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 MARCH 31, 2019

 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 Identification No.)
Incorporation or Organization)

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 x   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 x   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 x
Non-accelerated filer ¨	Smaller reporting company x
	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 x

The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of May 9, 2019 was 57,307,853 shares.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION		2
Item 1.	Financial Statements.	2
	Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	2
	Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 (unaudited)	3
	Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2019 and 2018 (unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity For the three months ended March 31, 2019 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity For the three months ended March 31, 2018 (unaudited)	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25
Item 3.	Quantitative Disclosures About Market Risks.	28
Item 4.	Controls and Procedures.	28
PART II - OTHER INFORMATION		29
Item 1.	Legal Proceedings.	29
Item 1A.	Risk Factors.	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	30
Item 3.	Defaults Upon Senior Securities.	30
Item 4.	Mine Safety Disclosures.	30
Item 5.	Other Information.	30
Item 6.	Exhibits.	30
SIGNATURES		31

ITEM 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

Celsius Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

	March 31, 2019 (Unaudited)			December 31, 2018 (1)
ASSETS
Current assets:
Cash	$	2,762,813		$	7,743,181
Accounts receivable-net		12,154,448			12,980,396
Note receivable-current		1,224,529			-
Unbilled royalty revenue		89,587			-
Inventories-net		13,556,512			11,482,701
Prepaid expenses and other current assets		2,832,174			2,299,375
Total current assets		32,620,063			34,505,653
Note receivable-long term		11,020,766			-
Operating lease-right of use asset		223,991			-
Property and equipment-net		103,093			121,854
Total Assets	$	43,967,913		$	34,627,507
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	9,027,059		$	14,845,211
Other current liabilities		65,395			19,933
Operating Lease Liability-current		139,042			-
Total current liabilities		9,231,496			14,865,144
Long-term liabilities:
Line of credit note payable-related party-net		4,850,839			3,500,000
Convertible note payables -related party-net		4,527,815			4,459,381
Operating Lease Liability-Long Term		87,592			-
Total Liabilities		18,697,742			22,824,525
Commitments and contingences (note 16)
Stockholders’ Equity:
Common stock, $0.001 par value; 75,000,000 shares authorized, 57,198,365 and 57,002,508 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		57,198			57,003
Additional paid-in capital		86,703,402			85,153,667
Accumulated other comprehensive Income/(Loss)		233,668			(26,997	)
Accumulated deficit		(61,724,097	)		(73,380,691	)
Total Stockholders’ Equity		25,270,171			11,802,982
Total Liabilities and Stockholders’ Equity	$	43,967,913		$	34,627,507

⁽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 March 31,
	2019			2018
Revenue	$	14,485,650		$	12,059,976
Cost of revenue		8,764,592			7,296,295
Gross profit		5,721,058			4,763,681
Selling and marketing expenses		3,601,003			5,599,271
General and administrative expenses		2,622,102			2,002,655
Total operating expense		6,223,105			7,601,926
Loss from operations		(502,047	)		(2,838,245	)
Other Income (Expense):
Interest income/(expense)-net		(28,632	)		(38,259	)
Amortization of discount on notes payable		(85,940	)		-
Gain on Investment repayment from China (Note Receivable Note 6)		12,273,213			-
Total Other Income/(Expense)		12,158,641			(38,259	)
Net Income/(Loss)		11,656,594			(2,876,504	)
Preferred stock dividend		-			(82,691	)
Net Income/(Loss) available to common stockholders	$	11,656,594		$	(2,959,195	)
Income/(Loss) per share:
Basic	$	0.20		$	(0.06	)
Diluted	$	0.19		$	(0.06	)
Weighted average shares outstanding:
Basic		57,155,445			47,449,553
Diluted		61,687,409			47,449,553

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

3 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income/(Loss)

For the three months ended March 31, 2019 and 2018

	For the three months
	ended March 31,
	2019		2018
Net Income/(Loss) available to common stockholders, as reported	$	11,656,594	$	(2,959,195	)
Other comprehensive income (loss):
Unrealized foreign currency translation income (loss)		260,665		(53,504	)
Comprehensive Income (loss)	$	11,917,259	$	(3,012,699	)

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

4 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2019

(Unaudited)

														Accumulated
	Preferred Stock						Common Stock				Additional Paid-In			Other- Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		Capital			Income (Loss)			Deficit			Total
Balance at December 31, 2018		(0	)	$	(0	)		57,002,508	$	57,003	$	85,153,667		$	(26,997	)	$	(73,380,691	)	$	11,802,982
Stock option expense												1,358,503									1,358,503
Issuance of common stock pursuant to exercise of stock options-Cashless								115,107		115		(115	)								-
Issuance of common stock pursuant to exercise of stock options-Cash								80,750		80		24,680									24,760
Beneficial Conversion Feature on Convertible Instruments												166,667									166,667
Foreign currency translation gain															260,665						260,665
Net Income																		11,656,594			11,656,594
Balance at March 31, 2019		(0	)	$	(0	)		57,198,365	$	57,198	$	86,703,402		$	233,668		$	(61,724,097	)	$	25,270,171

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

5 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2018

(Unaudited)

														Accumulated
	Preferred Stock						Common Stock				Additional Paid-In			Other- Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		Capital			Income (Loss)			Deficit			Total
Balance at December 31, 2017		6,760		$	7			45,701,593	$	45,702	$	79,101,824		$	(39,378	)	$	(61,960,910	)	$	17,147,245
Issuance of common stock in exchange of preferred stock		(4,000	)		(4	)		4,651,163	$	4,651		(5,251	)								(604	)
Stock option expense												770,862									770,862
Issuance of common stock pursuant to exercise of stock options-Cashless								306,340	$	306		(306	)								-
Issuance of common stock pursuant to exercise of stock options-Cash								297,773	$	298		142,329									142,627
Preferred stock dividend payable																		(82,691	)		(82,691	)
Foreign currency translation loss															(53,504	)					(53,504	)
Net loss																		(2,876,504	)		(2,876,504	)
Balance at March 31, 2018		2,760		$	3			50,956,869	$	50,957	$	80,009,458		$	(92,882	)	$	(64,920,105	)	$	15,047,431

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

6 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	For the three months ended
	March 31,  2019			March 31, 2018
Cash flows from operating activities:
Net Income (loss)	$	11,656,594		$	(2,876,504	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		107,343			7,953
Stock-based compensation expense		1,358,503			770,862
Gain on Investment repayment from China (Note Receivable Note 6)		(12,273,213	)		-
Changes in operating assets and liabilities:
Accounts receivable, net		(2,488,198	)		(2,698,222	)
Inventories net		(2,332,499	)		(1,363,237	)
Prepaid expenses and other current assets		(707,984	)		(1,977,614	)
Accounts payable and accrued expenses		(2,070,134	)		3,908,101
Accrued preferred dividends		-			(51,111	)
Unbilled royalty revenue		(89,587	)		-
Other current Assets/liabilities		45,463			4,059
Net cash used in operating activities		(6,793,712	)		(4,275,713	)
Cash flows from investing activities:
Purchase of property and equipment		-			(11,717	)
Net cash (used in) investing activities		-			(11,717	)
Cash flows from financing activities:
Proceeds from notes payable related party-net		1,500,000
Proceeds from exercise of stock options		24,760			142,023
Net cash provided by financing activities		1,524,760			142,023
Effect of exchange rate changes on cash and cash equivalents		288,584			(53,504	)
Net (decrease) increase in cash		(4,980,368	)		(4,198,911	)
Cash at beginning of the period		7,743,181			14,186,624
Cash at end of the period	$	2,762,813		$	9,987,713
Supplemental disclosures:
Cash paid during period for:
Interest	$	28,632		$	38,259
Non-cash investing and financing activities:
Accrued preferred dividends	$	-		$	82,691
Non-Cash Items Related to China Settlement:
Accounts Receivable		3,314,146			-
Inventory		258,688			-
Pre-paid expense and other current assets		175,185			-
Accounts payable and accrued expenses		3,748,019			-

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

7 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

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, 2018, the Company established Celsius Asia Holdings Limited a Hong Kong corporation as a wholly-owned subsidiary of the Company. On February 7, 2017 Celsius China Holdings Limited a Hong Kong corporation became a wholly-owned subsidiary of Celsius Asia Holdings Limited and on May 9, 2017, Celsius Asia Holdings Limited established Celsius (Beijing) Beverage Limited, a China corporation as a wholly-owned subsidiary of Celsius Asia Holdings Limited.

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, 2018 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.)

8 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by the CEO is identical to the information presented in the accompanying consolidated statement of operations. Therefore, the Company has determined that it operates in a single operating segment. For the three months ended March 31, 2019 and 2018 all material assets and revenues of the Company where in the United States except as disclosed in Note 2.

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

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

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

For the three months ended March 31, 2019 and 2018, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2019			2018
A*		17.9	%		18.0	%
B*		0.1	%		11.6	%
All other		82.0	%		70.4	%
Total		100.0	%		100.0	%

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

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

	2019			2018
A*		41.1	%		41.5	%
All other		58.9	%		58.5	%
Total		100.0	%		100.0	%

*Receivables from customer A are derived from a customer located in Sweden.

Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At March 31, 2019 and 2018, the Company did not have any investments with maturities of three months or less.

