As Filed with the Securities and Exchange Commission on August 2, 2002
================================================================================
File No. 333-83300
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to
Form F-1/A
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)
CSC Services of Nevada, Inc.
502 East John Street
Carson City, Nevada 89706
(775) 882-3072
(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
==================================================================================================================
Proposed Proposed
Title of Each Class Maximum Maximum
of Securities Amount to Offering Aggregate Amount of
to be Registered be Registered Price Per Share Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------
Common Stock,
no par value(2) 600,000 $1.00 $600,000 $55
- ------------------------------------------------------------------------------------------------------------------
Common Stock,
no par value (3) 3,000,000 $1.00 $3,000,000 $276
- ------------------------------------------------------------------------------------------------------------------
Common Stock,
no par value(4) 500,000 $1.00 $500,000 $46
- ------------------------------------------------------------------------------------------------------------------
Common Stock,
no par value(5) 22,522,974 $1.00 $22,522,974 $2,072
- ------------------------------------------------------------------------------------------------------------------
Total 26,622,979 $2,449
- ------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Reserved for issuance upon exercise of all 600,000 Class D warrants.
(3) Reserved for issuance upon exercise of all 3,000,000 Class E warrants.
(4) Reserved for issuance upon exercise of all 500,000 Class F warrants.
(5) Represents shares of Common Stock offered by the selling shareholders.
--------------------
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.
--------------------
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.
--------------------
This prospectus relates to 22,522,974 shares owned, as of July 30, 2002,
by the security holders named in this prospectus under the caption "Selling
Shareholders". Such 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.
We will bear all the costs and expenses associated with the preparation
and filing of this registration statement.
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 of sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 2, 2002
PRELIMINARY PROSPECTUS
26,622,974 Shares
THE BUCK A DAY COMPANY INC.
Common Stock
This prospectus relates to an offering of 26,622,974 shares of Common
Stock of The Buck A Day Company Inc., an Ontario corporation. 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 such shares. An additional 600,000 shares, 3,000,000 shares and
500,000 shares of Common Stock underlying our Class D, E and F warrants,
respectively, are also being registered.
The shares of 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. Although we are not currently quoted or listed on any market,
we anticipate a listing on the OTC Bulletin Board concurrent with the
effectiveness of this Prospectus.
--------------------
Our principal executive offices are located at 465 Davis Drive, Suite 226,
Newmarket, Ontario L3Y 2P1, Canada. Our telephone number is (905) 868-9477.
--------------------
The Common Stock being offered by this prospectus involves a high degree
of risk. You should read the "Risk Factors" section beginning on page 4 before
you decide to purchase any of the Common Stock.
--------------------
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.
--------------------
Until________________, [90 days after effectiveness] all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to any
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to any unsold allotments or subscriptions.
The date of this prospectus is [________, 2002]
TABLE OF CONTENTS
PROSPECTUS SUMMARY........................................................ 1
RISK FACTORS.............................................................. 3
A NOTE CONCERNING FORWARD-LOOKING STATEMENTS.............................. 7
ENFORCEMENT OF CIVIL LIABILITIES.......................................... 7
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS................................ 8
CURRENCY OF PRESENTATION.................................................. 8
USE OF PROCEEDS........................................................... 8
DIVIDEND POLICY........................................................... 9
CAPITALIZATION............................................................ 9
EXCHANGE RATES............................................................ 9
SELECTED FINANCIAL DATA................................................... 10
DILUTION.................................................................. 10
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................. 11
IMPACT OF THE "PENNY STOCK" RULES ON BUYING OR SELLING OUR
COMMON STOCK.............................................................. 11
PLAN OF DISTRIBUTION...................................................... 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 12
DESCRIPTION OF BUSINESS................................................... 18
MANAGEMENT................................................................ 24
PRINCIPAL SHAREHOLDERS.................................................... 30
RELATED PARTY TRANSACTIONS................................................ 31
SELLING SHAREHOLDERS...................................................... 33
DESCRIPTION OF SECURITIES................................................. 49
INCOME TAX CONSEQUENCES................................................... 52
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES................................................ 55
LEGAL MATTERS............................................................. 55
EXPERTS................................................................... 55
WHERE YOU CAN FIND MORE INFORMATION....................................... 55
FINANCIAL STATEMENTS...................................................... F-1
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS........................ II-1
SIGNATURES................................................................ II-5
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 incorporated on September 15, 1999 and
commencing operations in January 2000. The "Buck A
Day" branding is the basic premise of our business
model. 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 $650
to $6,500. As of July 30, 2002, CitiFinancial
approved approximately 20% of all applications for
"Buck A Day" credit cards. We take no credit risk.
However, our ability to provide financing is
dependent on the willingness of Citifinancial to
approve applicants. As a result of CitiFinancial's
ability and willingness to underwrite our credit
card program, our customers may finance their
purchases from us by making payments equal to less
than a dollar ("buck") a day, with no down
payment. For example, an approved customer of ours
who purchases a computer may choose to finance the
cost of that purchase over time. When reduced to
daily amounts, a $27 monthly payment is less than
a "buck" a day.
We market and sell name brand electronic and
consumer products from manufacturers such as Sony,
JVC, Samsung and IBM directly to consumers and
small businesses. These products primarily consist
of computers, television sets, high-end
electronics and appliances. 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.
As of July 30, 2002, we had approximately
seventy-five 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.
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.
1
During the third quarter of calendar 2002 we
intend to open an office in Ft. Lauderdale,
Florida. Preliminary discussions with Citigroup
U.S. lead us to conclude that they will provide us
with a similar financing structure to that of our
Canadian operation.
Province of Incorporation: We were incorporated in Ontario, Canada on
September 15, 1999.
The Offering:
Number of Shares our Being
Offered: The selling shareholders intend to register
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 July 30, 2002, we had 22,522,974 shares of
our Common Stock issued and outstanding. In
addition to the Common Stock, we have 600,000
shares of Class D Warrants, 3,000,000 shares of
Class E Warrants, and 500,000 shares of Class F
warrants issued and outstanding, respectively.
Estimated Use of Proceeds: We will not receive any of the proceeds from the
sale of the shares being offered by this
prospectus.
Risk Factors: For a discussion of the risks you should consider
before investing in our Common Stock, read the
"Risk Factors" section.
2
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
We suffered a loss of $2,992,757 for the nine months ended April 30, 2002.
The following factors contributed to such a loss: (i) recognition of
compensation expense as a result of shares issued to certain employees and
consultants which resulted in a $754,000 charge to our earnings; (ii) a write
off of goodwill in the amount of $527,153; and (iii) an increase in returns plus
a reserve for future returns totaling approximately $530,000. Although we
believe that we will return to profitable operations by the end of the quarter
ending July 31, 2002, we may have a difficult time procuring financing for our
expansion in the United States if we continue to experience losses.
Concentrated ownership of our common stock may allow certain security
holders to exert significant influence in corporate matters. 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
26,622,974 shares by us and the selling shareholders, the LaBuick family
members' aggregate holdings of our Common Stock is 5,820,000 shares or 22% 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" and "Principal
Shareholders".
In order to fund our planned expansion into the United States, we may need
to raise additional capital. As of April 30, 2002, we had approximately $227,000
in cash. Without additional capital we may not be able to expand into the United
States market and thus, may not grow as quickly as anticipated. In light of our
losses as of April 30, 2002, 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.
If our ability to buy media cheaply is hampered, our margins will suffer.
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 profitability may be
adversely affected our margins may suffer significant narrowing.
We have never paid a cash dividend to our shareholders and do not
anticipate paying any dividends to our shareholders in the foreseeable future.
Accordingly, investors must rely on the sale of their shares of Common Stock
after price appreciation, which may never occur, as the only way to realize on
their investment. Investors seeking cash dividends should not purchase our
shares of Common Stock.
3
We have a limited operating history with which to evaluate our business.
We commenced operation of our business in January 2000. Although every member of
our management team has extensive experience, we have 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.
Our ability to provide financing to our customers is wholly dependent on
CitiFinancial, as our sole financing program, the "Buck A Day" credit card, is
wholly underwritten by 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 to approve all applications and subsequently extend
credit to the approved individuals. Thus, without CitiFinancial's assistance, we
are unable to provide such service to our customers. Although we have a three
year Revolving Charge Dealer Agreement with CitiFinancial which extends through
2004, that agreement allows either party to terminate same upon thirty (30) days
notice. In the event CitiFinancial terminates its relationship with us, for any
reason, and we cannot locate a suitable replacement within thirty (30) days, we
will not be able to provide our credit card services to any new customers. Until
such time that we are able to promptly replace CitiFinancial, our ability to
grow will be severely restricted as the majority of our new customers purchase
our products through our credit card program. Furthermore, if at any time
CitiFinancial's approval rate of our applicants declines significantly, our
business may suffer a significant loss of revenue as our new customer base would
dwindle.
If our relationship with SuperCom Canada Ltd., our only supplier of IBM
computer equipment, suffers, our business may suffer material adverse effects.
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 $487,500 in addition to warehousing in their facilities an additional
$325,000 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.
Our rapid growth may strain our resources and hinder our ability to
implement our business strategy. We are currently experiencing a period of
significant growth. As of July 30, 2002, we had approximately 95 employees, an
increase of 280% from the 25 employees we had as of the same date last year. We
currently anticipate hiring an additional 50 employees during the current
calendar 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.
We face competition from existing and new competitors. 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
4
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.
Our business is highly dependent on marketing growth which may be
difficult to attain. 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 makes it difficult for us to
predict future growth. 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 our control. Our
results of operations could be materially adversely affected by changes in
economic conditions or customer spending patterns for our products.
Our anticipated expansion into the United States may strain our resources
to the point where our Canadian operation suffers a material adverse effect. 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.
We may encounter unanticipated regulatory risks in regards to
CitiFinancial's lending practices. 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
5
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.
We are dependent on the certain services of key individuals, the loss of
any of which may have a material adverse effect on us. 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 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.
Enforcement of certain civil liabilities may be difficult as our officers,
directors and assets are located in Canada. Our assets are located in Canada and
a majority of our directors and officers and experts with respect to The Buck A
Day Company Inc. named herein, are residents of Canada. As a result, it may be
difficult to effect service within the United States of America upon The Buck A
Day Company Inc. or upon such directors, officers and experts. Execution by
United States courts of any judgment obtained against any of those parties in
United States courts would be limited to the assets of The Buck A Day Company
Inc. or such person located in the United States.
Risks Related To This Offering
Competing sales by selling shareholders may make it difficult for us to
raise money for our expansion into the United States. Our ability to raise
additional capital through the sale of our Common Stock may be harmed by
competing re-sales of Common Stock by the selling shareholders. Sales by selling
shareholders may make it more difficult for us to sell equity or equity-related
securities or in the future at a time and price that we deem appropriate because
the selling shareholders may offer to sell their registered shares of Common
Stock to potential investors at competitive terms. Moreover, potential investors
may not be interested in purchasing shares of our Common Stock if the selling
shareholders are selling (or even have the ability to sell) their shares of
Common Stock.
The selling shareholders may sell some or all of their shares immediately
after they are registered. Certain of the selling shareholders are employed by
The Buck A Day Company Inc. as executive officers. Further, all of our directors
are selling shareholders. Conflicts of interests may occur between those selling
shareholders who have duties to us as executive officers and/or directors and
their interest in selling shares as they may find themselves having to decide
whether to pursue long term corporate growth at the cost of near term stock
performance (ie. acquisitions or mergers). See "Selling Shareholders".
Fluctuation of Common Stock may have an adverse effect on the market price
of our 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
6
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.
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.
ENFORCEMENT OF CIVIL LIABILITIES
A substantial portion of our assets are located in Canada and a majority
of our directors and officers and experts with respect to The Buck A Day Company
Inc. named herein, are residents of Canada. As a result, it may be difficult to
effect service within the United States of America upon The Buck A Day Company
Inc. or upon such directors, officers and experts. Further, it may not be
possible for the holders of our Common Stock to enforce against us in United
States courts judgments based on the civil liability provisions of the
securities laws of the United States. Further, we are unsure whether the courts
of Canada would recognize or enforce judgments of United States courts obtained
against us or directors or officers based on the civil liability provisions of
the securities laws of the United States or any state or hear actions brought in
Canada against us or those persons based on those laws. Execution by United
States courts of any judgment obtained against any of those parties in United
States courts would be limited to the assets of The Buck A Day Company Inc. or
such person located in the United States.
7
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 nine
month period ended April 30, 2002. 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 will not receive any of the proceeds of the sale of Common Stock by the
selling stockholders.
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.
8
CAPITALIZATION
The following table sets forth our capitalization as of April 30, 2002.
This table should be read in conjunction with the financial statements and
related notes included elsewhere in this prospectus.
