Zevia PBC 10-Q for FY2024 Q2
Zevia PBC (ZVIA)
About this 10-Q
Zevia PBC filed this 10-Q on August 7, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $40.43M
- down 4.3% from $42.24M a year earlier
- Net loss
- $6.96M
- compared with a net loss of $5.01M a year earlier
- Diluted EPS
- -$0.10
- compared with -$0.08 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer Identification Number) |
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(Address including Zip Code, and Telephone Number including Area Code, of Registrant’s Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
As of August 1, 2024, there were
Table of Contents
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PART I |
5 |
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Item 1. |
5 |
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5 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) |
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Condensed Consolidated Statements of Changes in Equity (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
9 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
Item 3. |
28 |
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Item 4. |
29 |
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Part II. |
30 |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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32 |
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the period ended June 30, 2024 (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) about us and our industry that involve substantial known and unknown risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including, without limitation, statements regarding our future results of operations or financial condition, business strategy, expectations about capital allocation, investment activities, sourcing of raw materials, the impact of our supply chain challenges, logistics, distribution and marketing initiatives, the impact of our Productivity Initiative, including expected restructuring charges, cost savings and other benefits, factors and trends in our business, including seasonality, future expenses or payments under the TRA (as defined below), shifting market demand and consumer preferences, ability to effectively compete, ESG-related commitments, validity of our trademarks and other intellectual property, impact of government regulations, liquidity and capital requirements, including the sufficiency of our cash and liquidity or sources of capital, satisfying commitments, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “consider,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “on track,” “outlook,” “plan,” “potential,” “predict,” “project,” “pursue,” “seek,” “should,” “target,” “will” or “would” or the negative of these words or other similar words, terms or expressions.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 6, 2024 for the period ended December 31, 2023 (“Annual Report”), as well as our subsequent filings with the SEC. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report, including, but not limited to, the following:
3
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by applicable law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
4
PART I – FINANCIAL INFORMATION
ITEM 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ZEVIA PBC
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts) |
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June 30, 2024 |
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December 31, 2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets under operating leases, net |
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Intangible assets, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Total liabilities |
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Stockholders’ equity |
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Preferred Stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Zevia PBC stockholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ZEVIA PBC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(in thousands, except share and per share amounts) |
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Selling and marketing |
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General and administrative |
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Equity-based compensation |
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Depreciation and amortization |
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Restructuring |
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Total operating expenses |
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Loss from operations |
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Other income, net |
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Loss before income taxes |
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Provision for income taxes |
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Net loss and comprehensive loss |
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Loss attributable to noncontrolling interest |
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Net loss attributable to Zevia PBC |
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$ |
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$ |
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$ |
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$ |
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Net loss per share attributable to common stockholders |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ZEVIA PBC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
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Class A Common Stock |
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Class B Common Stock |
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Additional |
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(in thousands, except for share amounts) |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid in |
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Accumulated |
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Noncontrolling interest |
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Total |
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Balance at January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Vesting and release of common stock under equity incentive plans, net |
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— |
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— |
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( |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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( |
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( |
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( |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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( |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Vesting and release of common stock under equity incentive plans, net |
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— |
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— |
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( |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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— |
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( |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Class A Common Stock |
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Class B Common Stock |
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Additional |
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(in thousands, except for share amounts) |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid in |
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Accumulated |
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Noncontrolling interest |
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Total |
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Balance at January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Vesting and release of common stock under equity incentive plans, net |
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— |
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— |
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( |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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( |
) |
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( |
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( |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Vesting and release of common stock under equity incentive plans, net |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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— |
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( |
) |
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— |
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( |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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( |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ZEVIA PBC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
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Six Months Ended June 30, |
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|||||
(in thousands) |
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2024 |
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2023 |
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Operating activities: |
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Net loss |
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$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
(Gain) loss on disposal of property, equipment and software, net |
|
|
( |
) |
|
|
|
|
Amortization of debt issuance cost |
|
|
|
|
|
|
||
Equity-based compensation |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
Investing activities: |
|
|
|
|
|
|
||
Purchases of property, equipment and software |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of property, equipment and software |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities: |
|
|
|
|
|
|
||
Proceeds from revolving line of credit |
|
|
|
|
|
|
||
Repayment of revolving line of credit |
|
|
( |
) |
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net change from operating, investing, and financing activities |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Non-cash investing and financing activities |
|
|
|
|
|
|
||
Capital expenditures included in accounts payable |
|
$ |
|
|
$ |
|
||
Conversion of Class B common stock to Class A common stock |
|
$ |
|
|
$ |
|
||
Operating lease right-of-use assets obtained in exchange for lease liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
ZEVIA PBC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS
Organization and operations
Zevia PBC (the “Company,” “we,” “us,” “our”), is a growth beverage company that develops, markets, sells, and distributes great tasting, zero sugar beverages made with simple, plant-based ingredients. We are a Delaware public benefit corporation and have been designated as a “Certified B Corporation,” and are focused on addressing the global health challenges resulting from excess sugar consumption by offering a broad portfolio of zero sugar, zero calorie, naturally sweetened beverages. All Zevia® beverages are Non-GMO Project verified, gluten-free, Kosher, vegan and zero sodium and include a variety of flavors across Soda, Energy Drinks, Organic Tea, and Kids drinks. Our products are distributed and sold principally across the United States (“U.S.”) and Canada through a diverse network of major retailers in the food, drug, warehouse club, mass, natural, convenience and e-commerce channels and in grocery and natural product stores and specialty outlets. The Company’s products are manufactured and maintained at third-party beverage production and warehousing facilities located in both the U.S. and Canada.
The Company completed its initial public offering (“IPO”) of
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statements and are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024, or for any other interim period or any other future fiscal year. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date but does not include all disclosures, including certain notes, required by U.S. GAAP that are required on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. Therefore, these interim financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2023 and accompanying notes included in the Annual Report. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the condensed consolidated financial statements for the periods presented have been reflected.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, Zevia LLC, that it controls due to ownership of a majority equity interest. All intercompany transactions and balances have been eliminated in consolidation.
The Company owns a majority economic interest in, and operates and controls all of the businesses and affairs of, Zevia LLC. Accordingly, the Company has prepared these accompanying unaudited condensed consolidated financial statements in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation.
On January 1, 2022, the Company and Zevia LLC entered into a service agreement to transfer the services of all employees of the Company to Zevia LLC. Under terms of the service agreement between the entities, the payroll costs of employees are borne by Zevia LLC while certain other non-payroll costs, such as those associated with stock compensation arrangements, remain with the Company. In addition, pursuant to the Thirteenth Amended and Restated Limited Liability Company Agreement of Zevia LLC, dated as of July 21, 2021, Zevia LLC shall reimburse the Company for certain expenses for overhead, administrative, and other expenses, at the Company’s discretion. For the three and six months ended June 30, 2024 and 2023, it was determined that the majority of such costs will be retained by the Company, with certain costs directly attributable to Zevia LLC being borne by that entity. These costs impacted the amount of net loss reported by Zevia LLC and consequently impacted the amount allocated to noncontrolling interest.
9
Use of estimates
The preparation of the accompanying unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported amount of net sales and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by the Company relate to: net sales and associated cost recognition; the useful lives assigned to and the recoverability of property and equipment; adjustments recorded for inventory obsolescence and adjustments made for net realizable value; the incremental borrowing rate for lease liabilities; allowance for doubtful accounts; the useful lives assigned to and the recoverability of intangible assets; realization of deferred tax assets; and the determination of the fair value of equity instruments, including restricted unit awards, and equity-based compensation awards. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of its assets and liabilities.
Recent accounting pronouncements
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the accompanying unaudited condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Recently Issued Accounting Pronouncements – Not Yet Adopted
In November 2023, the FASB issues ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.
In December 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures. The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The ASU is effective for private companies for annual periods beginning after December 15, 2025, with early adoption permitted. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating the impact of adopting this guidance.
Any other recently issued accounting pronouncements are neither relevant, nor expected to have a material impact on the Company’s financial statements.
3. REVENUES
Disaggregation of Revenue
The Company’s products are distributed and sold principally across the U.S. and Canada through a diverse network of major retailers, including: food and drug stores, grocery stores, natural product stores, specialty outlets, and warehouse clubs; and through natural, convenience, and online/e-commerce channels. The following table disaggregates the Company’s sales by channel:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Retail sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Online/e-commerce |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table disaggregates the Company’s sales by geographic location of the respective customers:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract liabilities
The Company did
10
4. INVENTORIES
Inventories consist of the following as of:
(in thousands) |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following as of:
(in thousands) |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Leasehold improvements |
|
$ |
|
|
$ |
|
||
Computer equipment |
|
|
|
|
|
|
||
Furniture and equipment |
|
|
|
|
|
|
||
Quality control and marketing equipment |
|
|
|
|
|
|
||
Assets not yet placed in service |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
For the three months ended June 30, 2024 and 2023, depreciation expense, including the amortization of leasehold improvements, amounted to approximately $
6. INTANGIBLE ASSETS, NET
The following table provides information pertaining to the Company’s intangible assets as of:
|
|
June 30, 2024 |
|
|||||||||||||
(in thousands) |
|
Weighted-Average Remaining Useful Life |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Intangible Assets, Net |
|
||||
Software |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Customer relationships |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trademarks |
|
N/A |
|
|
|
|
|
|
— |
|
|
|
|
|||
Intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
December 31, 2023 |
|
|||||||||||||
(in thousands) |
|
Weighted-Average Remaining Useful Life |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Intangible Assets, Net |
|
||||
Software |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Customer relationships |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trademarks |
|
N/A |
|
|
|
|
|
|
— |
|
|
|
|
|||
Intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
For the three months ended June 30, 2024 and 2023, total amortization expense amounted to $
11
Amortization expense for intangible assets with definite lives is expected to be as follows:
(in thousands) |
|
|
|
Remainder of 2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
Expected amortization expense for intangible assets with definite lives |
$ |
|
|
7. DEBT
ABL Credit Facility
On February 22, 2022, Zevia LLC (the “Borrower”) obtained a revolving credit facility (the “Secured Revolving Line of Credit”) by entering into a Loan and Security Agreement with Bank of America, N.A. (the “Loan and Security Agreement”). The Borrower may draw funds under the Secured Revolving Line of Credit up to an amount not to exceed the lesser of (i) a $
Loans under the Secured Revolving Line of Credit bear interest based on either, at the Borrower’s option, the Bloomberg Short-Term Bank Yield Index rate plus an applicable margin between
Under the Secured Revolving Line of Credit,
8. LEASES
The Company leases its office space which has a remaining lease term of 30 months. In January 2023, the Company entered into an amendment to the lease for its corporate headquarters offices to extend the term through December 31, 2026. The Company’s recognized lease costs include:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Statements of Operations and Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table presents information about our weighted average discount rate and remaining lease term as of:
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Weighted-average remaining lease term (months) |
|
|
|
|
|
||
Weighted-average discount rate |
|
% |
|
|
% |
||
The Company’s variable lease costs and short-term lease costs were not material.
The Company is obligated under a non-cancelable lease agreement providing for office space that expires on December 31, 2026.
(in thousands) |
|
June 30, 2024 |
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Total lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
12
9. COMMITMENTS AND CONTINGENCIES
Purchase commitments
As of June 30, 2024, the Company does not have any material agreements with suppliers for the purchase of raw material with minimum purchase quantities. Our contract manufacturers are obligated to fulfill against purchase orders that are aligned with our forecast based on terms and conditions of the contract. Our forecasts provided to our contract manufacturers are short term in nature and at no time extend beyond a year.
Legal proceedings
The Company is involved from time to time in various claims, proceedings, and litigation. The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable, and the amount of loss can be reasonably estimated. Management does not believe that the resolution of these matters would have a material impact on the accompanying unaudited condensed consolidated financial statements. The Company has not identified any legal matters where it believes a material loss is reasonably possible.
10. BALANCE SHEET COMPONENTS
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following as of:
(in thousands) |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Other current assets |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of:
(in thousands) |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Accrued employee compensation benefits |
|
$ |
|
|
$ |
|
||
Accrued direct selling costs |
|
|
|
|
|
|
||
Accrued customer paid bottle deposits |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
11. EQUITY-BASED COMPENSATION
In July 2021, prior to the IPO, the Company adopted the Zevia PBC 2021 Equity Incentive Plan (the “2021 Plan”) under which the Company may grant options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock awards, other equity-based awards and incentive bonuses to employees, officers, non-employee directors and other service providers of the Company and its affiliates.
The number of shares available for issuance under the 2021 Plan is increased on January 1 of each year beginning in 2022 and ending with a final increase in 2031 in an amount equal to the lesser of: (i)
In October and November 2021, the Company’s Board of Directors approved an amendment to its equity-based compensation plans for a certain number of employees to allow immediate vesting upon retirement of all outstanding RSUs and stock options, and to extend the exercisability of outstanding stock options up to five years after retirement, if they meet certain conditions, including a resignation after the holder has reached 50 years of age with at least 10 years of service to the Company, so long as the holder provides advance notice of his or her resignation to the Company’s Board of Directors.
As of June 30, 2024, the 2021 Plan provides for future grants and/or issuances of up to approximately
Stock Options
The Company uses a Black-Scholes valuation model to measure stock option expense as of each respective grant date. Generally, stock option grants vest ratably over four years, have a ten-year term, and have an exercise price equal to the fair market value as of the grant date. The fair value of stock options is amortized to expense over the vesting period.
