CELH · Read the filing

10-K

celsiusholdings_10k.htm

10-K

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-K

ANNUAL

REPORT PURSUANT TO SECTIONS 13 OR 15(d)

THE

SECURITIES EXCHANGE ACT OF 1934

For

the fiscal year ended December 31, 2020

Commission

File No. 001-34611

CELSIUS

HOLDINGS, INC.

(Exact

name of registrant as specified in its charter)

(State or Other Jurisdiction of (I.R.S. Employer

Incorporation or Organization) Identification No.)

2424

N Federal Highway, Suite 208, Boca Raton, Florida 33431

(Address

of Principal Executive Offices)

(561)

276-2239

(Registrant’s

telephone number, including area code)

(Former

name, former address and former fiscal year, if changed since last report)

Securities

registered under Section 12(b) of the Exchange Act:

Common

Stock, $0.001 par value

(Title

of Class)

Name

of each exchange on which registered: The Nasdaq Capital Market (Trading Symbol CELH)

Securities

registered under Section 12(g) of the Exchange Act: None

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐

Yes ☒ No

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. ☒ Yes ☐ No

Indicate

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)

and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant

to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit

such files). ☒ Yes ☐ No

Indicate

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer ☐ Accelerated Filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period

for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate

by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. ☐

Indicate

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes

☒ No

The

aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $301,864,237 as of June

30, 2020 for the Company’s common stock on such date on the Nasdaq Capital Market. For purposes of the foregoing computation,

all executive officers, directors, and 10% beneficial owners of the Registrant are deemed to be affiliates.

Indicate

the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

There were 72,585,354 shares of common stock outstanding as of March 10, 2021.

DOCUMENTS

INCORPORATED BY REFERENCE: No documents are incorporated by reference into this Report except those Exhibits so incorporated as

set forth in the Exhibit index.

TABLE

OF CONTENTS

Page

Part I 1

Item 1. Business 1

Item 1A. Risk Factors 8

Item1B. Unresolved Staff Comments 15

Item 2. Properties 15

Item 3. Legal Proceedings 15

Item 4. Mine Safety Disclosures 15

Item 6. Selected Financial Data. 16

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 19

Item 8. Financial Statements and Supplementary Data 19

Item 9A. Controls and Procedures 20

Item 9B. Other Information 21

Part III 22

Item 10. Directors, Executive Officers and Corporate Governance 22

Item 11. Executive Compensation 27

Item 12. Security Ownership of Certain Beneficial Owners and Management 30

Item 13. Certain Relationships and Related Transactions 32

Item 14. Principal Accountant Fees and Services 33

Part IV

Item 15. Financial Statements and Exhibits 33

Signatures 35

When

used in this Annual Report on Form 10-K (this “Report”), unless otherwise indicated, the terms “the Company,”

“Celsius,” “we,” “us” and “our” refers to Celsius Holdings, Inc. and its subsidiaries.

NOTE

REGARDING FORWARD-LOOKING STATEMENTS

This

Report contains or refers to certain statements that are not historical facts and are “forward-looking” statements

within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and

Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward looking

statements may be identified by words such as that. “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 are subject to various risks and uncertainties, many of which are outside our control, including, among others, strength

of the economy, potential effects of the COVID-19 pandemic, changes in the overall level of consumer spending, the performance

of the Company’s products within the prevailing retail environment, implementation of our strategy, trade restrictions,

availability of suitable store locations at appropriate terms, the availability of raw materials, compliance with regulations,

certifications and best practices with respect to the development, manufacture, sales and marketing of the Company’s products,

management changes, maintaining appropriate levels of inventory, changes in tax regulations, e-commerce relationships, disruptions

of manufacturing, warehouse or distribution facilities or information systems, political environment and other specific factors

described in “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial

Condition and Results of Operations” and elsewhere in this Report.

believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible

to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes

with certainty and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak

only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments.

Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

PART

Item

1. Business

Overview

are engaged in the development, marketing, sale and distribution of functional calorie-burning fitness and lifestyle 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 nine-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.

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.

currently offer five beverage lines, CELSIUS® Originals, CELSIUS HEATTM, CELSIUS® BCAA+ENERGY, CELSIUS® On-the-Go

and CELSIUS® Sweetened with Stevia.

