REED'S, INC. 10-Q

Item 1A. Risk Factors Except as set forth below, there have been no material changes with respect to the risk factors disclosed in our 2023 Form 10-K. Risks Related to Our Debt Service Obligations Our ability to service our indebtedness will depend on our ability to generate cash in the future. At March 31, 2024, our outstanding obligation on our 10% Secured Convertible Notes (“Notes”) was approximately $18.7 million and the balance on our ABL line of credit was approximately $8 million. Our Note holders have been amenable to making accommodations under the Notes by waiving conditions and financial covenants in exchange for certain negotiated penalties in lieu of declaring default. Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest and penalties on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations and maintain compliance with our financial and other covenants or, in the alternative, continue to negotiate suitable accommodations and fund our other liquidity needs, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies. We could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate. Holders of our Notes have been amenable to making accommodations under the Notes by waiving conditions and financial covenants in exchange for certain negotiated penalties in lieu of declaring default. If do not meet our obligations under the Notes and are unable to negotiate accommodations in the future, the Note holders may declare a default, which would likely force us into bankruptcy. At March 31, 2024, our outstanding obligation under the Notes was approximately $18.7 million. The Notes are secured by substantially all of the Company’s assets. The indebtedness under the Notes limits our growth, and management of the debt requires a significant amount of time and effort of our executive officers. While we have been successful negotiating waivers and amendments under the Notes, we may not be able to continue to do so in the future. We have further been exploring our options to refinance these Notes. If we are unable to service or repay these obligations at maturity and we are otherwise unable to extend the maturity dates or refinance these obligations, we may default. A default would trigger acceleration under the Notes, and it is unlikely that we would have sufficient funds to make these payments. Upon a default, the holders have the right to exercise their remedies to collect, including foreclosing on our assets. Accordingly, we would likely be forced to seek bankruptcy protection in the event of default. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None that have not been previously disclosed in a Current Report on Form 8-K. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable.