0001193125-21-246159.txt : 20210813 0001193125-21-246159.hdr.sgml : 20210813 20210813163756 ACCESSION NUMBER: 0001193125-21-246159 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 75 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210813 DATE AS OF CHANGE: 20210813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Zevia PBC CENTRAL INDEX KEY: 0001854139 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 862862492 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40630 FILM NUMBER: 211172823 BUSINESS ADDRESS: STREET 1: 15821 VENTURA BLVD. STREET 2: SUITE 145 CITY: ENCINO STATE: CA ZIP: 91436 BUSINESS PHONE: (310) 202-7000 MAIL ADDRESS: STREET 1: 15821 VENTURA BLVD. STREET 2: SUITE 145 CITY: ENCINO STATE: CA ZIP: 91436 10-Q 1 d213839d10q.htm 10-Q 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
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: 001-40630
 
 
Zevia PBC
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Delaware
 
86-2862492
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
 
 
15821 Ventura Blvd., Suite 145
 
 
Encino, CA 91436
(855)
469-3842
(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:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A common stock, par value $0.001 per
share
 
ZVIA
 
New York Stock Exchange
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.    Yes  ☐    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).    Yes  ☒    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.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
Emerging growth company           
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  
The number of shares outstanding of registrant’s common stock, as of the last practicable date were
34,416,450
 shares and 
30,113,152
 
shares of the registrant’s Class A and Class B common stock, respectively, $0.001 par value per share, as of August 11, 2021
.
 
 
 

Table of Contents
 
 
 
 
  
Page
 
PART I.
 
  
 
2
 
Item 1
 
CONDENSED FINANCIAL STATEMENTS (UNAUDITED) OF ZEVIA PBC
  
     
 
 
  
 
2
 
 
 
  
 
3
 
.
 
CONDENSED FINANCIAL STATEMENTS (UNAUDITED) OF ZEVIA LLC
  
     
 
 
  
 
6
 
 
 
  
 
7
 
 
 
  
 
8
 
 
 
  
 
9
 
 
 
  
 
10
 
Item 2.
 
  
 
22
 
Item 3.
 
  
 
37
 
Item 4.
 
  
 
37
 
PART II.
 
  
 
39
 
Item 1.
 
  
 
39
 
Item 1A.
 
  
 
39
 
Item 2.
 
  
 
60
 
Item 3.
 
  
 
60
 
Item 4.
 
  
 
60
 
Item 5.
 
  
 
60
 
Item 6.
 
  
 
61
 
 
 
  
 
62
 
 
 
i

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy 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,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar 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 on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. 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 on Form 10-Q including, but not limited to, the following:
 
 
 
failure to further develop and maintain our brand;
 
 
 
change in consumer preferences, perception and spending habits in the beverage industry and on naturally sweetened products, and failure to develop or enrich our product offering or gain market acceptance of our new products;
 
 
 
product safety and quality concerns including relating to our naturally sweetening system, could negatively affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions increasing our operating costs and reducing demand for our product offerings;
 
 
 
inability to compete in our intensely competitive categories;
 
 
 
we have a history of losses, and we may be unable to achieve profitability;
 
 
 
changes in the retail landscape or the loss of key retail customers
 
 
 
the impact of the COVID-19 pandemic on our business, results of operations and financial condition;
 
 
 
failure to attract, train or retain qualified employees, manage our future growth effectively or maintain our company culture;
 
 
 
fluctuation of our net sales and earnings as a result of price concessions, promotional activities and chargebacks;
 
 
 
failure to introduce new products or successfully improve existing products;
 
 
 
inability to obtain raw materials on a timely basis or in sufficient quantities to produce our products or meet the demand for our products due to reliance on a limited number of third-party suppliers;
 
 
 
extensive governmental regulation and enforcement if we are not in compliance with applicable requirements; and
 
 
 
other risks, uncertainties and factors set forth in the prospectus dated July 21, 2021 as filed with the U.S. Securities and Exchange Commission (“SEC”) on July 23, 2021 including those set forth under “
Risk
Factor
s
,” “
M
a
nagement’s
Discussion
and
Analysis
of
Financial
Condition
and Res
u
lts
of Operation
s
” and “
Bu
s
i
n
e
s
s
.”
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 on Form 10-Q. 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 on Form
10-Q.
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 on Form
10-Q
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 on Form
10-Q
to reflect events or circumstances after the date of this Quarterly Report on Form
10-Q
or to reflect new information or the occurrence of unanticipated events, except as required by 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.
 
1

PART I – FINANCIAL INFORMATION
ZEVIA PBC
CONDENSED BALANCE SHEET (Unaudited)
 
 
  
As of June 30, 2021
 
Assets
        
Other receivables
   $ 1  
    
 
 
 
Total assets
   $ 1  
    
 
 
 
Shareholder’s equity
        
Common stock, $0.001 par value—1,000
 shares authorized, issued and outstanding
   $ 1  
    
 
 
 
Total stockholder’s equity
   $ 1  
    
 
 
 
The accompanying notes are an integral part of these condensed financial statements.
 
