f10k2008_celsius.htm

Celsius Holdings, Inc. and Subsidiaries


Report of Independent Registered Public Accounting Firm	24

Consolidated Balance Sheets as of December 31, 2008 and 2007	25

Consolidated Statements of Operations for the years ended December 31, 2008 and 2007	26

Consolidated Statements of Changes in Stockholders' Equity(Deficit) for the years ended December 31, 2008 and 2007	27

Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007	28

Notes to Consolidated Financial Statements	29-46

	1900 NW Corporate Blvd., Suite 210 East Boca Raton, Florida 33431 Tel. 561-886-4200 Fax. 561-886-3330 e-mail:info@sherbcpa.com
SHERB & CO., LLP	Offices in New York and Florida

Certified Public Accountants

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Celsius Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Celsius Holdings, Inc. and Subsidiaries as of December 31, 2008 and 2007, respectively, and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows for the years ended December 31, 2008 and 2007, respectively. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as of December 31, 2008 and 2007, respectively, and the results of their operations and cash flows for the years ended December 31, 2008, and 2007, respectively, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered losses from operations, and has an accumulated deficit and net cash used in operations of $4,840,152 for the year ended December 31, 2008. This raises substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sherb & Co., LLP

Certified Public Accountants

Boca Raton, Florida

February 23, 2009

Celsius Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets

	December 31,				December 31,
ASSETS		2008				2007

Current assets:
Cash and cash equivalents		$	1,040,633			$	257,482
Accounts receivable, net			192,779				276,877
Inventories, net			505,009				578,774
Other current assets			12,155				44,960
Total current assets			1,750,576				1,158,093

Property, fixtures and equipment, net			183,353				64,697
Note receivable			250,000				1,250,000
Other long-term assets			18,840				60,340
Total Assets		$	2,202,769			$	2,533,130

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses		$	612,044			$	594,828
Loans payable			95,000				710,307
Deposit from customer			-				400,000
Short term portion of other liabilities			26,493				7,184
Convertible note payable, net of debt discount			-				199,692
Due to related parties, short-term portion			120,000				896,721
Total current liabilities			853,537				2,808,732

Convertible note payable, net of debt discount			562,570				1,314,914
Due to related parties, long-term portion			700,413				-
Other liabilities			75,022				14,236
Total Liabilities			2,191,542				4,137,882

Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value; 50,000,000 shares authorized,
4,000 shares and 0 shares issued and outstanding, respectively			4,000,000				-
Common stock, $0.001 par value: 350,000,000 shares
authorized, 149 million and 106 million shares
issued and outstanding, respectively			148,789				105,611
Additional paid-in capital			7,244,806				4,410,405
Accumulated deficit			(11,382,368	)			(6,120,768	)
Total Stockholders’ Equity (Deficit)			11,227				(1,604,752	)
Total Liabilities and Stockholders’ Equity (Deficit)		$	2,202,769			$	2,533,130

See Notes to Consolidated Financial Statements

Celsius Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations

	For the years ended December 31,
	2008			2007
Revenue	$	2,589,887		$	1,644,780

Cost of revenue		1,833,184			1,033,971

Gross profit		756,703			610,809

Operating expenses:
Selling and marketing expenses		3,936,552			2,100,687
General and administrative expenses		1,740,143			1,554,510
Termination of contract expense		-			500,000

Total operating expenses		5,676,695			4,155,197

Operating loss		(4,919,992	)		(3,544,388	)

Other expenses:
Interest income		70,441			7,837
Interest expense, related party		(773	)		(75,647	)
Interest expense, other, net		(411,276	)		(113,643	)

Total other expenses		(341,608	)		(181,453	)

Net loss	$	(5,261,600	)	$	(3,725,841	)


Loss per share, basic and diluted	$	(0.04)		$	(0.04)

Weighted average shares outstanding -
basic and diluted		128,703,645			100,688,634

See Notes to Consolidated Financial Statements

Celsius Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
for the Years Ended December 31, 2008 and 2007
									Additional
	Preferred Stock				Common Stock				Paid-In		Accumulated			Total
	Shares		Amount		Shares		Amount		Capital		Deficit

Balance at December 31, 2006		-	$	-		69,575,000	$	69,575	$	705,425	$	(2,394,927	)	$	(1,619,927	)

Effect of recapitalization due to merger						24,000,000		24,000		329,117					353,117
Issuance of common stock in exchange of note						500,000		500		249,500					250,000
Issuance of common stock for cash						5,013,800		5,014		1,777,720					1,782,734
Exercise of warrants						3,557,812		3,558		496,442					500,000
Shares issued as compensation for services						1,572,246		1,572		196,928					198,500
Shares issued for termination of contract						1,391,500		1,392		273,154					274,546
Beneficial conversion feature of debt instrument										243,838					243,838
Stock option expense										138,281					138,281
Net loss												(3,725,841	)		(3,725,841	)
Balance at December 31, 2007		-		-		105,610,358		105,611		4,410,405		(6,120,768	)		(1,604,752	)

Issuance of preferred stock for cash		3,500		3,500,000											3,500,000
Issuance of stock in exchange of note		500		500,000		29,030,661		29,030		1,550,533					2,079,563
Issuance of common stock for cash						13,198,529		13,198		785,802					799,000
Exercise of stock options						16,671		17		295					312
Shares issued as compensation						933,135		933		130,517					131,450
Beneficial conversion feature of debt instrument										170,460					170,460
Stock option expense										196,794					196,794
Net loss												(5,261,600	)		(5,261,600	)
Balance at December 31, 2008		4,000	$	4,000,000		148,789,354	$	148,789	$	7,244,806	$	(11,382,368	)	$	11,227

See Notes to Consolidated Financial Statements

Celsius Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
	For the Years Ended December 31,
	2008			2007
Cash flows from operating activities:
Net loss	$	(5,261,600	)	$	(3,725,841	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation		31,605			11,658
Loss on disposal of assets		804			-
Adjustment to allowance for doubtful accounts		53,101			-
Adjustment to reserve for inventory obsolescence		190,601			16,444
Impairment of intangible assets		41,500			26,000
Termination of contract		-			500,000
Issuance of stock options		196,794			138,281
Amortization of debt discount		211,245			7,732
Issuance of shares as compensation		131,450			198,500
Changes in operating assets and liabilities:
Accounts receivable		30,997			(148,558	)
Inventories		(116,836	)		(30,119	)
Prepaid expenses and other assets		32,805			(8,906	)
Accounts payable and accrued expenses		17,382			64,123
Deposit from customer		(400,000	)		400,000
Net cash used in operating activities		(4,840,152	)		(2,550,686	)

