Celsius in Southern California: A Logical Next Step

It was announced by Celsius Holdings (CSUH.OB) in a Thursday morning press release that the Celsius calorie burning beverage will soon be available in Ralph's Supermarkets in Southern California.

The product is already entrenched in the NorthEastern portion of the country and a significant push into the heavily populated SouthWest is a logical next step. With fitness and 'looking good' a huge part of the SoCal lifestyle, Celsius has a chance to catch on a big way, in my opinion. Those beach bunnies roller blading down the coastline in skin tight shorts and half tops will only look that much better with a can of everyone's favorite calorie burning beverage in their hand; but of course, that's just my opinion.

In the past, I had visited a few stores in SoCal that were listed on the Celsius website as offering Celsius (namely Albertson's and Gelson's), only to be told that the product was either not stocked had been discontinued. However, that was over a year ago and at that time product distribution was not being supported by a nationwide advertising campaign.

At this time, however, I have high hopes for Celsius in SoCal.

Ralphs will offer - in 258 locations - both Green Tea flavors (Raspberry Acai and Peach Mango) in addition to the 'On the Go' powdered Raspberry flavored packets.

Celsius CEO Steve Haley is keeping to his word regarding the amount of distribution growth that we are seeing, and if his words continue to be proven as correct, there could be quite a few more deals in the works.

I continue to believe that Celsius is in the midst of a huge growth phase - a phase being supported by television, print and radio ads - and the current share price, while a bit over valued when compared with past sales, is going to be looked back upon as a bargain - in my opinion - based on the sales and revenue growth that should result from the boom in both distribution and advertising.

While I won't rule out another dip down into the mid thirty cent range sometime during this quarter, I do consider mini a late year run as a possibility. However, I think that the big move in the CSUH share price will come early next year, in my opinion - barring any unforeseen bad news or setbacks.

I know that some investors are concerned about the possibilities of additional financing. Celsius is still a growing company and that means that financing is always a concern, but the need for financing goes side by side with early stage growth, so additional dilution along the way should come as no surprise. Also, since Carl DeSantis has come on board, the terms of financing for Celsius Holdings have been a lot more favorable than previous agreements. As long as revenues and product awareness are growing, additional financing agreements should just be looked at as an expected bump in the road - in my opinion. The overall potential of the company remains the same.

For the immediate future, investors have Tuesday's earnings release to look forward to.

The best for Celsius, in my opinion, is still yet to come.

Disclosure: VFC is long CSUH.

Comments

[bosstweed:]

Hey VFC, saw this on the quarterly that just came out and it didn't sound too rosy. The 70 million + in convertibles seems very large, and working capital is measly. What are your thoughts?

We have yet to establish any history of profitable operations. We have continuously incurred operating losses after we started the business. We have incurred an operating loss during the first nine months ending September 30, 2009 of $5.2 million. As a result, at September 30, 2009 we had an accumulated deficit of $16.7 million. Our revenues have not been sufficient to sustain our operations. We expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. Our profitability will require the successful commercialization of our current product Celsius� and any future products we develop. No assurances can be given when this will occur or that we will ever be profitable.

We will require additional financing to sustain our operations and without it we may not be able to continue operations.

At September 30, 2009, we had working capital of $70,000. The independent auditor's report for the year ended December 31, 2008, includes an explanatory paragraph to their audit opinion stating that our recurring losses from operations and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We do not currently have sufficient financial resources to fund our operations or those of our subsidiaries. Therefore, we need additional funds to continue these operations.

On September 8, 2009, we entered into a convertible loan agreement (the "Loan Agreement") with CDS. In connection with such Loan Agreement, CDS can convert the note in to a maximum of 65,000,000 shares of Common Stock.

On September 8, 2009, we entered into a convertible loan agreement (the "Refinance Agreement") with Lucille Santini. In connection with such Refinance Agreement, Ms. Santini can convert the note into a maximum of 6,150,000 shares of Common Stock.

