10-Q

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

Commission file number: 000-55663

CELSIUS HOLDINGS, INC. 

(Exact name of registrant as specified in its charter)

Nevada	20-2745790
(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)

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 (ss.232.405 of this chapter) 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, smaller reporting company, or an emerging growth company. See the 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 ☐

If 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of November 8, 2018 was 51,129,819.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	2
	Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017	2
	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (unaudited)	3
	Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2018 and 2017 (unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 3.	Quantitative Disclosures About Market Risks.	22
Item 4.	Controls and Procedures.	23
PART II - OTHER INFORMATION		24
Item 1.	Legal Proceedings.	24
Item 1A.	Risk Factors.	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	24
Item 3.	Defaults Upon Senior Securities.	24
Item 4.	Mine Safety Disclosures.	24
Item 5.	Other information.	24
Item 6.	Exhibits.	25
SIGNATURES		25

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

Celsius Holdings, Inc. and Subsidiaries 

Consolidated Balance Sheets

	September 30, 2018 (Unaudited)			December 31, 2017 (1)
ASSETS
Current assets:
Cash	$	5,314,112		$	14,186,624
Accounts receivable, net		12,836,991			6,375,658
Inventories, net		6,848,755			5,305,505
Prepaid expenses and other current assets		3,336,674			1,180,444
Total current assets		28,336,532			27,048,231
Property and equipment, net		121,504			62,642
Total Assets	$	28,458,036		$	27,110,873
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	14,501,149		$	6,311,824
Accrued preferred dividend		212,265			133,883
Customer advances and other current liabilities		14,534			17,921
Total current liabilities		14,727,948			6,463,628
Long-term liabilities:
Note payable-related party		3,500,000			3,500,000
Total Liabilities		18,227,948			9,963,628
Commitments and contingences (note 14)
Stockholders’ Equity:
Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 2,760 and 6,760 shares issued and outstanding at September 30, 2018 and December 31, 2017		3			7
Common stock, $0.001 par value; 75,000,000 shares authorized, 51,124,946 and 45,701,593 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively		51,125			45,702
Additional paid-in capital		82,659,488			79,101,824
Accumulated other comprehensive (loss)/income		6,752			(39,378	)
Accumulated deficit		(72,487,280	)		(61,960,910	)
Total Stockholders’ Equity		10,230,088			17,147,245
Total Liabilities and Stockholders’ Equity	$	28,458,036		$	27,110,873

(1) Derived from Audited Financial Statements

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

2 

Celsius Holdings, Inc. and Subsidiaries 

Consolidated Statements of Operations 

(Unaudited)

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
Revenue	$	16,565,316		$	10,785,796		$	37,923,619		$	27,023,123
Cost of revenue		9,694,932			6,110,898			22,307,735			15,398,798
Gross profit		6,870,384			4,674,898			15,615,884			11,624,325
Selling and marketing expenses		8,671,792			4,702,308			18,419,236			9,273,207
General and administrative expenses		2,287,374			1,559,173			7,430,580			5,261,694
Total operating expenses		10,959,166			6,261,481			25,849,816			14,534,901
Loss from operations		(4,088,782	)		(1,586,583	)		(10,233,932	)		(2,910,576	)
Other (Expense):
Interest expense		(42,932	)		(35,661	)		(122,944	)		(122,195	)
Total Other (Expense)		(42,932	)		(35,661	)		(122,944	)		(122,195	)
Net Loss		(4,131,714	)		(1,622,244	)		(10,356,876	)		(3,032,771	)
Preferred stock dividend		(43,639	)		(92,250	)		(169,494	)		(273,743	)
Net loss available to common stockholders	$	(4,175,353	)	$	(1,714,494	)	$	(10,526,370	)	$	(3,306,514	)
Loss per share:
Basic	$	(0.08	)	$	(0.04	)	$	(0.21	)	$	(0.08	)
Diluted	$	(0.08	)	$	(0.04	)	$	(0.21	)	$	(0.08	)
Weighted average shares outstanding:
Basic		51,098,575			45,487,908			49,675,624			43,990,367
Diluted		51,098,575			45,487,908			49,675,624			43,990,367

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

3 

Celsius Holdings, Inc. and Subsidiaries 

Consolidated Statements of Comprehensive Loss 

(Unaudited)

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
Net loss available to common stockholders, as reported	$	(4,175,353	)	$	(1,714,494	)	$	(10,526,370	)	$	(3,306,514	)
Other comprehensive (loss)/income:
Unrealized foreign currency translation income		65,949			—			46,130			—
Comprehensive loss		(4,109,404	)		(1,714,494	)		(10,480,240	)		(3,306,514	)

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

4 

Celsius Holdings, Inc. and Subsidiaries 

Consolidated Statements of Cash Flows 

(Unaudited)

	For the nine months ended
	September 30, 2018			September 30, 2017
Cash flows from operating activities:
Net Loss	$	(10,356,876	)	$	(3,032,771	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		34,620			14,292
Shares issued for settlement of legal claim		279,600			327,997
Stock-based option compensation expense		3,103,778			1,635,458
Changes in operating assets and liabilities:
Accounts receivable, net		(6,461,333	)		(4,284,156	)
Inventories net		(1,543,250	)		(2,105,226	)
Prepaid expenses and other current assets		(2,156,230	)		(2,130,941	)
Accounts payable and accrued expenses		8,189,325			6,656,778
Accrued preferred dividends		(91,111	)		(151,667	)
Deferred revenue and other current liabilities		(3,387	)		(161,624	)
Net cash used in operating activities		(9,004,864	)		(3,231,860	)
Cash flows from investing activities:
Purchase of property and equipment		(93,482	)		(30,716	)
Net cash (used in) investing activities		(93,482	)		(30,716	)
Cash flows from financing activities:
Net proceeds from issuance of common stock		—			9,999,948
Proceeds from exercise of stock options		179,704			934,073
Net cash provided by financing activities		179,704			10,934,021
Effect of exchange rate changes on cash and cash equivalents		46,130			—
Net increase (decrease) increase in cash		(8,872,512	)		7,671,445
Cash at beginning of the period		14,186,624			11,747,138
Cash at end of the period	$	5,314,112		$	19,418,583
Supplemental disclosures:
Cash paid during period for:
Interest	$	132,425		$	137,014
Income Taxes	$	—		$	—
Non-cash investing and financing activities:
Accrued preferred dividends	$	129,493		$	273,743
Conversion of convertible note to common stock, related-party	$	—		$	1,000,000

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

5 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited)  

September 30, 2018

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation – The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the 10K filed for December 31, 2017 and notes thereto and other pertinent information contained in our General Form for Registration of Securities of Form 10 as filed with the Securities and Exchange Commission (the “Commission”). The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material inter-company balances and transactions have been eliminated.

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

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

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by the CEO is identical to the information presented in the accompanying consolidated statement of operations. Therefore, the Company has determined that it operates in a single operating segment. For the three and nine months ended September 30, 2018 and 2017 all material assets and revenues of the Company were in the United States except as disclosed in Note 2.

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

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

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At September 30, 2018, the Company had approximately $8 million in excess of the Federal Deposit Insurance Corporation limit.

6 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

For the nine months ending September 30, 2018 and 2017, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2018			2017
A*		17.6	%		32.9	%
All other		82.4	%		67.1	%
Total		100.0	%		100.0	%

At September 30, 2018 and December 31, 2017, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

	2018			2017
A*		44.4	%		60.7	%
B		12.30	%		0	%
C		10.60	%		7.8	%
All other		32.70	%		31.5	%
Total		100.0	%		100.0	%

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

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 September 30, 2018 and December 31, 2017, the Company did not have any investments with maturities of three months or less.

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 September 30, 2018 and December 31, 2017, there was an allowance for doubtful accounts of $23,505 and $33,100, respectively.

Inventories — Inventories include only the purchase cost and are stated at the lower of cost and realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company outsources its manufacturing process and as a result has no work in process inventories. The Company writes down against inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). If the inventory items will not be utilized, these items will be included as part of the inventory reserve. At September 30, 2018 and December 31, 2017, the Company recorded a reserve of $161,190 and $36,300 respectively. The changes in reserve are included in cost of revenue.

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

7 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

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

Revenue Recognition —Revenue is derived from the sale of beverages. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Any discounts, slotting fees, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue.

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

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred advertising expense of approximately $13.1 million and $5.1 million, during the nine months ending September 30, 2018 and 2017, respectively.

Research and Development — Research and development costs are charged to general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $313,000 and $240,945 during the nine months ending September 30, 2018 and 2017, respectively.

Foreign Currency Translation — Generally, foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of long-term investment nature, are included in Comprehensive Income. The Company incurred foreign currency translation gain of approximately $46,130 and $0 during the nine months ending September 30, 2018 and 2017, respectively.

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

Fair Value Measurements - ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Other than these noted previously, the Company did not have any other assets or liabilities measured at fair value at September 30, 2018 and December 31, 2017.

8 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

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

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

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

The Company’s tax returns for tax years in 2014 through 2017 remain subject to potential examination by the taxing authorities.

Earnings per Share — Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of September 30, 2018, there were options outstanding to purchase approximately 5.6 million shares, which exercise price averaged $3.09, and Series C Preferred Stock outstanding to convert to 5.3 million common shares at $0.52 price per share.

Share-Based Payments —Effective January 1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. The Company will evaluate the requirements and potential impacts of the recently issued ASU 2018-07 which is effective for fiscal years beginning after December 15, 2018, in order to determine if it may have a material effect regarding the accounting for their Stock Compensation. Currently, compensation cost is measured on the date of grant at the fair value of the share-based payments. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

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

9 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

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

Shipping and Handling Costs — Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the nine months ended September 30, 2018 and 2017 was $4.1 million and $2.4 million, respectively.

Recent Accounting Pronouncements

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

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). The ASU replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842, which provides an optional transition practical expedient that allows companies to not evaluate (under Topic 842) existing or expired land easements that were not previously accounted for as leases (under Topic 840). Topic 842 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. Topic 842 requires a modified retrospective approach, which includes several optional practical expedients. The Company is currently evaluating the impact of ASU 2018-02 on the Company’s consolidated financial statements.

