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)
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)
|
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)
|
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. |_|
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.|_|
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.
.|_|
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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|
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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
Title
of Each Class of
Securities to
be Registered
|
|
Amount
to Be
Registered(1)
|
|
Proposed
Maximum
Offering
Price
Per
Share
(2)
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Proposed
Maximum
Aggregate
Offering Price (3)
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Amount
of
Registration
Fee
|
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Common
Stock, $0.001 par value
|
|
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167,150,000
|
|
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$0.39
|
|
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$11,915,000
|
|
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$664.86
|
|
Total
|
|
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167,150,000
|
|
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$0.39
|
|
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$11.915.000
|
|
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$664.86
|
|
(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, for the
maximum offering price per share, based on the closing price of $0.39 on the OTC
Bulletin Board on October 8, 2009
(3)
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 aggregate offering price if all shares were converted and offered at their
respective conversion price at the time of conversion.
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 ________, 2009
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.
167,150,000
SHARES OF COMMON STOCK
This
Prospectus relates to the sale of up to 167,150,000 shares of the common stock,
par value $0.001 per share, of Celsius Holdings, Inc., of which (a)
96,000,000 shares are issuable by the Company to CDS Ventures of South Florida,
LLC, a Florida limited liability company (“CDS”) upon conversion of Series B
Preferred Stock to be sold by CDS; (b) 65,000,000 shares are issuable by the
Company to CDS upon conversion of convertible debt to be sold by
CDS; and (c) 6,150,000 shares are issuable by the Company to Lucille
Santini (“Santini”) upon conversion of convertible debt to be sold by to be sold
by Santini (CDS and Santini are each a “Selling Stockholder” and collectively
referred to as the “Selling Stockholders”).
Please
refer to “Selling Stockholders” beginning on page 14.
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
October 8, 2009, the closing price as reported was $0.39.
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 5 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
TABLE OF
CONTENTS
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PAGE
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3
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4
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5
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5
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8
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8
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8
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10
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13
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14
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16
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18
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19
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19
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20
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26
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26
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27
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29
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40
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41
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43
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45
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48
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48
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49
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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 beverage. Celsius
is currently available in five sparkling flavors: cola, ginger ale, lemon/lime,
orange and wild berry and two green teas with the flavor of peach/mango and
raspberry/acai. We have also developed Celsius in powder form and sell the
active ingredients in an On-the-go packet. 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. The Company entered into
separate financing agreements with CDS Ventures of South Florida, LLC, a Florida
limited liability company (“CDS”) on December 12, 2008 and September 8, 2009, to
provide additional 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 96,000,000
shares of our Common Stock hereto. On December 12, 2008, we entered
into a securities purchase agreement (the “Purchase Agreement”) with
CDS. Under the Purchase Agreement, CDS purchased 2,000 shares of
Series B Preferred Stock (the “Preferred B Shares”), 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 2,000 shares of
Preferred B Shares (the “Additional Shares”), for an aggregate purchase price of
$2,000,000 (two million dollars). CDS exercised its right to purchase
the Additional Shares and purchased 1,000 Preferred B Shares on April 7, 2009
and 1,000 Preferred B Shares on May 1, 2009, each for $1,000,000 (one million
dollars). The aggregate purchase of 4,000 Preferred B shares had an aggregate
purchase price of $4,000,000 (four million dollars) (“the Purchase
Price”). CDS has the right to convert the Preferred B Shares to
Common Stock at any time. The conversion price is $0.05 (five cents) per share
of common stock from the date on which the Certificate of Designation is
effective with the Nevada Secretary of State until December 31,
2010. Thereafter, the conversion price shall be the greater of (i)
90% of the Market Price on the conversion date and (ii) $0.05 (five 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.
CDS is
also offering for sale up to 65,000,000 shares of our Common Stock
hereto. On September 8, 2009, we entered into a convertible loan
agreement (the “Loan Agreement”) with CDS. Under the Loan Agreement
CDS will lend the Company up to $6,500,000 (six million five hundred thousand
dollars), with disbursements to the Company limited as follows: (i) Two Million
Dollars ($2,000,000) during the month of September 2009; (ii) Two Million
Dollars ($2,000,000) during October 2009; Two Million Dollars ($2,000,000)
during November 2009; and (iii) Five Hundred Thousand ($500,000) in December
2009. Provided, however, that no disbursement shall be made in an amount less
than Five Hundred Thousand Dollars ($500,000). Any amounts not requested for
disbursement in one calendar month can be carried over to a subsequent month and
disbursed in addition to the maximum of such subsequent month. The
loan is due on September 8, 2012 and carries a variable interest rate equal to
three hundred (300) basis points over the one (1) month LIBOR. The loan can at
any time be converted to shares of our Common Stock at the Conversion Price. The
“Conversion Price” shall be: (A) from September 8, 2009 through and including
December 31, 2011, equal to the lesser of (i) $0.40 per share, or (ii) the
Market Price; or (B) after December 31, 2011 the greater of (i) $0.40
per share, or (ii) the Market Price, as appropriately adjusted for in either
case stock splits, stock dividends and similar events; provided that, the
conversion price shall never be less than $0.10 (ten cents) regardless of the
Market Price on the conversion date.
Lucille
Santini (“Santini”), a Selling Stockholder under this Prospectus, is offering
for sale up to 6,150,000 shares of our Common Stock hereto. On
September 8, 2009, we entered into a convertible loan agreement (the “Refinance
Agreement”) with Ms. Santini. Under the Refinance Agreement the
Company issued a convertible note for $615,000 and a cash payment of $3,699, in
exchange for a note issued by the Company on July 19, 2009, with a principal
amount of $620,885and accrued interest thereon. The loan is due on September 8,
2012 and carries a variable interest rate equal to three hundred (300) basis
points over the one (1) month LIBOR. The loan can at any time be converted to
shares of our Common Stock at the Conversion Price. The “Conversion Price” shall
be: (A) from September 8, 2009 through and including December 31, 2011, equal to
the lesser of (i) $0.40 per share, or (ii) the Market Price; or (B) after
December 31, 2011 the greater of (i) $0.40 per share, or (ii) the
Market Price, as appropriately adjusted for in either case stock splits, stock
dividends and similar events; provided that, the conversion price shall never be
less than $0.10 (ten cents) regardless of the Market Price on the conversion
date.
In
connection with the Purchase Agreement, Loan Agreement and Refinance Agreement,
we entered into registration rights agreements with CDS and Santini. Pursuant to
each registration rights agreement, we are obligated to file a registration
statement with the SEC covering the shares of Common Stock underlying the
Purchase Agreement, Loan Agreement and Refinance Agreement
respectively.
Common
Stock Offered
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167,150,000
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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152,615,242
shares as of October 2, 2009
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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
|
Information
included or incorporated by reference in this Prospectus may contain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934 (the “Exchange Act”). 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, 2008 are
derived from our audited financial statements included in the Company’s Annual
Report on Form 10-K as filed with the SEC on March 9, 2009. The unaudited
statement of operations and balance sheet data for the six months ended June 30,
2009 and 2008, was derived from our Quarterly Report on Form
10-Q.
|
For
the Six Months Ended June 30,
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For
the Year Ended
December
31,
|
|
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2009
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2008
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2008
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2007
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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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$ |
2,137,473 |
|
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$ |
1,533,491 |
|
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$ |
2,589,887 |
|
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$ |
1,644,780 |
|
Total
Operating Expenses
|
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3,479,020 |
|
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2,441,748 |
|
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5,676,695 |
|
|
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4,155,197 |
|
Net
Loss
|
|
|
(2,617,924 |
) |
|
|
(2,098,263 |
) |
|
|
(5,261,600 |
) |
|
|
(3,725,841 |
) |
|
As
of
June
30,
2009
|
|
As
of
December
31, 2008
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|
As
of
December
31, 2007
|
|
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(Unaudited)
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BALANCE
SHEETS DATA
|
|
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|
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|
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Cash
|
|
$ |
311,032 |
|
|
$ |
1,040,633 |
|
|
$ |
257,482 |
|
Total
Assets
|
|
|
2,371,265 |
|
|
|
2,202,769 |
|
|
|
2,533,130 |
|
Total
Liabilities
|
|
|
2,762,083 |
|
|
|
2,191,542 |
|
|
|
4,137,882 |
|
Stockholders’
(Deficiency) Equity
|
|
|
(390,818
|
) |
|
|
11,227 |
|
|
|
(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.
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 continuously
incurred operating losses from our inception. We have incurred an operating loss
during the first six months ending June 30, 2009 of $2.6 million. As a result,
at June 30, 2009 we had an accumulated deficit of $14.0 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, 2009, we had a working capital deficit of $187,000. The independent
auditor’s report for the year ended December 31, 2008, 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
$2.9 million for the six-month period ending June 30, 2009 and an operating cash
flow deficit of $4.8 million and $2.6 million, for the twelve month periods
ended December 31, 2008 and 2007, 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 Golden Gate Investors, LLC, CD Financial, LLC, CDS
Ventures of South Florida, LLC and Lucille Santini may cause dilution and the
sale of the shares of Common Stock acquired by Golden Gate Investors, LLC, CD
Financial, LLC, CDS Ventures of South Florida, LLC or Lucille Santini could
cause the price of our Common Stock to decline.
In
connection with issuing a convertible debenture to Golden Gate Investors, LLC
(“GGI”), we have issued 18.0 million shares to GGI between June 16, 2008 and May
21, 2009, as partial conversion of the debenture. If requested by GGI, we may
have to issue approximately one million shares to GGI based on the current
conversion price and outstanding amount of the debenture. We are not obligated
to convert the debenture, if the price of our shares is below
$0.20.
On June
10, 2008, the total amount of $750,000 in notes payable to CD Financial, LLC
(“CDF”) was converted to 11,184,016 shares of Common Stock.
We have
sold a total of 6,000 Preferred A and B shares to CDS Ventures of South Florida,
LLC (“CDS”), and they have received a total of 92 shares in dividends. CDS can
convert its Preferred A and B shares into a maximum of 106 million shares of
Common Stock. CDS has the right to purchase an additional 1,000 Series A
Preferred Shares, which may be converted into a maximum of 12.5 million shares
of Common Stock.
On
September 8, 2009, we entered into a convertible loan agreement (the “Loan
Agreement”) with CDS. In connection with such Loan Agreement, CDS can
convert the note in to a maximum of 65,000,000 shares of Common
Stock.
On
September 8, 2009, we entered into we entered into a convertible loan agreement
(the “Refinance Agreement 2”) with Lucille Santini. In connection
with such Refinance Agreement, Ms. Santini can convert the note into a maximum
of 6,150,000 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 net losses every quarter of operation since the Company’s inception. We
had an accumulated deficit of $14.0 million as of June 30, 2009. 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 in part on wholesale
distributors and in part on direct delivery to retailers for the success of our
business, the loss or poor performance of which may materially and adversely
affect our business.
We sell
our products in part to wholesalers for resale to retail outlets, and also
directly to retail outlets. Retail outlets, also referred to as
retailers; include grocery stores, convenience stores, nutritional and drug
stores. The replacement or poor performance of the Company's major customers and
or the Company's inability to collect accounts receivable from the Company's
major customers 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,
President, 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 or Mrs. 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:
·
|
Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
|
·
|
Disclose
certain price information about the
stock;
|
·
|
Disclose
the amount of compensation received by the broker-dealer or any associated
person of the broker-dealer;
|
·
|
Send
monthly statements to customers with market and price information about
the penny stock; and,
|
·
|
In
some circumstances, approve the purchaser's account under certain
standards and deliver written statements to the customer with information
specified in the rules.
|
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. In connection with the
sale of Preferred B Shares pursuant to the Purchase Agreement with CDS, we
received cash payments totaling $4,000,000. All proceeds from CDS we
received for sale of the Preferred B shares have been used for working capital
and marketing expense. As of the date of this Prospectus, we
have we have borrowed $2,000,000 under the Loan Agreement and will be able to
borrow additional $4,500,000 under the same Loan Agreement. Proceeds
from our borrowings under the Loan Agreement will be used for working capital
and marketing expenses. The proceeds from the Refinance Agreement with Ms.
Santini were received in 2004 and 2005. 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
December 12, 2008, we entered into the Purchase Agreement with CDS. Pursuant to
the Purchase Agreement we issued 2,000 Preferred B Shares, as well as a warrant
to purchase additional 2,000 Preferred B Shares, for a cash payment of $2.0
million. The Preferred B Shares can be converted into Common Stock at any time.
Until December 31, 2010, the conversion price is $0.05, after which the
conversion price is the greater of $0.05 or 90% of the volume weighted average
price of the Common Stock for the prior 10 trading days. Pursuant to the
Purchase Agreement, we entered into a registration rights agreement under which
we agreed to file a registration statement for the Common Stock issuable upon
conversion of Preferred B Shares. The Preferred B Shares accrue a ten percent
annual cumulative dividend, payable in additional Preferred B Shares. We
issued 11 Preferred B Shares in dividends during the first quarter of 2009. The
Preferred B Shares mature on December 31, 2013 and are only redeemable in shares
of our Common Stock. The full agreement can be reviewed in the Company’s Form
8-K filed with the SEC on December 17, 2008.
On March
31, 2009, CDS exercised its right to purchase additional 2,000 Preferred B
Shares and executed a subscription agreement for $2.0 million. The monies for
the subscription were paid on April 7 and May 1, 2009.
Certain
covenants of the Preferred B Shares restrict the Company from entering into
additional debt arrangements or permitting liens to be filed against the
Company’s assets, without approval from the holder of the Preferred B Shares.
There is a mandatory redemption in cash, if the Company breaches certain
covenants of the agreements. The holders have liquidation preference in case of
the Company’s liquidation. The Company can at any time on or after January 1,
2011, redeem the Preferred B Shares, 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.
The
Company has the intention to fulfill the transaction as it has sufficient shares
available to issue all the necessary shares for this transaction.
Valuation
of the Preferred Stock:
Date
|
Series
A
|
Underlying
|
Market
price
|
Total
market
|
|
Preferred
Stock
|
common
stock
|
on
such date
|
value
|
December
12, 2008
|
2,000
|
40,000,000
|
$ 0.04
|
$ 1,600,000
|
April
7, 2009
|
1,000
|
20,000,000
|
$ 0.13
|
$ 1,300,000
|
May
1, 2009
|
1,000
|
20,000,000
|
$ 0.13
|
$ 1,300,000
|
Payments
made or potentially required to be made to the Selling Stockholders in
connection with the CDS Preferred B Shares Transaction:
Type
of payment
|
|
Total
Payments made
|
|
|
Total
Potential Payments
|
|
Interest
payments
|
|
$ |
0 |
|
|
$ |
0 |
|
Finder’s
fee or commissions
|
|
$ |
0 |
|
|
$ |
0 |
|
Potential
Dividends 1)
|
|
$ |
8,800 |
|
|
$ |
1,562,108 |
|
Potential
Liquidated damages 2)
|
|
$ |
0 |
|
|
not
possible to estimate
|
|
Net
proceeds from the sale of Preferred Stock and total Potential Payments to be
made in the first year following the sale of the Preferred Stock
Net
proceeds from the sale of Preferred Stock received
|
|
$ |
4,000,000 |
|
Finder’s
fee or commissions
|
|
$ |
0 |
|
Potential
Dividends 1)
|
|
$ |
320,000 |
|
Potential
Liquidated damages 2)
|
|
$ |
200,000 |
|
1)
|
Annual
dividends of 10% are payable in additional Preferred B Shares. The actual
dividends value is calculated based on the closing price of the Common
Stock on March 12, 2009 when the dividend shares were issued and the
potential dividends are estimated for the period from the date of the CDS
Preferred B Shares Transaction until maturity, a potential amount of
dividend shares of 1,953 Preferred B Shares, converted at $0.05 and with a
market price of $0.04.
|
2)
|
If
the registration statement has not been declared effective by the SEC 180
days after the first filing date, then for every pro-rated 30 day period
thereafter the Company is required to pay liquidated damages in the amount
of one percent of the purchase price of the Preferred B Shares, until the
registration statement has been declared effective, or until the
registrable shares are freely saleable. The registrations rights agreement
in executed connection with the Purchase Agreement was amended on October
1, 2009 to change the required filing date to the same filing date set
forth in the registration rights agreement executed in connection with the
Loan Agreement.
|
Total
possible profit the Selling Shareholders could realize as a result of the
conversion discount for the securities underlying the Preferred
Stock:
|
|
12/8/2008
|
|
|
4/7/2009
|
|
|
5/1/2009
|
|
|
Total
|
|
Market
price of the Company’s Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
on
the date of the CDS Preferred B Shares Transaction
|
|
$ |
0.04 |
|
|
$ |
0.13 |
|
|
$ |
0.13 |
|
|
|
|
Lowest
possible conversion price
|
|
$ |
0.05 |
|
|
$ |
0.05 |
|
|
$ |
0.05 |
|
|
|
|
Maximum
possible underlying shares
|
|
|
40,000,000 |
|
|
|
20,000,000 |
|
|
|
20,000,000 |
|
|
|
80,000,000 |
|
Purchase
price for Series A Preferred Stock
|
|
$ |
2,000,000 |
|
|
$ |
1,000,000 |
|
|
$ |
1,000,000 |
|
|
$ |
4,000,000 |
|
Market
price for underlying shares
|
|
$ |
1,600,000 |
|
|
$ |
1,300,000 |
|
|
$ |
1,300,000 |
|
|
$ |
4,200,000 |
|
Total
possible (premium) discount to market price
|
|
$ |
(400,000 |
) |
|
$ |
300,000 |
|
|
$ |
300,000 |
|
|
$ |
200,000 |
|
Total
possible profit the Selling Shareholders could realize as a result of the
conversion discount for the securities underlying the Warrants issued in
connection with the first CDS Preferred B Shares Transaction:
Market
price of the Company’s Common Stock on the date of the first CDS Preferred
B Shares Transaction
|
|
$ |
0.04 |
|
Lowest
possible conversion price 1)
|
|
$ |
0.05 |
|
Maximum
possible underlying shares
|
|
|
40,000,000 |
|
Market
price for underlying shares
|
|
$ |
1,600,000 |
|
Total
possible premium to market price
|
|
$ |
(400,000 |
) |
1)
|
Until
December 31, 2010, the conversion price is $0.05, after which the
conversion price is the greater of $0.05 or 90% of the volume weighted
average price of the common stock for the prior 10 trading
days.
|
The
cost of financing can be shown as follows:
|
|
Initial
investment of Preferred Stock
|
|
|
Initial
investment of Preferred Stock and
exercise
of Warrants
|
|
Gross
proceeds paid
|
|
$ |
2,000,000 |
|
|
$ |
2,000,000 |
|
Exercise
of warrant
|
|
|
- |
|
|
|
4,000,000 |
|
All
required payments by issuer
|
|
|
0 |
|
|
|
0 |
|
Resulting
net proceeds
|
|
$ |
2,000,000 |
|
|
$ |
4,000,000 |
|
Combined
possible (loss)/profit as a result of conversion discounts related to the
Preferred and Warrant based on market price on day of
purchase
|
|
$ |
(400,000 |
) |
|
$ |
200,000 |
|
Potential
future dividends
|
|
$ |
809,966 |
|
|
$ |
1,562,108 |
|
Total
of discount and dividends
|
|
$ |
409,966 |
|
|
$ |
1,762,108 |
|
Total
of discount and dividends as a % of net proceeds
|
|
|
20.5 |
% |
|
|
44.1 |
% |
Average
discount and dividends over the term of the convertible
securities
|
|
|
4.1 |
% |
|
|
8.8 |
% |
General
On
September 8, 2009, we entered into a convertible loan agreement (the “Loan
Agreement”) with CDS. Under the Loan Agreement CDS will lend the
Company up to $6,500,000 (six million five hundred thousand dollars), with
disbursements to the Company limited as follows: (i) Two Million Dollars
($2,000,000) during the month of September 2009; (ii) Two Million Dollars
($2,000,000) during October 2009; Two Million Dollars ($2,000,000) during
November 2009; and (iii) Five Hundred Thousand ($500,000) in December 2009.
Provided, however, that no disbursement shall be made in an amount less than
Five Hundred Thousand Dollars ($500,000). Any amounts not requested for
disbursement in one calendar month can be carried over to a subsequent month and
disbursed in addition to the maximum of such subsequent month. The
loan is due on September 8, 2012 and carries a variable interest rate equal to
three hundred (300) basis points over the one (1) month LIBOR (the “Note Rate”).
Commencing on September 8, 2010 and continuing each three (3)-month period
hereafter, we will make payments of all accrued but unpaid interest only on the
unpaid principal amount at the Note Rate. The loan can at any time be converted
to shares of our Common Stock at the Conversion Price. The “Conversion Price”
shall be: (A) from September 8, 2009 through and including December 31, 2011,
equal to the lesser of (i) $0.40 per share, or (ii) the Market Price; or (B)
after December 31, 2011 the greater of (i) $0.40 per share, or (ii)
the Market Price, as appropriately adjusted for in either case stock splits,
stock dividends and similar events; provided that, the conversion price shall
never be less than $0.10 (ten cents) regardless of the Market Price on the
conversion date. Maximum number of shares to be issued based on the lowest
Conversion Price possible is 65,000,000 Common Stock.
