UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.
2
TO
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
Pursuant to Section
12(b) or (g) of The Securities Exchange Act of 1934
Celsius Holdings,
Inc.
(Exact name of registrant
as specified in its charter)
2424 North Federal Highway, Suite 208
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Boca Raton, Florida
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33431
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(561)
276-2239
Securities to be registered under Section 12(b) of the Act:
Title of each class
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Name of exchange on which each class is to
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To be so registered
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be registered
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None
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Not applicable
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001
par value
(Title of Class)
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 Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if smaller reporting company)
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Smaller reporting company
x
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TABLE OF CONTENTS
When used in this Registration Statement,
unless otherwise indicated, the terms “
the Company
,” “
Celsius
,” “
we
,”
“us” and “
our
” refers to Celsius Holdings, Inc. and its subsidiaries.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking
statements that reflect our current views about future events. We use the words “anticipate,” “assume,”
“believe,” “estimate,” “expect,” “will,” “intend,” “may,”
“plan,” “project,” “should,” “could,” “seek,” “designed,”
“potential,” “forecast,” “target,” “objective,” “goal,” or the negatives
of such terms or other similar expressions. These statements relate to future events or our future financial performance and involve
known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. These risks and other factors include described in “
Item 1A. Risk Factors
,”
“
Item 2. Financial Information
” and elsewhere in this Registration Statement.
Overview
We are engaged in the development, marketing,
sale and distribution of “
functional
” calorie-burning fitness beverages under the Celsius® brand name.
According to multiple clinical studies we funded, a single serving of Celsius® burns 100 to 140 calories by increasing a consumer’s
resting metabolism an average of 12% and providing sustained energy for up to a three-hour period. Our exercise focused studies
show Celsius delivers additional benefits when consumed prior to exercise. The studies shows benefits such as increase in fat
burn, increase in lean muscle mass and increased endurance.
We seek to combine nutritional science
with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus® formulation, while fostering the
goal of healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many
energy drinks and sodas. Celsius® has no artificial preservatives, aspartame or high fructose corn syrup and is very low in
sodium. Celsius® uses good-for-you ingredients and supplements such as green tea (EGCG), ginger, calcium, chromium, B vitamins
and vitamin C. The main Celsius line of products are sweetened with sucralose, a sugar-derived sweetener that is found in Splenda®,
which makes our beverages low-calorie and suitable for consumers whose sugar intake is restricted.
We have undertaken significant marketing
efforts aimed at building brand awareness, including a wide variety of marketing vehicles such as television, radio, digital,
social media, sponsorships, and magazine advertising. We also undertake various promotions at the retail level such as coupons
and other discounts in addition to in-store sampling.
We do not directly manufacture our beverages,
but instead outsource the manufacturing process to established third-party co-packers. We do, however, provide our co-packers
with flavors, ingredient blends, cans and other raw materials for our beverages purchased by us from various suppliers.
Corporate History
We were incorporated in Nevada on April
26, 2005 under the name “
Vector Ventures, Inc
.” and originally we engaged in mineral exploration. Such business
was unsuccessful. On January 26, 2007, we acquired the Celsius® beverage business of Elite FX, Inc., a Florida corporation
engaged in the development of “functional” beverages since 2004 in a reverse merger, and subsequently changed our
name to Celsius Holdings, Inc. In addition, on March 28, 2007, the Company established Celsius Netshipments, Inc. a Florida corporation
as a wholly-owned subsidiary of the Company.
The Company is an emerging growth company
under the Jumpstart Our Business Startups Act of 2012 (the “
Jobs Act
”) and as such, may elect to comply with
certain reduced public company reporting requirements for future filings.
Our Products
Celsius® calorie-burning beverages
were first introduced to the marketplace in 2005.
According to multiple clinical studies
we funded, a single serving (12 ounce can) of Celsius® burns 100 to 140 calories by increasing a consumer’s metabolism
an average of 12% for up to a three-hour period. In addition, these studies have indicated that drinking a single serving of Celsius
®
prior to exercising may improve cardiovascular health and fitness and enhance the loss of fat and gain of muscle from exercise.
We seek to combine nutritional science
with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus® formulation, while fostering the
goal of healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many
energy drinks or sodas. Celsius® has no chemical preservatives, aspartame or high fructose corn syrup and is very low in sodium.
Celsius® uses good-for-you ingredients and supplements such as green tea (EGCG), ginger, calcium, chromium, B vitamins and
vitamin C. Celsius is sweetened with sucralose, a sugar-derived sweetener that is found in Splenda®, which makes our beverages
low-calorie and suitable for consumers whose sugar intake is restricted. Each 12 ounce can of Celsius® contains 200 milligrams
of caffeine which is comparable to one 12 ounce cup of coffee from the leading coffeehouse.
We currently offer Celsius® in seven
flavors: orange, wild berry, cola, grape, and watermelon (which are carbonated), and non-carbonated green tea raspberry/acai,
and green tea/peach mango. Our beverages are sold in 12 ounce cans, and we have recently begun to market the active ingredients
in powdered form in individual On-The-Go packets as well as multiple serving canisters.
Celsius® is packaged in a distinctive
twelve ounce sleek can that uses vivid colors in abstract patterns to create a strong on-shelf impact. The cans are sold as singles
or in four-packs.
We target a niche in the functional beverage
segment of the beverage industry consisting of consumers seeking calorie-burning beverages to help them manage their weight and
enhance their exercise regimen. Our target consumers are generally individuals that exercise two to five times a week and are
concerned about their health.
Clinical Studies
It is our belief that clinical studies
substantiating product claims will become more important as more and more beverages are marketed with health claims. Celsius®
was one of the first functional beverages to be launched along with a clinical study. Celsius® is also one of very few functional
beverages that has clinical research on the actual product itself. 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.
We have funded seven U.S. based clinical
studies for Celsius®. Each was conducted by a research organization and each studied the total Celsius® formula. The first
study was conducted by the Ohio Research Group of Exercise Science & Sports Nutrition. The remaining studies were conducted
by the Applied Biochemistry & Molecular Physiology Laboratory of the University of Oklahoma. We funded all of the studies
and provided Celsius® beverage for the studies. However, none of our directors, executive officers or principal shareholders
is in any way affiliated with either of the two research organizations which conducted the studies.
The first study was conducted in 2005
by the Ohio Research Group of Exercise Science & Sports Nutrition
www.ohioresearchgroup.com
. 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. 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 this was done to make sure that 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 ten minutes at the end of each hour for three hours post-ingestion. The results showed an
average increase of metabolism of twelve percent over the three hour period, compared to a 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 in 2007. This blinded, placebo-controlled
study was conducted on a total of 60 men and women of normal weight. An equal number of participants were separated into two groups
to compare one serving (a single 12 ounce can) 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 65% more calories than those consuming
the placebo beverage and burned an average of more than 100 to 140 calories compared to the placebo. These results were statistically
significant.
The third study, conducted by the Applied
Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007, extended our second study with the same
group of 60 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, although 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, conducted by the Applied
Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009, combined Celsius® use with exercise.
This ten-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 ten weeks of combined aerobic and weight training,
following the American College of Sports Medicine guidelines of training for previously sedentary adults. The results showed that
consuming a single serving of Celsius® prior to exercising may enhance the positive adaptations of exercise on body composition,
cardio-respiratory fitness and endurance performance. 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 cardio-respiratory fitness and the ability to delay the onset of fatigue
when exercising to exhaustion.
Our fifth study was conducted by the Applied
Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009. This ten-week placebo-controlled, randomized
and blinded study was conducted on a total of 27 previously sedentary overweight and obese female subjects. Participants were
randomly assigned into groups that consumed identically tasting treatment beverages with exercise or without exercise. All participants
consumed one drink, either placebo or Celsius, per day for 10 weeks. The exercise groups participated in ten weeks of combined
aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary
adults. No changes were made to their diet. The results showed that consuming a single serving of Celsius® prior to exercising
may improve cardiovascular health and fitness and enhance the positive adaptations of exercise on body composition. According
to the preliminary findings, subjects consuming a single serving of Celsius® lost significantly more fat mass and gained significantly
more muscle mass when compared to exercise alone — a 46% greater loss in fat, 27% greater gain in muscle mass, respectively.
The study also confirmed that subjects consuming Celsius® significantly improved measures of cardio-respiratory fitness —
35% greater endurance performance with significant improvements to lipid profiles — total cholesterol decreases of 5 to
13% and bad LDL cholesterol 12 to 18%. Exercise alone had no effect on blood lipid levels.
Our sixth study was conducted by the Applied
Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009. This ten-week placebo-controlled, randomized
and blinded study was conducted on a total of 37 previously sedentary male subjects. Participants were randomly assigned into
groups that consumed identically tasting treatment beverages with exercise or without exercise. All participants consumed one
drink, either placebo or Celsius, per day for 10 weeks. The exercise groups participated in ten weeks of combined aerobic and
weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. No
changes were made to their diet. The results showed that consuming a single serving of Celsius® prior to exercising may improve
cardiovascular health and fitness and enhance the positive adaptations of exercise on body composition. Significantly greater
decreases in fat mass and percentage body fat and increases in VO
2
were observed in the subjects that consumed Celsius
before exercise versus those that consumed the placebo before exercise. Mood was not affected. Clinical markers for hepatic, renal,
cardiovascular and immune function, as determined by pre and post blood work revealed no adverse effects.
Our seventh study was conducted by Miami
Research Institute in 2010 and demonstrated the efficacy and safety of the powders and the shots. This study allows the Company
to make the same structure/function claims as the ready to drink beverages.
Manufacture and Supply of Our Products
Our beverages are produced by established
third party 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 one benefit of using co-packers is that 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. We purchase most of the ingredients and all packaging materials. The co-pack facility assembles our products
and charges us a fee by the case. The shelf life of Celsius® is specified as 15 to 18 months.
Substantially all of the raw materials
used in the preparation, bottling and packaging of our products are purchased by us or by our co-packers in accordance with our
specifications. Generally, we obtain the ingredients used in our products from domestic suppliers and some ingredients have several
reliable suppliers. The ingredients in Celsius® include green tea (EGCG), ginger (from the root), caffeine, B vitamins, vitamin
C, taurine, guarana, chromium, calcium, glucuronolactone, sucralose, natural flavors and natural colorings. Celsius® is labeled
with a supplements facts panel. We have no major supply contracts with any of our suppliers. We single-source all our ingredients
for purchasing efficiency; however, we have identified a second source for our critical ingredients and there are many suppliers
of flavors, colorings and sucralose. In case of a supply restriction or interruption from any of the flavor and coloring suppliers,
we would have to test and qualify other suppliers that may disrupt our production schedules.
Packaging materials, except for our distinctive
sleek aluminum cans, are easily available from multiple sources in the United States; however, due to efficiencies we utilize
single source vendor relationships.
We believe that our co-packing arrangement
and supply sources are adequate for our present needs.
Distribution
Celsius® is sold across many retail
segments. They include supermarkets, convenience stores, drug stores, nutritional stores, and mass merchants. We also sell to
health clubs, spas, gyms, the military, e-commerce websites and a limited number of international markets.
We distribute our products through a hybrid
of direct-store delivery (DSD) distributors and as well as sales direct to retailers (DTR).
Sales of our products to one customer,
a foreign distributor of our products accounted for 48.3% of our revenues for the year ended December 31, 2015, and 31.4% of our
revenues for the six months ended June 30, 2016. In addition, for the six months ended June 30, 2016, a domestic distributor accounted
for 12.3% of our revenues. Accordingly, if sales to either of these customers were to significantly decline or cease entirely,
our business, results of operations and financial condition may be significantly harmed.
Seasonality of Sales
As is typical in the beverage industry,
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
We believe that we are one of the few
calorie-burning fitness beverages whose effectiveness is supported by clinical studies, which gives us a unique position in the
beverage market. However, our products do compete broadly with all categories of consumer beverages. The beverage market is highly
competitive, and includes international, national, regional and local producers and distributors, most 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.
Proprietary Rights
We have registered the Celsius® and
MetaPlus® trademarks with the United States Patent and Trademark Office, as well as a number of additional trademarks.
We have and will continue to take appropriate
measures, such as entering into confidentiality agreements with our contract packers and ingredient suppliers, to maintain the
secrecy and proprietary nature of our MetaPlus® formulation and product formulas.
We maintain our MetaPlus® formulation
and product formulas as trade secrets. We believe that trade secrecy is a preferable method of protection for our formulas as
patenting them might require their disclosure. Other than a company that is our outsourced production manager, no single member
of the raw material supply chain or our co-packers has access to the complete formula.
We consider our trademarks and 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.
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 business, financial condition and results of operations.
Employees
As of the date of this Registration Statement,
the Company employs 38 persons, including its executive officers.
Our business faces certain risks. The
risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think
as immaterial, may also impair our business. If any of the events anticipated by the risks described below or elsewhere
in this report occur, our results of operations and financial conditions could be adversely affected.
Risk Factors Relating to Our Business
We have a history of losses and
we may experience additional losses in the futures.
The Company
has a history of losses, including net losses of $3,831,329 and
$
381,877 for the six months
ended June 30 2016 and 2015, respectively and $2,570,297 and $2,160,972 for the years ended December 31, 2015 and 2014, respectively.
Our future operating results will depend on many factors, both in and out of our control, including the ability to increase and
sustain demand for and acceptance of our products, the level of our competition, and our ability to attract and maintain key management
and key employees. Accordingly, there can be no assurance that we can attain consistent profitability.
We rely on third party co-packers
to manufacture our products. If we are unable to maintain good relationships with our co-packers and/or their ability to manufacture
our products becomes constrained or unavailable to us, our business could suffer.
We do not directly manufacture our products,
but instead outsource such manufacturing to established third party co-packers. These third party co-packers may not be able to
fulfill our demand as it arises, could begin to charge rates that make using their services cost inefficient or may simply not
be able to or willing to provide their services to us on a timely basis or at all. In the event of any disruption or delay, whether
caused by a rift in our relationship or the inability of our co-packers to manufacture our products as required, we would need
to secure the services of alternative co-packers. We may be unable to procure alternative packing facilities at commercially
reasonable rates and/or within a reasonably short time period and any such transition could be costly. In such case, our
business, financial condition and results of operations would be adversely affected.
We rely on distributors to distribute
our products in the DSD sales channel. If we are unable to secure such distributors and/or we are unable to maintain good relationships
with our existing distributors, our business could suffer.
We distribute Celsius® in the DSD
sales channel by entering into agreements with direct-to-store delivery distributors having established sales, marketing and distribution
organizations. Many of our distributors are affiliated with and manufacture and/or distribute other beverage products. In many
cases, such products compete directly with our products. The marketing efforts of our distributors are important for our success.
If Celsius® proves to be less attractive to our distributors and/or if we fail to attract distributors, and/or our distributors
do not market and promote our products with greater focus in preference to the products of our competitors, our business, financial
condition and results of operations could be adversely affected.
Our customers are material to our
success. If we are unable to maintain good relationships with our existing customers, our business could suffer.
Unilateral decisions could be taken by
our distributors, grocery chains, convenience chains, drug stores, nutrition stores, mass merchants, club warehouses and other
customers to discontinue carrying all or any of our products that they are carrying at any time, which could cause our business
to suffer.
Two of our customers account for
a significant portion of our revenues. If sales to either of those customers were to significantly decline or cease
,
our
business could be significantly harmed
.
Sales of our products to one customer,
a foreign distributor of our products accounted for 48.3% of our revenues for the year ended December 31, 2015, and 31.4% of our
revenues for the six months ended June 30, 2016. In addition, for the six months ended June 30, 2016, a domestic distributor accounted
for 12.3% of our revenues. Accordingly, if sales to either of these customers were to significantly decline or cease entirely,
our business, results of operations and financial condition may be significantly harmed.
Increases in cost or shortages of
raw materials or increases in costs of co-packing could harm our business
.
The principal raw materials used by us
are flavors and ingredient blends as well as aluminum cans, the prices of which are subject to fluctuations. We are uncertain
whether the prices of any of the above or any other raw materials or ingredients we utilize will rise in the future and whether
we will be able to pass any of such increases on to our customers. We do not use hedging agreements or alternative instruments
to manage the risks associated with securing sufficient ingredients or raw materials. In addition, some of these raw materials,
such as our distinctive sleek 12 ounce can, are available from a single or a limited number of suppliers. As alternative sources
of supply may not be available, any interruption in the supply of such raw materials might materially harm us.
Our failure to accurately estimate
demand for our products could adversely affect our business and financial results.
We may not correctly estimate demand for
our products. If we materially underestimate demand for our products and are unable to secure sufficient ingredients or raw materials,
we might not be able to satisfy demand on a short-term basis, in which case our business, financial condition and results of operations
could be adversely affected.
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.
Our products are manufactured using our
proprietary blends of ingredients. These blends are created by third-party suppliers to our specifications and then supplied to
our co-packers. Although all of the third parties in our supply and manufacture chain execute confidentiality agreements, there
can be no assurance that our trade secrets, including our proprietary ingredient blends will not become known to competitors.