Actual
-----------
Stockholders' Equity:
Common Stock, no par value, unlimited number of
shares authorized; 22,522,974 issued and
outstanding $ 2,823,043
Contributed Capital 1,339,241
Accumulated other comprehensive income 42,134
Retained Earnings (deficit) (4,924,004)
-----------
Total Stockholders' Deficiency (719,586)
-----------
Total Capitalization $ (719,586)
===========
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.
9
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, Nine Months Ended April 30,
------------------------------- -------------------------------
2001 2000 2002 2001
------------ ------------ ------------ ------------
Sales $ 5,381,008 $ 733,973 $ 12,356,968 $ 4,164,467
Cost of sales 3,955,228 537,406 8,615,836 3,042,246
Expenses 2,967,014 586,579 6,206,736 1,922,763
Goodwill writeoff -- -- 527,153 --
Net loss (1,541,234) (390,012) (2,992,757) (800,542)
Income (loss) per share $ (3,853.08) $ (975.03) (0.1567) (2,001)
Weighted average number 400 400 19,097,223 400
of shares outstanding
Balance Sheet Data:
April 30, 2002
-----------------
Working capital $(1,020,697)
Total Assets 1,430,869
Stockholders' deficiency $ (719,586)
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.
10
The net tangible book value of our Common Stock as of April 30, 2002, was
$(719,586), or approximately $.(0.03) per share. "Dilution" is determined by
subtracting net tangible book value per share after the offering from the
offering price to investors.
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 our 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 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
The selling shareholders are registering an aggregate of 22,522,974 shares
of our Common Stock. We anticipate being listed on the OTC-Bulletin Board
concurrently with the effectiveness of this Prospectus. The selling shareholders
may sell our Common Stock thereon at prevailing market prices or in negotiated
private transactions, or in a combination of these methods. The shares will not
be sold in an underwritten public offering.
Broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate. Broker-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
11
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.
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 less 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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".
CRITICAL ACCOUNTING POLICIES:
Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require management to
make estimates and assumptions that affect the reported amount of assets,
liabilities at the date of the financial statements, the disclosure of
contingent assets and
12
liabilities, and the report amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The critical
accounting policies that affect our more significant estimates and assumptions
used in the preparation of our financial statements are reviewed and any
required adjustments are recorded on a monthly basis.
LOWER OF COST OR MARKET FOR INVENTORIES:
Our inventories are recorded at the lower of cost and market. As with any
retailer, economic conditions, cyclical demand and changes in purchasing can
affect the carrying value of inventory. As circumstances warrant, we record
lower of cost or market inventory adjustments. In some cases these adjustments
can have a material effect on the financial results of an annual or interim
period. In order to determine such adjustments, we evaluate the age of the
inventory, inventory turns and their fair value of inventory. We quickly
sell-off slower moving merchandise to lessen the effect of any adjustment.
RETURNS PROCESS:
Each of our suppliers maintains a return policy with company specific
terms for defective items. Until May 26, 2002 inventory was sold subject to a
thirty-day (30) money back guarantee. The return policy allowed the customer a
thirty-day period to return the product; accordingly we were liable for returns
based on sales in the preceding 30 days to the balance sheet date. Returns were
processed under the old policy for 30 days thereafter up to June 26, 2002.
Subsequently our revised return policy is limited to the OEM's warranty. We
continually evaluate the returns of inventory by customers to ensure that there
are no problems with the inventory or that the customer can be sold a more
appropriate product. Actual returns are processed in the month the product is
returned. The return reserve is an estimation by management based on the average
historic percentage ratio of returns to gross sales. In determining the
appropriate return ratio, management reviews average historic ratios for the
year to date and for the latest quarter. Where the current quarterly return
ratio has deteriorated from the year to date return ratio, management will
record the reserve for potential returns based on the quarterly data, provided
management is unable to identify specific reasons for the deterioration that are
of a non-recurring nature. Historically, up to the end of January 31, 2002 our
average annual return to gross sales ratio was 5.7%. The actual return ratio for
specific months could vary significantly above or below the average for the
year. From February 2002 through April 2002, we noted that the returns to gross
sales ratio was significantly higher at 11.6% and had impacted the annual ratio,
increasing it from 5.7% to 8.0%. We believe that a large part of the reason for
the increase was our own promotion of the 30-day money back guarantee, which may
have been utilized by sales personnel to close sales. In addition, our customer
service department was accepting returns without question or challenging the
customers' decision because "our policy was 30 day money back guaranteed". At
April 30, 2002 we have established an initial reserve of $191,266 that was based
on that current quarter return ratio of 11.6%. In previous fiscal years we had
not tracked returns independently of sales activity as returned product was
recycled and resold. Although we have adopted the new policy henceforth, we
believe the returns experience of 11.6% is behind us and that our actual future
returns will be less than 5%. Since the new return policy was adopted we have
noted that the return ratio has remained below 2%, however the time period may
not be statistically valid.
ACCOUNTS RECEIVABLE:
CitiFinancial pays our accounts receivable. Our accounts receivable at any
point of time normally approximates the last 2 to 4 days of sales to our
customers. We only ship product to our customer once we have been provided with
credit approval for the full invoice price pertaining to that customer's order.
Once we have shipped the product to the customer we process our payment through
CitiFinancial, which normally takes 2 to 4 business days. The monthly revenues
for April 2002 were the highest monthly revenues ever recorded by us, which
resulted in the higher accounts receivable level at the end of the current
quarter. Below we have provided a table of revenues and accounts receivable:
13
Days Sales Days Sales
Mth_Yr [A] [B] [A] / [B] * No. Based On
Accounts Gross Days in Mth. Actual Daily
Receivable Revenues Sales
Oct_01 $357,000 $1,496,000 7.4 4.3
Jan_02 $391,000 $1,924,000 6.3 3.8
Apr_02 $126,621 $1,544,225 2.5 1.5
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 CitiFinancial 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 consumer financing arrangement with CitiFinancial allowed us to sell our
products to a broader base of consumers because CitiFinancial would pre-approve
the consumer credit and assume the risk of collection, thus enabling us to
supply a greater amount of credit to a greater number of customers. The direct
purchasing arrangement with suppliers of IBM allowed us to benefit from a
continual and consistent supply of products. Prior to this arrangement our
supply chain was inconsistent resulting in an inability to fulfill all orders
placed with us.
The gross margin on sales for the year ended July 31, 2001 was 26.5% as
compared to 26.9% 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 $586,579 to $2,967,014 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
55.1% as compared to 79.9%. 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 73.8% for the year
ended July 31, 2001 and 68.9% for the period ended July 31, 2000 of the
operational costs.
For the year ended July 31, 2001 we reflected a net loss of $1,541,234,
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.
Nine Months Ended April 30, 2002 vs. Nine Months Ended April 30, 2001:
Our net sales for the nine months ended April 30, 2002, grew to
$12,356,968 from $4,164,467 for the corresponding period of the previous year,
an increase of 197%. The primary reasons for this increase were: a stable low
cost purchasing arrangement with IBM Corporation; additional credit facilities
with IBM's distributors; and, a major television advertising campaign that
resulted in significant growth in leads and orders. The television campaign was
funded by capital raised through two private placements of our common stock of
approximately $1,500,000 in the aggregate.
Our nine months net sales include charges for actual returns of $1,165,443
and a reserve for future returns of $191,266, or 9.4% and 1.6% of net sales
respectively. The reserve for future returns was based on the percentage of
actual returns to gross sales for the three months ended April 30, 2002, which
was running at 13%. Return data was not tracked during the prior fiscal year.
14
As a result of the significant increase in the returns to gross sales
ratio of 13% in the current quarter versus the year to date ratio of 8%, we have
cancelled our "30 day money back guarantee" effective May 26, 2002. Returns were
processed under the old policy for 30 days thereafter up to June 26, 2002.
Subsequently our revised return policy is limited to the OEM's warranty. We
anticipate that the return ratio will be significantly reduced by year-end and
that our reserve for future returns will be minimal; based on recent return data
following June 26, 2002, our return ratio is running at less than 2% of gross
sales.
We estimate the impact on our future sales as a result of eliminating the
old policy will be nominal. Further to the change of policy on returns, we have
reviewed our administration process for handling customer returns, in order to
improve from a reactive to a proactive management style. The department
responsible for customer service was re-staffed with more experienced personnel.
In order to manage our inventory of returned products, which we sell as
"open box" items, we are offering sales incentives during the current quarter to
liquidate such products resulting in a negative impact on our gross margins.
Our net sales for the quarter ended April 30, 2002 were $$4.4 million,
which was higher than the previous two quarters ended January 2002 and October
2001, when we reported $3.8 million and $4.1 million respectively. We had
anticipated net sales in the range of $5.6 million to $7.1 million. Our rollout
of TV product was delayed until the fourth quarter, which accounted for $1.5
million off our high-end sales expectations. Part of the shortfall from our
low-end expectation was principally due to a fall (approximately 1%) of CITI
approvals, which reduced sales by approximately $450,000. Our staffing levels
through the end of the second quarter in to the third quarter were increasing in
order to manage our anticipated sales growth. When the growth did not
materialize our cutback in staffing levels was not as responsive, which
increased our operating losses.
Gross Profit
Gross profit for the nine months ended April 30, 2002, improved by
$2,618,911 to $3,741,132 from $1,122,221 for the comparable period in the
previous fiscal year, equal to an increase of 233%. The increase is attributable
to the greater revenues and improved gross margin. Gross margin increased from
26.9% to 30.3%, for the nine months ended April 30 for fiscal 2001 and 2002,
respectively. The improved margin is attributable to more stability in product
supply.
Notwithstanding the improvement in gross margin, it fell short of our
expectation of a gross margin of 39%. The lower gross margin is attributable to
a number of related and unrelated factors during the current quarter. First, the
initial reserve for future returns; second, the inventory of returned products
were promotionally discounted during the third quarter and re-sold as open box
items - we avoided excess inventory but traded-off with loss of gross margin
(approximately $340,000); and, third, related to the returns issue were
additional freight costs and inventory losses including spoilage and
obsolescence (approximately $200,000). Unrelated factors were: the complete
absence of purchase rebate from IBM during the current quarter - in the first
six months we were rebated $120,000 based on achieving minimum unit sales of
qualifying products and we anticipate additional rebates of between $75,000 and
$110,000 by year-end; in the first six months we resolved a dispute with a
product supplier over delivery terms that resulted in one time settlement in our
favor of approximately $80,000; and, finally the balance of margin loss,
approximately $60,000, can be mainly attributed to change in sales mix that
resulted in higher proportion of lower margin sales.
We estimate that the combined impact of these factors on the third quarter
sales reduced the gross margin, as a percentage of net sales, from 39% to 16% or
approximately $1,000,000.
Cost of Operations
Our operating expenses increased 221% in the nine months ended April 30,
2002, as compared to the same period in fiscal 2001, to $6,206,736 from
$1,922,763. The major reason for this increase is
15
attributable to the increase in sales revenues. However other factors recorded
in the quarter ended April 30 increased our reported operational costs by
approximately $754,000. These items were non-cash costs resulting from the
recognition of the market value attributed to certain warrants and common shares
that were issued, for nominal prices during the first six months of fiscal 2002,
to consultants and employees of the company in lieu of services.
Consulting fees in the nine months ended April 30, 2002 were $410,864,
including the non-cash cost of warrants and common shares issued of $274,000,
versus zero costs for such services in the corresponding period of fiscal 2001.
The consulting services related to the capital generated through private
placements of our common shares and in relation to our planned expansion into
the US markets.
Interest and bank charges increased from $4,990 to $45,286 for the nine
months ended April 30 2001 and 2002, respectively. The increase was due to
interest and penalties charged by federal and provincial payroll and sales
taxation agencies in connection with late filings and remittance of taxes,
particularly in the current quarter. The late filings and remittances of taxes
due and payable is due to cash flow shortages. In addition, during the current
quarter CitiFinancial commenced to charge us 1% of settlements in connection
with their financing of our customers. The addition of the charges by
CitiFinancial is a contentious issue that we are negotiating to have cancelled.
We anticipate a successful outcome in part because of competition by other
service providers.
Media and printing costs decreased as a percentage of sales from 17.7% to
13% for the nine months ended April 30, 2001 and 2002, respectively. The
decrease is attributed to our lower cost of leads, which was accomplished by
better management of media placement and greater economies achieved through
increased placement. During the current quarter we spent approximately $200,000
more on media, than in previous quarters of fiscal 2002, and generated
proportionally more leads. Our per-lead cost of $10 in the current quarter was
similar to previous quarters, but did not translate into increased sales. We
believe this was in part due to a fall in credit approvals plus a lower sell
through on credit-approved customers.
