SECURITIES EXCHANGE ACT OF 1934 (Former name, former address and former fiscal year, if changed since last report) and Comprehensive Income Changes in Stockholders’ Equity and Mezzanine Equity 2023 2023 year ended December 31, 2022 are as follows: limit. 2022, there were no indicators of impairment. Foreign Currency cash equivalents, accounts receivable, accounts payable, other current liabilities, note receivable and accrued expenses approximate fair value due to their relative short-term maturity and market interest rates. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan (the "2015 Plan"). This 2015 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. The 2015 Plan permits the grant of options and other stock-based awards for up to 5 million 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. See Note 18. Stock-Based Compensation for more information. 2023 following: resulting from the excess of the consideration paid over the fair value of net tangible and intangible assets acquired from the Func Food acquisition. amounts) and other awards 2023 The maximum contractual term of the Company's stock options is 10 years. The Company recognizes forfeitures as they occur. There December 31, 2022. year ended December 31, 2022. 2023: 2023 2023 and December 31, 2022, the Company had contingent commitments to third parties of $75.4 million and $30.7 million, respectively. The Company's guarantees are primarily related to third party suppliers and have arisen through the normal course of business. The contingent commitments may have various terms, and none are individually significant. extract. 2022 The following table sets forth the amount of revenues by category and changes therein for the three months ended 2022: Profit outbound freight efficiencies. 2022 revenues during the six months ended June 30, 2023, an increase from $0.9 million for the same period in 2022. 2022: Profit Net Diluted earnings per share was $0.92 and $0.20, respectively, for the six months ended June 30, 2023 and 2022. cash.SECTIONSSECTION 13 OR 15 (d)15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FORQUARTERLY PERIOD ENDED SEPTEMBER 30, 2017file number: File Number: 001-34611Nevada20-2745790Nevada 20-2745790 (State or Other Jurisdictionother jurisdiction of
incorporation or organization)(I.R.S. Employer
Identification No.)Incorporation or Organization)2424 N Federal Highway, Suite 208, Boca Raton, FloridaIdentification No.)33431 (Address of principal executive offices) (Zip Code) 2424 N Federal Highway, Suite 208. Boca Raton, Florida 33431 (Address of Principal Executive Offices)Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, $0.001 par value CELH Nasdaq Capital Market ☒x No ☐oand posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405(§.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐x No ☒oora smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Act:Large Accelerated Filer ☐Accelerated Filer ☐Large accelerated filer x Accelerated filer o Non-accelerated filer ☐o Smaller reporting company ☒o Emerging growth company o ☐o No ☒xNovember 8, 2017July 31, 2023 was 45,679,09376,891,227 shares.PagePage 222345202324 2525252525252525261I – FINANCIAL INFORMATION September 30,
2017
(Unaudited) December 31,
2016 (1) ASSETS Current assets: Cash $ 19,418,583 $ 11,747,138 Accounts receivable, net 7,071,888 2,787,732 Inventories 4,316,596 2,211,370 Prepaid expenses and other current assets 3,068,290 937,349 Total current assets 33,875,357 17,683,589 Property and equipment, net 49,958 33,533 Total Assets $ 33,925,315 $ 17,717,122 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 8,410,985 $ 1,754,207 Accrued preferred dividends 475,742 353,666 Deferred revenue and other current liabilities 52,988 214,612 Total current liabilities 8,939,715 2,322,485 Long-term liabilities: Line of credit note payable-related party 3,500,000 4,500,000 Total Liabilities 12,439,715 6,822,485 Stockholders’ Equity: Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 6,380 shares issued and outstanding at September 30, 2017 and December 31, 2016 6 6 Common stock, $0.001 par value; 75,000,000 shares authorized, 45,679,093 and 39,999,784 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 45,679 40,000 Additional paid-in capital 78,100,761 64,208,963 Accumulated deficit (56,660,846 ) (53,354,332 ) Total Stockholders’ Equity 21,485,600 10,894,637 Total Liabilities and Stockholders’ Equity $ 33,925,315 $ 17,717,122 (1)Derived from Audited Financial StatementsJune 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 681,054 $ 614,159 Restricted cash — 38,768 Accounts receivable-net 197,811 63,311 Note receivable-current, net 3,323 2,979 Inventories-net 152,545 173,289 Prepaid expenses and other current assets 23,398 11,341 Deferred other costs-current 14,124 14,124 Total current assets 1,072,255 917,971 Note receivable-non-current — 3,574 Property and equipment-net 15,892 10,185 Deferred tax asset 28,373 501 Right of use assets-operating leases 756 972 Right of use assets-finance leases 171 208 Other long-term assets 254 263 Deferred other costs-non-current 255,400 262,462 Intangibles-net 12,211 12,254 Goodwill 13,937 13,679 Total Assets $ 1,399,249 $ 1,222,069 LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 94,313 $ 106,147 Income taxes payable 58,798 1,193 Accrued distributor termination fees — 3,986 Accrued promotional allowance 98,933 35,977 Lease liability obligation-operating leases 505 661 Lease liability obligation-finance leases 67 70 Deferred revenue-current 9,500 9,675 Other current liabilities 7,109 3,586 Total current liabilities 269,225 161,295 Long-term liabilities: Lease liability obligation-operating leases 249 326 Lease liability obligation-finance leases 147 162 Deferred tax liability 2,333 15,919 Deferred revenue-non-current 171,745 179,788 Total Liabilities 443,699 357,490 Commitments and contingencies (Note 19) Mezzanine Equity: Series A convertible preferred shares, $0.001 par value, 5% cumulative dividends; 1,467 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively, aggregate liquidation preference of $550,000 as of June 30, 2023 and December 31, 2022, respectively 824,488 824,488 Stockholders’ Equity: 77 76 Additional paid-in capital 278,980 280,668 Accumulated other comprehensive loss (1,877) (1,881) Accumulated deficit (146,118) (238,772) Total Stockholders’ Equity 131,062 40,091 Total Liabilities, Mezzanine Equity and Stockholders’ Equity $ 1,399,249 $ 1,222,069 For the three months
ended September 30, For the nine months
ended September 30, 2017 2016 2017 2016 Revenue $ 10,785,796 $ 6,657,700 $ 27,023,123 $ 16,508,097 Cost of revenue 6,110,898 3,772,948 15,398,798 9,339,302 Gross profit 4,674,898 2,884,752 11,624,325 7,168,795 Selling and marketing expenses 4,702,308 1,736,029 9,273,207 6,709,345 General and administrative expenses 1,559,173 1,081,273 5,261,694 2,936,273 Total operating expenses 6,261,481 2,817,302 14,534,901 9,645,618 Income (Loss) from operations (1,586,583 ) 67,450 (2,910,576 ) (2,476,823 ) Other Income (Expense): Interest expense (35,661 ) (57,500 ) (122,195 ) (171,250 ) Total Other Income (Expense) (35,661 ) (57,500 ) (122,195 ) (171,250 ) Net Income (Loss) (1,622,244 ) 9,950 (3,032,771 ) (2,648,073 ) Preferred stock dividend (92,250 ) (102,958 ) (273,743 ) (276,264 ) Net income (Loss) available to common stockholders $ (1,714,494 ) $ (93,008 ) $ (3,306,514 ) $ (2,924,337 ) Income (Loss) per share: Basic $ (0.04 ) $ (0.00 ) $ (0.08 ) $ (0.08 ) Diluted $ (0.04 ) $ (0.00 ) $ (0.08 ) $ (0.08 ) Weighted average shares outstanding: Basic 45,487,908 38,666,451 43,990,367 38,530,195 Diluted 45,487,908 38,666,451 43,990,367 38,530,195 For The Three Months Ended June 30, For The Six Months Ended June 30, 2023 2022 2023 2022 Revenue $ 325,883 $ 154,020 $ 585,822 $ 287,408 Cost of revenue 166,889 94,701 313,010 174,195 Gross profit 158,994 59,319 272,812 113,213 Selling, general and administrative expenses 94,181 46,889 163,086 90,667 Income from operations 64,813 12,430 109,726 22,546 Other Income (Expense): Interest income on note receivable 28 55 73 133 Interest income (expense), net 5,545 (3) 10,469 (4) Foreign exchange loss (931) (514) (1,049) (676) Total other income (expense) 4,642 (462) 9,493 (547) Net income before income taxes 69,455 11,968 119,219 21,999 Income tax expense (17,946) (2,810) (26,483) (6,161) Net income $ 51,509 $ 9,158 $ 92,736 $ 15,838 Dividends on Series A convertible preferred shares (6,856) — (13,637) — Income allocated to participating preferred shares (3,796) — (6,727) — Net income attributable to common stockholders $ 40,857 $ 9,158 $ 72,372 $ 15,838 Other comprehensive income: Foreign currency translation (loss) gain, net of income tax (590) (2,296) 4 (2,787) Comprehensive income $ 40,267 $ 6,862 $ 72,376 $ 13,051 Earnings per share: Basic $ 0.53 $ 0.12 $ 0.94 $ 0.21 Dilutive $ 0.52 $ 0.12 $ 0.92 $ 0.20 Weighted average shares outstanding: Basic 76,845 75,451 76,759 75,472 Dilutive 78,944 78,372 78,859 78,397 Cash Flows For the nine months
ended September 30,
2017 September 30,
2016 Cash flows from operating activities: Net Loss $ (3,032,771 ) $ (2,648,073 ) Adjustments to reconcile net (loss) to net cash used in operating activities: Depreciation and amortization 14,292 12,346 Stock-based compensation expense for services 327,997 — Stock-based option compensation expense 1,635,458 1,361,398 Changes in operating assets and liabilities: Accounts receivable, net (4,284,156 ) (1,275,212 ) Inventories net (2,105,226 ) 216,575 Prepaid expenses and other current assets (2,130,941 ) (271,267 ) Accounts payable and accrued expenses 6,656,778 (95,427 ) Accrued preferred dividends (151,667 ) (152,197 ) Deferred revenue and other current liabilities (161,624 ) 511,479 Net cash provided by (used in) in operating activities (3,231,860 ) (2,340,378 ) Cash flows from investing activities: Purchase of property and equipment (30,716 ) (27,535 ) Net cash (used in) investing activities (30,716 ) (27,535 ) Cash flows from financing activities: Net proceeds from issuance of common stock 9,999,948 — Proceeds from exercise of stock options 934,073 5,300 Net cash provided by financing activities 10,934,021 5,300 Net increase (decrease) increase in cash 7,671,445 (2,362,613 ) Cash at beginning of the period 11,747,138 10,128,320 Cash at end of the period $ 19,418,583 $ 7,765,707 Supplemental disclosures: Cash paid during period for: Interest $ 137,014 $ 113,750 Income Taxes $ — $ — Non-cash investing and financing activities: Accrued preferred dividends $ 273,743 $ 276,238 Conversion of convertible note to common stock, related-party 1,000,000 — Stockholders' Equity Common Stock Mezzanine Equity Shares Amount Additional
Paid-In
CapitalAccumulated
Other
Comprehensive
Income (Loss)Accumulated
DeficitTotal Stockholders'
