Vita Coco Company, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is set forth below: I NDEX TO C ONSOLIDATED F INANCIAL S TATEMENTS Audited Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 60 Consolidated Balance Sheets as of December 31, 2022 and 2021 61 Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 62 Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020 63 Consolidated Statements of Non-Controlling Interests and Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020 64 Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 65 Notes to Consolidated Financial Statements 66 59 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of The Vita Coco Company, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Vita Coco Company, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, non-controlling interests and stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP New York, New York March 14, 2023 We have served as the Company’s auditor since 2012. 60 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 (Amounts in thousands, except share data) December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 19,629 $ 28,690 Accounts receivable, net of allowance of $ 2,898 at December 31, 2022, and $ 1,301 at December 31, 2021 43,350 47,195 Inventory 84,115 75,360 Supplier advances 1,534 1,170 Derivative assets 3,606 126 Asset held for sale 503 — Prepaid expenses and other current assets 22,181 20,718 Total current assets 174,918 173,259 Property and equipment, net 2,076 2,473 Goodwill 7,791 7,791 Intangible assets, net — 7,934 Supplier advances 4,360 2,808 Deferred tax assets, net 4,256 1,265 Right-of-use asset 2,679 — Other assets 1,677 1,954 Total assets $ 197,757 $ 197,484 Liabilities and Stockholders' Equity Current liabilities: Accounts payable 15,910 28,338 Accrued expenses 38,342 42,399 Notes payable, current 23 28 Derivative liabilities 71 3,197 Total current liabilities 54,346 73,962 Credit facility — — Notes payable 25 48 Other long-term liabilities 2,293 301 Total liabilities $ 56,664 $ 74,311 Stockholders' equity: Common stock, $ 0.01 par value; 500,000,000 shares authorized; and 62,225,250 shares and 61,764,582 shares issued at December 31, 2022 and 2021, respectively; 56,019,050 and 55,558,382 shares outstanding at December 31, 2022 and 2021, respectively. 622 618 Additional paid-in capital 145,210 134,730 Retained earnings 55,183 47,369 Accumulated other comprehensive loss ( 994 ) ( 616 ) Treasury stock, 6,206,200 shares at cost as of December 31, 2022, and December 31, 2021 ( 58,928 ) ( 58,928 ) Total stockholders' equity attributable to The Vita Coco Company, Inc. 141,093 123,173 Noncontrolling interests — — Total stockholders' equity $ 141,093 $ 123,173 Total liabilities and stockholders' equity $ 197,757 $ 197,484 See accompanying notes to the consolidated financial statements. 61 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 (Amounts in thousands, except for share and per share data) Year Ended December 31, 2022 2021 2020 Net sales $ 427,787 $ 379,513 $ 310,644 Cost of goods sold 324,426 266,365 205,786 Gross profit 103,361 113,148 104,858 Operating expenses Selling, general and administrative 100,306 88,559 74,401 Change in fair value of contingent consideration — — ( 16,400 ) Total operating expenses 100,306 88,559 58,001 Income from operations 3,055 24,589 46,857 Other income (expense) Unrealized gain (loss) on derivative instruments 6,606 2,093 ( 4,718 ) Foreign currency gain (loss) 1,387 ( 2,088 ) 1,848 Loss on extinguishment of debt — ( 132 ) — Interest income 51 127 404 Interest expense ( 258 ) ( 360 ) ( 791 ) Total other income (expense) 7,786 ( 360 ) ( 3,257 ) Income before income taxes 10,841 24,229 43,600 Income tax expense ( 3,027 ) ( 5,237 ) ( 10,913 ) Net income $ 7,814 $ 18,992 $ 32,687 Net income (loss) attributable to noncontrolling interest — ( 23 ) 27 Net income attributable to The Vita Coco Company, Inc. $ 7,814 $ 19,015 $ 32,660 Net income attributable to The Vita Coco Company, Inc. per common share Basic $ 0.14 $ 0.35 $ 0.56 Diluted $ 0.14 $ 0.35 $ 0.56 Weighted-average number of common shares outstanding Basic 55,732,619 53,689,910 58,501,170 Diluted 56,123,661 54,186,121 58,610,825 See accompanying notes to the consolidated financial statements. 62 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 (Amounts in thousands) Year Ended December 31, 2022 2021 2020 Net income $ 7,814 $ 18,992 $ 32,687 Other comprehensive income: Foreign currency translation adjustment ( 378 ) 320 346 Total comprehensive income including noncontrolling interest 7,436 19,312 33,033 Net income (loss) attributable to noncontrolling interest — ( 23 ) 27 Foreign currency translation adjustment attributable to noncontrolling interest — 4 5 Total comprehensive income (loss) attributable to noncontrolling interest — ( 19 ) 32 Total comprehensive income attributable to The Vita Coco Company, Inc. $ 7,436 $ 19,331 $ 33,001 See accompanying notes to the consolidated financial statements. 63 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 (Amounts in thousands, except share amounts) Common Stock Common Stock with Exit Warrants Total Common Stock Additional Paid-In Capital Loan to Shareholder Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income / (Loss) Treasury Stock Total Stockholders' Equity Attributable to The Vita Coco Company, Inc. Non- controlling Interest in Subsidiary Total Stockholders' Equity Shares $Amount Shares $Amount Shares $Amount Shares Amount Balance at January 1, 2020 50,793,470 508 8,113,105 81 58,906,575 589 98,450 ( 17,700 ) ( 4,306 ) ( 1,295 ) 211,575 ( 1,985 ) 73,753 46 73,799 Net income — — — — — — — — 32,660 — — — 32,660 27 32,687 Purchase of treasury stock — — — — — — — — — — 802,620 ( 6,940 ) ( 6,940 ) — ( 6,940 ) 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 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 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 ) Loan to Stockholder — — — — — — — 17,700 — — — — 17,700 — 17,700 Stock-based compensation — — — — — — 3,380 — — — — — 3,380 — 3,380 Exercise of stock options 20,930 — — — 20,930 — 178 — — — — — 178 — 178 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 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 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 Foreign currency translation adjustment — — — — — — — — — ( 378 ) — — ( 378 ) — ( 378 ) Balance at December 31, 2022 54,112,145 $ 541 8,113,105 $ 81 62,225,250 $ 622 $ 145,210 $ — $ 55,183 $ ( 994 ) 6,206,200 $ ( 58,928 ) $ 141,093 $ — $ 141,093 See accompanying notes to the consolidated financial statements. 