Cash flows from investing activities:
Purchases of intangible assets		-			(41,500	)
Purchases of property, fixtures and equipment		(151,065	)		(46,164	)
Net cash used in investing activities		(151,065	)		(87,664	)

Cash flows from financing activities:
Proceeds from sale of common stock		799,312			1,782,734
Proceeds from sale of preferred stock		3,500,000			-
Proceeds from issuance of convertible notes		990,900			500,000
Proceeds from exercise of warrants		-			500,000
Proceeds from recapitalization due to merger		-			353,117
Repayment of note to stockholders		-			( 621,715	)
Proceeds from note receivable		1,000,000			-
Proceeds from loans payable		743,552			483,891
Repayment of loans payable		(1,183,087	)		(24,325	)
Repayment of note to related parties		(76,309	)		(106,449	)
Net cash provided by financing activities		5,774,368			2,867,253
Increase in cash		783,151			228,903

Cash, beginning of year		257,482			28,579
Cash, end of year	$	1,040,633		$	257,482
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	190,826		$	107,364
Cash paid during the year for taxes	$	-		$	-

See Notes to Consolidated Financial Statements

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Business —Celsius Holdings, Inc. (f/k/a Vector Ventures Corp., the “Company”) was incorporated under the laws of the State of Nevada on April 26, 2005. The Company was formed to engage in the acquisition, exploration and development of natural resource properties. On December 26, 2006 the Company amended its Articles of Incorporation to change its name from Vector Ventures Corp. as well as increase the authorized shares to 350,000,000, $0.001 par value common shares and 50,000,000, $0.001 par value preferred shares.

Prior to January 26, 2007, the Company was in the exploration stage with its activities limited to capital formation, organization, development of its business plan and acquisition of mining claims. On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Celsius, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Sub”), Elite FX, Inc., a Florida corporation (“Elite”), and Steve Haley, the “Indemnifying Officer” and “Securityholder Agent” of Elite, (the “Merger Agreement”). Under the terms of the Merger Agreement Elite was merged into Sub and became a wholly-owned subsidiary of the Company on January 26, 2007 (the “Merger”).

Under the terms of the Merger Agreement, the Company issued:

·	70,912,246 shares of its common stock to the stockholders of Elite, including 1,337,246 shares of common stock issued as compensation, as full consideration for the shares of Elite;

·	warrants to Investa Capital Partners Inc. to purchase 3,557,812 shares of common stock of the Company for $500,000. The warrants were exercised in February 2007;

·	1,391,500 shares of its common stock as partial consideration for termination of a consulting agreement and assignment of certain trademark rights to the name “Celsius”;

·	options to purchase 10,647,025 shares of common stock of the Company in substitution for the options currently outstanding in Elite;

·	1,300,000 shares of its common stock concurrent with the Merger in a private placement to non-US resident investors for aggregate consideration of US$650,000 which included the conversion of a $250,000 loan to the Company.

Celsius Holdings, Inc’s majority stockholder, Mr. Kristian Kostovski, cancelled 7,200,000 shares of common stock of the Company held by him shortly after the close of the Merger Agreement.

For financial accounting purposes, the Merger was treated as a recapitalization of Celsius Holdings, Inc with the former stockholders of the Celsius Holdings, Inc retaining approximately 24.6% of the outstanding stock. This transaction has been accounted for as a reverse acquisition and accordingly the transaction has been treated as a recapitalization of Elite FX, Inc., with Elite FX, Inc. as the accounting acquirer. The historical financial statements are a continuation of the financial statements of the accounting acquirer, and any difference of the capital structure of the merged entity as compared to the accounting acquirer’s historical capital structure is due to the recapitalization of the acquired entity.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern — The accompanying consolidated financial statements are presented on a going concern basis. The Company has suffered losses from operations and has an accumulated deficit and net cash used in operations of $4,840,152 for the year ended December 31, 2008. This raises substantial doubt about its ability to continue as a going concern. Management is currently seeking new capital or debt financing to provide funds needed to increase liquidity, fund growth, and implement its business plan. However, no assurances can be given that the Company will be able to raise any additional funds. If not successful in obtaining financing, the Company will have to substantially diminish or cease its operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Consolidation Policy — The accompanying consolidated financial statements include the accounts of Celsius Holdings, Inc. and subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

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.

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

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. 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.

Cash and Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At December 31, 2008, the Company did not have any investments with maturities greater than three months.

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 December 31, 2008 and December 31 2007, there was an allowance for doubtful accounts of $53,101 and $0, respectively.

Inventories — Inventories include only the purchase cost and are stated at the lower of cost or market. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company writes down inventory during the period in which such materials and products are no longer usable or marketable. At December 31, 2008 and December 31, 2007, there was a reserve for obsolescence of $207,045 and $16,444, respectively.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Impairment of Long-Lived Assets — Asset impairments are recorded when the carrying values of assets are not recoverable.

The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or at least annually. If the sum of the undiscounted expected future cash flows is less than the carrying amount of the asset, the Company recognizes an impairment loss. Impairment losses are measured as the amount by which the carrying amount of assets exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset.

Intangible Assets — Intangible assets consist of the web domain name Celsius.com and other trademarks and trade names, and are subject to annual impairment tests. This analysis will be performed in accordance with Statement of Financial Standards (‘‘SFAS’’) No. 142, Goodwill and Other Intangible Assets. Based upon impairment analyses performed in accordance with SFAS No. 142 in fiscal years 2008 and 2007, impairment was recorded of $41,500 and $26,000, respectively. The impairment recorded was for expenses for trademarks, domain names and international registration of trademarks.

Revenue Recognition — Revenue is recognized when the products are delivered, invoiced at a fixed price and the collectability is reasonably assured. Any discounts, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue.

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events and printed advertising. The Company incurred advertising expense of $1.6 million and $535,000, during the fiscal years 2008 and 2007, respectively.