Payments
made or potentially required to be made to the Selling Stockholders in
connection with the CDS Loan Transaction:
Type
of payment
|
|
Total
Payments made
|
|
|
Total
Potential Payments
|
|
Interest
payments
|
|
$ |
0 |
|
|
$ |
642,799 |
|
Finder’s
fee or commissions
|
|
$ |
0 |
|
|
$ |
0 |
|
Potential
Dividends 1)
|
|
$ |
0 |
|
|
$ |
0 |
|
Potential
Liquidated damages 2)
|
|
$ |
0 |
|
|
not
possible to estimate
|
|
Net
proceeds from the Loan Transaction and total Potential Payments to be made in
the first year following the full disbursement of the $6.5 million
loan.
Net
proceeds from the sale of Preferred Stock received
|
|
$ |
6,500,000 |
|
Finder’s
fee or commissions
|
|
$ |
0 |
|
Potential
Interest 1)
|
|
$ |
214,266 |
|
Potential
Liquidated damages 2)
|
|
$ |
325,000 |
|
1)
|
Interest
payable on the note is a variable interest rate equal to three hundred
(300) basis points over the one (1) month LIBOR (the “Note Rate”). The one
month LIBOR on September 8, 2009 was
0.025125%.
|
2)
|
If
the registration statement has not been declared effective by the SEC 180
days after the first filing date, then for every pro-rated 30 day period
thereafter the Company is required to pay liquidated damages in the amount
of one percent of the purchase price of the note, until the registration
statement has been declared effective, or until the registrable shares are
freely saleable.
|
Total
possible profit the Selling Shareholders could realize as a result of the
conversion discount for the convertible loan:
|
|
9/8/2009
|
|
Market
price of the Company’s Common Stock on September 8, 2009
|
|
$ |
0.52 |
|
Conversion
Price based on the Market price on September 8, 2009
|
|
$ |
0.40 |
|
Total
underlying shares based on Conversion Price on September 8,
2009
|
|
|
16,250,000 |
|
Maximum
loan amount
|
|
$ |
6,500,000 |
|
Market
price for underlying shares
|
|
$ |
8,450,000 |
|
Total
possible discount to market price
|
|
$ |
1,950,000 |
|
The
cost of financing can be shown as follows:
|
|
Total
loan
|
|
Total
loan to be disbursed
|
|
$ |
6,500,000 |
|
All
required payments by issuer
|
|
|
0 |
|
Resulting
net proceeds
|
|
$ |
6,500,000 |
|
Combined
possible profit as a result of conversion discounts related to the
Conversion Price based on market price on day of purchase
|
|
$ |
1,950,000 |
|
Potential
future interest payment
|
|
$ |
642,799 |
|
Total
of discount and interest
|
|
$ |
2,542,799 |
|
Total
of discount and interest as a % of net proceeds
|
|
|
13.3 |
% |
Average
discount and interest over the term of the convertible
securities
|
|
|
8.8 |
% |
Effect
of Performance of the Purchase Agreement and Loan Agreement on Our
Stockholders
The
maximum number of Common Stock to be issued pursuant to the Purchase Agreement
and Loan Agreement to CDS is 141,500,000. This number of Common Stock is being
registered in this offering and is expected to be freely
tradable. The sale by CDS 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 Agreements
In
connection with the Purchase Agreement and the Loan Agreement, we entered into
separate registration rights agreements with CDS pursuant to which we were
obligated to file a registration statement with the SEC covering 120% of the
shares of Common Stock underlying the Purchase Agreement and the maximum amount
of shares of Common stock issuable under the Loan Agreement, 65,000,000. 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. The registrations rights
agreement executed in connection to the Purchase Agreement was amended on
October 1, 2009 to change the required filing date to the same filing date set
forth in the registration rights agreement executed in connection with the Loan
Agreement.
Prior
transactions with CDS or affiliates of CDS
We issued
to CD Financial, LLC (“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 a total of 11,184,016 shares of the Company’s Common Stock on
June 10, 2008. The conversion price was equal to the 75% of the average of
volume weighted average prices of the Common Stock during the 5 trading days
prior to conversion.
Date
of transaction
|
|
6/10/2008
|
|
Number
of common stock outstanding on 6/10/2008
|
|
|
120,575,558 |
|
Shares
owned by non-affiliated owners on 6/10/2008
|
|
|
72,424,666 |
|
Number
of shares issued to CD Financial
|
|
|
11,184,016 |
|
Number
of issued shares in % of shares owned by non-affiliated persons or the
selling shareholders
|
|
|
15.4 |
% |
Market
price per share on June 9, 2006
|
|
$ |
0.109 |
|
We sold
to CDS 2,000 Series A Preferred Stock (“Preferred A Shares”) on August 8, 2008
and a warrant to purchase 1,000 additional shares for a price of $1,000 per
share, for $1,500,000 in cash and the cancellation of a note for $500,000 issued
to CDF. Until December 31, 2010, 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.
Date
of transaction
|
|
8/8/2008
|
|
Number
of common stock outstanding on 8/8/2008
|
|
|
135,304,392 |
|
Shares
owned by non-affiliated owners on 8/8/2008
|
|
|
75,970,034 |
|
Number
of potential shares to be issued to CDS, excluding dividends in form of
additional Preferred A Shares
|
|
|
37,500,000 |
|
Number
of potentially issued shares in % of shares owned by non-affiliated
persons or the selling shareholders
|
|
|
33.0 |
% |
Market
price per share on August 7, 2008
|
|
$ |
0.10 |
|
Non-affiliated
owners and previously registered shares by the Selling Shareholders on the date
of the transaction, and total number of shares to be registered in this
transaction
Date
of transaction
|
|
9/8/2009
|
|
Shares
owned by non-affiliated owners
|
|
|
93,139,568 |
|
Number
of shares registered for resale by the selling shareholders or affiliates
in prior registration statements
|
|
|
42,434,016 |
|
Number
of shares registered for resale by the selling shareholders or affiliates
continued to be held 1)
|
|
|
37,196,516 |
|
Number
of shares sold in registered for resale transactions by the selling
shareholders or affiliates
|
|
|
0 |
|
Number
of shares registered for resale on behalf of the selling shareholders in
the current transaction
|
|
|
161,000,000 |
|
1)
|
The
number of shares consists of 11,184,016 of Common Stock held and 2,081
Preferred A Shares held, which are convertible into a maximum of
26,012,500 shares of Common Stock.
|
Board
representation
CDS can
nominate two representatives to join the Company’s board of
directors.
General
On
September 8, 2009, we entered into a convertible loan agreement (the “Refinance
Agreement”) with Lucille Santini. We received advances from Santini
at various instances during 2004 and 2005, $76,000 and $424,000, respectively.
The advances carried interest at a rate variable with the prime
rate. In July, 2008, the debt was refinanced, with interest at prime
rate flat and monthly amortization of $5,000. A balloon payment of approximately
$606,000 was due in January 2010. In July, 2009, the debt was refinanced again,
with interest at prime rate flat and monthly amortization of $11,500. A balloon
payment of approximately $451,600 was due in January 2011. This note together
with a cash payment of $3,699 was exchanged for a new note due on September 8,
2012. This note carries a variable interest rate equal to three hundred (300)
basis points over the one (1) month LIBOR (the “Note Rate”). Commencing on
September 8, 2010 and continuing each three (3)-month period hereafter, we will
make payments of all accrued but unpaid interest only on the unpaid principal
amount at the Note Rate. The loan can at any time be converted to shares of our
Common Stock at the Conversion Price. The “Conversion Price” shall be: (A) from
September 8, 2009 through and including December 31, 2011, equal to the lesser
of (i) $0.40 per share, or (ii) the Market Price; or (B) after December 31, 2011
the greater of (i) $0.40 per share, or (ii) the Market Price, as
appropriately adjusted for in either case stock splits, stock dividends and
similar events; provided that, the conversion price shall never be less than
$0.10 (ten cents) regardless of the Market Price on the conversion date. Maximum
number of shares to be issued based on the lowest Conversion Price possible is
6,150,000 Common Stock.
Payments
made or potentially required to be made to the Selling Stockholders in
connection with the Santini Loan Transaction:
Type
of payment
|
|
Total
Payments made
|
|
|
Total
Potential Payments
|
|
Interest
payments
|
|
$ |
0 |
|
|
$ |
60,819 |
|
Finder’s
fee or commissions
|
|
$ |
0 |
|
|
$ |
0 |
|
Potential
Dividends 1)
|
|
$ |
0 |
|
|
$ |
0 |
|
Potential
Liquidated damages 2)
|
|
$ |
0 |
|
|
not
possible to estimate
|
|
Net
proceeds from the Santini Loan Transaction and total Potential Payments to be
made in the first year following the restructure of the prior note due to
Santini
Amount
refinanced
|
|
$ |
615,000 |
|
Finder’s
fee or commissions
|
|
$ |
0 |
|
Potential
Interest 1)
|
|
$ |
20,273 |
|
Potential
Liquidated damages 2)
|
|
$ |
30,750 |
|
1)
|
Interest
payable on the note is a variable interest rate equal to three hundred
(300) basis points over the one (1) month LIBOR (the “Note Rate”). The one
month LIBOR on September 8, 2009 was
0.025125%.
|
2)
|
If
the registration statement has not been declared effective by the SEC 180
days after the first filing date, then for every pro-rated 30 day period
thereafter the Company is required to pay liquidated damages in the amount
of one percent of the purchase price of the note, until the registration
statement has been declared effective, or until the registrable shares are
freely saleable.
|
Total
possible profit the Selling Shareholders could realize as a result of the
conversion discount for the convertible loan:
|
|
9/8/2009
|
|
Market
price of the Company’s Common Stock on September 8, 2009
|
|
$ |
0.52 |
|
Conversion
Price based on the Market price on September 8, 2009
|
|
$ |
0.40 |
|
Total
underlying shares based on Conversion Price on September 8,
2009
|
|
|
1,537,500 |
|
Loan
amount
|
|
$ |
615,000 |
|
Market
price for underlying shares
|
|
$ |
799,500 |
|
Total
possible discount to market price
|
|
$ |
184,500 |
|
The
cost of financing can be shown as follows:
|
|
Total
loan
|
|
Total
loan to be disbursed
|
|
$ |
615,000 |
|
All
required payments by issuer
|
|
|
0 |
|
Resulting
net proceeds
|
|
$ |
615,000 |
|
Combined
possible profit as a result of conversion discounts related to the
Conversion Price based on market price on day of purchase
|
|
$ |
184,500 |
|
Potential
future interest payment
|
|
$ |
60,819 |
|
Total
of discount and interest
|
|
$ |
245,319 |
|
Total
of discount and interest as a % of net proceeds
|
|
|
39.9 |
% |
Average
discount and interest over the term of the convertible
securities
|
|
|
13.3 |
% |
Effect
of Performance of the Santini Loan Agreement on Our Stockholders
The
maximum number of Common Stock to be issued to Santini pursuant to the Refinance
Agreement is 6,150,000. This number of Common Stock is being registered in this
offering and is expected to be freely tradable. The sale by Santini
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 Refinance Agreement, we entered into a registration rights
agreement with Santini pursuant to which we were obligated to file a
registration statement with the SEC covering the shares of Common Stock
underlying the Refinance Agreement. 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 Santini are
freely saleable pursuant to Rule 144(k) of the Securities Act of 1933, as
amended.
Prior
transactions with Santini
We issued
to Santini during 2004 and 2005 26,744,926 of Common Stock for cash payments
totaling $400,000. Santini was a founder of our Company.
Non-affiliated
owners and previously registered shares by the Selling Shareholders on the date
of the transaction, and total number of shares to be registered in this
transaction
Date
of transaction
|
|
9/8/2009
|
|
Shares
owned by non-affiliated owners
|
|
|
93,139,568 |
|
Number
of shares registered for resale by the selling shareholders or affiliates
in prior registration statements, excluding dividends in form of
additional Preferred A Shares
|
|
|
0 |
|
Number
of shares registered for resale by the selling shareholders or affiliates
continued to be held
|
|
|
0 |
|
Number
of shares sold in registered for resale transactions by the selling
shareholders or affiliates
|
|
|
0 |
|
Number
of shares registered for resale on behalf of the selling shareholders in
the current transaction
|
|
|
6,150,000 |
|
Beneficial
ownership
The
following table presents information regarding our Selling Stockholders who
intend to sell up to 167,150,000 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.
|
|
Shares
Beneficially Owned Before Offering
|
|
|
Percentage
of Outstanding Shares Beneficially Owned Before Offering(1)
|
|
|
Shares
To Be Sold In The Offering
|
|
|
Percentage
of Outstanding Shares Beneficially Owned After The
Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDS
Ventures of South Florida, LLC
|
|
|
111,232,500 |
(2) |
|
|
42.2 |
% |
|
|
85,220,000 |
|
|
|
14.1 |
% |
Lucille
Santini
|
|
|
19,682,426 |
(3) |
|
|
12.8 |
% |
|
|
1,537,500 |
|
|
|
11.8 |
% |
Totals:
|
|
|
142,098,942 |
|
|
|
53.5 |
% |
|
|
86,757,500 |
|
|
|
20.9 |
% |
(1)
Applicable percentage of ownership is based on 152,615,242 shares of our Common
Stock outstanding as of October 2, 2009, together with securities exercisable or
convertible into shares of Common Stock within sixty (60) days of October 2,
2009 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)
CDS ownership consists as of the date hereof of 2,081 Preferred A Shares that
can be converted into 26,012,500 shares of Common Stock, 4,011 Preferred B
Shares that can be converted into 80,220,000 shares of Common Stock and
$2,000,000 of convertible debt outstanding under the Loan Agreement that can be
converted into 5,000,000 shares of Common Stock at the current Conversion Price
of $0.40 per share of Common Stock.
The
Preferred B Shares accrue dividend of 10 percent per annum. Pursuant to the
Purchase Agreement, the Company is registering additional 20% of the 80 million
Common Stock issuable upon conversion of the Preferred B Shares, to account for
future possible dividend shares of Preferred B Shares. We have included in this
table as shares to be sold in the offering only actual dividends issued as of
the date hereof.
(3)
Santini ownership consists of 18,144,926 shares of Common Stock held, and a
convertible note of $615,000 which is convertible into a maximum of 6,150,000
shares of Common Stock. We have in the table above included
1,537,500, which is the amount of shares the full amount of the loan would be
convertible into at the current Conversion Price of $0.40 per share of Common
Stock.
The
number of shares to be registered is calculated as follows:
CDS
Ventures of South Florida, LLC
|
Underlying
shares to Preferred B Shares
|
|
|
80,000,000 |
|
CDS
Ventures of South Florida, LLC
|
Underlying
shares to dividend shares
|
|
|
16,000,000 |
|
CDS
Ventures of South Florida, LLC
|
Underlying
shares to Loan Agreement
|
|
|
65,000,000 |
|
Lucille
Santini
|
Underlying
shares to Refinance Agreement
|
|
|
6,150,000 |
|
Totals:
|
|
|
|
167,150,000 |
|
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 December 12, 2008, we entered
into the Purchase Agreement with CDS. Pursuant to the Purchase Agreement we
issued 2,000 Preferred B Shares, as well as a warrant to purchase additional
2,000 Preferred B Shares, for a cash payment of $2.0 million. The Preferred B
Shares issued under the Purchase Agreement can be converted into our common
stock at any time. Until December 31, 2010, the conversion price is $0.05, after
which the conversion price is the greater of $0.05 or 90% of the volume weighted
average price of the common stock for the prior 10 trading days. Pursuant to the
Purchase Agreement, we entered into a registration rights agreement under which
we agreed to file a registration statement for the common stock issuable upon
conversion of Preferred B Shares. The Preferred B Shares accrue a ten percent
annual cumulative dividend, payable in additional Preferred B Shares. We
issued 11 Preferred B Shares in dividends during the first quarter of 2009. The
Preferred B Shares mature on December 31, 2013 and are only redeemable in shares
of our Common Stock. The full agreement can be reviewed in the Company’s Form
8-K filed with the SEC on December 17, 2008.
On March
31, 2009, CDS exercised its right to purchase additional 2,000 Preferred B
Shares and executed a subscription agreement for $2.0 million. The monies for
the subscription were paid on April 7 and May 1, 2009.
On
September 8, 2009, we entered into the Loan Agreement with CDS. Under
the Loan Agreement CDS will lend the Company up to $6,500,000 (six million five
hundred thousand dollars), with disbursements to the Company limited as follows:
(i) Two Million Dollars ($2,000,000) during the month of September 2009; (ii)
Two Million Dollars ($2,000,000) during October 2009; Two Million Dollars
($2,000,000) during November 2009; and (iii) Five Hundred Thousand ($500,000) in
December 2009. Provided, however, that no disbursement shall be made in an
amount less than Five Hundred Thousand Dollars ($500,000). Any amounts not
requested for disbursement in one calendar month can be carried over to a
subsequent month and disbursed in addition to the maximum of such subsequent
month. The loan is due on September 8, 2012 and carries a variable
interest rate equal to three hundred (300) basis points over the one (1) month
LIBOR (the “Note Rate”). Commencing on September 8, 2010 and continuing each
three (3)-month period hereafter, we will make payments of all accrued but
unpaid interest only on the unpaid principal amount at the Note Rate. The loan
can at any time be converted to shares of our Common Stock at the Conversion
Price. The “Conversion Price” shall be: (A) from September 8, 2009 through and
including December 31, 2011, equal to the lesser of (i) $0.40 per share, or (ii)
the Market Price; or (B) after December 31, 2011 the greater of (i)
$0.40 per share, or (ii) the Market Price, as appropriately adjusted for in
either case stock splits, stock dividends and similar events; provided that, the
conversion price shall never be less than $0.10 (ten cents) regardless of the
Market Price on the conversion date. Maximum number of shares to be issued based
on the lowest Conversion Price possible is 65,000,000 Common Stock.
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 Preferred B Shares 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.
On August
31, 2009, we entered into a lease agreement with CDR Plaza, Ltd, a company
controlled by Mr. DeSantis, for office space. It is a 6 month lease with monthly
payments $4,000.
Lucille
Santini. On September 8, 2009, we entered into a refinance
agreement with Lucille Santini (the “Refinance Agreement”). We
received advances from Santini at various instances during 2004 and 2005,
$76,000 and $424,000, respectively. The advances carried interest at a rate
variable with the prime rate. In July, 2008, the debt was refinanced,
with interest at prime rate flat and monthly amortization of $5,000. A balloon
payment of approximately $606,000 was due in January 2010. In July, 2009, the
debt was refinanced again, with interest at prime rate flat and monthly
amortization of $11,500. A balloon payment of approximately $451,600 was due in
January 2011. This note together with a cash payment of $3,699 was exchanged for
a new note due on September 8, 2012. This note carries a variable interest rate
equal to three hundred (300) basis points over the one (1) month LIBOR (the
“Note Rate”). Commencing on September 8, 2010 and continuing each three
(3)-month period hereafter, we will make payments of all accrued but unpaid
interest only on the unpaid principal amount at the Note Rate. The loan can at
any time be converted to shares of our Common Stock at the Conversion Price. The
“Conversion Price” shall be: (A) from September 8, 2009 through and including
December 31, 2011, equal to the lesser of (i) $0.40 per share, or (ii) the
Market Price; or (B) after December 31, 2011 the greater of (i) $0.40
per share, or (ii) the Market Price, as appropriately adjusted for in either
case stock splits, stock dividends and similar events; provided that, the
conversion price shall never be less than $0.10 (ten cents) regardless of the
Market Price on the conversion date. Maximum number of shares to be issued based
on the lowest Conversion Price possible is 6,150,000 Common Stock.
According
to information from the Selling Shareholders, neither they nor any affiliate of
the Selling Stockholders currently have, or in the past have had, a short
position in the Common Stock of the Company.
Prior
and Future Relationships with the Selling Shareholders
In the
past three years, the Company, or its predecessors, has not had any prior
relationships or arrangements with the Selling Stockholders or any of their
affiliates or any person with whom any selling shareholder has a contractual
relationship or any predecessors of those persons, except as previously
disclosed in this prospectus. There are no relationships or
arrangements to be performed in the future between the Company and the Selling
Shareholders or any of their affiliates or any person with whom any selling
shareholder has a contractual relationship regarding the CDS Preferred B Shares
Transaction other than those related to the CDS Preferred B Shares Transaction
as disclosed in 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):
·
|
in
the over-the-counter market, when our common stock is quoted on the
Over-The Counter Bulletin Board;
|
·
|
in
negotiated transactions;
|
·
|
through
put or call option transactions;
|
·
|
through
short sales; or
|
·
|
any
combination of such methods of
sale.
|
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:
·
|
exchange
distribution or secondary distribution;
or
|
·
|
a
purchase by a broker or dealer,
|
we will
then file, if required, a post-effective amendment to this
prospectus.
The
post-effective amendment will disclose:
·
|
the
name of the Selling Stockholder and of the participating
broker-dealer(s);
|
·
|
the
number of shares involved;
|
·
|
the
price at which such shares were
sold;
|
·
|
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify the
information in this prospectus; and
|
·
|
any
other facts material to the
transaction.
|
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 1,000,000,000 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
October 2, 2009, there were 152,615,242 shares of the Company’s Common Stock are
issued and outstanding and held by approximately 8,500 stockholders. The
prospectus relates to the sale of 167,150,000 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 October 2, 2009, 2,081 Preferred A Shares had been issued and
4,011Preferred B Shares, each with a face value of $1,000.
