What changed in this filing

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Item 1. Business

2022-04-15 compared with 2021-03-30 · 384 added, 338 removed, 100 unchanged (88% of the section changed)

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

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

the natural and specialty food channel, grocery stores, mass merchants, drug stores, convenience stores, club stores and on-premise

locations including bars and restaurants).

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

Real Ginger Ale and Virgil’s Handcrafted soda.

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

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

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

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

is the leading ginger beer in the US;

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

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

this report) owns a leading portfolio of handcrafted, natural beverages that is sold in over 45,000 outlets nationwide.

outlets include the natural and specialty food channel, grocery stores, mass merchants, drug stores, convenience stores, club stores

and on-premise locations including bars and restaurants.

Reed’s two core brands are Reed’s, which includes Reed’s

Craft Ginger Beer and Reed’s Real Ginger Ale, and Virgil’s Handcrafted sodas.

Reed’s Craft Ginger

Beers are unique due to the proprietary process of using fresh ginger root combined with a Jamaican inspired recipe of natural spices,

honey and fruit juices.

Reed’s uses this same handcrafted approach in its Reed’s Real Ginger Ale and Virgil’s line

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

Reed’s is the leading ginger beer in the

Virgil’s is the independent natural full line craft soda and is a leader in the craft soda category.

Original Ginger Brew, created in 1987 by Christopher J.

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

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

By 1990, we began marketing our products through United Natural

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

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

all production to a co-pack facility in Pennsylvania.

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

Brew varieties.

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

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

Reed, our founder, was introduced to the

market in Southern California stores in 1989.

By 1990, we began marketing our products through United Natural Foods Inc.

and other natural food distributors and moved our production to a larger facility in Boulder, Colorado.

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

to a co-pack facility in Pennsylvania.

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

Ginger Brews reached broad placement in natural and gourmet foods stores nationwide through UNFI and other major specialty, natural/gourmet

and mainstream food and beverage distributors.

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

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

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

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

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

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

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

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Reed, our founder.

The sale of the Brewery marked

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

Reed’s offers its portfolio of

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

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

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

The sale of the Brewery marked a fundamental

shift in the nature of our operations and effectively eliminated our costs associated with excess manufacturing capacity.

Going Concern

The Company’s

financial statements as of December 31, 2021 were prepared on a going concern basis.

For the year ended December 31, 2021,

the Company recorded a net loss of $16,402 and used cash in operations of $17,589.

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

$49 with borrowing capacity of $109, stockholders’ equity of $4,203 and a working capital of $2,981.

These conditions raise

substantial doubt about the Company’s ability to continue as a going concern.

The Company believes that its current level of cash

and cash equivalents are not sufficient to fund its operations for the next 12 months.

To alleviate these conditions, management is

currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or

debt securities, through arrangements with strategic partners or through obtaining credit from financial institutions.

As we seek additional

sources of financing, there can be no assurance that such financing will be available to us on favorable terms or at all.

to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions,

our performance and investor sentiment with respect to us and our industry.

offers its portfolio of natural hand-crafted beverages in the craft specialty foods industry as natural alternatives to the $25

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

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

natural food, specialty food,

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

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

conventional products across all retail channels.

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

distribution in these channels.

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

products across all retail channels.

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

Soft Drink Industry Overview

retail CSD category has rallied during the pandemic.

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

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

Ginger ale growth,

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

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

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

We believe there is significant growth potential

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

natural alternatives.

The retail CSD category grew 9% during 2021

and the ginger ale segment grew 5% and is now a $1.3 billion dollar market.

Ginger ale growth, we believe, is driven primarily

by a consumer perception of ginger ale as a healthier alternative to other sodas.

Our new line of ginger ales made with real ginger

deliver on this perception and are poised to breakout in the segment.

a result of the COVID-19 pandemic, consumers

are shifting consumption to better-for-you products.

