Why We DonÕt Trust Celsius Holdings Inc. (Nasdaq: CELH ...

October 9th 2020

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THE REPORT AND ALL STATEMENTS CONTAINED HEREIN ARE THE OPINIONS OF GRIZZLY RESEARCH, AND ARE NOT STATEMENTS OF FACT. AS OF THE PUBLICATION DATE OF THIS REPORT, GRIZZLY RESEARCH (POSSIBLY ALONG WITH OR THROUGH OUR MEMBERS, PARTNERS, AFFILIATES, EMPLOYEES, AND/OR CONSULTANTS) ALONG WITH OUR CLIENTS AND/OR INVESTORS HAS A DIRECT OR INDIRECT SHORT POSITION IN THE STOCK (AND/OR OPTIONS, SWAPS, AND OTHER DERIVATIVES RELATED TO ONE OR MORE OF THESE SECURITIES) OF THE COMPANY COVERED HEREIN, AND THEREFORE STANDS TO REALIZE SIGNIFICANT GAINS IN THE EVENT THAT THE PRICE OF CELH’S STOCK DECLINES. THEREFORE, USE GRIZZLY RESEARCH’S RESEARCH AT YOUR OWN RISK. YOU SHOULD DO YOUR OWN RESEARCH AND DUE DILIGENCE BEFORE MAKING ANY INVESTMENT DECISION WITH RESPECT TO THE SECURITIES COVERED HEREIN. THE OPINIONS EXPRESSED IN THIS REPORT ARE NOT INVESTMENT ADVICE NOR SHOULD THEY BE CONSTRUED AS INVESTMENT ADVICE OR ANY RECOMMENDATION OF ANY KIND. FOLLOWING PUBLICATION OF THIS REPORT, WE MAY CONTINUE TRANSACTING IN THE SECURITIES COVERED THEREIN, AND WE MAY BE LONG, SHORT, OR NEUTRAL AT ANY TIME HEREAFTER REGARDLESS OF OUR INITIAL OPINION. © 2020 GRIZZLY RESEARCH LLC. ALL RIGHTS RESERVED.

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$20.48$3.10

$26.76$1.47B

977,52371.6M

Stock Price: 52 Week Low:52 Week High:Market Capitalization:3 Month Avg. Volume:Weighted Avg. Shares Outstanding:

CELH Trade Data

Share price performance (%) 3 months 6 month 12 monthsAbsolute 90% 450% 368%Relative to S&P500 101% 454% 389%

As of Oct 8th 2020

CELH Stock Performance

R E P O R T S

Why We Don’t Trust Celsius Holdings Inc. (Nasdaq: CELH) Portrayed Growth

- Celsius Holdings Inc. is a fitness beverage company thathas seen its stock skyrocket in 2020 on the back of sudden andunexpected revenue growth- Investors have been led on by strong sales trends drivingsky-high expectations for the future, though our analysis showsEurope, a substantial portion of the business, is not nearly asgood as it looks, with far lower and potentially negative sequen-tial growth across Q3-2019 to Q2-2020.- We find Celsius’ acquisition of their Nordic distributorFunc Foods concerning, and urge investors to question why management would commit resources to a non-core business approaching insolvency with a poor track record of successfully growing brands, serving a geography with declining sales - Our search for a rationale revealed what appears to us tobe several troublesome factors indicating Func may have beenused for sales manipulation and/or channel stuffing. We highlightrising payables, beneficial distribution terms, and strong hints atMulti-Level-Marketing Activities.- It is not surprising these concerns have not beenaddressed, as Celsius’ auditor Assurance Dimensions has a far from stellar track record and in our view seems ill-equipped to spot misrepresentations.- Celsius has also rightfully come under scrutiny formisleading advertising. We believe the company carefully walksthe line with the health benefit claims of its products, backed byself -funded scientific studies, and that the recent rise in sales willbring additional regulatory scrutiny to the brand, an under-repre-sented risk.- There are key individuals with worrying backgroundsthat seem largely unknown to investors. We believe Celsius’s key shareholder Carl DeSantis has a checkered history of what appears to be fraudulent behavior. Particularly concerning, we believe Carl DeSantis is really the mastermind behind the company. - An executive member of Celsius’ initial Nordic Distribu-tor People’s Choice (acquired by Func Foods) is linked to the“Panama Papers”.- Current shareholders are selling large portions of shares.�Investors who participated in the 2020 Private Placement�immediately offered an on-shelf prospectus to dump their shares.�We see lack of confidence in their own stock.- Given the risks noted in this report, we believe investors�should exercise caution when thinking about the growth that(judging by market valuation) is assumed to be a foregone�conclusion. Combine this with the apparent fraudulent track�record of key individuals and an auditor who seems ill-equipped�to detect fraud, and you have yourself a perfect set up for a bad�awakening. We see the stock declining to a price target of $��and potentially much lower.

Research report on Celsius Holdings Inc. (Nasdaq: CELH)

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R E P O R T S

IMPORTANT LEGAL DISCLAIMER

PLEASE REVIEW CAREFULLY IN CONJUNCTION WITH OUR RESEARCH REPORT AND SUPPORTING MATERIALS, INCLUDING THE FULL LEGAL DISCLAIMER ON THE LAST PAGE OF THIS REPORT.

This report and all statements contained herein are the opinions of Grizzly Research, and are not statements of fact.

Reports are based on generally available information, field research, inferences and deductions through Grizzly Research’s due diligence and analytical process. Our opinions are held in good faith, and we have based them upon publicly available facts and evidence collected and analyzed including our understanding of representations made by the management of the companies we analyze, all of which we set out in our research reports to support our opinions, all of which we set out herein. HOWEVER, THEY REMAIN OUR OPINIONS AND BELIEFS ONLY.

