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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 26, 2013
Amerigo Energy, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-09047 20-3454263
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2580 Anthem Village Dr., Henderson, NV 89052
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 702-399-9777
Not Applicable
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ]Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ]Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
1
TABLE OF CONTENTS
ITEM NO. DESCRIPTION OF ITEM PAGE NO.
Item 1.01 Entry into Material Definitive Agreement 2
Item 2.01 Other Events 3
Item 9.01 Financial Statements and Exhibits 10
Item 1.01 ENTRY INTO MATERIAL DEFINITIVE AGREEMENT
On February 26, 2013, the Company completed the acquisition of the assets of
Le Flav Spirits, LLC.
Le FLAV Spirits, LLC is the entity which controls the assets, trademarks,
contracts, formulas, licenses, existing inventory and rights to the "Le FLAV"
spirits brands. This is to include Le FLAV Brooklyn Iced Tea, Chateau Le
FLAV, Le FLAV Cocktails, Le FLAV Cognacs, Le FLAV Super Premium Vodka &
Flavored Vodkas and all flavors currently in production and contemplated.
Jason Griffith, the Company's CEO, has a ten (10%) minority interest in Le Flav
Spirits, LLC.
The consideration given for the assets is:
A. 360,000 shares of company common stock to be issued to the owners of Le
FLAV Spirits, LLC, based on the closing price on February 26, 2013 the value of
the shares given is $32,400.
B. Warrants to Le FLAV Spirits, LLC to purchase two million (2,000,000)
shares of stock at $1.00 per share, with 5 year exercise period, vested
equally at 500,000 shares vested upon every 5,000 cases sold of vodka. Based on
Black Scholes calculations, the warrants are valued at $180,000.
C. $1 per bottle for the first 2,000,000 bottles sold. This will be treated
as a convertible promissory note, convertible at $1.00 per share (at the option
of the note holder). Promissory note bears interest at 8% per year. The note is
transferable.
Principal payments equal to $1 per bottle sold, payable quarterly from
receivables received from the distributors. Promotional bottles are not
included in the per bottle calculation. Prepayment of first principal payment
of $25,000 due 10 days from execution of the Acquisition agreement. Company has
the ability to make principal and interest payments above what is earned from
the 'per bottle' during the term. Unless otherwise satisfied, the balance of
the promissory note is due by March 1, 2016.
Based on existing and pending distribution contracts,as well as the majority of
the consideration being performance based, management felt the valuation of
consideration was deemed reasonable.
Le FLAV Spirits, LLC shall retain a UCC filing on the assets of the
company until such time as the convertible promissory note is satisfied.
Any payments not made by the 15th of the month following the end of
a calendar quarter will be considered late and a $500 late fee will be imposed.
If the Company misses two (2) consecutive quarters of payments then the
Company will be considered in default and Le Flav Spirits, LLC will have the
right to make final demand. If the Company does not cure the default of the
late payments within five(5) days, then the Seller has the right to call in the
balance of the note.
Item 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On February 26, 2013, the Company completed the purchase of assets from Le
Flav Spirits, LLC.
The assets acquired include the trademarks, contracts, formulas, licenses,
existing inventory and rights to the "Le FLAV" spirits brands. This is to
include Le FLAV Brooklyn Iced Tea, Chateau Le FLAV, Le FLAV Cocktails, Le FLAV
Cognacs, Le FLAV Super Premium Vodka & Flavored Vodkas and all flavors
currently in production and contemplated.
Jason Griffith, the Company's CEO, has a ten (10%) minority interest in Le Flav
Spirits, LLC.
The consideration given for the assets is:
A. 360,000 shares of company common stock to be issued to the owners of Le
FLAV Spirits, LLC, based on the closing price on February 26, 2013 the value of
the shares given is $32,400.
B. Warrants to Le FLAV Spirits, LLC to purchase two million (2,000,000)
shares of stock at $1.00 per share, with 5 year exercise period, vested
equally at 500,000 shares vested upon every 5,000 cases sold of vodka. Based on
Black Scholes calculations, the warrants are valued at $180,000.
C. $1 per bottle for the first 2,000,000 bottles sold. This will be treated
as a convertible promissory note, convertible at $1.00 per share (at the option
of the note holder). Promissory note bears interest at 8% per year. The note is
transferable.