Salaries and commissions increased 289% from fiscal 2001 to fiscal 2002
for the nine months ended April 30. During these periods, our salary and
commission costs as a percentage of sales increased from 19.1 % in fiscal 2001
to 25.1% in fiscal 2002. Approximately $500,000 (4.1% of net sales) of our
salaries was the non-cash cost of the revalued compensatory common shares issued
to certain employees and management that was recorded in the current quarter.
The higher employee costs represent our investment in infrastructure to handle
greater business levels and related obligations of being a public company. Since
December 2001 our head count climbed from 85 to 130 by the end of March 2002,
and then declined subsequent to the quarter end to 95 in July 2002. During the
quarter ended April 30 2002 our staffing costs were increased by higher turnover
and on-the-job training costs. In our customer services department we terminated
100% of our employees and re-staffed with more experienced personnel with less
than half the head count. In July 2002 we are handling sales call levels that
were comparable with January 2002, our highest sales-month to date, with 40%
less staff.
Our increase in professional fees from $18,274 (0.4% of net sales) for the
nine months ended April 30, 2001 to $148,897 (1.2% of net sales) to the
comparable period in fiscal 2002 was mainly due to our ongoing legal and
accounting expenses related to the preparation of our registration statement and
legal costs in connection with the supplier dispute.
Net Loss
Our operating loss for the nine months ended 30 April 2002 was $2,465,604
as compared to our operating and net loss of $800,542 for the corresponding
period in fiscal 2001. Our operating loss was increased by the write-off of
goodwill of $527,153 to a net loss for the nine months ended April 30, 2002 of
$2,992,757.
In the year ended July 31, 2001, under the guidance in SAB Topic 5-J, the
goodwill of $585,241 arising from the purchase by A.R.T. International Inc. of
100% of the ownership of Buck effective December 4, 2000, was "pushed down" into
our financial statements resulting in goodwill and contributed
16
capital of $585,241. In August 2001, ART ownership in our company was diluted to
16% and coincided with ART's determination to write off the goodwill and its
investment in our company. At that time its reported going concern issues also
influenced ART's decision. Subsequently, we successfully renegotiated terms with
our secured and unsecured creditors and raised approximately $2,000,000 through
private placements and the exercise of related warrants. In addition, our
secured creditors converted their debt to equity. The July 31, 2001 audited
financial statements have been restated to reflect the push down accounting for
goodwill (net of amortization) and contributed capital. We reviewed the value of
goodwill in the July 31, 2001 statements and subsequent events through September
15, the reporting accountant's date of our audited financial statements,
including the subsequent private placement of $900,000 in August 2001. Based on
these and other related factors we believe that there had been no permanent
impairment of goodwill at July 31, 2001.
Subsequently, as a result of our losses through the nine months ended
April 30, 2002, the negative working capital of $1,020,696 and the shareholders'
deficiency of $719,586 at that balance sheet date and the uncertainty of future
sustainable profitability we believe that goodwill is now permanently impaired.
Thus, we have consequently written off the goodwill as at April 30, 2002.
Liquidity and Capital Resources:
Cash & Working Capital
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.
Our cash reserves were $225,568 at April 30, 2002 compared to $316,427 at
July 31, 2001 and we reflected negative working capital of $1,020,697 versus
negative working capital of $798,680, respectively. At January 31, 2002 we
reflected cash of $947,072 and working capital of $607,105. The deterioration in
cash reserves and working capital was due to our cash losses of approximately
$1,700,000 in the third quarter that was partially offset by net changes in
components of working capital.
Share Issuance & Other Capital Transactions
During the nine months ended April 30, 2002 we raised capital of
approximately $2,500,000 through private placements and the exercise of
warrants. Our settlement of loans from secured creditors resulted in the
conversion of debt into share capital of $450,000. During the current quarter we
revised the value attributed to 2,600,000 common shares and 1,100,000 warrants
issued to management, employees and consultants in the first six months of
fiscal 2002. The revision in valuation resulted in the reported capital
contribution of $754,000.
On December 15, 1999, we executed an agreement with A.R.T. International
Inc. Initially, ART had the right to purchase a 44% interest in our company. By
March 30, 2000, ART had paid us $273,860 ($CDN 400,000) for 160 common shares,
representing a 44.44% interest in our company. On April 27, 2000, ART loaned us
$48,750 ($CDN 70,000) under an agreement, which allowed ART the right to convert
an additional 40 common shares, representing an additional 5.56% interest in us.
Effective August 8, 2000, ART exercised its option and converted its loan to
equity, thereby resulting in a 50% ownership interest in us. On December 4,
2000, ART acquired the balance of 200 common shares from our shareholders for
$627,150 ($CDN 970,000) including cash of $328,430 ($CDN 500,000) and $298,720
($CDN 470,000) of ART common shares. This acquisition resulted in ART owning
100% of us.
17
The total consideration paid by ART was as follows:
Cash:
Initial investment 273,860
Loan converted 48,750
Final investment (1) 328,430
--------
Total cash consideration $651,040
2,000,000 ART Common Shares (1) 298,720
--------
Total consideration 949,760
========
(1) Components of the 50% balance sold to ART by other shareholders; note the
2,000,000 common shares were restricted for a period of three years
pursuant to an oral agreement with ART.
In the opinion of management, the underlying fair market value of assets
sold to ART approximated the book value as stated in our audited financial
statements for the year ended November 30, 2000. The consideration was allocated
as follows:
Total Consideration $949,760
Less - Shares Purchased (1) 364,519
--------
Allocated to Goodwill $585,241
--------
(1) 200 common shares were issued by Buck from treasury for aggregate cash of
$322,610 for 50% of Buck total issued share capital. The balance of 200
common shares, which were purchased from the other shareholders of Buck,
had a stated capital of $31,640.
Under the guidance in SAB Topic 5-J whereby the form of ownership is
within the control of the parent company the goodwill and resultant contributed
capital of $585,241 have been "pushed down" into our financial statements.
In the nine months ended April 30, 2002 our shareholders' deficiency has
decreased from $962,243 to $719,586; the nine month net loss of $2,992,757 was
more than offset by the increases in share capital and contributed capital.
Seasonality:
Traditionally, our revenues are seasonally low in the months of November
and December, as we face significant competition for media advertising
placements during the lead up to the year end holidays. The consequent reduction
in our advertising activity, results in a decline to our revenues. In addition,
the year end holidays reduce the available days for deliveries to our customers,
which also reduces our revenues. The month of January is our strongest revenue
month and offsets to some extent the lower revenues of November and December
during that quarter.
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 and on November 13, 2001 our
name was changed to The Buck A Day Company Inc.
18
Our initial shareholders were members of the LaBuick family. In December
1999, A.R.T. International Inc., an Ontario corporation, acquired 160 shares of
common stock from us for $286,000 (Cdn. $440,000). In August 2000, A.R.T.
acquired 40 shares from us for $45,500 (Cdn. $70,000). On November 29, 2000
A.R.T. acquired the remaining 50% of the issued and outstanding shares of Buck
from the LaBuick family for $325,000 (Cdn. $500,000) and 2,000,000 shares of
A.R.T. At that time we concluded that our valuation exceeded Cdn. $1,000,000
based upon our current sales and the conservative forecasts of our business
models. With the purchase of such shares we became a wholly-owned subsidiary of
A.R.T. On December 4, 2000, Edward P. LaBuick and Dennis P. LaBuick were named
CEO and Director, respectively, of A.R.T.
On January 11, 2001, Nadia Faye LaBuick, wife of Edward P. LaBuick, our
chairman, loaned $138,125 (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
$331,500 (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 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 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.
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 $0.065 per share.
Also on August 1, we authorized conversion of the LaBuick family members' loans
with interest totaling $461,500 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.
Due to our severe liquidity problems, we requested that the LaBuicks and
148516 Ontario Limited convert their loans to us to equity. As a result of such
request, 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 August 31, 2001, Edward P. LaBuick and Dennis P. LaBuick resigned from
their positions as CEO and Director, respectively, of A.R.T.
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. Further, on that
same date, we issued 3,000,000 class E Warrants to 37 investors.
As a result of the aforementioned conversions 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. Specifically, Ms. Doering provided us with
the following services: (i) investor and shareholder relations services; (ii)
assisted in structuring and effecting the loan with 1483516 Ontario Limited.
19
On February 1, 2002, we issued 500,000 Class F Warrants to Mary Boswell
pursuant to an agreement under which Ms. Boswell provided marketing services in
a consulting capacity to the Company without compensation.
As of the date of this Prospectus, A.R.T. has no continuing relationship
with us other than its current ownership position of 2,000,000 shares of Common
Stock. Further, none of our officers, directors or employees hold a position as
an officer or director of A.R.T.
The current members of the board of A.R.T. are Roger Kirby, Simon
Meredith, Michel Van Herreweghe and Stefan Gundmundsson.
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 $162,500 and an additional
$487,500 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 $227,500, a creative budget of
$195,000 payable semi-annually, credit facilities of $487,500, guaranteed
inventory supply of an additional $325,000 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 fiscal 2002 our advertising budget of approximately $1,950,000 million
will enable us to air over 39,000 sixty second television commercials 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 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 April 30, 2002, 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:
20
o Ontario 50%
o Alberta 15%
o British Columbia 15%
o Manitoba 5%
o Saskatchewan 5%
o Quebec 5%
o Atlantic Provinces 5%
Rights of Return. As of June, 2002, we terminated our "no questions asked"
right of return policy which allowed any customer to return any item purchased
for a period of 30 days from the receipt of any product. Presently, customers
may only return those items for a limited period of time which are defective,
differ from the item ordered or are not promptly shipped. Each return will be
reviewed by us on a case by case basis before being accepted. To date, we have
found that approximately 2% of sales are returned.
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, 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 and web based marketing efforts. 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. 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.
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
$487,500 plus back-up inventory financing of an additional $325,000. The term of
the IBM Agreement is for three (3) years with no renewal terms. Further, IBM
provided a marketing allowance of $227,500 and a creative budget of $195,000
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 $487,500. 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 Buck A Day credit card which
21
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 $650 to a maximum of $6,500.
Lexmark Canada -- Printers Only. Commencing January 1, 2002, Lexmark, a
leading manufacturer of computer peripheral products extended to us a $66,300
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.
AOL Canada Inc. On June 14, 2002, we entered into a Marketing Agreement
with AOL Canada Inc., whereby AOL shall provide each of our customers purchasing
a computer with a free AOL membership for six months. Pursuant to the AOL
Marketing Agreement, we agreed to order and distribute a minimum of 1,000
packages containing a CD-ROM with AOL software in each calendar month during the
term of the Marketing Agreement in exchange for AOL certain co-marketing
concessions such as: (i) being designated our exclusive internet service
provider; (ii) inclusion of the AOL brand in certain promotions; and (iii) the
bundling of AOL products with all computers sold by us, among other marketing
efforts. The AOL Marketing Agreement has a two year term with a one year renewal
option.
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 our
relationship with CitiFinancial Services a division of Citigroup, we are now in
a position to provide financing to United States' customers via the Buck A Day
credit card plan. We anticipate opening our media buying, telemarketing center
and warehousing facilities in the State of Florida during 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 20% 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 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 ("buck") a day.
22
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. maintains a direct sales division as well as approximately
twenty-five retail outlets in the Southern Ontario market; however, 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 in calendar
year 2002.
Insurance
We currently carry a business insurance policy underwritten by The
Economical Insurance Group, which maintains $1,300,000 of property insurance for
inventory and equipment and $1,300,000 each for personal injury liability and
non-owned automotive liability.
Employees
We currently employ 75 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.
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 $262,937. 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
23
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 $162,500, plus interest and costs for unpaid accounts. On December 21, 2001
we settled the Beamscope lawsuit and paid them $45,500 pursuant to the terms of
such settlement.
24
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
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. On June 16, 2000, Mr. LaBuick filed for
bankruptcy protection pursuant to section 168.1 of the Bankruptcy and Insolvency
Act of Ontario and was granted a Certificate of Discharge on March 17, 2001. Mr.
LaBuick's bankruptcy was a result of the failure of his prior business, Denny,
Inc. (an Ontario corporation), an outstanding lawsuit stemming from that prior
business and reassessment of prior years tax returns.
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.
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.
25
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 $146,250 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 $130,000 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.
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
$52,000 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
26
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 $81,250 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 $250,250.
The following table sets forth all compensation we paid to each executive
officer whose total salary and bonus exceeded $65,000 in the calendar years
indicated.
Summary Compensation Table
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION CALENDAR OTHER ANNUAL OTHER OPTIONS
YEAR SALARY ($) COMPENSATION GRANTED (#)
--------- -------- ------------ -----------
Edward P. LaBuick; 2000 71,500 -- --
Chief Executive Officer and 2001 130,000 -- --
Chairman of the Board of
Directors
Dennis P. LaBuick; 2000 71,500 -- --
Director and President 2001 120,250 -- --
Keith Kennedy; 2000 32,500 -- --
Director and Vice President of 2001 52,000 -- --
Operations
27
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 during the fiscal year ending July 31, 2002.
