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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2022
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | 18. STOCK-BASED COMPENSATION The Company adopted the 2006 Incentive Stock Plan on January 18, 2007. This plan was intended to provide incentives to 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. While the plan terminated 10 years after the adoption date, issued awards have their own schedule of terminations. As such, the Company is no longer granting awards under this plan and there are no unvested awards as of September 30, 2022. The Company adopted the 2015 Plan on April 30, 2015. The 2015 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 million shares. In addition, there is a provision in the 2015 Plan for an annual increase to the maximum number of shares authorized under the 2015 Plan, which increase shall be added on the first day of the calendar year beginning January 1, 2016, equal to 15% of the number of shares outstanding as of such date (note 15). As of September 30, 2022, approximately 4.6 million shares are available for issuance under the 2015 Plan. The Company determines the fair value of restricted stock-based awards based on the market price on the date of grant. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances and recognizes forfeitures as they occur. For the nine months ended September 30, 2022 and 2021, the Company recognized an expense of approximately $14.8 million and $28.7 million, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying consolidated statement of operations). Stock Options Under the 2015 Plan, the Company has issued stock options to purchase approximately $2.6 million shares at an average price of $8.92 with a fair value of $213.8 million. For the nine months ended September 30, 2021, the Company issued stock options to purchase 304,750 shares. No options were issued during the nine months ended September 30, 2022. Upon exercise, shares of new common stock are issued by the Company. A summary of the status of the Company’s outstanding stock options as of September 30, 2022 and changes during the periods ending on that date is as follows:
|  |  |  |  | Weighted Average |  |  |  |  |  | Weighted |
|  | Shares |  |  | Exercise |  |  | Grant Date Fair |  |  | Aggregate Intrinsic |  |  | Average Remaining |
|  | (000’s) |  |  | Price |  |  | Value |  |  | Value (000’s) |  |  | Term (Yrs) |
Options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31,2021 |  |  | 3,600 |  |  | $ | 7.47 |  |  |  |  |  | $ | 241,515 |  |  |  | 6.37 |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  | — |  |  |  |
Exercised |  |  | (979 | ) |  | $ | 3.53 |  |  | $ | 79.17 |  |  | $ | 74,001 |  |  |  |
Forfeiture and cancelled |  |  | (61 | ) |  | $ | 5.05 |  |  |  |  |  |  | — |  |  |  |
At September 30,2022 |  |  | 2,560 |  |  | $ | 8.92 |  |  |  |  |  | $ | 213,831 |  |  |  | 6.37 |
Exercisable September 30,2022 |  |  | 1,920 |  |  | $ | 6.48 |  |  |  |  |  | $ | 161,633 |  |  |  | 5.49 |
The following table summarizes information about employee stock options outstanding at September 30, 2022:
|  | Outstanding Options |  |  | Vested Options |
|  | Number |  |  |  |  |  |  |  |  | Number |  |  |  |  |  |  |
|  | Outstanding |  |  | Weighted |  |  | Weighted |  |  | Exercisable |  |  | Weighted |  |  | Weighted |
Range of |  | at |  |  | Averaged |  |  | Averaged |  |  | at |  |  | Averaged |  |  | Averaged |
Exercise |  | September 30, 2022 |  |  | Remaining |  |  | Exercise |  |  | September 30, 2022 |  |  | Remaining |  |  | Exercise |
Price |  |  |  |  | Life |  |  | Price |  |  |  |  |  | Life |  |  | Price |
$0.34 - $1.05 |  |  | 30 |  |  |  | 1.69 |  |  | $ | 0.58 |  |  |  | 30 |  |  |  | 1.69 |  |  | $ | 0.58 |
$1.97 - $2.955 |  |  | 5 |  |  |  | 3.27 |  |  | $ | 1.97 |  |  |  | 5 |  |  |  | 3.27 |  |  | $ | 1.97 |
$3.23 - $4.845 |  |  | 1,736 |  |  |  | 5.84 |  |  | $ | 3.83 |  |  |  | 1,400 |  |  |  | 5.58 |  |  | $ | 3.93 |
$5.59 - $8.385 |  |  | 409 |  |  |  | 3.95 |  |  | $ | 5.70 |  |  |  | 340 |  |  |  | 3.24 |  |  | $ | 5.72 |
$14.53 - $21.795 |  |  | 61 |  |  |  | 7.84 |  |  | $ | 14.53 |  |  |  | 40 |  |  |  | 7.84 |  |  | $ | 14.53 |
$21.80 - $32.70 |  |  | 18 |  |  |  | 8.08 |  |  | $ | 21.80 |  |  |  | 5 |  |  |  | 8.08 |  |  | $ | 21.80 |
$42.64 - $63.96 |  |  | 301 |  |  |  | 8.26 |  |  | $ | 42.67 |  |  |  | 100 |  |  |  | 8.26 |  |  | $ | 42.67 |
Outstanding options |  |  | 2,560 |  |  |  | 5.83 |  |  | $ | 8.92 |  |  |  | 1,920 |  |  |  | 5.30 |  |  | $ | 6.48 |
As of September 30, 2022, the Company had approximately $4.4 million of unrecognized pre-tax non-cash compensation expense related to options to purchase shares, which the Company expects to recognize, based on a weighted-average period of 1.2 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 maximum contractual term of the Company's stock options is 10 years. The Company recognizes forfeitures as they occur. There are stock options to purchase approximately 1.9 million shares that have vested as of September 30, 2022. 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 holders of a restricted stock award are generally entitled after the release to transact and obtain the same rights as rights of a shareholder of the Company, including the right to vote the shares. The holders of unvested restricted stock awards do not have the same rights as shareholders including but not limited to any dividends which may be declared by the Company, and do not have the right to vote. The value of restricted 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 award activity for the nine months ended September 30, 2022 and 2021 is presented in the following table:
|  | For the nine months ended September 30, |
|  | 2022 |  |  | 2021 |
|  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Grant Date |  |  |  |  |  | Grant Date |
|  | Shares (000's) |  |  | Fair Value |  |  | Shares (000's) |  |  | Fair Value |
