What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-28 compared with 2024-04-01 · 655 added, 641 removed, 451 unchanged (74% of the section changed)

Financial Statements

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

Balance Sheets as of December 31, 2023 and December 31, 2022

Statements of Operations for the years ended December 31, 2023 and 2022

Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2023 and 2022

Statements of Cash Flows for the years ended December 31, 2023 and 2022

Notes to Financial Statements for the years ended December 31, 2023 and 2022

Financial Statements and Supplementary Data

of Independent Registered Public Accounting Firm (PCAOB Firm ID:

Sheets as of December 31, 2024 and December 31, 2023

of Operations for the years ended December 31, 2024 and 2023

of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2024 and 2023

of Cash Flows for the years ended December 31, 2024 and 2023

to Financial Statements for the years ended December 31, 2024 and 2023

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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on the Financial Statements

have audited the accompanying balance sheets of Reed’s, Inc.

(the “Company”) as of December 31, 2023 and 2022, the

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”).

In our opinion, the financial statements present fairly,

in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and

its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

We have audited the accompanying balance sheets of Reed’s, Inc.

“Company”) as of December 31, 2024 and 2023, the 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”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,

2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to

be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit

of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control

over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control

over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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.

The 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

(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.

As of December 31, 2024, the Company’s inventory totaled $8.1 million.

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relation to inventory on hand, market conditions, and other factors.

identified management’s assessment of net realizable value of inventory as a critical audit matter as a high degree of auditor

judgment and increased auditor effort was required to evaluate the Company’s ability to sell certain products, taking into consideration

a number of factors, such as estimating future customer demand, customer preferences, and the broader economy.

identified the evaluation of slow-moving and obsolete inventories at net realizable value as a critical audit matter because a high degree

of auditor judgment and effort was required to evaluate the Company’s ability to sell certain products.

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

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.

compared significant assumptions used by management to current industry and economic trends.

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

obtained management’s analysis for estimated excess or obsolete inventories and evaluated the appropriateness of management’s

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.

Evaluation of the Company’s

As discussed in Note 1 to the financial statements, the Company recorded

a net loss of $13.2 and used cash in operations of $6.1 million during the year ended December 31, 2024.

During 2024, management took

steps to convert high interest bearing debt to equity, and to raise additional equity.

Management believes that the Company’s ongoing

business, existing cash, and credit facilities are sufficient to fund operations for twelve months from the date of issuance of these

financial statements.

of the Company’s ability to continue as a going concern

discussed in Note 1 to the financial statements, for the year ended December 31, 2023, the Company recorded a net loss of $15,523 and

used cash in operations of $4,266.

Management believes that the Company’s ongoing business, existing cash, plus additional cash

received subsequent to December 31, 2023, from investments with significant stockholders, is sufficient to fund operations for twelve

months from the date of issuance of these financial statements.

identified the evaluation of Management’s assessment of the Company’s ability to continue as a going concern as a critical

audit matter due to the high degree of subjective auditor judgment required to evaluate the Company’s forecasted cash flows used

in its going concern analysis due to uncertainty in certain assumptions, specifically forecasted sales, gross profit margins, and feasibility

of the Company’s expense management activities

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

We identified the evaluation of Management’s

assessment of the Company’s ability fund its operations over the next twelve months as a critical audit matter due to the high degree

of subjective auditor judgment required to evaluate the Company’s forecasted cash flows used in its liquidity analysis due to uncertainty

in certain assumptions, specifically forecasted sales, gross profit margins, and feasibility of the Company’s expense management

The primary procedures we performed to address this

critical audit matter included:

obtained management’s cash flow forecast and evaluated the reasonableness of the cash

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and commitments.

considered the effects of the Company’s restructured debt and expected projected interest

and finance costs

performed sensitivity analyses on the forecasted revenue and operating margins used in the

Company’s cash flow forecast to evaluate the impact on the conclusions reached by management.

considered the Company’s historical ability to raise capital, and tested subsequent

event activity including, but not limited to, the receipt of subsequent proceeds from investments

with significant stockholders.

considered the Company’s historical ability to raise financing and re-finance its debt,

if necessary.

assessed the appropriateness and sufficiency of the Company’s liquidity disclosures

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with the Company’s disclosures.

Liability Claims

As described in Notes 15 and 16 of the financial statements,

the Company is subject to periodic lawsuits, claims, vendor disputes and other matters (the “Claims”).

The Company accrues

an estimated reserve related to the resolution cost of these matters for which management believes a loss is probable of occurring, and

the amount of the loss is reasonably estimable.

Due to the uncertainty of potential costs to be incurred related to the Claims, and the

uncertainty of the ultimate outcome of each of the individual Claims, management applies significant judgments and estimates in determining

the probability that a loss has been incurred and the amount to accrue for such loss.

We identified the accrual and disclosure of the Claims

as a critical audit matter due to the significant judgments made by management when assessing the probability of a loss as well as the

ultimate resolution costs of the Claims.

Auditing management’s estimates and assumptions required a high degree of auditor judgment

and increased audit effort due to the impact these assumptions have on the accrued reserves and disclosures.

