UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
________________________________________
FORM S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
________________________________________
CELSIUS
HOLDINGS, INC.
(Exact
Name of Small Business Issuer in its Charter)
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Nevada
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2086
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20-2745790
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(State
of Incorporation)
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(Primary
Standard Classification Code)
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(IRS
Employer ID No.)
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140
NE 4th
Avenue, Suite C
Delray
Beach, FL 33483
(561)
276-2239
(Address
and Telephone Number of Registrant’s Principal
Executive
Offices and Principal Place of Business)
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Jan
Norelid, CFO
140
NE 4th
Avenue, Suite C
Delray
Beach, FL 33483
(561)
276-2239
(Name,
Address and Telephone Number
of
Agent for Service)
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Copies of
communications to:
Roger L.
Shaffer, Esq.
Baritz
& Colman, LLP
1075
Broken Sound Parkway, NW, Suite 102
Boca
Raton, Florida 33487
(561)
864-5100 (Telephone)
(561)
864-5101 (Facsimile)
Approximate
date of commencement of proposed sale to the public: From time to time after
this Registration Statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act of 1933, please check the following box and list
the Securities Act registration Statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
number of the earlier effective registration statement for the same offering.
.o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Securities Exchange Act of
1934.
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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CALCULATION
OF REGISTRATION FEE
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Title
of Each Class of
Securities to
be Registered
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Amount
to Be
Registered(1)
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Proposed
Maximum
Offering
Price
Per
Share
(2)
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Proposed
Maximum
Aggregate
Offering Price (2)
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Amount
of
Registration
Fee
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|||||||||
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Common
Stock, $0.001 par value
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58,059,016
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$0.08
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$4,644,721
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$182.54
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|||||||||
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Total
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58,059,016
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$0.08
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$4,644,721
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$182.54
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|||||||||
(1) Pursuant
to Rule 416 under the Securities Act of 1933, as amended, this Registration
Statement also covers such indeterminate number of shares of common stock as may
be required to prevent dilution resulting from share splits, shares dividends or
similar events.
(2)
Estimated solely for the purpose of computing the amount of the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on
the closing price of $0.08 on the OTC Bulletin Board on August 27,
2008.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION DATED AUGUST 28, 2008
The information in this
Prospectus is not complete and may be changed. The selling stockholders may not
sell these securities until the registration statement filed with the U.S.
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not
permitted.
PROSPECTUS
CELSIUS
HOLDINGS, INC.
58,059,016
SHARES OF COMMON STOCK
This
Prospectus relates to the sale of up to 58,059,016 shares of the common stock,
par value $0.001 per share, of Celsius Holdings, Inc., of which (a) 46,875,000
shares are issuable by the Company to CDS Ventures of South Florida, LLC, a
Florida limited liability company upon conversion of Series A Preferred Stock to
be sold by CDS Ventures of South Florida, LLC; and (b) 11,184,016 shares to be
sold by CD Financial LLC (collectively the “Selling Stockholders”).
Please
refer to “Selling Stockholders” beginning on page 11.
The
shares are being registered to permit the Selling Stockholders to sell from time
to time in the public market. The prices at which the Selling Stockholders may
sell the shares will be determined by the prevailing market price for the shares
or in negotiated transactions. We will not receive proceeds from the
sale of our shares by the Selling Stockholders. We have agreed to pay the
expenses of preparing this prospectus and the related registration
expenses.
Our
Common Stock is registered under Section 12(g) of the Securities Exchange Act of
1934, as amended, and is quoted on the over-the-counter market and prices are
reported on the OTC Bulletin Board under the symbol “CSUH”. On August
27, 2008, the closing price as reported was $0.08.
We are a
Nevada corporation incorporated on April 26, 2005. Our principal
executive offices are located at 140 NE 4th Avenue, Suite C, Delray Beach, FL
33483, and our telephone number is (561) 276-2239.
Selling
Stockholders may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933.
INVESTMENT
IN THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK.
YOU MAY LOSE YOUR ENTIRE INVESTMENT. CONSIDER CAREFULLY THE “RISK FACTORS”
BEGINNING ON PAGE 7 OF THIS PROSPECTUS BEFORE INVESTING.
NEITHER
THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Date of This Prospectus
is: ____________,
2008
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F-1
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II-1
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II-6
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You
should rely only on the information contained in this prospectus. We have not
authorized any other person to provide you with information. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not making an offer to sell those securities in any jurisdiction where the
offer and sale is not permitted. The information appearing in this prospectus is
accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have
changed since that date.
The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the “Risk Factors” section, the
financial statements and the notes to the financial statements. As used
throughout this prospectus, the terms “we,” “us,” and “our” refer to Celsius
Holdings, Inc., a Nevada corporation, and/or our wholly owned subsidiaries,
Celsius Inc. and Celsius Netshipments, Inc., as the case may be.
Business
Celsius
Holdings, Inc (the “Company”) is in the business of producing, distributing and
marketing functional beverages. We are a Nevada corporation. We operate in the
United States through our wholly-owned subsidiaries, Celsius Inc. and Celsius
Netshipments, Inc. Celsius, Inc. acquired the operating business of Elite FX,
Inc. (“Elite”) through a reverse merger on January 26, 2007 (the “Merger
Agreement”). Celsius, Inc. is in the business of developing and marketing
functional beverages in the functional beverage category of the beverage
industry. Celsius® was Elite’s first commercially available product. Celsius is
a calorie burning soda. Celsius is currently available in five flavors: cola,
ginger ale, lemon/lime, orange and wild berry. Two new flavors will be
introduced in September, 2008, green teas with the flavor of peach/mango and
raspberry/acai. Celsius Netshipments, Inc., incorporated in Florida on March 29,
2007, is in the business of selling Celsius, Inc.’s products via the
internet.
We have
suffered losses from operations, have a stockholders’ deficit, and have a
negative working capital. Our auditors have raised substantial doubt that we
will be able to continue as a going concern. Management entered into a
financing agreement on August 8, 2008 with CDS Ventures of South Florida, LLC, a
Florida limited liability company (“CDS”), to provide funds needed for working
capital and marketing expenses.
Our principal executive offices are
located at 140 NE 4th Avenue, Delray Beach, FL 33483. Our telephone number is
(561) 276-2239 and our website is http://www.celsius.com. Through a link on our website we
provide free access to our Code of Business Conduct and Ethics for our
directors, officers and employees, available on our website, and we will post on
our website any waivers of, or amendments to, such code of ethics. We intend to
make certain charters of the committees of our Board of Directors (the “Board”)
available on our website in the future. Our website and the information
contained therein or linked thereto do not constitute part of and are not
incorporated by reference into this Prospectus.
The
Offering
CDS, a
Selling Stockholder under this Prospectus, is offering for sale up to 46,875,000
shares of our Common Stock hereto. On August 8, 2008, we entered into
a securities purchase agreement (the “Purchase Agreement”) with
CDS. Under the Purchase Agreement, CDS purchased 2,000 shares of
Series A Preferred Stock , evidenced by a certificate of designation filed with
the Nevada Secretary of State (the “Certificate of Designation”) and the right
to purchase up to an additional 1,000 shares of Series A Preferred Stock, for an
aggregate purchase price of $2,000,000 (two million dollars) consisting of a
cash payment of $1,500,000 and the cancellation of two notes in aggregate amount
of $500,000 issued by the Company to CD Financial, LLC, an affiliate of CDS (the
“Purchase Price”). The purchase of any part of the additional 1,000 shares of
Series A Preferred Stock (the “Additional Shares”) will have a consideration of
$1,000 per share of Series A Preferred Stock. CDS has the right to
convert the Series A Preferred Stock to Common Stock at any time. The conversion
price is $0.08 (eight cents) per share of common stock for a period of 200 days
from the date on which the Certificate of Designation is effective with the
Nevada Secretary of State. Thereafter, the conversion price shall be
the greater of (i) 90% of the Market Price on the conversion date and (ii) $0.08
(eight cents) as appropriately adjusted for stock splits, stock dividends and
similar events. Market price means the average of the ten daily volume weighted
average prices for the 10 trading days immediately preceding the applicable date
of determination.
In
connection with the Purchase Agreement, we entered into a registration rights
agreement with CDS (the “Registration Agreement”). Pursuant to the Registration
Agreement, we are obligated to file a registration statement with the SEC
covering the shares of Common Stock underlying the Purchase
Agreement.
In
addition to those shares being offered by CDS as described above, 11,184,016
shares are being offered by CD Financial, LLC (“CDF”), a Florida limited
liability company.
We issued
to CDF a convertible note for $250,000 on December 18, 2007, and an additional
note on April 4, 2008 for $500,000. Both notes were converted into 11,184,016
shares of the Company’s Common Stock on June 10, 2008.
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Common
Stock Offered
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58,059,016
shares by the Selling Stockholders
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Offering
Price
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Market
price
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Common
Stock Currently Outstanding
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136,793,431
shares as of August 27, 2008
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Use
of Proceeds
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We
will not receive any proceeds of the shares offered by the Selling
Stockholders. See “Use of Proceeds”.
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Risk
Factors
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The
securities offered hereby involve a high degree of risk. See “Risk
Factors”.
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Over-the-Counter
Bulletin Board Symbol
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CSUH.OB
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Information
included or incorporated by reference in this Prospectus may contain
forward-looking statements. This information may involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from the future results,
performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words “may”, “should”, “expect”, “anticipate”, “estimate”, “believe”,
“intend” or “project” or the negative of these words or other variations on
these words or comparable terminology.
This
Prospectus contains forward-looking statements, including statements regarding,
among other things, (a) our projected sales and profitability, (b) our growth
strategies, (c) anticipated trends in our industry, (d) our future financing
plans and (e) our anticipated needs for working capital. These statements may be
found under “Management’s Discussion and Analysis or Plan of Operations” and
“Description of Business”, as well as in this Prospectus generally. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under “Risk Factors” and matters described in this Prospectus
generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this Prospectus will in fact
occur.
The
following summary financial data should be read in conjunction with
“Management’s Discussion and Analysis or Plan of Operation” and the Financial
Statements and Notes thereto, included elsewhere in this Prospectus. The
statement of operations and balance sheet data from December 31, 2007 are
derived from our audited financial statements included in the Company’s Annual
Report on Form 10-KSB as filed with the SEC on March 3, 2008. The unaudited
statement of operations and balance sheet data for the six months ended June 30,
2008 and 2007, was derived from our Quarterly Report on Form
10-Q.
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For
the Six Months Ended June 30,
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For
the Year Ended
December
31,
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|||||||||||||||
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2008
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2007
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2007
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2006
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(Unaudited)
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(Unaudited)
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STATEMENTS
OF OPERATIONS
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Revenue
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$ | 1,533,491 | $ | 617,058 | $ | 1,644,780 | $ | 1,297,086 | ||||||||
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Total
Operating Expenses
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2,441,748 | 1,905,006 | 4,155,197 | 1,789,800 | ||||||||||||
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Net
Loss
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2,098,263 | 1,845,213 | 3,725,841 | 1,454,353 | ||||||||||||
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As
of
June
30,
2008
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As
of
December
31, 2007
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(Unaudited)
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||||||||
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BALANCE
SHEETS DATA
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||||||||
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Cash
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$ | 96,790 | $ | 257,482 | ||||
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Total
Assets
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2,197,829 | 2,533,130 | ||||||
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Total
Liabilities
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3,816,335 | 4,137,882 | ||||||
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Stockholders’
Deficiency
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(1,618,506 | ) | (1,604,752 | ) | ||||
WHERE
YOU CAN FIND US
Our
principal executive offices are located at 140 NE 4th Avenue, Delray Beach, FL
33483. Our telephone number is (561)276-2239 and our website is http://www.celsius.com.
An
investment in our Common Stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
Prospectus before investing in our Common Stock. As a result of the risk factors
set forth below, actual results could differ materially from those projected in
any forward-looking statements.
Additional
risks and uncertainties not presently known to us, or that we currently consider
to be immaterial, may also impact our business, operating results, liquidity and
financial condition. If any such risks occur, our business, operating results,
liquidity and financial condition could be materially affected in an adverse
manner. Under such circumstances, the trading price of our securities could
decline, and you may lose all or part of your investment. Please note that
throughout this Prospectus, the words “we”, “our” or “us” refer to the Company
and not to the Selling Stockholders.
We
have a limited operating history with significant losses and expect losses to
continue for the foreseeable future.
The
Company was incorporated in the State of Nevada on April 26, 2005 under the name
“Vector Ventures Corp.” The Company changed its name to “Celsius Holdings, Inc.”
on December 26, 2006. We are a holding company and carry on no operating
business except through our direct wholly-owned subsidiaries, Celsius, Inc. and
Celsius Netshipments, Inc. Celsius, Inc. was incorporated in Nevada on January
18, 2007, and merged with Elite on January 26, 2007, which was incorporated in
Florida on April 22, 2004. Celsius Netshipments, Inc. was incorporated in
Florida on March 29, 2007.
It is
difficult to evaluate our business future and prospects as we are a young
company with a limited operating history. At this stage of our business
operations, even with our good faith efforts, potential investors have a high
probability of losing their investment. Our future operating results will depend
on many factors, including the ability to generate sustained and increased
demand and acceptance of our products, the level of our competition, and our
ability to attract and maintain key management and employees.
We have
yet to establish any history of profitable operations. We have
incurred annual operating losses of $3.7 million, $1.5 million and $853,000,
respectively, during the past three fiscal years of operation. We
have incurred an operating loss during the first six months ending June 30, 2008
of $2.1 million. As a result, at June 30, 2008 we had an accumulated deficit of
$8.2 million. Our revenues have not been sufficient to sustain our
operations. We expect that our revenues will not be sufficient to
sustain our operations for the foreseeable future. Our profitability
will require the successful commercialization of our current product
Celsius® and any
future products we develop. No assurances can be given when this will
occur or that we will ever be profitable.
We
will require additional financing to sustain our operations and without it we
may not be able to continue operations.
At June
30, 2008, we had a working capital deficit of $1.5 million. The independent
auditor’s report for the year ended December 31, 2007, includes an explanatory
paragraph to their audit opinion stating that our recurring losses from
operations and working capital deficiency raise substantial doubt about our
ability to continue as a going concern. We have an operating cash
flow deficit of $1.9 million for the six-month period ending June 30, 2008 and
an operating cash flow deficit of $2.6 million and $1.2 million, for the twelve
month periods ended December 31, 2007 and 2006, respectively. We do
not currently have sufficient financial resources to fund our operations or
those of our subsidiaries. Therefore, we need additional funds to
continue these operations.
The
sale of our Common Stock to Fusion Capital, Golden Gate Investors, LLC, CD
Financial, LLC and CDS Ventures of South Florida, LLC may cause dilution and the
sale of the shares of Common Stock acquired by Fusion Capital, Golden Gate
Investors, LLC, CD Financial, LLC and CDS Ventures of South Florida, LLC could
cause the price of our Common Stock to decline.
In
connection with entering into a common stock purchase agreement (the “Purchase
Agreement”) with Fusion Capital Fund II, LLC (“Fusion Capital”), we authorized
the sale to Fusion Capital of up to 13,193,305 shares of our Common
Stock. The number of shares ultimately offered for sale by Fusion
Capital is dependent upon the number of shares purchased by Fusion Capital under
the Purchase Agreement. The purchase price for the Common Stock to be sold to
Fusion Capital pursuant to the Purchase Agreement will fluctuate based on the
price of our Common Stock. All 13,193,305 shares registered are freely
tradable. It is anticipated that these shares will be sold over a
period of up to twenty-five months until November 16, 2009. Depending
upon market liquidity at the time, a sale of shares under this offering at any
given time could cause the trading price of our Common Stock to
decline. Fusion Capital may ultimately purchase all, some or none of
the 10,000,000 shares of Common Stock not yet issued but
registered. After it has acquired such shares, it may sell all, some
or none of such shares. Therefore, sales to Fusion Capital by us
under the Purchase Agreement may result in substantial dilution to the interests
of other holders of our Common Stock. The sale of a substantial number of shares
of our Common Stock, or anticipation of such sales, could make it more difficult
for us to sell equity or equity-related securities in the future at a time and
at a price that we might otherwise wish to effect sales. However, we
have the right to control the timing and amount of any sales of our shares to
Fusion Capital and the Purchase Agreement may be terminated by us at any time at
our discretion without any cost to us.
In
connection with issuing a convertible debenture to Golden Gate Investors, LLC
(“GGI”), we are not obligated to convert the debenture, if the price of our
shares is below $0.20. We have issued 3.5 million shares to GGI between June 16
and August 6, 2008, as partial conversion of the debenture. We may have to issue
more than 20 million shares to GGI, upon their requests to convert the
debenture.
On June
10, 2008, the total amount of $750,000 in notes payable to CD Financial, LLC was
converted to 11,184,016 shares of Common Stock of which 7,456,011 shares are
freely tradable, as of June 30, 2008.
In
connection with issuing 2,000 Series A Preferred Shares in August 2008, CDS
Ventures of South Florida, LLC can convert these into 25 million shares of
Common Stock.
We
have not achieved profitability on an annual basis and expect to continue to
incur net losses in future quarters, which could force us to discontinue
operations.
We
recorded a net loss of $1.5 million and $3.7 million for the years ended
December 31, 2006, and 2007, respectively, and a loss of $2.1 million for the
six months ended June 30, 2008. We had an accumulated deficit of $8.2 million as
of June 30, 2008. We could incur net losses for the foreseeable future as we
expand our business. We will need to generate additional revenue from the sales
of our products or take steps to reduce operating costs to achieve and maintain
profitability. Even if we are able to increase revenue, we may experience price
competition that will lower our gross margins and our profitability. If we do
achieve profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis and we could be forced to
discontinue our operations.
We depend upon our trademarks and
proprietary rights, and any failure to protect our intellectual property rights
or any claims that we are infringing upon the rights of others may adversely
affect our competitive position.
Our
success depends, in large part, on our ability to protect our current and future
brands and products and to defend our intellectual property rights. We cannot be
sure that trademarks will be issued with respect to any future trademark
applications or that our competitors will not challenge, invalidate or
circumvent any existing or future trademarks issued to, or licensed by, us. We
believe that our competitors, many of whom are more established, and have
greater financial and personnel resources than we do, may be able to replicate
our processes, brands, flavors, or unique market segment products in a manner
that could circumvent our protective safeguards. Therefore, we cannot give you
any assurance that our confidential business information will remain
proprietary.
We rely predominately on wholesale
distributors for the success of our business, the loss or poor performance of
which may materially and adversely affect our business.
We sell
our products principally to wholesalers for resale to retail outlets including
grocery stores, convenience stores, nutritional and drug stores. The replacement
or poor performance of the Company's major wholesalers and or the Company's
inability to collect accounts receivable from the Company's major wholesalers
could materially and adversely affect the Company's results of operations and
financial condition. Distribution channels for beverage products have been
characterized in recent years by rapid change, including consolidations of
certain wholesalers. In addition, wholesalers and retailers of the Company's
products offer products which compete directly with the Company's products for
retail shelf space and consumer purchases. Accordingly, there is a risk that
these wholesalers or retailers may give higher priority to products of the
Company's competitors. In the future, the Company's wholesalers and retailers
may not continue to purchase the Company's products or provide the Company's
products with adequate levels of promotional support.
We may incur material losses as a
result of product recall and product liability.
We
may be liable if the consumption of any of our products causes injury, illness
or death. We also may be required to recall some of our products if they become
contaminated or are damaged or mislabeled. A significant product liability
judgment against us, or a widespread product recall, could have a material
adverse effect on our business, financial condition and results of operations.
The government may adopt regulations that could increase our costs or our
liabilities. The amount of the insurance we carry is limited, and that insurance
is subject to certain exclusions and may or may not be adequate.
We
may not be able to develop successful new products, which could impede our
growth and cause us to sustain future losses.
Part of
our strategy is to increase our sales through the development of new products.
We cannot assure you that we will be able to develop, market, and distribute
future products that will enjoy market acceptance. The failure to develop new
products that gain market acceptance could have an adverse impact on our growth
and materially adversely affect our financial condition.
Our lack of product diversification
and inability to timely introduce new or alternative products could cause us to
cease operations.
Our
business is centered on healthier functional beverages. The risks associated
with focusing on a limited product line are substantial. If consumers do not
accept our products or if there is a general decline in market demand for, or
any significant decrease in, the consumption of nutritional beverages, we are
not financially or operationally capable of introducing alternative products
within a short time frame. As a result, such lack of acceptance or market demand
decline could cause us to cease operations.
Our directors and executive officers
beneficially own a substantial amount of our Common Stock, and therefore other
stockholders will not be able to direct our Company.
The
majority of our shares and the voting control of the Company is held by a
relatively small group of stockholders, who are also our directors and executive
officers. Accordingly, these persons, as a group, will be able to exert
significant influence over the direction of our affairs and business, including
any determination with respect to our acquisition or disposition of assets,
future issuances of Common Stock or other securities, and the election or
removal of directors. Such a concentration of ownership may also have the effect
of delaying, deferring, or preventing a change in control of the Company or
cause the market price of our stock to decline. Notwithstanding the exercise of
the fiduciary duties of these directors and executive officers and any duties
that such other stockholder may have to us or our other stockholders in general,
these persons may have interests different than yours.
We are dependent on our key
executives, the loss of which may have a material adverse effect on our
Company.
Our
future success will depend substantially upon the abilities of, and personal
relationships developed by, Stephen C. Haley, our Chief Executive Officer,
Chairman of the Board and majority stockholder, Jan Norelid our Chief Financial
Officer, and Mrs. Irina Lorenzi, our Innovations VP. The loss of Messrs. Haley,
Norelid and Lorenzi’s services could materially adversely affect our business
and our prospects for the future. We do not have key person insurance on the
lives of such individuals. Our future success also depends on our continuing
ability to attract and retain highly qualified technical and managerial
personnel. Competition for such personnel in the functional beverage industry is
intense and we may not be able to retain our key managerial and technical
employees or that it will be able to attract and retain additional highly
qualified technical and managerial personnel in the future. The inability to
attract and retain the necessary technical and managerial personnel could have a
material and adverse affect upon our business, results of operations and
financial condition.
Our Common Stock is deemed a
low-priced "Penny" stock, therefore an investment in our Common Stock should be
considered high risk and subject to marketability
restrictions.
Since our
Common Stock is a penny stock, as defined in Rule 3a51-1 under the Exchange Act,
it will be more difficult for investors to liquidate their investment. Until the
trading price of the Common Stock rises above $5.00 per share, if ever, trading
in our Common Stock is subject to the penny stock rules of the Exchange Act
specified in rules 15g-1 through 15g-10. Those rules require broker-dealers,
before effecting transactions in any penny stock, to:
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Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
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·
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Disclose
certain price information about the
stock;
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·
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Disclose
the amount of compensation received by the broker-dealer or any associated
person of the broker-dealer;
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Send
monthly statements to customers with market and price information about
the penny stock; and,
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·
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In
some circumstances, approve the purchaser's account under certain
standards and deliver written statements to the customer with information
specified in the rules.
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Consequently,
the penny stock rules may restrict the ability or willingness of broker-dealers
to sell our Common Stock and may affect the ability of holders to sell their
Common Stock in the secondary market and the price at which such holders can
sell any such securities. These additional procedures could also limit our
ability to raise additional capital in the future.
The
foregoing list is not exhaustive. There can be no assurance that we have
correctly identified and appropriately assessed all factors affecting our
business or that the publicly available and other information with respect to
these matters is complete and correct. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial also may
adversely impact us. Should any risks and uncertainties develop into actual
events, these developments could have material adverse effects on our business,
financial condition and results of operations. For these reasons, the reader is
cautioned not to place undue reliance on our forward-looking
statements.
This
Prospectus relates to shares of our Common Stock that may be offered and sold
from time to time by the Selling Stockholders. Any proceeds from CDS
we receive for sale of the Series A Preferred Stock under the Purchase Agreement
will be used for working capital and marketing expenses. In connection with
entering into the Purchase Agreement, we received a cash payment of $1,500,000
and cancelled two outstanding notes issued to CDF totaling $500,000. We may in
the future receive up to $1,000,000 if we sell any additional Series A Preferred
Stock to CDS pursuant to the Purchase Agreement. We will not receive
any proceeds from the sale of the common stock being offered by the Selling
Shareholders under this prospectus.
Each
Selling Stockholder will determine at what price they may sell the offered
shares, and such sales may be at fixed prices, at prevailing market prices at
the time of sale, at prices related to the prevailing market price, at varying
prices determined at the time of sale or at negotiated prices.
General
On August
8, 2008, we entered into the Purchase Agreement with CDS Ventures of South
Florida, LLC, a Florida limited liability company. Under the Purchase
Agreement, CDS purchased 2,000 shares of Series A Preferred Stock and the right
to purchase up to an additional 1,000 shares of Series A Preferred Stock, for an
aggregate purchase price of $2,000,000 (two million dollars). The
purchase of any part of the additional 1,000 shares of Series A Preferred Stock
will have a consideration of $1,000 per share of Series A Preferred Stock. The
face amount of each share is $1,000. The Preferred Stock accrues ten percent
dividend annually. The dividend is paid in additional Preferred
Stock.
The
Series A Preferred Stock matures on February 1, 2013 and at CDS’s election can
be converted to Common Stock by dividing the aggregate preference liquidation
value by the conversion price then in effect. During the 200 days immediately
following the date on which the Certificate of Designation is effective with the
Nevada Secretary of State the conversion price shall be $0.08 per share of
common stock. Thereafter, the conversion price means the greater of
(i) 90% of the average of the prior ten days volume weighted average price of
the Common Stock to the conversion date and (ii) $0.08 (eight cents) as
appropriately adjusted for stock splits, stock dividends and similar
events.
The
Company can at any time after July 1, 2010, redeem the Preferred Stock, by
paying in cash 104% of the aggregate liquidation preference. The early
redemption can only take place after a sixty day notice period, during which
period CDS can convert the Preferred Stock for Common Stock using the then
applicable conversion price.
Events
of Default
CDS may
terminate the Purchase Agreement without any liability or payment to the Company
upon the occurrence of any of the following events of default:
(i) any
representation or warranty of the Company set forth in the Purchase Agreement
was not true and correct in all material respects as of the date when
made;
(ii) the
Company fails at any time to comply with or perform in all material respects all
of the agreements, obligations, covenants and conditions set forth in Section 5
of the Purchase Agreement or any other provision of the certificate of
designation that are required to be complied with or performed by it, and such
failure is not cured within five (5) Business Days from the date on which CDS
delivers written notice thereof to the Company; or
(iii) a
Change of Control, as defined in the Purchase Agreement.
Effect
of Performance of the Purchase Agreement on Our Stockholders
All
46,875,000 shares to be issued pursuant to the Purchase Agreement to CDS and the
11,184,016 shares of Common Stock CDF previously owned being registered in this
offering are expected to be freely tradable. The sale by CDS or CDF
of a significant amount of shares registered in this offering at any given time
could cause the market price of our Common Stock to decline and to be highly
volatile.