2
ZEVIA PBC
NOTES TO CONDENSED UNAUDITED BALANCE SHEET
1. Description of Organization and Business Operations
Zevia PBC (the “Company,” “we,” “us,” “our”) was incorporated as a Delaware public benefit corporation on March 23, 2021, and prior to the consummation of the reorganization described herein and our initial public offering (“IPO”), did not conduct any activities other than those incidental to our formation and the IPO. In connection with the completion of the IPO on July 26, 2021, the Company became the holding company, and its sole material asset is a controlling equity interest in Zevia LLC, a Delaware limited liability company (“Zevia LLC”). Zevia LLC is the predecessor of the Company for financial reporting purposes. As the sole managing member of Zevia LLC, the Company operates and controls all of the business and affairs of Zevia LLC and, through Zevia LLC, conducts its business and subsequent to July 26, 2021, consolidates the results of Zevia LLC with a non-controlling interest reflected for the portion of Zevia LLC not owned by the Company. For more information about our holding company reorganization, see the section “Organizational Structure—The Reorganization” in the prospectus dated July 21, 2021 and filed with the SEC on July 23, 2021.
Public Benefit Corporation
In line with our mission to support the health of individuals and communities we live in, we elected to be treated as a public benefit corporation under Delaware law. Public benefit corporations are intended to produce a public benefit and to operate in a responsible and sustainable manner. As a public benefit corporation, we are required to balance the pecuniary interests of our stockholders with the best interests of those stakeholders materially affected by our conduct, including particularly those affected by the specific benefit purposes set forth in our certificate of incorporation. As provided in our amended and restated certificate of incorporation, the public benefits that we promote are to: (i) create and provide better-for-you beverages, food or other products that support the health of our consumers and their communities, (ii) promote the wellbeing of our employees in a supportive and empowering environment and (iii) forge an enduring profitable business.
Certified B Corporation
We have been designated as a “Certified B Corporation” by B Lab, an independent non-profit organization. As a Certified B Corporation, we have elected to have our social and environmental performance, accountability and transparency assessed against the proprietary criteria established by B Lab.
Emerging Growth Company
As a company with less than $1.07
 
billion in revenue during our last fiscal year, we qualify as an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act provides that an EGC may take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption is required for private companies. As part of this election, we are delaying the adoption of accounting guidance related to implementation costs incurred in cloud computing arrangements that currently applies to public companies. We are assessing the impact this guidance will have on our financial statements.
As of June 30, 2021 the sole stockholder of the Company is the Chief Executive Officer of Zevia LLC (“the Purchaser”). The Company issued to the Purchaser, and the Purchaser purchased
1,000
shares of its common stock (the “PBC Shares”), for cash consideration of a $
1
to be paid in full before the issuance and delivery of the PBC Shares.
 
3

2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Balance Sheet is prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC. The preparation of the financial statement in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statement. As there has been no activity for this entity through June 30, 2021, separate statements of operations, changes in stockholder’s equity and cash flows have not been presented. The Company’s fiscal year end is December 31.
On March 23, 2021, the Purchaser acquired
 
1,000
shares of common stock for cash consideration of
$
0.001
per share, or total cash consideration of $
1
from the Company.
Initial Public Offering
On July 21, 2021, the prospectus of the Company was declared effective by the SEC related to the IPO of its Class A common stock. On July 22, 2021, the Company’s shares began trading on the New York Stock Exchange under the ticker symbol “ZVIA”. The Company completed the IPO of 10,700,000 shares of it’s Class A common stock at an offering price of
 
$14.00
 
per share on July 26, 2021. The Company received aggregate net
proceeds of approximately $139.7 million after deducting underwriting discounts and commissions of $10.1 million. Upon the closing of the IPO, we used (i) approximately $25.5 million to purchase Class B units from certain Zevia LLC’s unitholders, including certain members of our senior management, at a per-unit price equal to the per-share price paid by the underwriters for shares of Class A common stock, (ii) approximately $0.4 million to cancel and cash-out outstanding options held by certain of Zevia LLC’s option holders, including certain members of our senior management, at a per-option price equal to the per-share price paid by the underwriters for shares of Class A common stock, and (iii) approximately $23.7 million to pay the cash consideration to certain pre-IPO institutional investors in connection with the merger of the blocker corporations into the Company with the Company surviving. Accordingly, we have not retained any of those portions of the proceeds. The Company used the remaining net proceeds of $90.1 million to acquire newly issued Class A units of Zevia LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of its Class A common stock. The underwriters have 30 days after the date of the prospectus, July 21, 2021, to exercise their option to purchase 1,605,000 additional shares of Class A common stock from the selling stockholders, until August 20, 2021. 
Offering Costs Associated with the IPO
Offering costs incurred in connection with the preparation of the IPO of approximately $
8.4
 
million, consisted primarily of accounting, legal, filing, regulatory and other costs. These costs will be recorded as a reduction to stockholder’s equity and recorded against the proceeds from the offering.
Income Taxes
The Company is treated as a subchapter C corporation, and therefore, is subject to both federal and state income taxes. Zevia LLC will continue to be recognized as a limited liability company, a pass-through entity for income tax purposes. 
3. Subsequent Events
Initial Public Offering
On July 21, 2021, the prospectus of the Company related to the IPO of its Class A common stock (as defined herein) was declared effective by the SEC. The closing date of the IPO was July 26, 2021, and in connection with the closing of the IPO, the following actions were taken:
 
 
 
The Company recapitalized its common and preferred membership interests into a single class of common units and each common unit outstanding after giving effect thereto was reclassified as two Class B units;
 
 
 
The Company amended and restated its certificate of incorporation in its entirety to, among other things: (i) authorize 800,000,000 shares of common stock, 550,000,000 shares, of which are designated as “Class A Common Stock” and 250,000,000 shares of which are designated as “Class B Common Stock;” and (ii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the board in one or more series and amended and restated its bylaws in their entirety to, among other things: (i) establish procedures relating to the presentation of stockholder proposals at stockholder meetings; (ii) establish procedures relating to the nomination of directors; and (iii) conform to the provisions of the amended and restated certificate;
 
 
 
The limited liability company agreement of Zevia LLC was amended and restated (the “Amended and Restated Zevia LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint the Company as the sole managing member of Zevia LLC;
 
 
4

 
 
The Company assumed all outstanding equity awards of Zevia LLC on a one-to-two basis;
 
   
The Amended and Restated Zevia LLC Agreement classified the interests acquired by the Company as Class A units and reclassified the interests held by the continuing members of Zevia LLC as Class B units and permits the continuing members of Zevia LLC to exchange Class B units for shares of Class A common stock on a 
one-for-one basis
 or, at the election of
t
he Company, for cash. For each membership unit of Zevia LLC that is reclassified as a Class B unit, the Company issued one corresponding share of its Class B common stock to the continuing members; 
 
   
The Company issued and sold 10,700,000
 shares of its Class A common stock to the underwriters at an IPO price of $
14.00
 per share, for gross proceeds of $
149.8
 million before deducting underwriting discounts and commissions of $
10.1
 million; 
 
