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REVENUE | 9 Months Ended
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Sep. 30, 2022
Disclosure Revenue [Abstract] |
REVENUE | 4. REVENUE 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, based on the commercial terms. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Product sales are recorded net of variable consideration, such as provisions for returns, discounts and allowances. Such provisions are calculated using historical averages and adjusted for any expected changes due to current business conditions. Consideration given to customers for cooperative advertising is recognized as a reduction of revenue except to the extent that there is a distinct good or service, in which case the expense is classified as selling or marketing expense. Provisions for customer volume rebates are based on achieving a certain level of purchases and other performance criteria that are established on a situation basis. These rebates are estimated based on the expected amount to be provided to the customers and are recognized as a reduction of revenue. 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. Additionally, for any agreements which are one year or less, the practical expedient under ASC 340-40-25-4 is applied to expense contract acquisition costs when incurred if the amortization period of the contract asset would have otherwise been recognized in one year or less. Information about the Company’s net sales by geographical location for the three and nine months ended September 30, 2022 and 2021 is as follows:
|  | For the three months ended September 30, |  |  | For the nine months ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
North America |  | $ | 179,541 |  |  | $ | 84,490 |  |  | $ | 448,141 |  |  | $ | 177,094 |
Europe |  |  | 7,546 |  |  |  | 9,536 |  |  |  | 23,540 |  |  |  | 30,695 |
Asia |  |  | 964 |  |  |  | 706 |  |  |  | 2,857 |  |  |  | 1,861 |
Other |  |  | 182 |  |  |  | 177 |  |  |  | 1,102 |  |  |  | 367 |
Net sales |  | $ | 188,233 |  |  | $ | 94,909 |  |  | $ | 475,640 |  |  | $ | 210,017 |
All of the Company’s North America revenue is derived from the United States, which is the Company’s country of domicile. Total foreign revenues are approximately $8.7 million and $10.4 million for the three months ended September 30, 2022 and 2021, respectively. Total foreign revenues are approximately $27.5 million and $32.9 million for the nine months ended September 30, 2022 and 2021, respectively. Sweden represented the largest foreign portion of total consolidated revenue of approximately $5.3 million and $6.5 million for the three months ended September 30, 2022 and 2021, respectively and $16.2 million and $21.1 million for the nine months ended September 30, 2022 and 2021, respectively. Agreements with PepsiCo, Inc. The Company executed multiple agreements with Pepsi ("Purchaser") on August 1, 2022, including a Distribution Agreement relating to the sale and distribution of certain of the Company’s beverage products in existing channels and distribution methods in the United States, excluding certain existing customer accounts, sales channels, Puerto Rico and the US Virgin Islands (the “Territory”). Under the Distribution Agreement, the Company has granted Pepsi the right to sell and distribute its existing beverage products in existing channels and distribution methods and future beverage products that are added from time to time as licensed products under the Distribution Agreement in defined territories. The Distribution Agreement represents a master service agreement and can be cancelled by either party without cause in the nineteenth year of the term (i.e., 2041), the twenty-ninth year of the term (i.e., 2051) and each ten (10) year period thereafter (i.e., 2061, 2071, etc.) by providing twelve (12) months’ written notice on August 1st of each such year to the other party. Except for a termination by the Company “with cause” or a termination by Pepsi “without cause”, the Company is required to pay the Purchaser certain compensation upon a termination as specified in the Distribution Agreement. The Company agreed to provide Pepsi a right of first offer in the event the Company intends to (i) manufacture, distribute or sell products in certain additional countries as specified in the Distribution Agreement or (ii) distribute or sell products in any future channels and distribution methods during the term of the Agreement. Additionally, pursuant to the Distribution Agreement, the Company and the Purchaser agreed to use commercially reasonable efforts to negotiate and execute with Pepsi a distribution agreement reasonably consistent with the Distribution Agreement for the sale and distribution of the Products in Canada, and Pepsi agreed to meet and confer in good faith with the Company regarding the terms and conditions upon which the Purchaser may be willing to sell or distribute the Products, either directly or through local sub-distributors in certain other additional countries. The Distribution Agreement includes other customary provisions, including non-competition covenants in favor of the Company, representations and warranties, indemnification provisions, insurance provisions and confidentiality provisions. On August 1, 2022, the Company and Pepsi also executed a Transition Agreement, providing for the Company’s transition of certain existing distribution rights in the Territory to Pepsi. Under the terms of the Transition Agreement, Pepsi would pay the Company up to $250 million in multiple tranches to facilitate the Company’s transition of certain distribution rights to Pepsi. Amounts received from Pepsi were contractually restricted to only be used to pay termination fees due to other distributors; any