Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
1.
|
ORGANIZATION AND DESCRIPTION
OF BUSINESS
|
Business —Celsius Holdings,
Inc. (the “Company” or “Celsius Holdings”) develops, markets, sells and distributes “functional”
calorie-burning fitness beverages under the Celsius® brand name. The Company was incorporated under the laws of the State of Nevada
on April 26, 2005. On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Elite FX, Inc., a
Florida corporation. Under the terms of the Merger Agreement, on January 26, 2007, Elite FX, Inc. was merged into the Company’s
subsidiary, Celsius, Inc.. On March 28, 2007 the Company incorporated Celsius Netshipments, Inc. in Florida as a subsidiary of the Company.
On February 7, 2018, the Company established
Celsius Asia Holdings Limited a Hong Kong corporation as a wholly owned subsidiary. On February 7, 2018 Celsius China Holdings Limited
a Hong Kong corporation became a wholly owned subsidiary of Celsius Asia Holdings Limited and on May 9, 2018, Celsius Asia Holdings Limited
established Celsius (Beijing) Beverage Limited, a China corporation as a wholly owned subsidiary of Celsius Asia Holdings Limited.
On October 25, 2019, the Company acquired
100% of the shares of Func Food Group, Oyj (“Func Food”), a and a marketer and distributor of nutritional supplements,
health food products, and beverages. The transaction included a restructuring of Func Food’s pre-existing debt. Func Food had been
the Nordic distributor for the Company since 2015.
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation and Principles of Consolidation – The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim
financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial
statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring
nature. These unaudited consolidated financial statements and the accompanying notes should be read in conjunction with the Form 10-K
filed for December 31, 2020. The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries.
All material inter-company balances and transactions have been eliminated.
Significant
Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could
differ from those estimates. Significant estimates include the allowance for doubtful accounts, allowance for inventory obsolescence,
the useful lives and values of property, fixtures and equipment, impairment of intangible assets & goodwill, valuation of stock-based
compensation, and deferred tax asset valuation allowance.
Reclassification of Prior Year
Presentation – Certain prior year amounts in the consolidated balance sheets and statements of operations and comprehensive
income have been reclassified for consistency with the current year presentation. A reclassification has been made to present right-of-use
assets and lease liabilities related to finance leases separately from those related to operating leases. Additionally, the presentation
of amortization of intangible assets and amortization of finance lease right-of-use assets are now being reflected in the general
and administrative expenses, rather than in other expenses. These reclassifications had no effect on previously reported net income
and comprehensive income and did not have a material effect to the financial statements.
Segment
Reporting — Operating segments are defined as components of an enterprise that engage in business activities, have discrete
financial information, and whose operating results are regularly reviewed by the chief operating decision maker (CODM) to make decisions
about allocating resources and to assess performance. Even though we have operations in several geographies, we operate as a single enterprise.
Our operations and strategies are centrally designed and executed given that our geographical components are very similar. Our CODM,
the CEO, reviews operating results primarily from a consolidated perspective, and makes decisions and allocates resources based on that
review. The reason our CODM focuses on consolidated results in making decisions and allocating resources is because of the significant
economic interdependencies between our geographical operations and the Company’s U.S. entity.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Concentrations
of Risk — Substantially all of the Company’s revenue derives from the sale of Celsius ® beverages.
The
Company uses single supplier relationships for its raw materials purchases and filling capacity, which potentially subjects the Company
to a concentration of business risk. If these suppliers had operational problems or ceased making product available to the Company, operations
could be adversely affected.
Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in
the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At March 31, 2021, the Company had approximately
$31.4 million in excess of the Federal Deposit Insurance Corporation limit.
For
the three months ended March 31, 2021 and 2020, the Company had the following 10 percent or greater concentrations of revenue with its
customers. Specifically, there is one customer that has accounted for approximately 15.8% and 16.4% of our revenue for the three months
ended March 31, 2021 and 2020, respectively. The below table reflects this customer’s evolution as a percentage of our total revenue
for the three months ended March 31, 2021 and 2020:
|
|
2021
|
|
|
2020
|
|
Amazon
|
|
|
15.8
|
%
|
|
|
16.4
|
%
|
All other
|
|
|
84.2
|
%
|
|
|
83.6
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
At
March 31, 2021 and December 31, 2020, the Company had the following 10 percent or greater concentrations of accounts receivable with
its customers:
|
|
2021
|
|
|
2020
|
|
Amazon
|
|
|
22.1
|
%
|
|
|
11.3
|
%
|
ICA Sweden
|
|
|
11.8
|
%
|
|
|
9.0
|
%
|
All other
|
|
|
66.1
|
%
|
|
|
79.7
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cash
Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to
be cash equivalents. At March 31, 2021 and December 31, 2020, the Company did not have any investments with maturities of three months
or less.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Accounts
Receivable — Accounts receivable are reported a net realizable value. The Company establishes an allowance for doubtful accounts
based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts
are written-off when it is determined that the amounts are uncollectible. At March 31, 2021 and December 31, 2020, there was an allowance
for doubtful accounts of $772,607 and $549,573, respectively.