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

10 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

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

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At September 30, 2018, the Company had an accumulated deficit of $72,487,280 which includes a net loss available to common stockholders of $10,526,370 for the nine months ended September 30, 2018. During the nine months ending September 30, 2018 the Company’s net cash used in operating activities totaled $9,004,864. While these factors alone may raise substantial doubt as to the Company’s ability to continue as a going concern, the Company’s sale of an aggregate of $15 million in capital through the sale of an aggregate of 4,833,329 shares of our common stock at a purchase price of $3.00 per share in a private offering to 13 accredited investors between December 30, 2016 and March 14, 2017 and remaining cash and other current assets, as well as our 12 month Cashflow projections and strategic plan, are deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Moreover, the nine months ending September 30, 2018 included several non-recurring charges which affected our cashflow position by approximately $1.1 million.

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

3. REVENUE

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

The adoption of ASC 606 resulted in an immaterial impact to the specific financial statement line items of the Company’s unaudited Consolidated Statements of Income during the nine months ended September 30, 2018.

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

Information about the Company’s net sales by reporting segment for the nine months ended September 30, 2018 and 2017 is as follows:

	For the nine months ended
	September 30,		September 30,
	2018		2017
North America	$	27,911,538	$	17,356,081
Europe		7,097,942		9,179,116
Asia		2,740,175		421,668
Other		173,964		66,258
Net sales	$	37,923,619	$	27,023,123

11 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

4. INVENTORIES

Inventories consist of the following at:

	September 30,			December 31,
	2018			2017
Finished goods	$	4,200,013		$	4,137,239
Raw Materials		2,809,932			1,204,560
Less: Inventory Reserve		(161,190	)		(36,294	)
Inventories, net	$	6,848,755		$	5,305,505

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets total approximately $3.3 million and $1.2 million, at September 30, 2018 and December 31, 2017, respectively, and consist mainly of prepaid advertising, prepaid insurance, prepaid slotting fees, and deposits on purchases of raw materials.

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

	September 30,			December 31,
	2018			2017
Furniture and equipment	$	434,642		$	341,159
Less: accumulated depreciation		(313,136	)		(278,517	)
Total	$	121,504		$	62,642

Depreciation expense amounted to $34,644 and $14,292 during the nine months ended September 30, 2018 and 2017, respectively

7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at:

	September 30,		December 31,
	2018		2017
Accounts payable	$	5,106,023	$	3,003,086
Accrued expenses		9,395,126		3,308,738
Total	$	14,501,149	$	6,311,824

12 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited)  

September 30, 2018

8. CUSTOMER ADVANCES AND OTHER CURRENT LIABILITIES

Customer advances and other current liabilities:

	September 30,		December 31,
	2018		2017
State bottle bill liability	$	14,534	$	17,921
Total	$	14,534	$	17,921

9. NOTE PAYABLE - RELATED PARTIES

Note payable - related parties consists of the following as of:

	September 30,		December 31,
	2018		2017
Note Payable
In July 2010, the Company entered into a note payable with a related party principal shareholder which carries interest of five percent per annum paid quarterly. The Company has pledged all of its assets as security for the note payable. The notes mature in January 2020, at which time the principal amount is due. During April 2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of this line. In January 2018, the Company issued 333,333 of common stock at $3.00 per share the offering price in exchange for the cancellation of $1,000,000 of this line, reducing the amount of the line to $3,500,000.
Long-term portion	$	3,500,000	$	3,500,000

13 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

10. PREFERRED STOCK – RELATED PARTY

On August 26, 2013, the Company entered into a securities purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s note payable with CD (the CD Note Payable). The Preferred C Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends. As of September 30, 2018, $168,626 of dividends has been accrued. The Preferred C Shares mature on December 31, 2018 and are redeemable only in exchange for shares of Company common stock.

On April 16, 2015, the Company entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD note payable was reduced by $4.0 million, which amount was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred D Shares”). This related party was given a conversion price of $0.86 per common share, whereas other investors purchased common shares at $0.89 in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535, was recorded as a dividend in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other options. The Preferred D Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.86 per share until the earlier of the January 2, 2021 due date of our note payable with CD Financial or such earlier date as the note payable is satisfied (the “Maturity Date”). The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred D Shares accrue cumulative annual cash dividends at the rate of 5% per annum, payable quarterly in cash and have a liquidation preference of $1,000 per share. On the Maturity Date, the Preferred D Shares automatically convert into shares of our common stock in a number determined by dividing the $1,000 per Preferred D Share liquidation preference plus any accrued but unpaid dividends, by the conversion price then in effect. The Holder shall have the right, at its election, to require the Company to redeem all or any portion of the shares held by the holder in exchange for cash or common stock upon the occurrence of certain events which management believes are under the control of the Company. As of March 31, 2018, none of the contingent events have occurred and in accordance with ASC-480-10-25 “Distinguishing Liabilities from Equity” and Regulation S-X-Rule 5-02-27, the Company has classified these shares as permanent equity. The Preferred D Shares may also be redeemed by us at any time on or after December 31, 2017, at a redemption price equal to 104% of the liquidation preference. The holder of the Preferred D Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In March 2018, the Preferred D shares were converted into 4,651,163 shares of common stock.

14 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited)  

September 30, 2018

11. RELATED PARTY TRANSACTIONS

The Company’s office is rented from a company affiliated with CD which is controlled by Carl DeSantis, a principal shareholder (see note 14). Currently, the lease expires on October 2020 with monthly base rent of $12,090. The rental fee is commensurate with other properties available in the market.

Other related party transactions are discussed in notes 9 and 10.

12. STOCKHOLDERS’ EQUITY

Issuance of common stock pursuant to services performed

In January 2017, the Company issued 47,126 shares of “restricted” stock to each William H. Milmoe and Thomas E. Lynch in consideration for services previously rendered to Celsius. Total shares issued were 94,252 at a fair value of $328,000, or $3.48 per share representing the closing stock price on that date.

On July 31^st, 2018 the Company settled a legal matter that was filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products. As part of the settlement the Company issued 60,000 shares of “restricted” stock, effective July 19^th, 2018 to the ten plaintiffs involved in the complaint for a total fair value of $279,600, or $4.66 per share, representing the closing share price on that date. The stock “restriction” pertains to the shareholders intention of using the shares for investment purposes only and not with a view to distribute or resell the shares or any part thereof or interest therein. However, the Stockholder’s rights allow for the selling or otherwise disposal of all or part of the shares pursuant to an exemption under the Securities Act of 1933, as amended (the Securities Act”) and applicable state securities laws or pursuant to registration of the share under such laws.

Issuance of common stock pursuant to private placement

Between January 1, 2017 and March 2017, the Company issued a total of 3,333,329 shares of common stock at $3.00 per share for net proceeds of approximately $10 million to 12 accredited investors.

In January 2017, the Company issued 333,333 unregistered common shares upon the conversion of $1,000,000 of the note payable debt valued at $3.00 per share.

Issuance of common stock pursuant to exercise of stock options

During the nine months ended September 30, 2018, the Company issued an aggregate of 712,190 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 & 2015 Stock Incentive Plan. The Company received aggregate proceeds of $179,704 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

During the nine months ended September 30, 2017, the Company issued an aggregate of 1,918,395 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan. The Company received aggregate proceeds of $934,00 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

Issuance of preferred stock pursuant to private placement

In March 2018, the 4,000 preferred shares were converted into 4,651,163 of common stock. Refer to note 10 for discussion on preferred stock issuances.

15 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited)  

September 30, 2018

13. 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. During 2013, the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

Under the 2015 Stock Option Plan the Company has issued options to purchase approximately 4.35 million shares at an average price of $3.79 per share with a fair value of $7.4 million. For the nine months ended September 30, 2018 and 2017, the Company issued options to purchase 1.71 million and 1.5 million shares. For the nine months ended September 30, 2018 and 2017, the Company recognized an expense of approximately $3,012,799 and $1,963,455, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of September 30, 2018, the Company had approximately $8.1 million of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. There are options to purchase approximately 3.32 million shares that are vested as of September 30, 2018.

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

	Nine months ended September 30,
	2018		2017
Expected volatility		91.19% – 113.03%		137% - 140%
Expected term		4.7 – 5.06 Years		4 Years
Risk-free interest rate		2.56% - 2.86%		1.33%
Forfeiture Rate		0.00%		0.00%
Expected dividend yield		0.00%		0.00%

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

16 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited) 

September 30, 2018

A summary of the status of the Company’s outstanding stock options as of September 30, 2018 and changes during the period ending on that date is as follows:

				Weighted Average		Aggregate		Average
				Exercise		Intrinsic		Remaining
	Shares (000’s)			Price		Value (000’s)		Term (Yrs)
Options
Balance at December 31, 2017		4,614		$	1.82	$	12,476		4.23
Granted		1,705			5.41
Exercised		(705	)		0.41
Forfeiture and cancelled		(17	)		3.19
Balance September 30, 2018		5,597		$	3.09	$	7,398		5.34
Exercisable at September 30, 2018		3,323		$	2.05

The following table summarizes information about employee stock options outstanding at September 30, 2018:

	Outstanding Options					Vested Options
		Number					Number
		Outstanding	Weighted		Weighted		Exercisable		Weighted	Weighted
Range of		at	Averaged		Averaged		at		Averaged	Averaged
Exercise		September 30,	Remaining		Exercise		September 30,		Exercise	Remaining
Price		2018 (000’s)	Life (years)		Price		2018 (000’s)		Price	Life (years)
$0.20 - $0.53		514	3.25	$	0.28		514	$	0.28	3.25
$0.65 - $1.80		1,042	1.36	$	0.85		1,028	$	0.85	1.34
$1.83 - $2.84		1,166	3.57	$	2.06		895	$	2.07	3.62
$3.20 - $6.20		2,867	7.90	$	4.80		878	$	4.40	6.92
$7.20 - $22.00		8	.88	$	10.36		8	$	10.36	.88
Outstanding options		5,597	5.34	$	3.09		3,323	$	2.05	3.72

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the nine months ended September 30, 2018 and 2017 is presented in the following table:

	For the Nine Months ended
	September 30, 2018					September 30, 2017
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of period		72,222		$	—		—			—
Granted					—		100,000			3.64
Vested		(25,000	)		—		(11,111	)		—
Unvested at end of period		47,222		$	3.64		88,889			3.64

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2018 was $171,848 and is expected to be recognized over a weighted average period of 1.42 years.

17 

Celsius Holdings, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements (unaudited)  

September 30, 2018

14. 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 management’s belief that no such agreement has created any liability as of September 30, 2018.