64 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 (Amounts in thousands) Year Ended December 31, 2022 2021 2020 Cash flows from operating activities: Net income $ 7,814 $ 18,992 $ 32,687 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,901 2,069 2,125 (Gain)/loss on disposal of equipment 1 112 ( 5 ) Bad debt expense 2,641 76 859 Unrealized (gain)/loss on derivative instruments ( 6,606 ) ( 2,093 ) 4,718 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/(benefit) ( 3,081 ) ( 1,644 ) 6,282 Noncash lease expense 1,058 — — Change in fair value of contingent consideration — — ( 16,400 ) Loss on extinguishment of debt — 132 — Changes in operating assets and liabilities: Accounts receivable 321 ( 16,917 ) 190 Inventory ( 9,333 ) ( 43,501 ) 4,978 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 cash provided by (used in) operating activities ( 10,935 ) ( 16,166 ) 33,323 Cash flows from investing activities: Cash paid for property and equipment ( 982 ) ( 557 ) ( 392 ) Proceeds from sale of property and equipment — — 17 Net cash used in investing activities ( 982 ) ( 557 ) ( 375 ) Cash flows from financing activities: Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and offering costs — 30,356 — Proceeds from exercise of stock options/warrants 3,062 177 885 Proceeds from settlement of loan to stockholder — 17,700 — Borrowings on credit facility 22,000 — 25,000 Repayments of borrowings on credit facility ( 22,000 ) ( 25,000 ) — Proceeds from the term loan — 30,000 — Repayments of the term loan — ( 30,000 ) — Cash received (paid) on notes payable ( 28 ) 21 ( 16,895 ) Cash paid to acquire treasury stock — ( 50,003 ) ( 6,940 ) Cash paid to acquire portion of non-controlling interest — ( 54 ) — Net cash (used in) provided by financing activities 3,034 ( 26,803 ) 2,050 Effects of exchange rate changes on cash and cash equivalents ( 178 ) 35 443 Net (decrease) increase in cash and cash equivalents ( 9,061 ) ( 43,491 ) 35,441 Cash and cash equivalents at beginning of the period 28,690 72,181 36,740 Cash and cash equivalents at end of the period $ 19,629 28,690 72,181 Supplemental disclosures of cash flow information: Cash paid for income taxes $ 4,624 2,440 9,718 Cash paid for interest $ 217 349 812 See accompanying notes to the consolidated financial statements. 65 Table of Contents 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) 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION The Vita Coco Company, Inc. 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 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. on January 17 th , 2007. On September 9, 2021, we changed our name to The Vita Coco Company, Inc. In 2018, the Company purchased certain assets and liabilities of Runa , which is marketed and distributed primarily in the United States. We are a public benefit corporation under Section 362 of the Delaware General Corporation Law. 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 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. 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. Basis of Presentation The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation The consolidated financial statements include all the accounts of the wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation; the noncontrolling interest in consolidated subsidiaries presented in the accompanying consolidated financial statements represents the portion of AME stockholders’ equity, which is not directly owned by the Company. 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 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 $ 30,000 , 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. On October 27, 2021, the Company used the net proceeds from the IPO to repay the outstanding balance on the 2021 Term Loan. See Note 10 for additional information on the repayment of the 2021 Term Loan. Concurrent with the IPO, various agreements were amended or newly effective, which are further described in our Prospectus, which include: • The Registration Rights agreement; • The Investor Rights agreement; 66 Table of Contents 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) • 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; and • 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management considers many factors in selecting appropriate financial accounting policies and controls in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements. Management must apply significant judgement in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. The most significant estimates in the consolidated financial statements relate to share-based compensation, assessing long-lived assets for impairment, estimating the net realizable value of inventories, the determination of accounts receivables reserve, assessing goodwill for impairment, the determination of the value of trade promotions and assessing the realizability of deferred income taxes. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). ASC 606 defines a five-step model that requires entities exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying the performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Revenue is recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration to which the Company is expected to be entitled to receive in exchange for those products. Each contract includes a single performance obligation to transfer control of the product to the customer. For the Company’s various products in the Vita Coco Coconut Water and Other product categories (refer to Note 3, Revenue Recognition ), control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue. The transaction price recognized reflects the consideration the Company expects to receive in exchange for the sale of the product. 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 67 Table of Contents 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. Additionally, the Company determined the production and distribution of Private Label products represents a distinct performance obligation. Since there is no alternative use for these products and the Company has the right to payment for performance completed to date, the Company recognizes the revenue for the production of these Private Label products over time as the production for open purchase orders is completed, which may be prior to any shipment. The resulting contract assets are recorded in prepaid expenses and other current assets. The Company provides trade promotions to its customers. These discounts do not meet the criteria for a distinct good or service and therefore, the Company reduces revenue for the discounts associated with meeting this obligation based on the expected value method. These consolidated financial statements include trade promotion accruals. Trade promotion accruals are made for invoices that have not yet been received as of year-end and are recorded as a reduction of sales. This promotion accrual is a management estimate based upon the known price of retail promotions and estimates of the sales volume during the promotion period. Cost of Goods Sold 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. Shipping and Handling Costs Shipping and handling costs related to the sale of inventory represent outbound distribution costs, and are included in cost of goods sold in the consolidated statement of operations. Shipping and handling costs were $ 13,387 , $ 9,331 and $ 7,353 for the years ended December 31, 2022, 2021, and 2020, respectively. Advertising Expenses Advertising expenses are charged to expense in the period they are incurred and are recorded in selling, general and administrative expenses. Advertising expenses were $ 14,404 , $ 13,755 , and $ 12,862 for the years ended December 31, 2022, 2021 and 2020, respectively. Research and Development Research and development costs are charged to expense in the period incurred and are recorded in selling, general and administrative expenses. Research and development expenses were $ 541 , $ 477 , and $ 313 for the years ended December 31, 2022, 2021 and 2020, respectively. Stock-Based Compensation 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. If the actual forfeitures differ from those estimated by management, adjustment to compensation expense may be required in future periods. The Company issues stock-based awards with service-based and performance-based and market-based vesting conditions. The Company recognizes expense for performance-based awards when it becomes probable that such awards will be earned over a requisite service period. 