Celsius Holdings (CELH) Risk Factors

The production, marketingand sale of our functionalenergy drinksand supplementsaresubject to therulesand regulations of various federal, stateand local health agencies. Themarketingand sale of our products internationally is similarly subject to compliancewith applicablelaws, rulesand regulations in thoseforeign countries where our productsaresold. Ifaregulatory authority finds that acurrent or future product or production run is not in compliancewith any of theseregulations, wemay befined, or productionmay bestopped, thusadversely affectingour business, financial condition and results of operations. Similarly,any adverse publicity associatedwith any noncompliancemay damage our reputation and ourability to successfully market our products. Furthermore, therulesand regulationsaresubject to changefromtimeto timeandwhileweclosely monitor developments in thisarea, we have noway ofanticipatingwhetherchanges in theserulesand regulations will impact our businessadversely. Additional or revised regulatory requirements, whether labeling,environmental, taxor otherwise,could havean adverseeffect on our business, financialcondition and results of operations.

We have been and area party, fromtimeto time, to various litigation claimsand legal proceedings, including, but not limited to, intellectual property, falseadvertising, product liability, breach of contract claimsand others. Other lawsuits have been filed against usclaimingthat certain statements madein ouradvertisementsand/or on thelabels of our products werefalseand/ormisleadingor otherwise not in compliancewith food standards under local law. Putativeclassaction lawsuits havealso been filed against us,allegingthat certain claims in ourmarketingpromotionalamount to false advertising. We do not believeany statements made by us in our promotionalmaterials orset forth on our product labelsarefalse ormisleadingor noncompliant with local law,andwe have been defending,andwillcontinueto vigorously defend such lawsuits. Any of theforegoingmatters or other litigation, thethreat thereof, or unfavorablemediaattention arisingfrompendingor threatened litigation could consumesignificant financialandmanagerial resourcesand result in diminished operationalefficiency of theCompany, significant monetary awardsagainst us,an injunction barringthesale ofany of our productsand injury to our reputation. Our failureto successfully defend orsettleany litigation or legal proceedingscould result in liabilities that, to theextent not covered by our insurance,could haveamaterialadverseeffect on our financialcondition, revenueand profitability,and could causethemarket value of ourcommon stock to decline.

Wemay not correctly estimate demand for ourexistingproductsand/or newproducts. Ourability to estimate demand for our products is imprecise, particularly with regard to newproducts,and may beless precise duringperiods of rapid growth, includingin newmarkets. If wematerially underestimate demand for our products orare unableto securesufficient ingredients, flavors, sleek aluminumcansand other rawmaterials for oursupplements orexperience difficulties with ourco-packingarrangements, includingproduction shortages or quality issues, wemight not beableto satisfy demand on ashort-termbasis. Moreover, industry-wideshortages ofcertain ingredients have occurred and could occur, fromtimeto timein thefuture, resultingin production fluctuations and/or product shortages. We generally do not use hedgingagreements oralternativeinstruments tomanagethis risk. Such shortagescould interferewith and/or delay production ofcertain of our productsand could haveamaterialadverseeffect on our businessand financial results. If we do not accurately anticipatethefuture demand fora particular product or thetimeit will taketo obtain newinventory, our inventory levels may beinadequateand our results of operations may be negatively impacted. If wefail tomeet ourshippingschedules, wecould damage our relationships with distributorsand/or retailers, increase our distribution costsand/orcausesales opportunities to be delayed or lost. In order to beableto deliver our products on atimely basis, we need tomaintain adequateinventory levels of the desired products. If theinventory of our products held by our distributorsand/or retailers is too high, they will not place orders foradditional products, which could unfavorably impact our futuresalesand adversely affect our operatingresults.

Consolidation can causesignificant downward pricingpressureand can imposeadditionalcosts on us. If weare unableto successfully managethe potential impact of thesecommercialchanges, our financial results may bematerially and adversely affected.