Research and Development — Research and development costs are charged to operations as incurred and consists primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $261,000 and $214,000, during the fiscal years 2008 and 2007, respectively.

Fair Value of Financial Instruments — The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximates fair value. The carrying value of debt approximates the estimated fair value due to floating interest rates on the debt.

Income Taxes — Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than changes in the tax law or rates. A valuation allowance is recorded when it is deemed more likely than not that a deferred tax asset will be not realized.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Earnings per Share — Basic earnings per share are calculated by dividing income 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 preferred shares, exercise of stock options and warrants (calculated using the reverse treasury stock method). Common share equivalents outstanding were 86,130,991 and 8,534,864, as of December 31, 2008 and 2007, respectively.

Reclassifications — Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications had no effect on the reported net loss.

Share-Based Payments — In December 2004, the FASB issued SFAS No. 123(R) "Share-Based Payment," (“SFAS 123(R)”), which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No.107 "SAB 107'. SAB 107 expresses views of the staff regarding the interaction between SFAS 123(R) and certain SEC rules and regulations and provides the staffs views regarding the valuation of share-based payment arrangements for public companies. Effective January 1, 2006, the Company has fully adopted the provisions of SFAS 123(R) and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant as the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Standards No. 157, "Fair Value Measurements" (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 did not have a material impact on the Company's consolidated financial position or results of operations.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 did not have on the Company’s consolidated financial position and results of operations.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, in-process research and development, and restructuring costs. In addition, under SFAS 141R, changes in an acquired entity’s deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The Company does not anticipate that the adoption of SFAS 141R will have a material impact on its results of operations or financial condition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No 51 (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. This new consolidation method significantly changes the accounting for transactions with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 31, 2008. These standards will change our accounting treatment for business combinations on a prospective basis.

In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets.” This guidance is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”, and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to the asset upon renewal or extension. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for SFAS No. 142’s entity-specific factors. This standard is effective for fiscal years beginning after December 15, 2008, and is applicable to the Company’s fiscal year beginning January 1, 2008. The Company does not anticipate that the adoption of this FSP will have a material impact on its results of operations or financial condition.

In March 2008 and May 2008, respectively, the FASB issued the following statements of financial accounting standards, none of which is anticipated to have a material impact on the Company’s results of operations or financial position:

·	SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133;”

·	SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles;” and

·	SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60.”

3. INVENTORIES

Inventories consist of the following at:

	December 31,			December 31,
	2008			2007
Finished goods	$	581,970		$	407,972
Raw Materials		130,084			187,246
Less: inventory valuation allowance		(207,045	)		(16,444	)
Inventories, net	$	505,009		$	578,774

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. OTHER CURRENT ASSETS

Other current assets at December 31, 2008 and December 31, 2007 consist of deposits on purchases, prepaid insurance, other accounts receivable and accrued interest receivable.

5. PROPERTY, FIXTURES, AND EQUIPMENT

Property, fixtures and equipment consist of the following at:

	December 31, 2008			December 31, 2007
Furniture, fixtures and equipment	$	228,332		$	78,425
Less: accumulated depreciation		(44,979	)		(13,728	)
Total	$	183,353		$	64,697

Depreciation expense amounted to $31,605 and $11,658 during the fiscal years 2008 and 2007, respectively.

6. OTHER LONG-TERM ASSETS

Other long-term assets consist of the following at:

	December 31, 2008			December 31, 2007
Long term deposit on office lease	$	18,840		$	18,840
Intangible assets		41,500			41,500
Less: Impairment of intangible assets		(41,500	)		-
Total	$	18,840		$	60,340

7. NOTE RECEIVABLE

Note receivable from Golden Gate Investors, Inc. (“GGI”) was as of December 31, 2008 and December 31, 2007, $250,000 and $1,250,000, respectively. The note is due on February 1, 2012, under certain circumstances GGI is obligated to monthly prepay $250,000 on the note. During 2008, GGI made four monthly prepayments. As of December 31, 2008 GGI is not obligated to prepay the note. The prerequisites to obligate GGI to prepay the note are outside of the Company’s control and may exist at a future date. The note accrues 8% interest per annum. The Company has an outstanding debenture to the same company in the amount of $701,000. Also see Note 14 - Long term debenture

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at:

	December 31, 2008		December 31, 2007
Accounts payable	$	411,185	$	466,047
Accrued expenses		200,859		128,781
Total	$	612,044	$	594,828

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9. DUE TO RELATED PARTIES

Due to related parties consists of the following as of:

	December 31,			December 31,
	2008			2007
The Company received advances from one of its shareholders at various instances during 2004 and 2005, $76,000 and $424,000, respectively. In July, 2008, the debt was refinanced, has no collateral and accrues interest at the prime rate. Monthly amortization of $5,000 is due and a balloon payment of approximately $606,000 is due in January 2010.	$	643,916		$	669,111

The Company’s CEO loaned the Company $50,000 in February 2006. Moreover, the Company accrued salary for the CEO from March of 2006 through May 2007 for a total of $171,000. In August 2008, the total debt was refinanced, has no collateral and accrues interest at 3%; monthly payments of $5,000 are due with a balloon payment of $64,000 in January 2011.		176,497			227,610
	$	820,413		$	896,721
Less: Short-term portion	$	(120,000	)	$	(896,721	)
Long-term portion	$	700,413		$	-

Also, see Note 16 – Related party transactions.

