What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-17 · 271 added, 216 removed, 344 unchanged (59% of the section changed)

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in thousands, except share amounts)

December 31, 2020

Current assets:

Accounts receivable, net of allowance for doubtful accounts and returns and discounts of $ 165 and $ 234 , respectively

Accounts receivable, net of allowance of $ 152 and $ 234 , respectively

Receivable from related party

Inventory, net of reserve for obsolescence of $ 174 and $ 194 , respectively

Inventory, net of reserve of $ 164 and $ 194 , respectively

Prepaid expenses and other current assets

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Current portion of note payable

Current portion of leases payable

Current portion of leases liabilities

Total current liabilities

Leases payable, less current portion

Leases liabilities, less current portion

Note payable, less current portion

Warrant liability

Total liabilities

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STATEMENTS OF OPERATIONS

the Three Months Ended March 31, 2021 and 2020

the Three and Six Months Ended June 30, 2021 and 2020

in thousands, except share and per share amounts)

March 31, 2021

March 31, 2020

Three Months Ended June 30,

Six Months Ended June 30,

Cost of goods sold

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Interest expense

Gain on extinguishment of PPP note payable

Change in fair value of warrant liability

Net loss per share – basic and diluted

Dividends on Series A Convertible Preferred Stock

Net Loss Attributable to Common Stockholders

Loss per share – basic and diluted

Weighted average number of shares outstanding – basic and diluted

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STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

the Three Months Ended March 31, 2021 and 2020

the Three and Six Months Ended June 30, 2021 and 2020

in thousands except share amounts)

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Stockholders’ Equity

Balance, March 31, 2021

Fair value of vested options

Dividends on Series A Convertible Preferred Stock

Fair value of vested restricted shares granted to an officer for services

Issuance of shares for dividends on Series A Convertible Preferred Stock

Repurchase of shares

Common shares issued on exercise of stock options

Common shares issued for financing costs

Common shares issued for financing costs, shares

Common shares issued pursuant to the rights offering, net of offering costs

Balance, June 30, 2021

Preferred Stock

Additional Paid In

Total Stockholders’

Balance, December 31, 2020

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Fair value of vested restricted shares granted to officers

Issuance of shares for dividends on Series A Convertible Preferred Stock

Repurchase of common stock

Common shares issued on exercise of options

Common shares issued for financing costs

Common shares issued pursuant to the rights offering, net of offering costs

Balance, June 30, 2021

Preferred Stock

Additional Paid In

Total Stockholders’

Balance, March 31, 2020

Fair value of vested options

Dividends on Series A Convertible Preferred Stock

Common shares issued pursuant to the rights offering, net of offering costs

Balance, June 30, 2020

Preferred Stock

Common Stock Issuable

Additional Paid In

Stockholders’ Equity

Total Stockholders’

Balance, December 31, 2019

Fair value of vested options

Fair value of vested restricted shares granted to an officer

Balance, March 31, 2020

Fair value of vested restricted shares granted to an officer for services

Dividends on Series A Convertible Preferred Stock

Common shares issued pursuant to the rights offering, net of offering costs

Balance, June 30, 2020

accompanying notes are an integral part of these condensed financial statements.

STATEMENTS OF CASH FLOWS

the Three Months Ended March 31, 2021 and 2020

the Six Months Ended June 30, 2021 and 2020

in thousands)

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Gain on sale on termination of leases

Gain on termination of leases

Gain on forgiveness of debt

Amortization of debt discount

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Fair value of vested restricted shares granted to officers

Common stock issued for services

Decrease in allowance for doubtful accounts

Decrease in inventory reserve

Decrease (increase) in inventory reserve

Change in fair value of warrant liability

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Cash flows from investing activities:

Trademark costs

Proceeds from sale of property and equipment

Purchase of property and equipment

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Repayments of line of credit

Amounts from related party

Proceeds from note payable

Repayment of amounts due to/from officers

Principal repayments on capital lease obligation

Exercise of options

Proceeds from exercise of stock options

Repurchase of common stock

Proceeds from sale of common stock

Net cash provided by financing activities

Net increase (decrease) in cash

Net increase in cash

Cash at beginning of period

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Cash paid for interest

Non Cash Investing and Financing Activities

Dividends on Series A Convertible Preferred Stock

accompanying notes are an integral part of these condensed financial statements.

