Celsius Holdings Inc (CELH) 2009 Q4 法說會逐字稿

Good afternoon and welcome to Celsius Holdings Incorporated Fiscal 2009 Investor Conference Call. Joining me on the call today, Mr. Steve Haley, the Company's Chief Executive Officer, and Mr. Geary Cotton, Chief Financial Officer.

During the course of this conference call we will make forward-looking statements regarding future events and the future performance of the Company. We caution you that such statements reflect our best judgment based on factors currently known to us and that you should not rely on such forward-looking statements since our actual events or results could differ materially as a result of the number of important factors.

These factors include general economic and business conditions, trends, the impact of competition, technology and regulations and other risks and uncertainties discussed in the reports we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements or other information provided during this conference call.

In adherence to regulation and fair disclosure the Company has provided information in its fiscal 2009 results press release and in its publicly announced financial results conference call. We will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. I'll now turn the conference over to Mr. Steve Haley.

Thanks, Manny. And thank you for joining us for our fiscal 2009 investor conference call. Financial results for our fiscal 2009 were released to the public on March 4th through our press release distributed on this Thursday morning. You can view a copy of this document on our website at www.Celsius.com in the Investor section.

I'll begin with some prepared comments regarding highlights of our fourth quarter results and operations as well as progress made so far this year so as we have sometimes done in the past this is more of a state of the Company update than only a reflection on the fourth quarter or 2009 as a whole.

After this brief update, I'll then turn it over to Geary Cotton, our Chief Financial Officer for more details on the specific numbers for the quarter and the year. And after Gary reviews the financials we'll open it up to your questions.

We've accomplished several key milestones since our last conference call. In fact, if you compare the Company now versus a year ago we've made significant progress. We moved from the bulletin board to NASDAQ and raised the growth capital which should take us to profitability.

I want to thank Carl De Santis for having the foresight and vision of what Celsius could become. His guidance and funding got us to the point where we could do the secondary offering to raise over $13 million. In addition to our work on the capital side, we've strengthened our Board of Directors and oversight committees. Joining Geary Cotton, Bill Milmoe, Jim Cast and I are Tom Lynch, Richard Swanson and Chris Nast.

Tom Lynch became a Director of our company in November of 2009. He's been a President of the Plastridge Insurance Agency since 1975. He's been a Director of the First United Bank since 2004 and on the Board of Governors for the Citizens Property & Casualty Insurance. He's also on the board of many charitable organizations and has served as an elected official for many government entities over the past 20 years.

Rich Swanson joined the Board in December. He's a principal of The Swanson Group, a consumer products, sales and marketing firm. Rich also is serving his second term as a member of the National Association of Chain Drug Stores on the Retail Advisory Board, and is currently functioning on a steering committee.

Rich has been a senior executive within the consumer products industry for 31 years and held positions with Proctor & Gamble and Confab Corporation before forming his own sales and marketing firm in 1998. Chris Nast joined us in January. He has vast consumer products experience with Chesebrough-Pond's, Colgate-Palmolive and Rexall Sundown. He was Executive Vice President of Colgate North America from 1989 to 1995.

He served on Rexall's Board of Directors from 1993 when the company went public until it was sold. Chris also served as Rexall's President and COO from 1995 until he was named its CEO in 1997. He retired when Rexall was sold in June 2000 to Royal Numico.

Before I go into the Q4 highlights I'd like to put our progress into perspective relative to our overall strategy. As I've relayed in prior conference calls, last spring we decided to evolve our route-to-market strategy. Instead of primarily selling through distributors we would focus our resources towards selling direct to retailers.

Our experience had shown that it was taking too long to put together a contiguous group of distributors that could cover the larger retail chain's footprint of store locations. So last spring and through the summer we transformed our sales force from one primarily strong in selling to and servicing distributors to a force that understood and had the relationships to sell directly to the larger chains.

With this change in strategy we also added CROSSMARK as our sales and merchandising partner to aid in the initial sell in, the merchandising efforts and the management of the chains. We also developed and launched a comprehensive marketing plan, which was important in influencing the retailers to stock Celsius.

On the November conference call I listed many of the new retail wins that the team had brought on. By the way I also discussed on the last two calls, the length of time that it can take to make it to the actual shelves in some of these multi-thousand location chains. Sometimes it can take 60 to even 120 days to get onto all the approved shelves.

Remember too with this route-to-market strategy of selling into and through the retailer's own supply chain we are more dependent on their personnel and systems and some locations move quicker and adhere to the plans better than others.

So now, with this change in strategy and subsequent success on bringing on more key retailers as a backdrop, which has helped put our growth into perspective. We had $2.4 million in net revenues for the fourth quarter. This is an increase of 283% over the fourth quarter of 2008.

We continue to add key retailers at a strong pace in the fourth quarter and into this year. Celsius is currently planned in 33,800 retail outlets as measured by Nielsen. This does not include GNC, Vitamin Shoppes, and other channels such as health and fitness. There's a total number of 75,000 stores that are measured.

