Quarterly report pursuant to Section 13 or 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2022
COMMITMENTS AND CONTINGENCIES  
COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

 

a. Iconic Guarantees

 

On May 26, 2015, BiVi entered into a license agreement with Neighborhood Licensing, LLC (the “BiVi Licensor”), an entity owned by Chazz Palminteri (“Palminteri”), to use Palminteri’s endorsement, signature and other intellectual property owned by the BiVi Licensor. The Company has agreed to guarantee and act as surety for BiVi’s obligations under certain sections of the license agreement and to indemnify the BiVi Licensor and Palminteri against third party claims.

  

On November 12, 2015, Bellissima Spirits entered into a license agreement with Christie Brinkley, Inc. (the “Bellissima Licensor”), an entity owned by Christie Brinkley (“Brinkley”), to use Brinkley’s endorsement, signature, and other intellectual property owned by the Bellissima Licensor. The Company has agreed to guarantee and act as surety for Bellissima’s obligations under certain sections of the license agreement and to indemnify the Bellissima Licensor and Brinkley against third party claims.

b. Royalty Obligations of BiVi and Bellissima

 

Pursuant to the license agreement with the Bivi Licensor (see Note 11a. above), BiVi is obligated to pay the BiVi Licensor a Royalty Fee equal to 5% of monthly gross sales of BiVi Brand products payable monthly subject to an annual Minimum Royalty Fee of $100,000 in year 1, $150,000 in year 2, $165,000 in year 3, $181,500 in year 4, $199,650 in year 5, and $219,615 in year 6 and each subsequent year. The Minimum Royalty Fee has been waived until such time as the parties agree to reinstate the Minimum Royalty Fee. As of the date of this filing, the Minimum Royalty Fee was not reinstated.

 

Pursuant to the license agreement and Amendment No. 1 to the license agreement effective September 30, 2017 with the Bellissima Licensor (see Note 11a. above), Bellissima is obligated to pay the Bellissima Licensor a Royalty Fee equal to 10% of monthly gross sales (12.5% for sales in excess of defined Case Break Points) of Bellissima Brand products payable monthly. The Bellissima Licensor has the right to terminate the endorsement if Bellissima fails to sell 10,000 cases of Bellissima Brand products in year 1, 15,000 cases in year 2, or 20,000 cases in year 3 and each subsequent year. These appropriate thresholds were met during the year.

 

c. Brand Licensing Agreement relating to Hooters Marks

 

On July 23, 2018, United executed a Brand Licensing Agreement (the “Hooters Agreement”) with HI Limited Partnership (the “Licensor”). The Hooters Agreement provides United a license to use certain “Hooters” Marks to manufacture, market, distribute, and sell alcoholic products.

  

On November 1, 2021, the Company amended its agreement with Hooters (the “Amended Hooters Agreement”) which will be effective until December 31, 2025 with an option to extend until 2028. Under the Amended Hooters Agreement, the Company must pay Hooters 10% of net sales of all products during the term.

  

d. Marketing and Order Processing Services Agreement

 

During October 2019, United executed a Marketing and Order Processing Services Agreement (the “QVC Agreement”) with QVC, Inc. (“QVC”). Among other things, the QVC Agreement provides for United’s grant to QVC of an exclusive worldwide right to promote the Bellissima products through direct response television programs.

  

The initial license period commenced October 2019 and expires in December 2021 (i.e., two years after first airing of a Bellissima product). Unless either party notifies the other party in writing at least 30 days prior to the end of the Initial License Period or any Renewal License Period of its intent to terminate the QVC Agreement, the License continually renews for additional two-year periods. The license automatically renewed on January 1, 2022.

  

The QVC Agreement provides for United’s payment of “Marketing Fees” (payable no less than monthly) to QVC in amounts agreed to between United and QVC from time to time. For the three months ended March 31, 2022 and 2021, the Marketing Fees expense (payable to QVC) was $36,027 and $81,102, respectively, and the direct response sales generated from QVC programs was $142,689 and $405,510, respectively. 

  

e. Concentration of sales

 

For the three months ended March 31, 2022 and 2021, sales consisted of:

 

 

 

2022

 

 

2021

 

Bellissima product line:

 

 

 

 

 

 

QVC direct response sales

 

$ 142,689

 

 

$ 405,510

 

Other

 

 

390,406

 

 

 

206,732

 

Total Bellissima

 

 

533,095

 

 

 

612,242

 

TopPop

 

 

3,513,702

 

 

 

-

 

Hooters product line

 

 

-

 

 

 

22,291

 

 

 

 

 

 

 

 

 

 

Total

 

$ 4,046,797

 

 

$ 634,533

 

 

TopPop’s sales to one customer consisted of 92% and 65% of its total sales for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021, 93% and 9%, respectively, of TopPop’s accounts receivables were from that same customer.

 

f. Commission Agreements

 

On July 10, 2019, the Company executed a Commission Agreement with CAA-GBA USA, LLC (“CAA-GBG”). The agreement provides CAA-GBG to receive 5% revenue generated with respect to the co-packing or related manufacturing deal for Anheuser-Busch, LLC. Additionally, CAA-GBG is also entitled to receive 5% of revenue for new business identified. The initial agreement expired on July 31, 2021 and automatically renews every year. No commissions were incurred under this agreement since the date of acquisition of TopPop (July 26, 2021) through March 31, 2022. On May 23, 2022,CAA-GBG received notice of termination and the Commission Agreement will end on July 31, 2022.

 

Effective December 11, 2019, the Company executed a Commission Agreement with Christopher J. Connolly. Mr. Connolly had agreed to provide sales representation services to Company for alcohol ice pop packing opportunities in exchange for commission. The agreement provides a commission 5% of gross revenue collected. The initial term is one year from the effective date. The agreement will renew automatically for 1-year terms unless the agreement is terminated. The Company has decided to keep this agreement in place and no commissions were incurred under this agreement since the date of acquisition of TopPop (July 26, 2021) through March 31, 2022.