TO CONDENSED FINANCIAL STATEMENTS

Months Ended March 31, 2021 and 2020 (Unaudited)

and Six Months Ended June 30, 2021 and 2020 (Unaudited)

thousands, except share and per share amounts)

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or “our”), are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments,

necessary to present fairly our financial position at March 31, 2021 and the results of operations and cash flows for the three months

ended March 31, 2021 and 2020.

The balance sheet as of December 31, 2020 is derived from the Company’s audited financial statements.

necessary to present fairly our financial position at June 30, 2021 and the results of operations and cash flows for the three and six

months ended June 30, 2021 and 2020.

The balance sheet as of December 31, 2020 is derived from the Company’s audited financial

information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting

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as filed with the Securities and Exchange Commission on March 30, 2021.

results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations to be expected

results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results of operations to be expected

for the full fiscal year ending December 31, 2021.

Considerations

the period ended March 31, 2021, the COVID-19 pandemic has impacted our operating results and the Company anticipates a continued

impact for the balance of the year.

In addition, the pandemic may cause reduced demand for our products if, for example, the

pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products.

recent increase in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.

Through March 31, 2021,

the Company has experienced higher transportation expenses as the capacity in the freight market has not kept up with demand.

believes that costs will continue to increase throughout the year.

However, mitigation plans are being implemented to manage this risk.

ability to operate without significant incremental negative operational impact from the COVID-19 pandemic will in part depend

on our ability to protect our employees and our supply chain.

The Company has endeavored to follow the recommended actions of government

and health authorities to protect our employees.

Since the inception of the COVID-19 pandemic and through March 31, 2021, we maintained

the consistency of our operations during the onset of the COVID-19 pandemic.

the period ended June 30, 2021, the COVID-19 pandemic has impacted our operating results and the Company anticipates a continued impact

for the balance of the year.

In addition, the pandemic may cause reduced demand for our products if, for example, the pandemic results

in a recessionary economic environment which negatively effects the consumers who purchase our products.

Based on the recent increase

in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.

June 30, 2021, the Company has experienced higher transportation expenses as the capacity in the freight market has not kept up with

The Company believes that costs will continue to increase throughout the year.

In addition, the Company experienced increases

in the pricing of several of its raw materials and delays in procuring several of these items.

However, mitigation plans are being

implemented to manage this risk.

ability to operate without significant incremental negative operational impact from the COVID-19 pandemic will in part depend on our

ability to protect our employees and our supply chain.

The Company has endeavored to follow the recommended actions of government and

health authorities to protect our employees.

Since the inception of the COVID-19 pandemic and through June 30, 2021, we maintained the

consistency of our operations during the onset of the COVID-19 pandemic.

We will continue to innovate in managing our business, coordinating

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example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our

Net sales for the period ended March 31, 2021 were up 28% from the prior year period.

Through March 31, 2021, we

continue to generate cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets.

also not observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19

sales for the six month period ended June 30, 2021 were up 15% from the prior year period.

Through June 30, 2021, we continue to generate

cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets.

We have also not observed

any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic.

accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern.

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contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

For the three months ended March

For the six months ended June

30, 2021, the Company recorded a net loss of $ 7,649 and used cash in operations of $ 10,309 .

As of March 31, 2021, we had a cash balance

As of June 30, 2021, we had a cash balance

of $ 654 with borrowing capacity of $ 4,343 , a stockholder’s equity of $ 11,566 and a working capital of $ 10,470 , compared to a cash

balance of $ 595 with borrowing capacity of $ 5,166 , stockholders’ equity of $ 10,404 and a working capital of $ 9,528 at December

Notwithstanding the net loss for the three months ended March 31, 2021, management projects adequate cash from operations and

available line of credit to ensure continuation of the Company as a going concern for at least one year from the date of this quarterly

Notwithstanding the net loss for the six months ended June 30, 2021, management projects adequate cash from operations and

available line of credit to ensure continuation of the Company as a going concern for at least one year from the date these financial

statements are issued.