EquityPreferred Shares Amount Balance at December 31, 2022 76,382 $ 76 $ 280,668 $ (1,881) $ (238,772) $ 40,091 1,467 $ 824,488 Adoption of accounting standard — — — — (82) (82) — — Stock-based compensation expense — — 5,507 — — 5,507 — — Issuance of common stock pursuant to exercise of stock options and vested restricted stock units - Cashless 251 1 — — — 1 — — Issuance of common stock pursuant to exercise of stock options - Cash 149 — 478 — — 478 — — Dividends paid to Series A convertible preferred shares — — (6,781) — (6,781) — Foreign currency translation — — — 594 — 594 — — Net income — — — — 41,227 41,227 — — Balance at March 31, 2023 76,782 $ 77 $ 279,872 $ (1,287) $ (197,627) $ 81,035 1,467 $ 824,488 Stock-based compensation expense — — 5,735 — — 5,735 — — Issuance of common stock pursuant to exercise of stock options and vested restricted stock units - Cashless 63 — — — — — — — Issuance of common stock pursuant to exercise of stock options - Cash 39 — 229 — — 229 — — Dividends paid to Series A convertible preferred shares — — (6,856) — — (6,856) — — Foreign currency translation — — — (590) — (590) — — Net income — — — — 51,509 51,509 — — Balance at June 30, 2023 76,884 $ 77 $ 278,980 $ (1,877) $ (146,118) $ 131,062 1,467 $ 824,488 Stockholders' Equity Common Stock Mezzanine Equity Shares Amount Additional
Paid-In
CapitalAccumulated
Other
Comprehensive
Income (Loss)Accumulated
DeficitTotal Stockholders'
EquityPreferred Shares Amount Balance at December 31, 2021 74,909 $ 75 $ 267,847 $ 614 $ (51,490) $ 217,046 — $ — Stock-based compensation expense — — 4,310 — — 4,310 — — Issuance of common stock pursuant to exercise of stock options - Cashless 248 — — — — — — — Issuance of common stock pursuant to exercise of stock options - Cash 194 — 810 — — 810 — — Foreign currency translation — — — (491) — (491) — — Net income — — — — 6,679 6,679 — — Balance at March 31, 2022 75,351 $ 75 $ 272,967 $ 123 $ (44,811) $ 228,354 — $ — Stock-based compensation expense — — 4,207 — — 4,207 — — Issuance of common stock pursuant to exercise of stock options - Cashless 99 — — — — — — — Issuance of common stock pursuant to exercise of stock options - Cash 172 1 449 — — 450 — — Foreign currency translation — — — (2,296) — (2,296) — — Net income — — — — 9,158 9,158 — — Balance at June 30, 2022 75,622 $ 76 $ 277,623 $ (2,173) $ (35,653) $ 239,873 — $ — For The Six Months Ended June 30, 2023 2022 Cash flows from operating activities: Net income $ 92,736 $ 15,838 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 953 556 Amortization 294 275 Allowance for credit losses 1,088 466 Amortization of deferred other costs 7,062 — Inventory excess and obsolescence (3,888) 331 Loss on disposal of property and equipment 191 — Stock-based compensation expense 11,242 8,517 Deferred income taxes-net (41,044) 1,072 Foreign exchange loss 206 602 Changes in operating assets and liabilities: Accounts receivable-net (135,600) (27,920) Inventories-net 24,632 28,753 Prepaid expenses and other current assets (12,058) 1,257 Accounts payable and accrued expenses (12,491) (7,176) Income taxes payable 57,605 — Accrued promotional allowance 62,995 17,512 Accrued distributor termination fees (3,986) — Other current liabilities 3,523 1,820 Change in right of use and lease obligation-net (38) (95) Deferred revenue (8,219) — Other long-term liabilities — 488 Other assets 8 — Net cash provided by operating activities 45,211 42,296 Cash flows from investing activities: Collections from note receivable 3,233 2,592 Purchase of property and equipment (6,810) (2,456) Net cash (used in) provided by investing activities (3,577) 136 Cash flows from financing activities: Principal payments on finance lease obligations (22) (37) Proceeds from exercise of stock options 707 1,260 Dividends paid on preferred shares (13,637) — Net cash (used in) provided by financing activities (12,952) 1,223 Effect of exchange rate changes on cash and cash equivalents (555) 121 Net increase in cash and cash equivalents 28,127 43,776 Cash and cash equivalents at beginning of the period 652,927 16,255 Cash and cash equivalents at end of the period $ 681,054 $ 60,031 Supplemental disclosures: Cash paid for: Taxes $ 10,033 $ 2,100 September20171.ORGANIZATION AND DESCRIPTION OF BUSINESS“Company”“Company” or “Celsius Holdings”“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 two subsidiaries of the Company. On February 7, 2017, the Company established Celsius Asia Holdings Limited and Celsius China Holdings Limited, two Hong Kong corporations as wholly-owned subsidiaries of the Company and on May 9, 2017, the Company established Celsius (Beijing) Beverage Limited, a China corporation as a wholly-owned subsidiary of the Company.Since the merger, the“functional”“functional” calorie-burning fitness beveragesenergy drinks and liquid supplements under the Celsius® brand name.2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES–— The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03Rule 10-01 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotesnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results expected for any future period or the full year. These unaudited consolidated financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and the Amendment No. 1 to the Annual Report on Form 10-K/A (collectively the "2022 Annual Report"). These unaudited consolidated financial statements and the accompanying notes should be read in conjunction with the consolidated financial statements for the year ended December 31, 2016 and notes thereto and other pertinent information contained in our General Form for Registration of Securities of Form 10 as filed with the Securities and Exchange Commission (the “Commission”).2022 Annual Report. The consolidated financial statements of the Company include the Company and its wholly ownedwholly-owned subsidiaries. All material inter-companyintercompany balances and transactions have been eliminated.unaudited consolidated financial statements and accompanying disclosures in conformity with accounting principles generally accepted in the United States of AmericaUS GAAP 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. ActualAlthough these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results couldmay differ from those estimates. Significant estimates include the allowance for doubtful accounts, reservescurrent expected credit losses, allowance for inventory obsolescence and sales returns, the useful lives and values of property and equipment, impairment of goodwill and intangibles, deferred taxes and related valuation allowance, promotional allowance, and valuation of stock based compensation,stock-based compensation.deferred tax asset valuation allowance.Segment Reporting—Althoughwhose operating results are regularly reviewed by the chief operating decision maker ("CODM") to make decisions about allocating resources and to assess performance. Even though 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,Disclosures 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 nine months ended September 30, 2017 and 2016 all material assets and revenues of the Company were in the United States except as disclosed in “Concentration of Risk” below. and Subsidiaries September20172.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)derivesis derived from the sale of Celsius® beverages.The Company uses single supplier relationshipsCelsius® functional energy drinks and liquid supplements.its raw materials purchasesmore than 10% of total revenue for the three and filling capacity, which potentially subjectssix months ended June 30, 2023 and 2022 are as follows:For The Three Months Ended June 30, For The Six Months Ended June 30, 2023 2022 2023 2022 Pepsi 56.7 % — % 58.3 % — % Costco 13.0 % 15.9 % 12.9 % 16.6 % All others 30.3 % 84.1 % 28.8 % 83.4 % Total 100.0 % 100.0 % 100.0 % 100.0 % Company to a concentration of business risk. If these suppliers had operational problems or ceased making product available tosix months ended June 30, 2023 and the Company, operations could be adversely affected.2023 2022 Pepsi 68.4 % 47.6 % Amazon 10.7 % 11.8 % All others 20.9 % 40.6 % Total 100.0 % 100.0 % SeptemberJune 30, 20172023 and December 31, 2022, the Company had approximately $19.2$680.6 million and $652.4 million in excess of the Federal Deposit Insurance Corporation limit but has incurred no losses with respect to these accounts.For the nine months ended September 30, 2017 and 2016, the Company had the following 10 percent or greater concentrations of revenue with its customers: 2017 2016 A* 32.9 % 35.0 % B 7.9 % 11.1 % All other 59.2 % 53.9 % Total 100.0 % 100.0 % At September 30, 2017 and December 31, 2016, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers: 2017 2016 A* 57.5 % 53.8 % B 4.3 % 11.5 % All other 38.2 % 27.0 % Total 100.0 % 100.0 % *Revenues and receivables from customer A are derived from a distributor located in Sweden.SeptemberJune 30, 20172023 and December 31, 2016,2022, the Company did not have any investments with original maturities of three months or less.Accounts Receivable Accounts receivable are reported at net realizable value. The Company establishes anreceived upfront payments from Pepsi during 2022, which were contractually restricted and could only be used to satisfy termination payments due to former distributors or must be repaid to Pepsi. These upfront payments received from Pepsi could not be used for general operating activities of the Company and were classified as restricted cash based on the terms of the Transition Agreement. See Note 4. Revenue for more information. At June 30, 2023, the Company did not have restricted cash. At December 31, 2022, the Company had $38.8 million of restricted cash.doubtful accounts receivable is developed using historical collection experience, current and future economic and market conditions, a review of the current status of customers’ trade accounts receivables, and where available, a review of the financial strength and credit ratings of larger customers. Customers are pooled based uponon sharing specific risk factors pertainingand the Company reassesses these customer pools on a periodic basis. The receivables allowance is based on aging of the accounts receivable balances and forward-looking information. The Company uses the probability of default and forward-looking information to theassess credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined thatestimate expected credit losses for its note receivable related to Qifeng Food Technology (Beijing) Co. Ltd ("Qifeng"). See Note 7. Note Receivable for more information on Qifeng and the amounts are uncollectible. At September 30, 2017 and December 31, 2016, there was an allowance for doubtful accounts of $48,800 and $72,300, respectively.note receivable. and Subsidiaries September201720232.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Allowance for Expected Credit Losses Balance as of December 31, 2022 $ 2,147 Current period change for expected credit losses (118) Balance as of June 30, 2023 $ 2,029 include only the purchase cost and are statedvalued at the lower of cost or market.net realizable value. Cost is determined using the FIFOfirst-in, first-out method. Inventories consist of raw materials and finished products purchased from third parties. The Company outsources its manufacturing process as a result has no work in process inventories. The Company reserves against inventory during the period in which such materials and products are no longer usable or marketable. At SeptemberJune 30, 20172023 and December 31, 2016, the Company recorded a reserve2022, there was an inventory allowance for excess and obsolete products of $115,529approximately $4.5 million and $200,805,$8.4 million, respectively. The changes in reservethe allowance are included in cost of revenue. Free samples are also recorded as cost of revenue.liveslife of the assetsasset, generally ranging from three to seven years.“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 ofAn impairment loss is determined regarding a long-lived assets is measured by comparison ofasset, if 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,not recoverable and exceeds its fair value. The carrying amount is not recoverable when it exceeds the sum of the undiscounted cash flows expected to result from use of the asset over its remaining useful life and final disposition. The Company did not recognizerecord any impairment expense at Septembercharges during the six months ended June 30, 20172023 and 2022.June 30,
