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Item 8. Financial Statements and Supplementary Data

2024-03-06 compared with 2023-03-10 · 192 added, 315 removed, 540 unchanged (48% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss

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

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Zevia PBC

To the Stockholders and the Board of Directors of

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, 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").

We have audited the accompanying consolidated balance sheets of Zevia PBC and its subsidiary (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, consolidated statements of changes in equity, and consolidated statements of cash flows for each of the two years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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 US 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.

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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.

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March 6, 2024

We have served as the Company’s auditor since 2020.

CONSOLIDATED BALANCE SHEETS

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Cash and cash equivalents

Short-term investments

Accounts receivable, net

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Accumulated deficit

Total Zevia PBC stockholder's equity

Total Zevia PBC stockholders’ equity

Noncontrolling interests

12 unchanged sentences

Loss from operations

Other income (expense), net

Other income, net

Loss before income taxes

1 unchanged sentence

Net loss and comprehensive loss

Net loss attributable to Zevia LLC prior to the Reorganization Transactions

Loss attributable to noncontrolling interest

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Weighted average common shares outstanding

(1) 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 initial public offering (see Note 16).

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

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

Redeemable Convertible Preferred Units

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Class A Common Stock

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Noncontrolling interest

Balance at December 31, 2020

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 Transactions

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

Issuance of Class B units to Zevia LLC unitholders

Purchases of Zevia LLC units in connection with IPO

Cancellation of options in connection with IPO

Cancellation of options

Offering costs

Repurchase and cancellation of Zevia LLC units

Allocation of equity to noncontrolling interest

Balance at January 1, 2022

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

Net loss post-Reorganization Transactions

Balance at December 31, 2022

1 unchanged sentence

Exchange of Class B common stock for Class A common stock

Disposition of cost method investment in redemption of Class B common stock

Exercise of stock options

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Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Non-cash lease expense

Depreciation and amortization

Loss (gain) on sale of equipment

Loss on disposal of property, equipment and software, net

Amortization of debt issuance cost

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Proceeds from maturities of short-term investments

Payments for purchases of short-term investments

Purchases of property, equipment and software

Net cash provided by (used in) investing activities

Proceeds from sales of property and equipment

Net cash provided by investing activities

Financing activities:

Proceeds from revolving line of credit (1)

Repayment of revolving line of credit (1)

Payment of debt issuance costs

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Proceeds from exercise of stock options

Proceeds from exercise of common units

Exercise of stock options

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 cash provided by (used in) financing activities

Net change from operating, investing, and financing activities

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

Unpaid IPO offering costs

Supplemental Disclosure of Cash Flow Information:

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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 year ended December 31, 2021 .

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

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Organization and operations

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.

Initial Public Offering and Reorganization Transactions

On July 21, 2021, the registration statement on Form S-1 of Zevia PBC was declared effective by the Securities and Exchange Commission ("SEC") related to the initial public offering ("IPO") of its Class A common stock.

On July 22, 2021, the Company’s Class A common stock began trading on the New York Stock Exchange under the ticker symbol “ZVIA”.

The Company completed the IPO of 10,700,000 shares of its Class A common stock at an offering price of $ 14.00 per share on July 26, 2021.

The Company received aggregate net proceeds of approximately $ 139.7 million after deducting underwriting discounts and commissions of $ 10.1 million.

The underwriters did not exercise their option to purchase 1,605,000 additional shares of Class A common stock and that option expired on August 20, 2021.

In connection with the IPO, the Company completed the following transactions (“Reorganization Transactions”):

Zevia LLC recapitalized its common and preferred membership interests 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;

The Company amended and restated its certificate of incorporation in its entirety to, among other things:

(i) authorize 800,000,000 shares of common stock, 550,000,000 shares of which are designated as “Class A Common Stock”

and 250,000,000 shares of which are designated as “Class B Common Stock;”

and (ii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company's Board of Directors in one or more series and amended and restated its bylaws in their entirety to, among other things:

(a) establish procedures relating to the presentation of stockholder proposals at stockholder meetings;

(b) establish procedures relating to the nomination of directors;

and (c) conform to the provisions of the amended and restated certificate;

The limited liability company agreement of Zevia LLC was amended and restated (the “Amended and Restated Zevia LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint the Company as the sole managing member of Zevia LLC;

The Company assumed all outstanding equity awards of Zevia LLC on a one-to-two basis;

The Amended and Restated Zevia LLC Agreement classified the interests acquired by the Company as Class A units, reclassified the interests held by the continuing members of Zevia LLC as Class B units and permits the continuing members of Zevia LLC to exchange Class B units for shares of Class A common stock on a one-for-one basis or, at the election of the Company, for cash.

