XML 32 R22.htm IDEA: XBRL DOCUMENT v3.22.2.2
FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 2022
Fair Value Measurements, Nonrecurring Value Measurement [Abstract]  
FAIR VALUE MEASUREMENTS
16.
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.

 

The Company engaged a third-party valuation expert to assist in determining the fair value of the 1,466,666 shares of Series A Convertible Preferred Stock issued on August 1, 2022. The Series A Convertible Preferred Stock is classified in mezzanine equity, see Note 14, Mezzanine Equity, and the valuation of the Series A Convertible Preferred Stock represents a non-recurring fair value measurement. We used a Monte Carlo simulation model to determine the fair value of the Series A Convertible Preferred Stock on August 1, 2022. The Monte Carlo simulation utilized multiple input variables to determine the value of the Series A Convertible Preferred Stock including a volatility rate of 45%, risk free interest rate of 2.69%, 5.0% dividend rate, the closing price of the Company’s common stock on the issuance date of $98.87, a debt discount rate of 12.5% and a discount for lack of marketability attributed to the registration period of the underlying stock. The selected historical volatility was based on Celsius and a certain peer group. The risk-free interest rate was based on the US STRIPS Rate with a corresponding term as of issuance date. The 5.0% dividend rate is consistent with the provisions of the Series A Convertible Preferred Stock and with the Company’s past payments made in cash. The debt discount rate was based on estimated credit analysis and corresponding market yields as of the issuance date. The Company applied a nominal discount for lack of marketability with respect to the assumed registration period of the underlying shares.

 

The Company used the relief from royalty method model to determine the fair value of the Brand Name on September 30, 2022. The fundamental concept underlying this method is that in lieu of ownership, the acquirer can obtain comparable rights to use the subject asset via a license from a hypothetical third-party owner. The Relief from Royalty method utilized multiple input variables to determine the value of the Brand Name including forecasted sales, discount rate, and royalty rates. The selected royalty rate was based on comparable brands. The debt discount rate was based an expected debt and equity rate of return as of September 30, 2022.

 

The following is a tabular presentation of the non-recurring fair value measurement along with the level within the fair value hierarchy:

 

 

 

For the nine months ended September 30, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mezzanine equity:

 

 

 

 

 

 

 

 

 

Series A convertible preferred shares

 

$

—

 

 

$

—

 

 

$

824,488

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

Brands

 

 

—

 

 

 

408

 

 

 

—

 

Total

 

$

-

 

 

$

408

 

 

$

824,488

 

 

Other than those noted previously, the Company did not have any other assets or liabilities measured at fair value at September 30, 2022 and December 31, 2021.