Inventories
— Inventories include only the purchase cost and are stated at the lower of cost and net realizable value. Cost is determined
using the FIFO method. Inventories consist of raw materials and finished products. The Company establishes an inventory allowance to
reduce the value of the inventory during the period in which such materials and products are no longer usable or marketable. Specifically,
the Company reviews inventory utilization during the past twelve months and also customer orders for subsequent months. If there has
been no utilization during the last 12 months and there are no orders in-place in future months which will require the use of inventory
item, then inventory item will be included as part of the allowance during the period being evaluated. Management will then specifically
evaluate whether these items may be utilized within a reasonable time frame (e.g., 3 to 6 months). At March 31, 2021 and December 31,
2020, the Company recorded an allowance of $2,367,000 and $1,613,000, respectively. The changes in the allowance are included in cost
of revenue.
Property
and Equipment — Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property
and equipment is calculated using the straight-line method over the estimated useful life of the asset generally ranging from three to
seven years.
Impairment
of Long-Lived Assets — In accordance with ASC Topics 350 “Goodwill and Other Intangibles” and 360, “Property,
Plant, and Equipment” the Company reviews the carrying value of intangibles and other long-lived assets for impairment at least
annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is
expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the property, if any, exceeds its fair value. The Company did not record any impairment during the three months
ended March 31, 2021.
Long-lived
Asset Geographic Data
The
following table sets forth long-lived asset information, which includes property, plant and equipment and lease right-of-use assets and
excludes goodwill and intangibles, where individual countries represent a material portion of the total:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,181,188
|
|
|
$
|
694,697
|
|
|
|
|
|
|
|
|
|
|
Sweden
|
|
|
523,126
|
|
|
|
431,959
|
|
Finland
|
|
|
386,302
|
|
|
|
450,878
|
|
Long-lived assets related to foreign operations
|
|
|
909,428
|
|
|
|
882,837
|
|
Total long-lived assets
|
|
$
|
2,090,616
|
|
|
$
|
1,577,534
|
|
Goodwill —
The Company records goodwill when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets
acquired, including related tax effects. Goodwill is not amortized; instead, goodwill is tested for impairment on an annual basis, or
more frequently if the Company believes indicators of impairment exist. The Company first assesses qualitative factors to determine whether
it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. If the Company determines that the
fair value is less than the carrying value, the Company will recognize an impairment charge based on the excess of a reporting unit’s
carrying value over its fair value. At March 31, 2021, there were no indicators of impairment.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Intangible
assets – Intangible assets are comprised of customer relationships and brands acquired in a business combination. The
Company amortizes intangible assets with a definitive life over their respective useful lives. Intangibles with indefinite lives are
tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist.
Revenue
Recognition — The Company recognizes revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.”
The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales
occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects
to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies
with changes in customer incentives the Company offers to its customers and their customers. Sales taxes and other similar taxes are
excluded from revenue.
Customer
Advances — From time to time the Company requires deposits in advance of delivery of products and/or production runs. Such
amounts are initially recorded as customer advances liability within other current liabilities. The Company recognizes such revenue as
it is earned in accordance with revenue recognition policies. As of March 31, 2021, and December 31, 2020, the Company did not have any
customer advances.
Advertising
Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements,
and digital advertising. The Company incurred marketing and advertising expenses of approximately $5.3 million and $2.7 million, during
three months ended March 31, 2021 and 2020, respectively.
Research
and Development — Research and development costs are charged to general and administrative expenses as incurred and consist
primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $200,000 and $123,000
during the three months ended March 31, 2021 and 2020, respectively.
Foreign
Currency Translation — Foreign subsidiaries’ functional currency is the local currency of operations and the net assets
of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation,
as well as exchange gains and losses on intercompany balances of long-term investment nature, are included in Comprehensive Income. The
Company incurred foreign currency translation net losses during the three months ended March 31, 2021 of approximately $192,500 and net
losses of approximately $115,000 during the three months ended March 31, 2020. Our operations in different countries required that we
transact in the following currencies:
Chinese-Yuan
Norwegian-Krone
Swedish-Krona
Finland-Euro
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Fair
Value of Financial Instruments — The carrying value of cash and cash equivalents, accounts receivable, intangible assets, accounts
payable, accrued expenses, and notes payable approximates fair value due to their relative short-term maturity and market interest rates.
Fair
Value Measurements - ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
|
Level 1:
|
Observable inputs such
as quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
|
Level 2:
|
Observable market-based
inputs or unobservable inputs that are corroborated by market data.
|
|
|
|
|
Level 3:
|
Unobservable inputs for
which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
Other
than these noted previously, the Company did not have any other assets or liabilities measured at fair value at March 31, 2021 and December
31, 2020.
Income
Taxes — The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,”
which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
require the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets
for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provisions
of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain
that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about
the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of
ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.