We believe there is significant growth potential from consumers switching away from

mainstream beverages that contain artificial ingredients and preservatives towards great-tasting, natural alternatives.

Trends Driving Growth for Our Products

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

Interest in all-natural products has gone mainstream.

Clean Label :

Interest in natural products has gone mainstream.

62% of Americans are avoiding at least one ingredient.

Reduced Sugar :

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

Functionality :

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

This accelerating trend will drive

growth for our ginger-based beverages.

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

A favorable trend for our zero-sugar beverages, 67% of consumers prefer low or no sugar soft drinks.

reducing their sugar intake.

39% of consumers actively try to eat more plant based foods.

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

Premiumization:

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

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

including premium mixers.

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Ready-to-Drink

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

in a great position to succeed.

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

sales and marketing functions.

Cocktails (RTD) :

The RTD category grew 126% in 2021 is exploding alongside hard seltzer as people seek novelty and

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

and marketing functions.

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

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

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

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

of fresh organic ginger.

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

In April 2020, we

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

organic ginger.

In 2021, we extended our Ginger Ale offerings with Mocktails and we entered the alcohol space with the launch of our

RTD Classic Mule that is 7% ALC and Zero Sugar.

Craft Ginger Beer

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

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

We do not use artificial preservatives, artificial

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

We offer different levels of fresh ginger content, ranging

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

We also offer three sweetener

one with cane sugar, honey and fruit juices;

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

natural ingredients, and its authentic Jamaican-inspired recipe.

We do not use artificial preservatives, artificial flavors, or colors,

and Reed’s Ginger Beer is certified kosher.

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

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

We also offer three sweetener options:

one with cane sugar,

honey and fruit juices;

one with honey and pineapple juice;

and another without sugar (Zero Sugar)

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

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

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

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

and another without sugar (Zero Sugar) made from an innovative blend of natural

In 2021, we expanded our Extra Ginger Beer portfolio into cans offerings.

of the end of 2021, the Reed’s Craft Ginger Beer line included five major varieties with a mix of bottles and cans:

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

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

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

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

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

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

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

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

Real Ginger Ale

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

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

Reed’s Real Ginger Ale is unique for the

category because it combines real fresh ginger with the classic, refreshing taste that consumers love.

It contains nothing

artificial and is Non-GMO project verified.

We offer two sweetener options:

one with cane sugar and

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

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

It is the only mass market ginger ale

made with organic fresh ginger.

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

It uses our all-natural

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

one with cane sugar and the other with our zero-calorie proprietary

natural sweetening system.

Real Ginger Ale – launched in April 2020 in standard and sleek 12-ounce cans.

It is the only mass market ginger

ale made with organic fresh ginger.

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

It uses proprietary sweetening

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

Reed’s Mocktails- In 2021

Reed’s line extended its Zero Sugar Ginger Ale, with the launch of Mocktail Flavors.

It uses our proprietary sweetening system

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

The two flavors are Shirley Tempting and

Reed’s Ready to Drink

Reed’s Zero Sugar Classic Mule:

Launched in 2020 and expanded to 37 states in 2021, Reed’s first-ever alcoholic offering is packed with REAL, fresh ginger

root and made through a unique handcrafted brewing and fermentation process.

It contains 7% alcohol, and a light-spice flavor profile

with no artificial colors, gluten, GMOs or caffeine.

It is the ultimate mule, made with fresh ginger root, to be enjoyed anytime,

New Ginger Beverages under the Reed’s brand

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

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

Daily Ginger and Ginger Energize.

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

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

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

These convenient,

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

Handcrafted Sodas

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

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

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

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

Virgil’s line includes the following products:

Virgil’s first Handcrafted soda was launched in 1994.

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

root beer ever produced and has since won numerous awards.

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

bold, classic soda flavors.

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

ever produced and has since won numerous awards.

Virgil’s difference is using natural ingredients to craft bold, classic soda

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

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Each Zero Sugar soda is sweetened

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

This all-natural line of Zero Sugar flavors includes Root

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

The product has recently been certified Keto compliant.

with a proprietary blend of natural sweeteners with no added sugars and is certified Keto.