Celsius

has 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. During the first quarter of 2021, Celsius

launched a branded cooler program, with a first phase target of locating up to 1,000 coolers in various retail outlets.

distribute our In the United States and elsewhere in North America, Celsius® is sold across many retail segments.

They include supermarkets, convenience stores, drug stores, nutritional stores, and mass merchants. We also sell to health clubs,

spas, gyms, the military and e-commerce websites.

distribute our products domestically through a hybrid of direct-store delivery (DSD) distributors and as well as sales direct

to retailers (DTR). We are continuing to emphasize DSD distribution as we believe it has been a key element in opening additional

domestic markets and retail segments and increasing sales.

Our

products are distributed in various foreign regions, primarily Europe and Asia, through regional and country-specific distribution

partners. In October 2019, we acquired Func Food, our Nordic distribution partner, who markets both our products as well as other

products under its own brands. Celsius intends to use Func Food as a platform to expand product distribution elsewhere in Europe.

The

Company does not directly manufacture its beverages and powder packets, 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.

Recent

Developments

October 30, 2020, the Company fully repaid the outstanding bonds payable, which were reinstated as part of the acquisition of

Func Food on October 25, 2019, in accordance with the original terms of the bonds. The total amount repaid was approximately $9.9

million, which included principal of $9.6 million and accrued interest of $0.3 million.

Potential

Effects of the COVID-19 Pandemic on the Company’s Business

Our

business and results of operations may be adversely affected by changes in the global macro-economic environment which may also

reflect the negative impacts caused by pandemic and public health crises related to the COVID-19 pandemic. These macro-economic

aspects may also impact inflation, currency exchange rates, interest rates, availability of capital markets, consumer demand,

distribution and raw material costs.

Volatility

in the financial markets and deterioration of global economic conditions could impact our business and operations in several ways,

including the following:

Our

ability to commercialize our products is critical to our success. Damage or disruption to our supply chain, including third-party

manufacturing or transportation and distribution capabilities, due to the COVID-19 pandemic and related aspects or other reasons

beyond our control or the control of our suppliers and business partners, could impair our operations.

are closely monitoring the COVID-19 pandemic and its potential impact on our supply chain, distribution and our consolidated results

of operations. While the beverage industry has experienced some shortages of cans as a result of the COVID-19 pandemic, Celsius

has been able to secure adequate supply and has not experienced significant adverse effects on its business, operations and financial

condition from such shortage or otherwise from the COVID-19 pandemic. Nonetheless, we are unable to accurately predict the impact

that COVID-19 will have due to the uncertainties which include the ultimate geographic spread of the virus, the intensity of the

virus, the duration of the outbreak, and/or actions that may be taken by governmental agencies.

Corporate

History

were incorporated in Nevada on April 26, 2005 under the name “Vector Ventures, Inc.” and originally engaged in mineral

exploration. Such business was unsuccessful. On January 26, 2007, we acquired the Celsius® beverage business of

Elite FX, Inc., a Florida corporation engaged in the development of “functional” beverages since 2004 in a reverse

merger, and subsequently changed our name to Celsius Holdings, Inc.

Our

Products

Celsius®

calorie-burning beverages were first introduced to the marketplace in 2005.

According

to multiple clinical studies we funded, a single serving (12 ounce can) of Celsius® burns 100 to 140 calories by

increasing a consumer’s metabolism an average of 12% for up to a three-hour period. In addition, these studies have indicated

that drinking a single serving of Celsius® prior to exercising may improve cardiovascular health and fitness

and enhance the loss of fat and gain of muscle from exercise.

seek to combine nutritional science with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus®

formulation, while fostering the goal of healthier everyday refreshment by being as natural as possible without the artificial

preservatives often found in many energy drinks or sodas. Celsius® has no chemical preservatives, aspartame or

high fructose corn syrup and is very low in sodium. Celsius® uses good-for-you ingredients and supplements such

as green tea (EGCG), ginger, calcium, chromium, B vitamins and vitamin C. Celsius is sweetened with sucralose, a sugar-derived

sweetener that is found in Splenda®, which makes our beverages low-calorie and suitable for consumers whose sugar

intake is restricted. Each 12 ounce can of Celsius® contains 200 milligrams of caffeine which is comparable to

one 12-ounce cup of coffee from the leading coffeehouse.