On February 22, 2017, we were served with a summons and complaint with respect to a breach of contract action filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products, whose distribution agreement, with the Company had terminated effective November 2016 for “cause” (non-payment of invoices within the applicable grace period provided in the distribution agreement). The complaint alleged that the distribution agreement was terminated without “cause” and sought unspecified damages consisting of termination payments and fees which would be due upon a termination without “cause,” but not on a termination for “cause” as well as certain invasion fees allegedly due under the terms of the distribution agreement. The Company settled this case as of July 31, 2018 for three cash payments over a five (5) month period through January 1, 2019 totaling $750,000 and the issuance of 60,000 restricted shares of our common stock, valued at $4.66 per share. Accordingly, the total impact of this settlement amounted to $1,029,600.

In July 2018, we were served with a complaint filed in Palm Beach County, Florida Circuit Court by Johnny Nunez (“Plaintiff”), seeking damages for alleged breach of contract and unjust enrichment by D3M Licensing Group, LLC (“D3M”), who was also named as a defendant as well as Celsius. Celsius believes that Plaintiff’s claims are without merit, as Plaintiff was not a party to the Photography Agreement or any other agreement with Celsius and accordingly, cannot claim breach of contract or unjust enrichment as a matter of law. Accordingly, Celsius has filed a motion to dismiss Plaintiff’s amended complaint for failure to state a claim. Plaintiff’s counsel has filed a motion in opposition and the parties are currently awaiting a ruling from the Court. Please refer to Item 1 below, regarding Legal Proceedings, for additional details.

The Company entered into an office lease with a related party (see note 11) effective October 2015. The current monthly base rent amounts to $12,090 per month and the lease terminates in October 2020. Future minimum payments required under operating lease obligations at September 30, 2018 are as follows:

Future Minimum Lease Payments

Year ending December 31,
2018	$	36,994
2019		150,175
2020		128,259
Total	$	315,428

15. SUBSEQUENT EVENTS

Between October 1, 2018 and November 8, 2018, the Company issued an aggregate of 4,873 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan.

18 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Note Regarding Forward Looking Statements

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

Business Overview

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

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

We have undertaken significant marketing efforts aimed at building brand awareness, including a wide variety of marketing vehicles such as television, radio, digital, social media, sponsorships, and magazine advertising. We also undertake various promotions at the retail level such as coupons and other discounts in addition to in-store sampling.

We do not directly manufacture our beverages, but instead outsource the manufacturing process to established third-party co-packers. We do, however, provide our co-packers with flavors, ingredient blends, cans and other raw materials for our beverages purchased by us from various suppliers.

Results of Operations

Three months ended September 30, 2018 compared to three months ended September 30, 2017

Revenue

For the three months ended September 30, 2018, revenue was approximately $16.6 million, an increase of $5.8 million or 54% from $10.8 million for same period in the prior year. The increase of 54% was primarily due to strong growth in North American sales revenue, which accounted for $5.4 million. The Asian Markets also reflected an increase of $988,919 in revenues when compared to the same period in the prior year. This was offset by a decrease in European revenues of $649,168 or 15% and a decrease of $1,551 regarding other international markets when compared with the same quarter in 2017. The decrease in European revenues was associated with our principal European distributor and customer lowering inventory levels, timing of new flavor launches and discontinuation of certain flavors. The net increase in revenues related to additional sales volume, as opposed to increases in product pricing.

19 

The following table sets forth the amount of revenues by category and changes therein for the three months ended September 30, 2018 and 2017:

	Three months ended September 30,
Revenue Source	2018		2017		Change
Total Revenue	$	16,565,316	$	10,785,796		54	%
North American Revenue	$	11,360,474	$	5,919,154		92	%
European Revenue	$	3,809,645	$	4,458,813		(15	)%
Asian Revenue	$	1,351,215	$	362,296		273	%
All Other Regions Revenue	$	43,982	$	45,533		3	%

Gross profit

For the three months ended September 30, 2018, gross profit increased by approximately $2.2 million or 47% to $6.9 million, from $4.7 million for the same quarter in 2017. In contrast, gross profit margins decreased 1.87pp to 41.5% for the three months ended September 30, 2018, from the 2017 quarter. The increase in gross profit dollars is mainly related to increase in sales volume from the 2017 quarter. The decrease in gross profit margins from the 2017 to the 2018 quarter was mainly attributable to increases in promotional allowances, slotting charges and increase production and repacking costs.

Sales and marketing expenses

Sales and marketing expenses for the three months ended September 30, 2018 were approximately $8.7 million, an increase of $3.9 million or 84% from $4.7 million in the same quarter in 2017. The increase is due primarily to marketing program investments, particularly in the China market, as well as investments in employee costs.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2018 were approximately $2.3 million, an increase of approximately $728,000 or 47%, from $1.6 million for the three months ended September 30, 2017. The increase was primarily attributable to stock-based compensation expense of $1.2 million, which reflected an increase of approximately $552,000. Moreover, employee cost reflected an increase of $128,700 and professional fees increased by approximately $91,000; partially offset by savings in other areas of approximately $44,000.

Other expense

Total other expense increased to approximately $43,000 for three months ended September 30, 2018 from $35,700 for the same quarter in 2017, as a result of higher interest expense of approximately $7,300.

Net Income (Loss)

As a result of all of the above, for the three months ended September 30, 2018, the Company had a net loss of approximately $4.1 million, and after giving effect to preferred stock dividends of $43,639, a net loss available to common shareholders of $4.2 million or $0.08 per share based on a weighted average of 51,098,575 shares outstanding. In comparison, for the three months ended September 30, 2017, we had a net loss of $1.6 million and after giving effect to preferred stock dividends of $92,250 a net loss available to common shareholders of $1.7 million, or $0.04 per share based on a weighted average of 45,487,908 shares outstanding.

20 

Nine months ended September 30, 2018 compared to nine months ended September 30, 2017

Revenue

For the nine months ended September 30, 2018, revenue was approximately $37.9 million, an increase of $10.9 million or 40% from $27.0 million in revenue for the nine months ending September 30, 2017. The revenue increase of 40% was mainly attributable to strong growth of 61% in North American sales revenue to $28.0 million. In addition, revenues from Asian markets increased by $2.3 million and revenues from other international markets increased by $80,968; from the 2017 period to the 2018 period. This was offset by a decrease in European revenues of $2.1 million or 23%, from the 2017 period to the 2018 period. The decrease in European revenues was associated with our principal European distributor and customer lowering inventory levels, timing of new flavor launches and discontinuation of certain flavors. The net increase in revenues reflected additional sales volume, as opposed to increases in product pricing.

The following table sets forth the amount of revenues by category and changes therein for the nine months ended September 30, 2018 and 2017:

	Nine months Ended September 30,
Revenue Source	2018		2017		Change
Total Revenue	$	37,923,619	$	27,023,123		40	%
North American Revenue	$	27,963,164	$	17,356,081		61	%
European Revenue	$	7,104,473	$	9,179,116		(23	)%
Asian Revenue	$	2,708,756	$	421,668		542	%
All Other Regions Revenue	$	147,226	$	66,258		122	%

Gross profit

For the nine months ended September 30, 2018, gross profit dollars increased by approximately $3.9 million or 34% to $15.6 million compared to $11.6 million for the nine months ended September 30, 2017. Gross profit margins decreased 1.84pp to 41.2% in the nine months ended September 30, 2018, from the same period in 2017. The increase in gross profit dollars is mainly related to increase in sales volume from the 2017 quarter. The decrease in gross profit margins from the 2017 to the 2018 quarter was mainly attributable to increases in promotional allowances, slotting charges and increase production and repacking costs.

Sales and marketing expenses

Sales and marketing expenses for the nine months ended September 30, 2018 were approximately $18.4 million, an increase of $9.2 million, or 99% from $9.3 million in the same period in 2017. The increase is due primarily to marketing program investments including the China investment of $8.1 million, as well as increases in human resource investments in both the marketing and sales areas.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2018 were approximately $7.4 million, an increase of $2.2 million, or 41%, from $5.3 million for the nine months ended September 30, 2017. The increase was primarily due to increases in stock-based compensation expense of $1.5 million, accrual of $945,000 pertaining to the settlement of a territorial dispute with a distributor and an increase of approximately $117,000 pertaining to research and development costs; partially offset by savings in investor related expenses of approximately $91,000 and in employee costs, consulting fees and other administrative expenses, for a net reduction of approximately $271,000.

21 

Other expense

Total other expense increased to approximately $123,000 for the nine months ended September 30, 2018 from approximately $122,000 for the same period in 2017, as a result of an increase in interest expense of approximately $1,000.

Net Income (Loss)

As a result of all of the above, for the nine months ended September 30, 2018, the Company had a net loss of $10.4 million, and after giving effect to preferred stock dividends of $169,494, a net loss available to common shareholders of $10.5 million or $0.21 per share, based on a weighted average of 49,675,624 shares outstanding. In comparison, for the nine months ended September 30, 2017 we had a net loss of $3.0 million, and after giving effect to preferred stock dividends of $273,743, a net loss available to common shareholders of $3.3 million or $0.08 per share based on a weighted average of 43,990,367 shares outstanding.

Liquidity and Capital Resources

As of September 30, 2018, and December 31, 2017, we had cash of approximately $5.3 million and $14.2 million, respectively and working capital of approximately $13.6 million and $20.6 million, respectively. Cash used in operations during the nine months ended September 30, 2018 and 2017, totaled approximately $9.00 million and $3.23 million, respectively, to fund working requirements, as well as investments in sales and marketing programs and human resources initiatives.

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

We originally entered into a loan and security agreement with CD Financial in July 2010, which provided us with a note payable to fund operations. As amended in connection with an April 2015 private investment and related transactions, the loan and security agreement provide Celsius with a note payable pursuant to which Celsius can borrow up to an aggregate maximum of $4.5 million from time to time until maturity in January 2020. The facility requires quarterly cash payments of interest only at the rate of five percent (5%) per annum until maturity and is secured by a pledge of substantially all the Company’s assets. As of September 30, 2018, the principal amount outstanding under the facility with CD Financial was $3.5 million.

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

Off Balance Sheet Arrangements

As of September 30, 2018, and December 31, 2017, we had no off-balance sheet arrangements.

Item 3. Quantitative Disclosures About Market Risks.

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

22 

Item 4. Controls and Procedures.

Management’s Report on Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as of September 30, 2018 to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission (the “SEC”), including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial and accounting officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2018, our disclosure controls and procedures were effective in that (a) we maintain records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (b) our records provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and (c) our records provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Controls Over Financial Reporting

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

23 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On February 22, 2017, we were served with a summons and complaint with respect to a breach of contract action filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products, whose distribution agreement, with the Company had terminated effective November 2016 for “cause” (non-payment of invoices within the applicable grace period provided in the distribution agreement). The complaint alleged that the distribution agreement was terminated without “cause” and sought unspecified damages consisting of termination payments and fees which would be due upon a termination without “cause,” but not on a termination for “cause” as well as certain invasion fees allegedly due under the terms of the distribution agreement. The Company settled this case as of July 31, 2018 for three cash payments over a five (5) month period through January 1, 2019 totaling $750,000 and the issuance of 60,000 restricted shares of our common stock, valued at $4.66 per share. Accordingly, the total impact of this settlement amounted to $1,029,600.

