What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-30 compared with 2020-03-18 · 265 added, 246 removed, 173 unchanged (75% of the section changed)

Inc., a Delaware corporation (“Reed’s”, the “Company,”

“we,”

or “us”

Inc., a Delaware corporation (“Reed’s”, the “Company,” “we,” or “us” throughout

this report) owns a leading portfolio of handcrafted, all-natural beverages that is sold in over 40,000 outlets nationwide (including

1 unchanged sentence

locations including bars and restaurants).

Reed’s two core brands are Reed’s Craft Ginger Beer and Virgil’s

Handcrafted soda.

Reed’s Craft Ginger Beers are unique due to the proprietary process of using fresh ginger root combined

with a Jamaican inspired recipe of natural spices, honey and fruit juices.

Reed’s uses this same handcrafted approach in

its Virgil’s line of great tasting, bold flavored craft sodas, including its award-winning Virgil’s Root Beer.

Reed’s two core brands are Reed’s Craft Ginger Beer and Reed’s

Real Ginger Ale and Virgil’s Handcrafted soda.

Reed’s Craft Ginger Beers are unique due to the proprietary process

of using fresh ginger root combined with a Jamaican inspired recipe of natural spices, honey and fruit juices.

this same handcrafted approach in its Reed’s Real Ginger Ale and Virgil’s line of great tasting, bold flavored

craft sodas, including its award-winning Virgil’s Root Beer.

is the leading ginger beer in the US;

Virgil’s is the leading independent (not aligned with Coca-Cola, Pepsi or Keurig

Virgil’s is the leading independent (not aligned with Coca-Cola, Pepsi or Keurig Dr.

Pepper) all-natural full line craft soda and is ranked fourth in the craft soda category.

offers its portfolio of natural hand-crafted beverages in the craft specialty foods industry as natural alternatives to the estimated

$90 billion mainstream carbonated soft drinks (“CSD”) market in the United States.

Reed’s products are sold

across the country and internationally in the following major channels:

natural food, specialty food, grocery, mass merchant,

convenience, club, drug, and on-premise bars and restaurants.

Reed’s is a top-seller in natural food store markets, it also sells nationally to major grocery chains.

Sales growth of

natural food and beverage products is presently outpacing sales growth for conventional products in every region in the United

The trend in grocery stores is to expand offerings of natural products.

We believe that as we continue to invest our attention

and resources in driving accelerated growth and building our brands, we will have the ability to scale our business and continue

to build our presence and distribution across all retail channels.

Original Ginger Brew, created in 1987 by Christopher J.

Reed, our founder, and current Chief Innovation Officer and director,

was introduced to the market in Southern California stores in 1989.

By 1990, we began marketing our products through United Natural

(“UNFI”) and other natural food distributors and moved our production to a larger facility in Boulder,

1991, we incorporated our business operations in the state of Florida under the name of Original Beverage Corporation and moved

all production to a co-pack facility in Pennsylvania.

Throughout the 1990’s, we continued to develop and launch new Ginger

Brew varieties.

Reed’s Ginger Brews reached broad placement in natural and gourmet foods stores nationwide through UNFI

and other major specialty, natural/gourmet and mainstream food and beverage distributors.

1997, we began licensing the products of China Cola and eventually acquired the rights to that product in 2000.

In 1999, we purchased

the Virgil’s Root Beer brand from the Crowley Beverage Company.

In 2000, we moved into an 18,000-square foot warehouse property,

the Brewery, in Los Angeles, California, to headquarters.

In 2001, pursuant to a reincorporation merger, we changed our state

of incorporation to Delaware and also changed our name to “Reed’s, Inc.”

September 2018, we completed the relocation of its headquarters to Norwalk, Connecticut.

In December 2018, after a lengthy marketing

and bidding process, we sold the Brewery to a company owned by Christopher J.

Reed, our founder.

