What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-14 compared with 2022-03-14 · 330 added, 360 removed, 947 unchanged (42% of the section changed)

1 unchanged sentence

The financial statements required to be filed pursuant to this Item 8 are appended to this report.

An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.

An index of those financial statements is set forth below:

I NDEX TO C ONSOLIDATED F INANCIAL S TATEMENTS

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Derivative assets 3,606 126

Asset held for sale 503 —

Prepaid expenses and other current assets 22,181 20,718

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Deferred tax assets, net 4,256 1,265

Right-of-use asset 2,679 —

Other assets 1,677 1,954

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Notes payable 25 48

Deferred tax liability — 342

Other long-term liabilities 2,293 301

Total liabilities $ 56,664 $ 74,311

Commitments and contingencies (Note 11)

Stockholders' equity:

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Additional paid-in capital 145,210 134,730

Loan to stockholder — ( 17,700 )

Retained earnings 55,183 47,369

Accumulated other comprehensive loss ( 994 ) ( 616 )

Treasury stock, 6,206,200 shares at cost as of December 31, 2021, and 1,014,195 shares at cost as of December 31, 2020

Treasury stock, 6,206,200 shares at cost as of December 31, 2022, and December 31, 2021

( 58,928 ) ( 58,928 )

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Purchase of treasury stock — — — — — — — — — — 802,620 ( 6,940 ) ( 6,940 ) — ( 6,940 )

Issuance of common shares 2,472,925 25 — — 2,472,925 25 17,727 — 143 — — — 17,895 ( 143 ) 17,752

Loan to Stockholder — — — — — — — ( 17,700 ) — — — — ( 17,700 ) — ( 17,700 )

Stock-based compensation — — — — — — 1,517 — — — — — 1,517 — 1,517

Exercise of stock options 177,450 2 — — 177,450 2 882 — — — — — 884 — 884

Exercise of service warrants 116,025 1 — — 116,025 1 — — — — — — 1 — 1

Foreign currency translation adjustment — — — — — — — — — 346 — — 346 5 351

1 unchanged sentence

Net income — — — — — — — — 19,015 — — — 19,015 ( 23 ) 18,992

Issuance of common stock pursuant to initial public offering, net of underwriting discounts and offering costs 2,500,000 25 — — 2,500,000 25 30,331 — — — — — 30,356 — 30,356

Purchase of treasury stock — — — — — — — — — — 5,192,005 ( 50,003 ) ( 50,003 ) — ( 50,003 )

Issuance of common shares — — — — — — — — — — — — — — —

Loan to Stockholder — — — — — — — 17,700 — — — — 17,700 — 17,700

1 unchanged sentence

Exercise of stock options 20,930 — — — 20,930 — 178 — — — — — 178 — 178

Exercise of service warrants 116,025 1 — — 116,025 1 — — — — — — 1 — 1

Acquisition of non-controlling interest 43,602 1 — — 43,602 1 ( 8 ) — — 13 — — 6 ( 59 ) ( 53 )

Foreign currency translation adjustment — — — — — — — — — 320 — — 320 4 324

Balance at December 31, 2020 51,086,945 $ 511 8,113,105 $ 81 59,200,050 $ 592 $ 100,849 $ ( 17,700 ) $ 28,354 $ ( 949 ) 1,014,195 $ ( 8,925 ) $ 102,221 $ 78 $ 102,299

Common Stock Common Stock

Warrants Total Common

Stock Additional

Capital Loan to

Shareholder Retained

Deficit) Accumulated

Comprehensive

Income / (Loss) Treasury Stock Total

Stockholders'

to The Vita Coco Company, Inc.

Non- controlling

Subsidiary Total

Stockholders'

Shares $Amount Shares $Amount Shares $Amount Shares Amount

Balance at Balance at December 31, 2021 53,651,477 $ 537 8,113,105 $ 81 61,764,582 $ 618 $ 134,730 $ — $ 47,369 $ ( 616 ) 6,206,200 $ ( 58,928 ) $ 123,173 $ — $ 123,173

Net income — — — — — — — — 7,814 — — — 7,814 — 7,814

Issuance of common stock pursuant to initial public offering, net of underwriting discounts and offering costs 2,500,000 25 — — 2,500,000 25 30,331 — — — — — 30,356 — 30,356

Purchase of treasury stock — — — — — — — — — — 5,192,005 ( 50,003 ) ( 50,003 ) — ( 50,003 )

Loan to stockholder — — — — — — — 17,700 — — — — 17,700 — 17,700

Stock-based compensation — — — — — — 7,384 — — — — — 7,384 — 7,384

Exercise of stock options 460,668 4 — — 460,668 4 3,096 — — — — — 3,100 — 3,100

Acquisition of non-controlling interest 43,602 1 — — 43,602 1 ( 8 ) — — 13 — — 6 ( 59 ) ( 53 )

Foreign currency translation adjustment — — — — — — — — — ( 378 ) — — ( 378 ) — ( 378 )

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Stock-based compensation 7,384 3,380 1,517

Impairment loss on assets held for sale 619 — 90

Impairment of intangible assets 6,714 — —

Deferred tax expense ( 1,644 ) 6,282 ( 788 )

Deferred tax expense/(benefit) ( 3,081 ) ( 1,644 ) 6,282

Noncash lease expense 1,058 — —

Change in fair value of contingent consideration — — ( 16,400 )

3 unchanged sentences

Inventory ( 9,333 ) ( 43,501 ) 4,978

Prepaid expenses and other assets 2,584 ( 16,762 ) 3,276

Prepaid expenses, net supplier advances, and other assets ( 3,592 ) 2,725 ( 16,426 )

Accounts payable, accrued expenses, and other long-term liabilities ( 16,776 ) 20,503 12,708

Net advances to suppliers 141 336 ( 247 )

Net cash provided by (used in) operating activities ( 10,935 ) ( 16,166 ) 33,323

6 unchanged sentences

Proceeds from exercise of stock options/warrants 3,062 177 885

Proceeds from sale of common stock — — 27

Proceeds from settlement of loan to stockholder — 17,700 —

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and subsidiaries (the “Company”) develops, markets, and distributes various coconut water products under the brand name Vita Coco and for retailers own brands, predominantly in the United States.

Other products include coconut oil, coconut milk, coconut as a commodity, natural energy drink (under the brand name, Runa ), water (under the brand name, Ever & Ever ) and protein-infused fitness drink (under the brand name, PWR LIFT ).

Other products include coconut milk, natural energy drinks (under the brand name Runa ), coconut oil, water (under the brand name Ever & Ever ), protein infused fitness drinks (under the brand name PWR LIFT) and coconut as a commodity.

The Company was incorporated in Delaware as All Market Inc.

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As a public benefit corporation, our board of directors is required by the Delaware General Corporation Law to manage or direct our business and affairs in a manner that balances the pecuniary interests of our stockholders, the best interests of those materially affected by our conduct, and the specific public benefits identified in our certificate of incorporation.

The Company has ten wholly-owned subsidiaries including four wholly-owned Asian subsidiaries established between fiscal 2012 and 2015, one North American subsidiary established in 2015, as well as majority ownership in All Market Europe, Ltd.

The Company has nine wholly-owned subsidiaries including four wholly-owned Asian subsidiaries established between fiscal years 2012 and 2015, one North American subsidiary established in 2015, as well as majority ownership in All Market Europe, Ltd.

("AME") in the United Kingdom until the Company reacquired the minority stockholders' shares and became wholly-owned as of December 31, 2021.

AME was established in fiscal 2009 and has 100 % ownership in two European subsidiaries established in 2015.

The noncontrolling interest in AME represents minority stockholders’ proportionate share of the equity in AME.

The noncontrolling interest in AME represented minority stockholders’ proportionate share of the equity in AME.

The noncontrolling interest is presented in the equity section of the Company’s consolidated balance sheets.

One of the wholly-owned Asian subsidiaries, All Market Singapore Pte Ltd (AMS), has 100 % ownership in one subsidiary, established in 2018 in Ecuador.

Basis of Presentation

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Initial Public Offering (“IPO”)

The Company’s registration statement on Form S-1, as amended, was declared effective by the SEC on October 20, 2021 related to the IPO of its common stock in the prospectus dated October 20, 2021, filed with the Securities and Exchange Commission (“SEC”) in accordance with Rule 424(b)(4) of the Securities Act on October 22, 2021 (the “Prospectus”).

The Company’s registration statement on Form S-1, as amended, was declared effective by the SEC on October 20, 2021 related to the IPO of its common stock in the prospectus dated October 20, 2021, filed with the SEC in accordance with Rule 424(b)(4) of the Securities Act on October 22, 2021 (the “Prospectus”).

On October 21, 2021, the Company’s shares began trading on the NASDAQ under the ticker symbol “COCO”.

On October 25, 2021, we completed our IPO by issuing 2,500,000 shares of our common stock, $ 0.01 par value per share, at a price to the public of $ 15 per share, resulting in net proceeds to us of approximately $ 30 million, after deducting the underwriting discount and commissions of approximately $ 2 million and offering expenses of approximately $ 5 million.

Additionally, certain selling stockholders sold an aggregate of 9,000,000 shares in the initial offering, 399,922 shares under the option to purchase additional shares exercised by the underwriters, and 1,333,333 shares in a concurrent private placement (see Note 11 for additional information on the private placement).