Principal payments equal to $1 per bottle sold, payable quarterly from
receivables received from the distributors. Promotional bottles are not
included in the per bottle calculation. Prepayment of first principal payment
of $25,000 due 10 days from execution of the Acquisition agreement. Company
has the ability to make principal and interest payments above what is earned
from the 'per bottle' during the term. Unless otherwise satisfied, the balance
of the promissory note is due by March 1, 2016.
Based on existing and pending distribution contracts, as well as the majority
of the consideration being performance based, management felt the valuation of
consideration was deemed reasonable.
Le FLAV Spirits, LLC shall retain a UCC filing on the assets of the
company until such time as the convertible promissory note is satisfied.
Any payments not made by the 15th of the month following the end of
a calendar quarter will be considered late and a $500 late fee will be imposed.
If the Company misses two (2) consecutive quarters of payments then the
Company will be considered in default and Le Flav Spirits, LLC will have the
right to make final demand. If the Company does not cure the default of the
late payments within five (5) days,then the Seller has the right to call in the
balance of the note.
BUSINESS OVERVIEW
Based in Las Vegas, Nevada, we are compiling an experienced team of beverage,
entertainment, retail and consumer product industry professionals. We
specialize in the marketing and distribution of premium alcoholic and
nonalcoholic beverages with an emphasis on utilizing and leveraging
associations with iconic brand names, brands with historic origins or
entertainers and celebrities.
We develop, produce market and/or distribute alcoholic and non-alcoholic
beverages for sale primarily in the continental United States. For the majority
of our products we own the trademarks, have developed the formula for a product
that we distribute, or we have the exclusive licensed right to distribute and
market product in the United States.
We may own certain of our products jointly with brand owners, celebrities, or
their affiliates. We refer to all of the products we own as "our products".
Our strategy is to take advantage of the world-wide growth of premium spirits
and alcoholic beverages, established but underdeveloped brands, celebrity
brands and the strategic relationships our management team has developed
throughout their careers. We distribute our products through established
spirits, beer and wine, distributors, virtually all of which are well known to
our management team from prior business dealings with them in the beverage
industry. We are expanding the number of distributors with whom we do business,
allowing us to increase our distribution throughout the entire United States
and to expand internationally. Our management's relationships with
manufacturers, distillers, development/research companies, bottling concerns
and certain customers provide the foundation through which we expect to grow
our business in the future.
Furthermore, we believe our organizational approach will also minimize the need
to invest heavily in fixed assets or factories. Our strategic relationship with
24-7 Imports will allow us to operate with modest overhead and substantially
reduce our need for capital on an ongoing basis.
Our major alcoholic beverages, including the brands recently acquired include:
* Le Flav Vodka, which is our super premium vodka sold in a bottle with
a symbolic clock and Swarovski Crystal attached. Additional flavors other
than our traditional 'straight up' are in process;
* Le FLAV Brooklyn Iced Tea;
Le FLAV Cognac; and,
* Chateau Le FLAV - our sparkling wine.
STRATEGY
Our long-term business strategy is to expand the sales and distribution of our
alcoholic and non-alcoholic beverage portfolio and to continue to add branded
beverage products with existing revenue and profits from the largest and most
profitable beverage categories such as tequila or imported and specialty beer.
Entry into a strategic relationship with 24-7 Imports and our opportunity to
market our existing and new brands position the Company to compete in these
categories.
Key elements of our business strategy include: using our partnership with 24-7
Imports and our newly licensed brands, along with our distribution
relationships to accelerate our revenue, support our margins, and leverage
existing consumer awareness and demand for our brands.
We believe that the consumer awareness of our celebrity brands and iconic
associations give us a marketing advantage that allows for more efficient brand
marketing. We believe the public relations impact and resulting media
opportunities due to these brand histories and associations cuts across
electronic, social and print media formats and delivers an exponential impact
in building brand awareness and consumer excitement.
We plan on utilizing our iconic trademark brand strategy and the demonstrated
ability of these brands to generate public relations and promotional brand
marketing based on their already high level of consumer awareness, to grow and
establish these brands. This strategy we believe will result in top line growth
with the ability to be profitable in the very competitive beverage categories
of spirits, wine and beer.