The primary procedures we performed to address this critical audit matter

obtained management’s evaluation of the Claims for accrual and disclosure and management’s evaluation of the probability

that a loss has been incurred, and management’s estimate of the amount of the loss.

tested the accuracy and completeness of the initial agreements that served as the basis for management’s estimates of the

probability that a loss has been incurred, the amount of the loss, and any settlement activity.

evaluated the assumptions used by management to develop the estimate of the probability a loss has been incurred.

performed confirmation procedures with the Company’s external legal counsel to corroborate

management’s assertions regarding claim information, claim status, the probability

the Company has incurred a loss, and the estimated amount of any potential loss.

have served as the Company’s auditor since 2004.

Weinberg & Company, P.A.

/s/ Weinberg & Company,

& Company, P.A.

Angeles, California

in thousands, except share amounts)

receivable, net of allowance of $ 860 and $ 252 , respectively

from former related party

expenses and other current assets

Current assets:

and equipment, net of accumulated depreciation of $ 1,068 and $ 787 , respectively

AND STOCKHOLDERS’ DEFICIT

line of credit, net of capitalized financing costs of $ 201 and $ 363 , respectively

to former related party

portion of convertible notes payable, net of debt discount of $ 424 and $ 414 , respectively

portion of lease liabilities

Accounts receivable, net of allowance of $ 859

and $ 860 , respectively

Inventory, net

Receivable from former related party

Prepaid expenses and other

current assets

Total current assets

Property and equipment, net of accumulated

depreciation of $ 636 and $ 1,068 , respectively

Intangible assets

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Current liabilities:

note payable, net of debt discount of $ 148 and $ 562 , respectively, less current portion

liabilities, less current portion

Stockholders’ deficit:

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

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

Accounts payable

Accrued expenses

Revolving line of credit, net of capitalized

financing costs of $ 201

Senior secured loan, net of capitalized financing costs of $ 329

Payable to former related party

Current portion of convertible notes payable,

net of debt discount of $ 424

Current portion of lease

Total current liabilities

Convertible note payable, net of debt discount

of $ 148 less current portion

Lease liabilities, less

current portion

Commitments and Contingencies

Stockholders’ equity

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

shares authorized;

45,371,247 and 4,187,291 shares issued and outstanding, respectively

paid in capital

stockholders’ deficit

liabilities and stockholders’ deficit

Additional paid in capital

Accumulated deficit

stockholders’ equity (deficit)

liabilities and stockholders’ equity

accompanying notes are an integral part of these financial statements.

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Ended December 31,

of goods sold

write-offs associated with exited categories and major packaging and formula changes

Cost of goods sold

Inventory write-offs associated with exited

categories and major packaging and formula changes

Product quality hold write-down

and handling expense

and marketing expense

and administrative expense

for receivable with former related party

Operating expenses:

from operations

Delivery and handling expense

Selling and marketing expense

General and administrative expense

Provision for receivable

with former related party

operating expenses

Loss from operations

Interest expense, net

on Series A Convertible Preferred Stock

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per share – basic and diluted

average number of shares outstanding – basic and diluted

Weighted average number of shares outstanding – basic and diluted

accompanying notes are an integral part of these financial statements.

OF CHANGES IN STOCKHOLDERS’ DEFICIT

OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

the Years Ended December 31, 2024 and 2023

in thousands except share amounts)

Preferred Stock

Additional Paid In

Stockholders’ Equity

Stockholders’

Balance, December 31, 2022

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Fair value of vested options

Fair value of vested restricted shares granted to officers

Fair value of vested restricted shares granted

Repurchase of common stock

Dividends on Series A Convertible Preferred Stock

Common shares issued for financing costs

Common shares issued for interest payment

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

Dividends on Series A Convertible Preferred

Preferred Stock

Common shares issued as compensation

Common shares issued for cash, net of offering

Balance, December 31, 2023

Fair value of vested options

Fair value of vested restricted shares granted to officers

Repurchase of common stock

Common shares issued for financing costs

Issuance of shares for dividends on Series A Convertible Preferred Stock

Common shares issued as compensation

Common shares issued for cash, net of offering costs

Dividends on Series A Convertible Preferred

Preferred Stock

Issuance of shares for conversion of convertible

notes payable to related party

Capital contribution upon conversion of notes

Common shares issued for cash

Common shares issued upon conversion of SAFE

agreement with related entities

Balance, December 31,

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in thousands)

December 31, 2023

December 31, 2022

Cash flows from operating activities:

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

Loss on disposal of property & equipment

Cash flows from operating

Adjustments to reconcile

net loss to net cash used in operating activities:

Loss on disposal of property

Amortization of debt discount

Amortization of prepaid financing costs

Fair value of vested options

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

Common shares issued as financing costs

Common shares issued for compensation

Fair value of vested restricted

shares granted to directors and officers for services

Common shares issued for

Product quality hold write-down

Allowance for estimated credit losses

Provision for receivable with former related party

Allowance for estimated

credit losses

Provision for receivable

with former related party

Inventory write down

Accrued interest on convertible note

Accrued interest on convertible

Lease liability

Changes in operating assets and liabilities:

Changes in operating assets

and liabilities:

Accounts receivable

Prepaid expenses and other assets

Decrease in right of use assets

Prepaid expenses and other

Decrease in right of use

Accounts payable

Accrued expenses

Net cash used in operating activities

Cash flows from investing activities:

Intangible asset trademark costs

Purchase of property and equipment

Sale of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Net cash used in operating

Cash flows from investing

Intangible asset trademark

Purchase of property and

of property and equipment

Net cash used in investing

Cash flows from financing

Proceeds from line of credit

Payments on the line of credit

Payment of debt issuance costs

Proceeds from sale of common stock

Proceeds from convertible note payable, net of expenses

Payment of convertible note payable

Amounts from former related party, net

Repurchase of common stock

Net cash provided by financing activities

Payments on the line of

Proceeds from sale of common

Proceeds from senior

secured loan payable,

net of expenses

Proceeds from convertible

note payable, net of expenses

Proceeds received from

SAFE agreement

Proceeds received from

rights offering

Payment of convertible

Amounts from former related

Payment of costs recorded

as debt discount

of common stock

cash provided by financing activities

Net increase in cash

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Cash at end of period

Supplemental disclosures of cash flow information:

Supplemental disclosures

of cash flow information:

Cash paid for interest

Non-cash investing and financing activities:

Dividends on Series A Convertible Preferred Stock

Non-cash investing and financing

Dividends on Series A Convertible Preferred

Common Shares issued for financing costs

Common Shares issued for principal payment

Common Shares issued for interest payment

Common Shares issued upon conversion of convertible

notes payable

Common Shares issued upon conversion of SAFE

Initial recognition of right of use asset and

operating lease liability upon execution of new lease

accompanying notes are an integral part of these financial statements.

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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

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As of the issuance date of these

financial statements, management expects that the Company’s existing cash of $603, plus $4,100 of additional cash received subsequent

to December 31, 2023, from investments with significant stockholders, 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.

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

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Trends – Market Conditions

economy continued to grow throughout 2023, the 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

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.

The Company has experienced supply chain challenges, including increased lead times, as well as inflation of raw materials,

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 the Company regularly monitors 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 Company has experienced moderation in inflation and anticipates this to continue throughout 2024.

the year ended December 31, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022.

cost of shipping and handling for year ended December 31, 2023, was $ 3.07 per case, as compared to $ 3.95 per case for the year ended

December 31, 2022.

Although the Company has experienced decreases in freight costs over the last three quarters, 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 impacting our ability

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

The disruption caused by labor shortages, significant raw material

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

Delisting and now trading on the OTCQX US Market

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”).

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.

January 25, 2023, the Company effectuated a 1-for-50 reverse stock split of its 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, and there was no effect on total stockholders’ deficit.

All common shares, stock options, stock

warrants and per share amounts presented herein have been adjusted retroactively to reflect the reverse stock splits for all periods

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 year ended December 31, 2023.

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.

Mitigation 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.

disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and

ongoing port congestion, has resulted in suppressed margins.

In 2024 the Company experienced moderation in inflation.

refer to Notes 6, 7 and 8 in the accompanying financial statements for a description of our line of credit, senior secured loan, and notes payable.

Significant Accounting Policies

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of deferred tax assets and the related valuation allowance, accruals for potential liabilities, assumptions made in valuing stock instruments

issued for services, and assumptions used in the determination of the Company’s

issued for services, and assumptions used in the determination of the Company’s liquidity.

receivable are generally recorded at the invoiced amounts net of an allowance for credit losses, which

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is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis.

Company regularly reviews inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our

estimated forecast of product demand and our ability to sell the product(s) concerned.

Demand for our products can fluctuate significantly.

Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or

other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers.

Additionally,

our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision

required for excess and obsolete inventory.

At December 31, 2023, and 2022, inventory has been reduced by cumulative write-downs for

inventory aggregating $ 1,434 and $ 479 , respectively.

The Company regularly reviews inventory quantities on hand and record a provision for excess and obsolete inventory based primarily

on our estimated forecast of product demand and our ability to sell the product(s) concerned.

Demand for our products can fluctuate

significantly.

Factors that could affect demand for our products include unanticipated changes in consumer preferences, general

market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders

placed by customers.

Additionally, our management’s estimates of future product demand may be inaccurate, which could result

in an understated or overstated provision required for excess and obsolete inventory.

At December 31, 2024, and 2023, inventory has

been reduced by allowances for write-downs for inventory aggregating $ 277

and $ 1,848 ,

respectively.

and Equipment

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of Potentially Dilutive Securities

December 31, 2023

December 31, 2022

Common stock equivalent of Series A Convertible Preferred Stock

Common stock equivalent of Series A Convertible

Preferred Stock

Convertible note payable

Unvested restricted common stock

Anti-dilutive Securities

Series A Convertible Preferred Stock is convertible into Common shares at the rate of 1:0.08 .

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

Value of Financial Instruments

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

ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available

that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in

assessing performance.

The Company has one component.

Therefore, the Company’s Chief Executive Officer, who is also the CODM, makes

decisions and manages the Company’s operations as a single operating segment for the manufacture and distribution of its products.

Company’s President and Chief Executive Officer is the Company’s Chief Operating Decision Maker (“CODM”) and

evaluates performance and makes operating decisions about allocating resources based on internal financial data.