This natural line of Zero Sugar

flavors includes Root Beer, Cola, Black Cherry, Vanilla Cream, Orange Cream, Lemon-Lime, Ginger Ale, Grapefruit and

Product Launches

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

Real Ginger Ale Zero Sugar Line Extensions:

Shirley Tempting and Transfusion

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

Zero Sugar Line Extensions:

Better, Grapefruit, and Ginger Ale

● Limited Edition Swing Lid Bottles 0.5 liter:

Virgil’s Bavarian Nutmeg Root Beer and Flying Cauldron Butterscotch

Craft Stormy Mule

Hard Ginger Ale in Variety 8 Packs

Zero Sugar in 12-ounce sleek 4 packs

Zero Sugar Stormy Mule

Primary Markets

We target a smaller segment of the estimated

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

Our brands are generally

considered premium and natural, with upscale packaging.

They are loosely defined as the craft specialty bottled carbonated soft

drink category.

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

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

Additionally, we have sales managers

handling national accounts for natural, specialty, grocery, mass, club, drug and convenience channels.

Our sales managers are

responsible for all activities related to the sales, distribution, and marketing of our brands to our entire retail partner and

distributor network in North America.

The Company not only employs an internal sales force but has partnered with independent

sales brokers and outside representatives to promote our products in specific channels and key targeted accounts.

sell to well-known popular natural food and gourmet retailers, large grocery store chains, mass merchants, club stores, convenience

and drug stores, liquor stores, industrial cafeterias (corporate feeders), and to on-premise bars and restaurants nationwide and

in some international markets.

We also sell our products and promotional merchandise directly to consumers via the Internet through

our Amazon storefront which can be accessed through our company web site www.drinkreeds.com.

target a smaller segment of the estimated $25 billion mainstream carbonated and non-carbonated soft drink markets in the United

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

They are loosely defined as the craft specialty

bottled carbonated soft drink category.

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

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

Additionally, we have sales managers handling national

accounts for natural, specialty, grocery, mass, club, drug and convenience channels.

Our sales managers are responsible for all activities

related to the sales, distribution, and marketing of our brands to our entire retail partner and distributor network in North America.

The Company not only employs an internal sales force but has partnered with independent sales brokers and outside representatives to

promote our products in specific channels and key targeted accounts.

sell to well-known popular natural food and gourmet retailers, large grocery store chains, mass merchants, club stores, convenience and

drug stores, liquor stores, industrial cafeterias (corporate feeders), and to on-premise bars and restaurants nationwide and in some

international markets.

We also sell our products and promotional merchandise directly to consumers via the Internet through our Amazon

storefront which can be accessed through our company web site www.drinkreeds.com.

of our representative key customers include:

Whole Foods Market, Sprouts, Natural Grocers by Vitamin Cottage, Fresh Thyme Farmers Market

Whole Foods Market, Sprouts, Natural Grocers by Vitamin Cottage, Fresh Thyme Farmers Market, Mother’s

& specialty stores :

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and mass chains :

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

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

Wegmans, Target, Walmart

Costco and BJ’s

BevMo!, Total Wine & More, Spec’s

& drug stores :

Circle K, CVS Health, Rite Aid

Circle K, CVS Health, Rite Aid, QuikTrip

Distribution Network

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customer warehouse, and distributor networks.

The distribution system used depends on customer needs, product characteristics,

and local trade practices.

The distribution system used depends on customer needs, product characteristics, and local

trade practices.

product reaches the market in the following ways:

to Natural & Specialty Wholesale Distributors

natural and specialty distributor partners operate a distribution network delivering thousands of SKUs of natural and gourmet

products to thousands of small, independent, natural retail outlets around the U.S., along with national chain customers, both

conventional and natural.

This system of distribution allows our brands far reaching access to some of the most remote parts of

North America.