currently five beverage lines:

Celsius®

ready-to drink products are packaged in a distinctive 12 ounce sleek can that uses vivid colors in abstract patterns to create

a strong on-shelf impact. The cans are sold as singles or in four-packs. We have recently redesigned our packaging to provide

a cleaner, crisper and more modern look. In addition to being sugar free, our original ready-to -drink products line is non-GMO,

kosher and vegan certified and soy and gluten free.

a result of completion of the acquisition of Func Food in October 2019, we acquired the beverages, protein bars, supplements and

superfoods marketed and distributed in Finland, Sweden, and Norway. These products are distributed under the FAST, FitFarm and

CocoVi brands and which are owned by Func Food. FAST products is a market leader in Finland and has begun distribution into the

Swedish market. FitFarm and CocoVi are well-established brands of superfoods and other supplements in the Nordic countries.

Clinical

Studies

is our belief that clinical studies substantiating product claims will become more important as more and more beverages are marketed

with health claims. Celsius® was one of the first functional beverages to be launched along with a clinical study.

Celsius® is also one of very few functional beverages that has clinical research on the actual product itself.

Some beverage companies that do mention studies backing their claims are referencing independent studies conducted on one or more

of the ingredients in the product. We believe that it is important and will become more important to have studies on the actual

product.

have funded seven U.S. based clinical studies for Celsius®. Each was conducted by a research organization and each

studied the total Celsius® formula. The first study was conducted by the Ohio Research Group of Exercise Science

& Sports Nutrition. The remaining studies were conducted by the Applied Biochemistry & Molecular Physiology Laboratory

of the University of Oklahoma. We funded all of the studies and provided Celsius® beverage for the studies. However, none

of our directors, executive officers or principal shareholders is in any way affiliated with either of the two research organizations

which conducted the studies.

The

first study was conducted in 2005 by the Ohio Research Group of Exercise Science & Sports Nutrition www.ohioresearchgroup.com.

The Ohio Research Group of Exercise Science & Sports Nutrition is a multidisciplinary clinical research team dedicated to

exploring the relationship between exercise, nutrition, dietary supplements and health. This placebo-controlled, double-blind

cross-over study compared the effects of Celsius® and the placebo on metabolic rate. Twenty-two participants were

randomly assigned to ingest a 12 ounce serving of Celsius® and on a separate day a serving of twelve ounces of

Diet Coke®. All subjects completed both trials using a randomized, counterbalanced design. Randomized means that

subjects were selected for each group randomly to ensure that the different treatments were statistically equivalent. Counterbalancing

means that individuals in one group drank the placebo on the first day and drank Celsius® on the second day. The

other group did the opposite. Counterbalancing is a design method that is used to control “order effects.” In other

words, this was done to make sure that the order that subjects were served does not impact the results and analysis.

Metabolic

rate (via indirect calorimetry, measurements taken from breaths into and out of calorimeter) and substrate oxidation (via respiratory

exchange ratios) were measured at baseline (pre-ingestion) and for ten minutes at the end of each hour for three hours post-ingestion.

The results showed an average increase of metabolism of twelve percent over the three-hour period, compared to a statistically

insignificant change for the control group. Metabolic rate, or metabolism, is the rate at which the body expends energy. This

is also referred to as the “caloric burn rate.” Indirect calorimetry calculates heat that living organisms produce

from their production of carbon dioxide. It is called “indirect” because the caloric burn rate is calculated from

a measurement of oxygen uptake. Direct calorimetry would involve the subject being placed inside the calorimeter for the measurement

to determine the heat being produced. Respiratory Exchange Ratio is the ratio oxygen taken in a breath compared to the carbon

dioxide breathed out in one breath or exchange. Measuring this ratio can be used for estimating which substrate (fuel such as

carbohydrate or fat) is being metabolized or ‘oxidized’ to supply the body with energy.

The

second study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007.

