What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-05-15 compared with 2022-04-15 · 614 added, 524 removed, 552 unchanged (67% of the section changed)

Financial Statements

of Independent Registered Public Accounting Firm (PCAOB Firm ID:

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID:

Balance Sheets as of December 31, 2022 and December 31, 2021

Statements of Operations for the years ended December 31, 2022 and 2021

Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020

Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021

Statements of Cash Flows for the years ended December 31, 2022 and 2021

5 unchanged sentences

(the “Company”) as of December 31, 2022 and 2021, the

related statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related

related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended, and the related

notes (collectively referred to as the “financial statements”).

3 unchanged sentences

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

As discussed in

Note 1 to the financial statements, during the year ended December 31, 2021, the Company incurred a net loss and utilized cash in

As discussed in Note

1 to the financial statements, during the year ended December 31, 2022, the Company incurred a net loss and utilized cash in operations.

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

Management’s plans to alleviate these conditions are also described in Note 1.

The financial statements do not include any

adjustments that might result from the outcome of this uncertainty.

Management’s plans to

alleviate these conditions are also described in Note 1.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

20 unchanged sentences

provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we

are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the

accounts or disclosures to which it relates.

described in Notes 2 and 3 to the financial statements, the Company’s inventories are valued at the lower of cost or net realizable

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

described in Notes 2 and 3 to the financial statements, the Company’s inventories are stated at the lower of cost or net realizable

value, determined on first-in, first-out (“FIFO”) basis.

Management considers historical usage, forecasted demand in relation

to inventory on hand, market conditions, and other factors when estimating net realizable value.

identified management’s estimation of the net realizable value of inventory as a critical audit matter, because of the significant

judgments made by management in estimating future demand and market conditions which are used to arrive at the net realizable value.

As of December 31, 2022, the Company held inventories of $16.2 million.

In determining net realizable value, management considers historical usage, forecasted demand in relation to inventory on hand, market

conditions, and other factors.

identified the evaluation of management’s estimate of the net realizable value of certain inventory as a critical audit matter,

because of the significant judgments made by management in estimating future demand and market conditions which are used to arrive at

the net realizable value.

This required a high degree of auditor judgment and increased auditor effort in auditing such assumptions.

primary procedures we performed to address this critical audit matter included:

obtained an understanding of management’s process for estimating net realizable value.

assessed the reasonableness of management’s forecasted product demand and tested the completeness and accuracy of the underlying

data used in the analyses and whether they were consistent with the historical data and evidence obtained in other areas of the audit.

evaluated management’s product demand forecast for reasonableness considering historical sales by product, comparing prior

period estimates to actual results of the same period, and considering trends within the industry that could impact the movement

of the products provided by the Company.

developed an independent expectation of the net realizable value of inventory using historic inventory activity and compared our

independent expectation to the amount recorded in the financial statements.

evaluated management’s product demand forecast for reasonableness considering historical

sales by product, and whether they were consistent with the historical data and evidence

obtained in other areas of the audit.

developed an independent expectation of the net realizable value of inventory using historic

inventory activity and compared our independent expectation to the amount recorded in the

financial statements.

payable to former related party

As described in Note 13 to the financial

statements, as of December 31, 2022, the Company has an arrangement with California Custom Beverage, LLC (“CCB”), a

former related party and one of its one copackers.

In the opinion of management, the arrangement allows for the cost of certain

services provided by CCB to be offset to certain amounts due the Company.

As of December 31, 2022, the Company recorded a net

payable of $1,248 due to CCB.

We identified the net payable to CCB as a

critical audit matter because of the significant judgements made by management in estimating net payable to CCB including the

Company’s determination that a right of offset exists related to amounts payable to and amounts receivable from CCB.

required a high degree of auditor judgement to assess the reasonableness of management’s conclusions.

primary procedures we performed related to the net payable to CCB included:

inquired of management and external legal counsel to gain an understanding of the relevant facts and circumstances related to the

net payable to CCB.

obtained and read the contract, as amended, related to transactions between the Company and CCB.

amounts to a schedule of accumulated costs and offsets.

evaluated the reasonableness of management’s conclusions regarding the net payable to CCB.

assessed the sufficiency of management’s disclosures related to the net payable to CCB.

have served as the Company’s auditor since 2004.

2 unchanged sentences

in thousands, except share amounts)

December 31, 2021

December 31, 2020

Current assets:

Accounts receivable, net of allowance of $ 252 and $ 215 , respectively

Receivable from related party

Inventory, net

Receivable from former related party

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net of accumulated depreciation of $ 787 and $ 561 , respectively

Equipment held for sale

Intangible assets

3 unchanged sentences

Accrued expenses

Revolving line of credit

Payable to related party

Current portion of note payable

Revolving line of credit, net of capitalized financing costs of $ 363 and $ 0 , respectively

Payable to former related party

Current portion of convertible notes payable, net of debt discount of $ 414 and $ 0 , respectively

Current portion of lease liabilities

Total current liabilities

Convertible note payable, net of debt discount of $ 562 and $ 0 , respectively, less current portion

Lease liabilities, less current portion

Note payable, less current portion

Total liabilities

Stockholders’ equity:

Stockholders’ equity (deficit):

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

Common stock, $ .0001

par value, 180,000,000 and 120,000,000

shares authorized, respectively;

and 86,317,096 shares issued

and outstanding, respectively

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

2,519,485 and 1,874,866 shares issued and outstanding, respectively

Additional paid in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

accompanying notes are an integral part of these financial statements.

8 unchanged sentences

General and administrative expense

Provision for receivable with former related party

Total operating expenses

Loss from operations

Loss on extinguishment of debt

Gain on extinguishment of PPP note payable

Interest expense

Change in fair value of warrant liability

Dividends on Series A Convertible Preferred Stock

13 unchanged sentences

Fair value of vested restricted shares granted to officers

Fair value of vested restricted shares granted to officers,

Fair value of vested restricted shares granted to Directors for services

Fair value of warrants issued on extinguishment of debt

Dividends on Series A Convertible Preferred Stock

Repurchase of common stock

Repurchase of common stock,

Common shares issued on exercise of options

Common shares issued for financing costs

Common shares issued for financing costs, shares

Common shares issued pursuant to a rights offerings, net of offering costs

Common shares issued on conversion of note payable

Exercise of options

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

Balance, December 31, 2021

Beginning balance, value

Fair value of vested options

Fair value of warrants issued as financing costs

Fair value of vested restricted shares granted to officers

Dividends on Series A Convertible Preferred Stock

Repurchase of common stock

Common shares issued on exercise of options

Dividends on Series A Convertible Preferred Stock

Common shares issued for financing costs

Common shares issued pursuant to a rights offerings, net of offering costs

Common shares issued for interest payment

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

Balance, December 31, 2022

$ ( 123,199 )

