounts receivable (86,993) (39,628) (230,787) 12,732
Prepaid expenses 34,940 (84,317) (179,200) (123,200)
Inventory (109,920) (12,117) (113,249) 4,276
Provincial sales tax payable 79,319 -- (79,319) --
Accounts payable and
accrued liabilities 898,184 286,093 240,761 207,815
Deferred marketing revenue 228,865 -- (228,865) --
- ---------------------------------------------------------------------------------------------------------------------
1,044,395 150,031 (590,659) 101,623
- ---------------------------------------------------------------------------------------------------------------------
Cash used in operations (448,238) (230,698) (315,590) (189,842)
- ---------------------------------------------------------------------------------------------------------------------
Financing Activities
Advances from shareholders
and loans payable 801,151 33,825 (893,321) 171,996
Proceeds from capital
stock issuance 48,750 305,500 1,247,993 48,750
- ---------------------------------------------------------------------------------------------------------------------
Cash provided by
financing activities 849,901 339,325 354,672 220,746
- ---------------------------------------------------------------------------------------------------------------------
Investing Activity
Additions to fixed assets and
Cash used in investing activities (123,718) (99,538) (94,522) (28,402)
- ---------------------------------------------------------------------------------------------------------------------
Effect of foreign exchange
rate changes on cash 13,318 16,075 43,802 11,463
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and
Cash Equivalents 291,263 25,164 (11,638) 13,165
Cash and Cash Equivalents
Beginning of year (inception) 25,164 -- 316,427 25,164
- ---------------------------------------------------------------------------------------------------------------------
End of year $ 316,427 $ 25,164 $ 304,789 $ 38,329
=====================================================================================================================
See accompanying notes.
F-5
THE BUCK A DAY COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2001 AND 2000
(IN UNITED STATES DOLLARS)
(Information as of, and for the three month periods ended October 31,2001 and
2000 is unaudited)
1. Summary of Significant Accounting Policies
These financial statements are prepared in accordance with United States
Generally Accepted Accounting Principles ("GAAP") applied on a consistent
basis. There are no significant differences between Canadian GAAP and
United States Accounting standards as applied to these financial
statements.
The company is in the business of selling computer hardware, software and
peripherals throughout Canada.
(a) Reporting Currency and Foreign Currency translation
The financial statements have been presented in U.S. dollars. Assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange in effect at the balance sheet date.
Revenues and expenses are translated at the weighted average rate for the
period. Translation adjustments are deferred in accumulated other
comprehensive income (loss), a separate component of shareholders' equity.
(b) Inventory
Inventory is valued at the lower of cost and net realizable value.
(c) Depreciation
Fixed assets are recorded at cost. Depreciation has been provided for in
the accounts at the following rates:
Furniture, equipment and computers -20% declining balance
(d) Revenue Recognition
Revenues and expenses are recognized on the accrual basis. Revenue from
sales of products is recognized when title passes to customers, which is at
the time goods are shipped. Staff Accounting Bulletin ("SAB") No. 101
issued by the Securities and Exchange Commission ("SEC") requires the
company to report any changes in revenue recognition as a cumulative change
in accounting principle at the time of implementation. The adoption of SAB
101 did not have a material impact on the Company's financial position or
results of operations.
(e) Unaudited Interim Financial Data
The unaudited financial statements for the three months ended October
31,2001 and 2000 reflect all adjustments, all of which are of a normal
recurring nature, which are in the opinion of management, necessary to a
fair presentation of the results for the interim periods presented and are
not necessarily indicative of full year results.
F-6
THE BUCK A DAY COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2001 AND 2000
(IN UNITED STATES DOLLARS)
(Information as of, and for the three month periods ended October 31,2001 and
2000 is unaudited)
(f) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. The more
subjective of such estimates are deferred expenses relating to media
advertising, certain shipping costs and telemarketing costs affecting
future periods. The recorded amounts for such items are based on
management's best information and judgement, and accordingly, actual
results could differ from those estimates.
