Here's the e-mail:
“Warren Buffett of Canada” To Enter Into Joint Venture & Acquire Stake in DiscFactories (DSK:TSX-V)
This e-mail represents an effort on the part of our organization to make you aware of the planned expansion in the publishing activities of Al Budai who has been labeled by the media (i.e. CBC Radio) and investors as the “Warren Buffett of Canada”. He is currently one of the leaders in the 2005 edition of the annual stock-picking contest put on by The Globe & Mail newspaper.
Mr. Budai will be the driving force behind a joint venture that is being established between his private company, Tumbleweed Publishing Corp., and DiscFactories Corp., a public company trading on the TSX Venture Exchange under the symbol DSK. DiscFactories stock, which has recently been trading in a narrow range of 11-14 cents, closed at 13.5 cents on Friday, March 18, 2005.
The joint venture will publish personal finance, investment, tax and business opportunity newsletters, as well as a business start-up kit.
At the present time, there are few competitors in the financial newsletter publishing sector in Canada. Lombardi Publishing Corp., a wholly-owned subsidiary of Toronto-based Lombardi Media Corp., is currently the leading financial newsletter publisher in the country. Lombardi Publishing produces a wide variety of newsletters, books and home-study courses covering financial, health and business opportunity issues. The newsletters are typically no more than eight pages in length, published monthly and range in price from $40 to $1,500 per year. The bulk of the company’s sales are derived from the newsletters that are delivered either in print or online. The newsletters are marketed primarily through direct mail campaigns. Lombardi Media has generated tremendous growth in revenues and profits over the course of the last five years. The company, which reported revenues of approximately $9.9 million and net earnings of $0.3 million or 3 cents per share for the year ended January 31, 2000, posted sales of $25.4 million and profits of $1.2 million or 12 cents per share for fiscal 2004. Lombardi Media’s consistent financial performance leaves little doubt that the business of newsletter publishing can be highly lucrative. The high gross margins and economies of scale in printing and publishing newsletters, books and home-study courses clearly enhances the likelihood that the company will continue to report revenue and earnings per share growth. Not surprisingly, Lombardi Media recently announced record revenues of about $24.0 million and net earnings of $1.36 million or 13 cents per share for the 9 months ended October 31, 2004. In the comparative nine month period in the previous fiscal year, the company posted revenues of $19.4 million and net earnings of $1.18 million or 12 cents per share.
Will the joint venture between Mr. Budai and DiscFactories be as successful as Lombardi ? Of course, time will tell, but in the words of one investor “I wouldn’t bet against Budai as he has an exceptional track record for picking stocks and building businesses “.
Reproduced below in its entirety is the news release issued by DiscFactories on March 1, 2005, announcing the joint venture …
DISCFACTORIES SIGNS LETTER OF INTENT WITH TUMBLEWEED PUBLISHING CORP.
DiscFactories Corp. has entered into a letter of intent with Tumbleweed Publishing Corp. to create a joint venture, as originally announced in Stockwatch on Dec. 21, 2004. The joint venture will be formed through a limited partnership, which will operate as a new publishing division of DiscFactories under the name "Twin Rivers Media," and will publish personal finance, investment, tax and business opportunity newsletters, as well as a business start-up kit. DiscFactories and Tumbleweed shall each have a 50-per-cent interest in Twin Rivers Media. The terms of the joint venture will include an option for DiscFactories to acquire Tumbleweed Publishing Corp.'s 50-per-cent interest in the joint venture for fair market value consideration at a later date.
Tumbleweed shall be operator of the joint venture in Kamloops, B.C., and will contribute all right, title and interest in and to all of the content developed by it to date, inclusive of all intellectual property. DiscFactories will move its robotic production equipment to the joint venture's headquarters in Kamloops for use by Twin Rivers. Tumbleweed will be responsible for the further development and commercialization of Twin Rivers' products and services, and will exercise control over the day-to-day operations.
The company has agreed to advance $250,000 to Twin Rivers in the form of a loan, which will be provided at arm's-length terms at commercial credit rates, and which shall be repaid in full on or before March 1, 2007. In connection therewith, the company will be proceeding with a non-brokered private placement with SIS Investments Inc. for gross proceeds of approximately $250,000, as previously announced. The company will issue approximately five million units at a price of five cents per unit, each unit consisting of one common share and one share purchase warrant. Each warrant will be exercisable for an additional common share for a two-year period at 10 cents per share. The common shares and any shares issued on exercise of the warrants will be subject to a four-month hold period.
Tumbleweed Publishing Corp. is a private British Columbia company controlled by Albert S. Budai, an insider of the company, through his control of SIS Investments Inc., which owns more than 10 per cent of the issued and outstanding shares of the company.
Tumbleweed Publishing was established originally as a proprietorship over two years ago to commercialize various publishing properties and has built an extensive library of articles and content that will form the basis for the new service. The following titles have been under development by Tumbleweed Publishing over the course of the last two years:
Canadian Income Investor;
Dollars & Cents;
Real Estate Reporter; and
Canadian Tax Saver.
The joint venture and the financing are subject to the negotiation of definitive transaction documents, and all required regulatory and stock exchange approvals. The joint venture and the financing will also constitute related party transactions because of the common control of Tumbleweed Publishing Corp. and SIS Investments Inc. The company intends to rely on certain exemptions from the related party transaction requirements under applicable regulatory requirements in completing the transactions.
The company is also increasing a debt settlement transaction originally announced on Dec. 24, 2004, from $50,000 to $91,970, at 10 cents per share.
The company has granted incentive stock options to a consultant to purchase 50,000 common shares in the capital of the company at 10 cents per share, pursuant to the company's stock option plan.
An extensive marketing campaign to make the general Canadian investing public aware of the joint venture is expected to commence in the final week of March 2005.
Thank you for your past, present and future support.
CanStock Information Services Corp.
Suite 35, 750 Fortune Drive
Kamloops, B.C. V2B 2L2
phone: (250) 554 - 3101
fax: (250) 554 - 1120