Correspondence 0001341766-24-000061 from Celsius Holdings, Inc. (CELH) (CIK 0001341766) (CELH)
Celsius Holdings, Inc. (CELH) (CIK 0001341766)
Date: Aug. 9, 2024 · CIK: 0001341766 · Accession: 0001341766-24-000061
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-34611
Referenced dates: July 22, 2024
Letter
VIA EDGAR August 9, 2024 United States Securities and Exchange Commission Division of Corporation Finance Office of Manufacturing Attention: SiSi Cheng and Anne McConnell Re: Celsius Holdings, Inc. Form 10-K for the Year Ended December 31, 2023 File No. 001-34611
Dear Ms. Cheng and Ms. McConnell,
We respectfully submit this letter in response to the comment from the staff of the Division of Corporation Finance (the “Staff”), received by a letter dated July 22, 2024, relating to the above-mentioned Annual Report on Form 10-K for the Year ended December 31, 2023 (the “Form 10-K”).
We appreciate the opportunity to address the Staff’s comment with respect to our Form 10-K. The Staff’s comment has been reproduced below in italicized text. Our response thereto is set forth immediately following the reproduced comment. In the responses below, references to the “Company”, “we”, and “our” refer to Celsius Holdings, Inc.
Form 10-K for the Year Ended December 31, 2023
Consolidated Financial Statements
13. Related Party Transactions, page F-22
1.We have considered your response to prior comment 1; however, Rule 4-08(k)(1), Rule 5-02 and Rule 5-03 of Regulation S-X require related party transactions to be stated on the face of balance sheets, statements of operations, and statements of cash flows, in addition to related party and concentration of risk disclosures required to be provided in the notes to the financial statements under GAAP. It is not clear to us that stating amounts from related party transactions on the face of your financial statements would cause competitive harm and we do not believe the potential of competitive harm is sufficient to allow non-compliance with disclosure requirements in Regulation S-X. Please revise your financial statements in future annual and quarterly filings to comply with the above referenced disclosure requirements.
Response: We respectfully acknowledge the Staff’s comment and the provisions of Rule 4-08(k)(1), Rule 5-02 and Rule 5-03 of Regulation S-X to present related party transactions on the face of the balance sheets, statements of operations and comprehensive income, and statements of cash flows. Accordingly, beginning with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, we will prepare our financial statements in future annual and quarterly filings to provide this information on the face of our financial statements.
Set forth below for the Staff’s consideration is a draft of the Company’s proposed presentation of related party transactions on the face of our consolidated balance sheets, consolidated statements of operations and comprehensive income, and consolidated statements of cash flows:
Celsius Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts) (Unaudited)
March 31, 2024 December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents $ 879,498 $ 755,981
Accounts receivable-net[1]
200,117 183,703
Note receivable-current-net 2,259 2,318
Inventories-net 197,504 229,275
Prepaid expenses and other current assets 21,523 19,503
Deferred other costs-current[2]
14,124 14,124
Total current assets 1,315,025 1,204,904
Property and equipment-net 28,350 24,868
Deferred tax assets 22,437 29,518
Right of use assets-operating leases 1,688 1,957
Right of use assets-finance leases 263 208
Other long-term assets 7,963 291
Deferred other costs-non-current[2]
244,807 248,338
Intangibles-net 11,741 12,139
Goodwill 13,866 14,173
Total Assets $ 1,646,140 $ 1,536,396
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable 40,196 $ 42,840
Accrued expenses 63,871 62,120
Income taxes payable 58,619 50,424
Accrued promotional allowance[3]
129,201 99,787
Lease liability obligation-operating leases 821 980
Lease liability obligation-finance leases 61 59
Deferred revenue-current[2]
9,513 9,513
Other current liabilities 12,987 10,890
Total current liabilities 315,269 276,613
Lease liability obligation-operating leases 850 955
Lease liability obligation-finance leases 245 193
Deferred tax liability 2,248 2,880
Deferred revenue-non-current[2]
164,849 167,227
Total Liabilities 483,461 447,868
Commitments and contingencies (Note 15)
Mezzanine Equity[2]:
Series A convertible preferred stock, $0.001 par value, 5% cumulative dividends; 1,466,666 shares issued and outstanding at each of March 31, 2024 and December 31, 2023, aggregate liquidation preference of $550,000 as of March 31, 2024 and December 31, 2023 824,488 824,488
Stockholders’ Equity:
Common stock, $0.001 par value; 300,000,000 shares authorized, 233,070,146 and 231,787,482 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 78 77
Additional paid-in capital 281,247 276,717
Accumulated other comprehensive loss (2,055) (701)
Retained earnings (accumulated deficit) 58,921 (12,053)
Total Stockholders’ Equity 338,191 264,040
Total Liabilities, Mezzanine Equity and Stockholders’ Equity $ 1,646,140 $ 1,536,396
The accompanying notes are an integral part of these unaudited consolidated financial statements
[1] Includes $xxx and $xxx from a related party as of March 31, 2024 and December 31, 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Includes $xxx and $xxx from a related party as of March 31, 2024 and December 31, 2023, respectively.
