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Friday, May 16, 2014 11:09:11 AM
"NOTE 12 - SUBSEQUENT EVENTS
On January 10, 2014, with an effective date of January 1, 2014, the shareholders of Quest Marketing, Inc. (d/b/a Quest Solution, "Quest"), an Oregon corporation in the technology, software, and mobile data collection systems business, sold their interest in Quest to Amerigo Energy, Inc. ("Amerigo"). Quest will be a wholly owned subsidiary of Amerigo. The related party notes receivables outstanding will be settled against the loan proceeds owed to the selling Stockholders. There has been no change of control for Quest in its management.
The purchase price for Quest was $16,000,000.
The consideration given to the shareholders of Quest Solution, Inc. were as follows:
A. A promissory note for $4,969,000, which payments are to be a minimum of 45.0% of the cash earned from EBITDA of Quest Solutions, Inc. during the prior quarter. Once the Holder has received $3,375,000, the principal and interest payments on the promissory note are to be a minimum of 22.5% of the cash earned from EBITDA of Quest Solutions, Inc. during the prior quarter.
The balance of the promissory note is expected to be paid before February 18, 2016, or twenty five (25) months from the date of execution of this agreement. Should the cash flow and payments from EBITDA during the term of this agreement not be sufficient to pay off the loan prior to its maturation, the loan will extend for additional twelve (12) months periods till paid off.
The holder of the note is permitted to convert up $1,594,000 of the Promissory Note into common shares of the Company at a ratio of one share for every $1.00 of promissory note converted. This conversion feature is non-transferrable without written consent from the Company.
B. A promissory note for $11,031,000, which payments are to be payments on the promissory note are to be a minimum of forty five percent (45%) of the cash earned from EBITDA of Quest Solutions, Inc. during the prior quarter. Once the first promissory note ($4.97mm) has received $3,375,000, the principal and interest payments on this promissory note are to be a minimum of 67.5% of the cash earned from EBITDA of Quest Solutions, Inc. during the prior quarter.
The balance of the promissory note is expected to be paid before January 18, 2017, or three (3) years from the date of execution of this agreement. Should the cash flow and payments from EBITDA during the term of this agreement not be sufficient to pay off the loan prior to its maturation, the loan will extend for additional twelve (12) months periods till paid off.
The holders of the notes are permitted to convert up to $4,781,000 of the Promissory Note into common shares of the Company at a ratio of one share for every $1.00 of promissory note converted. This conversion feature is non- transferrable without written consent from the Company.
The prior owners of Quest shall retain a security interest in the subsidiary until the promissory note is satisfied.
On January 10, 2014, the Company came to terms on a settlement with its prior investment in Le Flav Spirits and the related liquor brands. The Company concurrently canceled its consulting contract related to the liquor line and will be receiving back 1,765,000 of the shares that had previously been issued in conjunction with this venture. This cancellation also removed the $2,000,000 promissory note related to the acquisition, as well as the consulting contracts with the respective Consultants.
During the first quarter of 2014, the Company issued warrants to executives of Quest Solution, Inc. with the following milestones:
When the Company reaches $35,000,000 in sales, 5,000,000 warrants at $1.00 per share vest and become exercisable. These warrants expire on January 9, 2016.
F-15
When the Company makes it to the NASDAQ or AMEX or larger exchange, 2,000,000 warrants at $3.00 per share vest and become exercisable. These warrants expire on January 9, 2017.
When the Company reaches $40,000,000 in sales, a 2,000,000 share bonus is given to the executives. This expires January 8, 2017.
Management evaluates events and transactions that occur after the balance sheet date as potential subsequent events. Management has performed this evaluation through the date of the accountant’s report. As of March 30, 2014, all other material subsequent events have been disclosed."
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