Item 1.01 Entry into a Material Definitive Agreement.
On January 9, 2020, we entered into a Joint Venture Agreement (the "Agreement")
with Industrias Marino, S.A. de C.V., a sociedad anónima de capital variable
incorporated under the laws of Mexico ("El Marino") to form a joint venture in
Mexico ("NuZee LATIN AMERICA" or the "Joint Venture"). We expect that NuZee
LATIN AMERICA will be able to take advantage of El Marino's existing
distribution network to make single serve pour over and tea bag styles of coffee
available to major retailers in Mexico, Central America and South America.
The material terms of the Agreement are as follows:
El Marino and an affiliate of El Marino will form NuZee LATIN AMERICA as a stock
corporation with variable capital (sociedad anónima de capital variable) under
the laws of Mexico, with corporate domicile in Mazatlán, Sinaloa, Mexico. NuZee
LATIN AMERICA's main business shall be the manufacture in Mexico of
machine-manufactured zero-landfill, single serve pour over and tea bag coffee
products (the "Products") and the sale thereof to clients in the American
continent.
Pursuant to the Agreement, NuZee and El Marino shall enter into an asset
purchase agreement (the "Asset Purchase Agreement") whereby NuZee will sell El
Marino two FPG-T1 and/or FPG-LT branded Fuso International, machines for
manufacture of the Products for USD$270,000.00. The Asset Purchase Agreement
shall include, among other items, the right of El Marino and/or any of its
successors to acquire via NuZee machines for packing pour over coffee and coffee
single serve bags (e.g., manufactured by Nasa Corporation of Tokyo, Japan or its
subsidiaries, Wooshin FA&T of Seoul, Korea or its subsidiaries, and/or an
alternative manufacturing company of comparable quality), to be selected by
NuZee and approved by Marino, along with any related equipment for the
manufacture of Products in Mexico, Central and South America (the "Exclusivity
Territory"), and a limitation on NuZee's right to provide similar assistance to
any other companies but Marino or the Joint Venture in the Exclusivity
Territory.
Upon the sale of two machines, El Marino shall assign the machines to NuZee
LATIN AMERICA and through a series of transactions, each party's total capital
contributed into the Joint Venture will be US$160,000. NuZee's contribution will
come in the form of the equipment contributed valued at US$270,000 less a
receivable from El Marino of US$110,000 and El Marino shall contribute US$50,000
in NuZee LATIN AMERICA and provide NuZee with a balancing payable of US$110,000.
Once we have become a stockholder in NuZee LATIN AMERICA, we and El Marino will
each sell raw materials to NuZee LATIN AMERICA at our own respective costs, plus
a margin of 5%, and the resultant profits from the sale of Products in Mexico,
Central and South America will shared between us and El Marino equally.
Pursuant to the Agreement, with respect to trading in the machines,
manufacturing the Products and related activities, we and El Marino will work
exclusively with each other in Mexico, Central and South America, together
growing the business and providing guidance to NuZee LATIN AMERICA where needed.
We and El Marino will have shared power to control NuZee LATIN AMERICA. In the
event of a disagreement not resolved pursuant to negotiation provisions set
forth in the Agreement, each party may exercise a buy/sell option. The buy/sell
option provides, in the event of exercise, the initiating party shall send a
notice to the receiving party advising of its intent to exercise such option,
describe the circumstances having triggered the disagreement, and offer either
to purchase the receiving party's shares in the Joint Venture or to sell its own
shares to the receiving party, with any difference between the "buy price" and
the "sell price" based solely on the difference (if any) in each party's share
ownership. The ensuing buy/sell transaction may take no longer than thirty days
unless otherwise mutually agreed. The buy/sell price shall be paid at closing by
wire transfer, the subject shares in the Joint Venture shall be transferred, and
the parties shall continue to cooperate with each other as necessary.
Shares in NuZee LATIN AMERICA can be transferred only to affiliates of NuZee or
El Marino, or persons meeting certain net worth and certain qualitative
requirements. Any such transfer will be subject to a right of first refusal and
an option to participate in favor of the other stockholder.
During the term of the Agreement and for three years after the termination of
the Agreement or winding-up of NuZee LATIN AMERICA, neither NuZee nor El Marino
will engage in any business substantially similar to any aspect of, or any
activity competitive with, the business of the Joint Venture in the Exclusivity
Territory, or solicit the other's employees, without the reasonable consent of
the other.
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8-K re El Marino(3697490.2).docx
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The Agreement automatically renews on an annual basis unless actively terminated
by either party. The fiscal year-end for NuZee LATIN AMERICA will be December
31, as required by Mexican law. NuZee LATIN AMERICA will regularly account to
the Parties and maintain its financial records in accordance with the
requirements of all applicable laws and the current Financial Information
Standards (Normas de Información Financiera) issued by the Consejo Mexicano de
Normas de Información Financiera, A.C. and will cooperate in maintaining
financial data in accordance with generally accepted international or U.S.
accounting standards (e.g. IFRS or U.S. GAAP) as the Parties may require.
The foregoing description of the Agreement is a summary of, and does not purport
to be a complete statement of, the Agreement or the rights and obligations of
the parties thereunder, and is qualified in its entirety by reference to the
full text of the Agreement, a copy of which will be filed with the Securites and
Exchange Commission as an exhibit to NuZee's next periodic report under the
Securities Act of 1934, as amended.
Item 9.01 Financial Statements and Exhibits
EXHIBIT NO. DESCRIPTION
99.1 Press Release re NuZee LATIN AMERICA dated January 15, 2020
Cautionary Note Regarding Forward-Looking Statements
This current report on Form 8-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Exchange Act of 1934. Forward-looking statements are subject to known and
unknown risks and uncertainties, many of which may be beyond our control. We
caution you that the forward-looking information presented in this current
report is not a guarantee of future events, and that actual events and results
may differ materially from those made in or suggested by the forward-looking
information contained in this current report. In addition, forward-looking
statements generally can be identified by the use of forward-looking terminology
such as "may," "plan," "will," "expect," "intend," "estimate," "anticipate,"
"believe" or "continue" or the negative thereof or variations thereon or similar
terminology. A number of important factors could cause actual events and results
to differ materially from those contained in or implied by the forward-looking
statements, including NuZee LATIN AMERICA's ability to implement production, the
demand for pour over and tea bag coffee products in the Exclusivity Territory,
our ability to work cooperatively with El Marino in the management of NuZee
LATIN AMERICA and those risk factors set forth in our most recent Annual Report
on Form10-K. Any forward-looking information presented herein is made only as of
the date of this current report, and we do not undertake any obligation to
update or revise any forward-looking information to reflect changes in
assumptions, the occurrence of unanticipated events, or otherwise.
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