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AS OF THE PUBLICATION DATE OF THIS REPORT, GRIZZLY RESEARCH (POSSIBLY ALONG WITH OR THROUGH OUR MEMBERS, PARTNERS, AFFILIATES, EMPLOYEES, AND/OR CONSULTANTS) ALONG WITH OUR CLIENTS AND/OR INVESTORS HAS A DIRECT OR INDIRECT SHORT POSITION IN THE STOCK (AND/OR OPTIONS, SWAPS, AND OTHER DERIVATIVES RELATED TO ONE OR MORE OF THESE SECURITIES) OF THE COMPANY COVERED HEREIN, AND THEREFORE STANDS TO REALIZE SIGNIFICANT GAINS IN THE EVENT THAT THE PRICE OF CELH’S STOCK DECLINES. THEREFORE, USE GRIZZLY RESEARCH’S RESEARCH AT YOUR OWN RISK. YOU SHOULD DO YOUR OWN RESEARCH AND DUE DILIGENCE BEFORE MAKING ANY INVESTMENT DECISION WITH RESPECT TO THE SECURITIES COVERED HEREIN. THE OPINIONS EXPRESSED IN THIS REPORT ARE NOT INVESTMENT ADVICE NOR SHOULD THEY BE CONSTRUED AS INVESTMENT ADVICE OR ANY RECOMMENDATION OF ANY KIND. FOLLOWING PUBLICATION OF THIS REPORT, WE MAY CONTINUE TRANSACTING IN THE SECURITIES COVERED THEREIN, AND WE MAY BE LONG, SHORT, OR NEUTRAL AT ANY TIME HEREAFTER REGARDLESS OF OUR INITIAL OPINION.

To the best of our ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and who are not insiders or connected persons of the stock covered herein or who may otherwise owe any fiduciary duty or duty of confidentiality to the issuer. Note that CELH Celsius Holdings inc. and insiders, agents, and legal representatives of Celsius Holdings and other entities mentioned herein may be in possession of material non-public information that may be relevant to the matters discussed herein. Do not presume that any person or company mentioned herein has reviewed our report prior to its publication.

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R E P O R T S


BackgroundCelsius Holdings Inc develops, markets, and distrib-utes fitness beverages under the Celsius brand. The company was founded in 2004 and came public via a reverse merger in 2007, with subsequent perfor-mance resembling a pump and dump as the stock

October 9th 2020

price dropped over 95% from peak in its first year. Despite the rocky start, Celsius has made significant operational progress over the last decade, growing from a fledgling microcap into a business now valued in close to $1.5 billion.

Celsius experienced modest growth in its early years, as their “good for you” active lifestyle energy drinks saw slow adoption in the US and internationally, but things began to change in 2017 as sales started to ramp. 2018 saw the trend continue and 2019 capped off with stellar 43% YoY growth. Growth continued to

look positive into 2020, and did not go unnoticed by investors, with the company’s market cap quadru-pling to over $1.6B over YTD 2020, implying a ~13x 2020 EV/Revenue multiple.

While the expectations built into the valuation are clearly lofty, there is indication to believe investors are significantly overestimating Celsius’ earnings growth capability. The hitch lies in Celsius’ European operations, led by recently acquired Swedish / Finnish distributor Func Foods. Europe contributed to nearly a quarter of the 43% growth in 2019 and has grown to account for almost half of all growth in H1-2020. At first glance this doesn’t seem like a serious cause for concern, but further analysis

reveals that true growth in Europe is likely far lower and potentially negative sequentially, obfuscated by the acquisition.

But it gets even worse. In our research we uncovered multiple red flags that lead us to conclude that there is a high probability of channel stuffing in the Europe-an segment and other aspects that lead us to doubt the integrity of Celsius’s financial statements.

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R E P O R T S

Func Foods Acquisition: When Misallocated Resources Looks Deceptively GoodOn Sep. 11th 2019, Celsius announced the acquisition of Nordic wellness company Func Food Group Oyj, claim-ing that it would bolster their product portfolio and provide a well-established operational infrastructure and unique marketing platform critical to expanding the Celsius brand in Europe.

“In addition, the combined business is expected to enable much stronger in-market investments to drive expansion across Europe before expected broader brand and market consolidation occurs. Adding Func Food's FAST Sports Nutrition line to the Celsius® line- will provide Celsius with new, additive revenue streams and establish an additional product offer and platforms for growth. ” --- Celsius PR

The acquisition instantaneously doubled European revenues, from ~$3.4M in Q3-2019 to over $6.8M in Q4-2019 which further jumped to $8.5M in Q1-2020 (the first quarter to fully account for the acquisition, which closed on Oct 24, 2019). While optically this looks great, all Celsius did was merge Func Food’s margin into their own. Investors are perceiving this massive bump as a key piece to the hyperbolic

growth story when largely all they’ve done is switch-ing from recording the revenue via sell-in (when it reaches the distributor) to sell-through (when it reaches the final consumer) and acquiring the addi-tional margin. The disconnect lies in that Celsius is being compensated for growth that isn’t really growth if you look past the surface. So what does the true sales growth really look like?

Func Foods provides public quarterly reports and conveniently breaks out Celsius product sales, though the filings are only available through to Q1-2019. The statistics are not encouraging, with flat towards decreasing revenue across 2017-2019.

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https://www.prnewswire.com/news-releases/celsius-to-acquire-nordic-wellness-company-func-food-group-oyj-300916469.html

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@ResearchGrizzly



October 9th 2020

R E P O R T S

Func Foods Acquisition: When Misallocated Resources Looks Deceptively GoodTo take things one step further, we look at the margin profile of Func Food, by comparing Celsius’ Europe revenues (essentially COGS for Func) vs Func’s Celsius

specific revenues. Averaging out the quarterly gross margin for the latest full year of data we have avail-able (2018) yields the following:

Adjusting down the consolidated post-acquisition revenues by Func Foods’ average gross margins provides a rough method for a closer apples to apples comparison versus Celsius’ previous quarters, and shows far lower and potentially negative growth versus the stellar 102.1% and 24.6% growth that is

perceived. Most notably, Q3-2019, the latest quarter prior to the Func Food Acquisition, vs Q1-2020, the first quarter fully inclusive , shows little to no growth in the core Europe business. Adding the latest results from Q2-2020 continues to show a downward trend, with the potential to go to negative in coming quarters.