Tax
positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold
are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable
taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above
should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and
penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain
of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The
Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether
a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position
can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions
considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered
more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The
Company’s tax returns for tax years in 2018 through 2020 remain subject to potential examination by the taxing authorities.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Earnings
per Share — Basic earnings per share are calculated by dividing net income available to stockholders by the weighted-average
number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of
common and dilutive common share equivalents outstanding during the period. Please refer to the below table for additional details:
|
|
For the three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net income
|
|
$
|
585,424
|
|
|
$
|
546,051
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
72,516,396
|
|
|
|
69,284,307
|
|
Diluted
|
|
|
76,925,484
|
|
|
|
70,339,416
|
|
Share-Based
Payments — The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related
interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation
amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock
Incentive Plan. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees
of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities
to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued.
The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase
of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January
1, 2017 (note 15). As of March 31, 2021, total shares available are 1.8 million.
Cost
of Sales — Cost of sales consists of the cost of concentrates and or beverage bases, the costs of raw materials utilized in
the manufacture of products, co-packing fees, repacking fees, in-bound & out-bound freight charges, as well as certain internal transfer
costs, warehouse expenses incurred prior to the manufacture of the Company’s finished products, inventory allowance for excess
and obsolete products and certain quality control costs. Raw materials account for the largest portion of the cost of sales. Raw materials
include cans, bottles, other containers, flavors, ingredients and packaging materials.
Operating
Expenses — Operating expenses include selling expenses such as warehousing expenses after manufacture, as well as expenses
for advertising, samplings and in-store demonstrations costs, costs for merchandise displays, point-of-sale materials and premium items,
sponsorship expenses, other marketing expenses and design expenses. Operating expenses also include such costs as payroll costs, travel
costs, professional service fees (including legal fees), depreciation and amortization, and other general and administrative costs.
Shipping
and Handling Costs — Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight
expense on goods shipped for three months ended March 31, 2021 and 2020 was $4.2 million and $2.1 million, respectively.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
2.
|
BASIS OF PRESENTATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Recent
Accounting Pronouncements
The
Company adopts all applicable, new accounting pronouncements as of the specified effective dates.
In
September 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”),
which requires the immediate recognition of management’s estimates of current and expected credit losses. In November 2018, the
FASB issued ASU 2018-19, which makes certain improvements to Topic 326. In April and May 2019, the FASB issued ASUs 2019-04 and 2019-05,
respectively, which adds codification improvements and transition relief for Topic 326. In November 2019, the FASB issued ASU 2019-10,
which delays the effective date of Topic 326 for Smaller Reporting Companies to interim and annual periods beginning after December 15,
2022, with early adoption permitted. In November 2019, the FASB issued ASU 2019-11, which makes improvements to certain areas of Topic
326. In February 2020, the FASB issued ASU 2020-02, which adds an SEC paragraph, pursuant to the issuance of SEC Staff Accounting Bulletin
No. 119, to Topic 326. Topic 326 is effective for the Company for fiscal years and interim reporting periods within those years beginning
after December 15, 2022. Early adoption is permitted for interim and annual periods beginning December 15, 2019. The Company is currently
evaluating the potential impact of adopting this guidance on our consolidated financial statements.
All
new accounting pronouncements issued but not yet effective are not expected to have a material impact on our results of operations, cash
flows or financial position with the exception of the updated previously disclosed above, there have been no new accounting pronouncements
not yet effective that have significance to our consolidated financial statements.
Liquidity
— These financial statements have been prepared assuming the Company will be able to continue as a going concern. At March
31, 2021, the Company had an accumulated deficit of $54,841,408 which includes net income of $585,424 for the three months ended March
31, 2021. During the three months ended March 31, 2021 the Company had net cash used by operating activities of $13.3 million.
If
our sales volumes do not meet our projections, expenses exceed our expectations, our plans change, we may be unable to generate enough
cash flow from operations to cover our working capital requirements. In such case, we may be required to adjust our business plan, by
reducing marketing, lower our working capital requirements and reduce other expenses or seek additional financing. Furthermore, our business
and results of operations may be adversely affected by changes in the global macro-economic environment related to the pandemic and public
health crises related to the COVID-19 outbreak.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
The
Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control
is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange
for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer
incentives the Company offers to its customers and their customers. Sales taxes and other similar taxes are excluded from revenue.
Information
about the Company’s net sales by geographical location for the three months ended March 31, 2021 and 2020 is as follows:
|
|
For the three months ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
North America
|
|
$
|
39,003,391
|
|
|
$
|
19,359,169
|
|
Europe
|
|
|
10,367,793
|
|
|
|
8,500,852
|
|
Asia
|
|
|
536,169
|
|
|
|
268,292
|
|
Other
|
|
|
127,526
|
|
|
|
56,576
|
|
Net sales
|
|
$
|
50,034,879
|
|
|
$
|
28,184,889
|
|
All
of the Company’s North America revenue is derived from the United States, which is the Company’s country of domicile. Of
the Company’s total foreign revenues of $11.0 million and $8.8 million for the three months ended March 31, 2021 and 2020, respectively,
the only individual country that represents a material portion of total consolidated revenue was Sweden, which had total revenues of
approximately $6.5 million and $5.8 million for the three months ended March 31, 2021 and 2020, respectively. Revenues are attributed
to countries based on the location of the customer.