The sale of the Brewery marked

a fundamental shift in the nature of our operations and effectively eliminated our costs associated with excess manufacturing

Reed’s offers its portfolio of

natural hand-crafted beverages in the craft specialty foods industry as natural alternatives to the $32 billion mainstream

carbonated soft drinks (“CSD”) market in the United States as measured by IRI Multi Outlet scan data.

products are sold across the country and internationally in the following major channels:

natural food, specialty food,

grocery, mass merchant, convenience, club, drug, and on-premise locations (bars and restaurants).

after a year of the pandemic, overall sales growth of natural food and beverage products continues to outpace sales growth for

conventional products across all retail channels.

We see ample opportunity to scale our natural beverage business and grow our

distribution in these channels.

Soft Drink Industry Overview

CSD market continues to be a large category in the overall American consumer beverage industry.

According to Chicago-based Mintel

in April 2017, carbonated soft drinks enjoyed about a 90% household penetration.

However, years of CSD decline (13 years of decline

through 2018 according to Mintel) have resulted in an urgency to innovate within this category.

The ginger ale category

has experienced steady CAGR growth of more than 5% over the last 4 years and more than 3% over the latest 52 weeks (based

on SPINS MULO/Natural/Specialty Sales ending 2/23/20.

Consumers continue to increasingly embrace ginger ingredients and

ginger products.

More consumers are focused on digestive health and are likely opting for the functional and digestive health

benefits of ginger-based beverages.

While many consumers clearly still want to indulge in soft drinks, they are turning to ginger

beverages as a way to impart some health benefits.

biggest shift seen over the last decade is a redefinition of what it means to eat and drink healthfully.

More consumers are opting

for naturally healthful products touting organic and natural appeals.

In addition, as the craft and natural soda segment is still

underdeveloped at only 1% of the total CSD market, we believe there is significant growth potential to continue to market and

sell our portfolio of branded products and encourage consumers to switch away from mainstream beverages that contain artificial

colors, flavors, sweeteners and preservatives to great tasting natural alternatives.

retail CSD category has rallied during the pandemic.

This past year, after 13 years of declines, the retail CSD category grew

The ginger ale segment grew even faster at 15.4% and is now a $1.1 billion dollar market.

Ginger ale growth,

we believe, is driven primarily by a consumer perception of ginger ale as a healthier alternative to other sodas.

of ginger ales made with real ginger deliver on this perception and are poised to breakout in the segment.

the wake of COVID-19, consumers are shifting consumption to better-for-you products.

We believe there is significant growth potential

from consumers switching away from mainstream beverages that contain artificial ingredients and preservatives towards great-tasting,

natural alternatives.

Trends Driving Growth for Our Products

following is a list of consumer trends that act as tailwinds as we sell and market our portfolio of ginger beer and handcrafted

Consumer Interest in Better-for-You and Healthier Products :

According to a recent study, consumers reported that ‘healthy

options,’

followed by ‘natural ingredients’

were the two top factors when considering purchasing new products.

Sugar and Artificial Sweeteners :

Consumers are moving away from high sugar beverages and artificially sweetened products.

and Distinct Brands :

There is a broad, cross-generational appeal (Millennials and Boomers alike) for brands with an authentic

story, proprietary processes, higher quality ingredients and unique packaging.

up to Premium and Craft :

The $500 million craft soda and premium mixer industry segments are growing.

Consumers are looking

for small batch, handcrafted brands that offer higher quality products and authentic bold flavors.

Craft Soda Category is Underdeveloped :

The craft soda segment is underdeveloped relative to other super-premium food and

beverage categories;

it is currently less than 1% of the overall CSD category while craft beer accounts for over 20% of the

total beer category.

Use in Beverages is Growing:

Ginger is showing up more and more in beverages, and we believe its momentum will continue.

in Non-Alcoholic Alternatives (Mocktails) in On-Premise :

More consumers are seeking non-alcoholic alternatives with bold

and unique flavors when they go out to bars and restaurants.

for Premium Mixed Drinks :

Leading the way in demand has been the Moscow Mule and Mule related cocktails, growing 30% year

over year in on-premise sales.

They are now in the top five most popular cocktails in the United States according to both

Nielsen and Cheers Magazine.

strategies will remain responsive to these macro consumer trends as we concentrate our efforts on developing the Company’s

following is a list of consumer trends that are accelerating as we exit the pandemic, and which support our brands.