Each
share of Preferred A and B Shares 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
Preferred A and B Shares accrue dividends on the stated share value at an annual
rate of ten percent. Dividends on the Preferred A and B shares are
payable annually on the last business day of each fiscal year of the Company in
additional shares of Preferred A and B Shares.
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 years ended December 31, 2008 and
2007, consisting of our balance sheets as of December 31, 2008 and 2007,
statements of operations, statements of changes in stockholders’ deficit and
statements of cash flows for the years ended December 31, 2008 and 2007,
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. (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 million, $0.001 par value common shares and 50
million, $0.001 par value preferred shares.
Celsius
Holdings, Inc. operates in United States through its 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. 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, Inc. is in the business of
developing and marketing healthier beverages in the functional beverage category
of the beverage industry. Celsius was Elite’s first commercially available
product. Celsius is a beverage that burns calories. Celsius is currently
available in five sparkling flavors: cola, ginger ale, lemon/lime, orange and
wild berry, and two non-carbonated green teas: peach/mango and raspberry/acai.
Celsius is also available in powder form in On-the-go packets. Celsius
Netshipments, Inc., incorporated in Florida on March 29, 2007, distributes the
Celsius beverage via the internet.
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.
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.
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. 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.
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 the 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 calorie burning
beverage. Celsius is currently available in five sparkling flavors: cola, ginger
ale, lemon/lime, orange and wild berry, and in two non-carbonated green teas
with flavors of peach/mango and raspberry/acai. Celsius is also available in
powder form in On-The-Go packets. 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.
A major
objective for the Celsius brand is to create a new beverage category, calorie
burners, we utilize a multi-channel route-to-market strategy. This includes
distributing through direct-store-delivery distributors and wholesalers to some
channels of trade (convenience, grocery, health clubs, etc) as well as shipping
direct-to-retailer for others (drug, mass, etc.).
We have
currently signed up distributors in many of the larger markets in the US
(Atlanta, Florida, Michigan, New England, Ohio, Texas, etc).
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 sites do 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, which often carries
a unique and sophisticated imagery and a premium price tag. The five
fastest-growing segments of the functional beverage market include:
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. 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 Celsius in five sparkling flavors: cola, ginger ale, lemon/lime,
orange and wild berry, and in two non-carbonated green teas flavors: 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. We have also started to market
a Celsius On-the-go packet, that contains the active ingredients of the Celsius
beverage and it is mixed with water to make a beverage.
Celsius
is currently packaged in distinctive twelve ounce sleek cans that are in vivid
colors in abstract patterns to create a strong on-shelf impact. 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 $1.79 to $2.19 per 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 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 are 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, cardiorespiratory fitness and endurance performance. According to
the preliminary findings, 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 93.75% greater loss in fat and 50% greater
gain in muscle mass, respectively. The study also confirmed that subjects
consuming Celsius significantly improved measures of cardiorespiratory fitness
and the ability to delay the onset of fatigue when exercising to
exhaustion.
Manufacture
and Supply of Our Products
Our
beverage 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-packers 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 Memphis, Tennessee, and Cold Spring, Minnesota. We
have two other plants authorized in Indiana and North Carolina. We usually
produce about 34,000 cases (24 units per case) of Celsius in a production run.
We supply most of the ingredients and all 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 16
to19 months.
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.
Our
On-The-Go packets are packed by a facility in Texas specialized in packing
shots, packets and sticks. Currently our sales volume of packets is
insignificant. As we grow the existing facility is capable to substantially
increase the production of our packets. There are many other packing sites in
the country. The On-The-Go packet contains the active ingredients of a Celsius
beverage, therefore we use the same or similar raw materials in the preparation,
most of them purchased by us and shipped to the contract packer.
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-packers, 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 direct-store-delivery
(“DSD”) distributors or brokers, who in turn sell to different channels or
through direct-to-retailer (“DTR”) sales. 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 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.
During
2009, we have increased our marketing efforts through more radio advertising and
participation in many more grass roots events. In September 2009, we launched a
new marketing campaign consisting of TV, radio, print and outdoor signage
advertising. We have yet to see the effects of this new marketing campaign, as
it is very early and it is very hard to measure the exact effects of specific
advertising.
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.
We have
started to sell Celsius internationally on a smaller scale 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 Retail Stores
We are
currently marketing to retail stores and chains by utilizing trade shows, trade
advertising, telemarketing, direct mail pieces and direct contact with retailers
we believe would be interested our products. Our DTR sales professional make
sales calls to and meet with the buyers of these larger national and regional
chains. Our strategy is for the chain to be serviced by direct delivery to the
retailer’s distribution warehouse or to a wholesaler that services the whole
retail chain. Examples of major retail chains that carry Celsius and get their
product directly or through wholesalers are Vitamin Shoppe, GNC, Supervalue,
Duane Reade, Albertsons, 7-Eleven, Raleys, etc. In some cases we service the
retailer through our DSD distributors, they include: Hannafords (Northeast),
Walgreens (Georgia, Michigan and Ohio), Meijers (Michigan), QFC (Washington).
See Selling to DSD Distribution Network for more detail.
We also
use brokers to capture retail chain customers. All brokers are paid a percentage
commission on delivered product. One of our major brokers is Crossmark, who is
one of the country’s three largest food brokers.
Selling
to 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 regional sales
managers. A DSD distributor will have a defined territory (usually determined by
a set of counties). In some 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.
Sales
via the Internet
Consumers,
smaller retailers and food service providers 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. 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 utilize
several marketing strategies to market directly to consumers. We have launched a
marketing campaign focused on TV, radio, magazines and outdoor signage targeting
consumers all over the country. 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 utilize.
In-Store Displays. As part of
our marketing efforts, we 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, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestlé,
Waters North America, Inc., Hansen Natural Corp., and Red Bull.
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
In 2009
we launched the On-The-Go packets. Beyond 2009, 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 line extension that
we plan to launch into the distribution network. 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
September 30, 2009, we employed a total of thirty one employees on a full-time
basis. Of our thirty employees, we employ six in administrative
capacities and twenty five 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 from time to
time will work for us at events and samplings.
Our
executive offices are located at 140 NE 4th Avenue, Suite C, 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 $6,745 per month. We
have a separate office for our sales and marketing personnel in a close by
location. This office is leased for $4,000 monthly until March of 2010, at which
point we plan to move all operations together in a new location.
The
Company has no warehouses or other facilities. We store our product
at third party contract warehouse facilities. We produce our products through a
packing, or co-pack, facility in Minnesota and Tennessee for our
cans. We have approved two other facilities for co-packing of cans in
Indiana and North Carolina 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
|
September
30, 2009
|
$0.70
|
$0.20
|
June
30, 2009
|
$0.20
|
$0.10
|
March
31, 2009
|
$0.15
|
$0.04
|
December
31, 2008
|
$0.08
|
$0.03
|
September
30, 2008
|
$0.15
|
$0.05
|
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
|
|
(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
October 2, 2009, 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 a
note for $105,000 to Brennecke Partners, LLC in exchange for the note issued on
April 7, 2007 and accrued interest having an aggregate value of
$225,155.
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 for 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.
In June
2008 the Company issued 11.2 million unregistered shares as conversion for
$750,000 convertible notes that were originally issued in December 2007 and
April 2008.
In August
2008 the Company issued 2,000 unregistered preferred Series A shares for a
consideration of $2.0 million, of which $500,000 was paid through cancellation
of two previously issued notes of $250,000 each and a cash payment of $1.5
million.
In June
through December 2008, the Company issued 16.8 million shares of common stock as
partial conversion of a convertible debenture issued in December
2007.
In
September through December 2008 the Company issued 158,135 unregistered shares
to a consultant with a fair value of $10,000 for services.
In
September 2008 the Company issued 25,000 unregistered shares with a fair value
of $1,450 to a distributor.
In
December 2008, the Company issued 2,000 unregistered preferred Series B shares
for a consideration of $2 million.
In
January through September 2009 the Company issued 203,506 unregistered shares to
a consultant with a fair value of $20,000 for services.
In March
2009 the Company issued 75,000 unregistered shares with a fair value of $10,125
to a distributor.
In May
2009, the Company issued 1.4 million shares of common stock as partial
conversion of a convertible debenture issued in December 2007.
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 Regulation 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, 2009
compared to the three and six months ended June 30, 2008 and the fiscal years
ended December 31, 2008 and December 31, 2007. 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.
Current
Business of our Company
We
operate in the 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 calorie burning
beverage. Celsius is currently available in five sparkling flavors: cola, ginger
ale, lemon/lime, orange and wild berry, and in two non-carbonated green teas
with flavors of peach/mango and raspberry/acai. Celsius is also available in its
On-the-go packets. 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.
A major
objective for the Celsius brand is to create a new beverage category, calorie
burners, we utilize a multi-channel route-to-market strategy. This includes
distributing through direct-store-delivery distributors and wholesalers to some
channels of trade (convenience, grocery, health clubs, etc) as well as shipping
direct-to-retailer for others (drug, mass, etc.).
We have
currently signed up distributors in many of the larger markets in the US
(Atlanta, Florida, Michigan, New England, Ohio, Texas, etc).
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 sites do 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, which often carries
a unique and sophisticated imagery and a premium price tag. The five
fastest-growing segments of the functional beverage market include:
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. 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 Celsius in five sparkling flavors: cola, ginger ale, lemon/lime,
orange and wild berry, and in two non-carbonated green teas flavors: 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. We have also started to market
a Celsius On-the-go packet, that contains the active ingredients of the Celsius
beverage and it is mixed with water to make a beverage.
Celsius
is currently packaged in distinctive twelve ounce sleek cans that are in vivid
colors in abstract patterns to create a strong on-shelf impact. 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 $1.79 to $2.19 per 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 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 are 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, cardiorespiratory fitness and endurance performance. According to
the preliminary findings, 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 93.75% greater loss in fat and 50% greater
gain in muscle mass, respectively. The study also confirmed that subjects
consuming Celsius significantly improved measures of cardiorespiratory fitness
and the ability to delay the onset of fatigue when exercising to
exhaustion.
Forward-Looking
Statements
Information
included or incorporated by reference in this Prospectus may contain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 (the “Exchange Act”). 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.
Risk
Factors
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 continuously
incurred operating losses since inception. We have incurred an operating loss
during the first six months ending June 30, 2009 of $2.6 million. As a result,
at June 30, 2009 we had an accumulated deficit of $14.0 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, 2009, we had a working capital deficit of $187,000. The independent
auditor’s report for the year ended December 31, 2008, 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 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 Golden Gate Investors, LLC, CD Financial, LLC, CDS
Ventures of South Florida, LLC and Lucille Santini may cause dilution and the
sale of the shares of Common Stock acquired by Golden Gate Investors, LLC, CD
Financial, LLC, CDS Ventures of South Florida, LLC or Lucille Santini could
cause the price of our Common Stock to decline.
In
connection with issuing a convertible debenture to Golden Gate Investors, LLC
(“GGI”), we have issued 18.0 million shares to GGI between June 16, 2008 and May
21, 2009, as partial conversion of the debenture. If requested by GGI, we may
have to issue approximately one million shares to GGI based on the current
conversion price and outstanding amount of the debenture. We are not obligated
to convert the debenture, if the price of our shares is below
$0.20.
On June
10, 2008, the total amount of $750,000 in notes payable to CD Financial, LLC
(“CDF”) was converted to 11,184,016 shares of Common Stock.
We have
sold a total of 6,000 Preferred A and B shares to CDS Ventures of South Florida,
LLC (“CDS”), and they have received a total of 92 shares in dividends. CDS can
convert its Preferred A and B shares into a maximum of 106 million shares of
Common Stock. CDS has the right to purchase an additional 1,000 Series A
Preferred Shares, which may be converted into a maximum of 12.5 million shares
of Common Stock.
On
September 8, 2009, we entered into a convertible loan agreement (the “Loan
Agreement”) with CDS. In connection with such Loan Agreement, CDS can
convert the note in to a maximum of 65,000,000 shares of Common
Stock.
On
September 8, 2009, we entered into we entered into a convertible loan agreement
(the “Refinance Agreement 2”) with Lucille Santini. In connection
with such Refinance Agreement, Ms. Santini can convert the note into a maximum
of 6,150,000 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 net losses every quarter of operation since inception. We had an
accumulated deficit of $14.0 million as of June 30, 2009. 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 in part on wholesale
distributors and in part on direct delivery to retailers for the success of our
business, the loss or poor performance of which may materially and adversely
affect our business.
We sell
our products in part to wholesalers for resale to retail outlets, and also
directly to retail outlets. Retail outlets, also referred to as
retailers; include grocery stores, convenience stores, nutritional and drug
stores. The replacement or poor performance of the Company's major customers and
or the Company's inability to collect accounts receivable from the Company's
major customers 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,
President, 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 or Mrs. 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:
·
|
Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
|
·
|
Disclose
certain price information about the
stock;
|
·
|
Disclose
the amount of compensation received by the broker-dealer or any associated
person of the broker-dealer;
|
·
|
Send
monthly statements to customers with market and price information about
the penny stock; and,
|
·
|
In
some circumstances, approve the purchaser's account under certain
standards and deliver written statements to the customer with information
specified in the rules
|
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.
Critical
Accounting Policies and Estimates
The
discussion and analysis of our financial condition and results of operations is
based upon our unaudited consolidated financial statements, which have been
prepared in accordance with Generally Accepted Accounting Principles (GAAP). The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates including, among others, those
affecting revenues, the allowance for doubtful accounts, the salability of
inventory and the useful lives of tangible and intangible assets. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form our
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions, or if management made
different judgments or utilized different estimates. Many of our estimates or
judgments are based on anticipated future events or performance, and as such are
forward-looking in nature, and are subject to many risks and uncertainties,
including those discussed below and elsewhere in this report. We do not
undertake any obligation to update or revise this discussion to reflect any
future events or circumstances.
Although
our significant accounting policies are described in Note 2 of the notes to our
unaudited consolidated financial statements, the following discussion is
intended to describe those accounting policies and estimates most critical to
the preparation of our consolidated financial statements. For a detailed
discussion on the application of these and our other accounting policies, see
Note 1 contained in Part II, Item 7 to the Consolidated Financial Statements for
the year ended December 31, 2008, included in Form 10-K.
Accounts Receivable – We
evaluate the collectability of our trade accounts receivable based on a number
of factors. In circumstances where we become aware of a specific customer’s
inability to meet its financial obligations, a specific reserve for bad debts is
estimated and recorded, which reduces the recognized receivable to the estimated
amount we believe will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
our recent past loss history and an overall assessment of past due trade
accounts receivable outstanding.
Revenue Recognition – Our
products are sold to distributors, wholesalers and retailers for cash or on
credit terms. Our credit terms, which are established in accordance with local
and industry practices, typically require payment within 30 days of delivery. We
recognize revenue when persuasive evidence of an arrangement exists, delivery
has occurred, the sales price is fixed or determinable and collectability is
reasonably assured. Any discounts, sales
incentives or similar arrangement with the customer is estimated at time of sale
and deducted from revenue. All sales to distributors and retailers are final
sales and we have a “no return” policy; however, in limited instances, due to
credit issues or distributor changes, we may take back product. We believe that
adequate provision has been made for cash discounts, returns and spoilage based
on the Company’s historical experience.
Inventory – We hold raw
materials and finished goods inventories, which are manufactured and procured
based on our sales forecasts. We value inventory at the lower of cost or market
and include adjustments for estimated obsolescence, principally on a first
in-first out basis. These valuations are subject to customer acceptance and
demand for the particular products, and our estimates of future realizable
values are based on these forecasted demands. We regularly review inventory
detail to determine whether a write-down is necessary. We consider various
factors in making this determination, including recent sales history and
predicted trends, industry market conditions and general economic conditions.
Differences could result in the amount and timing of write-downs for any period
if we make different judgments or use different estimates.
Stock-Based Compensation –We
use the Black-Scholes-Merton option pricing formula to estimate the fair value
of stock options at the date of grant. The Black-Scholes-Merton option pricing
formula was developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable. The Company’s
employee stock options, however, have characteristics significantly different
from those of traded options. For example, employee stock options are generally
subject to vesting restrictions and are generally not transferable. In addition,
option valuation models require the input of highly subjective assumptions,
including the expected stock price volatility, the expected life of an option
and the number of awards ultimately expected to vest. Changes in subjective
input assumptions can materially affect the fair value estimates of an option.
Furthermore, the estimated fair value of an option does not necessarily
represent the value that will ultimately be realized by an employee. The Company
uses historical data of comparable companies to estimate the expected price
volatility, the expected option life and the expected forfeiture rate. The
risk-free rate is based on the U.S. Treasury yield curve in effect at the time
of grant for the estimated life of the option. If actual results are not
consistent with the Company’s assumptions and judgments used in estimating the
key assumptions, the Company may be required to increase or decrease
compensation expense or income tax expense, which could be material to its
results of operations.
Recent
Accounting Pronouncements
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 adoption of SFAS 141R
did not have a material impact on the Company’s results of operations or
financial condition.
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. The adoption of this FSP did not have a material
impact on the Company’s results of operations or financial
condition.
In April
2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board
(“APB”) 28-1, Interim
Disclosures about Fair Value of Financial Instruments, which amends SFAS
No. 107, Disclosures
about Fair Value of Financial Instruments, (“SFAS No. 107”) and APB
Opinion No. 28, “Interim Financial Reporting,” respectively, to require
disclosures about fair value of financial instruments in interim financial
statements, in addition to the annual financial statements as already required
by SFAS No. 107. FSP FAS 107-1 and APB 28-1 will be required for interim
periods ending after June 15, 2009. As FSP FAS 107-1 and APB 28-1 provide
only disclosure requirements, the application of this standard will not have a
material impact on the Company’s results of operations, cash flows or financial
position.
All new
accounting pronouncements issued but not yet effective have been deemed to not
be applicable; hence the adoption of these new standards is not expected to have
a material impact on the Company’s results of operations, cash flows or
financial position.
RESULTS
OF OPERATIONS
THREE
MONTHS ENDED JUNE 30, 2009 COMPARED TO THREE MONTHS ENDED JUNE 30,
2008
Revenue
Revenue
for the three months ended June 30, 2009 and 2008 were $1.2 and $1.0 million,
respectively. The increase of 16.6 percent was mainly due improved sales to DSD
distributors, to direct customers such as Vitamin Shoppe and GNC and to
increased sales via the internet. During the three-month period in 2008 we
shipped a very large export order; the buyer has not reordered since then.
Without this order our increase would have been 102 percent for the quarter over
the same period last year. It is too early to project our revenue for the third
quarter 2009, but we believe that it will surpass the second
quarter.
Gross
profit
Gross
Profit was 42.0 percent in the second quarter 2009 as compared to 36.9 percent
for the same period in 2008. The margin last year was reduced due to low margin
on the large export order. As we increase our growth, our cost of shipping
should be reduced and therefore may increase our margins. We incurred cost
increases on some of our raw materials in the second quarter of 2009, but were
able to compensate for such increases by switching suppliers, which lowered
product cost as compared to the same period in 2008.
Operating
Expenses
Sales and
marketing expenses have increased substantially from one year to the next, $1.5
million for the second quarter of 2009 as compared to $705,000 for the same
three-month period in 2008, or an increase of $749,000. This was mainly due to
increased direct advertising expense by $378,000 and employee cost by $353,000.
The general and administrative expenses increased from $423,000 for the
three-month period in 2008 to $449,000 for the same period in 2009, an increase
of $26,000. This was mainly due to increased employee cost of $103,000 offset to
a lesser degree by $93,000 less expense for issuance of options and shares for
services. We have increased our efforts in radio and TV advertising. The radio
has been using our jingle “Burn Baby Burn” in various markets mainly in the
eastern and central United States. We have also used TV advertising in the
Boston area. We continue our efforts to participate in many sampling, shows,
sports and exercise events across the country.
Other
expense
The net
interest expense decreased from $157,000 for the three-month period in 2008 to
$27,000 during the second quarter in 2009, or a decrease of $130,000. This
decrease is mainly due to the reduction of debt discount amortization of
$121,000.
SIX
MONTHS ENDED JUNE 30, 2009 COMPARED TO SIX MONTHS ENDED JUNE 30,
2008
Revenue
Revenue
for the six months ended June 30, 2009 and 2008 were $2.1 and $1.5 million,
respectively. The increase of 39.4 percent was mainly due improved sales to DSD
distributors, mainly New England and Florida, to direct customers such as
Vitamin Shoppe and GNC and to increased sales via the internet. During the six
month period in 2008 we shipped a very large export order; the buyer has not
reordered since then. Without this order our increase would have been 91 percent
for the six months over the same period last year
Gross
profit
Gross
Profit was 42.9 percent in the six months ending June 30, 2009 as compared to
39.3 percent for the same period in 2008. The margin last year was reduced due
to low margin on the large export order. As we increase our growth, our cost of
shipping should be reduced and therefore may increase our margins. We incurred
cost increases on some of our raw materials in the second quarter of 2009, but
were able to compensate for such increases by switching suppliers, which lowered
product cost as compared to the same period in 2008.
Operating
Expenses
Sales and
marketing expenses have increased substantially from one year to the next, $2.7
million for the first two quarters of 2009 as compared to $1.6 million for the
same period in 2008, or an increase of $1.1 million. This was mainly due to
increased direct advertising expense by $559,000 and employee cost by $467,000.