In July 2018, we were served with a complaint, filed in Palm Beach County, Florida Circuit Court by Johnny Nunez (“Plaintiff”), a photographer who performed certain services for us seeking damages as a purported third- party beneficiary of a contract between Celsius and D3M Licensing Group, LLC (“D3M”), who was also named as a defendant. In 2014, Celsius had entered into an agreement with D3M, Plaintiff’s representative for Plaintiff to provide photography services to in exchange for the issuance to D3M of 30,000 shares of Celsius common stock. Plaintiff was not a party to the agreement other than to guaranty to D3M (and not Celsius) performance of his duties thereunder. In his complaint, which was amended in August 2018, Plaintiff alleges that he never received the shares (which should have been transferred to him by D3M pursuant to a separate agreement between Plaintiff and D3M. Celsius believes that Plaintiff’s claims are without merit, as Plaintiff was not a party to the agreement between Celsius and D3M or any other agreement with Celsius and accordingly, cannot claim breach of contract or unjust enrichment as a matter of law. Accordingly, Celsius has filed a motion to dismiss Plaintiff’s amended complaint for failure to state a claim. Plaintiff’s counsel has filed a motion in opposition and the parties are currently awaiting a ruling from the Court.

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

Item 1.A. Risk Factors.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

24 

Item 6. Exhibits.

Exhibit No.	Description of Exhibit
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

SIGNATURES

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

		CELSIUS HOLDINGS, INC.
Dated: November 8, 2018	By:	/s/ John Fieldly
		John Fieldly, Chief Executive Officer  (principal executive officer)

Dated: November 8, 2018	By:	/s/ Edwin Negron-Carballo
		Edwin Negron-Carballo, Chief Financial Officer  (principal financial and accounting officer)

25 

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Fieldly, the Chief Executive Officer of Celsius Holdings, Inc., a Nevada corporation (the “Registrant”), certify that:

1.              I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 of the Registrant;

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.              I, as the Registrant’s Chief Executive Officer, together with the Registrant’s Chief Financial Officer, am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:

a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)          Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)          Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.              I, as the Registrant’s Chief Executive Officer, have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 8, 2018	CELSIUS HOLDINGS, INC.
	By:	/s/ John Fieldly
		John Fieldly, Chief Executive Officer; (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Edwin Negron-Carballo, the Chief Financial Officer of Celsius Holdings, Inc., a Nevada corporation (the “Registrant”), certify that:

1.              I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 of the Registrant;

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.              I, as the Registrant’s Chief Financial Officer, together with the Registrant’s Chief Executive Officer, am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:

a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)          Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)         Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.              I, as the Registrant’s Chief Financial Officer, have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 8, 2018	CELSIUS HOLDINGS, INC.
	By:	/s/ Edwin Negron-Carballo
		Edwin Negron-Carballo, Chief Financial Officer; (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Celsius Holdings, Inc., a Nevada corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Fieldly, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1.          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2018	CELSIUS HOLDINGS, INC.
	By:	/s/ John Fieldly
		John Fieldly, Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Celsius Holdings, Inc., a Nevada corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edwin Negron-Carballo, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1.          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2018	CELSIUS HOLDINGS, INC.
	By:	/s/ Edwin Negron-Carballo
		Edwin Negron-Carballo, Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 08, 2018
Document And Entity Information
Entity Registrant Name	Celsius Holdings, Inc.
Entity Central Index Key	0001341766
Document Type	10-Q
Trading Symbol	CELH
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity's Reporting Status Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		51,129,819
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2018

XML

Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017	[1]
Current assets:
Cash	$ 5,314,112	$ 14,186,624
Accounts receivable, net	12,836,991	6,375,658
Inventories, net	6,848,755	5,305,505
Prepaid expenses and other current assets	3,336,674	1,180,444
Total current assets	28,336,532	27,048,231
Property and equipment, net	121,504	62,642
Total Assets	28,458,036	27,110,873
Current liabilities:
Accounts payable and accrued expenses	14,501,149	6,311,824
Accrued preferred dividends	212,265	133,883
Customer advances and other current liabilities	14,534	17,921
Total current liabilities	14,727,948	6,463,628
Long-term liabilities:
Note payable-related party	3,500,000	3,500,000
Total Liabilities	18,227,948	9,963,628
Commitments and contingences (note 14)
Stockholders' Equity:
Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 2,760 and 6,760 shares issued and outstanding at September 30, 2018 and December 31, 2017	3	7
Common stock, $0.001 par value; 75,000,000 shares authorized, 51,124,946 and 45,701,593 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	51,125	45,702
Additional paid-in capital	82,659,488	79,101,824
Accumulated other comprehensive loss/(income)	6,752	(39,378)
Accumulated deficit	(72,487,280)	(61,960,910)
Total Stockholders' Equity	10,230,088	17,147,245
Total Liabilities and Stockholders' Equity	$ 28,458,036	$ 27,110,873

[1] Derived from Audited Financial Statements

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017	[1]
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	2,500,000	2,500,000
Preferred stock, issued	2,760	6,760
Preferred stock, outstanding	2,760	6,760
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	75,000,000	75,000,000
Common stock, issued	51,124,946	45,701,593
Common stock, outstanding	51,124,946	45,701,593

[1] Derived from Audited Financial Statements

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenue	$ 16,565,316	$ 10,785,796	$ 37,923,619	$ 27,023,123
Cost of revenue	9,694,932	6,110,898	22,307,735	15,398,798
Gross profit	6,870,384	4,674,898	15,615,884	11,624,325
Selling and marketing expenses	8,671,792	4,702,308	18,419,236	9,273,207
General and administrative expenses	2,287,374	1,559,173	7,430,580	5,261,694
Total operating expenses	10,959,166	6,261,481	25,849,816	14,534,901
Loss from operations	(4,088,782)	(1,586,583)	(10,233,932)	(2,910,576)
Other (Expense):
Interest expense	(42,932)	(35,661)	(122,944)	(122,195)
Total Other (Expense)	(42,932)	(35,661)	(122,944)	(122,195)
Net Loss	(4,131,714)	(1,622,244)	(10,356,876)	(3,032,771)
Preferred stock dividend	(43,639)	(92,250)	(169,494)	(273,743)
Net loss available to common stockholders	$ (4,175,353)	$ (1,714,494)	$ (10,526,370)	$ (3,306,514)
Loss per share:
Basic (in dollars per share)	$ (0.08)	$ (0.04)	$ (0.21)	$ (0.08)
Diluted (in dollars per share)	$ (0.08)	$ (0.04)	$ (0.21)	$ (0.08)
Weighted average shares outstanding:
Basic (in shares)	51,098,575	45,487,908	49,675,624	43,990,367
Diluted (in shares)	51,098,575	45,487,908	49,675,624	43,990,367

XML

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Net loss available to common stockholders, as reported	$ (4,175,353)	$ (1,714,494)	$ (10,526,370)	$ (3,306,514)
Other comprehensive (loss)/income:
Unrealized foreign currency translation income	65,949		46,130
Comprehensive loss	$ (4,109,404)	$ (1,714,494)	$ (10,480,240)	$ (3,306,514)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net Loss	$ (10,356,876)	$ (3,032,771)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	34,620	14,292
Shares issued for settlement of legal claim	279,600	327,997
Stock-based option compensation expense	3,103,778	1,635,458
Changes in operating assets and liabilities:
Accounts receivable, net	(6,461,333)	(4,284,156)
Inventories net	(1,543,250)	(2,105,226)
Prepaid expenses and other current assets	(2,156,230)	(2,130,941)
Accounts payable and accrued expenses	8,189,325	6,656,778
Accrued preferred dividends	(91,111)	(151,667)
Deferred revenue and other current liabilities	(3,387)	(161,624)
Net cash used in operating activities	(9,004,864)	(3,231,860)
Cash flows from investing activities:
Purchase of property and equipment	(93,482)	(30,716)
Net cash (used in) investing activities	(93,482)	(30,716)
Cash flows from financing activities:
Net proceeds from issuance of common stock		9,999,948
Proceeds from exercise of stock options	179,704	934,073
Net cash provided by financing activities	179,704	10,934,021
Effect of exchange rate changes on cash and cash equivalents	46,130
Net (decrease) increase in cash	(8,872,512)	7,671,445
Cash at beginning of the period	14,186,624	11,747,138
Cash at end of the period	5,314,112	19,418,583
Cash paid during period for:
Interest	132,425	137,014
Income Taxes
Non-cash investing and financing activities:
Accrued preferred dividends	129,493	273,743
Conversion of convertible note to common stock, related-party		$ 1,000,000

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation – The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the 10K filed for December 31, 2017 and notes thereto and other pertinent information contained in our General Form for Registration of Securities of Form 10 as filed with the Securities and Exchange Commission (the “Commission”). The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material inter-company balances and transactions have been eliminated.

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

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

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by the CEO is identical to the information presented in the accompanying consolidated statement of operations. Therefore, the Company has determined that it operates in a single operating segment. For the three and nine months ended September 30, 2018 and 2017 all material assets and revenues of the Company were in the United States except as disclosed in Note 2.

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

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

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At September 30, 2018, the Company had approximately $8 million in excess of the Federal Deposit Insurance Corporation limit.

For the nine months ending September 30, 2018 and 2017, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2018			2017
A*		17.6	%		32.9	%
All other		82.4	%		67.1	%
Total		100.0	%		100.0	%

At September 30, 2018 and December 31, 2017, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

	2018			2017
A*		44.4	%		60.7	%
B		12.30	%		0	%
C		10.60	%		7.8	%
All other		32.70	%		31.5	%
Total		100.0	%		100.0	%

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

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 September 30, 2018 and December 31, 2017, the Company did not have any investments with maturities of three months or less.

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 September 30, 2018 and December 31, 2017, there was an allowance for doubtful accounts of $23,505 and $33,100, respectively.

Inventories — Inventories include only the purchase cost and are stated at the lower of cost and realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company outsources its manufacturing process and as a result has no work in process inventories. The Company writes down against inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). If the inventory items will not be utilized, these items will be included as part of the inventory reserve. At September 30, 2018 and December 31, 2017, the Company recorded a reserve of $161,190 and $36,300 respectively. The changes in reserve are included in cost of revenue.