Celsius Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
For The Three Months Ended March 31,
2024 2023
Revenue[1]
$ 355,708 $ 259,939
Cost of revenue 173,501 146,121
Gross profit 182,207 113,818
Selling, general and administrative expenses 99,017 68,905
Income from operations 83,190 44,913
Other income (expense):
Interest income on note receivable 28 45
Interest income, net 9,612 4,924
Foreign exchange loss (369) (118)
Total other income 9,271 4,851
Net income before income taxes 92,461 49,764
Income tax expense (14,650) (8,537)
Net income $ 77,811 $ 41,227
Dividends on Series A preferred shares[2]
(6,837) (6,781)
Income allocated to participating preferred shares[2]
(6,128) (2,934)
Net income attributable to common stockholders $ 64,846 $ 31,512
Other comprehensive (loss) income:
Foreign currency translation (loss) gain, net of income tax (1,354) 594
Comprehensive income $ 63,492 $ 32,106
Earnings per share:[3]
Basic $ 0.28 $ 0.14
Diluted $ 0.27 $ 0.13
Weighted average shares outstanding[3]:
Basic 232,780 230,019
Diluted 237,523 236,277
The accompanying notes are an integral part of these unaudited consolidated financial statements
[1] Includes $xxx and $xxx from a related party for the three months ended March 31, 2024 and 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Forward Stock Split - The accompanying consolidated financial statements and notes thereto have been retrospectively adjusted to reflect the three-for- one stock split that became effective on November 13, 2023. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for more information.
Celsius Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
For The Three Months Ended March 31,
2024 2023
Cash flows from operating activities:
Net income $ 77,811 $ 41,227
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,229 549
Allowance for expected credit losses[1]
2,250 837
Amortization of deferred other costs[2]
3,531 3,531
Inventory excess and obsolescence 2,386 1,672
Gain on disposal of property and equipment (8) —
Stock-based compensation expense 3,563 5,507
Deferred income taxes-net 6,450 2,873
Foreign exchange loss 369 69
Changes in operating assets and liabilities:
Accounts receivable-net[3]
(18,664) (109,639)
Inventories-net 29,386 17,338
Prepaid expenses and other current assets (2,076) (4,166)
Accounts payable (3,013) (19,712)
Accrued expenses 1,998 12,643
Income taxes payable 8,250 7,251
Accrued promotional allowance[4]
29,414 32,248
Accrued distributor termination fees (248) (2,923)
Other current liabilities 2,094 1,508
Change in right of use and lease obligation-net (23) (15)
Deferred revenue[2]
(2,378) (4,625)
Other assets (7,672) (4)
Net cash provided by (used in) operating activities 134,649 (13,831)
Cash flows from investing activities:
Collections from note receivable — 3,233
Purchase of property and equipment[5]
(4,525) (2,253)
Net cash (used in) provided by investing activities (4,525) 980
Cash flows from financing activities:
Principal payments on finance lease obligations (15) (11)
Proceeds from exercise of stock options 967 478
Dividends on Series A preferred shares[2]
(6,837) (6,781)
Net cash used in financing activities (5,885) (6,314)
Effect of exchange rate changes on cash and cash equivalents (722) (181)
Net increase (decrease) in cash and cash equivalents 123,517 (19,346)
Cash and cash equivalents at beginning of the period 755,981 652,927
Cash and cash equivalents at end of the period $ 879,498 $ 633,581
Supplemental disclosures:
Cash paid for:
Taxes $ 320 $ 408
The accompanying notes are an integral part of these unaudited consolidated financial statements
[1] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
[4] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
[5] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
We appreciate the SEC’s ongoing commitment to promoting transparent financial reporting practices and the opportunity to address your comments. If you or any other member of the Staff should have any further comments or questions regarding this response, please do not hesitate to contact the undersigned at 561-289-2088.
Sincerely,
Celsius Holdings, Inc.