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

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

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

where the products are merchandised by their route sales and field sales employees.

DSD enables us to merchandise with maximum

visibility and appeal.

natural and specialty distributor partners operate a distribution network delivering thousands of SKUs of natural and gourmet products

to thousands of small, independent, natural retail outlets around the U.S., along with national chain customers, both conventional and

This system of distribution allows our brands far reaching access to some of the most remote parts of North America.

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

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

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

the products are merchandised by their route sales and field sales employees.

DSD enables us to merchandise with maximum visibility and

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

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

We are primarily

focused on expanding our DSD network on a national basis.

to Store Warehouse Distribution

of our products are delivered from our co-packers and warehouses directly to customer warehouses.

Some retailers mandate we deliver

directly to them, as it is more cost effective and allows them to pass savings along to their customers.

Other retailers may not

mandate direct delivery, but they recommend and prefer it as they have the capability to self-distribute and can realize significant

savings with direct delivery.

Some retailers mandate we deliver directly

to them, as it is more cost effective and allows them to pass savings along to their customers.

Other retailers may not mandate direct

delivery, but they recommend and prefer it as they have the capability to self-distribute and can realize significant savings with direct

Wholesale Distributor network handles the wholesale shipments of our products.

These distributors have a warehouse and distribution

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

These distributors have a warehouse and distribution center,

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

International

We presently export Reed’s and Virgil’s

brands throughout international markets via US based exporters.

International markets where our brands are present

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

In the UK, our Virgil’s

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

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

International markets

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

International

sales to some areas of the world are cost prohibitive, except for some specialty sales, since our premium sodas were historically

packed in glass, which drives substantial freight costs when shipping overseas.

Despite these cost challenges, we believe there

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

friendly packages such as aluminum cans.

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

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

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

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

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

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

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

distribution network, allows us to compete effectively.

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

agreements early or without cause.

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

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

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

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

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

of our outside distributors are not bound by written agreements with us and may discontinue their relationship with us on short

sales to some areas of the world are cost prohibitive, except for some specialty sales, since our premium sodas were historically packed

in glass, which drives substantial freight costs when shipping overseas.

Despite these cost challenges, we believe there are good opportunities

to expand internationally, and we are increasing our marketing focus on these areas by adding freight friendly packages such as aluminum

We are open to exporting and co-packing internationally and expanding our brands into foreign markets, and we have held preliminary

discussions with trading companies and import/export companies for the distribution of our products throughout Asia, Europe, Australia,

and South America.

We believe these areas are a natural fit for Reed’s ginger products because of the popularity and importance

of ginger in international markets, especially the Asian market, where ginger is a significant part of the local diet and nutrition.

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

network, allows us to compete effectively.

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

early or without cause.

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

type of retailer within a defined geographic region.

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

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

We constantly review

our distribution agreements with our partners across North America.

of our outside distributors are not bound by written agreements with us and may discontinue their relationship with us on short notice.

Most distributors handle a number of competitive products.

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

distributors’ businesses.

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

Manufacturing

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

case, for the products produced.

of Reed’s products are produced by our co-pack partners.

They brew, blend, bottle, and package our products and charge

us a fee, generally by the case, for the products produced.

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

Additionally, in conjunction

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

beverages in glass bottles at prevailing West Coast market rates.

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

Beverage Company on the West Coast.

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

another on the West Coast, Noel Canning.

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

for future production needs.

and two in California.

During 2020 we entered into co-packing agreements with a co-packer on the East Coast, Clinton’s

Ditch, and on the West Coast, Noel Canning.

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

capability for future production needs.

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

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

In order to drive efficiency and reduce costs,

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

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

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

This partnership will support planning and execution

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

In order to drive efficiency and reduce costs, on February

1, 2019 we entered into a strategic partnership with Veritiv Logistics Solutions to manage all freight movement for the Company.

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

the movement of raw materials and finished goods.

