What changed in this filing

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Item 1. Financial Statements

2022-05-16 compared with 2021-11-09 · 452 added, 440 removed, 158 unchanged (85% of the section changed)

2 unchanged sentences

in thousands, except share amounts)

September 30, 2021

December 31, 2021

2 unchanged sentences

Receivable from related party

Inventory, net of reserve of $ 130 and $ 194 , respectively

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net of accumulated depreciation of $ 613 and $ 561 , respectively

Equipment held for sale, net of impairment reserves of $ 96 and $ 96 , respectively

Intangible assets

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Accounts payable

Payable to related party

Accrued expenses

Revolving line of credit

Current portion of note payable

Revolving line of credit, net of capitalized financing costs of $ 470 and $ 0 , respectively

Payable to related party

Current portion of lease liabilities

1 unchanged sentence

Lease liabilities, less current portion

Note payable, less current portion

Total liabilities

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Series A Convertible Preferred stock, $ 10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding

Common stock, $ .0001 par value, 120,000,000 shares authorized, 93,667,855 and 86,317,096 shares issued and outstanding, respectively

Common stock, $ .0001 par value, 180,000,000 shares authorized;

112,551,890 and 93,733,975 shares issued and outstanding, respectively

Additional paid in capital

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STATEMENTS OF OPERATIONS

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

the Three Months Ended March 31, 2022 and 2021

in thousands, except share and per share amounts)

September 30,

of goods sold

and handling expense

and marketing expense

and administrative expense

Cost of goods sold

Operating expenses:

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

Delivery and handling expense

Selling and marketing expense

General and administrative expense

Total operating expenses

Loss from operations

Other income (expense)

Interest expense

Net loss per share – basic and diluted

Weighted 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 Nine Months Ended September 30 and 2020

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

the Three Months Ended March 31, 2022 and 2021

in thousands except share amounts)

Common Stock Issuable

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

Preferred Stock

Additional Paid In

Total Stockholders’

Balance, December 31, 2021

$ ( 103,137 )

Fair value of vested options

Fair value of vested restricted shares granted to officers

Repurchase of common stock

Common shares issued for financing costs

Common shares issued for cash, net of offering costs

Balance, March 31, 2022

$ ( 108,117 )

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

Common shares issued on exercise of options

Common shares issued for financing costs

Balance, March 31, 2021

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

STATEMENTS OF CASH FLOWS

the Nine Months Ended September 30, 2021 and 2020

the Three Months Ended March 31, 2022 and 2021

in thousands)

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

March 31, 2022

March 31, 2021

Cash flows from operating activities:

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

Amortization of debt discount

Amortization of prepaid financing costs

Fair value of vested options

Fair value of vested restricted shares granted to officers

Fair value of common shares issued as financing costs

Change in allowance for doubtful accounts

Inventory write-downs

Gain on termination of leases

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Decrease in right of use assets

Accounts payable

Accrued expenses

Lease liability

Net cash used in operating activities

Cash flows from investing activities:

Purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from line of credit

Payments on line of credit

Proceeds from sale of common stock

Repurchase of common stock

Amounts from related party, net

Payments on capital lease obligation

Proceeds from exercise of options

Net cash provided by financing activities

Net increase (decrease) in cash

Cash at beginning of period

Cash at end of period

Supplemental disclosures of cash flow information:

Cash paid for interest

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

TO CONDENSED FINANCIAL STATEMENTS

and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

Months Ended March 31, 2022 and 2021 (Unaudited)

thousands, except share and per share amounts)

Basis of Presentation and Liquidity

accompanying interim condensed financial statements of Reed’s, Inc.

(the “Company”, “we”, “us”,

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 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

principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of

the Securities and Exchange Commission regarding interim financial reporting.

Summary of Significant Accounting Policies

of Presentation

accompanying condensed financial statements of Reed’s, Inc.

(the “Company”, “we”, “us”, or

“our”), have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim

financial reporting.

Certain information and note disclosures normally included in the financial statements prepared in accordance with

GAAP have been condensed or omitted pursuant to such rules and regulations.

We believe that the disclosures contained in these condensed

financial statements are adequate to make the information presented herein not misleading.

For further information, refer to the financial

statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,

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

In addition, the Company experienced increases

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

However, mitigation plans are being implemented

to manage this risk.

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

ability to protect our employees and our supply chain.

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

health authorities to protect our employees.

Since the inception of the COVID-19 pandemic and through 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

with our employees and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers.

However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for

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

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.

Such assumption

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

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.

