What changed in this filing

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Item 1A. Risk Factors

2021-03-30 compared with 2020-03-18 · 151 added, 227 removed, 751 unchanged (33% of the section changed)

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or that we currently deem immaterial may also harm our business.

All forward-looking statements in this document are based on information available to us as of the date hereof, and we assume

no obligations to update any such forward-looking statements.

Relating to Our Business

All forward-looking statements in this document are based on

information available to us as of the date hereof, and we assume no obligations to update any such forward-looking statements.

of Material Risk Factors

We have a history of operating losses.

If we continue to suffer losses from operations, our working capital may be insufficient

to support our ability to expand our business operations as rapidly as we would deem necessary at any time, unless we are able

to obtain additional financing.

We may need additional financing in the future, which may not be available when needed or may be costly and dilutive.

Our secured credit facility with Rosenthal and Rosenthal, Inc.

contains financial covenants that, if breached, could trigger default.

The recent global coronavirus outbreak could harm our business and results of operations.

Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business,

financial condition and results of operations.

Increased market spending may not drive volume growth.

Increases in costs of packaging, ingredients and contract manufacturing tolling fees may have an adverse impact on our gross margin.

If we do not adequately manage our inventory levels, our operating results could be adversely affected.

It is difficult to predict the timing and amount of our sales because our distributors are not required to place minimum orders

Factors Related to our recently received Paycheck Protection Program Loan

may not be entitled to forgiveness of our recently received Paycheck Protection Program Loan, and our application for the Paycheck

Protection Program Loan could in the future be determined to have been impermissible.

April 20, 2020, we were granted a Paycheck Protection Program loan (the “PPP Loan”) under the Coronavirus Aid, Relief,

and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration (the “SBA”)

in the aggregate amount of $770,000 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act.

PPP Loan agreement is dated April 20, 2020, matures on April 20, 2022, bears interest at a rate of 1% per annum, with the first

six months of interest deferred, is payable monthly commencing on November 2020, and is unsecured and guaranteed by the U.S.

Business Administration.

The loan term may be extended to April 20, 2025, if mutually agreed to by the Company and lender.

PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.

Under the CARES Act, as amended in June 2020,

loan forgiveness is generally available for the sum of documented payroll costs, covered rent payments, covered mortgage interest

and covered utilities during the “Covered Period”, which is 8 weeks or 24 weeks (at the election of the Company) beginning

on the date of the first disbursement of the PPP Loan.

We will be required to repay any portion of the outstanding principal that

is not forgiven, along with accrued interest, and we cannot provide any assurance that we will be eligible for loan forgiveness,

that we will apply for forgiveness, or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

In order to apply

for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request

necessary to support our ongoing operations.

We made this certification in good faith after analyzing, among other things, the

maintenance of our workforce, our need for additional funding to continue operations, and our ability to access alternative forms

of capital in the current market environment to offset the effects of the COVID-19 pandemic.

Following this analysis, we believe

that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad

objectives of the CARES Act.

The certification described above is subject to interpretation.

On April 23, 2020, the SBA issued

guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be

able to make the required certification in good faith.

The lack of clarity regarding loan eligibility under the Paycheck Protection

Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving

If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loan,

we are later determined to have not been in compliance with these requirements or it is otherwise determined that we were ineligible

to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties.

we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the

PPP Loan or otherwise, such audit or review could result in the diversion of management’s time and attention and the incurrence

of additional costs.

Any of these events could have a material adverse effect on our business, results of operations and financial

Factors Relating to Our Business

have a history of operating losses.

the year ended December 31, 2020, the Company recorded a net loss of $10,177 and used cash in operations of $9,496.

of December 31, 2019, we had a cash balance of $913 with borrowing capacity of $3,235, stockholders’

equity of $1,147 and

a working capital of $4,885, compared to a cash balance of $624, stockholder’s deficit of $6,743 and working capital shortfall

of $3,297 at December 31, 2018.

the years ended December 31, 2019 and 2018, the Company experienced significant financing shortages and engaged

in two separate transactions to raise capital in 2019.

Recently, the Company received net proceeds of $14,867,257

from an underwritten offering of common stock in February 2019 and $7,474,441 from an underwritten offering of common stock

in October 2019.

As of December

31, 2020, we had a cash balance of $595 with borrowing capacity of $5,166, stockholders’ equity of $10,404 and a working

capital of $9,528, compared to a cash balance of $913, stockholder’s equity of $1,147 and working capital of $4,885 at December

the years ended December 31, 2020 and 2019, the Company experienced significant financing shortages and engaged in two separate

transactions to raise capital in 2020.