This blinded, placebo-controlled study was conducted on a total of 60 men and women of normal weight. An equal number of participants

were separated into two groups to compare one serving (a single 12 ounce can) of Celsius® to a placebo of the same

amount. According to the study, those subjects consuming Celsius® burned significantly more calories versus those

consuming the placebo, over a three-hour period. The study confirmed that over the three-hour period, subjects consuming a single

serving of Celsius® burned 65% more calories than those consuming the placebo beverage and burned an average of

more than 100 to 140 calories compared to the placebo. These results were statistically significant.

The

third study, conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007, extended

our second study with the same group of 60 individuals and protocol for 28 days and showed the same statistical significance of

increased calorie burn (minimal attenuation). While the University of Oklahoma study did extend for 28 days, more testing would

be needed for long term analysis of the Celsius® calorie-burning effects. Also, although these studies were on

relatively small numbers of subjects, they have statistically significant results. Additional studies on a larger number and wider

range of body compositions can be considered to further the analysis.

Our

fourth study, conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009, combined

Celsius® use with exercise. This ten-week placebo-controlled, randomized and blinded study was conducted on a total

of 37 subjects. Participants were randomly assigned into one of two groups: Group 1 consumed one serving of Celsius®

per day, and Group 2 consumed one serving of an identically flavored and labeled placebo beverage. Both groups participated

in ten weeks of combined aerobic and weight training, following the American College of Sports Medicine guidelines of training

for previously sedentary adults. The results showed that consuming a single serving of Celsius® prior to exercising

may enhance the positive adaptations of exercise on body composition, cardio-respiratory fitness and endurance performance. According

to the preliminary findings, subjects consuming a single serving of Celsius® lost significantly more fat mass and

gained significantly more muscle mass than those subjects consuming the placebo — a 93.75% greater loss in fat and 50% greater

gain in muscle mass, respectively. The study also confirmed that subjects consuming Celsius® significantly improved measures

of cardio-respiratory fitness and the ability to delay the onset of fatigue when exercising to exhaustion.

Our

fifth study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009.

This ten-week placebo-controlled, randomized and blinded study was conducted on a total of 27 previously sedentary overweight

and obese female subjects. Participants were randomly assigned into groups that consumed identically tasting treatment beverages

with exercise or without exercise. All participants consumed one drink, either placebo or Celsius®, per day for

10 weeks. The exercise groups participated in ten weeks of combined aerobic and weight training, following the American College

of Sports Medicine guidelines of training for previously sedentary adults. No changes were made to their diet. The results showed

that consuming a single serving of Celsius® prior to exercising may improve cardiovascular health and fitness and

enhance the positive adaptations of exercise on body composition. According to the preliminary findings, subjects consuming a

single serving of Celsius® lost significantly more fat mass and gained significantly more muscle mass when compared

to exercise alone — a 46% greater loss in fat, 27% greater gain in muscle mass, respectively. The study also confirmed that

subjects consuming Celsius® significantly improved measures of cardio-respiratory fitness — 35% greater endurance

performance with significant improvements to lipid profiles — total cholesterol decreases of 5 to 13% and bad LDL cholesterol

12 to 18%. Exercise alone had no effect on blood lipid levels.

Our

sixth study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009.

This ten-week placebo-controlled, randomized and blinded study was conducted on a total of 37 previously sedentary male subjects.

Participants were randomly assigned into groups that consumed identically tasting treatment beverages with exercise or without

exercise. All participants consumed one drink, either placebo or Celsius®, per day for 10 weeks. The exercise groups

participated in ten weeks of combined aerobic and weight training, following the American College of Sports Medicine guidelines

of training for previously sedentary adults. No changes were made to their diet. The results showed that consuming a single serving

of Celsius® prior to exercising may improve cardiovascular health and fitness and enhance the positive adaptations

of exercise on body composition. Significantly greater decreases in fat mass and percentage body fat and increases in VO2

were observed in the subjects that consumed Celsius® before exercise versus those that consumed the placebo

before exercise. Mood was not affected. Clinical markers for hepatic, renal, cardiovascular and immune function, as determined

by pre-and post-blood work revealed no adverse effects.

Our

seventh study was conducted by Miami Research Institute in 2010 and demonstrated the efficacy and safety of the powders and the

shots. This study allows the Company to make the same structure/function claims as the ready to drink beverages.

