Fore Fitness Group enables access to fitness through gyms, products & apps
Business overview
| Location | London, United Kingdom |
|---|---|
| Social media | |
| Website | forefitnessgroup.com/ |
| Sectors | Travel, Leisure & Sport Mixed Digital/Non-Digital Mixed B2B/B2C |
| Company number | 11849873 |
| Incorporation date | 27 Feb 2019 |
Investment summary
Business highlights
- 20 affordable but high quality easyGym units across 3 countries
- Innovative fitness and wellness apps
- Online workout video library
- Investment conditional upon Future Fund funding - see Key Info
Learn more about convertible loan campaigns.
Idea
Introduction
Fore Fitness Group (FFG) operates the well-known easyGym and PACK45 brands in the fitness space. Our business plan includes opening gyms and boutique studios across the world, and developing digital assets such as workout apps. We raised capital via the Seedrs platform in October 2019.
We are happy to report that the business plan is ahead of schedule.
With the fundamental changes that are happening to the gym market due to Covid-19, FFG believes that the demand for its core pipeline projects is increasing. We are developing 2 exciting new products that we believe will have broad appeal both during and after the pandemic. These are:
1) An innovative workout app.
2) An effective & easy-to-use home fitness equipment piece.
Furthermore, we have launched an online video fitness series.
Combining this with the other brands under its umbrella, easyGym and PACK45, FFG is able to serve a wide variety of markets and customers.
Investors should read the "Important information - Disclosures" document for information relating to the IP licence agreement and outstanding loan in the business.
Intended impact
FFG operates using a franchise and tech distribution model. This means that the pandemic has had a lesser impact on the company than if we owned the physical assets themselves. Our franchisees have been able to tap into government initiatives that support small businesses.
Crucially, the pandemic resulted in increased demand for home fitness equipment and digital workouts, which is where FFG is focusing its efforts. In the short-term, the company aims to:
1) Finalise its workout app. We believe that these features will add significant value to the end user, while being difficult to replicate. The app is currently under review by the Google Play store.
2) Submit a patent for a piece of home fitness equipment that has digital capabilities. We believe that this product will serve the needs of many who are interested in fitness.
3) Launch a premium version of its online fitness video service.
Substantial accomplishments to date
FFG’s’ vision is to operate the largest fitness network in the world by 2030. The business plan crafted to fulfill this vision involves:
1) Opening gyms and boutique studios across the world by allocating master franchise agreements (MFA).
2) Reach a wide range of customers through different channels by developing digital assets.
This business plan is ahead of schedule, because:
• The company is in advanced discussions to sign 2 more MFAs for both the easyGym and PACK45 brands.
• An MFA was signed to open 100 PACK45 studios across India.
• Online fitness workouts have been launched. PACK45 workouts are designed to attract those who want a more intense 45 minute training sessions, while easyFitness videos are tailored to general fitness and family members who are looking to stay healthy by exercising together. The company has set up processes whereby it can release 2 new videos every weekday, while being able to respond to customer queries.
Monetisation strategy
FFG believes that its vision is more achievable than ever. This is because the company’s tech focus has made it prioritise the development of digital health products, which we believe is a major growth opportunity post pandemic.
Also, by using different brand names, FFG can sell to different customers that are attracted to a particular brand.
Therefore, the monetisation strategy involves the rapid completion of the development pipeline, followed by the scaling of all products. In particular:
• We intend for the workout app to be available on both the Google and Apple app stores, where +100 million users have downloaded fitness apps. We believe that the app can be priced competitively to attract users, and still be highly profitable.
• We expect to ship the first batch of our home fitness equipment in Q3 2020, and estimate that we’ll earn a 30%+ margin on each unit sold.
• A premium version of our online video library will be launched, where users can access features such as live workouts and nutrition plans for a fee.
Use of proceeds
As development of the company’s core products is almost complete, the proceeds will mostly be used to scale production. FFG intends to also build more cash reserves given the continued uncertainty of Covid-19.
In order to maximize the return on investment, the business plan envisages using the proceeds as follows:
• 10% to patent, prototype and gather initial feedback for the home fitness equipment.
• 20% to build, market and ship the first orders for the home fitness equipment.
• 15% to market and establish momentum for the workout app.
• 15% to launch a premium version of the online fitness library
• 20% for company costs such as rent and staffing.
The rest of the proceeds will be kept in reserve for investment opportunities that may present themselves and to seek new MFAs for different countries, in order to expand our reach
With our gyms, boutique studios, home equipment products and digital apps, we believe we are on track to become the largest fitness network in the world by 2030.
Please note that the company has in place a 5 year term loan for the sum of £1.05 million with an 8% annual compounding interest. Important further details are set out in the attached "Important information - Disclosures" document. Funds raised as part of this campaign will not be used to pay this loan.
Key Information
Seedrs is supporting companies who are intending to apply to the Government backed Future Fund. You can read more about the Future Fund here: https://www.seedrs.com/learn/blog/the-future-fu....
In order for a company to be eligible to seek matched funding from the Future Fund, this investment round must be on the convertible loan terms that have been prescribed by the Future Fund for this purpose. These terms differ to our normal ‘advanced subscription agreements’.