Registration
Rights Agreement
In
connection with the Purchase Agreement, we entered into the Registration
Agreement with CDS pursuant to which we were obligated to file a registration
statement with the SEC covering the shares of Common Stock underlying the
Purchase Agreement and the shares CDF previously owned. In addition, we are
obligated to use our best efforts to have the registration statement or
amendment declared effective by the SEC at the earliest possible date and
reasonable best efforts to keep the registration statement effective until the
all such shares held by CDS are freely saleable pursuant to Rule 144(k) of the
Securities Act of 1933, as amended.
Beneficial
Ownership
The
following table presents information regarding our Selling Stockholders who
intends to sell up to 58,059,016 shares of our Common Stock. A
description Selling Stockholders’ relationship to the Company and how the
Selling Stockholders acquired or will acquire shares to be sold in this offering
is detailed in the information immediately following this table.
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Selling
Stockholders
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Shares
Beneficially Owned Before Offering
|
Percentage
of Outstanding Shares Beneficially Owned Before Offering(1)
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Shares
To Be Sold In The Offering
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Percentage
of Outstanding Shares Beneficially Owned After The
Offering
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||||||||||||
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CD
Financial LLC
|
11,184,016 | (2) |
8.2
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% | 11,184,016 |
0
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% | |||||||||
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CDS
Ventures of South Florida, LLC
|
46,875,000 | (3) |
25.5
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% | 46,875,000 |
0
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% | |||||||||
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Totals:
|
58,059,016 |
31.6
|
% | 58,059,016 |
0
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% | ||||||||||
(1)
Applicable percentage of ownership is based on 136,793,431 shares of our Common
Stock outstanding as of August 27, 2008, together with securities exercisable or
convertible into shares of Common Stock within sixty (60) days of August 27,
2008 for the Selling Stockholders. Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Shares of Common Stock
are deemed to be beneficially owned by the person holding such securities for
the purpose of computing the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person. Note that affiliates are subject to Rule 144 and
insider trading regulations, percentage computation is for form purposes
only.
(2) As of
the date hereof 11,184,016 shares of our Common Stock have been acquired by CDF
previously when they converted a note for $750,000 to shares on June 10,
2008.
(3) As of
the date hereof 2,000 shares of Series A Preferred Stock have been acquired by
CDS, and can be converted into 25,000,000 shares of Common Stock. CDS can until
July 10, 2010 acquire additional 1,000 shares of Series A Preferred Stock that
potentially can be converted into 12,500,000 shares of Common Stock. In addition
the Series A Preferred Stock accrues dividend of 10 percent per
annum.
The
following information contains a description of the Selling Stockholders’
relationship to us and how the Selling Stockholders acquired the shares to be
sold in this offering is detailed below. None of the Selling Stockholders have
held a position or office, or had any other material relationship, with us,
except as follows:
CDS Ventures of
South Florida, LLC. On August 8, 2008, we entered into
the Purchase Agreement with CDS pursuant to which CDS purchased 2,000 shares of
Series A Preferred Stock and the right to purchase up to an additional 1,000
shares of Series A Preferred Stock, for an aggregate purchase price of
$2,000,000 (the “Purchase Price”). The purchase of any part of the
additional 1,000 shares of Series A Preferred Stock (the “Additional Shares”)
will have a consideration of $1,000 per share of Series A Preferred
Stock.
CD Financial,
LLC. On June 10, 2008, CDF acquired 11,184,016 shares of
the Company’s Common Stock by converting a $750,000 convertible note into shares
of common stock. The $750,000 note originated from an initial loan to the
Company on December 18, 2007 for $250,000 and an additional loan of $500,000 on
April 5, 2008.
Mr. Carl
DeSantis, one of the principals of CDS, is deemed to be beneficial owners of 98
percent of the shares of Common Stock owned by CDS. Messrs. Carl
DeSantis and William Milmoe have shared voting and disposition power over the
shares being offered under this Prospectus. See the Section herein
entitled “The CDS Transaction” for more information on the Purchase Agreement
and on the Selling Stockholders.
Mr. Carl
DeSantis, the principal of CDF, is deemed to be beneficial owners of all of the
shares of Common Stock owned by CDF. Messrs. Carl DeSantis and
William Milmoe have shared voting and disposition power over the shares being
offered under this Prospectus.
Resales
by Selling Stockholders
We are
registering the resale of the shares on behalf of the Selling Stockholders. The
Selling Stockholders may offer and resell the shares from time to time, either
in increments or in a single transaction. They may also decide not to sell all
the shares they are allowed to resell under this prospectus. The Selling
Stockholders will act independently of us in making decisions with respect to
the timing, manner, and size of each sale.
Donees
and Pledgees
The term
“Selling Stockholders” includes donees, i.e., persons who receive
shares from a Selling Stockholder after the date of this prospectus by gift. The
term also includes pledgee,
i.e., persons who, upon contractual default by a Selling Stockholder, may
seize shares which such Selling Stockholder pledged to such person. If a Selling
Stockholder notifies us that a donee or pledge intends to sell more than 500
shares, we will file a supplement to this prospectus.
Costs
and commissions
We will
pay all costs, expenses, and fees in connection with the registration of the
shares. The Selling Stockholders will pay all brokerage commissions and similar
selling expenses, if any, attributable to the sale of shares.
Types
of sale transactions
The
Selling Stockholders may sell the shares in one or more types of transactions
(which may include block transactions):
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in
the over-the-counter market, when our common stock is quoted on the
Over-The Counter Bulletin Board;
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in
negotiated transactions;
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·
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through
put or call option transactions;
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·
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through
short sales; or
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·
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any
combination of such methods of
sale.
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The
Selling Stockholders may sell shares under this prospectus at market prices
prevailing at the time of sale or at negotiated prices. Such transactions may or
may not involve brokers or dealers. The Selling Stockholders have informed us
that they have not entered into any agreements, understandings, or arrangements
with any underwriters or broker-dealers regarding sale of the shares. The
Selling Stockholders have also informed us that no one is acting as underwriter
or coordinating broker in connection with the proposed sale of
shares.
Sales
to or through broker-dealers
The
Selling Stockholders may conduct such transactions either by selling shares
directly to purchasers, or by selling shares to, or through, broker-dealers. Any
such broker-dealer may act either as an agent of a Selling Stockholder, or as a
principal for the broker-dealer’s own account. Any such broker-dealer may
receive compensation in the form of discounts, concessions, or commissions from
a Selling Stockholders and/or the purchasers of shares. This compensation may be
received both if the broker-dealer acts as an agent or as a principal. This
compensation might also exceed customary commissions.
Deemed
underwriting compensation
The
Selling Stockholders and any broker-dealers that act in connection with the sale
of shares might be deemed to be “underwriters” within the meaning of Section
2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”). Any
commissions received by such broker-dealers, and any profit on the resale of
shares sold by them while acting as principals, could be deemed to be
underwriting discounts or commissions under the Securities Act.
Indemnification
The
Selling Stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of shares against certain
liabilities, including liabilities arising under the Securities
Act.
Prospectus
delivery requirements
Because
they may be deemed underwriters, any Selling Stockholder must deliver this
prospectus and any supplements to this prospectus in the manner required by the
Securities Act.
State
requirements
Some
states require that any shares sold in that state only be sold through
registered or licensed brokers or dealers. In addition, some states require that
the shares have been registered or qualified for sale in that state, or that
there exist an exemption from the registration or qualification requirement and
that the exemption has been complied with.
Sales
under Rule 144
The
Selling Stockholders may also resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 promulgated under the Securities
Act. To do so, the Selling Stockholders must meet the criteria and conform to
the requirements of Rule 144 currently in effect.
Distribution
arrangements with broker-dealers
If a
Selling Stockholder notifies us that any material arrangement has been entered
into with a broker-dealer for the sale of shares through:
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a
block trade;
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special
offering;
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·
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exchange
distribution or secondary distribution;
or
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a
purchase by a broker or dealer,
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we will
then file, if required, a post-effective amendment to this
prospectus.
The
post-effective amendment will disclose:
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the
name of the Selling Stockholder and of the participating
broker-dealer(s);
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the
number of shares involved;
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the
price at which such shares were
sold;
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the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
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that
such broker-dealer(s) did not conduct any investigation to verify the
information in this prospectus; and
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·
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any
other facts material to the
transaction.
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The
Securities and Exchange Commission may deem the Selling Stockholder and any
underwriters, broker-dealers or agents that participate in the distribution of
the common shares to be “underwriters” within the meaning of the Securities Act.
The Securities and Exchange Commission may deem any profits on the resale of our
common shares and any compensation received by any underwriter, broker-dealer or
agent to be underwriting discounts and commissions under the Securities Act. The
Selling Stockholder has purchased the common shares in the ordinary course of
its business, and at the time the Selling Stockholder purchased the common
shares, it was not a party to any agreement or other understanding to distribute
the securities, directly or indirectly.
Under the
Securities Exchange Act of 1934, any person engaged in the distribution of the
common shares may not simultaneously engage in market-making activities with
respect to the common shares for five business days prior to the start of the
distribution. In addition, the selling stockholder and any other person
participating in a distribution will be subject to the Securities Exchange Act
of 1934, which may limit the timing of purchases and sales of common shares by
the selling stockholder or any such other person.
This
offering will terminate on the date that all shares offered by this Prospectus
have been sold by the Selling Stockholders.
General
Our authorized capital stock consists
of 350,000,000 shares of Common Stock at a par value of $0.001 per share and
50,000,000 shares of preferred stock at a par value of $0.001 per share. There
are no provisions in our charter or by-laws that would delay, defer or prevent a
change in our control.
Common
Stock
As of
August 27, 2008, 136,793,431 shares of Common Stock are issued and outstanding
and held by approximately 5,000 stockholders. The prospectus relates to the sale
of 58,059,016 shares of our Common Stock.
Holders
of our Common Stock are entitled to one vote for each share on all matters
submitted to a stockholder vote. Holders of Common Stock do
not have cumulative voting rights. Therefore, holders of a
majority of the shares of Common Stock voting for the election of directors can
elect all of the directors. Holders of our Common Stock representing a majority
of the voting power of our capital stock issued and outstanding and entitled to
vote, represented in person or by proxy, are necessary to constitute a quorum at
any meeting of our stockholders. A vote by the holders of a majority of our
outstanding shares is required to effectuate certain fundamental corporate
changes such as liquidation, merger or an amendment to our Articles of
Incorporation.
Although
there are no provisions in our charter or by-laws that may delay, defer or
prevent a change in control, we are authorized, without stockholder approval, to
issue shares of preferred stock that may contain rights or restrictions that
could have this effect.
Holders
of Common Stock are entitled to share in all dividends that the Board, in its
discretion, declares from legally available funds. In the event of liquidation,
dissolution or winding up, each outstanding share entitles its holder to
participate pro rata in all assets that remain after payment of liabilities and
after providing for each class of stock, if any, having preference over the
Common Stock. Holders of our Common Stock have no pre-emptive rights, no
conversion rights and there are no redemption provisions applicable to our
Common Stock.
Preferred
Stock
The
Company is authorized to issue up to 50,000,000 shares of preferred stock,
$0.001 par value per share (the “Preferred Stock”). Dividends on the Preferred
Stock may be declared from time to time by the Board. The Preferred Shares are
entitled to a preference over holders of the Company’s Common Stock equal to the
par value of the shares of Preferred Stock held, plus any unpaid dividends
declared. As of August 27, 2008, 2,000 shares of Series A Preferred Stock had
been issued, each with a face value of $1,000.
Each
share of Series A Preferred Stock has the same voting rights as the shares of
Common Stock into which it may be converted determined in accordance with the
conversion price then in effect.
Dividends
We have
never declared or paid any cash dividends on shares of our capital stock. We
currently intend to retain earnings, if any, to fund the development and growth
of our business and do not anticipate paying cash dividends in the foreseeable
future. Our payment of any future dividends will be at the discretion of our
Board after taking into account various factors, including our financial
condition, operating results, cash needs and growth plans.
The
Series A Preferred Stock accrues dividends on the stated share value at an
annual rate of ten percent. Dividends on the Series A Preferred Stock
are payable annually on the last business day of each fiscal year of the Company
in additional shares of Series A Preferred Stock.
Except
for Baritz & Colman LLP, no expert or counsel named in this Prospectus as
having prepared or certified any part of this Prospectus or having given an
opinion upon the validity of the securities being registered or upon other legal
matters in connection with the registration or offering of the Common Stock was
employed on a contingency basis, or had, or is to receive, in connection with
the offering, a substantial interest, direct or indirect, in the registrant or
any of its parents or subsidiaries. Nor was any such person connected with the
registrant or any of its parents or subsidiaries as a promoter, managing or
principal underwriter, voting trustee, director, officer, or
employee.
The
consolidated financial statements for the year ended December 31, 2007,
consisting of our balance sheet as of December 31, 2007, statements of
operations, statements of changes in stockholders’ deficit and statements of
cash flows for the years ended December 31, 2007 and 2006, included in this
Prospectus and the registration statement have been audited by Sherb & Co.,
LLP, independent registered public accounting firm, to the extent and for the
periods set forth in their report (which describes an uncertainty
as to going concern) appearing elsewhere herein and in the registration
statement, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
Celsius
Holdings, Inc. was incorporated under the laws of the State of Nevada on April
26, 2005. The Company was formed to engage in the acquisition,
exploration and development of natural resource properties. On December 26, 2006
the Company amended its Articles of Incorporation to change its name from Vector
Ventures Corp. as well as increase the authorized shares to 350,000,000, $0.001
par value common shares and 50,000,000, $0.001 par value preferred
shares.
Prior to
January 26, 2007, the Company was in the exploration stage with its activities
limited to capital formation, organization, development of its business plan and
acquisition of mining claims. On January 24, 2007, the Company
entered into a merger agreement and plan of reorganization with Celsius, Inc., a
Nevada corporation and wholly-owned subsidiary of the Company (“Sub”), Elite FX,
Inc., a Florida corporation, and Stephen C. Haley, the “Indemnifying Officer”
and “Securityholder Agent” of Elite, (the “Merger Agreement”). Under the terms
of the Merger Agreement Elite was merged into Sub and became a wholly-owned
subsidiary of the Company on January 26, 2007 (the “Merger”).
Under the
terms of the Merger Agreement, the Company issued:
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·
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70,912,246
shares of the Common Stock to the stockholders of Elite, including
1,337,246 shares of Common Stock issued as compensation, as full
consideration for the shares of
Elite;
|
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·
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warrants
to Investa Capital Partners Inc. to purchase 3,557,812 shares of Common
Stock for $500,000. The warrants were exercised in February
2007;
|
|
·
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1,391,500
shares of its Common Stock as partial consideration for
termination of a consulting agreement and assignment of certain trademark
rights to the name “Celsius”;
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·
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options
to purchase 10,647,025 shares of Common Stock in substitution for the
options then outstanding in Elite;
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·
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1,300,000
shares of the Common Stock concurrent with the Merger in a
private placement to non-US resident investors for aggregate consideration
of $650,000, which included the conversion of a $250,000 loan to the
Company.
|
Celsius
Holdings, Inc (f/k/a Vector Ventures Corp.) majority stockholder, Mr. Kristian
Kostovski, cancelled 7,200,000 shares of our Common Stock held by him shortly
after the close of the Merger Agreement.
As a
result of the Merger Agreement, Mr. Kostovski resigned as chief executive
officer, chief financial officer, president, secretary, and treasurer of the
Company and appointed Mr. Stephen C. Haley as Chief Executive Officer,
President, and Chairman of the Board and Mr. Jan Norelid, Mr. Richard McGee and
Ms. Janice Haley was appointed Chief Financial Officer, Chief Operating Officer,
and Vice President of Marketing of the Company, respectively, effective as of
the closing of the Merger, January 26, 2007.
Mr.
Kostovski also resigned as a director of the Company and appointed Messrs.
Stephen C. Haley, Jan Norelid, James Cast, and Greg Horn as the new directors of
the Company.
On
February 9, 2007 Investa Capital Corp. exercised its warrants to purchase
3,557,812 shares of Common Stock for an aggregate consideration of $500,000 in
cash.
Formation
The
Company was incorporated in the State of Nevada on April 26, 2005 under the name
“Vector Ventures Corp.” The Company changed its name to “Celsius Holdings, Inc.”
on December 26, 2006.
On
December 26, 2006, the Company completed a 4 for 1 forward split of its issued
and outstanding share capital.
We are a
holding company and carry on no operating business except through our direct
wholly owned subsidiaries, Celsius, Inc. and Celsius Netshipments, Inc. Celsius,
Inc. was incorporated in Nevada on January 18, 2007, and merged with Elite on
January 26, 2007, which was incorporated in Florida on April 22,
2004. Celsius Netshipments, Inc was incorporated in Florida on March
29, 2007. We expect Celsius and Celsius Netshipments will generate substantially
all of our operating revenue and expenses.
The
Company has not been involved in any bankruptcy, receivership or similar
proceeding nor has there been any material reclassification or merger,
consolidation or purchase or sale of a significant amount of assets not in the
ordinary course of business.
Historical
Information
The
Company was formed as an exploration stage company, meaning we were formed to
engage in the search for mineral deposits (reserves) which are not in either the
development or production stage. We issued 2,000,000 units (8,000,000
post split units) to thirty-five (35) unrelated Stockholders for cash valued at
$0.05 per unit pursuant to our SB-2 offering which closed on March 30, 2006.
Each unit consisted of four shares and eight (8) share purchase warrants after
taking into account the forward split of the Company completed on December 26,
2006. Each share purchase warrant is valid for a period of two years from the
date of the Prospectus, expiring on January 20, 2008 and is exercisable at a
price of $0.025 per share taking into account the forward split. All
warrants issued have since been exercised as of January 26, 2007.
Once we
obtained funding under our March 30, 2006 SB-2 offering we began Phase I
exploration on our one property in the Company's portfolio, the One Gun Project,
consisting of 9 unit mineral claims having a total surface area of approximately
473 acres. On October 23, 2006 we received the results of the initial campaign
and though these were generally poor, the Dollar Ext Zone was located and good
geological information was gained.
Given
there was a strong possibility that the One Gun Project claims do not
contain any reserves we began to look at other potential mineral properties to
explore or other possible business opportunities. The Company began
seriously looking at other opportunities in the fall of 2006 which resulted in
us arranging capital through a loan to make a bridge loan to Elite in November
2006.
On
January 24, 2006, we entered into the Merger Agreement and plan of
reorganization with Celsius, Inc, Elite and Stephen C. Haley, the “Indemnifying
Officer” and “Securityholder Agent” of Elite pursuant to which Elite was merged
into Celsius, Inc. and became a wholly-owned subsidiary of the Company on
January 26, 2007.
As of
closing the Merger Agreement, we have changed our business to the business of
Elite and have ceased to be an exploration stage company.
Current
Business of our Company
We
operate in United States through our wholly-owned subsidiaries, Celsius Inc.,
which acquired the operating business of Elite FX, Inc. (“Elite”) through a
reverse merger on January 26, 2007, and Celsius Netshipments,
Inc. Celsius, Inc. is in the business of developing and marketing
healthier functional beverages in the functional beverage category of the
beverage industry. Celsius was Elite’s first commercially available
product. Celsius is a sparkling beverage that burns calories. Celsius is
currently available in five flavors: cola, ginger ale, lemon/lime, orange and
wild berry. Two new flavors will be introduced in September, 2008, green teas
with the flavor of peach/mango and raspberry/acai. Celsius
Netshipments, Inc., incorporated in Florida on March 29, 2007, distributes the
Celsius beverage via the internet. Our focus is on increasing sales of our
existing products.
We are
using Celsius as a means to attract and sign up direct-store-delivery (“DSD”)
distributors across the US. DSD beverage distributors are
wholesalers/distributors that purchase product, store it in their warehouse and
then using their own trucks sell and deliver the product direct to retailers and
their store shelves or cooler doors. During this process they make sure that the
product is properly placed on the shelves, the invoicing and collection process
is managed and local personnel are trained. Most retailers prefer this method to
get beverages to their stores. One alternative to DSD is brokers, who supply
many different types of products to the retailer chains or independent
retailers. There are some retailers that prefer a different method called
direct-to-retailer (“DTR”). In this scenario, the retailer is buying direct from
the brand manufacturer and the product is delivered to the retailer’s
warehousing system. The retailer is then responsible to properly stock the
product and get it to the shelves. Our strategy is to cover the country with a
network of DSD distributors. This allows us to sell to retailer chains that
prefer this method and whose store locations span across distributor boundaries.
We believe that a strong DSD network gives us a path to get to the smaller
independent retailers who are too small to have their own warehousing and
distribution systems and thus can only get their beverages from distributors.
Our strategy of building a DSD network will not prohibit us from going DTR when
a retailer requests or requires it.
We have
currently signed up distributors in many of the larger markets in the US
(Detroit, Boston, South East Florida, Seattle, Los Angeles, etc). We expect that
it will take at least until 2009 before we have most of the United States
covered.
Our
experience has shown that it takes about two to three months to bring on a
distributor. From initial interest to actual purchase order and kick off or the
launch in that area, the steps include a physical meeting or two to explain the
brand, target markets and our marketing plans. As we add sales representatives,
we are able to do more of these activities at a time and speed up the
process.
Our
principal executive offices are located at 140 NE 4th Avenue, Delray Beach, FL
33483. Our telephone number is (561) 276-2239 and our website is http://www.celsius.com. The
information contained on our web site does not constitute part of, nor is it
incorporated by reference into, this Prospectus.
Industry
Overview
The
functional beverage market includes a wide variety of beverages with one or more
added ingredients to satisfy a physical or functional
need. This category includes the five fastest-growing segments
of the functional beverage market: herb-enhanced fruit drinks, ready-to-drink
(RTD) teas, sports drinks, energy drinks, and single-serve (SS) fresh
juice.
Our
Products
In 2005,
Elite introduced Celsius to the beverage marketplace and it is our first
product. Multiple clinical studies have shown that a single 12 ounce serving
raises metabolism over a 3 to 4 hour period. Quantitatively, the energy
expenditure was on average over 100 calories from a single serving.
It is our
belief that clinical studies proving product claims will become more important
as more and more beverages are marketed with functional claims. Celsius was one
of the first beverages to be launched along with a clinical study. Celsius is
also one of very few that has clinical research on the actual product. Some
beverage companies that do mention studies backing their claims are actually
referencing independent studies conducted on one or more of the ingredients in
the product. We believe that it is important and will become more important to
have studies on the actual product.
Two
different research organizations have statistically proven the Celsius calorie
burning capability in four clinical studies. This product line, which
is referred to as our “core brand”, competes in the “functional beverage”
segment of the beverage marketplace with distinctive flavors and
packaging. A functional beverage is a beverage containing one or more
added ingredients intended to satisfy a physical or functional need, which often
carries a unique and sophisticated imagery and a premium price tag. This segment
includes herb-enhanced fruit drinks, ready-to-drink (RTD) teas, sports drinks,
energy drinks, and single-serve (SS) fresh juice. By raising metabolism for the
extended period of three to four hours, Celsius provides a negative calorie
effect (burn more than you consume) as well as energy.
We
currently offer five flavors: cola, ginger ale, lemon/lime, orange and wild
berry. Two new flavors will be introduced in September, 2008, green teas with
the flavor of peach/mango and raspberry/acai. We have developed and
own the formula for this product including the flavoring. The formulation and
flavors for these products are produced under contract by concentrate
suppliers.
Celsius
is currently packaged in distinctive (12 fl oz) glass bottles with full-body
shrink-wrapped labels that are in vivid colors in abstract patterns and cover
the entire bottle to create a strong on-shelf impact. In April 2007,
we introduced Celsius in twelve ounce cans. The cans are sold in single units or
in packages of four. The graphics and clinically tested product are important
elements to Celsius and help justify the premium pricing of $1.99 per
bottle/can.
Clinical
Studies
We have
funded four U.S. based clinical studies for Celsius. Each conducted by research
organizations and each studied the total Celsius formula. The first study was
conducted by the Ohio Research Group of Exercise Science and Sports Nutrition.
The s second, third and fourth studies were conducted by the Applied
Biochemistry & Molecular Physiology Laboratory of the University of
Oklahoma. We entered into a contract with the University of Oklahoma to pay for
part of the cost of the clinical study. In addition, we provided Celsius
beverage for the studies and paid for the placebo beverage used in the studies.
None of our officers or directors is in any way affiliated with either of the
two research organizations.
The first
study was conducted by the Ohio Research Group of Exercise Science and Sports
Nutrition. The Ohio Research Group of Exercise Science & Sports Nutrition is
a multidisciplinary clinical research team dedicated to exploring the
relationship between exercise, nutrition, dietary supplements and health, www.ohioresearchgroup.com.
This placebo-controlled, double-blind cross-over study compared the effects of
Celsius and the placebo on metabolic rate. Twenty-two participants were randomly
assigned to ingest a twelve ounce serving of Celsius and on a separate day a
serving of twelve ounces of Diet Coke®. All
subjects completed both trials using a randomized, counterbalanced design.
Randomized means that subjects were selected for each group randomly to ensure
that the different treatments were statistically equivalent. Counterbalancing
means that individuals in one group drank the placebo on the first day and drank
Celsius on the second day. The other group did the opposite. Counterbalancing is
a design method that is used to control ‘order effects’. In other words, to make
sure the order that subjects were served does not impact the results and
analysis.
Metabolic
rate (via indirect calorimetry, measurements taken from breaths into and out of
calorimeter) and substrate oxidation (via respiratory exchange ratios) were
measured at baseline (pre-ingestion) and for 10 minutes at the end of each hour
for 3 hours post-ingestion. The results showed an average increase of metabolism
of twelve percent over the three hour period, compared to statistically
insignificant change for the control group. Metabolic
rate, or metabolism, is the rate at which the body expends energy. This is also
referred to as the “caloric burn rate”. Indirect calorimetry calculates heat
that living organisms produce from their production of carbon dioxide. It is
called “indirect” because the caloric burn rate is calculated from a measurement
of oxygen uptake. Direct calorimetry would involve the subject being placed
inside the calorimeter for the measurement to determine the heat being produced.
Respiratory Exchange Ratio is the ratio oxygen taken in a breath compared to the
carbon dioxide breathed out in one breath or exchange. Measuring this ratio can
be used for estimating which substrate (fuel such as carbohydrate or fat) is
being metabolized or ‘oxidized’ to supply the body with energy.
The
second study was conducted by the Applied Biochemistry & Molecular
Physiology Laboratory of University of Oklahoma. This blinded,
placebo-controlled study was conducted on a total of sixty men and women of
normal weight.
An equal
number of participants were separated into two groups to compare one serving
(12oz) of Celsius to a placebo of the same amount. According to the study, those
subjects consuming Celsius burned significantly more calories versus those
consuming the placebo, over a three hour period. The study confirmed that over
the three hour period, subjects consuming a single serving of Celsius burned
sixty-five percent more calories than those consuming the placebo beverage and
burned an average of more than one hundred calories compared to placebo. These
results were statistically significant.