Manufacture

and Supply of Our Products

Our

beverages are produced by established third party beverage co-packers. A co-packer is a manufacturing plant that provides the

service of filling bottles or cans for the brand owner. We believe one benefit of using co-packers is that we do not have to invest

in the production facility and can focus our resources on brand development, sales and marketing. It also allows us produce in

multiple locations strategically placed throughout the country. We purchase most of the ingredients and all packaging materials.

The co-pack facility assembles our products and charges us a fee by the case. The shelf life of Celsius® products

is specified as 15 to 18 months.

Substantially

all of the raw materials used in the preparation, bottling and packaging of our products are purchased by us or by our co-packers

in accordance with our specifications. Generally, we obtain the ingredients used in our products from domestic suppliers and some

ingredients have several reliable suppliers. The ingredients in Celsius® include green tea (EGCG), ginger (from

the root), caffeine, B vitamins, vitamin C, taurine, guarana, chromium, calcium, glucuronolactone, sucralose, natural flavors

and natural colorings. Celsius® is labeled with a supplements facts panel. We have no major supply contracts with

any of our suppliers. We single-source all our ingredients for purchasing efficiency; however, we have identified a second source

for our critical ingredients and there are many suppliers of flavors, colorings and sucralose. In case of a supply restriction

or interruption from any of the flavor and coloring suppliers, we would have to test and qualify other suppliers that may disrupt

our production schedules.

Packaging

materials, except for our distinctive sleek aluminum cans, are easily available from multiple sources in the United States; however,

due to efficiencies we utilize single source vendor relationships. While the beverage industry has experienced some shortages

of cans as a result of the COVID-19 pandemic, Celsius has been able to secure adequate supply and has not experienced significant

adverse effects from such shortages.

believe that our co-packing arrangement and supply sources are adequate for our present needs.

Func

Food similarly has its FAST and other products manufactured by independent third parties in the Nordic countries.

Distribution

Domestic

the United States and elsewhere in North America, Celsius® is sold across many retail segments. They include supermarkets,

convenience stores, drug stores, nutritional stores, and mass merchants. We also sell to health clubs, spas, gyms, the military,

and e-commerce websites.

distribute our products domestically through a hybrid of direct-store delivery (DSD) distributors and as well as sales direct

to retailers (DTR).

are continuing to emphasize the expansion of our DSD distribution network as we believe it has been a key element in opening additional

domestic markets and retail segments and increasing sales.

also sell our products online through our own and other e-commerce platforms such as Amazon. As a result of the shift to online

purchasing by consumers, including additional growth arising from the effects of the COVID-19 pandemic as a result of the shutdown

of various retail outlets, particularly gyms and health clubs in the fitness channel, e-commerce sales have accounted for a growing

percentage of our domestic revenue. We expect this trend to continue at least through most of 2021.

International

distribute our products in various foreign regions through regional and country-specific distribution partners. In October 2019,

we acquired Func Food, our Nordic distribution partner, who markets both our products as well as other products under its own

brands. Celsius intends to use Func Food as a platform to expand product distribution elsewhere in Europe.

market our products in the Asian market, which is one of the most dynamic and fastest-growing, through a partnership with A.S.

Watson industries in Hong Kong and a license agreement with our partner in China, Qifeng Food Technology (Beijing) Co., Ltd. (“Qifeng”).

While we initially began both local production and preliminary distribution of the Celsius® brand in 2018 through our partnership

in Qifeng, effective January 1, 2019, we restructured our China distribution efforts by entering into two separate agreements

as it relates to the commercialization of our Celsius products (i.e., license agreement) and a repayment of investment agreement

with Qifeng. Under the license agreement, Qifeng was granted the exclusive license rights to manufacture, market and commercialize

Celsius® brand products in China. Qifeng will pay a minimum royalty fee of $6.9 million for the five years of the term of

the agreement, transitioning to a volume-based royalty fee, thereafter. Under a separate economic agreement, Qifeng Food will

repay the marketing investments made by Celsius into the China market through 2018, over the same five-year period. The repayment,

which was formalized via a note receivable from Qifeng, will need to be serviced even if the licensing agreement is cancelled

or terminated.