9 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Accounts Receivable — Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At March 31, 2019 and December 31, 2018, there was an allowance for doubtful accounts of $260,649 and $183,000, respectively.

Inventories — Inventories include only the purchase cost and are stated at the lower of cost and net realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company establishes an inventory reserve to reduce the value of the inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). At March 31, 2019 and December 31, 2018, the Company recorded a reserve of $106,127 and $74,652 respectively. The changes in reserve are included in cost of revenue.

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

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 — 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.

10 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

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

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 $1.2 million and $4.0, during three months ending March 31, 2019 and 2018, 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 $103,000 and $121,000 during the three months ending March 31, 2019 and 2018, respectively.

Foreign Currency Translation-Chinese Yuan Renminbi — The Company’s functional currency for our China operation is the Chinese Yuan or Renminbi (CNY). For financial reporting purposes, the Chinese Yuan has been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the consolidated statements of comprehensive income (loss), as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Chinese Yuan to USD after the balance sheet date.

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

	March 31, 2019		March 31, 2018
Exchange rate on balance sheet dates
USD : CNY exchange rate		6.71		6.29
Average exchange rate for the period
USD : CNY exchange rate		6.75		6.36

11 

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 March 31, 2019 and December 31, 2018.

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

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 2016 through 2018 remain subject to potential examination by the taxing authorities.

12 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Earnings per Share — Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of March 31, 2019, the convertible debt may be converted into 3,162,260 additional shares of common stock.

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

Share-Based Payments — The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2017. As of March 31, 2019, total shares available are 6,901,360.

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

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

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

13 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Recent Accounting Pronouncements

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

In June 2016, the FASB issued ASU No. 2016-13 & updated in Nov 2018 ASU 2018-19, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires the immediate recognition of management’s estimates of current and expected credit losses. ASU 2016-13 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2019. Early adoption is permitted after fiscal years beginning December 15, 2018. The Company is currently evaluating the potential impact of adopting this guidance on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for the Registrants for fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Company is currently assessing the impact of this standard on their Financial Statements.

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

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At March 31, 2019, the Company had an accumulated deficit of $61,724,097 which includes a net income available to common stockholders of $11,656,594 for the three months ended March 31, 2019. During the three months ending March 31, 2019 the Company net cash used in operating activities totaled $6,765,795.

In addition to cash flow from operations, our primary sources of working capital have been private placements of our securities and our credit facilities with CD Financial, LLC (“CD Financial”), an affiliate of Carl DeSantis, a principal shareholder of the Company, as well as Charmnew Limited and Grieg International Limited. Charmnew Limited is an existing shareholder of record affiliated with Li Ka Shing, one of our principal shareholders. Grieg International Limited is an existing shareholder of record affiliated with Chau Hoi Shuen Solina, one of our principal shareholders.

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, lower our working capital requirements and reduce other expenses or seek additional financing.

14 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

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.

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

	For the three months ended
	March 31,		March 31,
	2019		2018
North America	$	11,397,862	$	8,096,080
Europe		2,999,664		2,506,433
Asia		52,764		1,389,277
Other		35,360		68,186
Net sales	$	14,485,650	$	12,059,976

License Agreement

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

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

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

15 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

4. INVENTORIES

Inventories consist of the following at:

	March 31,			December 31,
	2019			2018
Finished goods	$	10,775,168		$	8,739,877
Raw Materials		2,887,471			2,817,476
Less: Inventory reserves		(106,127	)		(74,652	)
Inventories-Net	$	13,556,512		$	11,482,701

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets total $2,832,174 and $2,299,375, at March 31, 2019 and December 31, 2018, respectively, and consist mainly of prepaid advertising, prepaid insurance, prepaid slotting fees and net deposits on purchases.

6. NOTE RECEIVABLE

Note receivable consists of the following at:

	March 31,		December 31,
	2019		2018
Note Receivable-Current	$	1,224,529	$	-
Note Receivable-Non-Current		11,020,766		-
Total Note Receivable	$	12,245,295	$	-

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

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

16 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

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

7. LEASES

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

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

Future Minimum Lease Payments
2019	$	112,818
2020		128,259
Total Minimum Lease Payments	$	241,077
Less: Amount representing interest		(14,443	)
Present value of lease liabilities	$	226,634

8. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

	March 31,			December 31,
	2019			2018
Furniture and equipment	$	451,576		$	451,576
Less: accumulated depreciation		(348,483	)		(329,722	)
Total	$	103,093		$	121,854

17 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Depreciation expense amounted to $18,761 and $7,953 during the three months ended March 31, 2019 and 2018, respectively

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at:

	March 31,		December 31,
	2019		2018
Accounts payable	$	5,749,943	$	5,825,446
Accrued expenses		3,277,116		9,019,765
Total	$	9,027,059	$	14,845,211

10. OTHER LIABILITIES

Other current liabilities consist of the following at:

	March 31,		December 31,
	2019		2018
Other Liabilities	$	65,395	$	19,933
Total	$	65,395	$	19,933

11. NOTES PAYABLE - RELATED PARTIES

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

	March 31,		December 31,
	2019		2018
Note Payable – line of credit
In July 2010, the Company entered into a line of credit note payable with a related party and major shareholder which carries interest of five percent per annum paid quarterly. The Company can borrow up to $9,500,000. The Company has pledged all its assets as security for the line of credit. The note matures 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, reducing the amount to $4,500,000. During March 2018, the Company issued $1,000,000 of common stock in exchange for cancellation of $1,000,000 of this line, reducing the amount to $3,500,000. In December 2018, the company amended and restated the note payable into a convertible loan agreement continuing to carry a five percent per annum interest but payable semi-annually. As a result, of this substantial modification which was treated as a debt extinguishment, a new liability was established and a loss of $377,0418 on the extinguishment of debt was recognized. The Company can now borrow up to $5.0 million. The note matures in December 2020. In January 2019, the company increased the borrowed amount by $1,500,000. The unamortized discount of the note as of March 2019 amounted to $149,161. The balance at March 31, 2019 is convertible into 1,491,338 shares at a conversion price of $3.40 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.
Long-term portion	$	4,850,839	$	3,500,000

18 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

	March 31,		December 31,
	2019		2018
Convertible Note Payable
-In December 2018, the Company entered into a convertible note payable with a related party and shareholder which carries interest of five percent per annum paid semi-annually. The Company can borrow up to $3.0 million. This note had an unamortized discount of $283,500 and $324,371 as of March 31, 2019 and as of December 31, 2018, respectively. The note matures in December 2020. The balance at March 31, 2019 is convertible into 1,002,553 shares at a fixed conversion price of $3.04 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.	2,716,500		2,675,629
-In December 2018, the Company entered into a line of credit convertible note payable with a related party and shareholder which carries interest of five percent per annum paid semi-annually. The Company can borrow up to $2.0 million. This note had an unamortized discount of $188,685 and $216,248 as of March 31, 2019 and as of December 31, 2018, respectively. The note matures in December 2020. The balance at March 31, 2019 is convertible into 668,369 shares at a fixed conversion price of $3.04 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.	1,811,315		1,783,752
Long-term portion-Net of Discount	$	4,527,815	$	4,459,381

12. PREFERRED STOCK – RELATED PARTY

The Company entered into a securities purchase agreement with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s line of credit with CD (the “CD Line of Credit”). The Preferred C Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends. In October 2017, the Company issued 383 Preferred C Shares valued at $383,000 in settlement of $383,000 in accrued preferred C dividends. As of December 31, 2018, $255,903 of dividends has been accrued and converted into 256 of additional Preferred C. The Preferred C Shares matured on December 31, 2018 and were exchanged for 5,806,022 shares of Company common stock.

On April 16, 2015, the Company entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD 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.

19 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

The Preferred D Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.86 per share until the earlier of the January 2, 2021 due date of our 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.

13. RELATED PARTY TRANSACTIONS

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

Other related party transactions are discussed in Notes 11 and 12

14. STOCKHOLDERS’ EQUITY

Issuance of common stock pursuant to services performed

On July 19, 2018 the Company settled a legal matter that was filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products. As part of the settlement the Company issued 60,000 shares of “restricted” stock, to the ten plaintiffs involved in the complaint for a total fair value of $279,600, or $4.66 per share, representing the closing stock price on the settlement 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.

20 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Issuance of common stock pursuant to exercise of stock options

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

During the three months ended March 31, 2018, the Company issued an aggregate of 604,113 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan. The Company received aggregate proceeds of $142,627 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

Issuance of preferred stock pursuant to private placement

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

Refer to Note 12 for discussion on preferred stock issuances.

15. 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. 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, 2017. As of March 31, 2019, 6,901,360 shares are available.

21 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

Under the 2015 Stock Option Plan the Company has issued options to purchase approximately 5.64 million shares at an average price of $3.85 per share with a fair value of $5.97 million. For the three months ended March 31, 2019 and 2018, the Company issued options to purchase 1.27 million and 1.1 million shares. For the three months ended March 31, 2019 and 2018, the Company recognized an expense of approximately $1,358,503 and $770,862, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of March 31, 2019, the Company had approximately $9,652,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. There are options to purchase approximately 2.95 million shares that are vested as of March 31, 2019.

