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What changed in Zevia PBC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Zevia PBC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+404 added−400 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-10)

Top changes in Zevia PBC's 2023 10-K

404 paragraphs added · 400 removed · 327 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCulture and Engagement Our team drives the success of our brand, and every leadership or full team engagement features a conscious effort to engage and communicate with a focus on our values. Our People team manages themes for contests, celebrations across diverse interests through the year, mental health resources, open surveys, team communication platforms, and training on resource access.
Biggest changeTeam members participate in the DEI&B Taskforce for twelve-months and regularly report on its work, priorities, and accomplishments to the overall organization, to foster transparency and trust. Culture and Engagement Our team drives the success of our brand, and every leadership or full team engagement features a conscious effort to engage and communicate with a focus on our values.
Contract manufacturers perform in-process quality checks common to the carbonated soft drink industry, throughout the manufacturing process. We provide beverage specifications for every unique formula, as well as Zevia-specific quality requirements to our manufacturers so that they comply with our unique needs.
Contract manufacturers perform in-process quality checks common to the carbonated soft drink industry, throughout the manufacturing process. We provide beverage specifications for every unique formula, as well as Zevia-specific quality requirements to our contract manufacturers so that they comply with our unique needs.
The foundation of our compensation policy is a base salary and a performance-based bonus with targets tied to the Company’s annual financial performance. We regularly review and survey our compensation and benefit programs against the market to confirm we remain competitive in our hiring practices.
The foundation of our compensation policy is a base salary and a performance-based bonus with targets tied to the Company’s annual financial performance. We regularly review and survey our compensation and benefit programs against market to confirm we remain competitive in our hiring practices.
The FDA requires that certain nutrient and product information appear on product labels and that the labels and labeling be truthful, not misleading. Similarly, the FTC requires that marketing and advertising claims be truthful, not misleading, not deceptive to customers and substantiated by adequate scientific data.
The FDA requires that certain nutrient and product information appear on product labels and that the labels and labeling be truthful and not misleading. Similarly, the FTC requires that marketing and advertising claims be truthful, not misleading, not deceptive to customers and substantiated by adequate scientific data.
Benefits and Compensation Strategies We strive to attract and retain diverse, high caliber individuals who raise the talent bar by offering competitive compensation and benefit packages, regardless of their gender, race or other personal characteristics. Our compensation program is designed to ensure our talented team is fairly paid and well rewarded for performance.
Benefits and Compensation Strategies We strive to attract and retain diverse, high caliber individuals who raise the talent bar by offering competitive compensation and benefit packages, regardless of their gender, race, or other personal characteristics. Our compensation program is designed to ensure our talented team is paid fairly and equitably, and well rewarded for performance.
We aggressively protect our intellectual property rights by relying on trademark laws and other laws related to proprietary rights around the world. Our domain name is https://www.zevia.com. Government Regulation In the normal course of our business, we are subject to a variety of federal, state and local laws and regulations in the countries in which we do business.
We aggressively protect our intellectual property rights by relying on trademark laws and other laws related to proprietary rights around the world. Our domain name is https://www.zevia.com. Government Regulation In the normal course of our business, we are subject to a variety of federal, state, provincial and local laws and regulations in the countries in which we do business.
As such, we seek to deploy funding to enhance our presence at shelf, including shelf tags, product displays and other means to build consumer awareness. We also deploy marketing funds in-store, through advertising and couponing vehicles, and around the store via geotargeted digital advertising and offers.
As such, we seek to deploy funding to enhance our presence at shelf, including shelf tags, product displays and other means to build consumer awareness and consideration. We also deploy marketing funds in-store, through advertising and couponing vehicles, and around the store via geotargeted digital advertising and offers.
We also use social media platforms such as Facebook, Instagram and Twitter for online collaboration to support our brand awareness strategy. These platforms allow us to directly engage with our consumers and publish content related to our products, activities and Company and to better connect with potential and existing consumers.
We also use social media platforms such as Facebook and Instagram for online collaboration to support our brand awareness strategy. These platforms allow us to directly engage with our consumers and publish content related to our products, activities and Company and to better connect with potential and existing consumers.
Various states, provinces and other authorities require deposits, eco-taxes or fees on certain products or packaging. Similar legislation or regulations may be proposed in the future at local, state and federal levels, both in the U.S. and elsewhere.
Various states, provinces and other authorities require deposits, eco-taxes or fees on certain products or packaging. Similar legislation or regulations may be proposed in the future at local, state, provincial and federal levels, both in the U.S. and elsewhere.
For more information about our holding company reorganization, see the section titled “Organizational Structure—The Reorganization” in the prospectus dated July 21, 2021 and filed with the U.S. Securities and Exchange Commission ("SEC") on July 23, 2021. References in this Annual Report to “Zevia PBC” refer to Zevia PBC and not to any of its subsidiaries unless the context indicates otherwise.
For more information about our holding company reorganization, see the section titled “Organizational Structure—The Reorganization” in the prospectus dated July 21, 2021, and filed with the U.S. Securities and Exchange Commission (“SEC”) on July 23, 2021. References in this Annual Report to “Zevia PBC” refer to Zevia PBC and not to any of its subsidiaries unless the context indicates otherwise.
Zevia promotes equity through consistency and fairness with our people policies and practices that offer access, opportunity, and career growth for all team members equally. We have best practice standards across all stages of the employee lifecycle, including performance standards. We strive to make promotions, compensation and growth opportunities are impartial, just and transparent.
Zevia promotes equity through consistency and fairness with our people policies and practices that are designed to offer access, opportunity, and career growth for all team members equally. We have best practice standards across various stages of the employee lifecycle, including performance standards. We strive to make promotions, compensation, and growth opportunities impartial, just, and transparent.
Moreover, shoppers who bought Zevia products online spend 3.5x more on our brand across all channels on average. Offline, we have strong, long-standing relationships with grocery, drug, warehouse club, mass, natural, and specialty retailers with whom we can grow distribution and sales through increased store penetration and shelf space.
Moreover, shoppers who bought Zevia products online spend 2.5x more on our brand across all channels on average. Offline, we have strong, long-standing relationships with grocery, drug, warehouse club, mass, natural, and specialty retailers with whom we can grow distribution and sales through increased store penetration and shelf space.
We are dedicated to acting responsibly and strive to do our part in making the world a better place with every drink. We are committed to creating real ESG impact through combatting the harmful effects of sugar, reducing plastic waste, democratizing healthier lifestyles and fostering an employee-centric culture.
We are dedicated to acting responsibly and strive to do our part in making the world a better place with every drink. We are committed to creating real ESG impact through combatting the harmful effects of sugar, reducing plastic waste, democratizing healthier options and fostering an employee-centric culture.
As a great-tasting, clean label beverage supporting a positive environmental and social impact, we are positioned to appeal to a broad range of consumer needs in our current markets and beyond. Consumers can purchase our products in both brick and mortar and e-commerce channels.
As a great-tasting, clean label beverage supporting a positive environmental and social impact, we are positioned to appeal to a broad range of consumer needs in our current markets and beyond. Consumers can purchase our products both in brick and mortar stores and through e-commerce channels.
Our Organic Tea is a pioneer in the zero calorie, naturally sweetened ready-to-drink tea segment, and was released in 2018. Zevia Organic Tea is USDA Organic and brewed with Fair Trade Certified Tea. We offer Organic Tea in eight flavors, including two caffeine-free options. Kidz.
Organic Tea. Our Organic Tea is a pioneer in the zero calorie, naturally sweetened ready-to-drink tea segment, and was released in 2018. Zevia Organic Tea is USDA Organic and brewed with Fair Trade Certified Tea. We offer Organic Tea in eight flavors, including two caffeine-free options. Kids.
Employee Health and Safety during COVID-19 As a values-driven organization, the health, safety and well-being of our team members is our top priority. We prioritize safety for all employees through a combination of education, training and safety-related policies, while also maintaining compliance with applicable regulations, including Occupational Safety and Health Administration (OSHA) guidelines and mandates by local health authorities.
Employee Health and Safety As a values-driven organization, the health, safety, and well-being of our team members is our top priority. We prioritize safety for all employees through a combination of education, training, and safety-related policies, while also maintaining compliance with applicable regulations, including Occupational Safety and Health Administration (OSHA) guidelines and mandates by local health authorities.
The SEC also maintains a web site that contains reports, proxy and information statements, and other information regarding issuers, such as the Company, that file electronically with the SEC. The address of the site is http://www.sec.gov.
The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers, such as the Company, that file electronically with the SEC. The address of the site is http://www.sec.gov.
As part of our DEI initiative, we have implemented best-in-class recruitment practices to remove bias in the selection process and we reflect our values to candidates through job description language using gender-neutral pronouns, no video calls during the first interview, and standard assessments for applicable roles.
As part of our DEI initiative, we have implemented recruitment practices designed to remove bias in the selection process and we reflect our values to candidates through job description language using gender-neutral pronouns, no video calls during the first interview, and standard assessments for applicable roles.
Kidz is our product line for kids, packaged in smaller cans for smaller hands, and the right size for lunch boxes and afternoon snacks. Our Kidz drinks are available in six kid-friendly flavors and were released in 2020. We benefit from sustained shifts across the liquid refreshment beverage market.
Kids is our product line for kids, packaged in smaller cans for smaller hands, and the right size for lunch boxes and afternoon snacks. Our Kids drinks are available in four kid-friendly flavors and were released in 2020. We benefit from sustained shifts across the liquid refreshment beverage market.
Specifically, we implement custom Injury and Illness Prevention Programs for our headquarters including safety training for medical emergencies, power failure, bomb threat, fire safety, earthquake, and evacuation prevention practices.
Specifically, we implement custom Injury and Illness Prevention Programs for our headquarters including safety training for our innovation lab, medical emergencies, power failure, bomb threat, fire safety, earthquake, and evacuation prevention practices.
In addition, we continue to evaluate and research alternate ingredients, including plant-based sweeteners other than stevia extract, that may meet or exceed our sensory and cost standards. We also assess how we can reduce our carbon footprint and plastic waste through our packaging.
In addition, we continue to evaluate and research alternate ingredients, including plant-based sweeteners other than stevia extract, which may meet or exceed our sensory, sustainability, and cost standards. We also assess how we can reduce our carbon footprint and plastic waste through our packaging.
Zevia also offers a Fortune-500 style benefits package that incorporates a robust contribution for all tiers of coverage to include: medical, dental, vision, voluntary life & AD&D, critical illness, hospital indemnity, accident, short-term and long-term disability insurance, health savings and flexible spending accounts, health savings accounts, pet insurance, legal access, and ID protection.
Zevia also offers a Fortune-500 style benefits package that incorporates a robust contribution for all tiers of coverage to include: medical, health savings account employer contribution, dental, vision, group and voluntary life & AD&D, critical illness, hospital indemnity, accident, short-term and long-term disability insurance, flexible spending accounts, pet insurance, legal access, and individual disability (ID) protection.
Our product development team provides ongoing sensory and cost evaluation of competing stevia extract products as well as other plant-based sweeteners as a means of planning alternate sources of supply that meet or exceed our sensory expectations. 8 Flavors are developed in collaboration with our product development team and our three flavor ingredient suppliers, as well as with our tea supplier.
Our product development team provides ongoing sensory and cost evaluation of competing stevia extract products as well as other plant-based sweeteners as a means of planning alternate sources of supply that meet or exceed our sensory expectations. Flavors are developed in collaboration with our product development team and our flavor ingredient suppliers.
Item 1. Business Overview Zevia PBC ("Zevia PBC") was incorporated as a Delaware public benefit corporation on March 23, 2021, and prior to the consummation of the reorganization described herein and our initial public offering (“IPO”), did not conduct any activities other than those incidental to our formation and the IPO.
Item 1. Business Overview Zevia PBC (“Zevia PBC”) was incorporated as a Delaware public benefit corporation on March 23, 2021, and prior to the consummation of the reorganization and initial public offering (“IPO”), did not conduct any activities other than those incidental to our formation and the IPO.
Sales As of December 31, 2022, our sales team is comprised of 26 people. The team works in close coordination with a national network of broker and distributor sales teams that gives us access to accounts across the U.S. Innovation Innovation is an integral part of what we do.
Sales As of December 31, 2023, our sales team is comprised of 27 people. The team works in close coordination with a national network of broker and distributor sales teams that gives us access to accounts across the U.S. Innovation Innovation is an integral part of what we do.
We aim for equity and make conscious efforts to close the pay equity gap through market adjustments and new-hire offers considered with thorough and transparent analysis. Every full-time team member is eligible to receive equity-based compensation, which provides a sense of ownership and next-level engagement among employees at all levels.
We aim for equal pay for equal work and make conscious efforts to close the pay equity gap through market adjustments and new-hire offers considered via thorough and transparent analysis. 9 Every full-time team member is eligible to receive equity-based compensation, which provides a sense of ownership and next-level engagement among employees at all levels.
All Zevia® beverages are Non-GMO Project verified, gluten-free, Kosher, vegan and zero sodium, We offer a variety of flavors across Soda, Energy Drinks, Organic Tea, Mixers, and Kidz drinks.
All Zevia® beverages are Non-GMO Project verified, gluten-free, Kosher, vegan and zero sodium, We offer a variety of flavors across Soda, Energy Drinks, Organic Tea, and Kids drinks.
We find candidates through a wide variety of sources to expand diversity, we offer flexible education requirements by role, and structure interviews with consistent processes to minimize bias. We conduct transparent, collaborative and panel interviews for group input on all hires.
We find candidates through a wide variety of sources to expand diversity, we offer flexible education requirements by role, and structure interviews with consistent processes to promote equal employment opportunities and minimize bias. We conduct transparent, collaborative and panel interviews for group input on all hires.
In addition, our products are manufactured pursuant to special certification programs such as those for organic, Kosher, and non-GMO products among others, and we must comply with strict standards imposed by federal, state, and third-party certifying organizations.
In addition, our products are manufactured pursuant to special certification programs such as those for organic, Kosher, Global Food Safety Initiative, and non-GMO products among others, and we must comply with strict standards imposed by federal, state, and third-party certifying organizations.
We regularly look for ways to improve product taste, expand our offerings across categories and usage occasions, improve the sustainability of our packaging formats and simplify our plant-based ingredients. Our product development team collaborates across our organization and supplier base to identify areas to improve our existing offerings and create new offerings.
We regularly look for ways to improve product taste, expand our offerings across categories and usage occasions, and improve the sustainability of our packaging formats. Our product development team collaborates across our organization and supplier base to identify areas to improve our existing offerings and create new offerings.
Available Information We make available, free of charge, on the "Investors Relations" section of our website, https://www.zevia.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
Available Information We make available, free of charge, on the “Investors Relations” section of our website, https://www.zevia.com (“Zevia Investor Relations website”) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
Accordingly, the Company encourages investors, stockholders, the media, and others interested in Zevia to review the information that it shares at the “Investors” link located at the bottom of our webpage at https://investors.zevia.com/ and to sign up for and regularly follow our social media accounts.
Accordingly, the Company encourages investors, stockholders, the media, and others interested in Zevia to review the information that it shares at the “Investors” link located at the bottom of our webpage at https://investors.zevia.com/ and to subscribe to and regularly follow our social media accounts.