Recently, the Company received net proceeds of $5,310 from an underwritten offering of

common stock in April 2020, and $11,254 from an underwritten offering of common stock in November 2020.

we continue to suffer losses from operations, our working capital may be insufficient to support our ability to expand our business

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If we violate any of the restrictions or covenants, a significant portion of our indebtedness may become immediately due and payable,

our lenders’

commitment to make further loans to us may terminate.

our lenders’ commitment to make further loans to us may terminate.

We might not have, or be able to obtain, sufficient funds

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to our Financing Agreement with Rosenthal & Rosenthal, Inc.

(“Rosenthal”) dated October 4, 2018 for our secured

credit facility, we are required to maintain at the end of each of our fiscal quarters, tangible net worth in an amount not less

than negative $1,500,000 and working capital of not less than negative $2,500,000.

We did not meet these requirements for the

fiscal quarter ended December 31, 2018, and Rosenthal waived compliance with these covenants for this period for a $5,000 fee.

We have been in compliance since.

We met these requirements for the fiscal year

ended December 31, 2020, and 2019.

Any breach that is not waived by Rosenthal could trigger default.

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and its effects on our business or results of operations at this time.

COVID-19 pandemic and mitigation measures has had an adverse impact on global economic conditions, including disruption of stock

markets and may impact on our ability to obtain financing on terms acceptable to us, if at all.

and March 2020, the financial markets significantly declined as the reality of the COVID-19 pandemic came into focus.

extent to which the COVID-19 pandemic continues to impact our results will depend on future developments that are highly uncertain

and cannot be predicted at this time, including new information that may emerge concerning the severity of the virus and its variants

and the actions to contain its impact.

Disruption of stock markets had an impact on the cost of capital in 2020 and may, in the

future, impact on our ability to obtain financing on terms acceptable to us, if at all.

within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial

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be adversely affected.

Furthermore, such third-parties’

financial position or market share may deteriorate, which could

Furthermore, such third-parties’ financial position or market share may deteriorate, which could

adversely affect our distribution, marketing and sales activities.

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number of competitive products.

In addition, our products are a small part of our distributors’

In addition, our products are a small part of our distributors’ businesses.

continually seek to expand distribution of our products by entering into distribution arrangements with regional bottlers or other

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independent distributors and national accounts are not required to place minimum monthly or annual orders for our products.

order to reduce their inventory costs, independent distributors typically order products from us on a “just in time”

basis in quantities and at such times based on the demand for the products in a particular distribution area.

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Packaging costs such as paper and aluminum cans have experienced

industry wide price increases in the past and there is always the risk that the company’s co-packers increase their toll

rates based on increases in their fixed and variable costs.

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market spending may not drive volume growth

Company’s marketing efforts in the past have been limited.

The current increase in marketing spending may not generate an

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happen in the fuel markets in 2021.

Due to the price sensitivity of our products, we may not be able to pass such increases

on to our customers.

Due to the price sensitivity of our products, we may not be able to pass such increases on

to our customers.

we are unable to attract and retain key personnel, our efficiency and operations would be adversely affected.

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by our management could significantly change our reported results.

have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting.

not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial

reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial

obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common

effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce

reliable financial statements.

As discussed in Item 9A –

“Controls and Procedures”

of this Form 10-K, we have

re-evaluated our internal control over financial reporting and our disclosure controls and procedures and concluded that they

were not effective as of December 31, 2019.

material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such

that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be

prevented or detected on a timely basis.

The material weaknesses we identified are (1) ineffective controls over outsourced IT

systems and business processes and (2) inadequate segregation of duties within accounting processes.

Company is committed to remediating its material weaknesses as promptly as possible.

Implementation of the Company’s remediation

plans has commenced and is being overseen by the audit committee.

However, there can be no assurance as to when these material

weaknesses will be remediated or that additional material weaknesses will not arise in the future.

Even effective internal control

can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting,

could result in material misstatements in our financial statements, which in turn could

have a material adverse effect on our financial condition and the trading price of our common stock and we could fail to

meet our financial reporting obligations.

we are unable to build and sustain proper information technology infrastructure, our business could suffer.

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Factors Relating to Our Industry

current aluminum can shortage could harm our ability to meet consumer demand.

current aluminum shortage can harm our ability to meet consumer demand.

a craft beverage company, we do not meet volume requirements to have a contract in place with our aluminum can supplier.

beverage companies such as us are facing an aluminum can shortage for certain sizes.