Ending balance, value

$ ( 123,199 )

10 unchanged sentences

Gain on extinguishment of PPP note payable

Loss on extinguishment of debt

Amortization of debt discount

2 unchanged sentences

Fair value of vested restricted shares granted to directors and officers for services

Decrease in accounts receivable allowance

Inventory write-off

Decrease in fair value of warrant liability

Accrual of interest on convertible note to a related party

Common shares issued as financing costs

Change in allowance for doubtful accounts

Provision for receivable with former related party

Change in inventory reserve

Accrued interest on convertible note

Lease liability

14 unchanged sentences

Capitalization of financing costs

Proceeds from loan payable

Amounts from related party

Proceeds from sale of common stock

Proceeds from convertible note payable, net of expenses

Repayment of convertible note payable

Amounts from former related party

Principal repayments on finance lease obligation

1 unchanged sentence

Repurchase of common stock

Proceeds from sale of common stock

Net cash provided by financing activities

Net decrease in cash

Net increase (decrease) in cash

Cash at beginning of period

3 unchanged sentences

Non-cash investing and financing activities:

Offset accounts receivable related party and accounts payable related party

Dividends on Series A Convertible Preferred Stock

1 unchanged sentence

Common Shares issued for financing costs

Common Shares issued for principal payment

Common Shares issued for interest payment

Note Payable principal extinguished

4 unchanged sentences

Operations and Liquidity

Reed’s, Inc, (the “Company”) is the owner and maker of both Reed Craft Ginger Beer and Reed’s Real Ginger Ale

and Virgil’s Handcrafted Sodas.

Reed’s, Inc, The Company was established in 1989 and is incorporated in the state of Delaware.

Going Concern

The 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 year ended December 31, 2021, the Company

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

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 issued.

The financial statements

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

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 .

On March 10, 2022, the

Company issued 18,594,571 shares of common stock and warrants to purchase 9,297,289 shares of common stock in a private placement.

net proceeds to the Company, after deducting placement agent fees and other offering expenses, are approximately $ 5,100 (see Note 15).

Historically, we have financed our operations

through public and private sales of common stock, issuance of preferred and common stock, convertible debt instruments, term loans and

credit lines from financial institutions, and cash generated from operations.

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 would 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.

We 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.

Considerations

the year ended December 31, 2021, the COVID-19 pandemic has impacted our operating results and the Company anticipates a continued impact

for the balance of the year.

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

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

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.

December 31, 2021, the Company has experienced higher transportation expenses as the capacity in the freight market has not kept up with

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

In addition, the Company experienced increases

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

However, mitigation plans are being implemented

Inc., (the “Company”) is the owner and maker of Reed’s Craft Ginger Beer, Reed’s Real Ginger Ale, Reed’s

Classic and Stormy Mules, and Reed’s Hard Ginger Ales and Virgil’s Handcrafted Sodas.

The Company was established in 1989

and is incorporated in the state of Delaware.

on January 24, 2023, the Board of Directors and stockholders have approved resolutions authorizing a reverse stock split of the outstanding

shares of the Company’s common stock on the basis of 1 share for every 50 shares of common stock .

All shares and per share amounts

and information presented herein have been retroactively adjusted to reflect the reverse stock split for all periods presented.

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 year

ended December 31, 2022, the Company recorded a net loss of $ 20,057 and used cash in operations of $ 15,530 .

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

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

of December 31, 2022, we had a cash balance of $ 533 , with $ 110 of current availability, and $ 1,663 of additional borrowing capacity.

Historically,

we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible

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

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.

Trends - Market Conditions

the year ended December 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 affects 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.

economy continued to grow during the first quarter of 2022, the continuing impact of the COVID-19 pandemic, higher inflation,

the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment

which will continue to evolve and may impact our business in future periods.

We have experienced supply chain challenges, including increased

lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand.

we regularly monitor companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints

could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations.

We expect the inflationary trends and supply chain pressures to continue throughout 2023.

the year ended December 31, 2022, the Company experienced moderation from elevated freight costs.

While the average cost of shipping

and handling for the year ended December 31, 2022, was $ 3.95 per case, which is the same as the $ 3.95 per case for the year ended December

31, 2021, it was significantly higher during the first half of the year, however, was significantly reduced during the second half of

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.

5 unchanged sentences

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.

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 December 31, 2022, we maintained

1 unchanged sentence

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 year ended December 31, 2021, were up 19% from the prior year period.

Through December 31, 2021, we continue to generate

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

We have also not observed

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

with our employees and suppliers to do our part to be responsible to our employees and business partners 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 operations.

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

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

August 16, 2021, the Company received a written notice from the Nasdaq Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”)

that the bid price of the Company’s common stock had closed at less than $1 per share over the previous 30 consecutive business

days and, as a result, did not comply with Listing Rule 5550(a)(2) (the “Bid Price Rule”).

In accordance with Listing Rule

5810(c)(3)(A), the Company was provided 180 calendar days, or until February 14, 2022, to regain compliance with the Bid Price Rule.

The Company did not regain compliance during the compliance period ended February 14, 2022.

Accordingly, the Company requested that Nasdaq

grant the Company a second 180 calendar day period to regain compliance.

On February 15, 2022, the Company was provided an additional

180 calendar day compliance period, or until August 15, 2022, to demonstrate compliance with the Bid Price Rule.

The Company did not

regain compliance during the compliance period ended August 15, 2022.

August 16, 2022, the Company received a written notice from Nasdaq indicating that, based upon the Company’s continued non-compliance

with the Bid Price Rule, Nasdaq had determined to delist the Company’s securities from Nasdaq unless the Company timely requested

a hearing before the Nasdaq Hearings Panel (the “Panel”).

The written notice also indicated that the Company was not in compliance

with the $ 2.5 million minimum stockholders’ equity requirement for continued listing of the Company’s common stock on Nasdaq

as set forth in Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Rule”).

The Company timely requested

a hearing with the Panel, and after a hearing on September 28, 2022, the Company was given until February 13, 2023, to regain compliance

with the Bid Price Rule, and to regain compliance with the Minimum Stockholders’ Equity Rule.

January 27, 2023, the Company achieved compliance with the Bid Price Rule after effecting a 1:50 reverse split (see Reverse Stock Split

However, after evaluating options to achieve compliance with the Minimum Stockholders’ Equity Rule, the Company’s

board of directors determined not to proceed with a dilutive capital raise.

On February 14, 2023, the Company received a written notice

that the Nasdaq’s Listing Qualifications staff has determined that the Company’s securities were to be delisted from Nasdaq,

and trading in the Company’s common stock was suspended from the Nasdaq Capital Market on February 16, 2023.