2023December 31,
2022United States $ 15,042 $ 9,750 Finland 12,165 12,171 Sweden 1,338 1,251 Other 29 1 Long-lived assets related to foreign operations 13,532 13,423 Total long-lived assets-net $ 28,574 $ 23,173 2016.is derived from the sale of beverages.Contracts with Customers ("ASC 606"). Revenue is recognized when persuasive evidenceperformance obligations under the terms 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 arrangementsa contract with the customer are estimated at timesatisfied. Product sales occur once control is transferred based on the commercial terms of salethe customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. See Note 4. Revenue for more information.deducted from revenue.Deferred Revenuerecognized ratably over the anticipated life of the respective new distribution agreements. As of June 30, 2023, the Company had approximately $181.2 million in deferred revenue, of which $171.7 million is classified as deferred revenue-non-current and $9.5 million is classified as deferred revenue-current in the consolidated balance sheets and are contract liabilities related to Pepsi which are recognized ratably over the twenty-year agreement. Refer to Note 13. prepayments for deposits in advance of delivery of products and/or production runs. Such amounts are initially recorded as customer advances liability within deferred revenue. The Company recognizes such revenue as it is earned in accordance with revenue recognition policies.Shipping and Handling Costs— Shipping and handling costs are reported in cost of revenue in the accompanying consolidated statements of income. The Company incurred shipping and handling costshad no customer advances as of $2.4 and $1.5 million during the nine months ended SeptemberJune 30, 2017 and 2016,2023 or December 31, 2022, respectively. Although our classification is consistent with many companies, our gross margin may not be comparable to many beverage companies that include shipping and handling costs in selling, general and administrative expenses.incurred.incurred and charged to selling, general and administrative expenses. The Company mainly uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred marketing and advertising expenseexpenses of approximately $5.1$36.5 million and $3.4$14.8 million, respectively, during the ninethree months ending Septemberended June 30, 20172023 and 2016,2022. During the six months ended June 30, 2023 and 2022, the Company incurred marketing and advertising expenses of approximately $67.5 million and $29.3 million, respectively.expenseexpenses as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred these expenses of $222,300approximately $0.2 million and $66,700$0.1 million, respectively, during the ninethree months ending Septemberended June 30, 20172023 and 2016,2022. During the six months ended June 30, 2023 and 2022, the Company incurred research and development expenses of approximately $0.5 million and $0.2 million, respectively.Fair Value of Financial Instruments — The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable approximate fair value due to their relative short-term maturity and market interest rates.7Celsius Holdings, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) September 30, 20172.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 other assets or liabilities measured at fair value at September 30, 2017 and December 31, 2016.TranslationGain/Loss — Generally, foreignresultsare included in the Statements of Operations as foreign exchange gains or losses. For the three months ended June 30, 2023 exchange loss was approximately $0.9 million versus foreign exchange loss of approximately $0.5 million during the three months ended June 30, 2022. For the six months ended June 30, 2023, the foreign exchange loss was approximately $1.0 million versus approximately $0.7 million during the six months ended June 30, 2022.suchthe translation of net assets from functional currency to the reporting currency, as well as exchange gains and losses on intercompany balances of long-term investment nature, are included in GeneralOther Comprehensive Income, net of tax. The Company incurred a foreign currency translation net loss during the three months ended June 30, 2023 of approximately $0.6 million and administrative expenses.a net loss of approximately $2.3 million during the three months ended June 30, 2022. The Company incurred foreign currency translation expensenet gains of less than $0.1 million during the six months ended June 30, 2023 and a net loss of approximately $2,200 and $0$2.8 million during the ninesix months ending Septemberended June 30, 20172022. The Company's primary operations in different countries required that it transacts in the following currencies:2016, respectively.“AccountingAccounting for Income Taxes” ("ASC 740-10"), 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 notmore-likely-than-not that the net deferred asset will not be realized. The Company follows the provisions of the ASC 740 -10,740-10 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 notmore-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 SubsidiariesNotes to Consolidated Financial Statements (unaudited) September 30, 20172.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 percent50% 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 consolidated balance sheetsheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.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 740-10-25Definition of Settlement, which provides guidance on how an entity should determine whetheraffirms a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can beas effectively settled upon the completion of an examination by a taxing authority, without beingirrespective of whether the position has been legally extinguished. Forextinguished, as per ASC 740-10-25 positions considered effectively settled, an entity would recognizebenefits. This policy allows the Company to record the full amount of tax benefit related to each tax position, even ifin cases where, based solely on its technical merits, the tax position is not considered more likely than notseen as 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 calendar year December 31 tax year. ended December 31, 2016, 2015, and 2014in 2020 through 2022 remain subject to potential examination by the taxing authorities.BasicThe Company computes 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. Dilutedin accordance with ASC Topic 260 Earnings per Share (“ASC 260”), which requires earnings per share are computed("EPS") for each class of stock (common stock and participating preferred stock) to be calculated using the weighted average numbertwo-class method. The two-class method is an allocation of earnings (distributed and undistributed) between the holders of common stock and dilutive common share equivalents outstanding duringa company’s participating preferred stockholders. Under 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 September 30, 2017, there were options outstanding to purchase 4.6 million shares, which exercise price averaged $1.80, 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 been presentedtwo-class method, earnings for the three months ended September 30, 2017 but have not been presentedreporting period are allocated between common stockholders and other security holders based on their respective participation rights in undistributed earnings. See Note 3. Earnings per Share for the three months ended September 30, 2016 and nine months ended September 30, 2017 and 2016, as the effects would be anti-dilutive.more information.Celsius Holdings, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited)September 30, 20172.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Share-Based PaymentsStock-Based Compensation—The Company has fully adoptedfollows the provisions of ASC Topic 718Compensation —Stock Compensationand related interpretations for employee and non-employee stock based compensation.interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments.stock-based compensation. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants.In August 2015,FASB issuedCompany adopted ASU No. 2015-15,Presentation and Subsequent2016-13 Financial Instruments — Credit Losses (Topic 326): Measurement of Debt Issuance Costs AssociatedCredit Losses on Financial Instruments ("CECL"), using a modified retrospective approach. ASU 2016-13 replaces the incurred loss impairment model with Line-of-Credit Arrangements (Amendmentsan expected credit loss impairment model for financial instruments, including trade receivables. The guidance requires entities to SEC Paragraphs Pursuantconsider forward-looking information 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 presentedestimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due. Upon adoption, changes 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. The Company has adopted ASU 2015-03 and ASU 2015-15 as of December 31, 2016; the adoption didallowance were not have a material impact on 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). and Subsidiaries September20172.