These condensed financial statements should

be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December

31, 2021, filed with the SEC on April 15, 2022.

The accompanying condensed financial statements are unaudited, but in the opinion of

management contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial

position as of March 31, 2022, and the results of its operations and its cash flows for the three months ended March 31, 2022 and 2021.

The balance sheet as of December 31, 2021 is derived from the Company’s audited financial statements.

results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations to be expected

for the full fiscal year ending December 31, 2022.

accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement

of liabilities and commitments in the normal course of business.

As reflected in the accompanying financial statements, for the three

months ended March 31, 2022, the Company recorded a net loss of $ 4,980 and used cash in operations of $ 2,207 .

These factors raise substantial

doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are

In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December

31, 2021, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern.

The financial

statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

of March 31, 2022, we had a cash balance of $ 122 , with no current availability, and $ 5,100 of additional borrowing capacity, stockholders’ equity of $ 4,616 and a working capital

On May 9, 2022 the Company issued $ 11,250 of secured convertible notes

to certain institutional investors.

The convertible notes mature May 9, 2025 , bear interest at 10 % per annum, and are secured by substantially

all of the Company’s assets.

The initial conversion rate of the convertible notes is 4.1503 shares of the Company’s common

stock per one dollar of principal amount converted (See Note 11).

Historically,

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

We have taken decisive

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

improved vendor contracts, and restructuring our selling prices.

Significant Accounting Policies

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.

we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or

Our ability 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.

have also taken decisive action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product

portfolio, negotiating improved vendor contracts and restructuring our selling prices.

During the first

quarter of 2022, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies

in transportation and warehouse costs and reduce operating expenses.

Company remains focused on driving sales growth and improving margin.

The sales growth focus is on channel expansion, new product introduction

and improved sales execution.

The margin enhancement initiative is driven by co-packer upgrades, better leveraged purchasing and improved

Underpinning these initiatives is a focus on strategically reducing operating costs, particularly delivery and handling expenses.

During 2021, the Company experienced elevated transportation costs over the prior year and anticipates these costs to remain elevated

for the balance of 2022.

Plans have been implemented to mitigate the impact of these costs.

Considerations

During the period

ended March 31, 2022, the COVID-19 pandemic continued to impact our operating results and the Company anticipates a residual effect for

the balance of the year.

In addition, the pandemic could 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.

Through March 31,

2022, the Company was able to lower its freight costs despite a higher transportation market as the capacity in the freight market has

not kept up with demand.

The Company believes these challenges will continue throughout the year.

In addition, the Company experienced

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

However, mitigation plans have

been 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.

The Company anticipates a continued impact throughout 2022.

Our ability to operate

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

our employees and protect our supply chain.

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

to protect our employees.

Since the inception of the COVID-19 pandemic and through March 31, 2022, 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 with our employees

and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers.

uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability

of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.

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

preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates

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

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

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

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

The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers

at the amount expected to be collected.

ASC 606 creates a five-step model that requires entities to exercise judgment when considering

the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations

in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance

obligations, and (5) recognizing revenue as each performance obligation is satisfied.

Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain

no incentives or discounts that could cause revenue to be allocated or adjusted over time.

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

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

shipment from our facilities.

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.

The Company does not

have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives

or discounts that could cause revenue to be allocated or adjusted over time.

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.

of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment

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earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number

of shares of common stock outstanding during the period.

Diluted earnings (loss) per share is computed by dividing the net income applicable

to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would

have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method.

Potential common shares

are excluded from the computation when their effect is antidilutive.

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

of shares of common stock outstanding during the year, excluding shares of unvested restricted common stock.

Shares of restricted stock

are included in the basic weighted average number of common shares outstanding from the time they vest.

Diluted earnings (loss) per share

is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding

plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued,

using the treasury stock method.

Shares of restricted stock are included in the diluted weighted average number of common shares outstanding

from the date they are granted.

Potential common shares are excluded from the computation when their effect is antidilutive.

the periods ended March 31, 2022 and 2021, 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

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.

Unvested restricted common stock

Series A Convertible Preferred stock

Compensation Expense

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

Advertising costs for the three months ended September

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

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

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

Advertising costs aggregated $ 312 and $ 349 for the

three months ended March 31, 2022 and 2021, respectively.

Concentrations

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

During the three months ended March 31, 2022, the Company’s two largest customers accounted for 18 % and 12 % of net sales,

respectively.

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

sales, respectively.

