What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-25 compared with 2025-03-28 · 343 added, 236 removed, 68 unchanged (89% of the section changed)

2 unchanged sentences

statements and the related notes appearing elsewhere in this report.

addition to our GAAP results, the following discussion includes Modified EBITDA as a supplemental measure of our performance.

Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent

basis by excluding items that we do not believe are indicative of our core operating performance.

In addition, we use Modified EBITDA

in developing our internal budgets, forecasts, and strategic plan;

in analyzing the effectiveness of our business strategies in evaluating

potential acquisitions;

addition to our United States generally accepted accounting principles (“U.S.

GAAP”) results, the following discussion

includes EBITDA as a supplemental measure of our performance.

We present EBITDA because we believe it assists investors and analysts

in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative

of our core operating performance.

In addition, we use EBITDA in developing our internal budgets, forecasts, and strategic plan;

analyzing the effectiveness of our business strategies in evaluating potential acquisitions;

making compensation decisions;

and in communications with our board of directors concerning our financial performance.

Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from

operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities

as a measure of liquidity.

We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation

and amortization, stock-based compensation, changes in fair value of warrant expense, change in fair value of SAFE agreements, legal

and insurance settlements, non-recurring professional fees, inventory write-offs associated with exited categories and major packaging

and formula changes, one-time changes in policy, impact of changes to accounting methodology and one-time restructuring-related costs

including employee severance and asset impairment.

communications with our board of directors concerning our financial performance.

EBITDA is not a recognized measurement under U.S

GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived

in accordance with U.S.

GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity.

EBITDA as net income (loss), plus interest expense, tax expense, and depreciation and amortization.

following discussion also includes the use of gross billing, a key performance indicator and metric.

9 unchanged sentences

of Operations

the year ended December 31, 2024, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives,

drive efficiencies in transportation and warehouse costs and reduce operating expenses.

In addition, it continues to build its innovation

pipeline with sustained growth in Reed’s Real Ginger Ale, Virgil’s Zero Sugar handcrafted sodas, Reed’s Classic and

Stormy Mule, and Reed’s Hard Ginger Ale.

Company remains focused on driving sales growth, improving gross margin, and reducing freight costs.

The sales growth focus is on channel

expansion, increase in store placements, new product introduction and improved sales execution.

The margin enhancement initiative is

driven by packaging savings, co-packer upgrades, and better leveraged purchasing and improved efficiency.

Underpinning these initiatives

is a focus on strategically reducing operating costs particularly delivery and handling expenses.

In addition, the Company continues

to augment its co-packer network to drive further efficiencies and build proper levels of inventory at the appropriate location to maximize

delivery metrics.

the year ended December 31, 2025, the Company continued its focus on profitable sales growth, improving gross margin, reducing

freight costs, and optimizing selling, general & administrative expenses.

The sales growth initiatives include channel

expansion, in-store product placements, new product innovation and improved sales execution.

The gross margin enhancement

initiatives include product portfolio optimization, equitable supplier negotiations, streamlining co-packer processes, and efficient

inventory management.

Underpinning these initiatives is a focus on optimizing delivery and handling and selling, general &

administrative expenses.

the year ended December 31, 2025, the Company began an expansion into new geographic markets in the Asia Pacific region.

formed a wholly owned subsidiary Reed’s (Asia) Limited (BVI).

Reed’s (Asia) Limited subsequently formed five additional wholly

owned subsidiaries, Reed’s (Hong Kong) Limited, Reed’s (Japan) Limited, Jiangzhi Beverage (Hainan) Co.

Limited, Reed’s

Beverages (Singapore) PTE Limited, and Shenshen Jiangzi Beverage Co.

These subsidiaries are an early part of the Company’s

strategic expansion in the Asia Pacific region.

The Company expects continued investment in its Asia Pacific growth initiative.

(Asia) Limited did not generate sales in the year ended December 31, 2025.

Trends – Market Conditions

economy continued to grow throughout 2024 and 2023, inflation, actions by the Federal Reserve to address inflation,

fluctuations in energy prices, and the potential impacts of tariffs and geopolitical events 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.

