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

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

The number of shares available for issuance under the 2021 Plan is increased on January 1 of each year beginning in 2022 and ending with a final increase in 2031 in an amount equal to the lesser of: (i) 5% of the total number of shares of Class A common stock outstanding on the preceding December 31, and (ii) a smaller number of shares determined by the Company's Board of Directors.

In October and November 2021, the Company amended outstanding RSU awards and outstanding stock options held by certain employees, in each case, to provide for accelerated vesting upon the holder’s retirement on or after January 17, 2022. For this purpose, “retirement” generally includes a resignation after the holder has reached 50 years of age with at least 10 years of service to the Company, so long as the holder provides advance notice of such retirement.

As of September 30, 2022, the 2021 Plan provides for future grants and/or issuances of up to approximately 2.5 million shares of our common stock. Stock-based awards under our employee compensation plans are made with newly issued shares reserved for this purpose.

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:


	Nine Months Ended September 30,
	2022
Stock price	$	3.37
Exercise Price	$	3.91
Expected term (years)(1)		6.25
Expected volatility (2)		62.5	%
Risk-Free interest rate (3)		2.7	%
Dividend yield (4)		0.0	%

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

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

(3) The risk-free interest rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

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

The weighted average grant date fair value for stock options granted for the nine months ended September 30, 2022 was $1.95.

The following is a summary of stock option activity for the nine months ended September 30, 2022:


	Shares			Weighted average exercise price		Weighted average remaining life		Intrinsic value (in thousands)
Outstanding Balance as of January 1, 2022		1,409,693		$	2.30
Granted		1,681,560		$	3.91
Exercised		(189,559	)	$	0.62
Forfeited and expired		(78,897	)	$	3.73
Balance as of September 30, 2022		2,822,797		$	3.32		8.1	$	5,245
Exercisable at the end of the period		967,780		$	1.24		5.5	$	3,619
Vested and expected to vest		2,822,797		$	3.32		8.1	$	5,245

The total intrinsic values of stock options exercised during the nine months ended September 30, 2022 was $0.7 million.

As of September 30, 2022, total unrecognized compensation expense related to unvested stock options was $3.7 million, which is expected to be recognized over a weighted-average period of 3.4 years.

In July 2021, the Company’s Board of Directors approved an amendment to 2,422,644 restricted phantom units (the "Restricted Phantom Units") previously granted by Zevia LLC (the “Phantom Unit Amendment"). The Phantom Unit Amendment changed the settlement feature of all outstanding Restricted Phantom Units so that following vesting, each award Restricted Phantom Units would be settled in shares of Class A common stock having a fair market value equal to (i) the number of Restricted Phantom Units subject to such award, multiplied by (ii) the difference between the fair market value of a share of Class A common stock and the grant date price per Restricted Phantom Unit. All other terms related to the Restricted Phantom Units remained unchanged. As a result of the Phantom Unit Amendment, the estimated fair value of the modified awards was $33.9 million and was recognized as an expense over the vesting period through January 2022 subsequent to the performance condition being met.

In March 2021, the Company's Board of Directors approved an amendment to the RSUs granted 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 IPO, the RSUs shall vest in equal monthly installments over a 36-month period following the termination of any lockup period and shall be subject to the participant’s continued employment through such vesting date. Additionally, settlement shall occur within 30 days following the vesting of the RSUs and the participant shall be entitled to receive one share of Class A common stock for each vested RSU. All other terms remained unchanged. As a result of the RSU Amendment, the estimated fair value of the modified awards was $48.9 million and are being recognized as expense over the vesting period subsequent to the performance condition being met.

In November 2021, the Company's Board of Directors approved an amendment to its share-based compensation plans for certain employees to allow immediate vesting upon retirement of all outstanding RSUs and stock options, and to extend the exercisability of outstanding stock options up to five years after retirement, if they meet certain conditions, including length of service and age, and they provide advance notice to the Board of Directors. During the nine months ended September 30, 2022, three employees retired from the Company and all outstanding awards and related stock compensation expense was accelerated through their retirement date.

The following is a summary of RSU activity for the nine months ended September 30, 2022:


	Shares				Weighted average grant date fair value		Aggregate Intrinsic Value (in thousands)
Balance unvested shares at January 1, 2022		7,981,444			$	5.33
Granted		1,071,397			$	3.37
Vested		(6,259,440	)	*	$	5.62
Forfeited		(38,814	)		$	6.58
Balance unvested at September 30, 2022		2,754,587			$	3.91		11,597
Expected to vest at September 30, 2022		2,754,587			$	3.91		11,597

*Shares vested includes 1,864,300 of RSUs which vested but are subject to a deferred settlement provision over the next three years.

As of September 30, 2022, total unrecognized compensation expense related to unvested RSUs was $12.3 million, which is expected to be recognized over a weighted-average period of 2.5 years.