The third
study, also conducted by the Applied Biochemistry & Molecular Physiology
Laboratory of University of Oklahoma, extended our second study with the same
group of sixty individuals and protocol for 28 days and showed the same
statistical significance of increased calorie burn (minimal attenuation). While
the University of Oklahoma study did extend for 28 days, more testing would be
needed for long term analysis of the Celsius calorie burning effects. Also,
these studies were on relatively small numbers of subjects, they have
statistically significant results. Additional studies on a larger number and
wider range of body compositions can be considered to further the
analysis.
Our
fourth study, also conducted by the Applied Biochemistry & Molecular
Physiology Laboratory of University of Oklahoma, combined Celsius with exercise.
This 10-week placebo-controlled, randomized and blinded study was conducted on a
total of 37 subjects. Participants were randomly assigned into one of two
groups: Group 1 consumed one serving of Celsius per day, and Group 2 consumed
one serving of an identically flavored and labeled placebo beverage. Both groups
participated in 10 weeks of combined aerobic and weight training, following the
American College of Sports Medicine guidelines of training for previously
sedentary adults. The results showed that consuming a single serving of Celsius
prior to exercising may enhance the positive adaptations of exercise on body
composition, cardio-respiratory fitness and endurance performance. The
researchers of the study presented its preliminary results at the annual meeting
of the International Society of Sports Nutrition in June 2008. According to the
presentation and abstract, subjects consuming a single serving of Celsius lost
significantly more fat mass and gained significantly more muscle mass than those
subjects consuming the placebo - a 93.8% greater loss in fat and 50% greater
gain in muscle mass, respectively. The study also confirmed that subjects
consuming Celsius significantly improved measures of cardio-respiratory fitness
and the ability to delay the onset of fatigue when exercising to
exhaustion.
Manufacture
and Supply of Our Products
Our
products are produced by beverage co-packers. A co-packer is a manufacturing
plant that provides the service of filling bottles or cans for the brand owner.
We believe the benefit of using co-packer is we do not have to invest in the
production facility and can focus our resources on brand development, sales and
marketing. It also allows us produce in multiple locations strategically placed
throughout the country. Currently our products are produced in Mooresville,
North Carolina, and Monroe, Wisconsin. We usually produce about 25,000 cases (24
units per case) of Celsius in a production run. We supply all the ingredients
and packaging materials. The co-pack facility assembles our products and charges
us a fee, by the case. We follow a “fill as needed” manufacturing model to the
best of our ability and we have no significant backlog of orders. The shelf life
of the Celsius is specified as 14 months for both cans and bottles.
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. Generally, we obtain the ingredients used in our products from
domestic suppliers and each ingredient has several reliable suppliers. The
ingredients in the Celsius Beverage include Green Tea (EGCG), Ginger (from the
root), Caffeine, B-Vitamins, Vitamin C, Taurine, Guarana, Chromium, Calcium,
Glucuronolactone and Sucralose, and Celsius is packaged using a supplements
facts panel. We have no major supply contracts with any of our suppliers. As a
general policy, we pick ingredients in the development of our products that have
multiple suppliers and are common ingredients. This provides a level of
protection against a major supply constriction or calamity.
We
believe that if we grow, we will be able to keep up with increased production
demands. We believe that our current co-packing arrangement has the capacity to
handle increased business we may face in the next twelve (12) months. To the
extent that any significant increase in business requires us to supplement or
substitute our current co-packer, we believe that there are readily available
alternatives, so that there would not be a significant delay or interruption in
fulfilling orders and delivery of our products. In addition, we do not believe
that growth will result in any significant difficulty or delay in obtaining raw
materials, ingredients or finished product.
Our
Primary Markets
We target
a niche in the soft drink industry known as functional beverages. The soft drink
industry generally characterizes beverages as being made with nutritional and
mineral additives, with upscale packaging, and often creating and utilizing new
and unique flavors and flavor combinations.
Celsius
is ultimately sold across many retail segments or channels. We group the
grocery, convenience, drug, mass and club channel into one group as major
channels. We classify health clubs, spas, gyms etc as our Health and Fitness
channel. We are expanding our distribution into each channel. We reach these
channels through sales to DSD distributors or brokers, who in turn sell to
different channels or through sales to DTR customers. We cannot accurately
estimate how much is sold in each channel, because the sales information comes
through our DSD distributors’ sales information, and each one may or may not
utilize the same sales channel classification as we do.
Distribution,
Sales and Marketing
Our
predecessor Elite initiated a grassroots marketing strategy to launch Celsius in
2005. This marketing strategy leveraged the significant media
interest in the results of the clinical trial which confirmed the product’s
functional benefit. Celsius was subsequently unveiled at the
International Society for Sports Nutrition (ISSN) annual scientific symposium in
June of 2005. Media interest in the category-creating positioning and
clinical proof generated national coverage. Over 200 TV news stations aired over
800 segments highlighting Celsius, as well as articles in a multitude of news
papers and magazines and their websites.
Once
initial distribution was achieved in the southeastern United States, a top-tier
branding agency was retained to develop a comprehensive integrated marketing
communications program for use in regional and national
roll-out. These materials included Point of Sale graphics,
billboards, print advertising layouts, coupon graphics, radio scripts and other
creative components. Over time the point of sale materials have evolved and
changed with input from employees and outside consultants. All of these are not
used in every market but provide a good foundation of promotional materials as
we do launch in a specific area or with a specific distributor.
Celsius
and the Beverage Supply Chain
Consumers
buy their beverages in various ways. Most beverages are purchased at retailers
which can be segmented by type of store such as grocery, drug, convenience/gas,
mass and club. Some health focused beverages can be purchased in gyms, health
clubs and spas. Some beverages are purchased from vending machines and some
consumers order beverages over the internet to be delivered to their homes or
offices.
Celsius
is a brand that can sell through all of these channels and we are doing so now
in the US. We intend to grow our volumes through each channel through various
means. We classify the channels into four sub-groups, Major Channel (grocery,
drub, convenience, club and mass), Health & Fitness (gyms, health clubs,
etc), Vending and Internet Sales. If we grow our distribution network, we
believe the largest percentage of sales will come from the major
channels.
In the
future we will sell Celsius internationally and will group those sales in two
large groups, export (an importer buys the product and resells it) and license
(a bottler will license the rights to produce locally and then they will sell
and distribute in their respective countries.) In the immediate future we are
focused on the US market.
Selling
to and Growing the DSD Distribution Network
We are
currently marketing to distributors using a number of marketing strategies,
including direct solicitation, telemarketing, trade advertising and trade show
exhibition. These distributors include established distributors of other
beverages such as beer, energy drinks, soft drinks, water and ready to drink
teas. Our distributors sell our products directly to retail chains, convenience
stores, drugstores and mainstream supermarkets for sale to the public. We
maintain direct contact with the distributors through our in-house sales
managers. In limited markets, where the use of our direct sales managers is not
cost-effective, we utilize food brokers and outside
representatives. A DSD distributor will have a defined territory
(usually determined by a set of counties). In many cases we will work
with the distributor under a contractual arrangement. For the right to sell
Celsius in their territory, they agree to certain duties of which one is a
quarterly or yearly minimum of sales.
Distributors
sell to the stores in their area. In many cases, the distributor services a
chain of retail stores that have a corporate office or buying office that is
outside their territory. We make the calls on those stores either on our own or
through the neighboring distributor that does have the buying office in their
territory. See Selling to Retail Stores for more detail.
Selling
to Retail Stores
We are
currently marketing to retail stores by utilizing trade shows, trade
advertising, telemarketing, direct mail pieces and direct contact with retailers
we believe would be interested our products. Our regional sales managers,
working with our National Accounts personnel, will make sales calls to and meet
with the buyers of these larger chains.
Our
strategy is for the chain to be serviced by our DSD distributors or by brokers.
Examples of major retail chains that carry Celsius and get their product through
our DSD distributors include: Hannafords (Northeast), Walgreens (Georgia,
Michigan and Ohio), Meijers (Michigan), QFC (Washington) and through brokers
include Walgreens (Florida). In some cases, the retailers are so large that they
have established their own distribution and warehousing systems and in these
cases we will sell DTR. Examples of these are Vitamin Shoppes (across United
States), Krogers, and Raley’s (California).
Vending
We
believe that vending is a way to not only get Celsius into the hands of more
consumers, in addition, when the machines are labeled or branded with our
graphics; they become great promotional signage to help build awareness. The
vending operators will buy Celsius either from our DSD distributors or vending
distributors strategically located across the US.
Sales
Direct to Consumers (Internet Sales)
Consumers
are able to purchase Celsius directly from our website. We have customers that
choose this method of purchase and delivery in all 48 contiguous states and a
few sales in Hawaii and Alaska. We are not focused on building this channel but
it helps us build brand awareness in areas that do not have strong retailer or
distributor presence yet.
Marketing
to Consumers
Advertising. We intend to
utilize several marketing strategies to market directly to consumers.
Advertising in targeted consumer magazines such aimed at consumers interested in
weight loss, diet and fitness, in-store discounts on the products, in-store
product demonstration, street corner sampling, coupon advertising, consumer
trade shows, event sponsoring and our website http://www.celsius.com are
all among consumer-direct marketing devices we intend to utilize in the
future.
In-Store Displays. As part of
our marketing efforts, we intend to offer in-store displays in key markets. We
also believe that our unique packaging is an important part of making successful
products.
Seasonality
of Sales
Sales of
our beverages are seasonal, with the highest sales volumes generally occurring
in the second and third fiscal quarters, which correspond to the warmer months
of the year in our major markets.
Competition
Our
products compete broadly with all beverages available to consumers. The beverage
market is highly competitive, and includes international, national, regional and
local producers and distributors, many of whom have greater financial,
management and other resources than us.
Our
direct competitors in the functional beverage market include but are not limited
to The Coca-Cola Company, Cadbury Schweppes, PepsiCo, Inc., Nestlé, Waters North
America, Inc., Hansen Natural Corp., Red Bull and Glaceau.
While we
believe that we offer a unique product which will be able to compete favorably
in this marketplace, the expansion of competitors in the functional beverage
market, along with the expansion of our competitor’s products, many of whom have
substantially greater marketing, cash, distribution, technical and other
resources than we do, may impact our products ultimate sales to distributors and
consumers.
Proprietary
Rights
In
connection with our acquisition of the business of Elite, we, through our wholly
owned subsidiary Celsius, Inc., have acquired the Celsius® trademark, which is
registered in the United States.
We will
continue to take appropriate measures, such as entering into confidentiality
agreements with our contract packers and exclusivity agreements with our flavor
houses, to maintain the secrecy and proprietary nature of our flavor
concentrates. We consider our trademarks and flavor concentrate 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.
Research
and Development
Throughout
2008, the Company will focus its full efforts on Celsius, limiting new product
development to flavor line extensions of this high-potential
brand. Two new flavors, peach/mango and raspberry/acai, were recently
developed and is being launched September 2008.
Beyond
2008, we intend to target development and launch one high-potential new product
per year. We followed a detailed process to identify, qualify and
develop Celsius. As our distribution network increases, we are beginning the
process for the next brand that we plan to launch into the distribution network.
Last year, we hired a R&D professional to work full time on this process,
however, due to budget restrictions, we had to utilize her expertise in other
areas, such as marketing and quality control.
The
objective is to allow the majority of the Company to stay focused on the current
product, Celsius, and the distribution expansion while insuring that there will
be additional follow on brands.
Government
Regulation
The
production, distribution and sale of our products in the United States is
subject to the Federal Food,
Drug and Cosmetic Act, the Dietary Supplement Health and
Education Act of 1994, the Occupational Safety and Health
Act, various environmental statutes and various other federal, state and
local statutes and regulations applicable to the production, transportation,
sale, safety, advertising, labeling and ingredients of such products. California
law requires that a specific warning appear on any product that contains a
component listed by California as having been found to cause cancer or birth
defects. The law exposes all food and beverage producers to the possibility of
having to provide warnings on their products because the law recognizes no
generally applicable quantitative thresholds below which a warning is not
required. Consequently, even trace amounts of listed components can expose
affected products to the prospect of warning labels. Products containing listed
substances that occur naturally in the product or that are contributed to the
product solely by a municipal water supply are generally exempt from the warning
requirement. While none of our products are required to display warnings under
this law, we cannot predict whether an important component of any of our
products might be added to the California list in the future. We also are unable
to predict whether or to what extent a warning under this law would have an
impact on costs or sales of our products.
Measures
have been enacted in various localities and states that require that a deposit
be charged for certain non-refillable beverage containers. The precise
requirements imposed by these measures vary. Other deposit, recycling or product
stewardship proposals have been introduced in certain states and localities and
in Congress, and we anticipate that similar legislation or regulations may be
proposed in the future at the local, state and federal levels, both in the
United States and elsewhere.
Our
facilities in the United States are subject to federal, state and local
environmental laws and regulations. Compliance with these provisions has not
had, and we do not expect such compliance to have, any material adverse effect
upon our capital expenditures, net income or competitive position.
Environmental
Matters
Based on
our current operations, environmental protection requirements do not have a
significant financial and operational effect on the capital expenditures,
earnings and competitive position of our company in the current financial year
and are not expected to have a significant effect in the reasonably foreseeable
future.
Employees
As of
July 31, 2008, we employed a total of twenty employees on a full-time basis. Of
our twenty employees, we employ four in administrative capacities and sixteen
persons in sales and marketing capacities. We have not experienced any work
stoppages. We have not entered into any collective bargaining agreements. We
consider our relations with employees to be good. We also contract with a number
of persons independently, who at time to time will work for us at events and
samplings.
Our
executive offices are located at 140 NE 4th Avenue, Suite C and A, Delray Beach,
FL 33483. We are currently being provided with space at this location by an
unrelated third party, pursuant to a twelve month lease for $6,717 per
month.
The
Company has no warehouses or other facilities. We produce our products through a
packing, or co-pack, facility in Monroe, Wisconsin for our bottles and in
Mooresville, North Carolina for our cans. We have approved three other
facilities for co-packing of bottles in New York, Tennessee and Oregon and
Tennessee for cans, but are not currently producing product at these
facilities.
We know of no material, active or pending legal proceedings against our Company, nor are we involved as a plaintiff in any
material proceeding or pending litigation. There are no proceedings in which any
of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party
or has a material interest adverse to our interest.
Market
Information
Our
Common Stock was first quoted on the Over-the-Counter Bulletin Board on
September 11, 2006, under the trading symbol “VCVC”. Our trading
symbol was changed on December 26, 2006 to “CSUH”. The following
quotations reflect the high and low bids for our Common Stock based on
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. The high and low bid prices for our common shares
(obtained from otcbb.com) for each full financial quarter since being quoted
were as follows:
|
Quarter Ended(1)
|
High
|
Low
|
|
June
30, 2008
|
$0.19
|
$0.08
|
|
March
31, 2008
|
$0.28
|
$0.10
|
|
December
31, 2007
|
$0.65
|
$0.13
|
|
September
30, 2007
|
$1.31
|
$0.47
|
|
June
30, 2007
|
$1.78
|
$0.62
|
|
March
31, 2007
|
$3.67
|
$1.20
|
|
December
31, 2006(2)
|
$0.602
|
$0.00
|
|
September
30, 2006
|
N/A
|
N/A
|
|
June
30, 2006
|
N/A
|
N/A
|
|
(1)
|
The
quotations above reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual
transactions.
|
|
|
(2)
|
The
Company was originally first quoted on the OTCBB on September 11,
2006.
|
Holders
of Our Common Stock
As of
August 27, 2008, we have approximately 40 stockholders of record. Our transfer
agent and registrar for our Common Stock is Interwest Transfer Company, Inc.,
1981 East Murray Holladay Road, Suite 100, Salt Lake City, UT 84117; Telephone
(801) 272-9294.
Dividends
The
Company has never declared nor paid any cash dividends on its capital stock and
does not anticipate paying cash dividends in the foreseeable future. The
Company’s current policy is to retain any earnings in order to finance the
expansion of its operations. The Board will determine future declaration and
payment of dividends, if any, in light of the then-current conditions they deem
relevant and in accordance with the Nevada Revised Statutes.
Recent
Sales of Unregistered Securities
On
January 24, 2007, the Company entered into a merger agreement and plan of
reorganization with Celsius, Inc., Elite and Stephen C. Haley, the “Indemnifying
Officer” and “Securityholder Agent” of Elite pursuant to which Elite was merged
into Celsius, Inc. and became a wholly-owned subsidiary of the Company on
January 26, 2007 (the “Merger”).
Under the
terms of the Merger Agreement, the Company issued:
|
·
|
70,912,246
shares of its Common Stock to the stockholders of Elite as full
consideration for the shares of
Elite;
|
|
·
|
1,391,500
shares of its Common Stock and a promissory note in the amount of
$250,000.00 to Specialty Nutrition Group, Inc. (“SNG”) as consideration
for termination of a consulting agreement and assignment of certain
trademark rights to the name “Celsius”. The note is non-interest bearing
and requires the Company to pay SNG $15,000 a month for eight (8) months
starting March 30, 2007 and a lump sum payment of $130,000 on November 30,
2007.
|
These
shares of our Common Stock and the note qualified for exemption under Section
4(2) of since the issuance shares by us did not involve a public offering. The
offerings were not “public offerings” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering, and
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares or notes to a high number of
investors. In addition, these stockholders and the note holder had and agreed to
the necessary investment intent as required by Section 4(2). Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act for these
transactions.
In
addition, under the terms of the Merger Agreement, the Company
issued:
|
·
|
warrants
to Investa Capital Partners Inc. representing 3,557,812 shares of Common
Stock of the Company which were exercised by on February 9, 2007 for an
aggregate consideration of $500,000 in
cash.
|
|
·
|
1,300,000
shares of its Common Stock concurrent with the Merger in a private
placement to non-US resident investors for aggregate consideration of
US$650,000 which included the conversion of a $250,000 loan to the
Company
|
On
November 8, 2006, the Company issued a promissory note in the principal amount
of US$250,000 to Barca Business Services (“Barca”). Prior to the
execution of the Note, there was no relationship between the Company and Barca.
The Note bore interest at an annual rate of eight percent (8%) per annum and was
due and payable in full one year from the date of issuance. The note was
converted into 500,000 shares of its Common Stock as part of a private placement
conducted concurrent with the close of the Merger Agreement.
On
February 23, 2007 the Company issued 3,557,812 shares of Common Stock to Investa
Capital Partners Inc. for an aggregate consideration of $500,000 in cash
representing their exercise of the warrant issued under the terms of the Merger
Agreement.
On May
15, and June 2, 2007, the Company issued 30,000 and 50,000 shares of Common
Stock, respectively to RedChip Companies as consideration for investor relations
services. The shares were valued at $70,500 based on the then current market
price.
On June
15, 2007, the Company issued 25,000 shares of Common Stock to Fusion Capital,
LLC as non-allocable expense reimbursement to cover such items as travel
expenses and other expenses in connection with their due diligence of a finance
transaction with the Company.
On June
22 and July 16, 2007 the Company issued a total of 3,168,305 for a total
consideration of $1.0 million as part of the Purchase Agreement with Fusion
Capital, LLC.
In
September and October, 2007 the Company issued a total of 250,000 unregistered
shares for a total consideration of $100,000 as part of a private
placement.
On
October 1, 2007, the Company issued 30,000 unregistered shares as consideration
for a trademark agreement. The shares were valued at $16,500 based on the then
current market price.
On October 25, 2007, the
Company issued 100,000 unregistered shares as consideration for a licensing
agreement. The shares were valued at $53,000 based on the then current market
price.
On January 22, 2008 the
Company issued 1,000,000 unregistered common stock and note for $105,000 in
exchange for a note and accrued interest of an aggregate value of $225,155 to
Brennecke Partners, LLC.
On February 15, 2008 the
Company issued 16,671 unregistered shares of common stock in accordance to its
2006 Stock Incentive Plan to an employee exercising vested options.
In February, 2008 the
Company issued a total of 3,198,529 unregistered shares of common stock in
private placements for an aggregate consideration of $298,900, net of
commissions.
In March, 2008 the Company
issued a total of 750,000 unregistered shares of common stock as compensation to
an international distributor with an aggregate consideration of
$120,000.
In March, 2008 the Company
issued a total of 10,000,000 unregistered shares of common stock in a private
placement, for an aggregate consideration of $500,100. In addition, the investor
received a warrant to purchase seven million unregistered shares of common stock
during a 3-year period, at an exercise price of $0.13 per share. Of the total
consideration, $100,000 was paid in March 2008 and the remaining $400,100 was
paid on April 7, 2008.
In June 2008 the Company
issued 11.2 million shares as conversion for a $750,000 convertible note that
was originally issued in December 2007 and April 2008.
In June 2008, the Company
issued 603,628 shares as partial conversion of a convertible debenture issued in
December 2007.
In July and August, 2008,
the Company issued 4,430,229 shares as partial conversion of a convertible
debenture issued in December 2007.
In June
and July 2008, the Company issued convertible notes of $250,000, each; the notes
were cancelled in connection with the CDS Transaction.
The
Company believes that all of the foregoing sales qualified for exemption under
Section 4(2) of the Securities Act since the issuance of the notes and shares by
us did not involve a public offering. The offerings were not “public offerings”
as defined in Section 4(2) due to the insubstantial number of persons involved
in the deal, size of the offering, and manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares or notes to a high number of investors. In addition, these
stockholders and the note holder had and agreed to the necessary investment
intent as required by Section 4(2). Based on an analysis of the above factors,
we have met the requirements to qualify for exemption under Section 4(2) of the
Securities Act and Section S promulgated under the Securities Act for these
transactions.
We did
not employ an underwriter in connection with the issuance of the securities
described above. We believe that the issuance of the foregoing securities was
exempt from registration under the Securities Act.
General
The
following is a discussion of the financial condition and results of operations
of Celsius Holdings, Inc. comparing the three and six months ended June 30, 2008
compared to the three and six months ended June 30, 2007 and the fiscal years
ended December 31, 2007 and December 31, 2006. We operate in the United States
through our wholly-owned subsidiaries Celsius Netshipments, Inc. and Celsius
Inc. (“Sub”), which acquired the operating business of Elite FX, Inc. (“Elite”)
through a reverse merger on January 26, 2007. You should consider the foregoing
when reviewing Celsius Holdings, Inc.’s consolidated financial statements
attached to this Registration Statement on Form S-1 and this discussion. You
should read this section together with the Company’s consolidated financial
statements including the notes to those financial statements for the years
mentioned above. Dollar amounts of $1.0 million or more are rounded to the
nearest one tenth of a million; all other dollar amounts are rounded to the
nearest one thousand and all percentages are stated to the nearest one tenth of
one percent.
Overview
We
operate in United States through our wholly-owned subsidiaries, Celsius Inc.,
which acquired the operating business of Elite FX, Inc. (“Elite”) through a
reverse merger on January 26, 2007, and Celsius Netshipments,
Inc. Celsius, Inc. is in the business of developing and marketing
healthier functional beverages in the functional beverage category of the
beverage industry. Celsius was Elite’s first commercially available
product. Celsius is a sparkling beverage that burns calories. Celsius is
currently available in five flavors: cola, ginger ale, lemon/lime, orange and
wild berry. Two new flavors will be introduced in September, 2008, green teas
with the flavor of peach/mango and raspberry/acai. Celsius Netshipments, Inc.,
incorporated in Florida on March 29, 2007, distributes the Celsius beverage via
the internet. Our focus is on increasing sales of our existing
products.
We are
using Celsius as a means to attract and sign up direct-store-delivery (“DSD”)
distributors across the US. DSD beverage distributors are
wholesalers/distributors that purchase product, store it in their warehouse and
then using their own trucks sell and deliver the product direct to retailers and
their store shelves or cooler doors. During this process they make sure that the
product is properly placed on the shelves, the invoicing and collection process
is managed and local personnel are trained. Most retailers prefer this method to
get beverages to their stores. One alternative to DSD is brokers, who supply
many different types of products to the retailer chains or independent
retailers. There are some retailers that prefer a different method called
direct-to-retailer (“DTR”). In this scenario, the retailer is buying direct from
the brand manufacturer and the product is delivered to the retailer’s
warehousing system. The retailer is then responsible to properly stock the
product and get it to the shelves. Our strategy is to cover the country with a
network of DSD distributors. This allows us to sell to retailer chains that
prefer this method and whose store locations span across distributor boundaries.
We believe that a strong DSD network gives us a path to get to the smaller
independent retailers who are too small to have their own warehousing and
distribution systems and thus can only get their beverages from distributors.
Our strategy of building a DSD network will not prohibit us from going DTR when
a retailer requests or requires it.
We have
currently signed up distributors in many of the larger markets in the US
(Detroit, Boston, South East Florida, Seattle, Los Angeles, etc). We expect that
it will take at least until 2009 before we have most of the United States
covered.
Our
experience has shown that it takes about two to three months to bring on a
distributor. From initial interest to actual purchase order and kick off or the
launch in that area, the steps include a physical meeting or two to explain the
brand, target markets and our marketing plans. As we add sales representatives,
we are able to do more of these activities at a time and speed up the
process.
Our
principal executive offices are located at 140 NE 4th Avenue, Delray Beach, FL
33483. Our telephone number is (561) 276-2239 and our website is http://www.celsius.com. The
information contained on our web site does not constitute part of, nor is it
incorporated by reference into, this Prospectus.
Forward-Looking
Statements
Information
included or incorporated by reference in this Prospectus may contain
forward-looking statements. This information may involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from the future results,
performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words “may”, “should”, “expect”, “anticipate”, “estimate”, “believe”,
“intend” or “project” or the negative of these words or other variations on
these words or comparable terminology.
This
Prospectus contains forward-looking statements, including statements regarding,
among other things, (a) our projected sales and profitability, (b) our growth
strategies, (c) anticipated trends in our industry, (d) our future financing
plans and (e) our anticipated needs for working capital. These statements may be
found under “Management’s Discussion and Analysis or Plan of Operations” and
“Description of Business”, as well as in this Prospectus generally. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under “Risk Factors” and matters described in this Prospectus
generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this Prospectus will in fact
occur.
Results
of Operations for the Three Months Ended June 30, 2008 Compared to the Three
Months Ended June 30, 2007
Revenue
Sales for
the three months ended June 30, 2008 and 2007 were $1.0 million and $376,000,
respectively. The increase of 166.2 percent was mainly due to one large
international order and to lesser extent to increased sales both to new
distributors and for re-orders from established distributors.
Gross
profit
Gross
Profit was 36.9 percent in the second quarter 2008 as compared to 19.7 percent
for the same period in 2007. The increase in gross profit was mainly due to a
product mix change from bottles to a majority of cans being shipped, and to
improved production efficiencies for our cans, offset to a less extent by lower
margin on our export shipments and higher cost for our bottles.