This partnership will support planning and execution of all inventory movement, assessment

of storage needs and cost management.

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

Product Development

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

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

in the all-natural beverage space.

alternatives will be the future for carbonated soft drinks.

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

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

In addition, we believe there are powerful

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

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

higher quality, all-natural handcrafted beverages.

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

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

Recent innovations include

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

Reed’s has also begun to expand and broaden

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

research and supply companies.

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

short period of time.

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

from small or emerging to very large and well established.

The principal areas of competition include pricing, packaging, development

of new products and flavors, and marketing campaigns.

Our products compete with a wide range of drinks produced by a relatively

large number of manufacturers.

Many of these brands have enjoyed broad, well-established national recognition for years, through

well-funded ad and other branding campaigns.

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

Cock ‘n Bull and Q Tonic;

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

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

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

Seagram’s and Zevia.

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

rapid and effective development of new, unique cutting-edge products, attractive and different packaging, branded product advertising,

We also compete for distributors who will concentrate on marketing our products over those of our competitors, provide

stable and reliable distribution, and secure adequate shelf space in retail outlets.

Competitive pressures in the soft drink category

could also cause our products to be unable to gain or even lose market share, or we could experience price erosion.

our products having a relatively high price for a craft premium beverage product, minimal mass media advertising to date, and

a small but growing presence in the mainstream market compared to many of our competitors, we believe our all-natural innovative

beverage recipes, packaging, use of premium ingredients, and a proprietary ginger processing formula provide us with a competitive

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

Our Reed’s Wellness Ginger Shot

was introduced during 2020.

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

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

beverage space.

Healthier alternatives will be the future for carbonated soft drinks.

will continue to drive product development in the natural, no and low sugar offerings in the “better for you” beverage categories.

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

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

increased demand for higher quality, natural handcrafted beverages.

Reed, the Company’s founder continues to support our new product development efforts in 2022.

Reed possesses thirty

plus years of product development and innovation experience.

Recent innovations include our compelling line of full flavor, natural,

zero sugar, zero calorie sodas.

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

working with larger, experienced beverage flavor houses and innovative ingredient research and supply companies.

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

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

small or emerging to very large and well established.

The principal areas of competition include pricing, packaging, development of new

products and flavors, and marketing campaigns.

Our products compete with a wide range of drinks produced by a relatively large number

of manufacturers.

Many of these brands have enjoyed broad, well-established national recognition for years, through well-funded ad and

other branding campaigns.

Competitors in the ginger beer category include Goslings, Fever Tree, Bundaberg, Cock ‘n Bull and Q Tonic;

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

Boylan, and Jones Soda;

In the Ginger Ale category we compete with Canada Dry, Schweppes, Seagram’s and Zevia.

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

and effective development of new, unique cutting-edge products, attractive and different packaging, branded product advertising, and

We also compete for distributors who will concentrate on marketing our products over those of our competitors, provide stable

and reliable distribution, and secure adequate shelf space in retail outlets.

Competitive pressures in the soft drink category could

also cause our products to be unable to gain or even lose market share, or we could experience price erosion.

our products having a relatively high price for a craft premium beverage product, minimal mass media advertising to date, and a small

but growing presence in the mainstream market compared to many of our competitors, we believe our natural innovative beverage recipes,

packaging, use of premium ingredients, and a proprietary ginger processing formula provide us with a competitive advantage.

Our commitments

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

Reed’s Wellness Ginger Shot was introduced during 2020.

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

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

Competition for market share and acceptance of new products is

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

Competition for market share and acceptance of new products is significant.

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

Reed’s Craft Crystallized Ginger

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

Crystallized Ginger and Reed’s Ginger Chews restaged their product line up in 2020.

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

Key competitors are Chimes

and Gin Gins.

Key competitors are Chimes and Gin Gins.

Ready to Drink:

The RTD category refers to canned cocktails

that offer convenience and quality for cocktail drinkers.

RTD sales held strong in 2021 with triple-digit growth.