   
The Company used approximately $90.1 million of the net proceeds of the IPO to acquire 6,900,000
 newly issued Class A units of Zevia LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of Class A common stock in the IPO; 
 
   
The Company used approximately $25.5 million of the net proceeds of the IPO to purchase 1,956,142 Class B units from certain of Zevia LLC’s unitholders, including certain members of senior management, at a per-unit price equal to the per-share price paid by the underwriters for shares of Class A common stock in the IPO. Such units were immediately converted into an equivalent number of Class A units;
 
   
The Company used approximately $0.4 million of the net proceeds of the IPO to cancel and cash-out outstanding options held by certain of Zevia LLC’s option holders, including certain members of senior management, at a per-option price equal to the per-share price paid by the underwriters for shares of Class A common stock in the IPO. The Company received an equivalent number of Class A units from Zevia LLC in exchange for the cancellation of such options;
 
   
The Company formed a new, first-tier merger subsidiary with respect to each blocker company of certain pre-IPO institutional investors (“Direct Zevia Stockholders”), and contemporaneously with the IPO, each respective merger subsidiary merged with and into the respective blocker company, with the blocker company surviving. Immediately thereafter, each blocker company merged with and into the Company, with the Company surviving. As a result of the blocker mergers, the 100% owners of the blocker companies acquired an aggregate of 23,716,450
 shares of newly issued Class A common stock and received approximately $
23.7
 million in cash consideration, and the blocker companies ceased to own any Zevia LLC units; 
 
   
The Company entered into the Tax Receivable Agreement for the benefit of the continuing members of Zevia LLC (not including the Company) and the Direct Zevia Stockholders pursuant to which
the
C
ompany
will pay 
85
% of the amount of the net cash tax savings, if any, that the Company realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting
from the
Company’s
 acquisition of a continuing member’s Zevia LLC units in connection with the IPO and in future exchanges, (ii) certain favorable tax attributes the Company acquired from the blocker companies in the blocker mergers and (iii) payments the Company makes under the Tax Receivable Agreement (including tax benefits related to imputed interest); 
 
   
The Company entered into an Amended and Restated Registration Rights Agreement with the Class B stockholders to provide for certain rights and restrictions after the IPO;
 
   
The underwriters have 30 days after the date of the prospectus, July 21, 2021, to exercise their option to purchase 1,605,000
 additional shares of Class A common stock, until August 20, 2021. 
Immediately following the closing of the IPO on July 26, 2021, Zevia LLC became the predecessor of the Company for financial reporting purposes. The Company is a holding company, and its sole material asset is its controlling equity interest in Zevia LLC. As the sole managing member of Zevia LLC, the Company operates and controls all of the business and affairs of Zevia LLC. This reorganization is accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of the Company will recognize the assets and liabilities received in the reorganization at their historical carrying amounts, as reflected in the historical financial statements of Zevia LLC. The Company will consolidate Zevia LLC in its consolidated financial statements and record a noncontrolling interest related to the Class B units held by the Class B stockholders on its consolidated balance sheet and statement of operations. The Company holds an economic interest of 53.5% in Zevia LLC and the remaining 46.7% represents the non-controlling interest. 
 
5

ZEVIA LLC
CONDENSED BALANCE SHEETS (Unaudited)
 
(in thousands, except unit and per unit amounts)
  
June 30, 2021
 
 
December 31, 2020
 
ASSETS
  
 
Current assets:
                
Cash
   $ 6,380     $ 14,936  
Accounts receivable, net
     9,417       6,944  
Inventories, net
     22,544       20,800  
Prepaid expenses and other current assets
     5,979       1,492  
    
 
 
   
 
 
 
Total current assets
     44,320       44,172  
Property and equipment, net
     2,653       991  
Right-of-use
assets under operating leases, net
     498       773  
Intangible assets, net
     3,838       3,939  
Other
non-current
assets
     82       81  
    
 
 
   
 
 
 
Total assets
   $ 51,391     $ 49,956  
    
 
 
   
 
 
 
LIABILITIES AND REDEEMABLE CONVERTIBLE PREFERRED UNITS AND MEMBERS’ DEFICIT
 
Current liabilities:
                
Accounts payable
   $ 10,806     $ 7,770  
Accrued expenses
     3,689       3,429  
Operating lease liabilities
     548       623  
Other current liabilities
     3,781       2,251  
    
 
 
   
 
 
 
Total current liabilities
     18,824       14,073  
Operating lease liabilities, net of current portion
     10       238  
    
 
 
   
 
 
 
Total liabilities
     18,834       14,311  
Commitments and contingencies (Note 9)
        
Redeemable convertible preferred units:
                
No par values. Authorized units of 34,410,379 and 34,410,379; 26,322,803 and 26,322,803 units issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; and aggregate liquidation preference, $329,753 and $329,753 as of June 30, 2021 and December 31, 2020, respectively.
     232,457       232,457  
Members’ deficit:
                
Common units: No par value. Authorized units of 7,274,742 and 7,274,742; 2,476,386 and 2,438,812
 units issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.
     976       966  
Additional
paid-in
capital
     73        
Accumulated deficit
     (200,949     (197,778
    
 
 
   
 
 
 
Total members’ deficit
     (199,900     (196,812
    
 
 
   
 
 
 
Total liabilities, redeemable convertible preferred units and members’ deficit
   $ 51,391     $ 49,956  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed financial statements.
 