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

	Three months ended March 31,
	2019	2018
Expected volatility	71%-121%	62.91 – 62.98
Expected term	4.02-4.64 Years	4.77 – 5 Years
Risk-free interest rate	2.55% - 2.72%	2.56% - 2.57%
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 March 31, 2019 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, 2018		4,840		$	3.04	$	5,338		5.05
Granted		1,269		$	3.73
Exercised		(342	)	$	1.17
Forfeiture and cancelled		(262	)	$	2.67
At March 31, 2019		5,505		$	3.33	$	5,968		6.05
Exercisable at March 31, 2019		2,951		$	2.45

22 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

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

	Outstanding Options						Vested Options
	Number						Number
	Outstanding		Weighted		Weighted		Exercisable		Weighted		Weighted
Range of	at		Average		Average		at		Average		Average
Exercise	March 31,		Remaining		Exercise		March 31,		Exercise		Remaining
Price	2019 (000’s)		Term		Price		2019 (000’s)		Price		Term
$0.20 - $0.53		399		3.83	$	0.27		399	$	0.27		3.83
$0.65 - $1.80		792		1.01	$	0.84		792	$	0.84		1.01
$1.83 - $2.84		626		3.19	$	2.06		612	$	2.06		3.18
$3.20 - $6.20		3,680		7.87	$	4.40		1,140		4.48		6.88
$7.20 - $22.00		8		0.38	$	10.36		8	$	10.36		0.38
Outstanding options		5,505		6.05	$	3.33		2,951	$	2.45		4.11

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the three months ended March 31, 2019 and 2018 is presented in the following table:

	For the Three Months ended
	March 31, 2019				March 31, 2018
			Weighted				Weighted
			Average				Average
	(000’s)		Grant Date		(000’s)		Grant Date
	Shares		Fair Value		Shares		Fair Value
Unvested at beginning of period		38,889	$	—		—		—
Granted				3.64		100,000		3.64
Vested		8,333		—		33,333		—
Unvested at end of period		30,556	$	3.64		66,667		3.64

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of March 31, 2019 was $111,196 and is expected to be recognized over a weighted average period of 0.92 years.

23 

Celsius Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

March 31, 2019

16. COMMITMENTS AND CONTINGENCIES

The Company has entered into distribution agreements with liquidated damages in the event the Company cancels the distribution agreements without cause. Cause has been defined in various ways. It is management’s belief that no such agreement has created any liability as of March 31, 2019.

On December 18, 2018, Rockstar, Inc. (“Rockstar”) filed suit against Celsius in federal district court in the District of Nevada. Rockstar’s complaint alleges three claims for relief: (a) false advertising in violation of 15 USC §1125(a); (b) violation of the Nevada Deceptive Trade Practice Act; and (c) Nevada common law unfair competition. On January 30, 2019, Celsius filed its answer to the complaint denying the allegations by Rockstar, and setting forth certain affirmative defenses. The action is in its initial stages and no discovery has taken place. Celsius believes that it has not committed the violations alleged, that it has strong defenses, and it intends to vigorously defend itself against the claims by Rockstar.

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

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

17. SUBSEQUENT EVENTS

Between April 1, 2019 and May 9, 2019, the Company issued an aggregate of 109,488 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2015 Stock Incentive Plan. The Company received cash in the amount of $56,400 for options exercised.

24 

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.

25 

Results of Operations

Three months ended March 31, 2019 compared to three months ended March 31, 2018

Revenue

For the three months ended March 31, 2019, revenue was approximately $14.5 million, an increase of $2.4 million or 20% from $12.1 million for same period in the prior year. The revenue increase of 20% was basically attributable continued strong growth of 41% in North American revenues primarily attributable to double digit growth in existing accounts and new distribution expansion. European sales achieved 20% growth mainly as a result of the launch of new flavors that have been very well accepted. Asian revenues reflect the change in business model to a royalty and license fee arrangement and therefore show a considerable reduction of approximately $1.3 million when compared to the prior year results for the three-months ended March 31, 2019. The total increase in revenue from the 2018 to the 2019 period was primarily attributable to an increase in sales volume, as opposed to increases in product pricing.

The following table sets forth the amount of revenues by segment and changes therein for the three months ended March 31, 2019 and 2018:

	Three months ended March 31,
Revenue Source	2019		2018		Change
Total Revenue	$	14,485,650	$	12,059,976		20	%
North American Revenue	$	11,397,862	$	8,096,080		41	%
European Revenue	$	2,999,664	$	2,506,433		20	%
Asian Revenue	$	52,764	$	1,389,277		-96	%
Other	$	35,360	$	68,186		-48	%

Gross profit

For the three months ended March 31, 2019, gross profit increased by approximately $960,000 or 20% to $5.7 million, from $4.8 million for the same period in 2018. Gross profit margins remained in-line at 39.5% for the three months ended March 31, 2019, when compared to the same period in 2018. There was an increase in gross profit dollars of approximately $960,000 or 120% when compared to the same period last year. The increase in gross profit is mainly related to increase in sales volume from the 2018 quarter.

Sales and marketing expenses

Sales and marketing expenses for the three months ended March 31, 2019 were approximately $3.6 million, a decrease of approximately $2.0 million or 36% from approximately $5.6 million in the same period in 2018. The decrease is due primarily to the change in business model in China which does not require direct marketing investments by Celsius. The actual reduction in marketing investments amounted to approximately $2.8 million which was partially offset by increases in sales expenses of $385,000, storage and distribution expenses of $186,000 and increases in headcount investments of $250,000.

26 

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2019 were approximately $2.6 million, an increase of approximately $620,000, or 31%, from $2.0 million for the three months ended March 31, 2018. The increase was primarily due to stock option expense which accounted for 95% of the variance or $588,000. There were increases in administrative expenses of approximately $103,000 mainly related to insurance, professional fees and depreciation which were partially offset by savings in research and development costs of approximately $18,000 and lower compensation expenses of $53,000, as the results for the 2018 period included retirement compensation for our prior CEO.

Other income/expense

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

Net Income (Loss)

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

Liquidity and Capital Resources

As of March 31, 2019, and December 31, 2018, we had cash of approximately $2.8 million and $7.7 million, respectively, and working capital of approximately $23.8 million and $19.6 million, respectively. Cash used in operations during the three months ended March 31, 2019 and March 31, 2018, totaled approximately $6.8 million and $4.3 million, respectively, reflecting investments in inventory, pre-payments and deposits and the settlement of marketing expenses related to the China change in business model.

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

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

27 

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

The other material terms and conditions of the loan transactions are as follows:

● The Notes will mature on the date that is two (2) years from the effective date of each Note (“Maturity Date”), at which time all indebtedness due under the Notes will be due and payable;

● Interest on the outstanding principal amount of the Notes accrues at the rate of five percent (5%) per annum and is payable semi-annually;

● Charmnew, Grieg and CD Financial each have the option, on or prior to the Maturity Date, to convert the entire principal amount of and all accrued but unpaid interest on the Note into shares of the Company’s common stock. The applicable conversion price is the average of the closing price for the shares during the ten (10) business days prior to each date a loan advance was disbursed, less a discount of 10%; and

● The Company may not prepay the loan without the lender’s prior written consent.

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

Off Balance Sheet Arrangements

As of March 31, 2019, and December 31, 2018, 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.

Item 4. Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

Our President and Chief Executive Officer as well as 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 Exchange Act, as of March 31, 2019, 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 SEC, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer (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.

28 

Based on that evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that as of March 31, 2019, 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 President and Chief Executive Officer and our 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 and our Chief Financial Officer have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Controls Over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable

29 

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

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, 2018, 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.

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

30 

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: May 9, 2019	By:	/s/ John Fieldly
		John Fieldly, Chief Executive Officer (Principal Executive Officer)

Dated: May 9, 2019	By:	/s/ Edwin Negron-Carballo
		Edwin Negron-Carballo, Chief Financial Officer (Principal Financial and Accounting Officer)

31 

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 March 31, 2019 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, 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: May 9, 2019	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 March 31, 2019 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: May 9, 2019	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 March 31, 2019, 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: May 9, 2019	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 March 31, 2019, 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: May 9, 2019	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	3 Months Ended
	Mar. 31, 2019	May 09, 2019
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	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity's Reporting Status Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		57,307,853
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

XML

Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash	$ 2,762,813	$ 7,743,181
Accounts receivable-net	12,154,448	12,980,396
Note receivable-current	1,224,529
Unbilled royalty revenue	89,587
Inventories, net	13,556,512	11,482,701
Prepaid expenses and other current assets	2,832,174	2,299,375
Total current assets	32,620,063	34,505,653
Note receivable-long term	11,020,766
Operating lease-right of use asset	223,991
Property and equipment-net	103,093	121,854
Total Assets	43,967,913	34,627,507
Current liabilities:
Accounts payable and accrued expenses	9,027,059	14,845,211
Other current liabilities	65,395	19,933
Operating Lease Liability-current	139,042
Total current liabilities	9,231,496	14,865,144
Long-term liabilities:
Line of credit note payable-related party-net	4,850,839	3,500,000
Convertible note payables -related party-net	4,527,815	4,459,381
Operating Lease Liability-Long Term	87,592
Total Liabilities	18,697,742	22,824,525
Stockholders' Equity:
Common stock, $0.001 par value; 75,000,000 shares authorized, 57,198,365 and 57,002,508 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	57,198	57,003
Additional paid-in capital	86,703,402	85,153,667
Accumulated other comprehensive Income/(Loss)	233,668	(26,997)
Accumulated deficit	(61,724,097)	(73,380,691)
Total Stockholders' Equity	25,270,171	11,802,982
Total Liabilities and Stockholders' Equity	$ 43,967,913	$ 34,627,507