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 or reverse
engineer our processes, brands, flavors, or our 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. Any such loss of confidentiality
could diminish or eliminate any competitive advantage provided by our proprietary information.
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 amount of the insurance we carry
is limited, and that insurance is subject to certain exclusions and may or may not be adequate.
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 Celsius®.
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 functional 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.
We are dependent on our key executives
and employees and the loss of any of their services could materially adversely affect us 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 a limited number of key executives and employees, including Gerry
David, our Chief Executive Officer and John Fieldly, our Chief Financial Officer. The loss of the services of Mr. David, Mr. Fieldly
or any other key employee 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 and the loss of any of their services could materially adversely affect us.
We are dependent on our ability
to attract and retain qualified technical, sales and managerial personnel
.
Our future success depends in part on
our continuing ability to attract and retain highly qualified technical, sales and managerial personnel. Competition for such
personnel in the beverage industry is intense and we may not be able to retain our key managerial, sales and technical employees
or attract and retain additional highly qualified technical, sales and managerial personnel in the future. Any inability to attract
and retain the necessary technical, sales and managerial personnel could materially adversely affect us.
The FDA has not passed on the efficacy
of our products or the accuracy of any claim we make related to our products.
Although six independent clinical studies
have been conducted relating to the calorie-burning and related effects of our products, the results of these studies have not
been submitted to or reviewed by the FDA. Further, the FDA has not passed on the efficacy of any of our products nor has
it reviewed or passed on any claims we make related to our products, including the claim that our products aid consumers in burning
calories or enhancing their metabolism.
Risk Factors Relating to Our Industry
We are subject to significant competition
in the beverage industry
.
The beverage industry is highly competitive.
The principal areas of competition are pricing, packaging, distribution channel penetration, development of new products and flavors
and marketing campaigns. Our products compete with a wide range of drinks produced by a relatively large number of manufacturers,
most of which have substantially greater financial, marketing and distribution resources and name recognition than we do.
Important factors affecting our ability
to compete successfully include the taste and flavor of our products, trade and consumer promotions, rapid and effective development
of new, unique cutting edge products, attractive and different packaging, branded product advertising and pricing. Our products
compete with all liquid refreshments and with products of much larger and substantially better financed competitors, including
the products of numerous nationally and internationally known producers, such as The Coca Cola Company, Dr. Pepper Snapple Group,
PepsiCo, Inc., Nestle, Waters North America, Inc., Hansen Natural Corp. and Red Bull. We also compete with companies that are
smaller or primarily local in operation. Our products also compete with private label brands such as those carried by supermarket
chains, convenience store chains, drug store chains, mass merchants and club warehouses.
There can be no assurance that we will
compete successfully in the functional beverage industry. The failure to do so would materially adversely affect our business,
financial condition and results of operations.
We compete in an industry that is
brand-conscious, so brand name recognition and acceptance of our products are critical to our success and significant marketing
and advertising could be needed to achieve and sustain brand recognition.
Our business is substantially dependent
upon awareness and market acceptance of our products and brands by our targeted consumers. Our business depends on acceptance
by our independent distributors of our brand as one that has the potential to provide incremental sales growth rather than reduce
distributors’ existing beverage sales. The development of brand awareness and market acceptance is likely to require significant
marketing and advertising expenditures. There can be no assurance that Celsius® will achieve and maintain satisfactory levels
of acceptance by independent distributors and retail consumers. Any failure of Celsius® brand to maintain or increase acceptance
or market penetration would likely have a material adverse effect on business, financial condition and results of operations.
Our sales are affected by seasonality.
As is typical in the beverage industry,
our sales are seasonal. Our highest sales volumes generally occur in the second and third quarters, which correspond to the warmer
months of the year in our major markets. Consumer demand for our products is also affected by weather conditions. Cool, wet spring
or summer weather could result in decreased sales of our beverages and could have an adverse effect on our results of operations.
Our business is subject to many
regulations and noncompliance is costly
.
The production, marketing and sale of
our beverage products are subject to the rules and regulations of various federal, state and local health agencies. If a regulatory
authority finds that a current or future product or production run is not in compliance with any of these regulations, we may
be fined, or production may be stopped, thus adversely affecting our business, financial condition and results of operations.
Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market
our products. Furthermore, the rules and regulations are subject to change from time to time and while we closely monitor developments
in this area, we have no way of anticipating whether changes in these rules and regulations will impact our business adversely.
Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have an adverse effect
on our business, financial condition and results of operations.
Risk Factors Relating to our Status
as a Fully Reporting Public Company
Upon effectiveness of this registration
statement, we will become subject to the periodic reporting requirements of the Securities Exchange Act of 1934 (the “Exchange
Act”) that will require us to incur audit fees and legal fees in connection with the preparation of such reports. These
additional costs could reduce or eliminate our ability to earn a profit.
Following effectiveness of this registration
statement, we will be required to file periodic reports with the Securities and Exchange Commission (the “
SEC
”)
pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements,
our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit
our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of
such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because factors
such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time
and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of such
costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements
and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could
be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if
a market ever develops, could drop significantly.
Our internal controls may be inadequate,
which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public
.
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal
control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal
financial officers and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that:
• pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
• provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and/or directors of the Company; and
• provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the financial statements.
We will be required to include a report
of management on the effectiveness of our internal control over financial reporting in certain of our periodic filings. We expect
to incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation,
testing and remediation required in order to comply with the management certification requirements.
We do not have a sufficient number of
employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals
to overcome our lack of employees. During the course of our testing, we may identify other deficiencies that we may not be able
to timely remediate. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for
us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial
reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported
financial information, and the trading price of our common stock could drop significantly.
The Jumpstart Our Business Startups
Act of 2012 (the “Jobs Act”) has reduced the information that the Company will be is required to disclose.
Under the Jobs Act, the information that
the Company will be required to disclose following effectiveness of this registration statement has been reduced in a number of
ways.
As a company that had gross revenues of
less than $1 billion during the Company’s last fiscal year, the Company is an “
emerging growth company
,”
as defined in the Jobs Act (an “
EGC
”). The Company will retain that status until the earliest of (a) the last
day of the fiscal year which the Company has total annual gross revenues of $1,000,000,000 (as indexed for inflation in the manner
set forth in the Jobs Act) or more; (b) the last day of the fiscal year of following the fifth anniversary of the date of the
first sale of the common stock pursuant to an effective registration statement under the Securities Act of 1933 (the “
Securities
Act
”); (c) the date on which the Company has, during the previous three year period, issued more than $1,000,000,000
in non-convertible debt; or (d) the date on which the Company is deemed to be a “
large accelerated filer
,”
as defined in Rule 12b-2 under the Exchange Act or any successor thereto. As an EGC, the Company is relieved from the following:
• The
Company is excluded from Section 404(b) of Sarbanes-Oxley Act (“
Sarbanes-Oxley
”), which otherwise would have
required the Company’s auditors to attest to and report on the Company’s internal control over financial reporting.
The JOBS Act also amended Section 103(a)(3) of Sarbanes-Oxley to provide that (i) any new rules that may be adopted by the PCAOB
requiring mandatory audit firm rotation or changes to the auditor’s report to include auditor discussion and analysis (each
of which is currently under consideration by the PCAOB) shall not apply to an audit of an EGC; and (ii) any other future rules
adopted by the PCAOB will not apply to the Company’s audits unless the SEC determines otherwise.
• The
Jobs Act amended Section 7(a) of the Securities Act to provide that the Company need not present more than two years of audited
financial statements in an initial public offering registration statement and in any other registration statement, need not present
selected financial data pursuant to Item 301 of Regulation S-K for any period prior to the earliest audited period presented in
connection with such initial public offering. In addition, the Company is not required to comply with any new or revised financial
accounting standard until such date as a private company (i.e., a company that is not an “
issuer
” as defined
by Section 2(a) of Sarbanes-Oxley) is required to comply with such new or revised accounting standard. Corresponding changes have
been made to the Exchange Act, which relates to periodic reporting requirements, which would be applicable if the Company were
required to comply with them.
• As
long as the Company is an EGC, the Company may comply with Item 402 of Regulation S-K, which requires extensive quantitative and
qualitative disclosure regarding executive compensation, by disclosing the more limited information required of a “smaller
reporting company.”
• In
the event that the Company registers the common stock under the Exchange Act as it intends to do, the Jobs Act will also exempt
the Company from the following additional compensation-related disclosure provisions that were imposed on U.S. public companies
pursuant to the Dodd-Frank Act: (i) the advisory vote on executive compensation required by Section 14A(a) of the Exchange Act;
(ii) the requirements of Section 14A(b) of the Exchange Act relating to shareholder advisory votes on “
golden parachute
”
compensation; (iii) the requirements of Section 14(i) of the Exchange Act as to disclosure relating to the relationship between
executive compensation and our financial performance; and (iv) the requirement of Section 953(b)(1)of the Dodd-Frank Act, which
requires disclosure as to the relationship between the compensation of the Company’s chief executive officer and median
employee pay.
In addition to the foregoing, Section
107 of the Jobs Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting standards. An emerging growth company can therefore delay the
adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing
to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards
on the relevant dates on which adoption of such standards is required for companies that are not EGCs. Section 107 of the Jobs
Act provides that our decision to “opt out” of the extended transition period for complying with new or revised accounting
standards is irrevocable.
Risk Factors Related to our Common
Stock
We cannot guarantee the continued
existence of an active established public trading market for our common stock.
Our common stock currently is listed for
trading on the OTCQX tier of the over-the-counter market operated by OTC Markets Group, Inc. Trading in stock quoted on the OTCQX
is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our
operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to
operating performance. Accordingly, OTCQX may provide less liquidity for holders of our common stock than a national securities
exchange such as the Nasdaq Stock Market. Although we intend to list our common stock for trading on the Nasdaq Stock Market concurrent
with or as soon as practicable after the effectiveness of this registration statement, there is no assurance that we can successfully
do so or that in any event, we can maintain an active established trading market for our common stock.
Market prices for our common stock may
also be influenced by a number of other factors, including:
|
•
|
the issuance of new equity securities pursuant to
a public or private offering;
|
|
•
|
changes in interest rates;
|
|
•
|
competitive developments, including announcements
by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures
or capital commitments;
|
|
•
|
variations in quarterly operating results;
|
|
•
|
change in financial estimates by securities analysts;
|
|
•
|
the depth and liquidity of the market for our common
stock;
|
|
•
|
investor perceptions of Celsius and the functional
beverage industry generally; and
|
|
•
|
general economic and other national conditions.
|
Our common stock is currently deemed
to be a “penny stock” and is restricted by the SEC’s penny stock regulations and FINRA’s sales practice
requirements, which may limit a shareholder’s ability to buy and sell our common stock
.
Our common stock is currently classified
as a “
penny stock
.” The SEC has adopted Rule 15g-9 which generally defines “
penny stock
”
to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our common stock is covered by the penny stock rules, which impose additional sales
practice requirements on broker-dealers who sell to persons other than established customers and “
accredited investors
.”
The term “
accredited investor
” refers generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements
showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the
secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and
limit the marketability of, our common stock.
In addition to the “
penny stock
”
rules promulgated by the SEC, the Financial Industry Regulatory Authority (“
FINRA
”) has adopted rules that
require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers,
broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that
speculative low-priced securities will not be suitable for at least some customers. FINRA’s requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
The market for penny stocks has
experienced numerous frauds and abuses that could adversely impact investors in our common stock.
Company management believes that the market
for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:
|
•
|
control of the market for the security by one or a few broker-dealers
that are often related to a promoter or issuer;
|
|
•
|
manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases;
|
|
•
|
“boiler room” practices involving high pressure
sales tactics and unrealistic price projections by sales persons;
|
|
•
|
excessive and undisclosed bid-ask differentials and markups
by selling broker-dealers; and
|
|
•
|
wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent
investor losses.
|
Our board of directors has the authority,
without shareholder approval, to issue preferred stock with terms that may not be beneficial to common shareholders and with the
ability to affect adversely shareholder voting power and perpetuate their control over us.
Our Articles of Incorporation allows us
to issue shares of preferred stock without any vote or further action by our shareholders. Our board of directors has the authority
to fix and determine the relative rights and preferences of preferred stock. As a result, our board of directors could authorize
the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the
right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption
of the shares, together with a premium, prior to the redemption of our common stock.
The ability of our principal shareholders
to control our business may limit or eliminate minority shareholders’ ability to influence corporate affairs.
Our principal shareholders own common
stock and/or preferred stock which holds a majority of the voting power of our issued and outstanding capital. Accordingly, they
will be able to effectively control the election of directors, as well as all other matters requiring shareholder approval. The
interests of our principal shareholders may differ from the interests of other shareholders with respect to the issuance of shares,
business transactions with or sales to other companies, selection of other directors and other business decisions. The minority
shareholders have no way of overriding decisions made by our principal shareholders. This level of control may also have an adverse
impact on the market value of our shares because our principal shareholders may institute or undertake transactions, policies
or programs that result in losses, may not take any steps to increase our visibility in the financial community and / or may sell
sufficient numbers of shares to significantly decrease our price per share.
We do not expect to pay cash dividends
in the foreseeable future
.
We have never paid cash dividends on our
common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment
of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our
board of directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment,
if any, will depend solely on an increase, if any, in the market value of our common stock.
The “market overhang”
from our outstanding options, warrants and convertible securities could adversely impact the market price of our common stock
.
We have 53,201,132 shares of common stock
issuable upon exercise of outstanding options and warrants and conversion of outstanding convertible securities. Such “
market
overhang
” could adversely impact the market price of our common stock as a result of the dilution which would result
if such securities were exercised for or converted into shares of common stock.
Item 2.
|
Financial Information
|
Management's Discussion and Analysis of Financial Condition
and Results of Operations
You should read the following discussion
in conjunction with the audited financial statements and the corresponding notes, the unaudited financial statements and the corresponding
notes included elsewhere in this information statement. This
Item 2
contains forward-looking statements. The
matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual
results to differ materially from those made, projected or implied in the forward-looking statements. Please refer to "
Item
1A. Risk Factors
" for a discussion of the uncertainties, risks and assumptions associated with these statements.
Results of Operations
Six months ended
June 30, 2016 compared to six months ended June 30, 2015
Revenue
For the six months ended June 30, 2016,
revenue was approximately $9.85 million, an increase of $545,000 or 6% from $9.30 million for same period in the prior year. The
revenue increase of 6% was attributable in large part to 71% growth in domestic revenues associated from blended growth rates
of 90% in retail accounts arising mainly from expansion of convenience store distribution initiatives, 33% in health and fitness
accounts and 44% growth in internet retailer accounts from the same period in 2015. The increase in revenue from the 2015 period
to the 2016 period was primarily attributable to an increase in sales volume, as opposed to increases in product pricing. This
growth was offset by a 40% decrease in international revenue from our Swedish distribution partner, who was adversely affected
by a rebalancing of inventory during the first quarter of 2016 resulting from a determination to reduce the number of weeks on
hand of such inventory.
The following table sets forth the amount
of revenues by category and changes therein for the six months ended June 30. 2016 and 2015:
|
|
Six months ended June 30,
|
|
Revenue Source
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
9,850,397
|
|
|
$
|
9,304,910
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Revenue
|
|
$
|
3,242,052
|
|
|
$
|
5,446,856
|
|
|
|
-40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Revenue
|
|
$
|
6,608,345
|
|
|
$
|
3,858,054
|
|
|
|
71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail accounts
|
|
$
|
4,753,812
|
|
|
$
|
2,506,720
|
|
|
|
90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Fitness accounts
|
|
$
|
1,037,117
|
|
|
$
|
782,145
|
|
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet Retailer accounts
|
|
$
|
817,416
|
|
|
$
|
569,189
|
|
|
|
44
|
%
|
Gross profit
For the six months ended June 30, 2016,
gross profit increased by approximately $417,000 or 10.8% to $4.28 million from $3.87 million for the same period in 2015. Gross
profit margins improved 1.9% to 43.5% for the six months ended June 30, 2016 from the same period in 2015 for comparable reasons.
The increases in gross profit and the improvement in gross profit margins from the 2015 to the 2016 periods are primarily attributable
to the increases in revenue and reductions in the cost of raw materials.
Sales and marketing expenses
Sales and marketing expenses for the six
months ended June 30, 2016 were approximately $4.97 million, an increase of $2.93 million or 143% from $2.04 million in the same
period in 2015. The increase is due primarily to increases in investments in marketing programs of $1.84 million and increases
in human resource investments of $1.09 million.
General and administrative expenses
General and administrative expenses for
the six months ended June 30, 2016 were approximately $1.86 million, a decrease of $36,000, or 2%, from $1.89 million for the
six months ended June 30, 2015. The decrease was primarily due to savings in option expense of $547,000 and depreciation and amortization
of $11,000, offset by increases in professional fees of $265,000, increases in travel of $96,000, investments in human resources
of $76,000, office related costs of $60,000 and research and development costs of $21,000.
Other expense
Total other expense decreased to approximately
$114,000 for six months ended June 30, 2016 from $207,000 for the same period in 2015, as a result of $93,000 in savings in interest
expense.