The general and administrative expenses decreased from $888,000 for the
six-month period in 2008 to $804,000 for the same period in 2009, a decrease of
$84,000. This was mainly due to $140,000 less expense for issuance of options
and less development cost of $108,000, offset to a lesser degree by increased
employee cost of $181,000. We have increased our efforts in radio and TV
advertising. The radio has been using our jingle “Burn Baby Burn” in various
markets mainly in the eastern and central United States. We have also used TV
advertising in the Boston area during 3 of the last six months. We continue our
efforts to participate in many sampling, shows, sports and exercise events
across the country.
Other
expense
The net
interest expense decreased from $260,000 for the six-month period in 2008 to
$56,000, during the second quarter in 2009, or a decrease of $204,000. This
decrease is mainly due to the reduction of debt discount amortization of
$165,000.
THE
YEAR ENDED DECEMBER 31, 2008 COMPARED TO THE YEAR ENDED DECEMBER 31,
2007
Revenue
Revenue
increased 57.5 percent for the year 2008 to $2.6 million, as compared to $1.6
million in 2007. The increase was mainly due to increased number of retailers
selling our product, such as Walgreens, CVS, Meijers; new large distributors
such as Farner-Bocken, Polar Beverages and RSI; increases from our existing
customers such as Vitamin Shoppe and Krogers; and to a large export order in the
second quarter of the year, offset to a lesser extent by losses of some
accounts.
Gross
Profit
Gross
profit was 29.2 percent of net revenue during the year 2008, as compared to 37.1
percent in 2007. The decrease is mainly due to the decision to discontinue sales
of Celsius in glass bottles and solely concentrate on cans. We recorded a write
down of inventory due to obsolescence of bottled finished goods and packaging
material of $320,000 in 2008. No such write down occurred in 2007. Without this
write down our gross profit would have been 41.6 percent in 2008.
Operating
Expenses
Sales and
marketing expenses increased to $3.9 million in 2008 as compared to $2.1 million
in 2007, an increase of $1.8 million or 87.4 percent. This increase was mainly
due to increased cost for personnel, $372,000; new local distribution
organization in South Florida, $225,000; increased cost of sampling events and
other local promotion, $882,000; license rights to the song “Burn Baby Burn” and
radio advertising increase, $344,000. We have shifted our focus on sales and
marketing expenditure. General and administrative expenses increased to $1.7
million in 2008 as compared to $1.6 million in 2007, an increase of $186,000.
The increase was mainly due to increased cost for issuance of shares to third
parties for services, $86,000; increased product development expenses, $48,000;
increased collection and factoring expenses, $74,000; offset to a lesser extent
by decreased investor relations expenses, $63,000; and decreased insurance
expenses, $59,000.
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 $412,000 in 2008 as
compared to $189,000 in 2007. The increase of $223,000 was mainly due to
amortization of debt discounts on convertible notes for a total of $211,000,
increased interest cost on a convertible debenture of $93,000, offset to a
lesser extent by decreased loan balances and renegotiation of interest rates.
Our interest income increased from $8,000 in 2007 to $70,000 in 2008, an
increase of $62,000, due to a note receivable from Golden Gate Investors,
Inc.
Liquidity
and Capital Resources
We have
yet to establish any history of profitable operations. As a result, at June 30,
2009, we had an accumulated deficit of $14.0 million. At June 30, 2009, we had a
working capital deficit of $187,000. The independent auditor’s report for the
year ended December 31, 2008, 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 had operating cash flow deficits all quarters of operations.
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 a line of credit with a related party, CD
Financial, LLC. The line of credit was started in December 2008 and is for $1
million. The interest rate is LIBOR rate plus three percent on the outstanding
balance. The line expires in December 2009 and is renewable. In connection with
the revolving line of credit we have entered into a loan and security agreement
under which we have pledged all our assets as security for the line of credit.
The outstanding balance as of June 30, 2009 was $300,000.
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. In July 2008, we restructured
the agreement and decreased the interest rate to prime rate flat, monthly
payments of $5,000 until a balloon payment of approximately $606,000 in January
2010. The outstanding balance as of June 30, 2009 was $620,000. In
September, 2009, this debt was restructured and we issued a convertible note of
$615,000 with maturity in September 2012. Interest on the convertible note is
set at 3% over the one-month LIBOR rate. The first interest payment is due in
September 2010 and quarterly thereafter. The note can be converted to shares of
our common stock.
We
borrowed $50,000 from the CEO of the Company in February 2006. We also owed the
CEO $171,000 for accrued salaries from 2006 and 2007. The two debts were
restructured in to one note accruing 3% interest, monthly payments of $5,000 and
with a balloon payment of $64,000 in January 2011. The outstanding balance as of
June 30, 2009 was $162,000.
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, 2009 was $45,000.
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.
In August
of 2008, we entered into a security purchase agreement (“SPA1”) with CDS
Ventures of South Florida, LLC (“CDS”), an affiliate of CD Financial, LLC
(“CD”), pursuant to which we received $1.5 million in cash, cancelled two
convertible notes issued to CD for $500,000. In exchange, the Company issued to
CDS, 2,000 Series A Preferred Shares, and a warrant to purchase additional 1,000
Series A Preferred Shares. See further discussion below on SPA1 with
CDS.
In
December of 2008, we entered into a second security purchase agreement (“SPA2”)
with CDS pursuant to which we received $2.0 million in cash and issued 2,000
Series B Preferred Shares, and a warrant to purchase additional 2,000 Series B
Preferred Shares. In March, 2009, CDS exercised its warrant and subscribed to an
additional 2,000 Series B Preferred Shares. During April and May, 2009, we
received the corresponding $2 million in cash. See further discussion below on
SPA2 with CDS.
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.
In August
2009, we issued to CD an unsecured note for $1 million and received $1 million
in cash. In September 2009, this note was refinanced. The
current unsecured note accrues interest at 6% per annum and has a maturity date
of February 28, 2010.
In
September 2009, we entered into a $6.5 million loan agreement with CDS. The loan
can be disbursed at $2 million per month for the months of September, October
and November and $500,000 in December. The loan is due in September 2012.
Interest is set at 3% over the one-month LIBOR rate. The first interest payment
is due in September 2010 and quarterly thereafter. The note can be converted to
shares of our common stock.
We will
require additional financing to sustain our operations. Management estimates
that we need to raise an additional $5.0 to $15.0 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. 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, 2008, 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
to
|
|
3
to
|
|
More Than
|
Obligations
|
|
1 Year
|
|
3 Years
|
|
5 Years
|
|
5 Years
|
Debt
to related party
|
820
|
|
120
|
|
700
|
|
—
|
|
—
|
Loans
payable
|
196
|
|
121
|
|
58
|
|
17
|
|
—
|
Convertible
debenture
|
563
|
|
563
|
|
—
|
|
—
|
|
—
|
Purchase
obligations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Total
|
$
|
1,579
|
|
$
|
804
|
|
$
|
758
|
|
$
|
17
|
|
$
|
—
|
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. The first 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 GGI may
immediately sell all of the Common Stock Issued at Conversion (as defined in the
Debenture) pursuant to Rule 144 of the Securities Act of 1933. The Company is
under no contractual obligation to ensure that GGI may immediately sell all of
the Common Stock Issued at Conversion pursuant to Rule 144. In the event that
GGI may not immediately sell all of the Common Stock Issued at Conversion
pursuant to Rule 144, GGI would be under no obligation to prepay the promissory
note and likewise under no obligation to exercise its conversion rights under
the Debenture. If GGI does not fully convert the Debenture by its maturity on
December 19, 2011, the balance of the Debenture is offset by any balance due to
the Company under the promissory note. As of June 30, 2009, the balances of the
promissory note and Debenture were $250,000 and $596,000, respectively. 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 converted $879,000 of its convertible
debenture through June 2009 receiving 18.0 million shares of Common
Stock.
GGI did
not make its note payment due on October 21, 2008. On September 8,
2009, the Company entered into an addendum to the agreement with GGI. The
balance of the note receivable, $250,000 was netted against the balance of the
Debenture. The outstanding balance of the debenture is $346,000. All future
tranches were cancelled and terminated without penalty to either
party.
The
foregoing description is qualified in its entirety by reference to the full text
of the promissory note, purchase agreement, and Debenture, a copy of each of
which was filed as Exhibit 10.2, 10.3, and 10.4, respectively to our Current
Report on Form 8-K/A as filed with the SEC on January 9, 2008 and each of which
is incorporated herein in its entirety by reference.
OUR
SECURITY PURCHASE AGREEMENT WITH CDS VENTURES OF SOUTH FLORIDA, LLC
On August
8, 2008, we entered into a securities purchase agreement (“SPA1”) with CDS, an
affiliate of CD Financial, LLC (“CD”). Pursuant to SPA1, we issued 2,000 Series
A preferred shares (“Preferred A Shares”), as well as a warrant to purchase
additional 1,000 Preferred A Shares, for a cash payment of $1.5 million and the
cancellation of two notes in aggregate amount of $500,000 issued to CD. The
Preferred A Shares can be converted into our common stock at any time. SPA1 was
amended on December 12, 2008 to provide that until December 31, 2010, 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 SPA1, we also entered into a registration
rights agreement, pursuant to which we filed a registration statement for the
common stock issuable upon conversion of Preferred Shares. The registration
statement filed in connection with the Preferred A Shares was declared effective
on May 14, 2009. The Preferred A Shares accrue ten percent annual cumulative
dividend, payable in additional Preferred A Shares. We issued 81 Preferred A
Shares in dividends during the first quarter of 2009. The Preferred A Shares
mature on February 1, 2013 and are only redeemable in Company Common Stock. The
full agreement can be reviewed in the Company’s Form 8-K filed with the SEC on
August 12, 2008.
On
December 12, 2008, we entered into a second securities purchase agreement
(“SPA2”) with CDS. Pursuant to SPA2 we issued 2,000 Series B preferred shares
(“Preferred B Shares”), as well as a warrant to purchase additional 2,000
Preferred B Shares, for a cash payment of $2.0 million. The Preferred B Shares
can be converted into our common stock at any time. Until December 31, 2010, the
conversion price is $0.05, after which the conversion price is the greater of
$0.05 or 90% of the volume weighted average price of the common stock for the
prior 10 trading days. Pursuant to SPA2, we entered into a registration rights
agreement under which we agreed to file a registration statement for the common
stock issuable upon conversion of Preferred B Shares. We have filed
this registration statement pursuant to registration rights agreement executed
in connection with SPA2. The Preferred B Shares accrue a ten percent annual
cumulative dividend, payable in additional Preferred B Shares. We issued 11
Preferred B Shares in dividends during the first quarter of 2009. The Preferred
B Shares mature on December 31, 2013 and are only redeemable in Company Common
Stock. The full agreement can be reviewed in the Company’s Form 8-K filed with
the SEC on December 17, 2008.
On March
31, 2009, CDS exercised its right to purchase additional 2,000 Preferred B
Shares and executed a subscription agreement for $2.0 million. The monies for
the subscription were paid on April 7 and May 1, 2009.
Certain
covenants of both Series A and B preferred shares restrict the Company from
entering into additional debt arrangements or permitting liens to be filed
against the Company’s assets, without approval from the holder of the preferred
shares. There is a mandatory redemption in cash, if the Company breaches certain
covenants of the agreements. The holders have liquidation preference in case of
company liquidation. The Company has the right to redeem the preferred shares
early by the payment in cash of 104% of the liquidation preference value. The
Company may redeem the Series A shares at any time on or July 1, 2010 and the
Series B shares at any time on or after January 1, 2011.
RELATED
PARTY TRANSACTIONS
We
received advances from one of our stockholders at various instances during 2004
and 2005, $76,000 and $424,000, respectively. In July 2008, we restructured the
agreement and decreased the interest rate to prime rate flat, monthly payments
of $5,000 until a balloon payment of approximately $606,000 in January 2010. The
outstanding balance as of June 30, 2009 was $620,000. In September
2009, this debt was restructured to a convertible note of $615,000 with maturity
in September 2012. Interest on the convertible note is set at 3% over the
one-month LIBOR rate. The first interest payment is due in September 2010 and
quarterly thereafter. The note can be converted to shares of our common
stock.
We have
accrued $171,000 for the CEO’s salary from March 2006 through May 30, 2007. The
CEO also lent us $50,000 in February 2006. The two debts were restructured in to
one note accruing 3% interest, monthly payments of $5,000 and with a balloon
payment of $64,000 in January 2011. The outstanding balance as of June 30, 2009
was $162,000.
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 shares in a private placement for a total consideration of
$25,000.
CD and
CDS are considered a related parties due to their ownership of preferred shares
and common stock, see further discussions under Liquidity and Capital Resources
and Our Security Purchase Agreement with CDS Ventures of South Florida, LLC,
above.
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
ACCOUNTING AND FINANCIAL DISCLOSURE
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 October 2, 2009. 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
|
|
52
|
|
Chief
Executive Officer, President and Chairman of the Board of
Directors
|
|
|
|
|
|
Jan
Norelid
|
|
56
|
|
Chief
Financial Officer and Director
|
|
|
|
|
|
Jeffrey
Perlman
|
|
45
|
|
Chief
Operating Officer
|
|
|
|
|
|
Janice
Haley
|
|
48
|
|
Vice
President of Strategic Accounts and Business
Development
|
|
|
|
|
|
James
Cast
|
|
61
|
|
Director
|
|
|
|
|
|
William
H. Milmoe
|
|
61
|
|
Director
|
|
|
|
|
|
Geary
W Cotton
|
|
57
|
|
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.
Jeffrey Perlman is the Chief
Operating Officer of the Company. Mr. Perlman joined Celsius as Chief
Operating Officer in January 2009. Since 2002 and until 2008 Mr. Perlman was
President of Community Ventures Inc., a consulting firm offering business
development, public relations, government relations, strategic planning,
publishing and economic development services. Mr. Perlman is the former mayor of
the City of Delray Beach. Mr. Perlman is member of the board of directors for
the Business Development Board of Palm Beach County, the Greater Delray Beach
Chamber of Commerce and several other non-profit organizations. Mr. Perlman
holds a BA in Political Science from the State University of New York, College
at Oswego.
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.
Geary Cotton is a director of
the Company. Mr. Cotton joined Celsius Holdings, Inc as director in September,
2008. Mr. Cotton is director of a privately held insurance industry company, XN
Financial. Mr. Cotton was from 1986 to 2000 chief financial officer of Rexall
Sundown, and public entity sold in 2000 for $1.8 billion. Mr. Cotton was a
director and audit committee chairman of QEP Co. Inc. from 2002 to 2006. Mr.
Cotton is a certified public accountant with over 30 years of broad business
experience in both public accounting and private industry. Mr. Cotton is a
graduate of University of Florida.
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.
Involvement
in certain legal proceedings
On
September 25, 2008, the Securities and Exchange Commission (SEC) filed a
consent by Jan Norelid, Chief Financial Officer and one of the Company’s
Directors, for the entry of a judgment against Mr. Norelid in a matter brought
by the SEC in the United States District Court for the Southern District of
Florida (Case No. 08-61524-CIV). The SEC’s allegations resulted from
Mr. Norelid’s purchase and sale of the stock of Services Acquisition Corp.
International (“SACI”) in 2006 while he acted as a consultant to
SACI. Mr. Norelid did not admit or deny the SEC’s allegations but
agreed to a permanent injunction, disgorgement of $5,102, prejudgment interest
of $906 and a penalty of $8,865. None of the SEC’s allegations
involve the Company or Mr. Norelid’s role as a Director or Chief Financial
Officer for the Company. The
foregoing matter was previously disclosed in our Current Report on Form 8-K as
filed with the SEC on September 26, 2008, and the description herein is
qualified in its entirety by reference to the full text of the consent filed by
the SEC, which is incorporated herein in its entierety by
reference.
Summary
Executive Compensation Table
The table
below summarizes all compensation awarded to, earned by, or paid to our
executive officers by any person for all services rendered in all capacities to
us for the years ended December 31, 2008, 2007 and 2006:
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan Compensation
|
|
|
Non-Qualified
Deferred Compensation Earnings
|
|
|
All
Other Compensation
|
|
|
Totals
|
|
Name
and Principal Position
|
Year
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Haley, President,
CEO
and Chairman of the Board
|
2008
|
|
|
141,231 |
|
|
|
- |
|
|
|
- |
|
|
|
0 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
141,231 |
|
2007
|
|
|
93,877 |
|
|
|
- |
|
|
|
- |
|
|
|
24,769 |
|
|
|
- |
|
|
|
- |
|
|
|
51,000 |
|
|
|
169,646 |
|
2006
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
120,000 |
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan
Norelid,
|
2008
|
|
|
141,092 |
|
|
|
|
|
|
|
|
|
|
|
62,120 |
|
|
|
|
|
|
|
|
|
|
|
7,200 |
|
|
|
210,412 |
|
CFO and
Director
|
2007
|
|
|
135,831 |
|
|
|
- |
|
|
|
25,000 |
|
|
|
20,271 |
|
|
|
- |
|
|
|
- |
|
|
|
4,985 |
|
|
|
186,087 |
|
2006
|
|
|
8,308 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
McGee, COO
|
2008
|
|
|
105,692 |
|
|
|
- |
|
|
|
- |
|
|
|
20,707 |
|
|
|
- |
|
|
|
- |
|
|
|
12,000 |
|
|
|
138,399 |
|
Formerly
COO
|
2007
|
|
|
106,615 |
|
|
|
13,506 |
|
|
|
- |
|
|
|
28,073 |
|
|
|
- |
|
|
|
- |
|
|
|
9,692 |
|
|
|
157,886 |
|
2006
|
|
|
60,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice
Haley
|
2008
|
|
|
98,077 |
|
|
|
- |
|
|
|
- |
|
|
|
17,256 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
115,333 |
|
Vice
President
|
2007
|
|
|
103,846 |
|
|
|
- |
|
|
|
- |
|
|
|
33,025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
136,871 |
|
2006
|
|
|
65,385 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
65,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irina
Lorenzi
|
2008
|
|
|
122,596 |
|
|
|
- |
|
|
|
- |
|
|
|
15,938 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
138,534 |
|
Innovations
Vice President
|
2007
|
|
|
45,673 |
|
|
|
|
|
|
|
|
|
|
|
96,924 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
136,871 |
|
|
2006
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
From
March 2006 through part of May of 2007 the Company accrued Mr. Haley’s
salary and have still not paid it, the accrued amounts are shown under All
Other Compensation as $120,000 and $51,000 for the years 2006 and 2007,
respectively.
|
Mr.
Norelid received $7,200 and 4,985 in health insurance reimbursement, for the
years 2008 and 2007, respectively.
Mr. McGee
received $12,000 and 9,692 as auto allowance for the years 2008 and 2007,
respectively.
Director
Compensation
The
following table sets forth with respect to the named director, compensation
information inclusive of equity awards and payments made in the year ended
December 31, 2008
Name
|
|
Fees
earned or paid in
cash ($)
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
|
|
Non-Qualified
Deferred
Compensation
Earnings
|
|
All
Other
Compensation
|
|
Total
Compensation
|
|
James
R. Cast (1) (2)
|
|
$
|
4,000
|
|
$
|
-
|
|
$
|
11,562
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
15,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
Horn (1) (2)
|
|
$
|
4,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
4,000
|
|
(1)
|
Represents
options to purchase 200,000 shares of common stock issued to Mr. Cast on
April 9, 2008 at an exercise price equal to
$0.11.
|
(2)
|
Cash
compensation to non-employee directors has been established to be $4,000
annually, and $250 per audit committee meeting, once such committee is
formed. The fee of $4,000 for the year of service ended in January 2008
was paid to the directors in 2008.
|
Executive
Officer Employment Agreements
On
January 19, 2007, Elite entered into employment agreements with the Messrs.
Stephen C. Haley, Jan Norelid, 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. Norelid 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 Ms. Janice Haley, our Vice President of Strategic Accounts and
Business Development, 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 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.
On
January 5, 2009 we entered into employment agreement with Mr. Jeff Perlman, our
Chief Operating Officer. It provides for a base annual salary of
$144,000.
The
agreements with Mr. Perlman 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.
Equity
Awards 2008 Table
The
following table sets forth information with respect to stock awards and grants
of options to purchase our common stock under our 2006 Stock Incentive Plan, or
separately, to the named executive officers during the fiscal year ended
December 31, 2008.