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	75,000,000	75,000,000
Common stock, issued	57,198,365	57,002,508
Common stock, outstanding	57,198,365	57,002,508

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Statement [Abstract]
Revenue	$ 14,485,650	$ 12,059,976
Cost of revenue	8,764,592	7,296,295
Gross profit	5,721,058	4,763,681
Selling and marketing expenses	3,601,003	5,599,271
General and administrative expenses	2,622,102	2,002,655
Total operating expense	6,223,105	7,601,926
Loss from operations	(502,047)	(2,838,245)
Other Income (Expense):
Interest income/(expense)-net	(28,632)	(38,259)
Amortization of Discount on Notes Payable	(85,940)
Gain on Investment repayment from China	12,273,213
Total Other Income/(Expense)	12,158,641	(38,259)
Net Income/(Loss)	11,656,594	(2,876,504)
Preferred stock dividend		(82,691)
Net Income/(Loss) available to common stockholders	$ 11,656,594	$ (2,959,195)
Income/(Loss) per share:
Basic	$ 0.2	$ (0.06)
Diluted	$ 0.19	$ (0.06)
Weighted average shares outstanding:
Basic	57,155,445	47,449,553
Diluted	61,687,409	47,449,553

XML

Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net Loss available to common stockholders, as reported	$ 11,656,594	$ (2,959,195)
Other comprehensive income (loss):
Unrealized foreign currency translation income (loss)	260,665	(53,504)
Comprehensive income	$ 11,917,259	$ (3,012,699)

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Balances at beginning at Dec. 31, 2017	$ 7	$ 45,702	$ 79,101,824	$ (39,378)	$ (61,960,910)	$ 17,147,245
Balances at beginning (in shares) at Dec. 31, 2017	6,760	45,701,593
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in exchange of preferred stock	$ (4)	$ 4,651	(5,251)			(604)
Issuance of common stock in exchange of preferred stock (in shares)	(4,000)	4,651,163
Stock option expense			770,862			770,862
Issuance of common stock pursuant to exercise of stock options - Cashless		$ 306	(306)
Issuance of common stock pursuant to exercise of stock options - Cashless (in shares)		306,340
Issuance of common stock pursuant to exercise of stock options - Cash		$ 298	142,329			142,627
Issuance of common stock pursuant to exercise of stock options - Cash (in shares)		297,773
Preferred stock dividend payable					(82,691)	(82,691)
Foreign currency translation income (loss)				(53,504)		(53,504)
Net income (loss)					(2,876,504)	(2,876,504)
Balances at ending at Mar. 31, 2018	$ 3	$ 50,957	80,009,458	(92,882)	(64,920,105)	15,047,431
Balances at ending (in shares) at Mar. 31, 2018	2,760	50,956,869
Balances at beginning at Dec. 31, 2018	$ 0	$ 57,003	85,153,667	(26,997)	(73,380,691)	11,802,982
Balances at beginning (in shares) at Dec. 31, 2018	(0)	57,002,508
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock option expense			1,358,503			1,358,503
Issuance of common stock pursuant to exercise of stock options - Cashless		$ 115	(115)
Issuance of common stock pursuant to exercise of stock options - Cashless (in shares)		115,107
Issuance of common stock pursuant to exercise of stock options - Cash		$ 80	24,680			24,760
Issuance of common stock pursuant to exercise of stock options - Cash (in shares)		80,750
Beneficial Conversion Feature on Convertible Instruments			166,667			166,667
Preferred stock dividend payable
Foreign currency translation income (loss)				260,665		260,665
Net income (loss)					11,656,594	11,656,594
Balances at ending at Mar. 31, 2019	$ 0	$ 57,198	$ 86,703,402	$ 233,668	$ (61,724,097)	$ 25,270,171
Balances at ending (in shares) at Mar. 31, 2019	(0)	57,198,365

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net Income (loss)	$ 11,656,594	$ (2,876,504)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	107,343	7,953
Stock-based compensation expense	1,358,503	770,862
Gain on Investment repayment from China	(12,273,213)
Changes in operating assets and liabilities:
Accounts receivable, net	(2,488,198)	(2,698,222)
Inventories net	(2,332,499)	(1,363,237)
Prepaid expenses and other current assets	(707,984)	(1,977,614)
Accounts payable and accrued expenses	(2,070,134)	3,908,101
Accrued preferred dividends		(51,111)
Unbilled royalty revenue	(89,587)
Deposits/deferred revenue and other current liabilities	45,463	4,059
Net cash used in operating activities	(6,793,712)	(4,275,713)
Cash flows from investing activities:
Purchase of property and equipment		(11,717)
Net cash (used in) investing activities		(11,717)
Cash flows from financing activities:
Proceeds from notes payable related party-net	1,500,000
Proceeds from exercise of stock options	24,760	142,023
Net cash provided by financing activities	1,524,760	142,023
Effect on exchange rate changes on cash and cash equivalents	288,584	(53,504)
Net (decrease) increase in cash	(4,980,368)	(4,198,911)
Cash at beginning of the period	7,743,181	14,186,624
Cash at end of the period	2,762,813	9,987,713
Cash paid during period for:
Interest	28,632	38,259
Non-cash investing and financing activities:
Accrued preferred dividends		82,691
Non-Cash Items Related to China Settlement:
Accounts Receivable	3,314,146
Inventory	258,688
Pre-paid expense and other current assets	175,185
Accounts payable and accrued expenses	$ 3,748,019

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ORGANIZATION AND DESCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2019

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, 2018, the Company established Celsius Asia Holdings Limited a Hong Kong corporation as a wholly-owned subsidiary of the Company. On February 7, 2017 Celsius China Holdings Limited a Hong Kong corporation became a wholly-owned subsidiary of Celsius Asia Holdings Limited and on May 9, 2017, Celsius Asia Holdings Limited established Celsius (Beijing) Beverage Limited, a China corporation as a wholly-owned subsidiary of Celsius Asia Holdings Limited.

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

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2019

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, 2018 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 months ended March 31, 2019 and 2018 all material assets and revenues of the Company where in the United States except as disclosed in Note 2.

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

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

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

For the three months ended March 31, 2019 and 2018, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2019			2018
A*		17.9	%		18.0	%
B*		0.1	%		11.6	%
All other		82.0	%		70.4	%
Total		100.0	%		100.0	%

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

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

	2019			2018
A*		41.1	%		41.5	%
All other		58.9	%		58.5	%
Total		100.0	%		100.0	%

*Receivables from customer A are derived from a customer located in Sweden.

Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At March 31, 2019 and 2018, 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 March 31, 2019 and December 31, 2018, there was an allowance for doubtful accounts of $260,649 and $183,000, respectively.

Inventories — Inventories include only the purchase cost and are stated at the lower of cost and net realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company establishes an inventory reserve to reduce the value of the inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). At March 31, 2019 and December 31, 2018, the Company recorded a reserve of $106,127 and $74,652 respectively. The changes in reserve are included in cost of revenue.

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

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 — 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.

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 $1.2 million and $4.0, during three months ending March 31, 2019 and 2018, 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 $103,000 and $121,000 during the three months ending March 31, 2019 and 2018, respectively.

Foreign Currency Translation-Chinese Yuan Renminbi — The Company’s functional currency for our China operation is the Chinese Yuan or Renminbi (CNY). For financial reporting purposes, the Chinese Yuan has been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the consolidated statements of comprehensive income (loss), as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Chinese Yuan to USD after the balance sheet date.

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

	March 31, 2019		March 31, 2018
Exchange rate on balance sheet dates
USD : CNY exchange rate		6.71		6.29
Average exchange rate for the period
USD : CNY exchange rate		6.75		6.36

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 March 31, 2019 and December 31, 2018.

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

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 2016 through 2018 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 March 31, 2019, the convertible debt may be converted into 3,162,260 additional shares of common stock.

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

Share-Based Payments — The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2017. As of March 31, 2019, total shares available are 6,901,360.

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

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

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

Recent Accounting Pronouncements

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

In June 2016, the FASB issued ASU No. 2016-13 & updated in Nov 2018 ASU 2018-19, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires the immediate recognition of management’s estimates of current and expected credit losses. ASU 2016-13 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2019. Early adoption is permitted after fiscal years beginning December 15, 2018. The Company is currently evaluating the potential impact of adopting this guidance on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for the Registrants for fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Company is currently assessing the impact of this standard on their Financial Statements.

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

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At March 31, 2019, the Company had an accumulated deficit of $61,724,097 which includes a net income available to common stockholders of $11,656,594 for the three months ended March 31, 2019. During the three months ending March 31, 2019 the Company net cash used in operating activities totaled $6,765,795.