Currently based on plannograms of the retailer's plans and authorizations we're at 35% ACV. This is up from 5% at latest just last June. ACV or all commodity volume is a metric that represents the total annual sales volume of retailers within the channels of food, drug, club and mass.

In analyzing distribution it helps value a Wal-Mart store versus a local convenience store and the industry uses it instead of only counting the number of locations or doors. So again last June we had distribution to retailers that did barely 5% of the entire sales volume of the food, drug, mass and club channels. At this time we are in stores that do 35% of the entire volume of commodities in these channels of trade.

In the drug channel we began shipments to Walgreens and Rite Aid toward the end of the year. We are now shipping to CVS. Combined with Duane Reade and Marc's we are planned into over 18,000 doors or locations, which equates to better than 95% ACV in the drug channel. We had our first shipments into the club channel in fourth quarter with 285 Costco stores.

We are beginning shipments to the remaining Costcos now and should be in all 408 stores in April. We are also pleased to announce that we are beginning shipments to Sam's Club. Sam's has agreed to stock Celsius in a select group of their locations and we're starting with 113 club stores throughout Texas, Colorado and Washington.

With shipments to the remaining Costcos and the initial Sam's Club stores we will have about 56% ACV of the club channel of trade. In the grocery channel we added Winn Dixie, Harris Peter, Johnny Carlisle and Ralph's in Q4. And key recent wins that we've added include Hy-Vee and [Derbigs] in the Midwest. These chains are high quality progressive chains that provide a terrific shopping experience to consumers throughout eight states.

Also in the Midwest we added ShopCo., which is one of the premiere mass retailers in the Midwest with locations in more than 13 states. Adding the new grocers to our distribution gives us a grocery ACV of 30%. We are also proud to announce that we will be in the Publix stores here in the South in May.

Shipments to their distribution centers will begin in March and April. In the convenience channel we just added two top 15 national convenience chains, Casey's General Stores and Cumberland Farms, which represent over 2,000 incremental locations in the Midwestern and Eastern portions of the US. The convenience channel is quite splintered and the majority of stores don't have scan data so there's no ACV calculation we're giving there.

The team has made great progress in getting Celsius onto more shelves and we plan on being at 80% total ACV by the end of this year. In addition to the food, drug, club, convenience and mass channels of trade we've made good progress in the health and fitness channel as well as in many e-commerce retailers. Some of these help Celsius more from a consumer awareness and trial standpoint than revenue volume.

We just initiated our first in the military channel as AAFES, which is Army/Air Force Exchange Service has approved both the Celsius ready-to-drink cans and the on-to-go packets in their largest format locations worldwide. Our highest priority has been getting distribution.

With the capital raise now behind us this year's number one priority will be creating the consumer awareness and trial needed for the sales from the shelves. Results have shown that when consumers know about Celsius, understand what it does and have a chance to try it a good percentage become loyal customers.

We continue to combine PR, grass roots events, and various advertising methods to increase awareness and drive trial. PR is a key component of our marketing especially when we get trusted third-party endorsements. Celebrity seeding continues. We opportunistically utilize gifting suites such as the Golden Globes, Ginny's and upcoming Oscars. We continue to build high awareness among the celebrities.

Also in February alone we sampled thousands of Celsius cans across five states in many local events as well as the in-store sampling at various retailers like Costco. Mario Lopez continues to attract attention as our Celsius national spokesperson. Just this last weekend he participated in a huge event at the Fort Louis military base where thousands of soldiers and their families were able to try Celsius.

Mario signed autographs and entertained the troops and helped lead to a great kickoff in the important military channel. Hopefully you've seen Mario on Extra holding a can of Celsius. He loves Celsius and continues to promote the brand whenever possible.

We announced Mario on the November conference call and our first usage was him appearing on the Giant Jumbotron in Times Square along with our 32nd TV spot. This started the day before the big Thanksgiving Parade in New York City and ran up through part of February. In addition to various print ads we have him on large signage in the entrance of many Duane Reade stores throughout the city as well as on many strategically placed signs beside the clocks in the subway systems in New York.

Advertising continues to raise awareness in key markets and nationally. Radio is an important component as we continue to drop in the top 16 Celsius markets with DJ endorsements and a combination of 30 and 60-second spots. With radio we're averaging 12 million impressions per month.

We're continuing with the national cable TV and network spot buys averaging upwards to 80 million impressions per month. This included over 74 million impressions for February on 11 cable networks including Fox News, Bravo, Lifetime, Lifetime Movies, Wi, Style and DIY. Network spot buys continue to air from seven to nine AM on ABC's Good Morning America and NBC's The Today Show in key Celsius markets and delivered over 6.8 million impressions.

We continue to utilize print media in national health and fitness magazines such as Women's Health, Shelf, and Shape. All advertising vehicles feature a call-to-action coupon to drive retail sales. In-store we are just initiating the Catalina coupon system. Many of you may have experienced this system in the past. If you've ever received a coupon printed along with your receipt at a checkout counter based on some of the items that you'd purchased it was most likely the Catalina system or one like it.