On October 25, 2021, we completed our IPO by issuing 2,500,000 shares of our common stock, $ 0.01 par value per share, at a price to the public of $ 15 per share, resulting in net proceeds to us of approximately $ 30,000 , after deducting the underwriting discount and commissions of approximately $ 2,000 and offering expenses of approximately $ 5,000 .

Additionally, certain selling stockholders sold an aggregate of 9,000,000 shares.

The Company did not receive any proceeds from the sale of these shares by certain selling stockholders.

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See Note 10 for additional information on the repayment of the 2021 Term Loan.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

Concurrent with the IPO, various agreements were amended or newly effective, which are further described in our Prospectus, which include:

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• The Investor Rights agreement;

• Amendments to the employment agreements for the co-CEOs, Mike Kirban and Martin Roper;

• Adoption of the new 2021 Stock Incentive Award Plan and new grants of awards to employees and directors, which was effective in connection with the IPO;

• Adoption of a new 2021 Employee Stock Purchase Plan, which was effective in connection with the IPO.

Stock Split and Authorized Shares

On October 11, 2021, the Company’s Board of Directors and stockholders approved an amended and restated certificate of incorporation of the Company effecting a 455 -for-1 stock split of the Company’s issued and outstanding shares of common stock, and an increase to the authorized shares of our common stock to 500,000,000 shares.

The split was effected on October 11, 2021 and without any change in the par value per share.

All information related to the Company’s common stock and stock awards has been retrospectively adjusted to give effect to the 455 -for-1 stock split, without any change in the par value per share.

Impact of the Covid-19 Pandemic

On March 11, 2020, the World Health Organization declared the recent novel coronavirus (“COVID-19”) outbreak a pandemic.

In response to the outbreak many jurisdictions, including those in which the Company has locations, have implemented measures to combat the outbreak, such as travel restrictions and shelter in place orders.

The global spread and unprecedented impact of COVID-19 continues to create significant volatility, uncertainty and economic disruption.

The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s cash flow, business, financial condition, results of operations and prospects will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), impact of the new COVID-19 variants and the rollout of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

The Company has experienced some impacts on inventory availability and delivery capacity since the outbreak which have impacted, at times, the Company’s ability to fully service its customers, including temporary facility shutdowns, local transportation interruptions, and general pressure on global shipping lines.

The Company has taken measures to bolster key aspects of its supply chain and the Company continues to work with its supply chain partners to try to ensure its ability to service its customers.

Although not a material impact in the years ended December 31, 2019 and 2020, the Company saw in fiscal year 2021 significant changes to global ocean shipping availability and pricing of containers, lengthening transit times, increased domestic transportation costs and some payroll inflationary effects among other impacts.

Starting in the second quarter 2021, we took pricing actions such as delaying promotions until later in the year, reducing discounting and sharing cost increases with private label customers as we were able, in order to partially offset the inflationary costs of goods effects we were experiencing.

We do not believe the current costs of goods inflated by the current economic and supply chain pressures are fully representative of our future costs of goods in a normal supply chain environment.

The Company is continuing to monitor the situation carefully to understand any future potential impact on its people and business.

The Company is taking all necessary steps to protect its people and mitigate any risk to its business.

As a result, it is not currently possible to ascertain the overall impact of COVID-19 on the Company’s business, results of operations, financial condition or liquidity.

Future events and effects related to COVID-19 cannot be determined with precision and actual results could significantly differ from estimates or forecasts.

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

• Amendments to the employment agreements for the Executive Chairman, Mike Kirban and CEO, Martin Roper;

• Adoption of the new 2021 Stock Incentive Award Plan and new grants of awards to employees and directors;

• Adoption of a new 2021 Employee Stock Purchase Plan.

Impact of the COVID-19 Pandemic and Current Geopolitical Instability

Disruptions in the worldwide economy may affect our business, and the macroeconomic environment continues to be affected by the COVID-19 pandemic and the current geopolitical instability (including the effects of the conflict between Ukraine and Russia).

As a result, the Company has seen significant cost inflation to domestic and international shipping costs and some inflationary pressures on other cost elements;

only some of which have been covered by pricing actions to date.

The Company is continuing to monitor the situation carefully to understand any future potential impact on its people and business.

As a result, it is not currently possible to ascertain the overall impact of COVID-19 or the ongoing economic and geopolitical instability on the Company’s business, results of operations, financial condition or liquidity.

Future events and effects related to COVID-19 or the ongoing geopolitical instability cannot be determined with precision and actual results could significantly differ from estimates or forecasts.

The Company has also seen greater volatility on foreign exchange rates.

A strong dollar generally benefits the Company's supply chain activities while negatively impacting our reported international revenues.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The Company’s performance obligations are satisfied at that time.

The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that would meet the criteria for a distinct good or service that could cause revenue to be allocated or adjusted over time.

The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

with customers contain no incentives or discounts that would meet the criteria for a distinct good or service that could cause revenue to be allocated or adjusted over time.

Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent fulfillment costs, which are included in cost of goods sold, rather than revenue.

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Costs of goods sold includes the costs of the products sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies, and warehouse fulfillment costs incurred in operating and staffing warehouses.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

Shipping and Handling Costs

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Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (ASC 718) for stock options issued under the 2014 Stock Option and Restricted Stock Plan and the 2021 Stock Incentive Award Plan.

The Company measures all stock option awards based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period of each stock-option grant, which is generally the vesting period of the respective award by using the accelerated attribution method.

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation ("ASC 718") for awards issued under the 2014 Stock Option and Restricted Stock Plan and the 2021 Stock Incentive Award Plan.

The Company measures all awards based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period of each stock award grant, which is generally the vesting period of the respective award by using the accelerated attribution method.

The Company applies an estimated forfeiture rate derived from historical employee termination behavior.

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The Company recognizes expense for performance-based awards when it becomes probable that such awards will be earned over a requisite service period.

The Company defers the recognition of compensation expense for the stock-option awards that vest upon a qualifying liquidity events until the qualifying events are probable of occurrence.

Stock option awards are equity-classified, as they do not contain a cash settlement option or other features requiring them to be liability-classified.

The Company uses the Black-Scholes-Merton (“Black-Scholes”) option-pricing model to determine the fair value of stock awards with service-based vesting conditions and performance-based vesting conditions.

For stock awards with performance-based and market-based vesting conditions, the Company uses the Barrier option valuation model to determine the fair value.

The Company has classified stock-based compensation expense in its consolidated statements of operations in selling, general, and administrative expenses, reflecting the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

See Note 15 for further information.

The Company accounts for income taxes under Accounting Standards Codification (ASC) 740, Income Taxes , which requires an asset and liability approach to financial accounting and reporting for income taxes.

Deferred income tax assets and liabilities are computed annually for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future.

Such deferred income tax assets and liabilities computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

Interest and penalties related to unrecognized tax positions are included in income tax expense in the consolidated statement of operations and comprehensive income and accrued expenses in the consolidated balance sheets.

The Company recognizes the effect of income tax positions only if those positions are more likely than not

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

of being sustained.

The Company defers the recognition of compensation expense for the stock awards that vest upon qualifying liquidity events until the qualifying events are probable of occurrence.

Stock awards are equity-classified, as they do not contain a cash settlement option or other features requiring them to be liability-classified.

The Company uses the Black-Scholes option-pricing model to determine the fair value of stock awards with service-based vesting conditions and performance-based vesting conditions.

For stock awards with performance-based and market-based vesting conditions, the Company uses the Barrier option valuation model to determine the fair value.

The Company has classified most of its stock-based compensation expense in its consolidated statements of operations in selling, general, and administrative expenses, reflecting the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

There are restricted stock units previously granted to entities affiliated with a major customer, which was recognized as a stock-based sales incentive based on guidance in ASC 606 and reflected as a reduction in the transaction price revenue.

See Note 14, Stockholders' Equity for further information.

The Company accounts for income taxes under ASC 740, which requires an asset and liability approach to financial accounting and reporting for income taxes.

Such deferred income tax assets and liabilities computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.

Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.

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The Company reserves for finished goods that are close to the date of expiration.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

Deferred Offering Costs

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• Leasehold improvements – The lesser of the life of the asset or the term of the lease

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

• Vehicles – 5 years

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If the estimated undiscounted future cash flows are less than the carrying amount, an impairment loss is recorded based upon the difference between the carrying amount and the fair value of the asset.

The Company evaluates each of its acquisitions under the accounting framework in Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (ASC 805).

The Company evaluates each of its acquisitions under the accounting framework in Accounting Standards Codification Topic 805, Business Combinations ("ASC 805").

ASC 805 requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable tangible and intangible assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity, and recognize and measure goodwill or a gain from the purchase.

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Transaction costs associated with business combinations are expensed as incurred and are included in selling, general and administrative expense in the consolidated statements of operations.

The Company performs valuations of assets acquired, liabilities assumed, and contingent consideration and allocate the purchase price to its respective assets and liabilities.

The Company performs valuations of assets acquired, liabilities assumed, and contingent consideration and allocates the purchase price to its respective assets and liabilities.

Determining the fair value of assets acquired, liabilities assumed, and contingent consideration requires the use of significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, the probability of the achievement of specified milestones, and selection of comparable companies.

The Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired, liabilities assumed, and contingent consideration in a business combination.