Significant

Customer

a result of the growth of our business and the increase in online sales in 2020 related in part to the COVID-19 pandemic, one

customer, Amazon, accounted for approximately 15% and 12.0% of our revenues during the years ended December 31, 2020 and December

31, 2019, respectively. Notwithstanding the foregoing, we do not believe that we are dependent on our sales to Amazon for our

continued growth and profitability.

Seasonality

of Sales

is typical in the beverage industry, sales of our beverages are seasonal, with the highest sales volumes generally occurring in

the second and third fiscal quarters, which correspond to the warmer months of the year in our major markets.

Competition

believe that our Celsius® brand products are one of the few calorie-burning fitness beverages whose effectiveness is supported

by clinical studies, which gives us a unique position in the beverage market. However, our products do compete broadly with all

categories of consumer beverages. The beverage market is highly competitive, and includes international, national, regional and

local producers and distributors, most of whom have greater financial, management and other resources than us. Our direct competitors

in the functional beverage market include, but are not limited to The Coca-Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc.,

Nestlé, Waters North America, Inc., Hansen Natural Corp., Vital Pharmaceuticals, Inc, Monster Energy, and Red Bull.

Proprietary

Rights

have registered the Celsius® and MetaPlus® trademarks with the United States Patent and Trademark

Office, as well as a number of additional trademarks.

have and will continue to take appropriate measures, such as entering into confidentiality agreements with our contract packers

and ingredient suppliers, to maintain the secrecy and proprietary nature of our MetaPlus® formulation and product

formulas.

maintain our MetaPlus® formulation and product formulas as trade secrets. We believe that trade secrecy is a preferable

method of protection for our formulas as patenting them might require their disclosure. Other than a company that is our outsourced

production manager, no single member of the raw material supply chain or our co-packers has access to the complete formula.

consider our trademarks and trade secrets to be of considerable value and importance to our business. No successful challenges

to our registered trademarks have arisen and we have no reason to believe that any such challenges will arise in the future.

a result of the acquisition of Func Food in October 2019, we have acquired additional brands and tradenames.

Government

Regulation

The

production, distribution and sale of our products in the United States is subject to the Federal Food, Drug and Cosmetic Act,

the Dietary Supplement Health and Education Act of 1994, the Occupational Safety and Health Act, various environmental

statutes and various other federal, state and local statutes and regulations applicable to the production, transportation, sale,

safety, advertising, labeling and ingredients of such products. California law requires that a specific warning appear on any

product that contains a component listed by California as having been found to cause cancer or birth defects. The law exposes

all food and beverage producers to the possibility of having to provide warnings on their products because the law recognizes

no generally applicable quantitative thresholds below which a warning is not required. Consequently, even trace amounts of listed

components can expose affected products to the prospect of warning labels. Products containing listed substances that occur naturally

in the product or that are contributed to the product solely by a municipal water supply are generally exempt from the warning

requirement. While none of our products are required to display warnings under this law, we cannot predict whether an important

component of any of our products might be added to the California list in the future. We also are unable to predict whether or

to what extent a warning under this law would have an impact on costs or sales of our products.

Measures

have been enacted in various localities and states that require that a deposit be charged for certain non-refillable beverage

containers. The precise requirements imposed by these measures vary. Other deposit, recycling or product stewardship proposals

have been introduced in certain states and localities and in Congress, and we anticipate that similar legislation or regulations

may be proposed in the future at the local, state and federal levels, both in the United States and elsewhere.

Our

facilities in the United States are subject to federal, state and local environmental laws and regulations. Compliance with these

provisions has not had, and we do not expect such compliance to have, any material adverse effect upon our business, financial

condition and results of operations.

The

marketing and sale of our products internationally is similarly subject to compliance with applicable laws, rules and regulations

in those foreign countries where our products are sold.

Employees

of the date of this Report, the Company employs 154 people, including its executive officers.

Item

1A. Risk Factors

Our

business faces certain risks. The risks described below may not be the only risks we face. Additional risks that we do not yet

know of, or that we currently think as immaterial, may also impair our business. If any of the events anticipated by the risks

described below or elsewhere in this report occur, our results of operations and financial conditions could be adversely affected.

Risk

Factors Relating to Our Business

Our

business and results of operations may be adversely affected by the COVID-19 pandemic