NielsenIQ, year-over-year off-premise dollar sales increased 126 percent for RTD cocktails for the 52-week period ending October 2,

According to IRI, premixed cocktails spirits-based and malt-based seltzers accounted for just over $7 billion in

off-premise sales over the 52 weeks ending November 28, 2021.

The start of Covid-19, when restaurants and bars

closed in March 2020, helped propel the category with consumers bringing the on-premise cocktail occasion to their homes.

major boost for canned, single-serve RTDs.

Without the recent quality improvements of RTD cocktails, however, it’s unlikely that

the category would have taken off.

Today’s RTD cocktails bring much higher quality versus earlier wine coolers and malt-based hard

Premiumization has resulted in a new wave of products that boast less sugar and more transparency.

Variety has also

been a key driver, allowing consumers ways to experiment without buying costly ingredients or spirits.

Reed’s is poised to

leverage these trends bringing high-quality, crafted Mules made with real fresh ginger to the market.

Top selling brands in the category are High Noon,

Cutwater Spirits, On The Rocks, Jose Cuervo, Skinnygirl, 1800 Tequila, Buzzballz, Bacardi, The Long Drink Company, and Fisher’s

In the Mule segment, the key players include ‘Merican Mule, Cutwater Mule, and Copper Can.

Substantially

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

contract packers in accordance with our specifications.

the raw materials used in our products are obtained from domestic and foreign suppliers and many of the materials have multiple

reliable suppliers.

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

packers in accordance with our specifications.

the raw materials used in our products are obtained from domestic and foreign suppliers and many of the materials have multiple reliable

This provides a level of protection against a major supply constriction or adverse cost or supply impacts.

Since our raw materials are common ingredients and supply is easily accessible, we have few long-term contracts in place with

our suppliers.

Since our raw materials

are common ingredients and supply is easily accessible, we have few long-term contracts in place with our suppliers.

Bottles and Aluminum Cans

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

In December 2017, we entered into

an exclusive strategic partnership with Owens-Illinois (glass), and in February 2018 we entered into a strategic partnership with

Crown Cork & Seal for aluminum cans.

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

be leveraged to further expand marketing and package offerings.

In December 2017, we entered into an exclusive

strategic partnership with Owens-Illinois (glass), and in February 2018 we entered into a strategic partnership with Crown Cork &

Seal for aluminum cans.

During 2021 we entered into an agreement with a packaging broker to supply us with 25 million sleek 12-ounce

cans during 2022.

These suppliers provide expertise in emerging package and material innovation that can be leveraged to further

expand marketing and package offerings.

Capital Practices

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During 2020 we entered into a licensing agreement

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

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

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

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

Full Sail manages all aspects of production and distribution.

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

The volume of sales

in the beverage business may be affected by weather conditions.

We subsequently

amended that agreement to assume the distribution rights from Full Sail and instead utilize Full Sail as a co-packer of our RTD Classic

We now fully control the sales and marketing process, and this change in distribution ownership enables us to recognize gross

revenue as opposed to a royalty fee going forward.

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

The volume of sales in the

beverage business may be affected by weather conditions.

own copyrights, trademarks and trade secrets relating to our products and the processes for their production;

the packages used

for our products;

the packages used for our

and the design and operation of various processes and equipment used in our business.

Some of our proprietary

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

Reed’s ginger processing and brewing process, finished

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

Some of our proprietary rights are licensed

to our co-packers and suppliers and other parties.

Reed’s ginger processing and brewing process finished beverage products

and concentrate formulas are among its most valuable trade secrets.

own trademarks in the United States that we consider material to our business.

Trademarks in the United States are valid as long

as they are in use and/or their registrations are properly maintained.

Pursuant to our manufacturing and bottling agreements,

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

of our products.

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

Trademarks in the United States are valid as long as they

are in use and/or their registrations are properly maintained.