68 Table of Contents 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 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. Income Taxes The Company accounts for income taxes under ASC 740, 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 of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Net Income per Common Share In accordance with ASC Topic 260 Earnings Per Share ("ASC 260"), net income per common share, on a basic and diluted basis, is presented for all periods, calculated using the treasury stock method. Basic net income per share is computed by dividing net income by the weighted average number of common shares and service warrants outstanding during each period. Diluted net income per share is computed by dividing net income by the weighted average number of common and dilutive common equivalent shares outstanding. The calculation of common equivalent shares assumes the exercise of dilutive in-the-money stock options, net of assumed treasury share repurchases at average market prices, as applicable. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and money market instruments with maturities of three months or less. Accounts Receivable Accounts receivable are reported net of an allowance for doubtful accounts. In determining such an allowance, the Company considers historical losses and existing economic conditions, as well as the credit quality of each customer. Accounts receivable are charged off when the Company deems amounts to be uncollectible. Inventory Inventory represents raw materials, finished goods, packaging, and inbound shipping and handling and is reported at the lower of cost or net realizable value being determined using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company reserves for finished goods that are close to the date of expiration. 69 Table of Contents 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 The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering. If an in-process equity financing is abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations. As a result of the completion of the IPO on October 25, 2021 as described in Note 1, deferred offering costs recorded during the period were netted against the proceeds of the offering and reflected as a component of additional paid-in-capital in the quarter ended December 31, 2021. As of December 31, 2022 and 2021, the Company had no deferred offering costs in the consolidated balance sheets. Property and Equipment Property and equipment are stated at cost and are depreciated over the estimated useful lives of the related assets or in the case of leasehold improvements, the lease term if shorter, using the straight-line method of depreciation. Repairs and maintenance are charged to expense as incurred. The estimated useful lives of the Company’s property and equipment are as follows: • Equipment and computer software and hardware – 3 - 7 years • Leasehold improvements – The lesser of the life of the asset or the term of the lease • Vehicles – 5 years • Furniture and fixtures – 3 - 5 years Impairment of Long-Lived Assets The Company evaluates the recoverability of its long-lived assets, principally intangibles and property and equipment, by comparing asset group’s carrying value to the expected undiscounted future cash flows to be generated from such assets when events or circumstances indicate that an impairment may have occurred. 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. Acquisitions 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. The acquiree’s results are included in the consolidated financial statements from the date of the acquisition. The Company allocated the purchase price, including the fair value of any non-cash and contingent consideration, to the identifiable assets and liabilities of the relevant acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Contingent consideration payable in cash or a fixed dollar amount settleable in a variable number of shares is classified as a liability and recorded at fair value, with changes in fair value recorded as a component of operating expenses in the accompanying consolidated statements of operations. 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 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 70 Table of Contents 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 Intangible assets consist primarily of acquired trade names and distributor relationships. The Company determines the appropriate useful life of the intangible assets by performing an analysis of expected cash flows of the acquired assets. 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. 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 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; instead goodwill is tested for impairment on an annual basis on December 31, or more frequently if the Company believes indicators of impairment exist. The Company has determined that there are three reporting units for purposes of testing goodwill for impairment: (i) the Americas reporting unit, (ii) the Europe reporting unit, and (iii) the Asia reporting unit. All of the Company’s goodwill is allocated to the Americas reporting unit. 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 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; otherwise, no further testing is required. Alternatively, the Company may elect to bypass the qualitative assessment and perform the quantitative impairment test instead, or if the Company reasonably determines that it is more-likely-than-not that the fair value is less than the carrying value, the Company performs its annual, or interim, goodwill impairment test by comparing the fair value of each of the reporting units with their carrying amount. The fair value of each of the reporting units is estimated by blending the results from the income approach and the market multiples approach. These valuation approaches consider a number of factors that include, but are not limited to, expected future cash flows, growth rates, discount rates, and comparable multiples from publicly-traded companies in the Company’s industry, and require to make certain assumptions and estimates regarding industry economic factors and future profitability of the Company’s business. It is the Company’s policy to conduct impairment testing based on its most current business plans, projected future revenues and cash flows, which reflect changes anticipated in the economy and the industry. The cash flows are based on five-year financial forecasts developed internally by management and are discounted to a present value using discount rates that properly account for the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in the Company’s reporting unit. The Company will recognize an impairment for the amount by which the carrying amount exceeds a reporting unit’s fair value. For the years ended December 31, 2022, 2021 and 2020, there were no impairments recorded. Supplier Advances 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, 2022 and December 31, 2021. 71 Table of Contents 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 The Company’s reporting currency is the U.S. dollar. The Company maintains the financial statements of each entity within the group in its local currency, which is also the entity’s functional currency. Gains and losses on transactions denominated in currencies other than the functional currency are included in determining net income for the period. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate applicable during the period. Translation gains and losses are included as a component of accumulated other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included as a component of other income (expense) in the accompanying consolidated statements of operations when incurred. Derivative Instruments The Company periodically enters into forward foreign currency exchange contracts to hedge its foreign currency exposure. The fair value of these contracts is recorded in the consolidated balance sheets with a corresponding adjustment to the consolidated statements of operations for the change in fair value of the derivative instruments, as the contracts have not been designated as a hedge instrument. Refer to Note 12, Derivative Instruments, for more information. Segment Information The Company operates as two operating and reportable segments: (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, 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 The Company’s cash and accounts receivable are subject to concentrations of credit risk. The Company’s cash balances are primarily on deposit with banks in the U.S. which are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250. At times, such cash may be in excess of the FDIC insurance limit. To minimize the risk, the Company’s policy is to maintain cash balances with high quality financial institutions and any excess cash above a certain minimum balance could be invested in overnight money market treasury deposits in widely diversified accounts. Substantially, all of the Company’s customers are either wholesalers or retailers of beverages. A material default in payment, a material reduction in purchase from these or any large customers, or the loss of a large customer or customer groups could have a material adverse impact on the Company’s financial condition, results of operations, and liquidity. The Company is exposed to concentration of credit risk from its major customers for which two customers represented 54 %, 53 %, and 54 % of total net sales during the years ended December 31, 2022, 2021 and 2020, respectively. In addition, the two customers also accounted for 39 % and 37 % of total accounts receivable as of December 31, 2022 and 2021, respectively. The Company has not experienced credit issues with these customers. Recently Adopted Accounting Pronouncements 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 72 Table of Contents 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) 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. The Company adopted the guidance in this amendment using a prospective approach effective January 1, 2021 for the fiscal year ended December 31, 2021. The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements. 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): Disclosures by Business Entities about Government Assistance , which requires disclosure about certain government assistance they receive. ASU 2021-10 is effective for all entities for annual periods beginning after December 15, 2021. 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 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. 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. 73 Table of Contents 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 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, but does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements. 3. REVENUE RECOGNITION Revenues are accounted for in accordance with ASC 606. The Company disaggregates revenue into the following product categories: • Vita Coco Coconut Water – This product category consists of all branded coconut water product offerings under the Vita Coco labels, where the majority ingredient is coconut water. The Company determined that the sale of the products represents a distinct performance obligation as customers can benefit from purchasing the products on their own or together with other resources that are readily available to the customers. For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue. • Private Label – This product category consists of all private label product offerings, which includes coconut water and oil. The Company determined the production and distribution of private label products represents a distinct performance obligation. Since there is no alternative use for these products and the Company has the right to payment for performance completed to date, the Company recognizes the revenue for the production of these private label products over time as the production for open purchase orders occurs, which may be prior to any shipment. • Other – This product category consists of all other products, which includes Runa, Ever & Ever and PWR LIFT product offerings, Vita Coco product extensions beyond coconut water, such as Vita Coco Sparkling , coconut milk products, and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue. The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers. Disaggregation of Revenue The following table disaggregates net revenue by product type and reportable segment: December 31, 2022 Americas International Consolidated Vita Coco Coconut Water $ 275,964 $ 38,570 $ 314,534 Private Label 88,173 12,855 101,029 Other 9,485 2,740 12,224 Total $ 373,622 $ 54,165 $ 427,787 74 Table of Contents 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) December 31, 2021 Americas International Consolidated Vita Coco Coconut Water $ 231,858 $ 34,639 $ 266,497 Private Label 80,639 14,007 94,646 Other 11,394 6,976 18,370 Total $ 323,891 $ 55,622 $ 379,513 December 31, 2020 Americas International Consolidated Vita Coco Coconut Water $ 164,786 $ 27,167 $ 191,953 Private Label 83,449 12,596 96,045 Other 14,664 7,982 22,646 Total $ 262,899 $ 47,745 $ 310,644 4. ACCOUNTS RECEIVABLE, NET Accounts receivable, net was $ 43,350 and $ 47,195 as of December 31, 2022 and 2021, respectively. The Company recorded an allowance for doubtful accounts of $ 2,898 and $ 1,301 as of December 31, 2022 and 2021, respectively. Changes in the allowance for doubtful accounts for the periods presented were as follows: Balance at January 1, 2021 $ 1,211 Provision charged to operating results 76 Account write-offs and other deductions, net of recoveries 14 Balance as of December 31, 2021 $ 1,301 Provision charged to operating results 2,641 Account write-offs and other deductions, net of recoveries ( 1,044 ) Balance as of December 31, 2022 $ 2,898 5. INVENTORY Inventory consists of the following: December 31, 2022 2021 Raw materials and packaging $ 5,771 $ 4,868 Finished goods 78,344 70,492 Inventory $ 84,115 $ 75,360 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: 75 Table of Contents 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) December 31, 2022 2021 Tax receivables $ 527 $ 2,946 Contract assets 10,337 2,627 VAT receivables 1,054 1,436 Supplier prepaid 4,018 6,182 Prepaid insurance 1,701 2,530 Other prepaid expenses 2,254 2,614 Other receivables 2,290 2,383 $ 22,181 $ 20,718 7. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following: December 31, 2022 2021 Equipment and computer software and hardware $ 5,137 $ 4,604 Leasehold improvement 339 503 Vehicles 784 820 Land and improvements — 506 Furniture and fixtures 401 321 Total Property Plant & Equipment 6,661 6,754 Less accumulated depreciation and amortization ( 4,585 ) ( 4,281 ) Property and equipment-net $ 2,076 $ 2,473 Depreciation expense related to property and equipment, net for the years ended December 31, 2022, 2021 and 2020 was $ 681 , $ 849 and $ 905 , respectively. 