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Recent Accounting Pronouncements (continued)In May 2014,2023FASB issued ASU No. 2014-09, “Revenueweighted average number of shares of basic common stock outstanding. The Company’s Series A Convertible Preferred Stock is classified as a participating security in accordance with ASC 260. Net income allocated to the holders of Series A Convertible Preferred Stock was calculated based on the stockholders’ proportionate share of weighted average shares of common stock outstanding on an if-converted basis.For The Three Months Ended June 30, For The Six Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income $ 51,509 $ 9,158 $ 92,736 $ 15,838 Less: dividends paid to Series A convertible preferred stockholders (6,856) — (13,637) — Undistributed income 44,653 9,158 79,099 15,838 Income allocated to participating preferred shares (3,796) — (6,727) — Net income attributable to common stockholders $ 40,857 $ 9,158 $ 72,372 $ 15,838 Denominator: Weighted average basic common shares outstanding 76,845 75,451 76,759 75,472 Dilutive effect of common shares 2,099 2,921 2,100 2,925 Weighted average diluted shares outstanding 78,944 78,372 78,859 78,397 Earnings per share: Basic $ 0.53 $ 0.12 $ 0.94 $ 0.21 Dilutive $ 0.52 $ 0.12 $ 0.92 $ 0.20 Contractsthe computation of diluted net income per share related to common stockholders as their effect was antidilutive.Customers (Topic 606)” which supersedes previous revenue recognition guidance. ASU No. 2014-09 requires thatASC 606.Revenue is recognized when performance obligations under the terms of a company recognize revenue at ancontract with the customer are satisfied. Product sales occur once control is transferred based on the commercial terms. Revenue is measured as the amount that reflectsof consideration the consideration to which the companyCompany expects to be entitledreceive in exchange for transferring goods or servicesgoods. Product sales are recorded net of variable consideration, such as provisions for returns, discounts and promotional allowances. Such provisions are calculated using historical averages and adjusted for any expected changes due to current business conditions. Consideration given to customers for cooperative advertising is recognized as a customer. In applying the new guidance, a company will (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction pricereduction of revenue except to the contract’s performance obligations;extent that there is a distinct good or service, in which case the expense is classified as selling or marketing expense. The amount of consideration the Company receives and (v) recognize revenue the Company recognizes varies with changes in customer incentives that the Company offers to its customers and their customers. Additionally, for any agreements which are one year or less, the practical expedient under ASC 340-40-25-4 is applied to expense contract acquisition costs when (or as)incurred if the entity satisfies a performance obligation. ASU No. 2014-09 was to be effective for reporting periods beginning after December 15, 2016. However, on July 9, 2015, the FASB voted to approve a one-year deferralamortization period of the effective date. This new guidance is effective for the Company beginning January 1, 2018. All new accounting pronouncements issued but not yet effective are not expected tocontract asset would have a material impact on our results of operations, cash flowsotherwise been recognized in one year or financial position. The Company adopts all applicable, new accounting pronouncements as of the specified effective dates. Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.Liquidity— These financial statements have been prepared assuming the Company will be able to continue as a going concern. At September 30, 2017, the Company had an accumulated deficit of $54,946,000 which includes a net loss available to common stockholders of approximately $1,592,000 for the nine months ended September 30, 2017. While these factors alone may raise doubt as to the Company’s ability to continue as a going concern, the Company’s sale of an aggregate of approximately $10 million in capital through the sale of an aggregate of 3,333,329 shares of our common stock at a purchase price of $3.00 per share in a private offering to 13 accredited investors between January 1, 2017 and March 14, 2017 is deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report.3.INVENTORIESInventories consist of the following at: September 30, December 31, 2017 2016 Finished goods $ 2,941,925 $ 2,142,032 Raw Materials 1,490,200 270,142 Less: Inventory write-down (115,529 ) (200,804 ) Inventories, net $ 4,316,596 $ 2,211,370 and SubsidiariesSeptember20174.PREPAID EXPENSES AND OTHER CURRENT ASSETSFor The Three Months Ended June 30, For The Six Months Ended June 30, 2023 2022 2023 2022 North America $ 310,815 $ 145,409 $ 559,367 $ 268,882 Europe 11,909 7,280 20,561 15,775 Asia-Pacific 1,606 883 2,864 1,849 Other 1,553 448 3,030 902 Net sales $ 325,883 $ 154,020 $ 585,822 $ 287,408 June 30,
2023December 31,
2022Finished goods $ 95,766 $ 119,229 Raw materials 61,322 62,491 Less: Inventory reserve (4,543) (8,431) Inventories-net $ 152,545 $ 173,289 $3,068,000$23.4 million and $937,000,$11.3 million at SeptemberJune 30, 20172023 and December 31, 2016,2022, respectively, and consistconsisting mainly of prepaid consulting agreement with D3M Licensing Group,advances to co-packers related to inventory production, advertising, prepaid insurance, prepaid slotting fees, value added tax payments and deposits on purchases.5.PROPERTY AND EQUIPMENTJune 30,
2023December 31,
2022Note receivable-current $ 3,392 $ 2,979 (69) — Note receivable-non-current — 3,574 Total $ 3,323 $ 6,553 Future minimum lease payments Operating
LeasesFinance
LeasesTotal 2023 $ 334 $ 52 $ 386 2024 369 40 409 2025 54 68 122 2026 31 65 96 2027 — — — Total future minimum lease payments 788 225 1,013 Less: Amount representing interest (34) (11) (60) Present value of lease liabilities 754 214 953 Less: current portion (505) (67) (674) Long-term portion $ 249 $ 147 $ 279 equipment consistequipment-net consists of the following at: September 30, December 31, 2017 2016 Furniture and equipment $ 322,342 $ 291,626 Less: accumulated depreciation (272,384 ) (258,093 ) Total $ 49,958 $ 33,533 Estimated Useful Life in Years June 30,
2023December 31,
2022Merchandising equipment - coolers 3-7 $ 14,962 $ 9,885 Office equipment 3-7 1,286 1,124 Vehicles 5 2,596 1,257 Less: accumulated depreciation (2,952) (2,081) Total $ 15,892 $ 10,185 $14,292approximately $0.6 million and $12,346 during$0.4 million for the ninethree months ended SeptemberJune 30, 20172023 and 2016,2022, respectively. Depreciation expense amounted to approximately $1.0 million and $0.6 million for the six months ended June 30, 2023 and 2022, respectively.6.ACCOUNTS PAYABLE AND ACCRUED EXPENSESJune 30,
2023December 31,
2022Definite-lived intangible assets Customer relationships $ 13,670 $ 13,418 Less: accumulated amortization (1,914) (1,610) Definite-lived intangible assets, net $ 11,756 $ 11,808 Indefinite-lived intangible assets Brands $ 446 $ 2,984 Less: impairment — (2,576) Effect of exchange rate changes 9 38 Indefinite-lived intangible assets, net $ 455 $ 446 Intangibles-net $ 12,211 $ 12,254 2023 $ 273 2024 547 2025 547 2026 547 2027 547 Thereafter 9,295 Total $ 11,756 June 30,
2023December 31,
2022Accounts payable $ 26,039 $ 36,248 — 34,807 Accrued freight 4,472 8,532 Accrued expenses 31,514 7,425 Accrued legal 12,403 10,463 Unbilled purchases 19,885 8,672 Total $ 94,313 $ 106,147 June 30,
2023December 31,
2022VAT payable $ 591 $ 198 State Beverage Container Deposit 6,518 3,388 Total $ 7,109 $ 3,586 at: September 30, December 31, 2017 2016 Accounts payable $ 5,716,824 $ 858,131 Accrued expenses 2,694,161 896,076 Total $ 8,410,985 $ 1,754,207
•Net sales to Pepsi amounted to $184.9 million and $341.4 million, respectively, for the three and six months ended June 30, 2023 and are included in revenue on the accompanying consolidated statements of operations and comprehensive income. and SubsidiariesSeptember20177.DEFERRED REVENUE AND OTHER CURRENT LIABILITIESDeferred revenue2023other current liabilities consist ofis included in accrued promotional allowance in the following at: September 30, December 31, 2017 2016 Customer deposits $ 38,106 $ 201,652 State bottle bill liability 14,882 12,960 Total $ 52,988 $ 214,612 8.LINE OF CREDIT NOTE PAYABLE - RELATED PARTIESLine of credit note payable - related parties consists ofCompany's consolidated balance sheets.following as of: September 30, December 31, 2017 2016 Note Payable – line of credit In July 2010, the Company entered into a line of credit note payable with a related party principle shareholder which carries interest of five percent per annum and is due quarterly. 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. In January 2017, the Company issued 333,333 of common stock at $3.00 per share the offering price in exchange for the cancellation of $1,000,000 of this line. Long-term portion $ 3,500,000 $ 4,500,000 Celsius Holdings, Inc. and SubsidiariesNotes to Consolidated Financial Statements (unaudited)September 30, 20179.PREFERRED STOCK – RELATED PARTYOn August 26, 2013,•Pepsi paid the Company entered into a securities purchase agreement (the “2013 Purchase$227.8 million in cash under the Transition Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) during the year ended 2022. This amount was used to pay termination fees owed by the Company to terminated distributors; any excess cash received from Pepsi was contractually restricted and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder.due back to Pepsi. The Company issued 2,200 sharesrecorded deferred revenues (a contract liability) of its Series C Preferred Stock (the “Preferred C Shares”)$181.2 million, which is presented net of $2.3 million and $4.7 million, respectively, of revenue recognized in exchangethe consolidated statements of operations for the conversionthree and six months ended June 30, 2023. The Company recorded deferred revenues of a $550,000 short term loan from CDS$189.5 million, net of $4.2 million of revenue recognized as of December 31, 2022. The deferred revenues will be recognized by Celsius ratably over the twenty-year agreement term.conversionCompany did not have a refund liability.$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 stockSeries A to Pepsi was recorded 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 stockfair value, 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 bybe $832.5 million, on August 1, 2022. Cash proceeds from the issuance of additionalSeries A received from Pepsi were $550 million. See Note 14. Mezzanine Equity for more information.C Shares. The holderStock over the issuance proceeds 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.$550 million. As of SeptemberJune 30, 2017,2023 amounts representing the unamortized deferred other costs of $14.1 million and $255.4 million, respectively, are presented in deferred other costs-current and deferred other costs-non-current in the consolidated balance sheets. As of December 31, 2016, $424,6312022 amounts representing the unamortized deferred other costs of $14.1 million and $302,555 of dividends has been accrued, respectively. The Preferred C Shares mature on December 31, 2018$262.5 million, respectively, are presented in deferred other costs-current 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, whereasdeferred other investors purchased common shares at $0.89costs-non-current in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535,consolidated balance sheets. Amortization for the three and six months ended June 30, 2023, was $3.6 million and $7.1 million, respectively. This 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 optionan offset 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 adjustmentrevenue in the eventconsolidated statements of stock dividends, stock splitsoperations and similar events. The Preferred D Shares accrue cumulative annual cash dividends at the ratecomprehensive income.5% per annum, payable quarterly in cashBusiness, 2. Basis of Presentation and have a liquidation preferenceSummary 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 Significant Accounting Policies, 4. Revenue, 11. Accounts Payable and Accrued Expenses, and 14.Mezzanine Equity for a vote, except as required by law. As of September 30, 2017, and December 31, 2016, $51,111 and $51,111 of dividends has been accrued regarding these shares, respectively.more information.