Oursuccess depends in large part on ourability tomaintain consumerconfidencein thesafety and quality ofall of our products. We haverigorous product safety and quality standards, whichwe expect our operationsas wellas oursuppliers tomeet. However, despite ourstrongcommitment to product safety and quality, we or oursuppliers may not always meet thesestandards, particularly as weexpand our product offerings through innovation oracquisitions into product categories that are beyond our traditional range of functionalenergy drinksand supplements. If we or oursuppliers fail to comply with applicable product safety and quality standards, or if oursupplement products taken to themarket are or becomecontaminated oradulterated by any means, we may berequired to conduct costly product recallsandmay becomesubject to product liability claimsand negative publicity, which could cause our business to suffer. Oursuccessalso depends on ourability to build andmaintain the brand imagefor ourexistingproducts, newproductsand brand extensionsandmaintain ourcorporatereputation. Therecan be no assurancethat ouradvertising, marketingand promotional programsand ourcommitment to product safety and quality, human rightsand environmentalsustainability will havethe desired impact on our products’ brand imageand on consumer preferencesand demand. Claims regardingproduct safety, quality and/or ingredient content issues,efficacy or lack thereof (real or imagined), ourculture and our workforce, ourenvironmental impact and thesustainability of our operations, orallegations of product contamination,even if false or unfounded,could tarnish theimage of our brandsand may causeconsumers to choose other products. Consumer demand for our productscould diminish significantly if we, ouremployees, distributors, suppliers or business partners fail to preservethe quality of our products,act orare perceived to act in an unethical, illegal, discriminatory, unequal orsocially irresponsiblemanner, includingwith respect to thesourcing,content orsale of our products, serviceand treatment of ourcustomers, or the use ofcustomer data. Forexample, Celsius’ formermanagingdirector of Asia, sinceleavingtheCompany, has been charged in connection with 1MalaysiaDevelopment Bhd.-relatedmatters. Furthermore, our brand image or perceived product quality could beadversely affected by litigation, unfavorablereports in themedia(internet or elsewhere), studies in generaland regulatory or other governmental inquiries (in each casewhether involvingour products or those of ourcompetitors)and proposed or newlegislation affectingour industry. Forexample, wearecurrently in arbitration proceedings withMcGovern Capital, Inc.andKevinMcGovern about afee disputeemergingfromarepresentativeagreement amongthe parties and Celsius Holdings in connectionwith sales of our products in the People’s Republic of Chinafor four years startingfromSeptember 1, 2017. Negative postings orcomments on socialmedia or networkingwebsitesabout theCompany orany one of our brands,even if inaccurate ormalicious,could generateadverse publicity that could damagethereputation of our brands or theCompany. Business incidents, whether isolated or recurringandwhether originatingfromus, our distributors, suppliers or business partners, that erodeconsumer trust can significantly reduce brand value or potentially trigger boycotts of our productsand can havea negativeimpact on consumer demand for our productsas wellas our reputation and financial results. Theimpact ofsuch incidents may be exacerbated if they receiveconsiderable publicity, includingrapidly through social or digitalmedia(includingformalicious reasons) or result in litigation. In addition, fromtimeto time, thereare public policy endeavors that areeither directly related to our productsand packagingor to our business. These public policy debatescan occasionally bethe subject of backlash fromadvocacy groups that havea differingpoint of viewand could result in adversemediaand consumer reaction, includingproduct boycotts. Similarly, oursponsorship relationshipscould subject us to negative publicity asaresult ofactual orallegedmisconduct by individuals orentitiesassociatedwith organizations wesponsor orsupport. Likewise,campaigns by activistsconnectingus, or oursupply chain, with human andworkplacerights,environmental oranimal rights issuescould adversely impact ourcorporateimageand reputation. Allegations,even if untrue, that weare not respectingthe human rights found in theUnitedNations UniversalDeclaration of Human Rights;actual or perceived failure by oursuppliers or other business partners to comply with applicablelaborandworkplacerights laws, includingchild labor laws, or theiractual or perceived abuse ormisuse ofmigrant workers;adverse publicity surroundingobesity and health concerns related to our products, ourenvironmental impact and thesustainability of our operations, labor relations, ourcultureand our workforce or thelikecould negatively affect our Company’s overall reputation and brand image, which in turn could havea negativeimpact on our products’acceptance by consumers.

We do not directly manufacture our products, but instead outsourcesuchmanufacturingto established third party co-packers. Thesethird-party co-packers may not beableto fulfill our demand as it arises,could begin to chargerates that make usingtheirservicescost inefficient ormay simply not beableto or willingto providetheirservices to us on atimely basis orat all. In theevent ofany disruption or delay, whethercaused by arift in our relationship or theinability of ourco-packers tomanufacture our productsas required, wewould need to securetheservices ofalternativecopackers. Wemay be unableto procurealternative packingfacilitiesat commercially reasonableratesand/or within areasonably short time period and any such transition could becostly. In such case, our business, financialcondition and results of operations would beadversely affected.