Operating
Expenses
Sales and
marketing expenses has increased substantially from one year to the next,
$705,000 for the second quarter of 2008 as compared to $373,000 for the same
three month period in 2007, or an increase of $332,000. This was mainly due to
increased employee cost by $90,000, local advertising and sampling by $182,000,
and sales and marketing travel expense by $46,000, offset to a lesser extent by
reduced other marketing expense of $24,000. The general and administrative
expenses increased from $378,000 for the second quarter of 2007 to $423,000 for
the same period in 2008, an increase of $45,000. This was mainly due to
increased cost for issuance of options to employees and consultants of $132,000,
increased cost of personnel of $32,000, and increased research and development
expense of $27,000, offset to a lesser extent by reduction of legal and
professional fees of $70,000, reduced investor relations expense of
$96,000.
Other
expense
The net
interest expense increased from $50,000 for the second quarter in 2007 to
$157,000, during the second quarter in 2008, or an increase of $107,000. This
increase was mainly due to amortization of debt discount of $133,000, incurred
when issuing convertible notes, offset to a lesser extent by an increase in
interest income of $25,000.
Results
of Operations for the Six Months Ended June 30, 2008 Compared to Six Months
Ended June 30, 2007
Revenue
Sales for
the six months ended June 30, 2008 and 2007 were $1.5 million and $617,000,
respectively. The increase of 148.5 percent was due to one large international
order and to increased sales both to new distributors and re-orders from
established distributors, mainly sales directly or indirectly to Walgreens of
$289,000, which is a new customer this year.
Gross
profit
Gross
profit was 39.3 percent in six months ended June 30, 2008 as compared to 22.7
percent for the same period in 2007. The increase in gross profit was mainly due
to a product mix change from bottles to a majority of cans being shipped, and to
improved production efficiencies on our cans, offset to a lesser extent by lower
margins on our export sales and increased cost for our bottles.
Operating
Expenses
Sales and
marketing expenses have increased substantially from one year to the next, $1.6
million for the first half of 2008 as compared to $718,000 for the same six
month period in 2007, or an increase of $836,000. Sales and marketing employee
cost increased by $281,000, local advertising and sampling by $303,000, sales
and marketing travel expense by $109,000, and national advertising by $120,000.
The general and administrative expenses increased from $687,000 for the first
half of 2007 to $888,000 for the same period in 2008, an increase of $201,000.
This increase was mainly due to increased cost for issuance of options to
employees and consultants of $104,000, expense for issuance of shares to a
distributor of $120,000, increased cost of personnel of $55,000, and increased
research and development expense of $137,000, offset to a lesser extent by
reduction of legal and professional fees of $59,000, reduced investor relations
expense of $101,000, and reduced insurance expense of $63,000.
We
recognized an expense for termination of a consulting agreement in January of
2007 of $500,000. Coinciding with the reverse merger, the Company issued 1.4
million shares, valued at $250,000 and an interest-free note for $250,000 as
consideration for termination of a consulting agreement and assignment of the
Celsius trademarks.
Other
expense
The net
interest expense increased from $81,000 for the first 6 months of 2007 to
$260,000, during the same period in 2008, or an increase of $179,000. This
increase was mainly due to amortization of debt discount of $188,000, incurred
when issuing convertible notes, offset to a lesser extent by an increase in
interest income of $51,000.
Results
of Operations for the Fiscal Year 2007 Compared to the Fiscal Year
2006
Revenue
Revenue
increased 26.8 % for the year 2007 to $1.6 million, as compared to $1.3 million
in 2006. The increase of $348,000 was mainly due to increase of our sales of
Celsius in sleek cans, which we started to ship in May of 2007. We have seen a
trend of more sales of cans compared to bottles. If we look at our sales by
quarter, we can see a downward trend during 2006 and an upward trend during
2007. For instance, our revenue during the fourth quarter of 2007 was 95% higher
than the same quarter in 2006.
Gross
Profit
Cost of
sales was 62.9% during the year 2007 as compared to 65.5% in 2006. The decrease
in cost of sales was mainly due improved margins on cans compared to bottles,
which was partially offset by some returns from customers in the middle of the
year 2007, when we were shifting some of our distributors to new distributors
that we believe will better serve us in the future.
Operating
Expenses
Sales and
marketing expenses increased to $1.5 million in 2007 as compared to $1.0 million
in 2006, an increase of $547,000. This increase was mainly due to increased cost
for personnel, $341,000; increased cost of sampling events, $96,000 and other
various marketing expenses, partially offset by reduced royalty fees of $66,000
and reduced print and radio media advertising. We have shifted our focus on
sales and marketing expenditure. We spend more on direct distributor support and
less on public relations expense. General and administrative expenses increased
to $2.1 million in 2007 as compared to $791,000 in 2006, an increase of $1.3
million. The increase was mainly due to increased cost for personnel, $655,000,
for professional fees and investor relations expenses, $239,000 and for product
development cost, $203,000, as well as increased insurance expense, office
expense, etc.
We
recognized an expense for termination of a consulting agreement in the first
quarter of 2007 of $500,000. Coinciding with the Merger, the Company issued 1.4
million shares of Common Stock, valued at $250,000, and an interest-free note
for $250,000, as consideration for termination of a consulting
agreement.
Other
Expense
Other
expense consists of interest on outstanding loans of $181,000 in 2007 as
compared to $112,000 in 2006. The increase of $70,000 was mainly due to
increased loans. As part of this expense, we recorded amortization of debt
discounts on two convertible notes for a total of $8,000. The remaining
un-amortized debt discount was $236,000 as of December 31, 2007.
Liquidity
and Capital Resources
We have
yet to establish any history of profitable operations. We have incurred annual
operating losses of $3.7 million, $1.5 million and $853,000, respectively,
during the past three years of operation, 2007, 2006 and 2005, respectively, and
a loss during the first six months of 2008 of $2.1 million. As a result, at June
30, 2008, we had an accumulated deficit of $8.2 million. At June 30, 2008, we
had a working capital deficit of $1.5 million. The independent auditor’s report
for the year ended December 31, 2007, includes an explanatory paragraph to their
audit opinion stating that our recurring losses from operations and working
capital deficiency raise substantial doubt about our ability to continue as a
going concern. We have an operating cash flow deficit of $2.6 million, $1.2
million and $813,000, for last three years, respectively. Our revenue has not
been sufficient to sustain our operations. We expect that our revenue will not
be sufficient to sustain our operations for the foreseeable future. Our
profitability will require the successful commercialization of our current
product Celsius® and any
future products we develop. No assurances can be given when this will occur or
that we will ever be profitable.
We fund
part of our working capital from two lines of credit. One line of credit with a
factoring company was renewed in January 2008 and is for $500,000. The line of
credit lets us borrow 80% of eligible receivables. The factoring flat fee is
1.5% of the invoice amount; in addition we incur an interest charge of prime
rate plus three percent on the average outstanding balance. The outstanding
balance as of June 30, 2008 was $114,000.
We
renewed a second line of credit on February 28, 2008 for inventory financing.
The line of credit is also for $500,000 and lets us borrow up to 50% of our cost
of eligible finished goods. The line of credit carries an interest charge of
1.5% per month of the outstanding balance and a monitoring fee of 0.5% of the
previous month’s average outstanding balance. The outstanding balance as of June
30, 2008 was $265,000.
In April
2007, the Company received $250,000 in bridge financing from Brennecke Partners
LLC. The note was restructured in January 2008. The remaining balance of the
original note was exchanged for one million shares of the Company’s common stock
valued at $121,555 and a new note for $105,000. The new note had 7 monthly
principal payments of $15,000 starting March 1, 2008. The note does not carry
interest. The outstanding balance on the note as of June 30, 2008 was
$45,000.
We
borrowed in 2004 and 2005 a total of $500,000 from one of our stockholders with
interest of a rate variable with the prime rate. There is no repayment date or
any plan in place to repay the loan. The outstanding balance as of June 30, 2008
was $669,000.
We
borrowed $50,000 from the CEO of the Company in February 2006. The loan carries
interest of seven percent. There is no fixed repayment date; the plan is to pay
off the loan as funds are available. The outstanding balance as of June 30, 2008
was $33,000. As of June 30, 2008, we also owe the CEO $171,000 for accrued
salaries from 2006 and 2007.
We
terminated a consulting agreement with a company controlled by one of our former
directors. As partial consideration we issued a note payable for $250,000. The
outstanding balance as of June 30, 2008 was $125,000.
We issued
in December 2007 a convertible note for $1.5 million and received $250,000 in
cash and a note receivable for $1.3 million; see further discussion below on our
purchase agreement with Golden Gate Investors.
We issued
in December 2007, a convertible note to CD Financial LLC (“CDF”) for $250,000.
The note carries 8 percent interest and was due on April 16, 2008. The note was
refinanced in April at the time CDF lent us additional $500,000. The combined
note was converted in June 2008 to 11.2 million shares of our Common
Stock.
We issued
in June and July, 2008, two separate convertible notes to CDF, each for
$250,000. The notes carry 8 percent interest. In August of 2008, we entered into
a securities purchase agreement with CDS Ventures of South Florida, LLC, an
affiliate of CDF, pursuant to which we received $1.5 million in cash, cancelled
the two convertible notes issued to CD Financial, LLC and issued 2,000 Series A
Preferred Shares, and the right to purchase additional 1,000 Series A Preferred
Shares.
We
received during 2007 a total of $400,000 as deposits against future orders from
an international customer. We received a purchase order from the customer, and
shipped products in April and June offsetting the deposit. There is no
outstanding balance as of June 30, 2008.
We
entered into a Stock Purchase Agreement with Fusion Capital in June 2007. During
2007, we received $1.4 million in proceeds from sales of shares to Fusion
Capital. We can sell shares for a consideration of up to $14.6 million to Fusion
Capital until October 2009, when and if the selling price of the shares to
Fusion Capital exceeds $0.45.
We will
require additional financing to sustain our operations. Management estimates
that we need to raise an additional $2.0 to $3.0 million in order to implement
our revised business plan over the next 12 months. We are able to implement an
alternative business plan with less financing, which is more in line to funds
received and financing that we have already negotiated to receive. We do not
currently have sufficient financial resources to fund our operations or those of
our subsidiaries. Therefore, we need additional funds to continue these
operations. No assurances can be given that the Company will be able to raise
sufficient financing.
The
following table summarizes contractual obligations and borrowings as of December
31, 2007, and the timing and effect that such commitments are expected to have
on our liquidity and capital requirements in future periods (in thousands). We
expect to fund these commitments primarily with raise of debt or equity
capital.
|
Payments Due by Period
|
||||||||||||||||||||
|
Contractual
|
Total
|
Less Than
|
1-3 Years
|
3-5 Years
|
More Than
|
|||||||||||||||
|
Obligations
|
1 Year
|
5 Years
|
||||||||||||||||||
|
Debt
to related party
|
1,057 | 1,057 | — | — | — | |||||||||||||||
|
Loans
payable
|
2,086 | 757 | 14 | 1,315 | — | |||||||||||||||
|
Purchase
obligations
|
— | — | — | — | — | |||||||||||||||
|
Total
|
$ | 3,143 | $ | 1,814 | $ | 14 | $ | 1,315 | $ | — | ||||||||||
Our
securities purchase agreement with CDS Ventures of South Florida,
LLC
On August
8, 2008, we entered into a securities purchase agreement (the “Purchase
Agreement”) with CDS, a Florida limited liability company. Under the
Purchase Agreement, CDS purchased 2,000 shares of Series A Preferred Stock ,
evidenced by a certificate of designation filed with the Nevada Secretary of
State (the “Certificate of Designation”) and the right to purchase up to an
additional 1,000 shares of Series A Preferred Stock, for an aggregate purchase
price of $2,000,000 consisting of a cash payment of $1.5 million and the
cancellation of two notes in aggregate amount of $500,000 issued to CD
Financial, LLC, an affiliate of CDS (the “Purchase Price”). The
purchase of any part of the additional 1,000 shares of Series A Preferred Stock
(the “Additional Shares”) will have a consideration of $1,000 per share of
Series A Preferred Stock. CDS has the right to convert the Series A
Preferred Stock to Common Stock at any time. The conversion price is $0.08
(eight cents) per share of common stock for a period of 200 days from the date
on which the Certificate of Designation is effective with the Nevada Secretary
of State. Thereafter, the conversion price shall be the greater of
(i) 90% of the Market Price on the conversion date and (ii) $0.08 (eight cents)
as appropriately adjusted for stock splits, stock dividends and similar events.
Market price means the average of the ten daily volume weighted average prices
for the 10 trading days immediately preceding the applicable date of
determination.
Pursuant
to the Purchase Agreement, the Company entered into a registration rights
agreement under which the Company agreed to file a registration statement for
the common stock issuable upon conversion of Series A Preferred
Shares.
The
Series A Preferred Stock accrues dividends on the stated share value at an
annual rate of ten percent. Dividends on the Series A Preferred Stock
are payable annually on the last business day of each fiscal year of the Company
in additional shares of Series A Preferred Stock.
Our
purchase agreement with Golden Gate Investors, Inc.
On
December 19, 2007, we entered into a securities purchase agreement with Golden
Gate Investors, Inc (“GGI”). The agreement includes four tranches of $1,500,000
each. Each tranche consists of a 7.75% convertible debenture (the
“Debenture”) issued by the Company, in exchange for $250,000 in cash and a
promissory note for $1,250,000 issued by GGI which matures on February 1, 2012.
The promissory note contains a prepayment provision which requires GGI to make
prepayments of interest and principal of $250,000 monthly upon satisfaction of
certain conditions. One of the conditions to prepayment is that Company’s shares
issued pursuant to the conversion rights under Debenture must be freely tradable
under Rule 144 of the Securities Act of 1933. The Debenture can be converted at
any time with a conversion price as the lower of (i) $1.00, or (ii) 80% of the
average of the three lowest daily volume weighted average price during the 20
trading days prior to GGI’s election to convert. The Company is not required to
issue the shares unless a corresponding payment has been made on the promissory
note.
GGI made
its first monthly payment of $250,000 in the end of June 2008 and made its
monthly payment in July and August, plus all accrued interest. GGI
converted $40,000 of its convertible debenture in June 2008 to 604,000 shares.
Subsequent to the quarter-end, GGI has converted additionally $305,000 of its
convertible debenture to approximately 4.4 million shares.
Tranches
2, 3 and 4 can be consummated at the election of GGI at any time beginning upon
the execution of the Debenture, or successive debenture, until the balance due
under the Debenture, or each successive debenture, decreases below $250,000.
Tranches 2, 3 and 4 of the agreement with Golden Gate Investors, Inc. may be
rescinded and not effectuated by either party, subject to payment of a
penalty.
Related
Party Transactions
We
received advances from one of our stockholders at various instances during 2004
and 2005, $76,000 and $424,000, respectively. The total amount outstanding,
including accrued interest, as of June 30, 2008 was $669,000. The loan was
restructured on August 8, 2008 whereby we will make 17 monthly payments of the
19th
day of each month with a final payment of the balance on January 19, 2010. The
interest on the loan is prime rate, which at today’s rate of five percent would
mean that the balloon payment in 2010 would be approximately
$619,000.
We
accrued the CEO’s salary from March 2006 through May 30, 2007. The
total accrued salary as of June 30, 2008 was $171,000. Since June 1, 2007 we
have paid his salary in full. The CEO also lent the Company $50,000 in February
2006. In April 2008, $25,000 was repaid and the outstanding amount as of June
30, 2008 was $33,000. In August 2008 we restructured the debt and combined it
into one note with three percent interest annually. Twenty-nine monthly payments
of $5,000 in principal and interest are due from August 31, 2008, onwards, and a
final payment on January 31, 2011 of $64,042.
The CEO
has guaranteed the Company’s obligations under the factoring agreement with
Bibby Financial Services, Inc. (“Bibby”). The outstanding balance to Bibby as of
June 30, 2008 was $114,000. The CEO has also guaranteed the financing of a
vehicle on behalf of the Company, and was previously guaranteeing the office
lease for the Company. The CEO was not compensated for issuing the
guarantees.
The COO
of the Company lent the Company $50,000 in February 2008, the loan was repaid in
March 2008. The COO also purchased in February 2008, 781,250 shares in a private
placement for a total consideration of $75,000.
The CFO
of the Company lent the Company $25,000 in February 2008, the loan was repaid in
February 2008. The CFO also purchased in February 2008, 245,098 shares in a
private placement for a total consideration of $25,000.
The VP of
Strategic Accounts and Business Development purchased in February 2008, 245,098
in a private placement for a total consideration of $25,000.
Related
party transactions are contracted on terms comparable to the terms of similar
transactions with unaffiliated parties.
Going
Concern
The
accompanying condensed consolidated financial statements are presented on a
going concern basis. This condition raises substantial doubt about the Company’s
ability to continue as a going concern. The Company is diligently
trying to raise financing; however, there can be no assurance that the Company
will be successful in its endeavors.
On August
4, 2006, we received the resignation of our principal independent accountant,
Armando C. Ibarra, C.P.A.
Armando
C. Ibarra, C.P.A. had served as our principal independent accountant from
inception (April 26, 2005) and the fiscal year September 2005, inclusive through
August 4, 2006.
The
principal independent accountant’s report issued by Armando C. Ibarra, C.P.A.
for the year ended September 30, 2005 did not contain any adverse opinion or
disclaimer of opinion and it was not modified as to uncertainty, audit scope, or
accounting principles, other than their opinion, based on our lack of operations
and our net losses, there was substantial doubt about our ability to continue as
a going concern. The financial statements did not include any
adjustments that might have resulted from the outcome of that
uncertainty.
We are
able to report that during the year ended September 30, 2005 through August 4,
2006 there were no disagreements with Armando C. Ibarra, C.P.A., our former
principal independent accountant, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to Armando C. Ibarra, C.P.A.’s satisfaction,
would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its reports on our consolidated financial
statements for such periods. We have requested that Armando C. Ibarra, C.P.A.
furnish us with a letter addressed to the SEC stating whether or not it
disagrees with the above statements. A copy of such letter is filed
herewith as Exhibit 16.1.
On August
4, 2006, upon authorization and approval of the Company’s Board of Directors,
the Company engaged the services of Chang G. Park, CPA, Ph.D. as its independent
registered public accounting firm.
On March
8, 2007, the Company terminated Chang G. Park, CPA, Ph.D. (“Park”) as the
Company’s independent registered public accounting firm. The decision to dismiss
Park was unanimously determined and approved by the Company’s Board of
Directors.
The audit
reports of Park on the financial statements of the Company as of and for the
years ended September 30, 2005 and 2006 did not contain any adverse opinion or
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principle. During the fiscal years ended
September 30, 2005 and 2006 and the subsequent interim period through March 8,
2007, there were no disagreements with Park on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Park,
would have caused it to make reference thereto in its reports on the financial
statements for such years.
In
connection with the audits of the two fiscal years ended September 30, 2005 and
2006 and the subsequent interim period through March 8, 2007, there have been no
“reportable events” (as defined in Item 304(a)(1)(v) of Regulation
S-K).
On March
8, 2007, upon authorization and approval of the Company’s Board of Directors,
the Company engaged Sherb & Co. (“Sherb”) as the Company’s independent
registered public accounting firm.
During
the Company’s fiscal years ended September 30, 2005 and 2006 and the subsequent
interim period through March 8, 2007, neither the Company nor anyone acting on
its behalf consulted with Sherb regarding either (i) the application of
accounting principles to a specific transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company’s financial
statements or (ii) any matter that was either the subject of a disagreement (as
such term is defined in Item 304(a)(1)(iv) of Regulation S-K), or a reportable
event (as such term is described in Item 304(a)(1)(v) of Regulation
S-K).
The
following table lists the current members of our Board of Directors and our
executive officers as of August 27, 2008. The address for our directors is c/o
Celsius Holdings, Inc., 140 NE 4th Avenue, Delray Beach, FL 33483. There are no family
relationships among members of our Board or our executive officers, with the
exception of Janice Haley who is the wife of Stephen C. Haley.
|
Name
|
Age
|
Position
|
||
|
Stephen
C. Haley
|
51
|
Chief
Executive Officer, President and Chairman of the Board of
Directors
|
||
|
Jan
Norelid
|
55
|
Chief
Financial Officer and Director
|
||
|
Richard
McGee
|
68
|
Chief
Operating Officer
|
||
|
Janice
Haley
|
47
|
Vice
President of Strategic Accounts and Business
Development
|
||
|
James
Cast
|
59
|
Director
|
||
|
William
H. Milmoe
|
60
|
Director
|
Set forth
below is a brief description of the background and business experience of each
of our executive officers directors.
Stephen C. Haley is Chief
Executive Officer, President and Chairman of the Board of Directors for the
Company, and has served in this capacity since he founded Elite in 2004. Elite
merged into the Company’s subsidiary, Celsius, Inc. on January 26,
2007. Prior to founding Elite, from 2001 to 2004, Mr. Haley invested
in multiple companies including the beverage industry. From 1999 to 2001, he
held positions as COO and Chief Business Strategist for MAPICS, a publicly held,
international software company with over 500 employees and $145 million in
revenue. From 1997 to 1999, he was CEO of Pivotpoint, a Boston based Enterprise
Requirements Planning (ERP) software firm, backed by a venture group including
Goldman Sachs, TA Associates, and Greyloc. He holds a BSBA in Marketing from the
University of Florida.
Jan Norelid is the Chief
Financial Officer and a director of the Company. He joined Elite as Chief
Financial Officer in November 2006. Mr. Norelid has thirty years of local and
international financial experience. Most recently, from 2005 to 2006 he worked
as consultant for Bioheart Inc, a start-up bio-medical company, and FAS Group, a
consulting firm specialized in SEC related matters. Previously, from September
1997 to January 2005, Mr. Norelid served as Chief Financial Officer for Devcon
International Corp, an $80 million NASDAQ listed company which manufactures
building materials and provides a comprehensive range of heavy-construction and
support services. From January 1996 to September 1997, Mr. Norelid owned and
operated a printing franchise. Prior to this, from 1990 to 1995, Mr. Norelid
worked as Chief Financial Officer for Althin Medical Inc., a $100 million public
medical device company. Previous experience since 1977 consisted of various
controller and CFO positions for Swedish companies, stationed in six different
countries in four continents. Mr. Norelid holds a degree in Business
Administration from the Stockholm School of Economics.
Richard McGee is the Chief
Operating Officer of the Company. Mr. McGee joined Elite as Chief
Operating Officer in September 2005. From 1998 to September 2005 Mr. McGee was
retired and did not work. His experience includes over 40 years in beverage
manufacturing, operations, and distribution. Mr. McGee was President of Cotton
Club Bottling Group in Cleveland Ohio, which manufactured its own brands and
distributed other nationally recognized beverages throughout the Midwest. Mr.
McGee arranged the sale of Cotton Club in 1998 to the American Bottling Group
Company which was jointly owned by Cadbury Schweppes and The Carlyle
Group. Mr. McGee has a degree in Business from Montana State
University.
Janice Haley is the Vice
President of Strategic Accounts and Business Development of the
Company. Ms. Haley joined Elite in 2006 as VP of Marketing. Prior to
joining Elite, from 2001 to 2006, Ms. Haley, together with her husband Stephen
C. Haley, was an investor in beverage distribution and manufacturing companies.
Ms. Haley has over 20 years management expertise including the software
technology industry in enterprise applications and manufacturing industries
specializing in business strategy, sales and marketing. From 1999 to 2001 she
was Director of Corporate Communications of Mapics, an international public
software company. Previously, from 1997 to 1999 she worked as VP of Marketing of
Pivotpoint, a Boston based, venture-funded, software company. Ms. Haley began
her career in production in commercial and defense manufacturing firms such as
ITT and Honeywell Inc. Ms. Haley holds a BSBA in Marketing from
University of Florida.
James Cast is a director of
the Company. Mr. Cast joined Elite as director in 2007. Mr. Cast is a
certified public accountant and is the owner of a CPA firm in Ft. Lauderdale,
Florida, which specializes in taxes and business consulting. Prior to forming
his firm in 1994, Mr. Cast was senior tax Partner-in-Charge of KPMG Peat
Marwick’s South Florida tax practice with over one hundred ten employees. During
his twenty-two years at KPMG he was also the South Florida coordinator for all
mergers, acquisitions, and business valuations. He is a member of AICPA and
FICPA. He currently serves on the Board of the Covenant House of Florida. He has
a BA from Austin College and a MBA from the Wharton School at the University of
Pennsylvania.
William Milmoe is a director
of the Company. Mr. Milmoe joined Celsius Holdings, Inc as director
in August 2008. Mr. Milmoe is president and chief financial officer of CDS
International Holdings, Inc., a position he has held since 2006. From 1997 to
2006, he was CDS’ chief financial officer and treasurer. Mr. Milmoe
is a certified public accountant with over 40 years of broad business experience
in both public accounting and private industry. His financial career has
included positions with PricewaterhouseCoopers, an internal public accounting
firm, General Cinema Corporation, an independent bottler of Pepsi Cola and movie
exhibitor. Mr. Milmoe is member of both the Florida and the American
Institute of Certified Public Accountants.
Term
of Office
Our
directors are elected for a one-year term to hold office until the next annual
general meeting of our stockholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our Board and hold office until
removed by the Board.
Board
Committees
We have
not separately designated an executive committee, nominating committee,
compensation committee or audit committee of the Board.
Corporate
Governance
We
believe that good corporate governance is important to ensure that, as a public
company, we will manage for the long-term benefit of our stockholders. In that
regard, we have established and adopted a code of business conduct and ethics
applicable to all of our directors, officers and employees.
Summary
Executive Compensation Table
The table
below summarizes all compensation awarded to, earned by, or paid to our
executive officers by any person for all services rendered in all capacities to
us for the years ended December 31, 2007 and 2006:
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Non-Qualified
Deferred Compensation Earnings
|
All
Other Compensation
|
Totals
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||
|
Stephen
Haley, President, CEO and Chairman
|
2006
|
-
|
-
|
-
|
-
|
-
|
-
|
120,000
(1)
|
120,000
|
|
2007
|
93,877
|
-
|
-
|
24,769
|
-
|
-
|
51,000
(1)
|
169,646
|
|
|
Jan
Norelid, CFO
|
2006
|
8,308
|
-
|
-
|
-
|
-
|
-
|
-
|
8,308
|
|
2007
|
135,831
|
-
|
25,000
|
20,271
|
-
|
-
|
4,985
|
186,087
|
|
|
Richard
McGee, COO
|
2006
|
60,000
|
-
|
-
|
-
|
-
|
-
|
-
|
60,000
|
|
2007
|
106,615
|
13,506
|
-
|
28,073
|
-
|
-
|
9,692
|
157,886
|
|
|
Janice
Haley, VP Strategic accounts
|
2006
|
65,385
|
-
|
-
|
-
|
-
|
-
|
-
|
65,385
|
|
2007
|
103,846
|
-
|
-
|
33,025
|
-
|
-
|
-
|
136,871
|
|
|
(1)
Salary was accrued but not paid.
|
|||||||||
Summary
Director Compensation Table
No
director has received compensation of any type for his or her work as director
during the fiscal years 2007 or 2006.