Pursuant to our manufacturing and bottling agreements, we authorize our

bottlers to use applicable Reed’s trademarks in connection with their manufacture, sale and distribution of our products.

registered and intend to obtain additional trademarks in international markets as may become necessary.

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

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

obligations to Reed’s.

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

Act, the Federal Trade Commission Act, the Lanham Act, state consumer protection laws, competition laws, federal, state and local

workplace health and safety laws, various federal, state and local environmental protection laws, and various other federal, state

and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, labeling and ingredients

of such products.

Outside the United States, the distribution and sale of our many products and related operations are also subject

to numerous similar and other statutes and regulations.

California law known as Proposition 65 requires a specific warning to appear on any product containing a component listed by the

state as having been found to cause cancer or birth defects.

The state maintains lists of these substances and periodically adds

other substances to these lists.

Proposition 65 exposes all food and beverage producers to the possibility of having to provide

warnings on their products in California because it does not provide for any generally applicable quantitative threshold below

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

Our Company is required to comply, and it

is our policy to comply, with all applicable laws in all jurisdictions in which we do business.

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

the Federal Trade Commission Act, the Lanham Act, state consumer protection laws, competition laws, federal, state and local workplace

health and safety laws, various federal, state and local environmental protection laws, and various other federal, state and local statutes

and regulations applicable to the production, transportation, sale, safety, advertising, labeling and ingredients of such products.

the United States, the distribution and sale of our many products and related operations are also subject to numerous similar and other

statutes and regulations.

The Safe Drinking Water and Toxic Enforcement

Act of 1986 (“Proposition 65”) of the state of California requires a specific warning to appear on any product containing

a component listed by the state as having been found to cause cancer or birth defects.

The state maintains lists of these substances

and periodically adds other substances to these lists.

Proposition 65 exposes all food and beverage producers to the possibility of having

to provide warnings on their products in California because it does not provide for any generally applicable quantitative threshold below

which the presence of a listed substance is exempt from the warning requirement.

Consequently, the detection of even a trace amount

of a listed substance can subject an affected product to the requirement of a warning label.

However, Proposition 65 does not

require a warning if the manufacturer of a product can demonstrate that the use of that product exposes consumers to a daily quantity

of a listed substance that is:

Consequently, the detection of even a trace amount of

a listed substance can subject an affected product to the requirement of a warning label.

However, Proposition 65 does not require a

warning if the manufacturer of a product can demonstrate that the use of that product exposes consumers to a daily quantity of a listed

substance that is:

a “safe harbor” threshold that may be established;

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Company beverages produced for sale in California are currently required to display warnings under this law.

We are unable to

predict whether a component found in a Company product might be added to the California list in the future, although the state

has initiated a regulatory process in which caffeine and other natural occurring substances will be evaluated for listing.

we are also unable to predict when or whether the increasing sensitivity of detection methodology may become applicable under

this law and related regulations as they currently exist, or as they may be amended, might result in the detection of an infinitesimal

quantity of a listed substance in a beverage of ours produced for sale in California.

We are unable to predict

whether a component found in a Company product might be added to the California list in the future, although the state has initiated

a regulatory process in which caffeine and other natural occurring substances will be evaluated for listing.

Furthermore, we are also

unable to predict when or whether the increasing sensitivity of detection methodology may become applicable under this law and related

regulations as they currently exist, or as they may be amended, might result in the detection of an infinitesimal quantity of a listed

substance in a beverage of ours produced for sale in California.

of our beverage products presently offer and use non-refillable, recyclable containers in the United States.

Some of these bottlers

also offer and use refillable containers, which are also recyclable.

Legal requirements apply in various jurisdictions in the

United States and overseas requiring deposits or certain taxes or fees be charged for the sale, marketing and use of certain non-refillable

beverage containers.

Some of these bottlers also

offer and use refillable containers, which are also recyclable.

Legal requirements apply in various jurisdictions in the United States

and overseas requiring deposits or certain taxes or fees be charged for the sale, marketing and use of certain non-refillable beverage

The precise requirements imposed by these measures vary.