License
Agreement
In January 2019, the Company entered
into a license agreement with our China distributor. Specifically, a license agreement was executed with Qifeng Food Technology
(Beijing) Co., Ltd (“Qifeng”). Under this license agreement, Qifeng was granted the exclusive license rights to process,
market and commercialize Celsius branded products in China. The term of the agreement is 50 years, with annual royalty fees calculated
based on each calendar year results. The royalty fees are based on a percentage of Qifeng’s sales of Celsius branded products;
however, the fees are fixed for the first five years of the agreement, totaling approximately $6.6 million, and then are subject
to annual guaranteed minimums over the remaining term of the agreement.
Under the license agreement, the
Company grants Qifeng exclusive license rights and provides ongoing support in product development, brand promotion and technical
expertise. The transaction price consists of the guaranteed minimums and the variable royalty fees, all of which are allocated
to the single performance obligation pertaining to the license agreement.
The
Company recognizes revenue from the agreement over time because the customer simultaneously receives and consumes the benefits from the
services. The Company uses the passage of time to measure progress towards satisfying its performance obligation because its efforts
in providing the exclusive license rights and ongoing support occur on a generally even basis throughout the year. Total revenue recognized
under the agreement was approximately $393,000 for the three months ended March 31,2021 and is reflected in the Company’s Asia
reporting segment.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
Inventories
consist of the following at:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Finished goods
|
|
$
|
26,224,583
|
|
|
$
|
15,334,386
|
|
Raw Materials
|
|
|
13,034,266
|
|
|
|
4,682,291
|
|
Less: Inventory allowance for excess and obsolete products
|
|
|
(2,366,990
|
)
|
|
|
(1,613,055
|
)
|
Inventories
|
|
$
|
36,891,859
|
|
|
$
|
18,403,622
|
|
5.
|
PREPAID EXPENSES AND
OTHER CURRENT ASSETS
|
Prepaid
expenses and other current assets total $17.2 million and $14.6 million at March 31, 2021 and December 31, 2020, respectively, consist
mainly of prepaid advances to co-packers related to inventory production, advertising, prepaid insurance, prepaid slotting fees, value
added tax payments and deposits on purchases. The increase of approximately $2.6 million is mainly related to advances to co-packers
and deposits to raw material suppliers pertaining to the processing and the procuring of inventory.
Note
receivable consists of the following at:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Note receivable-current
|
|
$
|
2,509,412
|
|
|
$
|
1,885,887
|
|
Note receivable-non-current
|
|
|
6,900,882
|
|
|
|
9,429,437
|
|
Total Note receivable
|
|
$
|
9,410,294
|
|
|
$
|
11,315,324
|
|
Effective
January 1, 2019, we restructured our China distribution efforts by entering into two separate economic agreements as it relates
to the commercialization of our Celsius products (i.e., license agreement) and a repayment of investment agreement with Qifeng.
Under the license agreement, Qifeng was granted the exclusive license rights to manufacture, market and commercialize Celsius®
brand products in China. Qifeng will pay a minimum royalty fee of $6.9 million for the five years of the term of the agreement,
transitioning to a volume-based royalty fee, thereafter as aforementioned. Under a separate economic agreement, Qifeng Food will
repay the marketing investments made by Celsius into the China market through 2018, over a five-year period. The repayment, which
was formalized via a Note Receivable from Qifeng, will need to be serviced even if the licensing agreement is cancelled or terminated.
Scheduled principal payments plus
accrued interest are due annually on March 31 of each year starting in 2020. The Note is recorded at amortized cost basis and
initially accrued interest at a rate per annum equal to the weighted average of 5% of the outstanding principal up to $5 million
and 2% of the outstanding principal above $5 million. On September 12, 2020, it was agreed to fix the interest rate at 3.21% which
reflected the weighted average interest rate for the 5-year period of the Note. For the three months ended March 31, 2021, interest
income was approximately $87,000.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
6.
|
NOTE RECEIVABLE (Continued)
|
The Company assesses the Note for
impairment periodically by evaluating whether it is probable that the Company will be unable to collect all the contractual interest
and principal payments as scheduled in the Note agreement, based on historical experience about Qifeng’s ability to pay,
the current economic environment and other factors. If the Note is determined to be impaired, the impairment is measured based
on the present value of the expected future cash flows under the Note, discounted at the Note’s effective interest rate.
At March 31, 2021, the Note was not deemed to be impaired. As of March 31, 2021, Qifeng is current on all amounts due under the
Note as well as the license agreement.
As collateral for the Note, a stock certificate in Celsius Holdings, Inc., which amounts
to 337,079 of shares owned by an affiliate under common control by Qifeng is being held at a brokerage account. These shares were
originally issued on April 20, 2015 via a private transaction which involved RiseJoy Services Limited an affiliate under the common
control of Qifeng, our Chinese licensee. Payment in-full was received timely pertaining to the amounts due on March 31, 2021.