On February 16, 2023,

the Company’s common stock began being quoted for trading on the OTCQX US Market, operated by OTC Markets, Inc.

and the Company continues to be a reporting company under the Securities Exchange Act of 1934, as amended.

a special meeting of shareholders held on January 24, 2023, the Company’s shareholders granted the Company’s board of directors

the discretion to effect a reverse stock split of the common stock through an amendment to the Company’s Certificate of Incorporation,

as amended, at a ratio of any ratio not less than 1-for-6 and not more than 1-for-50 , at any time on or prior to January 24, 2024, with

the exact ratio to be set at a whole number within this range by the board of directors in its sole discretion.

On January 25, 2023,

the Company announced that its board of directors approved a 1-for-50 reverse stock split of the Company’s issued and outstanding

shares of common stock, par value $ 0.0001 per share.

authorized number of shares of common stock were not affected by the reverse stock split.

No fractional shares were issued in connection

with the reverse stock split, as all fractional shares were rounded up to the next whole share.

Accordingly, all share and per share

amounts presented herein with respect to common stock have been retroactively adjusted to reflect the above-described reverse stock split

for all periods presented.

Significant Accounting Policies

30 unchanged sentences

At December 31, 2022, and 2021, inventory has been reduced by cumulative write-downs for inventory aggregating

respectively.

$ 479 and $ 135 , respectively.

and Equipment

and equipment is stated at cost.

and equipment are stated at cost.

Expenditures for major renewals and improvements that extend the useful lives of property and equipment

8 unchanged sentences

not be recoverable.

If there is indication of impairment, management prepares an estimate of future cash flows expected to result from

If there is an indication of impairment, management prepares an estimate of future cash flows expected to result from

the use of the asset and its eventual disposition.

6 unchanged sentences

Indefinite-lived intangible assets are not amortized but are assessed for impairment annually,

or more frequently if events or circumstances indicate that assets might be impaired and evaluated annually to determine whether

the indefinite useful life is appropriate.

As part of our impairment test, we first assess qualitative factors to determine whether it

is more likely than not 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 its discounted cash flows, an impairment

loss is recognized in an amount equal to that excess.

For the years ended December 31, 2021 and 2020, the Company determined there was

no impairment

of its indefinite-lived brand names.

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

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.

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

or more frequently if events or circumstances indicate that assets might be impaired and evaluated annually to determine whether the

indefinite useful life is appropriate.

As part of our impairment test, we first assess qualitative factors to determine whether it is

more likely than not the asset is impaired.

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

If the carrying amount of the asset exceeds its fair value, as determined by its discounted cash flows, an impairment loss

is recognized in an amount equal to that excess.

For the years ended December 31, 2022 and 2021, the Company determined there was no

impairment of its indefinite-lived brand names.

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

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 fulfillment activity rather than a promised service to the customer.

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

for customers to derive the expected value from them.

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

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

Damaged product returns have

8 unchanged sentences

costs in excess of charges allocated to finished goods in production.

Charges for labor and overhead

allocated to finished goods are determined on a market cost basis, which may be lower than the actual costs incurred.

Plant costs in

excess of production allocations are expensed in the period incurred rather than added to the cost of finished goods produced.

not related to the production of our products are classified as operating expenses.

Charges for labor and overhead allocated to finished goods are

determined on a market cost basis, which may be lower than the actual costs incurred.

Plant costs in excess of production allocations

are expensed in the period incurred rather than added to the cost of finished goods produced.

Expenses not related to the production

of our products are classified as operating expenses.

and Handling Expense

2 unchanged sentences

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

Advertising costs aggregated $ 1,418 and $ 1,518 for

the years ended December 31, 2021 and 2020, respectively.

Advertising costs aggregated $ 668 and $ 1,418 for the

years ended December 31, 2022 and 2021, respectively.

Compensation Expense

35 unchanged sentences

Schedule of Potentially Dilutive Securities

December 31, 2022

December 31, 2021

Common stock equivalent of Series A Convertible Preferred Stock

Convertible note payable

Unvested restricted common stock

8 unchanged sentences

3—Unobservable inputs based on the Company’s assumptions.

carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans,

accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments.

The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because interest rates

on these obligations are based on prevailing market interest rates.

Company operates in one

segment for the manufacture and distribution of our products.

In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been

identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and

assessing performance for the entire Company.

Existing guidance, which is based on a management approach to segment reporting, establishes

requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services,

major customers, and the countries in which the entity holds material assets and reports revenue.

All material operating units qualify

for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics,

nature of products and services, and procurement, manufacturing and distribution processes.

Since the Company operates in

one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Company believes the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, short-term

bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short-term nature of such

The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because

interest rates on these obligations are based on prevailing market interest rates.

Company operates in one segment for the manufacture and distribution of our products.

In accordance with the “Segment Reporting”

Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President,

who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information

quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the

entity holds material assets and reports revenue.

All material operating units qualify for aggregation under “Segment Reporting”

due to their similar customer base and similarities in economic characteristics, nature of products and services, and procurement, manufacturing

and distribution processes.

Since the Company operates in one segment, all financial information required by “Segment Reporting”

can be found in the accompanying financial statements.

Concentrations

7 unchanged sentences

respectively.

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

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

As of December 31, 2022, the Company had accounts receivable from two customers which comprised 19 % and 11 % of its gross

accounts receivable, respectively.

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

of its gross accounts receivable.

the years ended December 31, 2022, and 2021, the Company utilized six separate co-packers for most its production and bottling of beverage

products in the United States.

The Company utilizes co-packers to produce 100 %

of its products.

The Company has long-standing relationships with two different co-packers, and in conjunction with the sale of its manufacturing

plant we entered into a third co-packing agreement with California Custom Beverage LLC (“CCB”), the purchaser of the plant

(see Note 13).

owned by Chris Reed, founder of the Company and formerly Chief Executive Officer, Chairman, director, and most recently, Chief

Innovation Officer.

Although there are other packers, a change in co-packers may cause a delay in the production process, which could

ultimately affect operating results.

The Company utilizes co-packers to produce 100 % of its products.

The Company has long-standing relationships

with two different co-packers, and in conjunction with the sale of its manufacturing plant we entered into a third co-packing agreement

with California Custom Beverage LLC (“CCB”), the purchaser of the plant (see Note 13).

CCB is 100 % owned by Chris Reed, founder

of the Company and formerly Chief Executive Officer, Chairman, director, and most recently, Chief Innovation Officer.

Although there

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

from vendors.

During the year ended December 31, 2021, the Company’s largest two vendors accounted for approximately 13 % and

10 % of all purchases, respectively.

During the year ended December 31, 2020, the Company’s largest two vendors accounted for approximately

12 % and 11 % of all purchases, respectively.

