What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-11 · 234 added, 207 removed, 621 unchanged (42% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Redeemable Convertible Preferred Units and Changes in Equity (Deficit)

Consolidated Statements of Changes in Redeemable Convertible Preferred Units and Equity (Deficit)

Consolidated Statements of Cash Flows

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Zevia PBC

To the stockholders and the Board of Directors of Zevia PBC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zevia PBC and its subsidiary (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred units and changes in equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with the accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Zevia PBC and its subsidiary (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, consolidated statement of changes in redeemable convertible preferred units and equity (deficit), and consolidated statement of cash flows, for each of the two 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 two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

30 unchanged sentences

Other non-current assets

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED UNITS AND MEMBERS’

EQUITY (DEFICIT)

LIABILITIES AND EQUITY

Current liabilities:

1 unchanged sentence

Accrued expenses and other current liabilities

Operating lease liabilities

Current portion of operating lease liabilities

Total current liabilities

2 unchanged sentences

Commitments and contingencies (Note 9)

Redeemable convertible preferred units:

No par values.

None authorized and outstanding as of December 31, 2021.

34,410,379 units authorized, 26,322,803 units issued and outstanding as of December 31, 2020;

and aggregate liquidation preference $ 329,753 as of December 31, 2020.

Permanent Equity (Deficit)

Members’

Stockholders' equity

Preferred Stock, $ 0.001 par value.

1 unchanged sentence

Class A common stock, $ 0.001 par value.

550,000,000 shares authorized, 34,463,417 shares issued and outstanding as of December 31, 2021.

No shares authorized, issued and outstanding as of December 31, 2020.

550,000,000 shares authorized, 47,774,046 and 34,463,417 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively.

Class B common stock, $ 0.001 par value.

250,000,000 shares authorized, 30,113,152 shares issued and outstanding as of December 31, 2021.

No shares authorized, issued and outstanding as of December 31, 2020.

250,000,000 shares authorized, 21,798,600 and 30,113,152 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively.

Additional paid-in capital

Accumulated deficit

Total Zevia’s Equity / members’

Total Zevia PBC stockholder's equity

Noncontrolling interests

Total liabilities, redeemable convertible preferred units and equity

Total liabilities and equity

The accompanying notes are an integral part of these consolidated financial statements.

10 unchanged sentences

Loss from operations

Other expense, net

Other income (expense), net

Loss before income taxes

8 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED UNITS AND CHANGES IN EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED UNITS AND EQUITY (DEFICIT)

Redeemable Convertible Preferred Units

3 unchanged sentences

Noncontrolling interest

Balance at January 1, 2020

Series E Preferred units issuance cost

Exercise of common units

Equity-based compensation

Secondary sale of preferred units

Repurchase of common and redeemable convertible preferred units

Balance at December 31, 2020

Exercise of Common units prior to reorganization

Equity-based compensation prior to reorganization

Net loss prior to reorganization

Distributions to unitholders for tax payments prior to reorganization

Balance prior to reorganization

Exercise of common units prior to the Reorganization Transactions

Equity-based compensation prior to the Reorganization Transactions

Net loss prior to the Reorganization Transactions

Distributions to unitholders for tax payments

Balance prior to the Reorganization Transactions

Impact of Reorganization and IPO

Effect of the reorganization

Effect of the Reorganization Transactions

Issuance of Class A common stock in IPO, net of commission

Issuance of Class B units Zevia LLC unitholders

Issuance of Class B units to Zevia LLC unitholders

Purchases of Zevia LLC units in connection with IPO

6 unchanged sentences

Equity-based compensation

Net loss post reorganization

Net loss post-Reorganization Transactions

Balance at December 31, 2021

Vesting and release of common stock under equity incentive plans, net

Exchange of Class B common stock for Class A common stock

Exercise of stock options

Equity-based compensation

Balance at December 31, 2022

The accompanying notes are an integral part of these consolidated financial statements.

6 unchanged sentences

Depreciation and amortization

(Gain) loss on sale of equipment

Loss (gain) on sale of equipment

Amortization of debt issuance cost

8 unchanged sentences

Investing activities:

Proceeds from maturities of short-term investments

Payments for purchases of short-term investments

Purchases of property and equipment

Net cash used in investing activities

Purchases of property, equipment and software

Net cash provided by (used in) investing activities

Financing activities:

1 unchanged sentence

Repayment of revolving line of credit (1)

Proceeds from Paycheck Protection Program Loan

Repayment of Paycheck Protection Program Loan

Proceeds from issuance of redeemable convertible preferred units, net of issuance costs

Repurchase of common and redeemable convertible preferred units

Proceeds from transaction in common and redeemable convertible preferred units

Payment of debt issuance costs

Distribution to unitholders for tax payments

Minimum tax withholding paid on behalf of employees for net share settlement

Proceeds from exercise of stock options

Proceeds from exercise of common units

Proceeds from issuance of Class A common stock sold in initial public offering ("IPO"), net of underwriting discounts and commissions

Use of proceeds from issuance of Class A common stock to purchase Zevia LLC Units

Proceeds from the cancellation of options in IPO

Payment for cancellation of options

Payment of offering costs

Repurchase of Zevia LLC units

Exercise of stock options

Net cash provided by financing activities

Repurchase of Zevia LLC units

Distribution to unitholders for tax payments

Proceeds from issuance of Class A common stock sold in IPO, net of underwriting discounts and commissions

Use of proceeds from issuance of Class A common stock to purchase Zevia LLC Units

Cancellation of options in IPO

Cancellation of options

Payment of IPO costs

Net cash (used in) provided by financing activities

Net change from operating, investing, and financing activities

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Non-cash investing activities

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Non-cash investing and financing activities

Capital expenditures included in accounts payable

Non-cash financing activities

Conversion of Class B common stock to Class A common stock

Operating lease right-of-use assets obtained in exchange for lease liabilities

Unpaid IPO offering costs

1 unchanged sentence

Cash paid for interest

Cash paid for income taxes

(1) Zevia PBC’s revolving line of credit provides for daily drawdowns and repayments of amounts outstanding.

