you've got to be kidding... taken from 10k filed last year. According to this filing with the SEC there was a formal distribution agreement. Where the heck did ALan Sepe go and where was the announcement re Halperin (Kevin Sepe's sidekick) becoming President of BGEM.. with a not so good track record.. Look at DRGZ, HYGN, XYNH, LJYN
Title Beverage Distribution, Inc.
Prior to the closing of the Exchange, the Company was related by common ownership to Title Beverage Distribution, Inc. (“Title”), which became a wholly-owned subsidiary of the Company as a result of the Exchange. Allan Sepe, an 80% stockholder of Title prior to the Exchange, acquired 76.68% of the outstanding shares of Blue Gem Enterprise, Inc. on October 15, 2009. Mr. Sepe serves as President and Chief Executive Officer of both the Company and Title. The Company had advanced $842,347 to Title, which has been reflected on the balance sheets as a reduction to stockholders' equity as of May 31, 2010. No repayment terms for the advance had been scheduled.
F-12
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BLUE GEM ENTERPRISE, INC.
Notes to Financial Statements
NOTE 6. RELATED PARTY TRANSACTIONS (Continued)
The Electric Beverage Company, Inc.
The majority stockholder of The Electric Beverage Company, Inc. (“EBC”) is Kevin Sepe. He is the brother of Allan Sepe, the majority stockholder of the Company. The Company has advanced funds to EBC for the purchase of inventory. At May 31, 2010 the balance of these advances was $190,000.
Share Exchange Agreement
On December 8, 2009, the Company entered into a letter of intent with Title to enter into a merger agreement between the parties. However, the parties subsequently mutually agreed to instead affect a share exchange. On August 13, 2010, the Company, Title, and the stockholders of Title entered into a Share Exchange Agreement (the “Exchange”). Pursuant to the Exchange, the majority stockholders of Title agreed to exchange all of their shares of Title on a one-for-one basis for shares of common stock of the Company; provided that in lieu of the shares of the Company’s common stock which would have otherwise been due to Mr. Sepe, Mr. Sepe agreed to accept 1,000 shares of the Company’s Series A Preferred Stock. The closing of the Exchange occurred upon the completion of the audit of Title, which the Company finalized on September 14, 2010. As a result of the Exchange, Title became a wholly-owned subsidiary of the Company.
Distribution Agreement
Title and EBC previously entered into an exclusive distribution agreement for the distribution of Title sports drink. The agreement, which appointed Title as the sole distributor of the Title sports drink was for a term of three years with an automatic three year renewal, unless either party provided notification of their intention to cancel. The agreement called for increasing annual minimum purchase obligations and could be terminated by EBC in the event that these minimum purchases are not met. For the year ended May 31, 2010, Title did not comply with its minimum purchase obligations. In August, 2010, EBC agreed to amend and restate the original agreement to include the Company as a party and to waive the first year limits in exchange for $100,000 in advances from Blue Gem and Title to EBC. In addition, the Company also made an aggregate of $1,015,000 of pre-payments of product from May through July 2010, on behalf of Title and in anticipation of the Exchange and $700,000 in advances to Title, which advances were subsequently advanced to EBC, which advances to Title were forgiven by the Company in connection with and pursuant to the Exchange. The amended and restated agreement extends the exclusive distribution agreement to a six and a half year term, while reducing the annual minimum purchase obligations in each of the remaining years. The amended and restated agreement also provides for the right of first refusal on any new products developed by EBC during the duration of the amended agreement. In the event Title’s purchases of the Title sports drink do not, in any given year, equal or exceed the minimum purchase requirements to maintain exclusivity, Title may, within ten business days following the expiration of such year, (a) remit to EBC in immediately available funds an amount equal to the difference between the Title's purchases for the year and the minimum purchase requirement, as documented in writing and provided to Title prior to the due date of such payments, or (b) at Title's option, credit the amount of the exclusivity extension fee against any remaining balance due in connection with the pre-payment.
During the year ended May 31, 2010, EBC advanced $35,811 for various legal and investor relations expenses on behalf of the Company. The advance is non-interest bearing and payable upon demand.