8. GOODWILL AND INTANGIBLE ASSETS Goodwill and Intangible Assets, net consist of the following: December 31, 2022 2021 Goodwill $ 7,791 $ 7,791 December 31, 2022 December 31, 2021 Gross Carrying Amount Accumulated Amortization Impairment Net Gross Carrying Amount Accumulated Amortization Net Intangible assets, net Trade names $ 6,200 $ ( 2,807 ) $ ( 3,393 ) $ — $ 6,200 $ ( 2,187 ) $ 4,013 Distributor relationships 6,000 ( 2,717 ) ( 3,283 ) $ — 6,000 ( 2,117 ) 3,883 Other 38 — ( 38 ) $ — 38 — 38 Total Intangible assets subject to amortization & impairment $ 12,238 $ ( 5,524 ) $ ( 6,714 ) $ — 12,238 $ ( 4,304 ) $ 7,934 76 Table of Contents 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) Annual Goodwill Impairment Testing All of the Company’s goodwill is associated with the acquisition of Runa , which was acquired in June 2018. The goodwill is allocated to the Americas reporting unit and is tax deductible. In assessing whether goodwill was impaired in connection with its annual impairment testing performed at December 31, 2020, the Company elected to bypass the qualitative assessment and, performed a quantitative assessment in accordance with ASC 350. Refer to Note 2, Summary of Significant Accounting Policies, for further discussion of the quantitative analysis. In December 31, 2022, the Company performed the qualitative assessment only, which did not indicate that it is more likely than not that the carrying value of each of the reporting units exceeds their fair value, resulting in no further quantitative testing. Based on the results of the annual impairment test, the Company concluded that no impairment to goodwill existed as of December 31, 2022, 2021 and 2020. Intangible Assets, net The intangible assets, net associated with the acquisition of Runa was $ 0 and $ 7,934 as of December 31, 2022 and 2021, respectively. All the intangible assets are amortized over their useful life. Since the intangibles are subject to amortization, they are reviewed for impairment in accordance with ASC 360, Property, Plant, and Equipment . Under ASC 360, long-lived assets are tested for recoverability at the asset group level whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. In step 1, the entity determines recoverability of the asset group by comparing its carrying value with the sum of its undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If the sum of the undiscounted cash flows is less than the carrying value of the asset group, then step 2 must be performed, in which the entity compares the fair value of the asset group to its carrying amount. The excess of the carrying value of the asset group over its fair value, if any, would be recognized as an impairment loss. 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. 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. 9. ACCRUED EXPENSES Accrued expenses consist of the following: 77 Table of Contents 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) December 31, 2022 2021 Accrued promotions and marketing $ 18,624 $ 19,455 Payroll and benefits related expenses 3,814 10,258 Shipping and handling costs 8,854 4,175 Accrued trade payable 1,613 1,647 Current operating lease liabilities 734 — VAT payable 1,599 2,276 Income tax payable 834 2,138 Accrued professional fees 350 628 Other accrued expenses 1,920 1,822 $ 38,342 $ 42,399 10. DEBT The table below details the outstanding balances on the Company’s credit facility and notes payable as of December 31, 2022 and 2021: December 31, 2022 2021 2020 Credit facility $ — $ — Notes payable Vehicle loans 48 76 $ 48 $ 76 Current $ 23 $ 28 Non-current $ 25 $ 48 2020 Credit Facility 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: 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. In addition, the Company is currently subject to an unused commitment fee ranging from 0.05 % and 0.20 % on the unused amount of the line of credit, with the rate being based on the Company’s leverage ratio (as defined in the credit agreement). The maturity date on the 2020 Credit Facility is May 12, 2026. 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. 78 Table of Contents 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) Interest expense and unused commitment fee for the 2020 Credit Facility amounted to $ 255 and $ 51 , respectively, for the year ended December 31, 2022. Interest expense and unused commitment fee for the 2020 Credit Facility amounted to $ 176 and $ 39 , respectively, for the year ended December 31, 2021.The effective interest rate was 2.53 % and 0.97 %, respectively, as of December 31, 2022 and 2021. The 2020 Credit Facility is collateralized by substantially all of the Company’s assets. The 2020 Credit Facility contains certain affirmative and negative covenants that, among other things, limit the Company’s ability to, subject to various exceptions and qualifications: (i) incur liens; (ii) incur additional debt; (iii) sell, transfer or dispose of assets; (iv) merge with or acquire other companies, (v) make loans, advances or guarantees; (vi) make investments; (vii) make dividends and distributions on, or repurchases of, equity; and (viii) enter into certain transactions with affiliates. The 2020 Credit Facility also requires the Company to maintain certain financial covenants including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a minimum asset coverage ratio. As of December 31, 2022, the Company was compliant with all financial covenants. 2021 Term Loan 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 . The Company incurred interest on the 2021 Term Loan at the same rate as the 2020 Credit Facility. The Company was required to repay the principal on the 2021 Term Loan in quarterly installments commencing on October 1, 2021 through the maturity date of May 21, 2026. The 2021 Term Loan was subject to the same affirmative, negative and financial covenants as the 2020 Credit Facility. On October 27, 2021, the Company repaid the outstanding balance on the 2021 Term Loan using the net proceeds from the IPO as discussed in Note 1. 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, 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 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 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. The 2016 Term Loan and 2017 Term Loan contained certain affirmative and negative covenants that, among other things, limited the Company’s ability to, subject to various exceptions and qualifications: (i) incur liens; (ii) incur additional debt; (iii) sell, transfer or dispose of assets; (iv) merge with or acquire other companies, (v) make loans, advances or guarantees; (vi) make investments; and (vii) enter into certain transactions with affiliates. 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. 