We are waiting on redemption results for analysis to help us fine tune which products purchased should trigger a Celsius coupon. As I mentioned, event and grass roots marketing continue in top Celsius markets. Trial is important for the brand and we will continue to sample at events targeted to Celsius consumers.

This includes 5K or 10K runs, health and fitness expos with big shows such as Arnold Fitness Expo and Ursa on the horizon. We're increasing our Internet market with more online banner ads on targeted websites that offer coupons to drive trial at retail. Our new e-commerce portion of our own Celsius.com site is just about ready to launch later this month.

As I now turn it over to Geary, let me first say how good it is to have him on board. It's also good that Jan continues to play an important role, and I don't think our small company would have made it to where we are without the hard work and dedication of Jan. That said, adding Geary's wisdom and experience to the team is exciting for this stage of our growth.

And I don't just mean his experience on the institutional investor or the Wall Street side of the business. Geary joined Carl De Santis at Rexall Sundown when they were just about our size, 12 million in annual sales. Geary helped take them to NASDAQ as we've just done, and then to become a NASDAQ 100 company.

Eventually Geary led the process as they were acquired by Royal Numico for $1.8 billion. He instilled processes, reporting and a culture of accountability that helped Rexall grow 25% on average every year. By the way he was aided in this process by Chris Nast who has just joined our Board. It's great to have Geary more involved in the daily operations beyond just his input from the Board level, and with that said, I now turn it over to Geary to review our results. Geary?

Thank you, Steve, and thank you for joining us today. First of all, let me tell you how excited I am to be working with the Celsius team including all the colleagues from the Rexall Sundown days. Secondly, I want to welcome all the new shareholders that have come on board through our recent capital offering. I would also like to thank all the shareholders that had been such loyal supporters of the Celsius products over the past years. Now let's review the financial highlights for the fourth quarter of 2009.

Our revenue for the last quarter of 2009 was $2.4 million, a 283% increase over the $621,000 for the same quarter a year ago. This increase was a combination of increase in sales channels as well as initial shipments to new customers. Initial shipments to new customers were $1.7 million in the quarter. New customers shipped in the quarter included Costco, Walgreens, SuperValu and Rite Aid. Costco alone accounted for approximately $1 million with initial distribution to 285 stores of the total 408 in the chain.

The balance as Steve said are expected to be shipped in March and April. Our gross profit for the fourth quarter was 54.9% as compared to 28.1% for the same quarter last year. Last year's results included a write down of bottle inventory of approximately 130,000.

As Steve mentioned there's been a strategic shift of focusing on selling direct to the retailers. This shift has led to the increase in gross margin experienced in the fourth quarter. We've had questions raised as to how various discounts such as slotting fees, coupon redemption and store circular advertising fees are accounted for. All these expenses are deducted before net sales.

In other words they are not included in sales and marketing expense but deducted in deriving net sales. Many investors have asked for guidance as to gross margins going forward. While we have not commented on this before we do feel comfortable with giving guidance in the 45% to 55% range.

While I realize this is a large range gross margins can be affected by initial promotional expenses, distribution method as well as mix within the food, drug, mass, club, convenience and military channels. This range should condense as we get more history.

Sales and marketing expenses were $2.7 million in the fourth quarter as compared to 1 million in the same period last year. Of the $1.7 million increase, $231,000 was related to payroll costs of increasing the sales and marketing departments.

The balance represents an increase in the advertising and marketing efforts including TV, radio and print advertising. We expect to ramp up marketing expenses in the first and second quarter of 2010. Our general and administrative costs increased to $829,000 from $418,000 in the fourth quarter a year ago.

Of this $411,000 increase, $280,000 represents an increase in option and warrant expense related to employees, directors and a national spokesperson. Our net interest expense increased from $49,000 in the fourth quarter 2008 to $200,000 for the same period this year, this increase mainly due to the increase in debt and the amortization of debt discount.

Our net loss increased from $1.3 million for the fourth quarter last year to $2.4 million for the fourth quarter in 2009 or $0.30 per share in 2009 versus $0.18 per share last year, both basic and diluted. Please be aware that the dilutive common share equivalents of $2.8 million shares were not included in the computation of diluted earnings per share because of the inclusion would be anti-dilutive.

Our revenue for the year of 2009 was $5.9 million as compared to $2.6 million for 2008. The increase of $127,000 was due to the increased sales to new customers across all sales channels. Our gross profit for the year was 47.8% as compared to 29.2% for the 2008 year. This margin was improved from the previous year mainly to increase volumes, lower production costs, and mix of business between sales to distributors versus direct-to-retailer as well in 2008 we had the large write down of bottled inventory.

Our operating expenses have increased compared to last year. Our sales and marketing expenses were $8 million this year as compared to $3.9 million for 2008. The main reason, as I mentioned before, is the investment in traditional advertising including radio, TV and print.

