What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-12 · 304 added, 321 removed, 294 unchanged (68% of the section changed)

2 unchanged sentences

in thousands, except share amounts)

September 30, 2021

December 31, 2020

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Current portion of note payable

Current portion of leases liabilities

Current portion of lease liabilities

Total current liabilities

Leases liabilities, less current portion

Lease liabilities, less current portion

Note payable, less current portion

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STATEMENTS OF OPERATIONS

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

the Three and Nine Months Ended September 30, 2021 and 2020

in thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Cost of goods sold

September 30,

of goods sold

and handling expense

and marketing expense

and administrative expense

operating expenses

Delivery and handling expense

Selling and marketing expense

General and administrative expense

Total operating expenses

Loss from operations

Interest expense

Gain on extinguishment of PPP note payable

Change in fair value of warrant liability

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

from operations

on extinguishment of PPP note payable

in fair value of warrant liability

on Series A Convertible Preferred Stock

Loss Attributable to Common Stockholders

per share – basic and diluted

average number of shares outstanding – basic and diluted

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

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

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

the Three and Nine Months Ended September 30 and 2020

in thousands except share amounts)

Preferred Stock

Common Stock Issuable

Additional Paid In

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

Fair value of vested options

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

Additional Paid In

Total Stockholders’

Balance, December 31, 2019

Fair value of vested options

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

Stockholders’

June 30, 2021

value of vested options

value of vested restricted shares granted to an officer for services

on Series A Convertible Preferred Stock

on Series A Convertible Preferred Stock , shares

of shares for dividends on Series A Convertible Preferred Stock

of shares for dividends on Series A Convertible Preferred Stock , shares

of common stock

of common stock , shares

shares issued on exercise of stock options

shares issued for financing costs

shares issued for financing costs , shares

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

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

costs, shares

September 30, 2021

Common Stock Issuable

Stockholders’

December 31, 2020

value of vested options

value of vested restricted shares granted to officers

of shares for dividends on Series A Convertible Preferred Stock

of common stock

shares issued on exercise of options

shares issued for financing costs

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

September 30, 2021

Stock Issuable

Stockholders’

June 30, 2020

value of vested options

shares issued on exercise of options

of shares for dividends on Series A Convertible Preferred Stock

September 30, 2020

Stockholders’

December 31, 2019

value of vested options

value of vested restricted shares granted to officers

on Series A Convertible Preferred Stock

shares issued on exercise of options

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

September 30, 2020

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

STATEMENTS OF CASH FLOWS

the Six Months Ended June 30, 2021 and 2020

the Nine Months Ended September 30, 2021 and 2020

in thousands)

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 termination of leases

Gain on forgiveness of debt

Amortization of debt discount

Amortization of prepaid financing costs

Amortization of right of use assets

Fair value of vested options

Fair value of vested restricted shares granted to officers

Common stock issued for services

Decrease in allowance for doubtful accounts

Decrease (increase) in inventory reserve

Change in fair value of warrant liability

Accrual of interest on convertible note to a related party

Lease liability

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts payable

Accrued expenses

Net cash used in operating activities

Cash flows from investing activities:

Trademark costs

Proceeds from sale of property and equipment

Purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Borrowings on line of credit

Repayments of line of credit

Proceeds from note payable

Repayment of amounts due to/from officers

Principal repayments on capital lease obligation

Proceeds from exercise of stock options

Repurchase of common stock

Proceeds from sale of common stock

Net cash provided by financing activities

Net increase in cash

Cash at beginning of period

Cash at end of period

Supplemental disclosures of cash flow information:

Cash paid for interest

Non Cash Investing and Financing Activities

Dividends on Series A Convertible Preferred Stock

flows from operating activities:

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

on termination of leases

on extinguishment of PPP note payable

of debt discount

of prepaid financing costs

of right of use assets

value of vested options

value of vested restricted shares granted to officers

in allowance for doubtful accounts

(increase) in inventory reserve

in fair value of warrant liability

of interest on convertible note to a related party

in operating assets and liabilities:

expenses and other assets

cash used in operating activities

flows from investing activities:

of property and equipment

cash used in investing activities

flows from financing activities:

on line of credit

of line of credit

Capitalization

of financing costs

from note payable

of amounts due to/from officers

repayments on capital lease obligation

of common stock

from sale of common stock

cash provided by financing activities

increase in cash

at beginning of period

at end of period

disclosures of cash flow information:

paid for interest

Investing and Financing Activities

on Series A Convertible Preferred Stock

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

TO CONDENSED FINANCIAL STATEMENTS

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

and Nine Months Ended September 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 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

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

and nine months ended September 30, 2021, and 2020.

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

financial statements.

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 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.

results of operations for the nine months ended September 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 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 period ended September 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.

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

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

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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.

However, mitigation plans are being implemented

to manage this risk.