Executive
Officer Employment Agreements
On
January 19, 2007, Elite entered into employment agreements with the Messrs.
Stephen C. Haley, Jan Norelid, Richard McGee and Ms. Janice
Haley. Each of these agreements has been assumed by the Company
pursuant to the Merger Agreement. Each of the agreements has a three
(3) year term ending on January 18, 2010. The agreements provide for a
discretionary bonus. The bonus plans have not yet been established by the board,
but may contain items such as goals to achieve certain revenue, to reduce cost
of production, to achieve certain gross margin, to achieve financing,
etc.
The
agreement with Mr. Stephen C. Haley, our Chief Executive Officer and Chairman of
the Board, provides for a base annual salary of $144,000, a discretionary annual
bonus. Mr. Haley is entitled to severance benefits if Mr. Haley’s employment is
terminated upon his death or if his employment is terminated by the Sub other
than for cause. These severance benefits include on termination:
|
(a)
|
due to death a lump sum
payment death benefit equal to his annual base salary plus the annualized
amount of incentive compensation paid Mr. Haley most recently multiplied
by the term remaining in his employment agreement;
and
|
|
(b)
|
for other than for cause
(i) a lump sum payment equal to his annual base salary plus the annualized
amount of incentive compensation paid Mr. Haley most recently multiplied
by the greater of the term remaining in his employment agreement or two
(2) years, and (ii) a continuation of all other benefits through for the
greater of the term remaining in his employment agreement or two (2)
years.
|
If Mr.
Haley terminates his employment for reasons other than the Company’s breach of
the agreement, he will not be entitled to severance
benefits. Mr. Haley will not be entitled to severance benefits
if his employment agreement is terminated for cause (as described
below).
The
agreement with Mr. Jan Norelid, our Chief Financial Officer, provided for a base
annual salary of $108,000 and a discretionary annual bonus, and an increase of
his base salary to $144,000 at the earlier of ninety (90) days from the closing
of the Merger agreement or the Company has raised $2.5 million in financing, and
a discretionary annual bonus. Mr. Norelid is entitled to severance
benefits if Mr. Norelid’s employment is terminated by the Sub other than for
cause. These severance benefits include on termination:
for other than for cause (i) a
lump sum payment equal to his annual base salary plus the annualized amount of
incentive compensation paid Mr. Haley most recently multiplied by the greater of
the term remaining in his employment agreement or two (2) years, and (ii) a
continuation of all other benefits through for the greater of the term remaining
in his employment agreement or two (2) years.
The
agreement with Mr. Richard McGee provides for a base annual salary of $108,000
and an increase of his salary to $144,000 when the Company has raised $2.5
million in financing, and a discretionary annual bonus.
The
agreement with Ms. Janice Haley, our Vice President of Marketing, provides for a
base annual salary of $100,000 and an increase of her salary to $120,000 when
the Company has raised $2.5 million in financing, and a discretionary annual
bonus.
The
agreements with Mr. McGee and Ms. Haley provide for severance benefits if
employment is terminated by the Sub other than for cause. These
severance benefits include on termination:
for other than for cause an
amount equal to the sum of such employee’s then current annual base salary plus
the annualized amount of incentive compensation paid to such employee within the
last year before the date such employee’s employment was terminated, multiplied
by the number of full and partial years remaining in the term of the
agreement.
The
Company anticipates senior executive bonuses under each of these agreements will
be determined based on various factors, including revenue achievement and
operating income (loss) before depreciation and amortization targets, as well as
personal contributions.
These
employment agreements may be terminated by the Company if the executive commits
an act or an omission resulting in a willful and material breach of or failure
or refusal to perform his duties, commits fraud, embezzlement, misappropriation
of funds or breach of trust in connection with his services, convicts any crime
which involves dishonesty or breach of trust, or acts in gross negligence in the
performance of his duties (provided that the Company gives the executive notice
of the basis for the termination and an opportunity for 15 days to cease
committing the alleged conduct) or violates the confidentiality or
non-competition requirements of the agreement.
The
following table sets forth information with respect to the beneficial ownership
of our Common Stock as of August 27, 2008
for:
|
·
|
each
of our executive officers and
directors;
|
|
|
|
·
|
all
of our executive officers and directors as a group; and
|
|
|
·
|
Any
other beneficial owner of more than five percent (5%) of our outstanding
Common Stock.
|
Beneficial ownership is determined in
accordance with the rules of the SEC. These rules generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power or
investment power with respect to those securities and include ordinary shares
issuable upon the exercise of stock options that are immediately exercisable or
exercisable within 60 days. Except as otherwise indicated, all persons listed
below have sole voting and investment power with respect to the shares beneficially
owned by them, subject to applicable community property laws. The information is
not necessarily indicative of beneficial ownership for any other
purpose.
|
Beneficial
Ownership
|
|||||||||||||
|
Outstanding
Shares
Beneficially
|
Right
to Acquire Within 60 Days After August 27,
|
Shares
Beneficially Owned (3)
|
|||||||||||
|
Name
and Address of Beneficial Owner(1)
|
Owned
|
2008
|
Number
|
Percentage
|
|||||||||
|
Stephen
C. Haley
|
26,744,926
|
|
668,623
|
27,413,549
|
19.9%
|
|
|||||||
|
Lucille
Santini
|
18,144,926
|
-
|
18,144,926
|
13.3%
|
|
||||||||
|
CDS
Ventures of South Florida, LLC
|
25,000,000
|
25,000,000
|
15.5%
|
|
|||||||||
|
CD
Financial, LLC
|
11,184,016
|
-
|
11,184,016
|
8.2%
|
|
||||||||
|
Joseph
& Gionis LLC
|
10,000,000
|
7,000,000
|
17,000,000
|
11.8%
|
|
||||||||
|
Jan
Norelid
|
1,422,344
(2)
|
|
1,501,761
|
2,924,105
|
2.1%
|
|
|||||||
|
Richard
McGee
|
1,583,598
|
300,000
|
1,883,598
|
1.4%
|
|
||||||||
|
Janice
Haley
|
245,098
|
1,141,498
|
1,386,596
|
1.0%
|
|
||||||||
|
James
Cast
|
-
|
200,588
|
200,588
|
0.1%
|
|
||||||||
|
William
H. Milmoe (4)
|
10,000
|
2,500,000
|
2,510,000
|
1.8%
|
|
||||||||
|
All
executive officers and directors as a
group
(6 persons)
|
30,005,966
|
6,312,470
|
36,318,436
|
25.4%
|
|
||||||||
________________
|
(1)
|
Unless
otherwise noted in the table above, the address of each beneficial owner
listed on the table is c/o Celsius Holdings, Inc., 140 NE 4th Avenue,
Suite C, Delray Beach, FL 33483.
|
|
(2)
|
Includes
54,000 shares owned by Mr. Norelid’s adult children, beneficial ownership
of which is disclaimed by Jan Norelid.
|
|
(3)
|
Applicable
percentage of ownership is based on 136,793,431 shares of Common Stock
outstanding as of August 27, 2008, together with securities exercisable or
convertible into shares of common stock within sixty (60) days of August
27, 2008, for each stockholder. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Shares of Common Stock are
deemed to be beneficially owned by the person holding such securities for
the purpose of computing the percentage of ownership of such person, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Note that affiliates are subject to Rule
144 and insider trading regulations - percentage computation is for form
purposes only.
|
|
(4)
|
Includes
a beneficial interest of 10% in CDS Ventures of South Florida, LLC, which
owns 2,000 shares of Series A Preferred Stock that is
convertible into 25 million shares of common stock as of the date of this
filing.
|
FOR
SECURITIES ACT LIABILITIES
Our
directors and officers are indemnified as provided by the Nevada Statutes and
our articles of incorporation. We have been advised that in the opinion of the
SEC, indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
On close
of the Merger Agreement, the Sub assumed employment agreements with the Messrs.
Stephen C. Haley, Jan Norelid, Richard McGee and Ms. Janice Haley, previously
executed by Elite. The Company issued 50,000 shares of Elite to Jan
Norelid in compensation on January 19, 2007. The Company recorded a charge of
$25,000.
On
September 30, 2006, we issued 4,000,000 shares of Common Stock to our previous
president, Mr. Kostovski at a value of $0.0025 per share in exchange for
organizational services and expenses, proprietary rights, business plans, and
cash in for total aggregate consideration of $10,000. On April 30, 2006, a total
of 3,200,000 shares of Common Stock were issued in exchange for mining claims
valued in the amount of $8,000 U.S., or $.0025 per share to Mr. Kostovski. These
issuances were made to Mr. Kostovski, pursuant to Section 4(2) of the Securities
Act and were restricted shares as defined in the Act. On January 26,
the 7.2 million shares issued to Mr. Kostovski were cancelled as part of the
Merger Agreement.
On
January 26, 2007, the Company retired the loan provided by Mr. Kostovski to the
Company which amounted to an aggregate total of $1,800 ($500 cash loan and
another $1,300 owed to him for use of his office space). This amount was retired
as part of the requirement of the Merger Agreement. This loan was
unsecured, due on demand and did not bear interest.
The
Company generated revenue from Specialty Beverage Distributors, Inc. (“SBD”) of
$128 and $296,640 during the year ended December 31, 2006 and 2005,
respectively. SBD is 50% owned by Mr. Haley and 50% owned by Lucille Santini, a
stockholder of the Company. During 2006, the Company delivered and invoiced SBD
$69,832 for products, no revenue was recorded as the collectibility was not
reasonably assured. At the end of 2005, Elite recorded $60,640 in allowance for
bad debt for outstanding receivable from SBD. SBD ceased operations in
2006.
Elite
operated during 2005 and most of 2006 from temporary offices in the home of Mr.
Haley, who has also guaranteed certain of the Elite’s liabilities.
We
accrued the CEO’s salary from March 2006 through May 30, 2007. The
total accrued salary as of June 30, 2008 was $171,000. Since June 1, 2007 we
have paid his salary in full. The CEO also lent the Company $50,000 in February
2006. In April 2008, $25,000 was repaid and the outstanding amount as of June
30, 2008 was $33,000. In August 2008 we restructured the debt and combined it
into one note with three percent interest annually. Twenty-nine monthly payments
of $5,000 in principal and interest are due from August 31, 2008, onwards, and a
final payment on January 31, 2011 of $64,042.
The CEO
has guaranteed the Company’s obligations under the factoring agreement with
Bibby Financial Services, Inc. (“Bibby”). The outstanding balance to Bibby as of
June 30, 2008 was $114,000. The CEO has also guaranteed the financing of a
vehicle on behalf of the Company, and was previously guaranteeing the office
lease for the Company. The CEO was not compensated for issuing the
guarantees.
Included
in a consulting agreement, we acquired the rights to the trademark “Celsius”
from one of our directors. Upon termination of the agreement certain payment was
due. Payment was issued in the form of an interest-free note payable for
$250,000 and 1,391,500 shares of our common stock, valued at $250,000. In
addition, we had previously accrued two percent in deferred royalty on our sales
from January 1, 2006. The amount accrued, $24,546, was also considered part of
the agreement termination expense. The amount outstanding as of June 30, 2008
and December 31, 2007, was $125,000 and $160,000, respectively.
The COO
of the Company lent the Company $50,000 in February 2008, the loan was repaid in
March 2008. The COO also purchased in February 2008, 781,250 shares in a private
placement for a total consideration of $75,000.
The CFO
of the Company lent the Company $25,000 in February 2008, the loan was repaid in
February 2008. The CFO also purchased in February 2008, 245,098 shares in a
private placement for a total consideration of $25,000.
The VP of
Strategic Accounts and Business Development purchased in February 2008, 245,098
in a private placement for a total consideration of $25,000.
Related
party transactions are contracted on terms comparable to the terms of similar
transactions with unaffiliated parties
There
have been no other related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation
S-B.
We have
filed a Registration Statement on Form S-1 under the Securities Act the SEC with
respect to the shares of our Common Stock offered through this Prospectus. This
Prospectus is filed as a part of that registration statement and does not
contain all of the information contained in the registration statement and
exhibits. We refer you to our registration statement and each exhibit attached
to it for a more complete description of matters involving us, and the
statements we have made in this Prospectus are qualified in their entirety by
reference to these additional materials. You may inspect the registration
statement and exhibits and schedules filed with the SEC at the SEC’s principal
office in Washington, D.C. Copies of all or any part of the registration
statement may be obtained from the Public Reference Section of the SEC, Room
1580, 100 F Street NE, Washington DC 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. The SEC also maintains a web site at http://www.sec.gov
that contains reports, proxy statements and information regarding registrants
that file electronically with the SEC. In addition, we will file electronic
versions of our annual, quarterly and current reports on the SEC’s Electronic
Data Gathering Analysis and Retrieval, or EDGAR System.
CELSIUS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Index
to Financial Statements
|
Page Number
|
|
|
Condensed
Consolidated Balance Sheets at June 30, 2008 (unaudited)
|
|
|
and December 31,
2007
|
F-2
|
|
Condensed
Consolidated Statements of Operations for three months
|
|
|
and six months ended June 30, 2008
and 2007 (unaudited)
|
F-3
|
|
Condensed
Consolidated Statements of Cash Flows for
|
|
|
six months ended June 30, 2008 and
2007 (unaudited)
|
F-4
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
|
for
six months ended June 30, 2008 (unaudited)
|
F-5-
F-16
|
|
Report
of Independent Registered Public Accounting Firm
|
F-18
|
|
Consolidated
Balance Sheet as of December 31, 2007
|
F-19
|
|
Consolidated
Statements of Operations for the years ended
|
|
|
December 31, 2007 and
2006
|
F-20
|
|
Consolidated
Statements of Changes in Stockholders' Deficit
|
|
|
for the years ended December 31,
2007 and 2006
|
F-21
|
|
Consolidated
Statements of Cash Flows for the years ended
|
|
|
December 31, 2007 and
2006
|
F-22
|
|
Notes
to Consolidated Financial Statements
|
|
|
for the year ended
December 31,
2007
|
F-23
- F-36
|
|
Celsius
Holdings, Inc. and Subsidiaries
|
||||||||
|
Condensed
Consolidated Balance Sheets
|
||||||||
|
June
30
|
December
311
|
|||||||
|
ASSETS
|
2008
|
2007
|
||||||
|
(unaudited)
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 96,790 | $ | 257,482 | ||||
|
Accounts
receivable, net
|
340,939 | 276,877 | ||||||
|
Inventories,
net
|
575,615 | 578,774 | ||||||
|
Other
current assets
|
17,656 | 44,960 | ||||||
|
Total
current assets
|
1,031,000 | 1,158,093 | ||||||
|
Property,
fixtures and equipment, net
|
106,489 | 64,697 | ||||||
|
Note
receivable
|
1,000,000 | 1,250,000 | ||||||
|
Other
long-term assets
|
60,340 | 60,340 | ||||||
|
Total
Assets
|
$ | 2,197,829 | $ | 2,533,130 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 809,965 | $ | 594,828 | ||||
|
Loans
payable
|
548,766 | 710,307 | ||||||
|
Deposit
from customer
|
- | 400,000 | ||||||
|
Short
term portion of other liabilities
|
12,691 | 7,184 | ||||||
|
Convertible
note payable, net of debt discount
|
242,366 | 199,692 | ||||||
|
Due
to related parties
|
873,558 | 896,721 | ||||||
|
Total
current liabilities
|
2,487,346 | 2,808,732 | ||||||
|
Convertible
note payable, net of debt discount
|
1,298,242 | 1,314,914 | ||||||
|
Other
liabilities
|
30,747 | 14,236 | ||||||
|
Total
Liabilities
|
3,816,335 | 4,137,882 | ||||||
|
Stockholders’
Deficit:
|
||||||||
|
Preferred
stock, $0.001 par value; 50,000,000 shares
|
||||||||
|
authorized
and no shares issued and outstanding
|
- | - | ||||||
|
Common
stock, $0.001 par value: 350,000,000 shares
|
||||||||
|
authorized,
132 million and 106 million shares
|
||||||||
|
issued
and outstanding, respectively
|
132,363 | 105,611 | ||||||
|
Additional
paid-in capital
|
6,468,162 | 4,410,405 | ||||||
|
Accumulated
deficit
|
(8,219,031 | ) | (6,120,768 | ) | ||||
|
Total
Stockholders’ Deficit
|
(1,618,506 | ) | (1,604,752 | ) | ||||
|
Total
Liabilities and Stockholders’ Deficit
|
$ | 2,197,829 | $ | 2,533,130 | ||||
1 Derived from audited
financial statements.
The accompanying notes are an integral
part of these condensed consolidated financial
statements
|
Celsius
Holdings, Inc. and Subsidiaries
|
||||||||||||||||
|
Condensed
Consolidated Statements of Operations
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
For
the Three Months
Ended
June 30
|
For
the Six Months
Ended
June 30
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Net
sales
|
$ | 1,000,109 | $ | 375,668 | $ | 1,533,491 | $ | 617,058 | ||||||||
|
Cost
of sales
|
631,321 | 301,661 | 930,216 | 476,739 | ||||||||||||
|
Gross
profit
|
368,788 | 74,007 | 603,275 | 140,319 | ||||||||||||
|
Selling
and marketing expenses
|
705,135 | 372,915 | 1,553,351 | 717,599 | ||||||||||||
|
General
and administrative expenses
|
423,492 | 377,755 | 888,397 | 687,407 | ||||||||||||
|
Contract
termination expense
|
- | - | - | 500,000 | ||||||||||||
|
Loss
from operations
|
(759,839 | ) | (676,663 | ) | (1,838,473 | ) | (1,764,687 | ) | ||||||||
|
Other
expense:
|
||||||||||||||||
|
Interest
expense, related party
|
(12,588 | ) | 18,688 | 1,838 | 36,490 | |||||||||||
|
Interest
expense, net
|
169,168 | 30,933 | 257,952 | 44,036 | ||||||||||||
|
Total
other expense
|
156,580 | 49,621 | 259,790 | 80,526 | ||||||||||||
|
Net
loss
|
$ | (916,419 | ) | $ | (726,284 | ) | $ | (2,098,263 | ) | $ | (1,845,213 | ) | ||||
|
Basic
and diluted:
|
||||||||||||||||
|
Weighted
average shares outstanding
|
123,126,449 | 101,377,081 | 115,691,540 | 96,509,146 | ||||||||||||
|
Loss
per share
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements
|
Celsius
Holdings, Inc. and Subsidiaries
|
||||||||
|
Condensed
Consolidated Statements of Cash Flows
|
||||||||
|
(unaudited)
|
||||||||
|
For
the Six Months Ended June 30
|
||||||||
|
2008
|
2007
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
loss
|
$ | (2,098,263 | ) | $ | (1,845,213 | ) | ||
|
Adjustments
to reconcile net loss to net cash
|
||||||||
|
used
in operating activities:
|
||||||||
|
Depreciation
and amortization
|
11,124 | 3,560 | ||||||
|
Loss
on disposal of assets
|
804 | - | ||||||
|
Adjustment
to reserve for bad debt
|
- | 9,778 | ||||||
|
Impairment
of intangible assets
|
- | 26,000 | ||||||
|
Termination
of contract
|
- | 500,000 | ||||||
|
Issuance
of stock options
|
131,070 | 26,982 | ||||||
|
Amortization
of debt discount
|
188,575 | - | ||||||
|
Issuance
of shares as compensation
|
120,000 | 95,500 | ||||||
|
Change
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable, other
|
(64,062 | ) | (115,665 | ) | ||||
|
Inventories
|
3,159 | 16,244 | ||||||
|
Prepaid
expenses and other assets
|
27,304 | 26,400 | ||||||
|
Deposit
from customer
|
(400,000 | ) | 12,358 | |||||
|
Accounts
payable and accrued expenses
|
217,853 | (159,651 | ) | |||||
|
Net
cash used in operating activities
|
(1,862,436 | ) | (1,403,707 | ) | ||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchases
of property and equipment
|
(53,720 | ) | (2,337 | ) | ||||
|
Net
cash used in investing activities
|
(53,720 | ) | (2,337 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Proceeds
from sale of common stock
|
799,312 | 1,387,187 | ||||||
|
Proceeds
from recapitalization due to merger
|
- | 353,117 | ||||||
|
Proceeds
from note receivable
|
250,000 | - | ||||||
|
Proceeds
(repayment) of note to shareholders
|
750,000 | (621,715 | ) | |||||
|
Proceeds
from loans payable
|
81,229 | 551,381 | ||||||
|
Repayment
of loans payable
|
(100,077 | ) | - | |||||
|
Repayment
of debt to related parties
|
(25,000 | ) | (31,449 | ) | ||||
|
Net
cash provided by financing activities
|
1,755,464 | 1,638,521 | ||||||
|
(Decrease)
increase in cash
|
(160,692 | ) | 232,477 | |||||
|
Cash,
beginning of period
|
257,482 | 28,579 | ||||||
|
Cash,
end of period
|
$ | 96,790 | $ | 261,056 | ||||
|
Supplemental
disclosures of cash flow information:
|
||||||||
|
Cash
paid during the year for interest
|
$ | 110,715 | $ | 36,887 | ||||
|
Cash
paid during the year for taxes
|
$ | - | $ | - | ||||
|
Non-Cash
Investing and Financing Activities:
|
||||||||
|
Issuance
of shares for note payable
|
$ | 911,555 | $ | - | ||||
|
Issuance
of shares for termination of contract
|
$ | - | $ | 274,546 | ||||
|
Issuance
of note payable for termination of contract
|
$ | - | $ | 250,000 | ||||
|
|
||||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
|
1.
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS
|
Celsius
Holdings, Inc. (f/k/a Vector Ventures Corp.) (the “Company”) was incorporated
under the laws of the State of Nevada on April 26, 2005. The Company
was formed to engage in the acquisition, exploration and development of natural
resource properties. On December 26, 2006 the Company amended its Articles of
Incorporation to change its name from Vector Ventures Corp. as well as increase
the authorized shares to 350,000,000 $0.001 par value common shares and
50,000,000 $0.001 par value preferred shares.
Celsius
Holdings, Inc. is a holding company and carries on no operating business except
through its wholly owned subsidiaries, Celsius, Inc. and Celsius Netshipments,
Inc. Celsius, Inc. was incorporated in Nevada on January 18, 2007, and merged
with Elite FX, Inc. (“Elite”) on January 26, 2007 (the “Merger”), which was
incorporated in Florida on April 22, 2004. Celsius Netshipments, Inc. was
incorporated in Florida on March 28, 2007.
Prior to
January 26, 2007, the Company was in the exploration stage with its activities
limited to capital formation, organization, development of its business plan and
acquisition of mining claims. On January 24, 2007, the Company
entered into a merger agreement and plan of reorganization with Celsius, Inc., a
Nevada corporation and wholly-owned subsidiary of the Company (“Sub”), Elite FX,
Inc., a Florida corporation (“Elite”), and Steve Haley, the “Indemnifying
Officer” and “Securityholder Agent” of Elite, (the “Merger Agreement”). Under
the terms of the Merger Agreement Elite was merged into Sub and became a
wholly-owned subsidiary of the Company on January 26, 2007 (the
“Merger”).
Under the
terms of the Merger Agreement, the Company issued:
|
·
|
70,912,246
shares of its common stock to the stockholders of Elite, including
1,337,246 shares of common stock issued as compensation, as full
consideration for the shares of
Elite;
|
|
·
|
warrants
to Investa Capital Partners Inc. to purchase 3,557,812 shares of common
stock of the Company for $500,000, the warrants were exercised in February
2007;
|
|
·
|
1,391,500
shares of its common stock as partial consideration of termination of a
consulting agreement and assignment of certain trademark rights to the
name “Celsius”;
|
|
·
|
options
to purchase 10,647,025 shares of common stock of the Company in
substitution for the options currently outstanding in
Elite;
|
|
·
|
1,300,000
shares of its common stock concurrent with the Merger in a private
placement to non-US resident investors for aggregate consideration of
US$650,000 which included the conversion of a $250,000 loan to the
Company.
|
Celsius
Holdings, Inc’s majority stockholder, Mr. Kristian Kostovski, cancelled
7,200,000 shares of common stock of the Company held by him shortly after the
close of the Merger Agreement.
For
financial accounting purposes, the Merger was treated as a recapitalization of
Celsius Holdings, Inc with the former stockholders of Celsius Holdings, Inc
retaining approximately 24.6% of the outstanding stock. This
transaction has been accounted for as a reverse acquisition and accordingly the
transaction has been treated as a recapitalization of Elite, with
Elite as the accounting acquirer.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
The
historical financial statements are a continuation of the financial statements
of the accounting acquirer, and any difference of the capital structure of the
merged entity as compared to the accounting acquirer’s historical capital
structure is due to the recapitalization of the acquired entity.
After the
merger with Elite FX the Company changed its business to become a manufacturer
of beverages. The calorie burning beverage Celsius® is the
first brand of the Company.
|
2.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
The
unaudited condensed consolidated financial statements included herein have been
prepared by us, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, (the “SEC”). Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles in the United States
(“GAAP”) have been condensed or omitted pursuant to such rules and regulations.
In the opinion of the management, the interim consolidated financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the statement of the results for the
interim periods presented.
Going
Concern — The accompanying unaudited consolidated financial statements
are presented on a going concern basis. The Company has suffered losses from
operations, has a stockholders' deficit, and has a negative working capital that
raise substantial doubt about its ability to continue as a going
concern. Management is currently seeking new capital or debt financing to
provide funds needed to increase liquidity, fund growth, and implement its
business plan. However, no assurances can be given that the Company will be able
to raise any additional funds. If not successful in obtaining financing, the
Company will have to substantially diminish or cease its operations. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Consolidation
Policy — The accompanying consolidated financial statements include the
accounts of Celsius Holdings, Inc. and subsidiaries. All material inter-company
balances and transactions have been eliminated in consolidation.
Significant
Estimates — The preparation of condensed consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue and expenses
and disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates, and such
differences could affect the results of operations reported in future
periods.
Concentrations of
Risk — Substantially all of the Company’s revenue is derived from the
sale of the Celsius beverage.
The
Company uses single supplier relationships for its raw materials purchases and
bottling capacity, which potentially subjects the Company to a concentration of
business risk. If these suppliers had operational problems or ceased making
product available to the Company, operations could be adversely
affected.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents. The Company places its cash
and cash equivalents with high-quality financial institutions. At times,
balances in the Company’s cash accounts may exceed the Federal Deposit Insurance
Corporation limit.
Cash and Cash
Equivalents — The Company considers all highly liquid instruments with
maturities of three months or less when purchased to be cash equivalents. At
June 30, 2008 and December 31, 2007, the Company did not have any investments
with maturities greater than three months.