ALCOHOLIC BEVERAGE DISTRIBUTION
The Company sells its brands and products through its national network of
Spirits, Wine and Beer distributors. The Company plans to sell on consignment
to control states, whereby the Company provides inventory to state regulated
stores and is paid upon the sale of product.
BEER, WINE AND SPIRITS INDUSTRY OVERVIEW
The United States beverage alcohol market consists of three distinct segments:
beer, wine and distilled spirits. Distilled spirits consist of three primary
categories: white goods, whiskey and specialties. White goods, consisting of
vodka, rum, gin and tequila, represent the largest category. Vodka is the
largest product within the distilled spirits and accounts for 30% of industry
volume. As reported by the Distilled Spirits Council, 2009 Industry Review held
in New York on February 2, 2010, despite the recessionary economy, the
distilled spirits industry chartered its tenth consecutive year of growth in
2009, with a 2.6% average annual growth rate over the past 10 years. Spirits
volumes grew 1.4% in 2009, while Spirits revenue grew 66% over the past decade
with a 5.2%, 10-year average annual growth rate. Spirits volume market share
increased in 2009 to 30.2% from 29.7% in 2008; however, spirits revenue market
share decreased in 2009 to 32.9% down from 33.1% in 2008. The predominate
reason for the decline is because value brands volume share accounted for
40.6%, premium brands volume share accounted for 36.4%, while high-end and
super brands combined for the balance at 23%.
Vodka represented 24% of industry revenue at $4.6 billion, and category revenue
is up $75 million. Vodka value volume is up 10.7%; premium volume is up 5.0%,
and high-end and super volumes are down 2.3% and 5.8%, respectively. Rum
revenues increased by 0.8% to 2.2 billion. Tequila revenues increased by $48.5
million. Whiskey, which includes Bourbon, Blends, Canadian, Scotch & Irish, and
comprises 28% of industry revenues at $5.3 billion, saw a slight 0.7% decline
in overall volume. In summary, slow growth rates are consistent with past
recession's industry experience and increased volume share positions the
industry for growth when the economy fully recovers.
Significant consolidation in the global spirits industry has produced five
primary large competitors: Diageo, Allied Domecq, Pernod Ricard, Brown-Forman
and Bacardi & Company, Ltd.
The overall beer category's growth slowed in 2009 through 2010 most likely due
to the faltering economy which may have bolstered the lower-price beer
segments. Overall the U. S. beer industry has experienced decreased consumer
consumption in 2009. According to the industry-funded Beer Institute, beer
shipment volumes fell 2.1% during the first 11 months of 2009, and according to
market research firm IBIS World, beer producers revenues declined 2.7% in 2009.
Despite the above, one segment of the beer industry that has resisted the
recession is craft breweries, increasingly popular for flavorful beers made in
smaller batches. According to data from the Nielsen Co., craft breweries sales
rose 12.4% in 2009. Both the discount and economy class and Mexican Import
segment of the beer category continued to exhibit growth through calendar year
2011 and 2012.
The International Wine & Spirit Research Forecast Report
According to the International Wine & Spirit Research ("IWSR") Forecast Report
2010-2015, the spirits industry is on the path to recovery following the credit
crunch, which affected many markets starting in 2009. Several countries and
categories returned to stability or growth but the time and speed of recovery
will vary considerably depending on local circumstances.
The global spirits market is projected to continue to grow, albeit at a more
moderate rate than in the five years leading up to 2009 - a compound annual
growth rate ("CAGR") of 1.4% is predicted between 2009 and 2015, down from 2.4%
between 2004 and 2009.
The US is predicted to be the third fastest-growing market worldwide until
2015; the vodka market alone is likely to gain over 12 million cases. Most
spirits categories are projected to see more moderate growth until 2015 than
they have in the last five years. This is largely due to the cautious spending
behavior adopted by consumers after the economic recession. Rum and whiskey is
anticipated to gain share of the overall spirits market, while vodka's share is
expected to decline. Whiskey is projected to see the highest increase in
percentage terms and is estimated to gain 100 million cases over the next five
years. The booming market in India is leading the growth with Indian molasses-
based whisky. Furthermore, Scotch consumption is expected to grow at a rate of
1.2% until 2015, compared to a 2004-2009 CAGR of 1%. As consumers are switching
to Scotch from other categories such as aniseed, beer and even wine, and larger
bottle sizes are growing in popularity. France is forecast to show the
strongest volume growth in Scotch over the next five years.