% of Market Value
Total of Common
Common Options Shares
Share Under Granted Underlying Grant
Options in Fiscal Exercise Options on Date
Granted 2002 Price Date of Grant Present
Name (#) (%) ($/share) (1) ($) Value(2) Expiration Date
Edward P. LaBuick 952,500 27.2% $0.25 $0.25 $1.00 February 13, 2005
Dennis P. LaBuick 897,500 25.6% $0.25 $0.25 $1.00 February 13, 2005
Keith Kennedy 250,000 7.1% $0.25 $0.25 $1.00 February 13, 2005
John Mole 50,000 1.4% $0.25 $0.25 $1.00 February 13, 2005
(1) There was no public market for our common shares as of February 14, 2002.
Therefore, the amounts set forth in this column represent the fair market
value of each of our common shares as of that date, as determined by our
Board taking into consideration the present and future valuation of the
company based on the growth projections at that time and with the primary
goal of providing incentive to certain members of our senior management.
(2) There was no public market for our common shares as of July 30, 2002.
Therefore, the amounts set forth in this column represent the fair market
value of each of our common shares as of that date, as determined by our
Board taking into consideration the present and future valuation of the
company based on the growth projections and market conditions at that
time.
Options Exercised In Last Fiscal Year
No executive officers exercised any options during the fiscal year ended
July 31, 2001. The following table sets forth the estimated value of exercisable
and unexercisable options held by executive officers for the fiscal year ending
July 31, 2002.
Number of Securities Value of Unexercised In-The-Money
Underlying Unexercised Options Options as of July 30, 2002
as of July 30, 2002 (%) ($) (1)
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Edward P. LaBuick 100% -0- $714,375.00 -0-
Dennis P. LaBuick 100% -0- $673,125.00 -0-
Keith Kennedy 100% -0- $187,500.00 -0-
(1) The value of an "in-the-money" option represents the difference between
the aggregate estimated fair market value of common shares issuable upon
exercise of the option and the aggregate exercise price of the option.
There was no public market for our common shares as of July 30, 2002.
Therefore, the amounts set forth in this column represent the fair market
value of our common share as of July 30, 2002, $1.00 per share, as
determined by our board.
Summary of 2002 Stock Option Plan
28
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.
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.
A 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.
29
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 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
4, 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 July 30, 2002, of the 3,500,000 shares of Common Stock reserved for
issuance under the Stock Option Plan, options to acquire 3,500,000 shares of
Common Stock were granted under the Stock Option Plan.
30
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 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 calendar year 2002, we do not presently
maintain any form of liability insurance covering our directors and officers.
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
July 30, 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 July 30, 2002 and 3,000,000. Percentage
Ownership does not reflect the shares of Common Stock underlying the Class D, E
and F warrants, or the options granted pursuant to our Stock Option Plan.
31
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% 6.0%
Dennis P. LaBuick (2) 1,347,500 5.9% 5.9%
A.R.T. International Inc. 2,000,000 8.8% 8.8%
All Executive Officers and
Directors as a Group (4 persons)(3) 2,710,000 12.0% 12.0%
- ----------
(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 our
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 our
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.
RELATED PARTY TRANSACTIONS
Our initial shareholders were members of the LaBuick family. In December
1999, A.R.T. International Inc., an Ontario corporation, acquired 160 shares of
common stock us for $286,000 (Cdn. $440,000). In August 2000, A.R.T. acquired 40
shares from us for $45,500 (Cdn. $70,000). On November 29, 2000 A.R.T. acquired
the remaining 50% of the issued and outstanding shares of Buck from the LaBuick
family for $325,000 (Cdn. $500,000) and 2,000,000 shares of A.R.T. At that time
we concluded that our valuation exceeded Cdn. $1,000,000 based upon our current
sales and the conservative forecasts of our business models. With the purchase
of such shares we became a wholly-owned subsidiary of A.R.T.
On January 11, 2001, Nadia Faye LaBuick, wife of Edward P. LaBuick, our
chairman, loaned $138,125 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 $331,500 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 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 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.
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 $0.065 per share.
Also on August 1, we authorized conversion of the LaBuick family members' loans
with interest totaling $461,500 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,
32
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.
On February 15, 2002, certain members and employees of Spitzer & Feldman
P.C., our U.S. counsel, purchased a total of 96,000 shares of our Common Stock
for an aggregate of $24,000.
Spitzer & Feldman P.C. may receive unregistered shares of Buck common
stock or options to purchase shares of Buck common stock in lieu of cash in
satisfaction of a portion of the legal fees incurred in relation to the
preparation of this Prospectus.
33
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". 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 the selling shareholders are able to sell all 22,522,974
shares of their Common Stock which are being offered by them, the selling
shareholders will retain 0 shares of our Common Stock.
LIST OF SHAREHOLDERS OF THE BUCK A DAY COMPANY INC.
The selling shareholders acquired their shares from us as follows:
Subscriber Address Relationship Amount of shares Amount prior to
within the held prior to the offering if greater
past three (3) offering equals the than 1%
years amount of shares
being offered
====================================================================================================================================
1413251 Ontario Inc.(1) 6 Buggey Lane, Ajax, Ontario L1S 4S7 50,000
1435031 Ontario Ltd.(2) 248 Forest Hill Road, Toronto, ON M5P 2N5 250,000
1469403 Ontario Ltd.(3) 83 Maclaren Avenue, Barrie, Ontario L4N 7H3 60,000
1504426 Ontario Ltd.(4) 181 University Ave., Suite 1410, Toronto,
ON M5H 3M7 200,000
403266 Ontario Ltd.(5) c/o David & Carol Voyce, 663 Glen Crescent, 946,666 4.20%
Orillia, ON L3V 6R2
760761 Ontario Ltd.(6) 8 Vine Cres., Barrie, Ontario L4N 2B3 20,000
A.R.T. International Unit 5-7100 Warden Avenue, Markham ON L3R 2,000,000 8.88%
Inc.(7) 8B8
Ambeau Thomas 64 Royal Oak Drive, Barrie, On L4N 7S5 333,334 1.48%
Aravest Ltd.(8) P.O. Box N-9645, Nassau, Bahamas 66,666
- --------
(1) Mark Purdy maintains voting and investment power over the shares owned by
1413251 Ontario Inc.
(2) Barry Landen maintains voting and investment power over the shares owned
by 1435031 Ontario Ltd.
(3) Peter Landers maintains voting and investment power over the shares owned
by 1469403 Ontario Ltd.
(4) Wayne Long maintains voting and investment power over the shares owned by
1504426 Ontario Ltd.
(5) David and Carol Voyce maintain voting and investment power over the shares
owned by 403266 Ontario Ltd.
(6) Jeremy Pollard maintains voting and investment power over the shares owned
by 760761 Ontario Ltd.
(7) The Board of Directors consists of Roger Kirby, Simon Meredith, Michel Van
Herreweghe and Stefan Gundmundsson who maintain voting and investment
power over the shares owned by A.R.T. International Inc.
(8) Steve Koussaya maintains voting and investment power over the shares owned
by Aravest Ltd.
34
Beckley Mike 12 Chalmers Dr., Barrie, ON L4N 8A3 10,000
Belben Ted 303 Reading Place, Newmarket, Ontario L3Y 8,000
6H6
Bradley Stephen 46 Gibson Lake Drive, Palgrave, On L0N 1P0 200,000
Clark Linda 146 McCraney St. West, Oakville, 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 1.33%
Dale Kerry 426 Eagle Street, Newmarket, ON L3Y 1K6 Employee 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(9) 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 50,000
3G2
Doering Dennis 108 Marshall Street, Barrie, On L4N 4L5 33,333
Doering Jennifer 43 Fawn Crescent, Barrie, Ontario L4N 7Z6 250,000 1.11%
Donaldson Peter Share High School, Royal Oak, MI 10,000
Donaldson Walt 1929 Ontario St., Windsor, ON N8Y 1N1 20,000
Durham Int'l P.O. Box 1132 Lauraston House, Lower 448,334 1.99%
Investments(10) Collymore, Bridgetown St. Michael,
Barbados, WI
Garces Candy 44 Crew Avenue, Toronto, Ontario M4C 2V3 Employee 1,000,000 4.44%
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 Employee 10,000
Gordon Colin 2373 Blackstone Cres., Ottawa, Ontrario K1B 7,000
4H3
- -----------
(9) Norman Dodd maintains voting and investment power over the shares owned by
the Dodd Family Trust.
(10) Wayne Grant maintains voting and investment power over the shares owned by
Durham Int'l Investments.
35
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 2027 Russett Road, Mississauga, ON L4Y 1B8 25,000
Voyce
James Jacqueline 44 Barringham Drive, Oakville, ON L6J 4B2 200,000
Cadman
Johnston Lyle RR#4 Coldwater, Ontario L0K 1E0 3,000
Kelln Larry 2554 Maid Marion Place, Mississauga, On L5K 100,000
2L9
Kennedy Keith 412 Queen Street, Apt. A, Newmarket, ON L3Y Employee 500,000 2.22%
2P2
Khonsari Homa 1 Garrett Cres., Barrie, Ontario L4M 4R7 266,666 1.18%
Kisely Willy 539 Knowles Road, Kelowna, BC V1W 1H4 100,000
Korhonen Ed 2206 Pine Needle Row, Mississauga, Ontario 100,000
L5C 1V3
Koska Lynnette 8 Hester Court, Thornhill, ON L3T 3K5 Employee 885,000 3.93%
Ku Jim c/o Mark Twerdun, 1215 Riverbank Way, 206,666
Oakville, ON L6H 6X4
LaBuick Dennis 1936 St. John's Road, Newmarket, ON Employee 1,347,500 5.98%
LaBuick Ed P.O. Box 7, 24345 Highway 48, Baldwin, Ontario Employee 1,362,500 6.05%
L0E 1A0
LaBuick Nadia P.O. Box 7, 24345 Highway 48, Baldwin, Ontario Employee 1,562,500 6.94%
Faye L0E 1A0
LaBuick Patricia 1936 St. John's Road, Newmarket, ON Employee 1,547,500 6.87%
LaBuik Tillie 11719-135-B-ST, Edmonton, Alberta T5M 1L8 500,000 2.22%
Lachine Ken 107-190 Robert Speck Pkwy., Mississauga, ON 5,000
L4Z 3K3
Laroche Danny 151 Larkin Avenue, Markham, ON L3P 4Y4 Employee 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 1.87%
36
Mackenzie Phil 9 Amon Dr., R.R. 2, Sebright, ON L0K 1W0 40,000
Macmillan Isabel 80 InverlockyBlvd. Apt. 604, Thornhill, ON L3T 2,000
4P3
Martin Marilyn 9643 Melville Dr., Windsor, ON N8R 1B4 30,000
Matheson Jeff 1130 Oakery Woods Place, Oakville, ON L6M 40,000
2C1
Matheson Nicole 1130 Oakery Woods Place, Oakville, ON L6M 100,000
2C1
McCoy Jeff 7394 County Road #1, Beeton, Ontairo L0G 1A0 10,000
Milne Eric 1200 Sheppard Avenue East, Suite 102, North 5,000
York, Ontario M2K 2S5
Minnaar Brenda 30 Brentwood Drive, Dundas, ON L9H 3N3 66,666
Mole John 1817 Will Scarlet Drive, Mississauga, On L4K Director 166,666
1L6
Murphy Kelly 44 Brown Street, Tottenham, ON L0G 1W0 Employee 12,500
Patterson Michael 2240 Halifax Dr., Suite 1009, Ottawa, ON K1G 50,000
2W8
Phillips Lisa 2362 Bankside Drive, Mississauga, ON L5M 6E3 33,333
Pollard Jeremy 8 Vine Crescent, Barrie, On L4N 2B3 250,000 1.11%
Postance Michael 40,000
Powell Claire 13 Belmont Crescent, Midhurst, On L0L1X0 433,336 1.92%
R.E. Walker Packaging
Ltd.(11) 25 Willow Landing Road, Midhurst, On L0L 1X1 333,336 1.48%
Ramball Mary-Lee 4302 Vivian Road, Cedar Valley, ON L0G 1E0 Employee 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 3521 Town Line, Orillia, Ontario L3V 6H2 10,000
Rosenstadt William c/o Spitzer &Feldman, P.C., 405 Park Ave., NY Counsel 44,000
NY 10022
Rowe Andy 41 Marcus Street, Barrie, Ontario L4N 3L7 7,000
- ------------
(11) Rick Walker maintains voting and investment power over the shares owned by
R.E. Walker Packaging Ltd.