Net Loss
We incurred a net loss of $2.8 million
during six months ended June 30, 2016, as compared to a net loss of $381,877 during the six months ended June 30, 2015.
Year ended December
31, 2015 compared to year ended December 31, 2014
Revenue
For the year ended December 31, 2015, revenue
was approximately $17.2 million, an increase of $2.6 million or 18% from $14.6 million in revenue for year ending December 31,
2014. The revenue growth of 18% from 2014 to the 2015 was mainly associated with blended growth rates of 13% growth in international
revenue growth and 22% growth in domestic sales. The domestic sales growth of 22% was mainly associated from blended growth rates
of 18% in retail accounts, 21% in health and fitness accounts and 46% in Internet retailer accounts from 2014. The increase
in revenue from 2014 to 2015 was primarily attributable to an increase in sales volume, as opposed to increases in product pricing.
The following table sets forth the amount
of revenues by category and changes therein for the six months ended June 30. 2016 and 2015:
|
|
Year
Ending December 31,
|
|
Revenue Source
|
|
2015
|
|
|
2014
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
17,217,944
|
|
|
$
|
14,610,090
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Revenue
|
|
$
|
8,442,971
|
|
|
$
|
7,439,129
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Revenue
|
|
$
|
8,774,973
|
|
|
$
|
7,170,961
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail accounts
|
|
$
|
5,879,104
|
|
|
$
|
4,970,602
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Fitness accounts
|
|
$
|
1,550,821
|
|
|
$
|
1,277,673
|
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet Retailer accounts
|
|
$
|
1,345,048
|
|
|
$
|
922,686
|
|
|
|
46
|
%
|
Gross profit
For the year ended December 31, 2015,
gross profit increased by approximately $1.44 million or 25.8% to $7.04 million compared to $5.60 million for 2014. Gross profit
margins improved 2.6% to 40.9% in the fiscal year ended December 31, 2015 from 2014. The increases in gross profit and the improvement
in gross profit margins from 2014 to 2015 are primarily attributable to the increases in revenue and a reduction in the cost of
raw materials.
Sales and marketing expenses
Sales and marketing expenses for the year
ended December 31, 2015 were approximately $5.70 million, an increase of $880,000, or 18.2% from $4.82 million in 2014. The increase
is due primarily to increases in investments in marketing programs of $596,000, increases in human resource investments of $239,000
and increases in warehousing costs totaling $44,000.
General and administrative expenses
General and administrative expenses for
the year ended December 31, 2015 were approximately $3.17 million, an increase of $860,000, or 37.3%, from $2.31 million for the
year ended December 31, 2014. The increase was primarily due to increases in stock based compensation of $582,000, professional
fees of $129,000, research and development costs of $46,000, office related costs of $47,000, commercial insurance of $19,000,
investor relations of $17,000, human resources of $13,000, and other general administration expenses of $12,000, offset by savings
in depreciation and amortization of $4,000.
Other expense
Total other expense decreased to approximately
$322,000 for year ended December 31, 2015 from $497,000 for the same period in 2014, as a result of $175,000 in savings in interest
expense.
Net Loss
As a result of the all above, for the
year ended December 31, 2015, Celsius had a net loss of $2,149,804, and after giving effect to preferred stock dividends of $420,493,
a net loss of $2,570,297 or $0.07 per share based on a weighted average of 33,175,826 shares outstanding. In comparison, for the
year ended December 31, 2014 we had a net loss of $2,027,136, and after giving effect to preferred stock dividends of $133,836,
a net loss of $2,160,972 or $0.10 per share based on a weighted average of 20,392,594 shares outstanding.
Liquidity and Capital Resources
As of June 30, 2016, we had cash of approximately
$7.3 million and working capital of $11.4 million. Cash used in operations during the six months ended June 30, 2016 totaled $2.8
million, reflecting capital investments in sales and marketing programs and human resources initiatives.
In addition to cash flow from operations,
our primary sources of working capital have been private placements of our securities and our credit facility with CD Financial,
LLC (“
CD Financial
”), an affiliate of Carl DeSantis, a principal shareholder of the Company.
As more fully described in “
Item
10. Recent Sales of Unregistered Securities
,” in April 2015, the Company issued a total of 12,921,348 shares of common
stock at $0.89 per share to an investor group in a private transaction for gross proceeds of $11.5 million.
We originally entered into a loan and
security agreement with CD Financial in July 2010, which provided us with a line of credit to fund operations. As amended in connection
with the April 2015 private investment and related transactions described in “
Item 10. Recent Sales of Unregistered Securities
,”
the loan and security agreement provides Celsius with a revolving line of credit pursuant to which Celsius can borrow up to an
aggregate maximum of $4.5 million from time to time until maturity in January 2020. The credit facility requires quarterly cash
payments of interest only at the rate of five percent (5%) per annum until maturity and is secured by a pledge of substantially
all the Company’s assets. As of June 30, 2016, the principal amount outstanding under the credit facility with CD Financial
was $4.5 million.
Our current operating plan for next twelve
(12) months plans on a sufficient financial condition and we do not contemplate obtaining additional financing. However, if our
sales volumes do not meet our projections, expenses exceed our expectations, or our plans change, we may be unable to generate
enough cash flow from operations to cover our working capital requirements. In such case, we may be required to adjust our business
plan, by reducing marketing and other expenses or seek additional financing. There can be no assurance that such financing, if
required, will be available on commercially reasonable terms if at all.
Off Balance Sheet Arrangements
As of June 30, 2016 and December 31, 2015, we had no off-balance
sheet arrangements.
At present, we do not own any real property. We
currently lease our principal executive offices located at 2424 N Federal Highway, Boca Raton, Florida 33431. Our premises are
leased for a monthly cost of $$6,408. The current lease expires on October 2020. The Company has no warehouses or other facilities
as we store our product at third party contract warehouse facilities.
Item 4.
|
Security Ownership of Certain
Beneficial Owners and Management
|
The following table
sets forth, as of the date of this registration statement, the beneficial ownership of our common stock by each executive officer
and director, by each person known by us to beneficially own 5% or more of our common stock and by executive officers and directors
as a group. The address of the each of the executive officers and directors set forth in the table is c/o the Company,
2424 North Federal Highway, Suite 208, Boca Raton, Florida 33431.
|
|
Number of
|
|
|
|
|
Names and addresses of
|
|
Shares
|
|
|
|
|
beneficial owners
|
|
of common stock
(1)
|
|
|
Percentage of class
(%)
|
|
|
|
|
|
|
|
|
Gerry David
|
|
|
716,667
|
(2)
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
John Fieldly
|
|
|
370,833
|
(2)
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
Nicholas Castaldo
|
|
|
161,111
|
(2)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Hal Kravitz
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Kevin Harrington
|
|
|
161,111
|
(2)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Christopher Lai
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Tim Leissner
|
|
|
3,539,826
|
|
|
|
9.2
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Lynch
|
|
|
163,111
|
(2)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
William H. Milmoe
|
|
|
19,842,434
|
(3)
|
|
|
51.7
|
|
|
|
|
|
|
|
|
|
|
all officers and directors as a group (nine (9) persons)
|
|
|
24,955,093
|
(4)
|
|
|
65.0
|
|
|
|
|
|
|
|
|
|
|
Other 5% or greater shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl De Santis
|
|
|
19,678,823
|
(5)
|
|
|
51.3
|
|
3161 Jasmine Drive
Delray Beach, Florida 33483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Li Ka Shing
|
|
|
6,910,113
|
(6)
|
|
|
18.0
|
|
7/F Cheung Kong Center
2 Queen’s Road Central
Hong Kong
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solina Chau Hoi Shuen
|
|
|
4,842,697
|
(7)
|
|
|
12.5
|
|
House 4
2 Island Road,
Hong Kong.
|
|
|
|
|
|
|
|
|
* Less
than 1%
The persons named above have full voting
and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons)
is deemed to be a “
beneficial owner
” of a security if he or she, directly or indirectly, has or shares the
power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly,
more than one person may be deemed to be a beneficial owner of the same security.
(1) Includes
shares of our common stock that are issuable upon exercise of stock options or conversion of preferred stock as of the date of
this registration statement or within sixty (60) days thereafter.
(2) Represents
shares of common stock issuable upon the exercise of stock options.
(3) Represents
(a) 500 shares of common stock held of record by Mr. Milmoe; (b) 163,111 shares of common stock issuable upon exercise of stock
options; (c) 8,554,289 shares of common stock held of record by CDS Ventures, LLC (“
CDS Ventures
”); (d) 4,576,923
shares of common stock issuable upon conversion of Preferred C Shares held of record by CDS Ventures; (e)1,896,448 shares of common
stock held of record by CD Financial, LLC (“
CD Financial
”); and (f) 4,651,163 shares of common stock issuable
upon conversion of Preferred D Shares held of record by CD Financial. Mr. Milmoe and Carl DeSantis share voting power with respect
to shares of common stock beneficially owned by CDS Ventures and CD Financial. Mr. Milmoe does not have dispositive power with
respect to such shares.
(4) Includes
(a) the shares of common stock issuable upon the exercise of stock options held and the conversion of preferred stock beneficially
owned by Mr. Milmoe as set forth in footnote (3) above; and (b) 1,735,944 shares of common stock issuable upon the exercise of
stock options held by the Company’s other officers and directors.
(5) Represents
(a) 8,554,289 shares of common stock held of record by CDS Ventures; (b) 4,576,923 shares of common stock issuable upon conversion
of Preferred C Shares held of record by CDS Ventures; (c) 1,896,448 shares of common stock held of record by CD Financial; and
(d) 4,651,163 shares of common stock issuable upon conversion of Preferred D Shares held of record by CD Financial. Voting power
of shares of common stock beneficially owned by CDS Ventures and CD Financial is shared by Mr. DeSantis and William H. Milmoe.
Mr. De Santis has sole dispositive power with respect to such shares
(6) Represents
shares of common stock held of record by Charmnew Limited, over which shares Mr. Li has voting and dispositive power.
(7) Represents
shares of common stock held of record by Grieg International Limited and Oscar Time Limited, over which shares Ms. Chau has
voting and dispositive power
Item
5.
|
Directors
and Executive Officers
|
The following sets forth the name of each
of our officers and, directors and control persons and their positions with Celsius. The address for each of such individuals
is c/o Celsius, 2424 N Federal Highway, Boca Raton, Florida 33431.
Name
|
|
Age
|
|
Position with
the Company
|
|
|
|
|
|
Gerry David
|
|
64
|
|
Chief Executive Officer
|
|
|
|
|
|
John Fieldly
|
|
36
|
|
Chief Financial Officer
|
|
|
|
|
|
Nicholas Castaldo
|
|
65
|
|
Director
|
|
|
|
|
|
Hal Kravitz
|
|
59
|
|
Director
|
|
|
|
|
|
Kevin Harrington
|
|
60
|
|
Director
|
|
|
|
|
|
Chris Lai
|
|
29
|
|
Director
|
|
|
|
|
|
Tim Leissner
|
|
47
|
|
Director
|
|
|
|
|
|
Thomas E. Lynch
|
|
69
|
|
Director
|
|
|
|
|
|
William H. Milmoe
|
|
68
|
|
Director
|
Gerry David
joined Celsius in October
2011 as its Chief Executive Officer and has served in that position since that time. Prior to joining the Company, Mr. David served
as Executive Vice President of Oragenics, Inc., a publicly held pharmaceutical development company based in Tampa, Florida, from
September 2008 until October 2011.
John Fieldly
joined Celsius
in January 2012 as its Chief Financial Officer and has served in that position since that time. Mr. Fieldly joined the Company
from Oragenics, Inc., where he served as corporate controller from April 2010 until January 2012.
Nicholas
Castaldo
became a director of Celsius in March 2013. Since September 2004 he has served as Senior Vice President and Chief
Marketing Officer of Anthony’s Coal Fired Pizza, Inc., a Florida based chain of casual dining restaurants.
Hal Kravitz
became a director of
Celsius in April 2016. Since November 2014, Mr. Kravitz has served as Chief Executive Officer of AQUAhydrate, Inc., a company
engaged in the manufacture, distribution and marketing of bottled water. He also served as a consultant to AQUAhydrate from August
to November 2014 and in 2013, Mr. Kravitz helped form InterContinental Beverage Capital, a New York-based merchant bank focused
on investments in the beverage industry. For over thirty (30) years prior thereto, Mr. Kravitz served as an executive officer
and in other management positions in various units of the Coca-Cola system
Kevin Harrington
joined Celsius’
board of directors in March 2013. He has almost forty (40) years experience in product introduction and direct marketing, being
one of the first to market products through infomercials. Since 2005, he has been Chief Executive Officer of Harrington Business
Development, Inc., a privately-held consulting firm. A serial entrepreneur, Mr. Harrington appeared as one of the original panelists
on the ABC television program, “
Shark Tank
.” He currently also serves as Chairman of the Board of As Seen On
TV, Inc., a public company which focuses on marketing products through infomercials and other direct marketing.
Chris Lai
joined our board of directors
in April 2015. Since September 2012, he has served as a Project Manager for Horizon Ventures, Limited (“
Horizon Ventures
”),
a Hong Kong based private investment fund. From April 2011 to September 2012, Mr. Lai was an analyst with Mooreland Partners,
LLC, another private investment concern. Mr. Lai serves on the Board as one of two designees of an investor group led by Horizon
Ventures (the “
Investors
”), pursuant to an Investors’ Rights Agreement entered into in April 2015 (the
“
Investors’ Rights Agreement
”) by among the Company, the Investors, CD Financial and CDS Ventures, both
of which are affiliates of Carl De Santis, one of our principal shareholders. The terms of April 2015 investment by the Investors
and related transactions with CD Financial and CDS Ventures, as well as the terms of the Investors’ Rights Agreement and
other related agreements entered into in connection with those transactions are more fully set forth in
Item 10
of this
registration statement.
Tim Leissner
joined Celsius’
board of directors in April 2016 as the second designee of the Investors pursuant to the Investors’ Rights agreement. From
December 2002 to February 2016, Mr. Leissner was a partner at Goldman Sachs, Inc. Since that time, he has been acting a private
investor and business consultant. Mr. Leissner serves as a member of the board of directors of All Def Digital, Inc. (“
All
Def Digital
”).
Thomas E. Lynch
became a director
of the Company in November, 2009. For over forty (40) years, Mr. Lynch has served as President of the Plastridge Agency, Inc.,
a five-office insurance agency based in Delray Beach, Florida, which traces its origins to 1919. He also serves as a director
of First United Bancorp, Inc.
William H. Milmoe
has served as
a director of Celsius since August. 2008. Since June 2000, Mr. Milmoe has served as President of CDS International Holdings, Inc.,
a privately-held holding company based in Boca Raton, Florida, which oversees the business investments and holdings of Carl De
Santis, one of our principal shareholders.
Terms of Directors and Executive Officers
Our directors are appointed for a one-year
term to hold office until the next annual meeting of our shareholders and until their successors are appointed and qualified,
or until their removal, resignation, or death. Pursuant to the Investors’ Rights Agreement, the number of directors
is set at seven (7) and the Investors have the right to appoint two (2) designees to the board of directors. Officers of the Company
serve at the pleasure of the board of directors.
Family Relationships
There are no familial relationships among our officers and
directors.
Board Committees and Independence
Our board of directors has established
three standing committees, an audit committee, a compensation committee and a nominating and corporate governance committee. The
audit committee currently consists of Messrs. Lynch, Kravitz and Milmoe, the compensation committee currently consists of Messrs.
Lai, Castaldo and Harrington and the nominating and corporate governance committee currently consists of Messrs. Milmoe, Leissner
and Lai. Our board of directors has determined that each of our directors is “
independent
” within the meaning
of the applicable rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market.
In addition, we believe each of Messrs.
Lynch, Kravitz, and Milmoe qualifies an “
audit committee financial expert
” as the term is defined by the applicable
rules and regulations of the SEC and the Nasdaq Stock Market listing standards, based on their respective business professional
experience in the financial and accounting fields. At the time of the listing of our common stock on the Nasdaq Stock Market,
we will be required to certify to the Nasdaq Stock Market, that our audit committee has, and will continue to have, at least one
member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other
comparable experience or background that results in the individual’s financial sophistication.