Additionally, the Company was negatively impacted by supply chain challenges impacting our ability to benefit

from strong demand for and increased sales of our product.

The disruption caused by labor shortages, significant raw material cost inflation,

logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins and net income.

Company anticipates a continued impact through mid-2022.

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

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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.

Since the inception of the COVID-19 pandemic and through September 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

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.

sales for the nine-month period ended September 30, 2021, were up 19% from the prior year period.

Through September 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.

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 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 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 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.

the nine months ended September 30, 2021, the Company recorded a net loss of $ 11,536 and used cash in operations of $ 15,305 .

As of September

30, 2021, we had a cash balance of $ 941 with borrowing capacity of $ 1,293 , a stockholder’s equity of $ 8,177 and a working capital

of $ 7,102 , 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 31, 2020.

Notwithstanding the net loss for the nine months ended September 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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Shipping and handling activities are performed

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.

before the customer obtains control of the goods and therefore represent a fulfilment 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.

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

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

Damaged product returns

have historically been insignificant.

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

the periods ended September 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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Schedule of Potentially Dilutive Securities

Convertible note to a related party

Common stock equivalent of Series A Convertible Preferred stock

Common stock issuable

Unvested restricted common stock

restricted common stock

stock equivalent of Series A Convertible Preferred stock

note to a related party

stock issuable

Series A Convertible Preferred Stock is convertible into Common shares at the rate of 1:4.

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

Advertising costs for the three months ended June 30,

Advertising costs for the three months ended September

30, 2021, and 2020, aggregated $ 347 and $ 536 , respectively.

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

$ 702 and $ 606 , respectively.

Advertising costs for the nine months ended September 30, 2021, and 2020,

aggregated $ 1,050 and $ 1,141 , respectively.

Concentrations

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

During the three months ended September 30, 2021, one customer accounted for 24 % of gross billing, and during the nine months ended

September 30, 2021, two customers accounted for 21 % and 11 % of gross billing, respectively.

During the three months ended September 30,

2020, two customers accounted for 24 % and 12 % of gross sales, respectively, and during the nine months ended September 30, 2020, two

customers accounted for 25 % and 13 % of gross sales, respectively.

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

As of September 30, 2021, the Company had accounts receivable from one customer which comprised 27 % of its gross accounts

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

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from vendors.

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.

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

During the nine months ended September 30, 2021, two vendors accounted for 12 % and 12 % of all purchases, respectively.

During the three

months ended September 30, 2020, two vendors accounted for 13 % and 11 % of all purchases.

During the nine months ended September 30, 2020,

two vendors accounted for 11 % and 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

As of September 30, 2021, the Company’s three largest vendors accounted for 13 %, 10 % and 10 % of the total accounts

payable, respectively.

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Schedule of Inventory

Raw materials and packaging

Finished products

materials and packaging

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

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

was $ 164 and

$ 194 , respectively.

The reserve at September 30, 2021, and December 31,

2020, was $ 130 and $ 194 , respectively.

Property and Equipment

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Schedule of Property and Equipment

Right-of-use assets under operating leases

Right-of-use assets under finance leases

Computer hardware and software

Machinery and equipment

Accumulated depreciation and amortization

Net book value

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).

assets under operating leases

assets under finance leases

hardware and software

and equipment

depreciation and amortization

expense for the nine months ended September 30, 2021, and 2020 was $ 106 and $ 56 , respectively, and amortization of right-of-use assets

for the nine months ended September 30, 2021, and 2020 was $ 74 and $ 89 , respectively.

During the nine months ended September 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):

Schedule of Equipment Held for Sale

Equipment held for sale

Net book value

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

held for sale

balance as of September 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 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.

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

the nine months ended September 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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Schedule of Amount Outstanding Under Credit Facilities

Line of credit

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

(“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.

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 September 30, 2021, the unused borrowing capacity under the financing agreement was $ 1,293 .

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 E.

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

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 June 30, 2021.

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

The prepaid financing

fee is to be amortized over a twelve-month period.

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

financing costs to interest expense.

During the nine months ended September 30, 2021, the company amortized $ 272 of the

prepaid financing costs to interest expense.

financing agreement with Rosenthal includes customary restrictions that limit our ability to engage in certain types of transactions,

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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 June 30, 2021.

We were in compliance with the terms of our agreement with Rosenthal as of September 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 $ 193 for the six months ended June 30, 2021 and 2020, respectively.

On June 30, 2021, no remaining unamortized

debt discount remained.

of debt discount was $ 162 and $ 290 for the nine months ended September 30, 2021, and 2020, respectively.

On September 30, 2021, no remaining

unamortized debt discount remained.

April 20, 2020, the Company was granted a loan (the “PPP loan”) from City National Bank in the aggregate amount of $ 770 ,

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

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

During the nine months ended September 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.