Related Party LeaseCelsius Holdings, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) September 30, 201710.RELATED PARTY TRANSACTIONSrentedleased from a company affiliated with CD Financial, the line of credit note payable lender,LLC which is controlled by Carl DeSantis, a principal shareholder (see note 13). Currently, themajor stockholder. The lease expires on October 2020extends until December 2024 with a monthly rent of $8,809.$35 thousand.rental fee is commensurateexpansion space extends until December 2024 with other properties availablea monthly rent of $8 thousand.market.In April 2015,event dividends on the Series A are paid-in-kind (“PIK Dividends”) pursuant to the Series A Certification of Designation (the “Series A Certificate”). On August 1, 2022, pursuant to the Purchase Agreement, the Company entered intoissued approximately 1.5 million shares of Series A, representing 100% of the authorized Series A shares, to Pepsi for stated cash consideration aggregating $550 million, excluding issuance costs. The Series A was issued concurrently with the execution of the Distribution Agreement and the Transition Agreement. The Company determined that the aggregate fair value of the Series A on the issuance date was $832.5 million, or approximately $568 per share. Accordingly, the Series A Convertible Preferred Stock was recorded at that amount, net of issuance costs of $8.0 million, in the Company’s consolidated balance sheets.strategic marketing and advisory services agreement with All Def Digital. Tim Leissner,change in control as defined in the Series A Certificate. S99-3A(2) of the SEC's Accounting Series Release No. 268 ("ASR 268") requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a former director and current shareholderfixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268, an issuer should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity. The Series A is not mandatorily redeemable, however, a change in control is not solely in control of the Company, and accordingly, the Company determined that mezzanine treatment is appropriate for the Series A and has presented it as such in the consolidated balance sheets and consolidated statements of changes in stockholders' equity and mezzanine equity as of and for the periods ending June 30, 2023 and December 31, 2022, respectively. The Series A is not considered mandatorily redeemable.a directorsubject to various restrictions with respect to the percentage of the Company’s outstanding common shares on an as-converted basis through purchases of the Company’s common stock in the open market and shareholder in All Def Digital. Asthe accumulation of September 30, 2017, and since inception,PIK Dividends. Additionally, pursuant to the Purchase Agreement, Pepsi has the right to designate one nominee for election to Company’s board of directors, so long as Pepsi (together with its affiliates) beneficially owns at least approximately 3.7 million shares of the Company’s outstanding common stock on an as-converted basis. In August 2022, the Company has paid All Def Digital $440,395, for services relatingexpanded the number of seats from eight to nine in connection with the election of a Pepsi representative to the strategic marketingCompany’s board of directors.advisory services agreement. Forrights on liquidation, winding-up and dissolution, (i) senior and in priority of payment to the nineCompany’s common stock, (ii) on parity with any class or series of capital stock of the Company expressly designated as ranking on parity with the Series A, and (iii) junior to any class or series of capital stock of the Company expressly designated as ranking senior to the Series A. The aggregate liquidation preference of the Series A is $550 million as of June 30, 2023 and December 31, 2022.ending Septemberended June 30, 2017, services2023. There were performedno cumulative undeclared dividends on the Series A at June 30, 2023. In addition, there were no dividends issued to common shareholders as of the six months ended June 30, 2023 and 2022.All Def Digital totaling $50,000 respectively.Otherthe Company. The Company shall have the right to redeem all (and not less than all) of the then-outstanding shares of Series A at the Redemption Price. In the event of the Company's optional redemption, the Company shall affect such redemption by paying the entire Redemption Price on or before the date that is thirty days after the delivery of the Company’s redemption notice and by redeeming all the shares of Series A on such date.party transactions (other than sales in the ordinary course of business); or (ii) any merger, consolidation or reorganization of the Company with or into any other entity or entities as a result of which the holders of the Company’s outstanding capital stock (on a fully-diluted basis) immediately prior to the merger, consolidation or reorganization no longer represent at least a majority of the voting power of the surviving or resulting Company or other entity; or (iii) any sale or series of sales, directly or indirectly, beneficially or of record, of shares of the Company’s capital stock by the holders thereof which results in any person or group of affiliated persons owning capital stock holding more than 50% of the voting power of the Company (a “Change in Control”), the Company (or its successor) shall redeem all (and not less than all) of the then-issued and outstanding shares of Series A. Upon such redemption, the Company will pay or deliver, as applicable, to each holder in respect of each share of Series A held by such holder, an amount equal to the greater of (A) cash in an amount equal to the Redemption Price, or (B) the amount of cash and/or other assets (including securities) such holder would have received had each share of Series A held by such holder as of the close of business on the business day immediately prior to the effective date of such transaction resulting in a Change of Control, converted into a number of shares of common stock equal to the then-applicable conversion ratio and participated in such transaction resulting in such Change of Control as a holder of shares of common stock (such greater amount, the “Change of Control Redemption Price”). If, in connection with a transaction resulting in a Change of Control, the Company or its successor shall not have sufficient funds legally available under the Nevada law governing distributions to stockholders to redeem all outstanding shares of Series A, then the Company shall (A) redeem, pro rata among the holders, a number of shares of Series A equal to the number of shares of Series A that can be redeemed with the maximum amount legally available for the redemption of such shares of Series A under the Nevada law governing distributions to stockholders, and (B) redeem all remaining shares of Series A not redeemed because of the foregoing limitations at the applicable Change of Control Redemption Price as soon as practicable after the Company (or its successor) is able to make such redemption out of assets legally available for the purchase of such share of Series A. The inability of the Company (or its successor) to make a redemption payment for any reason shall not relieve the Company (or its successor) from its obligation to affect any required redemption when, as and if permitted by applicable law.discussednot redeemed for any reason on such Redemption Date, (x) from such Redemption Date until the fifteen-month anniversary of such Redemption Date, the dividend rate with respect to such unredeemed share of Series A shall automatically increase to 8% per annum, (y) from such fifteenth-month anniversary of such Redemption Date until the thirtieth-month anniversary of such Redemption Date, the dividend rate with respect to such unredeemed share of Series A shall automatically increase to 10% per annum and (z) from and after such thirtieth-month anniversary of such Redemption Date, the dividend rate with respect to any such unredeemed share of Series A shall automatically increase to 12% per annum, in notes 8 and 9.11.STOCKHOLDERS’ EQUITYIssuanceeach case until such share is duly redeemed or converted.services performedIn January 2017,the Series A Certificate either at the option of the Company or subject to an automatic conversion as discussed below. The Series A was issued 47,126with a conversion price of $75 which is potentially subject to adjustment pursuant to the Series A Certificate. The conversion ratio is calculated as the quotient of (a) the sum of (x) the stated value of such share of Series A as of the applicable conversion date, plus (y) of all accrued and unpaid dividends previously added to the stated value of such share of Series A, and without duplication, all accrued and unpaid dividends per share of Series A through the applicable conversion date; divided by (b) the conversion price as of the conversion date. As of June 30, 2023, the conversion ratio of the Series A into common was 1 to 5. At June 30, 2023, approximately 7.3 million shares of “restricted” stock to each William H. Milmoe and Thomas E. Lynch in consideration for services previously rendered to Celsius. Total shares issued were 94,252 at a fair value of $328,000, or $3.48 per share representing the closing stock price on that date.Issuance ofCompany’s common stock pursuantare issuable upon conversion of the Series A Convertible Preferred Stock.private placementBetween January 1, 2017 and March 2017,the date the Company issueddelivers a totalconversion notice to the holders of 3,333,329Series A exceeds the Conversion Price, the Company may elect to convert all, but not less than all, of the outstanding shares of Series A into shares of the Company’s common stock.$3.00their request even if such request has already been submitted, provided that the Series A shares have not already been redeemedfor net proceeds of approximately $10 million to 12 accredited investors.In January 2017, the Company issued 333,333 unregistered common shares upon the conversion of $1,000,000 of the line of credit not payable debt valued at $3.00 per share.ninesix months ended SeptemberJune 30, 2017,2023, the Company issued an aggregate of 1,918,3950.5 million shares of its common stock pursuant to the exercise of stock options grantedgrants under the Company’s 2006 Stock Incentive2015 Plan. The Company received aggregate proceeds of $934,000approximately $0.7 million for 0.2 million options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.