Our G&A expenses increased by $517,000 from $1.7 million to $2.3 million in 2009. Of this $517,000 increase, $360,000 is due to the increased cost of options and warrants issued to employees, directors and a national spokesman as compared to the previous year.

Our net interest expense decreased from $342,000 in 2008 to $305,000 for 2009. The increase was mainly due to differences of net debt levels. Our net loss increased from $5.3 million for 2008 to $7.8 million for 2009 or $1.02 per share in 2009 versus $0.82 per share in 2008, both basic and diluted.

We have a stockholder's deficit of $3.2 million at the end of December. Our cash requirements from operating activities for the year were $9.6 million compared to $4.8 million for the previous year. During the last quarter of 2009 we converted a note for $1 million to Series A preferred shares. We also converted all the Series B preferred shares to 4.3 million common shares.

In December we executed a 20 for 1 reverse split. Subsequent to year-end we raised new equity capital in the form of a secondary offering. We received a net of $13.1 million for the sale of 900,000 units, each unit consisting of four shares and a warrant to purchase one additional share for $5.32.

Today we have 15.7 million shares outstanding. I direct you to read our 10-K for the year 2009 for further explanations and other important information about the Company. We expect to file the 10-K within a week or so. Now I will turn the call back over to our CEO, Steve Haley.

Thanks, Geary. So now we have the capital to grow. We have the infrastructure ready along with a passionate and enthusiastic and experienced management team. We're excited about the new retailers that we just announced such as Sam's Club, Shop Co., [Dearberg's], Hy-Vee, and of course, Publix.

As I mentioned, while we will continue to add new retailers the primary focus will become driving consumer awareness and trial along with strong in-store execution. We're doing well in most retailers and channels and there are some we need to work on. We know that sampling increases sales so we will continue to sample in-store and at large national and local events. We will increase our trade marketing with targeted retailers or markets.

We've learned that the Burn Baby Burn jingle helps us with recall of our television ads but many do not remember or maybe understand what Celsius is or does. We've also learned that our best and most loyal customers drink Celsius as part of an overall fitness or health or well being plan. So we're fine tuning our messaging and getting clearer with the Celsius story and its benefits.

Our five key benefits or attributes are the proven and significant calorie burn, lasting energy, reduced fat, increased muscle mass and great taste. You will soon see our evolution to a more aggressive campaign around the Celsius unique selling proposition over the next couple of months.

So in summary, we're excited about the new distribution and we're committed to the excellent in-store execution and stepping up our marketing to drive home the proven benefits of Celsius. We have the capital and team in place and we've guidance of a revenue target of $25 million for the current year and we plan to move to cash flow positive by the end of this year. Our enthusiasm is high as is our commitment to delivering real results. We thank you for your continued confidence and support. With that we'll open it up for your questions. Manny or operator?

Thank you.

(Operator Instructions)

And our first question is from the line of Mickey Schleien with Ladenberg. Please go ahead.

Good afternoon Steve, and Geary.

Hi, Mickey.

I have several questions. I'll try to be as quick as possible. Could you please give us an update on your current advertising and marketing budget or at least some sense of how much that might grow this year versus last year? And also I think Steve you mentioned that there's been a 'good response' to advertising. Is there any kind of a metric that you can give us so that we can understand what that means?

You want to answer the budget question first?

Yes first -- Mickey this is Geary. I'll answer the marketing costs in the fourth quarter are about $2.7 million. That will increase to $4.2 million in the first quarter, remain about the same level in Quarter Two and then start to get to more normal levels, start to slide down to about $2.7 million for Quarters Three and Four based on our projections.

Terrific. That was selling and marketing, right?

That was selling and marketing expenses.

Okay and I'm trying to get a sense of how effective the marketing is? Steve, I think you mentioned something about a good response but what does that mean in terms of some sort of metric?

Don't have a clear metric for you to give on impressions translating into, say, dollar sales. Excuse me, more anecdotal data is we're doing more research with where we've done different types of ads. We know our number one driver is trial so, for example, the sampling we're doing in the Costcos we see a direct response when we're doing the sampling there to the increase in sales. And we've seen that historically throughout the years. As far as the TV ads and the dollars spent and where we're focusing that I don't have a metric for you right now on how that would translate into revenue.

Okay. Are you contemplating any new products this year, Steve?

We will stay mostly focused on our -- we'll stay totally focused right now on the Celsius line. That includes, as you know, Mickey, the ready-to-drink that's in the cans both the teas as well as the sparkling. We do have the On-the-Go packets and we may increase that later in the year. But as far as this quarter and next quarter we're going to run with what we've got in that we've got so much growth in these channels that I mentioned that we want to exploit that as fast as we can. So I don't see another product coming out. We're certainly not ready to announce in the next two quarters.

Okay and can you give us a sense of your sales volume in the fourth quarter?

The last quarter?

Yes, four quarter volume whether it's cases or ounces or cans or whatever metric you could give us?