6

ZEVIA LLC
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
 
    
For the Three Months Ended June 30,
   
For the Six Months Ended June 30,
 
(in thousands, except for per unit and weighted average common units outstanding)
  
2021
   
2020
   
2021
   
2020
 
Net sales
   $ 34,352     $ 27,677     $ 65,046     $ 50,167  
Cost of goods sold
     18,112       13,842       34,618       27,300  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
     16,240       13,835       30,428       22,867  
Operating expenses:
                                
Selling and marketing expenses
     10,703       5,717       18,691       12,638  
General and administrative expenses
     6,014       4,643       11,727       8,976  
Depreciation and amortization
     230       250       474       473  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     16,947       10,610       30,892       22,087  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) from operations
     (707     3,225       (464     780  
Other expense, net
     (42     (118     (38     (267
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) and comprehensive income (loss)
   $ (749   $ 3,107     $ (502   $ 513  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) attributable to common unit holders
     (749     460       (502     79  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) per unit attributable to common unit holders, basic
   $ (0.30   $ 0.10     $ (0.20   $ 0.02  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) per unit attributable to common unit holders, diluted
   $ (0.30   $ 0.10     $ (0.20   $ 0.02  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common units outstanding, basic
     2,476,386       4,549,828       2,469,518       4,549,828  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common units outstanding, diluted
     2,476,386       30,747,747       2,469,518       29,607,836  
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed financial statements.
 
7

ZEVIA LLC
CONDENSED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED UNITS AND MEMBERS’ DEFICIT
(Unaudited)
 
    
Redeemable Convertible
Preferred Units
           
Common Unit
    
Additional
Paid-In
    
Accumulated
   
Members’
 
(in thousands, except unit and per unit amounts)
  
Units
    
Amount
           
Units
    
Amount
    
Capital
    
Deficit
   
Deficit
 
Balance at January 1, 2020
     22,558,386      $ 58,037       
 
     4,529,061      $ 1,810      $ 1,312      $ (43,091 )   $ (39,969
Exercise of common units
     —          —         
 
     20,020        5        —          —         5  
Unit based compensation expense
     —          —         
 
     —          —          29        —         29  
Net loss
     —          —         
 
     —          —          —          (2,594     (2,594
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance at March 31, 2020
     22,558,386      $ 58,037               4,549,081
 
   $ 1,815      $ 1,341      $ (45,685 )   $ (42,529
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Exercise of common units
     —          —                 999        —          —          —         —    
Unit based compensation expense
     —          —                 —          —          29        —         29  
Net loss
    
—  
      
—  
              —          —          —          3,107       3,107  
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance at June 30, 2020
     22,558,386      $ 58,037               4,550,080      $ 1,815      $ 1,370      $ (42,578   $ (39,392
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
             
    
Redeemable Convertible
Preferred Units
           
Common Unit
    
Additional
Paid-In
    
Accumulated
   
Members’
 
(in thousands, except unit and per unit amounts)
  
Units
    
Amount
           
Units
    
Amount
    
Capital
    
Deficit
   
Deficit
 
Balance at January 1, 2021
     26,322,803      $ 232,457       
 
     2,438,812      $ 966        —        $ (197,778   $ (196,812
Exercise of common units
     —          —         
 
     37,574        10        —          —         10  
Unit based compensation expense
     —          —         
 
     —          —          37        —         37  
Net income
     —          —         
 
     —          —          —          247       247  
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance at March 31, 2021
     26,322,803      $ 232,457               2,476,386      $ 976      $ 37      $ (197,531   $ (196,518
Unit based compensation expense
     —          —                 —          —          36        —         36  
Distributions to
 
unitholders for tax
 
payments
     —          —                 —          —          —          (2,669     (2,669
Net loss
     —          —                 —          —          —          (749     (749
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance at June 30, 2021
     26,322,803      $ 232,457               2,476,386      $ 976      $ 73      $ (200,949   $ (199,900
    
 
 
    
 
 
           
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed financial statements.
 
8

ZEVIA LLC
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
 
    
For the Six Months
Ended June 30,
 
(in thousands)
  
2021
   
2020
 
Operating activities:
                
Net income (loss)
   $ (502   $ 513  
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                
Non-cash
lease expense
     275       242  
Depreciation and amortization
     474       448  
Loss on sale of equipment
     8       —    
Amortization of debt issuance cost
     17       25  
Unit-based compensation expense
     73       58  
Changes in operating assets and liabilities:
                
Accounts receivable, net
     (2,473     (2,625
Inventories, net
     (1,744     (7,117
Prepaid expenses and other current assets
     380       318  
Other
non-current
assets
     (30     (21
Accounts payable
     3,036       3,464  
Accrued expenses
     (778 )     724  
Operating lease liabilities—current
     (75     32  
Other current liabilities
     1,530       1,529  
Operating lease liabilities, net of current portion
     (228     (293
    
 
 
   
 
 
 
Net cash used in operating activities
     (37     (2,703
Investing activities:
                
Purchases of property and equipment
     (2,031     (489
    
 
 
   
 
 
 
Net cash used in investing activities
     (2,031     (489
Financing activities:
                
Proceeds from exercise of common units
     10       5  
Proceeds from revolving line of credit
1
     64,308       51,384  
Repayment of revolving line of credit
1
     (64,308     (48,660
Proceeds from PPP Loan
     —         1,429  
Payment of deferred IPO costs
     (3,829     —    
Distribution to unitholders for tax payments
     (2,669     —    
    
 
 
   
 
 
 
Net cash (used in) provided by financing activities
     (6,488     4,158  
    
 
 
   
 
 
 
Net change from operating, investing, and financing activities
     (8,556     966  
Cash at beginning of period
     14,936       3,243  
    
 
 
   
 
 
 
Cash at end of period
   $ 6,380     $ 4,209  
    
 
 
   
 
 
 
Supplemental Disclosure of Cash Flow Information:
                
Cash paid for interest
   $ 72     $ 131  
Unpaid deferred offering costs
   $ 1,038     $ —    
 
(1)
Zevia LLC’s revolving line of credit provides for daily drawdowns and repayments of amounts outstanding. As of June 30, 2021, no amounts were outstanding under the line of credit given repayments equaled drawdowns for each of the periods presented. Consistent with the provisions of ASC Topic 230,
Statement of Cash Flows,
Zevia LLC has presented these daily draw downs and repayments under its revolving line of credit with its lender on a gross basis in the statements of cash flows for the periods ended June 30, 2021, and 2020.
The accompanying notes are an integral part of these condensed financial statements.
 