Our team also has access to participate in independent third-party surveys through Comparably.com, providing qualitative results that reported a rating of 4.5 out of 5 stars for Company Culture, and 97 out of 100 for CEO Rating.
Our team also has access to and participated in independent third-party surveys through Comparably.com, providing qualitative results that reported a rating of 4.5 out of 5 stars for Company Culture, and 95 out of 100 for CEO Rating.
Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting "Request Email Alerts" in the "Investors" section of Zevia’s website at https://investors.zevia.com/. Our Business We are a high-growth beverage company that develops, markets, sells, and distributes great tasting, zero sugar beverages made with simple, plant-based ingredients.
Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting “Request Email Alerts” in the “Investors” section of Zevia’s website at https://investors.zevia.com/. Our Business We are a growth beverage company that develops, markets, sells, and distributes great tasting, naturally sweetened, 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" by B Lab, an independent non-profit organization, 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.
We have been designated as a “Certified B Corporation” by B Lab, an independent non-profit organization, in addition to being a Delaware public benefit corporation. We 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.
Regulations apply to many aspects of our business, including our products and their ingredients, manufacturing, safety, labeling, transportation, recycling, advertising and sales. Our products and sales of our products are regulated in the United States as conventional foods.
Regulations apply to many aspects of our business, including our products and their ingredients, manufacturing, safety, labeling, transportation, recycling, advertising and sales. Our products and sales of our products are regulated in the U.S. as conventional foods.
We believe that combining our focus on taste with the positive ESG benefits of our brand—zero sugar, zero plastic, and products that are affordable to consumers across a broad range of income brackets—creates a compelling proposition that will drive both initial product trial and ongoing brand consumption.
We believe that combining our focus on taste with the positive sugar reduction and natural sweetener health benefits of our brand—zero sugar, zero plastic, and naturally sweetened products that are affordable to consumers across a broad range of income brackets—creates a compelling proposition that will drive both initial product trial and ongoing brand consumption.
We also intend to use certain social media channels as a means of disclosing information about us and our products to consumers, our customers, investors and the public (e.g., @Zevia, #Zevia, #ZeviaLife and #LiveYourBest on Facebook, Instagram and Twitter).
We also intend to use certain social media channels as a means of disclosing information about us and our products to consumers, our customers, investors and the public (such as @Zevia and #Zevia on Facebook and Instagram).
Packaging and Packaging Suppliers We have chosen aluminum beverage cans as our primary packaging containers, which have the highest recycling rate of any beverage packaging format and a low carbon footprint in the supply chain.
Packaging and Packaging Suppliers We have chosen aluminum beverage cans as our primary packaging containers, which have the highest recycling rate of any beverage packaging format and a low carbon footprint in the supply chain. Our contract manufacturers source beverage cans through major can manufacturers.
In order for us to attract and retain the best talent, we have an inclusive, strategic and well-defined human capital planning process and a management approach that aligns to our business needs and mission. As of December 31, 2022, we had 106 full-time team members in the United States, and 4 full-time team members in Canada.
In order for us to attract and retain the best talent, we have an inclusive, strategic, and well-defined human capital planning process and a management approach that aligns to our business needs and mission. 8 As of December 31, 2023, we had 111 full-time team members in the U.S, and 4 full-time team members in Canada.
Our Diversity, Equity and Inclusion ("DEI") Taskforce, comprised of a diverse group of representatives from all levels of the organization, aims to give our team members a voice in DEI work and allows different perspectives to shape and hold accountable and transparent our people policies and practices.
Our Diversity, Equity, Inclusion and Belonging (“DEI&B”) Taskforce, comprised of a diverse group of representatives across the organization, aims to give our team members a voice in DEI&B work and allows different perspectives to shape and hold accountable and transparent our people policies and practices.
Our managers also conduct90-day reviews for new hires, mid-year reviews to formally track performance, and annual reviews for all employees, goals management throughout the year via an online portal, incorporate short- and long-term career goals during each review, and conduct regular one-on-one sessions to provide feedback, coaching and support.
Our managers also conduct 90-day reviews for new hires, mid-year reviews to formally track performance, and annual reviews for all employees, goals management throughout the year via our Human Resources Information System platform and incorporate short- and long-term career goals during each review. We also conduct regular one-on-one sessions to provide feedback, coaching and support.
We have refined the formulas of our products to appeal to ensure they meet our shoppers’ evolving taste profile, and have launched line and flavor extensions within existing categories to further fulfill consumer needs.
We have refined certain formulas of our products to help appeal to and meet our consumers’ evolving taste profile and have launched line and flavor extensions within existing categories to further fulfill consumer needs.
Our products are distributed and sold principally across the U.S. and Canada through a diverse network of major retailers in the grocery, drug, warehouse club, mass, natural, specialty outlets, and e-commerce channels.
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, convenience and e-commerce channels and in grocery and natural product stores and specialty outlets.
We maintain a strong relationship with our team members and have never experienced a labor-related work stoppage. 9 Our Board of Directors provides oversight on certain human capital management matters, including through its Compensation Committee, which is responsible for governance over policies regarding human capital and compensation practices, including executive compensation, diversity and inclusion, pay equity, recruiting, retention, training and development, safety, and creating a working environment consistent with our culture, objectives and strategy.
Our Board of Directors provides oversight on certain human capital management matters, including through its Compensation Committee, which is responsible for governance over policies regarding human capital and compensation practices, including executive compensation, diversity, inclusion, pay equity, recruiting, retention, training and development, safety, and creating a working environment consistent with our culture, objectives and strategy.
Our amended and restated certificate of incorporation, amended and restated bylaws, corporate governance principles, charters of the Audit, Compensation, Nominating and Enterprise Risk Management, and Environmental, Social and Governance (“ESG”) committees, our code of business conduct and ethics may be found under the “Investors Relations” section of the website at https://www.zevia.com.
Our amended and restated certificate of incorporation, amended and restated bylaws, corporate governance principles, charters of the Audit, Compensation, Nominating and Enterprise Risk Management, and Environmental, Social and Governance (“ESG”) committees, our code of business conduct and ethics may be found on the Zevia Investor Relations website.
As a public benefit corporation, we are guided by our mission to support the health of our consumers. Our products help consumers reduce their sugar intake and avoid artificial ingredients by offering a refreshing and enjoyable zero sugar, naturally sweetened alternative to high-sugar and artificially sweetened competitors.
As a public benefit corporation, we are guided by our mission of creating a world of better-for-you flavor, better for the people and the planet. Our products help consumers reduce their sugar intake and avoid artificial sweeteners by offering a refreshing and enjoyable zero sugar, naturally sweetened alternative to high-sugar and artificially sweetened competitors.
Diversity, Equity and Inclusion Our commitment to diversity, equity and inclusion starts at the top with a highly skilled, diverse executive leadership team and Board of Directors in terms of both gender and race, and representative by our Board of Directors and executive leadership team.
Diversity, Equity, Inclusion & Belonging Our commitment to diversity, equity, inclusion and belonging is focused on promoting equal employment opportunities and starts at the top with a highly skilled, diverse executive leadership team and Board of Directors in terms of both gender and race.
Our robust pipeline of new category innovations is expected to allow us to thoughtfully and strategically enter new segments within the beverage space and maximize share of stomach by offering flavors and beverages that can appeal to every family member. Our team is also working to improve our ingredients and packaging.
Our robust pipeline of new category innovations is expected to allow us to continue to thoughtfully and strategically innovate within the beverage space and maximize share of stomach by offering flavors and beverages that can appeal to a variety of usage occasions. Our product development team is also working to improve our ingredients and packaging.
These suppliers produce and supply the unique flavor ingredients to our contract manufacturers. We do not have long-term supply agreements with these ingredient suppliers. For flavors and for our other ingredients, we continuously seek to diversify our sourcing strategies in order to de-risk potential ingredient supply interruptions.
These suppliers produce and supply the unique flavor ingredients to our contract manufacturers, and as our contract manufacturers procure these ingredients, we do not have long-term supply agreements with these ingredient suppliers. For flavors and stevia leaf extract, we continue to seek to diversify our approved sources in order to de-risk potential ingredient supply interruptions.
We had 80 total enrollments with 40% of those being new learners in 2022. Performance Management We are focused on setting clear and specific expectations for performance that align with individual strengths and company objectives. We believe in a customized approach, where high-performers are rewarded.
Performance Management We are focused on setting clear and specific expectations for performance that align with individual strengths and company objectives. We believe in a customized approach, where high performers are rewarded.
Our contracts are typically in the form of multi-year master service agreements that define overall commercial and legal terms, while volume forecasts, production costs and other services are typically re-evaluated annually or as needed.
Our contracts are typically in the form of multi-year master service agreements that define overall commercial and legal terms, while volume forecasts, production costs and other services are typically re-evaluated annually or as needed. Quality Control We receive certifications from our suppliers in order to confirm that they meet our specifications.
We have valuable, long-standing relationships across our supply chain, and we work closely with our external supply chain partners to try to maximize forward-looking capacity and take a thoughtful approach to how we can leverage our existing relationships with our innovation efforts.
We have valuable, long-standing relationships across our supply chain, and we work closely with our external supply chain partners to try to maximize forward-looking capacity and take a thoughtful approach to how we can leverage our existing relationships with our innovation efforts. During the fourth quarter of 2023, we made a strategic change in how our products are manufactured.
We promote diversity, equity and inclusion at all levels of our organization, and our senior leadership team has developed a diversity and inclusion framework that is centered on minimizing subjectivity via data-driven decisions to reduce the risk of bias and ensure that everyone owns responsibility for inclusive behaviors and actions across the organization.
We promote diversity, equity, inclusion, and belonging across our organization, via framework that is centered on providing equal opportunities and minimizing subjectivity via data-driven decisions to reduce the risk of bias and help ensure that everyone owns responsibility for inclusive behaviors and actions across the organization.
We offer a consistent compensation policy across base salary, bonus, equity and benefit contributions. Everyone is an owner at Zevia and we work together as one team to deliver results and achieve performance.
We maintain a consistent compensation policy across base salary, bonus, equity in the form of Restricted Stock Units (“RSUs”) and stock options, and benefit contributions. We believe everyone is an owner at Zevia, and we work together as one team to deliver results and achieve performance.
We expect to continue seeking out other potential partnerships that provide cost competitiveness, responsiveness, and geographic growth potential. We also multi-source package types where volumes allow to mitigate supply risk in the event of a disruption at a specific facility and to disperse production geographically to reduce freight miles driven to distribute our products.
We also multi-source package types where volumes allow to mitigate supply risk in the event of a disruption at a specific facility and to disperse production geographically to reduce freight miles driven to distribute our products.
Our consumer base over-indexes to Gen Z and Millennials, particularly among those starting families. We believe this consumer base favors better-for-you options that support a balanced lifestyle and that they are driven less by discounts than some other demographic groups.
We believe this consumer base favors better-for-you options that support a balanced lifestyle and that they are driven less by discounts than some other demographic groups.
We also utilize independent contractors and temporary personnel to supplement our workforce. None of our team members is represented by a labor union.
We also utilize independent contractors and temporary personnel to supplement our workforce. None of our team members is represented by a labor union. We maintain a strong relationship with our team members and have never experienced a labor-related work stoppage.
In addition to helping Zevia maintain our status as the #1 total carbonated soft drink brand on Amazon, our e-commerce buyers are also heavily engaged with the brand offline. According to Numerator, 61% of Zevia shoppers who purchased us online in 2022 also purchased Zevia in brick-and-mortar retailers.
In addition to helping Zevia remain one of the top-selling carbonated soft drink brands on Amazon in 2023, our e-commerce buyers are also heavily engaged with the brand offline. According to Numerator more than half of Zevia shoppers who purchased us online in 2023 also purchased Zevia in brick-and-mortar retailers.
Ingredients and Ingredient Suppliers The principal ingredients of our beverages, aside from carbonated water, are stevia sweetener, flavors, and citric acid. All Zevia products are solely sweetened with highly purified stevia leaf extract. Zevia products do not contain erythritol. All Zevia beverages are zero sugar and naturally sweetened with plant-based ingredients that are Non-GMO Project verified.
All Zevia products are solely sweetened with highly purified stevia leaf extract. Zevia products do not contain erythritol. All Zevia beverages are zero sugar and naturally sweetened with plant-based ingredients that are Non-GMO Project verified.
Our competitors in the beverage market include category leaders such as The Coca-Cola Company, Keurig Dr. Pepper, PepsiCo, Inc., National Beverage Corp., Monster Energy, and Red Bull, as well as a range of emerging brands.
Our competitors in the beverage market include category leaders such as The Coca-Cola Company, Keurig Dr. Pepper, PepsiCo, Inc., National Beverage Corp., Monster Energy, and Red Bull, as well as established naturally positioned soda brands like Virgils and Reeds and emerging better-for-you functional soda brands like Poppi and Olipop.
We believe that by consistently offering great tasting products that are all zero calorie and naturally sweetened, with sustainable packaging under one brand, we can attract consumers to our new flavors and categories. Our Supply Chain Our products are produced and distributed through an expansive supply network of third-party contract manufacturers, logistics providers and distribution centers.
We believe that by consistently offering great tasting products that are all zero calorie and naturally sweetened, with sustainable packaging under one brand, we can attract consumers to our new flavors and categories.
The regulations and standards include various aspects of the Federal Food, Drug, and Cosmetic Act (“FDCA”), the Federal Trade Commission Act, the Food Safety Modernization Act, the Lanham Act, the Robinson-Patman Act, state consumer protection laws and state warning and labeling laws, such as Proposition 65 in California.
The regulations and standards include various aspects of the Federal Food, Drug, and Cosmetic Act (“FDCA”), the Federal Trade Commission Act, the Food Safety Modernization Act, the Lanham Act, the Robinson-Patman Act, the Clayton Antitrust Act of 1914, workplace health and safety laws, state consumer protection laws and state warning and labeling laws, such as Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”) in California, and the Federal Insecticide, Fungicide, and Rodenticide Act.
We believe Zevia consumers are heavily beverage engaged and migrate from other traditional full-calorie and low-calorie soda brands to including Zevia as an incremental beverage choice to aid in supporting their balanced lifestyle. We believe Zevia consumers care about their diets and their planet, and are willing to pay a premium for those attributes.
We believe Zevia consumers are heavily beverage engaged and migrate from other traditional full-calorie and low-calorie soda brands to choose Zevia as an incremental beverage choice to aid in supporting their balanced lifestyle without sacrificing great taste.
Training and Organizational Development Our team members have access to various internal and external formal training and development courses to support individual growth. We offer an annual professional development allowance for continued advancement, with focus on a team member’s career path at Zevia. We seek to promote from our internal talent pool as part of our enterprise-wide succession plan.
We offer an annual professional development allowance for continued advancement, with focus on a team member’s career path at Zevia. We seek to promote from our internal talent pool as part of our enterprise-wide succession plan. Our internal training includes custom content by department and role, 100% participation in unconscious bias training, and management training and development.
This is evidenced by our #1 brand ranking within carbonated soft drink brands in the Natural Channel according to SPINS, and our status as the #1 selling carbonated soft drink brand on Amazon in 2022 according to 1010data. Our brand has grown significantly over the past decade, which has been largely tied to a dedicated and growing consumer base.