Upon adjustment, it is quite evident that EU certainly has not seen the purported revenue growth in the consumer end, and that the drastic growth portrayed was merely an accounting gimmick to transfer gross profit from Func Food into top line revenue at Celsius.

Worse yet, despite management constantly boosting the synergies of the acquisition of the Nordic Partner, we believe this is ultimately a EPS dilutive transaction that in the short-term enhances perceived growth

but will in the long run only hurt investors.

We find ample evidence that suggests that the acquition was nothing more than a bailout of a failing company, a summation of two money losing entities. Management cleverly portrays the artificial growth in revenue while not address-ing the misrepresentation of revenue and cash flow.

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October 9th 2020

R E P O R T S

Func Foods Acquisition: Contradictory Statements Raise Concernsthat EU Acquisition Wasn’t Part of the PlanWhile the revenue bump from acquiring Func looks good optically, the data seems to show Celsius placed resources into a geography where growth was

inadequate. Management also indicates in commen-tary as recent as Q1-2019, that the real opportunity lies in North America, and that they don’t see that much growth potential in Europe:

Regards the Nordics, they did had a really good first quarter, as we mentioned. They had a new launch with a flavor called Peach Vibe, which was really successful. It seems to be the overall downturn we saw in 2017 and 2018 has stabilized. We're working with them really closely to continue to make sure we stabi-lize that Nordic operations and protect our that revenue that's there. So we're working with them closely. We're really focused at this point on North American expansion. There's opportunities throughout Europe, but with the limited resources we have -- as I mentioned, we're a really lean team. There's so much opportunity right now in North America with the expansions that's going place. We are very much focused on North America. We do have -- through our Nordic partner, there is activities and store expansion going on, taking place in Finland and Norway. But outside of that, at this point, we are really focused on North America. Europe, we've stated prior and within our European market really about stabilization within the region and we anticipate that move to more normalized levels as we stated in the past. We do have a strong presence with ACV there. We don't see a tremendous amount of expansion at this point. We're using all of our capital resources for North America, so more of a stabilization.

---Q1 2019 CC

Following the emphasis made on the US sector, and a slow-down in underlying growth in Europe in Q2 2019, Celsius management suddenly dubiously decided to acquire Func Food.

https://seekingalpha.com/article/4263221-celsius-holdings-inc-celh-ceo-john-fieldly-on-q1-2019-results-earnings-call-transcript

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@ResearchGrizzly



October 9th 2020

R E P O R T S

Func Foods Acquisition: Func Food Sports a History of Fail-ing Brands

To make matters worse, Celsius appears to be only one of many brands that Func Food had failed to promote and grow successfully. Using internet archives, we identified that across 2003-2018, Func Food has attempted to build 11 brands. Today, only 3 have survived, Celsius, FAST and CocoVi. This indicates that Celsius effectively bought an “expert” in distribution and brand building that could only

successfully scale 2/10 brands outside of Celsius, with the surviving 2 also declining. This hardly fits the description of a “well-established operational infrastructure and unique marketing platform”. Not to mention the fact that Celsius is not in the distribu-tion and supply chain business (evidenced by the fact that all of NA distribution is outsourced).

CocoVi and FAST are the only 2 brands that survived to today outside of Celsius. However, these two brands appear to be quickly deteriorating as well.

“Management updated their estimates for net revenue and cashflow for year 2019-2023. Key change is related to lowering the sales outlook of CocoVi products in Finland and Sweden. In addition FitFarm sales trend has been updated to steadily declining. For FAST brand portfolio restructuring in Finland and Sweden will slow down next few years' growth, and FAST expansion countries sales outlook has also been decreased.” --- CGU Finland 2018

This begs the question, why would Celsius buy a branding and distribution business that has this poor track record and has consistently struggled with unprofitability, when Celsius does not even do distribution at all?

Brands Start End StatusHealth Protein 2004 2006 FailedMy Diet 2006 2010 FailedPROFX 2008 2012 FailedEASYLIFE 2008 2015 FailedDieter SuperShake 2015 2015 FailedNula 2016 2018 FailedFi�arm 2015 2019 FailedCocoVi 2015 Present Going ConcernFreddy 2009 2019 FailedFAST 1998 Present Declining

https://www.sec.gov/Archives/edgar/data/1341766/000121390020000513/f8k102519a1ex99-2_celsius.htm

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October 9th 2020

R E P O R T S

Func Foods Acquisition: Revenue Recognition, Payables and Commentary Indicates Potential Channel Stuffing

Celsius recognizes revenue under sell-in, which is whenever they sell to a distributor, vs sell-through, which is when the product reaches the final customer. This is standard in the beverage industry, but there is some alarm-ing commentary and line items that bring concern.