Historically,

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depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization

of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock compensation expense.

Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers

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Shipping and handling activities are performed

before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the

Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon

shipment from our facilities.

before the customer obtains control of the goods and therefore represent a fulfilment activity rather than a promised service

to the customer.

Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs

upon shipment from our facilities.

The Company’s performance obligations are satisfied at that time.

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for customers to derive the expected value from them.

Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment.

Damaged product returns have

historically been insignificant.

Company does not allow for returns, except for damaged products when the damage occurred pre-fulfilment.

Damaged product returns

have historically been insignificant.

Because of this, the stand-alone nature of our products, and our assessment of performance obligations

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are excluded from the computation when their effect is antidilutive.

the periods ended March 31, 2021 and 2020, the calculations of basic and diluted loss per share are the same because potential dilutive

the periods ended June 30, 2021 and 2020, the calculations of basic and diluted loss per share are the same because potential dilutive

securities would have had an anti-dilutive effect.

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costs are expensed as incurred and are included in selling and marketing expense.

Advertising costs aggregated $ 349 and $ 302 for the

three months ended March 31, 2021 and 2020, respectively.

Advertising costs for the three months ended June 30,

2021 and 2020, aggregated $ 353 and $ 303 , respectively.

Advertising costs for the six months ended June 30, 2021 and 2020, aggregated

$ 702 and $ 606 , respectively.

Concentrations

During the three months ended March 31, 2021, the Company’s two largest customers accounted for 23 % and 12 % of gross

sales, respectively.

During the three months ended March 31, 2020, the Company’s two largest customers accounted for 22 % and 14 %

of gross sales, respectively.

No other customers exceeded 10 % of sales in either period.

As of March 31, 2021, the Company had accounts receivable from two customers which comprised 18 % and 10 % of its gross

accounts receivable, respectively.

As of December 31, 2020, the Company had accounts receivable from one customer which comprised 23 %

of its gross accounts receivable.

During the three months ended June 30, 2021, two customers accounted

of gross billing, respectively, and during the six months ended June 30, 2021, two customers accounted for 20 %

of gross billing, respectively.

During the three months ended June 30, 2020, two customers accounted for 26 %

of gross billing, respectively, and during the six months ended June 30, 2020, two customers accounted for 25 %

of gross billing, respectively.

No other customers exceeded 10 %

of sales in either period.

As of June 30, 2021, the Company had accounts receivable from one customer which comprised 12 % of its gross accounts

As of December 31, 2020, the Company had accounts receivable from one customer which comprised 23 % of its gross accounts

No other customers exceeded 10 % of gross accounts receivable in either period.

from vendors.

During the three months ended March 31, 2021, the Company’s two largest vendor accounted for approximately 13 %

and 13 % of all purchases, respectively.

During the three months ended March 31, 2020, the Company’s largest vendor accounted for

approximately 10 % of all purchases.

No other vendors exceeded 10 % of all purchases in either periods.

As of March 31, 2021, the Company’s two largest vendors accounted for 19 % and 10 % of the total accounts payable, respectively.

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

During the three months ended June 30, 2021, two vendors accounted for 13 % and 12 % of all purchases, respectively.

During the six months ended June 30, 2021, two vendors accounted for 13 % and 12 % of all purchases, respectively.

During the three months

ended June 30, 2020, no vendor exceeded 10 % of all purchases.

During the six months ended June 30, 2020, one vendor accounted for 11 %

of all purchases.

No other vendors exceeded 10 % of all purchases in either period.

As of June 30, 2021, the Company’s four largest vendors accounted for 13 %, 11 %, 10 % and 10 % of the total accounts

payable, respectively.

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

payable, respectively.

No other vendors exceeded 10 % of gross accounts payable in either period.

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Company has recorded a reserve for slow moving and potentially obsolete inventory.

The reserve at March 31, 2021, and December 31, 2020,

was $ 174 and $ 194 , respectively.

The reserve at June 30, 2021, and December 31, 2020,

was $ 164 and

$ 194 , respectively.