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
Number
of Securities underlying unexercised options #
|
|
|
Number
of Securities underlying unexercised options #
|
|
|
Equity
incentive plan awards
Number
of Securities underlying unexercised
Unearned
options
|
|
|
Option
exercise price
|
|
|
Option
Expiration Date
|
|
|
Number
of shares or units of stock that have not vested
|
|
|
Market
value of shares of units of stock that have not vested
|
|
|
Equity
incentive plan awards
Number
of unearned shares, units or other rights that
|
|
|
Equity
incentive plan awards
Market
or payout value of unearned shares, units or other rights that have not
vested
|
|
Name |
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
|
(#)
|
|
|
($)
|
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
C. Haley, CEO
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan
A. Norlid
|
|
|
- |
|
|
|
- |
|
|
|
900,000 |
|
|
$ |
0.11 |
|
|
4/9/2023
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
W. McGee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
Field Operations
|
|
|
- |
|
|
|
- |
|
|
|
300,000 |
|
|
$ |
0.11 |
|
|
4/9/2023
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice
H. Haley, Vice President
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
$ |
0.11 |
|
|
4/9/2023
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table sets forth information with respect to the beneficial ownership
of our Common Stock as of October 7, 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 Owned
|
|
|
Right
to Acquire Within 60 Days After
Oct
2, 2009
|
|
|
Shares
Beneficially Owned (6) Number
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Address of Beneficial Owner(1)
|
|
Percentage
|
|
Carl
DeSantis (2)
|
|
|
11,284,016 |
|
|
|
111,232,500 |
|
|
|
122,516,516 |
|
|
|
46.4%
|
% |
William
H. Milmoe (3)
|
|
|
11,194,016 |
|
|
|
111,232,500 |
|
|
|
122,426,516 |
|
|
|
46.4%
|
% |
CD
Financial, LLC (4)
|
|
|
11,184,016 |
|
|
|
111,232,500 |
|
|
|
122,416,516 |
|
|
|
46.4%
|
% |
CDS
Ventures of South Florida, LLC (4)
|
|
|
- |
|
|
|
111,232,500 |
|
|
|
111,232,500 |
|
|
|
42.2%
|
% |
Stephen
C. Haley (5)
|
|
|
44,889,852 |
|
|
|
1,337,246 |
|
|
|
46,227,098 |
|
|
|
30.0%
|
% |
Lucille
Santini
|
|
|
18,144,926 |
|
|
|
1,537,500 |
|
|
|
19,682,426 |
|
|
|
12.8%
|
% |
Joseph
& Gionis LLC
|
|
|
10,000,000 |
|
|
|
7,000,000 |
|
|
|
17,000,000 |
|
|
|
10.7%
|
% |
Jan
Norelid
|
|
|
1,894,920 |
|
|
|
900,000 |
|
|
|
2,794,920 |
|
|
|
1.8%
|
% |
Janice
Haley
|
|
|
245,098 |
|
|
|
2,032,995 |
|
|
|
2,278,093 |
|
|
|
1.5%
|
% |
Jeffrey
Perlman
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
-
|
% |
James
Cast
|
|
|
- |
|
|
|
367,450 |
|
|
|
367,450 |
|
|
|
0.2%
|
% |
Geary
Cotton
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
-
|
% |
All
executive officers and directors as a
|
|
|
58,323,886 |
|
|
|
115,870,191 |
|
|
|
174,194,077 |
|
|
|
64.9%
|
% |
group
(7 persons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(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)
|
Mr.
DeSantis directly owns 100,000 shares of common stock. He has beneficial
ownership of 11,184,016 common shares owned by CD Financial, LLC. He has
beneficial ownership of 2,081 shares of Series A Convertible Preferred
Stock and 4,011 shares of Series B Convertible Preferred Stock owned by
CDS Ventures of South Florida, LLC, immediately convertible into a maximum
of 26,012,500 and 80,220,000 common shares respectively. He has beneficial
ownership of the $6.5 million convertible note. Based on the
current outstanding balance, the note is immediately convertible at the
current Conversion Price into 5,000,000 shares of Common Stock. Mr.
DeSantis has dispositive power over the shares owned by CD Financial, LLC
and CDS Ventures of South Florida, LLC. Each of Mr. Milmoe and Mr.
DeSantis has shared voting power with regard to the shares held by CDS
Ventures of South Florida, LLC and CD Financial, LLC. Mr. Milmoe
does not have dispositive power with regard to the shares owned by CD
Financial, LLC or CDS Ventures of South Florida, LLC such
Shares.
|
(3)
|
Mr.
Milmoe directly owns 10,000 shares of common stock. He has beneficial
ownership of 11,184,016 common shares owned by CD Financial, LLC. He has
beneficial ownership of 2,081 shares of Series A Convertible Preferred
Stock and 4,011 shares of Series B Convertible Preferred Stock owned by
CDS Ventures of South Florida, LLC, immediately convertible into a maximum
of 26,012,500 and 80,220,000 common shares respectively. Mr. DeSantis has
dispositive power over such Preferred Shares. He has beneficial ownership
of the $6.5 million convertible note, which based on the current
outstanding balance of the note is immediately convertible at the current
Conversion Price to 5,000,000 shares of Common Stock. Each of Mr. Milmoe
and Mr. Carl DeSantis has shared voting power with regard to the shares
held by CDS Ventures of South Florida, LLC and CD Financial, LLC.
Mr. Milmoe does not have dispositive power with regard to such
Shares.
|
(4)
|
CD
Financial, LLC directly owns 11,184,016 common shares. It has beneficial
ownership of 2,081 shares of Series A Convertible Preferred Stock and
4,011 shares of Series B Convertible Preferred Stock owned by CDS Ventures
of South Florida, LLC, immediately convertible into a maximum of
26,012,500 and 80,220,000 common shares respectively and the $6.5 million
convertible note, immediately convertible at the current Conversion Price
to 16,250,000 shares of Common Stock..
|
(5)
|
Mr.
Haley directly owns 26,744,926 shares. Also includes 18,144,926 shares
owned by Lucille Santini. Mr. Haley has voting power over these shares
through a voting agreement dated on August 7, 2008, valid until July 31,
2010. Excludes any shares owned directly and indirectly by his wife Mrs.
Janice Haley.
|
(6)
|
Applicable
percentage of ownership is based on 152,615,242 shares of Common Stock
outstanding as of October 2, 2009 together with securities exercisable or
convertible into shares of common stock within sixty (60) days of the
Record Date, 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.
|
Arrangements
Possibly Resulting in a Change in Control
Upon
exercise of the unexpired warrants it holds, CD Financial, LLC with its
subsidiary CDS Ventures of Florida, LLC, would beneficially own, but not own of
record, 122,416,516 shares of the Company’s common stock giving it beneficial
ownership of approximately 46.0% of our common stock outstanding as of May 18,
2009. Accordingly, if CD Financial, LLC were to exercise its warrants, it would
have enough shares of our common stock to effectively control our
company.
SECTION
16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires our directors, executive
officers and beneficial owners of more than 10% of our common stock to file with
the SEC reports of their holdings of and transactions in our common stock. To
the best of our knowledge, based solely upon our review of copies of such
reports and representation from reporting persons that were provided to us, we
believe that each of our executive officers and directors timely filed Forms 4
and 5 with respect to transactions that should have been reported by them on
such Forms.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth, as of December 31, 2008, certain information
related to our compensation plans under which shares of our common stock are
authorized for issuance:
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
Equity
compensation plans approved by security holders
|
|
13,447,317
|
|
$
|
0.07
|
|
2,474,833
|
Equity
compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
—
|
Total
|
|
13,447,317
|
|
$
|
0.07
|
|
2,474,833
|
|
|
|
|
|
|
|
Material
Features of Plan Approved by Shareholders
On
January 18, 2007, we adopted our 2006 Incentive Stock Plan. The 2006 Incentive
Stock Plan provides for equity incentives to be granted to our employees,
officers or directors or to key advisers or consultants. Equity incentives may
be in the form of stock options with an exercise price not less than the fair
market value of the underlying shares as determined pursuant to the 2006
Incentive Stock Plan, stock appreciation rights, restricted stock awards, stock
bonus awards, other stock-based awards, or any combination of the foregoing. The
2006 Incentive Stock Plan is administered by the Compensation Committee of the
Board of Directors. In the absence of such committee, the Board of Directors
administers the plan. The 2006 Incentive Stock Plan was approved by our
stockholders at the shareholders’ annual meeting on January 18,
2007.
On July
16, 2009, the shareholders of the company approved the Amended 2006 Incentive
Stock Plan whereby the total number of shares of common stock available under
the plan was increased to 50,000,000.
Material
Features of Individual Arrangements Not Approved by Shareholders
As of
December 31, 2008, we do not have any individual equity compensation
arrangements outside of our 2006 Incentive Stock Plan.
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.
We
received advances from one of our stockholders, Mrs. Santini, at various
instances during 2004 and 2005, $76,000 and $424,000, respectively. Mrs. Santini
owned as of the record date 12.2% of our outstanding common stock. In July 2008,
we restructured the agreement and decreased the interest rate to prime rate
flat, no collateral, monthly payments of $5,000 until a balloon payment of
approximately $606,000 in January 2010. The outstanding balance as of June 30,
2009 was $620,000. In September 2009, this debt was restructured to a
convertible note of $615,000 with maturity in September 2012. Interest on the
convertible note is set at 3% over the one-month LIBOR rate. The first interest
payment is due in September 2010 and quarterly thereafter. The note can be
converted to shares of our common stock.
We have
accrued $171,000 for Mr. Haley’s, our CEO, salary from March 2006 through May
30, 2007. Mr. Haley also lent us $50,000 in February 2006. The two debts were
restructured in July 2008 into one note accruing 3 percent interest, no
collateral, monthly payments of $5,000 and with a balloon payment of $64,000 in
January 2011. The outstanding balance as of December 31, 2008 was
$176,000.
Mr. Haley
has guaranteed the Company’s obligations under the factoring agreement with
Bibby Financial Services, Inc. (“Bibby”). This agreement has been cancelled and
the debt was paid off in November 2008. Mr. Haley has also guaranteed the
financing of vehicles on our behalf, and was previously guaranteeing the office
lease for the Company. Mr. Haley was not compensated for issuing the
guarantees.
Mrs.
Janice Haley, Vice President of Strategic Accounts and Business Development, is
the spouse to Mr. Haley, our CEO. Her compensation is disclosed in the
compensation chart of named executives.
In August
of 2008, we entered into a security purchase agreement (“SPA1”) with CDS
Ventures of South Florida, LLC (“CDS”), an affiliate of CD Financial, LLC
(“CD”), pursuant to which we received $1.5 million in cash, cancelled two
convertible notes issued to CD for $500,000. In exchange, the Company issued to
CDS, 2,000 Series A Preferred Shares, and a warrant to purchase additional 1,000
Series A Preferred Shares. See further discussion below on SPA1 with
CDS.
In
December of 2008, we entered into a second security purchase agreement (“SPA2”)
with CDS pursuant to which we received $2.0 million in cash and issued 2,000
Series B Preferred Shares, and a warrant to purchase additional 2,000 Series B
Preferred Shares. In March, 2009, CDS exercised its warrant and subscribed to an
additional 2,000 Series B Preferred Shares. During April and May, 2009, we
received the corresponding $2 million in cash. See further discussion below on
SPA2 with CDS.
In August
2009, we issued to CD an unsecured note for $1 million and received $1 million
in cash. In September 2009, this note was refinanced. The
current unsecured note accrues interest at 6% per annum and has a maturity date
of February 28, 2010.
In
September 2009, we entered into a $6.5 million loan agreement with CDS. The loan
can be disbursed at $2 million per month for the months of September, October
and November and $500,000 in December. The loan is due in September 2012.
Interest is set at 3% over the one-month LIBOR rate. The first interest payment
is due in September 2010 and quarterly thereafter. The note can be converted to
shares of our common stock.
We have
entered into a 6 month lease agreement for office space with CDR Plaza, Ltd. a
company controlled by Carl DeSantis. The monthly rate is $4,000 for a 3,000
square foot space.
Related
party transactions are contracted on terms comparable to the terms of similar
transactions with unaffiliated parties. As part of our code of ethics, any
related party transaction must be approved in advance. If the interested party
is an officer or director of the Company, approval must be obtained from of a
majority of the Audit Committee of the Board or the Board itself, provided that
only those that do not have a relationship or an interest in the transaction are
eligible to cast a vote. In each such case, the full scope of the conflict of
interest must be disclosed to senior management and the Audit Committee or the
Board, and must also be publicly disclosed to the extent required by applicable
securities laws.
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.
Director
Independence
The board
of directors has determined that three of our five directors, Mr. Cast, Mr.
Milmoe and Mr. Cotton, are independent pursuant to the independence standards of
the NASDAQ Stock Market.
Conflicts Relating to Officers and
Directors
To
date, we do not believe that there are any conflicts of interest involving our
officers or directors.
With
respect to transactions involving real or apparent conflicts of interest, we
have adopted policies and procedures which require that: (i) the fact of
the relationship or interest giving rise to the potential conflict be disclosed
or known to the directors who authorize or approve the transaction prior to such
authorization or approval, (ii) the transaction be approved by a majority
of our disinterested outside directors, and (iii) the transaction be fair
and reasonable to us at the time it is authorized or approved by our
directors.
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
Financial
statements June 30, 2009
|
Page
Number |
Condensed
Consolidated Balance Sheets at June 30, 2009 (unaudited)
|
|
and December 31,
2008
|
F-2
|
|
|
Condensed
Consolidated Statements of Operations for three months
|
|
and six months ended June 30, 2009
and 2008
(unaudited)
|
F-3
|
|
|
Condensed
Consolidated Statements of Cash Flows for
|
|
six months ended June 30, 2009 and
2008
(unaudited)
|
F-4
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
for
six months ended June 30, 2009
(unaudited)
|
F-5
- F-19
|
|
|
|
|
Financial
statements December 31, 2008
|
|
Report
of Independent Registered Public Accounting
Firm
|
F-20
|
|
|
Consolidated
Balance Sheet as of December 31, 2008 and
|
|
December 31,
2007
|
F-21
|
|
|
Consolidated
Statements of Operations for the years ended
|
|
December 31, 2008 and
2007
|
F-22
|
|
|
Consolidated
Statements of Changes in Stockholders' Deficit
|
|
for the years ended December 31,
2008 and
2007
|
F-23
|
|
|
Consolidated
Statements of Cash Flows for the years ended
|
|
December 31, 2008 and
2007
|
F-24
|
|
|
Notes
to Consolidated Financial Statements
|
|
for the year ended December 31,
2008
|
F-25
- F-42
|
Celsius
Holdings, Inc. and Subsidiaries
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
June
30
|
|
December
311
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
311,032 |
|
|
$ |
1,040,633 |
|
Accounts
receivable, net
|
|
|
465,793 |
|
|
|
192,779 |
|
Inventories,
net
|
|
|
896,495 |
|
|
|
505,009 |
|
Other
current assets
|
|
|
256,889 |
|
|
|
12,155 |
|
Total
current assets
|
|
|
1,930,209 |
|
|
|
1,750,576 |
|
|
|
|
|
|
|
|
|
|
Property,
fixtures and equipment, net
|
|
|
172,216 |
|
|
|
183,353 |
|
Note
receivable
|
|
|
250,000 |
|
|
|
250,000 |
|
Other
long-term assets
|
|
|
18,840 |
|
|
|
18,840 |
|
Total
Assets
|
|
$ |
2,371,265 |
|
|
$ |
2,202,769 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
1,066,084 |
|
|
$ |
612,044 |
|
Loans
payable
|
|
|
45,000 |
|
|
|
95,000 |
|
Short
term portion of other liabilities
|
|
|
26,173 |
|
|
|
26,493 |
|
Due
to related parties, short-term portion
|
|
|
979,504 |
|
|
|
120,000 |
|
Total
current liabilities
|
|
|
2,116,761 |
|
|
|
853,537 |
|
|
|
|
|
|
|
|
|
|
Convertible
note payable, net of debt discount
|
|
|
480,886 |
|
|
|
562,570 |
|
Due
to related parties, long-term
|
|
|
102,156 |
|
|
|
700,413 |
|
Other
liabilities
|
|
|
62,280 |
|
|
|
75,022 |
|
Total
Liabilities
|
|
|
2,762,083 |
|
|
|
2,191,542 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
(Deficit) Equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 50,000,000 shares
|
|
|
|
|
|
|
|
|
authorized,
6,092 shares and 4,000 shares issued and outstanding,
respectively
|
|
|
6 |
|
|
|
4 |
|
Common
stock, $0.001 par value: 350,000,000 shares
|
|
|
|
|
|
|
|
|
authorized,
150 million and 149 million shares issued and outstanding,
respectively
|
|
|
150,214 |
|
|
|
148,789 |
|
Additional
paid-in capital
|
|
|
13,459,254 |
|
|
|
11,244,802 |
|
Accumulated
deficit
|
|
|
(14,000,292 |
) |
|
|
(11,382,368 |
) |
Total
Stockholders’ (Deficit) Equity
|
|
|
(390,818 |
) |
|
|
11,227 |
|
Total
Liabilities and Stockholders’ (Deficit) Equity
|
|
$ |
2,371,265 |
|
|
$ |
2,202,769 |
|
1 Derived from
audited financial statements.
The
accompanying notes are an integral part of these unaudited 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,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$ |
1,166,062 |
|
|
$ |
1,000,109 |
|
|
$ |
2,137,473 |
|
|
$ |
1,533,491 |
|
Cost
of revenue
|
|
|
676,312 |
|
|
|
631,321 |
|
|
|
1,220,836 |
|
|
|
930,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
489,750 |
|
|
|
368,788 |
|
|
|
916,637 |
|
|
|
603,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and marketing expenses
|
|
|
1,454,235 |
|
|
|
705,135 |
|
|
|
2,675,280 |
|
|
|
1,553,351 |
|
General
and administrative expenses
|
|
|
448,965 |
|
|
|
423,492 |
|
|
|
803,740 |
|
|
|
888,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,413,450 |
) |
|
|
(759,839 |
) |
|
|
(2,562,383 |
) |
|
|
(1,838,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, related party
|
|
|
6,071 |
|
|
|
(12,588 |
) |
|
|
13,481 |
|
|
|
1,838 |
|
Other
interest expense, net
|
|
|
20,473 |
|
|
|
169,168 |
|
|
|
42,060 |
|
|
|
257,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expense
|
|
|
26,544 |
|
|
|
156,580 |
|
|
|
55,541 |
|
|
|
259,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,439,994 |
) |
|
$ |
(916,419 |
) |
|
$ |
(2,617,924 |
) |
|
$ |
(2,098,263 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
149,613,238 |
|
|
|
123,126,449 |
|
|
|
149,237,916 |
|
|
|
115,691,540 |
|
Loss
per share
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
(unaudited)
|
|
|
|
For
the Six Months Ended June 30
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,617,924 |
) |
|
$ |
(2,098,263 |
) |
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
25,902 |
|
|
|
11,124 |
|
Loss
on disposal of assets
|
|
|
- |
|
|
|
804 |
|
Adjustment
to allowance for doubtful accounts
|
|
|
(31,246 |
) |
|
|
- |
|
Adjustment
to reserve for inventory obsolescence
|
|
|
(113,773 |
) |
|
|
- |
|
Issuance
of stock options
|
|
|
90,443 |
|
|
|
131,070 |
|
Amortization
of debt discount
|
|
|
23,316 |
|
|
|
188,575 |
|
Issuance
of shares as compensation
|
|
|
20,124 |
|
|
|
120,000 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(241,768 |
) |
|
|
(64,062 |
) |
Inventories
|
|
|
(277,713 |
) |
|
|
3,159 |
|
Prepaid
expenses and other current assets
|
|
|
(244,734 |
) |
|
|
27,304 |
|
Deposit
from customer
|
|
|
- |
|
|
|
(400,000 |
) |
Accounts
payable and accrued expenses
|
|
|
454,040 |
|
|
|
217,853 |
|
Net
cash used in operating activities
|
|
|
(2,913,333 |
) |
|
|
(1,862,436 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of property, fixtures and equipment
|
|
|
(14,765 |
) |
|
|
(53,720 |
) |
Net
cash used in investing activities
|
|
|
(14,765 |
) |
|
|
(53,720 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
|
|
|
|
|
|
and
exercise of stock options
|
|
|
312 |
|
|
|
799,312 |
|
Proceeds
from sale of preferred stock
|
|
|
2,000,000 |
|
|
|
- |
|
Proceeds
from note receivable
|
|
|
- |
|
|
|
250,000 |
|
Proceeds
from loans payable
|
|
|
- |
|
|
|
81,229 |
|
Repayment
of loans payable
|
|
|
(63,062 |
) |
|
|
(100,077 |
) |
Proceeds
from debt to related parties
|
|
|
300,000 |
|
|
|
750,000 |
|
Repayment
of debt to related parties
|
|
|
(38,753 |
) |
|
|
(25,000 |
) |
Net
cash provided by financing activities
|
|
|
2,198,497 |
|
|
|
1,755,464 |
|
|
|
|
|
|
|
|
|
|
Decrease
in cash
|
|
|
(729,601 |
) |
|
|
(160,692 |
) |
Cash,
beginning of period
|
|
|
1,040,633 |
|
|
|
257,482 |
|
Cash,
end of period
|
|
$ |
311,032 |
|
|
$ |
96,790 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
$ |
43,757 |
|
|
$ |
110,715 |
|
Cash
paid during the year for taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-Cash
Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Issuance
of shares for note payable
|
|
$ |
105,000 |
|
|
$ |
911,555 |
|
|
|
The
accompanying notes are an integral part of these unaudited 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 million, $0.001 par value common shares and 50
million, $0.001 par value preferred shares.
Celsius
Holdings, Inc. operates in United States through its 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. 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, Inc. is in the business of
developing and marketing healthier beverages in the functional beverage category
of the beverage industry. Celsius was Elite’s first commercially available
product. Celsius is a beverage that burns calories. Celsius is currently
available in five sparkling flavors: cola, ginger ale, lemon/lime, orange and
wild berry, and two non-carbonated green teas: peach/mango and raspberry/acai.