For each membership unit of Zevia LLC that is reclassified as a Class B unit, the Company issued one corresponding share of its Class B common stock to the continuing members;

The Company contributed approximately $ 90.1 million of the net proceeds of the IPO to Zevia LLC to acquire 6,900,000 newly issued Class A units of Zevia LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of Class A common stock in the IPO.

The Company retained $ 81.7 million of the total IPO proceeds after $ 8.4 million of offering costs.

The retained proceeds will ultimately be used by the Company for working capital and other general corporate purposes;

The Company used approximately $ 25.5 million of the net proceeds of the IPO to purchase 1,956,142 Class B units and corresponding shares of Class B common stock from certain of Zevia LLC’s unitholders, including certain members of senior management, at a per-unit price equal to the per-share price paid by the underwriters for shares of Class A common stock in the IPO.

Such units were immediately converted into an equivalent number of Class A units;

The Company used approximately $ 0.4 million of the net proceeds of the IPO to cancel and cash-out of 32,560 outstanding options held by certain option holders, including certain members of senior management, at a per-option price equal to the per-share price paid by the underwriters for shares of Class A common stock in the IPO.

The Company received an equivalent number of Class A units from Zevia LLC in exchange for the cancellation of such options;

Zevia PBC formed a new, first-tier merger subsidiary with respect to each blocker company of certain pre-IPO institutional investors (“Direct Zevia Stockholders”), and contemporaneously with the IPO, each respective merger subsidiary merged with and into the respective blocker company, with the blocker company surviving.

Immediately thereafter, each blocker company merged with and into Zevia PBC, with Zevia PBC surviving.

As a result of the blocker mergers, the 100 % owners of the blocker companies acquired an aggregate of 23,716,450 shares of newly issued Class A common stock and received approximately $ 23.7 million in cash consideration in exchange for 1,811,298 previously-held Class B units, which were immediately converted into an equivalent number of Class A units in the hands of Zevia PBC, and the blocker companies ceased to own any Zevia LLC units;

The Company entered into an Amended and Restated Registration Rights Agreement with the Class B stockholders to provide for certain rights and restrictions after the IPO.

Immediately following the closing of the IPO on July 26, 2021, Zevia LLC became the predecessor of the Company for financial reporting purposes.

Zevia PBC (the “Company,” “we,” “us,” “our”), is a growth beverage company that develops, markets, sells, and distributes great tasting, zero sugar beverages made with simple, plant-based ingredients.

We are a Delaware public benefit corporation and have been designated as a “Certified B Corporation,” and are focused on addressing the global health challenges resulting from excess sugar consumption by offering a broad portfolio of zero sugar, zero calorie, naturally sweetened beverages.

All Zevia® beverages are Non-GMO Project verified, gluten-free, Kosher, vegan and zero sodium and include a variety of flavors across Soda, Energy Drinks, Organic Tea, and Kids drinks.

Our products are distributed and sold principally across the United States (“U.S.”) and Canada through a diverse network of major retailers in the food, drug, warehouse club, mass, natural and e-commerce channels and in grocery and natural product stores and specialty outlets.

The Company’s products are manufactured and maintained at third-party beverage production and warehousing facilities located in both the U.S.

The Company completed its initial public offering (“IPO”) of 10,700,000 shares of its Class A common stock at an offering price of $ 14.00 per share on July 26, 2021.

Its Class A common stock is listed on the New York Stock Exchange trading under the ticker symbol “ZVIA.” In connection with the IPO, the Company also completed certain reorganization transactions (the “Reorganization Transactions”), pursuant to which Zevia LLC became the predecessor of the Company for financial reporting purposes.

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.

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

As a result, the consolidated financial statements of the Company will recognize the assets and liabilities received in the reorganization at their historical carrying amounts, as reflected in the historical financial statements of Zevia LLC.

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, 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

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP").

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary, Zevia LLC, that it controls due to ownership of a majority voting interest.

The consolidated financial statements include the accounts of the Company and its subsidiary, Zevia LLC, that it controls due to ownership of a majority equity interest.