(g) Income Taxes
The Company follows the liability method of accounting for income taxes in
accordance with the Canadian Institute of Chartered Accountants new income
tax standard and SFAS #109 - Accounting for income taxes. Under this
method, income tax liabilities and assets are recognized for the estimated
tax consequences attributable to differences between the amounts reported
in the financial statements and their respective tax bases, using enacted
income tax rates. The effect of a change in income tax rates on future
income tax liabilities and assets is recognized in income in the period
that the change occurs.
(h) Cash Flows
For purposes of the statements of cash flows, the company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents.
(i) Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share have been computed in
accordance with SFAS No. 128. In accordance with the "cheap stock" rules of
the securities and exchange commission, all shares issued are being treated
as outstanding for all periods presented.
2. FIXED ASSETS
Fixed assets consist of the following:
October 31,
As at July 31 2001 2000 2001
- -------------------------------------------------------------------------------------------------------------
Cost Accumulated Net Net (Unaudited)
Depreciation
- -------------------------------------------------------------------------------------------------------------
Furniture, equipment
and computers $ 223,256 $ 31,609 $ 191,647 $ 90,255 $ 273,967
=============================================================================================================
F-7
THE BUCK A DAY COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2001 AND 2000
(IN UNITED STATES DOLLARS)
(Information as of, and for the three month periods ended October 31,2001 and
2000 is unaudited)
3. Shareholder Advances and Loans payable
Shareholder advances and loans payable are non interest bearing and
repayable upon demand. The shareholders have indicated that no demand for
repayment will be made in the current year. Shareholder loans are secured
by a debenture over the assets of the company.
Subsequent to July 31, 2001, the shareholder advances and loans payable
were converted to common shares of the company's stock.
4. Provincial Sales Tax Payable
During the year the company entered into a structured repayment plan with a
Provincial Sales Tax authority. The company is committed to 24 equal
payments of principal and interest in the amount of $8,269 per month. At
July 31, 2001 the current portion due was $89,175 and is included in
accounts payable and accrued liabilities.
5. Deferred Marketing Revenue
During the year the company entered into a three year agreement with IBM
Canada Ltd. ("IBM") to promote and sell IBM products exclusively. In
addition to the agreement IBM provided co-marketing funds in the amount of
$227,500 with an additional $32,500 of co- marketing funds to be provided
semi-annually. The co-marketing funds are being charged against the media
and marketing costs as incurred. Management expects to utilize the entire
amount received within the current fiscal quarter.
F-8
THE BUCK A DAY COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2001 and 2000
(IN UNITED STATES DOLLARS)
(Information as of, and for the three month period ended October 31,2001 and
2000 is unaudited)
6. Capital Stock
October 31,
2001
As at July 31 2001 2000 (Unaudited)
- -----------------------------------------------------------------------------------------------
Authorized - unlimited, no par value
Common shares
Issued - 400 (July 31, 2000 - 200,
October 31,2001 - 20,000,000)
Common shares $ 354,250 $ 305,500 $ 1,602,243
===============================================================================================
(a) Subsequent to July 31, 2001, the loans payable to shareholders were
converted into 12,099,600 Common Shares of the corporation for aggregate
proceeds of $ 833,188.
(b) The Corporation issued Series A warrants for 1,500,000 Common Shares at
$0.065 per common share.
(c) The Corporation issued Series B warrants for 3,000,000 common shares at
$0.15 which were exercised subsequent to year end.
(d) The Corporation issued Series C warrants for 800,000 common shares at
$0.065.
The Series A and B warrants are exercisable up to 30 days from the issuance
of the common shares. The series C warrants are exercisable up to 120 days
from the issuance of the common shares. The Series B warrants were
exercised for cash consideration and services rendered.
7. Foreign Currency Translation Adjustment
The balance in the foreign currency translation adjustment account includes
historic amounts related to the Corporation's long term assets and
liabilities.