Audit Committee
The audit committee assists our board
of directors in its oversight of the company’s accounting and financial reporting processes and the audits of the company’s
financial statements, including (i) the quality and integrity of the company’s financial statements, (ii) the company’s
compliance with legal and regulatory requirements, (iii) the independent auditors’ qualifications and independence and (iv)
the performance of our company’s internal audit functions and independent auditors, as well as other matters which may come
before it as directed by the board of directors. Further, the audit committee, to the extent it deems necessary or appropriate,
among its several other responsibilities, shall:
`
|
•
|
be responsible for the appointment, compensation,
retention, termination and oversight of the work of any independent auditor engaged for the purpose of preparing or issuing
an audit report or performing other audit, review or attest services for our company;
|
|
•
|
discuss the annual audited financial statements
and the quarterly unaudited financial statements with management and the independent auditor prior to their filing with the
Securities and Exchange Commission in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q;
|
|
•
|
review with the company’s financial management
on a period basis (a) issues regarding accounting principles and financial statement presentations, including any significant
changes in our company’s selection or application of accounting principles, and (b) the effect of any regulatory and
accounting initiatives, as well as off-balance sheet structures, on the financial statements of our company;
|
|
•
|
monitor our Company’s policies for compliance
with federal, state, local and foreign laws and regulations and our company’s policies on corporate conduct;
|
|
•
|
maintain open, continuing and direct communication
between the board of directors, the audit committee and our independent auditors; and
|
|
•
|
monitor our compliance with legal and regulatory
requirements and shall have the authority to initiate any special investigations of conflicts of interest, and compliance
with federal, state and local laws and regulations, including the Foreign Corrupt Practices Act, as may be warranted.
|
Mr. Lynch is the chairman of our audit
committee.
Compensation Committee
The compensation committee aids our board
of directors in meeting its responsibilities relating to the compensation of our company’s executive officers and to administer
all incentive compensation plans and equity-based plans of the company, including the plans under which company securities may
be acquired by directors, executive officers, employees and consultants. Further, the compensation committee, to the extent it
deems necessary or appropriate, among its several other responsibilities, shall:
|
•
|
review periodically our company’s philosophy
regarding executive compensation to (i) ensure the attraction and retention of corporate officers; (ii) ensure the motivation
of corporate officers to achieve our company’s business objectives, and (iii) align the interests of key management
with the long-term interests of our company’s shareholders;
|
|
•
|
review and approve corporate goals and objectives
relating to Chief Executive Officer compensation and other executive officers of Celsius;
|
|
•
|
make recommendations to the board of directors regarding
compensation for non-employee directors, and review periodically non-employee director compensation in relation to other comparable
companies and in light of such factors as the compensation committee may deem appropriate; and
|
|
•
|
review periodically reports from management regarding
funding our company’s pension, retirement, long-term disability and other management welfare and benefit plans.
|
Mr. Lai is the chairman of our compensation
committee.
Nominating and Corporate Governance
Committee
The nominating and corporate governance
committee recommends to the board of directors individuals qualified to serve as directors and on committees of the board of directors
to advise the board of directors with respect to the board of directors composition, procedures and committees to develop and
recommend to the board of directors a set of corporate governance principles applicable to the Company; and to oversee the evaluation
of the board of directors and Celsius’ management.
Further, the nominating and corporate
governance committee, to the extent it deems necessary or appropriate, among its several other responsibilities shall:
|
•
|
recommend to the board of directors and for approval
by a majority of independent directors for election by shareholders or appointment by the board of directors as the case may
be, pursuant to our bylaws and consistent with the board of director’s evidence for selecting new directors;
|
|
•
|
review the suitability for continued service as
a director of each member of the board of directors when his or her term expires or when he or she has a significant change
in status;
|
|
•
|
review annually the composition of the board of
directors and to review periodically the size of the board of directors;
|
|
•
|
make recommendations on the frequency and structure
of board of directors meetings or any other aspect of procedures of the board of directors;
|
|
•
|
make recommendations regarding the chairmanship
and composition of standing committees and monitor their functions;
|
|
•
|
review annually committee assignments and chairmanships;
|
|
•
|
recommend the establishment of special committees
as may be necessary or desirable from time to time; and
|
|
•
|
develop and review periodically corporate governance
procedures and consider any other corporate governance issue.
|
Messrs. Milmoe and Leissner are the co-chairman
of our nominating and corporate governance committee.
Code of Ethics
We have adopted a code of ethics that
applies to all of our executive officers, directors and employees. The code of ethics codifies the business and ethical principles
that govern all aspects of our business. This document will be made available in print, free of charge, to any shareholder requesting
a copy in writing from our Secretary at our executive offices in Boca Raton, Florida. A copy of our code of ethics is available
on our website at
www.celsius.com
.
Board of Directors Role in Risk Oversight
Members of the board of directors have
periodic meetings with management and the Company’s independent auditors to perform risk oversight with respect to the Company’s
internal control processes. The Company believes that the board’s role in risk oversight does not materially affect the
leadership structure of the Company
.
Item 6.
|
Executive Compensation
|
Summary Compensation Table
The following table sets forth certain
information concerning the compensation paid to our Chief Executive Officer, and Chief Financial Officer, who are our two executive
officers, during the years ended December 31, 2015 and 2014.
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Awards (#)
|
|
|
Other ($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerry David, CEO
|
|
|
2015
|
|
|
|
230,850
|
|
|
|
45,825
|
|
|
|
90,000
|
(1)
|
|
|
10,200
|
(2)
|
|
|
286,875
|
|
|
|
|
2014
|
|
|
|
225,000
|
|
|
|
56,025
|
|
|
|
100,000
|
(1)
|
|
|
20,400
|
(2)
|
|
|
301,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Fieldly, CFO
|
|
|
2015
|
|
|
|
169,290
|
|
|
|
31,230
|
|
|
|
90,000
|
(1)
|
|
|
3,150
|
(2)
|
|
|
203,670
|
|
|
|
|
2014
|
|
|
|
165,000
|
|
|
|
36,630
|
|
|
|
100,000
|
(1)
|
|
|
10,800
|
(2)
|
|
|
212,430
|
|
(1)
Represents
stock options granted under our 2006 Stock Incentive Plan to purchase 90,000 shares of common stock at an exercise price of $1.05
per share and stock options granted to purchase 100,000 shares of common stock at an exercise price of $0.34 per share. The options
vest in three annual installments commencing one year from the date of grant, subject to continued employment and expire ten (10)
years from the date of grant.
(2)
Represents
housing allowances.
In addition, Messrs. David and Fieldly
are entitled to participate in benefit plans maintained for employees of the Company generally.
Employment Agreements
Effective January 1, 2016, we entered
into one-year employment agreements with each of Gerry David and John Fieldly, our Chief Executive Officer and Chief Financial
Officer, respectively. The employment agreements provide for base annual salaries of $237,780 and $174,370 for Messrs. David and
Fieldly, respectively, eligibility for performance-based incentive bonuses, pursuant to such criteria as may be established by
our compensation committee, the grant of options to each executive officer to purchase 100,000 shares of our common stock and
certain automobile and housing allowances. The employment agreements also provide for (a)severance payments equal to (i) two months
salary in the event of termination upon death of the executive officer; and (ii) six months’ salary and continued benefits
for such period in the event of termination other than for “
cause
” (as defined therein); and (b) a “
golden
parachute
” payment in an amount equal to twice the executive officer’s then base salary in the event of termination
without “
cause
” following a “
change in control
” (as defined therein). The employment agreements
contain customary confidentiality and non-competition provisions.
Compensation of Directors Table
The following table summarizes all compensation
paid to our directors for the fiscal year ended December 31, 2015.
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified
|
|
|
|
|
|
|
|
|
|
or
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
All
|
|
|
|
|
|
|
Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
Other
|
|
|
|
|
|
|
Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
(#)
(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas Castaldo
|
|
|
12,000
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen M. Dwyer
(2)
|
|
|
12,000
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Harrington
|
|
|
12,000
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Lynch
|
|
|
12,000
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William H. Milmoe
|
|
|
12,000
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Leissner
|
|
|
9,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris Lai
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Represents options to purchase 40,000 shares of
common stock at an exercise price of $1.05 per share granted under the 2006 Plan.
|
|
(2)
|
Ms. Dwyer did not stand for reelection at the expiration
of her term in April 2016.
|
Narrative Disclosure to the Director
Compensation Table
Our non-employee directors will be compensated
with options to purchase common stock or awards of common stock as determined by the Compensation Committee. Non-employee directors
are also reimbursed for out-of-pocket costs incurred in connection with attending meetings.
Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth information
with respect to stock awards and grants of options to purchase our common stock outstanding to the named executive officers at
December 31, 2015.
|
|
Number of securities
underlying unexercised
|
|
|
Number of securities underlying
|
|
|
Weighted average
|
|
|
|
|
|
Options (#)
(1)
|
|
|
unexercised unearned options
|
|
|
option exercise price
|
|
|
Option expiration
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
(1)
|
|
|
($)
(1)
|
|
|
date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerry David CEO
|
|
|
716,667
|
|
|
|
73,333
|
|
|
|
73,333
|
|
|
$
|
0.35
|
|
|
2021-2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Fieldly CFO
|
|
|
370,833
|
|
|
|
69,167
|
|
|
|
69,167
|
|
|
$
|
0.44
|
|
|
2022-2025
|
|
(1)
|
Represents grants under our Amended 2006 Stock Incentive
Plan.
|
Amended 2006 Incentive Stock Plan
In January 2007, we adopted our 2006 Incentive
Stock Plan, which was amended in July 2009 (as amended, the “
2006 Plan
”). The 2006 Plan provided 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 Plan, stock appreciation rights, restricted stock awards, stock bonus awards, other stock-based awards, or any combination
of the foregoing. The 2006 Plan is administered by the compensation committee of the board of directors. Options to purchase 4,634,166
shares of common stock are outstanding under the 2006 Plan as of the date of this registration statement and awards covering up
to an additional 321,275 shares may be granted under the 2006 Plan prior to its expiration in January 2017.
2015 Incentive Stock Plan
Our 2015 Incentive Stock Plan (the “
2015
Plan
”), adopted in April 2015, provides for equity incentives to be granted to our employees, executive 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 2015 Plan, restricted stock awards, other
stock based awards, or any combination of the foregoing. The 2015 Plan is administered by the compensation committee of the board
of directors. 5,000,000 shares of our common stock are reserved for issuance pursuant to the exercise of awards under the 2015
Plan. The number of shares so reserved automatically adjusts upward on January 1 of each year, so that the number of shares covered
by the 2015 Plan is equal to 15% of our issued and outstanding common stock. Stock options to purchase an aggregate of 908,500
shares of our common stock are outstanding under the 2015 Plan as of the date of this registration statement.
Compensation Committee Interlocks and
Insider Participation
None.
Item 7.
|
Certain Relationships and
Related Transactions, and Director Independence
|
Lease of Executive Offices
The Company’s executive offices
located at 2424 N Federal Highway, Boca Raton, Florida 33431 are leased from a company affiliated with CD Financial. The lease
expires in October 2020 and provides for monthly rent of $6,408. We believe that the monthly rent is commensurate with other properties
available in the market.
Marketing and Advisory Services Agreement
with All Def Digital
In April 2015, the Company entered into
a strategic marketing and advisory services agreement (the “
Advisory Services Agreement
”) with All Def Digital.
Tim Leissner, a director of the Company is also a director of All Def Digital. The Company has paid All Def Digital $152,437 and
$237,959 for services rendered pursuant to the Advisory Services Agreement during the six months ended June 30, 2016 and the year
ended December 31, 2015, respectively.
April 2015 Transactions with CD Financial,
CDS Ventures and other Related Persons
See “
Item 10. Recent Sales of
Unregistered Securities
” with respect to the April 2015 investment by the Investors and related transactions with CD
Financial and CDS Ventures.
The following sets forth the name and approximate
dollar value of the investment made by each related person in connection with the April 2015 common stock purchase transactions
more fully described in
Item 10
:
Name
|
|
Investment
Amount
|
|
|
|
Li Ka Shing
|
|
$6,150,000 (invested through Charmnew Limited)
|
|
|
|
Solina Chau Hoi Shuen
|
|
$4,310,000 (invested through Grieg International Limited
and Oscar Time Limited)
|
|
|
|
Tim Leissner
|
|
$3,150,000 (invested through Nu Horizons Investment Group,
LLC)
|
Investors’ Rights Agreement
At closing of the April 2015 investment
and related transactions described in “
Item 10. Recent Sales of Unregistered Securities
,” Celsius, the Investors,
CDS Ventures and CD Financial entered into the Investors’ Rights Agreement, pursuant to which, among matters, our board
of directors was expanded to seven (7), two of whom shall be designated by the Investors, the shareholder parties were accorded
certain registration rights for their respective shares of our common stock or underlying shares of common stock, as the case
may be, under the Securities Act and the shareholder parties were granted certain participation rights as to future offerings
of securities by Celsius.
Pursuant to the Investor’s Rights
Agreement the following matters require investor director approval: (i) liquidation, dissolution or winding-up of the business
and affairs of the Company or effecting any change of control; (ii) amending the Articles of Incorporation or Bylaws of the Company
in a manner that adversely affects Investor rights; (iii) purchasing or redeeming, or paying or declaring any dividend or making
any distribution on, certain shares of capital stock of the Company; (iv) authorization or issuance of any debt security creating
indebtedness that would exceed $1,000,000; (v) changing the authorized number of members of the board of directors; (vi) entering
into or materially amending certain distribution or other commercialization agreements for the Company’s products; (vii)
making any loan or advance to, or owning any stock or other securities of, any subsidiary or other entity unless it is wholly
owned by the Company; (viii) making any loan or advance to any person, except advances in the ordinary course of business or under
the terms of an employee stock or option plan approved by the board of directors; (ix) guarantee, directly or indirectly, any
indebtedness except for indebtedness of the Company or any subsidiary; (x) certain transactions with any director, officer, or
employee of the Company or their associates; (xi) hiring, terminating, or certain changes to the compensation of the executive
officers; (xii) materially changing the principal business of the Company; (xiii) the sale, assignment, license, pledge, or encumbering
of material technology or intellectual property, other than licenses granted in the ordinary course of business; and (xiv) entering
into any corporate strategic relationship involving money or assets greater than $1,000,000.
In addition to CDS Ventures and CD Financial,
the following related persons are party to the Investors’ Rights Agreement: (i) Charmnew Limited (an affiliate of Li Ka
Shing); (ii) Grieg International Limited (an affiliate of Solina Chau Hoi Shuen); and (iii) Nu Horizons Investment Group, LLC
(an affiliate of Tim Leissner).
Loan and Security Agreement with CD
Financial
We originally entered into a loan and security
agreement with CD Financial in July 2010, which provided us with a line of credit to fund operations. The original line of credit
was up to $3,000,000 and it was subsequently increased to $9,800,000. The loan and security agreement was then amended in connection
with the April 2015 investment and related transactions described in “
Item 10. Recent Sales of Unregistered Securities
.”
Pursuant to the amendment,
contemporaneously with the closing of the April 2015 investment transactions, the Company repaid $300,000 to CD Financial
and converted $4,000,000 of the outstanding principal balance of the line of credit into shares of Series D Convertible
Preferred Stock. As amended, the loan and security agreement now provides Celsius with a revolving line of credit pursuant to
which Celsius can borrow up to an aggregate maximum of $4.5 million from time to time until maturity in January 2020. The
credit facility requires quarterly cash payments of interest only at the rate of five percent (5%) of the outstanding balance
per annum until maturity and is secured by a pledge of substantially all the Company’s assets. As of June 30, 2016, the
principal amount outstanding under the credit facility with CD Financial was $4.5 million. Cash interest payments to CD
Financial pursuant to the credit facility were $113,750 and $220,042 during the six months ended June 30, 2016 and the year
ended December 31, 2016, respectively. Cash interest payments to CD Financial pursuant to the credit facility were $257,851
and $403,888 during the years ended December 31, 2013 and December 31, 2014, respectively.
Approval of Related Party Transactions
All related party transactions are subject
to the review, approval or ratification of our board of directors or an appropriate committee thereof.
Item 8.
|
Legal Proceedings
|
From time to time, we may become party
to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not
currently involved in any legal proceedings that could reasonably be expected to have a material adverse effect on our business,
prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
Item 9.
|
Market Price of and Dividends
on the Registrant’s Common Equity and Related Stockholder Matters
|
Since January 11, 2016, our common stock
has been on the OTCQX tier of the over-the-counter market maintained by OTC Markets Group, Inc., under the trading ticker “CELH.”
Prior thereto, our common stock was quoted on the OTCPink tier of the over-the counter market maintained by OTC Markets Group,
Inc. The trading price of our common stock has been volatile at times. Further, the stock market has from time to time experienced
extreme volatility that has often been unrelated to the operating performance of particular companies. These kinds of broad market
fluctuations may adversely affect the market price of our common stock. For additional information, see “
Item 1A. Risk
Factors
” above.
The following table sets forth the quarterly
high and low sale prices of our common stock for the two most recent fiscal years, as reported on the OTC Markets Group, Inc.
quotation system:
|
|
High Sale
|
|
|
Low Sale
|
|
Fiscal Quarters
|
|
Price
|
|
|
Price
|
|
2016
|
|
|
|
|
|
|
Second Quarter 2016
|
|
$
|
2.54
|
|
|
$
|
2.13
|
|
First Quarter 2016
|
|
$
|
2.40
|
|
|
$
|
1.56
|
|
2015
|
|
|
|
|
|
|
|
|
Fourth Quarter 2015
|
|
$
|
2.48
|
|
|
$
|
1.49
|
|
Third Quarter 2015
|
|
$
|
2.83
|
|
|
$
|
1.71
|
|
Second Quarter 2015
|
|
$
|
3.55
|
|
|
$
|
1.25
|
|
First Quarter 2015
|
|
$
|
1.25
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
Fourth Quarter 2014
|
|
$
|
0.61
|
|
|
$
|
0.35
|
|
Third Quarter 2014
|
|
$
|
0.77
|
|
|
$
|
0.44
|
|
Second Quarter 2014
|
|
$
|
0.94
|
|
|
$
|
0.51
|
|
First Quarter 2014
|
|
$
|
1.20
|
|
|
$
|
0.33
|
|
Holders
As of August 22, 2016, there were 52 holders
of record of our common stock and in excess of 5,000 beneficial owners of our common stock.