9

ZEVIA LLC
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Organization and operations
Zevia LLC develops, markets, sells, and distributes a wide variety of zero calorie, non-GMO verified, carbonated and non-carbonated soft drinks under the Zevia
®
brand name. Zevia LLC’s products are sold principally in the United States and Canada through various retailer channels, including grocery stores, natural products stores, warehouse stores, and specialty outlets. Zevia LLC’s products are manufactured and generally maintained at third-party beverage production and warehousing facilities located in both the United States and Canada.
Basis of presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with US GAAP for interim financial information and with the instructions to SEC Article 10 of Regulation S-X. Accordingly, these financial statements do not include all infor
m
ation and footnotes required by US GAAP for complete financial statements and are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021, or for any other interim period or for any other future fiscal year. The balance sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date but does not include all disclosures including certain notes required by US GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with US GAAP have been or 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, 2020 and notes included in the Registration Statement on Form S-1, as amended. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. Zevia LLC believes that the disclosures provided herein are adequate to prevent the information presented from being misleading.
Initial Public Offering
On July 21, 2021, the prospectus of Zevia PBC (“the Company”) was declared effective by the SEC related to the IPO of its Class A common stock. On July 22, 2021, the Company’s shares began trading on the New York Stock Exchange under the ticker symbol “ZVIA”. The Company completed the IPO of
 
10,700,000
shares of its Class A common stock at an offering price of
$
14.00
 
per share on July 26, 2021. The Company received aggregate net proceeds
of approximately $
139.7
million after deducting underwriting discounts and commissions of $
10.1
million. Upon the closing of the IPO, we used (i) approximately $
25.5
million to purchase Class B units from certain Zevia LLC’s unitholders, including certain members of our senior management, at a per-unit price equal to the per-share price paid by the underwriters for shares of Class A common stock, (ii) approximately $
0.4
 million to cancel and cash-out outstanding options held by certain of Zevia LLC’s option holders, including certain members of our senior management, at a per-option price equal to the per-share price paid by the underwriters for shares of Class A common stock, and (iii) approximately $
23.7
million to pay the cash consideration to certain pre-IPO institutional investors in connection with the merger of the blocker corporations into the Company with the Company surviving. Accordingly, we have not retained any of those portions of the proceeds. The Company used the remaining net proceeds of $
90.1
million to acquire newly issued Class A units of Zevia LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of its Class A common stock. The underwriters have
30
days after the date of the prospectus, July 21, 2021, to exercise their option to purchase
1,605,000
additional shares of Class A common stock from the selling stockholders, until August 20, 2021. 
 
10

2. Summary of Significant Accounting Policies
Use of estimates
The preparation of the financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported amount of net sales and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by Zevia LLC relate to net sales and associated cost recognition; the useful lives assigned to and the recoverability of property and equipment; reserves recorded for inventory obsolescence; the incremental borrowing rate for lease liabilities; allowance for doubtful accounts; and the determination of the fair value of equity instruments, including redeemable convertible preferred and common units, restricted unit awards, and equity-based compensation awards. On an ongoing basis, Zevia LLC evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of its assets and liabilities.
As of June 30, 2021, Zevia LLC’s operations have not been adversely impacted by the COVID-19 pandemic to a significant extent. The global impact of COVID-19 continues to rapidly evolve, and Zevia LLC will continue to monitor the situation and the effects on its business and operations, particularly if the COVID-19 pandemic continues and persists for an extended period of time.
Deferred offering costs
Offering costs consist of legal, accounting, and other costs incurred that are directly related to the Company’s registration statement on Form S-1 filed with the SEC. These costs will be charged to stockholder’s equity of Zevia PBC upon the completion of the transaction. During the three and six months ended June 30, 2021, the Company incurred offering costs of approximately
$
3.3 million and $4.9 million respectively, with approximately $1.0 
million of this amount included in accounts payable in the accompanying balance sheets. These deferred offering costs are included in prepaid expenses and other current assets in the accompanying
condensed 
balance sheets.
Recent accounting pronouncements
The Company is an emerging growth company, as defined in the 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 financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
In June 2016, the FASB issued ASU No.
2016-13,
 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
 (“ASU
2016-13”).
The ASU provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for private companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2022. Zevia LLC currently does not expect this guidance to have a significant impact on Zevia LLC’s financial statements as Zevia LLC does not have a history of material credit losses.
 
11

In August 2018, the FASB issued ASU
No. 2018-15,
Intangibles - Goodwill and Other - Internal Use Software
(Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
. The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. The ASU is effective for private companies for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Zevia LLC currently does not expect this guidance to have a significant impact on our financial statements as the Company does not currently have material cloud computing software.
In August 2020, the FASB issued ASU
No. 2020-06,
Debt – Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40).
This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, as well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance and requires the application of the
if-converted
method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU
2020-06
is applicable to this Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. Zevia LLC adopted the ASU as of January 1, 2021 and has applied the accounting standard update in computing diluted earnings per share for its redeemable convertible preferred units. The adoption of this guidance did not have a material impact on Zevia LLC’s financial statements.
In April 2021, the FASB issued ASU
2021-04,
which included Topic 260,
Earnings Per Share
and Topic 718,
Compensation - Stock Compensation
. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU
2021-04
is effective for all entities for fiscal years beginning after December 15, 2021. Early adoption is permitted. Zevia LLC is currently evaluating the impact of adopting ASU
2021-04
on its financial statements.
Any other recently issued accounting pronouncements are neither relevant, nor expected to have a material impact on Zevia LLC’s financial statements.
3. REVENUES
Disaggregation of Revenue
The following table disaggregates Zevia LLC’s sales by channel:
 
    
For the three months
ended June 30,
    
For the six months
ended June 30,
 
(in thousands)
  
2021
    
2020
    
2021
    
2020
 
Retail sales
   $ 30,902      $ 23,482      $ 56,769      $ 43,404  
Online/ecommerce
     3,450        4,195        8,277        6,763  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net sales
   $ 34,352      $ 27,677      $ 65,046      $ 50,167  
    