8. Lawsuit
In July 2001, Beamscope Canada Inc., a supplier of hardware and software
commenced an action against us in the Superior Court of Justice claiming the sum
of Cdn. $250,000, plus interest and costs for unpaid accounts. On December 21,
2001 we settled the Beamscope lawsuit and paid them Cdn. $70,000 pursuant to the
terms of such settlement.
F-9
THE BUCK A DAY COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2001 and 2000
(IN UNITED STATES DOLLARS)
(Information as of, and for the three month periods ended October 31,2001 and
2000 is unaudited)
9. Income Tax Losses The company has tax losses available for carry forward to
apply against future income In the amount of $1,934,364. No benefit or
deferred tax asset has been recognized in these financial statements in
accordance with SFAS No. 109 since there is no assurance that such asset
will be realized. These losses expire through 2008.
10. Economic Dependance In excess of 95% of the companies inventory purchases
are from IBM Corporation.
11. Commitments
(a) In September 2001 the company leased approximately 16,500 square feet.
The lease term is from September 1, 2001 to January 31, 2006.
Aggregate minimum rental commitments under non-cancelable operating
leases are as follows:
Fiscal 2002 $ 91,028
2003 99,511
2004 98,012
2005 98,012
2006 17,955
----------
$ 404,518
==========
(b) Subsequent to the year end, the company entered into employment
contracts with the Chief Executive Officer, the President, the Vice
President of operations and the Manager of Business Affairs. These
contracts are 3 years in length and provide for an aggregate annual
salary of $630,000 with annual increases equal to 10% of the income of
the preceding year, the right to participate in any share option plan,
share purchase plan, retirement plan or similar plan.
F-10
================================================================================
No dealer, salesman or other person has
been authorized to give any information
or to make representations other than
those contained in this prospectus, and
if given or made, such information or
representations must not be relied upon
as having been authorized by us or the
selling shareholders. Neither the
delivery of this prospectus nor any sale
hereunder will, under any circumstances,
create an implication that the
information herein is correct as of any
time subsequent to its date. This 29,622,974 Shares
prospectus does not constitute an offer
to or solicitation of offers by anyone
in any jurisdiction in which such an
offer or solicitation is not authorized
or in which the person making such an
offer is not qualified to do so or to
anyone to whom it is unlawful to make
such an offer or solicitation.
TABLE OF CONTENTS
Prospectus Summary..............................
Risk Factors.................................... THE BUCK A DAY COMPANY INC.
A Note Concerning Forward-Looking Statements....
Conventions Which Apply to this Prospectus......
Currency of Presentation........................ ----------------
Dividend Policy.................................
Capitalization.................................. PROSPECTUS
Exchange Rates..................................
Selected Financial Data......................... ----------------
Dilution........................................
Market for Common Equity and Related
Stockholders Matters............................
Impact of the "Penny Stock" Rules on Buying
or Selling Our Common Stock.....................
Plan of Distribution............................
Management Discussion and Analysis of
Financial Condition and Results of Operations...
Description of Business.........................
Management......................................
Principal Shareholders..........................
Certain Transactions............................ February 22, 2002
Selling shareholders............................
Description of Securities.......................
Income Tax Consequences.........................
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..
Legal Matters...................................
Experts.........................................
Where You Can Find More Information.............
The Buck A Day Company, Inc. Consolidated
Financial Statements.........................F-1
PART II......................................I-1
Information Not Required in the Prospectus..II-1
SIGNATURES..................................II-6
================================================================================
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by The Buck A
Day Company Inc. in connection with the sale of the securities being registered.
All amounts are estimates except the Securities and Exchange Commission
registration fee:
Registration Fee................................... $2,500
Printing and Engraving Expenses.................... $5,000
Accounting Fees and Expenses....................... $15,000
Legal Fees and Expenses............................ $70,000
Transfer Agent's Fees and Expenses.................