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

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

Revenue Recognition —Revenue is derived from the sale of beverages. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Any discounts, slotting fees, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue.

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

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred advertising expense of approximately $13.1 million and $5.1 million, during the nine months ending September 30, 2018 and 2017, respectively.

Research and Development — Research and development costs are charged to general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $313,000 and $240,945 during the nine months ending September 30, 2018 and 2017, respectively.

Foreign Currency Translation — Generally, foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of long-term investment nature, are included in Comprehensive Income. The Company incurred foreign currency translation gain of approximately $46,130 and $0 during the nine months ending September 30, 2018 and 2017, respectively.

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

Fair Value Measurements - ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Other than these noted previously, the Company did not have any other assets or liabilities measured at fair value at September 30, 2018 and December 31, 2017.

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

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

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

The Company’s tax returns for tax years in 2014 through 2017 remain subject to potential examination by the taxing authorities.

Earnings per Share — Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of September 30, 2018, there were options outstanding to purchase approximately 5.6 million shares, which exercise price averaged $3.09, and Series C Preferred Stock outstanding to convert to 5.3 million common shares at $0.52 price per share.

Share-Based Payments —Effective January 1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. The Company will evaluate the requirements and potential impacts of the recently issued ASU 2018-07 which is effective for fiscal years beginning after December 15, 2018, in order to determine if it may have a material effect regarding the accounting for their Stock Compensation. Currently, compensation cost is measured on the date of grant at the fair value of the share-based payments. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

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

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

Shipping and Handling Costs — Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the nine months ended September 30, 2018 and 2017 was $4.1 million and $2.4 million, respectively.

Recent Accounting Pronouncements

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

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). The ASU replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842, which provides an optional transition practical expedient that allows companies to not evaluate (under Topic 842) existing or expired land easements that were not previously accounted for as leases (under Topic 840). Topic 842 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. Topic 842 requires a modified retrospective approach, which includes several optional practical expedients. The Company is currently evaluating the impact of ASU 2018-02 on the Company’s consolidated financial statements.

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

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

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At September 30, 2018, the Company had an accumulated deficit of $72,487,280 which includes a net loss available to common stockholders of $10,526,370 for the nine months ended September 30, 2018. During the nine months ending September 30, 2018 the Company’s net cash used in operating activities totaled $9,004,864. While these factors alone may raise substantial doubt as to the Company’s ability to continue as a going concern, the Company’s sale of an aggregate of $15 million in capital through the sale of an aggregate of 4,833,329 shares of our common stock at a purchase price of $3.00 per share in a private offering to 13 accredited investors between December 30, 2016 and March 14, 2017 and remaining cash and other current assets, as well as our 12 month Cashflow projections and strategic plan, are deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Moreover, the nine months ending September 30, 2018 included several non-recurring charges which affected our cashflow position by approximately $1.1 million.

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

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REVENUE

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

REVENUE

3. REVENUE

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

The adoption of ASC 606 resulted in an immaterial impact to the specific financial statement line items of the Company’s unaudited Consolidated Statements of Income during the nine months ended September 30, 2018.

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

Information about the Company’s net sales by reporting segment for the nine months ended September 30, 2018 and 2017 is as follows:

	For the nine months ended
	September 30,		September 30,
	2018		2017
North America	$	27,911,538	$	17,356,081
Europe		7,097,942		9,179,116
Asia		2,740,175		421,668
Other		173,964		66,258
Net sales	$	37,923,619	$	27,023,123

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INVENTORIES

9 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

INVENTORIES

4. INVENTORIES

Inventories consist of the following at:

	September 30,			December 31,
	2018			2017
Finished goods	$	4,200,013		$	4,137,239
Raw Materials		2,809,932			1,204,560
Less: Inventory Reserve		(161,190	)		(36,294	)
Inventories, net	$	6,848,755		$	5,305,505

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2018

Prepaid Expenses And Other Current Assets

PREPAID EXPENSES AND OTHER CURRENT ASSETS

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets total approximately $3.3 million and $1.2 million, at September 30, 2018 and December 31, 2017, respectively, and consist mainly of prepaid advertising, prepaid insurance, prepaid slotting fees, and deposits on purchases of raw materials.

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PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

	September 30,			December 31,
	2018			2017
Furniture and equipment	$	434,642		$	341,159
Less: accumulated depreciation		(313,136	)		(278,517	)
Total	$	121,504		$	62,642

Depreciation expense amounted to $34,644 and $14,292 during the nine months ended September 30, 2018 and 2017, respectively

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9 Months Ended

Sep. 30, 2018

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at:

	September 30,		December 31,
	2018		2017
Accounts payable	$	5,106,023	$	3,003,086
Accrued expenses		9,395,126		3,308,738
Total	$	14,501,149	$	6,311,824

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CUSTOMER ADVANCES AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2018

Deferred Revenue And Other Current Liabilities

CUSTOMER ADVANCES AND OTHER CURRENT LIABILITIES

8. CUSTOMER ADVANCES AND OTHER CURRENT LIABILITIES

Customer advances and other current liabilities:

	September 30,		December 31,
	2018		2017
State bottle bill liability	$	14,534	$	17,921
Total	$	14,534	$	17,921

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NOTE PAYABLE - RELATED PARTIES

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

NOTE PAYABLE - RELATED PARTIES

9. NOTE PAYABLE - RELATED PARTIES

Note payable - related parties consists of the following as of:

	September 30,		December 31,
	2018		2017
Note Payable
In July 2010, the Company entered into a note payable with a related party principal shareholder which carries interest of five percent per annum paid quarterly. The Company has pledged all of its assets as security for the note payable. The notes mature in January 2020, at which time the principal amount is due. During April 2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of this line. In January 2018, the Company issued 333,333 of common stock at $3.00 per share the offering price in exchange for the cancellation of $1,000,000 of this line, reducing the amount of the line to $3,500,000.
Long-term portion	$	3,500,000	$	3,500,000

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PREFERRED STOCK - RELATED PARTY

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

PREFERRED STOCK - RELATED PARTY

10. PREFERRED STOCK – RELATED PARTY

On August 26, 2013, the Company entered into a securities purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s note payable with CD (the CD Note Payable). The Preferred C Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends. As of September 30, 2018, $168,626 of dividends has been accrued. The Preferred C Shares mature on December 31, 2018 and are redeemable only in exchange for shares of Company common stock.

On April 16, 2015, the Company entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD note payable was reduced by $4.0 million, which amount was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred D Shares”). This related party was given a conversion price of $0.86 per common share, whereas other investors purchased common shares at $0.89 in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535, was recorded as a dividend in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other options. The Preferred D Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.86 per share until the earlier of the January 2, 2021 due date of our note payable with CD Financial or such earlier date as the note payable is satisfied (the “Maturity Date”). The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred D Shares accrue cumulative annual cash dividends at the rate of 5% per annum, payable quarterly in cash and have a liquidation preference of $1,000 per share. On the Maturity Date, the Preferred D Shares automatically convert into shares of our common stock in a number determined by dividing the $1,000 per Preferred D Share liquidation preference plus any accrued but unpaid dividends, by the conversion price then in effect. The Holder shall have the right, at its election, to require the Company to redeem all or any portion of the shares held by the holder in exchange for cash or common stock upon the occurrence of certain events which management believes are under the control of the Company. As of March 31, 2018, none of the contingent events have occurred and in accordance with ASC-480-10-25 “Distinguishing Liabilities from Equity” and Regulation S-X-Rule 5-02-27, the Company has classified these shares as permanent equity. The Preferred D Shares may also be redeemed by us at any time on or after December 31, 2017, at a redemption price equal to 104% of the liquidation preference. The holder of the Preferred D Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In March 2018, the Preferred D shares were converted into 4,651,163 shares of common stock.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

11. RELATED PARTY TRANSACTIONS

The Company’s office is rented from a company affiliated with CD which is controlled by Carl DeSantis, a principal shareholder (see note 14). Currently, the lease expires on October 2020 with monthly base rent of $12,090. The rental fee is commensurate with other properties available in the market.

Other related party transactions are discussed in notes 9 and 10.

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

STOCKHOLDERS' EQUITY

12. STOCKHOLDERS’ EQUITY

Issuance of common stock pursuant to services performed

In January 2017, the Company issued 47,126 shares of “restricted” stock to each William H. Milmoe and Thomas E. Lynch in consideration for services previously rendered to Celsius. Total shares issued were 94,252 at a fair value of $328,000, or $3.48 per share representing the closing stock price on that date.

On July 31^st, 2018 the Company settled a legal matter that was filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products. As part of the settlement the Company issued 60,000 shares of “restricted” stock, effective July 19^th, 2018 to the ten plaintiffs involved in the complaint for a total fair value of $279,600, or $4.66 per share, representing the closing share price on that date. The stock “restriction” pertains to the shareholders intention of using the shares for investment purposes only and not with a view to distribute or resell the shares or any part thereof or interest therein. However, the Stockholder’s rights allow for the selling or otherwise disposal of all or part of the shares pursuant to an exemption under the Securities Act of 1933, as amended (the Securities Act”) and applicable state securities laws or pursuant to registration of the share under such laws.

Issuance of common stock pursuant to private placement

Between January 1, 2017 and March 2017, the Company issued a total of 3,333,329 shares of common stock at $3.00 per share for net proceeds of approximately $10 million to 12 accredited investors.

In January 2017, the Company issued 333,333 unregistered common shares upon the conversion of $1,000,000 of the note payable debt valued at $3.00 per share.

Issuance of common stock pursuant to exercise of stock options

During the nine months ended September 30, 2018, the Company issued an aggregate of 712,190 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 & 2015 Stock Incentive Plan. The Company received aggregate proceeds of $179,704 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

During the nine months ended September 30, 2017, the Company issued an aggregate of 1,918,395 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan. The Company received aggregate proceeds of $934,00 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

Issuance of preferred stock pursuant to private placement

In March 2018, the 4,000 preferred shares were converted into 4,651,163 of common stock. Refer to note 10 for discussion on preferred stock issuances.

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

13. 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. During 2013, the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

Under the 2015 Stock Option Plan the Company has issued options to purchase approximately 4.35 million shares at an average price of $3.79 per share with a fair value of $7.4 million. For the nine months ended September 30, 2018 and 2017, the Company issued options to purchase 1.71 million and 1.5 million shares. For the nine months ended September 30, 2018 and 2017, the Company recognized an expense of approximately $3,012,799 and $1,963,455, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of September 30, 2018, the Company had approximately $8.1 million of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. There are options to purchase approximately 3.32 million shares that are vested as of September 30, 2018.