 
 
    
 
 
    
 
 
    
 
 
 
Contract liabilities
Contract liabilities are recorded as deferred revenue on the accompanying condensed balance sheets and includes payments received in advance of performance obligations being filled under the contract. Zevia LLC did
not
have any material unsatisfied performance obligations as of June 30, 2021 and December 31, 2020, respectively.
4. INVENTORIES, NET
Inventories consist of the following as of:
 
(in thousands)
  
June 30, 2021
    
December 31, 2020
 
Raw materials
   $ 8,014      $ 8,155  
Finished goods
     14,530        12,645  
    
 
 
    
 
 
 
Inventories, net
   $ 22,544      $ 20,800  
    
 
 
    
 
 
 
 
12

5. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following as of:
 
(in thousands)
  
Useful Life
    
June 30, 2021
    
December 31, 2020
 
Land
 
 
N/A
 
 
$
 
336
 
 
$
 
 
Leasehold improvements
  
 
1-2
 
 
  468        468  
Computer equipment and software
  
 
3
 
 
  1,724        1,454  
Furniture and equipment
  
 
3-6
 
 
  672        473  
Quality control equipment
  
 
6
 
 
  140        340  
Building
  
 
30
 
 
  1,346        —    
    
 
 
 
 
 
 
    
 
 
 
    
 
 
 
 
  4,686        2,735  
Less accumulated depreciation
  
 
 
 
 
  (2,033      (1,744
    
 
 
 
 
 
 
    
 
 
 
Property and equipment, net
  
 
 
 
 
$ 2,653      $ 991  
    
 
 
 
 
 
 
    
 
 
 
For the three months ended June 30, 2021 and 2020, depreciation expense, including the amortization of leasehold improvements, amounted to approximately $0.2 million and $0.2 million, respectively. For the six months ended June 30, 2021 and 2020, depreciation expense, including the amortization of leasehold improvements, amounted to approximately $0.4 million and $0.3 
million, respectively These amounts are included under depreciation and amortization in the accompanying condensed statements of operations and comprehensive income (loss).
6. INTANGIBLE ASSETS, NET
The following table provides information pertaining to Zevia LLC’s intangible asset as of:
 
         
June 30, 2021
    
December 31, 2020
 
(in thousands)
   Useful lives              
Customer relationships
   15 years    $ 3,007      $ 3,007  
Accumulated amortization
          (2,169      (2,068 )
 
         
 
 
    
 
 
 
            838        939  
Trademarks
   Indefinite      3,000        3,000  
         
 
 
    
 
 
 
          $ 3,838      $  3,939  
         
 
 
    
 
 
 
For the three months ended June 30, 2021 and 2020, total amortization expense amounted to approximately $51,000
 
for each of the periods then ended. For the six months ended June 30, 2021 a
n
d 2020, total amortization expense amounted to $0.1
million for each of the periods then ended. No impairment losses have been recorded on any of Zevia LLC’s intangible assets for the
six-month
period ended June 30, 2021 and 2020.
 
13

Amortization expense for intangible assets with definite lives is expected to be as follows:
 
(in thousands)
      
Remainder of 2021
   $ 100  
2022
     200  
2023
     200  
2024
     200  
2025
     138  
    
 
 
 
Expected amortization expense for intangible assets with definite lives
   $ 838  
    
 
 
 
7. DEBT
Credit Facility
In 2019, Zevia LLC entered into a loan agreement providing for a
$9.0
million revolving line of credit (the “Credit Facility”) with Stonegate Asset Company II, LLC (“Stonegate”), with a maturity date in
 
April 2022
.
Borrowings under the revolving line are secured by accounts receivable and inventory. In June 2020, Zevia LLC amended the Credit facility and increased it to
$
12.0
million. As of June 30, 2021, and December 31, 2020, the revolving line interest rate was
 
7.5
% annual percentage rate and there was
no
outstanding balance. On June 1, 2021, Zevia LLC extended the Credit Facility through
 
April 2023
and there were no other modifications made to the terms and conditions. In July 2021 and subsequent to the IPO, Zevia LLC terminated the Credit Facility. There were no material early-termination fees or any other penalties associated with the termination of the Credit Facility.
8. LEASES
Zevia LLC leases office space, vehicles and equipment. Zevia LLC’s recognized lease costs include:
 
    
For the six months
ended June 30,
 
(in thousands)
  
2021
    
2020
 
Income Statement
                 
Operating lease cost
(1)
   $ 302     $ 302  
Lease income related to operating leases
(2)
     32            
     
Other Information
                 
Operating cash flows from operating leases
   $ 330      $ 319  
    
 
 
    
 
 
 
Weighted-average remaining lease term (months)
     10.40        22.31  
    
 
 
    
 
 
 
Weighted-average discount rate
     7.56        7.56  
    
 
 
    
 
 
 
 
(1)
Operating lease cost is recorded within general and administrative expenses in the accompanying condensed statements of operations and comprehensive income (loss).
(2)
Lease income related to operating leases is recorded within revenues in the accompanying condensed statements of operations and comprehensive income (loss).
Zevia LLC’s variable lease costs and short-term lease costs were inconsequential.
 