Miscellaneous...................................... $7,500
Total.................................... $100,000
Item 14. Indemnification of Directors and Officers
Under the Business Corporations Act, we are permitted to indemnify our
directors and officers and former directors and officers against costs and
expenses, including amounts paid to settle an action or satisfy a judgment in a
civil, criminal or administrative action or proceeding to which they are made
parties because of their position as directors or officers, including an action
against us. In order to be entitled to indemnification under this Act, the
director or officer must act honestly and in good faith with a view to our best
interests, and in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, the director or officer must have
reasonable grounds for believing that his or her conduct was lawful.
Under our by-laws, we may indemnify our current and former directors,
officers, employees and agents. Our by-laws also provide that, to the fullest
extent permitted by the Act, we are authorized to purchase and maintain
insurance on behalf of our and our subsidiaries' current and past directors,
officers, employees and agents against any liability incurred by them in their
duties. We believe that the provisions of our by-laws are necessary to attract
and retain qualified persons as directors and officers.
We recently terminated an employee for cause and issued a statement of
claim for more than Cdn.$1 million for the misappropriation of our property.
The defendant has issued a counter-claim against us which we feel is without
merit.
Currently, there is no pending litigation or proceeding where a current or
past director, officer or employee is seeking indemnification, nor are we aware
of any threatened litigation that may result in claims for indemnification. We
do not maintain any liability insurance covering our directors and officers.
II-1
Item 15. Recent Sales of Unregistered Securities
Set forth below is information regarding the issuance and sales of The Buck
A Day Company Inc.'s Common Stock without registration during the last three (3)
years. No such sales involved the use of an underwriter and no commissions were
paid in connection with the sale of any securities.
1. On September 15, 1999, we were incorporated pursuant to the Business
Corporation Act (Ontario). Upon our incorporation 200 shares were issued to
our founding shareholders. This transaction by us did not involve any
public offering and was exempt from the registration requirements under the
Securities Act pursuant to Section 4(2) thereof.
2. On April 27, 2000, we issued 200 shares of Common Stock to A.R.T.
International Inc. for an aggregate consideration of Cdn. $470,000. This
transaction by us did not involve any public offering and was exempt from
the registration requirements under the Securities Act pursuant to Section
4(2) thereof.
3. On January 11, 2001, Nadia Faye LaBuick loaned Cdn. $212,500 to us payable
on demand together with interest at the rate of 7% per annum. The loan was
secured by all of our assets and registered pursuant to the applicable
local laws. Also on January 11, 2001, Dennis and Patricia LaBuick advanced
Cdn. $510,000 to us payable on demand together with interest at the rate of
7% per annum. This loan was also secured by our assets and registered
pursuant to the applicable local laws. These transactions by us did not
involve any public offering and were exempt from the registration
requirements under the Securities Act pursuant to Section 4(2) thereof.
4. On or about July 7, 2001, 1483516 Ontario Limited, loaned $450,000 USD to
us payable on demand together with interest at the rate of 7% per annum and
secured by a first lien on all of our assets. The 1483516 Ontario Limited
Security Agreement contained a provision that, subject to approval of
A.R.T., the principal of the debt was convertible into 3,000,000 units
consisting of one share of our Common Stock and one series B warrant to
purchase one share of our Common Stock at a price of $0.15 USD. This
transaction by us did not involve any public offering and was exempt from
the registration requirements under the Securities Act pursuant to Section
4(2) thereof.
5. On August 1, 2001, we issued 800,000 Class C Warrants to A.R.T. entitling
it to purchase 800,000 shares of our common stock exercisable at Cdn. $0.10
per share. The aggregate consideration for the issuance of the Class C
Warrants was $1.00. Also on August 1, we authorized conversion of the
LaBuick family members' loans together with interest totaling Cdn. $710,000
into 7,100,000 shares of our common stock and Class A Warrants for an
additional 1,500,000 shares exercisable at Cdn. $0.10 per share. These
transactions by us did not involve any public offering and were exempt from
the registration requirements under the Securities Act pursuant to Section
4(2) thereof.