As of December 31, 2021, no amounts were outstanding due to the termination of the line of credit in July 2021.

Consistent with the provisions of ASC Topic 230, Statement of Cash Flows, Zevia PBC has presented daily draw-downs and repayments under its revolving line of credit with its lender on a gross basis in the consolidated statements of cash flows for the years ended December 31, 2021, and 2020 .

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

Organization and operations

Zevia PBC (the "Company") develops, markets, sells, and distributes a wide variety of zero calorie, non-GMO verified, carbonated and non-carbonated soft drinks and other beverages under the Zevia® brand name.

Zevia PBC’s products are sold principally in the United States and Canada through various retailer channels (both brick-and-mortar and e-commerce), including grocery stores, natural products stores, warehouse clubs, and specialty outlets.

Zevia PBC (the "Company") develops, markets, sells, and distributes a wide variety of zero sugar, zero calorie, non-GMO Project verified, gluten-free, Kosher, vegan, zero sodium carbonated and non-carbonated beverages under the Zevia® brand name that include a broad assortment of flavors across Soda, Energy Drinks, Organic Teas, Mixers, and Kidz drinks.

Zevia PBC’s products are distributed and sold principally across the United States of America ("U.S.") and Canada through a diverse network of major retailers (both brick-and-mortar and e-commerce), including grocery stores, natural products stores, warehouse clubs, and specialty outlets.

Zevia PBC’s products are manufactured and generally maintained at third-party beverage production and warehousing facilities located in both the United States and Canada.

31 unchanged sentences

The Company is a holding company, and its sole material asset is its controlling equity interest in Zevia LLC.

As the sole managing member of Zevia

LLC, the Company operates and controls all of the business and affairs of Zevia LLC.

As the sole managing member of Zevia LLC, the Company operates and controls all of the business and affairs of Zevia LLC.

This reorganization is accounted for as a reorganization of entities under common control.

1 unchanged sentence

The Company has consolidated Zevia LLC in its financial statements and record a noncontrolling interest related to the Class B units held by the Class B stockholders on its consolidated balance sheet and statement of operations.

As of December 31, 2021, the Company holds an economic interest of 53.4 % in Zevia LLC and the remaining 46.6 % represents the non-controlling interest.

As of December 31, 2022 and 2021, the Company held an economic interest of 68.7 % and 53.4 %, respectively, in Zevia LLC and the remaining 31.3 % and 46.6 %, respectively, represents the non-controlling interest.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 unchanged sentences

Accordingly, the Company has prepared these consolidated financial statements in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation .

The Reorganization Transactions were accounted for consistent with a combination of entities under common control.

In connection with the IPO, the Company completed the Reorganization Transactions, which were accounted for consistent with a combination of entities under common control.

As a result, the financial reports filed with the SEC by the Company subsequent to the Reorganization Transactions are prepared “as if”

5 unchanged sentences

No step-up basis of intangible assets or goodwill was recorded.

On January 1, 2022, Zevia PBC and Zevia LLC entered into a service agreement to transfer the services of all employees of Zevia PBC to Zevia LLC.

Under terms of the service agreement between the entities, the payroll costs of employees are borne by Zevia LLC while certain other non-payroll costs, such as those associated with stock compensation arrangements, remain with Zevia PBC.

In addition, pursuant to the Thirteenth Amended and Restated Limited Liability Company Agreement of Zevia LLC dated as of July 21, 2021, Zevia LLC shall reimburse Zevia PBC, for certain expenses for overhead, administrative, and other expenses, at Zevia PBC's discretion.

For the year ended December 31, 2022, it was determined that the majority of such costs should be retained by Zevia PBC, with certain costs directly attributable to Zevia LLC being borne by that entity.

These costs impacted the amount of net loss reported by Zevia LLC and consequently impacted the amount allocated to noncontrolling interest.

Reclassifications

Certain amounts from prior periods have been reclassified in the consolidated balance sheet, consolidated statement of operations and comprehensive loss, and statement of cash flows to conform to the current period presentation.

For the activity in the periods prior to the IPO and Reorganization Transactions, common stock, additional paid-in capital, and accumulated deficit information has been combined and presented as member’s deficit in the accompanying consolidated balance sheets and consolidated statements of changes in redeemable convertible preferred units and changes in equity (deficit).

Certain amounts from prior periods have been reclassified in the consolidated balance sheet and consolidated statement of operations and comprehensive loss to conform to the current period presentation.

Consolidated Balance Sheet:

The following table presents the reclassifications made to the Consolidated Balance Sheet:

The following table presents the adjustments made to the Consolidated Balance Sheet as of December 31, 2021, in order to reclassify computer software costs from property and equipment, net, to intangible assets, net in accordance with Accounting Standard Codification ("ASC") Topic 350, Intangibles—Goodwill and Other:

(in thousands)

December 31, 2020 (as reported)

Reclassification

December 31, 2021

(as reported)

December 31, 2021 (adjusted)

Accounts payable

Accrued expenses and other current liabilities

Other current liabilities

Property and equipment, net

Intangible assets, net

Consolidated Statement of Operations and Comprehensive Loss:

The following table presents the reclassifications made to the Consolidated Statement of Operations and Comprehensive Loss:

(in thousands)

Ended December 31, 2020 (as reported)

Reclassification

Ended December 31, 2020 (adjusted)

General and administrative

Equity-based compensation

Consolidated Statements of Cash Flows:

The following table presents the reclassifications made to the Consolidated Statement of Cash Flows:

The following table presents the reclassifications made to the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021 in order to reclassify repackaging and handling costs from cost of goods sold to selling and marketing expenses.