Due to its growing popularity among young people and its fashionable image in
many key markets, rum is projected to continue to increase at a similar CAGR as
that of the previous five-year period. After a difficult year in 2009, more
premium products are expected to return to growth in the long term.
The global vodka market is expected to grow at a CAGR of 0.7%, returning to
gradual growth after falling marginally between 2004 and 2009 (-0.1%). It is
expected that by 2015, more than every third bottle (35.1%) of spirits sold in
the US will be vodka. In spirits generally, the super-premium and above-price
segments are likely to see the highest increases in percentage terms, as
consumers will be more confident and able to trade up once again. The recovery
of the on-premise markets should also help the growth of this segment.
Industry Consolidation
There has been substantial consolidation in the Spirits industry. The biggest
mover in the consolidation game has been Pernod Ricard, which was in the top 10
in 1995 but with a low profile. Much of Pernod's 24-million-case business
(compared to 97 million cases today) was in France, where its Ricard and Pastis
51 brands dominated. Back then, the world's top two spirits companies were IDV
(GrandMet) and United Distillers (Guinness), followed by Seagram and Allied
Domecq, which was born in 1994 after the merger between Allied Lyons and Pedro
Domecq.
Guinness and GrandMet merged in 1997 to form Diageo, creating a spirits
portfolio of unparalleled power, led by Smirnoff, Johnnie Walker, and Baileys.
While the Diageo deal reshaped the global spirits landscape, it foreshadowed
three mega-deals that would transform the business even further. Pernod Ricard
was involved in all of them. In 2001, Diageo and Pernod Ricard acquired
Seagram's spirits and wine business, several months after Seagram announced it
would exit the business to focus on entertainment. The Seagram deal fortified
Diageo's already-formidable lineup, adding powerhouses like Captain Morgan and
Crown Royal. But it remade Pernod Ricard, energizing its portfolio with big-
name brands like Chivas Regal and Martell. Four years later Allied Domecq went
on the block, and Pernod was there again, collaborating with Fortune Brands,
whose Jim Beam Brands unit was aiming to diversify. That deal added
Ballantine's, Beefeater, Malibu and Kahl{u'}a to the Pernod portfolio, while
Beam got Sauza, Courvoisier, Canadian Club and Maker's Mark, among others. In
2008, one of the industry's crown jewels-Absolut vodka-was put on the block.
Seeing Absolut as the missing piece in the portfolio, Pernod again paid up-this
time without a partner, acquiring V&S for approximately $9 billion.
As a result of such significant consolidation within the spirits industry, in
recent years, there have been five major companies dominating the global
spirits market:
2010 - TOP FIVE DISTILLED SPIRIT MARKETERS WORLDWIDE1
(millions of nine-liter cases)
____________________________________________________________________________
2010 PRO 2010 1995 1995
Rank FORMA VOLUME VOLUME RANK
1 Diageo2,3 115.9 109.0 1
2 United 110.7 15.1 9
Spirits
3 Pernod 97.0 24.4 7
Ricard
4 Bacardi 36.4 27.4 5
5 Beam 33.5 24.7 6
TOTAL TOP FIVE 393.5 200.6
1Excludes RTDs, low-proof cocktails and spirit mixers
22010 adjusted to include Mey Icki, acquired this year.
3IDV (GrandMet) and United Distillers (Guinness) merged to form Diageo in 1998.
Prior to that merger, IDV was ranked #1 at 61 million cases, while
United Distillers was #2 at 48 million cases.
Source: IMPACT DATABANK
FLAVORS, RESEARCH AND DEVELOPMENT RELATIONSHIP
Through our relationship with 24-7 Imports ('24-7'), the Company has access to
leading distillery, suppliers and technical resources. In addition 24-7
provides development services, research resources, brand production planning
and various other resources on a large but economical scale.
MARKETING, SALES AND DISTRIBUTION
MARKETING
Our marketing plan is based upon our strategy of leveraging exciting consumer
trademarks and icon branding.