Property and Equipment

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Net book value

expense for the three months ended March 31, 2021 and 2020 was $ 32 and $ 12 , respectively, and amortization of right-of-use assets for

the three months ended March 31, 2021 and 2020 was $ 24 and $ 37 , respectively.

During the three months ended March 31, 2021, the Company

disposed of right-of-use assets under finance leases with a cost of $ 48 and accumulated amortization of $ 38 , and terminated $ 13 of related

finance leases payable (see Note 8).

expense for the six months ended June 30, 2021 and 2020 was $ 48 and $ 24 , respectively, and amortization of right-of-use assets for the

six months ended June 30, 2021 and 2020 was $ 69 and $ 62 , respectively.

During the six months ended June 30, 2021, the Company disposed

of right-of-use assets under finance leases with a cost of $ 48 and accumulated amortization of $ 38 and terminated $ 13 of related finance

leases payable (see Note 8).

held for sale consists of the following (in thousands):

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Net book value

balance as of March 31, 2021, and December 31, 2020, consists of residual manufacturing equipment, at estimated net realizable value,

balance as of June 30, 2021, and December 31, 2020, consists of residual manufacturing equipment, at estimated net realizable value,

which management anticipates selling during 2021.

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recognized in an amount equal to that excess.

Based on management’s assessment, there were no indications of impairment at March

the three months ended March 31, 2021, the Company capitalized costs of $ 2 pertaining to legal and other fees incurred in applying for

international trademarks for Reeds and Virgil’s brands.

Based on management’s assessment, there were no indications of impairment at June

the six months ended June 30, 2021, the Company capitalized costs of $ 6 pertaining to legal and other fees incurred in applying for international

trademarks for Reeds and Virgil’s brands.

assets consist of the following (in thousands):

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October 4, 2018, the Company entered into a financing agreement with Rosenthal & Rosenthal, Inc.

The financing agreement provides

a maximum borrowing capacity of $ 13,000 .

Borrowings are based on a formula of eligible accounts receivable and inventories (the “permitted

borrowings”) plus advances (an “over-advance” of up to $ 4,000 ) in excess of permitted borrowings.

At March 31, 2021,

the unused borrowing capacity under the financing agreement was $ 2,513 .

The line of credit matured on March 30, 2021 , with automatic

yearly renewals thereafter until terminated.

(“Rosenthal”).

The financing agreement provides a maximum borrowing capacity of $ 13,000 .

Borrowings are based on a formula of eligible accounts receivable and inventories (the “permitted borrowings”) plus advances

(an “over-advance” of up to $ 4,000 )

in excess of permitted borrowings.

At June 30, 2021, the unused borrowing capacity under the financing agreement was $ 4,343.

The line of credit automatically renews each year until terminated.

The line of credit matured on March 30, 2021, and was automatically

renewed to mature on March 30, 2022.

under the Rosenthal financing agreement bear interest at the greater of prime or 4.75 %, plus an additional 2.0 % to 3.5 % depending on

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Additionally, any over-advance was guaranteed by an irrevocable stand-by letter

of credit in the amount of $ 1,500 , issued by Daniel J.

of credit in the amount of $ 1,500 ,

issued by Daniel J.

Doherty III and the Daniel J.

Doherty, III 2002 Family Trust, affiliates of Raptor/Harbor

Reeds SPV LLC (“Raptor”).

On March 11, 2021, the Company entered into an amendment to the financing agreement, releasing

that irrevocable standby letter of credit of $1,500 by Raptor with a $2,000 pledge of securities to Rosenthal by John J.

Bello and Nancy

Bello, as Co-Trustees of The John and Nancy Bello Revocable Living Trust.

Doherty, III 2002 Family Trust, affiliates of Raptor/Harbor Reeds SPV LLC (“Raptor”).

On March 11, 2021, the Company entered into an amendment to the financing agreement, releasing that irrevocable standby letter of credit

of $1,500 by Raptor with a $2,000 pledge of securities to Rosenthal by John J.

Bello and Nancy E.

Bello, as Co-Trustees of The John and

Nancy Bello Revocable Living Trust.

Bello, current Chairman and former Interim Chief Executive Officer of Reed’s, is a related party.