The Company believes this classification change better portrays the financial impacts of the fulfillment activities conducted by the Company.

The Company made this change in classification during the year ended December 31, 2022 as a result of an increasing trend in the occurrence of such fulfillment costs in the business.

(in thousands)

Ended December 31, 2020 (as reported)

Year Ended December 31, 2021

(as reported)

Reclassification

Ended December 31, 2020 (adjusted)

Non-cash lease expense

Changes in operating assets and liabilities:

Right of use asset

Prepaid expenses and other current assets

Other non-current assets

Accounts payable

Accrued expenses and other current liabilities

Operating lease liabilities

Other current liabilities

Operating lease liabilities, net of current portion

Year Ended December 31, 2021

Cost of goods sold

Selling and marketing expenses

Use of estimates

The preparation of the financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported amount of net sales and expenses during the reporting period.

The preparation of the consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported amount of net sales and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates made by the Company relate to net sales and associated cost recognition;

Significant estimates made by the Company relate to:

net sales and associated cost recognition;

the useful lives assigned to and the recoverability of property and equipment;

2 unchanged sentences

allowance for doubtful accounts;

recoverability of intangible assets, realization of deferred tax assets, and the determination of the fair value of equity instruments, including redeemable convertible preferred and common units, restricted unit awards, and equity-based compensation awards.

recoverability of intangible assets;

realization of deferred tax assets;

and the determination of the fair value of equity instruments, including redeemable convertible preferred and common units, restricted unit awards, and equity-based compensation awards.

On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of its assets and liabilities.

As of December 31, 2021 , the Company’s operations have not been adversely impacted by the COVID-19 pandemic to a significant extent.

The global impact of COVID-19 continues to rapidly evolve, and the Company will continue to monitor the situation and the effects on its business and operations, particularly if the COVID-19 pandemic continues and persists for an extended period of time.

As of December 31, 2022, the Company’s operations continued to be impacted by the effects of the COVID-19 pandemic including the emergence of new variants, with respect to broad-based inflation in input costs, logistics, manufacturing and labor costs.

During the year ended December 31, 2022 , the Company experienced significant inflationary impact, which has created headwinds that the Company expects to continue into 2023.

The effects of the COVID-19 pandemic are expected to continue to impact global economies, and the Company will continue to monitor the situation and the effects on its business and operations, particularly if the COVID-19 pandemic, including the emergence of new variants, continues for an extended period of time.

Cash, cash equivalents and investments

1 unchanged sentence

Investments with original maturities at the date of acquisition of more than three months are classified as short-term investments or long-term investments based on the remaining contractual maturity of the security at the reporting date.

As of December 31, 2021 , the Company held $ 27.0 million of time deposits with contractual maturities of less than three months, which are classified as cash and cash equivalents on the consolidated balance sheets, and $ 30.0 million of time deposits with contractual maturities of greater than three months but less than one year which are classified as short-term investments on the consolidated balance sheets.

As of December 31, 2022 , the Company did no t hold any investments.

As of December 31, 2021, the Company held $ 27.0 million of time deposits with contractual maturities of less than three months, which are classified as cash and cash equivalents on the consolidated balance sheets, and $ 30 million of time deposits with contractual maturities of greater than three months but less than one year which are classified as short-term investments on the consolidated balance sheets.

The Company maintains cash deposits with high credit quality financial institutions.

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Balance, beginning of the year

Provision for bad debt

Deductions and write-offs

Provision (recovery) for bad debt

Balance, end of the year

6 unchanged sentences

While management believes that inventory is appropriately stated at the lower of average cost or net realizable value, judgment is involved in determining the net realizable value of inventory.

The inventory reserve was not material at December 31, 2021 or December 31, 2020 .

Inventory valuation reserves were $ 0.4 million as of December 31, 2022 and 2021.

Property and equipment, net

6 unchanged sentences

Shorter of lease term or estimated useful life

Computer equipment and software

Computer equipment

Furniture and equipment

1 unchanged sentence

Buildings and improvements

Certain external and internal computer software costs acquired for internal use are capitalized.

Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

Capitalized costs are included within property and equipment.

The Company periodically reviews long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

17 unchanged sentences

Intangible assets, net

Intangible assets subject to amortization consist of customer relationships, which were acquired and are amortized over their estimated useful life of 15 years .

Intangible assets subject to amortization consist of customer relationships, which were acquired and are amortized over their estimated useful life of 1 5 years and computer software costs which are amortized over their estimated useful life of three years .

In accordance with Accounting Standard Codification ("ASC") Topic 350, Intangibles—Goodwill and Other, intangible assets with definite lives are treated as a long-lived asset and are evaluated for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable.

5 unchanged sentences

For the years ended December 31, 2022 and 2021 , no impairment losses were recorded.

Certain external and internal computer software costs acquired for internal use are capitalized.

Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

Capitalized costs are included within intangible assets, net.

Debt issuance cost

2 unchanged sentences

Debt issuance costs are included in Other non-current assets in the accompanying consolidated balance sheets.

Net debt issuance costs totaled zero and $ 0.1 million as of December 31, 2021 and 2020 , respectively.

Net debt issuance costs totaled $ 0.3 million and $ 0 million as of December 31, 2022 and 2021 , respectively.

Customer incentives and allowances

16 unchanged sentences

Cost of goods sold

Cost of goods sold consists of all costs to acquire and manufacture the Company’s products including the cost of the various ingredients, packaging, in-bound freight, and third-party production fees—which are typically incurred at a flat rate per case produced—and all other costs incurred to bring the product to salable condition.

Cost of goods sold consists of all costs to acquire and manufacture the Company’s products including the cost of the various ingredients, packaging, in-bound freight and logistics, and third-party production fees—which are typically incurred at a flat rate per case produced—and all other costs incurred to bring the product to salable condition.