Dividends
We have never declared or paid cash dividends
on our common stock. We anticipate that in the future we will retain any earnings for operation of our business. Accordingly,
we do not anticipate declaring or paying any cash dividends in the foreseeable future.
Options, Warrants and Convertible Securities
As of the date of this report, there were:
·
4,412,775
shares of our common stock reserved for issuance upon exercise of outstanding options granted under the 2006 Plan and the 2015
Plan; and
·
9,228,086
shares of our common stock reserved for issuance upon conversion of our outstanding convertible preferred stock.
Securities Authorized for Issuance
under Equity Compensation Plans
Plan category
|
|
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining
available for
future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
5,542,666 shares
|
(1)
|
|
$
|
1.00
|
|
4,412,775 shares
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation plans not approved by security holders
|
|
0 shares
|
|
|
|
n/a
|
|
0 shares
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
5,542,666 shares
|
(1)
|
|
|
None issued
|
|
4,412,775 shares
|
(1)
|
(1)
|
Represents shares of common stock reserved for issuance under the 2005
Plan and the 2015 Plan.
|
Item 10.
|
Recent Sales of Unregistered
Securities
|
April 2015 Transactions:
|
·
|
On April 20, 2015, the Company entered into a common
stock purchase agreement (the “
2015 Purchase Agreement
”) with the Investors, pursuant to which the Company
sold 12,921,348 shares of its common stock on a private placement basis (the “
Private Placement
Shares
”)
to the Investors for an aggregate consideration of $11,388,159, net of expenses. Certain of the Investors contemporaneously
acquired an additional 5,000,000 shares of our common stock (the “
Conversion Shares
”) by purchasing an
outstanding $1.5 million convertible note held by CDS Ventures (the “
CDS Note
”) and immediately converting
the CDS Note into the Conversion Shares. In connection with the issuance of the Private Placement Shares and the Conversion
Shares, Celsius relied upon the exemptions from registration afforded by Sections 4(a)(2) and 3(a)(9) of the Securities Act,
respectively. The Private Placement Shares and the Conversion Shares are “
restricted
securities
”
of the Company. The certificates evidencing the Private Placement Shares and the Conversion Shares bear a legend (a) stating
that the shares have not been registered under the Securities Act and applicable state securities laws; and (b) setting forth
and referring to the restrictions on transferability and sale of the shares under the Securities Act and applicable state
securities laws.
|
|
·
|
We currently have shares of Series C Preferred Stock
(the “
Preferred C Shares
”) and shares of Series D Preferred Stock (the “
Preferred D Shares
”)
outstanding. On April 16, 2015, contemporaneously with the transactions with the Investors, the Company entered into an amendment
to its existing loan and security agreement (the “
Amendment
”) with CD Financial. Pursuant to the Amendment,
the outstanding principal amount of the line of credit with CD Financial was reduced by $4.0 million, which amount was converted
into 4,000 Preferred D Shares. Contemporaneously with the issuance of the Preferred D Shares, $180,000 of accrued but unpaid
dividends on outstanding Preferred C Shares was paid through the issuance of an additional 180 Preferred C Shares (the “
Additional
Preferred C Shares
”). In connection with the issuance of the Preferred D Shares and the Additional Preferred C Shares,
Celsius relied upon the exemption from afforded by Section 4(a)(2) of the Securities Act. The Preferred D Shares and the Additional
Preferred C Shares issued by Celsius are “
restricted securities
” of the Company. The certificates evidencing
the Preferred D Shares and the Additional Preferred C Shares issued by Celsius bear a legend (i) stating that the shares have
not been registered under the Securities Act and applicable state securities laws, and (ii) setting forth and referring to
the restrictions on transferability and sale of the shares under the Securities Act and applicable state securities laws.
|
|
·
|
At closing of the April 20, 2015 transactions, Celsius,
the Investors, CDS Ventures and CD Financial into the Investors’ Rights Agreement, pursuant to which, among matters,
our board of directors was expanded to seven (7), two of whom shall be designated by the Investors, the shareholder parties
were accorded certain registration rights for their respective shares of our common stock or underlying shares of common stock,
as the case may be, under the Securities Act and the shareholder parties were granted certain participation rights as to future
offerings of securities by Celsius. In order to effect the transactions, Celsius’ Amended and Restated Articles of Incorporation
were amended as authorized by our board of directors, which amendment increased required), to increase the number of authorized
shares of the which amendment increased the number of authorized shares of common stock from 50,000,000 to 75,000,000, increased
the number of authorized Preferred C Shares from 2,200 to 3,000 and designated the newly created Preferred D Shares.
|
Other Issuances of Common Stock
During 2014, the Company
issued a total of 280,000 “
restricted
” shares of its common stock as compensation pursuant to celebrity endorsement
agreements at an aggregate fair value of $216,100, 250,000 shares were issued at $0.79 per share on March 11, 2014 and 30,000
shares were issued at $0.62 per share on August 13, 2014 with each per share valuation representing the closing stock price on
the day of issuance.
On April 12, 2016,
the Company issued a total 250,000 “
restricted
” shares of its common stock as compensation pursuant to celebrity
endorsement agreements at a fair value of $560,000, or $2.24 per share representing, the closing stock price on that date.
Item 11.
|
Description of Registrant’s
Securities to be Registered
|
Capital Stock
Our authorized capital stock consists
of 75,000,000 shares of common stock, par value $0.001 per share and 2,500,000 shares of preferred stock, par value $0.001 per
share. Our shares of common stock are the securities covered by this registration statement.
Common Stock
As of the date of this report, we have
38,666,451 shares of our common stock issued and outstanding. All shares of our common stock that are presently issued and outstanding
are fully paid and non-assessable. Holders of our common stock are entitled to one vote for each share on all matters submitted
to a shareholder vote. Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares
of common stock, voting together with holders of our Preferred C Shares and Preferred D Shares as a single class, can elect all
of the directors. Holders of our capital stock representing a majority of the voting power of our capital stock entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any meeting of our shareholders. A vote by the holders
of a majority of our outstanding capital stock entitled to vote is required to effectuate certain fundamental corporate changes
such as liquidation, merger or an amendment to our Articles of Incorporation.
Holders of common stock are entitled to
share in all dividends that our board of directors, in its discretion, declares from legally available funds, subject to preferences
granted to shares of preferred stock. 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, including shares of preferred 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
General
Our board of directors has the authority,
without further action by the shareholders, to issue such shares of preferred stock in one or more series and to fix the rights,
preferences and the number of shares constituting any series or the designation of such series. While our Articles and bylaws
do not contain any provisions that may delay, defer or prevent a change in control, the issuance of preferred stock may have the
effect of delaying or preventing a change in control or make removal of our management more difficult. Additionally, the issuance
of preferred stock may have the effect of decreasing the market price of the common stock and may adversely affect the voting
and other rights of the holders of common stock. We currently have 3,000 shares of preferred stock designated as Preferred C Shares
designated, of which 2,380 Preferred C Shares are issued and outstanding and 4,000 shares of preferred stock designated as Preferred
D Shares, all of which are issued and outstanding.
Preferred C Shares
The Preferred C Shares are convertible
into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December
31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation
preference of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment
in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at
the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on
an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders
for a vote, except as required by law.
Preferred D
Shares
The Preferred D Shares are convertible
into our common stock at the option of the holder thereof at a conversion price of $0.86 per share until the earlier of the January
2, 2020 due date of our line of credit with CD Financial or such earlier date as the line of credit is satisfied (the “
Mandatory
Redemption Date
”). The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar
events. The Preferred D Shares accrue cumulative annual cash dividends at the rate of 5% per annum, payable quarterly in cash
and have a liquidation preference of $1,000 per share. On the Mandatory Redemption Date, the Preferred D Shares automatically
convert into shares of our common stock in a number determined by dividing the $1,000 per Preferred D Share liquidation preference
plus any accrued but unpaid dividends, by the conversion price then in effect. The Preferred D Shares may also be redeemed by
us at any time on or after December 31, 2016, at a redemption price equal to 104% of the liquidation preference. The holder of
the Preferred D Shares votes on an “as converted” basis, together with holders of common stock as a single class on
all matters presented to shareholders for a vote, except as required by law.
Item 12.
|
Indemnification of Directors
and Officers
|
Pursuant to our Articles of Incorporation
and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his
or her position, if he or she acted in good faith and in a manner he or she reasonably believed to be in our best interest.
In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director
is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him or her
against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only
for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only
by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Item 13.
|
Financial Statements and
Supplementary Data
|
The financial statements and supplementary
data listed in “
Item 15 Financials Statements and Exhibits
” are included with this registration statement.
Item 14.
|
Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure
|
None.
Item 15.
|
Financial Statements and
Exhibits
|
The following consolidated financial
statements of the Company are included herewith:
Report of Independent Registered Public Accounting Firm
|
|
|
|
Consolidated Balance Sheets as of December 31, 2015 and 2014
|
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014
|
|
|
|
Consolidated Statements of Changes
in Stockholders’ Equity (Deficit) for the years ended December 31, 2015 and 2014
|
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015
|
|
|
|
Consolidated Statements of Operations for the six months ended June 30, 2016 and 2015 (unaudited)
|
|
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (unaudited)
|
|
|
|
Notes to Consolidated Financial Statements (unaudited)
|
|
(b)
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Articles of Incorporation, as amended*
|
|
|
|
3.2
|
|
Bylaws, as amended*
|
|
|
|
10.1
|
|
Loan and Security Agreement with CD Financial, LLC, as amended*
|
|
|
|
10.2
|
|
Investors’ Rights Agreement dated April 20, 2015*
|
|
|
|
10.3
|
|
Amended 2006 Stock Incentive Plan*
+
|
|
|
|
10.4
|
|
2015 Stock Incentive Plan*
+
|
|
|
|
10.5
|
|
Code of Ethics*
|
|
|
|
10.6
|
|
Audit Committee Charter*
|
|
|
|
10.7
|
|
Compensation Committee Charter*
|
|
|
|
10.8
|
|
Nominating and Corporate Governance Committee Charter*
|
|
|
|
10.9
|
|
Employment Agreement with Gerry David*
+
|
|
|
|
10.10
|
|
Employment Agreement with John Fieldly*
+
|
|
|
|
10.11
|
|
Common Stock Purchase Agreement dated April 20, 2015**
|
|
|
|
10.12
|
|
Distribution Agreement with People’s Choice AB**
|
|
|
|
21.1
|
|
Subsidiaries of Registrant*
|
|
|
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm**
|
*Previously filed.
+
Management compensation plan or arrangement.
**Filed herewith.
SIGNATURES
Pursuant to the requirements of Section
12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: September 19, 2016
|
CELSIUS HOLDINGS,, INC.
|
|
|
|
|
By:
|
/s/ Gerry David
|
|
|
Gerry David, Chief Executive Officer
|
|
|
|
|
By:
|
/s/ John Fieldly
|
|
|
John Fieldly, Chief Financial Officer
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Celsius Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated
balance sheets of Celsius Holdings, Inc. and Subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements
of operations, changes in stockholders’ equity (deficit), and cash flows for each of the two years ended in the period December
31, 2015. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated 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.
Our audit included consideration of 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 consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement
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 consolidated financial position of Celsius Holdings,
Inc. and Subsidiaries as of December 31, 2015 and 2014 and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States
of America.
|
/s/ D’Arelli Pruzansky, P.A.
|
|
|
|
Certified Public Accountants
|
Coconut Creek, Florida
March 24, 2016
Celsius
Holdings, Inc. and Subsidiaries
Consolidated Balance
Sheets
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
10,128,320
|
|
|
$
|
349,072
|
|
Accounts receivable, net
|
|
|
2,127,060
|
|
|
|
2,612,191
|
|
Inventories, net
|
|
|
2,322,904
|
|
|
|
1,686,935
|
|
Prepaid expenses and other current assets
|
|
|
666,267
|
|
|
|
259,056
|
|
Total current assets
|
|
|
15,244,551
|
|
|
|
4,907,254
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
21,319
|
|
|
|
43,950
|
|
Total Assets
|
|
$
|
15,265,870
|
|
|
$
|
4,951,204
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1,805,931
|
|
|
$
|
828,049
|
|
Accrued preferred dividend
|
|
|
190,847
|
|
|
|
180,403
|
|
Deferred revenue and other current liabilities
|
|
|
25,057
|
|
|
|
356,602
|
|
Total current liabilities
|
|
|
2,021,835
|
|
|
|
1,365,054
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Convertible note payable - related party
|
|
|
-
|
|
|
|
1,500,000
|
|
Line of credit note payable-related party
|
|
|
4,500,000
|
|
|
|
9,250,000
|
|
Total Liabilities
|
|
|
6,521,835
|
|
|
|
12,115,054
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 6,380 and 2,200 shares issued
and outstanding at December 31, 2015 and December 31, 2014, respectively
|
|
|
6
|
|
|
|
2
|
|
Common stock, $0.001 par value; 75,000,000 shares authorized, 38,380,380 and 20,459,032 shares
issued and outstanding at December 31, 2015 and December 31, 2014, respectively
|
|
|
38,380
|
|
|
|
20,459
|
|
Additional paid-in capital
|
|
|
58,626,212
|
|
|
|
40,165,955
|
|
Accumulated deficit
|
|
|
(49,920,563
|
)
|
|
|
(47,350,266
|
)
|
Total Stockholders’ Equity (Deficit)
|
|
|
8,744,035
|
|
|
|
(7,163,850
|
)
|
Total Liabilities and Stockholders’ Equity
(Deficit)
|
|
$
|
15,265,870
|
|
|
$
|
4,951,204
|
|
The accompanying
notes are an integral part of these consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
Consolidated Statements
of Operations
|
|
For the year
|
|
|
|
ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
$
|
17,217,944
|
|
|
$
|
14,610,090
|
|
Cost of revenue
|
|
|
10,177,986
|
|
|
|
9,011,923
|
|
Gross profit
|
|
|
7,039,958
|
|
|
|
5,598,167
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
5,701,845
|
|
|
|
4,823,014
|
|
General and administrative expenses
|
|
|
3,165,573
|
|
|
|
2,305,086
|
|
Total operating expense
|
|
|
8,867,418
|
|
|
|
7,128,100
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,827,460
|
)
|
|
|
(1,529,933
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(322,344
|
)
|
|
|
(497,203
|
)
|
Total Other Income (Expense)
|
|
|
(322,344
|
)
|
|
|
(497,203
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(2,149,804
|
)
|
|
|
(2,027,136
|
)
|
Preferred stock dividend - beneficial conversion feature
|
|
|
(139,535
|
)
|
|
|
|
|
Preferred stock dividend - other
|
|
|
(280,958
|
)
|
|
|
(133,836
|
)
|
Net Loss available to common stockholders
|
|
$
|
(2,570,297
|
)
|
|
$
|
(2,160,972
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
33,175,826
|
|
|
|
20,392,594
|
|
Loss per share, basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.10
|
)
|
The accompanying
notes are an integral part of these consolidated financial statements
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
For the Years
Ended December 31, 2015 and 2014
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
2,200
|
|
|
$
|
2
|
|
|
|
20,179,032
|
|
|
$
|
20,179
|
|
|
$
|
39,263,208
|
|
|
|
(45,189,294
|
)
|
|
$
|
(5,905,905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange of service
|
|
|
|
|
|
|
|
|
|
|
280,000
|
|
|
|
280
|
|
|
|
215,820
|
|
|
|
|
|
|
|
216,100
|
|
Stock option expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
686,927
|
|
|
|
|
|
|
|
686,927
|
|
Preferred stock dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(133,836
|
)
|
|
|
(133,836
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,027,136
|
)
|
|
|
(2,027,136
|
)
|
Balance at December 31, 2014
|
|
|
2,200
|
|
|
|
2
|
|
|
|
20,459,032
|
|
|
|
20,459
|
|
|
|
40,165,955
|
|
|
|
(47,350,266
|
)
|
|
|
(7,163,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock in exchange of note
|
|
|
4,000
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
3,999,996
|
|
|
|
|
|
|
|
4,000,000
|
|
Issuance of preferred stock in exchange of accrued dividend
|
|
|
180
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
180,000
|
|
|
|
|
|
|
|
180,000
|
|
Issuance of common stock upon conversion of convertible note
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
|
|
5,000
|
|
|
|
1,495,000
|
|
|
|
|
|
|
|
1,500,000
|
|
Issuance of common stock pursuant to private placement
|
|
|
|
|
|
|
|
|
|
|
12,921,348
|
|
|
|
12,921
|
|
|
|
11,375,238
|
|
|
|
|
|
|
|
11,388,159
|
|
Stock option expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,270,488
|
|
|
|
|
|
|
|
1,270,488
|
|
Preferred stock dividend - beneficial conversion feature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,535
|
|
|
|
(139,535
|
)
|
|
|
-
|
|
Preferred stock dividend - other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(280,958
|
)
|
|
|
(280,958
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,149,804
|
)
|
|
|
(2,149,804
|
)
|
Balance at December 31, 2015
|
|
|
6,380
|
|
|
$
|
6
|
|
|
|
38,380,380
|
|
|
$
|
38,380
|
|
|
$
|
58,626,212
|
|
|
|
(49,920,563
|
)
|
|
$
|
8,744,035
|
|
The accompanying
notes are an integral part of these consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
Consolidated Statements
of Cash Flows
|
|
For the year ended
|
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,149,804
|
)
|
|
$
|
(2,027,136
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
33,043
|
|
|
|
37,256
|
|
Stock-based compensation expense
|
|
|
1,270,488
|
|
|
|
903,027
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
485,131
|
|
|
|
(1,120,641
|
)
|
Inventory
|
|
|
(635,969
|
)
|
|
|
(865,664
|
)
|
Prepaid expenses and other current assets
|
|
|
(313,942
|
)
|
|
|
258,338
|
|
Accounts payable and accrued expenses
|
|
|
1,168,400
|
|
|
|
121,828
|
|
Accrued preferred dividends
|
|
|
(280,958
|
)
|
|
|
(133,836
|
)
|
Deposits/deferred revenue and other current liabilities
|
|
|
(331,544
|
)
|
|
|
(92,389
|
)
|
Net cash used in operating activities
|
|
|
(755,155
|
)
|
|
|
(2,919,217
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(10,412
|
)
|
|
|
(12,493
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(10,412
|
)
|
|
|
(12,493
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Borrowing under revolving note payable, related-party
|
|
|
450,000
|
|
|
|
3,150,000
|
|
Repayment on short term notes payable, related-party
|
|
|
(1,200,000
|
)
|
|
|
-
|
|
Net proceeds from sale of common stock
|
|
|
11,388,084
|
|
|
|
-
|
|
Payments on short term notes payable
|
|
|
(93,269
|
)
|
|
|
(91,124
|
)
|
Net cash provided by financing activities
|
|
|
10,544,815
|
|
|
|
3,058,876
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
9,779,248
|
|
|
|
127,166
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year
|
|
|
349,072
|
|
|
|
221,906
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
$
|
10,128,320
|
|
|
$
|
349,072
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Cash paid during period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
401,808
|
|
|
$
|
460,589
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Borrowing under short term
notes payable for prepaid expense
|
|
$
|
93,269
|
|
|
$
|
91,124
|
|
Accrued preferred dividends
|
|
$
|
280,958
|
|
|
$
|
133,836
|
|
Preferred stock issued in exchange
for cancellation of revolving note payable - related party
|
|
$
|
4,000,000
|
|
|
$
|
-
|
|
Conversion of convertible note
to common shares - related party
|
|
$
|
1,500,000
|
|
|
$
|
-
|
|
Conversion of accrued preferred
dividend into preferred shares - related party
|
|
$
|
180,000
|
|
|
$
|
-
|
|
The accompanying
notes are an integral part of these consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
Business
—Celsius Holdings, Inc. (the
“Company” or “Celsius Holdings”) was incorporated under the laws of the State of Nevada on April 26, 2005.