Accounts
Receivable — Accounts receivable are reported at net realizable value.
The Company has established an allowance for doubtful accounts based upon
factors pertaining to the credit risk of specific customers, historical trends,
and other information. Delinquent accounts are written-off when it is determined
that the amounts are uncollectible. At June 30, 2008, there was no allowance for
doubtful accounts.
Inventories
— Inventories include only the purchase cost and are stated at the lower of cost
or market. Cost is determined using the average method. Inventories consist of
raw materials and finished products. The Company writes down inventory during
the period in which such materials and products are no longer usable or
marketable. At June 30, 2008 there was a write down of inventory of
$16,444.
Property,
Fixtures, and
Equipment — Furniture, fixtures and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of furniture, fixtures,
and equipment is calculated using the straight-line method over the estimated
useful life of the asset generally ranging from three to seven years.
Depreciation expense recognized in the first six months of 2008 was
$11,124.
Impairment of
Long-Lived Assets — Asset impairments are recorded when the carrying
values of assets are not recoverable.
The
Company reviews long-lived assets to be held and used for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, or at least annually. If the sum of the undiscounted
expected future cash flows is less than the carrying amount of the asset, the
Company recognizes an impairment loss. Impairment losses are measured as the
amount by which the carrying amount of assets exceeds the fair value of the
asset. When fair values are not available, the Company estimates fair value
using the expected future cash flows discounted at a rate commensurate with the
risks associated with the recovery of the asset.
The
Company recognized an impairment charge during the first six months of 2007 of
$26,000 and no impairment in 2008.
Intangible
Assets — Intangible assets consist of the web domain name Celsius.com and
other trademarks and trade names, and are subject to annual impairment tests.
This analysis will be performed in accordance with Statement of Financial
Standards (‘‘SFAS’’) No. 142, Goodwill and Other Intangible Assets. Based
upon impairment analyses performed in accordance with SFAS No. 142 in
fiscal years 2007 and 2006, an impairment was recorded of $26,000 and $0,
respectively. The impairment was recorded for domain names and international
registration of trademarks. During the Company’s annual review of long-lived
assets in July of 2008, the Company concluded that no further impairment was
required.
Revenue
Recognition — Revenue is recognized when the products are delivered,
invoiced at a fixed price and the collectibility is reasonably assured. Any
discounts, sales incentives or similar arrangement with the customer is
estimated at time of sale and deducted from revenue.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
Advertising
Costs — Advertising costs are expensed as incurred. The Company uses
mainly radio, local sampling events and printed advertising. The Company
incurred expenses of $529,000 and $166,000, during the first six months of 2008
and 2007, respectively.
Research and
Development — Research and development costs are charged to operations as
incurred and consist primarily of consulting fees, raw material usage and test
productions of soda. The Company incurred expenses of $138,000 and
$1,000, during the first six months of 2008 and 2007,
respectively.
Fair Value of
Financial Instruments — The carrying value of cash, accounts receivable,
and accounts payable approximates fair value. The carrying value of debt
approximates the estimated fair value due to floating interest rates on the
debt.
Income
Taxes — Income taxes are accounted for using an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company’s financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than changes in the tax law or rates. A valuation allowance is recorded when it
is deemed more likely than not that a deferred tax asset will be not
realized.
Earnings per
Share —
Basic earnings per share are calculated by dividing income available to
stockholders by the weighted-average number of common shares outstanding during
each period. Diluted earnings per share are computed using the weighted average
number of common and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents consist of shares issuable upon the
exercise of stock options, convertible notes and warrants (calculated using the
reverse treasury stock method). As of June 30, 2008 there were options to
purchase 13.3 million shares outstanding, which exercise price averaged $0.07.
The dilutive common shares equivalents, including convertible notes and
warrants, of 11.1 million shares were not included in the computation of
diluted earnings per share, because the inclusion would be
anti-dilutive.
Reclassifications —
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Recent Accounting
Pronouncements
In
September 2006, the FASB issued Statement of Financial Standards
No. 157, "Fair Value Measurements" (“SFAS 157”). SFAS
157 defines fair value, establishes a framework for measuring fair
value in
accordance with accounting principles generally accepted
in the United States, and expands disclosures about fair
value measurements. This statement does not require any
new fair value measurements; rather, it applies under other
accounting pronouncements that require or permit fair value
measurements. The provisions of SFAS 157 are effective for fiscal years
beginning after November 15, 2007. The adoption of SFAS 157 did not
have a material impact on the Company's consolidated financial
position or results of operations.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
In
February 2007, FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”).
SFAS 159 permits entities to choose to measure many financial instruments
and certain other items at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007. The adoption of SFAS
159 did not have on the Company’s consolidated financial position and results of
operations.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
141R”). SFAS 141R significantly changes the accounting for business combinations
in a number of areas including the treatment of contingent consideration,
pre-acquisition contingencies, transaction costs, in-process research and
development, and restructuring costs. In addition, under SFAS 141R, changes in
an acquired entity’s deferred tax assets and uncertain tax positions after the
measurement period will impact income tax expense. SFAS 141R is effective for
fiscal years beginning after December 15, 2008. The Company does not
anticipate that the adoption of SFAS 141R will have a material impact on its
results of operations or financial condition.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No 51 (“SFAS
160”). SFAS 160 changes the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests and classified as a
component of equity. This new consolidation method significantly changes the
accounting for transactions with minority interest holders. SFAS 160 is
effective for fiscal years beginning after December 31, 2008. These
standards will change our accounting treatment for business combinations on a
prospective basis.
In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets.” This guidance is intended to improve the consistency
between the useful life of a recognized intangible asset under
SFAS No. 142, “Goodwill and Other Intangible Assets”, and the period
of expected cash flows used to measure the fair value of the asset under
SFAS No. 141R when the underlying arrangement includes renewal or
extension of terms that would require substantial costs or result in a material
modification to the asset upon renewal or extension. Companies estimating the
useful life of a recognized intangible asset must now consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, must consider assumptions that market participants would
use about renewal or extension as adjusted for SFAS No. 142’s
entity-specific factors. This standard is effective for fiscal years beginning
after December 15, 2008, and is applicable to the Company’s fiscal year
beginning January 1, 2008. The Company does not anticipate that the adoption of
this FSP will have a material impact on its results of operations or financial
condition.
In March
2008 and May 2008, respectively, the FASB issued the following statements of
financial accounting standards, neither of which is anticipated to have a
material impact on the Company’s results of operations or financial
position:
|
•
|
SFAS No. 161,
“Disclosures about
Derivative Instruments and Hedging Activities — an amendment of FASB
Statement No. 133;” and
|
|
|
•
|
SFAS No. 162,
“The Hierarchy of
Generally Accepted Accounting
Principles.”
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
3.
|
INVENTORIES
|
Inventories
consist of the following at:
| June 30, | December 31, | |||||||
| 2008 | 2007 | |||||||
|
Finished
goods
|
$ | 496,334 | $ | 407,972 | ||||
|
Raw
Materials
|
95,725 | 187,246 | ||||||
|
Less:
inventory valuation allowance
|
(16,444 | ) | (16,444 | ) | ||||
|
Inventories,
net
|
$ | 575,615 | $ | 578,774 |
|
4.
|
OTHER
CURRENT ASSETS
|
Other
current assets at June 30, 2008 and December 31, 2007 consist of deposits on
purchases, prepaid insurance and accrued interest receivable.
|
5.
|
PROPERTY,
FIXTURES, AND EQUIPMENT
|
Property,
fixtures and equipment consist of the following at:
| June 30, | December 31, | |||||||
| 2008 | 2007 | |||||||
|
Furniture,
fixtures and equipment
|
$ | 130,986 | $ | 78,425 | ||||
|
Less:
accumulated depreciation
|
(24,497 | ) | (13,728 | ) | ||||
|
Total
|
$ | 106,489 | $ | 64,697 |
Depreciation
expense amounted to $11,124 and $3,561 during the first six months of 2008
and 2007, respectively.
|
6.
|
OTHER
LONG-TERM ASSETS
|
Other
long-term assets at June 30, 2008 and December 31, 2007 consist of a deposit on
office lease and intangible assets.
|
7.
|
ACCOUNTS
PAYABLE AND ACCRUED EXPENSES
|
Accounts
payable and accrued expenses consist of the following at:
| June 30, | December 31, | |||||||
| 2008 | 2007 | |||||||
|
Accounts
payable
|
$ | 657,632 | $ | 466,047 | ||||
|
Accrued
expenses
|
152,333 | 128,781 | ||||||
|
Total
|
$ | 809,965 | $ | 594,828 |
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
8.
|
DUE
TO RELATED PARTIES
|
Due to
related parties consists of the following as of:
|
June
30,
|
December
31,
|
|||||||||
|
2008
|
2007
|
|||||||||
| a. |
The
Company received advances from one of its shareholders at various
instances during 2004 and 2005, $76,000 and $424,000, respectively. The
loan, which is not documented and has no repayment date, accrues interest
with a rate varying with the prime rate. No interest has been paid to the
shareholder.
|
$ | 669,111 | $ | 669,111 | |||||
| b. |
The
Company’s CEO loaned the Company $50,000 in February 2006. This loan is
not documented, accrues 7 percent interest, and has no repayment date. The
current liability to the CEO at June 30, 2008 and December 31, 2007, was
$33,447 and $56,610, respectively. Moreover, the Company started accruing
salary for the CEO in March of 2006 at a rate of $12,000 per month; at
June 30, 2008 and December 31, 2007, the total liability for accrued
salary to the CEO was $171,000. The Company has since June 1, 2007 paid
the full salary to the CEO.
|
204,447 | 227,610 | |||||||
| $ | 873,558 | $ | 896,721 | |||||||
|
9.
|
LOANS
PAYABLE
|
Loans
payable consist of the following as of:
|
June
30,
|
December
31,
|
|||||||||
|
2008
|
2007
|
|||||||||
| a. |
The
Company renewed its factoring agreement for the Company’s accounts
receivable during the first quarter of 2008. The maximum finance amount
under the agreement is $500,000. Each factoring of accounts receivable has
a fixed fee of one and a half percent of the invoice amount, a minimum fee
per month and an interest charge of prime rate plus three percent on the
outstanding balance under the credit agreement. The accounts receivable
are factored with full recourse to the Company and are in addition secured
by all of the Company’s assets.
|
$ |
114,261
|
$ |
102,540
|
|||||
| b. |
The
Company renewed its financing agreement for inventory on February 28,
2008. The line of credit is for $500,000 and carries an interest charge of
1.5 percent of the outstanding balance and a monitoring fee of 0.5 percent
of the previous month’s average outstanding balance. The Company can
borrow up to 50 percent of the cost of eligible finished goods inventory.
The credit agreement is secured by all of the Company’s
assets.
|
264,505
|
222,092
|
|||||||
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
June
30,
|
December
31,
|
|||||||||
|
2008
|
2007
|
|||||||||
| c. |
On
April 2, 2007 the Company received a $250,000 loan from Brennecke Partners
LLC. In January, 2008 the Company restructured the then outstanding
balance of the note and issued 1 million shares for an equivalent value of
$121,555, and a new non-interest bearing note for $105,000. The note calls
for 7 monthly principal payments beginning March 1,
2008.
|
$ |
45,000
|
$ |
225,675
|
|||||
| d. |
The
Company terminated a consulting agreement and received in assignment the
rights to the trademark “Celsius” from one of its former directors.
Payment was issued in the form of an interest-free note payable for
$250,000 and 1,391,500 shares of common stock. The note had monthly
amortization of $15,000 beginning June 30, 2007 with final payment of the
remaining outstanding balance on November 30, 2007.
|
125,000 | 160,000 | |||||||
| $ | 548,766 | $ | 710,307 | |||||||
|
10.
|
DEPOSIT
FROM CUSTOMER
|
During
2007, the Company received $400,000 from an international customer as deposit on
future orders. The deposit was used in its entirety to pay for product shipped
in April and June of 2008. The current balance as of June 30, 2008 and December
31, 2007 was $0 and $400,000, respectively.
|
11.
|
CONVERTIBLE
NOTE PAYABLE
|
On
December 18, 2007 the Company issued a $250,000 convertible note to CD Financial
LLC (“CD”). The loan incurs eight percent interest per annum, and the note is
due on April 16, 2008. The note can be converted to Company common stock after
February 16, 2008 at a rate equal to seventy five percent of the average of the
previous five days volume weighted average price for trading of the common
stock, nevertheless, in no case can the note be converted to more than 25
million shares of common stock. At the time of recording the note a beneficial
conversion feature for the conversion option was recorded in the amount $57,219,
of which $6,199 was amortized in 2007, and $51,020 in 2008. Total outstanding as
of December 31, 2007 was $199,692, which is net of debt discount of $51,020. On
April 4, 2008 the Company received an additional $500,000 from CD on the same
terms as the first note, also extending the due date of the first note. At the
time of recording the second note a beneficial conversion feature for the
conversion option was recorded as debt discount in the amount $154,835. On June
10, 2008, the total amount of $750,000 was converted to 11,184,016 shares of
Common Stock. The Company amortized 106,948 of the debt discount as interest
expense; the remaining balance of the debt discount at time of conversion
reduced the amount credited to equity.
On June
5, 2008, the Company issued a third convertible note for $250,000 to CD. The
note carries 8 percent interest per annum and is convertible together with a
future possible investment on or before August 3, 2008. If not converted, the
note is due on November 3, 2008. At the time of recording the note a beneficial
conversion feature for the conversion option was recorded in the amount $15,625,
of which $6,621 was amortized in June of 2008. Total outstanding as of June 30,
2008 was $242,366, which is net of debt discount of $9,004.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
12.
|
OTHER
LIABILITY
|
During
2006, the Company acquired a copier and a delivery van. The outstanding balance
on the aggregate loans as of June 30, 2008 and December 31, 2007 was $16,342 and
$21,420, respectively, of which $7,463 and $7,184, is due during the next 12
months, respectively. The loans carry interest of 6.7% and 9.1%, respectively.
The monthly payments are $406 and $317, respectively. The assets that were
purchased are collateral for the loans.
In June
2008, the Company acquired two delivery vans. The outstanding balance as of June
30, 2008 was $27,096, of which $5,228 is due during the next 12 months. The loan
carries an interest of 5.8%. The monthly payment is $521. The assets that were
purchased are collateral for the loans.
|
13.
|
LONG
TERM DEBENTURE
|
On
December 19, 2007, the Company entered into a $6 million security purchase
agreement (the “Security Agreement”) with Golden Gate Investors, Inc (“GGI”),
a California corporation. Under the Security Agreement, the Company
issued as a first tranche a $1.5 million convertible debenture maturing on
December 19, 2011. The debenture accrues seven and 3/4 percent interest per
annum. As consideration the Company received $250,000 in cash and a
note receivable for $1,250,000. The note receivable accrues eight percent
interest per annum and is due on February 1, 2012. The note has a pre-payment
obligation of $250,000 per month when certain criteria are fulfilled. The
most significant criteria is that the Company can issue freely tradable shares
under the debenture for an equivalent value. The Company estimates that
according to Rule 144, the shares will be freely tradable at different dates in
2008. The Company is not obligated to convert the debenture to shares, partially
or in full, unless GGI prepays the respective portion of its obligation under
the note. The Security Agreement contains three more identical tranches for a
total agreement of $6 million. Each new tranche can be started at any time by
GGI during the debenture period which is defined as between December 19, 2007
until the balance of the existing debentures is $250,000 or less. Either party
can, with a total penalty payment of $45,000 for the Company, and $100,000 for
GGI, cancel any or all of the three pending tranches.
The
debenture is convertible to common shares at a conversion rate of eighty percent
of the average of the three lowest volume weighted average prices for the
previous 20 trading days. The Company is not obligated to convert the amount
requested to be converted into Company common stock, if the conversion price is
less than $0.20 per share. GGI’s ownership in the company cannot exceed 4.99% of
the outstanding common stock. Under certain circumstances the Company may be
forced to pre pay the debenture with a fifty percent penalty of the pre-paid
amount.
The
Company recorded a debt discount of $186,619 with a credit to additional paid in
capital for the intrinsic value of the beneficial conversion feature of the
conversion option at the time of issuance. The debt discount is being amortized
over the term of the debenture. The Company recorded $23,328 as interest expense
amortizing the debt discount during the first six months of 2008. The Company
considered SFAS 133 and EITF 00-19 and concluded that the conversion option
should not be bifurcated from the host contract according to SFAS 133 paragraph
11 a, and concluded that according to EITF 00-19 the conversion option is
recorded as equity and not a liability.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
In June
2008, the Company received the first payment of $250,000 on the note receivable.
The Company converted $40,000 of the debenture to 603,628 shares of Common Stock
in June 2008, and subsequent to June 30 has converted additional $150,000 to
2,255,436 shares of Common Stock.
The
outstanding liability, net of debt discount, as of June 30, 2008 and December
31, 2007 was $1,298,242 and $1,314,914, respectively.
|
14.
|
STOCK-BASED
COMPENSATION
|
The
Company adopted an Incentive Stock Plan on January 19, 2007. This plan is
intended to provide incentives which will attract and retain highly competent
persons at all levels as employees of the Company, as well as independent
contractors providing consulting or advisory services to the Company, by
providing them opportunities to acquire the Company's common stock or to receive
monetary payments based on the value of such shares pursuant to Awards issued.
While the plan terminates 10 years after the adoption date, issued options have
their own schedule of termination. Until 2017, options to acquire up to 16.0
million shares of common stock may be granted at no less than fair market value
on the date of grant. Upon exercise, shares of new common stock are issued by
the Company.
The
Company has issued approximately 13.3 million options to purchase shares at an
average price of $0.07 with a fair value of $519,000. For the six months ended
June 30, 2008, the Company recognized $131,070 of non-cash compensation expense
(included in Selling, General and Administrative expense in the accompanying
Unaudited Condensed Consolidated Statement of Operations). As of June 30, 2008,
the Company had approximately $249,000 of unrecognized pre-tax non-cash
compensation expense which the Company expects to recognize, based on a
weighted-average period of 1.3 years. The Company used the Black-Scholes
option-pricing model and straight-line amortization of compensation expense over
the two to three year requisite service or vesting period of the grant. There
are options to purchase 4.1 million shares that have vested, and 16,671 shares
were exercised as of June 30, 2008. The following is a summary of the
assumptions used:
|
Risk-free interest rate
|
1.7%
- 4.9%
|
|
|
Expected dividend yield
|
—
|
|
|
Expected
term
|
3 –
5 years
|
|
|
Expected
annual volatility
|
73% - 82%
|
Elite
granted on January 19, 2007, prior to the merger with Celsius Holdings, Inc,
equivalent to 1,337,246 shares of common stock in the Company, to its Chief
Financial Officer as starting bonus for accepting employment with the Company.
The Company valued the grant of stock based on fair value of the shares, which
was estimated as the value of shares in the most recent transaction of the
Company’s shares. The Company recognized the expense upon issuance of the
grant.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
In
March, 2008, the Company issued a total of 750,000 shares as compensation to an
international distributor at a fair value of $120,000. The same agreement can
give the distributor 750,000 additional shares if certain sales targets are met,
or if the stock price of the Company is 45 cents or greater for a period of 5
trading days, whichever occurs first.
|
15.
|
RELATED
PARTY TRANSACTIONS
|
The CEO
has guaranteed the Company’s obligations under the factoring agreement with
Bibby Financial Services, Inc. (“Bibby”), the outstanding balance to Bibby as of
June 30, 2008 and December 31, 2007 was $114,261 and $102,540,
respectively. The CEO has also guaranteed the financing for the Company’s
offices and a purchase of a vehicle. The CEO has not received any compensation
for the guarantees.
The COO
of the Company lent the Company $50,000 in February 2008, the loan was repaid in
March 2008. The COO also purchased in February 2008, 781,250 shares in a private
placement for a total consideration of $75,000.
The CFO
of the Company lent the Company $25,000 in February 2008, the loan was repaid in
February 2008. The CFO also purchased in February 2008, 245,098 shares in a
private placement for a total consideration of $25,000.
The Vice
President of Strategic Accounts and Business Development purchased in February
2008, 245,098 in a private placement for a total consideration of
$25,000.
|
16.
|
STOCKHOLDERS’
DEFICIT
|
Issuance
of common stock pursuant to conversion of note
In
January 2008, the Company restructured the then outstanding balance of a note
and issued 1 million shares for an equivalent value of $121,555, and a new
non-interest bearing note for $105,000. The note calls for 7 monthly
principal payments beginning March 1, 2008. The outstanding balance as of June
30, 2008 was $90,000.
In June
2008, the Company issued 11,184,016 and 603,628 as conversion of notes for
$750,000 and $40,000, respectively, to two separate noteholders.
Issuance
of common stock pursuant to services performed
In March
2008, the Company issued a total of 750,000 shares as compensation to an
international distributor at a fair value of $120,000.
Issuance
of common stock pursuant to exercise of stock options
On
February 15, 2008 the Company issued 16,671 shares of unregistered common stock
in accordance to its 2006 Stock Incentive Plan to an employee exercising vested
options.
Issuance
of common stock pursuant to private placements
In
February 2008 the Company issued a total of 3,198,529 unregistered shares of
common stock in private placements for an aggregate consideration of $298,900,
net of commissions.
In March
2008 the Company issued a total of ten million unregistered shares of common
stock in a private placement, for an aggregate consideration of $500,100. In
addition, the investor received a warrant to purchase seven million unregistered
shares of common stock during a 3-year period, at an exercise price of $0.13 per
share. Of the total consideration, $100,000 was paid in March and $400,100 was
paid on April 7, 2008.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
17.
|
SUBSEQUENT
EVENTS
|
In July
and August Golden Gate Investors, converted $200,000 of its convertible
debenture to 2.9 million shares. Golden Gate Investors made its second payment
of $250,000 in July on its note payable to the Company.
On July
15, 2008 the Company issued a convertible note for $250,000 to CD Financial,
LLC. The note carries 8 percent interest per annum and was converted in August
2008.
On August
8, 2008, the Company entered into a securities purchase agreement (“SPA”) with
CDS Ventures of South Florida, LLC (“CDS”), an affiliate of CD Financial, LLC.
Pursuant to the SPA, the Company issued 2,000 Series A preferred shares
(“Preferred Shares”), as well as a warrant to purchase additional 1,000
Preferred Shares, for a cash payment of $1.5 million and the cancellation of two
notes in aggregate amount of $500,000 issued to CD Financial, LLC. The Preferred
Shares can be converted into Company Common Stock at any time; for the first 200
days after the closing date, the conversion price is $0.08, after which the
conversion price is the greater of $0.08 or 90% of the volume weighted average
price of the Common Stock for the prior 10 trading days. Pursuant to the SPA,
the Company entered into a registration rights agreement under which the company
agreed to file a registration statement for the common stock issuable upon
conversion of Preferred Shares. The Preferred Shares accrues a ten percent
annual dividend, payable in additional Preferred Shares. The full agreement can
be reviewed in the Company’s Form 8-K filed with the SEC in August
2008.
CELSIUS
HOLDINGS, INC.
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2007
 SHERB & CO., LLP
|
1900
NW Corporate Blvd., Suite 210 East
Boca
Raton, Florida 33431
Tel.
561-886-4200
Fax.
561-886-3330
email:info@sherbcpa.com
Offices
in New York and Florida
|
Certified
Public Accountants
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
Celsius
Holdings, Inc.