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

As of December 31, 2020, the

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

During the year ended December 31, 2022, the Company’s largest vendor accounted for approximately 12 % of all

During the year ended December 31, 2021, the Company’s largest two vendors accounted for approximately 13 % and 10 % of

all purchases, respectively.

No other vendor accounted for more than 10% of the total vendor purchases.

As of December 31, 2022, no vendor accounted for more than 10 % of the total accounts payable.

As of December 31, 2021, no vendor

accounted for more than 10 % of the total accounts payable.

Accounting Pronouncements

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

ASU 2016-13 requires entities to

use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types

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 equity 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

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

ASU 2016-13 requires entities

to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types

of financial instruments, including trade receivables.

3 unchanged sentences

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,

2 unchanged sentences

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

Raw materials

and packaging

December 31, 2022

December 31, 2021

Raw materials and packaging

Finished products

Property and Equipment

and equipment is comprised of the following (in thousands):

and equipment are comprised of the following (in thousands):

Schedule of Property and Equipment

2 unchanged sentences

Right-of-use assets under operating leases

Right-of-use assets under finance leases

Computer hardware and software

2 unchanged sentences

Net book value

expense for the years ended December 31, 2021 and 2020 was $ 143 and $ 88 , respectively, and amortization of right-of-use assets for the

years ended December 31, 2021 and 2020 was $ 100 and $ 116 , respectively.

During the year ended December 31, 2021, the Company disposed

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

leases payable (see Note 8).

During the year ended December 31, 2020, the Company disposed of right-of-use assets under finance leases

with a net book value of $ 51 and terminated $ 51 of related finance leases (see Note 8).

Additionally, during the year ended December

31, 2020, the Company reclassified $ 6 of right-of-use assets under operating leases to right-of-use assets under finance leases and disposed

of fully depreciated computer hardware and software of $ 244 with zero net book value.

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

Schedule of Equipment Held for Sale

Equipment held for sale

Net book value

expense for the years ended December 31, 2022, and 2021 was $ 108 and $ 143 , respectively, and amortization of right-of-use assets for

the years ended December 31, 2022, and 2021 as $ 117 and $ 100 , respectively.

the year ended December 31, 2021, the Company disposed of right-of-use assets under finance leases with a cost of $ 48 and accumulated

amortization of $ 38 and terminated $ 13 of related finance leases payable.

the year ended December 31, 2021, the Company disposed the equipment held for sale and recorded a loss on disposal of $ 67 .

12 unchanged sentences

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

the year ended December 31, 2021, the Company capitalized costs of $ 9 pertaining to legal and other fees incurred in applying for international

trademarks for Reeds and Virgil’s brands.

the year ended December 31, 2022, and 2021, the Company capitalized costs of $ 2 and $ 9 , respectively, 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):

7 unchanged sentences

December 31, 2021

Line of Credit

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

(“Rosenthal”).

The financing

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

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

(an “over-advance” of up to $ 4,000 )

in excess of permitted borrowings.

At December 31, 2021, the unused borrowing capacity under the financing agreement was $ 109 .

The line of credit automatically renews each year until terminated.

The line of credit matured on March 30, 2022 and was automatically

renewed to mature on March

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 above

the collateralized base (the “Over Advance”) up to a total borrowing of $ 13,000 .

At December 31, 2022, $ 110 of current availability

and $ 1,663 of 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 $ 483 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 year ended December 31, 2022, amortization of

debt discount was $ 121 , and as of December 31, 2022, the remaining unamortized debt discount balance is $ 363 .

& 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

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.

Company determined the fair value of the 400,000 restricted stock to be $ 472

which was recorded as a prepaid financing costs

of which $ 75 remains in prepaid expenses and other current assets on the balance sheet at December 31, 2021.

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

During the year ended December 31, 2021, the company amortized $ 397

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 December 31, 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 $ 452 for the year ended December 31, 2021, and 2020, respectively.

On December 31, 2021, the remaining

unamortized debt discount of $ 65 is included in prepaid expense and other current assets on the balance sheet.

On 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 .

During the year ended December 31, 2021,

the Company was notified that its PPP loan forgiveness application was approved in full, and the Company recorded the loan forgiveness

as a gain on extinguishment of $ 770 .

Bello received 8,000 shares of Reed’s restricted stock, with a fair value of

$ 472 which was recorded a prepaid financing cost.

During the year ended December 31, 2022, $ 121 of the prepaid financing cost was amortized,

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

Company annually incurred an additional $ 130 of fees from Rosenthal, or 1 % of the $ 13,000 borrowing limit.

Amortization of this debt

discount was $ 65 and $ 162 for the year ended December 31, 2022, and 2021, respectively.

At December 31, 2022, there was no remaining

unamortized debt discount balance.

Secured Convertible Notes Payable

outstanding under secured convertible notes payable are as follows (in thousands):

December 31, 2022

December 31, 2021

Secured Convertible Note Payable

Accrued interest

Capitalized financing costs

Current portion

Long term portion

Convertible Note Payable

May 2022, the Company entered into a note purchase agreement and agreed to issue $ 11,250 of secured convertible promissory notes (the

“Notes”) to entities affiliated with Whitebox Advisors, LLC (collectively, “Whitebox”).

The Notes bear interest

at a rate of 10% per annum (with 5% per annum payable in cash and 5% per annum payable in kind (“PIK”) by adding such PIK

interest to the principal amount of the Notes) .

The Notes 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 6).

The Notes mature on May 9, 2025 .

May 9, 2022, the Company issued $ 11,250 of Notes to Whitebox.

In September 2022, the Company issued an additional $ 2,500 of Notes to

The net proceeds from the issuance of the Notes, after deducting placement agent fees and other debt issuance costs, was approximately

In November 2022, the Company paid off the $ 2,500 of Notes in cash.

Beginning in August 2022, $ 11,250 of the Notes have an amortization

feature which requires the Company to make monthly payments of principal of $ 200 plus accrued interest, payable in cash or in shares

of the Company’s common stock at the option of the Company.

Amortization payments that are paid in shares are priced at 90 % of

the average of the daily volume weighted average prices of the Company’s common stock during the five trading days prior to the

date of amortization payment.

During the year ended December 31, 2022, the Company made monthly amortization principal payments aggregating

$ 800 , made up of $ 600 in cash, and the issuance of 32,362 shares of common stock valued at $ 200 .

At December 31, 2022, the principal

balance of the Notes was $ 10,450 .

Effective February 10, 2023, the requirement for monthly amortization payments of $ 200 due December

2022 to May 2023 was waived (see Note 15).

Remaining amortization payments of principal, as amended, total approximately $ 1.2 million

in 2023, $ 2.4 million in 2024, and $ 800 in 2025, leaving a principal balance of the Notes of approximately $ 6.0 million due at maturity.