The Company engages the assistance of

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired, liabilities assumed, and contingent consideration in a business combination.

Intangible assets

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Intangible assets are amortized over their estimated useful lives of ten years , using the straight-line method, which approximates the pattern in which the economic benefits are consumed.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination and is measured in accordance with the provisions of ASC 350, Intangibles – Goodwill and Other (ASC 350).

The Company’s intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, or a triggering event.

When a triggering event is identified, a test of recoverability is performed by estimating the undiscounted future cash flows associated with such assets and comparing them to the carrying value of the asset.

When the recoverability test fails, the Company measures the impairment loss based on the fair value of the assets compared to the carrying amount of the asset.

The fair value of the trade names is determined through an income approach using the relief from royalty method.

The fair value of the distributor relationships is determined through an income approach using the excess earnings method.

Goodwill represents the excess of the purchase price paid in excess of the fair value of net identifiable tangible and intangible assets acquired in a business combination and is measured in accordance with the provisions of ASC 350, Intangibles – Goodwill and Other ("ASC 350").

Goodwill is not amortized;

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The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.

In performing the qualitative assessment, the Company reviews factors both specific to the reporting units and to the Company as a whole, such as

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

financial performance, macroeconomic conditions, industry and market considerations, and the fair value of each reporting unit at the last valuation date.

In performing the qualitative assessment, the Company reviews factors both specific to the reporting units and to the Company as a whole, such as financial performance, macroeconomic conditions, industry and market considerations, and the fair value of each reporting unit at the last valuation date.

If the Company elects this option and believes, as a result of the qualitative assessment, that it is more likely than not that the carrying value of each of the reporting units exceeds their fair value, the quantitative impairment test is required;

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Supplier Advances

The Company issues advances to certain manufacturers with interest at rates between 0 % and 4 % with terms extending to November 2024 .

The Company issues advances to certain manufacturers with interest at rates between 0 % and 4 % with terms extending to February 2028 .

These advances are assessed for collectability and an allowance for credit losses is recognized when it is probable that the Company will be unable to collect all amounts due according to the contractual terms.

There was no allowance recorded as of December 31, 2021 and a $ 384 allowance was recorded as of December 31, 2020.

There was no allowance recorded as of December 31, 2022 and December 31, 2021.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

Foreign Currency

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(i) Americas segment, which is comprised of the Company’s operations in the Americas region, primarily in the U.S.

and Canada, and (ii) International segment, which is comprised of the Company’s operations primarily in Europe, Middle East, and the Asia Pacific regions.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

The Company’s Co-Chief Executive Officers (“Co-CEOs”), as the chief operating decision makers (CODM), manage and allocate resources between the Americas and International segments.

Consistent with this decision-making process, the Co-CEOs use financial information disaggregated between the Americas and International segment for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.

The Co-CEOs evaluate segment business performance based primarily on net sales and gross profit.

and Canada, and (ii) International segment, which is comprised of the Company’s operations primarily in Europe, Middle East, Africa and the Asia Pacific regions.

The Company’s Chief Executive Officer, as the chief operating decision maker (CODM), manages and allocates resources between the Americas and International segments.

Consistent with this decision-making process, the CEO uses financial information disaggregated between the Americas and International segment for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.

The CEO evaluates segment business performance based primarily on net sales and gross profit.

Concentration of Credit Risk

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Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) , and several amendments, codified as ASC 606, which supersedes the revenue recognition guidance in ASC Topic 605.

ASC 606, among other provisions, (i) is based on the principle that revenue should depict the transfer of control of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and (ii) requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments.

The Company adopted ASC 606 and the related updates on January 1, 2019, for the year ended December 31, 2020.

Implementation followed the modified retrospective method, which applies the new guidance to contracts not completed as of the date of adoption.

The cumulative effect of initial application of the new standard did not result in any material changes, and therefore, no adjustment was made to the opening balance of retained earnings.

Prior year comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The Company did not identify material changes to the consolidated financial statements for the period of ASC 606 adoption, and there were no significant policy changes impacting the timing or measurement of revenue.

The Company has updated its accounting policies to ensure ongoing compliance with ASC 606.

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04 – Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).

This update removes Step 2 of the goodwill impairment test under current guidance, which requires a hypothetical purchase price allocation.

The new guidance requires an impairment charge to be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

Upon adoption, the guidance is to be applied prospectively.

The amendments in ASU 2017-04 are effective for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment test performed on testing dates after January 1, 2017.

The Company adopted ASU 2017-04 on January 1, 2020.

The adoption of ASU 2017-04 did not have a material impact on the consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Improvements to nonemployee share-based payment accounting (“ASU 2018-07”), that expands the scope of Topic 718 to include stock-based payments issued to nonemployees for goods and services, which are currently accounted for under Topic 505.

The ASU specifies that Topic 718 will apply to all stock-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations in exchange for stock-based payment awards.

The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2019.

The Company adopted the guidance in this amendment effective January 1, 2020.

Upon transition, the Company remeasured equity-classified awards for which a measurement date had not been established.

The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements.

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40).

The update is associated with customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The amendments in this update require that a customer in a hosting arrangement that is a service contract follow the guidance in Subtopic 350-40 to determine which implementation costs should be capitalized as an asset and which costs should be expensed and

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

In August 2018, the FASB issued ASU 2018-13, Changes to the disclosure requirements for fair value measurement , that modify the disclosure requirements on fair value measurements in Topic 820, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8:

Notes to Financial Statements , including the consideration of costs and benefits.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2019.

The Company adopted the guidance in this amendment effective January 1, 2020.

The adoption of ASU 2018-13 resulted in changes in disclosures but did not have an impact on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40).

The update is associated with customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

states that any capitalized implementation costs should be expensed over the term of the hosting arrangement.

The guidance is effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

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The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Pronouncements

As a company with less than $1.07 billion of revenue during the last fiscal year, the Company qualifies as an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act.

This classification allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

The Company has elected to use the adoption dates applicable to private companies.

As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), (“ASU 2019-12”) that simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating incomes taxes in interim periods.

ASU 2019-12 also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of consolidated group.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2021.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

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ASU 2021-10 is effective for all entities for annual periods beginning after December 15, 2021.

The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.

This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted.

The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements.

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

ASU 2019-12 also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of consolidated group.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2021.

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods with those fiscal years, for nonpublic entities.

Early adoption is permitted.

This standard will be effective for the Company in the first quarter of its fiscal year ending December 31, 2023.

The Company is assessing the impact of adoption on the consolidated financial statements.

The Company adopted this standard for all prospective acquisitions after the effective date.

In February 2016, the FASB issued ASC 842 , ASU 2016-02 , Leases (Topic 842), which was amended by subsequent Accounting Standard Updates ("ASUs"), to enhance the comparability and usefulness of financial reporting around leasing activity.

The new standard supersedes the existing authoritative literature for lease accounting under ASC 840 , with a focus on applying a “right-of-use model.” The guidance for leases under ASC 842 results in a right-of-use asset (“ROU asset”) and lease liability being reported on the balance sheet for leases with a lease term greater than twelve months.

In June 2020, the FASB issued ASU 2020-05 , Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842):

Effective Dates for certain entities, which deferred the effective date of ASU 2016-02 for certain entities.

ASC 842 is effective for the Company, as an Emerging Growth Company (“EGC”), for annual reporting periods beginning after December 15, 2021 and for interim periods beginning after December 15, 2022.

The Company adopted the standard on January 1, 2022 using the alternative modified retrospective transition approach in accordance with ASU 2018-11 , Leases (Topic 842):

Targeted Improvements, where the adoption date represents the initial date of application.

As part of its adoption, the Company elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for any existing leases.

Additionally, the Company elected the practical expedient that permits the exclusion of leases considered to be short-term.

Under the alternative modified retrospective transition approach, the reported results for 2022 reflect the application of ASC 842 guidance, whereas comparative periods and the respective disclosures prior to the adoption of ASC 842 are presented using the legacy guidance of ASC 840 .

As a result of adopting the new standard, the Company recognized right-of-use assets and lease liabilities of $ 1,866 and $ 2,097 , respectively, on the Company’s consolidated balance sheet as of January 1, 2022.

The difference of $ 231 between the operating lease right-of-use assets and operating lease liabilities represents reclassification of deferred rent liability from other liabilities to operating lease right-to-use assets at the adoption date.

The adoption of the standard did not have a material impact on the Company’s consolidated statements of operations, or consolidated statements of cash flows.

Recently Issued Accounting Pronouncements

As a company with less than $1.07 billion of revenue during the last fiscal year, the Company qualifies as an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act.

This classification allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

The Company has elected to use the adoption dates applicable to private companies.

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) (“ASU 2016-02”).

In July 2018, the FASB issued Accounting Standards Update 2018-11 Leases (Topic 842):

Targeted Improvements (“ASU 2018-11”), which contains certain amendments to ASU 2016-02 intended to provide relief in implementing the new standard.

The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all operating leases, with an exception provided for leases with a duration of one year or less.

Further, incremental disclosures will be required around the amount, timing, and uncertainty of cash flows arising from leases.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2021 for nonpublic entities.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326):

ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods with those fiscal years, for nonpublic entities.

Early adoption is permitted.

Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the consolidated financial statements.

The Company will adopt ASU 2016-02 beginning on January 1, 2022.