The Company’s cost of goods sold is generally subject to price fluctuations in the marketplace for aluminum, logistics costs such as fuel, freight and warehousing for raw materials, bottling tolling fees, as well as shifting product mix.

3 unchanged sentences

Selling and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss include warehousing and distribution costs, shipping and handling costs, advertising, and marketing costs, which generally are expensed as incurred.

Warehousing and distribution costs include storage, transfer and out-bound freight and delivery charges.

Warehousing and distribution costs include storage, transfer, repacking and handling fees, and out-bound freight and delivery charges.

The Company expenses sales and marketing costs as incurred.

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Forfeitures are recognized as incurred.

Depreciation and Amortization

Depreciation is primarily related to building and related improvements, computer equipment, quality control and marketing equipment, and leasehold improvements.

Intangible assets subject to amortization consist of customer relationships and software applications.

Non-amortizable intangible assets consist of trademarks, which represent the Company’s exclusive ownership of the Zevia® brand used in connection with the manufacturing, marketing, and distribution of its beverages.

The Company also owns several other trademarks in both the U.S.

and in foreign countries.

Foreign currency transactions

2 unchanged sentences

All Canadian dollar transactions are translated into United States dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for net sales and expenses.

Foreign currency transaction (losses) gains for the years ended December 31, 2021 and 2020 amounted to approximately $ ( 15,000 ) and $ 95,000 , respectively, and are included under other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.

Foreign currency transaction (losses) gains for the years ended December 31, 2022 and 2021 amounted to approximately $ 0.2 million and $ 0.0 million, respectively, and are included under other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.

The Company is the managing member of Zevia LLC and, as a result, consolidates the financial results of Zevia LLC in the consolidated financial statements.

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Any taxable income or loss generated by Zevia LLC is passed through to its members, including the Company.

The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated from Zevia LLC based on the Company's 53.4 % economic interest in Zevia LLC.

The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated from Zevia LLC based on the Company's economic interest in Zevia LLC, which was 68.7 % and 53.4 % as of December 31, 2022 and 2021, respectively.

Subsequent changes in economic ownership in Zevia LLC of the Company can occur as Zevia LLC holders may convert their shares of Class B common stock into an equivalent number of shares of Class A common stock with income (loss) allocated to the Company based on the economic interest applicable during each reporting period.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities (“DTAs”

14 unchanged sentences

Recently Adopted

In April 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2021-04, which included Topic 260, Earnings Per Share and Topic 718, Compensation - Stock Compensation .

This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification.

This ASU is effective for all entities for fiscal years beginning after December 15, 2021.

Early adoption is permitted.

The Company adopted ASU 2021-04 as of January 1, 2022.

The adoption of ASU 2021-04 did not have a significant impact on the Company's financial statements as the Company does not have freestanding equity-classified written call options.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes .

This ASU improves areas of US GAAP and reduces cost and complexity while maintaining usefulness.

The main provisions remove certain exceptions, including the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

In addition, the amendments simplify income tax accounting in the areas such as income based franchise taxes, eliminating the requirements to allocate consolidated current and deferred tax expense in certain instances and a requirement that an entity reflects the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

This ASU is effective for private companies for annual reporting periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022.

The Company adopted ASU 2019-12 as of January 1, 2022.

The adoption of ASU 2019-12 did not have a significant impact on the Company’s financial statements.

In August 2020, the FASB issued ASU No.

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The ASU 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.

This ASU is effective for private companies for annual reporting periods beginning after

December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

This ASU is effective for private companies for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

The Company adopted the ASU as of January 1, 2021.

2 unchanged sentences

Not Yet Adopted

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.2016-13, Financial Instruments –

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments –

Credit Losses (Topic 326):

3 unchanged sentences

The Company currently does not expect this guidance to have a significant impact on the Company’s financial statements as it does not have a history of material credit losses.

In December 2019, the FASB issued ASU No.

2019-12 Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes .

This ASU improves areas of GAAP and reduces cost and complexity while maintaining usefulness.

The main provisions remove certain exceptions including the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

This ASU is effective for private companies for annual reporting periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022.

The Company currently does not expect this guidance to have a significant impact on the Company’s financial statements.

In April 2021, the FASB issued ASU No.

2021-04, which included Topic 260, Earnings Per Share and Topic 718, Compensation - Stock Compensation .

This ASU is effective for all entities for fiscal years beginning after December 15, 2021.

Early adoption is permitted.

The Company currently does not expect this guidance to have a significant impact on the Company’s financial statements as the Company does not have freestanding equity-classified written call options.

Any other recently issued accounting pronouncements are neither relevant, nor expected to have a material impact on the Company’s financial statements.

Disaggregation of Revenue

The Company's products are distributed and sold principally across the U.S.

and Canada through a diverse network of major retailers, including:

grocery stores, natural products stores, specialty outlets, and warehouse clubs;

and through online/e-commerce channels.

The following table disaggregates the Company’s sales by channel:

2 unchanged sentences

Online/e-commerce

The following table disaggregates the Company’s sales by geographic location of the respective customers:

Year Ended December 31,

(in thousands)

United States

Contract liabilities

14 unchanged sentences

Furniture and equipment

Quality control equipment

Quality control and marketing equipment

Buildings and improvements

2 unchanged sentences

Property and equipment, net

(1) During the year ended December 31, 2022, the Company reclassified computer software costs from property and equipment, net, to intangible assets, net.

Refer to Note 2 - Summary of Significant Accounting Policies f or amounts reclassified.

During the year ended December 31, 2021, the Company purchased a warehouse facility in Evansville, Indiana for a total purchase price of $ 1.7 million.