Interest in all-natural products has gone mainstream.

Clean Label :

62% of Americans are avoiding at least one ingredient.

Reduced Sugar :

A favorable trend for our zero-sugar beverages, 77% of consumers say they are reducing their sugar intake.

Functionality :

Right before the pandemic, 65% of consumers looked for function in what they eat and drink.

This accelerating trend will drive

growth for our ginger-based beverages.

continues to grow of higher-quality, independent, and more authentic brands.

Premiumization:

trend towards embracing quality has accelerated during the pandemic with consumers splurging on premium beverages at retail,

including premium mixers.

Better-for-you

More consumers are seeking non-alcoholic alternatives with bold and unique flavors.

Ready-to-Drink

Category is exploding alongside hard seltzer as people seek novelty and variety, which puts our RTD Mules

in a great position to succeed.

strategies will remain responsive to these macro consumer trends as we concentrate our efforts on developing the Company’s

sales and marketing functions.

hand-crafted natural beverages use only premium natural ingredients.

Our products are free of genetically modified organisms (“GMOs”)

and are gluten free.

Over the years, Reed’s has developed several product offerings.

In 2019, we streamlined our

focus to our core product offerings of Reed’s Craft Ginger Beer and Virgil’s Craft Sodas and launched a new line of

Virgil’s Zero Sugar Sodas in twelve ounce cans.

make our hand-crafted beverages with only premium, natural ingredients.

Our products are free of genetically modified organisms

(“GMOs”) and artificial preservatives.

Over the years, Reed’s has developed several product offerings.

we streamlined our focus to our core categories of Reed’s Ginger Beverages and Virgil’s Craft Sodas.

2020, we launched our new line of Reed’s Real Ginger Ales, in both Full Sugar and Zero Sugar versions, made with 2,000mg

of fresh organic ginger.

Craft Ginger Beer

Craft Ginger Beer is distinguished from other ginger beers by its proprietary process of brewing fresh ginger root, its exclusive

Craft Ginger Beer is set apart from other ginger beers by its proprietary process of brewing fresh ginger root, its exclusive

use of all-natural ingredients, and its authentic Jamaican-inspired recipe.

We do not use preservatives, artificial flavors, or

colors, and our Ginger Beer is certified kosher.

We offer different levels of fresh ginger content, ranging from our lightest-spiced

Original, to our medium-spiced Extra, and finally to our spiciest Strongest.

We also offer two sweetener options:

one with cane

sugar, honey and fruit juices and another without sugar (Zero Sugar) made from an innovative blend of natural sweeteners (developed

in 2018 and commercialized in 2019).

of the end of 2019, the Reed’s Craft Ginger Beer line included four major varieties in restaged packaging:

Original Ginger Beer –

Our first to market product uses a Jamaican-inspired recipe that calls for fresh ginger root,

We do not use artificial preservatives, artificial

flavors, or colors, and Reed’s Ginger Beer is certified kosher.

We offer different levels of fresh ginger content, ranging

from our lightest-spiced Original, to our medium-spiced Extra, and finally to our spiciest Strongest.

We also offer three sweetener

one with cane sugar, honey and fruit juices;

one with honey and pineapple juice;

and another without sugar (Zero Sugar)

made from an innovative blend of natural sweeteners (developed in 2018 and commercialized in 2019).

of the end of 2020, the Reed’s Craft Ginger Beer line included five major varieties:

Original Ginger Beer – Our first to market product uses a Jamaican-inspired recipe that calls for fresh ginger root,

lemon, lime, honey, raw cane sugar, pineapple, herbs and spices.

Extra Ginger Beer –

Contains 100% more fresh ginger than Reed’s Original recipe for extra spice.

Strongest Ginger Beer –

Contains 200% more fresh ginger than Reed’s Original for the strongest spice.

Reed’s Zero Sugar Ginger Beer –

launched in 2019 in bottles and cans

uses a proprietary natural sweetening system that has no added sugars.