Furthermore, a letter of guarantee was executed with several restrictions regarding these shares. In particular, it was agreed
that the stock would not be sold or transferred without the prior written consent from Celsius Holdings, Inc. There are several
other restrictions and agreements, which include that a Statement of Account will be provided to Celsius on a Quarterly basis
to confirm and validate the existence of the shares. These shares serve only as collateral and provide comfort as to the “ability
to pay”.
The
Company’s leasing activities include an operating lease of its corporate office space from a related party (see note 13) and several
other operating and finance leases of vehicles and office space for the Company’s European operations.
At
the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based
on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially
all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of
the asset. The Company allocates the consideration in the contract to each lease and non-lease component based on the component’s
relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately.
Leases
are classified as either finance leases or operating leases based on criteria in ASC Topic 842, “Leases”. The Company’s
operating leases are generally comprised of real estate and vehicles, and the Company’s finance leases are generally comprised
of vehicles.
At
lease commencement, the Company records a lease liability equal to the present value of the remaining lease payments, discounted using
the rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. A corresponding
right-of-use asset (“ROU asset”) is recorded, measured based on the initial measurement of the lease liability. ROU assets
also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when
it is reasonably certain that the Company will exercise that option.
Lease
expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term. Included in lease
expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for
finance leases consists of the amortization of the ROU asset on a straight-line basis over the shorter of the useful life of the asset
or the lease term, and interest expense is calculated using the effective interest rate method.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
The
following is a summary of lease cost recognized in the Company’s consolidated statements of operations:
|
|
Three months ended
|
|
|
Three months ended
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
|
|
Operating
|
|
|
Finance
|
|
|
Operating
|
|
|
Finance
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
Lease cost in general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease expense
|
|
$
|
98,535
|
|
|
$
|
-
|
|
|
$
|
95,904
|
|
|
$
|
-
|
|
Amortization of finance lease ROU assets
|
|
|
-
|
|
|
|
36,000
|
|
|
|
-
|
|
|
|
137,165
|
|
Total lease cost in general and administrative expenses
|
|
|
98,535
|
|
|
|
36,000
|
|
|
|
95,904
|
|
|
|
137,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease cost in other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on finance lease liabilities
|
|
|
-
|
|
|
|
1,601
|
|
|
|
-
|
|
|
|
3,596
|
|
Total lease cost in other expense
|
|
|
-
|
|
|
|
1,601
|
|
|
|
-
|
|
|
|
3,596
|
|
Total lease cost
|
|
$
|
98,535
|
|
|
$
|
37,601
|
|
|
$
|
95,904
|
|
|
$
|
140,761
|
|
The
following is a summary of the impact of the Company’s leases on the consolidated statements of cash flows:
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Leasing activity in cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Payments under operating leases
|
|
|
(113,812
|
)
|
|
|
(96,084
|
)
|
Interest payments on finance lease liabilities
|
|
|
(1,601
|
)
|
|
|
(3,596
|
)
|
Total leasing activity in cash flows from operating activities
|
|
|
(115,413
|
)
|
|
|
(99,680
|
)
|
|
|
|
|
|
|
|
|
|
Leasing activity in cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Principal payments on finance lease liabilities
|
|
|
(25,149
|
)
|
|
|
(64,082
|
)
|
Total leasing activity in cash flows from financing activities:
|
|
|
(25,149
|
)
|
|
|
(64,082
|
)
|
The
weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at March 31, 2021 and December
31, 2020 were as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Weighted average remaining lease term (years) - operating leases
|
|
|
2.4
|
|
|
|
2.6
|
|
Weighted average remaining lease term (years) - finance leases
|
|
|
0.9
|
|
|
|
1.1
|
|
Weighted average discount rate - operating leases
|
|
|
6.48
|
%
|
|
|
6.52
|
%
|
Weighted average discount rate - finance leases
|
|
|
3.94
|
%
|
|
|
3.95
|
%
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
The
future annual minimum lease payments required under the Company’s leases as of March 31, 2021 are as follows:
|
|
Operating
|
|
|
Finance
|
|
|
|
|
Future minimum lease payments
|
|
Leases
|
|
|
Leases
|
|
|
Total
|
|
2021
|
|
$
|
300,786
|
|
|
$
|
203,990
|
|
|
$
|
504,776
|
|
2022
|
|
|
288,192
|
|
|
|
73,289
|
|
|
|
361,481
|
|
2023
|
|
|
256,332
|
|
|
|
7,088
|
|
|
|
263,420
|
|
2024
|
|
|
16,592
|
|
|
|
-
|
|
|
|
16,592
|
|
Total future minimum lease payments
|
|
|
861,902
|
|
|
|
284,367
|
|
|
|
1,146,269
|
|
Less: Amount representing interest
|
|
|
(87,645
|
)
|
|
|
(4,566
|
)
|
|
|
(92,211
|
)
|
Present value of lease liabilities
|
|
|
774,257
|
|
|
|
279,801
|
|
|
|
1,054,058
|
|
Less: current portion
|
|
|
(337,626
|
)
|
|
|
(192,649
|
)
|
|
|
(530,275
|
)
|
Long-term portion
|
|
$
|
436,631
|
|
|
$
|
87,152
|
|
|
$
|
523,783
|
|
8.