37
Rowe Dale 42 O'Neil Drive RR#4, Belleville, Ontario K8N 7,140
4Z4
Samuel Lewis RR 1 GB 96, Lansdowne, On K0E 1L0 290,000 1.29%
Sanders Lesley 431 E. 20th St., NY NY 10010 Counsel 40,000
Savaran Financial Inc.(12) 157 Adelaide West, Ste. 176, Toronto, ON M5H 1,000,000 4.44%
(Irene Lightfoot) 4E7
Shamess John R.R. # 1, Bradford, ON L3Z 2A4 24,000
Schmitz Peter 550 Westside road South, Kelowna, B.C. V1Z 100,000
3S2
Silver Mike 8 Highland Woods Court, London, Ontario W6C 12,000
5W9
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 430,000 1.91%
Street, Perth, On L7H 2K1
Smyth William 218 Deborah Way, Barrie, On L4N 4N7 50,000
Smyth Steven 99 Crimson Ridge, Barrie, Ontario L4N 0G8 10,000
Staring Jamie 20 Kelly Place, Barrie, On L4N 8N2 125,000
Stewart Steve 245 Pine Street, Belleville, Ontario K8N 2N3 4,000
Stone Perry 83-3rd Street Southeast, Medicine Hat, Alberta 2,500
T1A 0G3
Spitzer, Jr. M. James c/o Spitzer &Feldman, P.C., 405 Park Ave., NY Counsel 12,000
NY 10022
Straiton Ken c/o Mark Twerdun, TD Evergreen, 20 Milverton 333,335 1.48%
Drive, Mississauga, ON L5R 3G2
Swiaty Dan 15 Huxley Avenue Souty, Hamilton, Ontario L8K 6,000
2P5
Swiaty Terry 278 Cumberland Avenue, Hamilton, On L8M 34,000
2A1
Symons William R.R #5, Orangeville, On L9W 2Z2, Orillia, On 20,000
L3V 6R2
Thorncliffe Industries
Corp.(13) 100 Roehampton Avenue, Toronto, ON M4P 1R3 815,000 3.62%
- --------
(12) Irene Lightfoot maintains voting and investment power over the shares
owned by Savaran Financial Inc.
(13) Joe Elahos maintains voting and investment power over the shares owned by
Thorncliffe Industries Corp.
38
Twerdun Helen & 109-2240 Halifax Dr., Ottawa, Ontario 50,000
Walter
Twerdun Jill 1215 Riverbank Way, Oakville, ON L6H 6X4 250,000 1.11%
Vallesi Julie 5345 Forest Ridge Dr., Mississauga, ON L5M 20,000
5B4
The Via Trust(14) c/o Mark Twerdun, 1215 Riverbank Way, 250,000 1.11%
Oakville, ON L6H 6X4
Voyce David & 663 Glen Crescent, Orillia, On L3V 6R2 358,334 1.59%
Carol
Walkey Bruce R.R. # 3--6900 Concession road, Everett,
Ontario L0M 1J0 4,000
----------
Total 22,522,974
==========
- -----------
(14) Frank Demarinis maintains voting and investment power over the shares
owned by The Via Trust.
Assuming the sale of all shares offered by the selling shareholders, the
selling shareholders will have no holdings.
The selling shareholders acquired their shares of Common Stock pursuant to
three private placements conducted by us. Following is a summary of each
placement and a list of the participants.
39
Placement A
On November 23, 2000 we raised $354,250 through the sale of 100 shares
pursuant to a private placement as set forth in the chart below.
Amount of Subscription Date Shares were Acquired and
Subscriber Address Shares Price exercise of
Acquired or Strike Price Warrants or Options)
(Warrants or
Options) $
A.R.T. International Unit 5-7100 Warden Avenue, 400 $354,250 Nov 23, 2000--200 shares
Inc. Markham ON L3R 8B8
--------
TOTAL $354,250
--------
Placement B
From August through October 2001 we issued 19,367,933 shares of common
stock to the following investors of which certain investors exercised 4,366,666
warrants. In this private placement, we raised $1,562,259.50 as set forth in the
chart below.
Amount of
Shares Date Shares were Acquired and
Subscriber Address Acquired U.S. $ exercise of Warrants or Options)
403266 Ontario c/o David & Carol 946,666 $101,820.00 Aug 29, 2001 666,666 shares
Ltd Voyce, 663 Glen (exercise of Warrants);
(David and Carol Voyce) Crescent, Orillia,
ON L3V 6R2 Oct 1, 2001 50,000 shares; Dec. 1,
2001 230,000 shares
Ambeau Thomas 64 Royal Oak 333,334 $50,000.00 Aug 29, 2001 125,000 shares
Drive, Barrie, On (exercise of Warrants);
L4N 7S5
Dec 1, 2001 208,334 shares
(exercise of Warrants)
Aravest Ltd. P.O. Box N-9645, 66,666 $10,000.00 Aug 29, 2001
(Steve Kaussaya) Nassau, Bahamas
A.R.T. Unit 5- 7100 1,999,600 $1.00 Aug 2, 2001
International Inc. Warden Avenue,
(directors: Roger Kirby Markham ON L3R
Simon Meredith, 8B8
Michel Van Herreweghe and
Stefan Gundmundsson)
Bradley Stephen 46 Gibson Lake 200,000 $30,000.00 Aug 29, 2001 (exercise of
Drive, Palgrave, Warrants)
On L0N 1P0
Corvese Steve 5254 Forest Hill 66,666 $10,000.00 Aug 29, 2001
40
Drive,
Mississauga,
Ontario
Crosbie Robert RR 1, Stn Main, 300,000 $66,992.00 Aug 29, 2001 166,666 shares;
Port Hope, On L1A
3V7 Oct 1, 2001 50,000 shares;
Dec 27, 2001 83,334 shares
Dale Kerry 426 Eagle Street, 10,000 $65.00 Oct 1, 2001
Newmarket, ON
L3Y 1K6
Demarinis Enzo 2000 Peak Place, 66,666 $10,000.00 Aug 29, 2001
Oakville, ON L3H
5T2
Demarinis Frank 584 Vaughan Mills, 66,666 $10,000.00 Aug 29, 2001
Woodbride, ON
L1H 4H1
Desroches Paul 1311 Ludbrook 200,000 $30,000.00 Aug 29, 2001 (exercise of
Court, Warrants)
Mississauga,
On L5J 3P2
Dodd Family c/o Norman Dodd, 133,333 $20,000.00 Aug 29, 2001
Trust 656 Sunset Beach
(Norman Dodd) Road, Richmond
Hill, On L4E 3G2
Doering Dennis 108 Marshall 33,333 $5,000.00 Aug 29, 2001
Street,
Barrie, On L4N 4L5
Durham Int'l P.O. Box 1132 133,333 $19,999.95 29-Aug-01
Investments Lauraston House,
(Wayne Grant) Lower Collymore,
Bridgetown St.
Michael, Barbados,
WI
Garces Candy 44 Crew Avenue, 1,000,000 $65,000.00 Aug 29, 2001
Toronto, Ontario
M4C 2V3
Gayford Tom RR # 4, 100,000 $6,500.00 Aug 29, 2001
Stouffville,
4093 Bloomington
Road
41
Gomes Heather 445 Maple Grove 10,000 $65.00 Oct 1, 2001
Ave., Bradford, ON
L3Z 2V8
Hendershot Walter 233 Inksetter 50,000 $7,500.00 Aug 29, 2001
Road,
RR 1, Lynden, On
L0R 1T0
James Corinne 2027 Russett Road, 25,000 $162.50 Dec 1, 2001
Voyce Mississauga, ON
L4Y 1B8
James Jacqueline 44 Barringham 200,000 $30,000.00 Aug 29, 2001
Cadman Drive, Oakville,
ON L6J 4B2
Kelln Larry 2554 Maid Marion 100,000 $15,000.00 Aug 29, 2001
Place, Mississauga,
On L5K 2L9
Kennedy Keith 412 Queen Street, 500,000 $20,800.00 Aug 29, 2001 300,000 shares;
Apt. A, Newmarket,
ON L3Y 2P2 Oct 1, 2001 200,000 shares
Khonsari Homa 1 Garrett Cres., 266,666 $74,999.90 Aug 29, 2001 166,666 shares; Dec
Barrie, Ontario 27, 2001 100,000 shares
L4M 4R7
Koska Lynnette 8 Hester Court, 885,000 $29,152.50 Aug 29, 2001 585,000 shares; Oct
Thornhill, ON L3T 1, 2001 300,000 shares
3K5
(exercise of Warrants)
Ku Jim c/o Mark Twerdun, 166,666 $25,000.00 Aug 29, 2001
1215 Riverbank
Way, Oakville, ON
L6H 6X4
LaBuick Dennis 1936 St. John's 1,347,500 $64,330.50 Aug 29, 2001 950,000 shares; Oct
Road, Newmarket, 1, 2001 250,000 shares
ON
(exercise of Warrants); Oct 1,
2001 147,500 shares
LaBuick Ed P.O. Box 7, 24345 1,362,500 $49,806.25 Aug 29, 2001 700,000 shares; Oct
Highway 48, 1, 2001 250,000 shares
Baldwin, Ontario
L0E 1A0 (exercise of Warrants); Oct 1,
2001 412,500 shares
LaBuick Nadia P.O. Box 7, 24345 1,562,500 $51,106.25 Aug 29, 2001 700,000 shares; Oct
42
Faye Highway 48, 1, 2001 450,000 shares
Baldwin, Ontario
L0E 1A0 (exercise of Warrants; Oct 1,
2001 412,500 shares
LaBuick Patricia 1936 St. John's 1,547,500 $65,633.75 Aug 29, 2001 950,000 shares; Oct
Road, Newmarket, 1, 2001 450,000 shares
ON
(exercise of Warrants); October
1, 2001 147,500 shares
LaBuik Tillie 11719-135-B-ST, 500,000 $32,500 Aug 29, 2001
Edmonton, Alberta
T5M 1L8
Laroche Danny 151 Larkin Avenue, 12,500 $81.25 1-Oct-01
Markham, ON L3P
4Y4
Long Wayne 207 Mapleview 420,999 $2,975.45 Oct 1, 2001 200,000 shares; Dec 1,
Drive E., Barrie, 2001 220,999 shares
ON L4N 9H3
Matheson Nicole 1130 Oakery Woods 100,000 $15,000.00 Aug 29, 2001
Place, Oakville,
ON L6M 2C1
Minnaar Brenda 30 Brentwood 66,666 $10,000.00 Aug 29, 2001 (exercise of
Drive, Dundas, ON Warrants)
L9H 3N3
Mole John 1817 Will Scarlet 166,666 $25,000.00 Aug 29, 2001 (exercise of
Drive, Warrants)
Mississauga,
On L4K 1L6
Murphy Kelly 44 Brown Street, 12,500 $81.25 Oct 1, 2001
Tottenham, ON
L0G 1W0
Phillips Lisa 2362 Bankside 33,333 $4,999.95 Aug 29, 2001
Drive,
Mississauga,
ON L5M 6E3
Pollard Jeremy 8 Vine Crescent, 250,000 $37,500.00 Aug 29, 2001 (exercise of
Barrie, On L4N 2B3 Warrants)
Powell Claire 13 Belmont 433,336 $100,000.40 Aug 29, 2001 333,336 shares;
Crescent, Midhurst, Dec 27, 2001 100,000 shares
On L0L1X0
43
R.E. Walker 25 Willow Landing 333,336 $50,000.40 Aug 29, 2001
Packaging Ltd. Road, Midhurst, On
(Rick Walker) L0L 1X1
Ramball Mary-Lee 4302 Vivian Road, 5,000 $32.50 Oct 1, 2001
Cedar Valley, ON
L0G 1E0
Restorick Frank J. 1464 Jefferson 13,333 $1,999.95 29-Aug-01
Crescent, Oakville,
ON L6H 3G6
Riddell Glenn 110 Garden Avenue, 100,000 $15,000.00 29-Aug-01
Ancaster, On L9G
2J7
Samuel Lewis RR 1 GB 96, 290,000 $57,500.00 Aug 29, 2001 250,000 shares
Lansdowne, On (exercise of Warrants);
K0E 1L0
Dec 27, 2001 40,000 shares
Savaran 157 Adelaide West, 1,000,000 $65,000.00 Aug 29, 2001
Financial Inc. Ste. 176, Toronto,
(Irene Lightfoot) ON M5H 4E7
Simmons Scott 304 Sumner 100,000 $15,000.00 Aug 29, 2001 (exercise of
Avenue, Oakville, Warrants)
On L6J 1S5
Slightham Phyllis 48 Quail Valley 100,000 $650.00 Oct 1, 2001
Road, Thornhill,
ON L3T 4R2
Smyth William c/o Great War 330,000 $95,000.00 Aug 29, 2001 200,000 shares;
Memorial Hospital, Dec 24, 2001 130,000 shares
33 Drummond
Street, Perth, On
L7H 2K1
Smyth William 218 Deborah Way, 50,000 $7,500.00 Aug 29, 2001
Barrie, On L4N 4N7
Staring Jamie 20 Kelly Place, 125,000 $18,750.00 Aug 29, 2001 100,000 shares
Barrie, On L4N 8N2 (exercise of Warrants);
Dec 1, 2001 25,000 shares
Straiton Ken c/o Mark Twerdun, 333,335 $50,000.25 Aug 29, 2001
TD Evergreen, 20
Milverton Drive,
Mississauga, ON
L5R 3G2
44
Swiaty Terry 278 Cumberland 34,000 $3,091.00 Aug 29, 2001 20,000 shares; Dec
Avenue, Hamilton, 1, 2001 14,000 shares
On L8M 2A1
Symons William R.R #5, 20,000 $3,000.00 Aug 29, 2001
Orangeville,
On L9W 2Z2,
Orillia, On L3V
6R2
Thorncliffe 100 Roehampton 500,000 $32,500.00 Aug 29, 2001
Industries Corp. Avenue, Toronto,
(Joe Elahos) ON M4P 1R3
Voyce David & 663 Glen Crescent, 358,334 $50,162.50 Aug 29, 2001 333,334 shares
Carol Orillia, On L3V (exercise of Warrants);
6R2
Dec 1, 2001 25,000 shares
TOTAL $1,562,259.50
=============
Placement C
From December 2001 through February 2002 we issued 3,154,641 shares of
Common Stock to several investors pursuant to a private placement. Pursuant to
such private placement, we raised $1,070,929.15 as set forth in the chart below.