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

	Nine months ended September 30,
	2018		2017
Expected volatility		91.19% – 113.03%		137% - 140%
Expected term		4.7 – 5.06 Years		4 Years
Risk-free interest rate		2.56% - 2.86%		1.33%
Forfeiture Rate		0.00%		0.00%
Expected dividend yield		0.00%		0.00%

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

A summary of the status of the Company’s outstanding stock options as of September 30, 2018 and changes during the period ending on that date is as follows:

				Weighted Average		Aggregate		Average
				Exercise		Intrinsic		Remaining
	Shares (000’s)			Price		Value (000’s)		Term (Yrs)
Options
Balance at December 31, 2017		4,614		$	1.82	$	12,476		4.23
Granted		1,705			5.41
Exercised		(705	)		0.41
Forfeiture and cancelled		(17	)		3.19
Balance September 30, 2018		5,597		$	3.09	$	7,398		5.34
Exercisable at September 30, 2018		3,323		$	2.05

The following table summarizes information about employee stock options outstanding at September 30, 2018:

	Outstanding Options					Vested Options
		Number					Number
		Outstanding	Weighted		Weighted		Exercisable		Weighted	Weighted
Range of		at	Averaged		Averaged		at		Averaged	Averaged
Exercise		September 30,	Remaining		Exercise		September 30,		Exercise	Remaining
Price		2018 (000’s)	Life (years)		Price		2018 (000’s)		Price	Life (years)
$0.20 - $0.53		514	3.25	$	0.28		514	$	0.28	3.25
$0.65 - $1.80		1,042	1.36	$	0.85		1,028	$	0.85	1.34
$1.83 - $2.84		1,166	3.57	$	2.06		895	$	2.07	3.62
$3.20 - $6.20		2,867	7.90	$	4.80		878	$	4.40	6.92
$7.20 - $22.00		8	.88	$	10.36		8	$	10.36	.88
Outstanding options		5,597	5.34	$	3.09		3,323	$	2.05	3.72

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the nine months ended September 30, 2018 and 2017 is presented in the following table:

	For the Nine Months ended
	September 30, 2018					September 30, 2017
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of period		72,222		$	—		—			—
Granted					—		100,000			3.64
Vested		(25,000	)		—		(11,111	)		—
Unvested at end of period		47,222		$	3.64		88,889			3.64

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2018 was $171,848 and is expected to be recognized over a weighted average period of 1.42 years.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

14. 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 management’s belief that no such agreement has created any liability as of September 30, 2018.

On February 22, 2017, we were served with a summons and complaint with respect to a breach of contract action filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products, whose distribution agreement, with the Company had terminated effective November 2016 for “cause” (non-payment of invoices within the applicable grace period provided in the distribution agreement). The complaint alleged that the distribution agreement was terminated without “cause” and sought unspecified damages consisting of termination payments and fees which would be due upon a termination without “cause,” but not on a termination for “cause” as well as certain invasion fees allegedly due under the terms of the distribution agreement. The Company settled this case as of July 31, 2018 for three cash payments over a five (5) month period through January 1, 2019 totaling $750,000 and the issuance of 60,000 restricted shares of our common stock, valued at $4.66 per share. Accordingly, the total impact of this settlement amounted to $1,029,600.

In July 2018, we were served with a complaint filed in Palm Beach County, Florida Circuit Court by Johnny Nunez (“Plaintiff”), seeking damages for alleged breach of contract and unjust enrichment by D3M Licensing Group, LLC (“D3M”), who was also named as a defendant as well as Celsius. Celsius believes that Plaintiff’s claims are without merit, as Plaintiff was not a party to the Photography Agreement or any other agreement with Celsius and accordingly, cannot claim breach of contract or unjust enrichment as a matter of law. Accordingly, Celsius has filed a motion to dismiss Plaintiff’s amended complaint for failure to state a claim. Plaintiff’s counsel has filed a motion in opposition and the parties are currently awaiting a ruling from the Court. Please refer to Item 1 below, regarding Legal Proceedings, for additional details.

The Company entered into an office lease with a related party (see note 11) effective October 2015. The current monthly base rent amounts to $12,090 per month and the lease terminates in October 2020. Future minimum payments required under operating lease obligations at September 30, 2018 are as follows:

Future Minimum Lease Payments

Year ending December 31,
2018	$	36,994
2019		150,175
2020		128,259
Total	$	315,428

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

Between October 1, 2018 and November 8, 2018, the Company issued an aggregate of 4,873 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation – The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the 10K filed for December 31, 2017 and notes thereto and other pertinent information contained in our General Form for Registration of Securities of Form 10 as filed with the Securities and Exchange Commission (the “Commission”). The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material inter-company balances and transactions have been eliminated.

Significant Estimates

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

Segment Reporting

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

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by the CEO is identical to the information presented in the accompanying consolidated statement of operations. Therefore, the Company has determined that it operates in a single operating segment. For the three and nine months ended September 30, 2018 and 2017 all material assets and revenues of the Company were in the United States except as disclosed in Note 2.

Concentrations of Risk

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

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

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At September 30, 2018, the Company had approximately $8 million in excess of the Federal Deposit Insurance Corporation limit.

For the nine months ending September 30, 2018 and 2017, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2018			2017
A*		17.6	%		32.9	%
All other		82.4	%		67.1	%
Total		100.0	%		100.0	%

At September 30, 2018 and December 31, 2017, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

	2018			2017
A*		44.4	%		60.7	%
B		12.30	%		0	%
C		10.60	%		7.8	%
All other		32.70	%		31.5	%
Total		100.0	%		100.0	%

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

Cash and Cash Equivalents

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 September 30, 2018 and December 31, 2017, the Company did not have any investments with maturities of three months or less.

Accounts Receivable

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 September 30, 2018 and December 31, 2017, there was an allowance for doubtful accounts of $23,505 and $33,100, respectively.

Inventories

Inventories — Inventories include only the purchase cost and are stated at the lower of cost and realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company outsources its manufacturing process and as a result has no work in process inventories. The Company writes down against inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). If the inventory items will not be utilized, these items will be included as part of the inventory reserve. At September 30, 2018 and December 31, 2017, the Company recorded a reserve of $161,190 and $36,300 respectively. The changes in reserve are included in cost of revenue.

Property and Equipment

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

Impairment of Long-Lived Assets

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

Revenue Recognition

Revenue Recognition —Revenue is derived from the sale of beverages. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Any discounts, slotting fees, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue.

Customer Advances

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

Advertising Costs

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred advertising expense of approximately $13.1 million and $5.1 million, during the nine months ending September 30, 2018 and 2017, respectively.

Research and Development

Research and Development — Research and development costs are charged to general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $313,000 and $240,945 during the nine months ending September 30, 2018 and 2017, respectively.

Foreign Currency Translation

Foreign Currency Translation — Generally, foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of long-term investment nature, are included in Comprehensive Income. The Company incurred foreign currency translation gain of approximately $46,130 and $0 during the nine months ending September 30, 2018 and 2017, respectively.

Fair Value of Financial Instruments

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

Fair Value Measurements

Fair Value Measurements - ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Other than these noted previously, the Company did not have any other assets or liabilities measured at fair value at September 30, 2018 and December 31, 2017.

Income Taxes

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

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

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

The Company’s tax returns for tax years in 2014 through 2017 remain subject to potential examination by the taxing authorities.

Earnings per Share

Earnings per Share — Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of September 30, 2018, there were options outstanding to purchase approximately 5.6 million shares, which exercise price averaged $3.09, and Series C Preferred Stock outstanding to convert to 5.3 million common shares at $0.52 price per share.

Share-Based Payments

Share-Based Payments —Effective January 1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. The Company will evaluate the requirements and potential impacts of the recently issued ASU 2018-07 which is effective for fiscal years beginning after December 15, 2018, in order to determine if it may have a material effect regarding the accounting for their Stock Compensation. Currently, compensation cost is measured on the date of grant at the fair value of the share-based payments. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

Cost of Revenues

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

Operating Expenses

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

Shipping and Handling Costs

Shipping and Handling Costs — Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the nine months ended September 30, 2018 and 2017 was $4.1 million and $2.4 million, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). The ASU replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842, which provides an optional transition practical expedient that allows companies to not evaluate (under Topic 842) existing or expired land easements that were not previously accounted for as leases (under Topic 840). Topic 842 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. Topic 842 requires a modified retrospective approach, which includes several optional practical expedients. The Company is currently evaluating the impact of ASU 2018-02 on the Company’s consolidated financial statements.

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

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

Liquidity

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At September 30, 2018, the Company had an accumulated deficit of $72,487,280 which includes a net loss available to common stockholders of $10,526,370 for the nine months ended September 30, 2018. During the nine months ending September 30, 2018 the Company’s net cash used in operating activities totaled $9,004,864. While these factors alone may raise substantial doubt as to the Company’s ability to continue as a going concern, the Company’s sale of an aggregate of $15 million in capital through the sale of an aggregate of 4,833,329 shares of our common stock at a purchase price of $3.00 per share in a private offering to 13 accredited investors between December 30, 2016 and March 14, 2017 and remaining cash and other current assets, as well as our 12 month Cashflow projections and strategic plan, are deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Moreover, the nine months ending September 30, 2018 included several non-recurring charges which affected our cashflow position by approximately $1.1 million.