We have
audited the accompanying consolidated balance sheet of Celsius Holdings,
Inc. and subsidiaries as of December 31, 2007 and the related consolidated
statements of operations, changes in stockholders' deficit and cash flows for
the years ended December 31, 2007 and 2006, respectively. These consolidated
financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required
to have, nor were we engaged to perform, an audit of its internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company and subsidiaries
as of December 31, 2007 and the results of their operations and cash flows for
the years ended December 31, 2007 and 2006, respectively, in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered losses from
operations, has a stockholders' deficit, and has a negative working capital all
of which raise substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are described in Note 1
to the consolidated financial statements. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/
Sherb & Co., LLP
Certified
Public Accountants
Boca
Raton, Florida
February
28, 2008
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
|
||||
|
CONSOLIDATED
BALANCE SHEET
|
||||
|
December
31,
|
||||
|
2007
|
||||
|
ASSETS
|
||||
|
Current
Assets:
|
||||
|
Cash
|
$ | 257,482 | ||
|
Accounts
receivable
|
276,877 | |||
|
Inventories,
net
|
578,774 | |||
|
Prepaid
expenses and other current assets
|
44,960 | |||
|
Total
current assets
|
1,158,093 | |||
|
Property,
fixtures and equipment, net
|
64,697 | |||
|
Intangible
assets, net
|
41,500 | |||
|
Note
receivable
|
1,250,000 | |||
|
Other
assets
|
18,840 | |||
|
Total
assets
|
$ | 2,533,130 | ||
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||
|
Current
Liabilities:
|
||||
|
Accounts
payable and accrued expenses
|
$ | 594,828 | ||
|
Notes
payable
|
550,307 | |||
|
Deposit
from customer
|
400,000 | |||
|
Short
term portion of long term liabilities
|
7,184 | |||
|
Convertible
note payable, net of debt discount of $51,020
|
199,692 | |||
|
Due
to related parties
|
1,056,721 | |||
|
Total
current liabilities
|
2,808,732 | |||
|
Convertible
note payable, net of debt discount of $185,086
|
1,314,914 | |||
|
Other
long term liabilities
|
14,236 | |||
|
Total
liabilities
|
4,137,882 | |||
|
Stockholders'
Deficit:
|
||||
|
Preferred
stock; $.001 par value, 50,000,000 shares authorized,
none
issued or outstanding
|
- | |||
|
Common
stock; $.001 par value, 350,000,000 shares authorized,
|
||||
|
105,610,358
issued and outstanding
|
105,611 | |||
|
Additional
paid in capital
|
4,410,405 | |||
|
Accumulated
deficit
|
(6,120,768 | ) | ||
|
Total
stockholders’ deficit
|
(1,604,752 | ) | ||
|
Total
liabilities and stockholders’ deficit
|
$ | 2,533,130 | ||
See Notes
to Consolidated Financial Statements
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
|
||||||||
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||
|
For
the years ended December 31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Revenue
|
$ | 1,644,780 | $ | 1,296,958 | ||||
|
Revenue,
related party
|
- | 128 | ||||||
|
Total
Revenue
|
1,644,780 | 1,297,086 | ||||||
|
Cost
of revenue
|
1,033,971 | 815,154 | ||||||
|
Cost
of revenue, related party
|
- | 34,916 | ||||||
|
Total
cost of revenue
|
1,033,971 | 850,070 | ||||||
|
Gross
profit
|
610,809 | 447,016 | ||||||
|
Operating
expenses:
|
||||||||
|
Selling
and marketing expense
|
1,545,323 | 998,510 | ||||||
|
General
and administrative expense
|
2,109,874 | 791,290 | ||||||
|
Termination
of contract expense, related party
|
500,000 | - | ||||||
|
Total
operating expenses
|
4,155,197 | 1,789,800 | ||||||
|
Operating
loss
|
(3,544,388 | ) | (1,342,784 | ) | ||||
|
Other
expenses:
|
||||||||
|
Interest
expense, related party
|
75,647 | 72,468 | ||||||
|
Interest
expense, other, net
|
105,806 | 39,101 | ||||||
|
Total
other expenses
|
181,453 | 111,569 | ||||||
|
Net
loss
|
$ | (3,725,841 | ) | $ | (1,454,353 | ) | ||
|
Loss
per share, basic and diluted
|
$ | (0.04 | ) | $ | (0.02 | ) | ||
|
Weighted
average shares outstanding -
|
||||||||
|
basic
and diluted
|
100,688,634 | 70,912,246 | ||||||
See Notes
to Consolidated Financial Statements
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
|
||||||||||||||||||||
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
|
||||||||||||||||||||
|
FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
|
||||||||||||||||||||
|
Additional
|
||||||||||||||||||||
|
Common
Stock
|
Paid-In
|
Accumulated
|
Total
|
|||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
|||||||||||||||||
|
Balance
at December 31, 2005
|
69,575,000 | $ | 69,575 | $ | 705,425 | $ | (940,574 | ) | $ | (165,574 | ) | |||||||||
|
Net
loss
|
(1,454,353 | ) | (1,454,353 | ) | ||||||||||||||||
|
Balance
at December 31, 2006
|
69,575,000 | 69,575 | 705,425 | (2,394,927 | ) | (1,619,927 | ) | |||||||||||||
|
Effect
of recapitalization
due
to merger
|
24,000,000 | 24,000 | 329,117 | 353,117 | ||||||||||||||||
|
Issuance
of common stock
|
||||||||||||||||||||
|
in
exchange of note
|
500,000 | 500 | 249,500 | 250,000 | ||||||||||||||||
|
Issuance
of common stock
|
||||||||||||||||||||
|
for
cash
|
5,013,800 | 5,014 | 1,777,720 | 1,782,734 | ||||||||||||||||
|
Exercise
of warrants
|
3,557,812 | 3,558 | 496,442 | 500,000 | ||||||||||||||||
|
Shares
issued as compensation
|
1,572,246 | 1,572 | 196,928 | 198,500 | ||||||||||||||||
|
Shares
issued for termination
of
contract
|
1,391,500 | 1,392 | 273,154 | 274,546 | ||||||||||||||||
|
Beneficial
conversion feature of
debt
instrument
|
243,838 | 243,838 | ||||||||||||||||||
|
Stock
option expense
|
138,281 | 138,281 | ||||||||||||||||||
|
Net
loss
|
(3,725,841 | ) | (3,725,841 | ) | ||||||||||||||||
|
Balance
at December 31, 2007
|
105,610,358 | $ | 105,611 | $ | 4,410,405 | $ | (6,120,768 | ) | $ | (1,604,752 | ) | |||||||||
See Notes
to Consolidated Financial Statements
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
|
||||||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
|
For
the Years Ended December 31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
loss
|
$ | (3,725,841 | ) | $ | (1,454,353 | ) | ||
|
Adjustments
to reconcile net loss to net cash
|
||||||||
|
used
in operating activities:
|
||||||||
|
Depreciation
|
11,658 | 1,665 | ||||||
|
Impairment
of intangible assets
|
26,000 | - | ||||||
|
Termination
of contract
|
500,000 | - | ||||||
|
Issuance
of stock options
|
138,281 | - | ||||||
|
Accrued
interest, related parties and stockholders
|
126,647 | 209,086 | ||||||
|
Interest
expense, debt discount amortization
|
7,732 | - | ||||||
|
Issuance
of shares as compensation
|
198,500 | - | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(148,558 | ) | (94,980 | ) | ||||
|
Inventories
|
(13,675 | ) | (298,686 | ) | ||||
|
Prepaid
expenses and other current assets
|
3,674 | (38,635 | ) | |||||
|
Other
long-term assets
|
(12,580 | ) | - | |||||
|
Accounts
payable and accrued expenses
|
(62,524 | ) | 496,580 | |||||
|
Deposit
from customer
|
400,000 | - | ||||||
|
Net
cash used in operating activities
|
(2,550,686 | ) | (1,179,323 | ) | ||||
|
Cash
flows from investing activity:
|
||||||||
|
Purchases
of intangible assets
|
(41,500 | ) | (26,000 | ) | ||||
|
Purchases
of property, fixtures and equipment
|
(46,164 | ) | (27,646 | ) | ||||
|
Net
cash used in investing activities
|
(87,664 | ) | (53,646 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Proceeds
from sale of common stock
|
1,782,734 | 200,000 | ||||||
|
Proceeds
from exercise of warrants
|
500,000 | - | ||||||
|
Proceeds
from recapitalization due to merger
|
353,117 | - | ||||||
|
(Repayment)
Proceeds from note to stockholders
|
( 621,715 | ) | 600,000 | |||||
|
Proceeds
from issuance of convertible notes
|
500,000 | - | ||||||
|
Proceeds
from loans payable
|
483,891 | 365,772 | ||||||
|
Repayment
of loans payable
|
(24,325 | ) | - | |||||
|
Proceeds
from due to related parties
|
(106,449 | ) | 58,736 | |||||
|
Net
cash provided by financing activities
|
2,867,253 | 1,224,508 | ||||||
|
Increase
(decrease) in cash
|
228,903 | (8,461 | ) | |||||
|
Cash,
beginning of year
|
28,579 | 37,040 | ||||||
|
Cash,
end of year
|
$ | 257,482 | $ | 28,579 | ||||
|
Supplemental
disclosures of cash flow information:
|
||||||||
|
Cash
paid during the year for interest
|
$ | 107,364 | $ | 17,386 | ||||
|
Cash
paid during the year for taxes
|
$ | - | $ | - | ||||
See Notes
to Consolidated Financial Statements
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
BUSINESS
AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
Business
—Celsius Holdings, Inc. (f/k/a Vector Ventures Corp., the “Company”) was
incorporated under the laws of the State of Nevada on April 26,
2005. The Company was formed to engage in the acquisition,
exploration and development of natural resource properties. On December 26, 2006
the Company amended its Articles of Incorporation to change its name from Vector
Ventures Corp. as well as increase the authorized shares to 350,000,000, $0.001
par value common shares and 50,000,000, $0.001 par value preferred
shares.
Prior to
January 26, 2007, the Company was in the exploration stage with its activities
limited to capital formation, organization, development of its business plan and
acquisition of mining claims. On January 24, 2007, the Company
entered into a merger agreement and plan of reorganization with Celsius, Inc., a
Nevada corporation and wholly-owned subsidiary of the Company (“Sub”), Elite FX,
Inc., a Florida corporation (“Elite”), and Steve Haley, the “Indemnifying
Officer” and “Securityholder Agent” of Elite, (the “Merger Agreement”). Under
the terms of the Merger Agreement Elite was merged into Sub and became a
wholly-owned subsidiary of the Company on January 26, 2007 (the
“Merger”).
Under the
terms of the Merger Agreement, the Company issued:
|
·
|
70,912,246
shares of its common stock to the stockholders of Elite, including
1,337,246 shares of common stock issued as compensation, as full
consideration for the shares of
Elite;
|
|
·
|
warrants
to Investa Capital Partners Inc. to purchase 3,557,812 shares of common
stock of the Company for $500,000. The warrants were exercised in February
2007;
|
|
·
|
1,391,500
shares of its common stock as partial consideration for termination of a
consulting agreement and assignment of certain trademark rights to the
name “Celsius”;
|
|
·
|
options
to purchase 10,647,025 shares of common stock of the Company in
substitution for the options currently outstanding in
Elite;
|
|
·
|
1,300,000
shares of its common stock concurrent with the Merger in a private
placement to non-US resident investors for aggregate consideration of
US$650,000 which included the conversion of a $250,000 loan to the
Company.
|
Celsius
Holdings, Inc’s majority stockholder, Mr. Kristian Kostovski, cancelled
7,200,000 shares of common stock of the Company held by him shortly after the
close of the Merger Agreement.
For
financial accounting purposes, the Merger was treated as a recapitalization of
Celsius Holdings, Inc with the former stockholders of the Celsius Holdings,
Inc retaining approximately 24.6% of the outstanding stock. This
transaction has been accounted for as a reverse acquisition and accordingly the
transaction has been treated as a recapitalization of Elite FX, Inc., with
Elite FX, Inc. as the accounting acquirer. The historical financial
statements are a continuation of the financial statements of the accounting
acquirer, and any difference of the capital structure of the merged entity as
compared to the accounting acquirer’s historical capital structure is due to the
recapitalization of the acquired entity.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Going
Concern — The accompanying consolidated financial statements are
presented on a going concern basis. The Company has suffered losses from
operations, has a stockholders' deficit, and has a negative working capital that
raise substantial doubt about its ability to continue as a going
concern. Management is currently seeking new capital or debt financing to
provide funds needed to increase liquidity, fund growth, and implement its
business plan. However, no assurances can be given that the Company will be able
to raise any additional funds. If not successful in obtaining financing, the
Company will have to substantially diminish or cease its operations. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Consolidation
Policy — The accompanying consolidated financial statements include the
accounts of Celsius Holdings, Inc. and subsidiaries. All material inter-company
balances and transactions have been eliminated in consolidation.
Significant
Estimates — The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
Concentrations of
Risk — Substantially all of the Company’s revenue derives from the sale
of the Celsius beverage.
The
Company uses single supplier relationships for its raw materials purchases and
bottling capacity, which potentially subjects the Company to a concentration of
business risk. If these suppliers had operational problems or ceased making
product available to the Company, operations could be adversely
affected.
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents. The Company places its cash
and cash equivalents with high-quality financial institutions. At times,
balances in the Company’s cash accounts may exceed the Federal Deposit Insurance
Corporation limit.
Cash and Cash
Equivalents — The Company considers all highly liquid instruments with
maturities of three months or less when purchased to be cash equivalents. At
December 31, 2007, the Company did not have any investments with maturities
greater than three months.
Accounts
Receivable — Accounts receivable are reported at net realizable value.
The Company establishes an allowance for doubtful accounts based upon factors
pertaining to the credit risk of specific customers, historical trends, and
other information. Delinquent accounts are written-off when it is determined
that the amounts are uncollectible. At December 31, 2007, there was no allowance
for doubtful accounts.
Inventories
— Inventories include only the purchase cost and are stated at the lower of cost
or market. Cost is determined using the average method. Inventories consist of
raw materials and finished products. The Company writes down inventory during
the period in which such materials and products are no longer usable or
marketable.
Property,
Fixtures, and
Equipment — Furniture, fixtures and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of furniture, fixtures,
and equipment is calculated using the straight-line method over the estimated
useful life of the asset generally ranging from three to seven
years.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment of
Long-Lived Assets — Asset impairments are recorded when the carrying
values of assets are not recoverable.
The
Company reviews long-lived assets to be held and used for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable or at least annually. If the sum of the undiscounted
expected future cash flows is less than the carrying amount of the asset, the
Company recognizes an impairment loss. Impairment losses are measured as the
amount by which the carrying amount of assets exceeds the fair value of the
asset. When fair values are not available, the Company estimates fair value
using the expected future cash flows discounted at a rate commensurate with the
risks associated with the recovery of the asset.
Intangible
Assets — Intangible assets consist of the web domain name Celsius.com and
other trademarks and trade names, and are subject to annual impairment tests.
This analysis will be performed in accordance with Statement of Financial
Standards (‘‘SFAS’’) No. 142, Goodwill and Other Intangible Assets. Based
upon impairment analyses performed in accordance with SFAS No. 142 in
fiscal years 2007 and 2006, impairment was recorded of $26,000 and $0,
respectively. The impairment was recorded was for domain names and international
registration of trademarks. During the Company’s annual review of long-lived
assets in July of 2007, the Company cannot estimate a positive cash flow from
the internet business or international business and therefore impaired these
assets completely.
Revenue
Recognition — Revenue is recognized when the products are delivered,
invoiced at a fixed price and the collectability is reasonably assured. Any
discounts, sales incentives or similar arrangements with the customer are
estimated at time of sale and deducted from revenue.
Advertising
Costs — Advertising costs are expensed as incurred. The Company uses
mainly radio, local sampling events and printed advertising. The Company
incurred advertising expense of $561,000 and $452,000, during the fiscal years
2007 and 2006, respectively.
Research and
Development — Research and development costs are charged to operations as
incurred and consists primarily of consulting fees, raw material usage and test
productions of beverages. The Company incurred expenses of
$214,000 and $11,000, during the fiscal years 2007 and 2006,
respectively.
Fair Value of
Financial Instruments — The carrying value of cash and cash equivalents,
accounts receivable, and accounts payable approximates fair value. The carrying
value of debt approximates the estimated fair value due to floating interest
rates on the debt.
Income
Taxes — Income taxes are accounted for using an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company’s financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than changes in the tax law or rates. A valuation allowance is recorded when it
is deemed more likely than not that a deferred tax asset will be not
realized.
Earnings per
Share —
Basic earnings per share are calculated by dividing income available to
stockholders by the weighted-average number of common shares outstanding during
each period. Diluted earnings per share are computed using the weighted average
number of common and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents consist of shares issuable upon the
exercise of stock options and warrants (calculated using the reverse treasury
stock method). Common share equivalents outstanding were 8,534,864 and 0,
as of December 31, 2007 and 2006, respectively.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Share-Based
Payments — In December 2004, the FASB issued SFAS No.
123(R) "Share-Based Payment," (“SFAS 123(R)”), which replaces SFAS No. 123
and supersedes APB Opinion No. 25. Under SFAS 123(R), companies are required to
measure the compensation costs of share-based compensation arrangements based on
the grant-date fair value and recognize the costs in the financial
statements over the period during which employees are required to provide
services. Share-based compensation arrangements include stock options,
restricted share plans, performance-based awards, share appreciation rights and
employee share purchase plans. In March 2005, the SEC issued Staff Accounting
Bulletin No.107 "SAB 107'. SAB 107 expresses views of the staff regarding the
interaction between SFAS 123(R) and certain SEC rules and regulations and
provides the staffs views regarding the valuation of share-based payment
arrangements for public companies. Effective January 1, 2006, the Company
has fully adopted the provisions of SFAS 123(R) and related interpretations as
provided by SAB 107. As such, compensation cost is measured on the date of grant
as the fair value of the share-based payments. Such compensation amounts, if
any, are amortized over the respective vesting periods of the option
grant.
Recent Accounting
Pronouncements
In
September 2006, the FASB issued Statement of Financial Standards
No. 157, "Fair Value Measurements" (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value
in
accordance with accounting principles generally accepted
in the United States, and expands disclosures about fair
value measurements. This statement does not require any
new fair value measurements; rather, it applies under other
accounting pronouncements that require or permit fair value
measurements. The provisions of SFAS 157 are effective for fiscal years
beginning after November 15, 2007. The Company does
not expect the adoption of SFAS 157 to have a material
impact on the Company’s financial position or results
of operations.
In
September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
Accounting Bulletin (“SAB”) 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements,” which eliminates the diversity in practice surrounding the
quantification and evaluation of financial statement errors. The guidance
outlined in SAB 108 is effective for the Company in 2008 and is consistent with
our historical practices for assessing such matters when circumstances have
required such an evaluation. Accordingly, the Company does not believe that
adoption of SAB 108 will have any impact on the Company.
In
February 2007, FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value and establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
SFAS 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. The Company is assessing the impact the adoption
of SFAS 159 will have on the Company’s financial position and results of
operations for fiscal 2008.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS
160”). SFAS 160 requires companies with noncontrolling interests to disclose
such interests clearly as a portion of equity but separate from the parent’s
equity. The noncontrolling interest’s portion of net income must also be clearly
presented on the Income Statement. SFAS 160 is effective for financial
statements issued for fiscals years beginning after December 15, 2008 and will
be adopted by the Company in the first quarter of fiscal year 2009. The Company
does not believe that adoption of SFAS 160 will have any impact on the
Company.
In
December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations (revised
2007)” (“SFAS 141 (R)”). SFAS 141 (R) applies the acquisition method of
accounting for business combinations established in SFAS 141 to all acquisitions
where the acquirer gains a controlling interest, regardless of whether
consideration was exchanged. Consistent with SFAS 141, SFAS 141 (R) requires the
acquirer to fair value the assets and liabilities of the acquiree and record
goodwill on bargain purchases, with the application to all acquisitions where
control is achieved. SFAS 141 (R) is effective for financial statements issued
for fiscal years beginning after December 15, 2008 and will be adopted by the
Company in the first quarter of fiscal year 2009. The Company does not believe
that adoption of SFAS 141 (R) will have any impact on the Company.
|
2.
|
INVENTORIES
|
Inventories
at December 31, 2007 consist of the following:
|
Finished
goods
|
$407,972
|
|
Raw
Materials
|
187,246
|
|
Less:
inventory valuation allowance
|
(16,444)
|
|
Inventories,
net
|
$578,774
|
|
3.
|
PREPAID
EXPENSES AND OTHER CURRENT ASSETS
|
Other
current assets at December 31, 2007 consist of:
|
Deposits,
for purchase of raw materials and utilities
|
37,135
|
|
Prepaid
expense
|
4,537
|
|
Accrued
interest
|
3,288
|
|
Total
|
$44,960
|
|
4.
|
PROPERTY,
FIXTURES, AND EQUIPMENT
|
Property,
fixtures and equipment at December 31, 2007 consist of the
following:
|
Furniture,
fixtures and equipment
|
$78,425
|
|
Less
accumulated depreciation
|
(13,728)
|
|
Total
|
$64,697
|
Depreciation
expense amounted to $11,658 and $1,665 during 2007 and 2006,
respectively.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
5.
|
OTHER
LONG-TERM ASSETS
|
Other
long-term assets at December 31, 2007 consist of the
following:
|
Long
term deposits on office lease
|
18,840
|
|
Total
|
$18,840
|
|
6.
|
LEASE
COMMITMENTS
|
The
Company leases its office under an operating lease, with term expiring in 2008,
and a copier expiring in 2011. No other leases exist. The aggregate future
minimum non-cancelable operating lease payments at December 31, 2007 were as
follows:
|
Fiscal
Years Ending:
|
|
|
2008
|
68,719
|
|
2009
|
8,269
|
|
2010
|
8,269
|
|
2011
|
97
|
|
Total
|
$85,354
|
|
7.
|
ACCOUNTS
PAYABLE AND ACCRUED EXPENSES
|
Accounts
payable and accrued expenses at December 31, 2007 consist of the
following:
|
Accounts
payable – trade
|
$466,047
|
|
Accrued
expenses
|
128,781
|
|
Total
|
$594,828
|
|
8.
|
DUE
TO RELATED PARTIES
|
Due to
related parties consist of the following as of December 31, 2007:
|
The Company received
advances from one of its stockholders at various instances during 2004 and
2005, $76,000 and $424,000, respectively. The loan, which is not
documented and has no repayment date, accrues interest with a rate varying
with the prime rate; the interest rate at December 31, 2007 was 11.3
percent. No interest has been paid to the stockholder.
|
$669,111 |
|
The CEO loaned the
Company $50,000 in February 2006. This loan is not documented,
accrues 7 percent interest, and has no repayment date. The current
liability to the CEO for the loan at December 31, 2007 was $56,610.
Moreover, the Company started accruing salary for the CEO in March of
2006 at a rate of $12,000 per month; at December 31, 2007 the total
liability for accrued salary to the CEO was $171,000.
|
227,610 |
|
The Company
terminated a consulting agreement and received in assignment the rights to
the trademark “Celsius” from one of its directors. Payment was issued in
the form of an interest-free note payable for $250,000 and 1,391,500
shares of common stock. The note has monthly amortization of $15,000 from
March 31, 2007 and a final payment of the remaining outstanding balance on
November 30, 2007. The Company has paid the six of the installments as of
December 31, 2007.
|
160,000 |
|
$1,056,721
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
9.
|
NOTES
PAYABLE
|
|
The Company
renegotiated a factoring agreement for the Company’s accounts receivable
during the first quarter of 2007. The maximum finance amount under the
agreement is $500,000. Each factoring of accounts receivable has a fixed
fee of one and a half percent of the invoice amount, a minimum fee per
month and an interest charge of prime rate plus three percent on the
outstanding balance under the credit agreement. The accounts receivable
are factored with full recourse against the Company and are secured by all
of the Company’s assets.
|
$102,540 |
|
The Company entered
into a financing agreement for its inventory on February 28, 2007. The
line of credit is for $500,000 and carries an interest of 1.5 percent per
month of the outstanding balance and a monitoring fee of 0.5 percent per
month of the previous month’s average outstanding balance. The Company can
borrow up to 50 percent of the cost of eligible finished goods inventory.
The credit agreement is secured by all of the Company’s
assets.
|
222,092 |
|
On April 2, 2007 the
Company received a $250,000 loan from Brennecke Partners LLC. The loan
incurs nine percent interest per annum, and the note is due on
demand.
|
225,675 |
|
$ 550,307
|
|
10.
|
DEPOSIT
FROM CUSTOMER
|
During
2007, the company received $400,000 from an international customer as deposit on
future orders. The orders will necessitate special production of the packaging
materials, and certain other product development is necessary. The Company does
not have a specific purchase order on hand, and is currently waiting for the
final graphic design for the special packaging.
|
11.
|
CONVERTIBLE
NOTE PAYABLE
|
On
December 18, 2007 the Company issued a $250,000 convertible loan to CD Financial
LLC. The loan incurs eight percent interest per annum, and the note is due on
April 16, 2008. The note can be converted to Company common stock after February
16, 2008 at a rate equal to seventy five percent of the average of the previous
five days volume weighted average price for trading of the common stock. At the
time of recording the note a beneficial conversion feature for the conversion
option was recorded in the amount $57,219, of which $6,199 was amortized in
2007. Total outstanding, including accrued interest as of December 31, 2007, net
of debt discount was $199,692.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
12.
|
OTHER
LIABILITIES
|
During
2006, the Company acquired a copier and a delivery van. The outstanding balance
on the aggregate loans as of December 31, 2007 was $21,420, of which $7,184 is
due during the fiscal year 2008. The loans carry an interest of 6.7%
and 9.1% interest, respectively. The monthly payments are $406 and $317,
respectively. The assets that were purchased are collateral for the
loans.
|
13.
|
LONG
TERM DEBENTURE
|
On
December 19, 2007, the Company entered into a $6 million security purchase
agreement (the “Security Agreement”) with Golden Gate Investors, Inc (“GGI”),
a California corporation. Under the Security Agreement, the Company
issued as a first tranche a $1.5 million convertible debenture maturing on
December 19, 2011. The debenture accrues seven and 3/4 percent interest per
annum. As consideration the Company received $250,000 in cash and a
note receivable for $1,250,000. The note receivable accrues eight percent
interest per annum and is due on December 19, 2012. The note has a pre-payment
obligation of $250,000 per month when certain criteria are fulfilled. The
most significant criteria is that the Company can issue freely tradable shares
under the debenture for an equivalent value. The Company estimates that
according to Rule 144, the shares will be freely tradable on June 19, 2008. The
Company is not obligated to convert the debenture to shares, partially or in
full, unless GGI prepays its obligation under the note. The Security Agreement
contains three more identical tranches for a total agreement of $6 million. Each
new tranche can be started at any time by GGI during the second debenture period
which is defined as between December 19, 2007 until the balance of the existing
debentures is $250,000 or less. Either party can, with a total penalty payment
of $45,000 for the Company, and $100,000 for GGI, cancel any or all of the three
pending tranches.
The
debenture is convertible to common shares at a conversion rate of eighty percent
of the average of the three lowest volume weighted average prices for the
previous 20 trading days. GGI’s ownership in the company can not exceed 4.99% of
the outstanding common stock. Under certain circumstances the Company may be
forced to pre pay the debenture with a fifty percent penalty of the pre-paid
amount.
The
Company recorded a debt discount of $186,619 with credit to additional paid in
capital for the intrinsic value of the beneficial conversion feature of the
conversion option at the time of issuance. The debt discount is being amortized
over the term of the debenture. The Company recorded $1,533 as interest expense
amortizing the debt discount in December 2007. The Company considered SFAS 133
and EITF 00-19 and concluded that the conversion option should not be bifurcated
from the host contract according to SFAS paragraph 11 a, and concluded that
according to EITF 00-19 the conversion option is recorded as equity and not
liability.
|
14.
|
INCOME
TAXES
|
For the
years ended December 31, 2007 and 2006, the Company’s net tax provision was
zero.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
difference between the effective income tax rate and the United States federal
income tax rate is summarized as follows:
|
2007
|
2006
|
|||||||
|
Statutory
federal rate
|
(34.0 | %) | (34.0 | %) | ||||
|
State
income tax
|
(3.6 | %) | (3.6 | %) | ||||
|
Effect
of permanent differences
|
1.6 | % | - | |||||
|
Change
in valuation allowance
|
36.0 | % | 37.6 | % | ||||
| 0.0 | % | 0.0 | % | |||||
The
deferred tax asset consisted of the following at December 31:
|
2007
|
2006
|
|||||||
|
Net
operating losses
|
$ | 2,156,000 | $ | 849,000 | ||||
|
Other
deferred tax assets
|
79,000 | 45,000 | ||||||
|
Valuation
allowance
|
( 2,235,000 | ) | (894,000 | ) | ||||
|
Total
|
$ | 0 | $ | 0 | ||||
In
assessing the ability to realize a portion of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities and projected
future taxable income in making the assessment. The valuation allowance for
deferred tax assets as of December 31, 2007 and December 31, 2006 was
$2.2 million and $894,000, respectively. The increase in valuation allowance was
$1.3 million and $570,000 in 2007 and 2006, respectively. The increase in
valuation allowance was primarily attributable to the increase in net operating
losses. The Company has recorded a valuation allowance at December 31, 2007 of
$2,235,000 or 100% of the assets.
Net
operating loss carry forwards expire:
|
2024
|
$ | 87,681 | ||
|
2025
|
774,486 | |||
|
2026
|
1,394,662 | |||
|
2027
|
3,471,667 | |||
|
Total
|
$ | 5,728,496 | ||
The
Company’s net operating loss carry forwards may be limited due to ownership
changes pursuant to Internal Revenue Code section 382.