Given this product differs from most campaigns on Seedrs, we urge all investors, including regular Seedrs investors, to read the information below and ensure you understand the terms in full before making your investment.
Convertible key terms
You will see a term sheet attached to this Campaign in the Documents section which sets out the key terms of the convertible loan and you can see the full document prescribed by the Future Fund here: https://www.british-business-bank.co.uk/ourpart....
A summary of the key terms is set out below, but should be read in conjunction with the term sheet:
Discount: 20%
Interest: 8% per annum, non-compounding. On conversion events, the company can choose to repay the interest or convert it to equity (generally without the discount). See the Term Sheet for more details.
Redemption Premium: An amount equal to 100% of the principal loan amount
Valuation Cap: £100m
Qualifying Equity Financing. The convertible loan will automatically convert on an equity financing raising at least the total loan amount, at the lowest share price of equity financing less the Discount or, if lower, the Valuation Cap share price.
Maturity Date: 36 months from signing convertible loan agreement.
The default position on the maturity date is that the loan will convert to equity unless the investor majority elect to redeem.
If redeemed, the company will repay the principal together with the Redemption Premium.
If converted, the conversion price will be at the most recent funding round share price less the Discount, provided that funding round happened after 20 April 2020 and was at least a quarter of the size of the convertible loan investment. If no such funding round has occurred, conversion will be at the share price of the last funding round prior to 20 April 2020 (no Discount). Or, if lower, at the Valuation Cap share price.
Other events of default or conversion: There are various other scenarios in which the convertible loan may convert or be repaid and investors should reference the term sheet:
Non Qualifying Funding Round: The convertible loan can convert on an equity financing round which does not meet the size criteria of a ‘Qualifying Equity Financing”, at the election of the majority of investors under the loan. Please see the term sheet for how this conversion is priced.
Exit: The convertible loan will automatically convert or be redeemed on an Exit, whichever would give investors the higher cash return. Please see the term sheet for how conversion is priced and payments on redemption in this scenario.
Events of Default: The convertible loan is to be repaid on the events of default, such as liquidation or winding up. See the term sheet for more details.
Government matched funding
This campaign is conditional upon receiving matched funding from the Future Fund. Seedrs will not complete the investment and transfer the funds raised until we have confirmation that the Future Fund matched funding application has been approved and that the Future Fund is ready to make the investment. If the application is denied, the campaign will be cancelled and funds will be returned to investors.
Because this campaign is conditional upon the matched funding, you will see that we have reflected the Future Fund investment as part of the round. It is distinguished in pink in the progress bar of the campaign. This is to give investors an indication of the potential total size of the funding round (and potential dilution on conversion), but to also distinguish it from regular investment through the Seedrs platform.
Conversion to equity
The convertible loan agreement prescribed by the Future Fund is equity focused and favours conversion of the loan to equity as the default position.
Redemption is only available in certain scenarios and is often subject to the vote of majority of the investors. Where a vote of investors is required, Seedrs will vote on behalf of any investors it represents as nominee.
There is a possibility that the convertible loan will convert in some scenarios without the consent of Seedrs (if we do not make up a majority of investors). It is also Seedrs’ position that this is primarily an instrument for investing in the equity of the fundraising business and our default position would be to vote in favour of converting the loans to shares in the company, unless there is a clear or compelling reason not to.
Risks
As always, investors should be aware of and accept the risks involved in investing in early stage and growth focused businesses: https://www.seedrs.com/pages/risk-warnings
In addition to the usual risk warnings included above, investors should be aware of and accept the following with respect to convertible loans:
The convertible loan agreement is intended as bridge funding to a future funding round, but there is no guarantee that a company will be able to secure further funding.
The Future Fund is to be allocated on a ‘first come, first served basis’ and there is no guarantee that a company will be successful in its application to receive the Future Fund matched funding.
There is a risk that the Company may not have sufficient funds to repay the loan on the maturity date, pay interest when it becomes due or pay the redemption premium included in the terms.
Convertible loans are unsecured obligations and in the event of a winding up or liquidation event will rank behind secured creditors of the Company.
Secondary market
Investors will not be able to sell their interest in the convertible loans on the Seedrs Secondary Market unless and until they have converted to shares in the company (and then only subject to eligibility and the terms and conditions of the Seedrs Secondary Market).
EIS Relief - past, current and future
As noted above, the convertible loan instrument is not compatible with EIS requirements, so no EIS applications will be made with respect to investments in the convertible loan.
The government has confirmed that investing in the convertible loan will not impact EIS relief previously claimed on investments in the fundraising company:
“The government has confirmed that such previous investments will not be affected where the convertible loan converts into shares. Where the convertible loan note redeems, we have been alerted that the government intends to make changes to the rules to clarify that this is compatible with such previous investments.”
However, investing in a convertible loan could impact your ability to claim EIS relief on future investments into the same company. The government has not clarified the position on this and has said it is a matter for HM Treasury and HMRC.
Seedrs is unable to provide tax advice. Tax treatment depends on individual circumstances and is subject to change.
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