Yes, Mickey, we really haven't -- there's so many different units. You've got powders. You've got cases. You've got special packs. We really have not established the metrics for you to model off of if that's what you're trying to do at this point in time. As we move down the road we'll probably be able to give some better information on exact units and what we describe as a unit and how it's calculating.

Okay.

I think in the fourth quarter it was around 120,000 cases approximately.

Okay and can you give us a sense of how prices and raw material costs have been trending?

The costs have been coming down. Of course, as we have longer runs we buy more materials we have been seeing an impact of that in our gross margins going in the past this last year when we significantly ramped up, if you looked at our inventory versus last year you can see that we've increased over $1 million. So we are going to continue to get more benefits as we grow the Company.

And your realized prices, how are they trending?

The prices at the retail?

No, no your prices, the wholesale price.

A little higher because we're going direct to retailer than what we were getting when we go to distributors. But generally they've stayed the same the last two years. We haven't raised them and certainly are seeming to go down.

The only thing that would affect the margins, which I mentioned, is how promotional expenses -- a lot of times when we get into a retailer we will have special promotional items like buy one, get one free, those types of things. Those reduce the net sales and they reduce the margins and they generally are one-time events. So depending on what the promotional expenses that could affect the margins going forward.

Okay and Geary you gave us very specific guidance on selling and marketing expense, what can I expect in terms of G&A?

The G&A is certainly not going to ramp up anywhere near what the sales are. It's not the -- G&A expenses as I indicated this year the ramp up was basically because of options that we're trying to reward and get the employees to realize they have a big stake. It was one thing we did at Rexall Sundown was to make sure they understood that as this company is successful they will be successful and that was one of the things as well as the personality we brought on. But other than that you can see it did not ramp up that much nor do I expect it. But we have not given specific guidance on that.

Okay and Geary you mentioned inventory, what's your thinking on inventory turns? They seem to have been prior to the fourth quarter at least they were pretty high and I know you want to increase the turns. How much more efficient do you think you can get on your inventory turns?

That's one of the things going into this year we've talked about in some of our management meetings. Right now historically it has not been a big issue because it makes sure we're in supply when we get an order. And as far as increasing the number of turns that's going to be on our focus for this year but right now we probably have -- we want to make sure we have an adequate inventory so we do not have any outs.

Okay and I think you mentioned in the prepared remarks that you expect to be cash flow breakeven, if I'm correct, by year end, did I hear that right?

Yes, we expect that we will be not profitable in the fourth quarter but that we will start as we move into that December month in that fourth quarter we expect to start generating a profit if we get the levels of the sales that we've projected of 25 million.

Okay so I want to make sure I'm understanding you, you're saying cash flow breakeven in December, for the month of December?

No, just by the end of the year, let's put it this way, we would expect a profit in the first quarter of 2011 if we're meeting our marks.

Okay, fair enough. And just one more question and I'll sign off. How much more capital do you think you need to fully fund your business plan, I mean the long-term business plan?

We do not expect any future capital raises during the -- that was a question that was asked on the road show and given the amount of capital that we raised we expect to have a surplus, a significant surplus going into the beginning of the year. So we do not expect any capital raise going forward. We should be able to pay for our deposit of cash flow going into next year with sufficient cash on the balance sheet by the end of the year.

Okay. Thanks very much for your time this afternoon.

Want to do an Internet call or Manny do you have another one?

Yes, our next question is from the line of [Scotty Sparks], a private investor. Please go ahead.

Yes, hello?

Hey Scotty.

Hey. The last time we had one of these conference call, of course, I mentioned -- well I typed in about going to [Afee's] and you said you probably weren't going to be looking into anything like that until sometime this year. But I also asked about the possibility of a reverse split and you said, we don't anticipate doing anything like that anytime in the near future, and it was like a month later you announced a reverse split.

And since then we get these news releases about the product being offered in various locations but when I go and call corporate offices about it one example would be SuperValu, I have clients that work in the warehouse, they pull it up on the computer, they said they don't see anything whatsoever about Celsius product.

I called Costco, they don't see anything in the computer about Celsius product so I don't understand why the news and why the verbal reports are somewhat different and occasionally contrary to what we're getting in news releases, what's actually happening?

You asked several there -- let me say working backwards first. We're basing it on our actual POs, shipments and dollars going to these customers. We didn't call the people in the warehouses to verify it but we are shipping to Costco and our sales are good there.

So I don't know where that difference comes then. There may be a store -- this what I said in my comments, at a store level you could go into and we may still not be there. And we're working hard to make sure we're on all the authorized ones that we should be. So you may find at a store level as far as the warehouse guy, I don't know, Scotty. And as far as the -- you want to?

The reverse split was necessary for the Company to list on NASDAQ, so once a decision was made to raise capital that was a given that we had to do. And so that was just part of this going public and getting listed on NASDAQ process, of the secondary offering.

Yes and I thought that might be a possibility when I asked that question the last time, but it appeared the answer was something along the lines that wasn't even going -- wasn't even being considered.