Celsius is also available in its On-the-go packets. Celsius Netshipments, Inc.,
incorporated in Florida on March 29, 2007, distributes the Celsius beverage via
the internet.
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. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
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. 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 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.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
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,
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
June 30, 2009 and December 31, 2008, 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 uncollectable. At June 30, 2009 and December 31, 2008,
there was an allowance for doubtful accounts of $21,855 and $53,101,
respectively. During the six months ended June 30, 2009, the Company recognized
a reduction to allowance for doubtful accounts of $31,246.
Inventories
— Inventories include only the purchase cost and are stated at the lower of cost
or market. Cost is determined using the FIFO 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, 2009 and December 31, 2008, there was an allowance for obsolescence
of $93,272 and $207,045, respectively. During the six months ended June 30,
2009, the Company wrote down inventory by $113,773.
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 2009 was
$25,902.
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.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
The
Company did not recognize an impairment charge during the first six months of
2009 or 2008, respectively.
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 is 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 2009 and 2008, impairment was recorded of nil and $41,500, respectively.
The impairment recorded was for expenses for trademarks.
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 arrangement with the customer is
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 expenses of $861,000 and $529,000, during the first six months of 2009
and 2008, 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 new products. The Company incurred expenses of
$30,000 and $138,000, during the first six months of 2009 and 2008,
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, 2009 there were options
outstanding to purchase 15.9 million shares, which exercise price averaged
$0.07. The dilutive common shares equivalents, including convertible notes,
preferred stock and warrants, of 126.7 million shares were not included in
the computation of diluted earnings per share, because the inclusion would be
anti-dilutive.
Reclassifications —
Certain amounts have been reclassified to conform to the current period
presentation, such reclassifications had no effect on the reported net
loss.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
Recent Accounting
Pronouncements
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 adoption of SFAS 141R
did not have a material impact on the Company’s 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 the Company’s 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. The adoption of this FSP did not have a material
impact on the Company’s 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 did not 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.”
|
In April
2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies (“FSP FAS 141(R)-1”). This pronouncement amends SFAS
No. 141R to clarify the initial and subsequent recognition, subsequent
accounting, and disclosure of assets and liabilities arising from contingencies
in a business combination. FSP SFAS No. 141(R)-1 requires that assets
acquired and liabilities assumed in a business combination that arise from
contingencies be recognized at fair value, as determined in accordance with SFAS
No. 157, if the acquisition-date fair value can be reasonably estimated. If
the acquisition-date fair value of an asset or liability cannot be reasonably
estimated, the asset or liability would be measured at the amount that would be
recognized in accordance with FASB Statement No. 5, “Accounting for
Contingencies” (SFAS No. 5), and FASB Interpretation No. 14,
“Reasonable Estimation of the Amount of a Loss.” FSP SFAS No. 141(R)-1
became effective for the Registrants as of January 1, 2009. As the
provisions of FSP FAS 141(R)-1 are applied prospectively to business
combinations with an acquisition date on or after the guidance became effective,
the impact to the Registrants cannot be determined until the transactions occur.
No such transactions occurred during 2009.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
In April
2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board
(“APB”) 28-1, Interim
Disclosures about Fair Value of Financial Instruments, which amends SFAS
No. 107, Disclosures
about Fair Value of Financial Instruments, (“SFAS No. 107”) and APB
Opinion No. 28, “Interim Financial Reporting,” respectively, to require
disclosures about fair value of financial instruments in interim financial
statements, in addition to the annual financial statements as already required
by SFAS No. 107. FSP FAS 107-1 and APB 28-1 will be required for interim
periods ending after June 15, 2009. As FSP FAS 107-1 and APB 28-1 provide
only disclosure requirements, the application of this standard will not have a
material impact on the Company’s results of operations, cash flows or financial
position.
Inventories
consist of the following at:
|
|
June
30, |
|
|
December
31, |
|
|
|
2009 |
|
|
2008 |
|
Finished
goods
|
|
$ |
797,494 |
|
|
$ |
581,970 |
|
Raw
Materials
|
|
|
192,273 |
|
|
|
130,084 |
|
Less:
inventory valuation allowance
|
|
|
(93,272 |
) |
|
|
(207,045 |
) |
Inventories,
net
|
|
$ |
896,495
|
|
|
$ |
505,009
|
|
Other
current assets at June 30, 2009 and December 31, 2008 consist of prepaid
slotting fees, deposits on purchases, prepaid insurance, other accounts
receivable and accrued interest receivable.
5.
|
PROPERTY,
FIXTURES, AND EQUIPMENT
|
Property,
fixtures and equipment consist of the following at:
|
|
June
30, |
|
|
December
31, |
|
|
|
2009 |
|
|
2008 |
|
Furniture,
fixtures and equipment
|
|
$ |
243,097 |
|
|
$ |
228,332 |
|
Less:
accumulated depreciation
|
|
|
(70,881 |
) |
|
|
(44,979 |
) |
Total
|
|
$ |
172,216 |
|
|
$ |
183,353 |
|
Depreciation
expense amounted to $25,902 and $11,124 during the first six months of 2009 and
2008, respectively
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
6.
|
OTHER
LONG-TERM ASSETS
|
Other
long-term assets consist of the following at:
|
|
June
30, |
|
|
December
31, |
|
|
|
2009 |
|
|
2008 |
|
Long
term deposit on office lease
|
|
$ |
18,840 |
|
|
$ |
18,840 |
|
Intangible
assets
|
|
|
41,500 |
|
|
|
41,500 |
|
Less:
Impairment of intangible assets
|
|
|
(41,500 |
) |
|
|
(41,500 |
) |
Total
|
|
$ |
18,840 |
|
|
$ |
18,840 |
|
Note
receivable from Golden Gate Investors, Inc. (“GGI”) was as of June 30, 2009 and
December 31, 2008, $250,000. The note is due on February 1, 2012, but under
certain circumstances GGI is obligated to prepay the note. The prerequisites to
obligate GGI to prepay the note are outside of the Company’s control and may
exist at a future date. The note accrues 8% interest per annum. The Company has
an outstanding debenture to the same company in the amount of $596,000. Also see
Note 12 - Long term debenture.
8.
|
ACCOUNTS
PAYABLE AND ACCRUED EXPENSES
|
Accounts
payable and accrued expenses consist of the following at:
|
|
June
30, |
|
|
December
31, |
|
|
|
2009 |
|
|
2008 |
|
Accounts
payable
|
|
$ |
626,346 |
|
|
$ |
411,185 |
|
Accrued
expenses
|
|
|
439,738 |
|
|
|
200,859 |
|
Total
|
|
$ |
1,066,084 |
|
|
$ |
612,044 |
|
9.
|
DUE
TO RELATED PARTIES
|
Due to
related parties consists of the following as of:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
The
Company entered into a loan and security agreement in December 2008 with
CD Financial, LLC, pledging all our assets as security. The line of credit
is for $1.0 million, with interest at LIBOR plus 3 percentage points. The
line expires in December 2009 and is renewable.
|
|
$ |
300,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
The
Company received advances from one of its shareholders at various
instances during 2004 and 2005, $76,000 and $424,000, respectively. In
July, 2008, the debt was refinanced, has no collateral and accrues
interest at the prime rate. Monthly amortization of $5,000 is due and a
balloon payment of approximately $606,000 is due in January
2010.
|
|
|
619,504 |
|
|
|
643,916 |
|
|
|
|
|
|
|
|
|
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
|
June
30,
2009
|
|
|
December
31,
2008
|
|
The
Company’s CEO loaned the Company $50,000 in February 2006. Moreover, the
Company accrued salary for the CEO from March of 2006 through May 2007 for
a total of $171,000. In August 2008, the total debt was refinanced, has no
collateral and accrues interest at 3%; monthly payments of $5,000 are due
with a balloon payment of $64,000 in January 2011.
|
|
|
162,156 |
|
|
|
176,497 |
|
|
|
$ |
1,081,660 |
|
|
$ |
820,413 |
|
Less:
Short-term portion
|
|
$ |
(979,504 |
) |
|
$ |
(120,000 |
) |
Long-term
portion
|
|
$ |
102,156 |
|
|
$ |
700,413 |
|
Also, see
Note 14 – Related party transactions.
Loans
payable consist of the following as of:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
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 called for monthly
amortization of $15,000 beginning March 30, 2007 with final payment of the
remaining outstanding balance on November 30, 2007. The Company has not
fulfilled its obligation and is paying the debt off at a slower
pace.
|
|
$ |
45,000 |
|
|
$ |
95,000 |
|
During
2006 and 2008, the Company acquired a copier and 8 delivery vans, all of them
financed. The outstanding balance on the aggregate loans as of June 30, 2009 and
December 31, 2008 was $88,453 and $101,515, respectively, of which $26,173 and
$26,493, is due during the next 12 months, respectively. The loans carry
interest ranging from 5.4% to 9.1%. The total monthly principal payment is
$2,099. The assets that were purchased are collateral for the
loans.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
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. One of the
conditions to prepayment is that GGI may immediately sell all of the Common
Stock Issued at Conversion (as defined in the Debenture) pursuant to Rule 144 of
the Securities Act of 1933. The Company is under no contractual obligation to
ensure that GGI may immediately sell all of the Common Stock Issued at
Conversion pursuant to Rule 144. In the event that GGI may not immediately sell
all of the Common Stock Issued at Conversion pursuant to Rule 144, GGI would be
under no obligation to prepay the promissory note and likewise under no
obligation to exercise its conversion rights under the Debenture. If GGI does
not fully convert the Debenture by its maturity on December 19, 2011, the
balance of the Debenture is offset by any balance due to the Company under the
promissory note. 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 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 the lower of
(i) eighty percent of the average of the three lowest volume weighted average
prices for the previous 20 trading days and (ii) $1.00. 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 $23,316 as interest expense
amortizing the debt discount during the first six months of 2009 and 2008,
respectively. 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.
During
2008, the Company received $1,000,000 in payment on the note receivable. From
June 2008 to June 2009, the Company converted $879,000 of the debenture to
approximately 18.0 million shares of Common Stock and the Company paid $25,000
of the debenture in cash. The outstanding liability, net of debt discount, as of
June 30, 2009 and December 31, 2008 was $480,886 and $562,570,
respectively.
On August
8, 2008, the Company entered into a securities purchase agreement (“SPA1”) with
CDS Ventures of South Florida, LLC (“CDS”), an affiliate of CD Financial, LLC
(“CD”). Pursuant to SPA1, the Company issued 2,000 Series A preferred shares
(“Preferred A Shares”), as well as a warrant to purchase an additional 1,000
Preferred A Shares, for a cash payment of $1.5 million and the cancellation of
two notes in aggregate amount of $500,000 issued to CD. The Preferred A Shares
can be converted into Company common stock at any time. SPA1 was amended on
December 12, 2008 to provide that until December 31, 2010 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 SPA1, 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 A Shares accrue a
ten percent annual cumulative dividend, payable in additional Preferred A
Shares. In March 2009, the Company issued 81 Preferred A Shares in dividends.
The Preferred A Shares mature on February 1, 2013 and are redeemable only in
Company Common Stock.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
On
December 12, 2008, the Company entered into a second securities purchase
agreement (“SPA2”) with CDS. Pursuant to SPA2 the Company issued 2,000 Series B
preferred shares (“Preferred B Shares”), as well as a warrant to purchase
additional 2,000 Preferred B Shares, for a cash payment of $2.0 million. The
Preferred B Shares can be converted into Company common stock at any time. Until
December 31, 2010, the conversion price is $0.05, after which the conversion
price is the greater of $0.05 or 90% of the volume weighted average price of the
common stock for the prior 10 trading days. Pursuant to SPA2, 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 B Shares. The Preferred B Shares accrue a ten percent annual
cumulative dividend, payable in additional Preferred B Shares. In March
2009, the Company issued 11 Preferred B Shares in dividends. The Preferred B
Shares mature on December 31, 2013 and are redeemable only in Company Common
Stock.
On March
31, 2009, CDS exercised its right to purchase additional 2,000 Preferred B
Shares and executed a subscription agreement for $2.0 million. The monies for
the subscription were paid on April 7 and May 1, 2009.
Certain
covenants of both Series A and B preferred shares restrict the Company from
entering into additional debt arrangements or permitting liens to be filed
against the Company’s assets, without approval from the holder of the preferred
shares. There is a mandatory redemption in cash, if the Company breaches certain
covenants of the agreements. The holders have liquidation preference in case of
company liquidation. The Company has the right to redeem the preferred shares
early by the payment in cash of 104% of the liquidation preference value. The
Company may redeem Series A at any time on or after July 1, 2010 and Series B at
any time on or after January 1, 2011.
The
following table sets forth the conversion of Preferred Stock into common
stocks:
Convertible
Stock
|
Number
shares
|
Value/share
|
Convertible
into number
of
common Stock
|
Preferred
A
|
2,081
|
$
1,000.00
|
26,012,500
|
Preferred
B
|
4,011
|
$
1,000.00
|
80,220,000
|
Total
|
|
|
106,232,500
|
The
number of shares converted into is based on the current conversion
price.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
14.
|
RELATED
PARTY TRANSACTIONS
|
The CEO
has guaranteed the Company’s obligations under the factoring agreement with
Bibby Financial Services, Inc. The agreement was terminated in December
2008 and no balance is outstanding. The CEO has also guaranteed the
financing for the Company’s offices and purchases of vehicles. The CEO has
not received any compensation for the guarantees.
Also, see
Note 9 – Due to related parties and 13 – Preferred Stock.
15.
|
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 unregistered 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 Company paid off the outstanding
balance as of December 31, 2008.
In June
2008, the Company issued 11,184,016 unregistered shares as conversion of notes
for $750,000 that were originally issued in December 2007 and April
2008.
In June
through September, 2008, the Company issued 9,107,042 as a partial conversion of
a debenture for $575,000 originally issued in December 2007. In October through
December, 2008, the Company issued 7,739,603 shares as a partial conversion of
the same debenture for $199,000. The Company issued 1,168,817 shares as a
partial conversion of the same debenture for $105,000 in May 2009.
Issuance
of common stock pursuant to services performed
In March
2008, the Company issued a total of 750,000 unregistered shares as compensation
to an international distributor at a fair value of $120,000.
In
September through December, 2008, the Company issued a total of 183,135
unregistered shares as compensation to a consultant and a distributor at a fair
value of $11,450.
During
the six months ended June 30, 2009, the Company issued a total of 238,926
unregistered shares as compensation to a consultant and a distributor at a fair
value of $20,124.
Issuance
of common stock pursuant to exercise of warrant and 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.
On
January 13, 2009 the Company issued 16,671 shares of 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)
Issuance
of preferred stock pursuant to private placement
In August
2008, the Company issued 2,000 unregistered Preferred A Shares, as well as a
warrant to purchase additional 1,000 Preferred A Shares, for a cash payment of
$1.5 million and the cancellation of two notes in aggregate amount of
$500,000.
In
December 2008, the Company issued 2,000 unregistered Preferred B Shares, as well
as a warrant to purchase additional 2,000 Preferred B Shares, for a cash payment
of $2.0 million.
On March
31, 2009, CDS exercised its right to purchase additional 2,000 Preferred B
Shares and executed a subscription agreement for $2 million payment. CDS made
payments of $1 million each on April 7 and May 1, 2009.
Also, see
Note 13 – Preferred Stock.
16.
|
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.
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.
At June
30, 2009, the Company has issued approximately 15.9 million options to purchase
shares at an average price of $0.07 with a fair value of $725,000. For the six
months ended June 30, 2009 and 2008, respectively, the Company recognized
$90,443 and $131,070 of non-cash compensation expense, respectively, (included
in General and Administrative expenses in the accompanying Consolidated
Statement of Operations). As of June 30, 2009 and December 31, 2008, the Company
had approximately $295,000 and $192,000, respectively, of unrecognized pre-tax
non-cash compensation expense which the Company expects to recognize, based on a
weighted-average period of 1.2 and 0.9 years, respectively. 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 approximately 8.1 million
shares that have vested, and 33,342 shares were exercised as of June 30, 2009.
The following is a summary of the assumptions used:
Risk-free interest rate
|
|
1.6%
- 4.9%
|
Expected dividend yield
|
|
—
|
Expected
term
|
|
3 –
5 years
|
Expected
annual volatility
|
|
73% - 164%
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
In March,
2008, the Company issued a total of 750,000 unregistered shares as compensation
to an international distributor at a fair value of $120,000.
In
September through December, 2008, the Company issued a total of 183,135
unregistered shares as compensation to a consultant and a distributor at a fair
value of $11,450. During the six months ended June 30, 2009, the Company issued
a total of 238,926 unregistered shares as compensation to a consultant and a
distributor at a fair value of $20,124.The consultant will receive additional
shares with fair value of $2,000 monthly as long as the consultancy agreement
continues.
An
investment banking firm received, as placement agent for financing received from
Fusion Capital Fund II, LLC (“Fusion Capital”), a warrant to purchase 75,000
shares at a price of $1.31 per share. If unexercised, the warrant expires on
June 22, 2012.
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 at an exercise price of $0.13 per share. If unexercised,
the warrant expires on March 28, 2011.
On August
8, 2008, the Company entered into a securities purchase agreement with CDS, as
further described in Note 13 – Preferred Stock. In connection with the security
purchase, CDS received a warrant to purchase an additional 1,000 Preferred A
Shares, at a price of $1,000 per share. If unexercised, the warrant expires on
July 10, 2010. The Preferred A Shares can be converted into our common stock at
any time. Until the December 31, 2010, 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. The Preferred A
Shares accrue ten percent annual cumulative dividend, payable in additional
Preferred A Shares.
On
December 12, 2008, the Company entered into a second securities purchase
agreement with CDS, as further described in Note 13 – Preferred Stock. In
connection with the security purchase, CDS received a warrant to purchase an
additional 2,000 Preferred B Shares, at a price of $1,000 per share, which was
exercised in full on March 31, 2009. The Preferred B Shares can be converted
into our common stock at any time. Until December 31, 2010, the conversion price
is $0.05, after which the conversion price is the greater of $0.05 or 90% of the
volume weighted average price of the common stock for the prior 10 trading days.
The Preferred B Shares accrue a ten percent annual cumulative dividend, payable
in additional Preferred B Shares. On March 31, 2009, CDS exercised its warrant.
See also Note 13 – Preferred Stock.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
|
|
Period
Ended June 30, 2009
|
|
|
Year
Ended December 31, 2008
|
|
|
|
Thousands
of
|
|
|
Weighted
Average
|
|
|
Thousands
of
|
|
|
Weighted
Average
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Exercise Price
|
|
Balance
at the beginning of period
|
|
|
59,575 |
|
|
$ |
0.07 |
|
|
|
75 |
|
|
$ |
1.31 |
|
Granted
|
|
|
— |
|
|
|
— |
|
|
|
59,500 |
|
|
$ |
0.07 |
|
Exercised
|
|
|
(40,000 |
) |
|
$ |
0.05 |
|
|
|
— |
|
|
|
— |
|
Expired
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance
at the end of period
|
|
|
19,575 |
|
|
$ |
0.10 |
|
|
|
59,575 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable at end of period
|
|
|
19,575 |
|
|
$ |
0.10 |
|
|
|
59,575 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value of the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants
granted during the year
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
$ |
0.03 |
|
The
weighted average remaining contractual life and weighted average exercise price
of warrants outstanding and exercisable at June 30, 2009, for selected exercise
price ranges, is as follows:
Range of
Exercise
Price
|
|
Number
Outstanding at
June
30,
2009
(000s)
|
|
Weighted
Average
Remaining Life
|
|
Weighted
Average
Exercise
Price
|
$0.08
|
|
12,500
|
|
1.0
|
|
$0.08
|
$0.13
|
|
7,000
|
|
1.7
|
|
$0.13
|
$1.31
|
|
75
|
|
3.0
|
|
$1.31
|
|
|
19,575
|
|
1.5
|
|
$0.10
|
18.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company has entered into distribution agreements with liquidated damages in case
the Company cancels the distribution agreements without cause. Cause has been
defined in various ways. In one such distribution agreement, the liquidated
damages are payable in common stock rather than cash. If such agreement is
terminated with cause, the potential liability is to have to issue shares to the
distributor at a purchase price of $0.06. The quantity of shares depends on this
distributor’s purchases from the Company as compared to the Company’s total
revenue. It is managements’ belief that no liability for liquidated damages
exists as of today’s date.
19.
|
BUSINESS
AND CREDIT CONCENTRATION
|
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,
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. No vendor accounted for
more than 10% of total payments in 2009.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)
From
April to June, 2008, the Company sold in one order to one international customer
15.9% of the Company’s total revenue for the year 2008. There is no assurance
that this customer will order again. There were three customers that in the six
months ended June 30, 2009, purchased each for more than 10% of the Company’s
net revenue for the period.
At the
annual shareholders meeting on July 16, 2009, the shareholders approved an
increase in the number of authorized shares from 350 million to 1 billion common
shares and approved an amendment to the Company’s 2006 Incentive Stock Plan to
increase the total number of shares available to be issued from 16.0 million to
50.0 million shares of common stock.
![](sherb1.jpg) |
1900
NW Corporate Blvd., Suite 210 East
Boca
Raton, Florida 33431
Tel.
561-886-4200
Fax.
