TABLE OF CONTENTS

ITEM 1 – FINANCIAL INFORMATION

Celsius Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these unaudited consolidated financial statements

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Comprehensive LossIncome/(Loss)

For the three months ended March 31, 20182019 and 20172018

The accompanying notes are an integral part of these in-audited consolidated financial statements

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2019

(Unaudited)

Notes to Consolidated Financial Statements (unaudited)

March 31, 20182019

Business—Celsius Holdings, Inc. (the “Company” or “Celsius Holdings”) was incorporated under the laws of the State of Nevada on April 26, 2005. On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Elite FX, Inc., a Florida corporation. Under the terms of the Merger Agreement, Elite FX, Inc. was merged into the Company’s subsidiary, Celsius, Inc. and became a wholly-owned subsidiary of the Company on January 26, 2007. In addition, on March 28, 2007 the Company established Celsius Netshipments, Inc. a Florida corporation as a subsidiary of the Company. On February 7, 2017,2018, the Company established Celsius Asia Holdings Limited a Hong Kong corporation as a wholly-owned subsidiary of the Company. On February 7, 2017 Celsius China Holdings Limited a Hong Kong corporation became a wholly-owned subsidiary of Celsius Asia Holdings Limited and on May 9, 2017, Celsius Asia Holdings Limited established Celsius (Beijing) Beverage Limited, a China corporation as a wholly-owned subsidiary of Celsius Asia Holdings Limited.

Since the merger, theThe Company is engaged in the development, marketing, sale and distribution of “functional” calorie-burning fitness beverages under the Celsius® brand name.

Basis of Presentation and Principles of Consolidation –The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes 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. These unaudited consolidated financial statements should be read in conjunction with the 10K filed for December 31, 20172018 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”). The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material inter-company balances and transactions have been eliminated.

Significant Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful accounts, reserves for inventory obsolescence, the useful lives and values of property, fixtures and equipment, valuation of stock-based compensation, and deferred tax asset valuation allowance.

Segment Reporting— Although the Company has a number of operating divisions, separate segment data has not been presented, as they meet the criteria for aggregation as permitted by ASC Topic 280, Segment Reporting, (formerly Statement of Financial Accounting Standards (SFAS) No. 131,Disclosed About Segments of an Enterprise and Related Information.)

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

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 three months ended March 31, 20182019 and 20172018 all material assets and revenues of the Company where in the United States except as disclosed in Note 2.

Concentrations of Risk — Substantially all of the Company’s revenue derives from the sale of Celsius ® beverages.

The Company uses single supplier relationships for its raw materials purchases and filling capacity, which potentially subjects the Company to a concentration of business risk. If these suppliers had operational problems or ceased making product available to the Company, operations could be adversely affected.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At March 31, 2018,2019, the Company had approximately $10$2.5 million in excess of the Federal Deposit Insurance Corporation limit.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

AtFor the three months ended March 31, 20182019 and 2017,2018, the Company had the following 10 percent or greater concentrations of revenue with its customers:

At March 31, 2017 and December 31, 2017, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

*Revenues and receivables from customer A are derived from a customer located in Sweden and customer B are derived from a customer located in China. Revenues from all other customers were mainly derived in the United States.

At March 31, 2019 and December 31, 2018, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At March 31, 20182019 and March 31, 2017,2018, the Company did not have any investments with maturities of three months or less.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Accounts Receivable — Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At March 31, 20182019 and MarchDecember 31, 2017,2018, there was an allowance for doubtful accounts of $23,504$260,649 and $36,800,$183,000, respectively.

Inventories— Inventories include only the purchase cost and are stated at the lower of cost and net realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company outsources its manufacturing process and as a result has no work in process inventories. The Company writes down againstestablishes an inventory reserve to reduce the value of the inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). At March 31, 20182019 and December 31, 2017,2018, the Company recorded a reserve of $39,000$106,127 and $36,000$74,652 respectively. The changes in reserve are included in cost of revenue.

Property and Equipment — Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life of the asset generally ranging from three to seven years.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

Impairment of Long-Lived Assets — In accordance with ASC Topic 360, “Property, Plant, and Equipment” the Company reviews the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value.

Revenue Recognition —Revenue— As of January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and the adoption did not have a material impact on its consolidated financial statements.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Revenue is derived from the sale of beverages. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Any discounts, slotting fees, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue, Reference not 3.

revenue.

Customer Advances—From time to time the Company requires prepayments for deposits in advance of delivery of products and/or production runs. Such amounts are initially recorded as customer advances. The Company recognizes such revenue as it is earned in accordance with revenue recognition policies.