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 79 Table of Contents 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 Company periodically enters into vehicle loans. Interest rate on these vehicle loans range from 4.56 % to 5.68 %. The Company is required to make principal payments of $ 2 on a monthly basis. Aggregate principal payments on the notes payable for the next five years are as follows: 2023 $ 22 2024 13 2025 10 2026 3 Total notes payable $ 48 11. COMMITMENTS AND CONTINGENCIES Contingencies: Litigation —The Company may engage in various litigation in the ordinary course of business. The Company intends to vigorously defend itself in such matters and management, based upon the advice of legal counsel, is of the opinion that the resolution of these matters will not have a material effect on the consolidated financial statements. For the cases for which management believes that it is more likely than not that it will lose the case, a provision for legal settlements has been recorded. As of December 31, 2022 and 2021, the Company has no t recorded any liabilities relating to legal settlements. Business Risk —The Company imports finished goods predominantly from manufacturers located in South American and Southeast Asian countries. The Company may be subject to certain business risks due to potential instability in these regions. Major Customers — The Company’s customers that accounted for 10% or more of total net sales and total accounts receivable were as follows: Net sales Accounts receivable Year Ended December 31, December 31, 2022 2021 2020 2022 2021 Customer A 30 % 30 % 35 % 16 % 18 % Customer B 24 % 23 % 19 % 23 % 19 % 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: Year Ended December 31, 2022 2021 Supplier A 17 % 21 % Supplier B 13 % 13 % 12. 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 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 80 Table of Contents 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) 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. 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 notional amount and fair value of all outstanding derivative instruments in the consolidated balance sheets consist of the following at: December 31, 2022 Derivatives not designated as hedging instruments under ASC 815-20 Notional Amount Fair Value Balance Sheet Location Assets Foreign currency exchange contracts Receive USD/pay GBP $ 23,702 $ 1,104 Derivative assets Receive BRL/sell USD 46,301 2,314 Derivative assets Receive USD/pay CAD $ 4,819 $ 188 Derivative assets Liabilities Foreign currency exchange contracts Receive USD/pay EUR $ 604 $ ( 7 ) Derivative liabilities Receive THB/sell USD 21,990 ( 64 ) Derivative liabilities December 31, 2021 Derivatives not designated as hedging instruments under ASC 815-20 Notional Amount Fair Value Balance Sheet Location Assets Foreign currency exchange contracts Receive USD/pay GBP $ 22,323 $ 125 Derivative assets Receive MYR/sell USD $ 392 $ 1 Derivative assets Liabilities Foreign currency exchange contracts Receive BRL/sell USD $ 43,174 $ ( 2,389 ) Derivative liabilities Receive USD/pay CAD 4,731 ( 57 ) Derivative liabilities Receive THB/sell USD 18,488 ( 751 ) Derivative liabilities 81 Table of Contents 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: 2022 2021 2020 Unrealized gain (loss) on derivative instruments $ 6,606 $ 2,093 $ ( 4,718 ) 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 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"). In determining fair value, the Company used a market approach and incorporates the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable internally developed inputs. 13. FAIR VALUE MEASUREMENTS ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observability of the inputs used in valuation techniques, the Company’s assets and liabilities are classified as follows: • Level 1— Quoted market prices in active markets for identical assets or liabilities. • Level 2— Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted market prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3— Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes internally developed models and methodologies utilizing significant unobservable inputs. Forward currency swap contracts— The Company’s valuation methodology for forward currency swap contracts is based upon third-party institution data. Contingent consideration liability— The Company utilized a probability weighted scenario-based model to determine the fair value of the contingent consideration. The Company’s fair value hierarchy for those assets (liabilities) measured at fair value on a recurring basis at December 31, 2022 and 2021, is as follows: Level 1 Level 2 Forward Currency Swaps/Contracts Level 3 Contingent consideration liability Total 2022 $ — $ 3,535 $ — $ 3,535 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 82 Table of Contents 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) achieved. 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: 49 % of the product of (a) the net revenue for the trailing 12 calendar months and (b) a specified multiple, which is contingent on the revenue growth achieved since December 31, 2017. Per the acquisition agreement, the contingent payment cannot exceed $ 51,500 . 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. The contingent consideration liability related to the acquisition of Runa was considered a Level 3 liability, as the fair value was determined based on significant inputs not observable in the market, and recorded within other long-term liabilities in the accompanying consolidated balance sheets. The Company estimated the fair value of the contingent consideration liability based on a probability-weighted present value of various future cash payment outcomes using a Monte Carlo simulation. The technique considered the following unobservable inputs as of each valuation date: • The probability and timing of achieving the specified milestones, • Revenue performance expectations, and • Market-based discount rates. 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. There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements. 14. STOCKHOLDERS’ EQUITY 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, 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”). The Company repurchased 5,192,005 shares of its own common stock from the Seller at a purchase price of $ 9.63 per share, or an aggregate purchase price of approximately $ 50,000 . The purchase price per share approximated the most recent third-party common stock valuation prepared in conjunction with the accounting of stock-based compensation discussed within this Note. Non-controlling Interest —On August 17, 2021, the Company’s ownership interest in AME increased as a result of the subsidiary AME repurchasing AME shares from certain minority stockholders. As a result, the noncontrolling interest in AME representing minority stockholders’ proportionate share of the equity in AME was reduced from 1.3 % to 0.71 %. On December 31, 2021, the Company purchased the remaining outstanding AME shares directly from minority stockholders by exchanging shares in the Company on the basis of 5.485 Vita Coco shares being allotted for every 1 AME share. The share ratio exchange reflects a mutually agreed valuation of AME shares relative to Vita Coco shares. 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 — 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. 83 Table of Contents 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) 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”). The 2014 Plan allowed for a maximum of 8 % of the sum of the Available Equity defined as the sum of (i) the total then outstanding shares of common shares and (ii) all available stock option (i.e., granted and outstanding stock options and stock options not yet granted). Under the terms of the 2014 Plan, the Company may grant employees, directors, and consultants stock options and restricted stock awards and has the authority to establish the specific terms of each award, including exercise price, expiration, and vesting. Currently, only stock options were granted under the 2014 Plan. 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. 