August 11, 2022, the Notes were amended to add a 10 % fee for the amount that the Company’s line of credit with ACS exceeds $ 6,000 ,

as defined (the “Excess ABL Amount”).

In addition, Whitebox amended the amount of permitted indebtedness prior to September

30, 2022, to $ 11.5 million.

The Company was not in compliance with the Excess ABL Amount covenant at December 31, 2022, and received

a waiver of this covenant violation at December 31, 2022, on February 10, 2023.

conversion, holders of the Note are entitled to receive an interest make-whole payment, as defined.

The make-whole amount is equal to

the sum of the remaining scheduled payments of interest on the Notes to be converted that would be due if such notes matured May 9, 2025 ,

payable, at the Company’s option in cash or in shares of common stock.

the year ended December 31, 2022, the Company recorded interest of $ 3,023 , made up of $ 800 of interest on the Notes, $ 489 related to

make whole interest on the $ 2,500 Notes repaid in November 2022, and $ 1,734 related to the excess line of credit debt fee.

year ended December 31, 2022, the Company made interest payments of $ 1,892 , made up of $ 632 in cash, and the issuance of 229,871 shares

of common stock valued at $ 1,261 .

At December 31, 2022, the balance of accrued interest was $ 1,052 .

initial conversion rate of the Notes is 0.08306 shares of the Company’s common stock per $1 dollar of principal converted, or

approximately $12.04 per share, subject to customary anti-dilution adjustments.

In addition, if certain corporate events occur that

constitute a make-whole fundamental change as defined, then the note holders are, under certain circumstances, are entitled to an

increase in the conversion rate, limited to 0.12155 shares of Common Stock per $1 dollar of principal, or approximately $8.23 per

Company’s ability to settle conversions and make amortization payments and interest make-whole payments using shares of the Company’s

common stock is subject to certain limitations set forth in the Notes.

If the Company experiences a fundamental change as defined, the

holders of the notes have the right to require the Company to repurchase the notes for cash at a repurchase price equal to 100 % of the

principal amount, plus accrued interest thereon.

Effective February 10, 2023, the repurchase price was amended to 110 % of the principal

amount, plus accrued interest (see Note 15).

At December 31, 2022, the Notes, including accrued interest, are convertible into 955,363

shares of the Company’s common stock pursuant to a share conversion cap limit as defined in the Notes.

Company incurred $ 1,320 of direct costs of the transactions, consisting primarily of placement agent fees and other offering expenses.

These costs have been capitalized and are being amortized over the 3 -year life of the Notes.

For the year ended December 31, 2022, amortization

of debt discount was $ 344 , and as of December 31, 2022, the remaining unamortized debt discount balance is $ 976 .

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.

Leases Liabilities

9 unchanged sentences

the years ended December 31, 2022, and 2021, lease costs totaled $ 178 and $ 179 , respectively.

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

During the year ended December 31, 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.

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

During the year ended December 31, 2022, the Company made payments of

$ 161 towards its operating lease liability.

As of December 31, 2022, operating lease liabilities totaled $ 394 .

10 unchanged sentences

Non-current portion

Stockholders’

Stockholders’ Equity

A Convertible Preferred Stock

4 unchanged sentences

there were 9,411 shares outstanding.

Each share of Preferred Stock can be converted into four shares of the Company’s common stock.

Each share of Preferred Stock can be converted into 0.08 shares of the Company’s common stock .

are payable at the rate of 5 % annually, pro-rata and non-cumulative.

12 unchanged sentences

issue price, plus all accrued and unpaid dividends.

Preferred Stock may be converted at any time, at the option of the holder, into four shares of common stock, subject to adjustment in

Preferred Stock may be converted at any time, at the option of the holder, into 0.08 shares of common stock, subject to adjustment in

the event of stock splits, reverse stock splits, stock dividends, recapitalization, reclassification, and similar transactions.

5 unchanged sentences

redemption or voting, including any other security convertible into or exercisable for any senior preferred stock.

the year ended December 31, 2020, the Company paid dividends on the Preferred Stock through the issuance of 4,530 shares of its common

stock, respectively, which based upon the then-current market price of the stock equated to dividends of $ 5 in each of the years.

the year ended December 31, 2021, the Company accrued dividends on the Preferred Stock of $ 5 and is included in accrued expenses in

the accompanying balance sheets.

No shares of Series A preferred stock were converted into common stock in 2021 and 2020.

the year ended December 31, 2021, the Company paid dividends on the Preferred Stock through the issuance of 93 shares of its common stock,

respectively, which based upon the then-current market price of the stock equated to dividends of $ 5 in each of the years.

year ended December 31, 2022, the Company accrued dividends on the Preferred Stock of $ 5 and is included in accrued expenses in the accompanying

balance sheets.

No shares of Series A preferred stock were converted into common stock in 2022.

Company’s common stock has a par value of $ .0001 .

On December 30, 2021, our shareholders approved an increase in the authorized number of common shares from 120,000,000 to 180,000,000 .

On December 21, 2020, our shareholders approved an increase in the authorized number of common shares from 100,000,000 to 120,000,000 .

As of December 31, 2021, there were 180,000,000 shares

authorized, and 93,733,975 shares

of common stock outstanding.

As of December 31, 2020, there were 120,000,000 shares

authorized with 86,317,096 shares of

common stock outstanding.

On December 30, 2021, our shareholders approved an increase in the authorized

number of common shares from 120,000,000 to 180,000,000 .

On December 21, 2020, our shareholders approved an increase in the authorized

number of common shares from 100,000,000 to 120,000,000 .

As of December 31, 2022, there were 180,000,000 shares authorized, and 2,519,485

shares of common stock outstanding.

As of December 31, 2021, there were 180,000,000 shares authorized, and 1,874,866 shares of common

stock outstanding.

Stock Issuance

May 2021, the Company conducted a public offering of 6,680,000 shares of its common shares at a public offering price of $ 1.18 per share.

The net proceeds to the Company from this offering are $ 7,327 , after deducting underwriting discounts and commissions and other offering

November 2020, the Company conducted a public offering of 21,562,500 shares of its common shares at a public offering price of $ 0.56

The net proceeds to the Company from this offering are $ 11,254 , after deducting underwriting discounts and commissions and

other offering expenses.

April 2020, the Company conducted a public offering of 15,333,334 shares of its common shares at a public offering price of $ 0.375 per

The net proceeds to the Company from this offering are $ 5,310 , after deducting underwriting discounts and commissions and other

offering expenses.

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 371,892 shares of the Company’s common stock and warrants to purchase 185,946 shares

of common stock in a private placement (including 64,963 shares of the Company’s common stock and warrants to purchase 32,482 shares

of common stock to investors who are officers and directors of the Company).