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

As of March 31, 2022, the Company had accounts receivable from one customer which comprised 23 % of its gross accounts

As of December 31, 2021, the Company had accounts receivable from one customer which comprised 18 % of its gross accounts

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from vendors.

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.

During the three months ended March 31, 2022, the Company’s largest vendor accounted for approximately 13 % of

all purchases.

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

13 % of all purchases, respectively.

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

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

payable, respectively.

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

payable, respectively.

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

As of March 31, 2022, the Company’s two largest vendors accounted for 11 % and 10 % of the total accounts payable, respectively.

As of December 31, 2021, no vendor accounted for more than 10 % the total accounts payable.

No other vendors exceeded 10% of gross accounts

payable in either period.

Value of Financial Instruments

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Accounting Pronouncements

Adopted Accounting Pronouncements

August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2020-06 “Debt—Debt with Conversion

and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU

2020-06”).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash

conversion and beneficial conversion models.

The diluted net income per share calculation for convertible instruments will require the

Company to use the if-converted method.

For contracts in an entity’s own equity, the type of contracts primarily affected by this

update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet

the settlement conditions of the derivative scope exception.

This update simplifies the related settlement assessment by removing the

requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required

to be posted, and (iii) assess shareholder rights.

ASU 2020-06 is effective January 1, 2024, for the Company and the provisions of this

update can be adopted using either the modified retrospective method or a fully retrospective method.

Early adoption is permitted, but

no earlier than January 1, 2021, including interim periods within that year.

Effective January 1, 2021, the Company early adopted ASU

2020-06 and that adoption did not have an impact on our financial statements and related disclosures.

May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),

Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”

(“ASU 2021-04”).

ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions

or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or

exchange as an exchange of the original instrument for a new instrument.

An issuer should measure the effect of a modification or exchange

as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification

or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment

for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination

or modification).

ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods

within those fiscal years.

An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring

on or after the effective date.

The Company adopted ASU 2021-04 effective January 1, 2022.

The adoption of ASU 2021-04 did not have any

impact on the Company’s financial statement presentation or disclosures.

Issued Accounting Pronouncements Not Yet Adopted

June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

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of the new guidance and related codification improvements will be material to its financial position, results of operations and cash

August 2020, the FASB issued ASU No.

2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number

of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models.

net income per share calculation for convertible instruments will require the Company to use the if-converted method.

For contracts in

an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are

accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception.

This update simplifies the related settlement assessment by removing the requirements to (i) consider whether the contract would be settled

in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights.

ASU 2020-06 is

effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method

or a fully retrospective method.

Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that

Effective January 1, 2021, the Company early adopted ASU 2020-06 and that adoption did not have an impact on our financial statements

and related disclosures.

recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants,

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present or future financial statements.

is valued at the lower of cost (first-in, first-out) or net realizable value, and net of reserves is comprised of the following (in thousands):

Schedule of Inventory

materials and packaging

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

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

2020, was $ 130 and $ 194 , respectively.

is valued at the lower of cost (first-in, first-out) or net realizable value, net of write downs, and is comprised of the following (in

Raw materials and packaging

Finished products

Property and Equipment

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Schedule of Property and Equipment

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

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.

Right-of-use assets under operating leases

Computer hardware and software

Machinery and equipment

Accumulated depreciation and amortization

Net book value

expense for the three months ended March 31, 2022 and 2021 was $ 25

respectively, and amortization of right-of-use assets for the three months ended March 31, 2022 and 2021 was $ 27

respectively.

Intangible Assets

assets are comprised of brand names acquired, specifically Virgil’s, and costs related to trademarks.

They have been assigned an

indefinite life, as we currently anticipate that they will contribute cash flows to the Company perpetually.

These indefinite-lived intangible

assets are not amortized but are assessed for impairment annually and evaluated annually to determine whether the indefinite useful life

remains appropriate.

We first assess qualitative factors to determine whether it is more likely than not that the asset is impaired.

If further testing is necessary, we compare the estimated fair value of our asset with its book value.

If the carrying amount of the

asset exceeds its fair value, as determined by the discounted cash flows expected to be generated by the asset, an impairment loss is

recognized in an amount equal to that excess.

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):

3 unchanged sentences

Schedule of Amount Outstanding Under Credit Facilities

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 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

whether the borrowing is based upon receivables, inventory or is an over-advance.

Additionally, the line of credit is subject to monthly

facility and administration fees, and aggregate minimum monthly fees (including interest) of $ 4 .

line of credit is secured by substantially all of the assets, excluding intellectual property, of the Company.