Virgil’s

Premium Ginger Beer – Our Original Ginger Beer sweetened with honey and pineapple juice.

(No cane sugar added.)

Extra Ginger Beer – Contains 100% more fresh ginger than Reed’s Original recipe for extra spice.

Strongest Ginger Beer – Contains 200% more fresh ginger than Reed’s Original for the strongest spice.

Zero Sugar Extra Ginger Beer – launched in 2019 in bottles and cans, it uses a proprietary natural sweetening system

for a zero-calorie version of our Reed’s Extra Ginger Beer.

Real Ginger Ale

Real Ginger Ale is unique for the category because it combines real fresh ginger with the classic, refreshing taste that consumers

It contains nothing artificial and is Non-GMO project verified.

We offer two sweetener options:

one with cane sugar and

the other with our zero-calorie, all-natural sweetener blend.

Reed’s Real Ginger Ale – launched in April 2020 in standard and slim cans.

It is the only mass market ginger ale

made with organic fresh ginger.

Reed’s Zero Sugar Real Ginger Ale – also launched in April 2020 in standard and slim cans.

It uses our all-natural

sweetener blend to match the great taste of the cane sugar version in a zero-calorie drink.

New Ginger Beverages under the Reed’s brand

Reed’s Wellness Ginger Shots – launched in February 2020 offered in two varieties:

Daily Ginger and Ginger Energize.

These convenient, shelf-stable shots provide a ginger boost on the go.

Reed’s Zero Sugar Classic Mule – launched in June 2020 containing 7% ABV (Alcohol By Volume), is the ultimate

mule, made with fresh ginger root, to be enjoyed anytime, anywhere.

Handcrafted Sodas

Virgil’s

is a premium handcrafted soda that uses only all-natural ingredients to create bold renditions of classic flavors.

We don’t

use any preservatives, any artificial colors, or any GMO-sourced ingredients, and our Virgil’s line is certified kosher.

Virgil’s line includes the following products:

Virgil’s first Handcrafted soda was launched in 1994.

It began as one man’s passion to create the finest

use any artificial preservatives, any artificial colors, or any GMO-sourced ingredients, and our Virgil’s line is certified

Virgil’s line includes the following products:

Virgil’s first Handcrafted soda was launched in 1994.

It began as one man’s passion to create the finest

root beer ever produced and has since won numerous awards.

Virgil’s difference is using all-natural ingredients to craft

bold, classic soda flavors.

Virgil’s Handcrafted line includes Root Beer, Vanilla Cream, Black Cherry, and Orange.

Virgil’s launched a new line of Zero Sugar, Zero Calorie craft sodas in 2019.

Each Zero Sugar soda

is sweetened with a proprietary blend of natural sweeteners with no added sugars.

This all-natural line of Zero Sugar flavors

includes Root Beer, Cola, Black Cherry, Vanilla Cream, Orange and Lemon-Lime.

Virgil’s Handcrafted line includes Root Beer, Vanilla Cream, Black Cherry, and Orange Cream.

Virgil’s launched a new line of Zero Sugar, Zero Calorie craft sodas in 2019.

Each Zero Sugar soda is sweetened

with a proprietary blend of natural sweeteners with no added sugars.

This all-natural line of Zero Sugar flavors includes Root

Beer, Cola, Black Cherry, Vanilla Cream, Orange Cream and Lemon-Lime.

The product has recently been certified Keto compliant.

Product Launches

the second quarter of 2020, Reed’s will launch the below:

Reed’s®

Wellness Ginger Shots (Classic Ginger and Ginger Energize)

Real Ginger Ale™

(Classic and Zero Sugar)

Craft Ginger Mule.

(Classic Zero Sugar)

the second quarter of 2021, Reed’s will launch the below:

Real Ginger Ale Zero Sugar Line Extensions:

Shirley Tempting and Transfusion

Real Ginger Ale and Virgil’s 20 oz Bottles for the Convenience Channel

Zero Sugar Line Extensions:

Better, Grapefruit, and Ginger Ale

● Limited Edition Swing Lid Bottles 0.5 liter:

Virgil’s Bavarian Nutmeg Root Beer and Flying Cauldron Butterscotch

Craft Stormy Mule

Primary Markets

target a smaller segment of the estimated $90 billion mainstream carbonated and non-carbonated soft drink markets in the U.S.,

Canada, and international markets.