The Company is assessing the impact of adoption on the consolidated financial statements.

This standard will be effective for the Company in the first quarter of its fiscal year ending December 31, 2023.

The Company is assessing the impact of adoption on the consolidated financial statements, but does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

REVENUE RECOGNITION

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Amount Accumulated

Amortization Net Gross Carrying

Amortization Impairment

Net Gross Carrying

Amount Accumulated

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Other 38 — ( 38 ) $ — 38 — 38

Total intangible assets subject to amortization $ 12,238 $ ( 4,304 ) $ 7,934 12,238 $ ( 3,084 ) $ 9,154

Total Intangible assets subject to amortization & impairment $ 12,238 $ ( 5,524 ) $ ( 6,714 ) $ — 12,238 $ ( 4,304 ) $ 7,934

THE VITA COCO COMPANY, INC.

18 unchanged sentences

The excess of the carrying value of the asset group over its fair value, if any, would be recognized as an impairment loss.

During 2020, the Company identified facts and circumstances that indicated that the fair value of the intangible assets associated with Runa, including the trade names and distributor relationships, and certain of its Other intangible assets not associated with Runa may not be recoverable, resulting in the determination that a triggering event had occurred.

Based on step 1, the Company determined that the Runa intangible assets were recoverable based on a test of recoverability using expected undiscounted future cash flows for the Runa brand in the Americas.

However, based on step 1, the Other intangible assets not associated with Runa were not recoverable based on a test of recoverability using expected undiscounted future cash flows.

For the Other intangible assets not associated with Runa , the Company then applied step 2, by determining the fair value of the Other intangible asset using a discounted cash flow valuation analysis, which concluded that the fair value was below the carrying amount.

During 2022, the Company identified facts and circumstances indicating the carrying value of the intangible assets associated with Runa, including the trade names and distributor relationships, may not be recoverable, resulting in the determination that a triggering event had occurred.

Based on step 1, the Company determined that the Runa intangible assets were not recoverable based on a test of recoverability using expected undiscounted future cash flows for the Runa brand in the Americas.

For both trade names and distributor relationships, the Company applied step 2, by determining the fair value of these intangible assets, which concluded that the fair value was significantly below the carrying amount.

Accordingly, the Company recorded an impairment charge of $ 6,714 for the year ended December 31, 2022, which is recorded in selling, general and administrative expense on the Company’s consolidated statements of operations.

There were no indicators or impairment of the intangible assets for the year ended December 31, 2021 or 2019.

Amortization expense of $ 1,220 , $ 1,220 , and $ 1,236 for the years ended December 31, 2021, 2020 and 2019 were included in selling, general and administrative expenses on the consolidated statements of operations.

As of December 31, 2021, the estimated future amortization expense for amortizable intangible assets placed in service is as follows:

Year ending December 31,

Thereafter 1,814

Amortization expense of $ 1,220 for the years ended December 31, 2022, 2021 and 2020 were included in selling, general and administrative expenses on the consolidated statements of operations.

As of December 31, 2022, all amortizable intangible assets were impaired and no future amortization expense will be recognized in the Company's consolidated statements of operations.

ACCRUED EXPENSES

Accrued expenses consist of the following:

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

ACCRUED EXPENSES

Accrued expenses consist of the following:

Accrued promotions and marketing $ 18,624 $ 19,455

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Accrued trade payable 1,613 1,647

Current operating lease liabilities 734 —

VAT payable 1,599 2,276

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Notes payable

2021 Term Loan $ — $ —

Vehicle loans 48 76

2 unchanged sentences

2020 Credit Facility

In May 2020, the Company entered into a five-year credit facility (“2020 Credit Facility”) with Wells Fargo consisting of a revolving line of credit.

In May 2020, the Company entered into the five-year credit facility, the 2020 Credit Facility with Wells Fargo consisting of a revolving line of credit.

The 2020 Credit Facility was further amended in May 2021 and October 2021, and currently provides for committed borrowings of $ 60 million.

Borrowings on the 2020 Credit Facility bear interest at rates based on either London InterBank Offered Rate (LIBOR) or a specified base rate (determined by reference to the greatest of the prime rate published by Wells Fargo, the federal funds effective rate plus 1.5 % and one-month LIBOR plus 1.5 %), as selected periodically by the Company.

Borrowings on the 2020 Credit Facility bear interest at rates based on either:

1) LIBOR or 2) a specified base rate (determined by reference to the greatest of the prime rate published by Wells Fargo, the federal funds effective rate plus 1.5 % and one-month LIBOR plus 1.5 %), as selected periodically by the Company.

The LIBOR-based loans bear interest at LIBOR plus a spread ranging from 1.00 % to 1.75 % per annum, with the spread in each case being based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement.

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The maturity date on the 2020 Credit Facility is May 12, 2026.

In December 2020, the Company drew down $ 25,000 on the 2020 Credit Facility.

As of December 31, 2020, the Company had $ 25,000 outstanding, $ 25,000 undrawn and available as well as a $ 10,000 non-committed accordion feature under its 2020 Credit Facility.

As of December 31, 2021, the Company had no outstanding balance and $ 60,000 undrawn and available under its amended 2020 Credit Facility.

In December 2022, the Company amended the 2020 Credit Facility to transition the interest rate from reference to LIBOR to the SOFR.

The borrowings made after the amendment bear interest at rates based on either 1) a fluctuating rate per annum determined to be the sum of Daily Simple SOFR plus the same spread discussed above or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the same spread discussed.

The spread and the commitment fees did not change as a result of this amendment.

As of December 31, 2022 and December 31, 2021, the Company had no outstanding balance and $ 60,000 undrawn and available under its amended 2020 Credit Facility.

THE VITA COCO COMPANY, INC.

17 unchanged sentences

2021 Term Loan

In May 2021, the Company entered into a Term Commitment Note with Wells Fargo (“2021 Term Loan”) pursuant to the terms of the credit agreement entered into in connection with the 2020 Credit Facility.

In May 2021, the Company entered into the 2021 Term Loan pursuant to the terms of the credit agreement entered into in connection with the 2020 Credit Facility.

The 2021 Term Loan provided the Company with borrowings up to $ 30,000 .

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In accordance with ASC 470, the Company recognized a loss of $ 132 related primarily to the write-off of deferred financing costs, which was recorded in the "Loss on extinguishment of debt" line in the accompanying consolidated statements of operations.

Prior to entering into the 2021 Term Loan, the Company held two other Term Loans:

Prior to entering into the 2021 Term Loan, the Company held two other Term Loans, which were paid off in connection with entering into the 2020 Credit Facility in May 2020:

• 2016 Term Loan—On August 9, 2016, the Company entered into a five-year term loan with JPMorgan Chase, N.A.

(“2016 Term Loan”).

The total amount of the term loan is $ 10,000 which matures in August 2021.

Principal payments are based on an increasing percentage of the initial loan amount varying from 2.5 % to 5 % and are made at the end of each quarter.

The total amount of the term loan was $ 10,000 which matured in August 2021.

Principal payments were based on an increasing percentage of the initial loan amount varying from 2.5 % to 5 % and were made at the end of each quarter.

• 2017 Term Loan—On April 25, 2017, the Company entered into a five-year term loan with JPMorgan Chase, N.A.

(“2017 Term Loan 2017”).

The total amount of the term loan is $ 15,000 which matures in April 2022.

Principal payments are based on an increasing percentage of the initial loan amount varying from 2.5 % to 5 % and are made at the end of each quarter.

The total amount of the term loan was $ 15,000 which matured in April 2022.

Principal payments were based on an increasing percentage of the initial loan amount varying from 2.5 % to 5 % and were made at the end of each quarter.

The 2016 Term Loan and the 2017 Term Loan bear interest at LIBOR plus 1.50 % and were collateralized by substantially all of the Company’s assets.

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The 2016 Term Loan and 2017 Term Loan also required the Company to maintain certain financial covenants including a maximum leverage ratio and a minimum fixed charge coverage ratio.

In May 2020, the Company paid off its 2016 Term Loan and the 2017 Term Loan in connection with entering into the 2020 Credit Facility.

Interest expense related to the 2021, 2017, and 2016 Term Loans amounted to $ 141 and $ 188 for the years ended December 31, 2021 and 2020, respectively.

Vehicle Loans

THE VITA COCO COMPANY, INC.

3 unchanged sentences

(Amounts in thousands, except for share and per share data)

Vehicle Loans

The Company periodically enters into vehicle loans.

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COMMITMENTS AND CONTINGENCIES

Operating Leases — The aggregate minimum commitments for renting the office spaces under non-cancellable operating leases as of December 31 are as follows:

Years Ending December 31, Minimum Commitment

Rent expense on the leases included above amounted to $ 1,134 , $ 1,126 and $ 1,140 for the years ended December 31, 2021, 2020 and 2019, respectively, and is recorded within selling, general and administrative expenses in the accompanying consolidated statements of operations.

Contingencies:

6 unchanged sentences

Major Customers — The Company’s customers that accounted for 10% or more of total net sales and total accounts receivable were as follows:

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

Net sales Accounts receivable

3 unchanged sentences

Customer B 24 % 23 % 19 % 23 % 19 %

Concurrent with, and subject to, the consummation of the IPO, entities affiliated with a significant customer agreed to purchase $ 20 million of shares of common stock, at a price per share equal to the IPO price per share at which our common stock was sold to the public, from Verlinvest Beverages SA, an existing stockholder, in a private placement.