The Company has determined

that it operates in a single reportable segment, which consists of manufacturing carbonated beverages under Reed’s and Virgil’s

brand names and comprises the financial results of the Company.

The required segment information, including significant segment

expenses, is presented at Note 17 .

Concentrations

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To minimize the risk, the Company’s policy is to maintain cash balances with high quality financial institutions.

During the year ended December 31, 2023, the Company’s largest two customers accounted for 24 % and 15 % of gross sales,

respectively.

During the year ended December 31, 2022, the Company’s largest two customers accounted for 17 % and 16 % of gross sales,

respectively.

During the year ended December 31, 2024, the Company’s largest three customers accounted 19 %, 15 % and 11 % of gross

sales, respectively.

During the year ended December 31, 2023, the Company’s largest two customers accounted for 24 % and 15 % of

gross sales, respectively.

For the years ending December 31, 2024 or 2023, no other customer accounted for more than 10% revenue.

As of December 31, 2023, the Company had accounts receivable from three customers which comprised 24 %, 15 % and 11 % of

its gross accounts receivable, respectively.

As of December 31, 2022, the Company had accounts receivable from two customers which comprised

As of December 31, 2024, the Company had accounts receivable from two customers which comprised 17 % and 14 % of its gross

accounts receivable, respectively.

As of December 31, 2023, the Company had accounts receivable from three customers which comprised

24 %, 15 % and 11 % of its gross accounts receivable, respectively.

At December 31, 2023 or 2022, no other customers accounted for more than

10% of accounts receivable.

At December 31, 2024 or 2023, no other customers accounted for more

than 10% of accounts receivable.

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

During the year ended December 31, 2023 and the year ended December

31, 2022, the Company utilized six separate co-packers for most its production and bottling

of beverage products in the United States.

The Company has long-standing relationships with two different co-packers, and a third co-packing

agreement with California Custom Beverage LLC (“CCB”), a former related party (see Note 13).

Although there are other packers,

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

During the year ended December 31, 2024 and 2023, the Company utilized

nine separate co-packers for most its production and bottling of beverage products in the United States.

Although there are other co-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, 2023, the Company’s largest vendor accounted for approximately 12 % of all

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

As of December 31, 2023, two vendors accounted for 10 % and 10 % of total accounts payable, respectively.

As of December 31,

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

During the year ended December.

31, 2024, no vendor accounted for more than 10% of all purchases During the year ended December 31, 2023, the Company’s largest vendor accounted for approximately 12 %

of all purchases.

As of December 31, 2024, no vendor accounted for more than 10 % of total accounts payable.

As of December 31, 2023, two vendors

accounted for 10 % and 10 % of total accounts payable, respectively.

Reclassifications

prior year amounts have been reclassified for consistency with the current period presentation.

Collection from customers amounting

that was previously presented as a deduction from prepaid expenses at December 31, 2023 have been reclassified as an offset against

accounts receivable.

This reclassification had no effect on the reported results of operations or cash flows.

Accounting Pronouncements

In November 2023, the FASB issued ASU

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure , which is intended to improve

reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that

are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or

The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in

interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment

Reporting , including the significant segment expense disclosures.

This standard will be effective for the Company on January 1,

2024 and interim periods beginning in fiscal year 2025, with early adoption permitted.

The updates required by this standard should

be applied retrospectively to all periods presented in the financial statements.

The Company does not expect this standard to have a

material impact on its results of operations, financial position or cash flows.

September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier

Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

The ASU requires buyers to disclose information

about their supplier finance programs.

Interim and annual requirements include the disclosure of outstanding amounts under the obligations

as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period,

as well as a description of payment and other key terms of the programs.

This update is effective for annual periods beginning after

December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which

is effective for fiscal years beginning after December 15, 2023.

The Company adopted ASU 2022-04 on January 1, 2023, and there was no

material impact on our financial statements.

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.

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.

This may result in the earlier recognition of allowances for losses.

adopted this standard effective January 1, 2023 and there was no material impact of adopting this standard on the Company’s financial

statements and related disclosures.

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure , which

is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense

categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s

profit or loss.

The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided

in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting ,

including the significant segment expense disclosures.

This standard became effective for the Company on January 1, 2024.

of 2023-7 did not have a material impact on the Company’s results of operations, financial position or cash flows.

November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

(Subtopic 220-40) Disaggregation of Income Statement Expenses.

The guidance in ASU 2024-03 requires public business entities to disclose

in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases

of inventory;

employee compensation;

and depreciation and amortization expense for each caption on the income statement where such expenses

are included.

The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning

after December 15, 2027.

Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the

effective date or retrospectively to all periods presented in the financial statements.

We are currently evaluating the provisions of

this guidance and assessing the potential impact on our financial statement disclosures.

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

2 unchanged sentences

consisted of the following (in thousands):

December 31, 2023

December 31, 2022

Raw materials and packaging

Finished products

the year ended December 31, 2023, the Company incurred inventory charges of totaling $ 1,848 , which represents $ 1,452 impairment charge

related to major packaging and formula changes and $ 396 for the markdown of inventory related to exited categories.