3 unchanged sentences

The following table provides information pertaining to the Company’s intangible assets as of:

(in thousands)

December 31, 2022

December 31, 2020

(in thousands)

Weighted-Average Remaining Useful Life

Gross Carrying Amount

Accumulated Amortization

Intangible Assets, Net

Customer relationships

Intangible assets, net

December 31, 2021

(in thousands)

Weighted-Average Remaining Useful Life

Gross Carrying Amount

Accumulated Amortization

Intangible Assets, Net

For the years ended December 31, 2021 and 2020 , total amortization expense amounted to $ 0.2 million and $ 0.2 million, respectively.

Customer relationships

Intangible assets, net

For the years ended December 31, 2022 and 2021 , total amortization expense amounted to $ 0.7 million and $ 0.4 million, respectively, including $ 0.4 million and $ 0.2 million, respectively, of amortization expense related to software.

No impairment losses have been recorded on any of the Company’s intangible assets for the years ended December 31, 2022 and 2021.

2 unchanged sentences

Expected amortization expense for intangible assets with definite lives

ABL Credit Facility

On February 22, 2022, Zevia LLC (the "Borrower") obtained a revolving credit facility (the “Secured Revolving Line of Credit") by entering into a Loan and Security Agreement with Bank of America, N.A.

(the "Loan and Security Agreement").

The Borrower may draw funds under the Secured Revolving Line of Credit up to an amount not to exceed the lesser of (i) a $ 20 million revolving commitment and (ii) a borrowing base which is comprised of inventory and receivables.

Up to $ 2 million of the Secured Revolving Line of Credit may be used for letter of credit issuances and the Borrower has the option to increase the commitment under the Secured Revolving Line of Credit by up to $ 10 million, subject to certain conditions.

The Secured Revolving Line of Credit matures on February 22, 2027.

There have been no amounts drawn under the Secured Revolving Line of Credit.

The Secured Revolving Line of Credit is secured by a first priority security interest in substantially all of the Company's assets.

Loans under the Secured Revolving Line of Credit bear interest based on either, at the Borrower’s option, the Bloomberg Short-Term Bank Yield Index rate plus an applicable margin between 1.50 % to 2.00 % or the Base Rate (customarily defined) plus an applicable margin between 0.50 % to 1.00 % with margin, in each case, determined by the average daily availability under the Secured Revolving Line of Credit.

The Borrower is required under the Secured Revolving Line of Credit to comply with certain covenants, including, among others, by maintaining Liquidity (as defined therein) of $ 7 million at all times until December 31, 2023.

Thereafter, the Borrower must satisfy a financial covenant requiring a minimum fixed charge coverage ratio of 1.00 to 1.00 as of the last day of any fiscal quarter following the occurrence of certain events of default that are continuing or any day on which availability under the Secured Revolving Line of Credit is less than the greater of $ 3 million and 17.5 % of the borrowing base, and must again satisfy such financial covenant as of the last day of each fiscal quarter thereafter until such time as there are no events of default and availability has been above such threshold for 30 consecutive days.

As of December 31, 2022, the Company was in compliance with its liquidity covenant.

Credit Facility

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Early-termination fees were not material and were included in interest expense within other expenses, net in the accompanying consolidated statements of operations and comprehensive loss.

Paycheck Protection Program (“PPP”) Loan

As a result of COVID-19, the Company faced risks to raising necessary capital which could have significantly disrupted our business.

To help mitigate those risks and support the Company’s ongoing operations, in April 2020, the Company received loan proceeds in the amount of $ 1.4 million under the PPP.

The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses.

The loans and accrued interest are forgivable after 24 weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the forgiveness period.

Any unforgiven portion of the PPP loan would be payable over two years at an interest rate of 1 %, with a deferral of payments for the first six months.

The Company did not apply for forgiveness of the loan and has paid back the full amount of the proceeds and interest as of December 31, 2020.

The Company leases office space and vehicles.

The leases have remaining lease terms of four to fifteen months.

The leases have remaining lease terms of one to 15 months.

On March 25, 2022, the Company entered into an amendment to the lease for its corporate headquarters offices to extend the term through December 31, 2023, and to expand the total square footage from 17,923 square feet to 20,185 square feet commencing on May 1, 2022.

In January 2023, the Company extended the lease term through December 31, 2026.

The Company’s recognized lease costs include:

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(in thousands)

December 31, 2022

December 31, 2021

Accrued employee compensation benefits

Accrued direct selling costs

Accrued customer paid bottle deposits

Accrued other

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In connection with the IPO, the Company assumed all outstanding equity awards of Zevia LLC on a one-to-two basis and assumed all equity incentive plans and related award agreements from Zevia LLC.

In July 2021, prior to the IPO, the Company adopted the Zevia PBC 2021 Equity Incentive Plan (the “2021 Plan”) under which the Company may grant options, stock appreciation rights, restricted stock units (RSUs), restricted stock awards, other equity-based awards and incentive bonuses to employees, officers, non-employee directors and other service providers of Zevia PBC and its affiliates.

In October and November 2021, Zevia amended outstanding RSU awards and outstanding stock options held by certain senior management employees, in each case, to provide for accelerated vesting upon the holder’s retirement on or after January 17, 2022.

In July 2021, prior to the IPO, the Company adopted the Zevia PBC 2021 Equity Incentive Plan (the “2021 Plan") under which the Company may grant options, stock appreciation rights, restricted stock units ("RSUs"), restricted stock awards, other equity-based awards and incentive bonuses to employees, officers, non-employee directors and other service providers of the Company and its affiliates.

The number of shares available for issuance under the 2021 Plan is increased on January 1 of each year beginning in 2022 and ending with a final increase in 2031 in an amount equal to the lesser of:

(i) 5 % of the total number of shares of Class A common stock outstanding on the preceding December 31, and (ii) a smaller number of shares determined by the Company's Board of Directors.

In October and November 2021, the Company amended outstanding RSU awards and outstanding stock options held by certain employees, in each case, to provide for accelerated vesting upon the holder’s retirement on or after January 17, 2022.