All intercompany transactions and balances have been eliminated in consolidation.

The Company owns a majority economic interest in, and operates and controls all of the businesses and affairs of, Zevia LLC.

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

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”

Zevia LLC is the accounting predecessor of the Company.

The historical operations of Zevia LLC are deemed to be those of the Company.

Thus, the consolidated financial statements included in this report reflect (i) the historical operating results and financial position of Zevia LLC prior to the Reorganization Transactions;

(ii) the consolidated results of operations and financial position of the Company and Zevia LLC following the Reorganization Transactions;

and (iii) the Company's equity structure for all periods presented.

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.

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

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

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 the Company for certain expenses for overhead, administrative, and other expenses, at the Company’s discretion.

For the years ended December 31, 2023 and 2022 , it was determined that the majority of such costs will be retained by the Company, 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 and consolidated statement of operations and comprehensive loss 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 equity (deficit).

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, 2021

(as reported)

December 31, 2021 (adjusted)

Property and equipment, net

Intangible assets, net

Consolidated Statement of Operations and Comprehensive Loss:

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)

Year Ended December 31, 2021

(as reported)

Reclassification

Year Ended December 31, 2021

Cost of goods sold

Selling and marketing expenses

Use of estimates

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.

The preparation of the consolidated financial statements in accordance with U.S.

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.

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

reserves recorded for inventory obsolescence;

adjustments recorded for inventory obsolescence and adjustments made for net realizable value;

the incremental borrowing rate for lease liabilities;

allowance for doubtful accounts;

recoverability of intangible assets;

the useful lives assigned to and the 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.

and the determination of the fair value of equity instruments, including 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, 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.

At December 31, 2023 , the Company’s operations continued to be impacted by higher manufacturing, freight, and labor costs as a result of the short-term supply chain logistics challenges during 2023, which the Company does not expect to continue in 2024, as well as increased operating costs as a result of the global economy and political and economic uncertainties, which the Company expects to continue in 2024.

The Company will continue to monitor the economic environment, including any impact from current and future global events, and their effects on its business and operations.

Cash, cash equivalents and investments

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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, 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.

As of December 31, 2023 and 2022 , the Company did no t hold any investments.

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

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Unobservable inputs for the asset or liability.

The Company’s material financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, accrued expenses and other current liabilities.

The carrying values of the Company’s cash, short-term investments, accounts receivable, accounts payable, accrued expenses and other current liabilities approximated their fair values at December 31, 2022 and 2021 due to the short period of time to maturity or repayment.

As of December 31, 2022 and 2021, all cash and cash equivalents and short-term investments were considered Level 1.

The Company’s material financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities.

The carrying values of the Company’s cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximated their fair values at December 31, 2023 and 2022 due to the short period of time to maturity or repayment.

As of December 31, 2023 and 2022, all cash and cash equivalents were considered Level 1.

As of December 31, 2023 and 2022 , the Company did no t have any assets or liabilities measured on a recurring basis without observable market values that would require a high level of judgment to determine fair value (Level 3).

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Other comprehensive loss

The nature of the Company’s operations does not give rise to consequential other comprehensive loss.

Accounts receivable and allowance for doubtful accounts

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Credit is extended to customers based on an evaluation of their financial condition, credit rating, and trade references.

The Company monitors exposure to credit losses and maintains an allowance for anticipated losses based on each customer’s credit condition and payment behavior.

The Company’s accounts receivable balance is net of an allowance for doubtful accounts.

The allowance for doubtful accounts was not material at December 31, 2022 or December 31, 2021 .

The Company monitors exposure to credit losses and maintains an allowance for anticipated losses based on each customer’s credit condition and payment behavior.

The Company’s accounts receivable balance is net of an allowance for doubtful accounts.

The allowance for doubtful accounts was not material at December 31, 2023 and 2022 .

Changes in the Allowance for Doubtful Accounts were as follows:

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Balance, beginning of the year

Provision (recovery) for bad debt

Recovery of bad debt

Balance, end of the year

Inventories consist of raw materials and finished goods.

Raw materials include costs for the Company’s ingredients and packaging inventories.

The costs of finished goods inventories include production fees from third-party manufacturers.

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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.

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

Prepaid expenses

Prepaid expenses represent amounts paid in advance for products or services to be delivered in the future and are included within prepaid expenses and other current assets in the accompanying consolidated balance sheets.

