Zevia PBC 10-K

Item 9A. Controls and Procedures . Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on the foregoing evaluation, management determined that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021. Internal Control Over Financial Reporting This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies. Additionally, for as long as we remain an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, we intend to take advantage of the exemption permitting us not to comply with the requirement that our independent registered public accounting firm provide an attestation on the effectiveness of our internal control over financial reporting. Remediation of Material Weaknesses In connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2020 and 2019, we determined that we had material weaknesses in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to (a) a lack of sufficient accounting resources, (b) inadequate segregation of duties, including access security to our information technology ("IT") systems, related to the preparation, review and posting of journal entries, and (c) the sufficiency of review over accounting analyses used in the classification of promotional activities and the accounting for equity transactions. As of December 31, 2021, management completed the validation of the implementation of internal controls over financial reporting to remediate these material weaknesses. Specifically, management completed the following remediation actions during the year ended December 31, 2021 to ensure control deficiencies that contributed to the material weaknesses are remediated: • We hired additional accounting and financial personnel who possess public company accounting and reporting technical expertise, including a Chief Accounting Officer, Global Controller, Director of Financial Planning and Analysis, Director of Tax and a Senior Manager of SEC Reporting and Technical Accounting, to oversee internal controls and procedures and implement a formal closing process. • We hired an internal General Counsel and established corporate bylaws, organizational structure, code of conduct, and an employee handbook, including establishment of a whistleblower hotline for internal and external parties to anonymously report potential misconduct or other non-compliance with laws, formal accounting policies and memos. 63 • We implemented a training program addressing internal control over financial reporting, including educating control owners regarding the requirements of each control. • We developed internal controls and accounting procedures over key financial processes and significant estimates such as discounts and allowances, equity-based compensation, and inventories. These controls include, but are not limited to, review of technical memorandums, a formal journal entry approval workflow process, the review and approval of monthly accounts reconciliations with support to validate account balances, quarterly reviews by the Chief Accounting Officer or Controller of the Company’s trial balance, and dual authorization for wire transfers. • We developed an annual budget, which included strategic objectives. • We hired an independent third-party and established monitoring controls over the financial reporting process of the Company, as well as developed an annual fraud and risk assessment. • Entity level controls were established and implemented to provide oversight of the financial reporting of the Company. • We implemented an IT management review and testing plan to monitor IT general controls with a specific focus on systems supporting our financial reporting processes. • We designed, implemented, and tested IT controls for periodic user access reviews and system's security role over primary systems supporting the key financial processes. • We designed, implemented and tested IT controls for formal change management policies and documentation. During the fourth quarter of 2021, the Company validated the implementation of the newly designed controls. Based on the foregoing remediation activities and completion of validation of controls, management determined that the above material weaknesses were remediated as of December 31, 2021. Changes in Internal Control over Financial Reporting. Other than the remediation efforts undertaken throughout 2021 and described above in this Item 9A, there has been no change in our internal control over financial reporting during the three months ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 64 Item 9B. Other Information. Not applicable Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable 65 PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 11. Executive Compensation. The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 14. Principal Accountant Fees and Services. The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. 66 PART IV Item 15. Exhibits, Financial Statement Schedules. The following documents are filed as a part of this Annual Report. (a) Financial Statements Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report. (b) Financial Statement Schedules All financial statement schedules are omitted because the information called for is not required or is shown either in the consolidated financial statements or in the notes thereto. (c) Exhibits The exhibits listed below are filed as part of this Annual Report, or are incorporated herein by reference, in each case as indicated below. 67 EXHIBIT INDEX Exhibit No. Description of Exhibit 3.1 Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 26, 2021). 3.2 Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 26, 2021). 4.1* Description of Securities. 10.1 Thirteenth Amended and Restated Limited Liability Company Agreement of Zevia LLC Agreement dated as of July 21, 2021 (incorporated by reference to Exhibit 10.1 of the Registrant’s Periodic Report on Form 10-Q, filed August 13, 2021). 