|
PROPERTY AND EQUIPMENT
|
Property
and equipment consist of the following at:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Furniture and equipment
|
|
$
|
1,768,534
|
|
|
$
|
1,103,301
|
|
Less: accumulated depreciation
|
|
|
(599,512
|
)
|
|
|
(523,924
|
)
|
Total
|
|
$
|
1,169,022
|
|
|
$
|
579,377
|
|
Depreciation
expense amounted to $108,198 and $124,939 for the three months ended March 31, 2021 and 2020, respectively.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
9.
|
GOODWILL AND INTANGIBLES
|
Goodwill
consists of approximately $10,419,000 resulting from the excess of the consideration paid and the fair value of net tangible and intangible
assets acquired from the Func Food Acquisition. There was no further activity related to goodwill during the three months ended March
31, 2021.
Intangible
assets consist of acquired customer relationships and brands from the Func Food Acquisition. The gross carrying amount and accumulated
amortization of intangible assets were as follows as of March 31, 2021 and December 31, 2020:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Intangible assets subject to amortization
|
|
|
|
|
|
|
|
|
Customer relationships gross carrying amount
|
|
$
|
14,050,000
|
|
|
$
|
14,050,000
|
|
Less: accumulated amortization
|
|
|
(733,803
|
)
|
|
|
(582,917
|
)
|
Total
|
|
$
|
13,316,197
|
|
|
$
|
13,467,083
|
|
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization
|
|
|
|
|
|
|
|
|
Brands total carrying amount
|
|
$
|
3,123,000
|
|
|
$
|
3,123,000
|
|
Total Intangibles
|
|
$
|
16,439,197
|
|
|
$
|
16,590,083
|
|
Customer
relationships are amortized over an estimated useful life of 25 years and brands have an indefinite life. Amortization expense for the
three months ended March 31, 2021 and 2020 was approximately $151,000 and $144,000, respectively.
Other
fluctuations in the amounts of intangible assets are due to currency translation adjustments.
The
following is the future estimated amortization expense related to customer relationships:
As of March 31, 2021:
|
|
|
|
|
2021
|
|
|
$
|
562,000
|
|
2022
|
|
|
|
562,000
|
|
2023
|
|
|
|
562,000
|
|
2024
|
|
|
|
562,000
|
|
2025
|
|
|
|
562,000
|
|
Thereafter
|
|
|
|
10,506,197
|
|
|
|
|
$
|
13,316,197
|
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
10.
|
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES
|
Accounts
payable and accrued expenses consist of the following at:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Accounts payable
|
|
$
|
18,519,644
|
|
|
$
|
11,854,421
|
|
Accrued expenses
|
|
|
19,005,746
|
|
|
|
13,558,332
|
|
Total
|
|
$
|
37,525,390
|
|
|
$
|
25,412,753
|
|
Other
current liabilities consist of the following at:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Other Liabilities-State Beverage Container Deposit
|
|
$
|
586,954
|
|
|
$
|
425,232
|
|
Total
|
|
$
|
586,954
|
|
|
$
|
425,232
|
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
12.
|
RELATED PARTY TRANSACTIONS
|
The
Company’s office is rented from a company affiliated with CD Financial, LLC which is controlled by one of our major shareholders.
The current lease expires on January 2024 with monthly rent of $17,295. The rental fee is commensurate with other properties available
in the market.
Issuance
of common stock pursuant to exercise of stock options
During
the three months ended March 31, 2021, the Company issued an aggregate of 322,858 shares of its common stock pursuant to the exercise
of stock options granted under the Company’s 2015 Stock Incentive Plan. The Company received aggregate proceeds of $715,910 for
234,546 options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.
During
the three months ended March 31, 2020, the Company issued an aggregate of 337,949 shares of its common stock pursuant to the exercise
of stock options granted under the Company’s 2015 Stock Incentive Plan. The Company received aggregate proceeds of $215,347 for
133,921 options exercised for cash, with the balance of the options having been exercised on a “cashless” basis.
14.
|
STOCK-BASED COMPENSATION
|
The
Company adopted an Incentive Stock Plan on January 18, 2007. This plan is intended to provide incentives which will attract and retain
highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory
services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments
based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options
have their own schedule of termination. During 2013, the majority of the shareholders approved to increase the total available shares
in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase
the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of
the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock
and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million
to 5.1 million shares of common stock. Options to acquire shares of common stock may be granted at no less than fair market value on
the date of grant. Upon exercise, shares of new common stock are issued by the Company.