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6. On August 29, 2001, the LaBuick family members converted all of their loans
to us into 7,100,000 shares of our Common Stock and Class A Warrants which
granted them the right to purchase an additional 1,500,000 shares at
CDN$0.10 per share. Also on that day, 148516 Ontario Limited converted its
loans to us into 3,000,000 shares of Common Stock and exercised all series
B warrants for an additional 3,000,000 shares of Common Stock. These
transactions by us did not involve any public offering and were exempt from
the registration requirements under the Securities Act pursuant to Section
4(2) thereof.
7. On October 1, 2001, the LaBuick family members exercised all Class A
Warrants receiving 1,500,000 shares of our Common Stock and A.R.T.
International, Inc. exercised all Class C Warrants receiving 800,000 shares
of our Common Stock. These transactions by us did not involve any public
offering and were exempt from the registration requirements under the
Securities Act pursuant to Section 4(2) thereof.
Additionally, since the inception of our 2002 Stock Option Plan in February
2002, we have granted a total of 3,500,000 directors, officers, advisers or
consultants options, pursuant to the Stock Option Plan, to purchase an aggregate
of 3,500,000 shares of the company's Common Stock. Each of these transactions by
us did not involve any public offering and was exempt from the registration
requirements under the Securities Act pursuant to Section 4(2) thereof.
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Item 16. Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Articles of Incorporation of the Registrant.* [including all amendments thereto]
3.2 By-laws of the Registrant.*
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Bussin & Bussin with respect to the validity of the shares.*
10.1 IBM Canada Ltd. Business Partner Agreement, dated September 8, 2001.*
10.2 CitiFinancial Services of Canada Ltd. Agreement, dated April ____, 2000.*
10.3 Lexmark Canada Marketing Assistance Rebate Program, dated January 18, 2002.*
10.4 Primus Telecommunications Canada Inc. Access Agreement, dated June 21, 2001.*
10.5 Tannery Mall Lease Agreement, dated September 1, 2000.*
10.6 2002 Omnibus Stock Purchase Agreement, dated February _____, 2002.*
10.7 Employment Agreement, dated November 1, 2001 between the Registrant and Ed LaBuick.*
10.8 Employment Agreement, dated November 1, 2001 between the Registrant and Dennis LaBuick.*
10.9 Employment Agreement, dated November 1, 2001 between the Registrant and Keith Kennedy.*
10.10 Employment Agreement, dated November 1, 2001 between the Registrant and George Slightham.*
23.1 Consent of Bussin & Bussin (contained in Exhibit 5.1).*
23.2 Consent of Spitzer & Feldman P.C.*
23.3 Consent of Stephen A. Diamond, CA.*
24.1 Powers of Attorney (included on the signature pages).
* To be filed by amendment.
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Item 17. Undertakings
The undersigned Registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; provided, however, that paragraphs (a) and (b)
shall not apply if such information is contained in periodic reports filed
by the Registrant under Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference into this
Registration Statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(d) undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(e) The undersigned Registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(f) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report under Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report under Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference into this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(g) The undersigned Registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished under and meeting
the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange
Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
undersigned Registrant according
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the foregoing provisions, or otherwise, the undersigned Registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this amendment
to the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of New York, State of New York, on
February 21, 2002.
THE BUCK A DAY COMPANY, INC.
By: /s/ Edward P. LaBuick
-------------------------------------
Edward P. LaBuick
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Edward P. LaBuick, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
indicated on February 21, 2002.
/s/ Edward P. LaBuick
- ----------------------------
Edward P. LaBuick Chairman of the Board, Chief Executive Officer
/s/ Dennis P. LaBuick
- -----------------------------
Dennis P. LaBuick President, Director
/s/ Keith Kennedy
- -----------------------------
Keith Kennedy Director
/s/ John Mole
- -----------------------------
John Mole Director
/s/ Kelly Murphy
- -----------------------------
Kelly Murphy Controller
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