We are working with 24-7 Imports, and our distributions on account level
promotions, tastings and social media.
SALES
Our route to market is by selling our products directly through 24-7 Imports,
which is controlled by a minority shareholder.
DISTRIBUTION
Our policy is to grant our distributors rights to sell particular brands within
a defined territory on a case by case basis. Our distributors buy our products
from us for resale. We believe that substantially all of our distributors also
carry beverage products of our competitors. Our agreements with our
distributors vary - we have entered into written agreements with a number of
our top distributors for varying terms and most of our other distribution
relationships are oral (based solely on purchase orders) and are terminable by
either party at will.
PRODUCTION
CONTRACT PACKING ARRANGEMENTS
We currently use independent contract packers known as "co-packers" to prepare,
bottle and package our Le Flav Spirits products. We continually review our
contract packing needs in light of regulatory compliance and logistical
requirements and may add or change co-packers based on those needs. We rely on
and believe our co-packers comply with applicable environmental laws.
As is customary, we are expected to arrange for our contract packing needs
sufficiently in advance of anticipated requirements. Accordingly, it is our
business practice to require our independent distributors to place their
purchase orders for our products from 30 to 60 days in advance of shipping.
RAW MATERIALS
Substantially all of the raw materials used in the preparation, bottling and
packaging of our products are purchased by us or by our contract packers in
accordance with our specifications. Typically, we rely on our contract packers
to secure raw materials that are not unique to us. The raw materials used in
the preparation and packaging of our products consist primarily of spirits,
flavorings, concentrate, glass, labels, caps and packaging. These raw materials
are purchased from suppliers selected by us or in concert with our co-packers
or by the respective supplier companies.
QUALITY CONTROL
We use only quality ingredients to produce Le Flav Spirits to ensure that it
meets our quality standards. Contract packers are selected and monitored by the
Company in an effort to assure adherence to our production procedures and
quality standards. Our quality control measures include but are not limited to
microbiological checks and water purity tests to ensure that the production
facilities meet the standards and specifications of our quality assurance
program and government regulatory requirements.
GOVERNMENT REGULATION
The production and marketing of our licensed and proprietary alcoholic and
nonalcoholic beverages are subject to the rules and regulations of various
Federal, provincial, state and local health agencies, including in particular
the U.S. Food and Drug Administration ("FDA") and the U.S. Alcohol and Tobacco
Tax and Trade Bureau ("TTB"). The FDA and TTB also regulate labeling of our
products. From time to time, we may receive notification of various technical
labeling or ingredient reviews with respect to our products. We believe that we
have a compliance program in place to ensure compliance with production,
marketing and labeling regulations on a going-forward basis. There are no
regulatory notifications or actions currently outstanding.
TRADEMARKS, FLAVOR CONCENTRATE TRADE SECRETS AND PATENTS
We own a number of trademarks, including, in the United States, the "Le FLAV"
spirits brands. This is to include Le FLAV Brooklyn Iced Tea, Chateau Le FLAV,
Le FLAV Cocktails, Le FLAV Cognacs, Le FLAV Super Premium Vodka & Flavored
Vodkas and all flavors currently in production and contemplated. The company is
in development of a number of other trademarks which have yet to be filed
We consider our trademarks, patent and trade secrets to be of considerable
value and importance to our business. No successful challenges to our
registered trademarks have arisen and we have no reason to believe that any
such challenges will arise in the future.
COMPETITION
The beverage industry is highly competitive. We compete with other beverage
companies, most of which have significantly more sales, significantly more
resources and which have been in business for much longer than we have. We
compete with national and regional beverage producers and "private label"
suppliers. Some of our alcohol competitors are Diageo, Pernod Ricard, Brown-
Forman, Castle Brands, Allied Biomes and Bacardi & Company, Ltd. As a result,
we believe opportunities exist for smaller companies to develop high-quality,
high-margin brands, which can grow to be very attractive acquisition candidates
for the larger companies.
EMPLOYEES & CONTRACTORS
We have one employee, our CEO, and one independent contractor. All employees
are at-will employees and are not represented by a labor union. All independent
contractors are at-will contractors that have executed non-disclosure
agreements with us.