This is evidenced by our ranking among the top carbonated soft drink brands in the Natural Channel and on Amazon according to syndicated data sources SPINS and 1010data for 2023. Our brand has grown significantly over the past decade, which has been largely tied to an engaged and growing consumer base, broadening distribution across retail channels.
Our Products Since our founding in 2007, we have grown from three flavors of soda to a platform brand with multiple product lines that each have several flavor variations.
We believe Zevia has a meaningful opportunity to increase brand trial to capture more share in this growth leading segment of beverage over time. Our Products Since our founding in 2007, we have grown from three flavors of soda to a platform brand with multiple product lines that each have several flavor variations.
Beyond these channels, we believe there is significant opportunity to continue expanding distribution and total item availability in the drug, warehouse club, and foodservice channels in order to be as present as possible where our shoppers are seeking to buy us. Competition We believe we compete broadly with all categories of liquid refreshment beverages.
Beyond these channels, we believe there is significant opportunity to continue expanding distribution and total item availability in the mass, drug, warehouse club, convenience, and foodservice channels, putting Zevia at arm’s reach for consumers. Competition We believe we compete broadly with all categories of liquid refreshment beverages.
We are also subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers. In Canada, the manufacture, distribution, marketing and sale of our products are also subject to compliance with similar laws, rules and regulations. 11
In Canada, the manufacture, distribution, marketing and sale of our products are also subject to compliance with similar laws, rules and regulations. 11
We estimate that by choosing Zevia, our consumers have eliminated over 66,000 metric tons of sugar in their diets since 2011. Sustainable packaging is one of the top priorities for us and we actively seek to minimize our environmental impact. Since our founding in 2007, we have never sold a beverage in a plastic bottle.
We estimate that by choosing Zevia, our consumers have avoided over 79,000 metric tons of sugar in their diets since 2011. Sustainable packaging is one of our top priorities and we actively seek to minimize our environmental impact. We take pride in reducing plastic waste by using only aluminum cans as beverage containers.
Zevia drinkers have historically increased their brand spending over time, and tend to spend more on average than traditional shoppers within the soft drink, energy and ready-to-drink tea categories.
We believe Zevia consumers care about their health, their diets, and their planet and are willing to pay a premium for beverage attributes that support those considerations. Zevia drinkers have historically increased their brand spending over time and tend to spend more on average than traditional shoppers within the soft drink, energy and ready-to-drink tea categories.
We believe our brand has extensive consumer reach potential, as we deliver beverage offerings with a diversity of flavors and categories that we believe appeal to every family member, time of day, and usage occasion.
We believe our brand has extensive consumer reach potential, as we deliver beverage offerings with a diversity of flavors and categories that we believe appeal across multiple usage occasions, need states, and times of day, for a wide range of people across age groups.
We are an omnichannel brand found in more than 32,000 retailer locations across the traditional grocery, natural grocery, specialty outlets, warehouse club, and drug channels, and on e-commerce platforms.
We are an omnichannel brand found in more than 34,000 retailer locations across the traditional grocery, natural grocery, specialty outlets, warehouse club, drug and convenience channels, and on e-commerce platforms. ESG and Social Impact Our focus on ESG is core to how we conduct our business, and we believe this focus makes us a more successful company.
We are also restricted from making certain claims about our products, including health claims, claims that our products treat, cure, mitigate or prevent disease or claims regarding the effects of our products on the structure or function of the body except under certain limited circumstances.
We are also restricted from making certain claims about our products, including health claims, claims that our products treat, cure, mitigate or prevent disease or claims regarding the effects of our products on the structure or function of the body except under certain limited circumstances. 10 We are required to comply with federal, state, and local environmental laws and regulations such as restrictions on certain packaging containing per- and polyfluoroalkyl substances (PFAS), and bottle deposit ordinances.
Our Soda is available in 15 core flavors and annual limited-time-offer flavors to drive excitement. Our Soda sales constituted approximately 88% of our net sales in 2022. Energy. Energy drinks are zero sugar energy drinks that contain 120 mg of organic caffeine. We offer Energy in six flavors: Grapefruit, Kola, Mango Ginger, Raspberry Lime, Pineapple Paradise and Strawberry Kiwi.
Our Soda is available in 14 flavors across multiple packs, variety packs, and in limited time-offer flavors to drive excitement. Our Soda sales constituted approximately 91% of our net sales in 2023. Energy. Energy drinks are zero sugar energy drinks that contain 120 mg of organic caffeine. We offer Energy in eight flavors. We released our Energy drinks in 2016.
We take pride in reducing plastic waste by using only aluminum cans as beverage containers. We market Zevia under one unified brand across multiple beverage categories, including Soda, Energy Drinks, Organic Teas, Mixers, and Kidz drinks.
We market Zevia under one unified brand across multiple beverage categories, including Soda, Energy Drinks, Organic Teas, and Kids drinks.
Our main ingredient, after carbonated water, is stevia sweetener, which is extracted from the leaves of the stevia rebaudiana plant, containing many different naturally-occurring sweet compounds called steviol glycosides (“SG”). Each specific SG has a unique taste perception property, and is present in the leaf at widely differing percentages, driving cost differences between high-content SGs and low-content SGs.
Our main ingredient, after carbonated water, is stevia sweetener, which is extracted from the leaves of the stevia rebaudiana plant, containing many different naturally occurring sweet compounds called steviol glycosides (“SG”).
We believe that our brick-and-mortar retailers value Zevia’s continued sales growth and margin profile with significant upside with both overall store count growth with major retailers and with expansion of items carried in each store.
We believe that our brick-and-mortar retailers value Zevia’s continued sales growth and higher margin profile, giving us confidence that we can expand our presence over time in terms of store count and number of items carried.
Our internal trainings include custom trainings by department and role, 100% participation in DEI training, and management training and development. In 2022, we continued with our Zevia University initiative where we offer unlimited courses online for all levels of employees to enhance soft skills, professional acumen and discipline-specific skills.
In 2023, we continued with our Zevia University initiative where we offer unlimited courses online for all levels of employees to enhance soft skills, professional acumen, and discipline-specific skills. We had 185 total course enrollments with 33% of those being new learners in 2023.
In partnership with our People team, the DEI Taskforce prioritizes topics related to the lifecycle of an employee's experience at Zevia and through a DEI lens, offers suggestions for improvement. Team members participate in the DEI Taskforce for approximately 12-months and regularly report on its work, priorities and accomplishments to the overall organization, to foster transparency and trust.
In partnership with our People team, the DEI&B Taskforce prioritizes topics related to the lifecycle of an employee’s experience at Zevia and through a DEI&B lens, offers suggestions for improvement. In the latter part of 2023, the team also worked on defining equity and developing long-term initiatives and objectives.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following is a summary of the principal factors that make an investment in the Company speculative or risky: • failure to further develop and maintain our brand; • change in consumer preferences, perception and spending habits, particularly due to impacts of inflation, in the beverage industry and on zero sugar, naturally sweetened products, and failure to develop or enrich our product offerings or gain market acceptance of our products, including new offerings; • product safety and quality concerns, including those relating to our plant-based sweetening system, which could negatively affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings; • inability to compete in our intensely competitive categories; • our history of losses and potential inability to achieve or maintain profitability; • changes in the retail landscape or the loss of key retail customers; • fluctuation in our net sales and earnings as a result of price concessions, promotional activities and chargebacks; • the impact of the COVID-19 pandemic, any future pandemics or other disease outbreaks on our business, results of operations and financial condition; • the impact of adverse global macroeconomic conditions, including rising interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts; • failure to attract, hire, train or retain qualified personnel, manage our future growth effectively or maintain our company culture; • failure to introduce new products or successfully improve existing products; • inaccurate or misleading marketing claims, whether or not substantiated; • climate change, adverse weather conditions, natural disasters and other natural conditions; • difficulties and challenges associated with expansion into new markets; • inability to obtain raw materials on a timely basis or in sufficient quantities to produce our products or meet the demand for our products due to reliance on a limited number of third-party suppliers and trade tensions between the U.S. and China; • substantial disruption at our independent third-party manufacturing and distribution facilities; • concentration in our customer base and loss of any large customer; • extensive governmental regulation and enforcement if we are not in compliance with applicable requirements; • dependence on distributions from Zevia LLC to pay any taxes and other expenses; • changes in laws and regulations relating to beverage containers and packaging; • impact from our status, duty and liability exposure as a public benefit corporation; • loss of any registered trademark or other intellectual property; and • inadequacy, failure, interruption or security breaches of our information technology systems and failure to comply with data privacy and information security laws and regulations. 12 Risks Relating to Our Business, Our Industry and Macroeconomic Conditions If we fail to further develop and maintain our brand, our business could suffer.
Biggest changeThe following is a summary of the principal factors that make an investment in the Company speculative or risky: • failure to further develop, maintain, and promote our brand; • changes in the retail landscape or the loss of key retail customers; • product safety and quality concerns, including those relating to our plant-based sweetening system, which could negatively affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings; • change in consumer preferences, perception and spending habits, particularly due to impacts of inflation, in the commercial beverage industry and on zero sugar, naturally sweetened products, and failure to develop or enrich our product offerings or gain market acceptance of our products, including new offerings; • inability to compete in our intensely competitive industry; • fluctuation in our net sales and earnings as a result of price concessions, promotional activities and chargebacks; • failure to introduce new products or successfully improve existing products; • inaccurate or misleading marketing claims, whether or not substantiated; • loss of any registered trademark or other intellectual property or actual or alleged claims of infringement of intellectual property rights; • our history of losses and potential inability to achieve or maintain profitability; • failure to attract, hire, train or retain qualified personnel, manage our future growth effectively or maintain our company culture; • the impact of adverse global macroeconomic conditions, including relatively high interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts; • climate change, adverse weather conditions, natural disasters and other natural conditions; • difficulties and challenges associated with expansion into new markets; • inability to obtain raw materials on a timely basis or in sufficient quantities to produce our products or meet the demand for our products due to reliance on a limited number of third-party suppliers and trade tensions between the U.S. and China; • substantial disruption within our supply chain or distribution channels, including disruption at our contract manufacturers, warehouse and distribution facilities, failure by our transportation providers to facilitate on-time deliveries, or our own failure to accurately forecast; • extensive governmental regulation and enforcement if we are not in compliance with applicable requirements; • changes in laws and regulations relating to beverage containers and packaging as well as marketing and labeling; • dependence on distributions from Zevia LLC to pay any taxes and other expenses; • impact from our status, duty and liability exposure as a public benefit corporation; • inadequacy, failure, interruption or security breaches of our information technology systems and failure to comply with data privacy and information security laws and regulations. • the impact of any future pandemics, epidemics, or other disease outbreaks on our business, results of operations and financial condition; Risks Relating to Our Business, Our Industry and Macroeconomic Conditions If we fail to further develop, maintain and promote our brand, our business could suffer.
Increase in the cost, disruption of supply or shortage of stevia sweetener or other ingredients, other raw materials, packaging materials, aluminum cans or other containers could harm our business. We use various ingredients in our beverage products, including stevia sweetener and flavor ingredients relating to consumable products, aluminum cans and other packaging materials.
Increase in the cost, disruption of supply or shortage of stevia sweetener or other ingredients or raw materials, packaging materials, aluminum cans or other containers could harm our business. We use various ingredients in our beverage products, including stevia sweetener and flavor ingredients relating to consumable products, aluminum cans and other packaging materials.
The market price of our Class A common stock has been and may continue to fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our operating performance, including: • announcements of new products, commercial relationships, acquisitions or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of food and beverage companies in general and of companies in the beverage industry in particular; • addition or loss of significant customers or other developments with respect to significant customers; • fluctuations in the trading volume of our shares or the size of our public float; • actual or anticipated changes or fluctuations in our operating results; • whether our operating results meet the expectations of securities analysts or investors; • actual or anticipated changes in the expectations of investors or securities analysts; • litigation involving us, our industry, or both; • regulatory developments in the U.S., foreign countries, or both applicable to our products; • general economic conditions and trends; • major catastrophic events; • sales of large blocks of our Class A common stock; • departures of key employees; or • an adverse impact on the company from any of the other risks cited in this report.
The market price of our Class A common stock has been and may continue to fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our operating performance, including: • announcements of new products, commercial relationships, acquisitions or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of food and beverage companies in general and of companies in the commercial beverage industry in particular; • addition or loss of significant customers or other developments with respect to significant customers; • fluctuations in the trading volume of our shares or the size of our public float; • actual or anticipated changes or fluctuations in our operating results; • whether our operating results meet the expectations of securities analysts or investors; • actual or anticipated changes in the expectations of investors or securities analysts; • litigation involving us, our industry, or both; • regulatory developments in the U.S., foreign countries, or both applicable to our products; • general economic conditions and trends; • major catastrophic events; • sales of large blocks of our Class A common stock; • departures of key employees; or • an adverse impact on the company from any of the other risks cited in this report.
These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include the following provisions that: • our board of directors is classified into three classes of directors with staggered three-year terms.
These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include the following: • our board of directors is classified into three classes of directors with staggered three-year terms.
Commencing with the annual meeting of stockholders to be held in 2027, directors of each class the term of which shall then expire shall be elected to hold office for a one-year term; • directors are only able to be removed from office with the affirmative vote of at least 66 2/3% of the voting power of all shares of our common stock then outstanding and, until the annual meeting of stockholders to be held in 2027, only for cause; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholder action by written consent, which requires stockholder actions to be taken at a meeting of our stockholders; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; • provide the board of directors with sole authorization to establish the number of directors and fill director vacancies; • certain provisions of our amended and restated certificate of incorporation may only be amended only with the approval of at least 66 2/3% of the voting power of all shares of our common stock then outstanding; 24 • the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws and that our stockholders may amend our bylaws only with the approval of at least 66 2/3% of the voting power of all shares of our common stock then outstanding; and • special meetings of the stockholders may only be called by the stockholders upon the written request of one or more stockholders of record that own, or who are acting on behalf of persons who own, shares representing 25% or more of the voting power of the then outstanding shares of capital stock entitled to vote on the matter or matters to be brought before the proposed special meeting.
Commencing with the annual meeting of stockholders to be held in 2027, directors of each class the term of which shall then expire shall be elected to hold office for a one-year term; • directors are only able to be removed from office with the affirmative vote of at least 66 2/3% of the voting power of all shares of our common stock then outstanding and, until the annual meeting of stockholders to be held in 2027, only for cause; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholder action by written consent, which requires stockholder actions to be taken at a meeting of our stockholders; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; • provide the board of directors with sole authorization to establish the number of directors and fill director vacancies; • certain provisions of our amended and restated certificate of incorporation may only be amended with the approval of at least 66 2/3% of the voting power of all shares of our common stock then outstanding; • the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws and that our stockholders may amend our bylaws only with the approval of at least 66 2/3% of the voting power of all shares of our common stock then outstanding; and • special meetings of the stockholders may only be called by the stockholders upon the written request of one or more stockholders of record that own, or who are acting on behalf of persons who own, shares representing 25% or more of the voting power of the then outstanding shares of capital stock entitled to vote on the matter or matters to be brought before the proposed special meeting.