My answer was we were looking at all options but actually at that time the funding we were thinking was still with Carl De Santis. In a very quick period of time we looked at what was happening on the markets and decided to if we could get off the bulletin board that would be good, provide liquidity to investors and we made a quick decision to do that. But at the time it wasn't that we were holding back.

Okay. Can I ask one more question or get you to say one more thing?

Well you can ask one more question -- I'm not sure about the other.

You know I keep track of stocks and clients of mine -- I'm a financial advisor, I keep track of client assets and I'll do some of it on Yahoo! and I've occasionally gone to their message board, and I'll tell you it's about the most useless location to be but you get people on there telling other shareholders things like people at Celsius are pumpers and dumpers and just all kinds of nonsense. And I'm wondering if you could just comment on the validity of anything that's being said on these message boards as it pertains to people within the Company in terms of information?

There's not a lot I can say, but I sure would like to. Actually we pretty much have quit looking at the message boards.

I'm about there too.

The most disappointing is when someone does act like someone they're not. And the employees here get confused and wonder so we just said, let's just don't even look at that. We've got a lot of happy people here working very hard to build the Company and I think some of that stuff is driven by other agendas and so we just stay out of it.

Okay, all right. Thanks a lot, I appreciate it and I'm still along on this.

I appreciate it, Scotty.

Okay, let's take the first question from the webcast and that says how many outlets is Celsius currently available and what percentage increase is this over 2008?

The -- I answered a little on the number of sites that we can calculate through Nielsen is 33,800. We've got a few more when you add up to gyms and more the health and fitness channel. We went into this year with a little over 6,000, if that helps put the growth into perspective, and we were kind of flat there for the first quarter. So we really started ramping in Q3.

The next question, I have seen Mario Lopez on Extra with Celsius. Are there any more product placements planned in the near future?

There are more. He is doing great now, as we've started -- it took us a couple of months for -- to get the teams working together on things that they could impact and you'll see more over the next several months.

Would you consider Celsius drinks to be more of a warm weather type of drink?

I don't know that I would say warm or not. You just overall drink beverages maybe a little bit more in the summer, but being a fitness drink, people are drinking it all throughout the year.

Has the management from [Tentwater Capital] been in contact with the Delray Beach office? Is Tentwater Capital requesting direct representation on the Board of Directors?

No. This is Geary, but I think they may be one of our substantial new investors, but they have not requested to anything regarding the Board.

Manny, do you have any more?

Yes. Our next question is from the line of [Michael Tupin] with Celsius. Please go ahead.

Hi. My name is Michael.

Yes.

Hi. Yes. I'm a 20-year-old college student and I have a -- I hold some stocks in the Company. And I had originally bought it back when it was at $0.13. What is your demographic that you're targeting? It seems to be women in their mid-30s, I'm guessing? Why not go for college students who seem to be the majority drinkers of energy drinks?

I think you're hitting on a key point for us that I alluded a little bit to in the prepared comments there, Michael. We did start off more targeted towards females, especially when we had to line up a radio station or something and ask for which demographics. It -- because women just get the message of calorie burning and the metabolism so fast.

But as we've learned so much over the last year, both through sampling and advertising and getting into more stores where we can get the demographics, we were seeing much more of a shift, first to both more male and female, but our best customers are the ones that are concerned about fitness. This includes, certainly, students. You will see us doing much more targeted into that environment than you would for that fitness -- people using it to work out than we have in the past. So it will be broadening of our market, although tightening of our messaging.

Okay. So do you plan on coming out with alternative commercials to the burn baby burn and things like that?

Well, we may still use the jingle, but we're developing some new creative right now that you'll see targeted a lot -- a little bit different than the commercials we have right now.

Okay. Also, just do you plan on getting them into gas stations as in five hour (inaudible - microphone inaccessible) and variable on every gas station shelf in the country, so that (inaudible - microphone inaccessible) Do you plan on doing stuff like that as opposed to just these big grocery store brands?

The -- we are going after the convenience channel, the channel, which means whether that's a gas station or a truck stop or a convenience store, we are growing that part of our business now.

Okay. Well, thank you very much for your time.

The next question is from the Internet. What new advertisements from Mario Lopez will we see in 2010? Will Lopez be our spokesman in 2011?

We would hope so. We don't have anything firm on going out way into the future. As far as advertising, you will see us grow that in many forms. There's, like as I mentioned, the advertising we did that turned into good print, just this past weekend. So we have many more ads coming out, utilizing Mario.

Are we establishing any new international outlets in foreign countries, besides Sweden, Chile and Cyprus?

On the international front, we are de-emphasizing that a bit. We've been opportunistic over the last few years and have added some and they're growing and we're going to continue to support those. But as far as the next couple of months of growing internationally in a bigger way, we're de-emphasizing that to, again, really grow here in the United States more.

Why don't we take the next from the phone?

Manny, do you have another? Do you want to answer the international? Manny, do you have another one?