While standard 12 ounce can supply is not

in short supply, we will continue to see supply issues with non-standard cans such as slim cans in 8, 10, and 12 ounces.

aluminum can shortage could harm our ability to timely produce enough product to meet consumer demand.

beverage companies such as us are facing an aluminum can shortage.

We anticipate we will continue to see supply issues with all

sizes of aluminum cans.

This aluminum can shortage can harm our ability to timely produce enough product to meet consumer

may experience a reduced demand for some of our products due to health concerns (including obesity) and legislative initiatives

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Several municipalities in the United States

have implemented or are considering implementing taxes on the sale of certain “sugared”

beverages, including non-diet

have implemented or are considering implementing taxes on the sale of certain “sugared” beverages, including non-diet

soft drinks, fruit drinks, teas and flavored waters to help fund various initiatives.

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In addition, our business depends on acceptance by our independent distributors of our brands as beverage brands that have the

potential to provide incremental sales growth rather than reduce distributors’

existing beverage sales.

potential to provide incremental sales growth rather than reduce distributors’ existing beverage sales.

Although we believe

that we have been relatively successful towards establishing our brands as recognizable brands in the all-natural “better

for you”

beverage industry, it may be too early in the product life cycle of these brands to determine whether our products

that we have been relatively successful towards establishing our brands as recognizable brands in the all-natural “better

for you” beverage industry, it may be too early in the product life cycle of these brands to determine whether our products

and brands will achieve and maintain satisfactory levels of acceptance by independent distributors, retail customers and consumers.

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The soft drink industry is highly fragmented, and the craft soft drink

category consists of such competitors as IBC, Stewart’s, Zevia, Henry Weinhard’s, Hansen’s, Izze, Boylan and

Jones Soda, to name a few.

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distributors not to carry competitive sparkling brands such as ours.

We also compete with regional beverage producers and “private

soft drink suppliers.

We also compete with regional beverage producers and “private

label” soft drink suppliers.

competitor consolidations, market-place competition, particularly among branded beverage products, and competitive product and

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compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue

developing new products to satisfy our consumers’

changing preferences will determine our long-term success.

to introduce new products or product extensions into the marketplace as current ones mature and to meet our consumers’

developing new products to satisfy our consumers’ changing preferences will determine our long-term success.

to introduce new products or product extensions into the marketplace as current ones mature and to meet our consumers’ changing

preferences could prevent us from gaining market share and achieving long-term profitability.

Product lifecycles can vary, and

consumers’

preferences and loyalties change over time.

consumers’ preferences and loyalties change over time.

Although we try to anticipate these shifts and innovate new products

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could suffer.

the year ended December 31, 2019, the Company had two broker/distributors that accounted for approximately 12% and

11% of its sales, respectively;

and during the year ended December 31, 2018, the Company had two broker/distributors

that accounted for 24% and 17% of its sales, respectively.

These two broker/distributors serve hundreds if not thousands

of various retail chains and end customers.

the year ended December 31, 2020, the Company had two broker/distributors that accounted for approximately 25% and 12% of its

sales, respectively;

and during the year ended December 31, 2019, the Company had two broker/distributors that accounted for 12%

and 11% of its sales, respectively.

These two broker/distributors serve hundreds if not thousands of various retail chains and

end customers.

other customer exceeded 10% of sales for either period.

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could suffer.

the year ended December 31, 2019, the Company’s largest three vendors accounted for approximately 12%,

the year ended December 31, 2020, the Company’s largest two vendors accounted for approximately 12%, and 11% of its purchases,

respectively.

During the year ended December 31, 2019, the Company’s largest three vendors accounted for approximately 12%,

11%, and 10% of its purchases, respectively.

During the year ended December 31, 2018, the Company’s

largest two vendors accounted for 16% and 13% of its purchases, respectively.

of December 31, 2019, the Company’s largest three vendors accounted for 19%, 15% and 14% of the total accounts payable,

of December 31, 2020, the Company’s largest two vendors accounted for 12% and 10% of the total accounts payable, respectively.

As of December 31, 2019, the Company’s largest three vendors accounted for 19%, 15% and 14% of the total accounts payable,

respectively.

As of December 31, 2018, one vendor accounted for 24% of total accounts payable.

other account was more than 10% of the balance of accounts payable in either period.

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handle a number of competitive products.