Amount of U.S. $ Date Shares were Acquired and
Subscriber Address Shares exercise of Warrants or Options)
Acquired
1413251 Ontario 6 Buggey Lane, 50,000 $25,000.00 Feb 15, 2002
Inc. (Mark Ajax, Ontario L1S
Purdy) 4S7
1435031 Ontario 248 Forest Hill 250,000 $62,500.00 Feb 15, 2002
Ltd. (Barry Road, Toronto, ON
Landen) M5P 2N5
1469403 Ontario 83 Maclaren 60,000 $30,000.00 Feb 15, 2002
Ltd. (Peter Avenue, Barrie,
Landers) Ontario L4N 7H3
1504426 Ontario 181 University 200,000 $100,000.00 Feb 15, 2002
Limited (Wayne Ave., Suite 1410,
Long) Toronto, ON M5H
3M7
760761 Ontario 8 Vine Cres., 20,000 $10,000.00 Feb 15, 2002
Ltd. (Jeremy Barrie, Ontario
Pollard) L4N 2B3
45
Beckley Mike 12 Chalmers Dr., 10,000 $5,000.00 Feb 15, 2002
Barrie, ON L4N
8A3
Belben Ted 303 Reading Place, 8,000 $4,000.00 Feb 15, 2002
Newmarket,
Ontario L3Y 6H6
Clark Linda 146 McCraney St. 1,000 $500.00 Feb 15, 2002
West, Oakville, ON
L6H 1H6
Deluca Judy 1227 Riverbank 20,000 $10,000.00 Feb 15, 2002
Way, Oakville,
Ontario L6H 6X4
Demarinis Joe 1615 Amberlea 20,000 $10,000.00 Feb 15, 2002
Road, Pickering,
ON L1V 5P3
Dodd Norman 656 Sunset Beach 50,000 $25,000.00 Feb 15, 2002
Road, Richmond
Hill, On L4E 3G2
Doering Jennifer 43 Fawn Crescent, 250,000 $6,025.45 Feb 4, 2002
Barrie, Ontario
L4N 7Z6
Donaldson Peter Share High School, 10,000 $5,000.00 Feb 15, 2002
Royal Oak, MI
Donaldson Walt 1929 Ontario St., 20,000 $10,000.00 Feb 15, 2002
Windsor, ON N8Y
1N1
Durham Int'l P.O. Box 1132 315,001 $80,500.15 February 5, 2002 220,001 shares;
Investments Lauraston House, February 15, 2002 95,000 shares
(Wayne Grant) Lower Collymore,
Bridgetown St.
Michael, Barbados,
WI
Gilbert Eli 1227 Riverbank 60,000 $30,000.00 Feb 15, 2002
Way, Oakville,
Ontario L6H 6X4
Gordon Colin 2373 Blackstone 7,000 $3,500.00 Feb 15, 2002
Cres., Ottawa,
Ontrario K1B 4H3
Hochrein J.J. 5 Wells Street, 4,000 $2,000.00 Feb 15, 2002
Toronto, Ontario
M5R 1N8
46
Johnston Lyle RR#4 Coldwater, 3,000 $1,500.00 Feb 15, 2002
Ontario L0K 1E0
Kisely Willy 539 Knowles Road, 100,000 $50,000.00 Feb 15, 2002
Kelowna, BC V1W
1H4
Korhonen Ed 2206 Pine Needle 100,000 $50,000.00 Feb 15, 2002
Row, Mississauga,
Ontario L5C 1V3
Ku Jim c/o Mark Twerdun, 40,000 $20,000.00 February 15, 2002
1215 Riverbank
Way, Oakville, ON
L6H 6X4
Lachine Ken 107-190 Robert 5,000 $2,500.00 Feb 15, 2002
Speck Pkwy.,
Mississauga, ON
L4Z 3K3
Loeprich John 2070--10th 10,000 $5,000.00 Feb 15, 2002
Sideroad, Moffat,
ON L0P 1J0
Mackenzie Phil 9 Amon Dr., R.R. 40,000 $20,000.00 Feb 15, 2002
2, Sebright, ON
L0K 1W0
Macmillan Isabel 80 InverlockyBlvd. 2,000 $1,000.00 Feb 15, 2002
Apt. 604,
Thornhill,
ON L3T 4P3
Martin Marilyn 9643 Melville Dr., 30,000 $15,000.00 Feb 15, 2002
Windsor, ON N8R
1B4
Matheson Jeff 1130 Oakery 40,000 $20,000.00 Feb 15, 2002
Woods Place,
Oakville, ON L6M
2C1
McCoy Jeff 7394 County Road 10,000 $5,000.00 Feb 15, 2002
#1, Beeton,
Ontairo
L0G 1A0
Milne Eric 1200 Sheppard 5,000 $2,500.00 Feb 15, 2002
Avenue East, Suite
102, North York,
Ontario M2K 2S5
47
Patterson Michael 2240 Halifax Dr., 50,000 $25,000.00 Feb 15, 2002
Suite 1009,
Ottawa,
ON K1G 2W8
Postance Michael 40,000 $20,000.00 Feb 15, 2002
Restorick Frank J. 1464 Jefferson 7,000 $3,500.00 15-Feb-02
Crescent,Oakville,
ON L6H 3G6
Riddell Glenn 110 Garden 50,000 $25,000.00 15-Feb-02
Avenue, Ancaster,
On L9G 2J7
Rose Glenda 3521 Town Line, 10,000 $5,000.00 Feb 15, 2002
Orillia, Ontario
L3V 6H2
Rosenstadt William c/o Spitzer 44,000 $11,000.00 Feb 15, 2002
&Feldman, P.C.,
405 Park Ave., NY
NY 10022
Rowe Andy 41 Marcus Street, 7,000 $3,500.00 Feb 15, 2002
Barrie, Ontario
L4N 3L7
Rowe Dale 42 O'Neil Drive 7,140 $3,570.00 Feb 15, 2002
RR#4, Belleville,
Ontario K8N 4Z4
Sanders Lesley 431 E. 20th St., 40,000 $10,000.00 Feb 15, 2002
NY
NY 10010
Shamess John R.R. # 1, 24,000 $12,000.00 Feb 15, 2002
Bradford,
ON L3Z 2A4
Schmitz Peter 550 Westside road 100,000 $50,000.00 Feb 15, 2002
South, Kelowna,
B.C. V1Z 3S2
Silver Mike 8 Highland Woods 12,000 $6,000.00 Feb 15, 2002
Court, London,
Ontario W6C 5W9
Smyth Steven 99 Crimson Ridge, 10,000 $5,000.00 Feb 15, 2002
Barrie, Ontario
L4N 0G8
Smyth William c/o Great War 100,000 $50,000.00 15-Feb-02
48
Memorial Hospital,
33 Drummond
Street, Perth, On
L7H 2K1
Stewart Steve 245 Pine Street, 4,000 $2,000.00 Feb 15, 2002
Belleville,
Ontario
K8N 2N3
Stone Perry 83-3rd Street 2,500 $1,250.00 Feb 15, 2002
Southeast,
Medicine Hat,
Alberta T1A 0G3
Spitzer, Jr. M. James c/o Spitzer 12,000 $3,000.00 Feb 15, 2002
&Feldman, P.C.,
405 Park Ave., NY
NY 10022
Swiaty Dan 15 Huxley Avenue 6,000 $3,000.00 Feb 15, 2002
Souty, Hamilton,
Ontario L8K 2P5
Thorncliffe 100 Roehampton 315,000 $62,500.00 Jan 20, 2002
Industries Corp. Avenue, Toronto,
(Joe Elahos) ON M4P 1R3
Twerdun Helen & 109-2240 Halifax 50,000 $7,500.00 Feb 5, 2002
Walter Dr., Ottawa,
Ontario
Twerdun Jill 1215 Riverbank 250,000 $13,583.34 Feb 5, 2002
Way, Oakville, ON
L6H 6X4
Vallesi Julie 5345 Forest Ridge 20,000 $10,000.00 Feb 15, 2002
Dr., Mississauga,
ON L5M 5B4
Via Trust The c/o Mark Twerdun, 250,000 $125,000.00 Feb 15, 2002
(Frank Demarinis) 1215 Riverbank
Way, Oakville, ON
L6H 6X4
Walkey Bruce R.R. # 3-- 6900 4,000 $2,000.00 Feb 15, 2002
Concession road,
Everett, Ontario
L0M 1J0
TOTAL $1,070,929.15
=============
49
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.
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 July 30, 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. 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.
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 us. 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
50
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 October 1, 2001, we issued 3,000,000 Class E Warrants to several
investors pursuant to a private placement being conducted by us. The shares of
Common Stock underlying the Class E Warrants are currently being registered in
connection with this 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.
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 us without
compensation. The shares of Common Stock underlying the Class F warrants are
currently being registered in connection with this Registration Statement.
51
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 July 30, 2002, a total of 22,522,974 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, as amended 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, as amended 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
52
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 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
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;
53
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, 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
54
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 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
55
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 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 of 1933, as amended, 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 of 1933, as amended 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.
56
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.
You may review a copy of the registration statement, including exhibits
and schedules filed with it, at the Commission's public reference facilities in
Room 104, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Room. In addition, the SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy statements, and other
information regarding issuers that file electronically with the SEC.
57
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report F-2
Financial Statements:
Balance Sheets as of July 31, 2001 and 2000 and April 30, 2002
(unaudited) F-3
Statements of Operations for the Year ended July 31, 2001 and from
inception, January 1, 2000 to July 31, 2000 and the
nine months ended April 30, 2002 and 2001 (unaudited) F-4
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 nine months ended April 30, 2002
and 2001 (unaudited) F-5
Statement of Cash Flows for the Year ended July 31, 2001 and from
inception, January 1, 2000 to July 31, 2000 and the
nine months ended April 30, 2002 and 2001 (unaudited) F-6
Notes to Financial Statements F-7
F-1
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-2
THE BUCK-A-DAY COMPANY INC.
BALANCE SHEETS
(IN UNITED STATES DOLLARS)
July 31, July 31, April 30,
As at 2001 2000 2002
- ---------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 316,427 $ 25,164 $ 226,568
Accounts receivable 126,621 39,628 105,490
Prepaid expenses 49,377 84,317 134,468
Inventory 122,037 12,117 368,180
Loans to shareholders (Note 13) -- -- 270,923
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 614,462 161,226 1,105,629
FIXED ASSETS
(Net of accumulated depreciation)(Note 2) 191,647 90,255 325,240
GOODWILL - net (Note 3) 559,085 -- --
- ---------------------------------------------------------------------------------------------------
$ 1,365,194 $ 251,481 $ 1,430,869
===================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities
(Notes 5 and 8) $ 1,184,277 $ 286,093 $ 1,935,060
Deferred marketing revenue (Note 6) 228,865 -- --
Reserve for returns -- -- 191,266
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,413,142 286,093 2,126,326
- ---------------------------------------------------------------------------------------------------
LONG TERM LIABILITIES
Advances from shareholders (Note 4) 834,976 33,825 --
Provincial sales tax payable (Note 5) 79,319 -- 24,129
- ---------------------------------------------------------------------------------------------------
914,295 33,825 24,129
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,327,437 319,918 2,150,455
- ---------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)
SHAREHOLDERS' DEFICIENCY:
Capital stock - no par value, unlimited
number of common shares authorized;
July 31, 2001 - 400 , July 31, 2000 - 360
and April 30, 2002 - 22,522,974 shares
issued and outstanding (Note 7) 354,250 305,500 2,823,043
Additional Contributed Capital (Note 3 and 7) 585,241 -- 1,339,241
Accumulated other comprehensive income (Note 8) 29,512 16,075 42,134
Deficit (1,931,246) (390,012) (4,924,004)
- ---------------------------------------------------------------------------------------------------
(962,243) (68,437) (719,586)
- ---------------------------------------------------------------------------------------------------
$ 1,365,194 $ 251,481 $ 1,430,869
===================================================================================================
F-3
THE BUCK-A-DAY COMPANY INC.