The warrants have an exercise price of $ 14.39 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 $ 14.00 for certain investors and was $ 17.51 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 $ 5.0 million.

The officers and directors of the Company purchased approximately $ 1.1 million of

the securities in the offering.

January 2022, the Company issued 2,000 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 6).

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.

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 133,600 shares of common stock, at a price of $ 59.00 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.

2 unchanged sentences

The Company retired the shares.

the year ended December 31, 2021, the Company repurchased 270 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.

Share-Based Payments

believes that the ability to issue equity compensation, in order to incentivize performance by employees, directors, and consultants,

is essential to the Company’s growth strategy.

September 29, 2017, the 2017 Compensation Plan (the “2017 Plan”) was approved by our shareholders.

Initially it provided

for the issuance of up to 3,000,000 shares.

On December 13, 2018 our shareholders approved a 3,500,000 share increase in the number of

shares issuable under the 2017 Plan.

Options issued and forfeited under the 2017 Plan contain an Evergreen provision and cannot be re-priced

without shareholder approval.

As of December 31, 2020 and 2019, shares issuable under the 2017 Plan were 1,168,258 and 3,436,864 , respectively.

With the shareholder approval of the 2020 Equity Incentive Plan on December 21, 2020, no further shares will be issued from the 2017

Compensation Plan.

December 21, 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) was approved by our shareholders.

The 2020 Plan provides

for the issuance of up to 8,500,000

Options issued and forfeited under the

2020 plan contain an Evergreen provision and cannot be re-priced without shareholder approval.

As of December 31, 2021, shares

issuable under the 2020 Plan were 3,874,048 .

for the issuance of up to 300,000 shares.

Options issued and forfeited under the 2020 plan contain an Evergreen provision and cannot

be re-priced without shareholder approval.

As of December 31, 2022, shares issuable under the 2020 Plan were 297,534 .

2020 Plan permits the grant of options and stock awards to our employees, directors and consultants.

16 unchanged sentences

Balance, December 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 2022, payable quarterly in accordance with the company’s

policies for non-employee director compensation.

In addition, the Company granted 8,035 restricted stock awards to five non-employee

2,009 of these restricted stock awards vested on February 1, 2022, May 1, 2022, August 1, 2022, and November 1, 2022.

aggregate fair value of the stock awards was $ 150 based on the market price of our common stock price which was $ 16.00 per share on the

date of grants and is amortized as shares vest.

the year ended December 31, 2021, the Company issued 4,920 restricted stock awards to five non-employee directors.

61,475 of these

restricted stock awards vested on February 1, 2021, May 1, 2021, August 1, 2021, and November 1, 2021.

The aggregate fair value of the

stock awards was $ 226 based on the market price of our common stock price which was $ 0.92 per share on the date of grants and is amortized

as shares vest.

the year ended December 31, 2020, the Company issued 594,740 shares of restricted stock to a director and two executive employees.

of these shares vested immediately, 94,740 shares vested in increments of 47,370 each over a two-month period of October and November

2020, 75,000 shares will vest in increments of 18,750 each over four years from the date of grant, and 75,000 shares will vest over four

years based on performance criteria determined by the Board of Directors or Compensation Committee.

Unvested shares remain subject to

forfeiture if vesting conditions are not met.

The aggregate fair value of the stock awards was $ 508 based on the market price of our

common stock price which ranged from $ 0.81 to $ 0.95 per share on the dates of grants and is amortized as shares vest.

1,230 of these restricted

stock awards vested on February 1, 2021, May 1, 2021, August 1, 2021, and November 1, 2021.

The aggregate fair value of the stock awards

was $ 226 based on the market price of our common stock price which was $ 46.00 per share on the date of grants and is amortized as shares

total fair value of restricted common stock vesting during the year ended December 31, 2022, and 2021 was $ 158 and $ 243 , respectively,

18 unchanged sentences

Unvested forfeited or expired

( 2,052,954 )

Vested forfeited or expired

1 unchanged sentence

Exercisable at December 31, 2022

the year ended December 31, 2022, the Company approved options exercisable into 14,696 shares to be issued pursuant to Reed’s 2020

Equity Incentive Plan.

14,696 options were issued to employees, 7,348 options vesting annually over a four -year vesting period, and 7,348

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

stock options are exercisable at a price of $ 11.69 per share and expire in ten years .

The total fair value of these options at grant

date was approximately $ 122 , which was determined using a Black-Scholes-Merton option pricing model with the following average assumption:

stock price of $ 11.69 share, expected term of six years , volatility of 82 %, dividend rate of 0 %, and weighted average risk-free interest

rate of 2.89 %.

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

giving consideration to vesting schedules and historical participant exercise behavior;

the expected volatility is based upon historical

volatility of the Company’s common stock;

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

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

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

Treasury yield curve

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

the year ended December 31, 2021, the Company received proceeds of $ 32 and issued 1,260 shares of common shares on the exercise of stock

1 unchanged sentence

Equity Incentive Plan.

3,386,882 options were issued to employees, 1,693,441 options vesting annually over a four -year vesting period,

and 1,693,441 options that will vest based on performance criteria to be established by the board of directors

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

67,760 options were issued to employees, 33,880 options vesting annually over a four -year vesting period, and

33,880 options that will vest based on performance criteria to be established by the board of directors.

stock options are exercisable at prices ranging from $ 49.00 to $ 59.00 per share and expire in ten year s.

The total fair value of these

11 unchanged sentences

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

the year ended December 31, 2020, the Company approved options exercisable into 4,625,952 shares to be issued pursuant to Reed’s

2020 Equity Incentive Plan, and 2,267,800 shares to be issued pursuant to Reed’s 2017 Incentive Compensation Plan.

6,558,752 options

were issued to employees including 3,279,376 options that vest annually over a four-year vesting period, and 3,279,376 options that will

vest based on performance criteria to be established by the board.

In addition, 335,000 options granted to consultants, board members,

and former employees vest over various periods.

stock options are exercisable at a weighted average price $ 0.87 per share and expire in ten years.

The total fair value of these options

at grant date was approximately $ 3,561 , which was determined using a Black-Scholes-Merton option pricing model with the following average

average stock price of $ 0.87 per share, weight average expected term of 5.91 years, weighted average volatility ranging from

76 %, dividend rate of 0 %, and weighted average risk-free interest rate of 0.48 %.

The fair value of the options of $ 3,561 will be amortized

as the options vest over a weighted average period of 2.67 years.

the measurement of stock options granted in 2022 and 2021, the expected term represents the weighted-average period of time that share

7 unchanged sentences

the share option award.

the year ended December 31, 2021 and 2020, the Company recognized $ 1,684 and $ 1,176 of compensation expense relating to vested stock

As of December 31, 2021, the aggregate amount of unvested compensation related to stock options was approximately $ 2,833 which

will be recorded as an expense in future periods as the options vest.

the year ended December 31, 2022, and 2021, the Company recognized $ 701 and $ 1,684 of compensation expense relating to vested stock options.