For example: • we may choose to revise our policies in ways that we believe will be beneficial to our stakeholders, including our employees, customers and local communities, even though the changes may be costly; • we may take actions, such as building state-of-the-art facilities with technology and quality control mechanisms that exceed the requirements of USDA and the FDA, even though these actions may be more costly than other alternatives; • we may be influenced to pursue programs and services to demonstrate our commitment to the communities to which we serve and bringing ethically produced products to customers even though there is no immediate return to our stockholders; or 23 • in responding to a possible proposal to acquire the company, our board of directors may be influenced by the interests of our stakeholders, including our employees, customers and local communities, whose interests may be different from the interests of our stockholders.
For example: • we may choose to revise our policies in ways that we believe will be beneficial to our stakeholders, including our employees, customers and local communities, even though the changes may be costly; • we may take actions, such as building state-of-the-art facilities with technology and quality control mechanisms that exceed the requirements of USDA and the FDA, even though these actions may be more costly than other alternatives; • we may be influenced to pursue programs and services to demonstrate our commitment to the communities to which we serve and bringing ethically produced products to customers even though there is no immediate return to our stockholders; or • in responding to a possible proposal to acquire the company, our board of directors may be influenced by the interests of our stakeholders, including our employees, customers and local communities, whose interests may be different from the interests of our stockholders.
Thereafter, we 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 credit facility 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.
Thereafter, we 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 credit facility is less than the greater of $3.0 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.
Failure by us, our manufacturers, or our suppliers to comply with applicable laws and regulations or to obtain and maintain necessary permits, licenses, and registrations relating to our operations could subject us to administrative and civil penalties, including significant fines, injunctions, product recalls or seizures, withdrawals, warning letters, restrictions on the production or marketing of our products, or refusals to permit the import or export of products, civil liability, criminal liability or sanctions, or other enforcement actions.
Failure by us, our contract manufacturers, or our suppliers to comply with applicable laws and regulations or to obtain and maintain necessary permits, licenses, and registrations relating to our operations could subject us to administrative and civil penalties, including significant fines, injunctions, product recalls or seizures, withdrawals, warning letters, restrictions on the production or marketing of our products, or refusals to permit the import or export of products, civil liability, criminal liability or sanctions, or other enforcement actions.
Among other things, manufacturers of conventional foods must meet applicable cGMPs and certain requirements that govern the constituents, packaging, labeling and holding of foods. Failure by us, our manufacturers, or our suppliers to comply with these regulations could result in, by way of example, significant fines, criminal and civil liability, product seizures, recalls, withdrawals, or other enforcement action.
Among other things, manufacturers of conventional foods must meet applicable cGMPs and certain requirements that govern the constituents, packaging, labeling and holding of foods. Failure by us, our contract manufacturers, or suppliers to comply with these regulations could result in, by way of example, significant fines, criminal and civil liability, product seizures, recalls, withdrawals, or other enforcement action.
Additionally, unforeseen issues with the workforce of our supply chain or retailers failing to execute on the proposed timeline for the promotions could prohibit us from executing planned promotions and programs and have an adverse effect on our planned volume performance. Failure to introduce new products or successfully improve existing products may adversely affect our ability to continue to grow.
Additionally, unforeseen issues with the workforce of our supply chain or retailers failing to execute on the proposed timeline for the promotions could prohibit us from executing planned promotions and programs and have an adverse effect on our planned volume performance. 14 Failure to introduce new products or successfully improve existing products may adversely affect our ability to continue to grow.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business. As a public benefit corporation, our duty to balance a variety of interests may result in actions that do not maximize stockholder value.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business. 24 As a public benefit corporation, our duty to balance a variety of interests may result in actions that do not maximize stockholder value.
Disruptions in the worldwide economy may adversely affect our business, results of operations and financial condition. Adverse and uncertain economic conditions, including the impacts of inflation, may impact distributor, retailer and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, manufacturers, distributors, retailers and creditors may suffer.
Disruptions in the worldwide economy may adversely affect our business, results of operations and financial condition. Adverse and uncertain economic conditions, including the impacts of inflation, may impact distributor, retailer and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, contract manufacturers, distributors, retailers and creditors may suffer.
If these types of requirements are adopted and implemented on a large scale in any of the major markets in which we operate, they could affect our costs or require changes in our distribution model, which could reduce our net operating revenues and profitability. 18 The regulatory environment in which we operate could change significantly and adversely in the future.
If these types of requirements are adopted and implemented on a large scale in any of the major markets in which we operate, they could affect our costs or require changes in our distribution model, which could reduce our net operating revenues and profitability. The regulatory environment in which we operate could change significantly and adversely in the future.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. Our charter documents and the DGCL could discourage takeover attempts and other corporate governance changes.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 25 Our charter documents and the DGCL could discourage takeover attempts and other corporate governance changes.
We could be adversely affected by a change in consumer preferences, perception and spending habits in the beverage industry and on naturally sweetened products, and failure to develop or enrich our product offerings or gain market acceptance of our new products including any new offerings, could have a negative effect on our business.
We could be adversely affected by a change in consumer preferences, perception and spending habits in the commercial beverage industry and on naturally sweetened products, and failure to develop or enrich our product offerings or gain market acceptance of our new products including any new offerings, could have a negative effect on our business.
As a result, natural disasters, such as an earthquake, fire or tsunami in the Los Angeles area or in areas where our manufacturers are located, could lead to substantial losses. We may face difficulties as we expand our operations into countries in which we have no prior operating experience.
As a result, natural disasters, such as an earthquake, fire or tsunami in the Los Angeles area or in areas where our contract manufacturers are located, could lead to substantial losses. We may face difficulties as we expand our operations into countries in which we have no prior operating experience.
Also, as a public benefit corporation, our board of directors is required by the DGCL to manage or direct our business and affairs in a manner that balances the pecuniary interests of our stockholders, the best interests of those materially affected by our conduct, and the specific public benefits identified in our amended and restated certificate of incorporation.
Also, as a public benefit corporation under the DGCL, our board of directors is required to manage or direct our business and affairs in a manner that balances the pecuniary interests of our stockholders, the best interests of those materially affected by our conduct, and the specific public benefits identified in our amended and restated certificate of incorporation.
We expect that, as a result of the increases in the tax basis of the tangible and intangible assets of Zevia LLC attributable to the acquired or exchanged Zevia LLC interests, and certain other tax benefits, the payments that the Company will be required to make to the holders of rights under the TRA will be 20 substantial.
We expect that, as a result of the increases in the tax basis of the tangible and intangible assets of Zevia LLC attributable to the acquired or exchanged Zevia LLC interests, and certain other tax benefits, the payments that the Company will be required to make to the holders of rights under the TRA will be substantial.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. 25 Our management team has limited experience managing a public company.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. Our management team has limited experience managing a public company.
The FDA requires that facilities that produce food products comply with a range of requirements, including hazard analysis and preventative controls regulations, cGMPs requirements, and supplier verification requirements. Production facilities are subject to periodic inspection by federal, state, and local authorities.
The FDA requires that facilities that produce food products comply with a range of requirements, including hazard analysis and preventative controls regulations, cGMPs requirements, and supplier verification requirements. Production facilities are subject to periodic inspection by federal, state, provincial and local authorities.
Larger retailers have sought lower prices from us, demanded increased marketing or promotional expenditures, and have and may continue to use their distribution networks to introduce and develop private label brands, any of which could negatively affect profitability.
Larger retailers have sought lower prices from us, demanded increased marketing or promotional expenditures, and have and may continue to use their distribution networks to introduce and develop private label brands, any of which could negatively affect our profitability.
The political, legal and social systems of certain territories pose difficult challenges related to maintaining control and ownership of our brand and intellectual property, as well as mitigating the risk of diverted sales to other territories and/or sales diverted into the U.S.
The political, legal and social systems of certain territories pose difficult challenges related to establishing and maintaining control and ownership of our brand and intellectual property, as well as mitigating the risk of diverted sales to other territories and/or sales diverted into the U.S.
Further, efforts to market and sell our innovation products as incremental placements to existing products on-shelf could potentially lead to the discontinuation of existing products to make room for the innovation products, which may generate less sales than existing, familiar products.
Further, efforts to market and sell our innovation products as incremental placements to existing products on-shelf could potentially lead to the discontinuation of existing products to make room for the innovative products, which may generate less sales than existing, familiar products.
If regulators determine that the labeling and/or composition of any of our products is not in compliance with law or regulations in Canada or any other jurisdictions we may enter in the future, or if we or our manufacturers otherwise fail to comply with applicable laws and regulations in Canada or any other jurisdictions we may enter in the future, we could be subject to civil remedies or penalties, such as fines, injunctions, recalls or seizures, warning letters, restrictions on the marketing or manufacturing of the products, or refusals to permit the import or export of products, as well as potential criminal sanctions.
If regulators determine that the labeling and/or composition of any of our products is not in compliance with laws or regulations in Canada or any other jurisdictions we may enter in the future, or if we or our contract manufacturers otherwise fail to comply with applicable laws and regulations in Canada or any other jurisdictions we may enter in the future, we could be subject to civil remedies or penalties, such as fines, injunctions, recalls or seizures, warning letters, restrictions on the marketing or manufacturing of the products, or refusals to permit the import or export of products, as well as potential criminal sanctions.
Violations of these laws, or allegations of such violations, could disrupt our business, impact our reputation, and result in a material adverse effect on our results of operations, cash flows and financial condition. 19 Risks Relating to Tax Matters The Company is dependent on distributions from Zevia LLC to pay any taxes and other expenses, including payments under the Tax Receivable Agreement.
Violations of these laws, or allegations of such violations, could disrupt our business, impact our reputation, and result in a material adverse effect on our results of operations, cash flows and financial condition. 20 Risks Relating to Tax Matters The Company is dependent on distributions from Zevia LLC to pay any taxes and other expenses, including payments under the Tax Receivable Agreement.
Risks Relating to Governmental Regulation We and our manufacturers and suppliers are subject to extensive governmental regulation and may be subject to enforcement if we are not in compliance with applicable requirements.
Risks Relating to Governmental Regulation We and our contract manufacturers and suppliers are subject to extensive governmental regulation and may be subject to enforcement if we are not in compliance with applicable requirements.
These include laws administered by the FDA, the FTC, the USDA, Health Canada (including the Food and Drugs Act in Canada), and other federal, state, and local regulatory authorities.
These include laws administered by the FDA, the FTC, the USDA, Health Canada (including the Food and Drugs Act in Canada), and other federal, state, provincial and local regulatory authorities.
We are also subject to the terms of our privacy policies and obligations to our customers and other third parties related to privacy, data protection and information security.
We are also subject to the terms of our privacy policies and obligations to our consumers, customers and other third parties related to privacy, data protection and information security.
This could result in time consuming and expensive production interruptions, negative publicity, the destruction of product inventory, the discontinuation of sales or our relationships with customers, contract manufacturers, distributors, or suppliers, lost sales due to the unavailability of product for a period of time and higher-than-anticipated rates of returns of goods.
This could result in time consuming and expensive production interruptions, negative publicity, the destruction of product inventory, the discontinuation of sales or our relationships with customers, contract manufacturers, distributors, or suppliers, the dilution of our brand, lost sales due to the unavailability of product for a period of time and higher-than-anticipated rates of returns of goods.
Our expansion efforts may prove more expensive than we anticipate, and there is no guarantee that these efforts will translate into sufficient sales to cover our expenses and result in profits. We incur significant expenses in developing our innovative products, obtaining and storing ingredients and other products and marketing our products. In addition, many of our expenses are fixed.
Our expansion efforts may prove more expensive than we anticipate, and there is no guarantee that these efforts will translate into sufficient sales to cover our expenses and result in profits. We incur significant expenses in developing our innovative products and obtaining, storing, and marketing our products. In addition, many of our expenses are fixed.
The lack of regulatory definition for “natural” and other label statements has contributed to legal challenges against many consumer products companies, and plaintiffs have commenced legal actions against several food companies that market “natural” products, asserting false, misleading and deceptive advertising and labeling claims, including claims related to genetically modified ingredients.
The lack of regulatory definition for “natural” and other label statements has contributed to legal challenges against many consumer products companies, and plaintiffs have commenced legal actions against several food companies that market “natural” products and/or product ingredients, asserting false, misleading and deceptive advertising and labeling claims, including claims related to genetically modified ingredients.
We and our manufacturers and suppliers are subject to a broad range of federal, state, and local laws and regulations that govern, among other issues, the testing, design, development, formulation, manufacturing, storage, product safety, labeling, distribution, marketing, sales, advertising and post-market reporting of foods.
We and our contract manufacturers and suppliers are subject to a broad range of federal, state, provincial and local laws and regulations that govern, among other issues, the testing, design, development, formulation, manufacturing, storage, product safety, labeling, distribution, marketing, sales, advertising and post-market reporting of foods.
Our confidentiality agreements with our crew members and certain of our consultants, contract employees, suppliers and independent contractors, including some of our manufacturers who use our formulations to manufacture our products, generally require that all information made known to them be kept strictly confidential. Further, some of our formulations have been developed by or with our suppliers and manufacturers.
Our confidentiality agreements with our employees and certain of our consultants, contract employees, suppliers and independent contractors, including some of our contract manufacturers who use our formulations to manufacture our products, generally require that all information made known to them be kept strictly confidential. Further, some of our formulations have been developed by or with our suppliers and contract manufacturers.
As a result of climate change, we are and may continue to be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our third-party contract manufacturers’ operations, as well as the agricultural businesses of our suppliers, which rely on the availability and quality of water.
As a result of climate change, we are and may continue to be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our contract manufacturers’ operations, as well as the agricultural businesses of our suppliers, which rely on the availability and quality of water.
Our products and their manufacturing, labeling, marketing and sale are also subject to various aspects of the Federal Trade Commission Act, the Food Safety Modernization Act, the Lanham Act, Canada’s Food and Drugs Act and Regulations, state consumer protection laws and state warning and labeling laws, such as Proposition 65 in California.
Our products and their manufacturing, labeling, marketing and sale are also subject to various aspects of the Federal Trade Commission Act, the Robinson-Patman Act, the Food Safety Modernization Act, the Lanham Act, Canada’s Food and Drugs Act and Regulations, state consumer protection laws and state warning and labeling laws, such as Proposition 65 in California.
Additionally, we rely on independent third-party certification, including certifications of certain products or ingredients as “organic” and “Non-GMO” to differentiate the quality of our products from those of our competitors. We must comply with the requirements of the independent third-party organization or certification authorities in order to maintain these labels.
Additionally, we rely on independent third-party certification, including certifications of certain products or ingredients as “organic” and “Non-GMO” to differentiate the quality of our products from those of our competitors. We must comply with the requirements of the independent third-party organizations or certification authorities in order to maintain these labels.
Based on certain assumptions, including no material changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefit of the increased amortization of our assets and the net operating losses (and similar items), we expect that future payments to the continuing members of Zevia LLC (not including the Company) in respect of the IPO will be approximately $55.8 million in the aggregate, although the actual future payments to the continuing members of Zevia LLC will vary based on the factors discussed below, and estimating the amount and timing of payments that may be made under the TRA is by its nature imprecise, as the calculation of amounts payable depends on a variety of factors and future events.