STATEMENTS OF OPERATIONS
(IN UNITED STATES DOLLARS)
9 MONTHS 9 MONTHS
INCEPTION, ENDED ENDED
JANUARY 1, APRIL 30, APRIL 30,
THE YEAR ENDED 2000 TO 2002 2001
FOR JULY 31, 2001 JULY 31, 2000 (UNAUDITED) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
REVENUE
Sales $ 5,381,008 $ 733,973 $ 12,356,968 $ 4,164,467
Cost of sales (3,955,228) (537,406) (8,615,836) (3,042,246)
- -------------------------------------------------------------------------------------------------------------------
Gross Profit 1,425,780 196,567 3,741,132 1,122,221
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
Amortization 48,601 9,283 61,205 31,413
Automobile and travel 54,887 17,193 82,108 38,245
Bad debts 38,440 -- -- --
Communication costs 77,776 37,763 140,452 63,988
Consulting fees 104,656 796 410,864 --
Interest and bank charges 11,937 2,438 45,286 4,990
Media and printing costs 1,114,561 186,847 1,604,643 735,284
Office expenses 32,870 31,270 170,186 38,822
Outside answering and approval 184,218 2,550 348,122 129,656
Professional fees 63,399 14,647 148,897 18,274
Rent and utilities 67,585 32,106 71,007 49,556
Repairs and maintenance 23,547 6,945 21,394 15,669
Salaries and commissions 1,075,467 217,738 3,102,573 796,886
- -------------------------------------------------------------------------------------------------------------------
2,967,014 586,579 6,206,736 1,922,763
- -------------------------------------------------------------------------------------------------------------------
NET LOSS BEFORE UNDERNOTED ITEM (Note 10) $(1,541,234) $(390,012) $(2,465,604) $(800,542)
Goodwill writeoff (Note 3) -- -- (527,153) --
- -------------------------------------------------------------------------------------------------------------------
NET LOSS $(1,541,234) $(390,012) $(2,992,757) $(800,542)
Loss per share $(3,853) $(975.03) $(0.1567) $(2,001)
===================================================================================================================
Weighted average number
of shares outstanding 400 400 19,097,223 400
===================================================================================================================
F-4
THE BUCK-A-DAY COMPANY INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN UNITED STATES DOLLARS)
Accumulated
Comprehensive
Foreign
Accumulated Currency
Number of Contributed Translation Accumulated
Shares Capital Stock Capital Adjustment Deficit Total
- ---------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2000 -- $ -- $ -- $ -- $ --
Issued for cash 360 305,500 -- -- -- 305,500
Net Loss -- -- -- -- (390,012) (390,012)
Foreign currency translation adjustment
(Note 8) -- 16,075 -- 16,075
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2000 360 305,500 -- 16,075 (390,012) (68,437)
Issued for cash 40 48,750 -- -- -- 48,750
Pushdown accounting -- -- 585,241 -- -- --
Net Loss -- -- -- -- (1,541,234) (1,541,234)
Foreign currency translation adjustment
(Note 8) -- -- -- 13,437 -- 13,347
- ---------------------------------------------------------------------------------------------------------------------------------
Balance July 31, 2001 400 354,250 585,241 29,512 (1,931,246) (962,243)
Issue of common shares 1,999,600 1 -- -- -- 1
Settlement of secured creditor
loans and exercise of related
A and B Warrants 14,600,000 1,290,140 -- -- -- 1,350,140
Exercise of C Warrants 800,000 5,200 -- -- -- 5,200
Private placement of common shares 2,522,974 1,147,452 -- -- -- 1,087,452
Compensatory shares and warrants 2,600,000 26,000 754,000 -- -- 780,000
Net loss for nine months ended
April 31, 2002 (Unaudited) -- -- -- -- (2,992,757) (2,992,757)
Foreign currency translation adjustment
(Note 8) -- -- -- 12,622 -- 12,622
- ---------------------------------------------------------------------------------------------------------------------------------
Balance April 30, 2002 (Unaudited) 22,522,974 $ 2,823,043 $ 1,339,241 $ 42,134 $(4,924,004) $ (719,585)
=================================================================================================================================
F-5
THE BUCK-A-DAY COMPANY INC.
STATEMENTS OF CASH FLOWS
(IN UNITED STATES DOLLARS)
9 MONTHS 9 MONTHS
INCEPTION, ENDED ENDED
JANUARY 1, APRIL 30, APRIL 30,
THE YEAR ENDED 2000 TO 2002 2001
FOR JULY 31, 2001 JULY 31, 2000 (UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
Cash Used in Operating Activities
Net (loss) $ (1,541,234) $ (390,012) $ (2,992,757) $ (800,542)
Amortization 48,601 9,283 61,205 31,413
Goodwill writeoff -- -- 527,153 --
Reserve for returns -- -- 191,266 --
Compensatory shares and warrants -- -- 754,000 --
Accounts receivable (86,993) (39,628) 21,131 727
Prepaid expenses 34,940 (84,317) (85,091) (43,970)
Inventory (109,920) (12,117) (246,143) (87,474)
Loans to shareholders -- -- (270,923) --
Provincial sales tax payable 79,319 -- (55,190) --
Accounts payable and
accrued liabilities 898,184 286,093 750,783 555,785
Deferred marketing revenue 228,865 -- (228,865) --
- ------------------------------------------------------------------------------------------------------------------
Cash used in operations (448,238) (230,698) (1,573,431) (344,059)
- ------------------------------------------------------------------------------------------------------------------
Financing Activities
Advances from shareholders
and loans payable 801,151 33,825 (834,976) 336,624
Proceeds from capital
stock issuance 48,750 305,500 2,468,793 48,750
Additional contributed
capital (Notes 3 and 7) 585,241 -- -- 585,241
- ------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 1,435,142 339,325 1,633,817 965,334
- ------------------------------------------------------------------------------------------------------------------
Investing Activity
Additions to fixed assets (123,718) (99,538) (162,867) (73,187)
Goodwill (Note 3) (585,241) -- -- (563,760)
- ------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (708,959) (99,538) (162,867) (636,947)
- ------------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate
changes on cash 13,318 16,075 12,622 370
- ------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 291,263 25,164 (89,859) (10,761)
Cash and cash equivalents
Beginning of year (inception) 25,164 -- 316,427 25,164
- ------------------------------------------------------------------------------------------------------------------
End of year $ 316,427 $ 25,164 $ 226,568 $ 14,403
==================================================================================================================
F-6
THE BUCK-A-DAY COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
(Information as of and for the
Nine Month Periods Ended April 30,
2002 and 2001 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 produced by others, 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 realisable value and
consists of goods purchased and held for resale.
(c) Depreciation/Amortization
Fixed assets are recorded at cost. Depreciation/amortization has been
provided for in the accounts at the following rates:
Furniture, equipment and computers - 20% declining balance
Goodwill - 15 years straight line basis
(d) Revenue Recognition
Revenues and expenses are recognised on the accrual basis. Revenue from
sales of products is recognised 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.
EITF 99-19 requires the company to determine how revenues are recognised,
on a gross less cost basis or on a net revenue basis. The company has
followed the guidance of EITF 99-19 and reports revenues on gross basis.
The company purchases and takes title to inventory before it is sold and
if it is returned. The company assumes general inventory risk in the
transaction. Further the company establishes, within economic constraints,
the price charged to the customer. The company maintains primary
responsibility in fulfilling the needs of the customer. It is the
company's responsibility to determine the nature, type, characteristics
and specifications of inventory sold to the consumer. The company is
responsible for collecting the sales price from the customer and has to
pay the supplier regardless of whether the full sales price has been
collected.
Revenue from software sales (which is not modified or customized) is
recognised when there is persuasive evidence of a sales arrangement,
delivery has occurred, the fee is fixed or determinable and collectability
of the sales price is probable.
F-7
The company's policies for rights of return meet the criteria of SFAS # 48
since the selling price to the buyer is substantially fixed or
determinable at the date of sale. The buyer is obligated to pay the
company and that obligation is not contingent on resale of the product.
The buyer's obligation is unchanged in the event of theft or destruction
of the product. Upon the delivery of the product the buyer assumes the
risks of ownership. The buyer acquiring the product has physical presence
and substance beyond that of the company. The company does not have
significant obligations for future performance to directly bring about the
resale of the product by the buyer.
The company reports sales revenues net of returns. We continually evaluate
the returns of inventory by customers to ensure that there are no problems
with the inventory or that the customer can be sold a more appropriate
product. Actual returns are processed in the month the product is
returned. The return reserve is estimation by management based on the
average historic percentage ratio of returns to gross sales. In
determining the appropriate return ratio, management reviews average
historic ratios for the year to date and for the latest quarter. Where the
current quarterly return ratio has deteriorated from the year to date
return ratio, management will record the reserve for potential returns
based on the quarterly data, provided management is unable to identify
specific reasons for the deterioration that are of a non-recurring nature.
(e) Unaudited Interim Financial Data
The unaudited financial statements for the nine-months ended April 30,
2002 and 2001 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) 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 recognised 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 recognised 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. Basic earnings (loss) per share has been
computed on the basis of the weighted average number of common shares
outstanding. Separate diluted earnings (loss) per share has not been
presented, as the effect of any common stock equivalents, on such
calculation, would be antidilutive.
F-8
2. Fixed Assets
Fixed assets consist of the following:
July 31, July 31, April 30,
2001 2000 2002
- ----------------------------------------------------------------------------
(Unaudited)
Furniture, equipment
and computers $ 223,256 $ 99,538 $ 349,714
Leasehold improvements -- -- 49,078
Less: accumulated depreciation (31,609) (9,283) (73,552)
- ----------------------------------------------------------------------------
$ 191,647 $ 90,255 $ 325,240
============================================================================
3. Goodwill
The financial statements include the initial goodwill acquired in the
transactions described below with A.R.T. International Inc. ("ART").
Management has determined that goodwill should be amortized over 15 years.
On December 15, 1999 , Buck executed an agreement with ART. ART initially
had the right to purchase a 44% interest in Buck. By March 30, 2000, ART
had paid Buck $273,680 for 160 common shares, representing 44.44% of the
total issued share capital of Buck. On April 27, 2000 ART loaned Buck
$48,750 under an agreement which allowed ART the right to convert an
additional 40 common shares, representing an additional 5.56% of the total
issued share capital. Effective August 8, 2000, ART exercised its option
and converted its loan into equity, thereby bringing its ownership in Buck
up to 50%. On December 4, 2000 ART acquired the balance of 200 common
shares to own 100% of Buck for $627,150 including cash of $328,430 and
$298,720 of ART common shares, from other shareholders of Buck.
The total consideration paid by ART was as follows:
Cash:
Initial investment $ 273,860
Loan converted 48,750
Final investment 328,430
------------------------------------------------------------------
Total cash consideration $ 651,040
2,000,000 ART common shares 298,720
------------------------------------------------------------------
Total consideration $ 949,760
In the opinion of management, the underlying fair market value of assets
sold to ART approximated the book value as stated in Buck's interim
financial statements for the period ended November 30, 2000. The
consideration was allocated as follows:
July 31, 2001
Total consideration $ 949,760
Purchase price of 200 common shares by ART (364,519)
-------------------------------------------------------------------
Allocated to Goodwill $ 585,241
===================================================================
Under the guidance of SAB Topic 5-J whereby the form of ownership is
within the control of the parent company the goodwill and resultant
contributed capital of $585,241 have been 'pushed down' into Buck.
F-9
July 31, 2001 July 31, 2000 April 30, 2002
Goodwill on acquisition $ 585,241 $ -- $ 585,241
Accumulated amortization of goodwill (26,156) -- (58,088)
Write off of goodwill (a) -- -- (527,153)
--------------------------------------------------------------------------------------------
Net $ 559,085 $ -- $ --
============================================================================================
(a) Management has determined that as of April 30, 2002, Buck's continuing
losses and negative working capital have created an uncertainty of future
sustainable profits by Buck resulting in the decision to write off the
goodwill as at April 30, 2002.