Our brands are generally considered premium and natural, with upscale packaging.

They are loosely

defined as the craft specialty bottled carbonated soft drink category.

We target a smaller segment of the estimated

$32 billion mainstream carbonated and non-carbonated soft drink markets in the United States.

Our brands are generally

considered premium and natural, with upscale packaging.

They are loosely defined as the craft specialty bottled carbonated soft

drink category.

have an experienced and geographically diverse sales force promoting our products, with senior sales representatives strategically

placed in multiple regions across the country, supported by local Reed’s sales staff.

Additionally, we have sales managers

13 unchanged sentences

& specialty stores :

Trader Joe’s, Bristol Farms, Lazy Acres, The Fresh Market, Central Market

and mass chains :

Kroger (and all Kroger banners), Safeway, Albertson’s, Publix, Food Lion, Stop & Shop,

H.E.B., Wegmans, Target and now Walmart

Costco Wholesale

BevMo!, Total Wine & More, Spec’s

Kroger (and all Kroger banners), Safeway, Albertson’s, Publix, Food Lion, Stop & Shop, H.E.B.,

Wegmans, Target, Walmart

BevMo!, Total Wine & More, Spec’s

& drug stores :

Circle K, CVS Health

Circle K, CVS Health, Rite Aid

Distribution Network

10 unchanged sentences

North America.

to Store Distribution (“DSD”) Through Non-Alcoholic Beverage Distributor Network

During the past year we expanded, and will continue to expand, in this distribution network.

to Store Distribution (“DSD”) Through Non-Alcoholic Beverage Distributor Network

independent distributor partners operate DSD systems which deliver primarily beverages, foods, and snacks directly to retail stores

3 unchanged sentences

DSD is especially well-suited to products frequently restocked and responds to in-store promotion and merchandising.

We are primarily focused on expanding our DSD network on a national basis.

to Store Warehouse Distribution

7 unchanged sentences

These distributors have a warehouse and distribution

center, and ship Reed’s and Virgil’s products directly to the retailer (or to customers who opt for drop shipping).

International

presently export Reed’s and Virgil’s brands throughout international markets via US based exporters.

where you’ll find our brands present are France, UK, South Africa, portions of the Caribbean, Canada, Spain, Philippines,

Israel and Australia.

In the UK, our Virgil’s brands can be found at Pizza Hut, Tesco Supermarket and Sainsbury.

We presently export Reed’s and Virgil’s

brands throughout international markets via US based exporters.

International markets where our brands are present

are France, UK, South Africa, portions of the Caribbean, Canada, Spain, Philippines, Israel and Australia.

In the UK, our Virgil’s

brands can be found at Pizza Hut, Tesco Supermarket and Sainsbury.

International

2 unchanged sentences

Despite these cost challenges, we believe there

are good opportunities to expand internationally and we are increasing our marketing focus on these areas by adding freight friendly

packages such as aluminum cans.

We are open to exporting and co-packing internationally and expanding our brands into foreign

markets, and we have held preliminary discussions with trading companies and import/export companies for the distribution of our

products throughout Asia, Europe, Australia, and South America.

We believe these areas are a natural fit for Reed’s ginger

products because of the popularity and importance of ginger in international markets, especially the Asian market, where ginger

is a significant part of the local diet and nutrition.

are good opportunities to expand internationally, and we are increasing our marketing focus on these areas by adding freight

friendly packages such as aluminum cans.

We are open to exporting and co-packing internationally and expanding our brands into

foreign markets, and we have held preliminary discussions with trading companies and import/export companies for the distribution

of our products throughout Asia, Europe, Australia, and South America.