The fair value of stock option awards granted during the period was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:
|
|
Six Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
Stock price |
|
$ |
|
$ |
|
||
Exercise price |
|
|
|
|
|
||
Expected term (years)(1) |
|
|
|
|
|
||
Expected volatility (2) |
|
|
% |
|
% |
||
Risk-free interest rate (3) |
|
|
% |
|
% |
||
Dividend yield (4) |
|
|
% |
|
% |
||
13
(1)
(2)
(3)
(4)
The weighted average grant date fair values for stock options granted for the six months ended June 30, 2024 and 2023 was $
The following is a summary of stock option activity for the six months ended June 30, 2024:
|
Shares |
|
|
Weighted average exercise price |
|
|
Weighted average remaining life |
|
|
Intrinsic value |
|
||||
Outstanding balance as of January 1, 2024 |
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Forfeited and expired |
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Balance as of June 30, 2024 |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at the end of the period |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The total intrinsic values of stock options exercised during the six months ended June 30, 2024 was less than $
As of June 30, 2024, total unrecognized compensation expense related to unvested stock options was $
Restricted Stock Units
In March 2021, the Company’s Board of Directors also approved an amendment to the RSUs granted by Zevia LLC in August 2020 (“the RSU Amendment”). The RSU Amendment changed the vesting of such RSUs to occur as follows: (i) in the event of a change of control, the RSUs shall vest effective as of such change of control or (ii) in the event of an initial public offering as in the case of the IPO, the RSUs shall vest in equal monthly installments over a
14
The following is a summary of RSU activity for the six months ended June 30, 2024:
|
Shares |
|
|
Weighted average grant date fair value |
|
|
Aggregate Intrinsic Value |
|
|||
Balance unvested shares at January 1, 2024 |
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
$ |
|
|
|
|
|||
Vested |
|
( |
) |
|
$ |
|
|
|
|
||
Forfeited |
|
( |
) |
|
$ |
|
|
|
|
||
Balance unvested at June 30, 2024 |
|
|
|
$ |
|
|
$ |
|
|||
Expected to vest at June 30, 2024 |
|
|
|
$ |
|
|
$ |
|
|||
As of June 30, 2024, total unrecognized compensation expense related to unvested RSUs was $
As of June 30, 2024, there were
12. SEGMENT REPORTING
The Company has one operating and reporting segment, and operates as a product portfolio with a single business platform. In reaching this conclusion, management considered the definition of the Chief Operating Decision Maker (“CODM”); how the business is defined by the CODM; the nature of the information provided to the CODM and how that information is used to make operating decisions; and how resources and performance are assessed. The Company’s CODM is the Chief Executive Officer. The results of the operations are provided to and analyzed by the CODM at the Company’s level and accordingly, key resource decisions and assessment of performance are performed at the Company’s level. The Company has a common management team across all product lines and does not manage these products as individual businesses and as a result, cash flows are not distinct.
13. MAJOR CUSTOMERS, ACCOUNTS RECEIVABLE AND VENDOR CONCENTRATION
The table below represents the Company’s major customers that accounted for more than
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Customer A |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Customer B |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Customer C |
|
* |
|
|
* |
|
|
|
% |
|
|
% |
||||
The table below represents the Company’s customers that accounted for more than
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
|
||
Customer B |
|
* |
|
|
|
% |
|
||
Customer D |
|
|
% |
|
* |
|
|
||
Customer H |
|
|
% |
|
* |
|
|
||
Customer I |
|
* |
|
|
|
% |
|
||
The table below represents raw material and finished goods vendors that accounted for more than
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Vendor A |
|
* |
|
|
|
% |
|
* |
|
|
|
% |
||||
Vendor B |
|
* |
|
|
|
% |
|
* |
|
|
|
% |
||||
Vendor C |
|
* |
|
|
|
% |
|
* |
|
|
|
% |
||||
Vendor D |
|
|
% |
|
* |
|
|
|
% |
|
* |
|
||||
Vendor E |
|
|
% |
|
* |
|
|
|
% |
|
* |
|
||||
Vendor F |
|
|
% |
|
* |
|
|
|
% |
|
* |
|
||||
Vendor G |
|
* |
|
|
|
% |
|
* |
|
|
* |
|
||||
The increase in vendor concentration during the three and six months ended June 30, 2024 was driven by the changes made in our supply chain whereby our contract manufacturers are responsible for the procurement of raw materials to produce our products, which are then sold to us as finished goods.
* Less than
15
14. LOSS PER SHARE
Basic loss per share of Class A common stock is computed by dividing net loss attributable to the Company for the period by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted loss per share of Class A common stock is computed by dividing net loss attributable to the Company by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities and assumed conversion of Class B common stock into shares of Class A common stock on a one-for-one basis using the if-converted method.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted loss per share of Class A common stock:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
||||
(in thousands, except for share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss and comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Less: net loss attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: adjustment to reallocate net loss to controlling interest |
|
|
|
(1) |
|
( |
) |
(1) |
|
|
(1) |
|
|
(1) |
|||
Net loss to Zevia PBC - basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares of Class A common stock outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: weighted average shares of vested and unreleased RSUs |
|
|
|
(2) |
|
|
(2) |
|
|
(2) |
|
|
(2) |
||||
Weighted-average basic and diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share of Class A common stock – basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Loss per share of Class A common stock – diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
(1)
(2)
The following weighted average outstanding shares were excluded from the computation of diluted loss per share available to Class A common stockholders as they were anti-dilutive:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Zevia LLC Class B Common Units exchangeable to shares of Class A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
16
15. RESTRUCTURING
Restructuring
In May 2024, we initiated certain restructuring actions designed to reduce costs and improve efficiency while continuing to invest in our brand and related initiatives. As a result, we recognized $
As of June 30, 2024, accrued restructuring costs of $
16. INCOME TAXES AND TAX RECEIVABLE AGREEMENT
Income Taxes
The Company is the managing member of Zevia LLC and as a result, consolidates the financial results of Zevia LLC in the accompanying unaudited condensed consolidated financial statements of Zevia PBC. Zevia LLC is a pass-through entity for U.S. federal and most applicable state and local income tax purposes following the Reorganization Transactions effected in connection with the IPO. 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 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
The provision for income taxes differs from the amount of income tax computed by applying the applicable U.S. statutory federal income tax rate of
Tax Receivable Agreement
The Company expects to obtain an increase in its share of tax basis in the net assets of Zevia LLC when Class B units are exchanged by the holders of Class B units for shares of Class A common stock of the Company and upon certain qualifying transactions. Each change in outstanding shares of Class A common stock of the Company results in a corresponding change in the Company's ownership of Class A units of Zevia LLC. The Company intends to treat any exchanges of Class B units as direct purchases of LLC interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that Zevia PBC would otherwise pay in the future to various taxing authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”) with continuing members of Zevia LLC and the shareholders of blocker companies (“Blocker Companies”) of certain pre-IPO institutional investors (“the Direct Zevia Stockholders”). 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
The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Company generates each year and the tax rate then applicable. The Company calculates the liability under the TRA using a complex TRA model, which includes an assumption related to the fair market value of assets. Payments are generally due under the TRA within a specified period of time following the filing of the Company’s tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of the Secured Overnight Financing Rate plus 300 basis points from the due date (without extensions) of such tax return.
The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur; (ii) there is a material uncured breach of any obligations under the TRA; or (iii) the Company elects an early termination of the TRA, then the TRA will terminate and the Company’s obligations, or the Company’s successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any Class B units that have not been exchanged are deemed exchanged for the fair market value of the Company’s Class A common stock at the time of termination.
As of June 30, 2024, 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 June 30, 2024; therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such DTAs. The TRA liability that would be recognized if the associated tax benefits were determined to be fully realizable totaled $
17
Item 2. 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 accompanying unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report. 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 II, Item 1A. “Risk Factors” and other sections of this Quarterly Report and our consolidated financial statements and notes thereto included in our Annual Report. The financial data discussed below reflects the historical results of operations and financial position of the Company. References in this Quarterly Report to “Zevia,” the “Company,” “we,” “us,” and “our” refer (1) prior to the consummation of the Reorganization Transactions, to Zevia LLC, and (2) after the consummation of the Reorganization Transactions, to Zevia PBC and its consolidated subsidiaries unless the context indicates otherwise. 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 are a Delaware public benefit corporation and have been designated as a “Certified B Corporation,” and are focused on addressing the global health challenges resulting from excess sugar consumption by offering a broad portfolio of zero sugar, zero calorie, naturally sweetened beverages. All Zevia® beverages are Non-GMO Project verified, gluten-free, Kosher, vegan and zero sodium and include a variety of flavors across Soda, Energy Drinks, Organic Tea, and Kids drinks. Our products are distributed and sold principally across the 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. The Company’s products are manufactured and maintained at third-party beverage production and warehousing facilities located in both the U.S. and Canada. 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 2.0 billion cans of Zevia sold to date.
Key Events During the First Half of 2024
We have experienced delays in the recovery of SKU level distribution at certain retailers during the first half of 2024 which was primarily due to a lag effect from supply chain challenges in 2023 as well as from increased competition within the category, that resulted in reduced volumes. We are focused on building distribution in our key accounts and concurrently evolving our route-to-market, however we expect it will take time to regain placement and SKU level distribution in an increasingly competitive environment.
We launched a regional approach to direct store delivery “DSD” as well as gained distribution in a limited number of regional convenience chains in the U.S. and Canada. We are still in the early stages, however we expect these initiatives to have an immaterial impact to net sales in the near term. We expect to obtain certain insights from these routes to position us for potential additional opportunities for future growth and expansion.
In parallel with these evolutions in route-to-market, we began ramping up investments in consumer marketing outside of the store and increased our marketing spend in the second quarter, investing in brand awareness and building the “marketing flywheel”, as well as increased our spend on promotional activity at key accounts during the quarter in order to drive velocity, which we expect to continue throughout 2024.
Beginning in the first half of 2024, our contract manufacturers are responsible for the procurement of raw materials to produce our products, which are then sold to us as finished goods. We believe this change will allow us to leverage the purchasing power of our contract manufacturers and further diversify, as well as provide us with the flexibility to scale the business. We also onboarded a new global transportation management company to support the optimization of the procurement of freight and associated freight management activities to improve our cost management. We believe both of these changes will better optimize our supply chain in order to help support future growth and drive increasing returns as we scale the business.
Productivity Initiative
In the second quarter of 2024, we began executing a multi-year, broad-based Productivity Initiative designed to realign our cost structure in order to accelerate our route-to-market evolution and continue to build the Zevia Brand. This Productivity Initiative is designed to focus on our most critical initiatives including driving growth and innovation in our highest margin carbonated better for you beverages, re-align our cost structure to support greater investments in the Zevia Brand and improve operational excellence while simplifying processes across the organization.
The Productivity Initiative resulted in the following:
Additional restructuring charges or cash expenditures may be incurred as the Company makes further progress on this Productivity Initiative, which we expect to be substantially completed by the end of 2024.
18
NYSE Notice
On June 26, 2024, we received formal notice from the New York Stock Exchange (the “NYSE”) that we were not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of our Class A common stock was less than $1.00 per share over a consecutive 30 trading-day period. We subsequently notified the NYSE of our intent to regain compliance with the requirements of Section 802.01C. We are able to regain compliance at any time within the six-month period following receipt of the notice if, on the last trading day of any calendar month during this cure period (or the last trading day of this cure period), we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the prior 30 trading-day period. If we do not regain compliance with Section 802.01C within such cure period, the NYSE may commence delisting proceedings.
The notice does not affect our ongoing business operations or our SEC reporting requirements.
For more information, see the section titled “Item 1A. Risk Factors—We may fail to qualify for continued listing on the NYSE, which could make it more difficult for our stockholders to sell their shares.”
Factors Affecting Our Performance
Macroeconomic Environment
A number of external factors, including the global economy, 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, global hostilities, including the military conflicts in Ukraine and Israel and the surrounding areas, and political tensions between the U.S. and China have impacted and may continue to impact transportation, labor, and commodity costs. These pressures have and are expected to continue to impact our margins and operating results. 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 three and six months ended June 30, 2024 and 2023, respectively.
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, convenience retailers, natural products retailers, warehouse club retailers and retailers with e-commerce channels, in the U.S. and Canada.
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.
The following factors and trends in our business are expected to be key drivers of our net sales for the foreseeable future:
We expect our future growth to be driven by a combination of new distribution, increased organic sales from existing outlets, package and product innovation, and continued pricing strength; 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. During the first half of 2024, we experienced delays in the recovery of SKU level distribution at certain retailers which was primarily due to a lag effect from supply chain challenges in 2023 as well as increased competition within the category, that resulted in reduced volumes. We are also increasing our spend on promotional activity at key accounts in order to drive velocity. We are focused on building distribution in our key accounts and concurrently evolving our route-to-market, however we expect it will take time to regain placement and SKU level distribution in an increasingly competitive environment.
We sell our products in the U.S. and Canada, direct to retailers and also through distributors. We do not have short- or long- term sales commitments with our customers.
19
Cost of Goods Sold
Historically, 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. Beginning in the first quarter of 2024, our contract manufacturers are responsible for the procurement of raw materials to produce our products, which are then sold to us as finished goods, therefore, cost of goods sold for the three and six months ended June 30, 2024 consist of all costs to purchase our product from our contract manufacturers as a finished good.
Our cost of goods sold is subject to price fluctuations in the marketplace, particularly in the price of aluminum and other raw materials, as well as in the cost of production, packaging, in-bound freight and logistics. 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. We have long-term contracts with certain suppliers of stevia and certain third-party contract manufacturers governing quality control, regulatory compliance, pricing and other terms, but these contracts generally do not guarantee any minimum purchase commitments to our third-party contract manufacturers. Our third-party contract manufacturers procure packaging and ingredient materials to manufacture our products according to our submitted rolling forecasts, with the initial three months of each forecast generally constituting our purchase commitment.
We expect our cost of goods sold to increase in absolute dollars as our volume increases, however, decrease over time as a percentage of net sales as a result of the Productivity Initiative, our continued focus on cost and efficiency improvements, and as we realize the benefit of scale.
We elected to classify shipping and handling costs for salable product outside of cost of goods sold, in selling and marketing expenses in our accompanying unaudited condensed consolidated statements of operations and comprehensive loss. 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. Our gross profit and gross margin are affected by the mix of distribution channels of our net sales in each period, as well as the level of discounts and promotions offered during the period. 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, our Productivity Initiative, 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. 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. Selling and marketing expenses also includes the incremental costs of obtaining contracts, such as sales commissions.
Our selling expenses are expected to increase in absolute dollars in the long-term as a result of increased warehousing and distribution costs resulting from increased net sales, but decrease as a percentage of sales over time as a result of our Productivity Initiative and our continued focus on cost improvements in our supply chain. Our selling expenses are expected to decrease from the prior year in the short-term, largely due to a decrease in logistics expenses compared to the prior year as a result of the historical supply chain logistics challenges encountered during 2023 as well as a result of the Productivity Initiative.
Marketing expenses are expected to increase as we invest in in brand awareness, which are expected to be partially funded by the selling expense cost savings.
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. Our ongoing general and administrative expenses are expected to remain flat in absolute dollars in the near term and as a percentage of net sales over time.
Equity-Based Compensation Expenses
Equity-based compensation expense consists of the recorded expense of equity-based compensation for our employees and, if any, 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. 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.
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. 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.
20
Restructuring Expenses
Restructuring expenses include employee severance and benefit costs to terminate a specified number of employees as well as costs to exit two of our third-party warehouse and distribution facilities designed to reduce costs and improve efficiency while continuing to invest in our brand and related initiatives.
Other income, net
Other income, net consists primarily of interest income (expense), and foreign currency (loss) gains.