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The Company determined the fair value of the 400,000 restricted stock to be $ 472 which was recorded as a prepaid financing

costs and included in prepaid expenses and other current assets on the condensed balance sheet at March 31, 2021.

costs and included in prepaid expenses and other current assets on the condensed balance sheet at June 30, 2021.

The prepaid financing

fee is to be amortized over a twelve month period.

During the three months ended March 31, 2021, the company amortized $ 25 of the prepaid

During the six months ended June 30, 2021, the company amortized $ 147 of the prepaid

financing costs to interest expense.

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a financial covenant that requires us to meet certain minimum working capital and tangible net worth thresholds as of the end of each

We were in compliance with the terms of our agreement with Rosenthal as of March 31, 2021.

We were in compliance with the terms of our agreement with Rosenthal as of June 30, 2021.

Company annually incurs an additional $ 130 of fees from the bank, which is equal to 1 % of the $ 13,000 borrowing limit.

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2020, the remaining unamortized debt discount of $ 162 is included in prepaid expense and other current assets on the balance sheet.

of debt discount was $ 162 and $ 96 for the three months ended March 31, 2021 and 2020, respectively.

On March 31, 2021, no remaining unamortized

of debt discount was $ 162 and $ 193 for the six months ended June 30, 2021 and 2020, respectively.

On June 30, 2021, no remaining unamortized

debt discount remained.

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was $ 770 , of which $ 599 was reflected as the current portion of note payable.

At March 31, 2021, the note payable balance was $ 770 , of

which $ 727 was reflected as the current portion of note payable.

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.

Small Business Administration.

We applied ASC 470, Debt , to account for the PPP loan.

Funds from the PPP loan may only be used for qualifying expenses as described

in the CARES Act, including qualifying payroll costs, qualifying group health care benefits, qualifying rent and debt obligations, and

qualifying utilities.

The Company believes it used the entire loan amount for qualifying expenses.

Under the terms of the PPP, certain

amounts of the loan may be forgiven if they are used for qualifying expenses.

The Company was in compliance with the terms of the PPP

loan as of March 31, 2021.

the conditions outlined in the PPP loan program are adhered to by the Company, all or part of such loan could be forgiven.

believes that all or a substantial portion of the PPP loan is eligible for forgiveness.

The Company applied for full forgiveness of the

PPP loan on March 17, 2021.

As for the potential loan forgiveness, once the PPP loan is, in part or wholly, forgiven and a legal release

is received, the liability would be reduced by the amount forgiven and a gain on extinguishment would be recorded.

However, the Company

cannot provide any assurance whether the PPP loan will ultimately be forgiven by the SBA.

During the six months ended June 30, 2021, the Company

was notified that its PPP loan forgiveness application was approved.

The Company recorded the loan forgiveness as a gain on forgiveness

of debt of $ 770 , which is included in other income, leaving no remaining balance owed at June 30, 2021.

Leases Liabilities

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over the lease term, generally on a straight-line basis.

During the three months ended March 31, 2021, the Company reflected amortization

of right of use asset of $ 24 related to these leases, resulting in a net asset balance of $ 730 as of March 31, 2021.

During the six months ended June 30, 2021, the Company reflected amortization

of right of use asset of $ 48 related to these leases, resulting in a net asset balance of $ 724 as of June 30, 2021.

accordance with ASC 842, the right-of-use assets are being amortized over the life of the underlying leases.

of December 31, 2020, lease liabilities totaled $ 685 , made up of finance lease liabilities of $ 16 and operating lease liabilities of

During the three months ended March 31, 2021, the Company terminated $ 13 of finance leases, and made payments of $ 2 towards its

finance lease liability and $ 8 towards its operating lease liability.

As of March 31, 2021, lease liabilities totaled $ 663 , made up of

finance lease liability of $ 1 and operating lease liability of $ 662 .

of March 31, 2021, the weighted average remaining lease terms for operating lease and finance lease are 3.76 years and 0.50 years, respectively.