As of December 31, 2022, the aggregate amount of unvested compensation related to stock options was approximately $ 1,233 which will be

recorded as an expense in future periods as the options vest.

of December 31, 2022, the outstanding options have no intrinsic value.

10 unchanged sentences

$ 88.00 - $ 120.00

$ 122.00 - $ 183.00

Stock Warrants

8 unchanged sentences

Forfeited or expired

( 4,051,541 )

Outstanding at December 31, 2021

2 unchanged sentences

Exercisable at December 31, 2022

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 of $ 0.46 .

The fair value of the warrants granted was determined to be $ 458

and was recorded as a prepaid financing

During the year ended December 31, 2021, the Company amortized $ 148 of prepaid financing costs to interest expense, leaving a

balance remaining of $ 310 to be amortized through July 2022.

The fair value of the warrant was calculated using the Black-Scholes option pricing model using the following assumptions – stock

price of $ 0.46 ;

exercise price of $ 0.44 ;

expected life of 5

volatility of 84.7 %;

dividend rate of 0 %

and discount rate of 0.77 %.

As of December 31, 2021, the outstanding warrants have no intrinsic value.

The risk-free interest rate is based on rates established

by the Federal Reserve Bank.

The Company uses the historical volatility of its common stock to estimate its future volatility.

life of the warrant is based upon its remaining contractual life.

The expected dividend yield reflects that the Company has not paid

dividends to its common stockholders in the past and does not expect to do so in the foreseeable future.

December 11, 2020, the Company issued to Raptor a 5 -year warrant to purchase 1,000,000 shares of the Company common stock with an exercise

price of $ 0.64 .

The fair value of the warrants granted was determined to be $ 402 .

The fair value of the warrant was calculated using

the Black-Scholes option pricing model using the following assumptions – stock price of $ 0.64 ;

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 371,892 shares of the Company’s common stock and warrants to purchase 185,946 shares

of common stock in a private placement.

The warrants have an exercise price of $ 14.39 per share for a period of five years commencing

nine months from the closing date of March 11, 2022 (see Note 9).

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 30,000 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.

year ended December 31, 2021, the Company amortized $148 of prepaid financing costs to interest expense, leaving a balance remaining

of $ 310 to be amortized through July 2022.

The fair value of the warrant was calculated using the Black-Scholes option pricing model

using the following assumptions – stock price of $ 23.00 ;

exercise price of $ 22.00 ;

life of 5 years;

expected life of 5 years;

volatility of 84.7 %;

dividend rate of 0 % and discount rate of 0.77 %.

During the year ended December 31, 2020, warrants

to acquire 4,051,541 shares of common stock expired.

As of December 31, 2020, the outstanding warrants had no intrinsic value.

As of December 31, 2021, the outstanding warrants have no intrinsic value.

The risk-free

interest rate is based on rates established by the Federal Reserve Bank.

The Company uses the historical volatility of its common stock

to estimate its future volatility.

The expected life of the warrant is based upon its remaining contractual life.

The expected dividend

yield reflects that the Company has not paid dividends to its common stockholders in the past and does not expect to do so in the foreseeable

information regarding warrants outstanding and exercisable as of December 31, 2022, is as follows:

4 unchanged sentences

$ 14.39 - $ 32.20

$ 1.00 - $ 1.99

the years ended December 31, 2022, and 2021, a reconciliation of the effective income tax rate to the U.S.

11 unchanged sentences

of Deferred Income Tax Assets

December 31, 2022

December 31, 2021

Deferred income tax asset:

4 unchanged sentences

Inventory reserves

Operating lease liability

Operating Least Liability

Reserve for asset impairment

7 unchanged sentences

Net deferred tax asset (liability)

December 31, 2021 and 2020, the Company had available

Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income.

For Federal purposes the amounts

available were approximately $ 63,000

and $ 66,000 ,

respectively.

For state purposes approximately $ 36,000

was available at December 31, 2021 and 2020,

respectively.

The Federal carryforward for NOLs arising in years prior to 2019 is approximately $ 44,000 ,

which expires on various dates through 2038 .

December 31, 2022, and 2021, the Company had available Federal and state net operating loss carryforwards (“NOLs”) to reduce

future taxable income.

For Federal purposes the amounts available were approximately $ 91,000 $ 80,000 , respectively.

For state purposes

approximately $ 64,000 and $ 51,000 was available at December 31, 2022, and 2021, respectively.

The Federal carryforward for NOLs arising

in years prior to 2018 is approximately $ 33,000 , which expires on various dates through 2037 .

NOLs for 2019, 2020, 2021 and 2022 of approximately

can be carried forward indefinitely, but are only

able to offset 80% of taxable

income in future years .

$ 58,000 , can be carried forward indefinitely, but are only able to offset 80% of taxable income in future years .

The state carryforward

5 unchanged sentences

to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards,

the utilization of the Company’s NOL may be limited as a result of changes in stock ownership.

the utilization of the Company’s NOLs may be limited as a result of changes in stock ownership.

NOLs incurred subsequent to the

7 unchanged sentences

Company recognizes as income tax expense, interest and penalties on uncertain tax provisions.

As of December 31, 2021 and 2020, the Company

has not accrued interest or penalties related to uncertain tax positions.

Tax years 2017 through 2021 remain open to examination by the

major taxing jurisdictions to which the Company is subject.

As of December 31, 2022, and 2021, the

Company has not accrued interest or penalties related to uncertain tax positions.

Tax years 2018 through 2022 remain open to examination

by the major taxing jurisdictions to which the Company is subject.

the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the

use of the NOLs and will recognize the appropriate deferred tax asset at that time.

Related Party

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.

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

manufacturing plant.

Our release from the obligation by the lessor, however, is dependent upon CCB’s deposit of $ 1,200 of security

with the lessor.

The deposit is secured by Mr.

Reed’s pledge of common stock to the lessor and guaranteed personally by Mr.

and his wife.

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

Reed has placed approximately 363,000 pledged

shares valued at $ 131 that remain in escrow with the lessor.

in 2019, we are to receive a 5 %

royalty on CCB’s private label sales to existing customers for three years and a 5 %

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

During the year ended December 31, 2021 and 2020,

the Company recorded royalty revenue from CCB of $ 72 and $ 98 ,

respectively.

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

During the year ended December 31, 2021, the Company

recorded royalty revenue receivable of $ 72 , and advanced expenses of $ 179 , leaving an aggregate receivable balance of $ 933 at December

December 31, 2021, and December 31, 2020, the Company had accounts payable due to CCB of $ 614 and $ 557 , 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

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, 2020, the Company entered into an amendment to the financing agreement, releasing that irrevocable standby letter of credit

by Raptor with a $ 2,000

pledge of securities to Rosenthal by John J.