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Document
VIA EDGAR August 9, 2024
United States Securities and Exchange Commission
Division of Corporation Finance
Office of Manufacturing
100 F Street, N.E.
Washington, D.C. 20549
Attention: SiSi Cheng and Anne McConnell
Re: Celsius Holdings, Inc.
Form 10-K for the Year Ended December 31, 2023
File No. 001-34611
Dear Ms. Cheng and Ms. McConnell,
We respectfully submit this letter in response to the comment from the staff of the Division of Corporation Finance (the “Staff”), received by a letter dated July 22, 2024, relating to the above-mentioned Annual Report on Form 10-K for the Year ended December 31, 2023 (the “Form 10-K”).
We appreciate the opportunity to address the Staff’s comment with respect to our Form 10-K. The Staff’s comment has been reproduced below in italicized text. Our response thereto is set forth immediately following the reproduced comment. In the responses below, references to the “Company”, “we”, and “our” refer to Celsius Holdings, Inc.
Form 10-K for the Year Ended December 31, 2023
Consolidated Financial Statements
13. Related Party Transactions, page F-22
1.We have considered your response to prior comment 1; however, Rule 4-08(k)(1), Rule 5-02 and Rule 5-03 of Regulation S-X require related party transactions to be stated on the face of balance sheets, statements of operations, and statements of cash flows, in addition to related party and concentration of risk disclosures required to be provided in the notes to the financial statements under GAAP. It is not clear to us that stating amounts from related party transactions on the face of your financial statements would cause competitive harm and we do not believe the potential of competitive harm is sufficient to allow non-compliance with disclosure requirements in Regulation S-X. Please revise your financial statements in future annual and quarterly filings to comply with the above referenced disclosure requirements.
Response: We respectfully acknowledge the Staff’s comment and the provisions of Rule 4-08(k)(1), Rule 5-02 and Rule 5-03 of Regulation S-X to present related party transactions on the face of the balance sheets, statements of operations and comprehensive income, and statements of cash flows. Accordingly, beginning with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, we will prepare our financial statements in future annual and quarterly filings to provide this information on the face of our financial statements.
Set forth below for the Staff’s consideration is a draft of the Company’s proposed presentation of related party transactions on the face of our consolidated balance sheets, consolidated statements of operations and comprehensive income, and consolidated statements of cash flows:
Celsius Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts) (Unaudited)
March 31, 2024 December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents $ 879,498 $ 755,981
Accounts receivable-net[1]
200,117 183,703
Note receivable-current-net 2,259 2,318
Inventories-net 197,504 229,275
Prepaid expenses and other current assets 21,523 19,503
Deferred other costs-current[2]
14,124 14,124
Total current assets 1,315,025 1,204,904
Property and equipment-net 28,350 24,868
Deferred tax assets 22,437 29,518
Right of use assets-operating leases 1,688 1,957
Right of use assets-finance leases 263 208
Other long-term assets 7,963 291
Deferred other costs-non-current[2]
244,807 248,338
Intangibles-net 11,741 12,139
Goodwill 13,866 14,173
Total Assets $ 1,646,140 $ 1,536,396
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable 40,196 $ 42,840
Accrued expenses 63,871 62,120
Income taxes payable 58,619 50,424
Accrued promotional allowance[3]
129,201 99,787
Lease liability obligation-operating leases 821 980
Lease liability obligation-finance leases 61 59
Deferred revenue-current[2]
9,513 9,513
Other current liabilities 12,987 10,890
Total current liabilities 315,269 276,613
Lease liability obligation-operating leases 850 955
Lease liability obligation-finance leases 245 193
Deferred tax liability 2,248 2,880
Deferred revenue-non-current[2]
164,849 167,227
Total Liabilities 483,461 447,868
Commitments and contingencies (Note 15)
Mezzanine Equity[2]:
Series A convertible preferred stock, $0.001 par value, 5% cumulative dividends; 1,466,666 shares issued and outstanding at each of March 31, 2024 and December 31, 2023, aggregate liquidation preference of $550,000 as of March 31, 2024 and December 31, 2023 824,488 824,488
Stockholders’ Equity:
Common stock, $0.001 par value; 300,000,000 shares authorized, 233,070,146 and 231,787,482 shares
issued and outstanding at March 31, 2024 and December 31, 2023, respectively 78 77
Additional paid-in capital 281,247 276,717
Accumulated other comprehensive loss (2,055) (701)
Retained earnings (accumulated deficit) 58,921 (12,053)
Total Stockholders’ Equity 338,191 264,040
Total Liabilities, Mezzanine Equity and Stockholders’ Equity $ 1,646,140 $ 1,536,396
The accompanying notes are an integral part of these unaudited consolidated financial statements
[1] Includes $xxx and $xxx from a related party as of March 31, 2024 and December 31, 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Includes $xxx and $xxx from a related party as of March 31, 2024 and December 31, 2023, respectively.