Prepaid expenses are expensed as incurred and were $1.8 million and $2.3 million as of December 31, 2023 and 2022, respectively.

Property and equipment, net

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In order to assess recoverability, the Company compares the estimated undiscounted future pre-tax cash flows from the use of the group of assets, as defined, to the carrying amount of such assets.

Measurement of an impairment loss is based on the excess of the carrying amount of the group of assets over the long-lived asset’s fair value.

The Company did no t recognize any impairment charges associated with long-lived assets during the years ended December 31, 2023 and 2022 .

The Company leases office space and vehicles under operating leases.

Right of use ("ROU") lease assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments.

The Company leases office space.

Right of use (“ROU”) lease assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments.

Both the ROU lease asset and liability are recognized as of the lease commencement date based on the present value of the lease payments over the lease term.

The Company’s leases do not provide an implicit borrowing rate that can readily be determined.

Therefore, the Company applies a discount rate based on the incremental borrowing rate, which is determined using the Company’s synthetic credit rating and other information available as of the lease commencement date.

The Company’s leases do not provide an implicit borrowing rate that can readily be determined.

ROU lease assets also include any lease payments made before their contractual due dates and exclude any lease incentives.

The Company’s lease agreements may include options to extend the lease term or to terminate the lease early.

The Company includes options to extend or terminate leases upon determination of the ROU lease asset and liability when it is reasonably certain the Company will exercise these options.

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

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.

If impaired, the asset is written down to its estimated fair market value, which is generally measured by discounting future cash flows.

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

The Company also owns several other trademarks in both the United States and in foreign countries.

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

and in foreign countries.

Intangible assets not subject to amortization are evaluated for impairment annually, or sooner if management believes such assets may be impaired.

An impairment loss is recognized if the asset’s carrying amount exceeds its estimated fair market value.

For the years ended December 31, 2023 and 2022 , no impairment losses were recorded.

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The Company excludes from the transaction price those amounts which relate to sales and other taxes that are assessed by governmental authorities and that are imposed and concurrent with a specific revenue-producing transaction and collected by the Company from a customer.

The Company’s general payment terms are short-term in duration.

The Company does not have significant financing components or payment terms.

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 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.

The Company has elected to classify shipping and handling costs for salable product outside of cost of goods sold, in selling and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.

Such costs amounted to approximately $ 15.4 million and $ 13.2 million for the years ended December 31, 2022 and 2021 , respectively.

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

Selling and marketing expenses

1 unchanged sentence

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

Such costs amounted to approximately $ 14.2 million and $ 15.4 million for the years ended December 31, 2023 and 2022, respectively.

The Company expenses sales and marketing costs as incurred.

Advertising and marketing expenses represent costs associated with the promotion of the Zevia® brand and products as outlined in ASC Topic 730-25, Other Expenses –

Advertising Costs , such as those for digital and other forms of advertising.

Advertising and marketing expenses represent costs associated with the promotion of the Zevia® brand and products as outlined in ASC Topic 730-25, Other Expenses – Advertising Costs , such as those for digital and other forms of advertising.

Advertising and marketing expenses amounted to approximately $ 10.5 million and $ 11.1 million for the years ended December 31, 2023 and 2022 , respectively.

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Equity-based compensation expense

The Company records equity-based compensation expense for employees and nonemployees under the provisions of ASC Topic 718, Compensation—Stock compensation (“ASC 718”), using a Black-Scholes-Merton option pricing model to calculate the fair value of stock options by date granted.

The determination of the grant date fair value of stock options issued is affected by a number of variables, including the fair value of the Company’s common stock, the expected common stock price volatility over the expected life of the options, the expected term of the stock option, risk-free interest rates, and the expected dividend yield of the Company’s common stock.

The Company derives its volatility from the average historical volatilities of several peer public companies over a period equivalent to the expected term of the awards.

The Company derived its expected volatility for grants issued prior to July 21, 2023 (which is the two-year anniversary of the Company’s IPO) based on the average historical volatilities of several peer public companies over a period equivalent to the expected term of the awards, and its expected volatility for grants issued subsequent to July 21, 2023 based on historical volatility of the Company’s stock.

The Company estimates the expected term based on the simplified method prescribed by guidance provided by the Securities and Exchange Commission.

This decision was based on the lack of relevant historical data due to the Company’s limited experience for the Company’s common stock.