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred advertising expense of approximately $4.0$1.2 million and $926,000,$4.0, during three months ending March 31, 2019 and 2018, and 2017, respectively.

Research and Development — Research and development costs are charged to general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $121,000$103,000 and $71,000$121,000 during the three months ending March 31, 2019 and 2018, and 2017, respectively.

Foreign Currency TranslationTranslation-Chinese Yuan Renminbi —Generally, foreign subsidiaries’The Company’s functional currency for our China operation is the local currency of operationsChinese Yuan or Renminbi (CNY). For financial reporting purposes, the Chinese Yuan has been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and the net assets of foreign operationsliabilities are translated into U.S. dollars using currentat the exchange rates. The U.S. dollar results that ariserate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from such translation,the use of different exchange rates from period to period are included as wella component of stockholders’ equity as exchange gains“Accumulated other comprehensive income (loss).” Gains and losses on intercompany balances of long-term investment nature,resulting from foreign currency transactions are included in Comprehensive Income. The Company incurred foreign currency translation lossthe consolidated statements of approximately $53,500comprehensive income (loss), as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Chinese Yuan to USD after the balance sheet date.

As of and $0 duringfor the three months endingended March 31, 2019 and March 31, 2018, and 2017, respectively.the exchange rates used to translate amounts in Chinese Yuan into USD for the purposes of preparing the consolidated financial statements were as follows:

Fair Value of Financial Instruments — The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable approximates fair value due to their relative short-term maturity and market interest rates.

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:

Other than these noted previously, the Company did not have any other assets or liabilities measured at fair value at March 31, 20182019 and December 31, 2017.

Celsius Holdings, Inc. and Subsidiaries2018.

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

Income Taxes —The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provisions of the ASC 740 -10 related to,Accounting for Uncertain Income Tax Positions.When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

Income Taxes (continued) —Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

The Company has adopted ASC 740-10-25Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.

The Company’s tax returns for tax years in 20142016 through 20172018 remain subject to potential examination by the taxing authorities.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Earnings per Share— Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of March 31, 2017, there were options outstanding to purchase approximately 5.1 million2019, the convertible debt may be converted into 3,162,260 additional shares which exercise price averaged $2.83, and Series C Preferred Stock outstanding to convert to 5.3 millionof common shares at $0.52 price per share. stock.

There were no other dilutive common shares equivalents, including convertible notes and warrants, as no common share equivalents had an exercise price below the ending closing price of the year. The effects of dilutive instruments have not been presented as the effects would be anti-dilutive.

Share-Based Payments—Effective January 1, 2006, the The Company has fully adoptedfollows the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.2017. As of March 31, 2019, total shares available are 6,901,360.

Cost of Sales— Cost of sales consists of the cost of concentrates and or beverage bases, the costs of raw materials utilized in the manufacture of products, co-packing fees, repacking fees, in-bound & out-bound freight charges, as well as certain internal transfer costs, warehouse expenses incurred prior to the manufacture of the Company’s finished products and certain quality control costs. Raw materials account for the largest portion of the cost of sales whichsales. Raw materials include cans, bottles, other containers, flavors, ingredients and packaging materials changes in inventory reserve and write downs of inventory are included in cost of sales.

Celsius Holdings, Inc. and Subsidiariesmaterials.

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

Operating Expenses— Operating expenses include selling expenses such as warehousing expenses after manufacture, as well as expenses for advertising, samplings and in-store demonstrations costs, costs for merchandise displays, point-of-sale materials and premium items, sponsorship expenses, other marketing expenses and design expenses. Operating expenses also include such costs as payroll costs, travel costs, professional service fees (including legal fees), depreciation and other general and administrative costs.

Shipping and Handling Costs— Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for three months ended March 31, 2019 and 2018 was $1.3 million and 2017 was $1.1 million, respectively.

Celsius Holdings, Inc. and $635,200, respectively.Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Recent Accounting Pronouncements

The Company adopts all applicable, new accounting pronouncements as of the specified effective dates.

In FebruaryJune 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). The ASU replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. In January 2018, the FASB issued ASU 2018-01, LeasesNo. 2016-13 & updated in Nov 2018 ASU 2018-19, Financial Instruments – Credit Losses (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842,326) (“ASU 2016-13”), which provides an optional transition practical expedient that allows companies to not evaluate (under Topic 842) existing or expired land easements that were not previously accounted for as leases (under Topic 840). Topic 842requires the immediate recognition of management’s estimates of current and expected credit losses. ASU 2016-13 is effective for interimfiscal years and annualinterim reporting periods within those years beginning after December 15, 2018, and early2019. Early adoption is permitted. Topic 842 requires a modified retrospective approach, which includes several optional practical expedients.permitted after fiscal years beginning December 15, 2018. The Company does not expect thatis currently evaluating the adoption will have a materialpotential impact of adopting this guidance on its consolidatedour financial statements.

