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Item
1.01
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Entry
into a Material Definitive Agreement.
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On September 11, 2019, the Company issued a
press release announcing that effective such date, it had entered into a series of agreements (the “Acquisition Agreements”)
with the shareholders, bondholders and certain other lenders of Func Food Group Oyj, a Finnish corporation (“Func Food”),
pursuant to which Func Food’s outstanding debt of approximately US$55,257,991, certain of which is in default, will be restructured
and Celsius will acquire all of the issued and outstanding capital stock of Func Food. A copy of the press release is attached
as Exhibit 99.1 to this Current Report.
Func
Food is a Finland based wellness company that markets and distributes beverages, protein bars, supplements and superfoods in Finland,
Sweden, and Norway. Celsius has had a distribution arrangement with Func Food since 2016, when Func Food commenced distribution
of our products in Sweden (where they have become the best-selling fitness drink). Func Food subsequently expanded distribution
of our products to Finland in 2016 and Norway in 2018. In addition to Celsius’ products, Func Food also distributes products
under the brands FAST, FitFarm and CocoVi. The FAST, FitFarm and CocoVi brands and associated products are owned by Func Food.
FAST products is a market leader in Finland and has begun distribution into the Swedish market. FitFarm and CocoVi are well-established
brands of superfoods and other supplements in the Nordic countries.
Func
Food currently has the following outstanding debt:
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senior
secured bonds (the “Outstanding Bonds”) in the principal amount of
$33,181,649 plus accrued but unpaid interest and default interest;
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loans
from Func Food principal shareholders, Sentica Buyout IV KY and Sentica Buyout IV Co-Investment
Ky (collectively, “Sentica”) in the principal amount of $9,965,922
plus accrued but unpaid interest (the “Sentica Loans”);
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a
capital loan in the principal amount of $55,627, plus accrued but unpaid interest and
a shareholder loan in the principal amount of $40,693, plus accrued but unpaid interest
from Jutta Marketing Oy (the “Jutta Loans”);
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a
subordinated convertible loan in the principal amount of $338,078, plus accrued but unpaid
interest from Joy Group Oy (the “Joy Loan”); and
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a
subordinated vendor loan of $1,680,000, plus accrued but unpaid interest from Magmax
AB (the “Vendor Loan”).
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The
Acquisition Agreements provide for the restructuring of the Outstanding Bonds into two new classes of bonds as follows:
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“Reinstated
Bonds” to be held by the existing holders of the Outstanding Bonds, Sentica (in exchange for the Sentica Loans)
and management, as provided for below. The Reinstated Bonds will be in the original principal amount of $9,520,000 with
an original issue discount of 5%, be due and payable on October 30, 2020, bear interest at the rate of 6%, payable
semi-annually in arrears and will be secured by a first priority lien on substantially all of Func Food’s
assets.
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“Buyer
Bonds” in the original principal amount of $33,181,649, which will have the
same terms and conditions as the Reinstated Bonds but will be subordinated to the Reinstated
Bonds. The Buyer Bonds will be acquired by Celsius from the holders of the Outstanding
Bonds for $14,354,480. The purchase price of $672,000 to be paid by Celsius for the Jutta Loans, Joy
Loan and Vendor Loan as described below and $93,250 in cash, which will be paid to members
of Func Food management as part of a retention bonus, will be deducted from the purchase
price paid to the holders of the Outstanding Bonds for the Buyer Bonds. Celsius will
also have the option to convert up to $4,480,000 in trade receivables from Func Food
into Buyer Bonds.
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The Reinstated Bonds and the Buyer Bonds will
constitute direct, unconditional, unsubordinated and secured obligations of Func Food and will be guaranteed by all of Func Food’s
subsidiaries. Celsius may, in its own discretion choose to repay up to 50% of the principal amount of the Reinstated Bonds at maturity
by way of newly-issued shares of its common stock, at price per share equal to the lower of (i) 110% of the 30 day volume weighted
average closing price for our shares at closing of the acquisition; and (ii) €3.50.
The
Reinstated Bonds may be redeemed in full (but not in part) at Func Food’s option at any time prior to maturity at a redemption
premium of 103% of the principal amount. In addition, if (a) prior to maturity of the Reinstated Bonds, Func Food’s FAST
business is sold; or (b) on or after January 1, 2020, Celsius consummates a subsequent equity capital raise, the net proceeds
from such transactions, to the fullest extent possible shall be applied to redemption of the Reinstated Bonds.
The
Reinstated Bonds and the Buyer Bonds will have customary affirmative and negative covenants applicable to Fund Food, including
restrictions on distributions, pledging assets and incurring additional indebtedness, meeting quarterly liquidity and other financial
compliance tests, providing periodic financial reports and requiring bondholder consent to amendments and waivers.
$932,960
of the Reinstated Bonds will be allocated to Sentica in exchange for the Sentica Loans, $93,250 of the Reinstated Bonds will be
allocated to members of Func Food management as part of their retention bonus and the balance will be allocated to the holders
of the Outstanding Bonds.
At
closing, we will acquire the Jutta Loans, Joy Loan and Vendor Loan for an aggregate of $672,000 and all of the issued and outstanding
capital stock of Func Food from Sentica and the other shareholders for nominal consideration of $1.12. We will also reimburse
the other parties to the acquisition up to $224,000 in legal and advisory fees.
Consummation of the restructuring and acquisition
of Func Food is expected to occur in October 2019 and is subject to customary closing conditions, including (a) the absence
of a material breach by the parties with their respective covenants and agreements under the Acquisition Agreements; (b) approval
of the restructuring of Func Food by existing bondholders in accordance with Swedish Law; and (c) our successful completion
of this offering in an amount sufficient to fund the cash needed to consummate the acquisition. The Acquisition Agreements contain
certain termination rights, including the right of either party to terminate the transaction if it has not closed on or before
October 31, 2019.
We
intend to fund the acquisition of Func Food and pay related fees, costs and expenses through a portion of the proceeds of the
public offering described in Item 7.01 of this Current Report. The necessary cash to fund the consummation of the Func
Food acquisition will be placed in escrow with NT Services, AS, a Norwegian fiduciary services company located in Oslo, Norway
(“NT Services”), pending closing of the acquisition or termination of the Acquisition Agreements. This offering
is not conditioned on the closing of the acquisition of Func Food. We cannot assure you that the acquisition of Func Food will
be consummated on the terms described herein or at all. If the acquisition of Func Food is not consummated, we intend to use the
net proceeds of the public offering described in Item 7.01 of this Current Report for general corporate purposes, which
may include future acquisitions.
The above referenced summary of our planned
acquisition of Func Food is qualified in its entirety by reference to the Acquisition Agreements attached as Exhibits 10.1
and 10.2 to this Current Report.
All U.S. dollar denominated information in
this Current Report with respect to the Company’s acquisition of Func Food Group Oyj, reflects a foreign exchange rate of
US$1.12=€1.00.