The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant.

This decision was based on the lack of relevant historical data due to the Company’s limited experience for the Company’s common stock.

The risk-free interest rate is an interpolation of yields on U.S.

Treasury securities with maturities equivalent to the expected term.

Expected dividend yield is 0.0 % as the Company has not paid and does not anticipate paying dividends on its common stock.

The fair value of stock options is recognized as expense on a straight-line basis over the requisite service period, which is typically four years.

Equity-based compensation cost for restricted stock awards is measured based on the fair market value of the Company’s common stock at the date of grant and is recognized as expense over the requisite service period, which is the vesting period on a straight-line basis.

Forfeitures are recognized as incurred.

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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.

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The Company sells and distributes its products to Canadian customers, who are invoiced and remit payment in Canadian dollars.

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, 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.

All Canadian dollar transactions are translated into U.S.

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 for the years ended December 31, 2023 and 2022 amounted to approximately $ 0.0 million and $ 0.2 million, respectively, and are included under other income, 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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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”

and “DTLs”) for the expected future tax consequences of events that have been included in the financial statements.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities (“DTAs” and “DTLs,” respectively) for the expected future tax consequences of events that have been included in the financial statements.

Under this method, we determine DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

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As a result, the consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Issued Accounting Pronouncements –

Recently Adopted

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

Recently Issued Accounting Pronouncements – Recently Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This ASU provides for a new impairment model that requires measurement and recognition of expected credit losses for most financial assets held.

The ASU is effective for private companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2022.

The Company adopted ASU No.

2016-13 as of January 1, 2023.

The adoption of ASU No.

2016-13 did not 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 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.

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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.

This ASU improves areas of U.S.

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.

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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.

2020-06, Debt –

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –

Contracts in Entity’s Own Equity (Subtopic 815-40).

This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, as well as amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

In addition, this ASU improves and amends the related earnings per share guidance and requires the application of the if-converted method for calculating diluted earnings per share, with the treasury stock method no longer permissible.

The ASU is applicable to the Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Adoption is either a modified retrospective method or a fully retrospective method of transition.

The Company early adopted the ASU as of January 1, 2021 and applied the accounting standard update in computing diluted earnings per share for its redeemable convertible preferred units.

The adoption of ASU 2020-06 did not have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

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.

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

The adoption of ASU 2018-15 did not have a significant impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements –

Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This ASU provides for a new impairment model that requires measurement and recognition of expected credit losses for most financial assets held.

The ASU is effective for private companies for annual periods, and interim periods within those 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 as it does not have a history of material credit losses.

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

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

Recently Issued Accounting Pronouncements – Not Yet Adopted

In November 2023, the FASB issues ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This ASU requires entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting this guidance.

In December 2023, the FASB issued ASU No.

2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures .

The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

The guidance is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

The ASU is effective for private companies for annual periods beginning after December 15, 2025.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

The Company is currently evaluating the impact of adopting this guidance while early adoption is permitted.

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

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and through online/e-commerce channels.

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

Year Ended December 31,

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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

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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.

For the year ended December 31, 2023 and 2022, depreciation expense, including the amortization of leasehold improvements, amounted to approximately $ 1.0 million and $ 0.7 million, respectively.

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INTANGIBLE ASSETS, NET

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

December 31, 2023

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For the years ended December 31, 2023 and 2022, total amortization expense amounted to $ 0.6 million and $ 0.7 million, respectively, including $ 0.4 million and $ 0.4 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.

No impairment losses have been recorded on any of the Company’s intangible assets for the years ended December 31, 2023 and 2022.

Amortization expense for intangible assets with definite lives is expected to be as follows:

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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.

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”).

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

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

As of December 31, 2023, no amounts were 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.

Under the Secured Revolving Line of Credit, the Borrower is required 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, 2023 , the Company was in compliance with its liquidity covenant.

Credit Facility

In 2019, Zevia LLC entered into a loan agreement providing for a $ 9.0 million revolving line of credit (the “Credit Facility”) with Stonegate Asset Company II, LLC (“Stonegate”), with a maturity date in April 2022 .

Borrowings under the revolving line were secured by accounts receivable and inventory.

In June 2020, Zevia amended the Credit Facility and increased it to $ 12.0 million.

As of December 31, 2021 , the revolving line interest rate was 7.5 % annual percentage rate and there was no outstanding balance.