Celsius Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
For The Three Months Ended March 31,
2024 2023
Revenue[1]
$ 355,708 $ 259,939
Cost of revenue 173,501 146,121
Gross profit 182,207 113,818
Selling, general and administrative expenses 99,017 68,905
Income from operations 83,190 44,913
Other income (expense):
Interest income on note receivable 28 45
Interest income, net 9,612 4,924
Foreign exchange loss (369) (118)
Total other income 9,271 4,851
Net income before income taxes 92,461 49,764
Income tax expense (14,650) (8,537)
Net income $ 77,811 $ 41,227
Dividends on Series A preferred shares[2]
(6,837) (6,781)
Income allocated to participating preferred shares[2]
(6,128) (2,934)
Net income attributable to common stockholders $ 64,846 $ 31,512
Other comprehensive (loss) income:
Foreign currency translation (loss) gain, net of income tax (1,354) 594
Comprehensive income $ 63,492 $ 32,106
Earnings per share:[3]
Basic $ 0.28 $ 0.14
Diluted $ 0.27 $ 0.13
Weighted average shares outstanding[3]:
Basic 232,780 230,019
Diluted 237,523 236,277
The accompanying notes are an integral part of these unaudited consolidated financial statements
[1] Includes $xxx and $xxx from a related party for the three months ended March 31, 2024 and 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Forward Stock Split - The accompanying consolidated financial statements and notes thereto have been retrospectively adjusted to reflect the three-for- one stock split that became effective on November 13, 2023. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for more information.
Celsius Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
For The Three Months Ended March 31,
2024 2023
Cash flows from operating activities:
Net income $ 77,811 $ 41,227
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,229 549
Allowance for expected credit losses[1]
2,250 837
Amortization of deferred other costs[2]
3,531 3,531
Inventory excess and obsolescence 2,386 1,672
Gain on disposal of property and equipment (8) —
Stock-based compensation expense 3,563 5,507
Deferred income taxes-net 6,450 2,873
Foreign exchange loss 369 69
Changes in operating assets and liabilities:
Accounts receivable-net[3]
(18,664) (109,639)
Inventories-net 29,386 17,338
Prepaid expenses and other current assets (2,076) (4,166)
Accounts payable (3,013) (19,712)
Accrued expenses 1,998 12,643
Income taxes payable 8,250 7,251
Accrued promotional allowance[4]
29,414 32,248
Accrued distributor termination fees (248) (2,923)
Other current liabilities 2,094 1,508
Change in right of use and lease obligation-net (23) (15)
Deferred revenue[2]
(2,378) (4,625)
Other assets (7,672) (4)
Net cash provided by (used in) operating activities 134,649 (13,831)
Cash flows from investing activities:
Collections from note receivable — 3,233
Purchase of property and equipment[5]
(4,525) (2,253)
Net cash (used in) provided by investing activities (4,525) 980
Cash flows from financing activities:
Principal payments on finance lease obligations (15) (11)
Proceeds from exercise of stock options 967 478
Dividends on Series A preferred shares[2]
(6,837) (6,781)
Net cash used in financing activities (5,885) (6,314)
Effect of exchange rate changes on cash and cash equivalents (722) (181)
Net increase (decrease) in cash and cash equivalents 123,517 (19,346)
Cash and cash equivalents at beginning of the period 755,981 652,927
Cash and cash equivalents at end of the period $ 879,498 $ 633,581
Supplemental disclosures:
Cash paid for:
Taxes $ 320 $ 408
The accompanying notes are an integral part of these unaudited consolidated financial statements
[1] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
[4] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
[5] Includes $xxx and $xxx associated with a related party for the three months ended March 31, 2024 and 2023, respectively.
We appreciate the SEC’s ongoing commitment to promoting transparent financial reporting practices and the opportunity to address your comments. If you or any other member of the Staff should have any further comments or questions regarding this response, please do not hesitate to contact the undersigned at 561-289-2088.
Sincerely,
Celsius Holdings, Inc.
By: /s/ Jarrod Langhans
Jarrod Langhans
Chief Financial Office
cc: Drew M. Altman, Esq., Greenberg Traurig