In addition to cash flow from operations, our primary sources of working capital have been private placements of our securities and our credit facilities with CD Financial, LLC (“CD Financial”), an affiliate of Carl DeSantis, a principal shareholder of the Company, as well as Charmnew Limited and Grieg International Limited. Charmnew Limited is an existing shareholder of record affiliated with Li Ka Shing, one of our principal shareholders. Grieg International Limited is an existing shareholder of record affiliated with Chau Hoi Shuen Solina, one of our principal shareholders.

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, lower our working capital requirements and reduce other expenses or seek additional financing.

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REVENUE

3 Months Ended

Mar. 31, 2019

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.

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

	For the three months ended
	March 31,		March 31,
	2019		2018
North America	$	11,397,862	$	8,096,080
Europe		2,999,664		2,506,433
Asia		52,764		1,389,277
Other		35,360		68,186
Net sales	$	14,485,650	$	12,059,976

License Agreement

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

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

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

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INVENTORIES

3 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

INVENTORIES

4. INVENTORIES

Inventories consist of the following at:

	March 31,			December 31,
	2019			2018
Finished goods	$	10,775,168		$	8,739,877
Raw Materials		2,887,471			2,817,476
Less: Inventory reserves		(106,127	)		(74,652	)
Inventories-Net	$	13,556,512		$	11,482,701

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

3 Months Ended

Mar. 31, 2019

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 $2,832,174 and $2,299,375, at March 31, 2019 and December 31, 2018, respectively, and consist mainly of prepaid advertising, prepaid insurance, prepaid slotting fees and net deposits on purchases.

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NOTE RECEIVABLE

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

NOTE RECEIVABLE

6. NOTE RECEIVABLE

Note receivable consists of the following at:

	March 31,		December 31,
	2019		2018
Note Receivable-Current	$	1,224,529	$	-
Note Receivable-Non-Current		11,020,766		-
Total Note Receivable	$	12,245,295	$	-

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

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

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

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LEASES

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

LEASES

7. LEASES

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

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

Future Minimum Lease Payments
2019	$	112,818
2020		128,259
Total Minimum Lease Payments	$	241,077
Less: Amount representing interest		(14,443	)
Present value of lease liabilities	$	226,634

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PROPERTY AND EQUIPMENT

3 Months Ended

Mar. 31, 2019

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

8. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

	March 31,			December 31,
	2019			2018
Furniture and equipment	$	451,576		$	451,576
Less: accumulated depreciation		(348,483	)		(329,722	)
Total	$	103,093		$	121,854

Depreciation expense amounted to $18,761 and $7,953 during the three months ended March 31, 2019 and 2018, respectively

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at:

	March 31,		December 31,
	2019		2018
Accounts payable	$	5,749,943	$	5,825,446
Accrued expenses		3,277,116		9,019,765
Total	$	9,027,059	$	14,845,211

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OTHER CURRENT LIABILITIES

3 Months Ended

Mar. 31, 2019

Deferred Revenue And Other Current Liabilities

OTHER CURRENT LIABILITIES

10. OTHER LIABILITIES

Other current liabilities consist of the following at:

	March 31,		December 31,
	2019		2018
Other Liabilities	$	65,395	$	19,933
Total	$	65,395	$	19,933

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NOTES PAYABLE - RELATED PARTY

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

NOTES PAYABLE - RELATED PARTY

11. NOTES PAYABLE - RELATED PARTIES

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

	March 31,		December 31,
	2019		2018
Note Payable – line of credit
In July 2010, the Company entered into a line of credit note payable with a related party and major shareholder which carries interest of five percent per annum paid quarterly. The Company can borrow up to $9,500,000. The Company has pledged all its assets as security for the line of credit. The note matures 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, reducing the amount to $4,500,000. During March 2018, the Company issued $1,000,000 of common stock in exchange for cancellation of $1,000,000 of this line, reducing the amount to $3,500,000. In December 2018, the company amended and restated the note payable into a convertible loan agreement continuing to carry a five percent per annum interest but payable semi-annually. As a result, of this substantial modification which was treated as a debt extinguishment, a new liability was established and a loss of $377,0418 on the extinguishment of debt was recognized. The Company can now borrow up to $5.0 million. The note matures in December 2020. In January 2019, the company increased the borrowed amount by $1,500,000. The unamortized discount of the note as of March 2019 amounted to $149,161. The balance at March 31, 2019 is convertible into 1,491,338 shares at a conversion price of $3.40 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.
Long-term portion	$	4,850,839	$	3,500,000

	March 31,		December 31,
	2019		2018
Convertible Note Payable
-In December 2018, the Company entered into a convertible note payable with a related party and shareholder which carries interest of five percent per annum paid semi-annually. The Company can borrow up to $3.0 million. This note had an unamortized discount of $283,500 and $324,371 as of March 31, 2019 and as of December 31, 2018, respectively. The note matures in December 2020. The balance at March 31, 2019 is convertible into 1,002,553 shares at a fixed conversion price of $3.04 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.	2,716,500		2,675,629
-In December 2018, the Company entered into a line of credit convertible note payable with a related party and shareholder which carries interest of five percent per annum paid semi-annually. The Company can borrow up to $2.0 million. This note had an unamortized discount of $188,685 and $216,248 as of March 31, 2019 and as of December 31, 2018, respectively. The note matures in December 2020. The balance at March 31, 2019 is convertible into 668,369 shares at a fixed conversion price of $3.04 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.	1,811,315		1,783,752
Long-term portion-Net of Discount	$	4,527,815	$	4,459,381

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PREFERRED STOCK - RELATED PARTY

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

PREFERRED STOCK - RELATED PARTY

12. PREFERRED STOCK – RELATED PARTY

The Company entered into a securities purchase agreement with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s line of credit with CD (the “CD Line of Credit”). The Preferred C Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference of $1,000 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends. In October 2017, the Company issued 383 Preferred C Shares valued at $383,000 in settlement of $383,000 in accrued preferred C dividends. As of December 31, 2018, $255,903 of dividends has been accrued and converted into 256 of additional Preferred C. The Preferred C Shares matured on December 31, 2018 and were exchanged for 5,806,022 shares of Company common stock.

On April 16, 2015, the Company entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD 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

3 Months Ended

Mar. 31, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

13. RELATED PARTY TRANSACTIONS

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

Other related party transactions are discussed in Notes 11 and 12

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

STOCKHOLDERS' EQUITY

14. STOCKHOLDERS’ EQUITY

Issuance of common stock pursuant to services performed

On July 19, 2018 the Company settled a legal matter that was filed in Superior Court of the State of California, Los Angeles County, by Statewide Beverage Company, Inc. (“Statewide”), a former distributor of the Company’s products. As part of the settlement the Company issued 60,000 shares of “restricted” stock, to the ten plaintiffs involved in the complaint for a total fair value of $279,600, or $4.66 per share, representing the closing stock price on the settlement 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 exercise of stock options

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

During the three months ended March 31, 2018, the Company issued an aggregate of 604,113 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2006 Stock Incentive Plan. The Company received aggregate proceeds of $142,627 for options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.

Issuance of preferred stock pursuant to private placement

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

Refer to Note 12 for discussion on preferred stock issuances.

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

15. 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. 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, 2017. As of March 31, 2019, 6,901,360 shares are available.

Under the 2015 Stock Option Plan the Company has issued options to purchase approximately 5.64 million shares at an average price of $3.85 per share with a fair value of $5.97 million. For the three months ended March 31, 2019 and 2018, the Company issued options to purchase 1.27 million and 1.1 million shares. For the three months ended March 31, 2019 and 2018, the Company recognized an expense of approximately $1,358,503 and $770,862, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of March 31, 2019, the Company had approximately $9,652,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. There are options to purchase approximately 2.95 million shares that are vested as of March 31, 2019.

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

	Three months ended March 31,
	2019	2018
Expected volatility	71%-121%	62.91 – 62.98
Expected term	4.02-4.64 Years	4.77 – 5 Years
Risk-free interest rate	2.55% - 2.72%	2.56% - 2.57%
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 March 31, 2019 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, 2018		4,840		$	3.04	$	5,338		5.05
Granted		1,269		$	3.73
Exercised		(342	)	$	1.17
Forfeiture and cancelled		(262	)	$	2.67
At March 31, 2019		5,505		$	3.33	$	5,968		6.05
Exercisable at March 31, 2019		2,951		$	2.45

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

	Outstanding Options						Vested Options
	Number						Number
	Outstanding		Weighted		Weighted		Exercisable		Weighted		Weighted
Range of	at		Average		Average		at		Average		Average
Exercise	March 31,		Remaining		Exercise		March 31,		Exercise		Remaining
Price	2019 (000’s)		Term		Price		2019 (000’s)		Price		Term
$0.20 - $0.53		399		3.83	$	0.27		399	$	0.27		3.83
$0.65 - $1.80		792		1.01	$	0.84		792	$	0.84		1.01
$1.83 - $2.84		626		3.19	$	2.06		612	$	2.06		3.18
$3.20 - $6.20		3,680		7.87	$	4.40		1,140		4.48		6.88
$7.20 - $22.00		8		0.38	$	10.36		8	$	10.36		0.38
Outstanding options		5,505		6.05	$	3.33		2,951	$	2.45		4.11

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the three months ended March 31, 2019 and 2018 is presented in the following table:

	For the Three Months ended
	March 31, 2019				March 31, 2018
			Weighted				Weighted
			Average				Average
	(000’s)		Grant Date		(000’s)		Grant Date
	Shares		Fair Value		Shares		Fair Value
Unvested at beginning of period		38,889	$	—		—		—
Granted				3.64		100,000		3.64
Vested		8,333		—		33,333		—
Unvested at end of period		30,556	$	3.64		66,667		3.64

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of March 31, 2019 was $111,196 and is expected to be recognized over a weighted average period of 0.92 years.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

16. COMMITMENTS AND CONTINGENCIES

The Company has entered into distribution agreements with liquidated damages in the event the Company cancels the distribution agreements without cause. Cause has been defined in various ways. It is management’s belief that no such agreement has created any liability as of March 31, 2019.