Other types of beverage container-related deposit,

recycling, tax and/or product stewardship statutes and regulations also apply in various jurisdictions in the United States and

We anticipate additional, similar legal requirements may be proposed or enacted in the future at local, state and federal

levels, both in the United States and elsewhere.

of our facilities and other operations in the United States are subject to various environmental protection statutes and regulations,

including those relating to the use of water resources and the discharge of wastewater.

Our policy is to comply with all such

legal requirements.

Compliance with these provisions has not had, and we do not expect such compliance to have, any material adverse

effect on our capital expenditures, net income or competitive position.

Environmental

Other types of beverage container-related deposit, recycling, tax

and/or product stewardship statutes and regulations also apply in various jurisdictions in the United States and overseas.

We anticipate

additional, similar legal requirements may be proposed or enacted in the future at local, state and federal levels, both in the United

States and elsewhere.

has been proposed in Congress and by certain state and local governments which would prohibit the sale of soft drink products in non-refillable

bottles and cans or require a mandatory deposit as a means of encouraging the return of such containers, each in an attempt to reduce

solid waste and litter.

Similarly, we are aware of proposed legislation that would impose fees or taxes on various types of containers

that are used in our business.

We are not currently impacted by the policies in these types of proposed legislation, but it is possible

that similar or more restrictive legal requirements may be proposed or enacted within our distribution territories in the future.

co-packers are subject to various environmental

protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater.

with these provisions has not had, and we do not expect such compliance to have, any material adverse effect on our capital expenditures,

net income or competitive position.

are also subject to various federal, state and international laws and regulations related to privacy and data protection, including the

California Consumer Privacy Act of 2018 (“CCPA”), which became effective on January 1, 2020, and its extension, the California

Privacy Rights Act (“CPRA”), which will take effect on January 1, 2023.

The interpretation and application of data privacy,

cross-border data transfers and data protection laws and regulations are often uncertain and are evolving in the United States and internationally.

We monitor pending and proposed legislation and regulatory initiatives to ascertain their relevance to and potential impact on our business

and develop strategies to address regulatory trends and developments, including any required changes to our privacy and data protection

compliance programs and policies.

primary cost pertaining to environmental compliance activity is in recycling fees and redemption values.

We are required to collect

redemption values from our customers and remit those redemption values to the state, based upon the number of bottles or cans

of certain products sold in the state.

Capital Resources

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

We employ additional people on a part-time

basis as needed.

We are required to collect redemption

values from our customers and remit those redemption values to the state, based upon the number of bottles or cans of certain products

sold in the state.

of December 31, 2021, we had 31 full-time equivalent employees on our corporate staff.

We employ additional people on a

part-time basis as needed.

We have never participated in a collective bargaining agreement.

We believe relations with our employees are

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

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

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

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

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

These filings are available promptly after we file them with,

or furnish them to, the SEC.

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

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

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

Access to these filings is free of charge.

We believe relations with our employees

Company maintains a website at the following address:

www.reedsinc.com.

The information on the Company’s website is not incorporated

by reference in this report.

We make available on or through our website certain reports and amendments to those reports that we file

with or furnish to the Securities and Exchange Commission (“SEC”) in accordance with the Securities Exchange Act of 1934,

as amended (“Exchange Act”).

These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q

and our Current Reports on Form 8-K.

We make this information available on our website free of charge as soon as reasonably practicable

after we electronically file the information with, or furnish it to, the SEC.

In addition, we routinely post on the “Investors”

page of our website news releases, announcements and other statements about our business and results of operations, some of which may

contain information that may be deemed material to investors.

Therefore, we encourage investors to monitor the “Investors”

page of our website and review the information we post on that page.

The SEC maintains a website that contains reports, proxy and

information statements, and other information regarding issuers that file electronically with the SEC at the following address:

http://www.sec.gov.

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

What changed 10-K

Item 1. Business