On June 1, 2021, Zevia extended the Credit Facility through April 2023 and there were no other modifications made to the terms and conditions.

In July 2021 and subsequent to the IPO, Zevia terminated the Credit Facility.

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.

The Company leases office space and vehicles.

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:

The Company leases its office space which has a remaining lease term of 36 months.

In January 2023, the Company entered into an amendment to the lease for its corporate headquarters offices to extend the term through December 31, 2026.

The Company’s recognized lease costs include:

Year Ended December 31,

(in thousands)

Income Statement

Statements of Operations and Comprehensive Loss

Operating lease cost (1)

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Weighted-average discount rate

The Company’s variable lease costs and short-term lease costs were not material.

The Company is obligated under various non-cancellable lease agreements providing for office space and vehicles that expire at various dates through 2023.

Maturities of lease payments under non-cancellable leases were as follows:

The Company’s variable lease costs and short-term lease costs were not material.

The Company is obligated under a non-cancelable lease agreement providing for office space that expires on December 31, 2026.

Maturities of lease payments under the non-cancelable lease were as follows:

(in thousands)

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As of December 31, 2023, the Company does not have any material agreements with suppliers for the purchase of raw material with minimum purchase quantities.

Our contract manufacturers are obligated to fulfill against purchase orders that are aligned with our forecast based on terms and conditions of the contract.

Our forecasts provided to our contract manufacturers are short term in nature and at no time extend beyond a year.

Legal proceedings

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The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable, and the amount of loss can be reasonably estimated.

The Company has not identified any material legal matters where it believes an unfavorable material outcome is reasonably possible and/or for which an estimate of possible losses can be made.

Management does not believe that the resolution of these matters would have a material impact on the consolidated financial statements.

The Company has not identified any legal matters where it believes a material loss is reasonably possible.

EMPLOYEE BENEFIT PLAN

Employees of the Company may participate in the Zevia LLC 401(k) Plan (the “Plan”), a defined contribution plan which qualifies under Section 401(k) of the Internal Revenue Code.

Participating employees may contribute from 1 % to 90 % of their pre-tax earnings, up to the statutory limit.

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EQUITY-BASED COMPENSATION

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 the Company and its affiliates.

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 advance notice of such retirement.

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

In October and November 2021, the Company’s Board of Directors approved an amendment to its equity-based compensation plans for a certain number of 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 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 his or her resignation to the Company’s 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, respectively, were accelerated through their retirement dates.

As of December 31, 2023, the 2021 Plan provides for future grants and/or issuances of up to approximately 2.7 million shares of our common stock.

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(1) Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.

(2) Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.

(3) The risk-free rate is an interpolation of yields on U.S.

(2) Expected volatility for grants issued prior to July 21, 2023 (which is the two-year anniversary of the Company’s IPO) is based on the historical volatility of a selected peer group over a period equivalent to the expected term, and expected volatility for grants issued subsequent to July 21, 2023 is based on historical volatility of the Company’s stock.

(3) The risk-free interest rate is an interpolation of yields on U.S.

Treasury securities with maturities equivalent to the expected term.

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

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

The weighted average grant date fair values for stock options granted for the years ended December 31, 2023 and 2022 was $ 1.81 and $ 1.97 , respectively.

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Restricted Phantom Units and Restricted Stock Units

In July 2021, the Company’s Board of Directors approved an amendment to 2,422,644 restricted phantom units (the “Restricted Phantom Units”) previously granted by Zevia LLC (the “Phantom Unit Amendment”).

The Phantom Unit Amendment changed the settlement feature of all outstanding Restricted Phantom Units so that following vesting, each award Restricted Phantom Units would be settled in shares of Class A common stock having a fair market value equal to (i) the number of Restricted Phantom Units subject to such award, multiplied by (ii) the difference between the fair market value of a share of Class A common stock and the grant date price per Restricted Phantom Unit.

The Phantom Unit Amendment changed the settlement feature of all outstanding Restricted Phantom Units so that following vesting, each award of Restricted Phantom Units would be settled in shares of Class A common stock having a fair market value equal to (i) the number of Restricted Phantom Units subject to such award, multiplied by (ii) the difference between the fair market value of a share of Class A common stock and the grant date price per Restricted Phantom Unit.

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 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”).