Although 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.

the year ended December 31, 2024, the average cost of shipping and handling was $2.75 per case, as compared to $3.07 per case for the

economy continued to grow in 2025, inflation, actions by the Federal Reserve to address inflation, fluctuations in

energy prices, and the potential impacts of tariffs, trade tensions and geopolitical events 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

Although we regularly monitor vendors 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.

the year ended December 31, 2025, the average cost of delivery and handling was $2.75 per case, consistent with the

year ended December 31, 2024.

Although the Company has experienced decreases in freight costs, in the Company’s

opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation.

plans have been implemented to manage this risk.

The Company has been negatively impacted by supply chain challenges affecting our ability

to benefit from strong demand for, and increased sales of our product.

The disruption caused by labor shortages, significant raw material

cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins.

has experienced moderation in inflation and anticipates this continuing throughout 2025.

December 31, 2024, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain access to

the capital markets.

of Operations – Year Ended December 31, 2024

following table sets forth key statistics for the years ended December 31, 2024, and 2023, in thousands:

Ended December 31,

The Company has experienced increases in freight costs and there remains a volatile pricing environment, including due to the armed conflict in Iran.

The Company will continue to monitor pricing and availability in transportation and has implemented plans designed to manage this risk.

In the past, the Company has been negatively impacted by supply chain challenges affecting our ability to benefit from strong demand

for, and increased sales of our product.

Any disruption caused by labor shortages, significant raw material cost inflation, logistics

issues, increased freight costs, or port congestion, may adversely impact margins in the future.

December 31, 2025, we continued to finance our operations through existing cash balances, cash generated from

operations, public and private issuance of common stock, and credit lines from financial institutions.

As we seek additional financing,

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

Our ability to obtain additional financing

in the debt and equity capital markets is subject to several factors, including market and economic conditions, our operating performance

and investor sentiment with respect to us and our industry.

Public Offering

December 4, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with A.G.P./Alliance Global Partners,

as representative of the underwriters (the “Underwriters”), pursuant to which we agreed to sell and issue to the Underwriters,

in a public offering (the “Offering”), an aggregate of (i) 2,500,000 shares of common stock and (ii) warrants to purchase

up to 2,500,000 shares of common stock.

The Offering closed on December 8, 2025.

Each share of common stock and accompanying warrant

to purchase one share of common stock were sold together at a combined public offering price of $4.00 less underwriting discounts and

Additionally, the Company granted the Underwriters a 45-day option (the “Overallotment Option”) to purchase

up to an additional 375,000 shares of common stock and/or warrants at the public offering price, less underwriting discounts and commissions.

December 5, 2025, the Underwriters notified us of their determination to partially exercise the Overallotment Option for warrants to

purchase an aggregate of 375,000 shares of common stock.

On December 12, 2025, the Underwriters notified us of their determination

to exercise the remaining Overallotment Option to purchase an aggregate of 375,000 shares of common stock.

All of the securities in

the Offering, including the Overallotment Option, were sold by the Company.

net proceeds to the Company from the Offering, including the partial exercise of the Overallotment Option, were approximately $10.2 million,

after deducting underwriting discounts and commissions and certain offering expenses.

The Company currently intends to use the net proceeds

from the Offering, together with its existing cash and cash equivalents, to fund growth initiatives, working capital and other general

corporate purposes, which may include repayment of debt.

warrant issued in the Offering has an exercise price per share of common stock equal to $4.50, subject to certain adjustments.

are immediately exercisable upon issuance and will expire on December 8, 2030 (the “Expiration Date”), provided that the

holder will be prohibited, subject to certain exceptions, from exercising the warrant for shares of the Company’s common stock

to the extent that immediately after giving effect to such exercise, the holder, together with its affiliates and other attribution parties,

would own more than 4.99% or 9.99% (as elected by the holder) of the total number of shares of the Company’s common stock then

issued and outstanding, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess

of 9.99% upon 61 days’ prior notice from the holder to the Company subject to the terms of the warrants.

If, and only if, there

is no effective registration statement at the time of exercise, the warrants may be exercised cashlessly.

October 31, 2025, the Company effected a 1-for-6 reverse stock split (the “Reverse Stock Split”) of the Company’s issued

and outstanding shares of common stock.

