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STOCK-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 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 December 31, 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). Provisions have been made to permit the grant of options and other share-based awards for up to 5.0 million shares. For the years ended December 31, 2022, 2021, and 2020, the Company recognized non-cash compensation expense of approximately $20.7 million, $36.5 million, and $6.3 million respectively, (included in General and administrative expense in the accompanying Consolidated Statements of Operations). Stock Options 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 options to purchase approximately 1.9 million shares that have vested as of December 31, 2022 and 2021. Under the 2015 Plan, the Company has issued stock options to purchase approximately 2.3 million shares at an average price of $9.66 with a fair value of $213.9 million. No options were issued during the years ended December 31, 2022 and 2021. Upon exercise, shares of new common stock are issued by the Company. 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. This model uses an exercise price, dividend yields, risk-free interest rate, and expected annual volatility, as inputs. 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:
Schedule of black scholes option-pricing model valuation assumption |  |  |  |  |  |  |  |  |
|  | Years ended December 31, |
|  | 2022(1) |  | 2021 |  | 2020 |
Expected volatility |  | NA |  |  | 69.2 - 81.1% |  |  | 69.2 - 81.1% |
Expected term |  | NA |  |  | 4.5 - 5.0 Years |  |  | 4.8 - 5.0 Years |
Risk-free interest rate |  | NA |  |  | 0.3% - 1.4% |  |  | 0.2% - 1.4% |
Forfeiture Rate |  | NA |  |  | 0.0% |  |  | 0.0% |
| (1) | No stock options were issued during 2022.
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 December 31, 2022 and 2021 and changes during the periods ended on that date is as follows:
Schedule of outstanding stock options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Weighted Average |  |  | Aggregate |  |  | Weighted |
|  | Shares |  |  | Exercise |  |  | Grant Date |  |  | Intrinsic Value |  |  | Average Remaining |
|  | (000’s) |  |  | Price |  |  | Fair Value |  |  | (000’s) |  |  | Term (Yrs) |
Options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31, 2020 |  |  | 5,198 |  |  | $ | 4.23 |  |  |  |  |  |  | $ | 240,866 |  |  |  | 6.89 |
Granted |  |  | 305 |  |  |  | 42.37 |  |  | $ | 30.32 |  |  |  |  |  |  |  |  |
Exercised |  |  | (1,460 | ) |  |  | 3.85 |  |  |  | 80.58 |  |  |  | 84,371 |  |  |  |  |
Forfeiture and cancelled |  |  | (443 | ) |  |  | 5.01 |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31, 2021 |  |  | 3,600 |  |  | $ | 7.47 |  |  |  |  |  |  | $ | 241,515 |  |  |  | 6.37 |
Granted |  |  | - |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Exercised |  |  | (1,273 | ) |  | $ | 3.67 |  |  | $ | 80.70 |  |  | $ | 102,283 |  |  |  |  |
Forfeiture and cancelled |  |  | (61 | ) |  |  | 5.46 |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31, 2022 |  |  | 2,266 |  |  | $ | 9.66 |  |  |  |  |  |  | $ | 213,914 |  |  |  | 5.43 |
Exercisable at December 31, 2022 |  |  | 1,928 |  |  | $ | 6.41 |  |  |  |  |  |  | $ | 188,261 |  |  |  | 5.05 |
The following table summarizes information about employee stock options outstanding at December 31, 2022:
Schedule of employee stock options outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Outstanding Options |  |  | Vested Options |
Range of Exercise Price |  | Number Outstanding at December 31, 2022 (000’s) |  |  | Weighted Average Remaining Life |  |  | Weighted Average Exercise Price |  |  | Number Exercisable at December 31, 2022 (000’s) |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Life |
$0.34 - $1.05 |  |  | 30 |  |  |  | 1.44 |  |  | $ | 0.58 |  |  |  | 30 |  |  | $ | 0.58 |  |  |  | 1.44 |
$1.97 - $2.95 |  |  | 5 |  |  |  | 3.01 |  |  |  | 1.97 |  |  |  | 5 |  |  |  | 1.97 |  |  |  | 3.01 |
$3.23 - $4.85 |  |  | 1,465 |  |  |  | 5.38 |  |  |  | 3.81 |  |  |  | 1,412 |  |  |  | 3.80 |  |  |  | 5.34 |
$5.59 - $8.38 |  |  | 389 |  |  |  | 3.51 |  |  |  | 5.70 |  |  |  | 331 |  |  |  | 5.72 |  |  |  | 2.88 |
$14.53 - $21.79 |  |  | 61 |  |  |  | 7.58 |  |  |  | 14.53 |  |  |  | 40 |  |  |  | 14.53 |  |  |  | 7.58 |
$21.80 - $32.70 |  |  | 16 |  |  |  | 7.83 |  |  |  | 21.80 |  |  |  | 10 |  |  |  | 21.80 |  |  |  | 7.83 |
$42.64 - $63.96 |  |  | 300 |  |  |  | 8.01 |  |  |  | 42.67 |  |  |  | 100 |  |  |  | 42.67 |  |  |  | 8.01 |