10. LOANS PAYABLE

Loans payable consist of the following as of:

		December 31,		December 31,
		2008		2007
a.	The Company renewed its financing agreement for inventory on February 28, 2008. The line of credit was for $500,000 and carried an interest charge of 1.5 percent of the outstanding balance and a monitoring fee of 0.5 percent of the previous month’s average outstanding balance. The line of credit had as collateral all of the Company’s assets. The Company terminated the credit agreement and paid balance owed in December 2008.	$	-	$	222,092

b.	The Company renewed its factoring agreement for the Company’s accounts receivable during the first quarter of 2008. The maximum finance amount under the agreement was $500,000. Each factoring of accounts receivable has a fixed fee of one and a half percent of the invoice amount, a minimum fee per month and an interest charge of prime rate plus three percent on the outstanding balance under the credit agreement. The line of credit had as collateral all of the Company’s assets. The Company terminated the factoring agreement and paid balance owed in November 2008.		-		102,540

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

		December 31,		December 31,
		2008		2007
c.	In April 2, 2007 the Company received a $250,000 loan from Brennecke Partners LLC. In January, 2008 the Company restructured the then outstanding balance of the note and issued 1 million shares for an equivalent value of $121,555, and a new non-interest bearing note for $105,000. The Company paid the balance owed in December, 2008.		-		225,675

d.	The Company terminated a consulting agreement and received in assignment the rights to the trademark “Celsius” from one of its former directors. Payment was issued in the form of an interest-free note payable for $250,000 and 1,391,500 shares of common stock. The note called for monthly amortization of $15,000 beginning March 30, 2007 with final payment of the remaining outstanding balance on November 30, 2007.		95,000		160,000
		$	95,000	$	710,307

11. DEPOSIT FROM CUSTOMER

During 2007, the Company received $400,000 from an international customer as deposit on future orders. The deposit was used in its entirety to pay for product shipped in April and June of 2008. The current balance as of December 31, 2008 and December 31, 2007 was $0 and $400,000, respectively.

12. CONVERTIBLE AND OTHER NOTE PAYABLE

On December 18, 2007 the Company issued a $250,000 convertible note to CD Financial LLC (“CD”). The loan incurs eight percent interest per annum, and the note was due on April 16, 2008. The note can be converted to Company common stock after February 16, 2008 at a rate equal to seventy five percent of the average of the previous five days volume weighted average price for trading of the common stock, nevertheless, in no case can the note be converted to more than 25 million shares of common stock. At the time of recording the note a beneficial conversion feature for the conversion option was recorded in the amount $57,219, of which $6,199 was amortized in 2007, and $51,020 in 2008. Total outstanding as of December 31, 2007 was $199,692, which is net of debt discount of $51,020. On April 4, 2008 the Company received an additional $500,000 from CD on the same terms as the first note, also extending the due date of the first note. At the time of recording the second note a beneficial conversion feature for the conversion option was recorded as a debt discount in the amount $154,835. On June 10, 2008, the total amount of $750,000 was converted to 11,184,016 shares of Common Stock. The Company amortized $106,948 of the debt discount as interest expense; the remaining balance of the debt discount at time of conversion reduced the amount credited to equity.

On June 5, 2008, the Company issued a third convertible note for $250,000 to CD. On July 15, 2008 the Company issued a fourth convertible note for $250,000 to CD. The notes carry 8 percent interest. At the time of recording the first note a beneficial conversion feature for the conversion option was recorded in the amount $15,625, of which $6,621 was amortized in June of 2008. On August 8, 2008, the convertible notes in the aggregate amount of $500,000 were cancelled and exchanged as partial consideration for preferred stock issued to CDS Ventures of South Florida, LLC, an affiliate of CD.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In December 2008, the Company entered into a $1 million revolving line of credit with CD and it carries interest of Libor plus three percentage points. In connection with this line of credit, the Company entered into a loan and security agreement under which it has pledged all of its assets as security for the line of credit. At December 31, 2008, there was no outstanding balance for the line of credit.

In November and December 2008, the Company received loans from CD in the amount of $450,000 and $200,000, respectively. These loans incurred 10 percent interest per annum and were paid off in December 2008.

13. OTHER LIABILITY

During 2006 and 2008, the Company acquired a copier and 8 delivery vans, all of them financed. The outstanding balance on the aggregate loans as of December 31, 2008 and December 31, 2007 was $101,515 and $21,420, respectively, of which $26,493 and $7,184, is due during the next 12 months, respectively. The loans carry interest ranging from 5.4% to 9.1%. The total monthly principal payment is $2,099. The assets that were purchased are collateral for the loans.

14. LONG TERM DEBENTURE

On December 19, 2007, the Company entered into a $6 million security purchase agreement (the “Security Agreement”) with Golden Gate Investors, Inc (“GGI”), a California corporation. Under the Security Agreement, the Company issued as a first tranche a $1.5 million convertible debenture maturing on December 19, 2011. The debenture accrues seven and 3/4 percent interest per annum. As consideration the Company received $250,000 in cash and a note receivable for $1,250,000. The note receivable accrues eight percent interest per annum and is due on February 1, 2012. The note has a pre-payment obligation of $250,000 per month when certain criteria are fulfilled. The Company is not obligated to convert the debenture to shares, partially or in full, unless GGI prepays the respective portion of its obligation under the note. The Security Agreement contains three more identical tranches for a total agreement of $6 million. Each new tranche can be started at any time by GGI during the debenture period which is defined as between December 19, 2007 until the balance of the existing debentures is $250,000 or less. Either party can, with a penalty payment of $45,000 for the Company, and $100,000 for GGI, cancel any or all of the three pending tranches.

The debenture is convertible to common shares at a conversion rate of eighty percent of the average of the three lowest volume weighted average prices for the previous 20 trading days. The Company is not obligated to convert the amount requested to be converted into Company common stock, if the conversion price is less than $0.20 per share. GGI’s ownership in the company cannot exceed 4.99% of the outstanding common stock. Under certain circumstances the Company may be forced to pre-pay the debenture with a fifty percent penalty of the pre-paid amount.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company recorded a debt discount of $186,619 with a credit to additional paid in capital for the intrinsic value of the beneficial conversion feature of the conversion option at the time of issuance. The debt discount is being amortized over the term of the debenture. The Company recorded $46,656 and $1,533 as interest expense amortizing the debt discount during 2008 and 2007, respectively. The Company considered SFAS 133 and EITF 00-19 and concluded that the conversion option should not be bifurcated from the host contract according to SFAS 133 paragraph 11 a, and concluded that according to EITF 00-19 the conversion option is recorded as equity and not a liability.

During 2008, the Company received $1,000,000 in payment on the note receivable. In June to December, 2008, the Company converted $774,000 of the debenture to approximately 16.9 million shares of Common Stock and the Company paid $25,000 of the debenture in cash.

The outstanding liability, net of debt discount, as of December 31, 2008 and December 31, 2007 was $562,570 and $1,314,914, respectively.