14

Maturities of lease payments under
non-cancellable
leases were as follows:
 
(in thousands)
  
June 30, 2021
 
Remainder of 2021
   $ 336  
2022
     240  
2023
     1  
    
 
 
 
Total lease payments
     577  
Less Imputed Interest
     (19 )
 
    
 
 
 
Present value of lease liabilities
   $ 558  
    
 
 
 
9. COMMITMENTS AND CONTINGENCIES    
Zevia LLC is obligated under various
non-cancellable
lease agreements providing for office space, vehicles and equipment that e
x
pire at various dates through 2023. Refer to Note 8
Leases
.
Purchase commitments
As of June 30, 2021 Zevia LLC does not have any material agreements with suppliers for the purchase of raw material with minimum purchase quantities.
Legal proceedings
Zevia LLC is involved from time to time in various claims, proceedings, and litigation. Zevia LLC 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 has not identified any material legal matters where it believes an unfavorable material outcome is reasonably possible and/or for which an estimate of possible losses can be made. Management does not believe that the resolution of these matters would have a material impact on the condensed financial statements.
10. BALANCE SHEET COMPONENTS
Accrued Expenses
Accrued expenses consisted of the following as of:
 
(in thousands)
  
June 30, 2021
    
December 31, 2020
 
Accrued customer paid bottle deposits
   $ 711      $ 563  
Accrued incentive compensation
     1,250        2,826  
Accrued other
     1,728        40  
    
 
 
    
 
 
 
Total
   $ 3,689      $ 3,429  
    
 
 
    
 
 
 
Other Current Liabilities
Other current liabilities consisted of the following:
 
(in thousands)
  
June 30, 2021
    
December 31, 2020
 
Accrued vacation liability
   $ 857      $ 728  
Accrued purchases
     1,857        1,201  
Other current liabilities
     1,067        322  
    
 
 
    
 
 
 
Total
   $ 3,781      $ 2,251  
    
 
 
    
 
 
 
 
15

11. EQUITY-BASED COMPENSATION
Zevia LLC uses a Black-Scholes valuation model to measure unit option expense as of each respective grant date. Generally, unit option grants vest ratably over four years, have a
ten-year
term, and have an exercise price equal to the fair market value of each respective class of common unit as of the grant date. The fair value of unit options is amortized to expense over the vesting period. In determining the fair value of Zevia LLC’s unit options, management has made certain assumptions in calculating the various elements used in the option valuation model, including the expected term and volatility. There were
 
no
option grants during the period
s
ended June 30, 2021 and 2020.
Zevia LLC’s equity-based compensation expense for the three months ended June 30, 2021 and 2020 amounted to approximately $36,000 and $29,000, respectively. Zevia LLC’s equity-based compensation expense for the six months ended June 30, 2021 and 2020 amounted to approximately $73,000 and $58,000, respectively. These amounts are included in general and administrative expenses in the condensed statements of operations and comprehensive income (loss).
As of June 30, 2021, Zevia LLC’s
non-vested
unit options had a weighted average remaining contractual life of approximately
 
1.9
years. Total unrecognized unit compensation expense on unvested unit options as of June 30, 2021 was approximately $
0.4
 million.
Restricted Unit
Awards
In March 2021, Zevia LLC granted
878,250
units of Restricted Class C common units (“RCCCUs”). Under the terms of the award agreements, these RCCCUs carry a
ten-year
term from their grant date, and fully vest at the earlier of (i) a change of control of the Company, or (ii)
six months
after the effective date of an IPO and termination of any lock up period. Settlement of the vested RCCCUs is deferred and generally occurs in annual installments over three years from the vesting date.
Also, in March 2021, the Board approved an amendment to the RCCCUs granted in August 2020 (“the Amendment”). The Amendment changes the vesting of the RCCCUs granted in August 2020 to occur as follows: (i) full vesting in the event of a change of control, or (ii) in the event of an IPO, vesting in equal monthly installments over a 36-month period following the termination of any lockup period, subject to the participant’s continued employment through such vesting date. Settlement is to occur within 30 days following each vesting date of the RCCCUs. All other terms related to the August 2020 grant remained unchanged.
Total unrecognized compensation expense on unvested restricted unit awards as of June 30, 2021, was approximately $106.6 million. Because Zevia LLC deems the likelihood of vesting as not probable, there was no compensation expense recognized for restricted unit awards during the six months ended June 30, 2021 and 2020, respectively. In connection with the IPO, the Company is expected to recognize approximately $57.5 million of equity-based compensation expense ratably over the requisite service period through December 31, 2021.
In connection with the IPO, the Company assumed all outstanding equity awards of Zevia LLC on a one-to-two basis, such that unit options of Zevia LLC are now stock options of the Company, RCCCUs are now restricted stock of the Company, and phantom unit awards of Zevia LLC are now phantom stock awards of the Company.
12. SEGMENT REPORTING
Zevia LLC has one operating and reporting segment which operates as a product portfolio with a single business platform. In reaching this conclusion, management considered the definition of the Chief Operating Decision Maker (“CODM”); how the business is defined by the CODM; the nature of the information provided to the CODM and how that information is used to make operating decisions; and how resources and performance are accessed. Zevia LLC’s CODM is the Chief Executive Officer. The results of the operations provided to and analyzed by the CODM at Zevia LLC level and accordingly, key resource decisions and assessment of performance are performed at Zevia LLC level. Zevia LLC has a common management team across all product lines and Zevia LLC 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 Zevia LLC’s major customers and accounted for more than
 
10
% of total net sales for the periods:
 
    
For the three months
ended June 30,
   
For the six months
ended June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Customer A
     19     18     18     19
Customer B
     17     19     17     17
Customer C
     11     12     11     13
Customer D
     8     13     11     12
 
16

The table below represents Zevia LLC’s customers which accounted for
m
ore than
 
10
% of total accounts receivable, net as of:
 
    
June 30,
 
2021
   
December 31,
 
2020
 
Customer A
     8     11
Customer B
     22     17
Customer E
     11     14
Customer F
     11     2
Customer G
     6     12
The table below represents raw material vendors that accounted for more than 10% of all raw material purchases for the periods:
 
    
For the 
three
 
months

ended June 30,
   
For the six months
ended June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Vendor A
     30     31     32     32
Vendor B
     24     18     23     21
Vendor C
     12     9     13     9
Vendor D
     2     18     2     11
14. NET INCOME (LOSS) PER UNIT ATTRIBUTABLE TO COMMON UNIT HOLDERS
As all of Zevia LLC’s common units and redeemable convertible preferred units are participating securities, Zevia LLC has appl
i
ed the
two-class
method. Net income (loss) per unit under the
two-class
method is the same for all classes of common units for the periods presented.
Zevia LLC’s redeemable convertible preferred participating securities do not contractually require the holders of such units to participate in Zevia LLC’s losses. As such, net losses for the periods presented were not allocated to Zevia LLC’s participating securities. Further, given the net losses experienced, the net loss per unit for Zevia LLC’s Class A, Class B, and Class C common units are identical for the periods presented.
The computation of income (loss) per unit is as follows:
 