The over-advance is secured

by all of Reed’s intellectual property collateral.

Additionally, any over-advance 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 (“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

Line of credit – Alterna Capital Solutions

Line of credit – Rosenthal & Rosenthal

Capitalized financing costs

Capital Solutions

March 28, 2022, the Company entered into a financing agreement with Alterna Capital Solutions (“ACS”), for a line of credit

to replace its existing credit facility.

The ACS line of credit is for a term of 3 years , provides for borrowings of up to $ 13,000 , and

is secured by eligible accounts receivable and inventory.

An over advance rider provides for up to $ 400 of additional borrowing beyond

those amounts (the “Over Advance”).

At March 31, 2022, no unused borrowing capacity was available under the financing agreement.

based on receivables bears an interest of prime plus 4.75% but not less than 8.0%.

Borrowings based on inventory bears an interest of

prime plus 5.25% but not less than 8.5%.

The additional over advance rider bears a rate of prime plus 12.75%, but not less than 16.00%.

Additionally, the line of credit is subject to monthly monitoring fee of $1 with a minimum usage requirement on the credit facility .

A loan balance of less than $ 1,500 will bear interest at a rate in line with account receivables advances plus the monthly monitoring

Company incurred $ 503 of direct costs of the transaction, consisting primarily of broker, bank and legal fees.

These costs have been

capitalized and are being amortized over the 3 -year life of the ACS agreement.

For the three months ended March 31, 2022, amortization

of debt discount was $ 33 , and as of March 31, 2022, the remaining unamortized debt discount balance is $ 470 .

& Rosenthal (paid off in full on March 30, 2022)

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

(“Rosenthal”) that provided a maximum

borrowing capacity of $ 13,000 , based on eligible accounts receivable and inventories (the “permitted borrowings”) plus advances

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

On March 30, 2022, the Company paid in full the outstanding

balance on its credit facility with Rosenthal with proceeds from ACS discussed above.

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

whether the borrowing was based upon receivables, inventory or is an over-advance.

Additionally, the Rosenthal line of credit was subject

to monthly facility and administration fees, and aggregate minimum monthly fees (including interest) of $ 4 .

line of credit was secured by substantially all of the assets, excluding intellectual property, of the Company.

The over-advance was

secured by all of Reed’s intellectual property collateral.

On March 11, 2021, the Company entered into an amendment to the Rosenthal

agreement and replaced a standby letter of credit of $ 1,500 by a guarantor with a $2,000 pledge of securities to Rosenthal by John J.

Bello and Nancy E.

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

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

He is also a greater than

5 % beneficial owner of Reed’s common stock.

Bello, current Chairman and former

Interim Chief Executive Officer of Reed’s, is a related party, and 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.

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 September 30, 2021.

The prepaid financing

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

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,

including our ability to utilize tangible and intangible assets as collateral for other indebtedness.

Additionally, the agreement contains

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 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.

These costs have

been capitalized and recorded as a debt discount and are amortized over the remaining life of the Rosenthal agreement.

On December 31,

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 $ 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 ,

pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act.

At December 31, 2020, the note payable balance

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

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 September 30, 2021.

Bello received 400,000 shares of Reed’s restricted stock, with a fair value of

$ 472 which was recorded a prepaid financing cost.

During the three months ended March 31, 2022, $ 121 of the prepaid financing cost was

amortized, and as of March 31, 2022, there was no remaining unamortized prepaid finance cost balance.

Company annually incurs an additional $ 130

of fees from the bank, which is equal to 1 %

of the $ 13,000

borrowing limit.

Amortization of this debt discount

the three months ended March 31, 2022, and 2021, respectively.

At March 31, 2022, there was no remaining unamortized debt discount

Leases Liabilities

Company accounts for leases under ASC 842, Leases .

The standard requires a lessee to record a right-of-use asset and a corresponding

lease liability at the inception of the lease, initially measured at the present value of the lease payments.

842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated

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

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 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

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

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

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

Commission (“SEC”).

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

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

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.

stock repurchases

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.

the three months ended March 31, 2022 and 2021, lease costs totaled $ 27 and $ 24 , respectively.

of December 31, 2021, operating lease liabilities totaled $ 555 .

During the three months ended March 31, 2022, the Company made payments

of $ 38 towards its operating lease liability.

As of March 31, 2022, operating lease liabilities totaled $ 518 .

of March 31, 2022, the weighted average remaining lease terms for an operating lease are 2.76 years.