On December 18, 2018, Rockstar, Inc. (“Rockstar”) filed suit against Celsius in federal district court in the District of Nevada. Rockstar’s complaint alleges three claims for relief: (a) false advertising in violation of 15 USC §1125(a); (b) violation of the Nevada Deceptive Trade Practice Act; and (c) Nevada common law unfair competition. On January 30, 2019, Celsius filed its answer to the complaint denying the allegations by Rockstar, and setting forth certain affirmative defenses. The action is in its initial stages and no discovery has taken place. Celsius believes that it has not committed the violations alleged, that it has strong defenses, and it intends to vigorously defend itself against the claims by Rockstar.

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

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

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

17. SUBSEQUENT EVENTS

Between April 1, 2019 and May 9, 2019, the Company issued an aggregate of 109,488 shares of its common stock pursuant to the exercise of stock options granted under the Company’s 2015 Stock Incentive Plan. The Company received cash in the amount of $56,400 for options exercised.

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

3 Months Ended

Mar. 31, 2019

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, 2018 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 months ended March 31, 2019 and 2018 all material assets and revenues of the Company where 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 March 31, 2019, the Company had approximately $2.5 million in excess of the Federal Deposit Insurance Corporation limit.

For the three months ended March 31, 2019 and 2018, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2019			2018
A*		17.9	%		18.0	%
B*		0.1	%		11.6	%
All other		82.0	%		70.4	%
Total		100.0	%		100.0	%

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

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

	2019			2018
A*		41.1	%		41.5	%
All other		58.9	%		58.5	%
Total		100.0	%		100.0	%

*Receivables from customer A are derived from a customer located in Sweden.

Cash Equivalents

Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At March 31, 2019 and 2018, 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 March 31, 2019 and December 31, 2018, there was an allowance for doubtful accounts of $260,649 and $183,000, respectively.

Inventories

Inventories — Inventories include only the purchase cost and are stated at the lower of cost and net realizable value. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company establishes an inventory reserve to reduce the value of the inventory during the period in which such materials and products are no longer usable or marketable. Specifically, the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory item, then inventory item will be included as part of the reserve during the period being evaluated. Management will then specifically evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). At March 31, 2019 and December 31, 2018, the Company recorded a reserve of $106,127 and $74,652 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 — 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.

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 Advance

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 $1.2 million and $4.0, during three months ending March 31, 2019 and 2018, 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 $103,000 and $121,000 during the three months ending March 31, 2019 and 2018, respectively.

Foreign Currency Translation

Foreign Currency Translation-Chinese Yuan Renminbi — The Company’s functional currency for our China operation is the Chinese Yuan or Renminbi (CNY). For financial reporting purposes, the Chinese Yuan has been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the consolidated statements of comprehensive income (loss), as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Chinese Yuan to USD after the balance sheet date.

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

	March 31, 2019		March 31, 2018
Exchange rate on balance sheet dates
USD : CNY exchange rate		6.71		6.29
Average exchange rate for the period
USD : CNY exchange rate		6.75		6.36

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 March 31, 2019 and December 31, 2018.

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 2016 through 2018 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 March 31, 2019, the convertible debt may be converted into 3,162,260 additional shares of common stock.

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

Share-Based Payments

Share-Based Payments — The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2017. As of March 31, 2019, total shares available are 6,901,360.

Cost of Sales

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

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 three months ended March 31, 2019 and 2018 was $1.3 million and $1.1 million, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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

In June 2016, the FASB issued ASU No. 2016-13 & updated in Nov 2018 ASU 2018-19, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires the immediate recognition of management’s estimates of current and expected credit losses. ASU 2016-13 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2019. Early adoption is permitted after fiscal years beginning December 15, 2018. The Company is currently evaluating the potential impact of adopting this guidance on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for the Registrants for fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Company is currently assessing the impact of this standard on their Financial Statements.

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 March 31, 2019, the Company had an accumulated deficit of $61,724,097 which includes a net income available to common stockholders of $11,656,594 for the three months ended March 31, 2019. During the three months ending March 31, 2019 the Company net cash used in operating activities totaled $6,765,795.

In addition to cash flow from operations, our primary sources of working capital have been private placements of our securities and our credit facilities with CD Financial, LLC (“CD Financial”), an affiliate of Carl DeSantis, a principal shareholder of the Company, as well as Charmnew Limited and Grieg International Limited. Charmnew Limited is an existing shareholder of record affiliated with Li Ka Shing, one of our principal shareholders. Grieg International Limited is an existing shareholder of record affiliated with Chau Hoi Shuen Solina, one of our principal shareholders.

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, lower our working capital requirements and reduce other expenses or seek additional financing.

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

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Schedule of revenue & accounts receivable with customers

For the three months ended March 31, 2019 and 2018, the Company had the following 10 percent or greater concentrations of revenue with its customers:

	2019			2018
A*		17.9	%		18.0	%
B*		0.1	%		11.6	%
All other		82.0	%		70.4	%
Total		100.0	%		100.0	%

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

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

	2019			2018
A*		41.1	%		41.5	%
All other		58.9	%		58.5	%
Total		100.0	%		100.0	%

*Receivables from customer A are derived from a customer located in Sweden.

Schedule of exchange rates

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

	March 31, 2019		March 31, 2018
Exchange rate on balance sheet dates
USD : CNY exchange rate		6.71		6.29
Average exchange rate for the period
USD : CNY exchange rate		6.75		6.36

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REVENUE (Tables)

3 Months Ended

Mar. 31, 2019

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 three months ended March 31, 2019 and 2018 are as follows:

	For the three months ended
	March 31,		March 31,
	2019		2018
North America	$	11,397,862	$	8,096,080
Europe		2,999,664		2,506,433
Asia		52,764		1,389,277
Other		35,360		68,186
Net sales	$	14,485,650	$	12,059,976

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INVENTORIES (Tables)

3 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consist of the following at:

	March 31,			December 31,
	2019			2018
Finished goods	$	10,775,168		$	8,739,877
Raw Materials		2,887,471			2,817,476
Less: Inventory reserves		(106,127	)		(74,652	)
Inventories-Net	$	13,556,512		$	11,482,701

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NOTE RECEIVABLE (Tables)

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Schedule of note receivable

Note receivable consists of the following at:

	March 31,		December 31,
	2019		2018
Note Receivable-Current	$	1,224,529	$	-
Note Receivable-Non-Current		11,020,766		-
Total Note Receivable	$	12,245,295	$	-

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LEASES (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Future annual minimum cash payments required under operating lease

Future annual minimum cash payments required under this operating type lease as of March 31, 2019 are as follows:

Future Minimum Lease Payments
2019	$	112,818
2020		128,259
Total Minimum Lease Payments	$	241,077
Less: Amount representing interest		(14,443	)
Present value of lease liabilities	$	226,634

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PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Mar. 31, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment consist of the following at:

	March 31,			December 31,
	2019			2018
Furniture and equipment	$	451,576		$	451,576
Less: accumulated depreciation		(348,483	)		(329,722	)
Total	$	103,093		$	121,854

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following at:

	March 31,		December 31,
	2019		2018
Accounts payable	$	5,749,943	$	5,825,446
Accrued expenses		3,277,116		9,019,765
Total	$	9,027,059	$	14,845,211

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OTHER CURRENT LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2019

Deferred Revenue, Current [Abstract]

Schedule of other current liabilities

Other current liabilities consist of the following at:

	March 31,		December 31,
	2019		2018
Other Liabilities	$	65,395	$	19,933
Total	$	65,395	$	19,933

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NOTES PAYABLE - RELATED PARTY (Tables)

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Schedule of note payable - related parties

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

	March 31,		December 31,
	2019		2018
Note Payable – line of credit
In July 2010, the Company entered into a line of credit note payable with a related party and major shareholder which carries interest of five percent per annum paid quarterly. The Company can borrow up to $9,500,000. The Company has pledged all its assets as security for the line of credit. The note matures 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, reducing the amount to $4,500,000. During March 2018, the Company issued $1,000,000 of common stock in exchange for cancellation of $1,000,000 of this line, reducing the amount to $3,500,000. In December 2018, the company amended and restated the note payable into a convertible loan agreement continuing to carry a five percent per annum interest but payable semi-annually. As a result, of this substantial modification which was treated as a debt extinguishment, a new liability was established and a loss of $377,0418 on the extinguishment of debt was recognized. The Company can now borrow up to $5.0 million. The note matures in December 2020. In January 2019, the company increased the borrowed amount by $1,500,000. The unamortized discount of the note as of March 2019 amounted to $149,161. The balance at March 31, 2019 is convertible into 1,491,338 shares at a conversion price of $3.40 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.
Long-term portion	$	4,850,839	$	3,500,000