The Reverse Stock Split reduced the number of shares of the Company’s issued and outstanding

common stock, as well as the number of shares subject to then-outstanding warrants and the exercise price thereof and the number of shares

available for future issuance under the Company’s equity plans, the number of shares subject to such awards and purchase rights

and the exercise and purchase price of, and other terms and conditions relating to, such awards and purchase rights.

The conversion terms

of the Preferred Stock have also been adjusted automatically such that each share of Series A Convertible Preferred Stock will be convertible

into the number of shares of common stock that would have been issuable if all of the outstanding shares of Preferred Stock were converted

into common stock immediately prior to the Reverse Stock Split.

No fractional shares were distributed as a result of the Reverse Stock

Split, and stockholders were entitled to a cash payment in lieu of fractional shares.

The Reverse Stock Split did not affect the par

value or total number of authorized shares of common stock.

The share and per share amounts included in this Annual Report on Form 10-K

have been adjusted to account for the Reverse Stock Split.

Senior Secured Loan

September 26, 2025, the Company entered into the Amended Loan Agreement governing the Senior Secured Loan with certain funds affiliated

with Whitebox Advisors LLC, as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent.

The Amended Loan

Agreement (i) reduced the aggregate principal amount of the revolving credit commitment to $9,250 from $10,000, (ii) changed interest

payments on the revolving loan to be due monthly in arrears from quarterly in arrears, (iii) and extended the maturity date to September

September 12, 2025, we entered into a securities purchase agreement with six accredited investors for the issuance and sale in a private

placement of 833,330 shares of our common stock, at a purchase price of $6.00 per share, for aggregate gross proceeds of $5,000 (the

“September 2025 Private Placement”).

The September 2025 Private Placement closed on September 15, 2025 (the “September

2025 PIPE Closing Date”).

connection with the September 2025 Private Placement, we entered into a registration rights agreement, dated as of September 12, 2025,

with the investors, pursuant to which we agreed to prepare and file a registration statement with the SEC registering the resale of the

shares issued in September 2025 Private Placement.

The registration statement was filed with the SEC on September 19, 2025, and declared

effective on September 29, 2025.

of Operations – Years Ended December 31, 2025 and December 31, 2024

following table sets forth key statistics for the years ended December 31, 2025, and 2024:

Gross billing (A)

Promotional and

other allowances (B)

Promotional and other allowances (B)

Cost of goods sold

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% of Net sales

Product quality hold

% of Gross billing

% of Net sales

Provision for product hold

% of Gross billing

% of Net sales

Delivery and handling

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% of Net sales

Provision for receivable

with former related party

Provision for receivable with former related party

% of Net sales

Total Operating expenses

Loss from operations

Interest expense and other

per share – basic and diluted

Interest expense and other expense

Loss per share – basic and

Weighted average shares outstanding – basic & diluted

We define gross billing as the total sales for the Company unadjusted for costs related to generating those sales.

Management utilizes

gross billing as an indicator of and to monitor operating performance of products and salespersons before the effect of any promotional

or other allowances, which are determined in accordance with GAAP, and can mask certain performance issues.

We believe that the presentation

of gross billing provides a useful measure of our operating performance.

Additionally, gross billing may not be comparable to similarly

titled measures used by other companies, as gross billing has been defined by our internal reporting practices .

We define promotional and other allowances as costs deducted from gross billing which are associated with generating those sales.

utilizes promotional and other allowances as an indicator of and to monitor operating performance of products, salespersons, and customer

We believe that the presentation of promotional and other allowances provides a useful measure of our operating performance.

The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and

the spending levels incurred or correlated with such sales.

The expenditures described in this line item are determined in accordance

with GAAP and meet GAAP requirements, the disclosure thereof does not conform to GAAP presentation requirements.

Additionally, our definition

of promotional and other allowances may not be comparable to similar items presented by other companies.

Promotional and other allowances

primarily include consideration given to the Company’s distributors or retail customers including, but not limited to the following:

(i) reimbursements given to the Company’s distributors for agreed portions of their promotional spend with retailers, including

slotting, shelf space allowances and other fees for both new and existing products;

(ii) the Company’s agreed share of fees given

to distributors and/or directly to retailers for in-store marketing and promotional activities;

(iii) the Company’s agreed share

of slotting, shelf space allowances and other fees given directly to retailers;

(iv) incentives given to the Company’s distributors

and/or retailers for achieving or exceeding certain predetermined sales goals;

utilizes gross billing as an indicator of and to monitor operating performance of products and salespersons before the effect of any

promotional or other allowances, which are determined in accordance with U.S.