15. PREFERRED STOCK

On August 8, 2008, the Company entered into a securities purchase agreement (“SPA1”) with CDS Ventures of South Florida, LLC (“CDS”), an affiliate of CD Financial, LLC (“CD”). Pursuant to the SPA, the Company issued 2,000 Series A preferred shares (“Preferred A Shares”), as well as a warrant to purchase an additional 1,000 Preferred A Shares, for a cash payment of $1.5 million and the cancellation of two notes in aggregate amount of $500,000 issued to CD. The Preferred A Shares can be converted into Company common stock at any time; until December 31, 2010, (as amended on December 12, 2008), the conversion price is $0.08, after which the conversion price is the greater of $0.08 or 90% of the volume weighted average price of the Common Stock for the prior 10 trading days. Pursuant to the SPA1, the Company entered into a registration rights agreement under which the company agreed to file a registration statement for the common stock issuable upon conversion of Preferred Shares. The Preferred A Shares accrue a ten percent annual cumulative dividend, payable in additional Preferred A Shares. The Preferred A Shares mature on February 1, 2013 and is redeemable only in Company Common Stock.

On December 12, 2008, the Company entered into a securities purchase agreement (“SPA2”) with CDS. Pursuant to the SPA2 the Company issued 2,000 Series B preferred shares (“Preferred B Shares”), as well as a warrant to purchase additional 2,000 Preferred B Shares, for a cash payment of $2.0 million. The Preferred B Shares can be converted into Company common stock at any time, until December 31, 2010, the conversion price is $0.05, after which the conversion price is the greater of $0.05 or 90% of the volume weighted average price of the common stock for the prior 10 trading days. Pursuant to the SPA2, the Company entered into a registration rights agreement under which the company agreed to file a registration statement for the common stock issuable upon conversion of Preferred B Shares. The Preferred B Shares accrue a ten percent annual cumulative dividend, payable in additional Preferred B Shares. The Preferred B Shares mature on December 31, 2013 and is redeemable only in Company Common Stock.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Certain covenants of both Series A and B preferred shares restrict the Company to enter into additional debt or to permit liens to be filed against the Company’s assets, without approval from the holder of the preferred shares. There is a mandatory redemption in cash, if the Company breaches certain covenants of the agreements. The holders have liquidation preference in case of company liquidation. The Company has the right to redeem the preferred shares early in cash at 104% of the liquidation preference value for Series A, any date after July 1, 2010 and for Series B, any date after January 1, 2011.

16. RELATED PARTY TRANSACTIONS

The CEO has guaranteed the Company’s obligations under the factoring agreement with Bibby Financial Services, Inc. (“Bibby”), the outstanding balance to Bibby as of December 31, 2008 and December 31, 2007 was $0 and $102,540, respectively. The CEO has also guaranteed the financing for the Company’s offices and purchases of vehicles. The CEO has not received any compensation for the guarantees.

The COO of the Company lent the Company $50,000 in February 2008, the loan was repaid in March 2008. The COO also purchased in February 2008, 781,250 shares in a private placement for a total consideration of $75,000.

The CFO of the Company lent the Company $25,000 in February 2008, the loan was repaid in February 2008. The CFO also purchased in February 2008, 245,098 shares in a private placement for a total consideration of $25,000.

The Vice President of Strategic Accounts and Business Development purchased in February 2008, 245,098 shares in a private placement for a total consideration of $25,000.

Also, see Note 9 – Due to related parties.

17. STOCKHOLDERS’ DEFICIT

Issuance of common stock pursuant to conversion of note

During 2007, the Company issued 500,000 shares as conversion of a note for $250,000, or an average price of $0.50 per share.

In January 2008, the Company restructured the then outstanding balance of a note and issued 1 million unregistered shares for an equivalent value of $121,555, and a new non-interest bearing note for $105,000. The note calls for 7 monthly principal payments beginning March 1, 2008. The Company paid off the outstanding balance as of December 31, 2008.

In June 2008, the Company issued 11,184,016 unregistered shares as conversion of notes for $750,000 that were originally issued in December 2007 and April 2008.

In June through September, 2008, the Company issued 9,107,042 as a partial conversion of a debenture for $575,000 originally issued in December 2007. In October through December, 2008, the Company issued 7,739,603 shares as a partial conversion of the same debenture for $199,000.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Issuance of common stock pursuant to services performed and termination of contract

During 2007 the Company issued 1,572,246 shares as compensation to employees, consultants and service providers. The total consideration recorded was $198,500 or an average of $0.13 per share.

In January, 2007, the Company issued 1,391,500 shares to a director as part of the consideration for termination of a consulting contract. The total consideration recorded was $274,546, or an average of $0.20 per share.

In March 2008, the Company issued a total of 750,000 unregistered shares as compensation to an international distributor at a fair value of $120,000.

In September through December, 2008, the Company issued a total of 183,135 unregistered shares as compensation to a consultant and a distributor at a fair value of $11,450.

Issuance of common stock pursuant to exercise of warrant and stock options

In February 2007, an investor exercised its warrant to purchase 3,557,812 shares for a total consideration of $500,000, or an average of $0.14 per share.

On February 15, 2008 the Company issued 16,671 shares of unregistered common stock in accordance to its 2006 Stock Incentive Plan to an employee exercising vested options.

Issuance of common stock pursuant to private placements

On June 22, 2007, the Company entered into a $16 million common stock purchase agreement (the “Purchase Agreement”) with Fusion Capital Fund II, LLC (“Fusion”), an Illinois limited liability company. Under the Purchase Agreement, the Company received $500,000 from Fusion Capital on the signing of the agreement and received additional $500,000 on July 20, 2007 when a registration statement related to the transaction was filed with the SEC. Concurrently with entering into the Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Agreement”) with Fusion. Under the Registration Agreement, we filed a registration statement with the SEC covering the shares that have been issued or may be issued to Fusion under the common stock purchase agreement. The SEC declared effective the registration statement on October 12, 2007 and the Company has the right over a 25-month period to sell our shares of common stock to Fusion from time to time in amounts between $100,000 and $1 million, depending on certain conditions as set forth in the agreement, up to an additional $15 million.