Based on certain assumptions, including no material changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefit of the increased amortization of our assets and the net operating losses (and similar items), we expect that future payments to the continuing members of Zevia LLC (not including the Company) in respect of the IPO will be approximately $56.2 million in the aggregate, although the actual future payments to the continuing members of Zevia LLC will vary based on the factors discussed below, and estimating the amount and timing of payments that may be made under the TRA is by its nature imprecise, as the calculation of amounts payable depends on a variety of factors and future events.
We are subject to numerous federal, state, local and international laws and regulations regarding privacy, data protection, information security and the storing, sharing, use, processing, transfer, disclosure and protection of personal information and other content and data, which we refer to collectively as privacy laws, the scope of which is changing, subject to differing interpretations and may be inconsistent among countries, or conflict with other laws, 27 regulations or other obligations.
We are subject to numerous federal, state, local and international laws and regulations regarding privacy, data protection, information security and the storing, sharing, use, processing, transfer, disclosure and protection of personal information and other content and data, which we refer to collectively as privacy laws, the scope of which is changing, subject to differing interpretations and may be inconsistent among US states, countries, or conflict with other laws, regulations or other obligations.
If our third-party manufacturers and suppliers do not comply with applicable laws, regulations, employment practices, human rights standards, quality standards, environmental standards, and other applicable standards and practices, our brand reputation could be harmed and we could be exposed to investigations, product recalls, product liability claims, regulatory enforcement, litigation, monetary liability, and additional costs that could negatively impact our results of operations.
If our contract manufacturers and suppliers do not comply with applicable laws, regulations, employment practices, human rights standards, quality standards, environmental standards, and other applicable standards and practices, our brand reputation could be harmed and we could be exposed to investigations, product recalls, product liability claims, regulatory enforcement, litigation, monetary liability, and additional costs that could negatively impact our results of operations.
On the other hand, failure to attempt to market and sell our innovation products could limit the potential incremental revenue those products might provide. Inaccurate or misleading marketing claims may harm our brand and business.
On the other hand, failure to attempt to market and sell our innovative products could limit the potential incremental revenue those products might provide. Inaccurate or misleading marketing claims may harm our brand and business.
In limited circumstances, the FDA has taken regulatory action against products labeled “natural” that contain synthetic ingredients or components. As a result of such legal or regulatory challenges, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded.
In limited circumstances, the FDA has taken regulatory action against products labeled “natural” that contain synthetic ingredients, chemicals, processing and/or components. As a result of such legal or regulatory challenges, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded.
By expanding into other territories, we may be subject to additional product labeling and quality requirements, which could require us to market our products differently or change the formula of certain products to meet local standards.
By expanding into other territories, we may be subject to additional product labeling and quality requirements, which could require us to market our products differently or change the formula of certain products to meet local standards in order to commercialize.
Key third-party, cloud-based systems include NetSuite, an enterprise resource planning system used for executing purchase orders and other key operational and accounting transactions; Microsoft OneDrive for document storing, sharing and collaboration; as well as other platforms to manage activities including, but not limited to, payroll and personnel data.
Key third-party, cloud-based systems include NetSuite, an enterprise resource planning system used for executing purchase orders and other key operational and accounting transactions; Microsoft Office 365 for document storing, sharing and collaboration; as well as other platforms, including Paylocity, to manage activities including, but not limited to, payroll and personnel data.
Although we have implemented policies and procedures to promote compliance with applicable laws and regulations, including requiring our third-party manufacturers and suppliers to agree to our Supplier Code of Conduct, we cannot guarantee their compliance with ethical business practices and applicable laws and regulations.
Although we have implemented policies and procedures to promote compliance with applicable laws and regulations, including requiring our contract manufacturers and suppliers to agree to our Supplier Code of Conduct, we cannot guarantee their compliance with ethical business practices and applicable laws and regulations.
A general decline in the consumption of our products could occur at any time as a result of change in consumer preference, perception, confidence and spending habits, including an unwillingness or inability to purchase our products due to financial hardship or increased price sensitivity, which may be exacerbated by the effects of inflation and global public health concerns such as the COVID-19 pandemic.
A general decline in the consumption of our products could occur at any time as a result of change in consumer preference, perception, confidence and spending habits, including an unwillingness or inability to purchase our products due to financial hardship or increased price sensitivity, which may be exacerbated by the effects of inflation and global public health concerns such as epidemics and pandemics.
If we cannot successfully contract with manufacturers for our products and if they cannot conform to our specifications and the strict regulatory requirements of the FDA and applicable state and local laws, they may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products, could result in their inability to continue to pack for us, or could result in a recall of our products that have already been distributed.
If we cannot successfully contract with manufacturers for our products and if they cannot conform to our specifications and the strict regulatory requirements of the FDA and applicable state, provincial and local laws, they may be subject to adverse inspection findings or enforcement actions, which could materially impact our ability to market our products, could result in their inability to continue to manufacture our products, or could result in a recall of our products that have already been distributed.
The Company is a holding company and, its only business is to act as the managing member of Zevia LLC, and its only material assets are Class A units representing approximately 68.7% of the membership interests of Zevia LLC. The Company does not have any independent means of generating revenue.
The Company is a holding company and, its only business is to act as the managing member of Zevia LLC, and its only material assets are Class A units representing approximately 75.8% of the membership interests of Zevia LLC. The Company does not have any independent means of generating revenue.
We rely on information technology systems and any inadequacy, failure, interruption or security breaches of those systems may harm our ability to effectively operate our business. We are dependent on various information technology systems, including, but not limited to, networks, applications and outsourced services in connection with the operation of our business.
We rely on information technology systems and any inadequacy, failure, interruption, outage, or integration issue of those systems may harm our ability to effectively operate our business. We are dependent on various information technology systems, including, but not limited to, networks, applications and outsourced services in connection with the operation of our business.
For more information regarding government regulations, see “ Description of Business—Government Regulation .” Our policies and procedures are designed to comply with all applicable laws, accounting and reporting requirements, tax rules and other regulations and requirements, including those imposed by the SEC, the Internal Revenue Service (“IRS”), the U.S.
For more information regarding government regulations, see the section of this Annual Report captioned “ Business—Government Regulation .” Our policies and procedures are designed to comply with all applicable laws, accounting and reporting requirements, tax rules and other regulations and requirements, including those imposed by the SEC, the Internal Revenue Service (“IRS”), the U.S.
We do not have short-term or long-term commitments or minimum purchase volumes in our contracts with them that ensure future sales of our products. If we lose one or more of our significant customers and cannot replace the customer in a timely manner or at all, our business, results of operation and financial condition may be materially adversely affected.
For these customers, we do not have short-term or long-term commitments in our contracts that ensure future sales of our products. If we lose one or more of our significant customers and cannot replace the customer in a timely manner or at all, our business, results of operation and financial condition may be materially adversely affected.
Most members of our management team have had limited or no experience prior to our IPO managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies.
Most members of our management team have had limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies.
If our assumptions prove to be wrong, for reasons such as a change in demand for our products, increasing competition, our inability to streamline and optimize manufacturing capacity for specific products, rapid changes in product cycles and pricing, or a decrease in the growth of our overall market, our operating and financial results could differ materially from our expectations, and our business could suffer.
If our assumptions prove to be wrong, for reasons such as a change in demand for our products, increasing competition, our inability to streamline and optimize manufacturing capacity for specific products, our inability to effectively and timely resolve any supply chain logistics challenges , rapid changes in product cycles and pricing, or a decrease in the growth of our overall market, our operating and financial results could differ materially from our expectations, and our business could suffer.
Our utilization of delivery services for shipments is subject to risks that are beyond our control, including availability of trucking capacity and increases in fuel prices, which would increase our shipping costs, and employee strikes or work stoppages and inclement weather, which may impact the ability of providers to provide delivery services that adequately meet our shipping needs.
Our utilization of broker services for the shipment of our products is subject to risks that are beyond our control, including availability of trucking capacity and increases in fuel prices, which would increase our shipping costs, and employee strikes or work stoppages and inclement weather, which may impact the ability of our transportation broker to procure delivery services that adequately meet our shipping needs.
We also use mobile devices, social networking, email, and other online activities to connect with our employees, suppliers, manufacturers, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information.
We use computers in substantially all aspects of our business operations. We also use mobile devices, social networking, email, and other online activities to connect with our employees, suppliers, contract manufacturers, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information.
Brand value is based on perceptions of subjective qualities, and any incident that erodes the loyalty of our customers, suppliers or manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business.
Any negative publicity, regardless of its accuracy, could materially adversely affect our business. Brand value is based on perceptions of subjective qualities, and any incident that erodes the loyalty of our customers, suppliers or manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business.
Because tax distributions will be determined based on the member who is allocated the largest amount of taxable income on a per unit basis and on an assumed tax rate that is the highest possible rate applicable to any member, but will be made pro rata based on ownership of Zevia LLC units, Zevia LLC will be required to make tax distributions that, in the aggregate, will likely exceed the aggregate amount of taxes payable by its members with respect to the allocation of Zevia LLC income.
Because tax distributions will be determined based on the member who is allocated the largest amount of taxable income on a per unit basis and on an assumed tax rate that is the highest possible rate applicable to any member, but will be made pro rata based on ownership of Zevia LLC units, Zevia LLC will be required to make tax distributions that, in the aggregate, will likely exceed the aggregate amount of taxes payable by its members with respect to the allocation of Zevia LLC income. 22 Funds used by Zevia LLC to satisfy its tax distribution obligations will not be available for reinvestment in our business.
Product safety and quality concerns, including relating to our plant-based sweetening system, could negatively affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.
Product safety and quality concerns, including relating to our plant-based sweetening system, could negatively affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, or our brand dilution, which could increase our operating costs and reduce demand for our product offerings.
Competitive pressures may also cause us to reduce prices we charge customers or may restrict our ability to increase such prices. In order to remain competitive, we may also need to increase our marketing and advertising spend, which could have an impact on our operating results. We have a history of losses, and we may be unable to achieve profitability.
Competitive pressures may also cause us to reduce prices we charge customers or may restrict our ability to increase such prices. In order to remain competitive, we may also need to increase our marketing and advertising spend, which could have an impact on our operating results.
If we need to replace an existing supplier, there can be no assurance that supplies of raw materials will be available when required on acceptable terms, or that a new supplier would allocate sufficient capacity to us in order to meet our requirements, fill our orders in a timely manner or meet our strict quality standards.
If we need to replace an existing supplier, there can be no assurance that supplies of raw materials will be available when required on acceptable terms, or that a new supplier would allocate sufficient capacity to our contract manufacturers in order to produce sufficient products to meet our requirements, fill our orders in a timely manner, meet our strict quality standards, and ensure that we can supply enough products to meet consumer demand.
New or revised government laws and regulations and changes in enforcement priorities of regulators could inhibit sales of our products or result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, enforcement actions, injunctions, withdrawals, recalls or seizures and confiscations, as well as potential criminal sanctions, any of which may adversely affect our business, results of operations and financial condition.
New or revised government laws and regulations and changes in enforcement priorities of regulators could inhibit sales of our products or result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, enforcement actions, injunctions, withdrawals, recalls or seizures and confiscations, as well as potential criminal sanctions.
If our products fail to gain market acceptance, are restricted by regulatory requirements or have quality issues, we may not be able to fully recover costs and expenses incurred in our operations, and our business, financial condition or results of operations could be materially and adversely affected.
If our products fail to gain market acceptance, cannot keep pace with nutritional, scientific, or regulatory developments or changing consumer preferences, are restricted by regulatory requirements or have quality issues, we may not be able to fully recover costs and expenses incurred in our operations, and our business, financial condition or results of operations could be materially and adversely affected.
The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending on a number of factors, including the price of our Class A common stock at the time of the exchange; the timing of future exchanges; the extent to which exchanges are taxable; the amount and timing of the utilization of tax attributes; the amount, timing and character of the Company’s income; the U.S. federal, state and local tax rates then applicable; the amount of each exchanging unitholder’s tax basis in its units at the time of the relevant exchange; the depreciation and amortization periods that apply to the increases in tax basis; the timing and amount of any earlier payments that the Company may have made under the TRA and the portion of the Company’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.
To the extent such distributions or our cash resources are insufficient to meet our obligations under the TRA as a result of timing discrepancies or otherwise, such payments may be deferred for up to six months and would accrue interest until paid. 21 The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending on a number of factors, including the price of our Class A common stock at the time of the exchange; the timing of future exchanges; the extent to which exchanges are taxable; the amount and timing of the utilization of tax attributes; the amount, timing and character of the Company’s income; the U.S. federal, state and local tax rates then applicable; the amount of each exchanging unitholder’s tax basis in its units at the time of the relevant exchange; the depreciation and amortization periods that apply to the increases in tax basis; the timing and amount of any earlier payments that the Company may have made under the TRA and the portion of the Company’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.
If we fail to address changes in consumer product and shopping preferences, or do not successfully anticipate and prepare for future changes in such preferences, our share of sales, revenue growth and overall financial results could be negatively affected.
If we fail to address changes in consumer product and shopping preferences, or do not successfully anticipate and prepare for future changes in such preferences, our share of sales, revenue growth and overall financial results could be negatively affected. If we are unable to compete in our intensely competitive industry, our business may not grow or succeed.
The occurrence of health-related illnesses or other incidents related to the consumption of our products, including allergies, excessive consumption or death to a consumer, could also adversely affect the price and availability of affected ingredients, resulting in higher costs, disruptions in supply and a reduction in our sales.
The occurrence of health-related illnesses, public health concerns, or other incidents related to the consumption of our products, including allergies, excessive consumption or death to a consumer, could also adversely affect consumer perceptions and affinity for our brand, harm our reputation, and affect the price and availability of affected ingredients, resulting in higher costs and disruptions in supply, which could cause a material reduction in our sales.
If our third-party manufacturers and suppliers do not comply with our set standards and specifications, we may also be forced to seek alternative partners which could disrupt our operations and adversely affect our business. 17 Our results of operations could be harmed if we are unable to accurately forecast demand for our products.
If our contract manufacturers and suppliers do not comply with our set standards and specifications, we may also be forced to seek alternative partners which could disrupt our operations and adversely affect our business. 18 Our results of operations could be harmed if we are unable to accurately forecast demand for our products, revenue and costs, including maintaining adequate inventory levels.
Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take a significant time to start production, each of which could negatively affect our business and financial performance.
Moreover, if demand increases more than we forecast, we will need to acquire additional capacity. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take a significant amount of time to start production, each of which could negatively affect our business and financial performance.
If one or more of the analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline.
We do not have any control over these analysts. If one or more of the analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline.
We may choose to manage these excess distributions through a number of different approaches, including through the payment of dividends to our Class A common stockholders or by applying them to other corporate purposes. 21 Pursuant to regulations issued under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Company may not be permitted to deduct its distributive share of compensation expense to the extent that the compensation was paid by Zevia LLC to certain of the Company’s covered employees, potentially resulting in additional U.S. federal income tax liability for the Company and reducing cash available for distribution to the Company’s stockholders and/or for the payment of other expenses and obligations of the Company.
Pursuant to regulations issued under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Company may not be permitted to deduct its distributive share of compensation expense to the extent that the compensation was paid by Zevia LLC to certain of the Company’s covered employees, potentially resulting in additional U.S. federal income tax liability for the Company and reducing cash available for distribution to the Company’s stockholders and/or for the payment of other expenses and obligations of the Company.