GAAP, and can mask certain performance issues.

believe that the presentation of gross billing provides a useful measure of our operating performance.

Additionally, gross billing

may not be comparable to similarly titled measures used by other companies, as gross billing has been defined by our internal

reporting practices .

We define promotional and other allowances as costs deducted from gross billing that are associated with generating those sales.

Management utilizes promotional and other allowances as an indicator of and to monitor operating performance of products,

salespersons, and customer agreements.

We believe that the presentation of promotional and other allowances provides a useful

measure of our operating performance.

The presentation of promotional and other allowances facilitates an evaluation of their impact

on the determination of net sales and the spending levels incurred or correlated with such sales.

The expenditures described in this

line item are determined in accordance with U.S.

GAAP and meet U.S.

GAAP requirements, however the disclosure thereof does not

conform to U.S.

GAAP presentation requirements.

Additionally, our definition of promotional and other allowances may not be

comparable to similar items presented by other companies.

Promotional and other allowances primarily include consideration given to

the Company’s distributors or retail customers including, but not limited to the following:

(i) reimbursements given to the

Company’s distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space

allowances and other fees for both new and existing products;

(ii) the Company’s agreed share of fees given to distributors

and/or directly to retailers for in-store marketing and promotional activities;

(iii) the Company’s agreed share of slotting,

shelf space allowances and other fees given directly to retailers;

(iv) incentives given to the Company’s distributors and/or

retailers for achieving or exceeding certain predetermined sales goals;

and (v) discounted or free products.

1 unchanged sentence

allowances constitute a material portion of our marketing activities.

The Company’s promotional allowance programs with its numerous

distributors and/or retailers are executed through separate agreements in the ordinary course of business.

These agreements generally

provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year.

The Company’s promotional allowance programs with its

numerous distributors and/or retailers are executed through separate agreements in the ordinary course of business.

These agreements

generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one

Cost of Sales, and Gross Margins

following chart sets forth key statistics for the transition of the Company’s top line activity through the years ended December

following table sets forth key statistics for the Company’s sales, cost of sales, and gros margins for the years ended

December 31, 2025, and 2024:

Gross Billing:

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Cost of Sales, and Gross Margins

part of the Company’s ongoing initiative to simplify and streamline operations the Company has identified core products on which

to place its strategic focus.

These core products consist of Reed’s and Virgil’s branded beverages.

Non-core products consist

primarily of Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs.

beverage volume for the year ended December 31, 2024, represents 100% of all beverage volume.

brand gross billing decreased by 9% to $44,161 compared to $48,778 during the same period last year, driven by Reed’s volume decline

of 10% and Virgil’s volume decline of 13%.

The result is a decrease in total gross billing of 13%, to $44,316 during the year ended

December 31, 2024, from $50,689 in the same period last year.

Price on our core brands increased 2% to $20.70 per case.

The lower gross

billings was a result of volume declines that have impacted the carbonated soft drink segment as a result of price increases coupled

with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms

from suppliers.

as a percentage of gross sales were 14% compared to 12% in the same period last year.

As a result, net sales revenue decreased 15% during

the year ended December 31, 2024, to $37,954, compared to $44,711 in the same period last year driven by lower sales and elevated trade

Gross billing decreased by 8% to $40,847 during the year ended December 31, 2025, compared to $44,316 during the prior

year, driven by Reed’s volume decline of 3%, and Virgil’s volume decline of 18%.

Price on our brands increased 1% to

$20.94 per case.

as a percentage of gross sales were 17% during the year ended December 31, 2025, compared to 14% in the prior year.

decreased 10% during the year ended December 31, 2025, to $34,065, compared to $37,954 in the prior year driven by lower volumes

with recurring national customers and higher promotional and other allowances.

of Goods Sold

of goods sold decreased $5,306 during the year ended December 31, 2024, as compared to the same period last year.