During the six months ended June 30, 2022, the Company issued an aggregate of 0.7 million shares of its common stock pursuant to the exercise grants under the Company's 2015 Plan. The Company received aggregate proceeds of approximately $1.3 million for 0.4 million options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.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. June 30, 2023 Level 1 Level 2 Level 3 Mezzanine equity: Series A convertible preferred shares $ — $ 824,488 $ — Total $ — $ 824,488 $ — and SubsidiariesSeptember201712.STOCK-BASED COMPENSATIONanthe 2006 Incentive Stock Plan on January 18, 2007. This plan was intended to provide incentives to 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. While the plan terminated 10 years after the adoption date, issued awards have their own schedule of terminations. The Company is no longer granting awards under this plan and there are no unvested awards as of June 30, 2023.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 Awardsawards issued. The 2015 Plan permits the grant of options and shares for up to 5,147,0005 million shares. In addition, there is a provision in the 2015 Plan for an annual increase to the maximum number of 15% of the issued shares authorized under the plan to the shares included under the plan, with the shares to2015 Plan. The increase shall be added on the first day of eachthe calendar year beginning on January 1, 2016. On January 1, 2017,2016, equal to 15% of the permitted number of available option grants increased to 5,999,968 shares.shares outstanding as of such date. As of SeptemberJune 30, 2017 there were 3,488,1362023, approximately 5.9 million shares are available for issuance under the Plan.Cumulatively since inception of the 2015 Stock Incentive Plan, the Company has issued options to purchase 2,622,500 common shares. Plan. See Note 15 ninethree months ended SeptemberJune 30, 20172023 and 2016,2022, the Company recognized an expense of $1,963,455approximately $5.7 million and $495,108,$4.2 million, respectively. For the six months ended June 30, 2023 and 2022, the Company recognized an expense of approximately $11.2 million and $8.5 million, respectively, of non-cash compensation expense (included in Generalselling, general and Administrativeadministrative expense in the accompanying Consolidated Statementconsolidated statements of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate,operations and expected annual volatility. As of September 30, 2017, the Company had approximately $4,195,191 of unrecognized pre-tax non-cash compensation expense related to non-vested option-based compensation arrangements under the Plan. comprehensive income).expects to recognize this expense based on a weighted-average period of 3 years. The Company usesused straight-line amortization of compensation expense over the two to three yearthree-year requisite service or vesting period of the grant.arewere options to purchase approximately 3.11.9 million shares that have vested as of SeptemberJune 30, 2017.Celsius Holdings, Inc.2023 and Subsidiaries Notes to Consolidated Financial Statements (unaudited) September 30, 201712.STOCK-BASED COMPENSATION (CONTINUED)issuances. issuances and recognizes forfeitures as they occur.Black - ScholesBlack-Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following: Nine months ended September 30, 2017 2016 Expected volatility 133% - 140% 368% - 390% Expected term 4 Years 4 Years Risk-free interest rate 1.33% - 1.84% 1.36% - 1.61% Forfeiture Rate 0.00% 0.00% Expected dividend yield 0.00% 0.00% The expected volatility was determined with reference to2021 Expected volatility NA NA 69.18 - 81.11% Expected term NA NA 4.49 - 5.00 Years Risk-free interest rate NA NA 0.32% - 1.39% Forfeiture Rate NA NA 0.0% historical volatility ofsix months ended June 30, 2023 and 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.SeptemberJune 30, 20172023 and changes during the periodsix months ending on that date is as follows: Weighted
Average Aggregate Average Exercise Intrinsic Remaining Shares (000’s) Price Value Term (Yrs) Options Balance at December 31, 2016 5,636 $ 1.04 $ 14,847 5.06 Granted 1,170 $ 3.80 Exercised (1,985 ) $ 0.83 Forfeiture and cancelled (217 ) $ 1.77 At September 30, 2017 4,605 $ 1.80 $ 9,444,762 5.26 Exercisable at September 30, 2017 3,066 $ 1.15 Weighted Average Aggregate
Intrinsic
Value
(000’s)Weighted
Average
Remaining
Term (Yrs)Shares
(000’s)Exercise
PriceGrant Date
Fair
ValueAt December 31, 2022 2,266 $ 9.66 $ 213,914 5.43 Granted Exercised (290) 5.20 102.03 28,070 Forfeiture and cancelled (1) 18.17 At June 30, 2023 1,975 $ 10.31 $ 274,461 4.68 Exercisable at June 30, 2023 1,850 $ 8.47 $ 260,268 4.49 Celsius Holdings, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) September 30, 201712.STOCK-BASED COMPENSATION (CONTINUED)SeptemberJune 30, 2017: Outstanding Options Vested Options Number Number Outstanding Weighted Weighted Exercisable Weighted Weighted Range of At Averaged Averaged at Averaged Averaged Exercise September 30, Remaining Exercise September 30, Exercise Remaining Price 2017 (000’s) Life Price 2017 (000’s) Price Life $0.20 - $0.53 1,155 3.98 $ 0.26 1,155 $ 0.26 3.98 $0.65 - $1.80 1,063 2.86 $ 0.86 984 $ 0.84 2.74 $1.83 - $2.84 1,229 5.04 $ 2.07 695 $ 2.10 4.77 $3.20 - $6.20 1,150 7.07 $ 3.88 224 3.84 6.13 $7.20 - $22.00 8 1.88 $ 10.36 8 $ 10.36 1.88 Outstanding options 4,605 4.77 $ 1.80 3,066 $ 1.15 3.90 Outstanding Options Vested Options Range of Exercise Price Number Outstanding at June 30, 2023 (000's) Weighted Average Remaining Life Weighted Average Exercise Price Number Exercisable at June 30, 2023 (000's) Weighted Average Exercise Price Weighted Average Remaining Life $0.34 - $1.05 30 0.94 $ 0.58 30 $ 0.58 0.94 $1.97 - $2.96 5 2.52 1.97 5 1.97 2.52 $3.23 - $4.85 1,377 4.01 3.81 1,378 3.81 4.01 $5.59 - $8.39 188 4.76 5.78 189 5.78 4.76 $14.53 - $21.80 60 7.09 14.53 40 14.53 7.09 $21.80 - $32.70 14 7.17 21.80 8 21.80 7.04 $42.64 - $63.96 301 7.51 42.67 200 42.67 7.51 Outstanding options 1,975 4.68 $ 10.31 1,850 $ 8.47 4.49 holderholders of a restricted stock award isare generally entitled at all times on and after the date of issuance ofrelease to transact and obtain the restricted shares to exercisesame rights as the rights of a shareholder of the Company, including the right to vote the shares. The holders of unvested restricted stock awards do not have the same rights as shareholders including but not limited to any dividends which may be declared by the Company, and do not have the right to vote. The value of restricted stock awardsSix Months Ended June 30, 2023 June 30, 2022 Shares Weighted
Average
Grant Date
Fair ValueShares Weighted
Average
Grant Date
Fair ValueUnvested at beginning of period — $ — 0.2 $ 14.72 Transfers to restricted stock units — — — — Granted — — — — Vested — — — — Forfeited and cancelled — — (0.2) $ 14.72 Unvested at end of period — $ — — $ — ninesix months endedSeptember June 30, 20172023 and 20162022 is presented in the following table: For the nine months ended September 30, 2017 September 30, 2016 Weighted Weighted Average Average Grant Date Grant Date Shares Fair Value Shares Fair Value Unvested at beginning of period — $ — — — Granted 100,000 3.64 — — Vested (16,667) — — — Unvested at end of period 83,333 $ 3.64 — — Six Months Ended June 30, 2023 June 30, 2022 Shares (000's) Weighted
Average
Grant Date
Fair ValueShares (000's) Weighted
Average
Grant Date
Fair ValueUnvested at beginning of period 539 $ 60.73 566 $ 52.66 Transfers to restricted stock awards — — — — Granted 136 103.19 202 73.33 Vested (196) 57.30 (145) 51.08 Forfeited and cancelled (42) 67.72 (42) 61.17 Unvested at end of period 437 $ 74.79 581 $ 59.62 awardsunits to employees and directors as ofSeptember June 30, 20172023 and 2022 was $293,148$24.0 million and $25.8 million, respectively, and is expected to be recognizedexpensed over a weighted average period of 2.42the next 2.0 years. and Subsidiaries September201713.COMMITMENTS AND CONTINGENCIESSix Months Ended June 30, 2023 June 30, 2022 Shares (000's) Weighted
Average
Grant Date
Fair ValueShares (000's) Weighted
Average
Grant Date
Fair ValueUnvested at beginning of period 76 $ 91.48 15 $ 64.65 Granted — — — — Vested — — — — Forfeited and cancelled — — — — Unvested at end of period 76 $ 91.48 15 $ 64.65 ItIf management makes the decision to terminate an agreement without cause, an estimate of expected damages is management’s belief that no such agreement has created any liability asaccrued, and an expense is recorded within selling, general and administrative expenses in the consolidated statements of Septemberoperations and comprehensive income during the period in which termination was initiated.2017.entered into an office lease with ahad contractual obligations aggregating approximately $3.9 million at June 30, 2023, which related party (see note 10) effective October 2015. primarily to sponsorships and other marketing activities.monthly rent amountsCompany evaluates subsequent events and transactions that occur after the balance sheet date up to $8,809 per monththe date the consolidated financial statements are issued. Except for the matters discussed in Note 19. Commitments and Contingencies, there were no other subsequent events that would have required adjustment or disclosure in the lease terminates in October 2020. Future annual minimum payments required under operating lease obligations at September 30, 2017 are as follows:Future Minimum Lease PaymentsYear ending December 31, 2017 $ 26,427 2018 113,461 2019 116,720 2020 120,078 Total $ 376,686 14.SUBSEQUENT EVENTSIn October 2017, the Company issued 383 Preferred C Shares valued at $383,000 in settlement of $383,000 in accrued unpaid Preferred C dividends.Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.