First, the commentary noting all Nordic revenue is sell in, and does not indicate the product was sold to end consumers:

“In Europe, revenues for the third quarter were down 11%, coming in at approximately $3.4 million and slightly down to flat for the first 9 months of 2019 due to timing of new flavor launches, promotional programs and timing of orders. Please keep in mind, these revenues are derived from Celsius sales to our Nordic partner and are not sales from our Nordic partner to retail locations and consum-ers, i.e., sell-in or sell-through data. In addition, these figures are not consolidated as the Func Food Group acquisition took place post quarter-end on October 24. “ --- Q3 2019 CC

Of greater interest is CEO John Fieldly’s comments on the Nordics at a UBS Consumer and Retail Conference in April 2020:

“So it wasn't a core strategy for the company in the beginning. It was a good way for the company to receive immediate cash on cans being sold that we were producing in North America, and it's going back really in 2010, is when they first launched. “ --- Q3 2019 CC

While Mr. Fieldly’s comments do not necessarily indicate channel stuffing, they are not encouraging. A 2015 contract between Celsius and People’s Choice, who previously managed Nordic distribution of Celsius before being bought by Func Foods, indicates generous upfront terms with up to 50% of the purchase price paid out before the distributor receives the order:

“The Distributor shall pay twenty-five (25) percent of each total order price seven (7) days prior to sched-uled can production for the ordered Products and twenty-five (25) percent of each total order price seven (7) days prior to the scheduled filling of the cans for the ordered Products. The remaining fifty (50) percent of the total order price will be due net ninety (90) days from the date of pick up of the Products. “ --- Distribution Agreement

Is this simply good working capital management on Celsius’ part, or are they forcing a distributor into a situation where it can’t be economically viable? There is one additional piece that adds incremental concern to the issue, and that is the payables at Func Foods. Func Food’s payables rose steadily, peaking at 9.3M EUR in Q1-2019, the last quarter of public financials we have available before Func was acquired.

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https://www.fool.com/earnings/call-transcripts/2019/11/08/celsius-holdings-inc-celh-q3-2019-earnings-call-tr.aspx

https://www.fool.com/earnings/call-transcripts/2019/11/08/celsius-holdings-inc-celh-q3-2019-earnings-call-tr.aspx

https://www.lawinsider.com/contracts/4NdSF9McYXOvxy9nEbwBuS/celsius-holdings-inc/distribution-agreement/2016-09-19

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@ResearchGrizzly



October 9th 2020

R E P O R T S

Func Foods Acquisition: Revenue Recognition, Payables and Commentary Indicates Potential Channel Stuffing

Considering Celsius was Func’s main brand and revenue contributor by a large margin (and the last two brands standing are also failing), it’s safe to say that it is very likely a large portion of those payables

were due to Celsius. This is in fact corroborated by Celsius in their purchase documents, where they state approximately $5.2M USD of payables were due to them from Func Foods:

“The preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and income statement. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation may include (1) changes in fair value of inventories, (2) changes in fair values of property and equipment, (3) changes in goodwill and allocations to intangible assets such as trade names, technology, and customer relationships, and (4) other changes to assets and liabilities. The accounts payable include $5.2 million of payables due to the Company. “ -- Celsius 8K

So in addition to an optical doubling of European revenues, Celsius also got to sweep away a multi-mil-lion dollar loss on potentially uncollectable receiv-ables (uncollectable as Func was nearing bankruptcy and creditors would have likely taken all that remained of the company). This rationale seems much more likely to be the reasoning for acquiring Func, as the revenue growth and opportunity to scale do not seem compelling. In fact, in Q3 and Q4 2019, Celsius produced its best OCF results in its entire

lifespan. We highly suspect it to be a result of aggres-sive channel stuffing and the avoidance of write-offs through an acquisition that essentially cancelled out the receivables. In other words, we believe instead of being transparant with Wall Street, Celsius decided to extend, pretend and enjoy the fruits of their obfuscat-ing labor.

https://fintel.io/doc/sec-celh-8ka-celsius-holdings-2020-january-08-18269

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October 9th 2020

R E P O R T S

Func Foods Acquisition: On the Ground Due Dilligence Validates Our Concerns of Poor Growth Our investigator visited a number of stores that People’s Choice identified as major customers. We interviewed sales guides and store owners, and collected expiration dates on competing brands.

Typically, better selling brands in the same category tend to have more distant expiration dates, as they are sold out more quickly and therefore re-shelfed

with more recently produced products. Unsurprising-ly, upon compiling and averaging the expiration dates of multiple well-known brands, Celsius has the closest expiration dates, averaging only July 2021. Whereas Redbull on average expires in Nov 2021, and Monster averages May 2022.

We also inquired into how each brand was selling, and asked for recommendations for energy drinks in each store. Although Celsius was recognized as one of the larger brands, rarely did anyone recommend it. Nor did anyone identify them as top selling or top growing. In fact, almost every store mentioned that either Redbull or Monster was their best seller, and either Nocco or Powerking were their fastest growing brands.

Sample Interview ( Bergendalhs Foods aka. City Gross )

speaker 1:Hello there I wonder where the energy drinks are located?Speaker 2: There are some here in the refrigerator and some over there.Speaker 1: Which one do you recommend?Speaker 2: These ones are better which are the ones located by the entrance and the exit, they are refrigerated.Speaker 1: I see, the ones that sell the best are the ones that are stored cold in the refrigerator?Speaker 2: No I think it is not like that.Speaker 1: Because I am interested in becoming a distributor and then I would like to know which one is selling the most?Speaker 2: That is Powerking, people are looking for the cheapest alternative. Also it doesn't matter if they are cold or not. They still buy.Speaker 1: Ok, thank you.Speaker 2: You are welcome.

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October 9th 2020

R E P O R T S

Func Foods Acquisition: Negative + Negative ≠ PositiveSo what is the actual result of the acquisition on Celsius’s financial performance? According to our analysis, beneath the flabbergasting top line revenue growth, the acquisition is simply the summation of

two EBITDA negative, Net Income negative and cashflow negative companies. What’s the answer to a negative number + a negative number? The correct answer is more negative.

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As we can see from Celsius’s financials, the company has been operating at a loss consistently from both a cash and non-cash perspective up until Q1 of 2019.

Similarly, Func Food has almost consistently been operating in negative territory in the same metrics (The few abnormally positive columns are due to one-time events such as acquisitions or financing related).