As a percentage of

net sales, cost of goods sold for the year ended December 31, 2024, was 70% as compared to 71% for the same period last year.

was primarily driven by lower supply chain and input costs.

December 2023, the Company wrote off $1,848 of inventory comprised of $1,452 of packaging and ingredients related to major changes in

packaging and formulations, and $396 of candy as a result of exiting this line of business.

These write-offs represented 4% of net sales.

2023 the Company discovered a closure failure in our seasonal swing-lid products which resulted in a product quality hold

The Company recorded expense of $1,267 related to costs associated with the product quality hold write-down for the year ended December 31, 2023.

insurance claim is pending.

total cost of goods per case decreased to $12.46 per case for the year ended December 31, 2024, from $14.22 per case for the same period

The cost of goods sold per case on core brands was $12.46 during the year ended December 31, 2024, compared to $12.82 for

the same period last year.

Excluding the write-offs and provision for product quality hold write-down, total cost of goods sold per case

during the year ended December 31, 2023, would have been $12.96.

margin increased to 30% for the year ended December 31, 2024, compared to 22% for the same period last year.

of goods sold increased $525 during the year ended December 31, 2025, as compared to the prior year.

As a percentage of net

sales, cost of goods sold for the year ended December 31, 2025, was 80% as compared to 70% for the prior year.

in cost of goods sold was primarily driven by inventory write-offs related to changes in product portfolio optimization made by new management,

in an amount of $2,013.

total cost of goods per case increased to $13.89 per case in the year ended December 31, 2025, from $12.46 per case for the prior year.

margin was 20% for the year ended December 31, 2025, compared to 30% for the prior year.

and Handling Expenses

and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production.

Delivery and handling expenses decreased by $1,698 for the year ended December 31, 2024, to $5,863 from $7,561 in the same period last

year, driven by our efforts to mitigate inflationary costs.

Delivery costs for the year ended December 31, 2024, were 15% of net sales

and $2.75 per case, compared to 17% of net sales and $3.07 per case during the same period last year.

Delivery and handling expenses decreased by $489 in the year ended December 31, 2025, to $5,374 from $5,863 in the prior year,

primarily driven by lower transportation costs.

Delivery costs in the year ended December 31, 2025, were 16% of net sales and $2.75 per

case, compared to 15% of net sales and $2.75 per case during the prior year.

and Marketing Expenses

3 unchanged sentences

Total selling and marketing expenses were $5,271 during the

year ended December 31, 2024, compared to $4,865 during the same period last year.

As a percentage of net sales, selling and

marketing expenses were 12% of net sales during the year ended December 31, 2024, as compared to 11% of net sales during the same

period last year.

The decrease was driven by lower employee related costs, syndicated data fees, customer fees, and product sampling

expenses partially offset by higher broker fees and e-commerce delivery costs.

year ended December 31, 2025, compared to $4,405 during the prior year.

The increase was primarily driven by higher employee related

costs and marketing expenditures.

As a percentage of net sales, selling and marketing expenses were 15% of net sales during the year

ended December 31, 2025, as compared to 12% of net sales during the prior year.

and Administrative Expenses

and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional

General and administrative expenses increased in the year ended December 31, 2024, to $9,109 from $6,118, an increase of $2,991

over the same period last year.

The increase was driven by contract proceedings, impairment

of assets, professional fees, and quality assurance costs partially offset by lower bad debt and franchise tax expense.

and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as

professional fees.

General and administrative expenses were $11,296 during the year ended December 31, 2025, an increase of $2,187

over the prior year.

As a percentage of net sales, general and administrative expenses were 33% during the year ended

December 31, 2025, as compared to 24% during the prior year.

The increase was driven by contract proceedings costs and

the Company’s investments in personnel and related services to support growth initiatives.

from Operations

loss from operations was $8,116 for the year ended December 31, 2024, as compared to a loss of $9,417 in the same period last year driven

by increased gross profit and decreased operating expenses discussed above.

loss from operations was $15,148 for the year ended December 31, 2025, as compared to a loss of $8,116 in the prior year driven

by lower gross profit and higher operating expenses discussed above.

and Other Expense

and other expense was $5,036 for the year ended December 31, 2024, consisted of $5,481 of interest expense and $445 of other income

related to the reversal of accrued expense from prior years.

During the same period last year, interest and other expense consisted

of $6,106 of interest expense.

In addition to our GAAP results, we present Modified

EBITDA as a supplemental measure of our performance.

However, Modified EBITDA is not a recognized measurement under GAAP and should not

be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP,

or as an alternative to cash flow from operating activities as a measure of liquidity.

We define Modified EBITDA as net income (loss),

plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense,

change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional fees, inventory write-offs associated

with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology

and one-time restructuring-related costs including employee severance and asset impairment.

considers our core operating performance to be that which our managers can affect in any particular period through their management of

the resources that affect our underlying revenue and profit generating operations during that period.

Non-GAAP adjustments to our results

prepared in accordance with GAAP are itemized below.

You are encouraged to evaluate these adjustments and the reasons we consider them

appropriate for supplemental analysis.

In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that

are the same as or similar to some of the adjustments in this presentation.

Our presentation of Modified EBITDA should not be construed

as an inference that our future results will be unaffected by unusual or non-recurring items.

forth below is a reconciliation of net loss to Modified EBITDA for the year ended December 31, 2024, and 2023 (in thousands):

Ended December 31,

Modified EBITDA adjustments:

Depreciation and amortization

Interest expense

Stock option and other noncash compensation

Provision for receivable with former related

Product quality hold write-down

Inventory write-offs associated with exited

categories and major packaging and formula changes

Impairment of assets

One-time change in policy for discounts

Professional fees

Contract Proceedings

Severance costs

and other expense for the year ended December 31, 2025, consisted of $1,108 of interest expense offset by $414 of other income.

the prior year, interest and other expense consisted of $5,481 of interest expense offset by $445 of other income.

addition to our U.S.

GAAP results, we present EBITDA as a supplemental measure of our performance.

However, EBITDA is not a

recognized measurement under U.S.

GAAP and should not be considered as an alternative to net income, income from operations or any

other performance measure derived in accordance with U.S.

GAAP, or as an alternative to cash flow from operating activities as a

measure of liquidity.

We define EBITDA as net income (loss), plus interest expense, tax expense, and depreciation and

amortization.

considers our core operating performance to be that which our managers can affect in any particular period through their management

of the resources that affect our underlying revenue and profit generating operations during that period.

Non-GAAP adjustments to our

results prepared in accordance with U.S.

GAAP are itemized below.

You are encouraged to evaluate these adjustments and the reasons

we consider them appropriate for supplemental analysis.

In evaluating EBITDA, you should be aware that in the future we may incur

expenses that are the same as or similar to some of the adjustments in this presentation.

Our presentation of EBITDA should not be

construed as an inference that our future results will be unaffected by unusual or non-recurring items.

forth below is a reconciliation of net loss to EBITDA for the years ended December 31, 2025, and 2024:

EBITDA adjustments:

Modified EBITDA

present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on

Interest expense

Depreciation and amortization

Total EBITDA adjustments

present EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on

a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

In addition, we use Modified

In addition, we use

EBITDA in developing our internal budgets, forecasts and strategic plan;

3 unchanged sentences

and in communications with our board of directors concerning our financial

Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:

EBITDA has limitations as an analytical tool, which includes, among others, the following:

EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

2 unchanged sentences

depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in

the future, and Modified EBITDA does not reflect any cash requirements for such replacements.

the year ended December 31, 2024, the Company recorded a net loss of $13,152 and used cash in operations of $6,124.

During 2024, the Company took significant steps to convert high interest debt to equity, raise additional equity,

and refinance its credit facility.

In accordance with

Accounting Standards Codification (“ASC”) 205-40, Going Concern , the Company’s management has evaluated whether

there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue

as a going concern within one year after the date the accompanying financial statements were issued.

As of the issuance date of these

financial statements, management expects that the Company’s existing cash of $10,391 will be sufficient to fund the Company’s

current operating plan for at least twelve months from the date of issuance of these financial statements.

The financial statements do

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

assessment whether there is sufficient cash on hand, together with expected capital raises, to assure operations for a period of at least

twelve months from the date these financial statements are issued, is based on conditions that are known and reasonably knowable to management,

considering various scenarios, projections, and estimates and certain key assumptions.