4. 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.
5. Provincial Sales Tax
Due to poor cash flow during the first year of operations, the company was
delinquent in remitting its Provincial Sales Tax payments. The company
entered into a structured repayment plan with the 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. The company is currently not in default with the terms of the
payment plan.
6. 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. Management utilized the entire amount received by January
31, 2002. IBM advanced these funds to secure the company's exclusivity for
the sale of IBM products. The funds are non-refundable and can be utilized
at the discretion of management.
7. Capital Stock
(i) Warrants
On July 7, 2001, the Company issued Series B Warrants for 3,000,000 common
shares at $0.15 per common shares. The Warrants were issued to the holders
of secured convertible loans totaling $450,000, and were exercisable
within 30 days following the date of conversion of the secured convertible
loans into 3,000,000 common shares of the Company.
In August 2001, the Company issued Series A Warrants for 1,500,000 Common
Shares at $0.0065 per common share. The Warrants were issued to the
holders of secured convertible loans to the company totaling $441,690, and
were exercisable within 30 days following the date of conversion of the
secured convertible loans into 7,100,000 common shares of the Company.
In August 2001, the Company issued Series C Warrants for 800,000 common
shares at $0.0065 per common share. The Warrants were issued to ART, and
were exercisable within 120 days following of the issuance of common
shares arising from the conversion of the secured convertible loans into
common shares.
The Series A, B and C Warrants have been fully exercised during the nine
months ended April 30, 2002.
On October 1, 2001, the company issued 3,000,000 Class E Warrants to 37
investors. Class E Warrants are exercisable at $0.15 per common share,
expire on October 1, 2002 and entitles the holder to one share of Company
common stock.
In December 2001, the Company issued 600,000 Class D Warrants as
compensation for services rendered by a business consultant. Class D
Warrants are exercisable at $0.25 per share, expire on December 1, 2002
and entitles the holder to one share of Company common stock. The Class D
Warrants have been valued at 15 cents per warrant under the Black Scholes
method, resulting in an aggregate charge to consulting service expense and
contributed capital of $90,000.
In February 2002, the company issued 500,000 Class F Warrants to a
consultant as compensation for services rendered in their capacity as a
marketing consultant to the company. Class F Warrants are exercisable at
$0.50 per share, expire on February 1, 2003 and entitles the holder to one
share of Company common stock. The Class F Warrants have been valued at 8
cents per warrant under the Black Scholes method, resulting in an
aggregate charge to consulting service expense and contributed capital of
$40,000.
(ii) Common Stock
From inception (January 1, 2000) through May 31, 2000, the Company issued
360 shares of its common stock for net proceeds of $305,500.
In August 2000, the Company issued 40 shares of it common stock for net
proceeds of $48,750.
In August 2001, the Company issued to ART International Inc. 1,999,960
common shares for $1, which brought the total common shares owned by ART
to 2,000,000.
F-10
Through October 2001, the Company issued 8,600,000 shares of its common
stock in settlement of secured creditor loans ($441,690) and the exercise
of the Series A Warrants ($8,450) aggregating $450,140. The Company also
issued 6,000,000 shares of its common stock and received net proceeds of
$840,000 upon the conversion of certain secured convertible loans and the
exercise of Series B Warrants. In addition, the Series C Warrants were
exercised and the Company issued 800,000 shares of its common stock for
net proceeds of $5,200.
In October 2001, the Company issued 2,600,000 shares of its common stock
with an aggregate value of $650,000 in lieu of payment of salaries and
consulting fees resulting in additional contributed capital.
In December 2001 through February 2002, pursuant to a private placement of
its common shares, the Company issued an aggregate of 2,522,974 shares of
its common stock for net proceeds of $1,147,452.
8. 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.
9. Lawsuit
A supplier of computer hardware and software commenced an action against
the company in July 2001 claiming the sum of $150,875, plus interest and
costs for unpaid accounts. This amount was reflected in accounts payable
as of July 31, 2001. The Company settled this action in December 2001 for
$45,875 and effected payment at that time.
10. Income Taxes
At July 31, 2001, the Company has net operating loss carry forwards
("NOLs") of $1,934,000 for income tax purposes that expire in years
through 2008 and accordingly has deferred tax assets of $380,000. In
accordance with SFAS No. 109, the Company has not recorded a deferred tax
asset since utilization of such is dependent on future taxable profits and
it is unknown at the present time when future taxable profits will be
realized.
The components of deferred income taxes are as follows:
July 31, July 31 April 30,
2001 2000 2002
------------- ------------- -------------
Net operating loss carry forward $ 380,000 $ 78,000 $ 473,500
Less: valuation allowance (380,000) (78,000) (473,500)
------------- ------------- -------------
$ -- $ -- $ --
============= ============= =============
The components of the provision for income taxes is composed of the
following:
Year Ended July 31 Nine Months Ended April 30,
----------------------------- ---------------------------
2001 2000 2002 2001
------------- ------------- ------------ ------------
Current:
Federal and Provincial $ -- $ -- $ -- $ --
Deferred:
Federal and Provincial -- -- -- --
------------- ------------- ------------ ------------
$ -- $ -- $ -- $ --
============= ============= ============ ============
All of the Company's operations are in Canada and there were no
significant timing differences between the loss reported for financial
statement purposes and that reflected on the corporate tax return
The reconciliation of income tax computed at the statutory rates for
Canadian Federal and Provincial taxes, to income tax expense is:
Year Ended July 31 Nine Months Ended April 30,
----------------------------- -----------------------------
2001 2000 2002 2001
------------ ------------ ------------ ------------
Tax at Canadian statutory rates (22.00)% (22.00)% (22.00)% (22.00)%
Effect of NOLs 22.00 22.00 22.00 22.00
----------- ----------- ----------- -----------
-- % -- % -- % -- %
=========== =========== =========== ===========
F-11
11. Economic Dependence
In excess of 95% of the company's inventory purchases are from IBM
Corporation or its authorized business partners. The company has revolving
credit lines totalling $950,000 with these suppliers. Terms are net 30
days.
CITI Financial has agreed to make its Revolving Charge Plan available to
customers to facilitate credit purchases of consumer goods offered by the
Company. In excess of 90% of all sales of goods are placed through CITI
using the Revolving Charge Plan.
The following are details of the significant transaction with CITI:
--------------------------------------------------------------------------
# of transactions $ value of transactions
--------------------------------------------------------------------------
January 2000 - July 31, 2000 519 $505,000
--------------------------------------------------------------------------
August 2000 - July 31, 2001 3,473 $5,100,000
--------------------------------------------------------------------------
August 2001 - April 30, 2002 10,121 $12,419,633
--------------------------------------------------------------------------
12. 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-cancellable operating leases are as
follows:
F-12
Fiscal 2002 $91,028
2003 99,511
2004 98,012
2005 98,012
2006 17,955
--------
$404,518
========
(b) Subsequent to the year ended July 31, 2001, 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 $409,500 with annual increases equal to 10% of the of preceding year's
salary, the right to participate in any share option plan, share purchase
plan, retirement plan or similar plan. The anticipated increase will be
$63,000. Commencing January 1, 2002 through the period ended April 30,
2002, management was paid the contractual amount.
13. Loans to Shareholders
Loans to shareholders represent advances provided to various shareholders/
management of the company. The loans are repayable on demand and secured
by notes from the individuals and carry interest based on the floating
Canadian prime interest rate plus 2%. As of July 31, 2002, $200,000 has
been repaid to the company. We anticipate the balance being repaid by
December 31, 2002.
14. Prior year Comparative Numbers
Certain comparative numbers for the years ended July 31, 2001 and 2000
have been reclassified to conform to the presentation adopted for the
nine-month periods ended April 30, 2002 and 2001.
F-13
================================================================================
26,622,974 Shares
THE BUCK A DAY COMPANY INC.
-------------------
PROSPECTUS
-------------------
August 2, 2002
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 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.
Until________________, [90 days after effectiveness] all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to any dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to any unsold allotments or subscriptions.
TABLE OF CONTENTS
Prospectus Summary 1
Risk Factors 3
A Note Concerning Forward-Looking Statements 7
Enforcement of Civil Liabilities 7
Conventions Which Apply to this Prospectus 8
Currency of Presentation 8
Use of Proceeds 8
Dividend Policy 9
Capitalization 9
Exchange Rates 9
Selected Financial Data 10
Dilution 10
Market for Common Equity and Related
Stockholders Matters 11
Impact of the "Penny Stock" Rules on Buying
or Selling Our Common Stock 11
Plan of Distribution 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Description of Business 18
Management 24
Principal Shareholders 30
Related Party Transactions 31
Selling shareholders 33
Description of Securities 49
Income Tax Consequences 52
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities 55
Legal Matters 55
Experts 55
Where You Can Find More Information 55
The Buck A Day Company, Inc. Consolidated
Financial Statements F-1
PART II Information Not Required in the Prospectus II-1
Signatures II-5
================================================================================
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 .......................... $ 30,000
Legal Fees and Expenses ............................... $150,000(1)
Transfer Agent's Fees and Expenses
Miscellaneous ......................................... $ 7,500
Total ......... $210,000
(1) A portion of the legal fees owed to Spitzer & Feldman P.C. may be paid in
the form of unregistered shares of common stock or options to purchase
shares of common stock at terms to be negotiated by the parties subsequent
to the effectiveness of this registration statement.
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.
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.
II - 1
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. In December 1999 we issued 160 shares of common stock to A.R.T.
International Inc. for consideration of $286,000. In August 2000 we issued
40 shares of common stock to A.R.T. for $45,500. 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.
3. On January 11, 2001, Nadia Faye LaBuick loaned $138,125 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
$331,500 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 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 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. 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 to A.R.T. 800,000 class C warrants to
purchase 800,000 shares of Common Stock exercisable at $0.065 per share.
Also on August 1, we authorized conversion of the LaBuick family members'
loans with interest totaling $461,500 into 7,100,000 shares of Common
Stock and class A warrants for an additional 1,500,000 shares exercisable
at $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.
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.
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. In August 2001, we issued 19,367,933 shares of Common Stock to 53
investors for $1,186,475. Each of the investors in this placement were
accredited. Further, these transactions did not involve any public
offering and were exempt from the registration requirements under the
Securities Act pursuant to Section 4(2) thereof.
8. 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.
9. On October 1, 2001, we issued 3,000,000 class E warrants to 37 investors.
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. Twenty-four of the investors in this
offering were accredited. The remaining
II - 2
investors were non-accredited investors who had access to the books and
records of the company as well as ample access to its management.
10. 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. 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.
Ms. Doering was an accredited investor at that time.
11. In February 2002, we issued 3,154,641 shares of Common Stock to 54
investors for $1,070,929.15. Each of these investors in this placement
were accredited. Further, these transactions did not involve any public
offering and were exempt from the registration requirements under the
Securities Act pursuant to Section 4(2) thereof.
12. In February 2002, we issued 500,000 class F warrants to Mary Boswell as
compensation for services rendered by Ms. Boswell in her capacity as a
marketing consultant to the company. This transaction did not involve any
public offering and was exempt from the registration requirements under
the Securities Act pursuant to Section 4(2) thereof. Ms. Boswell was an
accredited investor at that time.
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.
Item 16. Exhibits
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of the Registrant**
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 July 23, 2001**
10.2 CitiFinancial Services of Canada Ltd. Agreement, dated April April 24, 2000**
10.3 Lexmark Canada Marketing Assistance Rebate Program, dated January 18, 2002**
10.4 AOL Canada Inc. Marketing Agreement, Dated June 14, 2002
10.5 Tannery Mall Lease Agreement, dated September 1, 2000**
10.6 2002 Omnibus Stock Purchase Agreement, dated February 14, 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**
10.11 Class D Warrant**
10.12 Class E Warrant**
10.13 Class F Warrant**
10.14 Form of Subscription Agreement*
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.
II - 3
** Previously filed
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 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.
II - 4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form F-1 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 August 1, 2002.
THE BUCK A DAY COMPANY, INC.
By: /s/ Edward P. LaBuick
--------------------------------------
Edward P. LaBuick
Chairman and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement was signed by the following persons in the
capacities indicated on August 1, 2002.
*
- ------------------------
Edward P. LaBuick Chairman of the Board, Chief Executive Officer
*
- ------------------------
Dennis P. LaBuick President, Director
*
- ------------------------
Keith Kennedy Director
*
- ------------------------
John Mole Director
*
- ------------------------
Kelly Murphy Controller/Principal Financial Officer
/s/ Edward P. LaBuick
- ------------------------
Edward P. LaBuick
ATTORNEY IN FACT
II - 5