On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Elite FX, Inc., a Florida corporation.
Under the terms of the Merger Agreement, Elite FX, Inc. was merged into the Company’s subsidiary, Celsius, Inc. and became
a wholly-owned subsidiary of the Company on January 26, 2007. In addition, on March 28, 2007 the Company established Celsius Netshipments,
Inc. a Florida corporation as a wholly-owned subsidiary of the Company.
Since the merger, the Company is engaged in the
development, marketing, sale and distribution of “functional” calorie-burning fitness beverages under the Celsius®
brand name.
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Consolidation Policy
— The accompanying
consolidated financial statements include the accounts of Celsius Holdings, Inc. and its 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. Significant estimates include the allowance for doubtful accounts, reserves for inventory obsolescence, the useful
lives and values of property, fixtures and equipment, valuation of stock based compensation, and deferred tax asset valuation
allowance.
Segment Reporting
— Although the Company
has a number of operating divisions, separate segment data has not been presented, as they meet the criteria for aggregation as
permitted by ASC Topic 280, Segment Reporting, (formerly Statement of Financial Accounting Standards (SFAS) No. 131,
Disclosed
About Segments of an Enterprise and Related Information.)
Our chief operating decision-maker is considered
to be our Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes
of making operating decisions and assessing financial performance. The financial information reviewed by the CEO is identical
to the information presented in the accompanying consolidated statement of operations. Therefore, the Company has determined that
it operates in a single operating segment. For the years ended December 31, 2015 and 2014 all material assets and revenues of
the Company were in the United States except as disclosed in Note 2.
Concentrations of Risk
— Substantially
all of the Company’s revenue derives from the sale of Celsius ® beverages.
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 and accounts receivable. 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. At December 31, 2015 the Company had approximately $10.0 million in
excess of the Federal Deposit Insurance Corporation limit.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
At December 31, 2015 and 2014, the Company had the
following 10 percent or greater concentrations of revenue with its customers:
|
|
2015
|
|
|
2014
|
|
A*
|
|
|
48.3
|
%
|
|
|
49.8
|
%
|
B
|
|
|
9.1
|
%
|
|
|
10.0
|
%
|
All other
|
|
|
42.6
|
%
|
|
|
40.2
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
At December 31, 2015 and 2014, the Company had the
following 10 percent or greater concentrations of accounts receivable with its customers:
|
|
2015
|
|
|
2014
|
|
A*
|
|
|
50.0
|
%
|
|
|
68.0
|
%
|
B
|
|
|
11.8
|
%
|
|
|
8.5
|
%
|
All other
|
|
|
38.2
|
%
|
|
|
23.5
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
*Revenues and receivables from customer A are derived
from a distributor located in Sweden.
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, 2015
and December 31, 2014, the Company did not have any investments with maturities of three months or less.
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, 2015 and December 31, 2014, there was an allowance for doubtful
accounts of $3,500 and $3,500, respectively.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
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 reserved against inventory during the period in which such materials and products
are no longer usable or marketable. In 2015 and 2014, the Company recorded a reserve of $329,075 and $30,059, respectively. The
changes in reserve are included in cost of revenue. Free Samples are recorded as cost of sales.
Property and Equipment
— Property and
equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property 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
— In
accordance with ASC Topic 360, “Property, Plant, and Equipment” the Company reviews the carrying value of intangibles
and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying
amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds
its fair value.
Revenue Recognition
— Revenue is derived
from the sale of beverages. Revenue is recognized when persuasive evidence of an agreement exists, the products are delivered,
sales price is fixed or determinable, and collectability is reasonably assured. Any discounts, slotting fees, sales incentives
or similar arrangements with the customer are estimated at time of sale and deducted from revenue.
Deferred Revenue
— From time to time
the Company requires prepayments for deposits in advance of delivery of products and/or production runs. Such amounts are initially
recorded as deferred revenue. The Company recognizes such revenue as it is earned in accordance with revenue recognition policies.
Advertising Costs
— Advertising costs
are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising.
The Company incurred advertising expense of approximately $3.2 million and $2.2 million, during year ending December 31, 2015
and 2014, 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 beverages. The Company incurred expenses of $71,166 and $25,510 during year ending December 31, 2015 and 2014,
respectively.
Fair Value of Financial Instruments
—
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable approximates
fair value due to their relative short-term maturity and market interest rates.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Fair Value Measurements
- ASC 820 defines
fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1:
|
Observable inputs such as quoted market prices in active markets for
identical assets or liabilities.
|
|
|
Level 2:
|
Observable market-based inputs or unobservable inputs that are corroborated by market data.
|
|
|
Level 3:
|
Unobservable inputs for which there is little or no market data, which require the use of
the reporting entity’s own assumptions.
|
The Company did not have any assets or liabilities
measured at fair value at December 31, 2015 and December 31, 2014.
Income Taxes —
The Company accounts
for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other
things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for
which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the
provisions of the ASC 740 -10 related to,
Accounting for Uncertain Income Tax Positions.
When tax returns are filed, it
is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance
with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon
examination, including the resolution of appeals or litigation processes, if any.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Income Taxes (continued) —
Tax positions
taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold
are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the
applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with
any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its
tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain
tax benefits.
The Company has adopted ASC 740-10-25
Definition
of Settlement,
which provides guidance on how an entity should determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon
the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.
The Company files its tax returns on a fiscal year
September 30
th
tax year. The Company’s tax returns for tax years ended September 30, 2015 (although not yet filed),
2014, 2013, and 2012 remain subject to potential examination by the taxing authorities.
Earnings per Share
— Basic earnings
per share are calculated by dividing net income (loss) 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 convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of December
31, 2015 there were options outstanding to purchase 4.6 million shares, which exercise price averaged $0.80, Series C Preferred
Stock warrants outstanding to convert to 4.6 million common shares at $0.52 price per share and Series D Preferred Stock warrants
outstanding to convert to 4.7 million common shares at $0.86 price per share. There were no other dilutive common shares equivalents,
including convertible notes and warrants, as no common share equivalents had an exercise price below the ending closing price
of the year. The effects of dilutive instruments have not been presented as the effects would be anti-dilutive.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Share-Based Payments
—Effective January
1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and
related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments.
Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company
adopted the 2015 Stock Incentive Plan, 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. The 2015 Plan permits the grant of options and shares for up to 5,000,000
shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares
to be added on the first day of each calendar year, beginning on January 1, 2016.
Shipping and Handling Costs
— Shipping
and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for year
ended December 31, 2015 and 2014 was $1,161,088 and 1,007,054, respectively.
Recent Accounting Pronouncements
The Company adopts all applicable,
new accounting pronouncements as of the specified effective dates.
In September 2015, the Financial
Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-16,
Simplifying
the Accounting for Measurement-Period Adjustments
(“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments
made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional
amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined,
(ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if
any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition
date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that
would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of
the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015.
Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2015-16 on January 1, 2016 to its consolidated
financial position or results of operations.
In April 2015, the FASB issued
ASU No. 2015-03,
Simplifying the Presentation of Debt Issuance Costs
(“ASU 2015-03”). ASU 2015-03 simplifies
the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount of that debt liability (consistent with debt discounts).
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Recent Accounting Pronouncements (continued)
In August 2015, the FASB issued
ASU No. 2015-15,
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
(Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting)
(“ASU 2015-15”). ASU
2015-15 allows debt issuance costs related to line-of-credit agreements to be presented in the balance sheet as an asset. ASU
2015-03 and ASU 2015-15 are effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption
is permitted. The Company plans to early adopt ASU 2015-03 and ASU 2015-15 as of December 31, 2015; the adoption is not expected
to have a material impact on its consolidated financial position or results of operations.
All new accounting pronouncements issued but not
yet effective are not expected to have a material impact on our results of operations, cash flows or financial position.
Liquidity
— These financial statements
have been prepared assuming the Company will be able to continue as a going concern. At December 31, 2015, the Company had an
accumulated deficit of $49,920,563 which includes a net loss available to common stockholders of $2,570,297 for year ended December
31, 2015. While these factors alone may raise doubt as to the Company’s ability to continue as a going concern, the Company’s
sale of common stock to an investor group on April 20, 2015 for a total of $11.5 million is deemed sufficient to alleviate substantial
doubt regarding the Company’s ability to continue as a going concern.
Inventories consist of the following at:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Finished goods
|
|
$
|
2,309,288
|
|
|
$
|
1,570,201
|
|
Raw Materials
|
|
|
342,691
|
|
|
|
146,793
|
|
Less: Inventory Reserve
|
|
|
(329,075
|
)
|
|
|
(30,059
|
)
|
Inventories, net
|
|
$
|
2,322,904
|
|
|
$
|
1,686,935
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
4.
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
Prepaid expenses and other current assets total
$666,267 and $259,056, at December 31, 2015 and December 31, 2014, respectively, and consist mainly of prepaid consulting agreement
with D3M Licensing Group, advertising, prepaid insurance, prepaid slotting fees, deposits on purchases, and customer deposits.
|
5.
|
PROPERTY AND EQUIPMENT
|
Property and equipment consist of the following
at:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Furniture and equipment
|
|
$
|
264,495
|
|
|
$
|
254,083
|
|
Less: accumulated depreciation
|
|
|
(243,176
|
)
|
|
|
(210,133
|
)
|
Total
|
|
$
|
21,319
|
|
|
$
|
43,950
|
|
Depreciation expense amounted to $33,043 and $37,256
during year ended December 31, 2015 and 2014, respectively
|
6.
|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
Accounts payable and accrued expenses consist of
the following at:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Accounts payable
|
|
$
|
1,207,353
|
|
|
$
|
360,062
|
|
Accrued expenses
|
|
|
598,578
|
|
|
|
467,987
|
|
Total
|
|
$
|
1,805,931
|
|
|
$
|
828,049
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
7.
|
DEFERRED REVENUE AND OTHER CURRENT LIABILITIES
|
Deferred revenue and other current liabilities consist
of the following at:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Customer deposits
|
|
$
|
13,063
|
|
|
$
|
351,716
|
|
State bottle bill liability
|
|
|
11,994
|
|
|
|
4,886
|
|
Total
|
|
$
|
25,057
|
|
|
$
|
356,602
|
|
|
8.
|
LINE OF CREDIT NOTE PAYABLE - RELATED PARTIES
|
Line of credit note payable - related parties consists
of the following as of:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Note Payable – line of credit
|
|
|
|
|
|
|
|
|
In July 2010, the Company entered into a line of credit note payable with a related party which
carries interest of five percent per annum. The Company can borrow up to $4,500,000. The Company has pledged all of its assets
as security for the line of credit. The notes mature in January 2020, at which time the principal amount is due. During April
2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of
this line.
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
4,500,000
|
|
|
$
|
9,250,000
|
|
|
9.
|
CONVERTIBLE NOTE PAYABLE - RELATED PARTIES
|
Convertible note payable
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Convertible note payable, related party
|
|
$
|
0
|
|
|
$
|
1,500,000
|
|
In September 2009, the Company entered into a convertible
note payable with a related party, a majority shareholder which carries interest at six percent per annum. The outstanding balance
is convertible into the Company’s common stock at a conversion price of $0.30 per share. The Company is obligated to file
a registration statement upon written notice from the creditor and such registration statement must be effective within 180 days
of the date of notice. If after the 180 days the Company has not complied with the agreement it shall pay $65,000 per month in
penalty, until the registration statement is effective.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
9.
|
CONVERTIBLE NOTE PAYABLE - RELATED PARTIES (CONTINUED)
|
The note matures in December
2016, at which time the principal amount is due. In April 2015, the note holder converted the outstanding portion of $1,500,000,
into shares of common stock in accordance with the conversion terms of the agreement. The creditor also terminated all registration
rights and waived any penalties that might have been incurred in connection therewith. The outstanding balance on the loan as
of December 31, 2015 and December 31, 2014 was $0 and $1,500,000, respectively.
|
10.
|
PREFERRED STOCK – RELATED PARTY
|
On August 26, 2013, the
Company entered into a securities purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida,
LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates
of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the
“Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of
$1,650,000 in indebtedness under the Company’s line of credit with CD (the “CD Line of Credit”).
The
Preferred C Shares are convertible into
our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018,
at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference
of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event
of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of
6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as
converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a
vote, except as required by law. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of
$180,000 in accrued preferred C dividends. As of December 31, 2015, $139,736 of dividends has been accrued. The Preferred C Shares
mature on December 31, 2018 and are redeemable only in exchange for shares of Company common stock.
On April 16, 2015, the Company
entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS
Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD Line of Credit was reduced by
$4.0 million, which amount was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred
D Shares”). This related party was given a conversion price of $0.86 per common share, whereas other investors purchased
common shares at $0.89 in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in
$139,535, was recorded as a dividend in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other
options. The Preferred D Shares are convertible into our common stock at the option of the holder thereof at a conversion price
of $0.86 per share until the earlier of the January 2, 2020 due date of our line of credit with CD Financial or such earlier date
as the line of credit is satisfied (the “
Mandatory Redemption Date
”). The conversion price is subject to adjustment
in the event of stock dividends, stock splits and similar events. The Preferred D Shares accrue cumulative annual cash dividends
at the rate of 5% per annum, payable quarterly in cash and have a liquidation preference of $1,000 per share. On the Mandatory
Redemption Date, the Preferred D Shares automatically convert into shares of our common stock in a number determined by dividing
the $1,000 per Preferred D Share liquidation preference plus any accrued but unpaid dividends, by the conversion price then in
effect. The Preferred D Shares may also be redeemed by us at any time on or after December 31, 2016, at a redemption price equal
to 104% of the liquidation preference. The holder of the Preferred D Shares votes on an “as converted” basis, together
with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law.