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. The maximum number of shares of our common stock available for issuance under the 2021 Plan is equal to the sum of (i) 3,431,312 shares of our common stock and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) two percent ( 2 %) of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year and (B) such lesser amount as determined by our board of directors; provided, however, no more than 3,431,312 shares may be issued upon the exercise of incentive stock options, or ISOs. The 2021 Plan provides for the grant of stock options, including ISOs and nonqualified stock options, or NSOs, restricted stock, dividend equivalents, stock payments, restricted stock units, or RSUs, other incentive awards, SARs, and cash awards. Currently, stock options, restricted stock, and RSU's were granted under 2021 Plan. As of December 31, 2022, there were 2,898,930 shares of common stock reserved for future issuance pursuant to the 2021 Plan. 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 $ 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. 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: Number of Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (per option) (in years) (in thousands) Outstanding—December 31, 2021 4,117,671 $ 10.34 Granted 128,940 15.36 Exercised 370,940 8.36 Forfeited 161,697 11.27 Outstanding—December 31, 2022 3,713,974 $ 11.00 7.0 $ 10,062 Exercisable—December 31, 2022 2,129,042 $ 10.29 6.7 $ 7,522 The weighted average grant-date fair value of the service-based stock option awards granted during the years ended December 31, 2022 and 2021 was $ 6.98 per option and $ 5.62 per option, respectively. The aggregate intrinsic value of service-based stock options exercised was $ 2,026 and $ 66 for the years ended December 31, 2022 and 2021, respectively. 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. 84 Table of Contents 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. 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. The weighted average assumptions used in the Black-Scholes option-pricing model were as follows: 2022 2021 Weighted average expected term 7.00 years 6.3 years Weighted average expected volatility 39 % 39 % Weighted average risk-free interest rate 2.86 % 1.19 % Weighted average expected dividend yield 0 % 0 % Expected Term: Represents the period that the stock-based awards are expected to be outstanding based on a contractual term and service conditions specified for the awards. 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. Expected Volatility : 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. Risk-free Interest Rate: The risk-free interest rate was based on the yield, as of the option valuation date, by reference to the U.S. Treasury yield curve in effect at the time of the grant or the modification of the award for time periods equal to the expected term of the award. Dividend Yield —The Company does not anticipate declaring a dividend over the expected term. As such, the dividend yield has been estimated to be zero . 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 . The third-party common stock valuations were prepared using a combination of the income approach and market approach. As of December 31, 2022, there was $ 4,425 of total unrecognized compensation cost related to unvested service-based stock options, which is expected to be recognized over a weighted-average service period of 2.2 Years. Stock Option Awards with Performance and Market-based Vesting Conditions 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, 2021, the Company awarded options to purchase 68,250 shares of common stock of the Company containing 85 Table of Contents 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: Number of Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (per option) (in years) (in thousands) Outstanding—December 31, 2021 778,960 $ 10.33 Granted 38,675 10.18 Exercised — — Forfeited 9,100 10.18 Outstanding—December 31, 2022 808,535 $ 10.32 6.9 $ 2,658 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 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. All other option terms remained the same. In connection with the modification, the Company revalued the options using a Barrier option valuation model which resulted in a fair value of $ 2.11 per option. There was no incremental compensation expense recognized in connection with the modification during the year ended December 31, 2021, as the attainment of the performance and market vesting conditions was not probable. The assumptions used to revalue the performance and market-based stock option grants were as follows: Weighted average expected term 2.44 years Weighted average expected volatility 40 % Weighted average risk-free interest rate 0.16 % Weighted average expected dividend yield 0 % Expected Term: The period of time for which the stock option awards are expected to be outstanding until exercise and considers time until expected liquidity event. Expected Volatility : 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 86 Table of Contents 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: The risk-free interest rate is based on the yield, as of the option valuation date, by reference to the U.S. Treasury yield curve in effect at the time of the grant or the modification of the award for time periods equal to the expected term of the award. Dividend Yield —The Company does not anticipate declaring a dividend over the expected term. As such, the dividend yield has been estimated to be zero . 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. Restricted Stock and Restricted Stock Unit Awards ("RSUs") Restricted stock and RSUs were granted under the 2021 Plan and primarily vest based on continuous service. Currently, there is no restricted stock or RSUs that contain any performance or market conditions. The RSUs awarded to the employees have different vesting schedules as specified in each grant agreement. 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: Number of Restricted Stock or RSU Awards Weighted Average Grant Date Fair Value Non-vested - December 31, 2021 454,881 $ 15.00 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 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. Assuming the distribution agreement has not been terminated by either party for cause, 50 % of the shares are released on October 11, 2023 and the remaining 50 % are released on October 11, 2024. 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 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. 