	March 31,		December 31,
	2019		2018
Convertible Note Payable
-In December 2018, the Company entered into a convertible note payable with a related party and shareholder which carries interest of five percent per annum paid semi-annually. The Company can borrow up to $3.0 million. This note had an unamortized discount of $283,500 and $324,371 as of March 31, 2019 and as of December 31, 2018, respectively. The note matures in December 2020. The balance at March 31, 2019 is convertible into 1,002,553 shares at a fixed conversion price of $3.04 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.	2,716,500		2,675,629
-In December 2018, the Company entered into a line of credit convertible note payable with a related party and shareholder which carries interest of five percent per annum paid semi-annually. The Company can borrow up to $2.0 million. This note had an unamortized discount of $188,685 and $216,248 as of March 31, 2019 and as of December 31, 2018, respectively. The note matures in December 2020. The balance at March 31, 2019 is convertible into 668,369 shares at a fixed conversion price of $3.04 per share which was determined based on the average of the closing price for the shares during the ten (10) business days prior to the Advance Date, less a discount of 10%.	1,811,315		1,783,752
Long-term portion-Net of Discount	$	4,527,815	$	4,459,381

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [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:

	Three months ended March 31,
	2019	2018
Expected volatility	71%-121%	62.91 – 62.98
Expected term	4.02-4.64 Years	4.77 – 5 Years
Risk-free interest rate	2.55% - 2.72%	2.56% - 2.57%
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 March 31, 2019 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, 2018		4,840		$	3.04	$	5,338		5.05
Granted		1,269		$	3.73
Exercised		(342	)	$	1.17
Forfeiture and cancelled		(262	)	$	2.67
At March 31, 2019		5,505		$	3.33	$	5,968		6.05
Exercisable at March 31, 2019		2,951		$	2.45

Schedule of employee stock options outstanding

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

	Outstanding Options						Vested Options
	Number						Number
	Outstanding		Weighted		Weighted		Exercisable		Weighted		Weighted
Range of	at		Average		Average		at		Average		Average
Exercise	March 31,		Remaining		Exercise		March 31,		Exercise		Remaining
Price	2019 (000’s)		Term		Price		2019 (000’s)		Price		Term
$0.20 - $0.53		399		3.83	$	0.27		399	$	0.27		3.83
$0.65 - $1.80		792		1.01	$	0.84		792	$	0.84		1.01
$1.83 - $2.84		626		3.19	$	2.06		612	$	2.06		3.18
$3.20 - $6.20		3,680		7.87	$	4.40		1,140		4.48		6.88
$7.20 - $22.00		8		0.38	$	10.36		8	$	10.36		0.38
Outstanding options		5,505		6.05	$	3.33		2,951	$	2.45		4.11

Summary of restricted stock awards

A summary of the Company’s restricted stock activity for the three months ended March 31, 2019 and 2018 is presented in the following table:

	For the Three Months ended
	March 31, 2019				March 31, 2018
			Weighted				Weighted
			Average				Average
	(000’s)		Grant Date		(000’s)		Grant Date
	Shares		Fair Value		Shares		Fair Value
Unvested at beginning of period		38,889	$	—		—		—
Granted				3.64		100,000		3.64
Vested		8,333		—		33,333		—
Unvested at end of period		30,556	$	3.64		66,667		3.64

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - 10% or Greater Revenue [Member]		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Concentration Risk [Line Items]
Total		100.00%	100.00%
Customer A [Member]
Concentration Risk [Line Items]
Total	[1]	17.90%	18.00%
Customer B [Member]
Concentration Risk [Line Items]
Total		0.10%	11.60%
All Other [Member]
Concentration Risk [Line Items]
Total		82.00%	70.40%

[1] Revenues from customer A are derived from a customer located in Sweden. Revenues from all other customers were mainly derived from the United States. Receivables from customer B are obtained from a customer located in China.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - 10% or Accounts Receivable [Member]		3 Months Ended	12 Months Ended
		Mar. 31, 2019	Dec. 31, 2018
Concentration Risk [Line Items]
Total		100.00%	100.00%
Customer A [Member]
Concentration Risk [Line Items]
Total	[1]	41.10%	41.50%
All Other [Member]
Concentration Risk [Line Items]
Total		58.90%	58.50%

[1] Revenues from customer A are derived from a customer located in Sweden. Revenues from all other customers were mainly derived from the United States. Receivables from customer B are obtained from a customer located in China.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Accounting Policies [Abstract]
Exchange rate on balance sheet dates	6.71	6.29
Average exchange rate for the period	6.75	6.36

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Amount excess of FDIC limit	$ 2,500,000
Allowance for doubtful accounts	260,649		$ 183,000
Inventory reserve	106,127		74,652
Advertising expense	1,200,000	$ 4,000,000
Research and development expense	$ 103,000	121,000
Number of shares available	6,901,360
Freight expense	$ 1,300,000	1,100,000
Conversion Of Convertible Debt into common stock	3,162,260
Accumulated deficit	(61,724,097)		$ (73,380,691)
Net (loss) available to common stockholders	11,656,594	(2,959,195)
Net cash used in operating activities	$ (6,793,712)	$ (4,275,713)
Minimum [Member]
Useful life	3 years
Maximum [Member]
Useful life	7 years

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REVENUE (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net sales	$ 14,485,650	$ 12,059,976
North America [Member]
Net sales	11,397,862	8,096,080
Europe [Member]
Net sales	2,999,664	2,506,433
Asia [Member]
Net sales	52,764	1,389,277
Other [Member]
Net sales	$ 35,360	$ 68,186

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REVENUE (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues	$ 14,485,650	$ 12,059,976
License Agreement [Member]
Royalty fees	6,900,000
Revenues	$ 90,000

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INVENTORIES (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Finished goods	$ 10,775,168	$ 8,739,877
Raw Materials	2,887,471	2,817,476
Less: Inventory reserves	(106,127)	(74,652)
Inventories, net	$ 13,556,512	$ 11,482,701

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details Narrative) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
D3M Licensing Group [Member] | Prepaid Consulting Agreement [Member]
Prepaid expenses and other current assets	$ 2,832,174	$ 2,299,375

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NOTE RECEIVABLE (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Notes to Financial Statements
Note Receivable-Current	$ 1,224,529
Note Receivable-Non-Current	11,020,766
Total Note Receivable	$ 12,245,295

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NOTE RECEIVABLE (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Notes to Financial Statements
Note Receivable	$ 12,245,295
Note Receivable description	Scheduled principal payments plus accrued interest are due annually on March 31 of each year starting in 2020. The Note is recorded at amortized cost basis and accrues interest at a rate per annum equal to the weighted average of 5% of the outstanding principal up to $5 million and 2% of the outstanding principal above $5 million.
Weighted average interest rate	3.21%
Interest income	$ 96,000

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LEASES (Details)	Mar. 31, 2019 USD ($)
Leases [Abstract]
2019	$ 112,818
2020	128,259
Total Minimum Lease Payments	241,077
Less: Amount representing interest	(14,443)
Present value of lease liabilities	$ 226,634

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LEASE (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Jan. 02, 2019	Dec. 31, 2018
Leases [Abstract]
Right to use assets	$ 223,991	$ 259,358
Operating lease liability	226,634
Short-term operating lease liability	139,042
Long term operating lease liability	$ 87,592
Lease description	The monthly rent amounts to $12,452 per month until October 2019 and then increases to $12,826 per month until the termination of the lease in October 2020.
Lease term		19 months
Discount rate		5.00%

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PROPERTY AND EQUIPMENT (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation	$ (348,483)	$ (329,722)
Total	103,093	121,854
Furniture and Equipment [Member}
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 451,576	$ 451,576

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PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 18,761	$ 7,953

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accounts payable	$ 5,749,943	$ 5,825,446
Accrued expenses	3,277,116	9,019,765
Total	$ 9,027,059	$ 14,845,211

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OTHER LIABILITIES (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Deferred Revenue, Current [Abstract]
Other Liabilities	$ 65,395	$ 19,933
Total	$ 65,395	$ 19,933

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NOTES PAYABLE - RELATED PARTIES (Details) - USD ($)	1 Months Ended				3 Months Ended
	Dec. 31, 2018	Mar. 31, 2018	Apr. 30, 2015	Jul. 31, 2010	Mar. 31, 2019
Long-term portion	$ 3,500,000				$ 4,850,839
5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member] | CD Financial, LLC [Member]
Long-term portion	$ 3,500,000				4,850,839
Maximum borrowing capacity				$ 9,500,000	5,000,000
Debt maturity date	Dec. 31, 2020			Jan. 02, 2020
Loss on debt extinguishment	$ (3,770,418)
Conversion of common stock	1,491,338
Unamortized discount					$ 149,161
Conversion price					$ 3.40
Discount rate	10.00%
5% Note Payable - Line of Credit [Member] | Carl DeSantis [Member] | CD Financial, LLC [Member] | 5% Series D Preferred Stock [Member]
Number of shares issued upon debt cancellation		1,000,000	4,000,000
Debt cancelled amount		$ 1,000,000	$ 4,000,000
Increased in borrowed amount					$ 1,500,000