For this purpose, “retirement”

generally includes a resignation after the holder has reached 50 years of age with at least 10 years of service to the Company, so long as the holder provides one year advance notice of such retirement unless waived by the Company.

generally includes a resignation after the holder has reached 50 years of age with at least 10 years of service to the Company, so long as the holder provides advance notice of such retirement.

As of December 31, 2022, the 2021 Plan provides for future grants and/or issuances of up to approximately 2.5 million shares of our common stock.

Stock-based awards under our employee compensation plans are made with newly issued shares reserved for this purpose.

Equity-based awards under our employee compensation plans are made with newly issued shares reserved for this purpose.

Stock Options

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The fair value of stock options is amortized to expense over the vesting period.

In July 2021 immediately following the effectiveness of the Company’s registration statement on the Form S-1, the Company’s Board of Directors approved the issuance of 186,000 stock options under the 2021 Plan to certain employees and non-employee directors.

The fair value of stock option

awards granted during the year ended December 31, 2021 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

The fair value of stock option awards granted during the period was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

Year Ended December 31,

Exercise Price

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(4) We have assumed a dividend yield of zero as we have no plans to declare dividends in the foreseeable future.

A summary of stock option activity for the year ended December 31, 2021:

The weighted average grant date fair values for stock options granted for the years ended December 31, 2022 and 2021 was $ 1.97 and $ 6.39 , respectively.

The following is a summary of stock option activity for the year ended December 31, 2022:

Weighted average exercise price

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Outstanding Balance as of January 1, 2022

Exercised (1)

Cancelled in the IPO

Forfeited and expired

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Vested and expected to vest

(1) Includes 75,148 options exercised prior to the IPO and Reorganization Transactions and included in member's deficit

The total intrinsic values of options exercised during the year ended December 31, 2022 was $ 0.9 million.

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All other terms related to the Restricted Phantom Units remained unchanged.

As a result of the Phantom Unit Amendment, the estimated fair value of the modified awards were $ 33.9 million and are being recognized as expense over the vesting period subsequent to the performance condition being met.

As a result of the Phantom Unit Amendment, the estimated fair value of the modified awards was $ 33.9 million and was recognized as an expense over the vesting period through January 2022 subsequent to the performance condition being met.

In March 2021, the Company's Board of Directors also approved an amendment to the RSUs granted in August 2020 (“the RSU Amendment”).

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All other terms remained unchanged.

As a result of the RSU Amendment, the estimated fair value of the modified awards were $ 48.9 million and are being recognized as expense over the vesting period subsequent to the performance condition being met.

RSU activity during the year ended December 31, 2021 was as follows:

As a result of the RSU Amendment, the estimated fair value of the modified awards was $ 48.9 million and are being recognized as expense over the vesting period subsequent to the performance condition being met.

As of December 31, 2022, the remaining service period of the awards is 25 months .

In November 2021, the Company's Board of Directors approved an amendment to its equity-based compensation plans for certain employees to allow immediate vesting upon retirement of all outstanding RSUs and stock options, and to extend the exercisability of outstanding stock options up to five years after retirement, if they meet certain conditions, including length of service and age, and they provide advance notice to the Board of Directors.

During the year ended December 31, 2022 , three employees retired from the Company and all outstanding awards and related stock compensation expense of $ 8.2 million was accelerated through their retirement date.

The following is a summary of RSU activity for the year ended December 31, 2022:

Weighted average grant date fair value

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Balance unvested at December 31, 2022

Vested and expected to vest at December 31, 2021

Expected to vest at December 31, 2022

*Shares vested includes 1,345,800 of RSUs which vested but are subject to a deferred settlement provision over the next three years and therefore have not been released.

As of December 31, 2022, total unrecognized compensation expense related to unvested RSUs was $ 9.8 million, which is expected to be recognized over a weighted-average period of 2.3 years.

REDEEMABLE CONVERTIBLE PREFERRED UNITS

In November 2020, the Company entered into a securities purchase agreement with a certain accredited investor, pursuant to which it sold and issued approximately 11.9 million units of its newly created Series E redeemable convertible preferred unit (“the Series E Financing”) at a purchase price of

$ 16.87 per unit (“the Series E Unit Price”).

The aggregate gross proceeds from the Series E Financing were approximately $ 200.0 million.

The Company incurred issuance costs of approximately $ 9.6 million during the year ended December 31, 2020 in connection with the Series E Financing and Tender Offer, which were recorded as a reduction of the Series E redeemable convertible preferred unit balance.

In connection with the closing of the Series E Financing in December 2020, the Company used approximately $ 175.0 million of the proceeds from the Series E Financing to repurchase outstanding common units, vested common unit options and redeemable convertible preferred units from certain existing unit holders.

The repurchase occurred through a tender offer made by the Company following the closing of the Series E Financing (the “Tender Offer”).

The Tender Offer was made to certain existing equity holders of the Company to repurchase common and redeemable convertible preferred units and vested option units from such equity holders at a gross repurchase price equal to the Series E Unit Price.

The repurchased redeemable convertible preferred and common units were retired and considered authorized, but not issued or outstanding, pursuant to the Company’s Eleventh Amended and Restated Limited Liability Company Agreement.

In accordance with ASC 718, in connection with the tender offer, the Company recorded equity-based compensation expense of $ 7.8 million in the fiscal year ended December 31, 2020, which represents the excess of the tender offer repurchase price over the fair value of the units and unit options repurchased which were held by both current and former employees and is included in equity-based compensation in the statements of operations and comprehensive loss.

In connection with the IPO and the reorganization transaction, all outstanding preferred units were reclassified into a single class of common units and each common unit outstanding after giving effect thereto was reclassified as two Class B units on a one-to-two basis.

Prior to the IPO and the Reorganization Transactions, Zevia LLC had various classes of redeemable convertible preferred units ("preferred units") outstanding that were issued at various times since inception.

