| Commitments and Contingencies Disclosure [Text Block] |
15.
COMMITMENTS
AND CONTINGENCY
As of May 31, 2010 and May 31, 2009, the company has
the following commitments and contingencies:
|
Term
|
Agreement
|
|
Monthly
Expense
|
|
|
8/15/07
– 8/14/12
|
Preferred
Vendor Agreement (a)
|
|
|
n/a
|
|
|
8/15/07
– 8/14/12
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Product
Development Agreement (b)
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|
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n/a
|
|
|
8/15/07
– 8/14/12
|
Trademark
Assignment (c)
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|
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n/a
|
|
|
9/28/07
– 9/27/12
|
Lease
Agreement (d)
|
|
$
|
23,650
|
|
|
|
a.
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The
Company has entered into a five-year Preferred
Vendor Agreement with two restaurant
establishments owned by the former member of
Artisanal Cheese, LLC, pursuant to which the
Company will supply the restaurants or their
affiliates with any and all premium cheese
products at a high volume discount and at prices
not to exceed prices offered to other customers,
and the restaurants are to purchase exclusively
from the Company provided the Company can meet
terms and conditions acceptable to the
restaurants. The Preferred Vendor
Agreement also provides for a credit to the
restaurant establishments which credit shall be
applied to the first $228,000 worth of product,
not to exceed $57,000 in any calendar
quarter. This credit is the result of
the payoff in full at the closing of Artisanal by
one of its former members of a certain loan to
the Company. (See Note 8, Notes
Payable).
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b.
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The
Company has entered into a five-year Product
Development Agreement pursuant to which the
Company shall have a “first-look”
right and 30-day exclusivity period to evaluate
and negotiate in good faith a distribution
arrangement (including minimum orders,
exclusivity, prices/royalty rates and terms) for
all new cheeses, cheese related products and
other products developed by the two restaurant
establishments owned by the former member of
Artisanal Cheese, LLC. After the
30-day exclusivity period, the Company will have
an opportunity to match any terms and conditions
of a distribution agreement that the restaurants
may subsequently reach with a third
party. The Agreement provides for a
written trademark license from the Company to the
restaurants upon terms to be mutually agreed upon
with respect to any distribution by the
restaurants under the Artisanal brand of such new
products other than distribution by the
Company.
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c.
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The
Company has entered into a Trademark License
Agreement pursuant to which the Company granted a
royalty-free license to the two restaurant
establishments to use the trade name
“Artisanal Fromagerie & Bistro”
and the derivative logo (consisting of an oval
design with four stylized sheep seated in front
of a barn and the words “Artisanal
Fromagerie – Bistro – Wine
Bar”) in connection with the operation,
distribution and sale of cheese, cheese products
and other food products from the restaurant
establishments or their affiliated restaurants or
retail stores. In October 2009 this
mark was assigned to the Licensees in accordance
with the agreement.
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d.
|
Upon
closing the acquisition of Artisanal Cheese LLC
in August 2007, the Company negotiated a new
five-year lease for approximately 10,000 square
feet commencing September 28, 2007, subject to
rent increase of approximately ten percent per
annum. The current lease payment is approximately
$23,500 per month. The leased space
consists of all executive and sales offices, five
cheese aging caves, a packaging and shipping
facility, a customer call center and a 1,000
square foot cheese center consisting of a
fully-equipped kitchen, classroom and
presentation area with two large flat screen
television panels used for conducting cheese
education courses and third-party special
events. From this facility the
business distributes its line of Artisanal
Premium Cheese products to fine food wholesalers,
specialty food outlets, restaurants and through
its catalogue and Website.
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The
Company's subsidiary is currently involved in a
couple of legal proceedings that are incidental
to its operations. None of these
proceedings may have, or have had in the 12
months preceding the date of this report, a
significant effect on the financial position or
profitability of the Company or its
subsidiary:
|
CIT
Technology Financing Services, Inc. v. Artisanal Cheese,
LLC, New York Supreme Court (New York), Index No.
06159/10 – Plaintiff sought approximately
$107,000 pursuant to two copier leases. The
Company negotiated a settlement with plaintiff to
resume monthly payments for the copiers.
Christopher
Calise and Perry Lerner v. Artisanal Cheese, LLC, New
York Supreme Court (New York County), Index No.
5073/2010. Plaintiffs each loaned
$50,000 to the Company on or about July 10,
2009. In June 2010, they commenced an action
for unpaid interest and requesting acceleration of the
loan. The Company negotiated a settlement with
plaintiffs to pay off the note by December 31,
2011.
Central
Business Solutions v. Artisanal Cheese, LLC New York City
Civil Court (New York County), Index No. 043515/2010. Plaintiff
is seeking approximately $13,000 for equipment
maintenance services. The Company rejects
Plaintiff's claim in full and has counterclaimed for
damages resulting from Plaintiff's breach of contract,
misrepresentation and fraud.
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