The RSU Amendment changes the vesting of such RSUs to occur as follows:

(i) in the event of a change of control, the RSUs shall vest effective as of such change of control or (ii) in the event of an IPO, the RSUs shall vest in equal monthly installments over a 36-month period following the termination of any lockup period and shall be subject to the participant’s continued employment through such vesting date.

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

The RSU Amendment changed the vesting of such RSUs to occur as follows:

(i) in the event of a change of control, the RSUs shall vest effective as of such change of control or (ii) in the event of an initial public offering as in the case of the IPO, the RSUs shall vest in equal monthly installments over a 36 -month period following the termination of any lockup period and shall be subject to the participant’s continued employment through such vesting date.

Additionally, settlement shall occur within 30 days following the vesting of the RSUs and the participant shall be entitled to receive one share of Class A common stock for each vested RSU.

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As of December 31, 2023 , the remaining service period of the awards is 13 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, 2023:

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Expected to vest at December 31, 2023

*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, 2023, total unrecognized compensation expense related to unvested RSUs was $ 5.2 million, which is expected to be recognized over a weighted-average period of 2.2 years.

REDEEMABLE CONVERTIBLE PREFERRED UNITS

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.

As of December 31, 2023 and 2022, there wer e 593,672 and 1,345,800 , respectively, of RSUs outstanding which vested in 2022 but are subjected to a deferred settlement provision over the next two years and therefore have not been released.

As a result, these RSUs are not included in the table above.

SEGMENT REPORTING

The Company has one operating and reporting segment which operates as a product portfolio with a single business platform.

In reaching this conclusion, management considered the definition of the Chief Operating Decision Maker (“CODM”);

The Company has one operating and reporting segment, and operates as a product portfolio with a single business platform.

In reaching this conclusion, management considered the definition of the Chief Operating Decision Maker (“CODM”);

how the business is defined by the CODM;

the nature of the information provided to the CODM and how that information is used to make operating decisions;

and how resources and performance are accessed.

The Company’s CODM is the Chief Executive Officer.

and how resources and performance are assessed.

The Company’s CODM is the Chief Executive Officer.

The results of the operations are provided to and analyzed by the CODM at the Company’s level and accordingly, key resource decisions and assessment of performance are performed at the Company’s level.

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MAJOR CUSTOMERS, ACCOUNTS RECEIVABLE AND VENDOR CONCENTRATION

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 that accounted for more than 10 % of total accounts receivable, net as of:

December 31, 2023

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Year Ended December 31,

* Less than 10 % of total net sales, accounts receivable, net or raw material purchases.

* Less than 10 % of total net sales, accounts receivable, net or raw material purchases in the respective periods.

LOSS PER SHARE

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.

There were no shares of Class A or Class B common stock outstanding prior to July 22, 2021, therefore no earnings per share information has been presented for any period prior to that date.

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Zevia PBC and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Zevia LLC Class B Common Units, are exchangeable into shares of Class A common stock on a one-for-one basis.

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

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 any period prior to the IPO.

Basic 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 loss 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 and assumed conversion of Class B common stock into shares of Class A common stock on a one-for-one basis using the if-converted method.

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 and comprehensive loss

net loss attributable to Zevia LLC prior to the Reorganization Transactions

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 –

Net loss to Zevia PBC - basic

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

weighted average shares of vested and unreleased RSUs

Weighted-average basic and diluted shares

Loss per share of Class A common stock –

Loss per share of Class A common stock – basic

Loss per share of Class A common stock – diluted

(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:

Zevia LLC Class B Common Units, stock options and RSUs 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 loss per share available to Class A common stockholders as they were anti-dilutive:

Year Ended December 31,

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Provision for income taxes

A reconciliation between the Company’s effective tax rate and the applicable U.S.

federal statutory income tax rate is summarized as follows:

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes.

The components that comprise the Company's net deferred tax assets consist of the following:

The components that comprise the Company’s net DTAs s consist of the following:

Year Ended December 31,

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Net deferred tax assets

The Company records a valuation allowance to reduce deferred tax assets to the amount the Company believes is more likely than not to be realized.

The determination of recording or releasing tax valuation allowances is made, in part, pursuant to an assessment performed by management regarding the likelihood that the Company will generate sufficient future taxable income against which benefits of the deferred tax assets may or may not be realized.

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 $ 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 Company records a valuation allowance to reduce DTAs to the amount the Company believes is more likely than not to be realized.