As of December 31, 2015, $51,111 of dividends has been accrued regarding these shares.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
11.
|
RELATED PARTY TRANSACTIONS
|
The Company’s office is rented from a company
affiliated with CD which is controlled by our majority shareholder Carl DeSantis. Currently, the lease expires on October 2020
with monthly rent of $6,408. The rental fee is commensurate with other properties available in the market.
In April 2015, the Company entered into a strategic
marketing and advisory services agreement with All Def Digital. Tim Leissner, a director and shareholder of the Company is also
a director and shareholder in All Def Digital. As of December 31, 2015, the Company has paid All Def Digital $237,959, for services
relating to the strategic marketing and advisory services agreement.
Other related party transactions are discussed in
notes 8, 9, and 10,
|
12.
|
STOCKHOLDERS’ EQUITY (DEFICIT)
|
Issuance of common stock pursuant to services
performed
During 2014, the Company issued a total of 280,000
unregistered shares as compensation in connection with celebrity endorsement agreements at an aggregate fair value of $216,100,
250,000 shares were issued at $0.79 per share on March 11
th
, 2014 and 30,000 shares were issued at $0.62 per share
on August 13
th
, 2014, with each per share valuation representing the closing stock price on the day of issuance.
Issuance of common stock pursuant to conversion
of note
In April 2015, the Company issued 5,000,000 unregistered
common shares upon conversion of $1,500,000 of convertible notes, at contractual terms.
Issuance of common stock pursuant to private
placement
In April 2015, the Company issued a total of 12,921,348
shares of common stock at $0.89 per share for gross proceeds of $11.5 million (see note 10). Expenses incurred of $111,841 were
charged to additional paid in capital and the Company received net proceeds of $11,388,159.
Issuance of preferred stock pursuant to private
placement
Refer to note 10 for discussion on preferred stock
issuances.
Due to recurring losses for book and tax purposes,
for the years ended December 31, 2015 and 2014, the Company’s net tax provision was zero.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
13.
|
INCOME TAXES (CONTINUED)
|
The difference between the effective income tax
rate and the applicable statutory federal income tax rate is summarized as follows:
|
|
2015
|
|
|
2014
|
|
Statutory federal rate
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
State income tax rate, net of federal benefit
|
|
|
(3.5
|
)%
|
|
|
(3.5
|
)%
|
Permanent differences, including stock based compensation
|
|
|
25.3
|
%
|
|
|
18.5
|
%
|
Change in valuation allowance
|
|
|
13.5
|
%
|
|
|
20.0
|
%
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
At December 31, 2015 and 2014, the Company’s
deferred tax assets were as follows:
Deferred Tax Assets
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
16,029,000
|
|
|
|
16,303,000
|
|
Less: Valuation allowance net deferred
tax assets
|
|
|
(16,029,000
|
)
|
|
|
(16,303,000
|
)
|
Net deferred tax assets
|
|
|
0.0
|
|
|
|
0.0
|
|
Due to taxable income before net operating loss
carryforwards during tax year ending in 2015, the valuation allowance decreased by approximately $274,000 in 2015. Total net operating
loss carry forwards at December 31, 2015 were approximately $41.6 million. The losses, if unused, expire through 2035.The Company’s
net operating loss carry forwards may be limited due to ownership changes pursuant to Internal Revenue Code section 382.
|
14.
|
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.
During 2013 the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5
million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares
in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved
to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015,
the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares
of common stock. Until 2017, options to acquire 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.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
14.
|
STOCK-BASED COMPENSATION (CONTINUED)
|
The Company adopted the 2015 Stock Incentive Plan
on April 30, 2015. 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. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision
for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar
year, beginning on January 1, 2016.
Cumulatively since inception, the Company has issued
options to purchase approximately 4.6 million shares at an average price of $0.81 with a fair value of $5.3 million. For the year
2015 and 2014, the Company issued options to purchase 1.3 million and 1.4 million shares. For the year ended December 31, 2015
and 2014, the Company recognized an expense of $1,270,488 and $686,927, respectively, of non-cash compensation expense (included
in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a
Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected
annual volatility. As of December 31, 2015, the Company had approximately $742,000 of unrecognized pre-tax non-cash compensation
expense, which the Company expects to recognize, based on a weighted-average period of 0.5 years. The Company used 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 4.3 million shares that have vested, of which 267,000 shares were exercised as of December 31, 2015.
The Company uses the Black-Scholes option-pricing
model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards
using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as
assumptions regarding the following:
|
|
Year ended December 31,
|
|
|
2015
|
|
|
2014
|
Expected volatility
|
|
306
|
%
|
|
172% - 328%
|
Expected term
|
|
4 Years
|
|
|
3 - 5 Years
|
Risk-free interest rate
|
|
0.89
|
%
|
|
0.91% - 1.69%
|
Forfeiture Rate
|
|
0.00
|
%
|
|
0.00%
|
Expected dividend yield
|
|
0.00
|
%
|
|
0.00%
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
14.
|
STOCK-BASED COMPENSATION (CONTINUED)
|
The expected volatility was determined with reference
to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee
termination within the valuation model. The expected term of options granted represents the period of time that options granted
are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on
the U.S. Treasury rate in effect at the time of grant.
A summary of the status of the Company’s outstanding
stock options as of December 31, 2015 and changes during the period ending on that date is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted Average
|
|
|
Aggregate
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
Fair
|
|
|
Intrinsic
|
|
|
Remaining
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
Value
|
|
|
Term (Yrs)
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
2,374
|
|
|
$
|
0.44
|
|
|
$
|
0.33
|
|
|
$
|
366
|
|
|
|
8.5
|
|
Granted
|
|
|
1,417
|
|
|
|
0.78
|
|
|
|
0.56
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture and cancelled
|
|
|
(295
|
)
|
|
|
0.42
|
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
At December 31, 2014
|
|
|
3,496
|
|
|
$
|
0.49
|
|
|
$
|
0.41
|
|
|
$
|
588
|
|
|
|
6.5
|
|
Granted
|
|
|
1,306
|
|
|
|
1.61
|
|
|
|
0.33
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture and cancelled
|
|
|
(168
|
)
|
|
|
0.52
|
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
At December 31, 2015
|
|
|
4,634
|
|
|
$
|
0.81
|
|
|
$
|
0.41
|
|
|
$
|
5,300
|
|
|
|
5.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2015
|
|
|
4,056
|
|
|
$
|
0.73
|
|
|
$
|
1.21
|
|
|
$
|
477
|
|
|
|
6.1
|
|
The following table summarizes information about employee stock
options outstanding at December 31, 2015:
|
|
Outstanding Options
|
|
|
Vested Options
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Exercisable
|
|
|
Weighted
|
|
|
Weighted
|
|
Range of
|
|
at
|
|
|
Averaged
|
|
|
Averaged
|
|
|
at
|
|
|
Averaged
|
|
|
Averaged
|
|
Exercise
|
|
December 31,
|
|
|
Remaining
|
|
|
Exercise
|
|
|
December 31,
|
|
|
Exercise
|
|
|
Remaining
|
|
Price
|
|
2015 (000's)
|
|
|
Life
|
|
|
Price
|
|
|
2015 (000's)
|
|
|
Price
|
|
|
Life
|
|
$0.20 - $0.42
|
|
|
2,522
|
|
|
|
5.90
|
|
|
$
|
0.26
|
|
|
|
2,495
|
|
|
$
|
0.26
|
|
|
|
5.96
|
|
$0.53 - $1.42
|
|
|
1,431
|
|
|
|
5.37
|
|
|
$
|
0.87
|
|
|
|
1,009
|
|
|
$
|
0.80
|
|
|
|
7.61
|
|
$1.80 - $3.80
|
|
|
637
|
|
|
|
4.30
|
|
|
$
|
2.29
|
|
|
|
509
|
|
|
$
|
2.26
|
|
|
|
5.39
|
|
$4.25 - $9.40
|
|
|
30
|
|
|
|
3.89
|
|
|
$
|
5.57
|
|
|
|
30
|
|
|
|
5.57
|
|
|
|
3.89
|
|
$10.80 - $22.00
|
|
|
14
|
|
|
|
2.78
|
|
|
$
|
14.87
|
|
|
|
14
|
|
|
$
|
14.87
|
|
|
|
2.78
|
|
Outstanding options
|
|
|
4,634
|
|
|
|
5.49
|
|
|
$
|
0.81
|
|
|
|
2,707
|
|
|
$
|
0.55
|
|
|
|
6.28
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements
December 31, 2015
|
15.
|
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 management’s belief that no such agreement has created any liability as of December 31, 2015.
The Company entered into an office lease with a
related party (see note 11) effective October 2015. The monthly rent amounts to $6,408 per month and the lease terminates in October
2020. Future annual minimum payments required under operating lease obligations at December 31, 2015 are as follows:
Future Minimum
Lease Payments
2016
|
|
$
|
77,803
|
|
2017
|
|
$
|
82,792
|
|
2018
|
|
$
|
85,276
|
|
2019
|
|
$
|
87,834
|
|
2020
|
|
$
|
75,016
|
|
Total
|
|
$
|
408,721
|
|
We have evaluated events and transactions that occurred
subsequent to December 31, 2015 through March 24, 2016, the date these financial statements were issued, for potential recognition
or disclosure in the accompanying financial statements. We did not identify any events or transactions that should be recognized
or disclosed in the accompanying financial statements.
Celsius
Holdings, Inc. and Subsidiaries
Consolidated Balance
Sheets
|
|
June 30,
2016
(Unaudited)
|
|
|
December 31,
2015 (1)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
7,347,403
|
|
|
$
|
10,128,320
|
|
Accounts receivable, net
|
|
|
3,059,167
|
|
|
|
2,127,060
|
|
Inventories, net
|
|
|
2,573,768
|
|
|
|
2,322,904
|
|
Prepaid expenses and other current assets
|
|
|
1,103,418
|
|
|
|
666,267
|
|
Total current assets
|
|
|
14,083,756
|
|
|
|
15,244,551
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
26,281
|
|
|
|
21,319
|
|
Total Assets
|
|
$
|
14,110,037
|
|
|
$
|
15,265,870
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1,574,408
|
|
|
$
|
1,805,931
|
|
Accrued preferred dividend
|
|
|
262,486
|
|
|
|
190,847
|
|
Deferred revenue and other current liabilities
|
|
|
800,029
|
|
|
|
25,057
|
|
Total current liabilities
|
|
|
2,636,923
|
|
|
|
2,021,835
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Line of credit note payable-related party
|
|
|
4,500,000
|
|
|
|
4,500,000
|
|
Total Liabilities
|
|
|
7,136,923
|
|
|
|
6,521,835
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 6,380 and 6,380 shares issued and outstanding at June
30, 2016 and December 31, 2015
|
|
|
6
|
|
|
|
6
|
|
Common stock, $0.001 par value; 75,000,000 shares authorized, 38,666,451 and 38,380,380 shares
issued and outstanding at June 30, 2016 and December 31, 2015, respectively
|
|
|
38,666
|
|
|
|
38,380
|
|
Additional paid-in capital
|
|
|
59,686,334
|
|
|
|
58,626,212
|
|
Accumulated deficit
|
|
|
(52,751,892
|
)
|
|
|
(49,920,563
|
)
|
Total Stockholders’ Equity
|
|
|
6,973,114
|
|
|
|
8,744,035
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
14,110,037
|
|
|
$
|
15,265,870
|
|
|
(1)
|
Derived from Audited Financial Statements
|
The accompanying
notes are an integral part of these consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
Consolidated Statements
of Operations
(Unaudited)
|
|
For the six months
|
|
|
|
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
|
$
|
9,850,397
|
|
|
$
|
9,304,910
|
|
Cost of revenue
|
|
|
5,566,354
|
|
|
|
5,438,221
|
|
Gross profit
|
|
|
4,284,043
|
|
|
|
3,866,689
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
4,973,316
|
|
|
|
2,042,506
|
|
General and administrative expenses
|
|
|
1,855,000
|
|
|
|
1,891,385
|
|
Total operating expense
|
|
|
6,828,316
|
|
|
|
3,933,891
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
|
(2,544,273
|
)
|
|
|
(67,202
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(113,750
|
)
|
|
|
(206,733
|
)
|
Total Other Income (Expense)
|
|
|
(113,750
|
)
|
|
|
(206,733
|
)
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(2,658,023
|
)
|
|
$
|
(273,935
|
)
|
Preferred stock dividend
|
|
|
(173,306
|
)
|
|
|
(107,942
|
)
|
Net Income (Loss) available to common stockholders
|
|
$
|
(2,831,329
|
)
|
|
$
|
(381,877
|
)
|
|
|
|
|
|
|
|
|
|
Income (Loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
Diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38,461,318
|
|
|
|
27,885,006
|
|
Diluted
|
|
|
38,461,318
|
|
|
|
27,885,006
|
|
The accompanying
notes are an integral part of these consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
Consolidated Statements
of Cash Flows
(Unaudited)
|
|
For the six months
ended
|
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,658,023
|
)
|
|
$
|
(273,935
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,368
|
|
|
|
17,851
|
|
Stock-based compensation expense
|
|
|
1,055,108
|
|
|
|
1,042,103
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(932,107
|
)
|
|
|
537,451
|
|
Inventories net
|
|
|
(250,864
|
)
|
|
|
241,765
|
|
Prepaid expenses and other current assets
|
|
|
(437,151
|
)
|
|
|
(837,824
|
)
|
Accounts payable and accrued expenses
|
|
|
(159,884
|
)
|
|
|
434,219
|
|
Accrued preferred dividends
|
|
|
(173,306
|
)
|
|
|
(107,942
|
)
|
Deferred revenue and other current liabilities
|
|
|
774,972
|
|
|
|
(352,967
|
)
|
Net cash provided by (used in) in operating activities
|
|
|
(2,773,887
|
)
|
|
|
700,721
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(12,330
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(12,330
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Borrowing under revolving note payable, related-party
|
|
|
-
|
|
|
|
450,000
|
|
Repayment on short term notes payable, related-party
|
|
|
-
|
|
|
|
(1,200,000
|
)
|
Net proceeds from issuance of common stock
|
|
|
-
|
|
|
|
11,388,084
|
|
Proceeds from exercise of stock options
|
|
|
5,300
|
|
|
|
-
|
|
Payments on short term notes payable
|
|
|
-
|
|
|
|
(44,684
|
)
|
Net cash (used in) financing activities
|
|
|
5,300
|
|
|
|
10,593,400
|
|
Net (decrease) increase in cash
|
|
|
(2,780,917
|
)
|
|
|
11,294,121
|
|
Cash at beginning of the period
|
|
|
10,128,320
|
|
|
|
349,072
|
|
Cash at end of the period
|
|
$
|
7,347,403
|
|
|
$
|
11,643,193
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Cash paid during period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
113,750
|
|
|
$
|
206,733
|
|
Income Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Borrowing under short term notes payable for
prepaid expense
|
|
$
|
-
|
|
|
$
|
91,099
|
|
Accrued preferred dividends
|
|
$
|
86,652
|
|
|
$
|
107,942
|
|
Preferred stock issuance in exchange for cancellation
of revolving note payable, related-party
|
|
|
-
|
|
|
|
4,000,000
|
|
Conversion of convertible note to common shares,
related-party
|
|
|
-
|
|
|
|
1,500,000
|
|
Conversion of accrued preferred dividend into
preferred shares, related-party
|
|
|
-
|
|
|
|
180,000
|
|
The accompanying
notes are an integral part of these consolidated financial statements
Celsius
Holdings, Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
Business
—Celsius Holdings, Inc. (the
“Company” or “Celsius Holdings”) was incorporated under the laws of the State of Nevada on April 26, 2005.
On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Elite FX, Inc., a Florida corporation.
Under the terms of the Merger Agreement, Elite FX, Inc. was merged into the Company’s subsidiary, Celsius, Inc. and became
a wholly-owned subsidiary of the Company on January 26, 2007. In addition, on March 28, 2007 the Company established Celsius Netshipments,
Inc. a Florida corporation as a wholly-owned subsidiary of the Company.
Since the merger, the Company is engaged in the
development, marketing, sale and distribution of “functional” calorie-burning fitness beverages under the Celsius®
brand name.
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Consolidation Policy
— The accompanying
consolidated financial statements include the accounts of Celsius Holdings, Inc. and its 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. Significant estimates include the allowance for doubtful accounts, reserves for inventory obsolescence, the useful
lives and values of property and equipment, valuation of stock based compensation, and deferred tax asset valuation allowance.
Segment Reporting
—Although the
Company has a number of operating divisions, separate segment data has not been presented, as they meet the criteria for aggregation
as permitted by ASC Topic 280, Segment Reporting, (formerly Statement of Financial Accounting Standards (SFAS) No. 131, Disclosed
About Segments of an Enterprise and Related Information.) Our chief operating decision-maker is considered to be our Chief Executive
Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions
and assessing financial performance. The financial information reviewed by the CEO is identical to the information presented in
the accompanying consolidated statement of operations. Therefore, the Company has determined that it operates in a single operating
segment. For the six months ended June 30, 2016 and 2015 all material assets and revenues of the Company were in the United States
except as disclosed in Note 2.