In August 2017,2018, the FASB issued ASU 2017-12, Derivatives and HedgingNo. 2018-13, Fair Value Measurements (Topic 815)820): Targeted ImprovementsDisclosure Framework Changes to Accountingthe Disclosure Requirements for Hedging Activities (“ASU 2017-12”).Fair Value Measurement. The objective ofamendments in this update modify the ASU is to improve the financial reporting of hedging relationshipsdisclosure requirements on fair value measurements in order to better portray the economic results of an entity’s risk management activities in its financial statements and to make certain targeted improvements to simplify the application of hedge accounting guidance.Topic 820. The ASU 2017-12 is effective for interim and annual reporting periodsthe Registrants for fiscal years beginning after December 15, 2018,2019, and earlyinterim periods therein. Early adoption is permitted. The Company is currently evaluatingassessing the impact of ASU 2017-12this standard on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) (“ASU 2018-02”). The objective of the ASU is to allow a reclassification from accumulated comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“TCJA”) and will improve the usefulness of information reported to financial statement users. ASU 2018-02 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of ASU 2018-02 on the Company’s consolidated financial statements.

As of January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and did not have a material impact on its consolidated financial statements. The Company expects that the impact to net income of the new standard will be immaterial on an ongoing quarterly and annual basis. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Refer to Note 3 for additional information regarding the Company’s adoption of ASC 606.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidatedtheir Financial Statements (unaudited)

March 31, 2018Statements.

All new accounting pronouncements issued but not yet effective are not expected to have a material impact on our results of operations, cash flows or financial position with the exception of the updated previously disclosed above, there have been no new accounting pronouncements not yet effective that have significance to our consolidated financial statements.

Liquidity— These financial statements have been prepared assuming the Company will be able to continue as a going concern. At March 31, 2018,2019, the Company had an accumulated deficit of $64,920,105$61,724,097 which includes a net lossincome available to common stockholders of $2,959,195$11,656,594 for the three months ended March 31, 2018.2019. During the three months ending March 31, 20182019 the Company net cash used in operating activities totaled $4,275,713. While these factors alone may raise substantial doubt as$6,765,795.

In addition to the Company’s ability to continue as a going concern, the Company’s salecash flow from operations, our primary sources of an aggregate of $15 million inworking capital through the sale of an aggregate of 4,833,329 shareshave been private placements of our common stock atsecurities and our credit facilities with CD Financial, LLC (“CD Financial”), an affiliate of Carl DeSantis, a purchase priceprincipal shareholder of $3.00 per share in a private offering to 13 accredited investors between December 30, 2016the Company, as well as Charmnew Limited and March 14, 2017 and remaining cash and other current assetsGrieg International Limited. Charmnew Limited is deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern for a periodan existing shareholder of twelve months from the issuance daterecord affiliated with Li Ka Shing, one of this report.our principal shareholders. Grieg International Limited is an existing shareholder of record affiliated with Chau Hoi Shuen Solina, one of our principal shareholders.

Our current operating plan for the next twelve (12) months plans on a sufficient financial condition and we do not contemplate obtaining additional financing. However, ifIf our sales volumes do not meet our projections, expenses exceed our expectations, 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, lower our working capital requirements and reduce 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.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Sales taxes and other similar taxes are excluded from revenue.

The adoption of ASC 606 resulted in an immaterial impact to the individuals financial statement line items of the Company’s unaudited Consolidated Statements of Income during the three months ended March 31, 2018.

Information about the Company’s net sales by reporting segment for the three months ended March 31, 2019 and 2018 and 2017 isare as follows:

License Agreement

In January 2019, the Company entered into a license and repayment of investment agreement with Qifeng Food Technology (Beijing) Co., Ltd (“Qifeng”). Under the agreement, Qifeng was granted the exclusive license rights to manufacture, market and commercialize Celsius branded products in China. The term of the agreement is 50 years, with annual royalty fees due from Qifeng after the end of each calendar year. The royalty fees are based on a percentage of Qifeng’s sales of Celsius branded products; however, the fees are fixed for the first five years of the agreement, totaling approximately $6.9 million, and then are subject to annual guaranteed minimums over the remaining term of the agreement.

Under the agreement, the Company grants Qifeng exclusive license rights and provides ongoing support in product development, brand promotion and technical expertise. The ongoing support is integral to the exclusive license rights and, as such, both of these represent a combined, single performance obligation. The transaction price consists of the guaranteed minimums and the variable royalty fees, all of which are allocated to the single performance obligation.