15. Income Taxes The domestic and foreign components of the Company’s income before income taxes are as follows: 87 Table of Contents 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, 2022 2021 2020 Domestic $ 5,634 $ 15,085 $ 33,412 Foreign 5,207 9,144 10,188 Income before income taxes $ 10,841 $ 24,229 $ 43,600 The income tax expense for the years ended December 31, 2022, 2021, and 2020 consist of the following: Year Ended December 31, 2022 2021 2020 Current Federal $ 3,654 $ 3,343 $ 1,871 State and local 1,477 1,076 886 Foreign 965 2,435 1,874 6,096 6,854 4,631 Deferred Federal $ ( 2,940 ) $ ( 304 ) $ 4,884 State and local ( 839 ) ( 29 ) 1,403 Foreign 710 ( 1,284 ) ( 5 ) ( 3,069 ) ( 1,617 ) 6,282 Total $ 3,027 $ 5,237 $ 10,913 The reconciliation of the U.S. federal statutory rate to the Company’s effective rate is as follows: 2022 2021 2020 Income tax benefit using U.S. federal statutory rate 21.0 % 21.0 % 21.0 % State and local taxes. net of U.S. federal income tax benefit 4.7 % 3.6 % 4.7 % Global intangible low-taxed income — % 1.8 % 2.7 % Stock compensation ( 3.9 %) — % — % Officer's compensation limitation 4.4 % — % — % Tax attribute expiration — % — % 1.5 % Permanent differences 0.3 % 0.4 % ( 0.1 %) Foreign rate differential ( 2.9 %) ( 1.8 %) ( 0.4 %) Foreign derived intangible income ( 3.6 %) ( 1.9 %) ( 0.8 %) Valuation allowance 5.4 % ( 3.2 %) ( 1.2 %) Return to provision — % ( 0.1 %) 0.3 % Tax credits ( 0.6 %) ( 1.8 %) ( 2.7 %) IPO costs — % 2.1 % — % Other 3.1 % 1.5 % — % Provision for income taxes 27.9 % 21.6 % 25.0 % Deferred tax assets and liabilities at December 31, 2022 and 2021, consist of the following: 88 Table of Contents 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) 2022 2021 Deferred Tax Assets: Inventory reserves $ 878 $ 562 Reserves and accruals 1,330 868 Stock based compensation 3,728 2,632 Net operating loss carryforwards 4,834 5,454 Charitable contributions carryforward — 356 Lease liability 673 — Subtotal 11,443 9,872 Valuation allowance ( 4,586 ) ( 4,267 ) Total deferred tax assets 6,857 5,605 Deferred Tax Liabilities: Prepaid insurance ( 397 ) ( 615 ) Intangibles ( 1,464 ) ( 3,453 ) Right-of-use assets ( 646 ) — Fixed assets ( 84 ) ( 183 ) Other—Net ( 10 ) ( 89 ) Total deferred tax liabilities ( 2,601 ) ( 4,340 ) Net deferred tax assets (liability) $ 4,256 $ 1,265 A valuation allowance of $ 4,586 and $ 4,267 was recorded against the non-US deferred tax asset balance as of December 31, 2022 and 2021, respectively. 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, 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, 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. A reconciliation of the beginning and ending amount of income tax uncertainties is as follows; 2022 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. 89 Table of Contents 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) 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. net deferred tax assets. 16. Earnings Per Share Basic and diluted earnings per share is calculated as follows: Year Ended December 31, 2022 2021 2020 Numerator: Net income attributable to The Vita Coco Company, Inc. $ 7,814 $ 19,015 $ 32,660 Denominator: Weighted-average number of common shares used in earnings per share—basic 55,732,619 53,689,910 58,501,170 Effect of conversion of stock options and RSU's 391,042 496,211 109,655 Weighted-average number of common shares used in earnings per share—diluted 56,123,661 54,186,121 58,610,825 Earnings per share—basic $ 0.14 $ 0.35 $ 0.56 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 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: December 31, 2022 2021 2020 Options to purchase common stock 1,880,904 1,288,350 3,719,625 17. 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. 90 Table of Contents 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) 18. Segment Reporting The Company has two operating and reportable segments: • 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 ), 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. Information about the Company’s operations by operating segment as of and for the years ended December 31, 2022, 2021 and 2020 is as follows: December 31, 2022 Americas International Consolidated Net sales $ 373,622 $ 54,165 $ 427,787 Gross profit 95,492 7,869 103,361 Total segment assets 156,588 41,169 197,757 December 31, 2021 Americas International Consolidated Net sales $ 323,891 $ 55,622 $ 379,513 Gross profit 101,864 11,284 113,148 Total segment assets 141,973 55,511 197,484 December 31, 2020 Americas International Consolidated Net sales $ 262,899 $ 47,745 $ 310,644 Gross profit 90,256 14,602 104,858 Total segment assets 139,452 44,409 183,861 91 Table of Contents 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, Reconciliation 2022 2021 2020 Total gross profit $ 103,361 $ 113,148 $ 104,858 Less: Selling, general and administrative expenses 100,306 88,559 74,401 Change in fair value of contingent consideration — — ( 16,400 ) Income from operations 3,055 24,589 46,857 Less: Unrealized (gain) loss on derivative instruments ( 6,606 ) ( 2,093 ) 4,718 Foreign currency (gain) loss ( 1,387 ) 2,088 ( 1,848 ) Loss on extinguishment of debt — 132 — Interest income ( 51 ) ( 127 ) ( 404 ) Interest expense 258 360 791 Income before income taxes 10,841 24,229 43,600 Geographic Data: The following table provides information related to the Company’s net revenues by country, which is presented on the basis of the location that revenue from customers is recorded: Year Ended December 31, 2022 2021 2020 United States $ 352,731 $ 323,891 $ 262,899 All other countries (1) 75,056 55,622 47,745 Net sales $ 427,787 $ 379,513 $ 310,644 (1) No individual country is greater than 10% of total net sales for the years ended December 31, 2022, 2021 and 2020. The following table provides information related to the Company’s property and equipment, net by country: Year Ended December 31, 2022 2021 United States $ 683 $ 890 Ecuador 503 870 Singapore 1,288 536 All other countries (1) 105 177 Property and equipment, net $ 2,579 $ 2,473 (1) No individual country is greater than 10% of total property and equipment, net as of December 31, 2022 and 2021. 92 Table of Contents 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) 19. 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. 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 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 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 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. The distribution agreement grants the stockholder the right to sell, resell and distribute designated products supplied by the Company within a specified territory. The amount of revenue recognized related to this distribution agreement was $ 6,375 , $ 6,247 , and $ 5,294 for the years ended December 31, 2022, 2021 and 2020, respectively. The amounts due from the stockholder in Accounts Receivable, net were $ 753 and $ 600 as of December 31, 2022 and 2021, respectively. Amounts payable to the stockholder in Accounts payable were $ 38 and $ 71 as of December 31, 2022 and 2021 respectively. Related to this distribution arrangement, the Company and the stockholder have a service agreement where the Company shares in the compensation costs of the stockholder’s employee managing the China market. 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. 93 Table of Contents 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) 20. 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 Land $ 503 94 Table of Contents 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) 21. Leases 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 $ 1,124 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 95 Table of Contents 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 2023 $ 1,218 2024 1,218 2025 437 2026 — Thereafter — Total lease payments $ 2,873 Less: 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 2022 $ 1,085 2023 226 2024 154 2025 51 2026 — Thereafter — $ 1,516 96 Table of Contents 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) 22. 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. Mr. 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. Mr. Baker will succeed Rowena Ricalde, who has served as the Company’s Interim Chief Financial Officer since September 2022. Ms. Ricalde will be appointed Chief Accounting Officer and continue as the Principal Accounting Officer. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None