“the“the Company,,” “Celsius,“Celsius,” “we,“we,” “us“us,” and “our”“our” refer to Celsius Holdings, Inc. and its subsidiaries.Forward LookingForward-Looking Statements“anticipate,“anticipate,” “assume,“assume,” “believe,“believe,” “estimate,“estimate,” “expect,“expect,” “will,“will,” “intend,“intend,” “may,“may,” “plan,“plan,” “project,“project,” “should,“should,” “could,“could,” “seek,“seek,” “designed,“designed,” “potential,“potential,” “forecast,“forecast,” “target,“target,” “objective,“objective,”“goal, “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.We are engaged“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% drinks and providing sustained energy for upliquid supplements to a three-hour period. broad range of consumers. We believe that we provide differentiated products that offer clinically proven and innovative formulas meant to change the lives of our consumers for the better. We also believe that our brand is attractive to a broad range of customers including fitness enthusiasts.focused studies showaccelerates metabolism and burns calories and body fat while providing energy. This product line comes in two versions, a ready-to-drink supplement format and an on-the-go powder form. We also offer a Celsius delivers additional benefits when consumed priorHeat and a Branch Chain Amino Acids line, catered to exercise. The studies shows benefits such as increaseboth pre and post-workout consumer needs. Our products are currently offered in fat burn, increasemajor retail channels in lean musclethe US including conventional grocery, natural, convenience, fitness, mass market, vitamin specialty and increased endurance.We seek to combine nutritional science with mainstream beverages by usinge-commerce.thermogenic (calorie-burning) MetaPlus®formulation while fostering the goalin our portfolio, a blend of healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many energy drinksginger root, guarana seed extract, chromium, vitamins, 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.SeptemberJune 30, 20172023 compared to three months ended SeptemberJune 30, 2016SeptemberJune 30, 2017,2023, revenue was approximately $10.79$325.9 million, an increase of $4.13$171.9 million or 62%112% from $6.66$154.0 million for the three months ended June 30, 2022. The total increase in revenue was largely driven by continued gains in distribution points and Club Channel growth. This growth was the result of increased revenues from North America, where second quarter 2023 revenues were $310.8 million, an increase of $165.4 million or 114% from the same period in 2022. North America was driven by increases in distribution points and increased sales and marketing investments.prior year. The revenuethree months ended June 30, 2023 were $11.9 million, which increased by $4.6 million or 64% from the same period in 2022 due to timing of new product launches. Asia-Pacific revenues (which primarily consist of royalty revenues from our China licensee) contributed an additional $1.6 million, an increase of 62% was attributable$0.7 million or 82% for the same period in large part to 73% growth2022. Other international markets generated approximately $1.6 million in international revenue, mainlyrevenues during the three months ended June 30, 2023, an increase from our Swedish and Asian distribution partners, and a 54% growth$0.4 million for the same period in domestic revenues associated with blended growth rates of 47% in retail accounts (mainly from existing accounts), 67% in health and fitness accounts and 59% in internet retailer accounts. The increase in revenue from the 2016 period to the 2017 period was primarily attributable to increases in sales volume, as opposed to increases in product pricing.2022.SeptemberJune 30, 20172023 and 2016: Three months ended September 30, Revenue Source 2017 2016 Change Total Revenue $ 10,785,796 $ 6,657,700 62 % International Revenue $ 4,866,641 $ 2,808,777 73 % Domestic Revenue $ 5,919,155 $ 3,848,923 54 % Retail accounts $ 3,529,790 $ 2,397,750 47 % Health & Fitness accounts $ 1,677,376 $ 1,002,682 67 % Internet Retailer accounts $ 711,989 $ 448,491 59 % For The Three Months Ended June 30, Revenue Source 2023 2022 Total revenue $ 325,883 $ 154,020 North America revenue $ 310,815 $ 145,409 Europe revenue $ 11,909 $ 7,280 Asia-Pacific revenue $ 1,606 $ 883 Other revenue $ 1,553 $ 448 profitSeptemberJune 30, 2017,2023, gross profit increased by approximately $1.79$99.7 million or 62%168% to $4.68$159.0 million, from $2.89approximately $59.3 million for the three months ended June 30, 2022. Gross profit margins reflected an increase to 49% for the three months ended June 30, 2023 from 39% for the same period in 2016.2022. Gross profit margins remained consistent at 43.3% for the three months ended September 30, 2017improvements are attributed to lower package and September 30, 2016.Salesraw material cost, reduced product waste/scrap, and marketing expensesSalesimproved inbound and marketing expenses for the three months ended September 30, 2017 were approximately $4.70 million, an increase of $2.97 million or 171% from $1.74 million in the same period in 2016. The increase is due primarily to increases in marketing programs, investments in human resources and warehousing costs, particularly with respect to the launch of our products in China and Hong Kong, where we expended approximately $2.1 million during the 2017 quarter.administrative expensesGeneralAdministrative ExpensesSeptemberJune 30, 20172023 were approximately $1.56$94.2 million, an increase of $478,000, or 44%, from $1.08compared to $46.9 million for the three months ended SeptemberJune 30, 2016. The2022, an increase was primarily due to increases in option expense of $294,000, investments in human resources of $83,000, office related costs of $21,000 and research and development costs of $79,000.Other expenseTotal other expense decreased to approximately $35,700 for three months ended September 30, 2017 from $57,500 for the same period in 2016, as a result of a decrease in interest expense.Net Income (Loss)As a result of all of the above,$47.3 million or 101%. Marketing investment activities were increased by $21.7 million for the three months ended SeptemberJune 30, 2017, Celsius had net loss2023 in comparison to the same period in 2022. Storage and distribution costs increased by $3.0 million compared to the same period in 2022 as our sales volume continues to grow organically. Employee costs increased by $1.8 million as we continued to invest in this area to have the proper infrastructure to support our growth. Administrative expenses amounted to $21.8 million, or an increase of approximately $1.62$15.0 million when compared to the same period in the prior year. This variance is mainly related toafter giving effectoffice rent. Stock-based compensation for the three months ended June 30, 2022, was $5.7 million, an increase of $1.5 million from the same period in 2022. The change in stock-based compensation was mainly attributable to preferred stock dividendsnew awards to our growing employee base. Management deems it very important to motivate employees by providing them with ownership in the business in order to promote over-performance, which translates into the continued success of $92,250, a net loss availableour business based on key performance attributes. The remaining increases totaling $4.3 million were related to depreciation and amortization, research and development, use and excise taxes, and other selling expenses.of $1.72for the three months ended June 30, 2023 was $40.9 million or $0.04$0.53 per share based on a weighted average of 45,487,908approximately 76.8 million shares outstanding. In comparison, for the three months ended SeptemberJune 30, 2016 we2022, the Company had a net income of $9,950, and after giving effect to preferred stock dividends of $102,958, a net loss availableattributable to common stockholders of $93,000approximately $9.2 million or $0.00$0.12 per share, based on a weighted average of 38,666,45175.5 million shares outstanding. NineDiluted earnings per share was $0.52 and $0.12, respectively, for the three months ended SeptemberJune 30, 20172023 and 2022.ninesix months ended SeptemberJune 30, 2016ninesix months ended SeptemberJune 30, 2017,2023, revenue was approximately $27.02$585.8 million, an increase of $10.52$298.4 million or 64%104% from $16.51$287.4 million for the six months ended June 30, 2022. The total increase in revenue for nine months ending September 30, 2016.was largely driven by continued gains in distribution points and Club Channel growth. This increase e revenuegrowth was the result of increased revenues from North America, where 2023 revenues were $559.4 million, an increase of 64% was attributable in large part to a 60% growth in international revenue, mainly from the Company’s Swedish and Asian distribution partners and a 66% growth in domestic revenues associated with blended growth rates of 42% in retail accounts (mainly from existing accounts, 136% in health and fitness accounts and 86% in internet retailer accounts,$290.5 million or 108% from the same period in 2016. The increase2022. North America was driven by increases in revenuedistribution points and increased sales and marketing investments.2016same period in 2022 due to timing of new product launches. Asia-Pacific revenues (which primarily consist of royalty revenues from our China licensee) contributed an additional $2.9 million, an increase of $1.0 million or 55% for the 2017same period was primarily attributable to increases in sales volume, as opposed to increases2022. Other international markets generated approximately $3.0 million in product pricing.ninesix months ended SeptemberJune 30, 20172023 and 2016: Nine months Ended September 30, Revenue Source 2017 2016 Change Total Revenue $ 27,023,123 $ 16,508,097 64 % International Revenue $ 9,667,042 $ 6,050,830 60 % Domestic Revenue $ 17,356,081 $ 10,457,267 66 % Retail accounts $ 10,013,276 $ 7,076,139 42 % Health & Fitness accounts $ 4,994,440 $ 2,115,221 136 % Internet Retailer accounts $ 2,348,365 $ 1,265,907 86 % For The Six Months Ended June 30, Revenue Source 2023 2022 Total revenue $ 585,822 $ 287,408 North America revenue 559,367 268,882 Europe revenue 20,561 15,775 Asia-Pacific revenue 2,864 1,849 Other revenue 3,030 902 profitninesix months ended SeptemberJune 30, 2017,2023, gross profit increased by approximately $4.46$159.6 million or 62%141% to $11.62$272.8 million, from approximately $113.2 million for the six months ended June 30, 2022. Gross profit margins reflected an increase to 47% for the six months ended June 30, 2023 from 39% for the same period in 2022. Gross profit improvements are attributed to lower package and raw material cost, reduced product waste/scrap, and improved inbound and outbound freight efficiencies for the quarter ended June 30,2023.