10.2 Tax Receivable Agreement dated as of July 21, 2021 (incorporated by reference to Exhibit 10.2 of the Registrant’s Periodic Report on Form 10-Q, filed August 13, 2021). 10.3 Zevia PBC Eleventh Amended and Restated Registration Rights Agreement dated July 21, 2021 (incorporated by reference to Exhibit 10.3 of the Registrant’s Periodic Report on Form 10-Q, filed August 13, 2021). 10.4 Form of Indemnification Agreement entered into with Directors and Executive Officers (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1/A, filed on July 12, 2021). 10.8# Zevia PBC 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed with the SEC on July 26, 2021). 10.9# Form of Restricted Stock Unit Award Grant Notice and Standard Terms and Conditions under the Zevia PBC 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed with the SEC on July 26, 2021). 10.10# Form of Nonqualified Stock Options Grant Notice and Standard Terms and Conditions under the Zevia PBC 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 filed with the SEC on July 26, 2021). 10.11# Zevia 2020 Incentive Plan (incorporated herein by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1, filed on June 25, 2021). 10.12# Form of Zevia LLC Notice of Restricted Class C Common Unit Award and Restricted Class C Common Unit Agreement (2020) (incorporated herein by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1, filed on June 25, 2021). 10.13# Form of Zevia LLC Notice of Restricted Class C Common Unit Award and Restricted Class C Common Unit Agreement (2021) (incorporated herein by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1, filed on June 25, 2021). 10.14# Form of Zevia LLC First Amendment to Notice of Restricted Class C Common Unit Award and Restricted Class C Common Unit Agreement (incorporated herein by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1, filed on June 25, 2021). 10.15#* Form of Zevia LLC Second Amendment to Notice of Restricted Class C Common Unit Award and Restricted Class C Common Unit Agreement. 10.16# Zevia LLC 2011 Unit Incentive Plan, as amended, and the Form of Unit Option Agreement (incorporated herein by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1, filed on June 25, 2021). 10.17#* Form of Zevia LLC 2011 Unit Incentive Plan, as amended, Second Amendment to Unit Option Agreement. 10.18#* Form of Zevia LLC 2011 Unit Incentive Plan, as amended, Third Amendment to Unit Option Agreement. 10.19# Form of Zevia LLC Notice of Restricted Phantom Class C Common Unit Award and Restricted Phantom Class C Common Unit Agreement (incorporated herein by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1, filed on June 25, 2021). 10.20# Form of Zevia LLC First Amendment to Notice of Restricted Phantom Class C Common Unit Award and Restricted Phantom Class C Common Unit Agreement (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1/A, filed on July 12, 2021). 10.21# Offer Letter dated June 9, 2021 between Zevia LLC and Amy Taylor (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1/A, filed on July 12, 2021). 10.22# Severance Agreement dated as of July 26, 2021 by and between Zevia LLC and Harry Margolis (incorporated herein by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q, filed on August 13, 2021). 68 10.23# Severance Agreement dated as of July 26, 2021 by and between Zevia LLC and Robert Gay (incorporated herein by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q, filed on August 13, 2021). 10.24# Severance Agreement dated as of July 26, 2021 by and between Zevia LLC and Padraic Spence (incorporated herein by reference to Exhibit 10.6 of the Registrant's Quarterly Report on Form 10-Q, filed on August 13, 2021) . 10.25 Loan and Security Agreement, dated as of February 22, 2022, by and among Zevia LLC, certain of its subsidiaries from time to time joined hereto as borrowers, the financial institutions party thereto from time to time as Lenders and Bank of America, N.A., a national banking association, as agent for the Lenders thereto (incorporated herein by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K, filed on February 24, 2022) . 10.26#* Severance Agreement dated as of March 8, 2022 by and between Zevia PBC and Amy Elizabeth Taylor. 21.1* Subsidiaries of the Registrant. 23.1* Consent of Independent Registered Accounting Firm 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32** Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. ** Furnished herewith. # Management contract or compensatory plan or arrangement. Item 16. Form 10-K Summary None 69 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Zevia PBC By: /s/ Padraic Spence Name: Padraic Spence Title: Chief Executive Officer and Executive Chairman of the Board of Directors (Principal Executive Officer) Date: March 11, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Padraic Spence By: /s/ William D. Beech Name: Padraic Spence Name: William D. Beech Title: Chief Executive Officer and Executive Chairman of the Board of Directors Title: Chief Financial Officer (Principal Executive Officer) (Principal Financial Officer) Date: March 11, 2022 Date: March 11, 2022 By: /s/ Hany Mikhail By: /s/ Amy E. Taylor Name: Hany Mikhail Name: Amy E. Taylor Title: Chief Accounting Officer Title: President and Director (Principal Accounting Officer) Date: March 11, 2022 Date: March 11, 2022 By: /s/ Jacqueline J. Hayes By: /s/ Brian W. McGuigan Name: Jacqueline J. Hayes Name: Brian W. McGuigan Title: Director Title: Director Date: March 11, 2022 Date: March 11, 2022 By: /s/ Rosemary L. Ripley By: /s/ Andrew Ruben Name: Rosemary L. Ripley Name: Andrew Ruben Title: Director Title: Director Date: March 11, 2022 Date: March 11, 2022 By: /s/ Julie G. Ruehl By: /s/ Justin Shaw Name: Julie G. Ruehl Name: Justin Shaw Title: Director Title: Director Date: March 11, 2022 Date: March 11, 2022 By: /s/ Quincy B. Troupe By: /s/ Philip H. O'Brien Name: Quincy B. Troupe Name: Philip H. O'Brien Title: Director Title: Director Date: March 11, 2022 Date: March 11, 2022 70