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

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Schedule of revenue & accounts receivable with customers

For the nine months ending September 30, 2018 and 2017, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2018			2017
A*		17.6	%		32.9	%
All other		82.4	%		67.1	%
Total		100.0	%		100.0	%

At September 30, 2018 and December 31, 2017, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

	2018			2017
A*		44.4	%		60.7	%
B		12.30	%		0	%
C		10.60	%		7.8	%
All other		32.70	%		31.5	%
Total		100.0	%		100.0	%

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

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REVENUE (Tables)

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of net sales by reporting segment

Information about the Company’s net sales by reporting segment for the nine months ended September 30, 2018 and 2017 is as follows:

	For the nine months ended
	September 30,		September 30,
	2018		2017
North America	$	27,911,538	$	17,356,081
Europe		7,097,942		9,179,116
Asia		2,740,175		421,668
Other		173,964		66,258
Net sales	$	37,923,619	$	27,023,123

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consist of the following at:

	September 30,			December 31,
	2018			2017
Finished goods	$	4,200,013		$	4,137,239
Raw Materials		2,809,932			1,204,560
Less: Inventory Reserve		(161,190	)		(36,294	)
Inventories, net	$	6,848,755		$	5,305,505

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PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment consist of the following at:

	September 30,			December 31,
	2018			2017
Furniture and equipment	$	434,642		$	341,159
Less: accumulated depreciation		(313,136	)		(278,517	)
Total	$	121,504		$	62,642

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

9 Months Ended

Sep. 30, 2018

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following at:

	September 30,		December 31,
	2018		2017
Accounts payable	$	5,106,023	$	3,003,086
Accrued expenses		9,395,126		3,308,738
Total	$	14,501,149	$	6,311,824

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CUSTOMER ADVANCES AND OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2018

Deferred Revenue And Other Current Liabilities

Schedule of customer advances and other current liabilities

Customer advances and other current liabilities:

	September 30,		December 31,
	2018		2017
State bottle bill liability	$	14,534	$	17,921
Total	$	14,534	$	17,921

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NOTE PAYABLE - RELATED PARTIES (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of note payable - related parties

Note payable - related parties consists of the following as of:

	September 30,		December 31,
	2018		2017
Note Payable
In July 2010, the Company entered into a note payable with a related party principal shareholder which carries interest of five percent per annum paid quarterly. The Company has pledged all of its assets as security for the note payable. The notes mature in January 2020, at which time the principal amount is due. During April 2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of this line. In January 2018, the Company issued 333,333 of common stock at $3.00 per share the offering price in exchange for the cancellation of $1,000,000 of this line, reducing the amount of the line to $3,500,000.
Long-term portion	$	3,500,000	$	3,500,000

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of black - scholes option-pricing model valuation assumption

The calculation of the fair value of the awards using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

	Nine months ended September 30,
	2018		2017
Expected volatility		91.19% – 113.03%		137% - 140%
Expected term		4.7 – 5.06 Years		4 Years
Risk-free interest rate		2.56% - 2.86%		1.33%
Forfeiture Rate		0.00%		0.00%
Expected dividend yield		0.00%		0.00%

Schedule of outstanding stock options

A summary of the status of the Company’s outstanding stock options as of September 30, 2018 and changes during the period ending on that date is as follows:

				Weighted Average		Aggregate		Average
				Exercise		Intrinsic		Remaining
	Shares (000’s)			Price		Value (000’s)		Term (Yrs)
Options
Balance at December 31, 2017		4,614		$	1.82	$	12,476		4.23
Granted		1,705			5.41
Exercised		(705	)		0.41
Forfeiture and cancelled		(17	)		3.19
Balance September 30, 2018		5,597		$	3.09	$	7,398		5.34
Exercisable at September 30, 2018		3,323		$	2.05

Schedule of employee stock options outstanding

The following table summarizes information about employee stock options outstanding at September 30, 2018:

	Outstanding Options					Vested Options
		Number					Number
		Outstanding	Weighted		Weighted		Exercisable		Weighted	Weighted
Range of		at	Averaged		Averaged		at		Averaged	Averaged
Exercise		September 30,	Remaining		Exercise		September 30,		Exercise	Remaining
Price		2018 (000’s)	Life (years)		Price		2018 (000’s)		Price	Life (years)
$0.20 - $0.53		514	3.25	$	0.28		514	$	0.28	3.25
$0.65 - $1.80		1,042	1.36	$	0.85		1,028	$	0.85	1.34
$1.83 - $2.84		1,166	3.57	$	2.06		895	$	2.07	3.62
$3.20 - $6.20		2,867	7.90	$	4.80		878	$	4.40	6.92
$7.20 - $22.00		8	.88	$	10.36		8	$	10.36	.88
Outstanding options		5,597	5.34	$	3.09		3,323	$	2.05	3.72

Summary of restricted stock awards

A summary of the Company’s restricted stock activity for the nine months ended September 30, 2018 and 2017 is presented in the following table:

	For the Nine Months ended
	September 30, 2018					September 30, 2017
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of period		72,222		$	—		—			—
Granted					—		100,000			3.64
Vested		(25,000	)		—		(11,111	)		—
Unvested at end of period		47,222		$	3.64		88,889			3.64

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of future annual minimum payments

Future minimum payments required under operating lease obligations at September 30, 2018 are as follows:

Future Minimum Lease Payments

Year ending December 31,
2018	$	36,994
2019		150,175
2020		128,259
Total	$	315,428

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - 10% or Greater Revenue [Member]	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Concentration Risk [Line Items]
Total	100.00%	100.00%
Customer A [Member]
Concentration Risk [Line Items]
Total	17.60%	32.90%
All Other [Member]
Concentration Risk [Line Items]
Total	82.40%	67.10%

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - 10% or Accounts Receivable [Member]		9 Months Ended	12 Months Ended
		Sep. 30, 2018	Dec. 31, 2017
Concentration Risk [Line Items]
Total		100.00%	100.00%
Customer A [Member]
Concentration Risk [Line Items]
Total	[1]	44.40%	60.70%
Customer B [Member]
Concentration Risk [Line Items]
Total		12.30%	0.00%
Customer C [Member]
Concentration Risk [Line Items]
Total		10.60%	7.80%
All Other [Member]
Concentration Risk [Line Items]
Total		32.70%	31.50%

[1] Revenues and receivables from customer A are derived from a customer located in Sweden. Revenues from all other customers were mainly derived in the United States.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	1 Months Ended	2 Months Ended	3 Months Ended		9 Months Ended
	Apr. 30, 2015 shares	Mar. 14, 2017 USD ($) Number shares	Sep. 30, 2018 USD ($) $ / shares	Sep. 30, 2017 USD ($) $ / shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) Number $ / shares shares	Dec. 31, 2017 USD ($)		Jun. 30, 2017 $ / shares
Amount excess of FDIC limit			$ 8,000,000		$ 8,000,000
Allowance for doubtful accounts			23,505		23,505		$ 33,100
Inventory reserve			161,190		161,190		36,294
Advertising expense					13,100,000	$ 5,100,000
Research and development expense					313,000	240,945
Shipping and handling costs					4,100,000	2,400,000
Foreign currency translation expense					46,130	$ 0
Number of options outstanding | shares						5,600,000
Exercise price of awards (in dollars per share) | $ / shares				$ 1.00		$ 1.00			$ 3.09
Accumulated deficit			(72,487,280)		(72,487,280)		$ (61,960,910)	[1]
Net (loss) available to common stockholders			$ (4,175,353)	$ (1,714,494)	(10,526,370)	$ (3,306,514)
Net cash used in operating activities					(9,004,864)	(3,231,860)
Proceeds from sale of common stock						9,999,948
Stock Incentive Plan 2015 [Member]
Number of shares authorized | shares	5,000,000
Description of plan	Provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.
Private Placement [Member]
Proceeds from sale of common stock		$ 15,000,000				$ 10,000,000
Number of shares issued upon transaction | shares		4,833,329				3,333,329
Number of investors | Number		13				12
Share price (in dollars per share) | $ / shares			$ 3.00		$ 3.00
Series C Preferred Stock [Member]
Conversion price (in dollars per share) | $ / shares					$ 0.52
Number of preferred stock warrants outstanding | shares					5,300,000
Minimum [Member]
Useful life					3 years
Maximum [Member]
Useful life					7 years

[1] Derived from Audited Financial Statements

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REVENUE (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net sales	$ 16,565,316	$ 10,785,796	$ 37,923,619	$ 27,023,123
North America [Member]
Net sales			27,911,538	17,356,081
Europe [Member]
Net sales			7,097,942	9,179,116
Asia [Member]
Net sales			2,740,175	421,668
Other [Member]
Net sales			$ 173,964	$ 66,258

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INVENTORIES (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Finished goods	$ 4,200,013	$ 4,137,239
Raw Materials	2,809,932	1,204,560
Less: Inventory Reserve	(161,190)	(36,294)
Inventories, net	$ 6,848,755	$ 5,305,505	[1]

[1] Derived from Audited Financial Statements

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details Narrative) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Prepaid Expenses And Other Current Assets
Prepaid expenses and other current assets	$ 3,300,000	$ 1,200,000

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PROPERTY AND EQUIPMENT (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation	$ (313,136)	$ (278,517)
Total	121,504	62,642	[1]
Furniture and Equipment [Member}
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 434,642	$ 341,159

[1] Derived from Audited Financial Statements

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PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Property And Equipment Details Narrative
Depreciation expense	$ 34,644	$ 14,292

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Accounts Payable And Accrued Expenses Details
Accounts payable	$ 5,106,023	$ 3,003,086
Accrued expenses	9,395,126	3,308,738
Total	$ 14,501,149	$ 6,311,824	[1]

[1] Derived from Audited Financial Statements

XML

CUSTOMER ADVANCES AND OTHER CURRENT LIABILITIES (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Deferred Revenue And Other Current Liabilities
State bottle bill liability	$ 14,534	$ 17,921
Total	$ 14,534	$ 17,921

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NOTE PAYABLE - RELATED PARTIES (Details) - USD ($)	1 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Apr. 30, 2015	Jul. 31, 2010	Sep. 30, 2018	Dec. 31, 2017
Long-term portion					$ 3,500,000	$ 3,500,000	[1]
CD Financial, LLC [Member] | Carl DeSantis [Member]
Number of shares issued upon debt cancellation		333,333
CD Financial, LLC [Member] | 5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member]
Long-term portion					$ 3,500,000	$ 3,500,000
Maturity date				Jan. 31, 2020
CD Financial, LLC [Member] | 5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member] | Common Stock [Member]
Number of shares issued upon debt cancellation	333,333
Debt cancelled amount	$ 1,000,000
CD Financial, LLC [Member] | 5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member] | Series D Preferred Stock [Member]
Number of shares issued upon debt cancellation			4,000,000
Debt cancelled amount			$ 4,000,000