Yes. Our next question is from the line of [Peter Vilardi] with ACV Investments. Please go ahead.

Hello, gentlemen. My question is regarding reorders from major chains and from all the retailers that you added. How well are the products moving off the shelf and either from feedback or reorders from your retail distributions?

As I mentioned, in most -- you have to look at it across the board as well as by channel, we're doing very well. There are some that we have to work on more, generally those are in the newer markets where we haven't been much longer as opposed to the mature. But pretty well. And the ones we're not, we're working on it.

So that's on? I mean, you -- because I know, you get the initial orders, obviously. So I guess I just want to make sure that the product is actually moving off of the shelves. Because it's easy to reflect an initial quarter when you have the new customers -- the new retailer. But to me the bigger key is are they moving off the shelves?

Yes, it's -- as we transition now, as I said in the comments, the first goal was we had to get on the shelves. Because you can't sell if you're not there. And now we've got to all out push to get it off the shelves. And we're -- that's our big number one total goal for this year.

Do you have any agreements with some of the retail outlets as far as not necessarily shelf placement, but what section of the grocery store, for instance, that those -- because the ones I've been in, the product is located next to the shakes and not necessarily next to the energy drinks or the other kind of bottled drinks.

It varies by retailer, but strategically, you would see us more in what we would say the take-care-of-yourself aisles, as opposed to the beverage aisles. So some stores may call that health, beauty, beauty care, some will call it diet, some will call it nutrition, but we are -- usually you're going to find us more over in those parts of the store as opposed to the beverage aisle, which themselves are getting more fragmented from the soft drinks to waters to teas to energy drinks. And we try to now, you'll see us on our website, on our store locator, putting the part of the store, where we can, where we are.

Are you happy with that placement or are you going to try to shift that?

Well, we want to be in more places throughout any store, that's better shelf -- for growing our shelf. The one thing to remember is the shift in going direct to retail, by going to that part of the store, many times, that's the way to get to the store if you don't have the DSD distributors that mainly do the beverage aisle. So my main answer to the question, I'm very happy because it got us to the store.

Which aisle sells more? You can argue with a new product as well. People going down the beverage aisle don't seem to stop as much to try something new as opposed to down the more nutrition aisle, they will try something new more often. But the volume is higher on the other. So that the -- I'm happy. But we've got to grow the -- we want to grow our sales everywhere.

Makes sense. Okay. Well, overall, great job, guys. I appreciate the shift and the effort that you guys are putting forth and hopefully we won't be doing any more things that will drop the stock price down dramatically like --

We hope so too. Now operational, it's execution and growing the brand. We've got all of that, we hope, behind us.

Yes. I'm behind you.

Thank you for the nice comments. I appreciate it.

Okay. Thank you.

The next question from the Internet, when will Wal-Mart sign on as a distributor of Celsius?

Well, this is Geary. Certainly we had discussions. They are a part of the Sam's Club, it is certainly a good start. And hopefully it's just a matter of time before they come aboard. But they are a great retailer. They were a great retailer with Rexall-Sundown and so we'll just wait and see when that comes along. But we've got plenty of things to do and new distribution would be great, but we've got -- we're very clear with our objectives is to make this stuff -- make sure it moves off the shelf and it's still in the -- great in a lot of locations. So we're real happy about it.

The next question is a little bit longer. I think we have touched on the answer already. Your company is doing something rarely achieved, creating a new beverage category from scratch. The studies are impressive. The media support is outstanding and the distribution is ramping up. Now that you have had a short track record in some major chains and the longer one is on regionals, what does the scan data indicate in terms of movement in older chains versus newer ones? How much does the average store move per week and to what other beverage category are you comparing that to?

It is a long-winded question. Thank you for the first comments there. I think along the same theme that we've heard before. How well are we selling off the shelves? We've -- the team -- the sales team has done a good job getting it on the shelves, they're going to continue to do that with more and more, but we have to get it off the shelves.

We're doing well, and you mentioned older stores versus new. In the more mature stores and chains, or the more mature areas of the country, we're doing quite well and we're pleased with that. In the newer chains, it's -- there's that that are -- get off the ground very fast and some that are slower. And it seems to vary a little bit by channel. The drug channel being a little bit slower than some others, as an example.

It's still very new in our distribution with some of these. Some are, as I mentioned, it takes 60 to 120 days just to get on all the shelves. So it's a little hard to judge them all, but I would say the mature accounts would be very well, the newer ones, it's hit or miss here on how much we need to work on it. They're all trending in the right direction, though.

And next one from the Internet, what stores, retailers, currently sell the packets, or stick packs? Are more retailers planning on stocking the stick packs in the near future?

The question on the on-the-go packets, we don't have it very pervasive out there. And one of the reasons is the -- as the sales team is selling in a new item, remember, it's not just a new item for the Company, it's sometimes we're selling a whole new company to the retailer and they're starting with the ready-to-drink cans because they can look at the IRI data and see how we're doing and they can make a decision. The packets are new. So some of the stores will bring them in right when they're bringing in the cans. But that's not always the case and not the majority of the case.