These assumptions include, among other factors,

management’s ability to raise additional capital, and the expected timing and nature of the Company’s forecasted cash expenditures.

the future, and EBITDA does not reflect any cash requirements for such replacements.

reflected in the financial statements included elsewhere in this Annual Report on Form 10-K, for the year ended December 31, 2025, the

Company recorded a net loss of $15,842 and used cash in operations of $17,037.

Cash used in operations was primarily from our operating

losses, working capital, and investment in strategic growth initiatives.

As of December 31, 2025, we had a cash balance

of $10,424 and no remaining availability under our Senior Secured Loan.

Historically,

the Company has financed its operations through public and private sales of common stock, convertible debt instruments, credit lines

from financial institutions, and cash generated from operations.

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.

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.

we have financed our operations through existing cash balances, cash generated from operations, public and private issuance of common

stock, preferred stock, convertible debt instruments, term loans and credit lines from financial institutions.

On December 4, 2025, we entered into the Underwriting Agreement with the

Underwriters, pursuant to which the Company agreed to sell and issue to the Underwriters, in the Offering, an aggregate of (i) 2,500,000

shares of common stock and (ii) warrants to purchase up to 2,500,000 shares of common stock.

The Offering closed on December 8, 2025.

Each share of common stock and accompanying warrant to purchase one share of common stock were sold together at a combined public offering

price of $4.00 less underwriting discounts and commissions.

Additionally, the Company granted the Underwriters the Overallotment Option

to purchase up to an additional 375,000 shares of common stock and/or warrants at the public offering price, less underwriting discounts

and commissions.

On December 5, 2025, the Underwriters notified us

of their determination to partially exercise the Overallotment Option for warrants to purchase an aggregate of 375,000 shares of common

On December 12, 2025, the Underwriters notified us of their determination to exercise the remaining Overallotment Option to purchase

an aggregate of 375,000 shares of common stock.

All of the securities in the Offering, including the Overallotment Option, were sold by

net proceeds to the Company from the Offering, including the partial exercise of the Overallotment Option, were approximately $10.2 million,

after deducting underwriting discounts and commissions and certain offering expenses.

The Company currently intends to use the net proceeds

from the Offering, together with its existing cash and cash equivalents, to fund growth initiatives, working capital and other general

corporate purposes, which may include repayment of debt.

warrant issued in the Offering has an exercise price per share of common stock equal to $4.50, subject to certain adjustments.

are immediately exercisable upon issuance and will expire on December 8, 2030 (the “Expiration Date”), provided that the

holder will be prohibited, subject to certain exceptions, from exercising the warrant for shares of the Company’s common stock

to the extent that immediately after giving effect to such exercise, the holder, together with its affiliates and other attribution parties,

would own more than 4.99% or 9.99% (as elected by the holder) of the total number of shares of the Company’s common stock then

issued and outstanding, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess

of 9.99% upon 61 days’ prior notice from the holder to the Company subject to the terms of the warrants.

If, and only if, there

is no effective registration statement at the time of exercise, the warrants may be exercised cashlessly.

September 26, 2025, the Company entered into the Amended Loan Agreement governing the Senior Secured Loan with certain funds affiliated

with Whitebox Advisors LLC, as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent.

The Amended Loan

Agreement (i) reduced the aggregate principal amount of the revolving credit commitment to $9,250 from $10,000, (ii) changed interest

payments on the revolving loan to be due monthly in arrears from quarterly in arrears, (iii) and extended the maturity date to September

The Senior Secured Loan accrues interest at a per annum rate equal to 8.00% on the principal amount outstanding, payable monthly

The Senior Secured Loan also accrues an unused fee at a rate per annum equal to 3.00% on the excess, if any, of the revolving

credit commitment over the average principal amount outstanding from time to time during the preceding fiscal quarter, payable monthly

The Senior Secured Loan is secured by substantially all of the Company’s assets, including all intellectual property.

connection with the entry into the Amended Loan Agreement, the Company repaid $650 of the aggregate outstanding principal balance, plus

accrued interest.

of December 31, 2025, the principal amount outstanding on the Senior Secured Loan was $9,250 and the

remaining availability was $0.