There were no such

inventory charges during the year ended December 31, 2022.

the year ended December 31, 2024 the Company incurred $ 277

of inventory charges related to inventory obsolescence.

During the year ended December 31, 2023, the Company incurred inventory

charges of totaling $ 1,848 ,

which includes a $ 1,452

impairment charge related to major packaging and formula changes and $ 396

for the markdown of inventory related to exited categories.

Property and Equipment

1 unchanged sentence

Schedule of Property and Equipment

December 31, 2023

December 31, 2022

Right-of-use assets under operating leases

Right-of-use assets under operating

Leasehold improvements

Computer hardware and software

1 unchanged sentence

Construction in progress

Accumulated depreciation and amortization

Accumulated depreciation

and amortization

Net book value

4 unchanged sentences

assets consisted of the following (in thousands):

Summary of Intangible Assets

December 31, 2023

December 31, 2022

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

They have been assigned an

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

These indefinite-lived intangible

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

remains appropriate.

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

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

If the carrying amount of the

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

recognized in an amount equal to that excess.

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

the year ended December 31, 2023, and 2022, the Company capitalized costs of $ 3 and $ 2 , respectively, pertaining to legal and other fees

incurred in applying for international trademarks for Reeds and Virgil’s brands.

of Intangible Assets

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

They have been

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

indefinite-lived intangible assets are not amortized but are assessed for impairment annually and evaluated annually to determine

whether the indefinite useful life remains appropriate.

We first assess qualitative factors to determine whether it is more likely

than not that the asset is impaired.

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

If the carrying amount of the asset exceeds its fair value, as determined by the discounted cash flows expected to be

generated by the asset, an impairment loss is recognized in an amount equal to that excess.

Based on management’s assessment,

there were no indications of impairment at December 31, 2024.

the year ended December 31, 2024, and 2023, the Company capitalized costs of $ 15 and $ 3 , respectively, pertaining to legal and other

fees incurred in applying for international trademarks for Reeds and Virgil’s brands.

Line of Credit

Company’s credit facility consisted of the following (in thousands):

Schedule of Amount Outstanding Under Credit Facilities

Line of credit – Alterna Capital Solutions

capitalized financing costs

In March, 2022, the Company entered into a financing agreement for a line of credit with Alterna Capital Solutions

(“ACS”) 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, and are subject to a collateral sharing agreement with Whitebox, another secured lender (see Note 7).

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 .

As of December 2023, the remaining availability under the line of credit was $ 23 of current availability,

and $ 3,041 of borrowing capacity available.

based on receivables bears an interest of prime plus 4.75% but not less than 8.0% (13.25% at December 31, 2023 and 12.25% at December

Borrowings based on inventory bears an interest of prime plus 5.25% but not less than 8.5% (13.90 % at December, 31, 2023

and 12.90% at December 31, 2022).

The additional over advance rider bears a rate of prime plus 12.75%, but not less than 16.00% (18.00%

at December 31, 2023 and 18.00% at December 31, 2022).

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 .

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.

of Amount Outstanding Under Credit Facilities

Line of credit – Alterna

Capital Solutions

capitalized financing

March 28, 2022, the Company entered into a financing agreement for a line of credit with Alterna Capital Solutions

The ACS line of credit was for a term of 3

years, provided for borrowings of up to $ 13,000 , was secured by eligible accounts receivable and inventory, and was subject to a collateral sharing agreement with Whitebox

Advisors, LLC (“Whitebox”), another secured lender (see Note 7).

An over advance rider provided for up to $ 400

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

As of December 2023, the remaining availability under the line of credit was $ 23

of current availability, and $ 3,041

of borrowing capacity available.

based on receivables accrued interest at a rate equal to prime plus 4.75% but not less than 8.00% (13.25% at December 31, 2023).

Borrowings based on inventory accrued interest at a rate equal to prime plus 5.25% but not less than 8.50% (13.90 % at December, 31,

The additional over advance rider accrued interest at a rate equal to prime plus 12.75%, but not less than 16.00% (18.00% at

December 31, 2023).

Additionally, the line of credit was subject to a monthly monitoring fee of $1 with a minimum usage requirement

on the credit facility.

Any loan balance of less than $ 1,500 accrued interest at a rate equal to account receivables advances plus the monthly monitoring fee of $ 1 .

November 14, 2024 the Company repaid the full outstanding principal amount of $ 6,569

of the line of credit.

Company incurred $ 483 of direct costs associated with the line of credit transaction, consisting primarily of broker, bank and legal fees.

These costs were

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

The unamortized debt discount balance was $ 201 at December

For the year ended December 31, 2023, amortization of debt discount was $ 162 , and as of December 31, 2023, the remaining unamortized

debt discount balance is $ 201 .

For the year ended December 31, 2024, amortization of debt discount was $ 121 , and upon repayment of the outstanding principal amount, the remaining unamortized

debt discount of $ 81 was written off.

Senior Secured Loan Payable

of Secured Notes Payable

Secured Convertible Note Payable

Capitalized financing

On November 14, 2024, the Company entered into a

Senior Secured Loan and Security Agreement (the “Loan Agreement”) with certain funds affiliated with Whitebox, as

lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent.