Outstanding options |  |  | 2,266 |  |  |  | 5.43 |  |  | $ | 9.66 |  |  |  | 1,928 |  |  | $ | 6.41 |  |  |  | 5.05 |
As of December 31, 2022, the Company had approximately $3.4 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 1.0 year. 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 stockholder of the Company, including the right to vote the shares. The holders of unvested restricted stock awards 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 awards that vest over time is established by the market price on the date of its grant and generally vests over a period of 3 years. A summary of the Company’s restricted stock activity for the years ended December 31, 2022 and 2021 is presented in the following table:
Schedule of restricted stock activity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | For the twelve months ended |
|  | December 31, 2022 |  |  | December 31, 2021 |
|  | Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested at beginning of period |  |  | 0.3 |  |  | $ | 14.72 |  |  |  | 66.2 |  |  | $ | 28.11 |
Transfers to restricted stock units |  |  | - |  |  |  | - |  |  |  | (45.9 | ) |  |  | 34.02 |
Granted |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Vested |  |  | - |  |  |  | - |  |  |  | (18.9 | ) |  |  | 14.79 |
Forfeited and cancelled |  |  | (0.3 | ) |  |  | 14.72 |  |  |  | (1.1 | ) |  |  | 14.72 |
Unvested at end of period |  |  | - |  |  | $ | - |  |  |  | 0.3 |  |  | $ | 14.72 |
There were no shares granted, vested or outstanding during and as of the year ended December 31, 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 years ended December 31, 2022 and 2021 is presented in the following table:
Schedule of restricted stock unit activity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | For the twelve months ended |
|  | December 31, 2022 |  |  | December 31, 2021 |
|  | Shares (000’s) |  |  | Weighted Average Grant Date Fair Value |  |  | Shares (000’s) |  |  | Weighted Average Grant Date Fair Value |
Unvested at beginning of period |  |  | 566 |  |  | $ | 52.66 |  |  |  | - |  |  | $ | - |
Transfers to restricted stock awards |  |  | - |  |  |  | - |  |  |  | 46 |  |  |  | 34.02 |
Granted |  |  | 248 |  |  |  | 74.14 |  |  |  | 574 |  |  |  | 54.40 |
Vested |  |  | (205 | ) |  |  | 54.17 |  |  |  | (19 | ) |  |  | 64.58 |
Forfeited and cancelled |  |  | (70 | ) |  |  | 61.99 |  |  |  | (35 | ) |  |  | 50.46 |
Unvested at end of period |  |  | 539 |  |  | $ | 60.73 |  |  |  | 566 |  |  | $ | 52.66 |
The total fair value of shares vested during the year ended December 31, 2022, was approximately $11.6 million. Unrecognized compensation expense related to outstanding restricted stock units to employees and directors as of December 31, 2022 was approximately $20.3 million 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, as well as to certain employees as discussed below. 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 as discussed below. 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 PSUs to certain employees which represented restricted stock 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 according to ASC 718. A summary of the Company’s PSU activity for the years ended December 31, 2022 and 2021 is presented in the following table:
Schedule of stock-based awards issued to non-employee consultants |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | For the twelve months ended |
|  | December 31, 2022 |  |  | December 31, 2021 |
|  | Shares (000’s) |  |  | Weighted Average Grant Date Fair Value |  |  | Shares (000’s) |  |  | Weighted Average Grant Date Fair Value |
Unvested at beginning of period |  |  | 15 |  |  | $ | 64.65 |  |  |  | - |  |  | $ | - |
Granted |  |  | 76 |  |  |  | 98.28 |  |  |  | 15 |  |  |  | 64.65 |
Vested |  |  | (15 | ) |  |  | 98.28 |  |  |  | - |  |  |  | - |
Forfeited and cancelled |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Unvested at end of period |  |  | 76 |  |  | $ | 91.48 |  |  |  | 15 |  |  | $ | 64.65 |
Unrecognized compensation expense related to outstanding PSUs issued to employees and non-employee consultants as of December 31, 2022, was approximately $4.3 million and is expected to be expensed over the next 1.6 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 modifications which required re-valuation of un-vested awards to modification date fair value with recognition of compensation expense over the remaining service period. The Company modified awards resulting in approximately $19.3 million in incremental compensation cost during the year ended December 31, 2021.

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