Nov 09 03:01 PM

[mlongj:]

bosstweed

These are very good questions indeed! According to Steve Haley, this loss was to be expected as advertising is the major expense listed on the quarterly report. I guess it is not cheap to advertise on a national scale, but this was mentioned in the coverage given by Thallman last month as well. Thallman said that if the company were to invest heavily into advertising, above and beyond the current campaign, it should cause an increase in distribution and demand which is why they began coverage with a buy at .90. It looks like this is just what Mr. Haley and company are doing at this time. The sales seem to suggest about 650,000 units sold in the quarter @ approximately 2.00 per unit. This is really anemic at this point, but if they could ramp up to 3 or 4 million units in a quarter with the additional advertising and awareness campaign, it is easy to see where the revenues could be (somewhere in between 6-10 million a quarter). Needless to say, it is a speculative play with a huge upside. I have a very substantial position with this company at the moment and do not look for a rise in SP until one of the major "big box" stores begin distributing. As Steve said in his interview recently, they are in talks with all the big box stores at this time which coincides with the advertising campaign. I think they are in the beginning of a huge growth phase and we will certainly know the results come next quarter. If sales do not increase dramatically in the first and second quarter of FY10, there may be a problem. However, if this thing kicks off it is going to be huge. I have concerns just like any other investor, but I do not think now is the time to run for the hills, not yet anyway. The report is what it is, which is an accurate statement of where they are right now, not where they want to be or where they will be.

Just one investors perspective!

Thanks for the opportunity.

Long CSUH


On Nov 09 03:01 PM bosstweed wrote:

> Hey VFC, saw this on the quarterly that just came out and it didn't
> sound too rosy. The 70 million + in convertibles seems very large,
> and working capital is measly. What are your thoughts?
>
> We have yet to establish any history of profitable operations. We
> have continuously incurred operating losses after we started the
> business. We have incurred an operating loss during the first nine
> months ending September 30, 2009 of $5.2 million. As a result, at
> September 30, 2009 we had an accumulated deficit of $16.7 million.
> Our revenues have not been sufficient to sustain our operations.
> We expect that our revenues will not be sufficient to sustain our
> operations for the foreseeable future. Our profitability will require
> the successful commercialization of our current product Celsius�
> and any future products we develop. No assurances can be given when
> this will occur or that we will ever be profitable.
>
> We will require additional financing to sustain our operations and
> without it we may not be able to continue operations.
>
> At September 30, 2009, we had working capital of $70,000. The independent
> auditor's report for the year ended December 31, 2008, includes an
> explanatory paragraph to their audit opinion stating that our recurring
> losses from operations and working capital deficiency raise substantial
> doubt about our ability to continue as a going concern. We do not
> currently have sufficient financial resources to fund our operations
> or those of our subsidiaries. Therefore, we need additional funds
> to continue these operations.
>
> On September 8, 2009, we entered into a convertible loan agreement
> (the "Loan Agreement") with CDS. In connection with such Loan Agreement,
> CDS can convert the note in to a maximum of 65,000,000 shares of
> Common Stock.
>
> On September 8, 2009, we entered into a convertible loan agreement
> (the "Refinance Agreement") with Lucille Santini. In connection with
> such Refinance Agreement, Ms. Santini can convert the note into a
> maximum of 6,150,000 shares of Common Stock.

Nov 09 05:57 PM

[mlongj:]

Mario Lopez is now the national spokesman for Celcius!

Nov 10 07:18 AM

[User 495233:]

Since irrigation water use is such a large issue regarding the amount of water we use for irrigation why not start there in designing and using a better product? www.IrrigationThatMake... is a non profit group trying to battle our national water issues by providing funding and installation of green irrigation products. They have a irrigation product that conserves up to 80% of water use after two years. Their product is installed sub-surface therefore you never see it watering. It makes the plants stronger, uses less fertilizer along with water and no over spray onto sidewalks and roads. The cost to install their underground irrigation product is comparable to overhead sprinklers but this is the green irrigation choice.

Nov 10 02:03 PM

[mlongj:]

Well VCF you were right about the pullback to the mid thirties. The call was a good one. The answer concerning the additional advertising and marketing from Steve Haley was impressive. Basically, if you think we spent a lot in 3Q, you have not seen anything yet!

Net income profitability in 2010 according to Steve!

Nov 11 05:53 PM