RISK FACTORS:
WE COMPETE IN AN INDUSTRY THAT IS BRAND-CONSCIOUS, SO BRAND NAME RECOGNITION
AND ACCEPTANCE OF OUR PRODUCTS ARE CRITICAL TO OUR SUCCESS.
Our business is substantially dependent upon awareness and market acceptance of
our products and brands by our targeted consumers. In addition, our business
depends on acceptance by our independent distributors of our brands as beverage
brands that have the potential to provide incremental sales growth rather than
reduce distributors' existing beverage sales. Although we believe that we have
made progress towards establishing market recognition for certain of our brands
in both the alcoholic and non alcoholic beverage industry, it is too early in
the product life cycle of these brands to determine whether our products and
brands will achieve and maintain satisfactory levels of acceptance by
independent distributors and retail consumers.
COMPETITION FROM TRADITIONAL ALCOHOLIC AND NON-ALCOHOLIC BEVERAGE MANUFACTURERS
MAY ADVERSELY AFFECT OUR DISTRIBUTION RELATIONSHIPS AND MAY HINDER DEVELOPMENT
OF OUR EXISTING MARKETS, AS WELL AS PREVENT US FROM EXPANDING OUR MARKETS.
The beverage industry is highly competitive. We compete with other beverage
companies, most of which have significantly more sales and significantly more
resources, giving them significant advantages in gaining consumer acceptance
for their products, access to shelf space in retail outlets and marketing focus
by our distributors, all of whom also distribute other beverage brands. Our
products compete with all beverages, most of which are marketed by companies
with greater financial resources than what we have. Some of these competitors
are or will likely in the future, place severe pressure on our independent
distributors not to carry competitive alternative brands such as ours. We also
compete with regional beverage producers and "private label" suppliers. Some of
our alcoholic competitors are Diageo, Pernod Ricard, Castle Brands, Brown-
Furman and Bacardi & Company, Ltd. Some of our direct competitors in the
alternative beverage industry include Cadbury Schweppes (Snapple, Stewart,
Nantucket Nectar, Mystic), Thomas Kemper, Boylans and Hansens. Competitor
consolidations, market place competition, particularly among branded beverage
products, and competitive product and pricing pressures could impact our
earnings, market share and volume growth. If, due to such pressure or other
competitive phenomena, we are unable to sufficiently maintain or develop our
distribution channels, or develop alternative distribution channels, we may be
unable to achieve our financial targets. As a means of maintaining and
expanding our distribution network, we intend to expand the market for our
products, and introduce additional brands. However, we will require financing
to do so. There can be no assurance that we will be able to secure additional
financing or that other companies will not be more successful in this regard
over the long term. Competition, particularly from companies with greater
financial and marketing resources than those available to us, could have a
material adverse effect on our existing markets, as well as our ability to
expand the market for our products.
WE COMPETE IN AN INDUSTRY CHARACTERIZED BY RAPID CHANGES IN CONSUMER
PREFERENCES, SO OUR ABILITY TO CONTINUE DEVELOPING NEW PRODUCTS TO SATISFY OUR
CONSUMERS' CHANGING PREFERENCES WILL DETERMINE OUR LONG-TERM SUCCESS.
Our current market distribution and penetration is limited as compared with the
potential market and so our initial views as to customer acceptance of a
particular brand can be erroneous, and there can be no assurance that true
market acceptance will ultimately be achieved. In addition, customer
preferences are also affected by factors other than taste, such as the recent
media focus on obesity in youth. If we do not adjust to respond to these and
other changes in customer preferences, our sales may be adversely affected.
A DECLINE IN THE CONSUMPTION OF ALCOHOL COULD ADVERSELY AFFECT OUR BUSINESS.
There have been periods in American history during which alcohol consumption
declined substantially. A decline in alcohol consumption could occur in the
future due to a variety of factors including: (i) a general decline in economic
conditions, (ii) increased concern about health consequences and concerns about
drinking and driving, (iii) a trend toward other beverages such as juices and
water, (iv) increased activity of anti-alcohol consumer groups, and (v)
increases in federal, state or foreign excise taxes. A decline in the
consumption of alcohol would likely negatively affect our business.