Thecurrent COVID-19 pandemic has presented and continues to present asubstantial public health and economicchallengearound theworld and isaffectingouremployees,communitiesand business operations,as wellas the globaleconomy and financialmarkets. The human and economicconsequences of theCOVID-19 pandemicas wellas themeasures taken or that may betaken in thefuture by governments, businesses (includingtheCompany and oursuppliers, bottlers/distributors,co-packersand otherservice providers)and the publicat largeto limit theCOVID-19 pandemic, haveandwill directly and indirectly impact our businessand results of operations, including, without limitation, thefollowing: •We haveexperienced some decreases in sales of our products in various distribution channels that have been affected by theCOVID-19 pandemic, such as health and fitnessclubs. While some of therestrictions imposed asaresult of theinitial COVID-19 outbreak have been lifted oreased inmany jurisdictionsas therates of COVID-19 infections have decreased or stabilized, resurgence of theCOVID-19 pandemicin somemarkets has slowed or reversed thereopeningprocess,andmarketsaremovingthrough varyingstages of restrictionsand reopeningat different times. However, we haverecently seen aresurgence of theCOVID-19 pandemicin theNorthernHemispherewhilecases in the SouthernHemispherecontinueto rise. Asaresult,a number ofcountries, particularly in EMEA, havereinstituted lockdownsand other restrictions, which could further impact customer demand. If theCOVID-19 pandemicand related unfavorableeconomicconditionscontinueto intensify, the negativeimpact on oursales, includingour newproduct innovation launches,could be prolonged andmay becomemore severe. •Deterioratingeconomicconditionsand continued financial uncertainties inmany of ourmajormarkets dueto theCOVID-19 pandemic, such as increased and prolonged unemployment, decreases in percapitaincomeand thelevel of disposableincome, declines in consumerconfidence, oreconomicslowdowns or recessions,could affect consumer purchasingpowerand consumers’ability to purchase our products, thereby reducingdemand for our products. In addition, publicconcern amongconsumers regardingtherisk ofcontractingCOVID-19may also reduce demand for our products. •Theclosures of,and continued restrictions on, on-premiseretailersand otherestablishments that sell our productsasaresult of theCOVID-19 pandemic haveadversely impacted andmay continueto adversely impact oursalesand results of operations. •Ouradvertising, marketing, promotional, sponsorship and endorsement activities have been,andwillcontinueto be, disrupted by reduced opportunities forsuch activities duetomeasures taken to limit thespread of theCOVID-19 pandemicand thecancellations of or reduced capacity at sportingevents,concertsand otherevents may result in decreased demand for our products. Our product samplingprograms, which are part of ourstrategy to develop brand awareness, have been,andwillcontinueto be, disrupted by theCOVID-19 pandemic. If weare unableto successfully adapt to thechanginglandscape ofadvertising, marketing, promotional, sponsorship and endorsement opportunitiescreated by theCOVID-19 pandemic, oursales, market share, volume growth and overall financial resultscould be negatively affected. •Our innovation activities, includingourability to introduce newproducts in certainmarkets, have been delayed and/oradversely impacted by theCOVID-19 pandemic. Ifsuch innovation activitiesare disrupted andwecontinueto delay thelaunch of newproductsand/or weare unableto securesufficient distribution levels forsuch newproducts, our businessand results of operationscould beadversely affected. •Some of oursuppliers, bottlers/distributorsand co-packers may experience plant closures, production slowdownsand disruptions in operationsasaresult of theimpact of theCOVID-19 pandemic. Thiscould result in a disruption to our operations. •Wemay experience delays in receivingcertain rawmaterialsasaresult ofshippingdelays dueto,amongother things,additionalsafety requirements imposed by port authorities,closures of, orcongestion at ports, reduced availability ofcommercial transportation, border restrictionsand capacity constraints. •Dueto increased demand in at-homeconsumption, thefunctionalenergy drink and liquid supplement industries haveexperienced someshortages ofaluminumcans. However, we have been ableto secureadequatesupply and have not experienced significant adverseeffects on our business, operationsand financialcondition fromsuch shortage, however weare unableto accurately predict howthis might change. •Asaresult of theCOVID-19 pandemic, includingrelated governmentalmeasures, restrictions, directivesand guidance, many of our office-based employees haveworked remotely. Wemay experiencereductions in productivity and disruptions to our business routines while our remotework policy remains in place. If ouremployees workingremotely do not maintain appropriatemeasures tomitigate potential risks to our technology and operations frominformation technology-related disruptions, wemay facecybersecurity threats. Employees of our third-party service providers who areworkingremotely, withwhomwemay share data,aresubject to similarcybersecurity risks. •Governmentalauthoritiesat theU.S. federal, stateand/ormunicipal leveland in certain foreign jurisdictions may increase or impose newincometaxes, indirect taxes or other taxes or revise interpretations ofexistingtaxrulesand regulationsasameans of financingthecosts ofstimulus ormay take othermeasures to protect populationsand economies fromtheimpact of the COVID-19 pandemic. Increases in direct and indirect taxratescould affect our net incomeand increases in consumer taxescould affect our products’affordability and reduce oursales. •Wemay berequired to record significant impairment charges with respect to goodwill or intangibleassets whosefair values may be negatively affected by theeffects of theCOVID-19 pandemic. •Thecontinued financial impact of theCOVID-19 pandemicmay cause one ormore of thefinancial institutions we do business with to fail or default in their obligations to us or to become insolvent or filefor bankruptcy, which could cause us to incursignificant lossesand negatively impact our results of operations and financial condition. •Actions we havetaken ormay take, or decisions we havemade ormay make,asaconsequence of theCOVID-19 pandemicmay result in negative publicity and theCompany becominga party to litigation claimsand/or legal proceedings, which could consumesignificant financialandmanagerial resources, result in decreased demand for our productsand injury to our reputation. •Theresumption of normal business operationsafter the disruptionscaused by theCOVID-19 pandemicmay be delayed orconstrained by theCOVID-19 pandemic’s lingeringeffects on oursuppliers, bottlers/distributors,co-packers,contractors, business partnersand/or otherservice providers. Any of the negativeimpacts of theCOVID-19 pandemic, includingthose described above,alone or in combinationwith others, may haveamaterialadverseeffect on our business, reputation, operatingresultsand/or financialcondition. Any of these negativeimpacts,alone or in combinationwith others,could exacerbatemany of therisk factors discussed herein,any of which could materially affect our business, reputation, operatingresultsand/or financialcondition.