561-886-3330
e-mail:info@sherbcpa.com
|
SHERB
& CO., LLP |
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 sheets of Celsius Holdings,
Inc. and Subsidiaries as of December 31, 2008 and 2007, respectively, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for the years ended December 31, 2008 and 2007,
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 audits.
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, 2008 and 2007, respectively, and the results of their
operations and cash flows for the years ended December 31, 2008, and 2007,
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 2 to the
consolidated financial statements, the Company has suffered losses from
operations, and has an accumulated deficit and net cash used in operations of
$4,840,152 for the year ended December 31, 2008. This raises substantial doubt
about its ability to continue as a going concern. Management's plans in regards
to these matters are described in Note 2 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
23, 2009
Celsius
Holdings, Inc. and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
|
|
|
December
31,
|
|
December
31,
|
|
ASSETS
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
1,040,633 |
|
|
$ |
257,482 |
|
Accounts
receivable, net
|
|
|
192,779 |
|
|
|
276,877 |
|
Inventories,
net
|
|
|
505,009 |
|
|
|
578,774 |
|
Other
current assets
|
|
|
12,155 |
|
|
|
44,960 |
|
Total
current assets
|
|
|
1,750,576 |
|
|
|
1,158,093 |
|
|
|
|
|
|
|
|
|
|
Property,
fixtures and equipment, net
|
|
|
183,353 |
|
|
|
64,697 |
|
Note
receivable
|
|
|
250,000 |
|
|
|
1,250,000 |
|
Other
long-term assets
|
|
|
18,840 |
|
|
|
60,340 |
|
Total
Assets
|
|
$ |
2,202,769 |
|
|
$ |
2,533,130 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
612,044 |
|
|
$ |
594,828 |
|
Loans
payable
|
|
|
95,000 |
|
|
|
710,307 |
|
Deposit
from customer
|
|
|
- |
|
|
|
400,000 |
|
Short
term portion of other liabilities
|
|
|
26,493 |
|
|
|
7,184 |
|
Convertible
note payable, net of debt discount
|
|
|
- |
|
|
|
199,692 |
|
Due
to related parties, short-term portion
|
|
|
120,000 |
|
|
|
896,721 |
|
Total
current liabilities
|
|
|
853,537 |
|
|
|
2,808,732 |
|
|
|
|
|
|
|
|
|
|
Convertible
note payable, net of debt discount
|
|
|
562,570 |
|
|
|
1,314,914 |
|
Due
to related parties, long-term portion
|
|
|
700,413 |
|
|
|
- |
|
Other
liabilities
|
|
|
75,022 |
|
|
|
14,236 |
|
Total
Liabilities
|
|
|
2,191,542 |
|
|
|
4,137,882 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity (Deficit):
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 50,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
4,000 shares
and 0 shares issued and outstanding, respectively
|
|
|
4,000,000 |
|
|
|
- |
|
Common
stock, $0.001 par value: 350,000,000 shares
|
|
|
|
|
|
|
|
|
authorized,
149 million and 106 million shares
|
|
|
|
|
|
|
|
|
issued
and outstanding, respectively
|
|
|
148,789 |
|
|
|
105,611 |
|
Additional
paid-in capital
|
|
|
7,244,806 |
|
|
|
4,410,405 |
|
Accumulated
deficit
|
|
|
(11,382,368 |
) |
|
|
(6,120,768 |
) |
Total
Stockholders’ Equity (Deficit)
|
|
|
11,227 |
|
|
|
(1,604,752 |
) |
Total
Liabilities and Stockholders’ Equity (Deficit)
|
|
$ |
2,202,769 |
|
|
$ |
2,533,130 |
|
See
Notes to Consolidated Financial Statements
Celsius
Holdings, Inc. and Subsidiaries
|
|
Consolidated
Statements of Operations
|
|
|
|
|
|
For
the years ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Revenue
|
|
$ |
2,589,887 |
|
|
$ |
1,644,780 |
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
1,833,184 |
|
|
|
1,033,971 |
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
756,703 |
|
|
|
610,809 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling
and marketing expenses
|
|
|
3,936,552 |
|
|
|
2,100,687 |
|
General
and administrative expenses
|
|
|
1,740,143 |
|
|
|
1,554,510 |
|
Termination
of contract expense
|
|
|
- |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
5,676,695 |
|
|
|
4,155,197 |
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(4,919,992 |
) |
|
|
(3,544,388 |
) |
|
|
|
|
|
|
|
|
|
Other
expenses:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
70,441 |
|
|
|
7,837 |
|
Interest
expense, related party
|
|
|
(773 |
) |
|
|
(75,647 |
) |
Interest
expense, other, net
|
|
|
(411,276 |
) |
|
|
(113,643 |
) |
|
|
|
|
|
|
|
|
|
Total
other expenses
|
|
|
(341,608 |
) |
|
|
(181,453 |
) |
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(5,261,600 |
) |
|
$ |
(3,725,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share, basic and diluted
|
|
$ |
(0.04) |
|
|
$ |
(0.04) |
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding -
|
|
|
|
|
|
|
|
|
basic
and diluted
|
|
|
128,703,645 |
|
|
|
100,688,634 |
|
See
Notes to Consolidated Financial Statements
Celsius
Holdings, Inc. and Subsidiaries
|
|
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
|
|
for
the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 for services
|
|
|
|
|
|
|
|
|
|
|
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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of preferred stock for cash
|
|
|
3,500 |
|
|
|
3,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500,000 |
|
Issuance
of stock in exchange of note
|
|
|
500 |
|
|
|
500,000 |
|
|
|
29,030,661 |
|
|
|
29,030 |
|
|
|
1,550,533 |
|
|
|
|
|
|
|
2,079,563 |
|
Issuance
of common stock for cash
|
|
|
|
|
|
|
|
|
|
|
13,198,529 |
|
|
|
13,198 |
|
|
|
785,802 |
|
|
|
|
|
|
|
799,000 |
|
Exercise
of stock options
|
|
|
|
|
|
|
|
|
|
|
16,671 |
|
|
|
17 |
|
|
|
295 |
|
|
|
|
|
|
|
312 |
|
Shares
issued as compensation
|
|
|
|
|
|
|
|
|
|
|
933,135 |
|
|
|
933 |
|
|
|
130,517 |
|
|
|
|
|
|
|
131,450 |
|
Beneficial
conversion feature of debt instrument
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,460 |
|
|
|
|
|
|
|
170,460 |
|
Stock
option expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,794 |
|
|
|
|
|
|
|
196,794 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,261,600 |
) |
|
|
(5,261,600 |
) |
Balance
at December 31, 2008
|
|
|
4,000 |
|
|
$ |
4,000,000 |
|
|
|
148,789,354 |
|
|
$ |
148,789 |
|
|
$ |
7,244,806 |
|
|
$ |
(11,382,368 |
) |
|
$ |
11,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements
Celsius
Holdings, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
For
the Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(5,261,600 |
) |
|
$ |
(3,725,841 |
) |
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
31,605 |
|
|
|
11,658 |
|
Loss
on disposal of assets
|
|
|
804 |
|
|
|
- |
|
Adjustment
to allowance for doubtful accounts
|
|
|
53,101 |
|
|
|
- |
|
Adjustment
to reserve for inventory obsolescence
|
|
|
190,601 |
|
|
|
16,444 |
|
Impairment
of intangible assets
|
|
|
41,500 |
|
|
|
26,000 |
|
Termination
of contract
|
|
|
- |
|
|
|
500,000 |
|
Issuance
of stock options
|
|
|
196,794 |
|
|
|
138,281 |
|
Amortization
of debt discount
|
|
|
211,245 |
|
|
|
7,732 |
|
Issuance
of shares as compensation
|
|
|
131,450 |
|
|
|
198,500 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
30,997 |
|
|
|
(148,558 |
) |
Inventories
|
|
|
(116,836 |
) |
|
|
(30,119 |
) |
Prepaid
expenses and other assets
|
|
|
32,805 |
|
|
|
(8,906 |
) |
Accounts
payable and accrued expenses
|
|
|
17,382 |
|
|
|
64,123 |
|
Deposit
from customer
|
|
|
(400,000 |
) |
|
|
400,000 |
|
Net
cash used in operating activities
|
|
|
(4,840,152 |
) |
|
|
(2,550,686 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of intangible assets
|
|
|
- |
|
|
|
(41,500 |
) |
Purchases
of property, fixtures and equipment
|
|
|
(151,065 |
) |
|
|
(46,164 |
) |
Net
cash used in investing activities
|
|
|
(151,065 |
) |
|
|
(87,664 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
799,312 |
|
|
|
1,782,734 |
|
Proceeds
from sale of preferred stock
|
|
|
3,500,000 |
|
|
|
- |
|
Proceeds
from issuance of convertible notes
|
|
|
990,900 |
|
|
|
500,000 |
|
Proceeds
from exercise of warrants
|
|
|
- |
|
|
|
500,000 |
|
Proceeds
from recapitalization due to merger
|
|
|
- |
|
|
|
353,117 |
|
Repayment
of note to stockholders
|
|
|
- |
|
|
|
(
621,715 |
) |
Proceeds
from note receivable
|
|
|
1,000,000 |
|
|
|
- |
|
Proceeds
from loans payable
|
|
|
743,552 |
|
|
|
483,891 |
|
Repayment
of loans payable
|
|
|
(1,183,087 |
) |
|
|
(24,325 |
) |
Repayment
of note to related parties
|
|
|
(76,309 |
) |
|
|
(106,449 |
) |
Net
cash provided by financing activities
|
|
|
5,774,368 |
|
|
|
2,867,253 |
|
Increase
in cash
|
|
|
783,151 |
|
|
|
228,903 |
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of year
|
|
|
257,482 |
|
|
|
28,579 |
|
Cash,
end of year
|
|
$ |
1,040,633 |
|
|
$ |
257,482 |
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
$ |
190,826 |
|
|
$ |
107,364 |
|
Cash
paid during the year for taxes
|
|
$ |
- |
|
|
$ |
- |
|
See
Notes to Consolidated Financial Statements
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION
AND DESCRIPTION OF BUSINESS
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 (continued)
2.
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Going
Concern — The accompanying consolidated financial statements are
presented on a going concern basis. The Company has suffered losses from
operations and has an accumulated deficit and net cash used in operations of
$4,840,152 for the year ended December 31, 2008. This raises 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
filling 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, 2008, 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, 2008 and December 31 2007,
there was an allowance for doubtful accounts of $53,101 and $0,
respectively.
Inventories
— Inventories include only the purchase cost and are stated at the lower of cost
or market. Cost is determined using the FIFO 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 December 31, 2008 and December 31, 2007, there was a reserve for
obsolescence of $207,045 and $16,444, respectively.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
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 2008 and 2007, impairment was recorded of $41,500 and $26,000,
respectively. The impairment recorded was for expenses for trademarks, domain
names and international registration of trademarks.
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 $1.6 million and $535,000, during the fiscal
years 2008 and 2007, 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
$261,000 and $214,000, during the fiscal years 2008 and 2007,
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.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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
conversion of preferred shares, exercise of stock options and warrants
(calculated using the reverse treasury stock method). Common share equivalents
outstanding were 86,130,991 and 8,534,864, as of December 31, 2008 and
2007, respectively.
Reclassifications —
Certain prior year amounts have been reclassified to conform to the current year
presentation. Such reclassifications had no effect on the reported net
loss.
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 adoption of SFAS 157 did not
have a material impact on the Company's consolidated financial
position or results of operations.
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.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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, none 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;”
|
·
|
SFAS No. 162,
“The Hierarchy of
Generally Accepted Accounting Principles;”
and
|
·
|
SFAS
No. 163, “Accounting for Financial
Guarantee Insurance Contracts-an interpretation of FASB Statement No.
60.”
|
Inventories
consist of the following at:
|
|
December
31,
|
|
|
December
31, |
|
|
|
2008
|
|
|
2007 |
|
Finished
goods
|
|
$ |
581,970 |
|
|
$ |
407,972 |
|
Raw
Materials
|
|
|
130,084 |
|
|
|
187,246 |
|
Less:
inventory valuation allowance
|
|
|
(207,045 |
) |
|
|
(16,444 |
) |
Inventories,
net
|
|
$ |
505,009 |
|
|
$ |
578,774 |
|
|
|
|
|
|
|
|
|
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other
current assets at December 31, 2008 and December 31, 2007 consist of deposits on
purchases, prepaid insurance, other accounts receivable and accrued interest
receivable.
5.
PROPERTY,
FIXTURES, AND EQUIPMENT
Property,
fixtures and equipment consist of the following at:
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Furniture,
fixtures and equipment
|
|
$ |
228,332 |
|
|
$ |
78,425 |
|
Less:
accumulated depreciation
|
|
|
(44,979 |
) |
|
|
(13,728 |
) |
Total
|
|
$ |
183,353 |
|
|
$ |
64,697 |
|
Depreciation
expense amounted to $31,605 and $11,658 during the fiscal years 2008 and
2007, respectively.
6.
OTHER
LONG-TERM ASSETS
Other
long-term assets consist of the following at:
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Long
term deposit on office lease
|
|
$ |
18,840 |
|
|
$ |
18,840 |
|
Intangible
assets
|
|
|
41,500 |
|
|
|
41,500 |
|
Less:
Impairment of intangible assets
|
|
|
(41,500 |
) |
|
|
- |
|
Total
|
|
$ |
18,840 |
|
|
$ |
60,340 |
|
|
|
|
|
|
|
|
|
|
Note
receivable from Golden Gate Investors, Inc. (“GGI”) was as of December 31, 2008
and December 31, 2007, $250,000 and $1,250,000, respectively. The note is due on
February 1, 2012, under certain circumstances GGI is obligated to monthly prepay
$250,000 on the note. During 2008, GGI made four monthly prepayments. As of
December 31, 2008 GGI is not obligated to prepay the note. The prerequisites to
obligate GGI to prepay the note are outside of the Company’s control and may
exist at a future date. The note accrues 8% interest per annum. The
Company has an outstanding debenture to the same company in the amount of
$701,000. Also see Note 14 - Long term
debenture
8.
ACCOUNTS
PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consist of the following at:
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Accounts
payable
|
|
$ |
411,185 |
|
|
$ |
466,047 |
|
Accrued
expenses
|
|
|
200,859 |
|
|
|
128,781 |
|
Total
|
|
$ |
612,044 |
|
|
$ |
594,828 |
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
DUE
TO RELATED PARTIES
Due to
related parties consists of the following as of:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
The
Company received advances from one of its shareholders at various
instances during 2004 and 2005, $76,000 and $424,000, respectively. In
July, 2008, the debt was refinanced, has no collateral and accrues
interest at the prime rate. Monthly amortization of $5,000 is due and a
balloon payment of approximately $606,000 is due in January
2010.
|
|
$ |
643,916 |
|
|
$ |
669,111 |
|
|
|
|
|
|
|
|
|
|
The
Company’s CEO loaned the Company $50,000 in February 2006. Moreover, the
Company accrued salary for the CEO from March of 2006 through May 2007 for
a total of $171,000. In August 2008, the total debt was refinanced, has no
collateral and accrues interest at 3%; monthly payments of $5,000 are due
with a balloon payment of $64,000 in January 2011.
|
|
|
176,497 |
|
|
|
227,610 |
|
|
|
$ |
820,413 |
|
|
$ |
896,721 |
|
Less:
Short-term portion
|
|
$ |
(120,000 |
) |
|
$ |
(896,721 |
) |
Long-term
portion
|
|
$ |
700,413 |
|
|
$ |
- |
|
Also, see
Note 16 – Related party transactions.
Loans
payable consist of the following as of:
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
a. |
|
The
Company renewed its financing agreement for inventory on February 28,
2008. The line of credit was for $500,000 and carried 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 line of
credit had as collateral all of the Company’s assets. The Company
terminated the credit agreement and paid balance owed in December
2008.
|
|
$ |
- |
|
|
$ |
222,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b. |
|
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 was $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 line of credit had
as collateral all of the Company’s assets. The Company terminated the
factoring agreement and paid balance owed in November
2008.
|
|
|
- |
|
|
|
102,540 |
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
c.
|
|
In
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 Company
paid the balance owed in December, 2008.
|
|
|
- |
|
|
|
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 called for monthly
amortization of $15,000 beginning March 30, 2007 with final payment of the
remaining outstanding balance on November 30, 2007.
|
|
|
95,000 |
|
|
|
160,000 |
|
|
|
|
|
|
$ |
95,000 |
|
|
$ |
710,307 |
|
11. 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 December 31, 2008 and
December 31, 2007 was $0 and $400,000, respectively.
12. CONVERTIBLE
AND OTHER 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 was
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 a 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. On July
15, 2008 the Company issued a fourth convertible note for $250,000 to
CD. The notes carry 8 percent interest. At the time of recording the
first 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.
On August 8, 2008, the convertible notes in the aggregate amount of $500,000
were cancelled and exchanged as partial consideration for preferred stock issued
to CDS Ventures of South Florida, LLC, an affiliate of CD.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In
December 2008, the Company entered into a $1 million revolving line of credit
with CD and it carries interest of Libor plus three percentage points. In
connection with this line of credit, the Company entered into a loan and
security agreement under which it has pledged all of its assets as security for
the line of credit. At December 31, 2008, there was no outstanding balance for
the line of credit.
In
November and December 2008, the Company received loans from CD in the amount of
$450,000 and $200,000, respectively. These loans incurred 10 percent interest
per annum and were paid off in December 2008.
During
2006 and 2008, the Company acquired a copier and 8 delivery vans, all of them
financed. The outstanding balance on the aggregate loans as of December 31, 2008
and December 31, 2007 was $101,515 and $21,420, respectively, of which $26,493
and $7,184, is due during the next 12 months, respectively. The loans carry
interest ranging from 5.4% to 9.1%. The total monthly principal payment is
$2,099. The assets that were purchased are collateral for the
loans.
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
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 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.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 $46,656 and $1,533 as
interest expense amortizing the debt discount during 2008 and 2007,
respectively. 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.
During
2008, the Company received $1,000,000 in payment on the note receivable. In June
to December, 2008, the Company converted $774,000 of the debenture to
approximately 16.9 million shares of Common Stock and the Company paid $25,000
of the debenture in cash.
The
outstanding liability, net of debt discount, as of December 31, 2008 and
December 31, 2007 was $562,570 and $1,314,914, respectively.
On August
8, 2008, the Company entered into a securities purchase agreement (“SPA1”) with
CDS Ventures of South Florida, LLC (“CDS”), an affiliate of CD Financial, LLC
(“CD”). Pursuant to the SPA, the Company issued 2,000 Series A preferred shares
(“Preferred A Shares”), as well as a warrant to purchase an additional 1,000
Preferred A Shares, for a cash payment of $1.5 million and the cancellation of
two notes in aggregate amount of $500,000 issued to CD. The Preferred A Shares
can be converted into Company common stock at any time; until December 31, 2010,
(as amended on December 12, 2008), 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
SPA1, 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 A Shares accrue a ten percent
annual cumulative dividend, payable in additional Preferred A Shares. The
Preferred A Shares mature on February 1, 2013 and is redeemable only in Company
Common Stock.
On
December 12, 2008, the Company entered into a securities purchase agreement
(“SPA2”) with CDS. Pursuant to the SPA2 the Company issued 2,000 Series B
preferred shares (“Preferred B Shares”), as well as a warrant to purchase
additional 2,000 Preferred B Shares, for a cash payment of $2.0 million. The
Preferred B Shares can be converted into Company common stock at any time, until
December 31, 2010, the conversion price is $0.05, after which the conversion
price is the greater of $0.05 or 90% of the volume weighted average price of the
common stock for the prior 10 trading days. Pursuant to the SPA2, 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 B Shares. The Preferred B Shares accrue a ten percent annual
cumulative dividend, payable in additional Preferred B Shares. The
Preferred B Shares mature on December 31, 2013 and is redeemable only in Company
Common Stock.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Certain
covenants of both Series A and B preferred shares restrict the Company to enter
into additional debt or to permit liens to be filed against the Company’s
assets, without approval from the holder of the preferred shares. There is a
mandatory redemption in cash, if the Company breaches certain covenants of the
agreements. The holders have liquidation preference in case of company
liquidation. The Company has the right to redeem the preferred shares early in
cash at 104% of the liquidation preference value for Series A, any date after
July 1, 2010 and for Series B, any date after January 1, 2011.
16. 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
December 31, 2008 and December 31, 2007 was $0 and $102,540, respectively.
The CEO has also guaranteed the financing for the Company’s offices and
purchases of vehicles. 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 shares in a private placement for a total consideration of
$25,000.
Also, see
Note 9 – Due to related parties.
17. STOCKHOLDERS’
DEFICIT
Issuance
of common stock pursuant to conversion of note
During
2007, the Company issued 500,000 shares as conversion of a note for $250,000, or
an average price of $0.50 per share.
In
January 2008, the Company restructured the then outstanding balance of a note
and issued 1 million unregistered 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 Company paid off the outstanding
balance as of December 31, 2008.
In June
2008, the Company issued 11,184,016 unregistered shares as conversion of notes
for $750,000 that were originally issued in December 2007 and April
2008.
In June
through September, 2008, the Company issued 9,107,042 as a partial conversion of
a debenture for $575,000 originally issued in December 2007. In October through
December, 2008, the Company issued 7,739,603 shares as a partial conversion of
the same debenture for $199,000.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Issuance
of common stock pursuant to services performed and termination of
contract
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.