Bello and Nancy E.

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

Bello, current Chairman, significant

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

As consideration for the collateral support,

Bello received 400,000

shares of Reed’s restricted stock.

November 24, 2021, the Bello trust provided additional collateral support securing a $ 2,500,000 over-advance under the Financing Agreement,

Bello also provided a personal guarantee.

The additional collateral was released on March 17, 2022 along with the personal

The initial pledged collateral was released March 30, 2022 with the pay-off of the Rosenthal facility.

Martin, daughter of a director of the Company, was employed as Vice President of Marketing during the years ended December 31, 2021 and

Martin was paid approximately $ 181 and $ 215 , respectively, for her services during the years ended December 31, 2021 and 2020,

respectively.

and Contingencies

Transactions with California Custom Beverage, LLC, former related party

In December 2018, the Company signed

a co-packing agreement with California Custom Beverage, LLC’s (“CCB”), an entity owned by Christopher J.

former related party, pursuant to which CCB agreed to produce certain products for the Company for agreed fees.

The co-packing

agreement, as amended, includes certain provisions, among others, for product inputs, shrinkage, and quality assurance.

beginning in 2019, CCB agreed to pay the Company a 5 %

royalty through 2021 on certain private label sales made by CCB.

During the years ended December 31, 2022 and 2021,

the Company incurred co-packing fees due to CCB of $ 3,718 and $ 2,747 , respectively, of which $ 2,025 and $ 614 , were payable to CCB as

of December 31, 2022 and 2021.

At December 31, 2022 and 2021, the Company had also recorded receivables from CCB of $ 1,315 and $ 933 , respectively,

including royalty receivable of $ 297 and $ 297 , and charge backs of certain costs management determined were permittable under the co-packing

agreement of $ 1,018 and $ 636 , respectively.

At December 31, 2022 and 2021, accounts receivable due from and accounts

payable due to CCB were as follows:

of Related Parties

December 31, 2022

December 31, 2021

Accounts receivable, net of provision of $ 538 and zero at December 31, 2022 and 2021, respectively

Accounts payable

Net (payable) receivable

December 31, 2022, CCB disputes that it owes $ 1,043

of the $ 1,315 recorded as receivable by the Company.

The Company believes that it will prevail in this dispute, however, as of

December 31, 2022, due to the uncertainty about the ultimate amount that will be settled, the Company has provided a reserve for

based on management’s estimate.

In addition, on April 19, 2023, the Company received a letter from CCB demanding payment of

various amounts, including the $ 2,025

outstanding at December 31, 2022.

The Company has determined that the probability of realizing any loss on the demand from CCB is

remote and therefore has not recorded any additional accruals related to the demand.

Commitments and Contingencies

In 2018, CCB assumed the monthly payments on our lease obligation for a

Los Angeles manufacturing plant, and our release from the obligation by the lessor, however, is dependent upon CCB’s deposit of

$1,200 of security with the lessor.

As of December 31, 2022, $800 has been deposited with the lessor and Chris J.

Reed has placed approximately

7,260 shares of the Company’s common stock valued at $25 that remain in escrow with the lessor.

time to time, we are a party to claims and legal proceedings arising in the ordinary course of business.

6 unchanged sentences

impact on our financial position, liquidity, or results of operations.

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.

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.

proceeds to the Company, after deducting placement agent fees and other offering expenses, was approximately $ 5.1 million.

officers and directors of the Company purchased approximately $ 1.1

million of the securities in the offering.

March 21, 2022, the Board of Directors of the Company, upon recommendation from its governance committee, expanded the board from six

to seven members and appointed Mr.

Zaltzman to serve as director.

Zaltzman is the founder

and managing member of Union Square Park Capital Management, LLC (“USPCM”), and is also the managing member of Union Square Park GP (“USPGP”).

USPCM and USPGP serve as the investment manager and general

partner to Union Square Park Partners, LP (“USPP Fund”), respectively.

Foregoing entities hereinafter collectively referred

to as the “Union Square Entities”.

Fund participated in the Company’s recent private placement of common stock and it acquired 10,714,286 shares

of common stock and warrants to purchase 5,357,143 shares

of common stock for $ 3,000 .

Prior to the private placement, Mr.

Zaltzman and the Union Square Entities beneficially owned approximately 7.79 % of

Reed’s common stock.

After the private placement, Mr.

Zaltzman and the Union Square Entities beneficially owned approximately 14.6 % of

Reed’s common stock.

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 and provides for borrowings of up to $ 13,000 .

Borrowings are based upon eligible accounts receivable and inventory.

The line of credit is secured by eligible accounts receivable

and inventory of the Company.

Inventory collateral is set to a maximum of 100 % of

eligible accounts receivable.

An overadvance rider is in place which provides for up to $ 400 of

additional borrowing beyond those amounts (the “Over Advance”).

under the ACS financing agreement bear interest of prime plus 4.75% but not less than 8.0% on receivables.

Borrowings based on inventory

bear an interest of prime plus 5.25% but not less than 8.5%.

The additional overadvance 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 fee of $ 1 .

The 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.

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

balance on its credit facility with Rosenthal & Rosenthal, Inc.

Subsequent Events

February 10, 2023, the Company entered into a Partial Option Exercise and Second Amendment to 10% Convertible Notes (the

“Notes”, see Note 7) with Whitebox.

The Notes were amended so if the Company experiences a fundamental change as

defined, the holders of the notes have the right to require the Company to repurchase the notes for cash at a repurchase price equal

(amended from 100 %)

of the principal amount, plus accrued interest.

In addition, Whitebox exercised a partial option to purchase $ 2,550

of additional notes (the “Option Notes”) from the Company.

The Option Notes bear interest at 10 %

payable in cash and mature on June

No amortization payments (as defined in the Notes) are payable on the Option Notes, and the Option Notes may be

prepaid without premium or penalty.

February 13, 2023, the Company entered into a Limited Waiver and Deferral Agreement with Whitebox.

Whitebox waived the Company’s

covenant violation of its Excess ABL Amount (see Note 7) at November 30, 2022, December 31, 2022, and January 31, 2023, and deferred

payment of the 10 % fee for the Excess ABL Amount until June 2023.

In addition, Whitebox also temporarily waived any requirement that

the Company repurchase of the Notes in the event of fundamental change (as defined in the Notes), through April 1, 2023, subject to the

terms and conditions contained therein.

an inducement, the company issued an aggregate of 82,438 shares of common stock to the holders with a fair value of $ 273 .

issued and the shares of common stock issuable upon conversion of the Option Notes are registrable and subject to that certain Registration

Rights Agreement dated May 9, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data