RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Transactions with Pepsi

As further described in Note 14. Mezzanine Equity, on August 1, 2022, the Company issued approximately 1.5 million shares non-voting Series A to Pepsi. The shares accounted for approximately 8.5% of the Company’s outstanding common stock on the date of issuance, on an as-converted method. The Purchase Agreement granted Pepsi the right to designate a nominee for election to the Company’s nine-member board of directors, provided Pepsi meets certain ownership requirements. During the year ended 2022, a Pepsi executive was nominated by Pepsi and elected to the Company’s board of directors.

Based on Pepsi’s contractual representation rights for a seat on the Company’s Board of Directors, the Company concluded that Pepsi represents a related party to the Company. The following transactions were recognized in the Company’s financial statements:

•Net sales to Pepsi amounted to $248.6 million and $590.0 million, respectively, for the three and nine months ended September 30, 2023 and $58.8 million for each of the three and nine months ended September 30, 2022, and are included in revenue.

•Estimated accrued promotional allowance related to Pepsi was $82.5 million and $13.9 million at September 30, 2023 and December 31, 2022, respectively, and is included in accrued promotional allowance in the Company's consolidated balance sheets.

•During the three and nine months ended September 30, 2023, the Company purchased company-branded coolers from Grayhawk Leasing, LLC ("Grayhawk"), a wholly-owned subsidiary of Pepsi, amounting to $3.3 million and $7.5 million, respectively. The Company did not transact with Grayhawk during the three and nine months ended September 30, 2022.

•Accounts receivable due from Pepsi on September 30, 2023 and December 31, 2022, were $160.9 million and $31.6 million, respectively, and are included in accounts receivable, net on the Company’s consolidated balance sheets.

•Pepsi paid the Company $227.8 million in cash under the Transition Agreement during the year ended December 31, 2022. This amount was used for settling termination fees with former distributors; any excess cash was contractually restricted and due back to Pepsi. As of September 30, 2023, the Company recorded deferred revenues (a contract liability) of $178.9 million, net of the $2.4 million and $7.1 million, for the three and nine months ended September 30, 2023, respectively, in the consolidated statements of operations. As of December 31, 2022, the Company recorded deferred revenues of $189.5 million, net of $4.2 million of revenue recognized. The deferred revenues will be recognized by Celsius ratably over the twenty-year agreement term.

•Amounts due to Pepsi of $34.8 million as of December 31, 2022, representing refund liabilities owed to Pepsi under the Transition Agreement, were recorded to accounts payable and accrued expenses on the accompanying consolidated balance sheets. As of September 30, 2023, payments due to Pepsi had been fully refunded, and the Company did not have a refund liability.

•The Company issued Series A Convertible Preferred Stock with a fair value of $832.5 million for an issuance price of $550 million on August 1, 2022. The excess of the fair value over the issuance proceeds, amounting to $282.5 million, has been recorded as deferred other costs in the accompanying consolidated balance sheets. See Note 14. Mezzanine Equity for more information. As of September 30, 2023 unamortized deferred other costs of $14.1 million and $251.9 million, were recorded in deferred other costs-current and deferred other costs-non-current, respectively in the consolidated balance sheets. As of December 31, 2022 unamortized deferred other costs of $14.1 million and $262.5 million were recorded as deferred other costs-current and deferred other costs-non-current, respectively in the consolidated balance sheets. Amortization of deferred other costs for the three and nine months ended September 30, 2023, was $3.5 million and $10.6 million, respectively. This was recorded as an offset to revenue.

See Notes 1. Organization and Description of Business, 2. Basis of Presentation and Summary of Significant Accounting Policies, 4. Revenue, 11. Accounts Payable and Accrued Expenses, and 14. Mezzanine Equity for more information.

Related Party Lease

The Company’s office is leased from a company affiliated with CD Financial, LLC. The lease extends until December 2024 with a monthly rent of $35 thousand.

Additionally, on May 17, 2023, the Company and CD Financial, LLC entered into an amendment to the lease that expanded the leased space, effective on July 1, 2023. The expansion space extends until December 2024 with a monthly rent of $8 thousand.