In consideration for entering into the $16 million Purchase Agreement, which provides for up to $15 million of future funding as well as the $1 million of funding prior to the registration statement being declared effective by the SEC, we agreed to issue to Fusion 3,168,305 shares of our common stock. The purchase price of the shares related to the $15 million of future funding will be based on the prevailing market prices of the Company’s shares at the time of sales without any fixed discount, and the Company will control the timing and amount of any sales of shares to Fusion. Fusion shall not have the right or the obligation to purchase any shares of our common stock on any business day that the price of our common stock is below $0.45. The Purchase Agreement may be terminated by us at any time at our discretion without any cost to us. The Company has sold to Fusion 795,495 shares for a total consideration of $400,000, before expenses related to the share issuances.

During 2007, the Company issued 5,013,800 shares to investors for a total consideration of approximately $1,783,000.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In February 2008 the Company issued a total of 3,198,529 unregistered shares of common stock in private placements for an aggregate consideration of $298,900, net of commissions.

In March 2008 the Company issued a total of ten million unregistered shares of common stock in a private placement, for an aggregate consideration of $500,100. In addition, the investor received a warrant to purchase seven million unregistered shares of common stock during a 3-year period, at an exercise price of $0.13 per share. Of the total consideration, $100,000 was paid in March and $400,100 was paid on April 7, 2008.

Issuance of preferred stock pursuant to private placement

In August 2008, the Company issued 2,000 unregistered Preferred A Shares, as well as a warrant to purchase additional 1,000 Preferred A Shares, for a cash payment of $1.5 million and the cancellation of two notes in aggregate amount of $500,000.

In December 2008, the Company issued 2,000 unregistered Preferred B Shares, as well as a warrant to purchase additional 2,000 Preferred B Shares, for a cash payment of $2.0 million.

Also, see Note - 15 Preferred stock.

18. INCOME TAXES

For the years ended December 31, 2008 and 2007, the Company’s net tax provision was zero.

The difference between the effective income tax rate and the United States federal income tax rate is summarized as follows:

	2008			2007
Statutory federal rate		(34.0	%)		(34.0	%)
State income tax		(3.6	%)		(3.6	%)
Effect of permanent differences		3.0	%		1.6	%
Change in valuation allowance		34.6	%		36.0	%
		0.0	%		0.0	%

The deferred tax asset consisted of the following at December 31:

	2008			2007
Net operating losses	$	3,803,000		$	2,156,000
Other deferred tax assets		206,000			79,000
Valuation allowance		(4,009,000	)		( 2,235,000	)
Total	$	0		$	0

In assessing the ability to realize a portion of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making the assessment. The valuation allowance for deferred tax assets as of December 31, 2008 and December 31, 2007 was $4.0 million and $2.2 million, respectively. The increase in valuation allowance was $1.8 million and $1.3 million in 2008 and 2007, respectively. The increase in valuation allowance was primarily attributable to the increase in net operating losses. The Company has recorded a valuation allowance at December 31, 2008 of $4.0 million or 100% of the assets.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net operating loss carry forwards expire:

2024	$	95,699
2025		787,446
2026		1,392,190
2027		3,303,187
2028		4,528,859
Total	$	10,107,381

The Company’s net operating loss carry forwards may be limited due to ownership changes pursuant to Internal Revenue Code section 382.

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” ((“FIN48”). This Interpretation prescribes a consistent recognition threshold and measurement standard, as well as clear criteria for subsequently recognizing, derecognizing and measuring tax positions for financial statement purposes. The Interpretation also requires expanded disclosure with respect to uncertainties as they relate to income tax accounting. Fin 48 is effective for fiscal years beginning after December 15, 2006. Management has evaluated all of its tax positions and determined that FIN 48 did not have a material impact on the Company’s financial position or results of operations during its year ended December 31, 2008.

19. STOCK-BASED COMPENSATION

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. Until 2017, options to acquire up to 16.0 million 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 has issued approximately 13.4 million options to purchase shares at an average price of $0.07 with a fair value of $527,000. For the year ended December 31, 2008 and December 31, 2007, the Company recognized $196,794 and $138,000, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations). As of December 31, 2008 and December 31, 2007, the Company had approximately $192,000 and $488,000, respectively, of unrecognized pre-tax non-cash compensation expense which the Company expects to recognize, based on a weighted-average period of 0.9 years. The Company used the Black-Scholes option-pricing model and 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 5.1 million shares that have vested, and 16,671 shares were exercised as of December 31, 2008. The following is a summary of the assumptions used:

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Risk-free interest rate		1.7% - 4.9%
Expected dividend yield		—
Expected term		3 – 5 years
Expected annual volatility		73% - 82%

Elite FX granted on January 19, 2007, prior to the merger with Celsius Holdings, Inc, equivalent to 1,337,246 shares of common stock in the Company, to its Chief Financial Officer as starting bonus for accepting employment with the Company. The Company valued the grant of stock based on fair value of the shares, which was estimated as the value of shares in the most recent transaction of the Company’s shares. The Company recognized the expense upon issuance of the grant.

In March, 2008, the Company issued a total of 750,000 shares as compensation to an international distributor at a fair value of $120,000. The same agreement can give the distributor 750,000 additional shares if certain sales targets are met, or if the stock price of the Company is 45 cents or greater for a period of 5 trading days, whichever occurs first.

During 2008 the Company issued a total of 183,135 shares as compensation to a consultant and a distributor at a fair value of $11,450. The consultant will receive additional shares with fair value of $2,000 monthly as long as the consultancy agreement continues. The distributor can receive additional shares depending on its purchases until end of March 2009.