The Company has recorded a full valuation allowance of $ 75.5 and $ 72.7 million as of December 31, 2023 and 2022, respectively, as it cannot conclude that it is more likely than not that the DTAs 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:

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As of December 31, 2023 , the Company has no uncertain tax positions and does no t expect a significant change in unrecognized tax benefits during the next 12 months.

The Company is subject to taxation in the United States and various states.

The Company is not currently under examination by any taxing authorities.

The Company is subject to taxation in the U.S.

and various states.

The Company is currently under the audit examinations by Texas for taxable years 2019-2021.

As of December 31, 2023, the Company believes there will be no change of significance in its recorded tax positions and accordingly, no liability for uncertain tax benefits has been recorded.

The Company is not currently under examination by any other taxing authorities.

Due to the carryover of tax attributes, the statute of limitations is currently open for tax years since inception for Zevia PBC.

On March 27, 2020, the United States enacted the CARES Act.

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.

On March 27, 2020, the U.S.

enacted the CARES Act.

The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S.

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 Paycheck Protection program.

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.

At December 31, 2023 , 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 August 16, 2022, the U.S.

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.

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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.

This legislation did not have a material impact on the consolidated financial statements.

Tax Receivable Agreement

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In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA” ) with continuing members of Zevia LLC and the Direct Zevia Stockholders.

allocable share of existing tax basis), (ii) increases in tax basis resulting from Zevia PBC's acquisition of continuing member's Zevia LLC units in connection with the IPO and in future exchanges and, (iii) tax basis increases attributable to payments made under the TRA (including tax benefits related to imputed interest).

In the event that such parties exchange any or all of their Class B units for Class A common stock, the TRA requires the Company to make payments to such holders for 85 % of the tax benefits realized, or in some cases deemed to be realized, by the Company by such exchange as a result of (i) certain favorable tax attributes acquired from the Blocker Companies in the Mergers (including net operating losses and the Blocker Companies’ allocable share of existing tax basis), (ii) increases in tax basis resulting from Zevia PBC’s acquisition of continuing member’s Zevia LLC units in connection with the IPO and in future exchanges and, (iii) tax basis increases attributable to payments made under the TRA (including tax benefits related to imputed interest).

The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits.

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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 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 Secured Overnight Financing Rate 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;

(ii) there is a material uncured breach of any obligations under the TRA;

or (iii) the Company elects an early termination of the TRA, then the TRA will terminate and the Company's obligations, or the Company's successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any Class B units that have not been exchanged are deemed exchanged for the fair market value of the Company's Class A common stock at the time of termination.

As of December 31, 2022, the Company has concluded, based on applicable accounting standards, that it was more likely than not that its deferred tax assets subject to the TRA would not be realized;

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

or (iii) the Company elects an early termination of the TRA, then the TRA will terminate and the Company’s obligations, or the Company’s successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any Class B units that have not been exchanged are deemed exchanged for the fair market value of the Company’s Class A common stock at the time of termination.

As of December 31, 2023, the Company has concluded, based on applicable accounting standards, that it was more likely than not that its DTAs subject to the TRA would not be realized;

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

The TRA liability that would be recognized if the associated tax benefits were determined to be fully realizable totaled $ 56.2 million and $ 55.8 million at December 31, 2023 and 2022, respectively.

The increase in the TRA liability is primarily related to Class B to Class A exchanges during the year ended December 31, 2023.

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.

If utilization of the DTAs 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.

UNAUDITED QUARTERLY INFORMATION

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Diluted earnings per share

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

Weighted-average shares of Class A Common Stock - basic

Weighted-average shares of Class A Common Stock - diluted

(1) Net loss in the third quarter of 2023 increased primarily due to short-term supply chain logistics challenges w hich hindered fulfillment and impacted net sales results and selling and marketing expenses.

(2) Gross profit decreased in the fourth quarter of 2023 primarily due to a decrease in volumes and higher inventory losses as a result of the brand refresh, SKU optimization, and procurement changes.

(3) Net loss in the fourth quarter of 2023 increased primarily due to short-term supply chain logistics challenges w hich hindered fulfillment and impacted net sales results and selling and marketing expenses, as well as higher inventory losses as a result of the brand refresh, SKU optimization, and procurement changes.

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

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Diluted earnings per share

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.

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

Weighted-average shares of Class A Common Stock - basic

Weighted-average shares of Class A Common Stock - diluted

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