In March
2008, the Company issued a total of 750,000 unregistered shares as compensation
to an international distributor at a fair value of $120,000.
In
September through December, 2008, the Company issued a total of 183,135
unregistered shares as compensation to a consultant and a distributor at a fair
value of $11,450.
Issuance
of common stock pursuant to exercise of warrant and stock options
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.
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
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 the Company has 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.
During
2007, the Company issued 5,013,800 shares to investors for a total consideration
of approximately $1,783,000.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
Issuance
of preferred stock pursuant to private placement
In August
2008, the Company issued 2,000 unregistered Preferred A Shares, as well as a
warrant to purchase additional 1,000 Preferred A Shares, for a cash payment of
$1.5 million and the cancellation of two notes in aggregate amount of
$500,000.
In
December 2008, the Company issued 2,000 unregistered Preferred B Shares, as well
as a warrant to purchase additional 2,000 Preferred B Shares, for a cash payment
of $2.0 million.
Also, see
Note - 15 Preferred stock.
For the
years ended December 31, 2008 and 2007, the Company’s net tax provision was
zero.
The
difference between the effective income tax rate and the United States federal
income tax rate is summarized as follows:
|
|
2008
|
|
|
2007
|
|
Statutory
federal rate
|
|
|
(34.0 |
%) |
|
|
(34.0 |
%) |
State
income tax
|
|
|
(3.6 |
%) |
|
|
(3.6 |
%) |
Effect
of permanent differences
|
|
|
3.0 |
% |
|
|
1.6 |
% |
Change
in valuation allowance
|
|
|
34.6 |
% |
|
|
36.0 |
% |
|
|
|
0.0 |
% |
|
|
0.0 |
% |
The
deferred tax asset consisted of the following at December 31:
|
|
2008
|
|
|
2007
|
|
Net
operating losses
|
|
$ |
3,803,000 |
|
|
$ |
2,156,000 |
|
Other
deferred tax assets
|
|
|
206,000 |
|
|
|
79,000 |
|
Valuation
allowance
|
|
|
(4,009,000 |
) |
|
|
( 2,235,000 |
) |
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, 2008 and December 31, 2007 was
$4.0 million and $2.2 million, respectively. The increase in valuation allowance
was $1.8 million and $1.3 million in 2008 and 2007, 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,
2008 of $4.0 million or 100% of the assets.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net
operating loss carry forwards expire:
2024
|
|
$ |
95,699 |
|
2025
|
|
|
787,446 |
|
2026
|
|
|
1,392,190 |
|
2027
|
|
|
3,303,187 |
|
2028
|
|
|
4,528,859 |
|
Total
|
|
$ |
10,107,381 |
|
|
|
|
|
|
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,
2008.
19. 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.
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 13.4 million options to purchase shares at an
average price of $0.07 with a fair value of $527,000. For the year ended
December 31, 2008 and December 31, 2007, the Company recognized $196,794 and
$138,000, respectively, of non-cash compensation expense (included in General
and Administrative expense in the accompanying Consolidated Statement of
Operations). As of December 31, 2008 and December 31, 2007, the Company had
approximately $192,000 and $488,000, respectively, of unrecognized pre-tax
non-cash compensation expense which the Company expects to recognize, based on a
weighted-average period of 0.9 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 approximately 5.1 million shares that have vested, and
16,671 shares were exercised as of December 31, 2008. The following is a summary
of the assumptions used:
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Risk-free interest rate
|
|
1.7%
- 4.9%
|
Expected dividend yield
|
|
—
|
Expected
term
|
|
3 –
5 years
|
Expected
annual volatility
|
|
73% - 82%
|
Elite FX
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.
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.
During
2008 the Company issued a total of 183,135 shares as compensation to a
consultant and a distributor at a fair value of $11,450. The consultant will
receive additional shares with fair value of $2,000 monthly as long as the
consultancy agreement continues. The distributor can receive additional shares
depending on its purchases until end of March 2009.
The
following table summarizes information about options for purchase of shares;
granted, exercised and forfeited during the two-year period ending
December 31, 2008:
|
|
Shares
|
|
|
Weighted
Average
|
|
|
Weighted
Average
Remaining
Contractual
|
|
|
|
(in
|
|
|
Exercise
|
|
|
Fair
|
|
|
Term
|
|
Options
|
|
thousands)
|
|
|
Price
|
|
|
Value
|
|
|
(in years)
|
|
at
December 31, 2006
|
|
|
—
|
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
Granted
|
|
|
11,872 |
|
|
|
0.09 |
|
|
|
0.05 |
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
— |
|
|
|
|
Forfeiture
|
|
|
(201 |
) |
|
|
0.02 |
|
|
|
0.01 |
|
|
|
|
At
December 31, 2007
|
|
|
11,671 |
|
|
$ |
0.02 |
|
|
$ |
0.05 |
|
|
|
6.7 |
|
Granted
|
|
|
2,970 |
|
|
|
0.11 |
|
|
|
0.07 |
|
|
|
|
|
Exercised
|
|
|
(17 |
) |
|
|
0.02 |
|
|
|
0.01 |
|
|
|
|
|
Forfeiture
|
|
|
(1,177 |
) |
|
|
0.45 |
|
|
|
0.26 |
|
|
|
|
|
At
December 31, 2008
|
|
|
13,447 |
|
|
$ |
0.07 |
|
|
$ |
0.04 |
|
|
|
5.9 |
|
Exercisable
at December 31, 2008
|
|
|
5,088 |
|
|
$ |
0.07 |
|
|
$ |
0.04 |
|
|
|
5.1 |
|
Available
for future grant
|
|
|
2,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The
following table summarizes information about options outstanding at
December 31, 2008:
Range of Exercise
Price
|
|
Number
Outstanding at
December 31,
2008
(000s)
|
Weighted
Average
Remaining Life
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable at
December 31,
2008
(000s)
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Life
in
Years
|
|
$0.02
|
|
10,162
|
5.4
|
|
$ |
0.02
|
|
3,488
|
|
$
|
0.02
|
|
5.4
|
|
$0.08
- $0.11
|
|
2,835
|
5.9
|
|
$ |
0.11
|
|
1,450
|
|
$
|
0.11
|
|
4.3
|
|
$0.23
- $0.60
|
|
50
|
8.8
|
|
$ |
0.42
|
|
17
|
|
$
|
0.42
|
|
8.8
|
|
$0.84
- $1.10
|
|
400
|
8.5
|
|
$ |
0.91
|
|
133
|
|
$
|
0.91
|
|
8.5
|
|
|
|
13,447
|
5.6
|
|
$ |
0.07
|
|
5,088
|
|
$
|
0.07
|
|
5.1
|
The
following table summarizes information about non-vested options outstanding at
December 31, 2008:
|
|
Number
of
|
|
|
Weighted
average Grant
|
|
Total
Non-vested options
|
|
shares
(000s)
|
|
|
Date Fair Value
|
|
At
December 31, 2006
|
|
|
- |
|
|
|
- |
|
Granted
|
|
|
11,872 |
|
|
$ |
0.05 |
|
Vested
|
|
|
(134 |
) |
|
|
0.01 |
|
Forfeited
|
|
|
(201 |
) |
|
|
0.01 |
|
At
December 31, 2007
|
|
|
11,537 |
|
|
$ |
0.06 |
|
Granted
|
|
|
2,970 |
|
|
$ |
0.07 |
|
Vested
|
|
|
(5,171 |
) |
|
|
0.05 |
|
Forfeited
|
|
|
(977 |
) |
|
|
0.27 |
|
At
December 31, 2008
|
|
|
8,359 |
|
|
$ |
0.04 |
|
20. STOCK
OPTIONS AND WARRANTS
Under the
terms of the Merger Agreement with Vector Ventures, Corp., see further Note 1 to
the Consolidated Financial Statements, the Company issued warrants to Investa
Capital Partners Inc. representing 3,557,812 shares of Common Stock of the
Company, which were exercised on February 9, 2007 for an aggregate consideration
of $500,000 in cash.
An
investment banking firm received, as placement agent for the Fusion Capital
financing, a warrant to purchase 75,000 shares at a price of $1.31 per share. If
unexercised, the warrant expires on June 22, 2012.
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 at an exercise price of $0.13 per share. If unexercised,
the warrant expires on March 28, 2011.
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On August
8, 2008, the Company entered into a securities purchase agreement with CDS, as
further described in Note 15 to the Consolidated Financial Statements. In
connection with the security purchase, CDS received a warrant to purchase an
additional 1,000 Preferred A Shares, at a price of $1,000 per share. If
unexercised, the warrant expires on July 10, 2010. The Preferred A Shares can be
converted into our common stock at any time; until the December 31, 2010, (as
amended on December 12, 2008), 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. The Preferred A Shares
accrue ten percent annual cumulative dividend, payable in additional Preferred A
Shares.
On
December 12, 2008, the Company entered into another securities purchase
agreement with CDS, as further described in Note 15 to the Consolidated
Financial Statements. In connection with the security purchase, CDS received a
warrant to purchase an additional 2,000 Preferred B Shares, at a price of $1,000
per share. If unexercised, the warrant expires on December 31,
2009. The Preferred B Shares can be converted into our common stock
at any time. Until December 31, 2010, the conversion price is $0.05,
after which the conversion price is the greater of $0.05 or 90% of the volume
weighted average price of the common stock for the prior 10 trading days. The
Preferred B Shares accrue a ten percent annual cumulative dividend, payable in
additional Preferred B Shares.
|
|
Year
Ended December 31, 2008
|
|
|
Year
Ended December 31, 2007
|
|
|
|
Thousands
of
|
|
|
Weighted
Average
|
|
|
Thousands
of
|
|
|
Weighted
Average
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Exercise Price
|
|
Balance
at the beginning of year
|
|
|
75 |
|
|
$ |
1.31 |
|
|
|
— |
|
|
$ |
— |
|
Granted
|
|
|
59,500 |
|
|
$ |
0.07 |
|
|
|
3,633 |
|
|
$ |
0.16 |
|
Exercised
|
|
|
— |
|
|
|
— |
|
|
|
3,558 |
|
|
$ |
0.14 |
|
Expired
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance
at the end of year
|
|
|
59,575 |
|
|
$ |
0.07 |
|
|
|
75 |
|
|
$ |
1.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable at end of year
|
|
|
59,575 |
|
|
$ |
0.07 |
|
|
|
75 |
|
|
$ |
1.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value of the
warrants
granted during the year
|
|
|
|
|
|
$ |
0.03 |
|
|
|
|
|
|
$ |
1.85 |
|
The
weighted average remaining contractual life and weighted average exercise price
of warrants outstanding and exercisable at December 31, 2008, for selected
exercise price ranges, is as follows:
Range of Exercise
Price
|
|
Number
Outstanding at
December 31,
2008
(000s)
|
|
Weighted
Average
Remaining Life
|
|
Weighted
Average
Exercise
Price
|
|
$0.05
|
|
40,000
|
|
1.0
|
$0.05
|
|
$0.08
|
|
12,500
|
|
1.5
|
$0.08
|
|
$0.13
|
|
7,000
|
|
2.2
|
$0.13
|
|
$1.31
|
|
75
|
|
3.6
|
$1.31
|
|
|
|
59,575
|
|
1.3
|
$0.07
|
|
CELSIUS
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The
Company entered into a new office lease effective October 2008. The monthly rent
amounts to $6,717 per month and the lease terminates in September 2009. Future
annual minimum payments required under operating lease obligations at December
31, 2008 are as follows:
|
|
Future
Minimum
Lease
Payments
|
|
|
|
|
|
2009
|
|
$
|
60,453 |
|
2010
and thereafter
|
|
|
0 |
|
Total
|
|
$
|
60,453 |
|
22. COMMITMENTS
AND CONTINGENCIES
The
Company has entered into distribution agreements with liquidated damages in case
the Company cancels the distribution agreements without cause. Cause has been
defined in various ways. It is the management belief that no such agreement has
created any liability as of today’s date.
There is
one agreement that also has liquidated damages, but instead of a monetary
damage, the potential liability is to have to issue shares to the distributor at
a purchase price of $0.06. The quantity of shares depends on this distributor’s
purchases from the Company as compared to the Company’s total
revenue.
23. BUSINESS
AND CREDIT CONCENTRATION
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
filling 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. No
vendor accounted for more than 10% of total payments.
During
2008, the Company sold in one order to one international customer 15.9% of the
Company’s total revenue for the year. There is no assurance that this customer
will order again.
24. NON-CASH
INVESTING AND FINANCING ACTIVITIES
For
the years ended December 31,
|
|
2008
|
|
|
2007
|
|
Issuance
of shares for note payable
|
|
$ |
2,079,563 |
|
|
$ |
250,000 |
|
Debt
discount for beneficial conversion feature
|
|
$ |
170,460 |
|
|
$ |
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 |
|
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
_______ ___, 2009, 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
167,150,000
Shares of Common Stock
CELSIUS
HOLDINGS, INC.
___________,
2009
|
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC
registration fee
|
|
$
|
665
|
|
Printing
Expenses
|
|
|
5,000
|
|
Accounting
fees and expenses
|
|
|
5,000
|
|
Legal
fees and expense
|
|
|
10,000
|
|
Miscellaneous
|
|
|
4,335
|
|
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., 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 a
note for $105,000 to Brennecke Partners, LLC in exchange for the note issued on
April 7, 2007 and accrued interest having an aggregate value of
$225,155.
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 for 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.
In June
2008 the Company issued 11.2 million unregistered shares as conversion for
$750,000 convertible notes that were originally issued in December 2007 and
April 2008.
In August
2008 the Company issued 2,000 unregistered preferred Series A shares for a
consideration of $2.0 million, of which $500,000 was paid through cancellation
of two previously issued notes of $250,000 each and a cash payment of $1.5
million.
In June
through December 2008, the Company issued 16.8 million shares of common stock as
partial conversion of a convertible debenture issued in December
2007.
In
September through December 2008 the Company issued 158,135 unregistered shares
to a consultant with a fair value of $10,000 for services.
In
September 2008 the Company issued 25,000 unregistered shares with a fair value
of $1,450 to a distributor.
In
December 2008, the Company issued 2,000 unregistered preferred Series B shares
for a consideration of $2 million.
In
January through September 2009 the Company issued 203,506 unregistered shares to
a consultant with a fair value of $20,000 for services.
In March
2009 the Company issued 75,000 unregistered shares with a fair value of $10,125
to a distributor.
In April
and May, 2009,, the Company issued 2,000 unregistered preferred Series B shares
for a consideration of $2 million in aggregate.
In May
2009, the Company issued 1.4 million shares of common stock as partial
conversion of a convertible debenture issued in December 2007.
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 Regulation 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 Amendment to our Registration
Statement on Form S-1 to be signed on our behalf by the undersigned, on October
9, 2009.
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CELSIUS
HOLDINGS, INC.
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By:
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/s/ Stephen C.
Haley |
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Name Stephen
C. Haley |
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Title Principal
Executive Officer, Chief Executive Officer and
President |
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By:
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/s/ Jan Norelid |
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Name
Jan Norelid |
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Title Principal
Financial and Accounting Officer, Chief Financial Officer, Secretary and
Treasurer |
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In
accordance with the Securities Act, this S-1 has been signed below by the
following persons on their own behalf in the capacities and on the dates
stated.
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Chairman
of the Board, Principal
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October
9, 2009
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Stephen
C. Haley
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Executive
Officer, Chief Executive Officer and President
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Director,
Principal Financial and
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October
9, 2009
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Jan
Norelid
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Accounting
Officer, Chief Financial Officer, Secretary and Treasurer
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Director
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October
9, 2009
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James
Cast
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Director
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October
9, 2009
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William
H. Milmoe
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Director
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October
9, 2009
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Geary
W. Cotton
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INDEX
TO EXHIBITS
Exhibit
No.
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Description
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Location
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2.1
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Agreement
and Plan of Reorganization dated
January
26, 2007
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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
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2.2
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Articles
of Merger
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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
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3.1
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Articles
of Incorporation
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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
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3.2
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Bylaws
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Incorporated
by reference to Exhibit B to the Company’s Information on Form DEF-14C as
filed with the SEC on December 5, 2006
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3.3
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Articles
of Amendment
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Incorporated
by reference to Exhibit A to the Company’s Information on Form DEF-14C as
filed with the SEC on December 5, 2006
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4.1
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Warrant
Agreement with Joseph & Gionis LLC
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Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the SEC on April 7, 2008
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4.2
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Amended
Stock Option Plan Adopted
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Incorporated
by reference to Exhibit 4.5 to the Company’s Proxy Statement filed as
Appedix A on DEF 14A filed with the SEC on May 20, 2009
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4.3
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Certificate
of Amendment to Certificate of designation
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Incorporated
by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
as filed with the SEC on December 17, 2008
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4.4
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Certificate
of designation
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Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
as filed with the SEC on December 17, 2008
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5.1
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Opinion
of counsel
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Filed
herewith
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10.1
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Stock
Grant Agreement Gregory Horn
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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
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10.2
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Promissory
Note to Special Nutrition Group, Inc.
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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
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10.3
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Employment
Agreement with Stephen Haley, as amended
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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
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10.4
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Employment
Agreement with Jan Norelid, as amended
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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
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10.5
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Employment
Agreement with Richard McGee, as amended
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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
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10.6
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Employment
Agreement with Janice Haley
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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
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10.7
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Stock
Grant Agreement Addendum 1 with Jan Norelid
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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
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10.8
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Common
Stock Purchase Agreement with Fusion Capital Fund II, LLC
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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
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10.9
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Registration
Rights Agreement with Fusion Capital Fund II, LLC
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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
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10.10
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Promissory
note issued to CD Financial, LLC dated December 18, 2007 , as
amended
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Incorporated
by reference to Exhibit 10.12 to the Company’s filing of Form 10-KSB as
filed with the SEC on March 3, 2008
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10.11
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Secured
promissory note issued by Golden Gate Investors, Inc. dated December 19,
2007
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Incorporated
by reference to Exhibit 10.2 to the Company’s filing of Form 8-K/A as
filed with the SEC on January 9,
2008
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10.12
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Secured
purchase agreement between Celsius Holdings, Inc. and Golden Gate
Investors, Inc. dated December 19, 2007
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Incorporated
by reference to Exhibit 10.3 to the Company’s filing of Form 8-K/A as
filed with the SEC on January 9, 2008
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10.13
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7
¾% Convertible Debenture issued by Celsius Holdings, Inc. dated December
19, 2007
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Incorporated
by reference to Exhibit 10.4 to the Company’s filing of Form 8-K/A as
filed with the SEC on January 9, 2008
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10.14
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Securities
purchase agreement between Celsius Holdings, Inc. and CDS Ventures of
South Florida, LLC. dated August 8, 2008
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Incorporated
by reference to Exhibit 10.1 to the Company’s filing of Form 8-K as filed
with the SEC on August 12, 2008
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10.15
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Registration
rights agreement between Celsius Holdings, Inc. and CDS Ventures of South
Florida, LLC. dated August 8, 2008
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Incorporated
by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed
with the SEC on August 12, 2008
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10.16
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Loan
and Security Agreement between Celsius, Inc and CD Financial,
LLC.
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Incorporated
by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed
with the SEC on December 10, 2008
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10.17
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Securities
purchase agreement between Celsius Holdings, Inc. and CDS Ventures of
South Florida, LLC. dated December 12, 2008
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Incorporated
by reference to Exhibit 10.1 to the Company’s filing of Form 8-K as filed
with the SEC on December 17, 2008
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10.18
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Registration
rights agreement between Celsius Holdings, Inc. and CDS Ventures of South
Florida, LLC. dated December 12, 2008
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Incorporated
by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed
with the SEC on December 17, 2008
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10.19
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Employment
Agreement with Jeffrey Perlman
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Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the SEC on January 7, 2009
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10.20
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Unsecured
note issued to CD Financial, LLC dated August 12, 2009, refinanced and
replaced by 10.25
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Incorporated
by reference to Exhibit 10.1 to the Company’s filing of Form 8-K as filed
with the SEC on August 13, 2009
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10.21
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Convertible
note issued to CDS Ventures of South Florida, LLC dated September 8,
2009
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Incorporated
by reference to Exhibit 10.1 to the Company’s filing of Form 8-K as filed
with the SEC on September 10, 2009
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10.22
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Loan
and Security Agreement between Celsius, Inc and CD Financial, LLC dated
September 8, 2009.
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Incorporated
by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed
with the SEC on September 10, 2009
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10.23
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Registration
rights agreement between Celsius Holdings, Inc. and CDS Ventures of South
Florida, LLC. dated September 8, 2009
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Incorporated
by reference to Exhibit 10.3 to the Company’s filing of Form 8-K as filed
with the SEC on September 10, 2009
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10.24
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Unsecured
note issued to CD Financial, LLC dated September 29, 2009
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Filed
herewith
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14.1
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Code
of Ethical Conduct
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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
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23.1
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Consent of Sherb & Co.
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Filed
herewith
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23.2
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Consent of Counsel
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Incorporated by reference to Exhibit
5.1 filed herewith
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24.1
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Power
of Attorney
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Filed
herewith
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99.1
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Results
from Clinical Studies
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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
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99.2
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Abstract
from Clinical Study released in June 2008
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Incorporated
by reference to Exhibit 99.2 to the Company’s Original filing of Form S-1
as filed with the SEC on August 29,
2008
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