We believe these areas are a natural fit for Reed’s

ginger products because of the popularity and importance of ginger in international markets, especially the Asian market, where

ginger is a significant part of the local diet and nutrition.

believe the strength of our brands, innovation, and marketing, coupled with the quality of our products and flexibility of our

distribution network, allows us to compete effectively.

have entered into agreements with some of our distributors that commit us to “termination fees”

if we terminate our

have entered into agreements with some of our distributors that commit us to “termination fees” if we terminate our

agreements early or without cause.

These agreements provide for our distributor partners to have the right to distribute

our products to a defined type of retailer within a defined geographic region.

As is customary in the beverage industry, if we

should terminate the agreement or not automatically renew the agreement, we would be obligated to make certain payments to our

distributor partners.

These agreements provide for our distributor partners to have the right to distribute our products

to a defined type of retailer within a defined geographic region.

As is customary in the beverage industry, if we should terminate

the agreement or not automatically renew the agreement, we would be obligated to make certain payments to our distributor partners.

We constantly review our distribution agreements with our partners across North America.

1 unchanged sentence

Most distributors handle a number of competitive products.

In addition, our products are sometimes a small part

of our distributors’

In addition, our products are sometimes a small part of our

distributors’ businesses.

Manufacturing

of Reed’s products are produced by our co-pack partners, which assemble our products and charge us a fee, generally by the

case, for the products produced.

We have a long-standing relationship with two co-packers in Pennsylvania.

Additionally, in conjunction

with the sale of our plant, we entered into a three-year co-packing agreement with CCB, whereby CCB will produce Reed’s

beverages in glass bottles at prevailing West Coast market rates.

In 2019, we entered into a co-packing agreement with Sonoma

Beverage Company on the West Coast.

We recently engaged an additional co-packer on the East Coast, Clinton’s Ditch, and

another on the West Coast, Noel Canning.

We are in discussions and negotiations with additional co-packers to secure added capability

for future production needs.

We periodically review our co-packing relationships to ensure that they are optimal with respect

to quality of production, cost and location.

and Logistics are a significant portion of the Company’s operational costs.

In order to drive efficiency and reduce costs,

on February 1, 2019 we entered into a strategic partnership with Veritiv Logistics Solutions to manage all freight movement for

Veritiv is one of the largest distribution service providers in North America and has expertise that will provide

a competitive advantage in the movement of raw materials and finished goods.

This partnership will support planning and execution

of all inventory movement, assessment of storage needs and cost management.

follow a “fill as needed” model to the best of our ability and have no significant order backlog.

Product Development

we have simplified our business and have streamlined a significant number of SKUs in order to further our primary objective of

accelerating the growth of the Reed’s and Virgil’s core product offerings, we believe significant opportunity remains

in the all-natural beverage space.

alternatives will be the future for carbonated soft drinks.

We will continue to drive product development in the all-natural,

no and low sugar offerings in the “better for you” beverage categories.

In addition, we believe there are powerful

consumer trends that will help propel the growth of our brand portfolio including the increased consumption of ginger as a recognized

superfood, the growing use of ginger beer in today’s popular cocktail drinks, and consumers’ increased demand for

higher quality, all-natural handcrafted beverages.

Reed, the Company’s founder and Chief Innovation Officer continues to support our new product development efforts in

Reed possesses thirty plus years of product development and innovation experience.

Recent innovations include

our compelling line of full flavor, all-natural, zero sugar, zero calorie sodas.

Reed’s has also begun to expand and broaden

its product development capabilities by engaging and working with larger, experienced beverage flavor houses and innovative ingredient

research and supply companies.

believe our new business model enhances our ability to be nimble and innovative, producing category leading new products in a

short period of time.

nonalcoholic beverage segment of the commercial beverage industry is highly competitive, consisting of numerous companies ranging

7 unchanged sentences

Competitors in the ginger beer category include Goslings, Fever Tree, Bundaberg,

Cock ‘n Bull and Q Tonic;

in the craft soda category we compete with brands such as Stewart’s, IBC, Zevia, Blue Sky,

Hansen’s, Henry Weinhard’s, Boylan, and Jones Soda;

Cock ‘n Bull and Q Tonic;

in the craft soda category we compete with brands such as Stewart’s, IBC, Zevia, Blue Sky,

Hansen’s, Henry Weinhard’s, Boylan, and Jones Soda;

In the Ginger Ale category we compete with Canada Dry, Schweppes,

Seagram’s and Zevia.

factors affecting our ability to compete successfully include the taste and flavor of products, trade and consumer promotions,

8 unchanged sentences

Our commitments to the highest quality standards and brand innovation are keys to our success.

ready Wellness Ginger Shot will be entering the energy shot category that many companies have already entered.