The weighted average discount rate for operating lease is 12.6 % and 12.6 % for finance lease.

of December 31, 2020, lease liabilities totalled $ 685 , made up of finance lease liabilities of $ 16 and operating lease liabilities of

During the six months ended June 30, 2021, the Company terminated $ 13 of finance leases, and made payments of $ 2 towards its finance

lease liability and $ 43 towards its operating lease liability.

As of June 30, 2021, operating lease liabilities totalled $ 627 .

of June 30, 2021, the weighted average remaining lease terms for operating leases are 3.51 years.

The weighted average discount rate

for operating leases is 12.6 %.

stock issuance

May 5, 2021, the Company entered into a placement agency agreement with Roth Capital Partners, LLC (the “Placement Agent”)

and a securities purchase agreement with a certain purchaser for the purchase of shares of the Company’s common stock, par value

$ 0.0001 per share, in an offering of securities registered under an effective registration statement filed with the Securities and Exchange

Commission (“SEC”).

In the offering, the Company sold 6,680,000 shares of common stock, at a price of $ 1.18 per share.

offering closed on May 7, 2021 and total proceeds received, net of fees, were $ 7,333 .

The Placement Agent was paid a total cash fee at

the closing of the Offering equal to 6.5% of the gross cash proceeds received by the Company from the sale of the shares of common stock

in the offering.

stock repurchases

the six months ended June 30, 2021, the Company repurchased 13,943

shares of common stock from an officer

for $ 15 based

on the market value of share on the date repurchased.

The Company retired the shares.

Stock-Based Compensation

following table summarizes restricted stock activity during the three months ended March 31, 2021:

following table summarizes restricted stock activity during the six months ended June 30, 2021:

Summary of Non-vested Restricted Stock Activity

Balance, December 31, 2020

Balance, March 31, 2021

Balance, June 30, 2021

January 26, 2021, the board of directors of Reed’s, pursuant to a joint recommendation from its governance and compensation committees,

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In addition, the Company granted 245,900 restricted stock awards to five non-employee

61,475 of these restricted stock awards vested on February1, 2021.

The remaining 184,425 restricted stock awards will vest

equally on May 1, 2021, August 1, 2021, and November 1, 2021.

The aggregate fair value of the stock awards was $ 226 based on the market

price of our common stock price which was $ 0.92 per share on the date of grants and is amortized as shares vest.

total fair value of restricted common stock vesting during the three months ended March 31, 2021 and 2020 was $ 98

respectively, and is included in general and administrative expenses in the accompanying statements of operations.

31, 2021, the amount of unvested compensation related to issuances of restricted common stock was $ 220 ,

which will be recognized as an expense in future periods as

the shares vest.

When calculating basic loss per share, these shares are included in weighted average common shares outstanding

from the time they vest.

When calculating diluted net income per share, these shares are included in weighted average common shares

outstanding as of their grant date.

following table summarizes stock option activity during the three months ended March 31, 2021:

61,475 of these restricted stock awards vested on February 1, 2021 and May 1, 2021.

The remaining 122,950 restricted stock

awards will vest equally on August 1, 2021, and November 1, 2021.

The aggregate fair value of the stock awards was $ 226 based on the

market price of our common stock price which was $ 0.92 per share on the date of grants and is amortized as shares vest.

total fair value of vested restricted common stock vesting during the six months ended June 30, 2021 and 2020 was $ 169 and $ 285 , respectively,

and is included in general and administrative expenses in the accompanying statements of operations.

As of June 30, 2021, the amount

of unvested compensation related to issuances of restricted common stock was $ 147 , which will be recognized as an expense in future periods

as the shares vest.

When calculating basic loss per share, these shares are included in weighted average common shares outstanding from

the time they vest.

When calculating diluted net income per share, these shares are included in weighted average common shares outstanding

as of their grant date.

following table summarizes stock option activity during the six months ended June 30, 2021:

Schedule of Stock Option Activity

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Vested forfeited

Outstanding at March 31, 2021

Exercisable at March 31, 2021

the three months ended March 31, 2021, the Company received proceeds of $ 3 and issued 6,000 shares of common shares on the exercise of

Outstanding at June 30, 2021

Exercisable at June 30, 2021

the six months ended June 30, 2021, the Company received proceeds of $ 29 and issued 58,000 shares of common shares on the exercise of

stock options.

the three months ended March 31, 2021, the Company approved options exercisable into 1,939,700 shares to be issued pursuant to Reed’s

the six months ended June 30, 2021, the Company approved options exercisable into 3,288,700

shares to be issued pursuant to Reed’s

2020 Equity Incentive Plan.

1,939,700 options were issued to employees, 969,850 options vesting annually over a four -year vesting period,

and 969,850 options that will vest based on performance criteria to be established by the board of directors.

stock options are exercisable at a price of $ 1.01 per share and expire in ten years .