excess cash received over amounts due to other distributors is to be refunded back to Pepsi. In August 2022, the Company received an initial $174.7 million payment from Pepsi in accordance with the Transition Agreement. In the fourth quarter, the Company received a second payment from Pepsi under the Transition Agreement totaling $53.1 million as a result of negotiations with distributors whose territories were excluded from the first payment made by Pepsi. Accounting for the agreements executed with PepsiCo, Inc. The Company evaluated the SPA, Transition Agreement, Distribution Agreement, and other agreements executed with Pepsi on August 1, 2022, as one combined contract since the agreements were executed on the same day, with the same counterparty, in contemplation of one another and contractual terms are defined and referenced across the agreements. These agreements will be referred to as the “Pepsi Arrangement” herein. Management concluded the Pepsi Arrangement was partially in the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”) and partially in the scope of ASC 505, Equity (“ASC 505") and ASC 480, Distinguishing liabilities from equity. The Company first applied the measurement and classification criteria in ASC 505 and ASC 480 with respect to the Company’s issuance of 1,446,666 shares of Series A Convertible Preferred Stock, as the substance of the issuance of the Series A Convertible Preferred Stock was determined to be a financing transaction. See Footnote 14, Mezzanine Equity for the Company’s accounting conclusions with respect to the issuance of the Series A Convertible Preferred Stock. After application of the measurement and classification principles in ASC 505, and ASC 480, Distinguishing liabilities from equity, the Company accounted for the residual revenue elements of the Pepsi Arrangement under ASC 606. The revenue elements of the Pepsi Arrangement consisted of (i) a $174.7 million upfront payment received from Pepsi under the Transition agreement and (ii) a $282.5 million implicit payment made to Pepsi by Celsius, representing the excess fair value over issuance proceeds received for the Series A Convertible Preferred Stock. The $174.7 million upfront payment received from Pepsi was only to be used by Celsius to transition territory rights from terminated distributors to Pepsi; any excess cash received from Pepsi over transition payments made by Celsius to the Company’s terminated distributors was contractually restricted and due back to Pepsi. As of September 30, 2022, the Company has recorded a refund liability of $19.3 million representing cash refunds due to back to Pepsi and recognized the difference of $155.4 million as deferred revenues (a contract liability). The deferred revenues will be recognized by Celsius ratably over the twenty-year year agreement term, which does not materially differ compared to anticipated delivery of goods. The Company recognized $1.3 million of deferred revenues in the Statement of Operations in the three and nine-month periods ended September 30, 2022. The $282.5 million excess fair value over issuance proceeds of the Series A Convertible Preferred Stock represents an implicit payment made to a customer. The Company concluded that this implicit payment meets the definition of an asset under FASB Concepts Statement 6, and has been recorded as a ‘Deferred Other Cost’ in the statement of financial position. The Company will amortize the asset balance as contra-revenues ratably over a twenty-year period consistent with the term of the Distribution Agreement. The Company recognized contra-revenues of $2.4 million in the Statement of Operations in the three and nine-month periods ended September 30, 2022. The Company will assess the Deferred Other Cost asset for impairment on a quarterly basis. For product sales under the Distribution Agreement, the Company will recognize revenues when control of the underlying goods are transferred to Pepsi based on the contractual terms of noncancellable purchase orders issued by Pepsi. The Company’s customary revenue recognition policy as explained above is applied with respect to rebates. License Agreement In January 2019, the Company entered into a license and repayment of investment agreement with Qifeng Food Technology (Beijing) Co., Ltd (“Qifeng”). Under the agreement, Qifeng was granted the exclusive license rights to manufacture, market and commercialize Celsius branded products in China. The term of the agreement is 50 years, with annual royalty fees due from Qifeng after the end of each calendar year. 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 $6.9 million, and then are subject to annual guaranteed minimums over the remaining term of the agreement. Under the agreement, the Company grants Qifeng exclusive license rights and provides ongoing support in product development, brand promotion and technical expertise. The ongoing support is integral to the exclusive license rights and, as such, both of these represent a combined, single performance obligation. The transaction price consists of the guaranteed minimums and the variable royalty fees, all of which are allocated to the single performance obligation. The Company recognizes revenue from the agreement over time because Qifeng 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 of its ongoing efforts in providing the exclusive license rights including providing continuous access, updates and support. Total revenue recognized under the agreement was approximately $0.5 million for the three months ended September 30, 2022 and 2021, respectively and approximately $1.5 million and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively, which is reflected in the revenues from Asia.

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