The Company did no t receive any proceeds from the private placement.

As a result, this customer acquired less than 5 % ownership in the Company.

One of the customers acquired less than 5% ownership in the Company upon consummation of the IPO.

Major Suppliers — The Company’s suppliers that accounted for 10% or more of the Company’s purchases were as follows:

2 unchanged sentences

Supplier B 13 % 13 %

Supplier C 6 % 10 %

DERIVATIVE INSTRUMENTS

The Company accounts for derivative instruments in accordance with the ASC Topic 815, Derivatives and Hedging ("ASC 815").

These principles require that all derivative instruments be recognized at fair value on each balance sheet date unless they qualify for a scope exclusion as a normal purchases or sales transaction, which is accounted for under the accrual method of accounting.

In addition, these principles permit derivative instruments that qualify for hedge accounting to reflect the changes in the fair value of the derivative instruments through earnings or stockholders’ equity as other comprehensive income on a net basis until the hedged item is settled and recognized in earnings, depending on whether the derivative is being used to hedge changes in fair value or cash flows.

The ineffective portion of a derivative instrument’s change in fair value is immediately recognized in earnings.

As of December 31, 2021 and December 31, 2020, the Company did not have any derivative instruments that it had designated as fair value or cash flow hedges.

The Company is subject to the following currency risks:

Inventory purchases from Brazilian and Malaysian manufacturers— In order to mitigate the currency risk on inventory purchases from its Brazilian and Malaysian manufacturers, which are settled in Brazilian Real (BRL) and Thai Bhatt (THB), the AMS subsidiary enters into a series of forward currency swaps to buy BRL and THB.

Intercompany transactions between AME and AMS— In order to mitigate the currency risk on intercompany transactions between AME and AMS, AMS enters into foreign currency swaps to buy/sell British Pounds (GBP).

Commercial transactions with Canadian customer and vendors— In order to mitigate the currency risk on transactions with Canadian customer and vendors, the Company enters into foreign currency swaps to sell Canadian Dollars (CAD).

The Company was also subject to interest rate risk on its variable interest rate over the 2017 Term Loan.

On October 29, 2018 the Company entered into a swap agreement (ISDA) with JPMorgan Chase, N.A.

to hedge part of its variable interest rate over the Term Loan 2017 listed in Note 10.

The lock in rate was fixed at 3.08 % and covered a notional amount of $ 10,875 as of December 31, 2019.

The Company terminated the swap agreement in May 2020, in connection with the repayment of the outstanding Term Loan 2017 balance.

These principles require that all derivative instruments be recognized at fair value on each balance sheet date unless they qualify for a scope exclusion as a normal purchase or sale transaction, which is accounted for under the accrual method of accounting.

In addition, these principles permit derivative instruments that qualify for hedge accounting to

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

reflect the changes in the fair value of the derivative instruments through earnings or stockholders’ equity as other comprehensive income on a net basis until the hedged item is settled and recognized in earnings, depending on whether the derivative is being used to hedge changes in fair value or cash flows.

The ineffective portion of a derivative instrument’s change in fair value is immediately recognized in earnings.

As of December 31, 2022 and December 31, 2021, the Company did not have any derivative instruments that it had designated as fair value or cash flow hedges.

The Company is subject to the following currency risks:

Inventory purchases from Brazilian and Malaysian manufacturers— In order to mitigate the currency risk on inventory purchases from its Brazilian and Malaysian manufacturers, which are settled in Brazilian Real ("BRL") and Thai Bhatt ("THB"), the AMS subsidiary enters into a series of forward currency swaps to buy BRL and THB.

Intercompany transactions between AME and AMS— In order to mitigate the currency risk on intercompany transactions between AME and AMS, AMS enters into foreign currency swaps to sell GBP.

The notional amount and fair value of all outstanding derivative instruments in the consolidated balance sheets consist of the following at:

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Receive USD/pay GBP $ 23,702 $ 1,104 Derivative assets

Receive MYR/sell USD 392 1 Derivative assets

Receive BRL/sell USD 46,301 2,314 Derivative assets

Receive USD/pay CAD $ 4,819 $ 188 Derivative assets

Foreign currency exchange contracts

Receive BRL/sell USD $ 43,174 $ ( 2,389 ) Derivative liabilities

Receive USD/pay CAD 4,731 ( 57 ) Derivative liabilities

Receive USD/pay EUR $ 604 $ ( 7 ) Derivative liabilities

Receive THB/sell USD 21,990 ( 64 ) Derivative liabilities

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Foreign currency exchange contracts

Receive THB/sell USD $ 8,730 $ 200 Derivative assets

Receive USD/pay GBP $ 22,323 $ 125 Derivative assets

Receive MYR/sell USD $ 392 $ 1 Derivative assets

Foreign currency exchange contracts

Receive BRL/sell USD $ 43,174 $ ( 2,389 ) Derivative liabilities

Receive USD/pay GBP 15,298 ( 1,120 ) Derivative liabilities

Receive USD/pay CAD 4,731 ( 57 ) Derivative liabilities

Receive THB/sell USD 18,488 ( 751 ) Derivative liabilities

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

The amount of realized and unrealized gains and losses and consolidated statements of operations and comprehensive income location of the derivative instruments as of December 31, 2022 and 2021 are as follows:

1 unchanged sentence

Unrealized gain (loss) on derivative instruments $ 6,606 $ 2,093 $ ( 4,718 )

Location Unrealized gain on derivative instruments Unrealized (loss) on derivative instruments Unrealized (loss) on derivative instruments

Location Unrealized gain on derivative instruments Unrealized gain on derivative instruments Unrealized (loss) on derivative instruments

Foreign currency gain (loss) $ 2,682 $ ( 5,679 ) $ 6,765

Location Foreign currency (loss) Foreign currency gain Foreign currency (loss)

Location Foreign currency gain Foreign currency (loss) Foreign currency gain

The Company applies recurring fair value measurements to its derivative instruments in accordance with ASC Topic 820, Fair Value Measurements ("ASC 820").

1 unchanged sentence

These inputs can be readily observable, market corroborated, or generally unobservable internally developed inputs.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

FAIR VALUE MEASUREMENTS

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2021 $ — $ ( 3,071 ) $ — $ ( 3,071 )

In connection with the Company’s acquisition of the entity currently known as AMI Runa USA LLC ("Runa") , the Company was obligated to pay contingent payments to Runa’s former shareholders only if a certain growth rate is achieved.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

Assuming the revenue growth is achieved, the former shareholders could elect for payment to be calculated based on quarterly data available between December 2021 and December 2022, as follows:

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Per the acquisition agreement, the contingent payment cannot exceed $ 51,500 .

If a certain revenue growth rate is not achieved, the Company is not required to pay any contingent payment.

The Company does not believe that the Runa business will achieve the growth targets required and thus expect that the contingent consideration will be zero at December 2022.

If a certain revenue growth rate is not achieved during the remeasurement period, the Company is not required to pay any contingent payment.

The term of the remeasurement period under the agreement ended in December 2022.

The fair value of contingent consideration of $ 15,700 determined on the acquisition date in 2018 was initially recognized as a liability and then subsequently remeasured to fair value at each reporting date with changes in fair value recognized as a component of operating expenses in the accompanying consolidated statements of operations.

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• The probability and timing of achieving the specified milestones,

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

• Revenue performance expectations, and

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Based on updated revenue performance expectations during the earn-out period for Runa, the Company remeasured the contingent consideration to zero at December 31, 2021 and at December 31, 2022.

The $ 16,400 decrease in the liability is included as a component of operating expenses in the accompanying consolidated statements of operations for the year ended December 31, 2020.

The following table presents the change in contingent consideration liability during the twelve months ended December 31, 2021 and 2020:

Balance at the beginning of the period $ — $ ( 16,400 )

Change in fair value of contingent consideration — 16,400

Ending balance $ — $ —

There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.

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Common and Treasury Stock — Each share of common stock entitles its holder to one vote on matters required to be voted on by the stockholders of the Company and to receive dividends, when and if declared by the Company’s board of directors.

As of December 31, 2021 and 2020, the Company held 6,206,200 and 1,014,195 shares, respectively, in treasury stock and had 3,434,312 and 3,883,425 shares, respectively, of common stock reserved for issuance upon the conversion of outstanding warrants and stock options.

As of December 31, 2022 and 2021, the Company held 6,206,200 shares in treasury stock and had 2,898,930 and 3,434,312 shares, respectively, of common stock reserved for future issuance upon the conversion of outstanding warrants and stock options.

In January 2021, the Company entered into a Stock Purchase Agreement with RW VC S.a.r.l, f/k/a Vita Coco S.a.r.l (the “Seller”).

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Since the Company continued to retain a controlling financial interest in AME, the change in ownership interest was accounted for as an equity transaction.

Warrants —The following table summarizes warrant activity as of and for the years ended December 31, 2021 and 2020:

Warrants — All service warrants were exercised and exit warrants were expired as of December 31, 2021.

As such, there was no warrant activity for the year ended December 31, 2022.

THE VITA COCO COMPANY, INC.