In addition, our products are a small part of our distributors’

In addition, our products are a small part of our distributors’ businesses.

continually seek to expand distribution of our products by entering into distribution arrangements with regional bottlers or other

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from Peru, Fiji and Indonesia.

We do not have agreements guaranteeing supply of our ingredients.

Any decrease in the supply of

these ingredients or increase in the prices of these ingredients as a result of any adverse weather conditions, pests, crop disease,

interruptions of shipment or political considerations, among other reasons, could substantially increase our costs and adversely

affect our financial performance.

Any decrease in the supply of these ingredients or increase in the prices of these ingredients

as a result of any adverse weather conditions, pests, crop disease, interruptions of shipment or political considerations, among

other reasons, could substantially increase our costs and adversely affect our financial performance.

also depend upon an uninterrupted supply of packaging materials, such as glass, cans and paper items.

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rely on third parties, called co-packers in our industry, to produce our beverages.

the years ended December 31, 2019 and 2018, the Company had utilized four and three, respectively, separate

US based co-packers for most its production needs.

Although there are other packers that could produce the Company’s beverages,

a change in packers may cause a delay in the production process, which could ultimately affect operating results.

the years ended December 31, 2020 and 2019, the Company had utilized six and four, respectively, separate US based co-packers

for most its production needs.

Although there are other packers that could produce the Company’s beverages, a change in

packers may cause a delay in the production process, which could ultimately affect operating results.

co-packing arrangements with other companies are on a short-term basis and such co-packers may discontinue their relationship

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compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue

to market our existing products and develop new products to satisfy our consumers’

changing preferences will determine our

to market our existing products and develop new products to satisfy our consumers’ changing preferences will determine our

long-term success.

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Product lifecycles for some beverage brands and/or products and/or packages may be limited to a few years before

consumers’

preferences change.

consumers’ preferences change.

The beverages we currently market are in varying stages of their lifecycles and there can

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to execute our business plan and could have a material adverse effect on our business, results of operations and financial condition.

price of our common stock may be volatile, and a shareholder’s investment in our common stock could suffer a decline in

has been significant volatility in the volume and market price of our common stock, and this volatility may continue in the future.

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board of directors has the power to issue additional shares of common or preferred stock up to the amounts authorized in our certificate

of incorporation without stockholder approval, subject to restrictive covenants contained in the Company’s contracts.

additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our existing

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stock would require board and shareholder approval and subsequent amendment to our certificate of incorporation.

Factors Related to Distribution of Alcoholic Beverages

for our products may be adversely affected by many factors, including changes in consumer preferences and trends.

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product innovations, changes in vacation or leisure activity patterns and a downturn in economic conditions, which may reduce

consumers’

willingness to purchase distilled spirits or cause a shift in consumer preferences away from ginger beer based

consumers’ willingness to purchase distilled spirits or cause a shift in consumer preferences away from ginger beer based

cocktails toward beer, wine or non-alcoholic beverages.

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underage consumers in their advertising.

Plaintiffs in these cases allege that the defendants’

advertisements, marketing

Plaintiffs in these cases allege that the defendants’ advertisements, marketing

and promotions violate the consumer protection or deceptive trade practices statutes in each of these states and seek repayment

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lower-taxed categories of beverage alcohol.

Extract Risk Factors

CBD initiative may not materialize or develop as planned due to business and regulatory factors.

CBD initiative may not materialize or develop as planned due a myriad of business and regulatory factors.

many companies are entering the CBD space and competition for market share and acceptance of new products will be significant.

press from having a hemp or cannabis-related line of business could have a material adverse effect on our business, financial

condition, and results of operations.

is a misconception that hemp and marijuana, which both belong to the cannabis family, are the same thing, but industrial hemp

is roughly defined as a cannabis plant with not more than 0.3 percent THC content on a dry-weight basis.

Any hemp oil or hemp

derivative we use will comport with this definition of less than 0.3% THC.

Despite this, we may still receive negative attention

from regulatory bodies, the press, business clients, or partners, grounded in these broad misconceptions, and this in turn can

materially adversely affect our business.

yet unanticipated changes in federal law could cause our products which include cannabis/industrial hemp CBD extracts to be illegal,

or could otherwise prohibit, limit or restrict our business and products, forcing us to abandon our business activities or reduce

our financial prospects.

move toward ending hemp prohibition and the reemergence of a hemp economy began with the 2014 Farm Bill, which provided states

with opportunities to create pilot programs for hemp research.