The Company recognizes revenue from the agreement over time because the customer simultaneously receives and consumes the benefits from the services. The Company uses the passage of time to measure progress towards satisfying its performance obligation because its efforts in providing the exclusive license rights and ongoing support occur on a generally even basis throughout the year. Total revenue recognized under the agreement was approximately $90,000 for the three months ended March 31, 2019 and is reflected in the Company’s Asia reporting segment which was determined by the minimum royalties due during first year, as per the licensing agreement.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 20182019

4.    INVENTORIES

Inventories consist of the following at:

5.    PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets total $3,158,000$2,832,174 and $1,180,000,$2,299,375, at March 31, 20182019 and December 31, 2017,2018, respectively, and consist mainly of prepaid advertising, prepaid insurance, prepaid slotting fees and net deposits on purchases, and customer deposits.purchases.

Note receivable consists of the following at:

On January 1, 2019, the Company entered into a license and repayment of investment agreement with Qifeng Food Technology (Beijing) Co., Ltd (“Qifeng”). Under the agreement, Qifeng will repay the market investment Celsius has made into China to date, over a five-year period, under an unsecured, interest-bearing note receivable (“Note”). The initial outstanding principal under the Note was approximately $12.2 million, which was recorded as Other Income on the Consolidated Statements of Operations for the three months ended March 31, 2019. The amount recognized considered the net of the balances of the accounts receivable, accounts payable and accrued expenses, as well as the marketing investments that were performed in the China market.

Scheduled principal payments plus accrued interest are due annually on March 31 of each year starting in 2020. The Note is recorded at amortized cost basis and accrues interest at a rate per annum equal to the weighted average of 5% of the outstanding principal up to $5 million and 2% of the outstanding principal above $5 million. For the three months ended March 31, 2019, the weighted average interest rate was 3.21% and interest income was $96,000.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

The Company assesses the Note for impairment periodically by evaluating whether it is probable that the Company will be unable to collect all the contractual interest and principal payments as scheduled in the Note agreement, based on historical experience about Qifeng’s ability to pay, the current economic environment and other factors. If the Note is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows under the Note, discounted at the Note’s effective interest rate. At March 31, 2019, the Note was not deemed to be impaired.

In February 2016, the FASB issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use (ROU) asset and lease liability in the balance sheet for all leases, including operating leases with terms of more than twelve months.The Company adopted ASU No. 2016-02, as amended, effective January 1, 2019. We recognized a ROU asset and a corresponding lease liability measured based on the present value of the future minimum lease payments utilizing our incremental borrowing rate as the basis for our computations. As of January 1, 2019, we recognized Right to use assets in the amount of $259,358 and a corresponding liability. The asset is being amortized over the life of the lease agreement. As of March 31, 2019, the value of the asset amounted to $223,991. The adoption of the guidance did not have a material impact on our Statement of Operations or Statement of Cash flows.

The ROU represents our right to utilize the corresponding asset for the lease term and the related lease liability translates into an obligation to related to the lease payments. The operating lease liability as of March 31, 2019 amounted to $226,634 of which the short-term value amounted to $139,042 and the long-term portion was $87,592. Company entered into an office lease with a related party effective October 2015. The monthly rent amounts to $12,452 per month until October 2019 and then increases to $12,826 per month until the termination of the lease in October 2020. As of March 31, 2019, the remaining lease term is 19 months and the discount rate is 5%. Future annual minimum cash payments required under this operating type lease as of March 31, 2019 are as follows:

Property and equipment consist of the following at:

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Depreciation expense amounted to $7,953$18,761 and $4,233$7,953 during the three months ended March 31, 20182019 and 2017,2018, respectively

Accounts payable and accrued expenses consist of the following at:

Deferred revenue and otherOther current liabilities consist of the following at:

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

Line of credit convertible note payable - related parties consists of the following as of:

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

On August 26, 2013, theThe Company entered into a securities purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s line of credit with CD (the “CD Line of Credit”). The Preferred C Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends and in Novemberdividends. In October 2017, the Company issued 383 Preferred C Shares valued at $383,000 in settlement of $383,000 in accrued preferred C dividends. As of MarchDecember 31, 2018, $125,500$255,903 of dividends has been accrued.accrued and converted into 256 of additional Preferred C. The Preferred C Shares maturematured on December 31, 2018 and are redeemable only in exchangewere exchanged for 5,806,022 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 Creditnote payable was reduced by $4.0 million, which amount was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred D Shares”). This related party was given a conversion price of $0.86 per common share, whereas other investors purchased common shares at $0.89 in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535, was recorded as a dividend in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other options.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