Results of Operations
The following table sets forth selected items in our accompanying unaudited condensed consolidated statements of operations and comprehensive loss for the periods presented:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
||||
(in thousands, except per share amounts) |
|
|
|
|
|
|
|
||||||||||
Net sales |
|
$ |
40,426 |
|
|
$ |
42,241 |
|
|
$ |
79,225 |
|
|
$ |
85,541 |
|
|
Cost of goods sold |
|
|
23,484 |
|
|
|
22,549 |
|
|
|
44,564 |
|
|
|
45,744 |
|
|
Gross profit |
|
|
16,942 |
|
|
|
19,692 |
|
|
|
34,661 |
|
|
|
39,797 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
13,622 |
|
|
|
16,100 |
|
|
|
28,692 |
|
|
|
28,012 |
|
|
General and administrative |
|
|
7,694 |
|
|
|
6,207 |
|
|
|
15,809 |
|
|
|
14,852 |
|
|
Equity-based compensation |
|
|
1,427 |
|
|
|
2,358 |
|
|
|
2,916 |
|
|
|
4,738 |
|
|
Depreciation and amortization |
|
|
403 |
|
|
|
404 |
|
|
|
731 |
|
|
|
823 |
|
|
Restructuring |
|
|
865 |
|
|
|
— |
|
|
|
865 |
|
|
|
— |
|
|
Total operating expenses |
|
|
24,011 |
|
|
|
25,069 |
|
|
|
49,013 |
|
|
|
48,425 |
|
|
Loss from operations |
|
|
(7,069 |
) |
|
|
(5,377 |
) |
|
|
(14,352 |
) |
|
|
(8,628 |
) |
|
Other income, net |
|
|
142 |
|
|
|
403 |
|
|
|
239 |
|
|
|
743 |
|
|
Loss before income taxes |
|
|
(6,927 |
) |
|
|
(4,974 |
) |
|
|
(14,113 |
) |
|
|
(7,885 |
) |
|
Provision for income taxes |
|
|
34 |
|
|
|
35 |
|
|
|
47 |
|
|
|
36 |
|
|
Net loss and comprehensive loss |
|
|
(6,961 |
) |
|
|
(5,009 |
) |
|
|
(14,160 |
) |
|
|
(7,921 |
) |
|
Loss attributable to noncontrolling interest |
|
|
1,070 |
|
|
|
1,078 |
|
|
|
2,445 |
|
|
|
1,899 |
|
|
Net loss attributable to Zevia PBC |
|
$ |
(5,891 |
) |
|
$ |
(3,931 |
) |
|
$ |
(11,715 |
) |
|
$ |
(6,022 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.10 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.11 |
) |
|
Diluted |
|
$ |
(0.10 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.11 |
) |
|
The following table presents selected items in our accompanying unaudited condensed consolidated statements of operations and comprehensive loss as a percentage of net sales for the respective periods presented. Percentages may not sum due to rounding:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net sales |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Cost of goods sold |
|
|
58 |
% |
|
|
53 |
% |
|
|
56 |
% |
|
|
53 |
% |
Gross profit |
|
|
42 |
% |
|
|
47 |
% |
|
|
44 |
% |
|
|
47 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
34 |
% |
|
|
38 |
% |
|
|
36 |
% |
|
|
33 |
% |
General and administrative |
|
|
19 |
% |
|
|
15 |
% |
|
|
20 |
% |
|
|
17 |
% |
Equity-based compensation |
|
|
4 |
% |
|
|
6 |
% |
|
|
4 |
% |
|
|
6 |
% |
Depreciation and amortization |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
Restructuring |
|
|
2 |
% |
|
|
0 |
% |
|
|
1 |
% |
|
|
0 |
% |
Total operating expenses |
|
|
59 |
% |
|
|
59 |
% |
|
|
62 |
% |
|
|
57 |
% |
Loss from operations |
|
|
(17 |
)% |
|
|
(13 |
)% |
|
|
(18 |
)% |
|
|
(10 |
)% |
Other income, net |
|
|
0 |
% |
|
|
1 |
% |
|
|
0 |
% |
|
|
1 |
% |
Loss before income taxes |
|
|
(17 |
)% |
|
|
(12 |
)% |
|
|
(18 |
)% |
|
|
(9 |
)% |
Provision for income taxes |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
|
Net loss and comprehensive loss |
|
|
(17 |
)% |
|
|
(12 |
)% |
|
|
(18 |
)% |
|
|
(9 |
)% |
Loss attributable to noncontrolling interest |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
2 |
% |
Net loss attributable to Zevia PBC |
|
|
(15 |
)% |
|
|
(9 |
)% |
|
|
(15 |
)% |
|
|
(7 |
)% |
21
Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023
Net Sales
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Net sales |
|
$ |
40,426 |
|
|
$ |
42,241 |
|
|
$ |
(1,815 |
) |
|
|
(4.3 |
)% |
Net sales were $40.4 million for the three months ended June 30, 2024 as compared to $42.2 million for the three months ended June 30, 2023. Equivalized cases sold were 3.1 million during the three months ended June 30, 2024 as compared to 3.3 million equivalized cases sold during the three months ended June 30, 2023. The decrease in net sales was primarily driven by a decrease in the number of equivalized cases sold, resulting in $4.2 million lower net sales primarily caused by delay in the recovery of SKU level distribution at retail discussed above in the Key Events During the First Half of 2024 section as well as lost distribution in our club channel, partially offset by pricing increases of $2.4 million which is inclusive of greater promotional levels at retailers. We define an equivalized case as a 288 fluid ounce case.
Cost of Goods Sold
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Cost of goods sold |
|
$ |
23,484 |
|
|
$ |
22,549 |
|
|
$ |
935 |
|
|
|
4.1 |
% |
Cost of goods sold was $23.5 million for the three months ended June 30, 2024 as compared to $22.5 million for the three months ended June 30, 2023. The increase of $0.9 million, or 4.1%, was largely due to higher inventory write-downs primarily related to club specific excess inventory driven by lost distribution of $1.4 million as well as unfavorable unit costs of $1.0 million primarily driven by investments in enhanced package-specific designs to improve on-shelf visibility and drive brand awareness, partially offset by a 5.9% decrease in the shipment of equivalized cases, resulting in $1.3 million lower costs of goods sold and favorable product mix of $0.2 million.
Gross Profit and Gross Margin
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Gross profit |
|
$ |
16,942 |
|
|
$ |
19,692 |
|
|
$ |
(2,750 |
) |
|
|
(14.0 |
)% |
Gross margin |
|
|
41.9 |
% |
|
|
46.6 |
% |
|
|
|
|
|
(4.7 |
)% |
|
Gross profit was $16.9 million for the three months ended June 30, 2024 as compared to $19.7 million for the three months ended June 30, 2023. The decrease in gross profit of $2.8 million, or 14.0%, was primarily driven by lower volumes, higher inventory write-downs, unfavorable unit costs, and increased spend on promotional activity at key accounts.
Gross margin for the three months ended June 30, 2024 declined to 41.9% from 46.6% in the prior-year period. The decrease was primarily due to inventory write-downs, unfavorable unit costs and increased spend on promotional activity at key accounts.