WE COULD BE EXPOSED TO PRODUCT LIABILITY CLAIMS FOR PERSONAL INJURY OR POSSIBLY
DEATH.
To the extent any product liability insurance coverage obtained is
insufficient; a product liability claim would likely have a material adverse
effect upon our financial condition. In addition, any product liability claim
successfully brought against us may materially damage the reputation of our
products; thus adversely affecting our ability to continue to market and sell
that or other products.
OUR BUSINESS IS SUBJECT TO MANY REGULATIONS AND NONCOMPLIANCE IS COSTLY.
The production, marketing and sale of our alcoholic and non alcoholic
beverages, including contents, labels, caps and containers, are subject to the
rules and regulations of various federal, state and local health agencies. If a
regulatory authority finds that a current or future product or production run
is not in compliance with any of these regulations, we may be fined, or
production may be stopped, thus adversely affecting our financial conditions
and operations. Similarly, any adverse publicity associated with any
noncompliance may damage our reputation and our ability to successfully market
our products. Furthermore, rules and regulations are subject to change from
time to time and while we monitor developments in this area, the fact that we
have limited staff makes it difficult for us to keep up to date and we have no
way of anticipating whether changes in these rules and regulations will impact
our business adversely. Additional or revised regulatory requirements, whether
regarding labeling, the environment, taxes or otherwise, could have a material
adverse effect on our financial condition and results of operations.
THE CURRENT ECONOMIC EVENTS, INTERNATIONAL CONFLICTS, AND TERRORISM EVENTS ALL
OR INDIVIDUALLY MAY HAVE AN ADVERSE IMPACT ON OUR SALES AND EARNINGS, AND OUR
SHIPPING COSTS HAVE INCREASED.
We cannot predict the impact of the current economic climate in the United
States, or the current international situation, on current and future consumer
demand for and sales of our products. In addition, recent volatility in the
global oil markets has resulted in rising fuel and freight prices, which many
shipping companies are passing on to their customers. Our shipping costs have
increased, and these costs may continue to increase. Due to the price
sensitivity of our products, we do not anticipate that we will be able to pass
these increased costs on to our customers.
WE RELY HEAVILY ON OUR INDEPENDENT DISTRIBUTORS, AND THIS COULD AFFECT OUR
ABILITY TO EFFICIENTLY AND PROFITABLY DISTRIBUTE AND MARKET OUR PRODUCTS, AND
MAINTAIN OUR EXISTING MARKETS AND EXPAND OUR BUSINESS INTO OTHER GEOGRAPHIC
MARKETS.
Our ability to establish a market for our brands and products in new geographic
distribution areas, as well as maintain and expand our existing markets, is
dependent on our ability to establish and maintain successful relationships
with reliable independent distributors strategically positioned to serve those
areas. Many of our larger distributors sell and distribute competing products,
including non-alcoholic and alcoholic beverages, and our products may represent
a small portion of their business. To the extent that our distributors are
distracted from selling our products or do not expend sufficient efforts in
managing and selling our products, our sales will be adversely affected. Our
ability to maintain our distribution network and attract additional
distributors will depend on a number of factors, many of which are outside our
control. Some of these factors include: (i) the level of demand for our brands
and products in a particular distribution area; (ii) our ability to price our
products at levels competitive with those offered by competing products; and
(iii) our ability to deliver products in the quantity and at the time requested
by distributors.
There can be no assurance that we will be able to meet all or any of these
factors in any of our current or prospective geographic areas of distribution.
Further, shortage of adequate working capital may make it impossible for us to
do so. Our inability to achieve any of these factors in a geographic
distribution area will have a material adverse effect on our relationships with
our distributors in that particular geographic area, thus limiting our ability
to maintain and expand our market, which will likely adversely affect our
revenues and financial results.
WE GENERALLY DO NOT HAVE LONG-TERM AGREEMENTS WITH OUR DISTRIBUTORS, AND WE
EXPEND SIGNIFICANT TIME AND MAY NEED TO INCUR SIGNIFICANT EXPENSE IN ATTRACTING
AND MAINTAINING KEY DISTRIBUTORS.