We therefore find it extremely difficult to believe that shortly after the Nordic Acquisition, Celsius could “miraculously” become a cash-flow positive, EBITDA positive and Net Income positive company while maintaining its hyper growth in both US and Europe.

As we’ve previously demonstrated, the growth in revenue the acquisition has brought is only artificial. It is merely transferring Func Food’s previous gross profits item into Celsius’s revenue line item. The underlying economics do not change. In fact, post adjustments, we even observe quarter over quarter decline.

Thus we highly doubt the integrity of the company’s financials post acquisition. We believe whatever benefit the acquisition has brought is short-lived. In the long run, the Nordic Acquisition will only hurt shareholder value.

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October 9th 2020

R E P O R T S

Func Foods Acquisition: Our View Is That Nordic Partner Acquisition Was a Bailout

So why did the acquisition happen despite its long term negative effect on Celsius? We believe the acquisition was nothing more than a bailout of a near-bankruptcy entity that only brings in short term non-organic growth.

We noticed a few things that stood out on Func Food’s financial statements.

1. Top line clearly was not growing. Both Func Food’s overall revenue and Celsius brands revenue has been stagnant, if not declining.2. The company continues to operate at a loss. Losses are also expanding despite growth slowing down.3. Ballooning accounts payables ($5.2M USD due to Celsius)4. Dreaded June 2019 Bond of 38M EUR that has been defaulted

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Revenue (EUR Mil) Celsius Revenue (EUR Mil)

Hence, as the June maturity approaches, Celsius is left with two choices, either to let Func Food go into bankruptcy and get picked apart by creditors with first priority (and say goodbye to the “immediate cash for North American product”), or acquire a company and merge Func’s margins into the compa-ny despite Celsius having no business in distribution and branding. Management chose the latter, result-ing in an optically massive bump in European revenues (due to transition from wholesale to retail)

“The company has been in event of default after non payment of bond coupon interest at 26 th March 2019 Standstill period was agreed with bondholders on 17 th April 2019 which was to enable finalizing acquisition negotiations with potential buyer. Acquisition negotiations and standstill period ended on 9 th May 2019 “ -- Func Food Q1 2019

and the avoidance of losses of accounts receivables. This optical growth amounted to over 100% and ~25% in Q4 2019 and Q1 2020 respectively and drove the stock price to historical highs with the stock appreciating almost 4x to highs. However, after adjusting for the acquired margins, real growth is likely <30% and negative for Q4 2019 and Q1 2020.

http://www.funcfood.com/wp-content/uploads/2019/05/Func-Food-Group-Q1-2019-Release.pdf

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October 9th 2020

R E P O R T S

Func Foods Acquisition: Nordic Partner Hint Multi-Level Marketing

According to People’s Choice’s introduction, the main marketer for Celsius in Sweden and a subsidiary of Func Food, they had a non-employee & non-paid ambassador system with A-F rankings. This language

sounds awfully similar to multi-level-marketing to us, which is a known tool to stuff sales channels and inflate revenues artificially.

“People’s Choice has a sale force comprising of approximately 30 employees together with approximately 150 brand ambassadors. People’s Choice’s sales force structure includes one head of sales, two key account managers and 2 regional managers, who in turn are supported by 21 sales persons which together ensure nationwide coverage. “

“In addition to the sale force, People’s Choice is supported by a network of approximately 150 ambassa-dors who take part in the marketing of Celsius. These are not employed by People’s Choice, but assists with spreading the brand and inspire other people to follow a healthy and active lifestyle. Each ambas-sador is categorised on a scale from A-F according to their ability to contribute to the marketing of Celsius“ -- People’s Choice 2016

Our investigator visited People’s Choice Headquarter in Sweden, where we could only identify three employees at the company. The office was much too small to accommodate 30 employees. We question whether this looks like a successful distribution company that sells over millions of Euros worth of product a year, or a sham middle-man?

Our doubts were further corroborated by similar instances found in China, where they were publicly accused for multi-level marketing schemes.

http://www.funcfood.com/wp-content/uploads/2016/06/Func-Food-Group-Oyj-Prospectus.pdf

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October 9th 2020

R E P O R T S

Failed Expansion in China Accused for Multi-Level Market-ing Scheme

Outside of the “miraculous” newfound growth from Northern Europe, Celsius’s international growth trajectory has been rather disappointing. Previously, Celsius had high hopes for international growth in China. But the China expansion did not work out as envisioned.

Celsius made their first order to China in Q3 2013 and entered a partnership with Qifeng Food Technology for China distribution in 2017. Similar to their attitude towards their Nordic Partner, management also presented a wonderful picture regarding the Chinese sector.

“we recently announced our partnership with Qifeng Food Technology, an international wholesale distributor of food and beverages founded by former Pepsi, Nestlé and Red Bull executives to distribute CELSIUS in China through their nationwide distribution network, commencing in the back half of 2017. Through this partnership, CELSIUS will be available for distribution through a network of over 500 distributors. Qifeng's network of distributors, national experience, proven ability to execute will provide us a strong partner to maximize our exposure and speed to market”.

“we look forward to much success in China with our partner Qifeng Foods, who has a distribution network of distributors who are proven, experienced team members with an in-depth knowledge of launching and growing brands in the China marketplace.” --- CC 2017 Q2

However, after nominal sales and no profitability, the business was sold in Jan 2019 to Qifeng Food. The stated sales price of Celsius China business was $6.9m of royalties over the next three five and additional royalties on the backend. Additionally, Qifeng Food took on a $12.5m unsecured note due to of Celsius, so that Celsius can recoup its capital investments in China.

Based on historical performance of the China market we see little chances of Celsius recouping their Chinese investment.

Worse yet, it was reported that Celsius was operating an illegal Multi-Level Marketing scheme in China.