In July
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes – an Interpretation of FASB Statement No. 109” ((“FIN48”). This
Interpretation prescribes a consistent recognition threshold and measurement
standard, as well as clear criteria for subsequently recognizing, derecognizing
and measuring tax positions for financial statement purposes. The Interpretation
also requires expanded disclosure with respect to uncertainties as they relate
to income tax accounting. Fin 48 is effective for fiscal years beginning after
December 15, 2006. Management has evaluated all of its tax positions and
determined that FIN 48 did not have a material impact on the Company’s financial
position or results of operations during its year ended December 31,
2007.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
15.
|
STOCK-BASED
COMPENSATION
|
The
Company adopted an Incentive Stock Plan on January 18, 2007. This plan is
intended to provide incentives which will attract and retain highly competent
persons at all levels as employees of the Company, as well as independent
contractors providing consulting or advisory services to the Company, by
providing them opportunities to acquire the Company's common stock or to receive
monetary payments based on the value of such shares pursuant to awards issued
under the plan. While the plan terminates 10 years after the adoption date,
issued options have their own schedule of termination. Until 2017, options to
acquire up to16.0 million shares of common stock may be granted at no less than
fair market value on the date of grant. Upon exercise, shares of new common
stock are issued by the Company.
The
Company has issued approximately 11.7 million options to purchase shares at an
average price of $0.09 with a fair value of $631,293. For the year ended
December 31, 2007, the Company recognized approximately $138,000, of non-cash
compensation expense (included in Selling, General and Administrative expense in
the accompanying Condensed Consolidated Statement of Operations). As of December
31, 2007, the Company had approximately $488,000 of unrecognized pre-tax
non-cash compensation expense which the Company expects to recognize, based on a
weighted-average period of 1.3 years. The aggregate intrinsic value of fully
vested stock options is $19,000. The Company used the Black-Scholes
option-pricing model and straight-line amortization of compensation expense over
the two to three year requisite service or vesting period of the grant. The
following is a summary of the assumptions used:
|
Risk-free interest rate
|
|
3.2%
- 4.9%
|
|
Expected dividend yield
|
|
—
|
|
Expected term
|
|
3 –
5 years
|
|
Expected annual volatility
|
|
73% - 82%
|
Elite
granted on January 19, 2007, prior to the merger with Celsius Holdings, Inc,
equivalent to 1,337,246 shares of common stock in the Company, to its Chief
Financial Officer as starting bonus for accepting employment with the Company.
The shares are subject to forfeiture during the first year of employment. On May
14, 2007, the Company amended its stock grant and released from forfeiture
160,000 of said shares. The Company valued the grant of stock based on fair
value of the shares, which was estimated as the value of shares in the most
recent transaction of the Company’s shares. The Company recognized the expense
upon issuance of the grant.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Weighted
|
||||||||||||||||
|
Weighted
|
Weighted
|
Average
|
||||||||||||||
|
Shares
|
Average
|
Average
|
Remaining
|
|||||||||||||
|
(in
|
Exercise
|
Fair
|
Contractual
|
|||||||||||||
|
thousands)
|
Price
|
Value
|
Term (years)
|
|||||||||||||
|
Balance
at December 31, 2006
|
— | $ | — | $ | — | |||||||||||
|
Granted
|
11,872 | 0.09 | 0.05 | |||||||||||||
|
Exercised
|
— | — | — | |||||||||||||
|
Forfeiture
|
(201 | ) | 0.02 | 0.01 | ||||||||||||
|
Expired
|
— | — | — | |||||||||||||
|
Options
outstanding at
December
31, 2007
|
11,671 | $ | 0.02 | $ | 0.05 | 6.7 | ||||||||||
|
Options
exercisable at
December
31, 2007
|
134 | $ | 0.02 | $ | 0.01 | 4.0 | ||||||||||
|
Available
for future grant
|
4,376 | |||||||||||||||
The
following table summarizes information about options outstanding at
December 31, 2007:
|
Range of Exercise
Price
|
Number
Outstanding at
December 31,
2007
(000s)
|
Weighted
Average
Remaining Life
|
Weighted
Average
Exercise
Price
|
Number
Exercisable at
December 31,
2007
(000s)
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Life
in
Years
|
||||||||||||||||||||
| $ | 0.02 | 10,446 | 6.4 | $ | 0.02 | 134 | $ | 0.02 | 4.0 | |||||||||||||||||
| $ | 0.23 | 275 | 9.9 | $ | 0.23 | — | $ | — | — | |||||||||||||||||
| $ | 0.52 - $0.60 | 175 | 9.8 | $ | 0.55 | — | $ | — | — | |||||||||||||||||
| $ | 0.84 - $1.10 | 775 | 9.2 | $ | 0.95 | — | $ | — | — | |||||||||||||||||
| 11,671 | 134 | |||||||||||||||||||||||||
The
following table summarizes information about non-vested options outstanding at
December 31, 2007:
|
Number
of
|
Weighted
average Grant
|
|||||||
|
shares (000s)
|
Date Fair Value
|
|||||||
|
Non-vested
at December 31, 2006
|
- | - | ||||||
|
Granted
|
11,872 | $ | 0.05 | |||||
|
Vested
|
(134 | ) | 0.01 | |||||
|
Forfeited
|
(201 | ) | 0.01 | |||||
|
Non-vested
at December 31, 2007
|
11,537 | $ | 0.05 | |||||
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
16.
|
RELATED
PARTY TRANSACTIONS
|
During
2006, the Company delivered and invoiced Specialty Beverage Distributors, Inc
(“SBD”) $69,832 for products, no revenue was recorded as the collectability was
not reasonably assured. SBD is owned by, a stockholder, and the CEO of the
Company.
The
Company received advances from one of its stockholder at various instances
during 2004 and 2005, $76,000 and $424,000, respectively. The total amount
outstanding, including accrued interest, as of December 31, 2007 was $669,111.
The loan, which is not documented and has no repayment date, accrues interest
with a rate varying with the prime rate. No interest has been paid to the
stockholder.
The CEO
also lent the Company $50,000 in February 2006. This loan is not documented,
accrues 7 percent interest, has no repayment date and the outstanding amount as
of December 31, 2007 was $56,610. In addition, the Company has accrued for
unpaid salary due to the CEO, as of December 31, 2007 the accrued salary was
$171,000. The Company started to pay the CEO his full salary from June 1,
2007.
Included
in a consulting agreement, we acquired the rights to the trademark “Celsius”
from one of our directors. Upon termination of the agreement certain payment was
due. Payment was issued in the form of an interest-free note payable for
$250,000 and 1,391,500 shares of common stock, valued at $250,000. In addition,
the Company had previously accrued two percent in deferred royalty on sales from
January 1, 2006. The amount accrued, $24,546, was also considered part of the
expense for termination of the agreement. The amount outstanding as of December
31, 2007 was $160,000.
The CEO
has guaranteed the Company’s obligations under the factoring agreement with
Bibby Financial Services, Inc. (“Bibby”), the outstanding balance to Bibby as
of December 31, 2007 and December 31, 2006 was $102,540 and $155,853,
respectively. The CEO has also guaranteed a lease for a vehicle.
|
17.
|
STOCKHOLDERS’
DEFICIT
|
During
2007, the Company issued 5,513,800 shares to investors for a total consideration
of approximately $2.0 million, including cash and conversion of a note payable,
or an average price of $0.37 per shares.
In
February 2007, an investor exercised its warrant to purchase 3,557,812 shares
for a total consideration of $500,000, or an average of $0.14 per
share.
During
2007 the Company issued 1,572,246 shares as compensation to employees,
consultants and service providers. The total consideration recorded was $198,500
or an average of $0.13 per share.
In
January, 2007, the Company issued 1,391,500 shares to a director as part of the
consideration for termination of a consulting contract. The total consideration
recorded was $274,546, or an average of $0.20 per share.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On June
22, 2007, the Company entered into a $16 million common stock purchase agreement
(the “Purchase Agreement”) with Fusion Capital Fund II, LLC (“Fusion”), an
Illinois limited liability company. Under the Purchase Agreement, the Company
received $500,000 from Fusion Capital on the signing of the agreement and
received additional $500,000 on July 20, 2007 when a registration statement
related to the transaction was filed with the SEC. Concurrently with entering
into the Purchase Agreement, the Company entered into a registration rights
agreement (the “Registration Agreement”) with Fusion. Under the Registration
Agreement, we filed a registration statement with the SEC covering the shares
that have been issued or may be issued to Fusion under the common stock purchase
agreement. The SEC declared effective the registration statement on October 12,
2007 and we now have the right over a 25-month period to sell our shares of
common stock to Fusion from time to time in amounts between $100,000 and $1
million, depending on certain conditions as set forth in the agreement, up to an
additional $15 million.
In
consideration for entering into the $16 million Purchase Agreement which
provides for up to $15 million of future funding as well as the $1 million of
funding prior to the registration statement being declared effective by the SEC,
we agreed to issue to Fusion 3,168,305 shares of our common stock. The purchase
price of the shares related to the $15 million of future funding will be based
on the prevailing market prices of the Company’s shares at the time of sales
without any fixed discount, and the Company will control the timing and amount
of any sales of shares to Fusion. Fusion shall not have the right or the
obligation to purchase any shares of our common stock on any business day that
the price of our common stock is below $0.45. The Purchase Agreement may be
terminated by us at any time at our discretion without any cost to us. The
Company has sold to Fusion 795,495 shares for a total consideration of $400,000,
before expenses related to the share issuances.
In
September and October, 2007 the Company issued 250,000 shares for a total
consideration of $100,000, or a price of $0.40 per share.
In
December 2007, the Company issued two convertible notes for a total of
$1,750,000, both of which had a beneficial conversion feature; a debt discount
of $243,838 was recorded against additional paid in capital.
During
2007 the Company issued stock options to employees and consultants, the expense
is amortized immediately or over the vesting period, and during 2007 a total
expense of $138,281 was recorded.
|
18.
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES
|
|
For
the years ended December 31,
|
2007
|
2006
|
||||||
|
Issuance
of shares for note payable
|
$ | 250,000 | $ | - | ||||
|
Debt
discount for beneficial conversion feature
|
$ | 243,838 | $ | - | ||||
|
Issuance
of debenture for note receivable
|
$ | 1,250,000 | $ | - | ||||
|
Issuance
of shares for termination of contract
|
$ | 274,546 | $ | - | ||||
|
Issuance
of notes payable for termination of contract
|
$ | 250,000 | $ | - | ||||
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
19.
|
SUBSEQUENT
EVENTS
|
In
January 2008, the Company restructured the $250,000 note owed to Brennecke
Partners, LLC and issued a new note, non-interest bearing, for $105,000 to be
paid in 7 installments of $15,000 each from March 1, 2008. The
Company also issued one million shares of common stock to Brennecke Partners,
LLC with a total valuation of $121,555.
In
February 2008, the Company issued 781,250 shares of common stock in a private
placement to Richard W. McGee, an officer of the Company, for a consideration of
$75,000. Mr. McGee also lent the company $50,000 against an eight percent
convertible note due on March 15, 2008.
In
February 2008, the Company issued 245,098 shares of common stock in a private
placement to Jan Norelid, the Company’s Chief Financial Officer, for a
consideration of $25,000. Mr. Norelid also lent the company $25,000 against an
eight percent convertible note due on March 15, 2008, the note has been
repaid.
In
February 2008, the Company issued 245,098 shares of common stock in a private
placement to Janice Haley, an officer of the Company, for a consideration
of $25,000.
In
February 2008, the Company issued 1,927,083 shares of common stock in a private
placement to an investor, for a consideration of $185,000.
|
We
have not authorized any dealer, salesperson or other person to provide any
information or make any representations about Celsius Holdings, Inc.
except the information or representations contained in this prospectus.
You should not rely on any additional information or representations if
made.
This
prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy any securities:
· except
the common stock offered by this prospectus;
· in
any jurisdiction in which the offer or solicitation is not
authorized;
· in
any jurisdiction where the dealer or other salesperson is not
qualified to make the offer or solicitation;
· to
any person to whom it is unlawful to make the offer or solicitation;
or
· to
any person who is not a United States resident or who is outside the
jurisdiction of the United States.
The
delivery of this prospectus or any accompanying sale does not imply
that:
· there
have been no changes in the affairs of Celsius Holdings, Inc. after the
date of this prospectus; or
· the
information contained in this prospectus is correct after the date of this
prospectus.
Until
_______ ___, 2008, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as
underwriters.
|
PROSPECTUS
58,059,016
Shares of Common Stock
CELSIUS
HOLDINGS, INC.
___________,
2008
|
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
|
SEC
registration fee
|
$
|
183
|
||
|
Printing
Expenses
|
5,000
|
|||
|
Accounting
fees and expenses
|
5,000
|
|||
|
Legal
fees and expense
|
10,000
|
|||
|
Miscellaneous
|
4,817
|
|||
|
Total
|
$
|
25,000
|
All
amounts are estimates. We are paying all expenses of the offering listed above.
No portion of these expenses will be borne by the Selling Stockholders. The
Selling Stockholders, however, will pay any other expenses incurred in selling
their Common Stock, including any brokerage commissions or costs of
sale.
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Nevada Revised Statutes and our bylaws provide for the indemnification of our
directors, officers, employees and other persons against claims and liability by
reason of serving as a director, officer or employee.
Indemnification
Under Nevada Law
Nevada
law generally permits us to indemnify our directors, officers, employees and
agents. Pursuant to the provisions of Nevada Revised Statutes 78.7502, a
corporation may indemnify its directors, officers, employees and agents as
follows:
(a) A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any action, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation, against expenses, actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (a) is not liable for
breach of his fiduciary duties as a director or officer pursuant to Nevada
Revised Statutes 78.138; or (b) acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any action by or in the right of the corporation to procure a
judgment in its favor, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation against expenses actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit if he:
(a) is not liable for breach of his fiduciary duties pursuant to Nevada Revised
Statutes 78.138; or (b) acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
(c) To
the extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, or in defense of any claim, issue or matter therein, the corporation
shall indemnify him against expenses, including attorneys’ fees, actually and
reasonably incurred by him in connection with the defense.
Articles
of Incorporation and Other Arrangements of the Registrant
Our
articles of incorporation provide for the indemnification of every person that
is or was a director or officer of the Company or is or was serving at the
request of the Company as a director or officer of another corporation, or as
its representative in a partnership, joint venture, trust or other
enterprise. The articles of incorporation provide that such right of
indemnification shall be a contract right which may be enforced in any manner
desired by such person.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
provisions described above, or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
On
January 24, 2007, the Company entered into a merger agreement and plan of
reorganization with Celsius, Inc., a Nevada corporation and wholly-owned
subsidiary of the Company (“Sub”), Elite FX, Inc., a Florida corporation
(“Elite”), and Stephen C. Haley, the “Indemnifying Officer” and “Securityholder
Agent” of Elite, (the “Merger Agreement”). Under the terms of the Merger
Agreement Elite was merged into Sub and became a wholly-owned subsidiary of the
Company on January 26, 2007 (the “Merger”).
Under the
terms of the Merger Agreement, the Company issued:
|
·
|
70,912,246
shares of its Common Stock to the stockholders of Elite as full
consideration for the shares of
Elite;
|
|
·
|
1,391,500
shares of its Common Stock and a promissory note in the amount of
$250,000.00 to Specialty Nutrition Group, Inc. (“SNG”) as consideration
for the termination of a consulting agreement and the assignment of
certain trademark rights to the name “Celsius”. The note is non-interest
bearing and requires the Company to pay SNG $15,000 a month for eight (8)
months starting March 30, 2007 and a lump sum payment of $130,000 on
November 30, 2007.
|
These
shares of our Common Stock and the note qualified for exemption under Section
4(2) of since the issuance shares by us did not involve a public offering. The
offerings were not “public offerings” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering, and
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares or notes to a high number of
investors. In addition, these stockholders and the note holder had and agreed to
the necessary investment intent as required by Section 4(2). Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act for these
transactions.
In
addition, under the terms of the Merger Agreement, the Company
issued:
|
·
|
warrants
to Investa Capital Partners Inc. representing 3,557,812 shares of Common
Stock of the Company which were exercised by on February 9, 2007 for an
aggregate consideration of $500,000 in
cash.
|
|
·
|
1,300,000
shares of its Common Stock concurrent with the Merger in a private
placement to non-US resident investors for aggregate consideration of
US$650,000 which included the conversion of a $250,000 loan to the
Company
|
On
November 8, 2006, the Company issued a promissory note in the principal amount
of US$250,000 to Barca Business Services (“Barca”). Prior to the
execution of the Note, there was no relationship between the Company and Barca.
The Note bore interest at an annual rate of eight percent (8%) per annum and was
due and payable in full one year from the date of issuance. The note was
converted into 500,000 shares of its Common Stock as part of a private placement
conducted concurrent with the close of the Merger Agreement.
On
February 23, 2007 the Company issued 3,557,812 shares of Common Stock to Investa
Capital Partners Inc. for an aggregate consideration of $500,000 in cash
representing their exercise of the warrant issued under the terms of the Merger
Agreement.
On May
15, and June 2, 2007, the Company issued 30,000 and 50,000 shares of Common
Stock, respectively to RedChip Companies as consideration for investor relations
services. The shares were valued at $70,500 based on the then current market
price.
On June
15, 2007, the Company issued 25,000 shares of Common Stock to Fusion Capital as
non-allocable expense reimbursement to cover such items as travel expenses and
other expenses in connection with their due diligence of a finance transaction
with the Company.
On June
22 and July 16, 2007 the Company issued a total of 3,168,305 for a total
consideration of $1.0 million as part of the Purchase Agreement with Fusion
Capital.
In September and October,
2007 the Company issued a total of 250,000 unregistered shares for a total
consideration of $100,000 as part of a private placement.
On October 1, 2007, the
Company issued 30,000 unregistered shares as consideration for a trademark
agreement. The shares were valued at $16,500 based on the then current market
price.
On October 25, 2007, the
Company issued 100,000 unregistered shares as consideration for a licensing
agreement. The shares were valued at $53,000 based on the then current market
price.
On January 22, 2008 the
Company issued 1,000,000 unregistered common stock and note for $105,000 in
exchange for a note and accrued interest of an aggregate value of $225,155 to
Brennecke Partners, LLC.
On February 15, 2008 the
Company issued 16,671 unregistered shares of common stock in accordance to its
2006 Stock Incentive Plan to an employee exercising vested options.
In February, 2008 the
Company issued a total of 3,198,529 unregistered shares of common stock in
private placements for an aggregate consideration of $298,900, net of
commissions.
In March, 2008 the Company
issued a total of 750,000 unregistered shares of common stock as compensation to
an international distributor with an aggregate consideration of
$120,000.
In March, 2008 the Company
issued a total of 10,000,000 unregistered shares of common stock in a private
placement, for an aggregate consideration of $500,100. In addition, the investor
received a warrant to purchase seven million unregistered shares of common stock
during a 3-year period, at an exercise price of $0.13 per share. Of the total
consideration, $100,000 was paid in March 2008 and the remaining $400,100 was
paid on April 7, 2008.
In June 2008 the Company
issued 11.2 million shares as conversion for a $750,000 convertible note that
was originally issued in December 2007 and April 2008.
In June
2008, the Company issued 603,628 shares as partial conversion of a convertible
debenture issued in December 2007.
In July
and August, 2008, the Company issued 4,430,229 shares as partial conversion of a
convertible debenture issued in December 2007.
In June
and July 2008, the Company issued two convertible notes of $250,000, each; the
notes were cancelled as part of the CDS Transaction.
The
Company believes that all of the foregoing sales notes and shares qualified for
exemption under Section 4(2) of the Securities Act since the issuance of the
notes and shares by us did not involve a public offering. The offerings were not
“public offerings” as defined in Section 4(2) due to the insubstantial number of
persons involved in the deal, size of the offering, and manner of the offering
and number of shares offered. We did not undertake an offering in which we sold
a high number of shares or notes to a high number of investors. In addition,
these stockholders and the note holder had and agreed to the necessary
investment intent as required by Section 4(2). Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act and Section S promulgated under the Securities Act
for these transactions.
We did not employ an
underwriter in connection with the issuance of the securities described above.
We believe that the issuance of the foregoing securities was exempt from
registration under the Securities Act.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
Exhibits.
The
exhibits filed with this registration statement or incorporated herein by
reference are set forth on the “Exhibit Index” set forth elsewhere
herein.
(b)
Financial Statement Schedules.
Schedules
filed with this registration statement are set forth on the “Index to Financial
Statements” set forth elsewhere herein.
ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1. To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To
include any Prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the “Securities Act”);
(b) To
reflect in the Prospectus any facts or events arising after the effective date
of this Registration Statement, or most recent post-effective amendment, which,
individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospects filed with the SEC
pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement; and
(c) To
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in the registration statement.
2. That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
3. To
remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
offering.
4. For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned small business issuer undertakes that in a primary offering of
securities of the undersigned small business issuer pursuant to this
Registration Statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
(a) Any
preliminary Prospectus or Prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424 of the
Securities Act;
(b) Any
free writing Prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
(c) The
portion of any other free writing Prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
(d) Any
other communication that is an offer in the offering made by the undersigned
small business issuer to the purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by us of
expenses incurred or paid by one of our directors, officers, or controlling
persons in the successful defense of any action, suit or proceeding, is asserted
by one of our directors, officers, or controlling persons in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is against
public policy as expressed in the Securities Act, and we will be governed by the
final adjudication of such issue.
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
of the Securities Act or other than prospectuses filed in reliance on Rule 430A
of the Securities Act, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
In
accordance with the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-1 and authorized this Registration Statement on Form S-1 to
be signed on our behalf by the undersigned, on August 28, 2008.
|
Date:
August 28, 2008
|
CELSIUS
HOLDINGS, INC.
|
|
By:
/s/Stephen C.
Haley
|
|
|
Name:
Stephen C. Haley
|
|
|
Titles:
Principal Executive Officer,
Chief ExecutiveOfficer and President
|
|
|
By:
/s/Jan Norelid
|
|
|
Name:
Jan Norelid
|
|
|
Titles:
Principal Financial and Accounting Officer,
Chief Financial Officer, Secretary andTreasurer
|
|
In
accordance with the Securities Act, this S-1 has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates stated.
|
Signatures
|
Title(s)
|
Date
|
||
|
/s/
Stephen C. Haley
|
Chairman
of the Board
|
August
28, 2008
|
||
|
Stephen
C. Haley
|
||||
|
/s/
Jan Norelid
|
Director
|
August
28, 2008
|
||
|
Jan
Norelid
|
||||
|
/s/
James Cast
|
Director
|
August
28, 2008
|
||
|
James
Cast
|
||||
|
/s/
William H. Milmoe
|
Director
|
August
28, 2008
|
||
|
William
H. Milmoe
|
||||
INDEX
TO EXHIBITS
|
Exhibit
No.
|
Description
|
Location
|
|
|
2.1
|
Agreement
and Plan of Reorganization dated January 26, 2007
|
Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as
filed with the SEC on February 2, 2007
|
|
|
2.2
|
Articles
of Merger
|
Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
as filed with the SEC on February 2, 2007
|
|
|
3.1
|
Articles
of Incorporation
|
Incorporated
by reference to Exhibit 3.1 to the Company’s Registration Statement on
Form SB-2 as filed with the SEC on November 21, 2005
|
|
|
3.2
|
Bylaws
|
Incorporated
by reference to Exhibit B to the Company’s Information on Form DEF-14C as
filed with the SEC on December 5, 2006
|
|
|
3.3
|
Articles
of Amendment
|
Incorporated
by reference to Exhibit A to the Company’s Information on Form DEF-14C as
filed with the SEC on December 5, 2006
|
|
|
4.1
|
Warrant
Agreement with Investa Partners LLC
|
Incorporated
by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as
filed with the SEC on February 2, 2007
|
|
|
4.2
|
Subscription
Agreement
|
Incorporated
by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K as
filed with the SEC on February 2, 2007
|
|
|
4.3
|
Registration
Rights Agreement
|
Incorporated
by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K as
filed with the SEC on February 2, 2007
|
|
|
4.4
|
Observation
Rights and Termination Agreement
|
Incorporated
by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K as
filed with the SEC on February 2, 2007
|
|
|
4.5
|
Stock
Option Plan Adopted
|
Incorporated
by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K
filed with the SEC on February 2, 2007
|
|
|
5.1
|
Opinion
of counsel
|
Filed
herewith
|
|
|
10.1
|
Stock
Grant Agreement Gregory Horn
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the SEC on February 2, 2007
|
|
|
10.2
|
Promissory
Note to Special Nutrition Group, Inc.
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
as filed with the SEC on February 2, 2007
|
|
10.3
|
Employment
Agreement with Stephen Haley, as amended
|
Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
as filed with the SEC on July 16, 2007
|
|
|
10.4
|
Employment
Agreement with Jan Norelid, as amended
|
Incorporated
by reference to Exhibit 10.4 to the Company’s Current Report on
Form 8-K as filed with the SEC on July 16, 2007
|
|
|
10.5
|
Employment
Agreement with Richard McGee, as amended
|
Incorporated
by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
as filed with the SEC on July 16, 2007
|
|
|
10.6
|
Employment
Agreement with Janice Haley
|
Incorporated
by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
as filed with the SEC on February 2, 2007
|
|
|
10.7
|
Stock
Grant Agreement Addendum 1 with Jan Norelid
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
10-QSB as filed with the SEC on May 15, 2007
|
|
|
10.8
|
Common
Stock Purchase Agreement with Fusion Capital Fund II, LLC
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K as filed with the SEC on June 25, 2007
|
|
|
10.9
|
Registration
Rights Agreement with Fusion Capital Fund II, LLC
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
as filed with the SEC on June 25, 2007
|
|
|
10.10
|
Letter
Agreement, dated July 19, 2007, by and among the Company, Mr. Anthony J.
Baudanza and Mr. John T. Nugent.
|
Incorporated
by reference to Exhibit 10.10 to the Company’s Original filing of Form
SB-2 as filed with the SEC on July 20, 2007
|
|
|
10.11
|
Master
Purchase and Sale Agreement (factoring agreement) with Bibby Financial
Services, Inc.
|
Incorporated
by reference to Exhibit 10.11 to the Company’s filing of Form SB-2/A as
filed with the SEC on August 28, 2007
|
|
|
10.12
|
Securities
Purchase Agreement with CDS Ventures of South Florida, LLC.
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the SEC on August 12, 2008
|
|
|
10.13
|
Registration
Rights Agreement with CDS Ventures of South Florida, LLC.
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
as filed with the SEC on August 12, 2008
|
|
|
10.14
|
Certificate
of Designation
|
Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
as filed with the SEC on August 12, 2008
|
|
|
14.1
|
Code
of Ethical Conduct
|
Incorporated
by reference to Exhibit 14.1 to the Company’s Original filing of Form SB-2
as filed with the SEC on July 20, 2007
|
|
23.1
|
Consent
of Sherb & Co.
|
Filed
herewith
|
|
|
23.3
|
Consent
of Counsel
|
Incorporated
by reference to Exhibit 5.1 filed herewith
|
|
|
24.1
|
Power
of Attorney
|
Filed
herewith
|
|
|
99.1
|
Results
from Clinical Studies
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Original filing of Form SB-2
as filed with the SEC on July 20, 2007
|
|
|
99.2
|
Abstract
from Clinical Study released in June 2008
|
Filed
herewith.
|