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(Amounts in thousands, except for share and per share data)

Warrants Weighted-

Exercise Price Weighted-

Contractual Term

Outstanding - January 1, 2021 28,665 — 28,665 $ 0.000022 0.75

Granted — — — — 0.0

Exercised — — — — 0.0

Expired 28,665 — 28,665 — 0.0

Outstanding - December 31, 2021 — — — — 0.0

Exercisable - December 31, 2021 — — — — —

Outstanding - January 1, 2020 285,285 123,760 409,045 $ 0.000022 0.60

Granted — — — — 0.0

Exercised — 116,025 116,025 0.000022 0.0

Expired 256,620 7,735 264,355 — 0.0

Outstanding - December 31, 2020 28,665 — 28,665 $ 0.000022 0.75

Exercisable - December 31, 2020 — — — $ — —

(a) As of December 31, 2021 and 2020, the Company has exit warrants to purchase zero and 28,665 , respectively,shares of common stock at a weighted-average exercise price of $ 0.000022 per share outstanding to certain investors.

These exit warrants, expire upon the earlier of 10 years from the date of grant or the occurrence of a liquidity event, as defined in the warrant agreements.

The warrants, which were issued in connection with the sale of common stock, only vest when proceeds from a liquidity event provide an annual internal rate of return of less than 30 %.

(b) As of December 31, 2021 and 2020, the Company has no remaining service warrants to purchase shares of common stock at an exercise price of $ 0.000022 per share outstanding to several individuals for the performance of certain marketing services.

Stock-based Compensation — The stockholders of the Company approved the adoption of the Company’s 2014 Stock Option and Restricted Stock Plan (the “2014 Plan”).

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Generally, stock options issued pursuant to the 2014 Plan must contain exercise prices no less than the fair value of the Company’s common stock on the date of grant and have a ten-year contractual term.

As of December 31, 2021 and 2020, there were 618,995 and 545,545 shares, respectively, of common stock reserved for future issuance pursuant to the 2014 Plan.

All shares awarded due to exercise of stock options are newly issued.

Subsequent to September 30, 2021, the stockholders of the Company approved the adoption of the 2021 Incentive Award Plan ("2021 Plan"), which was effective after the closing of the initial public offering discussed in Note 1.

Subsequent to September 30, 2021, the stockholders of the Company approved the adoption of the 2021 Incentive Award Plan ("2021 Plan"), which became effective after the closing of the IPO discussed in Note 1.

On and after closing of the offering and the effectiveness of the 2021 Incentive Award Plan, no further grants will be made under the 2014 Plan.

4 unchanged sentences

As of December 31, 2022, there were 2,898,930 shares of common stock reserved for future issuance pursuant to the 2021 Plan.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

The Company recognized stock-based compensation expense of $ 6,134 , $ 3,103 and $ 1,517 for the years ended December 31, 2022, 2021 and 2020, respectively in selling, general, and administrative expenses.

The Company also recognized a reduction of revenue of $ 277 related to stock-based compensation awards granted to a customer that was accounted for as a stock-based sales incentive for the year ended December 31, 2021.

The total impact to additional paid-in capital related to stock-based compensation arrangements in 2021was $ 3,380 .

The Company also recognized a reduction of revenue of $ 1,250 and $ 277 for the years ended December 31, 2022 and 2021 related to stock-based compensation awards granted to entities affiliated with a major customer that was accounted for as a stock-based sales incentive.

The total impact to additional paid-in capital related to stock-based compensation arrangements in 2022 and 2021 were $ 7,384 and $ 3,380 , respectively.

Stock Option Awards with Service-based Vesting Conditions

Most stock option awards granted under the 2014 and 2021 Plans vest based on the continuous service.

Generally, 50 % of the stock options granted vest over the two years and 50 % of the stock options granted vest over the four years .

The stock options awarded to the employees have different vesting schedules as specified in each grant agreement.

Generally, the majority of the outstanding stock options vest 50 % over the two years and 50 % vest over the four years .

The following table summarizes the service-based stock option activity during the year ended December 31, 2022:

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The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for all stock options that had exercise prices lower than the fair value of the Company’s common stock.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

In December 2019, the board of directors of the Company approved a one-time repricing of 1,877,785 outstanding service-based stock options for 53 grantees.

In addition, the Company extended the expiration date of the modified stock options with the contractual term being 10 years from the date of the modification, while all other modified option terms remained the same.

As a result of that option modification, the Company recognized incremental compensation expense of $ 115 and $ 408 for the years ended December 31, 2021 and 2020, respectively.

The fair value of the service-based stock options granted in 2022 and 2021 pursuant to the Stock Option Plan as well as the fair value of the modified in 2019 stock options was estimated on a grant or on a modification date using the Black-Scholes option-pricing model.

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The Company estimated the expected term of the options with service conditions in accordance with the “simplified” method as defined in ASC 718, which enables the use of a practical expedient for “plain vanilla” share options.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

Expected Volatility :

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As such, the dividend yield has been estimated to be zero .

Fair Value of Common Stock —Because there has been no public market for the Company’s common stock, the board of directors has determined the estimated fair value of the common stock at the time of grant of options by considering valuations performed by an independent third-party valuation specialist, which considers a number of objective and subjective factors including valuations of comparable companies, operating and financial performance, the lack of liquidity of capital stock, the likelihood of achieving an initial public offering and general and industry specific economic outlook.

Fair Value of Common Stock — For stock awards granted subsequent to the IPO, the fair value of the common stock assumed for the grant date fair value of the awards will be based on the closing price of our common stock as reported on the day of grant.

Prior to the IPO in October 2021, because there has been no public market for the Company’s common stock, the board of directors has determined the estimated fair value of the common stock at the time of grant of options by considering valuations performed by an independent third-party valuation specialist, which considers a number of objective and subjective factors including valuations of comparable companies, operating and financial performance, the lack of liquidity of capital stock, the likelihood of achieving an initial public offering and general and industry specific economic outlook.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

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During the year ended December 31, 2021, the Company awarded options for the purchase 262,990 shares of common stock of the Company containing a performance-based vesting condition, subject to achievement of various performance goals by the end of 2027, including revenue and gross margin targets.

In addition, during the year ended December 31, 2020, the Company awarded options to purchase 68,250 shares of common stock of the Company containing performance and market vesting conditions, such as option vesting upon occurrence of an initial public offering (“IPO”) or other qualifying liquidity event and upon achieving predetermined equity value of the Company at a time of the IPO or other qualifying liquidity event.

In addition, during the year ended December 31, 2021, the Company awarded options to purchase 68,250 shares of common stock of the Company containing

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

performance and market vesting conditions, such as option vesting upon occurrence of an initial public offering or other qualifying liquidity event and upon achieving predetermined equity value of the Company at a time of the initial public offering or other qualifying liquidity event.

During the year ended December 31, 2022, certain awards that contained a performance-based vesting condition were modified.

The modification adjusted the performance condition to allow for 50 % of the performance awards to meet the criteria to vest, and no other terms were modified.

Since it did not affect any terms that would affect the fair value, and only the number of awards, it is considered an improbable-to-probable modification.

The impact of the modification was not material.

The following table summarizes the stock option activity during the year ended December 31, 2022:

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Outstanding—December 31, 2022 808,535 $ 10.32 6.9 $ 2,658

None of the stock options included in the table above are exercisable at December 31, 2021.

No ne of the stock options included in the table above are exercisable at December 31, 2022.

The fair value of the awards with performance-based vesting condition was estimated using the Black-Scholes option-pricing model used for the Company’s service-based stock options and assumed that performance goals will be achieved.

If such performance conditions are not met, no compensation cost is recognized and any recognized

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

compensation cost is reversed.

The grant-date fair value of the stock options with performance-based vesting condition granted during the year ended December 31, 2021 and 2020 was $ 4.38 per option and $ 4.56 per option, respectively.

If such performance conditions are not met, no compensation cost is recognized and any recognized compensation cost is reversed.

The grant-date fair value of the stock options with performance-based vesting condition granted during the years ended December 31, 2021 and 2020 was $ 4.38 per option and $ 4.56 per option, respectively.

The Company has not granted any performance based options for the year ended December 31, 2022 other than the modified awards noted above.

In December 2020, the board of directors of the Company approved a one-time modification of the options to purchase 579,670 shares of common stock containing both a performance and market vesting conditions to reduce the equity value required to be achieved at the time of the IPO or other qualifying liquidity event.

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The Company has historically been a private company and lacks company-specific historical and implied volatility information for its stock.

Therefore, the Company estimated volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the expected term of the options.

Therefore, the Company estimated volatility for option grants by evaluating

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the expected term of the options.

Risk-free Interest Rate:

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As such, the dividend yield has been estimated to be zero .

As of December 31, 2021, the unrecognized stock-based compensation cost related to the stock options for which performance-based vesting conditions are probable of being achieved was $ 403 , expected to be recognized over the period of approximately 3.18 years.

As of December 31, 2022, total unrecognized compensation cost related to the unvested stock option awards containing performance and market vesting conditions was $ 1,606 , which is expected to be recognized over the period of approximately 4.22 years.

As of December 31, 2021, the unrecognized stock-based compensation cost related to the stock options for which performance-based vesting conditions are probable of being achieved was $ 403 , which is expected to be recognized over the period of approximately 3.18 years.

As of December 31, 2021, total unrecognized compensation cost related to the unvested stock option awards containing performance and market vesting conditions was $ 1,599 , which will be recognized when attainment of the performance and market vesting conditions becomes probable.