The Preferred D Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.86 per share until the earlier of the January 2, 2021 due date of our line of creditnote payable with CD Financial or such earlier date as the line of creditnote payable is satisfied (the “Maturity Date”“Maturity Date”). The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred D Shares accrue cumulative annual cash dividends at the rate of 5% per annum, payable quarterly in cash and have a liquidation preference of $1,000 per share. On the Maturity 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 Holder shall have the right, at its election, to require the Company to redeem all or any portion of the shares held by the holder in exchange for cash or common stock upon the occurrence of certain events which management believes are under the control of the Company. As of March 31, 2018, none of the contingent events have occurred and in accordance with ASC-480-10-25 “Distinguishing Liabilities from Equity” and Regulation S-X-Rule 5-02-27, the Company has classified these shares as permanent equity. The Preferred D Shares may also be redeemed by us at any time on or after December 31, 2017, at a redemption price equal to 104% of the liquidation preference. The holder of the Preferred D Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. As of March 31, 2018, $40,000 of dividends has been accrued regarding these shares. In March 2018, the Preferred D shares were converted into 4,651,163 Common Shares.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018shares of common stock.

The Company’s office is rented from a company affiliated with CD Financial, LLC which is controlled by one of our shareholders Carl DeSantis, a principal shareholder (see note 13).DeSantis. Currently, the lease expires on October 2020 with monthly rent of $9,727.$12,452. The rental fee is commensurate with other properties available in the market.

Other related party transactions are discussed in notes 8Notes 11 and 9.12

Issuance of common stock pursuant to services performed

 In January 2017,On July 19, 2018 the Company settled a legal matter that was filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products. As part of the settlement the Company issued 47,12660,000 shares of “restricted”“restricted” stock, to each William H. Milmoe and Thomas E. Lynchthe ten plaintiffs involved in considerationthe complaint for services previously rendered to Celsius. Total shares issued were 94,252 at a total fair value of $328,000,$279,600, or $3.48$4.66 per share, representing the closing stock price on thatthe settlement date.

Issuance The stock “restriction” pertains to the shareholders intention of common stockusing the shares for investment purposes only and not with a view to distribute or resell the shares or any part thereof or interest therein. However, the Stockholder’s rights allow for the selling or otherwise disposal of all or part of the shares pursuant to private placement

Between January 1, 2017an exemption under the Securities Act of 1933, as amended (the Securities Act”) and March 2017, the Company issued a total of 3,333,329 shares of common stock at $3.00 per share for net proceeds of approximately $10 millionapplicable state securities laws or pursuant to 12 accredited investors.

In January 2017, the Company issued 333,333 unregistered common shares upon the conversion of $1,000,000registration of the line of credit not payable debt valued at $3.00 per share.share under such laws.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Issuance of common stock pursuant to exercise of stock options

During the three months ended March 31, 2019, the Company issued an aggregate of 195,857 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2015 Stock Incentive Plan. The Company received aggregate proceeds of $24,760 for 80,750 options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

During the three months ended March 31, 2018, the Company issued an aggregate of 604,113 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan. The Company received aggregate proceeds of $142,000 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis

During the year ended December 31, 2017, the Company issued an aggregate of 1,940,895 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan. The Company received aggregate proceeds of $946,000$142,627 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

Issuance of preferred stock pursuant to private placement

In March 2018, the 4,000 preferred D shares were converted into 4,651,163 shares of common stock.

Refer to note 10Note 12 for discussion on preferred stock issuances.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

The Company adopted an Incentive Stock Plan on January 18, 2007. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. During 2013, the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Until 2017, options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.2017. As of March 31, 2019, 6,901,360 shares are available.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Under the 2015 Stock Option Plan the Company has issued options to purchase approximately 3.75.64 million shares at an average price of $3.63$3.85 per share with a fair value of $8.1$5.97 million. For the three months ended March 31, 20182019 and 2017,2018, the Company issued options to purchase 1.11.27 million and 1.01.1 million shares. For the three months ended March 31, 20182019 and 2017,2018, the Company recognized an expense of approximately $770,862$1,358,503 and $444,164,$770,862, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of March 31, 2018,2019, the Company had approximately $6,275,000$9,652,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. There are options to purchase approximately 2.82.95 million shares that are vested as of March 31, 2018.2019.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2018

A summary of the status of the Company’s outstanding stock options as of March 31, 20182019 and changes during the period ending on that date is as follows: 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

The following table summarizes information about employee stock options outstanding at March 31, 2018:2019:

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the three months endedMarch 31, 20182019 and 20172018 is presented in the following table:

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as ofMarch 31, 20182019 was $242,609$111,196 and is expected to be recognized over a weighted average period of 1.920.92 years.