Section 404(a) of the Sarbanes-Oxley Act, or Section 404(a), requires that beginning with this Annual Report for the year ended December 31, 2022, management assess and report annually on the effectiveness of our internal control over financial reporting and identify any material weaknesses in our internal control over financial reporting.
Section 404(a) of the Sarbanes-Oxley Act, or Section 404(a), requires that management assess and report annually on the effectiveness of our internal control over financial reporting and identify any material weaknesses in our internal control over financial reporting.
As a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting.
We have expended significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting. 27 As a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting.
As a result of this concentration in our supply chain, any disruption in the supply, price, quality, availability or timely delivery of stevia from this supplier could adversely affect our business, performance, and results of operations. Additionally, the concentration of our supply of stevia extract increases the risk of significant supply disruptions from local and regional events.
Any disruption in the stevia extract supply, price, quality, availability or timely delivery could adversely affect our business, performance, and results of operations. Additionally, our contract manufacturers’ sourcing of the majority of the stevia extract used in our products from one supplier increases the risk of significant supply disruptions from local and regional events.
In addition to the impact on our distributors, suppliers and contract manufacturers, the COVID-19 pandemic, any future pandemics or other disease outbreaks and related public health measures have impacted and may continue to impact consumer preferences and demand for our products and thus may have a material impact on our business, results of operations and financial condition and such impact remains uncertain and unpredictable.
In addition to the impact on our distributors, contract manufacturers and their suppliers, any future pandemics, epidemics, or other disease outbreaks and related public health measures could impact consumer preferences and demand for our products, government regulations and restrictions, transportation and route to market, and availability of raw materials and thus may have a material impact on our business, results of operations and financial condition and such impact remains uncertain and unpredictable.
Likewise, our reputation could be harmed if our publicly reported Certified B Corporation score declines. As a public benefit corporation, we may become subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interests, the occurrence of which may have an adverse impact on our financial condition and results of operations.
As a public benefit corporation, we may become subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interests, the occurrence of which may have an adverse impact on our financial condition and results of operations. We have elected to be a public benefit corporation under the DGCL.
Our growth and success depends in part upon our ability to attract, hire, train and retain a sufficient number of employees who understand and appreciate our culture and can represent our brand effectively and establish credibility with our business partners and consumers. Any of our employees may terminate his or her employment with us at any time.
Our growth and success depends in part upon our ability to attract, hire, train and retain a sufficient number of highly qualified and skilled employees who understand and appreciate our culture and can represent our brand effectively and establish credibility with our business partners, retailers and consumers.
If Zevia LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, Zevia PBC and Zevia LLC might be subject to potentially significant tax inefficiencies, and Zevia PBC would not be able to recover payments previously made by it under the TRA, even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
If Zevia LLC or an entity in which Zevia LLC directly or indirectly invests does not make this election, the then-current members of Zevia LLC (including Zevia PBC) could economically bear the burden of the understatement. 23 If Zevia LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, Zevia PBC and Zevia LLC might be subject to potentially significant tax inefficiencies, and Zevia PBC would not be able to recover payments previously made by it under the TRA, even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
We are often required to grant retailers price concessions that negatively impact our margins and our profitability in order to compete with our larger competitors with significantly greater financial resources.
Our net sales and earnings may fluctuate as a result of price concessions, promotional activities and chargebacks. We are often required to grant retailers price concessions that negatively impact our margins and our profitability in order to compete with our larger competitors with significantly greater financial resources.
Future disruptions could have a material negative impact on our business operations. 16 We seek alternative sources of stevia extract and other plant-based ingredients to use in our products, but we may not be successful in diversifying the raw materials we use in our products.
We seek alternative sources of stevia extract and other plant-based ingredients to use in our products, but we may not be successful in diversifying the raw materials we use in our products.
Additionally, we have been subject to security breaches and cyber incidents in the past and our preventative measures and incident response efforts may not be entirely effective at preventing future breaches.
Such risks may involve ransomware or other malicious software programs that exploit information security vulnerabilities. Additionally, we have been subject to security breaches and cyber incidents in the past and our preventative measures and incident response efforts may not be entirely effective at preventing future breaches.
Funds used by Zevia LLC to satisfy its tax distribution obligations will not be available for reinvestment in our business. Moreover, the tax distributions Zevia LLC will be required to make may be substantial, and may significantly exceed (as a percentage of Zevia LLC’s income) the overall effective tax rate applicable to a similarly situated corporate taxpayer.
Moreover, the tax distributions Zevia LLC will be required to make may be substantial, and may significantly exceed (as a percentage of Zevia LLC’s income) the overall effective tax rate applicable to a similarly situated corporate taxpayer.
Some of these manufacturers are also our direct competitors, or also manufacture and distribute products for our competitors. As independent companies, these manufacturers and distributors make their own business decisions. They have the right to determine whether, and to what extent, they produce and distribute our products, our competitors’ products and their own products.
Some of these contract manufacturers are also our direct competitors, or manufacture and distribute products for our competitors. As independent companies, these contract manufacturers and distributors make their own business decisions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our current facilities are suitable and adequate to meet our current needs, but continue to evaluate opportunities for expansion to support our plans for growth and cost reduction. In addition, we believe that additional or alternative space to support future use and expansion will be available on reasonable commercial terms. Item 3.
Biggest changeWe continue to evaluate opportunities to support our future plans for growth and cost reduction. We believe that additional or alternative space to support future use and expansion will be available on reasonable commercial terms. Item 3. Legal Proceedings We are not subject to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 31 PART II
Item 2. Properties Our corporate headquarters are located in Encino, California and consists of approximately 20,185 square feet of leased property pursuant to a lease that expires on December 31, 2026. We primarily utilize third-party distribution networks. During 2021, we purchased a 131,930 square feet warehouse facility in Evansville, Indiana for a total purchase price of $1.7 million.
Item 2. Properties Our corporate headquarters offices are located in Encino, California and consists of approximately 20,185 square feet of leased space pursuant to a lease that expires on December 31, 2026. We utilize third-party distribution networks. We believe that our current facilities are suitable and adequate to meet our current needs.
Removed
Legal Proceedings We are not subject to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 29 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Repurchases of Equity Securities None Use of Proceeds and Recent Sales of Unregistered Securities None Item 6. R eserved 30
Biggest changeIssuer Repurchases of Equity Securities None Recent Sales of Unregistered Securities None
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. As of March 1, 2023, there were 51 holders of record of our Class B common stock.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. As of February 29, 2024, there were 42 holders of record of our Class B common stock.
Prior to that date, there was no public trading market for our Class A common stock. Our Class B common stock is neither listed nor traded. Holders of Record As of March 1, 2023, there were 10 holders of record of our Class A common stock.
Prior to that date, there was no public trading market for our Class A common stock. Our Class B common stock is neither listed nor traded. Holders of Record As of February 29, 2024, there were 18 holders of record of our Class A common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther income (expense), net Other income (expense), net consists primarily of interest income (expense), and foreign currency (loss) gains. 33 Results of Operations The following table sets forth selected items in our consolidated statements of operations and comprehensive loss for the periods presented: Year Ended December 31, 2022 2021 (in thousands, except per share amounts) Net sales $ 163,181 $ 138,172 Cost of goods sold 93,160 74,231 Gross profit 70,021 63,941 Operating expenses: Selling and marketing 52,869 45,130 General and administrative 36,793 27,516 Equity-based compensation 26,880 77,724 Depreciation and amortization 1,347 997 Total operating expenses 117,889 151,367 Loss from operations (47,868 ) (87,426 ) Other income (expense), net 286 (207 ) Loss before income taxes (47,582 ) (87,633 ) Provision for income taxes (65 ) (34 ) Net loss and comprehensive loss (47,647 ) (87,667 ) Net loss attributable to Zevia LLC prior to the Reorganization Transactions — 1,913 Loss attributable to noncontrolling interest 13,790 39,768 Net loss attributable to Zevia PBC $ (33,857 ) $ (45,986 ) Net loss per share attributable to common stockholders Basic $ (0.81 ) $ (1.33 ) (1) Diluted $ (0.81 ) $ (1.33 ) (1) (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 IPO (see Note 16 of Notes to Consolidated Financial Statements) The following table presents selected items in our consolidated statements of operations and comprehensive loss as a percentage of net sales for the respective periods presented.
Biggest changeResults of Operations The following table sets forth selected items in our consolidated statements of operations and comprehensive loss for the periods presented: Year Ended December 31, 2023 2022 (in thousands, except per share amounts) Net sales $ 166,424 $ 163,181 Cost of goods sold 91,666 93,160 Gross profit 74,758 70,021 Operating expenses: Selling and marketing 62,312 52,869 General and administrative 31,495 36,793 Equity-based compensation 8,279 26,880 Depreciation and amortization 1,615 1,347 Total operating expenses 103,701 117,889 Loss from operations (28,943 ) (47,868 ) Other income, net 673 286 Loss before income taxes (28,270 ) (47,582 ) Provision for income taxes 52 65 Net loss and comprehensive loss (28,322 ) (47,647 ) Loss attributable to noncontrolling interest 6,828 13,790 Net loss attributable to Zevia PBC $ (21,494 ) $ (33,857 ) Net loss per share attributable to common stockholders Basic $ (0.41 ) $ (0.81 ) Diluted $ (0.41 ) $ (0.81 ) 35 The following table presents selected items in our consolidated statements of operations and comprehensive loss as a percentage of net sales for the respective periods presented.
Changes in cash flows related to operating assets and liabilities were primarily due to an increase in accounts receivable of $2.0 million due to increases in net sales and a decrease in accounts payable and accrued expenses and other current liabilities of $4.1 million, primarily due to timing of inventory purchases, partially offset by decrease in inventories of $3.9 million due to timing of inventory purchases and a $0.8 million decrease in prepaid expenses and other assets, primarily insurance expenses as a result of becoming a public company.
Changes in cash flows related to operating assets and liabilities were primarily due to an increase in accounts receivable of $2.0 million due to increases in net sales and a decrease in accounts in accounts payable and accrued expenses and other current liabilities of $4.1 million, primarily due to timing of inventory purchases, partially offset by decrease in inventories of $3.9 million due to timing of inventory purchases and a $0.8 million decrease in prepaid expenses and other assets, primarily insurance expenses as a result of becoming a public company.
We would cease to be an emerging growth company if any of the following events occur; (i) we have more than $1.235 billion in annual revenue, (ii) we have more than $700.0 40 million in market value of our Class A common stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or (iii) we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
We would cease to be an emerging growth company if any of the following events occur: (i) we have more than $1.235 billion in annual revenue, (ii) we have more than $700.0 million in market value of our Class A common stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or (iii) we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
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 Secured Overnight Financing Rate plus 300 basis points from the due date (without extensions) of such tax return.
Net Cash Provided by (Used in) Investing Activities Net cash provided by investing activities of $27.4 million for the year ended December 31, 2022 was primarily due to proceeds from maturities of short-term investments of $30.0 million, offset by capital expenditures of $2.6 million for the purchase of marketing fixtures, software applications and computer equipment used in ongoing operations.
Net cash provided by investing activities of $27.4 million for the year ended December 31, 2022 was due to proceeds from maturities of short-term investments of $30.0 million, offset by capital expenditures of $2.6 million for the purchase of marketing fixtures, software applications and computer equipment used in ongoing operations.
If the disruption continues into the future, we may not be able to access the financial markets and could experience an inability to access additional capital, which could negatively affect our operations in the future. Failure to raise additional capital, if and when needed, could have a material adverse effect on our financial position, results of operations, and cash flows.
If any disruption continues into the future, we may not be able to access the financial markets and could experience an inability to access additional capital, which could negatively affect our operations in the future. Failure to raise additional capital, if and when needed, could have a material adverse effect on our financial position, results of operations, and cash flows.
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).
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 course of mergers related to the IPO (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 members’ 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).
This assessment requires management to exercise significant judgment and make estimates with respect to our ability to generate revenue, gross profits, operating income and taxable income in future periods. Although we believe that 39 the judgment we used is reasonable, actual results can differ due to a change in market conditions, changes in tax laws and other factors.
This assessment requires management to exercise significant judgment and make estimates with respect to our ability to generate revenue, gross profits, operating income and taxable income in future periods. Although we believe that our judgment used is reasonable, actual results can differ due to a change in market conditions, changes in tax laws and other factors.
Net Cash (Used in) Provided by Financing Activities Net cash used in financing activities of $2.3 million for the year ended December 31, 2022 was primarily due to minimum tax withholdings paid on behalf of employees for net share settlements of $2.1 million and payment of debt issuance costs of $0.3 million in connection with the Secured Revolving Line of Credit.
Net cash used in financing activities of $2.3 million for the year ended December 31, 2022 was primarily due to minimum tax withholdings paid on behalf of employees for net share settlements of $2.1 million and payment of debt issuance costs of $0.3 million in connection with the Secured Revolving Line of Credit.
Our selling and marketing expenses are expected to increase in absolute dollars, both as a result of the increased warehousing and distribution costs resulting from increased net sales, which we expect to be partially offset by our continued focus on cost improvements in our supply chain, and as a result of increased focus on marketing programs/spend.
Our selling and marketing expenses are expected to increase in absolute dollars in the long-term, both as a result of the increased warehousing and distribution costs resulting from increased net sales and as a result of increased focus on marketing programs/spend, which we expect to be partially offset by our continued focus on cost improvements in our supply chain.
A 10% change in the accrual for customer incentives and allowances would have affected our income from operations by $0.6 million and $0.4 million for the years ended December 31, 2022 and 2021, respectively. Inventories Inventories consist of raw materials and finished goods. Raw materials include costs for the Company’s ingredients and packaging inventories.
A 10% change in the accrual for customer incentives and allowances would have affected our income from operations by $0.4 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively. Inventories Inventories consist of raw materials and finished goods. Raw materials include costs for the Company’s ingredients and packaging inventories.
Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Overview We are a high-growth company that develops, markets, sells, and distributes great tasting, zero sugar beverages made with simple, plant-based ingredients.
Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Overview We are a growth beverage company that develops, markets, sells, and distributes great tasting, zero sugar beverages made with simple, plant-based ingredients.
We, along with our competitors, have increased pricing on a number of products in response to widespread inflation. These pricing increases may result in future reductions in volume. The following summarizes the components of our results of operations for the years ended December 31, 2022 and 2021, respectively.
We, along with our competitors, have increased pricing on a number of products in response to widespread inflation. These pricing increases may result in future reductions in volume. The following summarizes the components of our results of operations for the years ended December 31, 2023 and 2022, respectively.
Future capital requirements will depend on many factors, including our rate of revenue growth, gross margin and the level of expenditures in all areas of the Company. In future years, we may experience an increase in operating and capital expenditures from time to time, as needed, as we expand business activities and increase headcount to promote growth.
Future capital requirements will depend on many factors, including our rate of revenue growth, gross margin and the level of expenditures in all areas of the Company. In future years, we may experience an increase in operating and capital expenditures from time to time, as needed, as we expand business activities.
All tax positions are periodically analyzed and adjusted as a result of events, such as the resolution of tax audits, issuance of new regulations or new case law, negotiations with tax authorities, and expiration of statutes of limitations. We did not record any unrecognized tax benefit as of December 31, 2022.