In connection with the IPO and the Reorganization Transactions, all outstanding preferred units were reclassified into a single class of common units and each common unit outstanding after giving effect thereto was reclassified as two Class B units on a one-to-two basis.

SEGMENT REPORTING

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MAJOR CUSTOMERS, ACCOUNTS RECEIVABLE AND VENDOR CONCENTRATION

The table below represents the Company’s major customers and accounted for more than 10 % of total net sales for the periods:

The table below represents the Company’s major customers that accounted for more than 10 % of total net sales for the periods:

Year Ended December 31,

The table below represents the Company’s customers which accounted for more than 10 % of total accounts receivable, net as of:

The table below represents the Company’s customers that accounted for more than 10 % of total accounts receivable, net as of:

December 31, 2022

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LOSS PER SHARE

Basic earnings per share of Class A common stock is computed by dividing net loss attributable to the Company for the period from July 22, 2021 through December 31, 2021, the period following the Reorganization Transactions and IPO, by the weighted-average number of shares of Class A common stock outstanding during the same period.

Basic earnings (loss) per share of Class A common stock is computed by dividing net loss attributable to the Company for the period by the weighted-average number of shares of Class A common stock outstanding during the same period.

Diluted earnings per share of Class A common stock is computed by dividing net loss attributable to the Company by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

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The Company analyzed the calculation of earnings per unit for periods prior to the IPO and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements.

Therefore, earnings per share information has not been presented for the year ended December 31, 2020.

Therefore, earnings per share information has not been presented for any period prior to the IPO.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:

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net loss attributable to Zevia LLC prior to the Reorganization Transactions

Net loss post reorganization

net loss attributable to non-controlling interests

adjustment to reallocate net loss to controlling interest

Net loss to Zevia PBC

Weighted-average shares of Class A common stock outstanding - basic

Weighted-average shares of Class A common stock outstanding - diluted

Loss per share of Class A common stock - basic

Loss per share of Class A common stock - diluted

Zevia LLC Class B Common Units, s tock options and restricted stock units were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.

Weighted-average shares of Class A common stock outstanding –

weighted average shares of vested and unreleased RSUs

Weighted-average basic and diluted shares

Loss per share of Class A common stock –

(1) The numerator for the basic and diluted loss per share is adjusted for additional losses being attributed to controlling interest as a result of the impacts of vested but unreleased RSUs being included in the denominator of the basic and diluted loss per share.

(2) The denominator for basic and diluted loss per share includes vested and unreleased RSUs as there are no conditions that would prevent these RSUs from being issued in the future as shares of Class A common stock except for the mere passage of time.

(3) Represents earnings per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from July 22,2021 through December 31, 2021, the period following the Reorganization Transactions and IPO.

Zevia LLC Class B Common Units, stock options and restricted stock units were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.

The following weighted average outstanding shares were excluded from the computation of diluted net loss per share available to common stockholders:

Year Ended December 31,

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Zevia LLC is a pass-through entity for U.S.

federal and most applicable state and local income tax purposes, following the Reorganization Transactions effected in connection with our initial public offering.

federal and most applicable state and local income tax purposes following the Reorganization Transactions effected in connection with the IPO.

As an entity classified as a partnership for tax purposes, Zevia LLC is not subject to U.S.

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Any taxable income or loss generated by Zevia LLC is passed through to its members, including the Company.

The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated from Zevia LLC based on Zevia PBC's 53.4 % economic interest in Zevia LLC.

I ncome tax expense consists of the following:

The Company is taxed as a C corporation and pays corporate federal, state and local taxes with respect to income allocated from Zevia LLC based on Zevia PBC's economic interest in Zevia LLC, which was 68.7 % and 53.4 %, as of December 31, 2022 and 2021, respectively.

Income tax expense consists of the following:

Year Ended December 31,

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This assessment requires management to exercise significant judgment and make estimates with respect to the Company’s ability to generate revenue, gross profits, operating income and taxable income in future periods.

The Company has recorded a full valuation allowance of $ 58.9 million as of December 31, 2021 as it cannot conclude that it is more likely than not that the deferred tax assets will be realized primarily due to the generation of pre-tax book losses from its inception.

The following table summarizes the activity related to the Company's valuation allowance for the:

The Company has recorded a full valuation allowance of $ 72.7 and $ 58.9 million as of December 31, 2022 and 2021, respectively, as it cannot conclude that it is more likely than not that the deferred tax assets will be realized primarily due to the generation of pre-tax book losses from its inception.

The following table summarizes the activity related to the Company's valuation allowance:

Year Ended December 31,

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The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19.

The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions are amending certain provisions of the previously enacted Tax Cuts and Jobs Act related to depreciable property and net operating losses, deferral of payroll taxes, and the PPP.

At December 31, 2021, the Company has no t booked any income tax provision or benefit for the impact for the CARES Act due to its recent incorporation and the pass-through treatment of Zevia, LLC.

On June 29, 2020, the state of California enacted Assembly Bill No.

85 (AB 85) suspending California net operating loss utilization and imposing a cap on the amount of business incentive tax credits companies can utilize, effective for tax years 2020, 2021 and 2022.

There was no material impact from the provisions of AB 85 in 2021.

December 31, 2022 , the Company has no t booked any income tax provision or benefit for the impact for the CARES Act due to its recent incorporation and the pass-through treatment of Zevia, LLC.

On February 9, 2022, California enacted SB 113, which, among other changes, ends the temporary limitations on the utilization of net operating loss ("NOL") carryforwards and certain credits.

Under previously enacted provisions, NOL carryforward deductions were suspended for tax years 2020-2022 for taxpayers with over $ 1 million of California taxable income.

The newly enacted legislation removes this limitation on NOL utilization for the 2022 tax year and removes the $ 5 million cap on the usage of corporate income tax credits.