As of March 31, 2022, the weighted

average discount rate on the operating lease is 12.60 % .

Stockholder’s Equity

March 10, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant

to which the investors agreed to purchase 18,594,571

shares of the Company’s common stock and

warrants to purchase 9,297,289

shares of common stock in a private placement

(including 3,248,142 shares of the Company’s common stock and warrants to purchase 1,624,071 shares of common stock to investors

who are officers and directors of the Company).

The warrants have an exercise price of $ 0.2877

per share for a period of five

years commencing six months from the closing date

of March 11, 2022.

The purchase price per share of common stock and associated warrant was $ 0.28

for certain investors and was $ 0.3502

for investors who are officers and directors

of the Company in compliance with the rules of the Nasdaq Stock Market.

The net proceeds to the Company, after deducting placement agent

fees and other offering expenses, was approximately $ 5.1

The officers and directors of the Company

purchased approximately $ 1.1

million of the securities in the offering.

In January 2022, the Company issued 100,000 shares

of common stock valued at $ 37 to John J.

Bello and Nancy E.

Bello, as Co-Trustees of The John and Nancy Bello Revocable Living Trust as consideration for the $ 2,000 pledge of securities to Rosenthal (see Note 5).

Bello, current Chairman and former

Interim Chief Executive Officer of Reed’s, is a related party, and greater than 5 % beneficial owner of Reed’s common stock.

Stock-Based Compensation

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

following table summarizes restricted stock activity during the three months ended March 31, 2022:

Summary of Non-vested Restricted Stock Activity

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,

set the cash compensation of its non-employee directors at $ 50,000 for fiscal 2021, payable quarterly in accordance with the company’s

policies for non-employee director compensation.

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, 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 ,

Balance, December 31, 2021

Balance, March 31, 2022

January 26, 2022, the board of directors of Reed’s, pursuant to a joint recommendation from its governance and compensation

committees, set the cash compensation of its non-employee directors at $ 50,000

for fiscal 2021, payable quarterly in accordance

with the company’s policies for non-employee director compensation.

In addition, the Company granted 401,720

restricted stock awards to five non-employee

of these restricted stock awards vested on

February1, 2022.

The remaining 301,290

restricted stock awards will vest equally

on May 1, 2022, August 1, 2022, and November 1, 2022.

The aggregate fair value of the stock awards was $ 150

based on the market price of our common stock

price which was $ 0.32

per share on the date of grants and is amortized

as shares vest.

total fair value of restricted common stock vesting during the three months ended March 31, 2022 and 2021, was $ 66

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:

As of March 31, 2022,

the amount of unvested compensation related to issuances of restricted common stock was $ 138 ,

which will be recognized as an expense in future

periods as the shares vest.

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

from the time they vest.

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

as of their grant date.

following table summarizes stock option activity during the three months ended March 31, 2022:

Schedule of Stock Option Activity

Exercise Price

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

2020 Equity Incentive Plan.

options were issued to employees, 1,693,441

Outstanding at December 31, 2021

Unvested forfeited

Vested forfeited

Outstanding at March 31, 2022

Exercisable at March 31, 2022

the three months ended March 31, 2022, the Company approved options exercisable into 60,000

shares to be issued pursuant to Reed’s 2020 Equity Incentive Plan.

60,000 options

were issued to employees, 30,000

options vesting annually over a four -year

vesting period, and 30,000

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

options vesting based on performance criteria to be established by the board of directors.

stock options are exercisable at a price of $ 0.29

per share and expire in ten

1 unchanged sentence

at grant date was approximately $ 12 ,

which was determined using a Black-Scholes-Merton option pricing model with the following average assumption:

which was determined using a Black-Scholes-Merton

option pricing model with the following average assumption:

stock price of $ 0.29

per share, expected term of six

share, expected term of six

years , volatility of 82 %,

10 unchanged sentences

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 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 September 30, 2021, which was $ 0.60 , and the exercise price

of the outstanding stock options.

the three months ended March 31, 2022 and 2021, the Company recognized $ 225 and $ 300 of compensation expense relating to vested stock

As of March 31, 2022, the aggregate amount of unvested compensation related to stock options was approximately $ 2,398 which

will be recognized as an expense as the options vest in future periods through March 28, 2026.

of March 31, 2022, the outstanding and exercisable options have no intrinsic value.

The aggregate intrinsic value was calculated as the

difference between the closing market price as of March 31, 2022, which was $ 0.30 , and the exercise price of the outstanding stock options.