The total fair value of these options at grant date

was approximately $ 1,294 , which was determined using a Black-Scholes-Merton option pricing model with the following average assumption:

stock price of $1.01 per share, expected term of six years , volatility of 76 %, dividend rate of 0 %, and weighted average risk-free interest

rate of 0.94 %.

The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding

giving consideration to vesting schedules and historical participant exercise behavior;

the expected volatility is based upon historical

volatility of the Company’s common stock;

the expected dividend yield is based on the fact that the Company has not paid dividends

in the past and does not expect to pay dividends in the future;

and the risk-free interest rate is based on the U.S.

Treasury yield curve

in effect at the time of measurement corresponding with the expected term of the share option award.

the three months ended March 31, 2021 and 2020, the Company recognized $ 300

options were issued to employees, 1,644,350

options vesting annually over a four-year

vesting period, and 1,644,350

options that will vest based on performance

criteria to be established by the board of directors.

stock options are exercisable at prices ranging from $ 0.98 to $ 1.18 per share and expire in ten years .

The total fair value of these

options at grant date was approximately $ 2,345 , which was determined using a Black-Scholes-Merton option pricing model with the following

average assumption:

stock price of $ 1.06 per share, expected term of six years , volatility of 79 %, dividend rate of 0 %, and weighted

average risk-free interest rate of 0.98 %.

The expected term represents the weighted-average period of time that share option awards granted

are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior;

the expected volatility

is based upon historical volatility of the Company’s common stock;

the expected dividend yield is based on the fact that the Company

has not paid dividends in the past and does not expect to pay dividends in the future;

and the risk-free interest rate is based on the

Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.

the six months ended June 30, 2021 and 2020, the Company recognized $ 828

of compensation expense relating to vested

stock options.

As of March 31, 2021, the aggregate amount of unvested compensation related to stock options was approximately

which will be recognized as an expense

as the options vest in future periods through March 28, 2025.

of March 31, 2021, the outstanding and exercisable options have an intrinsic value of $ 2,332 and $ 759 , respectively.

As of June 30, 2021, the aggregate amount of unvested compensation related to stock options was approximately $ 4,700

which will be recognized as an expense as the

options vest in future periods through March 28, 2025.

of June 30, 2021, the outstanding and exercisable options have an intrinsic value of $ 1,012 and $ 510 , respectively.

The aggregate intrinsic

value was calculated as the difference between the closing market price as of March 31, 2021, which was $ 1.17 , and the exercise price

value was calculated as the difference between the closing market price as of June 30, 2021, which was $ 1.02 , and the exercise price

of the outstanding stock options.

Stock Warrants

of March 31, 2021, the Company has issued warrants to purchase an aggregate of 3,362,241 shares of common stock.

The Company’s

warrant activity during the three months ended March 31, 2021 is as follows:

of June 30, 2021, the Company has issued warrants to purchase an aggregate of 3,362,241 shares of common stock.

The Company’s warrant

activity during the six months ended June 30, 2021 is as follows:

Schedule of Warrant Activity

3 unchanged sentences

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

were no warrant transactions during the three months ended March 31, 2021.

As of March 31, 2021, the outstanding and exercisable warrants

Outstanding at June 30, 2021

Exercisable at June 30, 2021

were no warrant transactions during the six months ended June 30, 2021.

As of June 30, 2021, the outstanding and exercisable warrants

have an intrinsic value of $ 376 .

The intrinsic value was calculated as the difference between the closing market price as of March 31,

The intrinsic value was calculated as the difference between the closing market price as of June 30,

2021, which was $ 1.02 , and the exercise price of the Company’s warrants to purchase common stock.