There was no material impact from the provisions of SB 113 in 2022.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IRA”), which includes a 15 % book-income alternative minimum tax on corporations with average applicable financial statement income over $ 1 billion for any three year period ending with 2022 or later and a 1 % excise tax on the fair market value of stock that is repurchased by publicly-traded U.S.

corporations or their specified affiliates.

The alternative minimum tax and the excise tax are effective in taxable years beginning after December 31, 2022.

The IRA also includes provisions intended to mitigate climate change by, among others, providing tax credit incentives for reductions in greenhouse gas emissions.

The Company does not believe this legislation will have a material impact on our consolidated financial statements.

Tax Receivable Agreement

The Company expects to obtain an increase in its share of tax basis in the net assets of Zevia, LLC when Class B units are exchanged by the holders of Class B units for shares of Class A common stock of the Company and upon certain qualifying transactions.

Each change in outstanding shares of Class

A common stock of the Company results in a corresponding change in the Company's ownership of Class A units of Zevia, LLC.

Each change in outstanding shares of Class A common stock of the Company results in a corresponding change in the Company's ownership of Class A units of Zevia, LLC.

The Company intends to treat any exchanges of Class B units as direct purchases of LLC interests for U.S.

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The Company calculates the liability under the TRA using a complex TRA model, which includes an assumption related to the fair market value of assets.

Payments are generally due under the TRA within a specified period of time following the filing of the Company’s tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of the Secured Overnight Financing Rate ("SOFR") plus 300 basis points from the due date (without extensions) of such tax return.

Payments are generally due under the TRA within a specified period of time following the filing of the Company’s tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of the SOFR plus 300 basis points from the due date (without extensions) of such tax return.

The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur;

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therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such deferred tax assets.

The TRA liability that would be recognized if the associated tax benefits were determined to be fully realizable totaled $ 45.6 million at December 31, 2021 .

The TRA liability that would be recognized if the associated tax benefits were determined to be fully realizable totaled $ 55.8 million and $ 45.6 million at December 31, 2022 and 2021, respectively.

The increase in the TRA liability is primarily related to Class B to Class A exchanges during the year ended December 31, 2022.

If utilization of the deferred tax asset subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recognized as expense within its consolidated statements of operations.

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The following summarizes selected unaudited quarterly financial data for the year ended December 31, 2022 (amounts may not sum due to rounding):

(in thousands, except for share and per amounts)

(in thousands, except share and per share amounts)

First Quarter

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Fourth Quarter

Income (loss) from operations

Net income (loss) and comprehensive loss

Net income (loss) attributable to Zevia PBC

Loss from operations

Loss before income taxes

Net loss and comprehensive loss

Net loss attributable to Zevia PBC

Basic earnings per share

Diluted earnings per share

Weighted-average shares of Class A Common Stock - basic and diluted

The following summarizes selected unaudited quarterly financial data for the year ended December 31, 2021 (amounts may not sum due to rounding):

(in thousands, except for share amounts)

(in thousands, except share and per share amounts)

First Quarter

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Fourth Quarter

Income (loss) from operations

Net income (loss) and comprehensive loss

Net income (loss) attributable to Zevia PBC

Loss from operations

Loss before income taxes

Net loss and comprehensive loss

Net loss attributable to Zevia PBC

Basic earnings per share

Diluted earnings per share

(1) Net loss in the second half of 2021 increased primarily due to $ 45.7 million and $ 31.9 million of equity-based compensation in the third and fourth quarter of 2021 relating to restricted stock unit awards and phantom stock awards that generally vest over six months following the IPO.

Weighted-average shares of Class A Common Stock - basic and diluted

(1) The Company reclassified $ 1.3 million and $ 1.9 million of expenses in the first and second quarter of 2022, respectively, which were previously recorded as cost of goods sold to selling and marketing expenses to conform to the current presentation.

(2) The Company has revised basic and diluted earnings per share amounts for the first, second, and third quarters of 2022 to include the impact of vested but unreleased restricted stock units which were previously excluded from the respective basic and diluted earnings per share computations.

The impact of this immaterial correction was to decrease both basic and diluted loss per share by $0 .02 , $ 0.01 , and $ 0.01 , respectively, from the amounts previously reported in the Company’s Form 10-Q for each of the respective first, second, and third quarters of 2022.

(3) The Company reclassified $ 0.5 million, $ 0.4 million, $ 0.8 million, and $ 1.0 million of expenses in the first, second, third, and fourth quarter of 2021, respectively, which were previously recorded as cost of goods sold to selling and marketing expenses to conform to the current presentation.

(4) Net loss in the second half of 2021 increased primarily due to $ 45.7 million and $ 31.9 million, respectively, of equity-based compensation in the third and fourth quarter of 2021 relating to restricted stock unit awards and phantom stock awards that generally vest over six months following the IPO.

(5) Prior to the IPO, the Zevia LLC membership structure included various classes of Preferred Units and Common units.

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Therefore, earnings per share information has not been presented for the periods prior to the IPO.

(3) Net loss in the fourth quarter of 2020 increased primarily due to $ 7.8 million of equity-based compensation relating to the tender offer.

SUBSEQUENT EVENTS

On February 22, 2022, Zevia LLC (the “Borrower”) obtained a revolving credit facility (the “Secured Revolving Line of Credit”) by entering into a Loan and Security Agreement with Bank of America, N.A.

The Borrower may draw loans under the Secured Revolving Line of Credit up to an amount not to exceed the lesser of (i) a $ 20 million revolving commitment and (ii) a borrowing base which is comprised of inventory and receivables.

The Secured Line of Credit matures in five years on February 22, 2027.

The Borrower is required under the Secured Revolving line of Credit to comply with certain covenants, including, among others, by maintaining Liquidity (as defined therein) of $ 7 million at all times until December 31, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data