Unvested at beginning of period |  |  | 0.3 |  |  | $ | 14.72 |  |  |  | 66 |  |  | $ | 14.78 |
Transfers to restricted stock units |  |  | — |  |  |  | — |  |  |  | (46 | ) |  | $ | 34.02 |
Granted |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Vested |  |  | — |  |  |  | — |  |  |  | (19 | ) |  | $ | 22.30 |
Forfeiture and cancelled |  |  | (0.3 | ) |  | $ | 14.72 |  |  |  | (1 | ) |  | $ | 34.02 |
Unvested at end of period |  |  | — |  |  | $ | — |  |  |  | — |  |  | $ | - |
There were no shares vested during the nine months ended September 30, 2022. There are no outstanding restricted stock awards as of September 30, 2022. 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 holders of unvested units do not have the same rights as stockholders including but not limited to any dividends which may be declared by the Company, and do not have the right to vote. 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 nine months ended September 30, 2022 and 2021 is presented in the following table:
|  | For the nine months ended September 30, |
|  | 2022 | 2021 |
|  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Grant Date |  |  |  |  |  | Grant Date |
|  | Shares (000's) |  |  | Fair Value |  |  | Shares (000's) |  |  | Fair Value |
Unvested at beginning of period |  |  | 566 |  |  | $ | 52.66 |  |  |  | — |  |  | $ | — |
Transfers from restricted stock awards |  |  | — |  |  |  | — |  |  |  | 46 |  |  | $ | 34.02 |
Granted |  |  | 207 |  |  |  | 81.74 |  |  |  | 546 |  |  | $ | 51.03 |
Vested |  |  | (183 | ) |  |  | 56.33 |  |  |  | (1 | ) |  |  | — |
Forfeited and cancelled |  |  | (47 | ) |  |  | 64.37 |  |  |  | (15 | ) |  | $ | 50.67 |
Unvested at end of period |  |  | 543 |  |  | $ | 63.93 |  |  |  | 576 |  |  | $ | 50.82 |
The total fair value of shares vested during the nine months ended September 30, 2022 was approximately $9.7 million. Unrecognized compensation expense related to outstanding restricted stock units to employees and directors as of September 30, 2022 and 2021 was $29.3 million and approximately $36.1 million, respectively, and is expected to be expensed over the next 2.0 years. Performance-based Stock Awards The Company issues stock-based awards to third-party consultants for providing marketing, sales, and general business development services related to Celsius products. The stock-based awards are in the form of restricted stock units with performance vesting conditions (“performance stock units” or “PSUs”). The holders of unvested PSUs do not have the same rights as stockholders including but not limited to any dividends which may be declared by the Company, and do not have the right to vote. Some of the PSU performance vesting conditions are linked to the consultants obtaining specified incremental earnings for the Company in a given year over the performance vesting period, typically five years and some of the awards are linked to employees of the Company and have specific performance-based metrics to be met in year one and year two of the issuance. The fair value of PSUs is based on the market price of the underlying stock on the grant date. The Company recognizes compensation cost for performance stock awards issued to non-employees in the same manner and periods as though cash had been paid for services received. In the third quarter of 2022, the Human Resources and Compensation Committee of the Board of Directors approved the issuance of “Performance-based RSUs” to certain employees which represented restricted share units with performance-based vesting. The aggregate grant date fair value of $7.5 million included an immediate vesting of 20% of the shares as well as specific performance-based metrics to be met in year one and year two of the issuance. The Company believes the performance-based metrics are probable of being achieved and will recognize expense each tranche of the awards separately using the accelerated attribution method according to ASC 718. A summary of the Company’s PSU activity for the nine months ended September 30, 2022 and 2021 is presented in the following table:
|  | For the nine months ended September 30, |
|  | 2022 | 2021 |
|  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Grant Date |  |  |  |  |  | Grant Date |
|  | Shares (000's) |  |  | Fair Value |  |  | Shares (000's) |  |  | Fair Value |
Unvested at beginning of period |  |  | 15 |  |  | $ | 64.65 |  |  |  | — |  |  | $ | — |
Granted |  |  | 76 |  |  | $ | 102.92 |  |  |  | — |  |  |  | — |
Vested |  |  | (18 | ) |  | $ | 96.47 |  |  |  | — |  |  |  | — |
Forfeited and cancelled |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Unvested at end of period |  |  | 73 |  |  | $ | 96.47 |  |  |  | — |  |  | $ | — |
The total fair value of awards vested during the nine months ended September 30, 2022 was approximately $2.3 million. Unrecognized compensation expense related to outstanding PSUs issued to employees and non-employee consultants as of September 30, 2022 was approximately $6.8 million and is expected to be expensed over the next 2.2 years. Modifications There were certain Board of Directors members and employees whose service was terminated during 2021. In connection with their terminations, the vesting conditions of the previously granted awards were modified to accelerate the vesting of specified un-vested awards pursuant to board resolutions or severance agreements. Pursuant ASC 718, these were Type III modifications requiring re-valuation of un-vested awards to modification date fair value with recognition of compensation expense over the remaining service period. There have been no modifications in the three and nine months ended September 30, 2022. Modifications during the three-and nine-month period ended September 30, 2021 resulted in additional stock-based compensation expense of $12.1 million and $15.3 million, respectively. See note 2. Basis of Presentation Significant Accounting Policies for more information.

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