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

Additionally, the agreement contains a financial covenant that requires us to meet a certain minimum cash balance and liquidity threshold

as of the end of each month.

We were in compliance with the terms of our agreement with Whitebox as of December 31, 2025.

Company incurred $410 of direct costs associated with the Senior Secured Loan transaction, consisting primarily of broker, bank and legal

These costs have been deferred and are being amortized over the life of the agreement.

The unamortized debt discount balance was

$329 at December 31, 2024.

For the year ended December 31, 2025, the Company incurred $34 of additional fees, and the amortization of

debt discount was $295.

The unamortized debt discount balance was $68 at December 31, 2025.

Additionally, in connection with the Amended

Loan Agreement, the Company incurred $40 of direct costs, which were expensed.

On September 15, 2025, the Company completed a private

placement with certain accredited investors, pursuant to which the Company issued and sold to the investors an aggregate of 833,330 common

shares for total consideration of $5,000.

expects that the Company’s existing cash of $10,424, cash generated from operations, and access to committed financing will be

sufficient to fund the Company’s operating plan, which was approved by the board of directors in February 2026, for at least twelve

months from the date of issuance of the financial statements included elsewhere in this Annual Report on Form 10-K;

however, if the Company’s

management and board of directors approve additional growth initiatives and related investment in human resources, working capital, new

geographic markets, information technology, and other uses of cash, the Company may require additional funding.

alleviate any funding considerations, management periodically evaluates various funding alternatives and may seek to raise additional

funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, strategic transactions,

or through obtaining credit from financial institutions.

As we seek additional sources of financing, there can be no assurance that such

financing will be available to us on favorable terms or at all.

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.

are also continuing to take actions to improve the Company’s operating performance and cash generated from operations, including

product portfolio optimization, implementing strategies to increase sales, streamlining operations, improving supply chains, negotiating

equitable vendor contracts, and managing product price architecture.

However, we may be unsuccessful in executing these actions in a

timely manner or at all.

the Company is unable to raise additional capital whenever necessary or otherwise improve its operating performance or generation of

cash from operations, it may be forced to decelerate or curtail certain of its operations until such time as additional capital becomes

cash used in operating activities totaled $17,037 for the year ended December 31, 2025, compared to $6,124 for the year ended December

The increase in net cash used in operating activities was primarily driven by operating losses, working capital, and investment

in strategic growth initiatives.

cash used in investing activities totaled $253 for the year ended December 31, 2025, compared to $167 for the year ended December 31,

The increase in net cash used in investing activities was primarily driven by purchases of property and equipment.

cash provided by financing activities totaled $17,323 for the year ended December 31, 2025, compared to $16,079 for the year ended

December 31, 2024.

The net cash provided by financing activities in the year ended December 31, 2025 was primarily driven by

proceeds from the sale of common stock in two private placements and one public offering.

The net cash provided by financing activities in the year ended

December 31, 2024 was primarily driven by proceeds from the issuance of a SAFE agreement and two private placements.

Accounting Policies and Estimates

preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

at the date of the financial statements and the reported amounts of expenses during the reporting period.

Some of those judgments can

be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in

relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments

about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates

the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances,

historical experience and reasonable assumptions.

preparation of the Company’s financial statements in conformity with U.S.

GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported

amounts of expenses during the reporting period.

Some of those judgments can be subjective and complex, and therefore, actual

results could differ materially from those estimates under different assumptions or conditions.

Management bases its estimates on

historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as

a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and

liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to

develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and

reasonable assumptions.

After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Significant estimates include those related to assumptions used in estimates for reserves

of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term

tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing

stock instruments issued for services.

There were no changes to our critical accounting policies described in the financial

statements included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024, that impacted our condensed consolidated

financial statements and related notes included herein.

Actual results

could differ from those estimates.

Significant estimates include those related to assumptions used in estimates for reserves of

uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded

long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions

made in valuing stock instruments issued for services.

Accounting Pronouncements

Note 2 of the financial statements for a discussion of recent accounting pronouncements.

Quantitative and Qualitative Disclosures about Market Risk

a smaller reporting company, Reed’s is not required to provide the information required by this Item 7A.

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 7. Management’s Discussion and Analysis