The
Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain
highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory
services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments
based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000
shares. In addition, there is a provision for an annual increase of 15% of the shares pertaining to the 2015 plan that are outstanding
as of the last day of the prior year. As of March 31, 2021, approximately 1.8 million shares are available.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
14.
|
STOCK-BASED COMPENSATION
(Continued)
|
Under
the 2015 Stock Incentive Plan, the Company has issued options to purchase approximately 4.9 million shares at an average price of $4.23
with a fair value of $205.4 million. For the three months ended March 31, 2021 and 2020, the Company issued options to purchase 303,750
and 285,000 shares, respectively. Upon exercise, shares of new common stock are issued by the Company.
For
the three months ended March 31, 2021 and 2020, the Company recognized an expense of approximately $3.6 million and $1.4 million, respectively,
of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations)
determined by application of a Black-Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free
interest rate, and expected annual volatility. As of March 31, 2021, the Company had approximately $24.7 million of unrecognized pre-tax
non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 2.45 years. The Company
used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant.
The Company recognizes forfeitures as they occur. There are options to purchase approximately 2.73 million shares that have vested as
of March 31, 2021.
The
Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The
calculation of the fair value of the awards using the Black-Scholes option-pricing model is affected by the Company’s stock price
on the date of grant as well as assumptions regarding the following:
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Expected volatility
|
|
|
69.18%-81.11
|
%
|
|
|
69.18%-81.11
|
%
|
Expected term
|
|
|
4.49-5.00 Years
|
|
|
|
4.84-5.00 Years
|
|
Risk-free interest rate
|
|
|
0.32%-1.39
|
%
|
|
|
1.35% - 1.39
|
%
|
Forfeiture Rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The
expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical
data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents
the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual
life of the option is based on the U.S. Treasury rate in effect at the time of grant.
A
summary of the status of the Company’s outstanding stock options as of March 31, 2021 and changes during the period ending on that
date is as follows:
|
|
|
|
|
Weighted
Average
|
|
|
Aggregate
|
|
|
Weighted
|
|
|
|
Shares
|
|
|
Exercise
|
|
|
Grant Date
Fair
|
|
|
Intrinsic
Value
|
|
|
Average
Remaining
|
|
|
|
(000’s)
|
|
|
Price
|
|
|
Value
|
|
|
(000’s)
|
|
|
Term
(Yrs)
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2020
|
|
|
5,198
|
|
|
$
|
4.23
|
|
|
|
|
|
|
$
|
240,866
|
|
|
|
6.89
|
|
Granted
|
|
|
304
|
|
|
$
|
42.49
|
|
|
$
|
30.40
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(328
|
)
|
|
$
|
3.10
|
|
|
$
|
56.37
|
|
|
$
|
17,467
|
|
|
|
|
|
Forfeiture and cancelled
|
|
|
(225
|
)
|
|
$
|
15.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2021
|
|
|
4,949
|
|
|
$
|
6.55
|
|
|
|
|
|
|
$
|
205,375
|
|
|
|
7.04
|
|
Exercisable at March 31,
2021
|
|
|
2,734
|
|
|
$
|
3.99
|
|
|
|
|
|
|
$
|
120,458
|
|
|
|
5.99
|
|
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
15.
|
STOCK-BASED COMPENSATION
(Continued)
|
The
following table summarizes information about employee stock options outstanding at March 31, 2021:
|
|
Outstanding
Options
|
|
|
Vested
Options
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Exercisable
|
|
|
Weighted
|
|
|
Weighted
|
|
Range of
|
|
at
|
|
|
Averaged
|
|
|
Averaged
|
|
|
at
|
|
|
Averaged
|
|
|
Averaged
|
|
Exercise
|
|
March 31,
|
|
|
Remaining
|
|
|
Exercise
|
|
|
March 31,
|
|
|
Exercise
|
|
|
Remaining
|
|
Price
|
|
2021
(000’s)
|
|
|
Life
|
|
|
Price
|
|
|
2021
(000’s)
|
|
|
Price
|
|
|
Life
|
|
$0.20 - $0.53
|
|
|
100
|
|
|
|
1.98
|
|
|
$
|
0.26
|
|
|
|
100
|
|
|
$
|
0.26
|
|
|
|
1.98
|
|
$0.65 - $1.80
|
|
|
105
|
|
|
|
3.91
|
|
|
$
|
1.05
|
|
|
|
105
|
|
|
$
|
1.05
|
|
|
|
3.91
|
|
$1.83 - $2.84
|
|
|
117
|
|
|
|
4.77
|
|
|
$
|
1.97
|
|
|
|
117
|
|
|
$
|
1.97
|
|
|
|
4.77
|
|
$3.20
- $6.20
|
|
|
4,238
|
|
|
|
7.06
|
|
|
$
|
4.18
|
|
|
|
2,412
|
|
|
|
4.37
|
|
|
|
6.31
|
|
$7.20-$60.00
|
|
|
389
|
|
|
|
9.68
|
|
|
|
36.77
|
|
|
|
0
|
|
|
|
0.00
|
|
|
|
0
|
|
Outstanding
options
|
|
|
4,949
|
|
|
|
6.87
|
|
|
$
|
6.53
|
|
|
|
2,734
|
|
|
$
|
3.99
|
|
|
|
5.99
|
|
As
of March 31, 2021, the Company had approximately $24.7 million of unrecognized pre-tax non-cash compensation expense, which the Company
expects to recognize, based on a weighted-average period of 2.45 years.