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

Leases Liabilities

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

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.

During the nine months ended September 30, 2021, the Company reflected amortization

of right of use asset of $ 74 related to these leases, resulting in a net asset balance of $ 448 as of September 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 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 %.

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

During the nine months ended September 30, 2021, the Company terminated $ 13 of finance leases, and made payments of $ 2 towards

its finance lease liability and $ 78 towards its operating lease liability.

As of September 30, 2021, operating lease liabilities totaled

of September 30, 2021, the weighted average remaining lease terms for operating leases are 3.25 years.

The weighted average discount

rate for operating leases is 12.6 %.

stock issuance

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offering closed on May 7, 2021, and total proceeds received, net of fees, were $ 7,327 .

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.

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 nine months ended September 30, 2021, the Company repurchased 13,493 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 six months ended June 30, 2021:

following table summarizes restricted stock activity during the nine months ended September 30, 2021:

Summary of Non-vested Restricted Stock Activity

Balance, December 31, 2020

Balance, June 30, 2021

December 31, 2020

September 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 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:

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

The remaining 61,475 restricted

stock awards will vest equally on 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 nine months ended September 30, 2021, and 2020 was $ 226 and $ 285 ,

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

As of September 30,

2021, the amount of unvested compensation related to issuances of restricted common stock was $ 82 , 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 nine months ended September 30, 2021:

Schedule of Stock Option Activity

Exercise Price

Outstanding at December 31, 2020

Unvested forfeited

Vested forfeited

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

at December 31, 2020

( 1,330,397 )

at September 30, 2021

the nine months ended September 30, 2021, the Company received proceeds of $ 32 and issued 63,000 shares of common shares on the exercise

of stock options.

the nine months ended September 30, 2021, the Company approved options exercisable into 3,386,882

shares to be issued pursuant to Reed’s

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vesting period, and 1,693,441

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

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

per share and expire in ten

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 U.S.

Treasury yield curve in

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

the nine months ended September 30, 2021, and 2020, the Company recognized $ 1,264 and $ 722 of compensation expense relating to vested

stock options.

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.

As of September 30, 2021, the aggregate amount of unvested compensation related to stock options was approximately $ 3,683

which will be recognized as an expense as the options vest in future periods through March 28, 2025.

of September 30, 2021, the outstanding and exercisable options have an intrinsic value of $ 80 and $ 80 , respectively.

The aggregate 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

value was calculated as the difference between the closing market price as of September 30, 2021, which was $ 0.60 , and the exercise price

of the outstanding stock options.

Stock Warrants

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:

following table summarizes stock warrant activity during the nine months ended September 30, 2021:

Schedule of Warrant Activity

Average Exercise Price

Average Remaining Contractual Terms (Years)

Aggregate Intrinsic Value

Outstanding at December 31, 2020

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 June 30,

Exercise Price

Remaining Contractual Terms (Years)

Intrinsic Value

at December 31, 2020

at September 30, 2021

were no warrant transactions during the nine months ended September 30, 2021.

As of September 30, 2021, the outstanding and exercisable

warrants have no intrinsic value.

The intrinsic value was calculated as the difference between the closing market price as of September

30, 2021, which was $ 0.60 , and the exercise price of the Company’s warrants to purchase common stock.

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and his wife.

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

Reed has placed approximately 363,000 pledged shares

valued at $ 370 that remain in escrow with the lessor.

in 2019, we are to receive a 5 % royalty on CCB’s private label sales to existing customers for three years and a 5 % referral fee

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

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

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

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

Reed has placed approximately 363,000 pledged

shares valued at $ 218 that remain in escrow with the lessor.

in 2019, we receive a 5 % royalty on CCB’s private label sales to existing customers for three years and a 5 % referral fee on CCB’s

private label sales to referred customers for three years.

During the nine months ended September 30, 2021, and 2020, the Company recorded

royalty revenue from CCB of $ 4 and $ 26 , respectively.

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

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.

During the nine months ended

September 30, 2021, the Company recorded royalty revenue receivable of $ 4 , and advanced expenses of $ 140 , leaving an aggregate receivable

balance of $ 826 at September 30, 2021.

September 30, 2021, and December 31, 2020, the Company had accounts payable due to CCB of $ 856 and $ 577 , respectively.

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.

Doherty III and the Daniel J.

Doherty, III 2002 Family Trust, affiliates of Raptor/Harbor Reeds SPV LLC

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.

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.

As consideration for

the collateral support, Mr.

Bello received 400,000 shares of Reed’s restricted stock (see Note 6).

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

Martin was paid approximately $ 178 and

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

$ 129 , respectively, for her services during the nine months ended September 30, 2021, and 2020, respectively.

Subsequent Events

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.

to September 30, 2021, the Company issued 61,475 shares of common stock on the vesting of restricted stock awards.

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