The Agricultural Improvement Act of 2018 (“2018 Bill”)

was signed into law at the end of December 2018 and expands on the 2014 Farm Bill.

The 2018 Bill removes “hemp”

the definition of “Marihuana”

in the Controlled Substances Act, decriminalizes the plant and its components, and as

a result, transfers oversight of the cultivation and sale of the crop from the Drug Enforcement Administration to the Department

of Agriculture.

The net result of the 2018 Bill’s passage is that farmers and entrepreneurs gain several significant benefits,

in addition to ending the uncertainty of criminal exposure for growing, processing or selling hemp:

licensing for farmers wishing to grow hemp in states that don’t have a pilot program

Clarification

that interstate commerce in hemp is permitted

oversight of hemp with the USDA

hemp in the Federal Crop Insurance Act.

provisions will go a long way toward helping the industry by clarifying existing gray areas of law, creating certainty around

transport and interstate sale, and normalizing hemp as an industrial crop.

However, there can be no assurance that Federal laws

ending hemp prohibition will not be modified or repealed.

In the event of either repeal of Federal regulations, or of amendments

thereto which are adverse to our business and products, we may be required to cease operations or restrict or limit our products

or the distribution thereof, which could be expected to have adverse consequences to our business, operations, revenues and profitability.

of our key ingredient, CBD extracts from cannabis/industrial hemp plants, depend upon legality of cultivation, processing, marketing

and sales of products derived from those plants.

key ingredient is broad spectrum CBD extracts derived from cannabis/industrial hemp plants.

CBD may be legally produced in states

which have laws and regulations that qualify under 7 US Code §5940 for implementation of “agricultural pilot programs

to study the growth, cultivation or marketing of industrial hemp”, apart from state laws legalizing and regulating medical

and recreational cannabis or marijuana which remains illegal under federal law.

In addition, Federal licensing for farmers wishing

to grow hemp in states that don’t have a pilot program is now available as a result of the 2018 Bill.

If we were to be unsuccessful

in arranging new sources of supply of our raw ingredients, or if our raw ingredients were to become legally unavailable, our business

and operations could be limited, restricted or entirely prohibited, which could be expected to have adverse consequences to our

business, operations, revenues and profitability.

may have difficulty accessing the service of banks which may make it difficult for us to operate.

banks have not historically accepted deposits from and credit card processors will not clear transactions for businesses involved

with the broadly defined cannabis industry, notwithstanding the legality of cannabis/industrial hemp derived products.

2018 Bill is expected to alleviate this hindrance, we may still have difficulty finding a bank and credit card processor willing

to accept our business.

The inability to open or maintain bank accounts or accept credit card payments from customers could be

expected to cause us difficulty processing transactions in the ordinary course of business, including paying suppliers, employees

and landlords, which could have a significant negative effect on our operations and your investment in our common stock.

Factors Related to Our Common Stock

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In general, Section 203 prohibits a publicly

held Delaware corporation from engaging in a “business combination”

with an “interested stockholder”

held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for

a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination

is approved in a prescribed manner.

A “business combination”

includes, among other things, a merger, asset or stock

A “business combination” includes, among other things, a merger, asset or stock

sale or other transaction resulting in a financial benefit to the interested stockholder.

An “interested stockholder”

is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested

stockholder status, 15% or more of the corporation’s voting stock.

Under Section 203, a business combination between a corporation

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of the outstanding voting stock which is not owned by the interested stockholder.

existence of this provision may have an anti-takeover effect with respect to transactions the Company’s board of directors

does not approve in advance.

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provisions of Delaware law and the Certificate of Incorporation could have the effect of discouraging others from attempting hostile

takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of the Company’s common

stock that often result from actual or rumored hostile takeover attempts.

These provisions may also have the effect of preventing

changes in the Company’s management.

It is possible that these provisions could make it more difficult to accomplish transactions

that stockholders may otherwise deem to be in their best interests.

Harbor Reeds SPV LLC (“Raptor), our largest shareholder, holds approximately 5% of our outstanding common stock and

beneficially owns approximately 15% of our common stock and may greatly influence the outcome of all matters on which stockholders

Raptor holds approximately 5% of our outstanding common stock and beneficially owns approximately 15% of our common

stock, it may greatly influence the outcome of all matters on which stockholders vote.

Doherty III, a principal and

shareholder of Raptor also serves as a director of Reed’s.

Raptor is a secured creditor of Reed’s and its interests

may not always coincide with the interests of other holders of our common stock.