A few mainstream

companies drive the shelf stable category, but there is room for an all-natural alternative.

Competition for market share and

acceptance of new products is significant.

Our Reed’s Wellness Ginger Shot

was introduced during 2020.

The shot category is very competitive and a few mainstream companies dominate

the category, but there is room for an all-natural alternative.

Competition for market share and acceptance of new products is

Main competitors are 5-Hour Energy, Ginger Time, and Rescue Ginger Shots.

Craft Ginger is at the beginning of its restage.

The category is small and there isn’t a significant number of entrants.

Key competition are Chimes and Gin Gins.

Manufacturing

100% of Reed’s product is produced by our co-pack partners, which assemble our products and charge us a fee, generally by

the case, for the products produced.

We have a long-standing relationship with a co-packer in Pennsylvania and

recently engaged an additional co-packer on the East Coast.

Additionally, in conjunction with the sale of our plant, we entered

into a three-year co-packing agreement with CCB, whereby CCB will produce Reed’s Inc.

beverages in glass bottles at prevailing

West Coast market rates.

During the first quarter of 2019, we also entered into a one-year co-packing agreement with Sonoma Beverage

Company, also on the West Coast.

We are in discussion and negotiations with additional co-packers to secure added capability

for future production needs.

We periodically review our co-packing relationships to ensure that they are optimal with respect

to quality of production, cost and location.

Reed’s Craft Crystallized Ginger

and Reed’s Ginger Chews restaged their product line up in 2020 and we will be working with a new distribution partner

The category is small and there is not a significant number of entrants.

Key competitors are Chimes

and Gin Gins.

Substantially

all of the raw materials used in the preparation, bottling and packaging of our products are purchased by Reed’s or by our

contract packers in accordance with our specifications.

4 unchanged sentences

our suppliers.

Bottles and Aluminum Cans

significant component of our product cost is the purchase of glass bottles and aluminum cans.

2 unchanged sentences

Crown Cork & Seal for aluminum cans.

Both suppliers provide expertise in emerging package and material innovation that

can be leveraged to further expand marketing and package offerings.

part of our ongoing initiative to simplify and streamline operations, we have identified approximately thirty-five core products

on which to place our strategic focus.

These core products consist of Reed’s and Virgil’s branded beverages, which

accounted for approximately 96% of sales in 2019.

Product innovation within these two major lines remains a top

and Distribution

and Logistics are a significant portion of the Company’s operational costs.

In order to drive efficiency and reduce costs,

on February 1, 2019 we entered into a strategic partnership with Veritiv Logistics Solutions to manage all freight movement for

Veritiv is one of the largest distribution service providers in North America and has expertise that will provide

a competitive advantage in the movement of raw materials and finished goods.

This partnership will support planning and execution

of all inventory movement, assessment of storage needs and cost management.

follow a “fill as needed”

model to the best of our ability and have no significant order backlog.

Product Development

we have simplified our business and have streamlined a significant number of SKUs in order to further our primary objective of

accelerating the growth of the Reed’s and Virgil’s core product offerings, we believe significant opportunity remains

in the all-natural beverage space.

Healthier alternatives will be the future for carbonated soft drinks.

We will continue to drive

product development in the all-natural, no and low sugar offerings in the “better for you”

beverage categories.

addition, we believe there are powerful consumer trends that will help propel the growth of our brand portfolio including the

increased consumption of ginger as a recognized superfood, the growing use of ginger beer in today’s popular cocktail drinks,

and consumers’

increased demand for higher quality, all-natural handcrafted beverages.

Reed, the Company’s founder and Chief Innovation Officer continues to support our new product development efforts in 2020.