    
Three Months Ended June 30,
    
Six Months Ended June 30,
 
    
2021
    
2020
    
2021
   
2020
 
    
(in thousands, except unit and per unit amounts)
 
Net income (loss) per unit:
                                  
Net income (loss)
   $ (749    $ 3,107      $ (502   $ 513  
Less: Impact of assumed conversions
                                  
Income allocated to participating units
    
 
 
       (2,647     
 
 
      (434
    
 
 
    
 
 
    
 
 
   
 
 
 
Net income (loss) available to Class A, Class B and Class C common unit members
     (749      460        (502     79  
Units used in computation:
                                  
Weighted-average common units outstanding, Basic
     2,476,386        4,549,828        2,469,518       4,549,828  
Common equivalent units from options to purchase common units, restricted units, and conversion of redeemable convertible preferred units
     —          26,197,919        —         25,058,008  
    
 
 
    
 
 
    
 
 
   
 
 
 
Weighted average common units outstanding, Diluted
     2,476,386        30,747,747        2,469,518       29,607,836  
  
 
 
    
 
 
    
 
 
   
 
 
 
Basic net income (loss) per unit
   $ (0.30    $ 0.10      $ (0.20   $ 0.02  
Diluted net income (loss) per unit
   $ (0.30    $ 0.10      $ (0.20   $ 0.02  
 
17

Net income (loss) per unit under the
two-class
method is the same for all classes of common units for all the applicable periods are presented below (amounts in thousands, except for unit and per unit amounts).
 
 
  
Three months ended June 30, 2021
 
 
  
(in thousands, except unit and per unit amounts)
 
Common Units
  
Net loss
 
  
Class A
Common
Unitholders
 
  
Class B
Common
Unitholders
 
  
Class C
Common
Unitholders
 
As reported – basic
   $ (749                           
Deduct:
                                   
Undistributed earnings allocated to participating securities
    
                            
Allocation of net loss to Common Class A, B & C Unit members
   $ (749    $ (722    $ (13    $ (14
Weighted average common units outstanding, basic
              2,387,994        43,387        45,005  
             
 
 
    
 
 
    
 
 
 
Basic net loss per unit
           
$
(0.30
  
$
(0.30
  
$
(0.30
             
 
 
    
 
 
    
 
 
 

 
  
Three months ended June 30, 2020
 
 
  
(in thousands, except unit and per unit amounts)
 
Common Units
  
Net income
 
  
Class A
Common
Unitholders
 
  
Class B
Common
Unitholders
 
  
Class C
Common
Unitholders
 
As reported – basic
   $ 3,107                             
Deduct:
                                   
Undistributed earnings allocated to participating securities
     (2,647                           
  
 
 
          
Allocation of net income to Common Class A, B & C Unit members
   $ 460      $ 450      $ 5      $ 5  
Weighted average common units outstanding, basic
              4,450,341        49,459        50,028  
             
 
 
    
 
 
    
 
 
 
Basic net income per unit
           
$
0.10
 
  
$
0.10
 
  
$
0.10
 
             
 
 
    
 
 
    
 
 
 
Numerator adjustment for diluted Incentive unit options and Restricted Class A common units (“RCCA”)/ RCCC
            $ 2,537      $ 29      $ 81  
Options (Dilutive)
              1,524,199        289,321        655,298  
Redeemable convertible preferred units converted to common
              22,558,386        —          —    
RCCAs/RCCCs
              1,022,334        —          148,381  
     
 
 
    
 
 
    
 
 
 
Total shares – Diluted
              29,555,260        338,780        853,707  
             
 
 
    
 
 
    
 
 
 
Diluted net income per unit
           
$
0.10
 
  
$
0.10
 
  
$
0.10
 
             
 
 
    
 
 
    
 
 
 
 
18

 
  
Six months ended June 30, 2021
 
 
  
(in thousands, except unit and per unit amounts)
 
Common Units
  
Net loss
 
  
Class A
Common
Unitholders
 
  
Class B
Common
Unitholders
 
  
Class C
Common
Unitholders
 
As reported – basic
   $ (502                           
Deduct:
                                   
Undistributed earnings allocated to participating securities
    
                            
  
 
 
          
Allocation of net loss to Common Class A, B & C Unit members
   $ (502    $ (485    $ (9    $ (9
Weighted average common units outstanding, basic
              2,383,570        42,128        43,820  
             
 
 
    
 
 
    
 
 
 
Basic net loss per unit
           
$
(0.20
  
$
(0.20
  
$
(0.20
             
 
 
    
 
 
    
 
 
 

 
  
Six months ended June 30, 2020
 
Common Units
  
Net Income
 
  
Class A
Common
Unitholders
 
  
Class B
Common
Unitholders
 
  
Class C
Common
Unitholders
 
As reported – basic
   $ 513                             
Deduct:
                                   
Undistributed earnings allocated to participating sec
u
rities
     (434                           
  
 
 
          
Allocation of net income to Common Class A, B & C Unit members
   $ 79      $ 77      $ 1      $ 1  
Weighted average common units outstanding, basic
              4,450,555        49,417        49,856  
             
 
 
    
 
 
    
 
 
 
Basic net income per unit
           
$
0.02
 
  
$
0.02
 
  
$
0.02
 
             
 
 
    
 
 
    
 
 
 
Numerator adjustment for diluted Incentive unit
options and Restricted Class A common units (“RCCA”)/ RCCC
            $ 418      $ 5      $ 11  
Options (Dilutive)
              1,524,152        289,314        655,040  
Redeemable convertible preferred units converted to common
              22,558,386        —          —    
RCCAs and RCCCs (Dilutive)
              29,875        —         
1,241
 
     
 
 
    
 
 
    
 
 
 
Total shares – Diluted
              28,562,968        338,731        706,137  
             
 
 
    
 
 
    
 
 
 
Diluted net income per unit