Selling and Marketing Expenses
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Selling and marketing expenses |
|
$ |
13,622 |
|
|
$ |
16,100 |
|
|
$ |
(2,478 |
) |
|
|
(15.4 |
)% |
Selling and marketing expenses were $13.6 million for the three months ended June 30, 2024 as compared to $16.1 million for the three months ended June 30, 2023. The decrease of $2.5 million, or 15.4%, was primarily due to $2.3 million of lower freight transfer costs as a result of the impact of supply chain logistics challenges in the prior year, decrease in repackaging costs of $1.2 million due to the automation of certain processes, a decrease in freight costs of $0.3 million due to lower volume, and a decrease in warehousing costs of $0.1 million due to the consolidation of warehouses. These decreases were partially offset by higher marketing expenses of $1.4 million as a result of investments made to drive brand awareness discussed above in the Key Events During the First Half of 2024 section.
General and Administrative Expenses
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
General and administrative expenses |
|
$ |
7,694 |
|
|
$ |
6,207 |
|
|
$ |
1,487 |
|
|
|
24.0 |
% |
General and administrative expenses were $7.7 million for the three months ended June 30, 2024 as compared to $6.2 million for the three months ended June 30, 2023. The increase of $1.5 million, or 24.0%, was primarily driven by the benefit of an accrual reversal related to employee costs of $1.3 million in the second quarter of 2023, as well as higher employee costs of $0.4 million, partially offset by a decrease in costs of $0.2 million as a result of our Productivity Initiative discussed above in the Key Events During the First Half of 2024 section.
22
Equity-Based Compensation Expenses
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Equity-based compensation expenses |
|
$ |
1,427 |
|
|
$ |
2,358 |
|
|
$ |
(931 |
) |
|
|
(39.5 |
)% |
Equity-based compensation expenses were $1.4 million for the three months ended June 30, 2024 as compared to $2.4 million for the three months ended June 30, 2023, primarily related to outstanding equity-based awards being recognized over the remaining service periods of the awards. The decrease of $0.9 million was primarily driven by a $1.0 million decrease related to the accelerated method of expense recognition on certain equity awards issued in connection with the Company’s IPO in 2021, partially offset by equity-based compensation expenses related to new equity awards granted.
Restructuring Expenses
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Restructuring expenses |
|
$ |
865 |
|
|
$ |
— |
|
|
$ |
865 |
|
|
|
100.0 |
% |
Restructuring expenses were $0.9 million the three months ended June 30, 2024 which primarily includes employee related severance costs as well as costs to exit two of our third-party warehouse and distribution facilities.
Six months Ended June 30, 2024, Compared to Six months Ended June 30, 2023
Net Sales
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Net sales |
|
$ |
79,225 |
|
|
$ |
85,541 |
|
|
$ |
(6,316 |
) |
|
|
(7.4 |
)% |
Net sales were $79.2 million for the six months ended June 30, 2024 as compared to $85.5 million for the six months ended June 30, 2023. Equivalized cases sold were 6.0 million during the six months ended June 30, 2024 as compared to 6.6 million equivalized cases sold during the six months ended June 30, 2023. The decrease in net sales was primarily driven by a decrease in the number of equivalized cases sold, resulting in $8.6 million lower net sales primarily caused by delay in the recovery of SKU level distribution at retail discussed above in the Key Events During the First Half of 2024 section and lost distribution in our club channel, partially offset by pricing increases of $2.3 million which is inclusive of greater promotional levels at retailers. We define an equivalized case as a 288 fluid ounce case.
Cost of Goods Sold
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Cost of goods sold |
|
$ |
44,564 |
|
|
$ |
45,744 |
|
|
$ |
(1,180 |
) |
|
|
(2.6 |
)% |
Cost of goods sold was $44.6 million for the six months ended June 30, 2024 as compared to $45.7 million for the six months ended June 30, 2023. The decrease of $1.2 million, or 2.6%, was primarily due to a 8.2% decrease in the shipment of equivalized cases, resulting in $3.6 million lower costs of goods sold and favorable product mix of $0.9 million, partially offset by unfavorable unit costs of $2.1 million primarily driven by investments in enhanced package-specific designs to improve on-shelf visibility and drive brand awareness, and higher inventory write-downs primarily related to club specific excess inventory driven by lost distribution of $1.2 million.
Gross Profit and Gross Margin
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Gross profit |
|
$ |
34,661 |
|
|
$ |
39,797 |
|
|
$ |
(5,136 |
) |
|
|
(12.9 |
)% |
Gross margin |
|
|
43.8 |
% |
|
|
46.5 |
% |
|
|
|
|
|
(2.8 |
)% |
|
Gross profit was $34.7 million for the six months ended June 30, 2024 as compared to $39.8 million for the six months ended June 30, 2023. The decrease in gross profit of $5.1 million, or 12.9%, was primarily driven by lower volumes, unfavorable unit costs, and higher inventory write-downs, partially offset by favorable product mix.
Gross margin for the six months ended June 30, 2024 declined to 43.8% from 46.5% in the prior-year period. The decrease was primarily due to unfavorable unit costs, higher inventory write-downs, and increased spend on promotional activity at key accounts, partially offset by favorable product mix.
23
Selling and Marketing Expenses
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Selling and marketing expenses |
|
$ |
28,692 |
|
|
$ |
28,012 |
|
|
$ |
680 |
|
|
|
2.4 |
% |
Selling and marketing expenses were $28.7 million for the six months ended June 30, 2024 as compared to $28.0 million for the six months ended June 30, 2023. The increase of $0.7 million, or 2.4%, was primarily due to an increase in marketing expenses of $1.9 million as a result of investments made to drive brand awareness, higher warehousing costs of $1.5 million resulting from increased level of storage costs driven by higher levels of inventory in the first quarter of 2024, and higher sales and broker and sales commissions of $0.4 million. These increases were partially offset by $1.5 million of lower freight transfers costs as a result of the impact of supply chain logistics challenges in the prior year, a decrease in repackaging costs of $1.5 million due to the automation of certain processes, and a decrease in freight out costs of $0.1 million due to lower volumes of $0.5 million partially offset by higher rates of $0.4 million.
General and Administrative Expenses
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
General and administrative expenses |
|
$ |
15,809 |
|
|
$ |
14,852 |
|
|
$ |
957 |
|
|
|
6.4 |
% |
General and administrative expenses were $15.8 million for the six months ended June 30, 2024 as compared to $14.9 million for the six months ended June 30, 2023. The increase of $1.0 million, or 6.4%, was primarily driven by an increase in employee compensation costs of $1.5 million, partially offset by a decrease in costs of $0.5 million as a result of our Productivity Initiative discussed above in the Key Events During the First Half of 2024 section.
Equity-Based Compensation Expenses
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Equity-based compensation expenses |
|
$ |
2,916 |
|
|
$ |
4,738 |
|
|
$ |
(1,822 |
) |
|
|
(38.5 |
)% |
Equity-based compensation expenses were $2.9 million for the six months ended June 30, 2024 as compared to $4.7 million for the six months ended June 30, 2023, primarily related to outstanding equity-based awards being recognized over the remaining service periods of the awards. The decrease of $1.8 million was primarily driven by a $2.0 million decrease related to the accelerated method of expense recognition on certain equity awards issued in connection with the Company’s IPO in 2021, partially offset by equity-based compensation expenses related to new equity awards granted.
Restructuring Expenses
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
Restructuring expenses |
|
$ |
865 |
|
|
$ |
— |
|
|
$ |
865 |
|
|
|
100.0 |
% |
Restructuring expenses were $0.9 million for the six months ended June 30, 2024 which primarily includes employee related severance costs as well as costs to exit two of our third-party warehouse and distribution facilities.
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. 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.
Liquidity and Capital Resources
Liquidity and Capital Resources
As of June 30, 2024, we had $28.9 million in cash and cash equivalents. We believe that our cash and cash equivalents as of June 30, 2024, 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.
Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from sales of our products, and borrowing capacity currently available under our Secured Revolving Line of Credit. Our primary cash needs are for operating expenses, working capital, and capital expenditures to support the growth in our business.
24
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. To the extent that existing capital resources and sales growth are not sufficient to fund future activities, we may seek alternative financing through additional equity or debt financing transactions. Additional funds may not be available on terms favorable to us or at all. 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. 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.
The Company is a holding company, and is the sole managing member of Zevia LLC. The Company operates and controls all of the business and affairs of Zevia LLC. Accordingly, the Company is dependent on distributions from Zevia LLC to pay its taxes, its obligations under the TRA and other expenses. 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 amount payable under the TRA will be based on an annual calculation of the reduction in our U.S. federal, state and local taxes resulting from the utilization of certain pre-IPO tax attributes and tax benefits resulting from sales and exchanges by continuing members of Zevia LLC. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” included in the prospectus dated July 21, 2021 and filed with the SEC on July 23, 2021. We expect that the payments that we may be required to make under the TRA may be substantial. 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 $66.3 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 $56.4 million through 2037.
The actual amounts may materially differ from these hypothetical amounts, as potential future reductions in tax payments for us and TRA payments by us will be calculated using prevailing tax rates applicable to us over the life of the TRA and will be dependent on us generating sufficient future taxable income to realize the benefit.
We cannot reasonably estimate future annual payments under the TRA given the difficulty in determining those estimates as they are dependent on a number of factors, including the extent of exchanges by continuing Zevia LLC unitholders, the associated fair value of the underlying Zevia LLC units at the time of those exchanges, the tax rates applicable, our future income, and the associated tax benefits that might be realized that would trigger a TRA payment requirement.
However, a significant portion of any potential future payments under the TRA is anticipated to be payable over 15 years, consistent with the period over which the associated tax deductions would be realized by us, assuming Zevia LLC generates sufficient income to utilize the deductions. If sufficient income is not generated by Zevia LLC, the associated taxable income of Zevia will be impacted and the associated tax benefits to be realized will be limited, thereby similarly reducing the associated TRA payments to be made. 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.
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”). Under the Secured Revolving Line of Credit, we may draw funds up to an amount not to exceed the lesser of (i) a $20 million revolving commitment and (ii) a borrowing base which is comprised of inventory and receivables. Up to $2 million of the Secured Revolving Line of Credit may be used for letter of credit issuances with the option to increase the commitment under the Secured Revolving Line of Credit by up to $10 million, subject to certain conditions. The Secured Revolving Line of Credit matures on February 22, 2027. During the first quarter of 2024, the Company drew $8 million on the Secured Revolving Line of Credit which was subsequently repaid in the same period. As of June 30, 2024, there was no amount outstanding on the Secured Revolving Line of Credit. The Secured Revolving Line of Credit is secured by a first priority security interest in substantially all of the Company’s assets.
Loans under the Secured Revolving Line of Credit bear interest based on either, at 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.
25
Under the Secured Revolving Line of Credit 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 Secured Revolving Line of Credit is less than the greater of $3 million and 17.5% of the borrowing base, and must again satisfy such financial covenant as of the last day of each fiscal quarter thereafter until such time as there are no events of default and availability has been above such threshold for 30 consecutive days. As of June 30, 2024, the Company was in compliance with its financial 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.
|
|
Six Months Ended June 30, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(2,920 |
) |
|
$ |
1,071 |
|
Investing activities |
|
$ |
(93 |
) |
|
$ |
(1,463 |
) |
Financing activities |
|
$ |
— |
|
|
$ |
23 |
|
Net Cash (Used in) Provided by Operating Activities
Our cash flows used in or provided by operating activities are primarily influenced by working capital requirements.
Net cash used in operating activities of $2.9 million for the six months ended June 30, 2024 was primarily driven by a net loss of $14.2 million, partially offset by non-cash expenses of $4.0 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 $7.3 million. Changes in cash flows related to operating assets and liabilities were primarily due to a decrease in inventories of $12.3 million due to decreased production of inventory as inventory levels are managed as well as higher inventory reserves, decreased prepaid expenses and other assets of $2.1 million largely due to a decrease in prepaid deposits related to the sale of raw materials, partially offset by a decrease in accounts payable, accrued expenses and other current liabilities of $6.6 million due to timing of purchases and decreased production of inventory, and an increase in accounts receivable of $0.2 million due to timing of payments.
Net cash provided by operating activities of $1.1 million for the six months ended June 30, 2023 was primarily driven by a net increase in cash related to changes in operating assets and liabilities of $3.1 million and non-cash expenses of $5.9 million primarily related to equity-based compensation and depreciation and amortization expense, partially offset by a net loss of $7.9 million. Changes in cash flows related to operating assets and liabilities were primarily due to an increase of $18.7 million in accounts payable, accrued expenses and other current liabilities due to timing of purchases and increased production of inventory, and a decrease in prepaid expenses and other assets of $0.6 million primarily due to amortization of prepaid insurance policies, partially offset by an increase in accounts receivable of $5.9 million due to timing of invoices, and an increase in inventories of $10.0 million due to timing of purchases and build-up of inventory to support future sales.
Net Cash Used in Investing Activities
Net cash used in investing activities of $0.1 million for the six months ended June 30, 2024 was primarily due to purchases of property, equipment, and software of $0.1 million for computer equipment, marketing fixtures, and software used in ongoing operations.
Net cash used in investing activities of $1.5 million for the six months ended June 30, 2023 was primarily due to purchases of property, equipment, and software of $1.5 million for leasehold improvements and computer equipment and software used in ongoing operations.
Net Cash Provided By Financing Activities
Net cash provided by financing activities of less than $0.1 million for the six months ended June 30, 2024 was due to proceeds from the Secured Revolving Line of Credit of $8 million which was repaid in the same period.
Net cash provided by financing activities of less than $0.1 million for the six months ended June 30, 2023 was primarily due to proceeds from the exercise of stock options.
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.
We calculate Adjusted EBITDA as net loss adjusted to exclude: (1) other income (expense), net, which includes interest (income) expense, foreign currency (gains) losses, and (gains) losses on disposal of fixed assets, (2) provision (benefit) for income taxes, (3) depreciation and amortization, (4) equity-based compensation, and 5) restructuring expenses (for 2024, in light of our Productivity Initiative). 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.
Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. 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. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.
26
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. Some of the limitations of Adjusted EBITDA include that (1) it does not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures, (3) it does not consider the impact of equity-based compensation expense, including the potential dilutive impact thereof, and (4) it does not reflect other non-operating expenses, including interest (income) expense, foreign currency (gains)/losses and (gains)/losses on disposal of fixed assets, and restructuring. In addition, our use of Adjusted EBITDA may not be comparable to similarly-titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. 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. GAAP, to Adjusted EBITDA for the periods presented:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss and comprehensive loss |
|
$ |
(6,961 |
) |
|
$ |
(5,009 |
) |
|
$ |
(14,160 |
) |
|
$ |
(7,921 |
) |
Other income, net* |
|
|
(142 |
) |
|
|
(403 |
) |
|
|
(239 |
) |
|
|
(743 |
) |
Provision for income taxes |
|
|
34 |
|
|
|
35 |
|
|
|
47 |
|
|
|
36 |
|
Depreciation and amortization |
|
|
403 |
|
|
|
404 |
|
|
|
731 |
|
|
|
823 |
|
Equity-based compensation |
|
|
1,427 |
|
|
|
2,358 |
|
|
|
2,916 |
|
|
|
4,738 |
|
Restructuring |
|
|
865 |
|
|
|
— |
|
|
|
865 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
(4,374 |
) |
|
$ |
(2,615 |
) |
|
$ |
(9,840 |
) |
|
$ |
(3,067 |
) |
* Includes interest (income) expense, foreign currency (gains) losses, and (gains) losses on disposal of fixed assets.