The Loan Agreement provides a revolving

credit commitment in an aggregate amount of $ 10,000

(the “Senior Secured Loan”).

The Senior Secured Loan accrues interest at a per annum rate equal to 8.00 %

on the principal amount outstanding, payable quarterly in arrears.

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 quarterly in arrears.

The Senior Secured Loan is secured by substantially

all of the Company’s assets, including all intellectual property.

As of December 31, 2024, the principal amount outstanding on

the Senior Secured Loan was $ 9,900

and the remaining availability was $ 100 .

The 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, 2024.

Company incurred $ 376

of direct costs associated with the Senior Secured Loan transaction, consisting primarily of broker, bank and legal fees.

costs have been capitalized and are being amortized over the 1 -year

life of the agreement.

For the year ended December 31, 2024, amortization of debt discount was $ 47 .

The unamortized debt discount balance was $ 329

at December 31, 2024.

Secured Convertible Notes Payable

1 unchanged sentence

of Secured Convertible Notes Payable

Secured Convertible Note Payable

Accrued interest (includes excess ABL fees of $ 2,176 and $ 648 )

Capitalized financing costs

Secured Convertible “Original”

Note Payable (A)

Secured “Option” Notes Payable

Secured Convertible “Option”

Notes Payable

Accrued interest (includes excess ABL fees

of $ 2,176 and $ 648 )

Capitalized financing

Current portion

Long term portion due through May, 2025

May 2022, the Company issued $ 11,250 of convertible notes payable (the “Original Notes”) to entities affiliated with Whitebox

Advisors, LLC (collectively, “Whitebox”).

The Original Notes bear interest at 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), 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 Original Notes mature on May 9, 2025 .

2022, the Company issued an additional $ 2,500 of convertible notes payable (the “Option Notes”) to Whitebox.

The Option Notes

were due May 9, 2025, and were repaid in full in November 2022.

The Original Notes together with the Option Notes are collectively referred

to as the “Notes”.

Upon conversion or early payment, holders of the Notes are entitled to receive an interest make-whole

payment, as defined, equal to the sum of the remaining scheduled payments of interest on the Notes that would be due at maturity, payable,

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

Effective August 11, 2022,

the Notes were amended to add a 10 % fee for the amount that the Company’s line of credit with ACS (see Note 6) exceeds $ 6,000 ,

as defined (the “Excess ABL Amount”).

Effective June 30, 2023, the Excess ABL Amount was amended to $ 7,500 .

Original Notes and Option 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, based on 90 % of

the average prices of the Company’s common stock, as defined.

During 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 .

February 2023 and May 2023, the Company issued an aggregate of $ 4,050 of additional Option Notes to Whitebox that substantially have

the same terms as the Original Notes, except the Option Notes issued in 2023 do not require any amortization payments, bear interest

at 10% payable in cash, and were initially due four months after issuance and extended to November 28, 2023.

The Company and Whitebox

have tentatively agreed to extend the due date of the 2023 Option Notes to approximately April 30, 2024 (see Note 15).

During 2023, Whitebox

waived the requirement for the Company to pay the December 2022 to October 2023 monthly amortization payments on the Original Notes.

The November 2023 amortization payment of $ 200 principal was paid, and the amortization payment for December 2023 was waived subsequent

to December 31, 2023 (see Note 15).

At December 31, 2023, the principal balance of the Notes was $14,300.

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 2022

Option Notes repaid November 2022, and $ 1,734 related to the Excess ABL Amount fee.

During 2022, the Company made interest payments of

$ 1,892 , including the issuance of 229,871 shares of common stock valued at $ 1,261 , and at December 31, 2022, the balance of accrued interest

was $ 1,052 .

2023, the Company recorded interest of $ 3,604 , made up of $ 1,428 of interest on the Notes, and $ 2,176 related to the Excess ABL Amount

In addition, during 2023, accrued interest of $ 773 was paid.

At December 31, 2023, the balance of accrued interest was $ 3,883 .

2022, the Company incurred $ 1,320 of direct costs of the Notes transactions, consisting primarily of placement agent fees and other offering

These costs were 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 .

the year ended December 31, 2023, the Company incurred $ 299 of direct costs of issuing the 2023 Option Notes and issued 82,438 shares

of the Company’s common stock valued at $ 273 as inducement for the aforementioned waiver.

These costs have been capitalized and

are being amortized over the shorter of the remaining term of the Notes or waiver period.

For the year ended December 31, 2023, amortization

of debt discount was $ 976 , and as of December 31, 2023, the remaining unamortized debt discount balance is $ 572 .

the Company experiences a fundamental change, as defined, such as a change of control, or the sale or disposition of all or substantially

all of the Company’s asset, the holders of the Notes have the right to require the Company to repurchase the notes for cash at

a repurchase price equal to 110 % (amended from 100%) of the principal amount, plus accrued interest, and among other amendments.

At December 31, 2023, the Original Notes and 2023

Option Notes are convertible at an initial conversion rate of 0.0831 shares of the Company’s common stock per one 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 one dollar of principal, or approximately $8.23 per

Subsequent to December 31, 2023, the conversion rate of the Notes was amended (see Note 15).