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The RSUs awarded to the employees have different vesting schedules as specified in each grant agreement.

The RSUs granted to non-employee directors vest in full on the earlier of (i) the day immediately preceding the date of the first Annual Meeting following the date of grant and (ii) the first anniversary of the date of grant.

The RSUs granted to non-employee directors vested in full on the earlier of (i) the day immediately preceding the date of the first Annual Meeting following the date of grant and (ii) the first anniversary of the date of grant.

The following table summarizes the restricted stock and RSU activity for the year ended December 31, 2022:

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

Number of Restricted Stock or RSU Awards Weighted Average Grant Date Fair Value

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Granted 342,637 $ 12.97

Vested 89,728 $ 15.00

Forfeited/Cancelled 41,613 $ 13.12

Non-vested - December 31, 2022 666,177 $ 14.08

Included in these awards are the RSU's granted to co-CEO, Mike Kirban, related to a new bonus agreement approved on October 11, 2021 by the Company’s Board of Directors, that will replace and supersede existing agreements.

In the new bonus agreement, upon the consummation of the IPO, (i) each of Verlinvest, and RW VC S.a.r.l.

(the “Bonus Stockholders”) shall pay Mr.

Kirban a bonus equal to 1.4 % of the total cash consideration received by the Bonus Stockholders through the sale by the Bonus Stockholders of the Company’s securities pursuant to the IPO, as of the closing date of the IPO (the “Bonus Stockholders Proceeds”);

and (ii) the Company shall pay Mr.

Kirban a bonus equal to 1.4 % of the total cash consideration received by the Company through the sale of the Company’s securities pursuant to the IPO, as of the closing date of the IPO (the “Company IPO Proceeds”).

The Bonus Stockholders’ portion was paid in cash equal to 1.4 % of the Bonus Stockholders Proceeds to be made on the closing date of the IPO.

The Company’s portion was satisfied through a grant of restricted stock units pursuant to the 2021 Plan that is equal to the ratio of (x) an amount equal to 1.4 % of the Company IPO Proceeds to (y) the fair market value per share of the Company’s common stock on the date of grant, which shall vest in full on the six ( 6 ) month anniversary of the date of grant subject to Mr.

Kirban’s continued employment with the Company through such vesting date.

Also included in these awards are $ 3 million of shares of restricted common stock granted to entities affiliated with a significant customer, at a price per share granted at the initial public offering price per share of $ 15.00 , or 200,000 restricted shares, in exchange for an amendment to extend the distributor agreement term to June 10, 2026.

1 unchanged sentence

The grant was accounted for as a stock-based sales incentive based on guidance in ASC 606 and is reflected as a reduction in the transaction price of revenue on the basis of the grant-date fair-value measure in accordance with the stock compensation guidance in ASC 718.

The aggregate grant date fair value of RSUs granted during 2021 was $ 3,837 .

The aggregate grant date fair value of RSUs granted during 2022 and 2021 was $ 4,445 and $ 3,837 , respectively.

At December 31, 2022, there was $ 5,035 of unrecognized stock compensation expense related to non-vested RSUs, which is expected to be recognized over a weighted average period of 2.7 years.

At December 31, 2021, there was $ 3,261 of unrecognized stock compensation expense related to non-vested RSUs, which is expected to be recognized over a weighted average period of 2.1 years.

The domestic and foreign components of the Company’s income before income taxes are as follows:

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

Year Ended December 31,

4 unchanged sentences

The income tax expense for the years ended December 31, 2022, 2021, and 2020 consist of the following:

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(Amounts in thousands, except for share and per share data)

Year Ended December 31,

17 unchanged sentences

Global intangible low-taxed income — % 1.8 % 2.7 %

Stock compensation ( 3.9 %) — % — %

Officer's compensation limitation 4.4 % — % — %

Tax attribute expiration — % — % 1.5 %

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Charitable contributions carryforward — 356

Deferred revenue — 52

Other—Net — 8

Lease liability 673 —

Subtotal 11,443 9,872

4 unchanged sentences

Intangibles ( 1,464 ) ( 3,453 )

Right-of-use assets ( 646 ) —

Fixed assets ( 84 ) ( 183 )

4 unchanged sentences

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

As of December 31, 2021 and 2020, management determined that there is sufficient positive evidence to conclude that it is more likely than not that the US deferred taxes are realizable with the exception of a portion of the charitable contribution deferred tax asset in which no valuation allowance was recorded as of December 31, 2021 and $ 255 as of December 31, 2020.

As of December 31, 2022 and 2021, management determined that there is sufficient positive evidence to conclude that it is more likely than not that the US deferred taxes are realizable.

A valuation allowance has been established against the net operating loss carryforwards which has been generated by our foreign jurisdictions.

As of December 31, 2021 and 2020, the Company had no US state and net operating loss carryforwards.

As of December 31, 2022 and 2021, the Company had no US state and federal net operating loss carryforwards.

As of December 31, 2022 and 2021, the Company had net operating loss carryforwards related to foreign operations of $ 22,987 and $ 24,920 , respectively.

These net operating loss carryforwards have various lives ranging from 10 years to indefinite carryforward periods.

As of December 31, 2021 and 2020, there were no liabilities for income tax uncertainties recorded in the Company’s consolidated balance sheets.

The Company did no t recognize any interest on penalties related to income tax uncertainties in its consolidated balance sheets or consolidated statements of operations for years ended December 31, 2021 and 2020.

A reconciliation of the beginning and ending amount of income tax uncertainties is as follows;

Beginning balance as of January 1, 2022 $ —

Additions based on tax positions related to prior years 144

Additions based on tax positions related to current year —

Ending balance as of December 31, 2022 $ 144

As of December 31, 2022 and 2021, there were $ 144 and $ 0 liabilities for income tax uncertainties recorded in the Company’s consolidated balance sheets.

The Company recognized interest and penalties related to income tax uncertainties of $ 50 and $0 in its consolidated balance sheets or consolidated statements of operations for years ended December 31, 2022 and 2021, respectively.

The Company is subject to income tax examinations by the IRS and various state and local jurisdictions for the open tax years between December 31, 2019 and December 31, 2022.

As of December 31, 2020, income taxes on undistributed earnings of the Company’s subsidiaries have not been provided for as the Company planned to indefinitely reinvest these amounts, had the ability to do so, and the cumulative undistributed foreign earnings were not material.

As of December 31, 2021, income taxes on undistributed earnings of the Company’s foreign subsidiaries have not been provided for as the Company plans to indefinitely reinvest these amounts.

The cumulative undistributed foreign earnings were not material as of December 31, 2021.

The COVID-19 pandemic has a global reach, and many countries are introducing measures that provide relief to taxpayers in a variety of ways.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) into law to support businesses during the COVID-19 pandemic, which included

THE VITA COCO COMPANY, INC.

3 unchanged sentences

(Amounts in thousands, except for share and per share data)

deferment of the employer portion of certain payroll taxes, refundable payroll tax credits, and technical amendments to tax depreciation methods for qualified improvement property.

Under ASC 740, entities are required to recognize the financial statement effects of new tax legislation upon enactment, which in the U.S.

federal jurisdiction is the date the President signs the Bill into law.

Accordingly, the enactment requires the recognition of the financial statement impacts of the new federal income tax law in the period that includes March 27, 2020.

The CARES Act did not have a material impact on the Company’s income tax provision for the year ended December 31, 2021 or December 31, 2020.

During the second quarter of 2021, the Finance Act 2021 (the Act) was enacted in the United Kingdom.

The Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021.

As of December 31, 2022 and 2021, income taxes on undistributed earnings of the Company’s foreign subsidiaries have not been provided for as the Company plans to indefinitely reinvest these amounts.

The cumulative undistributed foreign earnings were not material as of December 31, 2022 and 2021.

During the second quarter of 2021, the Finance Act 2021 (the Finance Act) was enacted in the United Kingdom.

The Finance Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021.

The effects on the Company’s existing deferred tax balances have been recorded and is offset by the valuation allowance maintained against the Company’s U.K.

11 unchanged sentences

Earnings per share—diluted $ 0.14 $ 0.35 $ 0.56

The vested service warrants are exercisable for little consideration and all necessary conditions have been satisfied.

Accordingly, the calculation of weighted average common shares outstanding includes vested service warrants, exercisable for a value of $ 0.000022 , which consisted of zero and 4,550 weighted number of service warrants as of December 31, 2021 and 2020, respectively.

The exit warrants, which expire upon a liquidity event and only vest when proceeds from a liquidity event provide an annual internal rate of return of less than 30 %, were not considered in the basic and diluted earnings per share, as the contingency of a liquidity event has not occurred during the years ended December 31, 2021 and 2020.

The vested service warrants are exercisable for little consideration and all necessary conditions have been satisfied as of December 31, 2021.

Accordingly, the calculation of weighted average common shares outstanding includes vested service warrants, exercisable for a value of $ 0.000022 .

All exit warrants expired as of December 31, 2021.

Before expiration, for the year ended December 31, 2021, the exit warrants, which expired upon a liquidity event and only vest when proceeds from a liquidity event provide an annual internal rate of return of less than 30 %, were not considered in the basic and diluted earnings per share, as the contingency of a liquidity event had not occurred.