All tax positions are periodically analyzed and adjusted as a result of events, such as the resolution of tax audits, issuance of new regulations or new case law, negotiations with tax authorities, and expiration of statutes of limitations. We did not record any unrecognized tax benefit as of December 31, 2023.
For a further discussion on our debt and operating lease commitments as of December 31, 2022, see the sections above as well as Note 7 - Debt , and Note 8 - Leases , in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
For a further discussion on our debt and operating lease commitments as of December 31, 2023, see the sections above as well as Note 7 - Debt , and Note 8 - Leases , in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Any future credit facilities may impose limitations on the ability of Zevia LLC to pay dividends to the Company. In connection with the IPO and the Reorganization Transactions, the Direct Zevia Stockholders and certain continuing members of Zevia LLC received the right to receive future payments pursuant to the TRA.
Any future credit facilities may impose limitations on the ability of Zevia LLC to pay dividends to the Company. In connection with the IPO and the Reorganization Transactions in July 2021, the Direct Zevia Stockholders and certain continuing members of Zevia LLC received the right to receive future payments pursuant to the TRA.
The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. We record a valuation allowance to reduce deferred tax assets to the amount that we believe is more likely than not to be realized.
The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. We record a valuation allowance to reduce DTAs to the amount that we believe is more likely than not to be realized.
As of December 31, 2022, the Company was in compliance with its liquidity covenant. Cash Flows The following table presents the major components of net cash flows from and used in operating, investing and financing activities for the periods indicated.
As of December 31, 2023, the Company was in compliance with its liquidity covenant. Cash Flows The following table presents the major components of net cash flows from and used in operating, investing and financing activities for the periods indicated.
We believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with US GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook.
We believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with U.S. GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook.
The determination of recording or releasing a tax valuation allowance is made, in part, pursuant to an assessment performed by management regarding the likelihood that we will generate sufficient future taxable income against which the benefits of our deferred tax assets may or may not be realized.
The determination of recording or releasing a tax valuation allowance is made, in part, pursuant to an assessment performed by management regarding the likelihood that we will generate sufficient future taxable income against which the benefits of our DTAs may or may not be realized.
In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, historical levels of income, projections of future income, expectations and risk associated with estimates of future taxable income and ongoing prudent and practical tax planning strategies.
In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of DTLs, historical levels of income, projections of future income, expectations and risk associated with estimates of future taxable income and ongoing prudent and practical tax planning strategies.
We believe that consumers increasingly select beverage products based on taste, ingredients and fit with today’s consumer preferences, which has benefited the Zevia® brand and resulted in over one billion cans of Zevia sold to date.
We believe that consumers increasingly select beverage products based on taste, ingredients and fit with today’s consumer preferences, which has benefited the Zevia® brand and resulted in over 1.9 billion cans of Zevia sold to date.
We expect to satisfy these commitments through a combination of cash on hand and cash generated from sales of our products. 38 Critical Accounting Policies and Estimates Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with US GAAP.
We expect to satisfy these commitments through a combination of cash on hand and cash generated from sales of our products. Critical Accounting Policies and Estimates Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with U.S. GAAP.
Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A. “Risk Factors” and other sections of this Annual Report on Form 10-K. The financial data discussed below reflects the historical results of operations and financial position of the Company.
Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A. “Risk Factors” and other sections of this Annual Report. The financial data discussed below reflects the historical results of operations and financial position of the Company.
Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that the reduction in tax payments for us associated with the federal, state and local tax benefits described above would aggregate to approximately $65.7 million through 2037.
Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that the reduction in tax payments for us associated with the federal, state and local tax benefits described above would aggregate to approximately $66.1 million through 2037.
Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with US GAAP.
Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP.
We believe that our cash and cash equivalents as of December 31, 2022, together with our operating activities and available borrowings under the Secured Revolving Line of Credit, will provide adequate liquidity for ongoing operations, planned capital expenditures and other investments beyond the next 12 months.
We believe that our cash and cash equivalents as of December 31, 2023, together with our operating activities and available borrowings under the Secured Revolving Line of Credit (as defined below), will provide adequate liquidity for ongoing operations, planned capital expenditures and other investments beyond the next 12 months.
Components of Our Results of Operations Net Sales We generate net sales from sales of our products, including Soda, Energy Drinks, Organic Tea, Mixers, and Kidz drinks, to our customers, which include grocery distributors, national retailers, natural products retailers, warehouse club and e-commerce channels, in the U.S. and Canada.
Components of Our Results of Operations Net Sales We generate net sales from the sales of our products, including Soda, Energy Drinks, Organic Tea, and Kids drinks, to our customers, which include grocery distributors, national retailers, natural products retailers, warehouse club retailers and retailers with e-commerce channels, in the U.S. and Canada.
Adjusted EBITDA may in the future also be adjusted for amounts impacting net income related to the TRA liability and other infrequent and unusual transactions. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with US GAAP.
Also, Adjusted EBITDA may in the future be adjusted for amounts impacting net income related to the TRA liability and other infrequent and unusual transactions. 39 Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with U.S. GAAP.
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, Mixers, and Kidz drinks.
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.
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.
Gross profit may be favorably impacted by leveraging our asset-light business model and through increased distribution direct to retailers, the increased scale of our business and our continued focus on cost improvements, particularly in our supply chain. Operating Expenses Selling and Marketing Expenses Selling and marketing expenses consist primarily of warehousing and distribution costs and advertising and marketing expenses.
Gross profit may be favorably impacted by leveraging our asset-light business model and through increased distribution direct to retailers, the increased scale of our business and our continued focus on cost and efficiency improvements. Operating Expenses Selling and Marketing Expenses Selling and marketing expenses consist primarily of warehousing and distribution costs and advertising and marketing expenses.
The following table summarizes our significant contractual obligations as of December 31, 2022: Payments Due by Period Total Less Than One Year 1-3 Years 3-5 Years More Than Five Years (in thousands) Rent obligations (1) $ 745 $ 745 $ — $ — $ — Total $ 745 $ 745 $ — $ — $ — (1) Real estate lease payments Our inventory purchase commitments are generally short-term in nature and have ordinary commercial terms.
The following table summarizes our significant contractual obligations as of December 31, 2023: Payments Due by Period Total Less Than One Year 1-3 Years 3-5 Years More Than Five Years (in thousands) Rent obligations (1) $ 2,187 $ 702 $ 1,485 $ — $ — Total $ 2,187 $ 702 $ 1,485 $ — $ — (1) Real estate lease payments Our inventory purchase commitments are generally short-term in nature and have ordinary commercial terms.
As a result, our gross profit and profit margin may not be comparable to other entities that present shipping and handling costs as a component of cost of goods sold.
As a result, our gross profit and profit margin may not be comparable to other entities that present shipping and handling costs as a component of cost of goods sold. Gross Profit Gross profit consists of our net sales less costs of goods sold.
Under such scenario we would be required to pay the Direct Zevia Stockholders and certain continuing members of Zevia LLC 85% of such amount, or $55.8 million through 2037.
Under such scenario we would be required to pay the Direct Zevia Stockholders and certain continuing members of Zevia LLC 85% of such amount, or $56.2 million through 2037.
The following factors and trends in our business have driven net sales growth over the past two years and are expected to continue to be key drivers of our net sales growth for the foreseeable future: • leveraging our platform and mission to grow brand awareness, increase velocity and expand our consumer base; • continuing to grow our strong relationships across our retailer network and expand distribution amongst new and existing channels, both in-store and online; and • continuous innovation efforts, enhancement of existing products, and introduction of additional flavors within existing categories, as well as entering into new categories.
The amounts for these incentives are deducted from gross sales to arrive at our net sales. 33 The following factors and trends in our business have driven net sales over the past two years and are expected to continue to be key drivers of our net sales for the foreseeable future: • leveraging our platform and mission to grow brand awareness, increase velocity and expand our consumer base; • continuing to grow our strong relationships across our retailer network and retain and expand distribution amongst new and existing channels, both in-store and online; and • continuous innovation efforts, enhancement of existing products, and introduction of additional flavors within existing categories, as well as entering into new categories.
Summary of Significant Accounting Policies , in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, for information about these policies as well as a description of our other accounting policies. Our critical accounting estimates are described below.
Summary of Significant Accounting Policies , in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, for information about these policies as well as a description of our other accounting policies.
To the extent that we believe it is more likely than not that some portion of our deferred tax assets will not be realized, we would increase the valuation allowance against deferred tax assets.
To the extent that we believe it is more likely than not that some portion of our DTAs will not be realized, we would increase the valuation allowance against DTAs.
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.
As of December 31, 2023, the Company believes based on applicable accounting standards, that it was more likely than not that its DTAs subject to the TRA would not be realized as of December 31, 2023; therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such DTAs.
Revenue Recognition We recognize revenue when performance obligations under the terms of a contract with the customer are satisfied. Accruals for customer incentives and allowances, sales returns and marketing programs are established for the expected payout based on contractual terms, volume-based metrics and/or historical trends.
Our critical accounting estimates are described below. 40 Revenue Recognition We recognize revenue when performance obligations under the terms of a contract with the customer are satisfied. Accruals for customer incentives and allowances, sales returns and marketing programs are established for the expected payout based on contractual terms, volume-based metrics and/or historical trends.
As our business continues to grow, we expect to see continued seasonality effects, with net sales tending to be greater in the second and third quarters of the year. 35 Liquidity and Capital Resources Liquidity and Capital Resources As of December 31, 2022, we had $47.4 million in cash and cash equivalents.
As our business continues to grow, we expect to see continued seasonality effects, with net sales tending to be greater in the second and third quarters of the year. 37 Liquidity and Capital Resources Liquidity and Capital Resources As of December 31, 2023, we had $32.0 million in cash and cash equivalents.
Commitments Effective March 2022, the Company entered into an amendment to the lease for our corporate headquarters offices to extend the term through December 31, 2023 and 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.
Commitments Effective March 2022, the Company entered into an amendment to the lease for its corporate headquarters offices to extend the lease term through December 31, 2023 and expand the total square footage from 17,923 square feet to 20,185 square feet which commenced on May 1, 2022.
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.
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 75.8% and 68.7% as of December 31, 2023 and 2022, respectively.
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 an expense within its consolidated statements of operations and comprehensive loss.
We expect our cost of goods sold to increase in absolute dollars as our volume increases. We elected to classify shipping and handling costs for salable product outside of cost of goods sold, in selling and marketing expenses in our consolidated statements of operations and comprehensive loss.
We elected to classify shipping and handling costs for salable product outside of cost of goods sold, in selling and marketing expenses in our consolidated statements of operations and comprehensive loss.
We offer our customers sales incentives that are designed to support the distribution of our products to consumers. These incentives include discounts, trade promotions, price allowances and product placement fees. The amounts for these incentives are deducted from gross sales to arrive at our net sales.
We offer our customers sales incentives that are designed to support the distribution of our products to consumers. These incentives include discounts, trade promotions, price allowances and product placement fees.
As of December 31, 2022, we have a full valuation allowance against deferred tax assets totaling $72.7 million. In accordance with ASC 740, Income Taxes we perform a comprehensive review of uncertain tax positions regularly.
As of December 31, 2023, we have a full valuation allowance against DTAs totaling $75.5 million. 41 In accordance with ASC 740, Income Taxes we perform a comprehensive review of uncertain tax positions regularly.
Twelve Months Ended December 31, (in thousands) 2022 2021 Cash (used in) provided by: Operating activities $ (20,778 ) $ (17,806 ) Investing activities $ 27,407 $ (33,143 ) Financing activities $ (2,340 ) $ 79,123 Net Cash Used in Operating Activities Our cash flows used in operating activities are primarily influenced by working capital requirements.
Twelve Months Ended December 31, (in thousands) 2023 2022 Cash (used in) provided by: Operating activities $ (16,274 ) $ (20,778 ) Investing activities $ 805 $ 27,407 Financing activities $ 25 $ (2,340 ) Net Cash Used in Operating Activities Our cash flows used in operating activities are primarily influenced by working capital requirements.
Equity-Based Compensation Expense Equity-based compensation expense consists of the recorded expense of equity-based compensation for our employees and for certain consultants and service providers who are non-employees. We record equity-based compensation expense for employee grants using grant date fair value for RSUs or a Black-Scholes valuation model to calculate the fair value of stock options by date granted.
We record equity-based compensation expense for employee grants using grant date fair value for RSUs or a Black-Scholes valuation model to calculate the fair value of stock options by date granted.
Also, we will continue to assess our liquidity needs in light of current and future global health emergencies, inflationary pressures, the hostilities in Eastern Europe, and political tensions between the U.S. and China that may continue to disrupt and impact the global and national economies and global financial markets.
Also, we will continue to assess our liquidity needs in light of current and future global health emergencies, inflationary pressures, relatively high interest rates, volatility in the financial markets, recession fears, financial institution instability, any potential shutdown of the U.S. government, current and future global hostilities, and political tensions between the U.S. and China that may continue to disrupt and impact the global and national economies and global financial markets.
We do not have short- or long- term sales commitments with our customers. Cost of Goods Sold Cost of goods sold consists of all costs to acquire and manufacture our products, including the cost of ingredients, raw materials, packaging, in-bound freight and logistics and third-party production fees.
Cost of Goods Sold Cost of goods sold consists of all costs to acquire and manufacture our products, including the cost of ingredients, raw materials, packaging, in-bound freight and logistics and third-party production fees.
Emerging Growth Company Status We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.
Recent Accounting Pronouncements Refer to Note 2 - Summary of Significant Accounting Policies in the Notes to our Consolidated Financial Statements included in this Annual Report for a discussion of recently issued accounting pronouncements not yet adopted. 42 Emerging Growth Company Status We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.
Percentages may not sum due to rounding: Year Ended December 31, 2022 2021 Net sales 100 % 100 % Cost of goods sold 57 % 54 % Gross profit 43 % 46 % Operating expenses: Selling and marketing 32 % 33 % General and administrative 23 % 20 % Equity-based compensation 16 % 56 % Depreciation and amortization 1 % 1 % Total operating expenses 72 % 110 % Loss from operations (29 )% (63 )% Other income (expense), net 0 % (0 )% Loss before income taxes (29 )% (63 )% Provision for income taxes (0 )% (0 ) Net loss and comprehensive loss (29 )% (63 )% Net loss attributable to Zevia LLC prior to the Reorganization Transactions 0 % 1 % Loss attributable to noncontrolling interest 8 % 29 % Net loss attributable to Zevia PBC (21 )% (33 )% Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Sales Year Ended December 31, Change (in thousands) 2022 2021 Amount Percentage Net sales $ 163,181 $ 138,172 $ 25,009 18.1 % 34 Net sales were $163.2 million for the year ended December 31, 2022 as compared to $138.2 million for the year ended December 31, 2021.