Stock Warrants

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

Schedule of Warrant Activity

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.

of March 31, 2022, the Company has issued warrants to purchase an aggregate of 13,835,768 shares of common stock.

The Company’s

warrant activity during the three months ended March 31, 2022 is as follows:

of Warrant Activity

Average Exercise Price

Average Remaining Contractual Terms (Years)

Aggregate Intrinsic Value

Outstanding at December 31, 2021

Outstanding at March 31, 2022

Exercisable at March 31, 2022

March 10, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant

to which the investors agreed to purchase 18,594,571 shares of the Company’s common stock and warrants to purchase 9,297,289 shares

of common stock in a private placement.

The warrants have an exercise price of $ 0.2877 per share for a period of five years commencing

six months from the closing date of March 11, 2022 (see Note 7).

November 24, 2021, the Company granted John Bello, current Chairman, significant shareholder and former Interim Chief Executive Officer

of Reed’s, who is a related party, a 5 -year warrant to purchase 1,500,000 shares of the Company common stock with an exercise price

The fair value of the warrants granted was determined to be $ 458 and was recorded as a prepaid financing costs.

The unamortized

balance of prepaid financing costs was $ 310 on December 31, 2021.

During the three month ended March 31, 2022, the Company amortized

$ 310 of prepaid financing costs to interest expense, leaving no remaining prepaid financing cost balance at March 31, 2022.

of March 31, 2022, the outstanding and exercisable warrants have no aggregate intrinsic value.

The aggregate intrinsic value was calculated

as the difference between the closing market price as of March 31, 2022, which was $ 0.30 , and the exercise price of the Company’s

warrants to purchase common stock.

Related Party Activities

December 31, 2018, the Company completed the sale of its Los Angeles manufacturing plant to California Custom Beverage, LLC (“CCB”),

an entity owned by Christopher J.

2018, the Company completed the sale of its Los Angeles manufacturing plant to California Custom Beverage, LLC (“CCB”), an

entity owned by Christopher J.

Reed, a related party, and CCB assumed the monthly payments on our lease obligation for the Los Angeles

5 unchanged sentences

and his wife.

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

As of March 31, 2022, $ 800 has been deposited with the lessor and Mr.

Reed has placed approximately 363,000 pledged shares

valued at $ 109 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 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 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.

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 (see Note 6).

The royalty agreement terminated December 31, 2021.

During the three months

ended March 31, 2022 and 2021, the Company recorded royalty revenue from CCB of $ 0 and $ 3 , respectively.

December 31, 2021, the Company had an aggregate receivable balance from CCB of $ 933 .

During the three months ended March 31, 2022, the

Company advanced expenses of $ 8 , leaving an aggregate receivable balance of $ 941 at March 31, 2022.

March 31, 2022 and December 31, 2021, the Company had accounts payable due to CCB of $ 735 and $ 614 , respectively.

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

Martin was paid approximately $ 46 and

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

$ 87 , respectively, for her services during the three months ended March 31, 2022 and 2021, respectively.

Subsequent Events

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

Subsequent to March 31, 2022, the Company issued

100,430 shares of common stock on the vesting of restricted shares.

May 9, 2022, the Company entered into a note purchase agreement and agreed to issue $ 11,250

of secured convertible promissory notes (the “Notes”).

The net proceeds from the issuance of the Notes, after deducting

placement agent fees and other offering expenses, was approximately $ 10,013 .

The Notes will mature on May

9, 2025 , bear interest at a rate of 10 %

per annum, and are secured by substantially all of the Company’s assets (including all of its intellectual property) and are subject to a

collateral sharing agreement with ACS, the Company’s existing secured lender (see Note 5).

The Notes also have an amortization feature

beginning in August 2022, which, if elected by a majority of holders, would require the Company to make monthly payments of $ 200

of principal and interest in cash or in shares of common stock.

initial conversion rate of the Notes is 4.1503

shares of the Company’s common stock per one dollar of principal converted, subject to customary anti-dilution adjustments.

Upon conversion, holders of the Note are entitled to receive an interest make-whole payment, as defined, which is payable, at the Company’s

election, in cash or in shares of common stock valued at a 10 %

discount to the 5-day volume-weighted average price.

The Company’s ability to settle conversions and make amortization and

interest make-whole payments using shares of the Company’s common stock is subject to certain limitations set forth in the

Company entered into a registration rights agreement with the holders, pursuant to which the Company agreed to register for resale shares

issuable under the Notes within 45 days of the closing of Notes.

The Company is currently in the process of determining its accounting

for the Notes.

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