According to a presentation on Celsius marketing, when team leader A develops a subordinate member B, A can get RMB 8,000, and then if B develops a subordinate member C, B can get RMB 8,000. Addi-tionally, after B develops a subordinate member C, A

will get RMB 3,890 from that recruitment on top of the RMB 8,000 A obtained when developing member B. This clearly has a pyramid scheme aspect to it and seems to be more focused on recruitment rather than selling the actual product.

Chinese articles also state that the Celsius marketing teams were using social media platforms to conduct “brainwashing” type of promotion to recruit WeChat business groups and develop distributors.

We note at this point that multi-level-marketing seems to be a recurring theme. As we will explain later, Celsius’s biggest shareholder has also had allegation of illegal multi-level marketing involve-ment against him.

-200,000

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Asia (Mainly China)

https://seekingalpha.com/article/4098130-celsius-holdings-celh-ceo-john-fieldly-on-q2-2017-results-earnings-call-transcript

https://kuaibao.qq.com/s/20190730A0GBFN00?refer=spider

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October 9th 2020

R E P O R T S

Extremely Unsuitable Auditor Ill-equipped to Identify Red Flags

We believe Celsius has engaged an auditor who seems ill equipped to spot any wrongdoing. Celsius has engaged D’Arelli Pruzansky, P.A. (DPP) since 2015. In 2017, the company merged with Assurance Dimensions, Inc. (AD). AD has served as Celsius’s auditor ever since.

Out of the 22 companies they audited that we could identify, at least 14 public companies reek of fraud and/or saw its stock price plummet to

virtually zero. The track record is so bad that it makes us question if this auditor might be specifical-ly sought out by bad actors. The stock price of most of these firms already screams caution, as they appear to be highly dilutive towards public share-hoders. To make matters worse, many complaints regarding these companies can be found on Inves-torshub. We believe the only reason these companies are not yet delisted is because their abysmal size allowed them to fly under the radar on the OTC market.

In 2019 and 2018, Celsius paid 179,100 and 119,500 in audit fees respectively. Surprisingly, Verus International, with a market cap of merely 7M, paid 129,350 and 45,000 in 2019 and 2018 respectively. We believe with AD is not only not suitable, but is severely ill-equipped to fully audit Celsius.

https://investorshub.advfn.com/boards/hubstocks.aspx

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October 9th 2020

R E P O R T S

Concerning History of Key PersonnelThe credibility of key management is always a tell-tale sign of the quality of company’s reporting. Unfortunately, their present and future business plans were not the only red flags that stood out. We have identified a stagger-ing number of individuals in both Celsius and its Nordic Partner that hints lack of corporate governance, pyramid schemes, multi-level marketing, insider enrichment and aggressive promotional pump and dump - old habits die hard and we believe the same tactics are taking place at Celsius.

The Man Behind Celsius - Carl DeSantisAt the very center of Celsius’s control seems to be the long-term shareholder Carl DeSantis, who effectively controls the company. CD Financial, Charmnew Limited, and Grieg International have been funding Celsius since its inception and all three entities are affiliated with DeSantis.

DeSantis had previously been involved in many notorious companies including failed stock promo-tion schemes iBio and Integrated BioPharma, but most concerning to us is Rexall Showcase Interna-

tional, and the way he marketed Cellasene. Similar in name and in claim, Cellasene, like Celsius, was marketed to make you look and feel your best, though in this case it referred to the elimination of cellulite. Rexall Sundown faced a lawsuit from the FTC with regards to Cellasene, as the FTC reported Rexall had no clinical evidence to support their claims. These claims included the ability to increase metabolic rate and improve circulation, claims we find oddly similar to those made by Celsius.

Rexall Sundown Inc. - Stock Manipulation, Pyramid Scheme & MoreRexall Sundown Inc. was founded by DeSantis in 1976, operating as a manufacturing of vitamins and nutritional supplements. In 2000, Royal Numico N.V. acquired the company for close to $2Bil USD. Accord-ing to an article published on a palm beach local newspaper, while DeSantis was at the helm, the company created Rexall Showcase International (RSI), to market dietary supplements through Amway-type independent distributors, including doctors who peddled pills to family, friends and patients. The article further alleges that RSI is engaged in a fraudulent pyramid scheme, in which the distributors make money by recruiting new distributors rather than selling products to retail customers.

We find this especially worrisome since we see a similar pattern with Celsius. Celsius had allegations of pyramid scheme like activities against it in China. Moreover, language from old documents on their Nordic distribution partners suggests that Nordic distribution was or is supplemented with multi-level marketing activities.

In 1995, DeSantis hired Stanley Cherelstein, a former controller for Phar-Mor, the infamous and notorious Billion Dollar fraud, as the Financial Controller for RSI. In 2000, Cherlstein was further promoted to CEO and President. Phar-Mor was one of the largest frauds in American corporate history. The official report of the U.S. Federal Court-appointed bankruptcy examiner, Jay Alix states that Cherelstein not only knew about the PharMor fraud, but participated in the prepara-

tion of fraudulent financial records and personally profited from the fraud. At Phamor, Cherelstein and his accomplices kept a second set of books to which they even assigned the strikingly accurate code name ‘cookie.’ Their purpose was to deceive investors and defraud them in the magnitude of more than one billion dollars.

More disturbingly, DeSantis through RSI distributed another dietary supplement product called Cellasene, an herbal dietary supplement purported to eliminate cellulite. DeSantis marketed Cellasene as a product that is clinically proven to eliminate cellulite. However, the Federal Trade Commission (FTC) filed a lawsuit against RSI in 2000 for false and unsubstantiated and misleading advertisement. FTC further reported that Rexall had no clinical evidence to support claims that Cellasene “fights cellulite from the inside”.

We find this alarmingly similar to the claims Celsius is making regarding its “Clinically-proven” benefits. However, this time around, Celsius was more “careful”, yet nonetheless misleading, in their advertisement. We will further address this in later sections of the report.