Percentages may not sum due to rounding: Year Ended December 31, 2023 2022 Net sales 100 % 100 % Cost of goods sold 55 % 57 % Gross profit 45 % 43 % Operating expenses: Selling and marketing 37 % 32 % General and administrative 19 % 23 % Equity-based compensation 5 % 16 % Depreciation and amortization 1 % 1 % Total operating expenses 62 % 72 % Loss from operations (17 )% (29 )% Other income, net 0 % 0 % Loss before income taxes (17 )% (29 )% Provision for income taxes 0 % 0 Net loss and comprehensive loss (17 )% (29 )% Loss attributable to noncontrolling interest 4 % 8 % Net loss attributable to Zevia PBC (13 )% (21 )% Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Sales Year Ended December 31, Change (in thousands) 2023 2022 Amount Percentage Net sales $ 166,424 $ 163,181 $ 3,243 2.0 % Net sales were $166.4 million for the year ended December 31, 2023 as compared to $163.2 million for the year ended December 31, 2022.
Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net income (loss) and other results stated in accordance with US GAAP.
Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net income (loss) and other results stated in accordance with U.S. GAAP. The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with U.S.
Loans under the Secured Revolving Line of Credit bear interest based on either, at our 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.
Loans under the Secured Revolving Line of Credit bear interest based on either, at our 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. 38 Under the Secured Revolving Line of Credit, we are 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.
There have been no amounts drawn from 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.
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.
General and Administrative Expenses Year Ended December 31, Change (in thousands) 2022 2021 Amount Percentage General and administrative expenses $ 36,793 $ 27,516 $ 9,277 33.7 % General and administrative expenses were $36.8 million for the year ended December 31, 2022 as compared to $27.5 million for the year ended December 31, 2021.
General and Administrative Expenses Year Ended December 31, Change (in thousands) 2023 2022 Amount Percentage General and administrative expenses $ 31,495 $ 36,793 $ (5,298 ) (14.4 )% General and administrative expenses were $31.5 million for the year ended December 31, 2023 as compared to $36.8 million for the year ended December 31, 2022.
General and Administrative Expenses Administrative expenses include all salary and other personnel expenses (other than equity-based compensation expense) for our employees, including employees related to management, marketing, sales, product development, quality control, accounting, information technology and other functions. Our general and administrative expenses are expected to grow in absolute dollars but decline as a percentage of net sales over time.
General and Administrative Expenses General and administrative expenses include all salary and other personnel expenses (other than equity-based compensation expense) for our employees, including employees related to management, marketing, sales, product development, quality control, accounting, information technology and other functions.
Warehousing and distribution costs include storage, transfer, repacking and handling fees and out-bound freight and delivery charges. Advertising and marketing expenses consist of variable costs associated with production and media buying of marketing programs and trade events. Selling and marketing expenses also includes the incremental costs of obtaining contracts, such as sales commissions.
Warehousing and distribution costs include storage, transfer, repacking and handling fees and out-bound freight and delivery charges. Advertising and marketing expenses consist of variable costs associated with production and media buying of marketing programs and trade events, as well as sampling and in-store demonstration costs.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report.
Gross Profit and Gross Margin Year Ended December 31, Change (in thousands) 2022 2021 Amount Percentage Gross profit $ 70,021 $ 63,941 $ 6,080 9.5 % Gross margin 42.9 % 46.3 % Gross profit was $70.0 million for the year ended December 31, 2022 as compared to $63.9 million for the year ended December 31, 2021.
Gross Profit and Gross Margin Year Ended December 31, Change (in thousands) 2023 2022 Amount Percentage Gross profit $ 74,758 $ 70,021 $ 4,737 6.8 % Gross margin 44.9 % 42.9 % 2.0 Gross profit was $74.8 million for the year ended December 31, 2023 as compared to $70.0 million for the year ended December 31, 2022.
Our results of operations depend on our ability to arrange for the purchase of raw materials and the production of our products in sufficient quantities at competitive prices. We have long-term contracts with certain suppliers of stevia and aluminum cans.
Our results of operations depend on our contract manufacturers ability to arrange for the purchase of raw materials and the production of our products in sufficient quantities at competitive prices.
Equity-based compensation cost for RSU awards is measured based on the closing fair market value of the Zevia LLC Class B unit or the Zevia PBC Class A common stock, as applicable, on the date of grant.
Equity-based compensation cost for RSU awards is measured based on the closing fair market value of the Zevia LLC Class B unit or the Zevia PBC Class A common stock, as applicable, on the date of grant. Our equity-based compensation expense is expected to remain relatively consistent in absolute dollars but decline as a percentage of net sales over time.
Cost of Goods Sold Year Ended December 31, Change (in thousands) 2022 2021 Amount Percentage Cost of goods sold $ 93,160 $ 74,231 $ 18,929 25.5 % Cost of goods sold was $93.2 million for the year ended December 31, 2022 as compared to $74.2 million for the year ended December 31, 2021.
Cost of Goods Sold Year Ended December 31, Change (in thousands) 2023 2022 Amount Percentage Cost of goods sold $ 91,666 $ 93,160 $ (1,494 ) (1.6 )% Cost of goods sold was $91.7 million for the year ended December 31, 2023 as compared to $93.2 million for the year ended December 31, 2022.
Zevia LLC is a pass-through entity for U.S. federal and most applicable state and local income tax purposes. As an entity classified as a partnership for tax purposes, Zevia LLC is not subject to U.S. federal and certain state and local income taxes.
As an entity classified as a partnership for tax purposes, Zevia LLC is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Zevia LLC is passed through to its members, including the Company.
The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with US GAAP, to Adjusted EBITDA for the periods presented: Year Ended December 31, (in thousands) 2022 2021 Net loss and comprehensive loss $ (47,647 ) $ (87,667 ) Other (income) expense, net* (286 ) 207 Provision for income taxes 65 34 Depreciation and amortization 1,347 997 Equity-based compensation 26,880 77,724 Adjusted EBITDA $ (19,641 ) $ (8,705 ) * Includes interest (income) expense, foreign currency (gains) losses, and (gains) losses on disposal of fixed assets.
GAAP, to Adjusted EBITDA for the periods presented: Year Ended December 31, (in thousands) 2023 2022 Net loss and comprehensive loss $ (28,322 ) $ (47,647 ) Other income, net* (673 ) (286 ) Provision for income taxes 52 65 Depreciation and amortization 1,615 1,347 Equity-based compensation 8,279 26,880 Adjusted EBITDA $ (19,049 ) $ (19,641 ) * Includes interest (income) expense, foreign currency (gains) losses, and (gains) losses on disposal of fixed assets.
Net cash used in operating activities of $17.8 million for the year ended December 31, 2021 was primarily driven by a net loss of $87.7 million and by a net decrease in cash related to changes in operating assets and liabilities of $9.5 million, partially offset by non-cash expenses of $79.4 million primarily related to equity-based compensation.
Net cash used in operating activities of $16.3 million for the year ended December 31, 2023 was primarily driven by a net loss of $28.3 million, partially offset by non-cash expenses of $11.0 million primarily related to equity-based compensation and depreciation and amortization expense and a net increase in cash related to changes in operating assets and liabilities of $1.0 million.
We expect both new distribution and increased organic sales from existing outlets and pricing strategies to contribute to our growth going forward, however sales levels in any given period may be impacted by seasonality and customers efforts to manage inventory. We sell our products in the U.S. and Canada, direct to retailers and also through distributors.
We expect both new distribution and increased organic sales from existing outlets and pricing strategies to contribute to our future growth; however, sales levels in any given period may continue to be impacted by seasonality, increased level of competition, customers efforts to manage inventory, and our ability to fulfill customer demands.
The TRA liability that would be recognized if the associated tax benefits were determined to be fully realizable totaled $55.8 million at December 31, 2022.
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.
These factors are impacted by market and economic conditions and changes in strategic direction. The calculation of our inventory valuation, specifically the write-down for excess or obsolete inventories, requires management to make assumptions and to apply judgment regarding forecasted customer demand that may turn out to be inaccurate.
The calculation of our inventory valuation, specifically the write-down for excess or obsolete inventories, requires management to make assumptions and to apply judgment regarding forecasted customer demand that may turn out to be inaccurate. Inventory net realizable value adjustments, once established, are not reversed until the related inventory has been sold or scrapped.
We did not have any material long-term inventory purchase commitments as of December 31, 2022. Our leases generally consist of long-term operating leases, which are payable monthly and relate to our office space.
Our leases generally consist of long-term operating leases, which are payable monthly and relate to our office space.
The IPO related amounts were partially offset by distribution to unitholders for tax payments of $2.7 million. Non-GAAP Financial Measures We report our financial results in accordance with US GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our operating performance.
Non-GAAP Financial Measures We report our financial results in accordance with U.S. GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our operating performance.
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.
Depreciation and Amortization Depreciation is primarily related to 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.
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. We also own several other trademarks in both the U.S. and in foreign countries. Depreciation and amortization expense is expected to increase in-line with ongoing capital expenditures as our business grows.
We also own several other trademarks in both the U.S. and in foreign countries. Depreciation and amortization expense is expected to increase in-line with ongoing capital expenditures as our business grows. Other income, net Other income, net consists primarily of interest income (expense), and foreign currency (loss) gains.
Equity-based compensation expense was $77.7 million for the year ended December 31, 2021, reflecting RSU awards and phantom stock awards that generally vested over six months following the IPO. Seasonality Generally, we experience greater demand for our products during the second and third fiscal quarters, which correspond to the warmer months of the year in our major markets.
Seasonality Generally, we experience greater demand for our products during the second and third fiscal quarters, which correspond to the warmer months of the year in our major markets.
Although the timing and extent of future payments could vary significantly under the TRA for the factors discussed above, we anticipate funding payments from the TRA from cash flows generated from operations. 36 Credit Facility ABL Credit Facility On February 22, 2022, we 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.
Credit Facility ABL Credit Facility On February 22, 2022, we 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 increase in gross profit of $6.1 million, or 9.5%, was primarily driven by higher net sales, partially offset by higher cost of goods sold. Gross margin for the year ended December 31, 2022 declined to 42.9% from 46.3% in the prior-year period. The decline was primarily due to the impact of inflationary pressures partially offset by price increases.
The increase in gross profit of $4.7 million, or 6.8%, was primarily driven by pricing increases taken in 2022 and 2023, partially offset by lower volumes and higher inventory losses. Gross margin for the year ended December 31, 2023 improved to 44.9% from 42.9% in the prior-year period.
Selling and Marketing Expenses Year Ended December 31, Change (in thousands) 2022 2021 Amount Percentage Selling and marketing expenses $ 52,869 $ 45,130 $ 7,739 17.1 % Selling and marketing expenses were $52.9 million for the year ended December 31, 2022 as compared to $45.1 million for the year ended December 31, 2021.
The improvement was primarily due to pricing increases taken in 2022 and 2023, partially offset by higher inventory losses. 36 Selling and Marketing Expenses Year Ended December 31, Change (in thousands) 2023 2022 Amount Percentage Selling and marketing expenses $ 62,312 $ 52,869 $ 9,443 17.9 % Selling and marketing expenses were $62.3 million for the year ended December 31, 2023 as compared to $52.9 million for the year ended December 31, 2022.
Given the length of time over which payments would be payable, the impact to liquidity in any single year is greatly reduced.
Given the length of time over which payments would be payable, the impact to liquidity in any single year is greatly reduced. Although the timing and extent of future payments could vary significantly under the TRA for the factors discussed above, we anticipate funding payments from the TRA from cash flows generated from operations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−3 removed1 unchanged
Biggest changeAs we source some ingredients and packaging materials from international sources, our results of operations could be impacted by changes in exchange rates. We sell and distribute our products to Canadian customers, who are invoiced and remit payment in Canadian dollars.
Biggest changeForeign Exchange Risk The majority of our sales and costs are denominated in U.S. dollars and are not subject to foreign exchange risk. As we source some ingredients and packaging materials from international sources, our results of operations could be impacted by changes in exchange rates.
The prices of stevia and other ingredients we use are subject to many factors beyond our control, such as market conditions, climate change, supply chain challenges, and adverse weather conditions. The price for aluminum cans also fluctuates depending on market conditions.
Additionally, the prices of stevia and other ingredients we use are subject to many factors beyond our control, such as market conditions, climate change, supply chain challenges, and adverse weather conditions. Our aluminum cans are procured by our contract manufacturers through various can manufacturers. The price for aluminum cans also fluctuates depending on market conditions.
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 sales and expenses.
We sell and distribute our products to Canadian customers, who are invoiced and remit payment in Canadian dollars. 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 sales and expenses.
To the extent we increase sourcing from outside the United States or increase net sales outside of the United States that are denominated in currencies other than the U.S. dollar, the impact of changes in exchange rates on our results of operations would increase.
To the extent we increase sourcing from outside the U.S. or increase net sales outside of the U.S. that are denominated in currencies other than the U.S. dollar, the impact of changes in exchange rates on our results of operations would increase. Foreign exchange gains and losses were not material for the years ended December 31, 2023 and 2022.
If our costs were to become subject to further and prolonged significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations and financial condition.
Inflation Risk We believe that inflation has had a material effect on our business, results of operations, and financial condition. If our costs were to become subject to further and prolonged significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
Commodity Risk We are subject to market risks with respect to commodities because our ability to recover increased costs through higher pricing may be limited by the competitive environment in which we operate. Our principal commodities risks relate to our purchases of aluminum, diesel fuel, cartons and corrugate. 41
Our inability or failure to do so could harm our business, results of operations and financial condition. Commodity Risk We are subject to market risks with respect to commodities because our ability to recover increased costs through higher pricing may be limited by the competitive environment in which we operate.
Our ability to continue to procure enough aluminum cans at reasonable prices will depend on future developments that are highly uncertain.
Our contract manufacturers ability to continue to procure enough aluminum cans at reasonable prices will depend on future developments that are highly uncertain. We, along with our contract manufacturers, are working to diversify our sources of supply and intend to enter into additional long-term contracts to better ensure stability of prices of our raw materials.
Currently, a key ingredient in our products is stevia extract. We have a two-year agreement effective June 1, 2021 with a large multi-national ingredient company for the supply of stevia on similar terms as our prior agreement with the same ingredient company, including fixed pricing for the duration of the term.
Currently, a key ingredient in our products is stevia extract. Our stevia leaf extract is procured by our contract manufacturers and sourced from a large multi-national ingredient company with whom we have a long-standing relationship through a two-year agreement that was entered into effective October 15, 2023 which includes fixed pricing for the duration of the term.
Removed
For the year ended December 31, 2022, a hypothetical 10% increase or 10% decrease in the weighted average cost of aluminum would have resulted in an increase of approximately $1.5 million or a decrease of $1.5 million, respectively, to cost of goods sold.
Added
During 2023, we also tested and approved the use of another stevia leaf extract supplier, whose stevia leaf is derived from a region different than the above supplier. We continue to seek to diversity alternative sources of supply to mitigate potential supply disruptions. However, there can be no assurance that we will be able to secure alternative sources of supply.
Removed
We are working to diversify our sources of supply and intend to enter into additional long-term contracts to better ensure stability of prices of our raw materials. Foreign Exchange Risk The majority of our sales and costs are denominated in U.S. dollars and are not subject to foreign exchange risk.
Added
Our principal commodities risks relate to purchases of aluminum, diesel fuel, cartons and corrugate. 43
Removed
Foreign exchange gains and losses were not material for the years ended December 31, 2022 and 2021. Inflation Risk We believe that inflation has had a material effect on our business, results of operations, and financial condition.

Other ZVIA 10-K year-over-year comparisons