[1] Derived from Audited Financial Statements

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PREFERRED STOCK - RELATED PARTY (Details Narrative) - USD ($)			1 Months Ended			9 Months Ended
	Apr. 16, 2015	Aug. 26, 2013	Mar. 30, 2018	Jan. 31, 2017	Apr. 30, 2015	Sep. 30, 2018	Dec. 31, 2017	[1]	Sep. 30, 2017	Jun. 30, 2017
Accrued dividend						$ 212,265	$ 133,883
Share price (in dollars per share)									$ 1.00	$ 3.09
Series D Preferred Stock [Member]
Conversion price (in dollars per share)						$ 0.86
Preferred D shares converted into common Shares			4,651,163
Series C Preferred Stock [Member]
Conversion price (in dollars per share)						$ 0.52
CD Financial, LLC [Member] | Carl DeSantis [Member]
Number of shares issued upon debt conversion				333,333
Original debt conversion amount				$ 1,000,000
Conversion price (in dollars per share)				$ 3.00
CD Financial, LLC [Member] | Carl DeSantis [Member] | Series D Preferred Stock [Member] | Amendment Loan and Security Agreement [Member]
Number of shares issued upon debt conversion	4,000
Conversion price (in dollars per share)	$ 0.86
Liquidation preference (in dollars per share)	$ 1,000
Accrued dividend	$ 139,535
Preferred stock redemption date	Jan. 02, 2021
Share price (in dollars per share)	$ 0.89
Dividend payable (in dollars per share)	$ 0.03
Preferred stock redemption price, percent	104.00%
CD Financial, LLC [Member] | 5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member] | Amendment Loan and Security Agreement [Member]
Line of credit reduction borrowing capacity	$ 4,000,000
CD Financial, LLC [Member] | 5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member] | Securities Purchase Agreement [Member]
Original debt conversion amount		$ 1,650,000
CDS Ventures of South Florida, LLC [Member] | Carl DeSantis [Member] | Series C Preferred Stock [Member] | Securities Purchase Agreement [Member]
Number of shares issued upon accrued dividend					180
Value of shares issued upon accrued dividend					$ 180,000
Accrued dividend						$ 168,626
Preferred stock redemption date						Dec. 31, 2018
CDS Ventures of South Florida, LLC [Member] | Short Term Loan [Member] | Carl DeSantis [Member] | Securities Purchase Agreement [Member]
Original debt conversion amount		$ 550,000
CDS Ventures of South Florida, LLC & CD Financial, LLC [Member] | Carl DeSantis [Member] | Series C Preferred Stock [Member] | Securities Purchase Agreement [Member]
Number of shares issued upon debt conversion		2,200
Conversion price (in dollars per share)		$ 0.52
Liquidation preference (in dollars per share)		$ 1,000

[1] Derived from Audited Financial Statements

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RELATED PARTY TRANSACTIONS (Details Narrative) - CD Financial, LLC [Member] - Office [Member] - Carl DeSantis [Member]	9 Months Ended
	Sep. 30, 2018 USD ($)
Lease expiration	2020-10
Monthly expense	$ 12,090

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STOCKHOLDERS' EQUITY (Details Narrative)	1 Months Ended			2 Months Ended	9 Months Ended		12 Months Ended
	Jul. 31, 2018 USD ($) $ / shares shares	Mar. 30, 2018 shares	Jan. 31, 2017 USD ($) $ / shares shares	Mar. 14, 2017 USD ($) Number shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) Number $ / shares shares	Dec. 31, 2017 USD ($) shares	Jun. 30, 2017 $ / shares
Stock price (in dollars per sahre) | $ / shares						$ 1.00		$ 3.09
Proceeds from sale of common stock | $						$ 9,999,948
Series D Preferred Stock [Member]
Conversion price (in dollars per share) | $ / shares					$ 0.86
Number of preferred shares converted		4,000
Preferred D shares converted into common Shares		4,651,163
2006 & 2015 Stock Incentive Plan [Member]
Number of option shares granted					712,190
Value of option shares granted | $					$ 179,704
2006 Stock Incentive Plan [Member]
Number of option shares granted							1,918,395
Value of option shares granted | $							$ 93,400
Private Placement [Member]
Proceeds from sale of common stock | $				$ 15,000,000		$ 10,000,000
Number of shares issued upon transaction				4,833,329		3,333,329
Number of investors | Number				13		12
Share price (in dollars per share) | $ / shares					$ 3.00
Carl DeSantis [Member] | CD Financial, LLC [Member]
Number of shares issued upon debt conversion			333,333
Original debt conversion amount | $			$ 1,000,000
Conversion price (in dollars per share) | $ / shares			$ 3.00
Restricted Common Stock [Member] | Statewide [Member]
Stock price (in dollars per sahre) | $ / shares	$ 4.66
Stock issued for settlement of legal matter	60,000
Fair value | $	$ 279,600
Celebrity Endorsement Agreements [Member] | Restricted Common Stock [Member]
Number of shares issued upon services			94,252
Fair value of shares issued upon services rendered | $			$ 328,000
Stock price (in dollars per sahre) | $ / shares						$ 3.48

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STOCK-BASED COMPENSATION (Details)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Expected term		4 years
Risk-free interest rate		1.33%
Forfeiture Rate	0.00%	0.00%
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Expected volatility	91.19%	137.00%
Expected term	4 years 8 months 12 days
Risk-free interest rate	2.56%
Maximum [Member]
Expected volatility	113.03%	140.00%
Expected term	5 years 22 days
Risk-free interest rate	2.86%

XML

STOCK-BASED COMPENSATION (Details 1)	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance at beginning | shares	4,614,000
Granted | shares	1,705,000
Exercised | shares	(705,000)
Forfeiture and cancelled | shares	(17,000)
Balance at end | shares	5,597,000
Exercisable at end | shares	3,323,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Balance at beginning | $ / shares	$ 1.82
Granted | $ / shares	5.41
Exercised | $ / shares	0.41
Forfeiture and cancelled | $ / shares	3.19
Balance at end | $ / shares	3.09
Exercisable at end | $ / shares	$ 2.05
Share-based Compensation Arrangement by Share-based Payment Award, Options, Intrinsic Value [Roll Forward]
Balance at beginning | $	$ 12,476,000
Balance at end | $	$ 7,398,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Average Remaining Term [Roll Forward]
Balance at beginning	4 years 2 months 23 days
Balance at end	5 years 4 months 2 days

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STOCK-BASED COMPENSATION (Details 2) - $ / shares	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Outstanding Options
Number Outstanding	5,597,000	4,614,000
Weighted Averaged Remaining Life	5 years 4 months 2 days
Weighted Averaged Exercise Price	$ 3.09
Vested Options
Number Exercisable	3,323,000
Weighted Averaged Exercise Price	$ 2.05
Weighted Averaged Remaining Life	3 years 8 months 19 days
$0.20 - $0.53 [Member]
Outstanding Options
Number Outstanding	514,000
Weighted Averaged Remaining Life	3 years 2 months 30 days
Weighted Averaged Exercise Price	$ 0.28
Vested Options
Number Exercisable	514,000
Weighted Averaged Exercise Price	$ 0.28
Weighted Averaged Remaining Life	3 years 2 months 30 days
$0.65 - $1.80 [Member]
Outstanding Options
Number Outstanding	1,042,000
Weighted Averaged Remaining Life	1 year 4 months 9 days
Weighted Averaged Exercise Price	$ 0.85
Vested Options
Number Exercisable	1,028,000
Weighted Averaged Exercise Price	$ 0.85
Weighted Averaged Remaining Life	1 year 4 months 2 days
$1.83 - $2.84 [Member]
Outstanding Options
Number Outstanding	1,166,000
Weighted Averaged Remaining Life	3 years 6 months 25 days
Weighted Averaged Exercise Price	$ 2.06
Vested Options
Number Exercisable	895,000
Weighted Averaged Exercise Price	$ 2.07
Weighted Averaged Remaining Life	3 years 7 months 13 days
$3.20 - $6.20 [Member]
Outstanding Options
Number Outstanding	2,867,000
Weighted Averaged Remaining Life	7 years 10 months 25 days
Weighted Averaged Exercise Price	$ 4.80
Vested Options
Number Exercisable	878,000
Weighted Averaged Exercise Price	$ 4.40
Weighted Averaged Remaining Life	6 years 11 months 1 day
$7.20 - $22.00 [Member]
Outstanding Options
Number Outstanding	8,000
Weighted Averaged Remaining Life	10 months 17 days
Weighted Averaged Exercise Price	$ 10.36
Vested Options
Number Exercisable	8,000
Weighted Averaged Exercise Price	$ 10.36
Weighted Averaged Remaining Life	10 months 17 days

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STOCK-BASED COMPENSATION (Details 3) - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Number of Shares
Unvested at beginning of period	72,222
Restricted stock granted	0	100,000
Restricted stock vested	(25,000)	(11,111)
Unvested at end of period	47,222	88,889
Weighted Average Grant-Date Fair Value per Share
Unvested at beginning of period
Restricted stock granted		3.64
Restricted stock vested
Unvested at end of period	$ 3.64	$ 3.64

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STOCK-BASED COMPENSATION (Details Narrative) - USD ($)		1 Months Ended	9 Months Ended
	Jan. 18, 2007	Apr. 30, 2015	Sep. 30, 2018	Sep. 30, 2017	Feb. 28, 2015	May 31, 2014	Dec. 31, 2013
Average share price (in dollars per share)			$ 5.41
Option issued for puchase			1,710,000	1,500,000
Unrecognized pre-tax non-cash compensation expense to non-vested option			$ 8,100,000
Period unrecognized pre-tax non-cash compensation expense to non-vested option			3 years
Number of shares vested			3,320,000
Director [Member]
Unrecognized compensation expense			$ 171,848
Weighted average period of unrecognized compensation expense			1 year 5 months 1 day
Stock Incentive Plan [Member]
Plan expiration term	10 years
Number of shares authorized	2,500,000	5,100,000			4,600,000	4,250,000	3,500,000
Stock Incentive Plan 2015 [Member]
Number of shares authorized		5,000,000
Description of plan		Provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.
Average share price (in dollars per share)			$ 3.79
Option issued for puchase			4,350,000
Value option purchased			$ 7,400,000
General And Administrative Expense [Member]
Non-cash compensation expense			$ 3,012,799	$ 1,963,455

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COMMITMENTS AND CONTINGENCIES (Details)	Sep. 30, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2018	$ 36,994
2019	150,175
2020	128,259
Total	$ 315,428

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COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended
	Jul. 31, 2018	Sep. 30, 2018
Restricted common stock issued, Shares	60,000
Restricted common stock issued, Value	$ 750,000
Shares issued, Price Per Share	$ 4.66
Impact on settlement	$ 1,029,600
CD Financial, LLC [Member] | Office [Member] | Carl DeSantis [Member]
Lease expiration		2020-10
Monthly expense		$ 12,090

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SUBSEQUENT EVENTS (Details Narrative) - 2006 Stock Incentive Plan [Member] - shares	1 Months Ended	12 Months Ended
	Nov. 08, 2018	Dec. 31, 2017
Stock option Granted		1,918,395
Subsequent Event [Member]
Stock option Granted	4,873