Fred Meyers, I think, Meyers, has them. The Harris Teeter, I think, took them in and you start counting -- when I can start naming them, you know it's not pervasive out there yet in our base, but that will be getting more attention, again, as we build up success with some of these key retailers.

The next one is can you comment on whether or not your long-term strategy business includes licensing of the MetaPlus formula to other food and beverage companies? Could you give us some examples of companies that you are or would be targeting in a strategic partner and the types of products that we might see MetaPlus in?

We trademarked the name MetaPlus so that we could take it to other products, whether they're our own products or others'. At this time, there's none that we can announce or want to announce, whether that's in beverages or bars or other food types. And I think it would be a mistake to announce that. Are we thinking about it? I would say, yes, though.

In the past week, the Celsius stock has taken a downturn. I've noticed that the volume has been well below average during these weeks. Is there anything that you plan to do to increase volume and interest in the stock?

Do you want to take that?

Yes, this is Geary. As we move down the road here, one of my responsibilities will be investor relations, getting the Celsius story out to other institutional investors and speaking at forums and being more active. Right now, this next couple of months, we are working on our strategic plan, our marketing plans and we're really focused on what the objectives are right now. But that's something that down the road I will be personally handling and whether we get an IR firm or how we go about doing it, we will have that as a focus.

And next question is how well is Celsius selling in GNC? And have you considered info commercials or infomercials?

We are working on changing some of our advertising format that may lean a little bit more towards the direct response type commercials. So you may see some of that coming up, but nothing to announce as regards to infomercials today.

As far as sales through GNC, we're not -- I think we're able to say what the sales in any particular retailer are. I don't want to hide from the question, but just some of these, we're not -- we should not be and cannot be saying.

Manny, can you take the next call from the phone?

Manny?

Yes. Certainly. Our next question is from the line of [Donald Anderson], a private investor. Please go ahead.

Hi there.

Hi, Donald.

You're projecting sales of $25 million in 2010 and could you give me a rough idea as to how the sales are going in January and February, towards that goal?

This is Geary. I can't really comment on how we're doing in the middle of a quarter, that's just the way the rules are. I can say that we're very well aware that we gave guidance on $25 million. And it's our obligation, as soon as we feel that that is unattainable, have a responsibility to go and correct that. So all I can say is we have not done that. We have reiterated it today and I can't really describe the ramp up of what we expect from each quarter. It certainly is going to be a ramp up from each quarter, but that's about all I can say on that specific question.

Okay. I suppose that after the first quarter is over, sometime in April or May, you have a first quarter wrap up and that would give us an indication?

Yes, we're not that far away from having our first quarter and then we'll be able to discuss a lot more and -- but we're into March right now, so in April, we'll be coming out with the results.

I would just like to make one further comment. I heard somebody talking about the marketing to age groups. I happen to be 86 years old and I drink a packet of Celsius every day and my cardiac doctor has said that it's good for me and to keep it up, so -- .

Well, thank you, Donald. We actually -- on our website, we have 16 people over 85, as far as the data they've told us, so you're one of the 16 maybe and we sure appreciate all your business.

Okay. Thank you.

Thanks, Donald.

Okay. Bye.

Manny?

The next question is do you feel that investors are supporting the product by purchasing it on a regular basis?

Do we feel investors are supporting it by purchasing it? I would hope so. But we don't really know.

The last question that we have right now is what is the fully diluted share count as of now? And good job on the bigger picture and moving the brand forward.

It's in the script --

Yes, right now we have 15 million shares outstanding. That doesn't include the preferred shares that can be converted, about 2 million additional shares. So fully diluted, it would be about 18 million, 19 million shares, fully diluted.

Is that it? Manny, are -- no more calls?

There are no other questions in queue.

Another one just came in. Last one.

And there's -- is the current manufacturing facility suitable to supply demand in 2010? Where is Celsius made?

How is our capacity is the question and where is it made? This was asked a lot on our road show -- would we have the capacity that we -- to supply our growth plans? We feel we're very well covered with capacity. We use a strategy of using co-packers or third-parties to produce the product. The product is currently being made up in Minnesota. We've got plants that can make it is Tennessee, North Carolina, Minnesota and there is other that we're qualified. We think the -- way down on the list of priorities is that being any sort of issue. We need to get it pulled off the shelves to grow it. The capacity is, by far, there for us. Is that it?

And one more question that has also been on the log, I think. And it says here, I noticed Janice Haley bought, recently, or was this stock options?

The shares were issued -- I -- at the --.

It was an option grant we were given to fully --

Oh, it was an option grant.

Yes, she didn't buy. It was the grant of -- another round of grants to the employees. It sounds like that is it. We sure appreciate everybody attending now or listening in later on. The call will be archived for a while. And stay tuned, we are excited about continuing to grow the Company and the brand. Thank you, guys.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.