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. In January 2023, the Company entered into another amendment to the lease and further extended the lease term through December 31, 2026.
Our leases generally consist of long-term operating leases, which are payable monthly and relate to our office space. For a further discussion on our debt and operating lease commitments as of June 30, 2024, see the sections above including Note 7, Debt, and Note 8, Leases, included in the accompanying unaudited condensed consolidated financial statements of this Quarterly Report.
Our inventory purchase commitments are generally short-term in nature and have ordinary commercial terms. We did not have any material long-term inventory purchase commitments as of June 30, 2024. Our contract manufacturers are obligated to fulfill against purchase orders that are aligned with our forecast based on terms and conditions of the contract. Our forecasts provided to our contract manufacturers are short term in nature and at no time extend beyond a year.
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 accompanying unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report are prepared in accordance with U.S. GAAP. The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
There have been no material changes to our critical accounting policies from those discussed in our Annual Report.
Recent Accounting Pronouncements
Refer to Note 2, Summary of Significant Accounting Policies, included in the accompanying unaudited condensed consolidated financial statements of this Quarterly Report for a discussion of recently issued accounting pronouncements.
27
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 such time 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. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that we are no longer an emerging growth 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 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to certain market risks in the ordinary course of our business. These risks primarily consist of raw material and finished goods prices, foreign exchange, inflation and commodities as follows:
Raw Material and Finished Goods Risk
Our profitability is dependent on, among other things, our ability to anticipate and react to raw material costs. 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. During 2023, we tested, qualified, and approved the use of another stevia leaf extract supplier, whose stevia leaf is derived from a region different than the above supplier, and we continue to seek to diversify to 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. 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. Our contract manufacturers’ ability to continue to procure enough aluminum cans at reasonable prices will depend on future developments that are highly uncertain.
We are seeking to diversify our sources of supply and intend to enter into arrangements to better ensure stability of prices of our raw materials.
Due to a change in supply chain processes during the first quarter of 2024, our contract manufacturers are now responsible for the procurement of raw materials to produce our products, which are then sold to us as finished goods. As a result, during the six months ended June 30, 2024, we had three vendors accounting for approximately 89% of our total raw material and finished goods purchases. Refer to Note 13, Major Customers, Accounts Receivable and Vendor Concentration, included in the accompanying unaudited condensed consolidated financial statements.
Foreign Exchange Risk
The majority of our sales and costs are denominated in U.S. dollars and are not subject to foreign exchange risk. Our contract manufacturers source some ingredients and packaging materials from international sources, and as a result 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. 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 our contract manufacturers increase sourcing from outside the U.S. or we 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 three and six months ended June 30, 2024 and 2023, respectively.
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. 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 principal commodities risks relate to purchases of aluminum, diesel fuel, cartons and corrugate.
28
Item 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. Based on the foregoing evaluation, management determined that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024.
Internal Control over Financial Reporting
Management determined that as of June 30, 2024, no changes in our internal control over financial reporting had occurred during the fiscal quarter then ended that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not subject to any material legal proceedings.
Item 1A. Risk Factors
Our business is subject to various risks, including those described in the section titled “Risk Factors” in Part I, Item 1A of our Annual Report. Except as set forth below, there have been no material changes from the risk factors disclosed in Item 1A of our Annual Report.
We may fail to qualify for continued listing on the NYSE, which could make it more difficult for our stockholders to sell their shares.
Our Class A common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “ZVIA.” We are required to satisfy the continued listing requirements of the NYSE to maintain such listing, including, among other things, the maintenance of a certain average closing price of our Class A common stock.
On June 26, 2024, we received formal notice from the NYSE that we were not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of our Class A common stock was less than $1.00 per share over a consecutive 30 trading-day period. We subsequently notified the NYSE of our intent to regain compliance with the requirements of Section 802.01C. We are able to regain compliance at any time within the six-month period following receipt of the notice if, on the last trading day of any calendar month during this cure period (or the last trading day of this cure period), we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the prior 30 trading-day period. If we do not regain compliance with Section 802.01C within such cure period, the NYSE may commence delisting proceedings.
There can be no assurance that we will be able to regain compliance with the NYSE’s continued listing requirements. If our stock price does not increase, we may not be able to meet the standards for continued listing on the NYSE within the compliance period. In the event that we do not regain compliance with the NYSE continued listing standards, we could face significant material adverse consequences, including:
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
(c) None of our directors or executive officers
30
EXHIBIT INDEX
Exhibit No. |
|
Description of Exhibit |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
4.1 |
|
|
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32** |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* |
Filed herewith. |
** |
Furnished herewith. |
# |
Management contract or compensatory plan or arrangement. |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Zevia PBC |
|
|
|
|
|
|
|
|
By: |
|
|
|
/s/ Amy E. Taylor |
|
|
|
|
|
|
|
|
|
|
Name: |
|
Amy E. Taylor |
|
|
|
|
|
|
|
|
|
|
Title: |
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
Date: |
|
August 7, 2024 |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
By: |
|
|
|
/s/ Amy E. Taylor |
|
|
|
|
|
Name: |
|
Amy E. Taylor |
|
|
|
|
|
Title: |
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
Date: |
|
August 7, 2024 |
|
|
|
By: |
|
|
|
/s/ Girish Satya |
|
|
|
|
|
Name: |
|
Girish Satya |
|
|
|
|
|
Title: |
|
Chief Financial Officer and Principal Accounting Officer |
|
|
|
|
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |
|
|
|
|
|
Date: |
|
August 7, 2024 |
|
|
32
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Amy E. Taylor, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of ZEVIA PBC; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: |
/s/ Amy E. Taylor |
Name: |
Amy E. Taylor |
Title: |
President and Chief Executive Officer |
|
(principal executive officer) |
|
|
Date: |
August 7, 2024 |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Girish Satya, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of ZEVIA PBC; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: |
/s/ Girish Satya |
Name: |
Girish Satya |
Title: |
Chief Financial Officer and Principal Accounting Officer |
|
(principal financial officer and principal accounting officer) |
|
|
Date: |
August 7, 2024 |
Exhibit 32
Zevia PBC
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q (the “Report”) of Zevia PBC (the “Company”) for the quarter ended June 30, 2024, as filed with the U.S. Securities and Exchange Commission on the date hereof, Amy E. Taylor, as President and Chief Executive Officer of the Company, and Girish Satya, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to each officer’s knowledge:
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ AMY E. TAYLOR |
|
Name: |
Amy E. Taylor |
Title: |
President and Chief Executive Officer (principal executive officer) |
Date: |
August 7, 2024 |
|
|
/s/ GIRISH SATYA |
|
Name: |
Girish Satya |
Title: |
Chief Financial Officer and Principal Accounting Officer (principal financial officer and principal accounting officer) |
Date: |
August 7, 2024 |
A signed original of this certification required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 1350 of Title 18 of the United States Code and, accordingly, is not being filed with the U.S. Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).