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NOTES PAYABLE - RELATED PARTIES (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Convertible Note Payable	$ 4,527,815	$ 4,459,381
5% Convertible Note Payable [Member] | Related Party And Shareholder [Member]
Convertible Note Payable	2,716,500	2,675,629
Maximum borrowing capacity	3,000,000
Unamortized discount	$ 283,500	324,371
Debt maturity date	Dec. 31, 2020
Conversion of common stock	1,002,553
Conversion price	$ 3.04
Discount rate	10.00%
5% Line of Credit Convertible Note Payable [Member] | Related Party And Shareholder [Member]
Convertible Note Payable	$ 1,811,315	1,783,752
Maximum borrowing capacity	2,000,000
Unamortized discount	$ 188,685	$ 216,248
Debt maturity date	Dec. 31, 2020
Conversion of common stock	668,369
Conversion price	$ 3.04
Discount rate	10.00%

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PREFERRED STOCK - RELATED PARTY (Details Narrative) - Carl DeSantis [Member] - USD ($)			1 Months Ended			12 Months Ended
	Apr. 16, 2015	Aug. 26, 2013	Mar. 31, 2018	Oct. 31, 2017	Apr. 30, 2015	Dec. 31, 2018	Dec. 31, 2017
CD Financial, LLC [Member] | 5% 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, 2020
Share price (in dollars per share)	$ 0.89
Dividend payable (in dollars per share)	$ 0.03
Preferred stock redemption price, percent	104.00%
Conversion of preferred stock into common stock			4,651,163
CD Financial, LLC [Member] | 5% Note Payable - Line of Credit [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] | Securities Purchase Agreement [Member]
Original debt conversion amount		$ 1,650,000
CDS Ventures of South Florida, LLC & CD Financial, LLC [Member] | 6% 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
CDS Ventures of South Florida, LLC [Member] | 6% Series C Preferred Stock [Member] | Securities Purchase Agreement [Member]
Number of shares issued upon accrued dividend				383	180
Value of shares issued upon accrued dividend				$ 383,000	$ 180,000
Accrued dividend						$ 255,903
Preferred stock redemption date							Dec. 31, 2018
Number of preferred stock converted						256
Conversion of preferred stock into common stock						5,806,022
CDS Ventures of South Florida, LLC [Member] | Short Term Loan [Member] | Securities Purchase Agreement [Member]
Original debt conversion amount		$ 550,000

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RELATED PARTY TRANSACTIONS (Details Narrative) - CD Financial, LLC [Member] - Office [Member] - Carl DeSantis [Member]	3 Months Ended
	Mar. 31, 2019 USD ($)
Lease expiration	2020-10
Monthly expense	$ 12,452

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STOCKHOLDERS' EQUITY (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended
	Jul. 31, 2018	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Proceeds from Options exercised			$ 24,760	$ 142,023
Number of options exercised			342,000
Series D Preferred Stock [Member]
Number of preferred stock converted		4,000		4,000
Conversion of preferred stock into common stock		4,651,163
2006 Stock Incentive Plan [Member]
Number of option shares granted			195,857	604,113
Value of option shares granted			$ 24,760	$ 142,627
Proceeds from Options exercised			$ 24,760
Number of options exercised			80,750
Restricted Common Stock [Member] | Statewide [Member]
Fair value of shares issued upon services rendered	$ 279,600
Stock price (in dollars per share)	$ 4.66
Stock issued for settlement of legal matter	60,000

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STOCK-BASED COMPENSATION (Details)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Forfeiture Rate	0.00%	0.00%
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Expected volatility	71.00%	62.91%
Expected term	4 years 7 days	4 years 9 months 7 days
Risk-free interest rate	2.55%	2.56%
Maximum [Member]
Expected volatility	121.00%	62.98%
Expected term	4 years 7 months 21 days	5 years
Risk-free interest rate	2.72%	2.57%

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STOCK-BASED COMPENSATION (Details 1)	3 Months Ended
	Mar. 31, 2019 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance at beginning | shares	4,840,000
Granted | shares	1,269,000
Exercised | shares	(342,000)
Forfeiture and cancelled | shares	(262,000)
Balance at end | shares	5,505,000
Exercisable at end | shares	2,951,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Balance at beginning | $ / shares	$ 3.04
Granted | $ / shares	3.73
Exercised | $ / shares	1.17
Forfeiture and cancelled | $ / shares	2.67
Balance at end | $ / shares	3.33
Exercisable at end | $ / shares	$ 2.45
Share-based Compensation Arrangement by Share-based Payment Award, Options, Intrinsic Value [Roll Forward]
Balance at beginning | $	$ 5,338,000
Balance at end | $	$ 5,968,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Average Remaining Term [Roll Forward]
Balance at beginning	5 years 18 days
Balance at end	6 years 18 days

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STOCK-BASED COMPENSATION (Details 2)	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Outstanding Options
Number Outstanding at end | shares	5,505,000
Weighted Averaged Remaining Life	6 years 18 days
Weighted Averaged Exercise Price | $ / shares	$ 3.33
Vested Options
Number Exercisable at end | shares	2,951,000
Weighted Averaged Exercise Price | $ / shares	$ 2.45
Weighted Averaged Remaining Life	4 years 1 month 9 days
$0.20 - $0.53 [Member]
Outstanding Options
Number Outstanding at end | shares	399,000
Weighted Averaged Remaining Life	3 years 9 months 29 days
Weighted Averaged Exercise Price | $ / shares	$ 0.27
Vested Options
Number Exercisable at end | shares	399,000
Weighted Averaged Exercise Price | $ / shares	$ 0.27
Weighted Averaged Remaining Life	3 years 9 months 29 days
$0.65 - $1.80 [Member]
Outstanding Options
Number Outstanding at end | shares	792,000
Weighted Averaged Remaining Life	1 year 4 days
Weighted Averaged Exercise Price | $ / shares	$ 0.84
Vested Options
Number Exercisable at end | shares	792,000
Weighted Averaged Exercise Price | $ / shares	$ 0.84
Weighted Averaged Remaining Life	1 year 4 days
$1.83 - $2.84 [Member]
Outstanding Options
Number Outstanding at end | shares	626,000
Weighted Averaged Remaining Life	3 years 2 months 8 days
Weighted Averaged Exercise Price | $ / shares	$ 2.06
Vested Options
Number Exercisable at end | shares	612,000
Weighted Averaged Exercise Price | $ / shares	$ 2.06
Weighted Averaged Remaining Life	3 years 2 months 5 days
$3.20 - $6.20 [Member]
Outstanding Options
Number Outstanding at end | shares	3,680,000
Weighted Averaged Remaining Life	7 years 10 months 14 days
Weighted Averaged Exercise Price | $ / shares	$ 4.4
Vested Options
Number Exercisable at end | shares	1,140,000
Weighted Averaged Exercise Price | $ / shares	$ 4.48
Weighted Averaged Remaining Life	6 years 10 months 17 days
$7.20 - $22.00 [Member]
Outstanding Options
Number Outstanding at end | shares	8,000
Weighted Averaged Remaining Life	4 months 17 days
Weighted Averaged Exercise Price | $ / shares	$ 10.36
Vested Options
Number Exercisable at end | shares	8,000
Weighted Averaged Exercise Price | $ / shares	$ 10.36
Weighted Averaged Remaining Life	4 months 17 days

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STOCK-BASED COMPENSATION (Details 3) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Number of Shares
Unvested at beginning of period	38,889,000
Restricted stock granted	0	100,000,000
Restricted stock vested	8,333,000	33,333,000
Unvested at end of period	30,556,000	66,667,000
Weighted Average Grant-Date Fair Value per Share
Unvested at beginning of period
Restricted stock granted	3.64	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	3 Months Ended		167 Months Ended
	Jan. 18, 2007	Apr. 30, 2015	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Feb. 28, 2015	May 31, 2014	Dec. 31, 2013
Number of shares available			6,901,360		6,901,360
Average share price (in dollars per share)			$ 3.73
Unrecognized pre-tax non-cash compensation expense to non-vested option			$ 9,652,000		$ 9,652,000
Period unrecognized pre-tax non-cash compensation expense to non-vested option			3 years
Number of shares vested			2,950,000
Minimum [Member]
Vesting period			2 years
Maximum [Member]
Vesting period			3 years
General And Administrative Expense [Member]
Non-cash compensation expense			$ 1,358,503	$ 770,862
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, 2017
Purchase of common shares				1,100,000
Stock Option Plan 2015 [Member]
Purchase of common shares			1,270,000		5,640,000
Average share price (in dollars per share)					$ 3.85
Fair value of common shares purchased					$ 5,970,000
Director [Member]
Unrecognized compensation expense			$ 111,196		$ 111,196
Weighted average period of unrecognized compensation expense			11 months 1 day

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SUBSEQUENT EVENTS (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended
	May 09, 2019	Mar. 31, 2019
Stock options granted		1,269,000
Subsequent Event [Member] | Stock Incentive Plan 2015 [Member]
Stock options granted	109,488
Options exercised, value	$ 56,400