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 20182019

The Company has entered into distribution agreements with liquidated damages in casethe event the Company cancels the distribution agreements without cause. Cause has been defined in various ways. It is management’s belief that no such agreement has created any liability as of March 31, 2018.2019.

On December 18, 2018, Rockstar, Inc. (“Rockstar”) filed suit against Celsius in federal district court in the District of Nevada. Rockstar’s complaint alleges three claims for relief: (a) false advertising in violation of 15 USC §1125(a); (b) violation of the Nevada Deceptive Trade Practice Act; and (c) Nevada common law unfair competition. On January 30, 2019, Celsius filed its answer to the complaint denying the allegations by Rockstar, and setting forth certain affirmative defenses. The Company entered into an office lease with a related party (see note 10) effective October 2015. The monthly rent amountsaction is in its initial stages and no discovery has taken place. Celsius believes that it has not committed the violations alleged, that it has strong defenses, and it intends to $9,727 per month andvigorously defend itself against the lease terminates in October 2020. Future annual minimum payments required under operating lease obligations at March 31, 2018 are as follows:claims by Rockstar.

Future Minimum Lease PaymentsOn April 8, 2019, Daniel Prescod filed suit against Celsius Holdings, Inc., Case No. 19STCV09321, pending in Superior Court for the State of California, County of Los Angeles (the “Prescod Litigation”). Daniel Prescod asserts that the Company’s use of citric acid in its products while simultaneously claiming “no preservatives” violates California Consumer Legal Remedies Act, California Business and Professions Code Section 17200, et seq., and California Business and Professions Code Section 17500, et seq., because citric acid acts as a preservative. The Company does not use citric acid as a preservative in its products, but rather as a flavoring, and therefore it believes that its “no preservatives” claim is fair and not deceptive. The Company intends to contest the claims vigorously. Since this matter is still in its initial stages, it is impossible to predict the outcome at this time.

In addition to the foregoing, from time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

Between April 1, 20182019 and May 10, 2018,9, 2019, the Company issued an aggregate of 3,000109,488 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 20062015 Stock Incentive Plan. The Company received $6,665cash in the amount of $56,400 for options exercised.

When used in this report, unless otherwise indicated, the terms “the Company,” “Celsius,” “we,” “us” and “our” refer to Celsius Holdings, Inc. and its subsidiaries.

Note Regarding Forward Looking Statements

This report contains forward-looking statements that reflect our current views about future events. We use the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “will,” “intend,” “may,” “plan,” “project,” “should,” “could,” “seek,” “designed,” “potential,” “forecast,” “target,” “objective,” “goal,” or the negatives of such terms or other similar expressions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Business Overview

We are engaged in the development, marketing, sale and distribution of “functional” calorie-burning fitness beverages under the Celsius® brand name. According to multiple clinical studies we funded, a single serving of Celsius® burns 100 to 140 calories by increasing a consumer’s resting metabolism an average of 12% and providing sustained energy for up to a three-hour period. Our exercise focused studies show Celsius delivers additional benefits when consumed prior to exercise. The studies show benefits such as increase in fat burn, increase in lean muscle mass and increased endurance.

We seek to combine nutritional science with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus® formulation, while fostering the goal of healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many energy drinks and sodas. Celsius® has no artificial preservatives, aspartame or high fructose corn syrup and is very low in sodium. Celsius® uses good-for-you ingredients and supplements such as green tea (EGCG), ginger, calcium, chromium, B vitamins and vitamin C. The main Celsius line of products are sweetened with sucralose, a sugar-derived sweetener that is found in Splenda®, which makes our beverages low-calorie and suitable for consumers whose sugar intake is restricted.

During the first quarter of 2018, we introduced two extensions of our product line, a line of naturals, consisting of three sparkling and three non-carbonated beverages three carbonated beverages targeted at the natural channel and Celsius Heat™ a three-flavor dietary supplement line which contains the same proprietary CELSIUS^® thermogenic formula, with 300 mg of caffeine and 2,000 mg of L-Citrulline added. Designed for consumers looking to optimize their training results, Celsius Heat™ is targeting athletic trainers, body builders, military personnel, and endurance athletes.

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.