Concentrations of Risk
— Substantially all of the Company’s revenue derives from the sale of Celsius
®
beverages.
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 accounts receivable. The Company places its
cash with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal
Deposit Insurance Corporation limit. At June 30, 2016 the Company had approximately $7.0 million in excess of the Federal Deposit
Insurance Corporation limit but has incurred no losses with respect to these accounts.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
At June 30, 2016 and 2015, the
Company had the following 10 percent or greater concentrations of revenue with its customers:
|
|
2016
|
|
|
2015
|
|
A*
|
|
|
31.4
|
%
|
|
|
58.3
|
%
|
B
|
|
|
12.3
|
%
|
|
|
1.0
|
%
|
All other
|
|
|
56.3
|
%
|
|
|
40.7
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
At June 30, 2016 and December
31, 2015, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:
|
|
2016
|
|
|
2015
|
|
A*
|
|
|
54.3
|
%
|
|
|
50.0
|
%
|
B
|
|
|
7.4
|
%
|
|
|
11.8
|
%
|
All other
|
|
|
38.3
|
%
|
|
|
38.2
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
*Revenues and receivables from
customer A are derived from a distributor located in Sweden.
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, 2016 and December 31, 2015, the Company did not have any investments with maturities of three months or less.
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 June 30, 2016 and December 31, 2015, there was an allowance for doubtful
accounts of $79,332 and $3,500.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
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 reserves against inventory during the period in which such materials
and products are no longer usable or marketable. At June 30, 2016 and December 31, 2015, the Company recorded a reserve of $112,807
and $329,075, respectively. The changes in reserve are included in cost of revenue. Free Samples are also recorded as cost of
revenue.
Property and Equipment
— Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property 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
— In accordance with ASC Topic 360, “Property, Plant, and Equipment” the Company reviews the carrying value
of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount
to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair
value.
Revenue Recognition
—
Revenue is derived from the sale of beverages. Revenue is recognized when persuasive evidence of an agreement exists, the products
are delivered, sales price is fixed or determinable, and collectability is reasonably assured. Any discounts, slotting fees, sales
incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue.
Deferred Revenue
—
From time to time the Company requires prepayments for deposits in advance of delivery of products and/or production runs. Such
amounts are initially recorded as deferred revenue. The Company recognizes such revenue as it is earned in accordance with revenue
recognition policies.
Advertising Costs
—
Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements,
and digital advertising. The Company incurred advertising expense of approximately $2.8 million and $0.9 million during the six
months ending June 30, 2016 and 2015, 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 beverages. The Company incurred there expenses of $45,800 and $24,900 during the six months ending June
30, 2016 and 2015, respectively.
Fair Value of Financial Instruments
—
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable approximates
fair value due to their relative short-term maturity and market interest rates.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
Fair Value Measurements
- ASC 820 defines
fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1:
|
Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
|
|
|
Level 2:
|
Observable market-based inputs or unobservable inputs that are corroborated by market data.
|
|
|
Level 3:
|
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The Company did not have any assets or liabilities
measured at fair value at June 30, 2016 and December 31, 2015.
Income Taxes —
The Company accounts
for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other
things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for
which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the
provisions of the ASC 740 -10 related to,
Accounting for Uncertain Income Tax Positions.
When tax returns are filed, it
is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance
with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon
examination, including the resolution of appeals or litigation processes, if any.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
3.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
Income Taxes (continued) —
Tax positions
taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold
are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the
applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with
any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its
tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain
tax benefits.
The Company has adopted ASC 740-10-25
Definition
of Settlement,
which provides guidance on how an entity should determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon
the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.
The Company files its tax returns on a fiscal year
September 30
th
tax year. The Company’s tax returns for tax years ended September 30, 2015, 2014, and 2013 remain
subject to potential examination by the taxing authorities.
Earnings per Share
— Basic earnings
per share are calculated by dividing net income (loss) available to common 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 convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method).
As of June 30, 2016 there were options outstanding to purchase 5.6 million shares, which exercise price averaged $1.00, Series
C Preferred Stock warrants outstanding to convert to 4.6 million common shares at $0.52 price per share and Series D Preferred
Stock warrants outstanding to convert to 4.7 million common shares at $0.86 price per share. There were no other dilutive common
shares equivalents, including convertible notes and warrants, as no common share equivalents had an exercise price below the ending
closing price of the year. The effects of dilutive instruments have not been presented for the three and six months ended June
30, 2016, as the effects would be anti-dilutive.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
Share-Based Payments
—Effective January
1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and
related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments.
Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company
adopted the 2015 Stock Incentive Plan, 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. The 2015 Plan permits the grant of options and shares for up to 5,147,000
shares. In addition, there is a provision for an annual increase of 15% of the issued shares under the plan to the shares included
under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016. On January 1
st
,
2016, the permitted number of available option grants increased 147,000 (see also note 12).
Shipping and Handling Costs
— Shipping
and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for six
months ended June 30, 2016 and 2015 was $958,000 and $539,000, respectively.
Recent Accounting Pronouncements
The Company adopts all applicable, new accounting
pronouncements as of the specified effective dates.
In September 2015, the Financial Accounting Standards
Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-16,
Simplifying the Accounting
for Measurement-Period Adjustments
(“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made
to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional
amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined,
(ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if
any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition
date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that
would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of
the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015.
Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2015-16 on January 1, 2016 to its consolidated
financial position or results of operations.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
2.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
Recent Accounting Pronouncements (continued)
In April 2015, the FASB issued ASU No. 2015-03,
Simplifying the Presentation of Debt Issuance Costs
(“ASU 2015-03”). ASU 2015-03 simplifies the presentation
of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability (consistent with debt discounts).
In August 2015, the FASB issued
ASU No. 2015-15,
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
(Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting)
(“ASU 2015-15”). ASU
2015-15 allows debt issuance costs related to line-of-credit agreements to be presented in the balance sheet as an asset. ASU
2015-03 and ASU 2015-15 are effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption
is permitted. The Company has adopted ASU 2015-03 and ASU 2015-15 as of December 31, 2015; the adoption is not expected to have
a material impact on its consolidated financial position or results of operations.
All new accounting pronouncements issued but not
yet effective are not expected to have a material impact on our results of operations, cash flows or financial position.
Liquidity
— These financial statements
have been prepared assuming the Company will be able to continue as a going concern. At June 30, 2016, the Company had an accumulated
deficit of $52,751,892 which includes a net loss available to common stockholders of $2,831,329 for the six months ended June
30, 2016. While these factors alone may raise doubt as to the Company’s ability to continue as a going concern, the proceeds
remaining from the Company’s sale of common stock to an investor group on April 20, 2015 for a total of $11.5 million (see
note 11) is deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern.
Inventories consist of the following
at:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
2,459,786
|
|
|
$
|
2,309,288
|
|
Raw Materials
|
|
|
226,789
|
|
|
|
342,691
|
|
Less: Inventory Reserve
|
|
|
(112,807
|
)
|
|
|
(329,075
|
)
|
Inventories, net
|
|
$
|
2,573,768
|
|
|
$
|
2,322,904
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
4.
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
Prepaid expenses and other current
assets total $1,103,418 and $666,267, at June 30, 2016 and December 31, 2015, respectively, and consist mainly of prepaid consulting
agreement with D3M Licensing Group, advertising, prepaid insurance, prepaid slotting fees, deposits on purchases, and customer
deposits.
|
5.
|
PROPERTY AND EQUIPMENT
|
Property and equipment consist
of the following at:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Furniture and equipment
|
|
$
|
276,825
|
|
|
$
|
264,495
|
|
Less: accumulated depreciation
|
|
|
(250,544
|
)
|
|
|
(243,176
|
)
|
Total
|
|
$
|
26,281
|
|
|
$
|
21,319
|
|
Depreciation expense amounted to $7,368 and $17,851
during the six months ended June 30, 2016 and 2015, respectively
|
6.
|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
Accounts payable and accrued expenses
consist of the following at:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
875,847
|
|
|
$
|
1,207,353
|
|
Accrued expenses
|
|
|
698,561
|
|
|
|
598,578
|
|
Total
|
|
$
|
1,574,408
|
|
|
$
|
1,805,931
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
7.
|
DEFERRED REVENUE AND OTHER CURRENT LIABILITIES
|
Deferred revenue and other current
liabilities consist of the following at:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
$
|
793,380
|
|
|
$
|
13,063
|
|
State bottle bill liability
|
|
|
6,649
|
|
|
|
11,994
|
|
Total
|
|
$
|
800,029
|
|
|
$
|
25,057
|
|
LINE OF CREDIT NOTE PAYABLE - RELATED PARTIES
Line of credit note payable -
related parties consists of the following as of:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Note Payable – line of credit
|
|
|
|
|
|
|
|
|
In July 2010, the Company entered into a line of credit note payable with a related party which
carries interest of five percent per annum. The Company can borrow up to $4,500,000. The Company has pledged all of its assets
as security for the line of credit. The notes mature in January 2020, at which time the principal amount is due. During April
2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of
this line.
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
4,500,000
|
|
|
$
|
4,500,000
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
9.
|
PREFERRED STOCK – RELATED PARTY
|
On August 26, 2013, the Company entered into a securities
purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) and
CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s
principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”)
in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the
Company’s line of credit with CD (the “CD Line of Credit”). The Preferred C Shares can be converted into Company
common stock at any time until December 31, 2018 at a conversion price of $0.52 per share. The conversion price per share is based
on the weighted average of the ten daily VWAPs for the 10 trading days immediately preceding the closing date of August 26, 2013.
The Preferred C Shares accrue a 6% annual cumulative dividend, payable in additional Preferred C Shares. The Preferred C Shares
are mandatorily redeemable on December 31, 2018 and are redeemable only in shares of the Company’s common stock. In April
2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends.
As of June 30, 2016, $211,930 of dividends has been accrued. The Preferred C Shares mature on December 31, 2018 and are redeemable
only in exchange for shares of Company common stock.
On April 16, 2015, the Company entered into an amendment
to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis.
Pursuant to the Amendment, the outstanding principal amount of the CD Line of Credit was reduced by $4.0 million, which amount
was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred D Shares”). This related
party was given a conversion price of $0.86 per common share, whereas other investors purchased common shares at $0.89 in the
private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535, was recorded as a dividend
in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other options. The Preferred D Shares can
be converted into Company common stock at any time until the expiration date of the line of credit in 2020 or its earlier satisfaction
in full, at a conversion price of $0.86 per share. The Preferred D Shares accrue a 5% annual cumulative cash dividend, payable
quarterly and accords the holders thereof voting rights on an “as converted” basis. As of June 30, 2016, $50,556 of
dividends has been accrued regarding these shares.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
10.
|
RELATED PARTY TRANSACTIONS
|
The Company’s office is
rented from a company affiliated with CD which is controlled by our majority shareholder Carl DeSantis (see note 13). Currently,
the lease expires on October 2020 with monthly rent of $6,408. The rental fee is commensurate with other properties available
in the market.
In April 2015, the Company entered
into a strategic marketing and advisory services agreement with All Def Digital. Tim Leissner, a director and shareholder of the
Company is also a director and shareholder in All Def Digital. For the six months ending as of June 30, 2016, the Company has
paid All Def Digital $152,438, for services relating to the strategic marketing and advisory services agreement.
Other related party transactions
are discussed in notes 8 and 9.
|
11.
|
STOCKHOLDERS’ EQUITY (DEFICIT)
|
Issuance of common stock pursuant to services
performed
In April 2016, the Company issued a total 250,000
“restricted” shares of its common stock as compensation pursuant to celebrity endorsement agreements at a fair value
of $560,000, or $2.24 per share representing the closing stock price on that date.
Issuance of common stock pursuant to conversion
of note
In April 2015, the Company issued 5,000,000 unregistered
common shares upon conversion of $1,500,000 of convertible notes, at contractual terms.
Issuance of common stock pursuant to private
placement
In April 2015, the Company issued a total of 12,921,348
shares of common stock at $0.89 per share for gross proceeds of $11.5 million (see note 2). Expenses incurred of $111,841 were
charged to additional paid in capital and the Company received net proceeds of $11,388,159.
Issuance of preferred stock pursuant to private
placement
Refer to note 9 for discussion
on preferred stock issuances.
Issuance of common stock pursuant
to exercise of stock options
During the six months ended June 30, 2016, the Company
issued an aggregate of 36,071 shares of its common stock pursuant to the exercise of stock options granted under the Company’s
2006 Stock Incentive Plan. The Company received aggregate proceeds of $5,300 for options exercised for cash, with the balance
of the options having been exercised on a “cashless” basis.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
12.
|
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.
During 2013 the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5
million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares
in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved
to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015,
the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares
of common stock. Until 2017, options to acquire 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 adopted the 2015 Stock Incentive Plan
on April 30, 2015. 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. The 2015 Plan permits the grant of options and shares for up to 5,147,000 shares. In addition, there is a provision
for an annual increase of 15% of the issued shares under the plan to the shares included under the plan, with the shares to be
added on the first day of each calendar year, beginning on January 1, 2016. On January 1
st
, 2016, the permitted number
of available option grants increased 147,000 (see also note 2).
Cumulatively since inception, the Company has issued
options to purchase approximately 5.6 million shares at an average price of $1.00 with a fair value of $1.1 million. For the six
months ended June 30, 2016 and 2015, the Company recognized an expense of $495,108 and $1,042,103, respectively, of non-cash compensation
expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by
application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest
rate, and expected annual volatility. As of June 30, 2016, the Company had approximately $2,361,716 of unrecognized pre-tax non-cash
compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used
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 4.3 million shares that have vested, of which 307,000 shares were exercised as of
June 30, 2016.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
12.
|
STOCK-BASED COMPENSATION (CONTINUED)
|
The Company uses the Black-Scholes option-pricing
model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards
using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as
assumptions regarding the following:
|
|
Six months ended June
30,
|
|
|
2016
|
|
2015
|
Expected volatility
|
|
381% - 390%
|
|
306%
|
Expected term
|
|
4 Years
|
|
4 Years
|
Risk-free interest rate
|
|
1.23% - 1.36%
|
|
0.91% - 1.69%
|
Forfeiture Rate
|
|
0.00%
|
|
0.00%
|
Expected dividend yield
|
|
0.00%
|
|
0.00%
|
The expected volatility was determined with reference
to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee
termination within the valuation model. The expected term of options granted represents the period of time that options granted
are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on
the U.S. Treasury rate in effect at the time of grant.
A summary of the status of the Company’s outstanding
stock options as of June 30, 2016 and changes during the period ending on that date is as follows:
|
|
|
|
|
Weighted
Average
|
|
|
Aggregate
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
Remaining
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
Term (Yrs)
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
4,634,166
|
|
|
$
|
0.81
|
|
|
$
|
5,346,349
|
|
|
|
5.49
|
|
Granted
|
|
|
1,008,500
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(40,000
|
)
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
Forfeiture and cancelled
|
|
|
(89,301
|
)
|
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
At June 30, 2016
|
|
|
5,513,365
|
|
|
$
|
1.02
|
|
|
$
|
1,154,756
|
|
|
|
5.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2016
|
|
|
4,280,115
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
13.
|
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 management’s belief that no such agreement has created any liability as of June 30, 2016.
The Company entered into an office lease with a
related party (see note 10) effective October 2015. The monthly rent amounts to $6,408 per month and the lease terminates in October
2020. Future annual minimum payments required under operating lease obligations at June 30, 2016 are as follows:
Future Minimum
Lease Payments
Year ending December 31,
|
|
|
|
2016
|
|
$
|
38,448
|
|
2017
|
|
$
|
82,792
|
|
2018
|
|
$
|
85,276
|
|
2019
|
|
$
|
87,834
|
|
2020
|
|
$
|
75,016
|
|
Total
|
|
$
|
369,366
|
|
We have evaluated events and transactions that occurred
subsequent to June 30, 2016 through August 11, 2016, the date these financial statements were issued, for potential recognition
or disclosure in the accompanying financial statements. Other than the disclosures shown and presented below, we did not identify
any events or transactions that should be recognized or disclosed in the accompanying financial statements.
Lease Agreement
– On July 25
th
,
2016 we amended our existing lease for 2424 North Federal Hwy. Suite 208, Boca Raton, FL 33431. This amended lease is effective
on September 1, 2016, the term of the lease shall be extended for a period of fifty months so that the termination date shall
be October 31, 2020.
Celsius Holdings,
Inc. and Subsidiaries
Notes to Consolidated
Financial Statements (unaudited)
June 30, 2016
|
14.
|
SUBSEQUENT EVENTS (CONTINUED)
|
Future Minimum
Lease Payments
Year ending December 31,
|
|
|
|
2016
|
|
$
|
50,052
|
|
2017
|
|
$
|
113,460
|
|
2018
|
|
$
|
116,718
|
|
2019
|
|
$
|
120,080
|
|
2020
|
|
$
|
103,250
|
|
Total
|
|
$
|
503,560
|
|
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