At December 31, 2023, the Notes, including accrued

interest, are convertible into 1,514,055 shares of the Company’s common stock.

The 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.

A holder may not convert or be issued shares of common stock to the extent such conversion or issuance

would cause such holder, together with its affiliates and attribution parties and any group of which it is a member, to beneficially own

a number of shares of common stock which would exceed 9.9% of the Company’s then outstanding common stock following such conversion

The Company is subject to a registration rights agreement

with Whitebox dated May 9, 2023 pursuant to which the Company registered for resale by holders all shares potentially issuable upon conversion

of, or in satisfaction of amortization or interest make-whole payments with respect to the Notes.

noted above, while the Company has been successful negotiating waivers and amendments under the Notes to extend various due dates and

defer certain payments of interest and principal that were not paid when due, it may not be able to continue to do so in the future.

If the Company is unable to service or repay the Notes and accrued interest at maturity and is otherwise unable to extend the maturity

dates or refinance these obligations, the Company may default.

A default would trigger acceleration under the Notes, and it is unlikely

that the Company would have sufficient funds to make these payments.

Upon a default, the holders of the Notes have the right to exercise

their remedies to collect, including foreclosing on our assets.

Leases Liabilities

Long term portion due

through May, 2025

May 2022, the Company issued $ 11,250

of convertible notes payable (the “Original Notes”) to entities affiliated with Whitebox.

Original Notes bear interest at 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), 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 Alterna

Capital (ACS), the Company’s existing secured lender.

The Original Notes mature the earlier of September

30, 2025 or the scheduled maturity of any unsecured indebtedness incurred by the Company that is junior in right of payment

to Note obligations.

At each of December 31, 2024 and December 31, 2023, the principal balance of the Original Notes was $ 0 and

$ 10,250 , respectively.

conversion or early payment, holders of the Original Notes are entitled to receive an interest make-whole payment, as defined, equal

to the sum of the remaining scheduled payments of interest on the Original Notes that would be due at maturity, payable, at the Company’s

option, in cash or in shares of common stock.

On August 1, 2022, the Original Notes were amended to add a 10 % fee (“Excess

ABL Fee’) commencing with the fiscal month ending October 31, 2022 for the amount that the Company’s line of credit with

ACS exceeds (i) (x) prior to November 30, 2024, $9,500 and (y) on and after November 30, 2024, $6,500, if the Company has not publicly

announced or is not actively pursuing a proposed transaction as a result of which the Company reasonably believes that its Common

Stock will be listed on a national securities exchange) or $9,500 otherwise, minus (ii) any amounts repaid to ACS pursuant to the

Option Notes (not to exceed $500) plus (iii) the aggregate principal amount of Original Notes voluntarily converted into Conversion

Consideration (as defined therein), in each case subject to the terms of the collateral sharing agreement;

provided that the sum

of the amounts in clauses (i), (ii) and (ii) above shall not exceed $10,500 minus any amounts repaid ACS as contemplated by the Option

Notes (not to exceed $500).

Original 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, based on 90 % of the average

prices of the Company’s common stock, as defined.

During 2023, Whitebox waived the requirement for the Company to pay the December

2022 to October 2023 monthly amortization payments on the Original Notes.

The November 2023 amortization payment of $ 200 principal

was paid, and the amortization payment for December 2023 to May 2024 was waived.

The amortization period resumed on June 1, 2024.

the time of issuance of the Original Notes, the Company also granted the investors an option to purchase up to an additional $ 12,000

aggregate principal amount of “Option Notes”.

At December 31, 2023, the principal balance of the Option Notes was $ 4,050 .

August 1, 2024, the Company entered into an Option Exercise and Nineth Amendment (“Exercise and Amendment Agreement”)

to the Notes with Whitebox.

Pursuant to the Exercise and Amendment Agreement, holders of the Original Notes exercised an option to

purchase an aggregate of approximately $ 6,504 Option Notes, which consisted of (i) an exchange of $ 4,050 of existing notes, (ii)

additional cash proceeds to the Company of $ 1,400 , and (iii) an additional finance cost of $ 1,054 The Option Notes mature on the

earlier of December 15, 2024, and ninety one days before the schedule maturity of any unsecured indebtedness incurred by the Company

that is junior in right of payment to its Note obligations.

The Option Notes bear interest in arrears on the outstanding principal

amount at a rate of 11.13 % per annum, payable in cash.

The Option Notes may be prepaid without premium or penalty.

Unless $ 1,400

of the principal amount is prepaid, payment of any Option Note on the maturity date (or due to an acceleration (whether declared

or automatic)) shall be accompanied by an additional amount (such amount, the “MOIC Deficiency Amount”), if any, sufficient

to achieve a 1.13:1.00 multiple of invested capital since August 1, 2024 (the “MOIC”) on the aggregate principal amount

of the Option Notes being paid.

The MOIC Deficiency Amount shall be calculated based on (i) the sum of all fees, original issue discount,

interest, premiums, principal and other payments received in cash by the applicable holders in respect of the Option Notes since

August 1, 2024 (excluding any reimbursement of out-of-pocket costs or expenses reimbursed and any indemnification payments made to

the applicable Holders in respect of the Option Notes), as the numerator, and (ii) the aggregate principal amount of the Option Notes

on August 1, 2024, as the denominator.