Our marketing and sales strategy presently, and in the future, will rely on the
performance of our independent distributors and our ability to attract
additional distributors. We have entered into written agreements with certain
of our distributors for varying terms and duration; however, most of our
distribution relationships are informal (based solely on purchase orders) and
are terminable by either party at will. We currently do not have, nor do we
anticipate in the future that we will be able to establish, long-term
contractual commitments from many of our distributors. In addition, despite the
terms of the written agreements with certain of our significant distributors,
we have no assurance as to the level of performance under those agreements, or
that those agreements will not be terminated. There is also no assurance that
we will be able to maintain our current distribution relationships or establish
and maintain successful relationships with distributors in new geographic
distribution areas. Moreover, there is the additional possibility that we will
have to incur significant expenses to attract and maintain key distributors in
one or more of our geographic distribution areas in order to profitably exploit
our geographic markets. We may not have sufficient working capital to allow us
to do so.
BECAUSE OUR DISTRIBUTORS ARE NOT REQUIRED TO PLACE MINIMUM ORDERS WITH US, WE
NEED TO CAREFULLY MANAGE OUR INVENTORY LEVELS, AND IT IS DIFFICULT TO PREDICT
THE TIMING AND AMOUNT OF OUR SALES.
Our independent distributors are not required to place minimum monthly,
quarterly or annual orders for our products. In order to reduce their inventory
costs, our independent distributors maintain low levels of inventory which,
depending on the product and the distributor, range from 15 to 45 days, of
typical sales volume in the distribution area. We believe that our independent
distributors endeavor to order products from us in such quantities, at such
times, as will allow them to satisfy the demand for our products in the
distribution area. Accordingly, there is no assurance as to the timing or
quantity of purchases by any of our independent distributors or that any of our
distributors will continue to purchase products from us in the same frequencies
and volumes as they may have done in the past. Our goal is to maintain
inventory levels for each of our products sufficient to satisfy anticipated
purchase orders for our products from our distributors, which is difficult to
estimate. This places additional burdens on our working capital. As a result,
we have not consistently been able to maintain sufficient inventory levels and
may not be able to do so in the future.
As is customary in the contract packing industry for small companies, we are
expected to arrange for the production of our products sufficiently in advance
of anticipated requirements. To the extent demand for our products exceeds
available inventory and the capacities available under our contract packing
arrangements, or orders are not submitted on a timely basis, we will be unable
to fulfill distributor orders on a timely basis. Conversely, we may produce
more products than warranted by actual demand, resulting in higher storage
costs and the potential risk of inventory spoilage. Our failure to accurately
predict and manage our contract packaging requirements may impair relationships
with our independent distributors, which, in turn, would likely have a material
adverse effect on our ability to maintain relationships with those distributors
CERTAIN OF OUR PRODUCTS ARE CLOSELY IDENTIFIED WITH CELEBRITIES AND OUR BRAND
RECOGNITION IS SIGNIFICANTLY AFFECTED BY THEIR SUCCESS IN THEIR PROFESSION.
Le Flav Spirits is currently our only spirit, which is closely identified with
a celebrity, which is associated with Flavor Flav. While part of our business
plan is to include our marketing and sales on other non-celebrity licensed
brands, currently this makes up the entirety of our launched products. The
reduction in acceptance or public approval of any such personality will
correspondingly damage the associated product and could have a material adverse
effect on the results of our operations.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission this Form 8-K,
including exhibits, under the Securities Act. You may read and copy all or any
portion of the statement or any reports, statements or other information in the
files at SEC's Public Reference Room located at 100 F Street, NE., Washington,
DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.
You can request copies of these documents upon payment of a duplicating fee by
writing to the Commission. You may call the Commission at 1-800-SEC-0330 for
further information on the operation of its public reference room. Our filings,
including this Form 8-K/A, will also be available to you on the website
maintained by the Commission at http://www.sec.gov.
All other information related to this acquisition is incorporated by reference
in the Company's Annual Report on Form 10-K and interim Quarterly Reports on
Form 10-Q. Please see those filings for additional information.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
16.1 Copy of press release filed February 27, 2013.
16.2 Copy of purchase agreement, dated February 26, 2013.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 27, 2013
Amerigo Energy, Inc
By: /s/ Jason F. Griffith, CPA
-------------------------------
Jason F. Griffith, CPA
Chief Executive Officer