Results of Operations

Three months ended March 31, 20182019 compared to three months ended March 31, 20172018

Revenue

For the three months ended March 31, 2018,2019, revenue was approximately $12.06$14.5 million, an increase of $6.06$2.4 million or 101%20% from $6.00$12.1 million for same period in the prior year. The revenue increase of 101%20% was basically attributable in large part to blendedcontinued strong growth rates of 69% growth41% in North American revenues primarily attributable to double digit growth in existing accounts and new distribution expansion. European sales achieved 118%20% growth mainly as a result of the launch of new flavors that have been very well accepted. Asian revenues reflect the change in business model to a BCAA Celsius line extension in Northern Europeroyalty and in Asia revenues grew 100% mainly aslicense fee arrangement and therefore show a resultconsiderable reduction of our initial product line launch in China.approximately $1.3 million when compared to the prior year results for the three-months ended March 31, 2019. The total increase in revenue from the 2017 period2018 to the 20182019 period was primarily attributable to an increase in sales volume, as opposed to increases in product pricing.

The following table sets forth the amount of revenues by categorysegment and changes therein for the three months ended March 31, 20182019 and 2017:2018:

Gross profit

For the three months ended March 31, 2018,2019, gross profit increased by approximately $2.38 million$960,000 or 100%20% to $4.76$5.7 million, from $2.38$4.8 million for the same period in 2017.2018. Gross profit margins decreased 0.2% toremained in-line at 39.5% for the three months ended March 31, 2018, from2019, when compared to the same period in 2017 for comparable reasons. The decrease2018. There was an increase in gross profit margin is duedollars of approximately $960,000 or 120% when compared to increases in new account promotional activities.the same period last year. The improvementincrease in gross profit in 2018 comparedis mainly related to the 2017 period is primarily attributable to the increasesincrease in revenue generated by additional sales volume as described above.from the 2018 quarter.

Sales and marketing expenses

Sales and marketing expenses for the three months ended March 31, 20182019 were approximately $5.60$3.6 million, an increasea decrease of $3.45approximately $2.0 million or 160%36% from $2.15approximately $5.6 million in the same period in 2017.2018. The increasedecrease is due primarily to the change in business model in China which does not require direct marketing investments by Celsius. The actual reduction in marketing investments amounted to approximately $2.8 million which was partially offset by increases in investments in human resourcessales expenses of $385,000, storage and distribution expenses of $186,000 and increases in marketing programs in Asia (including initial launchheadcount investments of our products in China) totaling $2.40 million and increased investments in North American marketing programs.$250,000.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 20182019 were approximately $2.00$2.6 million, a decreasean increase of $0.06 million,approximately $620,000, or 2.9%31%, from $2.06$2.0 million for the three months ended March 31, 2017.2018. The decreaseincrease was primarily due to savingsstock option expense which accounted for 95% of the variance or $588,000. There were increases in human resources associated with a $423,000 CEO retirement compensation payment paid in 2017,administrative expenses of approximately $103,000 mainly related to insurance, professional fees and depreciation which waswere partially offset by investments in human resources of $226,000, increases in insurance cost $30,000, increases in professional fees $76,000, increased investmentssavings in research and development costs $50,000, increases in depreciation expense $4,000, offset by savings in option expense of $11,000.approximately $18,000 and lower compensation expenses of $53,000, as the results for the 2018 period included retirement compensation for our prior CEO.

Other income/expense

Total other expense decreased toincome increased by approximately $38,000$12.2 million for three months ended March 31, 2019 from the 2018 quarter, mainly related to the recognition of the income pertaining to the Note Receivable from $48,000 forQifeng Food Technology (Beijing) Co., Ltd. Under the sameagreement, Qifeng will repay the market investment Celsius has made into China, over a five-year period, in 2017, as a result of savings in interest expense.under an unsecured, interest-bearing note receivable (“Note”).

Net Income (Loss)

As a result of the above, for the three months ended March 31, 2019, Celsius had net income to common shareholders of approximately $11.7 million or $0.20 per share based on a weighted average of 57,155,445 shares outstanding. In comparison, for the three months ended March 31, 2018 Celsiuswe had net loss of approximately $2.9 million, and after giving effect to preferred stock dividends of $82,691,approximately $83,000, a net loss available to common shareholders of $2.96$2.9 million or $0.06 per share based on a weighted average of 47,449,44947,449,553 shares outstanding. In comparison, for the three months ended March 31, 2017 we had net loss of approximately $1.88 million, and after giving effect to preferred stock dividends of $90,245, a net loss available to common shareholders of $1.97 million or $0.05 per share based on a weighted average of 41,783,853 shares outstanding.

Liquidity and Capital Resources

As of March 31, 2018,2019, and December 31, 2017,2018, we had cash of approximately $10.0$2.8 million and $14.2$7.7 million, respectively, and working capital of approximately $18.5$23.8 million and $20.6$19.6 million, respectively. Cash used in operations during the three months ended March 31, 20182019 and the year ended DecemberMarch 31, 2017,2018, totaled approximately $4.3$6.8 million and $2.4$4.3 million, respectively, reflecting capital investments in salesinventory, pre-payments and deposits and the settlement of marketing programs and human resources initiatives.expenses related to the China change in business model.

In addition to cash flow from operations, our primary sources of working capital have been private placements of our securities and our credit facility with CD Financial, LLC (“CD Financial”), an affiliate of Carl DeSantis, a principal shareholder of the Company.

We originally entered into a loan and security agreement with CD Financial in July 2010, which provided us with a line of credit to fund operations. As amended in connection with ana private investment transaction consummated in April 2015, private investment and related transactions, the loan and security agreement providesprovided Celsius with a revolving line of credit pursuant to which Celsius can borrow up to an aggregate maximum of $4.5 million from time to time until maturity in January 2020. The credit facility requires quarterly cash payments of interest only at the rate of five percent (5%) per annum until maturity and is secured by a pledge of substantially all the Company’s assets. As of March 31,In December 2018, the Company amended and restated the note payable into a convertible loan agreement, as reflected below, continuing to carry a five percent per annum interest but payable semi-annually. As a result, of this substantial modification which was treated as a debt extinguishment, a new liability was established and a loss of $377,048 on the extinguishment of debt was recognized as of December 31, 2018.

The Company entered into Convertible Loan Agreements (the “Loan Agreements”) with Charmnew Limited (“Charmnew”) and Grieg International Limited (“Grieg”) on December 12, 2018, and with its affiliate CD Financial on December 14, 2018, providing for aggregate loans to the Company in principal amount outstanding underamounts of US$3,000,000, US$2,000,000 and US$5,000,000. In connection with the credit facilityLoan Agreements, the Company executed and delivered Convertible Promissory Notes (the “Notes”) in favor of each of Charmnew, Grieg and CD Financial. The Loan Agreement and Note entered into with CD Financial was $3.5 million.replaces the existing credit facility between the Company and CD Financial described above.

Between December 30, 2016The other material terms and March 14, 2017,conditions of the Company raised an aggregate of $15.0 million in capital through the sale of an aggregate of 4,833,329 shares of our common stock at a purchase price of $3.00 per share in a private offering to 13 accredited investors. Investors in the private placement included:loan transactions are as follows:

●                     CD Financial (533,333 Shares);

●                     Charmnew Limited (800,000 Shares), an existing shareholder of record affiliated with Li Ka Shing, one of our principal shareholders;

●                     Grieg International Limited (533,333 Shares), an existing shareholder of record affiliated with Chau Hoi Shuen Solina, one of our principal shareholders; and

●                     Nu Horizons Investment Group, LLC (433,333 Shares), an existing shareholder of record affiliated with Tim Leissner, a former director and one of our principal shareholders; and Russell Simmons, one of our principal shareholders.

Our current operating plan for the next twelve (12) months plans onindicates a sufficient financial condition and we do not contemplate obtaining additional financing. However, if our sales volumes do not meet our projections, expenses exceed our expectations, or our plans change, we may be unable to generate enough cash flow from operations to cover our working capital requirements. In such case, we may be required to adjust our business plan, by reducing marketing and other expenses or seek additional financing. There can be no assurance that such financing, if required, will be available on commercially reasonable terms if at all.

Off Balance Sheet Arrangements

As of March 31, 2018,2019, and December 31, 2017,2018, we had no off-balance sheet arrangements.

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Management’s Report on Disclosure Controls and Procedures

Our President and Chief Executive Officer who also currently servesas well as our Interim Chief Financial 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 March 31, 20182019, 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 President and Chief Executive Officer who also currently serves as(our principal executive officer) and our interim Chief Financial Officer (our Principal Executive, Financialprincipal financial and Accounting Officer)accounting officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, our including ourPresident and Chief Executive Officer who also currently serves asand our interim Chief Financial Officer (our Principal Executive, Financial and Accounting Officer) hashave concluded that as of March 31, 2018,2019, our disclosure controls and procedures were effective.effective in that (a) we maintain records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (b) our records provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and (c) our records provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Our President and Chief Executive Officer who also currently serves asand our interim Chief Financial Officer (our Principal Executive, Financial and Accounting Officer) doesdo 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 includingprincipal executive officer and our Chief Executive Officer, who also currently serves as our interim Chief Financial Officer (our Principal Executive, Financial and Accounting Officer) hashave determined that 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 Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Not Applicable.applicable

In addition to matters reported in item 3 of our Annual Report on Form 10-K for the year ended December 31, 2018, from time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

See “Item 1.A. Risk Factors.” in our Annual Report on Form 10-K for the year ended December 31, 2017,2018, as filed with the Securities and Exchange Commission.

None.

None.

Not applicable.

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.