Reed possesses thirty years of product development and innovation experience.

Recent innovations include our compelling line

of full flavor, all-natural, zero sugar, zero calorie sodas.

Reed’s has also begun to expand and broaden its product development

capabilities by engaging and working with larger, experienced beverage flavor houses and innovative ingredient research and supply

believe our new business model enhances our ability to be nimble and innovative, producing category leading new products in a

short period of time .

have entered into a licensing agreement with Full Sail Brewery headquartered in Hood River, Oregon to manufacture and sell our

new line of Reed’s Alcoholic Moscow Mule in 4 pack cans.

Full Sail will manage all aspects of production and distribution.

Both suppliers provide expertise in emerging package and material innovation that can

be leveraged to further expand marketing and package offerings.

Capital Practices

Historically,

we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible

debt instruments, term loans and credit lines from financial institutions, and cash generated from operations.

We have taken decisive

action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product portfolio, negotiating

improved vendor contracts and restructuring our selling prices.

During 2020 we entered into a licensing agreement

with Full Sail Brewery headquartered in Hood River, Oregon to manufacture and sell our new line of Reed’s Alcoholic Moscow

Mule in 4 pack, 12 pack, and 16 ounce cans.

Full Sail manages all aspects of production and distribution.

of our nonalcoholic beverages are somewhat seasonal with a higher than average volume in the warmer months.

7 unchanged sentences

rights are licensed to our co-packers and suppliers and other parties.

Reed’s ginger processing and brewing process, finished

beverage products and concentrate formulas are among its most valuable trade secrets.

3 unchanged sentences

Pursuant to our manufacturing and bottling agreements,

we authorize our bottlers to use applicable Reed’s trademarks in connection with their manufacture, sale and distribution

of our products.

We intend to obtain trademarks in international markets as may become necessary.

We have registered and intend to obtain additional trademarks in international markets as may become

use confidentiality and non-disclosure agreements with employees, manufacturers and distributors to protect our proprietary rights.

Reed is also subject to an intellectual property agreement with Reed’s restricting competition consistent with his fiduciary

obligations to Reed’s.

Reed is also subject to an intellectual property agreement with Reed’s restricting competition consistent with his fiduciary

obligations to Reed’s.

production, distribution and sale in the United States of many of our products are subject to the Federal Food, Drug, and Cosmetic

17 unchanged sentences

of a listed substance that is:

a “safe harbor”

threshold that may be established;

a “safe harbor” threshold that may be established;

result of necessary cooking;

29 unchanged sentences

of certain products sold in the state.

Capital Resources

of December 31, 2020, we have 34 full-time equivalent employees on our corporate staff.

employ additional people on a part-time basis as needed.

We employ additional people on a part-time

basis as needed.

We have never participated in a collective bargaining agreement.

relations with our employees are good.

are subject to the reporting requirements of the Exchange Act and, accordingly, we file annual reports, quarterly

reports and other information with the Securities and Exchange Commission, or SEC.

Access to copies of our Annual Reports

on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC, including

amendments to such filings, may be obtained free of charge from our website, http://www.reedsinc.com.

These filings

are available promptly after we file them with, or furnish them to, the SEC.

We are not incorporating our website or any information

from the website into this annual report.

The SEC also maintains a website, http://www.sec.gov, that contains our Annual

Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Report on Form 8-K and other filings with the SEC.

to these filings is free of charge.

We believe relations with our employees are

are subject to the reporting requirements of the Exchange Act and, accordingly, we file annual reports, quarterly reports and

other information with the Securities and Exchange Commission, or SEC.

Access to copies of our Annual Reports on Form 10-K, Quarterly

Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC, including amendments to such filings, may be

obtained free of charge from our website, http://www.reedsinc.com.

These filings are available promptly after we file them with,

or furnish them to, the SEC.

We are not incorporating our website or any information from the website into this annual report.

The SEC also maintains a website, http://www.sec.gov, that contains our Annual Reports on Form 10-K, Quarterly Reports on Form

10-Q, Current Report on Form 8-K and other filings with the SEC.

Access to these filings is free of charge.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business