In short, we see the exact same patterns in DeSantis previous company Rexall, as we see with Celsius. Multi-level-marketing allegations, overexaggerated product claims backed by little or biased scientific evidence and a culture of fraud.

https://www.browardpalmbeach.com/news/undercurrents-6330971

https://www.naturalproductsinsider.com/regulatory/ftc-takes-action-against-rexalls-cellasene-seeks-refunds-0

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R E P O R T S

Concerning History of Key Personnel

Oragenics - Why is Celsius Recruiting from a Failed Bio-Pharma Company?

The Man Behind Celsius - Carl DeSantis

Oragenics is a healthcare company focused on developing treatments for oral mucositis and novel antibiotics against infectious disease. The company was originally established in 1996 in Tampa Florida, focusing on the concept of replacement therapy called S.Mutans Replacement Therapy. Over the past 15 years, the company has produced little to no revenue due to lack of successful products. Little can be found today regarding this particular replace-ment therapy. Recently, the company has been

making headlines as they attempt to advance their Covid vaccines, in what appears to be another pump and dump scheme.

However, Oragenics’s stock price very much reflects the reality of the company, with the stock falling over 99% from its highs. It appears the only thing the company was successful in was diluting shareholders into oblivion.


@ResearchGrizzly


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October 9th 2020

R E P O R T S

Concerning History of Key PersonnelNordic Partner Owners Involved in European InvestigationCircumfilia Limited was one of the original owners of Func Food. Through our research, we found that Circumfilia Limited was registered in Malta and its shareholder and director is Andreas Celik, who was a former co-owner of People’s Choice AB. Be reminded that People’s Choice AB has long been used by Celsius to market Celsius products in Sweden of

Europe. However, according to Offshore Leaks Database by The International Consortium of Investi-gative Journalists (ICIJ), Circumfilia Limited was identified in the Paradise Papers investigation. According to the introduction of this Paradise Papers investigation:

“As a whole, the Paradise Papers files expose offshore holdings of political leaders and their financiers as well as household-name companies that slash taxes through transactions conducted in secret. Financial deals of billionaires and celebrities are also revealed in the documents. “

Roger Ng, Lessner, Ka-Shing and SimonsSome other key individuals involved in the invest-ment of Celsius also caught our attention.

Russell Simmons was one of the earlier investors. He invested in the company in April 2015 along with Kimora Lee Simmons. Russell is most known as a hip-hop producer. He was accused by two women for sexual misconduct in 2017. Simmons was actively promoting (misleading) customers for Celsius. During one exclusive interview with HipHopDX, he said “If you drink a Celsius, you lose 100 calories without working out.”

Tim Lessner and Roger Ng, both of whom were heavily involved in the Malaysian 1MBD 4candal

were also significant shareholders of the company. Roger Ng was in fact the “managing director for Asia” for Celsius until recently.

According to Sarawak Report, it appears that Celsius holdings was embarrassed by their connection to the two and removed them from their website. However, Kimora Lee Simmons, current wife of Leissner and ex-wife of Simmons still has a 5.6% stake in the company.

https://offshoreleaks.icij.org/nodes/55076916

https://www.icij.org/investigations/paradise-papers/about/

https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad_scandal

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R E P O R T S

False Advertisement Claims Based on Own “Scientific” Studies

Back in 2000, DeSantis’s prior company RSI touted the clinically proven benefits of another dietary supplement product called Cellasene. However, the FTC filed a lawsuit against RSI for false, unsubstanti-ated and misleading advertisement. In fact, people have allegedly died due to the consumption of Cellasene.

A decade later, we believe DeSantis is back at it again with Celsius, only this time he played it smart and actually went through the trouble of actually conducting “Clinical Studies”, which we discovered to be self-funded and uncreditworthy.

Self-funded Studies Appear to be Uncreditworthy

Celsius quotes seven “Peer Reviewed Clinical Studies” that validates that their product increases metabo-lism and helps burn fat. However, all of the studies were funded by Celsius. Furthermore, five out of the seven studies were conducted by researchers

with a history that invokes little confidence, if any history at all. The main researchers include Vincent Dalbo, Michael Roberts, Jeffery Stout and Chad Kerksick.

- Vincent Dalbo: Titled as Lead Researcher. However, we discovered that he was actually a graduate student at the time of study. He now appears to be measuring the effects of caffeine on the dribbling speed for basketball payers.- Michael Roberts: Retired shortly after conducting the studies for Celsius (We wonder why)- Jeffrey Stout: Titled as Secondary Author. His other work includes caffeine’s impact on exercise. Unsurprisingly, caffeine improved performance!- Chad Kerksick: We found him to be arguably the most questionable character. He is listed in two of the research papers as “Principal investigator of the study who obtained grant funds for project, supervised data collection and analysis, supervised statistical analyses and co-authored the papers”. He has been involved in multiple allegations of data tampering and self-participation in his own studies. Furthermore, he was put on leave of absence, and later resigned due to accusations of “Using Students As Guinea Pigs, Poking And Bruising Them”

Furthermore, Miami Research Associates was also listed on Celsius’s 2018 presentation. However, the study was nowhere to be found on their own web-site. We were only able to locate this study, which appears to have included Celsius. No results are

posted even to today, we wonder why.

Moreover, a study funded by GNC appears to show the same result as Celsius, yet with generic “thermo-genic” ingredients.