The following table summarizes information about options for purchase of shares; granted, exercised and forfeited during the two-year period ending December 31, 2008:

	Shares			Weighted Average				Weighted Average Remaining Contractual
	(in			Exercise		Fair		Term
Options	thousands)			Price		Value		(in years)
at December 31, 2006		—		$	—	$	—
Granted		11,872			0.09		0.05
Exercised		—			—		—
Forfeiture		(201	)		0.02		0.01
At December 31, 2007		11,671		$	0.02	$	0.05		6.7
Granted		2,970			0.11		0.07
Exercised		(17	)		0.02		0.01
Forfeiture		(1,177	)		0.45		0.26
At December 31, 2008		13,447		$	0.07	$	0.04		5.9
Exercisable at December 31, 2008		5,088		$	0.07	$	0.04		5.1
Available for future grant		2,475

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes information about options outstanding at December 31, 2008:

Range of Exercise Price		Number Outstanding at December 31, 2008 (000s)	Weighted Average Remaining Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2008 (000s)	Weighted Average Exercise Price		Weighted Average Remaining Life in Years
	$0.02	10,162	5.4	$	0.02	3,488	$	0.02	5.4
	$0.08 - $0.11	2,835	5.9	$	0.11	1,450	$	0.11	4.3
	$0.23 - $0.60	50	8.8	$	0.42	17	$	0.42	8.8
	$0.84 - $1.10	400	8.5	$	0.91	133	$	0.91	8.5
		13,447	5.6	$	0.07	5,088	$	0.07	5.1

The following table summarizes information about non-vested options outstanding at December 31, 2008:

	Number of			Weighted average Grant
Total Non-vested options	shares (000s)			Date Fair Value
At December 31, 2006		-			-
Granted		11,872		$	0.05
Vested		(134	)		0.01
Forfeited		(201	)		0.01
At December 31, 2007		11,537		$	0.06
Granted		2,970		$	0.07
Vested		(5,171	)		0.05
Forfeited		(977	)		0.27
At December 31, 2008		8,359		$	0.04

20. STOCK OPTIONS AND WARRANTS

Under the terms of the Merger Agreement with Vector Ventures, Corp., see further Note 1 to the Consolidated Financial Statements, the Company issued warrants to Investa Capital Partners Inc. representing 3,557,812 shares of Common Stock of the Company, which were exercised on February 9, 2007 for an aggregate consideration of $500,000 in cash.

An investment banking firm received, as placement agent for the Fusion Capital financing, a warrant to purchase 75,000 shares at a price of $1.31 per share. If unexercised, the warrant expires on June 22, 2012.

In March, 2008 the Company issued a total of 10,000,000 unregistered shares of common stock in a private placement, for an aggregate consideration of $500,100. In addition, the investor received a warrant to purchase seven million unregistered shares of common stock at an exercise price of $0.13 per share. If unexercised, the warrant expires on March 28, 2011.

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On August 8, 2008, the Company entered into a securities purchase agreement with CDS, as further described in Note 15 to the Consolidated Financial Statements. In connection with the security purchase, CDS received a warrant to purchase an additional 1,000 Preferred A Shares, at a price of $1,000 per share. If unexercised, the warrant expires on July 10, 2010. The Preferred A Shares can be converted into our common stock at any time; until the December 31, 2010, (as amended on December 12, 2008), the conversion price is $0.08, after which the conversion price is the greater of $0.08 or 90% of the volume weighted average price of the common stock for the prior 10 trading days. The Preferred A Shares accrue ten percent annual cumulative dividend, payable in additional Preferred A Shares.

On December 12, 2008, the Company entered into another securities purchase agreement with CDS, as further described in Note 15 to the Consolidated Financial Statements. In connection with the security purchase, CDS received a warrant to purchase an additional 2,000 Preferred B Shares, at a price of $1,000 per share. If unexercised, the warrant expires on December 31, 2009. The Preferred B Shares can be converted into our common stock at any time. Until December 31, 2010, the conversion price is $0.05, after which the conversion price is the greater of $0.05 or 90% of the volume weighted average price of the common stock for the prior 10 trading days. The Preferred B Shares accrue a ten percent annual cumulative dividend, payable in additional Preferred B Shares.

	Year Ended December 31, 2008				Year Ended December 31, 2007
	Thousands of		Weighted Average		Thousands of		Weighted Average
	Warrants		Exercise Price		Warrants		Exercise Price
Balance at the beginning of year		75	$	1.31		—	$	—
Granted		59,500	$	0.07		3,633	$	0.16
Exercised		—		—		3,558	$	0.14
Expired		—		—		—		—
Balance at the end of year		59,575	$	0.07		75	$	1.31

Warrants exercisable at end of year		59,575	$	0.07		75	$	1.31

Weighted average fair value of the warrants granted during the year			$	0.03			$	1.85

The weighted average remaining contractual life and weighted average exercise price of warrants outstanding and exercisable at December 31, 2008, for selected exercise price ranges, is as follows:

Range of Exercise Price	Number Outstanding at December 31, 2008 (000s)	Weighted Average Remaining Life	Weighted Average Exercise Price
$0.05	40,000	1.0	$0.05
$0.08	12,500	1.5	$0.08
$0.13	7,000	2.2	$0.13
$1.31	75	3.6	$1.31
	59,575	1.3	$0.07

CELSIUS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

21. OPERATING LEASES

The Company entered into a new office lease effective October 2008. The monthly rent amounts to $6,717 per month and the lease terminates in September 2009. Future annual minimum payments required under operating lease obligations at December 31, 2008 are as follows:

	Future Minimum Lease Payments

2009	$	60,453
2010 and thereafter		0
Total	$	60,453

22. COMMITMENTS AND CONTINGENCIES

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

There is one agreement that also has liquidated damages, but instead of a monetary damage, the potential liability is to have to issue shares to the distributor at a purchase price of $0.06. The quantity of shares depends on this distributor’s purchases from the Company as compared to the Company’s total revenue.

23. BUSINESS AND CREDIT CONCENTRATION

Substantially all of the Company’s revenue derives from the sale of the Celsius beverage.

During 2008, the Company sold in one order to one international customer 15.9% of the Company’s total revenue for the year. There is no assurance that this customer will order again.