The following potentially dilutive securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average number of common shares outstanding, as they would be anti-dilutive:

2 unchanged sentences

Employee Benefit Plan

Employees of the Company may participate in a defined contribution plan which qualifies under Section 401(k) of the Internal Revenue Code.

Participating employees may contribute into a traditional plan with pretax salary or into a Roth plan with after tax salary up to statutory limits.

The Company matches contributions up to 3 % of each employee’s earnings, which vest over 2 years.

Matching contributions were $ 592 , $ 475 and $ 372 for the years ended December 31, 2022, 2021 and 2020, respectively.

THE VITA COCO COMPANY, INC.

3 unchanged sentences

(Amounts in thousands, except for share and per share data)

Employees of the Company may participate in a defined contribution plan which qualifies under Section 401(k) of the Internal Revenue Code.

Participating employees may contribute into a traditional plan with pretax salary or into a Roth plan with after tax salary up to statutory limits.

The Company matches contributions up to 3 % of each employee’s earnings, which vest over 2 years.

Matching contributions were $ 475 , $ 372 and $ 329 for the years ended December 31, 2021, 2020 and 2019, respectively.

Segment Reporting

1 unchanged sentence

• Americas—The Americas segment is comprised primarily of US and Canada and derives its revenues from the marketing and distribution of various coconut water and non-coconut water products (e.g., oil and milk).

The Company’s Guayusa leaf products ( Runa ) and aluminum bottle canned water ( Ever & Ever ) are marketed only in the Americas segment.

• International—The International segment is comprised primarily of Europe, Middle East, and Asia Pacific, which includes the Company’s procurement arm, and derives its revenues from the marketing and distribution of various coconut water and non-coconut water products.

The Company’s Co-CEOs are the chief operating decision makers and evaluate segment performance primarily based on net sales and gross profit.

The Company’s Guayusa leaf products ( Runa ), aluminum bottle canned water ( Ever & Ever ) and protein infused water ( PWR LIFT ) are marketed only in the Americas segment.

• International—The International segment is comprised primarily of Europe, Middle East, Africa and Asia Pacific, which includes the Company’s procurement arm, and derives its revenues from the marketing and distribution of various coconut water and non-coconut water products.

The Company’s CEO is the chief operating decision maker and evaluates segment performance primarily based on net sales and gross profit.

All intercompany transactions between the segments have been eliminated.

14 unchanged sentences

Gross profit 90,256 14,602 104,858

Total segment assets 139,452 44,409 183,861

THE VITA COCO COMPANY, INC.

30 unchanged sentences

(1) No individual country is greater than 10% of total property and equipment, net as of December 31, 2022 and 2021.

Related-Party Transactions

Management Fees —The Company is subject to an arrangement with one of its stockholders for as long as such stockholder holds at least 5 % of the Company’s capital stock.

Pursuant to the terms of the amended arrangement, the Company was required to make fixed annual management fee payments of $ 281 .

On October 20, 2021, in connection with the IPO discussed in Note 1, the Stockholder’s Agreement was revised and the new Investor Rights Agreement does not include a management fee to this stockholder.

For the year ended December 31, 2021, the Company had amounts due in accounts payable of $ 227 for the portion of the year prior to the execution of the new Investor Rights Agreement.

THE VITA COCO COMPANY, INC.

3 unchanged sentences

(Amounts in thousands, except for share and per share data)

Related-Party Transactions

Management Fees —The Company is subject to an arrangement with one of its stockholders for as long as such stockholder holds at least 5 % of the Company’s capital stock.

Pursuant to the terms of the amended arrangement, the Company was required to make fixed annual management fee payments of $ 281 .

For the year ended December 31, 2021, the Company had amounts due in accounts payable of $ 227 for the portion of the year prior to the execution of the new Investor Rights Agreement.

Director Nominee Agreements - On May 24, 2022, two members of the board of directors appointed as nominees under the Investor Rights Agreement by Verlinvest Beverages SA, a stockholder of the Company, entered into nominee agreements instructing the Company to pay all cash compensation earned in connection with their board of director services to Verlinvest Beverages SA.

Based on the aforementioned nominee agreements, RSUs granted to these two directors will be held by them as nominees for Verlinvest Beverages SA and, upon vesting of the RSUs, the shares will be transferred to Verlinvest Beverages SA.

The nominee agreements are primarily between the directors and Verlinvest Beverages SA.

The Company is a party to this arrangement solely to agree to the manner in which it would satisfy the compensation obligations to these directors.

As of December 31, 2022, there is only one active member of the board of directors that is subject to this nominee agreement.

Loan to Employee —On September 18, 2019 the Company extended a five year promissory note of $ 17,700 to its newly appointed President, in order for him to buy 1,739,010 shares of The Vita Coco Company, Inc.’s common stock in conjunction with his employment agreement.

The interest on the note accrues annually at a rate of 1.78 % with principal balance due at maturity.

The interest on the note accrued annually at a rate of 1.78 % with principal balance due at maturity.

The purchase of the Company's shares occurred simultaneously with the commencement of the loan, as a result no funds were actually disbursed by the Company.

The purchased shares are pledged as collateral to the loan until full repayment of the principal balance.

The purchased shares were pledged as collateral to the loan until full repayment of the principal balance.

On May 18, 2020, the Company amended the interest rate on the note to 0.58 %.

On September 16, 2021, Martin Roper, the co-CEO of the Company, repaid the outstanding principal balance and accrued interest in full satisfaction of the promissory note.

On September 16, 2021, Martin Roper, the CEO of the Company, repaid the outstanding principal balance and accrued interest in full satisfaction of the promissory note.

Distribution Agreement with Shareholder – On October 1, 2019 the Company entered into a distribution agreement with one of its stockholders, which currently extends through December 31, 2022.

5 unchanged sentences

The Company recorded $ 234 , $ 215 and $ 132 for the years ended December 31, 2022, 2021 and 2020, respectively, in selling, general, and administrative expense for this service agreement.

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

Asset held for sale

The asset group held for sale consists of a farm in Ecuador which was the source of Guayusa leaves for our Runa products.

Since the Company is able to source Guayusa through alternative means to produce the Runa products, as of September 30, 2022, the Company committed to a plan for disposal through sale.

The Company performed a fair value assessment on the asset group held for sale consisting of land, a production plant, equipment and inventory.

The Company obtained a valuation of the assets and adjusted the carrying amount down to their fair value less costs to sell, which resulted in a $ 619 impairment loss recorded in selling, general and administrative expenses.

The remaining carrying amount is listed below.

These assets held for sale do not qualify for discontinued operations reporting.

Asset held for sale Amount

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

In January 2016, the Company entered into an operating lease for office space in New York, New York, which was set to expire in January 2023.

In June 2022, the Company extended its lease agreement for the New York office to April 30, 2025 and remeasured the lease liability and right-of-use asset as of June 30, 2022.

The Company pays for its proportionate share of building operating costs such as maintenance, utilities, and insurance that are treated as variable costs and excluded from the measurement of the lease.

The Company also maintains additional leases for office space and equipment in London and Singapore, which are operating leases.

On March 31, 2022, the Company renewed the lease for the Singapore office, extending it through June 30, 2025, which is reflected in the lease term.

As of December 31, 2022, the Company did not have any additional operating leases that have not yet commenced with future undiscounted lease payments.

The components of lease cost, which are included within operating expenses in the accompanying consolidated statements of operations, are summarized in the following table (in thousands).

Any variable lease costs are immaterial.

Year Ended December 31, 2022

Operating lease cost

The following table summarizes supplemental balance sheet information for the Company’s operating leases:

Line Item in Balance Sheet As of December 31, 2022

Noncurrent assets:

Operating lease right-of-use assets Right-of-use assets $ 2,679

Current liabilities:

Current portion of operating lease liabilities Accrued expenses $ 734

Noncurrent liabilities:

Non-current portion of operating lease liabilities Other long-term Liabilities $ 2,052

The following summarizes the weighted average remaining lease term and weighted average discount rate related to the Company’s right-of-use assets and lease liabilities recorded on the balance sheet as of December 31, 2022 :

As of December 31, 2022

Weighted-average remaining lease terms 2.4 years

Weighted average discount rate 1.5 %

The following table summarizes supplemental cash flow information for the Company’s operating leases:

As of December 31, 2022

Cash paid for amounts included in the measurement of operating lease liabilities $ 1,197

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2022:

Year ending December 31, Maturity of Lease Payments

Total lease payments $ 2,873

imputed interest ( 87 )

Total lease liabilities $ 2,786

The aggregate minimum commitments for renting the office spaces under non-cancellable operating leases as of December 31, 2021 are summarized in the following table.

This table was populated in accordance with the prior guidance under ASC 840, Leases .

Years Ending December 31, Minimum Commitment

THE VITA COCO COMPANY, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020

(Amounts in thousands, except for share and per share data)

Subsequent Events

On March 7, 2023, the Company announced that the board of directors of the Company approved the appointment of Corey Baker as the Company’s Chief Financial Officer.

Baker joins the Company as Executive Vice President of Finance, and he will succeed to the position of Chief Financial Officer and assume the designation of Principal Financial Officer immediately following the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 with the SEC.

Baker will succeed Rowena Ricalde, who has served as the Company’s Interim Chief Financial Officer since September 2022.

Ricalde will be appointed Chief Accounting Officer and continue as the Principal Accounting Officer.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

The information required by this Item 9 was previously reported in the Prospectus.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data