“Although six independent clinical studies have been conducted relating to the calorie-burning and related effects of our products, the results of these studies have not been submitted to or reviewed by the FDA. Further, the FDA has not passed on the efficacy of any of our products nor has it reviewed or passed on any claims we make related to our products, including the claim that our products aid consumers in burning calories or enhancing their metabolism.”

https://www.huffpost.com/entry/chad-kerksick-ou-professo_n_1071394

https://clinicaltrials.gov/ct2/show/record/NCT02255201?term=%22miami+research+associates%22&draw=3&rank=4

https://journals.lww.com/nsca-jscr/Fulltext/2009/05000/Acute_Effects_of_a_Thermogenic_Nutritional.16.aspx

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October 9th 2020

R E P O R T S

False Advertisement Claims Based on Own “Scientific” Studies

Rockstar Lawsuit Accuses False Product ClaimsCelsius and its management has had a history of misleading buyers with false or exaggerated health claims. In addition to DeSantis and his RSI product Cellasene, Kimora Leissner, an early investor, incor-rectly and publicly stated that weight loss can be

experience without exercise with the consumption of Celsius.

In 2018, the energy drink producer Rockstar laid out a series of false product claims against Celsius. Highlights of the lawsuit include:

- CELH has knowingly and willfully made false and misleading advertising claims, and used deceptive business practices to gain customers- CELH marketed their product as “dietary supplements” event though it is just a conventional beverage- Company claims of its drinks providing “healthy energy” are unsubstantiated- Even the self-funded studies done by the company can’t hide the fact that their drinks contain only customary energy drink ingredients.

So beneath all the “scientific studies”, what is the ultimate benefit of Celsius? It seems to us that Celsius paid for bogus studies to hide the fact that the benefits simply stem from an overdose of caffeine. Celsius is ranked amongst the top 5 in popular energy drinks in terms of Caffeine containment.

Aggressive Claims Don’t Scale WellCelsius makes a lot of product claims, stating that it “burns body fat” (since updated to include exercise as a requirement), enhances metabolism and is “negative calorie”.

While we understand that the beverage industry is hyper competitive, this is not a good way to

generate sales, especially at scale. As the brand attracts more eyes, it also attracts more regulatory scrutiny, and the sheer breadth and significance of the claims Celsius presents pose a major risk of investigation and litigation, one that investors seem to overlook. In our view it is a risk of particular importance, especially considering the history of Celsius’ largest shareholder Carl DeSantis.

https://drive.google.com/file/d/1JPCU-dq6_AI9Z-CB7yD-1bSeVBe4Wi9l/view

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October 9th 2020

R E P O R T S

ValuationWe believe the company is overvalued even under positive assumptions, and especially given the glaring red flags we outlined in this report. The multiple expansion relative to revenue is unreasonable because a lot of the growth has come from dubious and unsustainable sources.

Currently Celsius is trading at BCPVU�� EV/S, whereas multiple comparables in this sector are trading at an average of EV/S of 4.6 and median EV/S of 3.3.

After adjusting the revenues post-acquisition of Func Food in Europe, we applied average EV/S, median EV/S and 20% discount to MNST’s EV/S to calculate our price targets for Celsius.

USD MN Symbol TTM Sales EV EV/S The Coca-Cola Company NYSE: KO 34,326 249,265 7.3 PepsiCo, Inc. NASDAQ: PEP 68,557 225,369 3.3 Na�onal Beverage Corp. NASDAQ: FIZZ 1,030 3,240 3.1 Monster Beverage Corpora�on NASDAQ: MNST 4,307 40,582 9.4 NewAge, Inc. NASDAQ: NBEV 255 149 0.6

Average 4.7 Median 3.3

Celsius Holdings, Inc. NASDAQ: CELH 103 1,433 13.9

USD MN Average EV/S Median EV/S MNST EV/S -

20% Discount TTM Reported Total Revenue $102.8 $102.8 $102.8 TTM Adjusted Total Revenue $90.5 $90.5 $90.5 Adjusted EV/S mul�ple 4.7 3.3 7.5 Adjusted EV $428.9 $297.4 $682.0 + Cash $42.1 $42.1 $42.1 - Total Debt $9.0 $9.0 $9.0

$462.0 $330.5 $715.1 Outstanding shares 71.6 71.6 71.6 Target Price $6.45 $4.62 $9.99 Last Closed Price $20.48 $20.48 $20.48

Poten�al downside -68.5% -77.5% -51.2%

Under these three scenarios, the target price of Celsius ranges from $4.62 to $��, suggesting a potential downside between ��% and 7��%. We believe that our corporate governance discount might be far too generous based on the checkered history of DeSantis.


@ResearchGrizzly



October 9th 2020

R E P O R T S

Valuation

22

Insiders Seem to Agree with UsArcus Capital is a hedge fund that we believe is at least partially owned by Carl DeSantis’ son Damon. The fund’s majority holdings were Celsius along side with KO and various ETFS. We believe they hold a managed account for DeSantis.

However, just recently, Arcus sold close to 5 million shares in June 2020. DeSantis also sold 700,000 shares in August. We believe DeSantis used Arcus sales to mask the fact that he is aggressively dumping shares at the current valuation, indicating that he also believes the share price to be too high.

0n August 20th 2020, six directors and Carl DeSantis again sold an aggregate of 1.3M shares valued at��. during a private placement deal to Boyu Capital and a leading global institutional investor�(*$.

Shortly after in September 2020, Boyu and other shareholders filed an open-shelf prospectus to resell their acquired shares in the 2020 private placement to the market. We believe this reflects poorly, as it indicates that insiders lack confidence in the performance of the company and is simply flipping over quickly.

https://privatefunddata.com/fund-employees/damon-scott-desantis-5907959/

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R E P O R T S

In conclusion, in order to justify the company’s current stock price, one would have to believe that Celsius is the next Monster Beverage and we can’t wrap our heads around this given what we know. Quite the opposite, we believe Celsius and its key insiders exhibit a pattern that shows they are willing to conduct fraudulent activities to boost sales and defraud investors. Combine this with an auditor who seems to be utterly unable to detect fraud, and you have yourself a perfect set up for a bad awakening when more light is shed on the company.

Conclusion

R E P O R T S

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Why We DonÕt Trust Celsius Holdings Inc. (Nasdaq: CELH ...

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