9 unchanged sentences

and his wife.

As of March 31, 2021, $ 800 has been deposited with the lessor and Mr.

As of June 30, 2021, $ 800 has been deposited with the lessor and Mr.

Reed has placed approximately 363,000 pledged shares

2 unchanged sentences

on CCB’s private label sales to referred customers for three years.

During the three months ended March 31, 2021 and 2020, the

Company recorded royalty revenue from CCB of $ 3 and $ 5 , respectively.

During the six months ended June 30, 2021 and 2020, the Company

recorded royalty revenue from CCB of $ 3 and $ 5 , respectively.

December 31, 2020, the Company had an aggregate receivable balance from CCB of $ 682 at December 31, 2020.

During the quarter ended March

31, 2021, the Company recorded royalty revenue receivable of $ 3 , and advanced expenses of $ 16 , leaving an aggregate receivable balance

of $ 701 at March 31, 2021.

March 31, 2021 and December 31, 2020, the Company had accounts payable due to CCB of $ 557 and $ 1,034 , respectively.

During the six months ended

June 30, 2021, the Company recorded royalty revenue receivable of $ 3 , and advanced expenses of $ 55 , leaving an aggregate receivable balance

of $ 740 at June 30, 2021.

Any over-advance on the Company’s line of

credit with Rosenthal was guaranteed by an irrevocable stand-by letter of credit in the amount of $ 1,500 , issued by Daniel J.

III and the Daniel J.

Doherty, III 2002 Family Trust, affiliates of Raptor/Harbor Reeds SPV LLC (“Raptor”).

2021, the Company entered into an amendment to the financing agreement, releasing that irrevocable standby letter of credit of $1,500

by Raptor with a $2,000 pledge of securities to Rosenthal by John J.

Bello and Nancy E.

Bello, as Co-Trustees of The John and Nancy Bello

Revocable Living Trust.

Bello, current Chairman and former Interim Chief Executive

Officer of Reed’s, is a related party.

He is also a greater than 5 % beneficial owner of Reed’s common stock.

As consideration

for the collateral support, Mr.

Bello received 400,000 shares of Reed’s restricted stock.

June 30, 2021 and December 31, 2020, the Company had accounts payable due to CCB of $ 799 and $ 577 , respectively.

Martin, daughter of a director of the Company, is employed as Vice President of Marketing.

Martin was paid approximately $ 87

and $ 42 , respectively, for her services during the three months ended March 31, 2021 and 2020, respectively.

Martin was paid approximately $ 133 and

$ 87 , respectively, for her services during the six months ended June 30, 2021 and 2020, respectively.

Subsequent Events

May 5, 2021, the Company entered into a placement agency agreement with Roth Capital Partners, LLC (the “Placement Agent”)

and a securities purchase agreement with a certain purchaser for the purchase and sale of shares of the Company’s common stock,

par value $ 0.0001 per share, in an offering of securities registered under an effective registration statement filed with the Securities

and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended (SEC File No.

In the offering,

the Company sold 6,680,000 shares of common stock, at a price of $ 1.18 per share (the “Offering”).

offering closed on May 7, 2021 .

a period of 90 days after the closing date of the sale of the shares of common stock, the provisions of the securities purchase agreement

generally prohibit the Company from issuing or agreeing to issue shares of common stock or common stock equivalents other than under

equity compensation plans, outstanding rights to acquire common stock or common stock equivalents, or in connection with certain acquisitions

or strategic transactions.

The placement agency agreement provides that the Company will indemnify the Placement Agent against certain

liabilities, including liabilities under the Securities Act of 1933, as amended.

The Placement Agent agreed to use reasonable best efforts

to arrange for the sale of the shares of common stock being issued and sold in the Offering.

The Placement Agent will be paid a total

cash fee at the closing of the Offering equal to 6.5% of the gross cash proceeds received by the Company from the sale of the shares

of common stock in the offering.

Subsequent to June 30, 2021, the Company issued

5,000 shares of common stock on the exercise of stock options, and 61,475 shares of common stock to its directors.

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-Q

Item 1. Financial Statements