24. NON-CASH INVESTING AND FINANCING ACTIVITIES

For the years ended December 31,	2008		2007
Issuance of shares for note payable	$	2,079,563	$	250,000
Debt discount for beneficial conversion feature	$	170,460	$	243,838
Issuance of debenture for note receivable	$	-	$	1,250,000
Issuance of shares for termination of contract	$	-	$	274,546
Issuance of notes payable for termination of contract	$	-	$	250,000

NEVADA	333-129847	20-2745790
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Quarter Ended(1)	High	Low
December 31, 2008	$0.08	$0.03
September 30, 2008	$0.15	$0.05
June 30, 2008	$0.19	$0.08
March 31, 2008	$0.28	$0.10
December 31, 2007	$0.65	$0.13
September 30, 2007	$1.31	$0.47
June 30, 2007	$1.78	$0.62
March 31, 2007	$3.67	$1.20

Name	Age	Position

Stephen C. Haley	51	Chief Executive Officer, President and Chairman of the Board of Directors

Jan Norelid	55	Chief Financial Officer and Director

Jeffrey Perlman	44	Chief Operating Officer

Janice Haley	46	Vice President of Marketing

James Cast	60	Director

William Milmoe	60	Director

Geary Cotton	57	Director

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	13,447,317	$	0.07	2,474,833
Equity compensation plans not approved by security holders	—		—	—

Total	13,447,317	$	0.07	2,474,833

Exhibit No.	Description	Location
2.1	Agreement and Plan of Reorganization dated January 26, 2007	Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 2, 2007
2.2	Articles of Merger	Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 2, 2007
3.1	Articles of Incorporation	Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 as filed with the SEC on November 21, 2005
3.2	Bylaws	Incorporated by reference to Exhibit B to the Company’s Information on Form DEF-14C as filed with the SEC on December 5, 2006
3.3	Articles of Amendment	Incorporated by reference to Exhibit A to the Company’s Information on Form DEF-14C as filed with the SEC on December 5, 2006
4.1	Warrant Agreement with Investa Partners LLC	Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 2, 2007
4.2	Stock Option Plan Adopted	Incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed with the SEC on February 2, 2007
10.1	Stock Grant Agreement Gregory Horn	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 2, 2007
10.2	Promissory Note to Special Nutrition Group, Inc.	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 2, 2007
10.3	Employment Agreement with Stephen Haley, as amended	Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2007
10.4	Employment Agreement with Jan Norelid, as amended	Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2007
10.5	Employment Agreement with Richard McGee, as amended	Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2007

Notes:
		(1)	The quotations above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

	Payments Due by Period
Contractual	Total		Less Than		1 to		3 to		More Than
Obligations			1 Year		3 Years		5 Years		5 Years
Debt to related party	820		120		700		—		—
Loans payable	196		121		58		17		—
Convertible debenture	563		563		—		—		—
Purchase obligations	—		—		—		—		—
Total	$	1,579	$	804	$	758	$	17	$	—

10.6	Employment Agreement with Janice Haley	Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on February 2, 2007
10.7	Stock Grant Agreement Addendum 1 with Jan Norelid	Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB as filed with the SEC on May 15, 2007
10.8	Common Stock Purchase Agreement with Fusion Capital Fund II, LLC	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on June 25, 2007
10.9	Registration Rights Agreement with Fusion Capital Fund II, LLC	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on June 25, 2007
10.11	Master Purchase and Sale Agreement (factoring agreement) with Bibby Financial Services, Inc.	Incorporated by reference to Exhibit 10.11 to the Company’s filing of Form SB-2/A as filed with the SEC on August 28, 2007
10.12	Promissory note issued to CD Financial, LLC dated December 18, 2007 , as amended	Incorporated by reference to Exhibit 10.12 to the Company’s filing of Form 10-KSB as filed with the SEC on March 3, 2008
10.13	Secured promissory note issued by Golden Gate Investors, Inc. dated December 19, 2007	Incorporated by reference to Exhibit 10.2 to the Company’s filing of Form 8-K/A as filed with the SEC on January 9, 2008
10.14	Secured purchase agreement between Celsius Holdings, Inc. and Golden Gate Investors, Inc. dated December 19, 2007	Incorporated by reference to Exhibit 10.3 to the Company’s filing of Form 8-K/A as filed with the SEC on January 9, 2008
10.15	7 ¾% Convertible Debenture issued by Celsius Holdings, Inc. dated December 19, 2007	Incorporated by reference to Exhibit 10.4 to the Company’s filing of Form 8-K/A as filed with the SEC on January 9, 2008
10.16	Securities purchase agreement between Celsius Holdings, Inc. and CDS Ventures of South Florida, LLC. dated August 8, 2008	Incorporated by reference to Exhibit 10.1 to the Company’s filing of Form 8-K as filed with the SEC on August 12, 2008
10.17	Registration rights agreement between Celsius Holdings, Inc. and CDS Ventures of South Florida, LLC. dated August 8, 2008	Incorporated by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed with the SEC on August 12, 2008
10.18	Loan and Security Agreement between Celsius, Inc and CD Financial, LLC.	Incorporated by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed with the SEC on December 10, 2008
10.19	Securities purchase agreement between Celsius Holdings, Inc. and CDS Ventures of South Florida, LLC. dated December 12, 2008	Incorporated by reference to Exhibit 10.1 to the Company’s filing of Form 8-K as filed with the SEC on December 17, 2008
10.20	Registration rights agreement between Celsius Holdings, Inc. and CDS Ventures of South Florida, LLC. dated December 12, 2008	Incorporated by reference to Exhibit 10.2 to the Company’s filing of Form 8-K as filed with the SEC on December 17, 2008
14.1	Code of Ethical Conduct	Incorporated by reference to Exhibit 14.1 to the Company’s Original filing of Form SB-2 as filed with the SEC on July 20, 2007
22.1	List of subsidiaries	Filed herewith
99.1	Results from Clinical Studies	Incorporated by reference to Exhibit 99.1 to the Company’s Original filing of Form SB-2 as filed with the SEC on July 20, 2007

	CELSIUS HOLDINGS, INC.
Dated: March 6, 2009	/s/ Stephen C. Haley Stephen C. Haley Chairman and Chief Executive Officer (Principal Executive Officer)

Name	Title	Date

/s/ Stephen C. Haley Stephen C. Haley	Chairman and Chief Executive Officer (Principal Executive Officer)	March 6, 2009
/s/ Jan A. Norelid Jan A. Norelid	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 6, 2009
/s/ James R. Cast James R. Cast	Director	March 6, 2009
/s/ William H. Milmoe William H. Milmoe	Director	March 6, 2009
/s/ Geary W. Cotton Geary W. Cotton	Director	March 6, 2009

Exhibit No.		Title

22.1		List of subsidiaries
31.1		Section 302 Certification of Chief Executive Officer
31.2		Section 302 Certification of Chief Financial Officer
32.1		Section 906 Certification of Chief Executive Officer
32.2		Section 906 Certification of Chief Financial Officer