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Press Release Source: GREM USA
GREM USA Provides Update on $10M Sales Agreement; in Negotiations to Offer GREM-Branded Guitar Pickups
Tuesday March 25, 3:04 pm
FORT WAYNE, IN--(MARKET WIRE)--Mar 25, 2008 -- GREM USA (OTC BB:GRMU.OB - News) ("GREM," "The Company"), an emerging leader in the design and manufacturing of custom hand-crafted and mass produced electric guitars, today provided an update regarding the previously announced $10M sales agreement currently being negotiated between GREM and a major US musical instrument retailer ("Retailer").
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The Company and the Retailer have had continued and productive discussions over the last several weeks and GREM management expects that a definitive agreement will be reached and finalized in the near term. Outstanding areas of negotiation are primarily related to the quantity of guitars GREM could provide the Retailer relative to the maximum quantity of guitars GREM could produce over a specific period altogether. While GREM management does not envision a completed agreement carrying any exclusivity rights, it has been of prime importance to balance the larger revenue potential of a nationally-recognized retailer with the intrinsic marketing value achieved through distribution to a network of smaller stores. The Company believes its current proposal offers a substantial commitment of GREM guitars to the Retailer while affording the Company flexibility to continue expanding its brand-awareness through other sales channels. If the agreement is finalized within discussed timeframes, the Company would anticipate shipment of GREM guitars under the agreement within the next 6-8 weeks. The Company expects to finance the costs associated with production under a Purchase Order Financing plan, whereby the Company would receive a loan against the Retailer's purchase order. This method of financing would eliminate any shareholder dilution as a result of the Company fulfilling this agreement.
The Company also announced that it has begun negotiations with a manufacturer of guitar pickups that would enable the Company to self-brand these pickups and concurrently receive a cost savings of up to 70% against vendors the Company has previously been using. In turn, the reduced pickup costs would significantly improve Company margins on future guitar sales, reduce expenses, and provide the Company additional control over production and delivery. If agreed as initially discussed, the Company would have the ability to expand its product offerings beyond entire guitars and to higher-margin component sales. The Company will provide relevant updates on the progress of this negotiation in a future release.
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