Restricted
Stock Awards
Restricted
stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves
the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the
date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares.
The value of stock awards that vest over time is established by the market price on the date of its grant. A summary of the Company’s
restricted stock activity for the three months ended March 31, 2021 and 2020 is presented in the following table:
|
|
For the three Months ended
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Unvested at beginning of period
|
|
|
66,229
|
|
|
$
|
14.78
|
|
|
|
123,334
|
|
|
$
|
3.34
|
|
Transfers to restricted stock units
|
|
|
(45,871
|
)
|
|
|
34.02
|
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
0
|
|
|
|
0.00
|
|
|
|
3,916
|
|
|
|
5.59
|
|
Vested
|
|
|
(172
|
)
|
|
|
22.30
|
|
|
|
(3,916
|
)
|
|
|
5.59
|
|
Unvested at end of period
|
|
|
20,186
|
|
|
$
|
14.72
|
|
|
|
123,334
|
|
|
$
|
3.34
|
|
The
total fair value of shares vested during the three months ended March 31, 2021 and 2020 was immaterial. Unrecognized compensation
expense related to outstanding restricted stock awards to employees and directors as of March 31, 2021 was $98,234 and is expected
to be expensed over the next four months.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
15.
|
STOCK-BASED COMPENSATION
(Continued)
|
Restricted
Stock Units
Restricted
stock units are awards that give the holder the right to receive one share of common stock for each restricted stock unit upon meeting
service-based vesting conditions (typically annual vesting in three equal annual installments, with a requirement that the holder remains
in the continuous employment of the Company). The value of restricted stock units that vest over time is established by the market price
on the date of its grant. A summary of the Company’s restricted stock unit activity for the three months ended March 31, 2021 and
2020 is presented in the following table:
|
|
For the three Months ended
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Unvested at beginning of period
|
|
|
-
|
|
|
$
|
|
|
|
|
-
|
|
|
$
|
-
|
|
Transfers from restricted stock awards
|
|
|
45,871
|
|
|
|
34.02
|
|
|
|
-
|
|
|
|
|
|
Granted
|
|
|
468,600
|
|
|
|
50.56
|
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeiture and cancelled
|
|
|
(10,200
|
)
|
|
|
50.31
|
|
|
|
|
|
|
|
|
|
Unvested at end of period
|
|
|
504,271
|
|
|
$
|
49.06
|
|
|
|
-
|
|
|
$
|
-
|
|
Unrecognized
compensation expense related to outstanding restricted stock units to employees and directors as of March 31, 2021 was $22.8 million
and is expected to be expensed over the next 35 months.
Celsius
Holdings, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (unaudited)
March
31, 2021
16.
|
COMMITMENTS AND CONTINGENCIES
|
In
November of 2020, McGovern Capital, Inc. and Kevin McGovern (collectively “McGovern”) filed a claim in arbitration related
to its Representative Agreement with Celsius Holdings, Inc. as amended by the first amendment dated August 6, 2016. Pursuant to the Representative
Agreement, McGovern is entitled to receive a fee of three percent (3%) of “Net Revenues” received by the Company’s
from sales of the Company’s Products in the People’s Republic of China for a period of four years from Initial Commercial
Sale (which was September 1, 2017). “Net Revenues” are defined in the Representative Agreement as “the Company’s
revenues net of actual discounts applied, credits and returns.” Effective January 1, 2019, the Company restructured its China operations
from a distribution arrangement with Qifeng Food Technology (Beijing) Co. Ltd. (“Qifeng”), to a license and royalty arrangement
and a loan, pursuant to which Qifeng will market and distribute the Company’s products in China, and Celsius will receive an annual
royalty payment. The Company intends to pay McGovern its percentage of the annual royalty payment, but McGovern has objected claiming
that McGovern is entitled to be paid commissions on the entire royalty payment and the amount of the loan to Qifeng. The Company intends
to defend against McGovern’s claims vigorously and has filed a counterclaim related to McGovern’s failure to comply with
the covenant of good faith and fair dealing in the Representative Agreement. This matter is still in its early stages and the Company
is unable to predict the outcome at this time.
In
addition to the foregoing, from time to time, we may become party to litigation or other legal proceedings that we consider to be a part
of the ordinary course of our business.
The
Company has entered into distribution agreements with liquidated damages in case the Company cancels the distribution agreements without
Cause. Cause has been defined in various ways. It is management’s belief that no such agreement has created any liability as of
December 31, 2020.
Additionally,
our business and results of operations may be adversely affected by the pandemic and public health crises related to the COVID-19 outbreak
which is affecting the macro-economic environment. Please refer to Item 1A. Risk Factors for further details.
None