$7.17$90.7 million for 2016. Gross profit margins decreased 0.4%the six months ended June 30, 2022, an increase of $72.4 million. Marketing investment activities increased by $38.2 million for the six months ended June 30, 2023 in comparison to 43.0%the same period in 2022. Employee costs increased by $5.4 million, as we continued to invest in this area to have the proper infrastructure to support our growth. Administrative expenses amounted to $32.4 million or an increase of $21.0 million, approximately 184%, when compared to the same period in the nineprior year. This variance is mainly related to an increase in audit costs, legal expenses, insurance costs and office rent. Stock-based compensation for the six months ended SeptemberJune 30, 20172023, was $11.2 million, an increase of $2.7 million from the same period in 2016.2022. The increaseschange in gross profit and the decrease in gross profit margins from 2016 to 2017 are primarilystock-based compensation was mainly attributable to the increases in revenue and a reductionnew awards to our growing employee base. Management deems it very important to motivate employees by providing them with ownership in the cost of raw materials, off-set by increasesbusiness in promotional allowances.Sales and marketing expensesSales and marketing expenses fororder to promote over-performance, which translates into the nine months ended September 30, 2017 were approximately $9.27 million, an increase of $2.56 million, or 38.0% from $6.71 million in the same period in 2016. The increase is due primarily to increases in marketing programs, investments in human resources and warehousing costs, particularly with respect to the launchcontinued success of our products in Chinabusiness based on key performance attributes. The remaining increases totaling $5.1 million were related to depreciation and Hong Kong, where we expended approximately $2.1 million during the third quarter of 2017.General and administrative expensesGeneral and administrative expenses for the nine months ended September 30, 2017 were approximately $5.26 million, an increase of $2.33 million, or 79.2%, from $2.94 million for the nine months ended September 30, 2016. The increase was primarily due to increases in option expense of $834,000, human resources of $162,000, professional fees of $115,000,amortization, research and development, costs of $155,000,use and employment recruiter costs $100,000, as well as one-time charges of $328,000excise taxes, and other selling expenses.issuance of restricted stockinterest income on cash and cash equivalents and foreign currency exchange loss.two board members in consideration for services previously rendered, $423,000 associated with CEO retirement compensation and office related costs of $79,000, offset by savings in travel of $65,000.Common StockholdersOther expenseTotal other expense decreased to approximately $122,200 for nine months ended September 30, 2017 from $171,300 for the same period in 2016, as a result of $27,300 in savings in interest expense.LossAs a result of all of the above, for the nine months ended September 30, 2017, Celsius had a net loss of $3.03 million, and after giving effect to preferred stock dividends of $274,000, a net loss availableincome attributable to common stockholders of $3.31for the six months ended June 30, 2023 was $72.4 million or $0.07$0.94 per share based on a weighted average of 43,990,367approximately 76.8 million shares outstanding. In comparison, for the ninesix months ended SeptemberJune 30, 2016 we2022, the Company had a net loss of $2.65 million, and after giving effect to preferred stock dividends of $276,000, a net loss availableincome attributable to common stockholders of $2.92approximately $15.8 million or $0.08$0.21 per share, based on a weighted average of 38,530,19575.5 million shares outstanding.SeptemberJune 30, 2017,2023 and December 31, 2016,2022, we had cash of approximately $19.4$681.1 million and $11.8$652.9 million (including restricted cash of $38.8 million at December 31, 2022), respectively, and working capital of approximately $24.9$803.0 million and $15.4$756.7 million, respectively. Cash used in operations during the nine months ended September 30, 2017 and the year ended December 31, 2016, totaled approximately $3.23 million and $2.36 million, respectively, reflecting capital investments in sales and marketing programs and human resources initiatives.In addition toflowavailable from operations, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable and other assets, and purchases of capital assets and equipment for the next twelve (12) months with respect to our current operating plan. Please refer to "Risk Factors" in Part 1, Item 1A, in our 2022 Annual Report for these and other factors that may have a material impact on our operations. Our primary sources of working capital have been private placementscash included cash from operations and proceeds from the issuance of our securities and our credit facility with CD Financial, LLC (“CD Financial”), an affiliateSeries A convertible preferred shares. These sources of Carl DeSantis, a principal shareholder of the Company.We originally entered into a loan and security agreement with CD Financial in July 2010, which provided us with a line of creditcash are available to fund operations. As amended in connection with an April 2015 private investmentcash outflows that have both a short and related transactions, the loanlong-term component.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 cashother assets, property and equipment (including coolers), advances for our co-packers, payments of interest only at the rateaccounts payable, and income taxes payable are expected to remain our principal recurring uses of five percent (5%) per annum until maturity and is secured by a pledge of substantially all the Company’s assets. As of September 30, 2017, the principal amount outstanding under the credit facility with CD Financial was $3.5 million.plans on areflects sufficient financial resources.we do not contemplate obtaining additional financing. However, ifresults and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and that have had, or are reasonably likely to have, a material impact on our sales volumes do not meetfinancial condition or results of operations. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions. There have been no material changes to our projections, expenses exceedcritical accounting policies or estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8, "Financial Statements and Supplementary Data" (Note 2), included in 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 ArrangementsAs of September 30, 2017, and2022 Annual Report for the fiscal year ended December 31, 2016, we had no off-balance sheet arrangements.Risks.AsRisk.“smaller reporting company,”variety of risks. The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which we are exposed are fluctuations in commodity and other input prices affecting the costs of our raw materials (including, but not requiredlimited to, provideincreases in the information requiredcosts of the price of aluminum cans, sucralose and other sweeteners, as well as other raw materials contained within our products). We generally do not use hedging agreements or alternative instruments to manage the risks associated with securing sufficient ingredients or raw materials. We are also subject to market risks with respect to the cost of commodities and other inputs because our ability to recover increased costs through higher pricing is limited by this Item.the competitive environment in which we operate.
We do not use derivative financial instruments to protect ourselves from fluctuations in interest rates and generally do not hedge against fluctuations in commodity prices. Interim Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial and accounting officer), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, of 1934 (the “Exchange Act”), as amended, as of SeptemberJune 30, 20172023, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission (the “SEC,”), including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our Interim Chief Executive Officer and our Chief Financial Officer, (as our principal execute, financial and accounting officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our InterimChief Financial Officer concluded that as of September 30, 2017, our disclosure controls and procedures were effective.Our Interim Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officer has determined thatChief Executive Officer and our Chief Financial Officer are evaluating whether our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.Changes in Internal Controls Over Financial ReportingThere were no changesoccurred duringthere is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. As a result of these material weaknesses, we concluded that internal controls over the period covered byfollowing areas were not effective as of December 31, 2022 and were not fully remedied as of June 30, 2023.report that has materially affected, orQuarterly Report on Form 10-Q, management is reasonably likelyreassessing the design of controls and modifying processes designed to materially affect,improve our internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses, including but not limited to (a) improving consistency in change management supported by standard operating procedures to govern the authorization, testing and approval of changes to information technology systems supporting all of the Company’s internal control processes, (b) enhancing design and implementation of our control environment, including the expansion of formal accounting and IT policies and procedures and financial reporting controls, (c) continuing to identify, design and implement effective review and approval controls, and (d) implementing appropriate timely review and oversight responsibilities within the accounting and financial reporting functions.Item 1.Legal Proceedings.We knowno material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.Item 1.A.Risk Factors.See “Item 1.A. Risk Factors.” in our Annualthis Quarterly Report on Form 10-K, filed with10-Q.SEC on Marchyear ended December 31, 2022. At June 30, 2017.2023, there have been no material changes to the information.Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.None.Item 3.Defaults Upon Senior Securities.Item 4.Mine Safety Disclosures.Item 5.Other Information.None.Item 6.Exhibits.Exhibit No.Description of Exhibit101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline iXBRL and contained in Exhibit 101
*Filed herewithCELSIUS HOLDINGS, INC. Dated: NovemberDate: August 8, 20172023By: /s/ John Fieldly John Fieldly, Interim President and
Chief Executive Officer; Officer
(Principal Executive Officer)Date: August 8, 2023 By: /s/ Jarrod Langhans Jarrod Langhans,
Chief Financial Officer
(Principal Executive, Financial and Accounting Officer)26