(Beneficial ownership is calculated pursuant

to Section 13d-3 of the Securities Exchange Act of 1934, as amended, and includes shares underlying derivative securities which

may be exercised or converted within 60 days.)

Collectively,

members of our board of directors and our executive officers hold approximately 17% of the Company’s outstanding

common stock, beneficially own approximately 26% of our common stock and may greatly influence the outcome of all matters

on which stockholders vote.

members of our board of directors and our executive officers hold approximately 8% of the Company’s outstanding common

stock, beneficially own approximately 10% of our common stock and may greatly influence the outcome of all matters on which

stockholders vote.

Collectively,

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beneficially own approximately 10% of our common stock.

Of these percentages, Daniel J.

Doherty III, a director of Reed’s,

as principal and shareholder of Raptor beneficially owns approximately 15% of our common stock.

Members of our board of

directors and our executive officers may influence the outcome of certain matters on which stockholders vote.

(Beneficial ownership

is calculated pursuant to Section 13d-3 of the Securities Exchange Act of 1934, as amended, and includes shares underlying derivative

securities which may be exercised or converted within 60 days.)

Raptor’s

interests may not always coincide with the interests of other holders of our common stock.

is a secured creditor of Reed’s, holding a subordinated note with a principal balance of $3,400,000 and additional reserved

principal amount of $4,000,000 to cover the permitted over-advance under Rosenthal’s $13,000,0000 credit facility.

Raptor’s

security interest is subordinate to Rosenthal’s first priority security interest.

The $4,000,000 permitted over-advance

is guaranteed by Daniel J.

Doherty III and Daniel J.

Doherty III 2002 Family Trust through the issuance of an irrevocable stand-by-letter

of credit in favor of Rosenthal, in amount not less than $1,500,000.

The permitted over-advance is secured by all of Reed’s

intellectual property collateral.

In the event of default under Reed’s financing agreement with Rosenthal, Raptor has a

put option to purchase the entire aggregate amount of the outstanding permitted over-advance of up to $4,000,000 at par plus accrued

interest (without regard to any prepayment penalty or premium) from Rosenthal, prior to Rosenthal declaring a default under the

financing agreement.

If Raptor exercises the option, Rosenthal will release its first priority security interest on all intellectual

property collateral of the Company to Raptor and terminate the letter of credit.

As such, Raptor’s interests may not always

coincide with the interests of other holders of Reed’s common stock.

Members of our board of directors and our executive officers may

influence the outcome of certain matters on which stockholders vote.

(Beneficial ownership is calculated pursuant to Section 13d-3

of the Securities Exchange Act of 1934, as amended, and includes shares underlying derivative securities which may be exercised

or converted within 60 days.)

securities analysts or industry analysts downgrade our shares, publish negative research or reports, or do not publish reports

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If one or more analysts adversely change their recommendation regarding our shares or

our competitors’

stock, our share price would likely decline.

our competitors’ stock, our share price would likely decline.

If one or more analysts cease coverage of us or fail to regularly

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shares of preferred stock.

The power of the Board of Directors to issue shares of common stock, preferred stock or warrants

or options to purchase shares of common stock or preferred stock is generally not subject to stockholder approval.

any additional issuance of our common stock, or preferred stock that may be convertible into common stock, may have the effect

of diluting your investment, and the new securities may have rights, preferences and privileges senior to those of our common

The power of the Board of Directors to issue shares of common stock, preferred stock or warrants or

options to purchase shares of common stock or preferred stock is generally not subject to stockholder approval.

Accordingly, any

additional issuance of our common stock, or preferred stock that may be convertible into common stock, may have the effect of

diluting your investment, and the new securities may have rights, preferences and privileges senior to those of our common stock.

sales of our stock may impact the market price of our common stock.

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at all, and sales of large blocks of shares may depress the price of our common stock.

common stock has historically been sporadically or “thinly-traded,”

meaning that the number of persons interested

common stock has historically been sporadically or “thinly-traded,” meaning that the number of persons interested

in purchasing shares of our common stock at prevailing prices at any given time may be relatively small or nonexistent.

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will not be able to receive a return on their shares unless they sell such shares.

September 1, 2018, the Company leases 8,620 square feet of office space in Norwalk, Connecticut, which serves as our principal

executive offices.

The lease is for a period of 6.5 years.

Unresolved Staff Comments

Company leases 8,620 square feet of office space in Norwalk, Connecticut, which serves as our principal executive offices.

lease commenced September 1, 2018 and continues in effect for a period of 6.5 years.

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 1A. Risk Factors