October 10, 2024, Whitebox sold and assigned its entire interest in the $ 10,250 Secured Convertible Note Payable, interest

added to Original Note of $ 1,124 and the $ 6,504 Option Note Payable to the Company’s majority stockholder, D&D Source of

Life Holding LTD (“D&D”) including accrued interest of $ 4,600 in the aggregate amount of $ 22,478 .

December 31, 2023, the balance of accrued interest was $ 3,883 .

During the year ended December 31, 2024, the Company recorded interest

of $ 3,409 , made up of $ 2,100 interest on the Notes, and $ 1,309 related to the excess ABL fees, made payments of $ 514 towards accrued

interest and $ 2,178 was added to principal.

At November 14, 2024, the balance of accrued interest was $ 4,600 .

November 19, 2024, the Company entered into an exchange agreement with D&D wherein outstanding principal of the convertible notes

amounting to $ 17,878 and accrued interest of $ 4,600 or an aggregate of $ 22,478 were converted into 22,478,074 shares of the Company’s

common stock (see Note 10).

December 31, 2023, the unamortized debt discount was $ 572 .

During the period ended December 31, 2024, the Company incurred $ 237

of costs for the aforementioned waivers.

These costs have been capitalized and are being amortized over the term of the Notes or

waiver period.

For the year ended December 31, 2024, amortization of debt discount was $ 606 .

Upon conversion of the notes to common shares, the Company wrote-off the remaining unamortized debt discount balance of $ 203

to interest expense.

Lease Liabilities

Company determines whether a contract is, or contains, a lease at inception.

6 unchanged sentences

Leases with an initial term of 12 months or less are not included on the balance sheets.

of December 31, 2023, operating lease liabilities pertaining to its former office facility totaled $ 207 .

In May 2024, the Company entered

into a long-term non-cancellable lease agreement for its new office facility that requires aggregate average monthly payments of $ 9 beginning

December 2024.

The lease terminates in November 2035.

The Company classified the lease as an operating lease and determined that the

value of the right of use asset and lease liability at the adoption date was $ 835 , respectively, using a discount rate of 8.00 %.

the year ended December 31, 2024, the Company made aggregate payments of $ 205 towards its operating lease liability.

As of December 31,

2024, operating lease liabilities totaled $ 837 .

the years ended December 31, 2024, and 2023, lease costs totaled $ 134 and $ 178 , respectively.

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

During the year ended December 31, 2023, the Company made payments of

$ 187 towards its operating lease liability.

As of December 31, 2023, operating lease liabilities totaled $ 207 .

of December 31, 2023, the weighted average remaining lease terms for an operating lease are 1.00 years.

As of December 31, 2023, the

weighted average discount rate for operating lease is 12.60 %.

minimum lease payments under the leases are as follows (in thousands):

of Future Minimum Lease Payments Under Leases

Years Ending December 31,

Ending December 31,

Total payments

Amount representing interest

Amount representing

Present value of net minimum lease payments

1 unchanged sentence

Non-current portion

Stockholders’ Equity

A Convertible Preferred Stock

Issuance of Common Stock

Issuance of common stock in accordance with SAFE

the first quarter of 2024, the Company received $ 4,097 in gross proceeds from three significant stockholders of the Company, D&D,

Union Square Park Partners LP, and John J.

Bello, the Company’s former Chairman, pursuant to Simple Agreements for Future Equity

(“SAFE”) investments.

The SAFE investments were to convert into the next equity financing of Reed’s on the same terms

and conditions as investors in Reed’s next equity financing at the lesser of $ 1.50 per share or the per share price in the financing.

D&D was given the right to designate a second independent director nominee to the board of directors of Reed’s and the company

agreed to limit the size of its board of directors to nine (9) for so long as D&D owns 25% or more of the equity securities of the

The Company initially recorded the SAFE investments as a liability at $ 5,490 which was reflected on its June 30, 2024 balance

sheet, and reflected a loss from change in fair value of SAFE investments of $ 1,393 .

On September 9, 2024, as part of a Securities Purchase

Agreement described below, the Company issued 2,731,205 shares of its common stock valued at $ 4,096 upon conversion of the SAFEs.

conversion of the SAFE instruments, the Company recorded a gain from change in fair value of SAFE investments of $ 1,393 during the year

ended December 31, 2024.

Other issuances of common stock for cash

On September 9, 2024, the Company entered into

a Securities Purchase Agreement with various purchasers for the issuance of 4,000,000 common shares for total consideration of $ 6,000 .

The various purchasers also held the investment in the Company’s SAFEs as described above.

In addition to the issuance of the 2,731,205

shares of common stock valued at $ 4,096 upon conversion of the SAFE described above, the Company issued an additional 1,268,795 common

shares to D&D for consideration of $ 1,903 .

On December 30, 2024, the Company entered into a Securities

Purchase Agreement with accredited investors.

The Company issues 14,705,882 shares of common stock for aggregate gross proceeds of $ 10

The average price per share was $ 0.68 .

On May 25, 2023, the Company entered into a Securities

Purchase Agreement with D&D, as the lead investor, and certain of Reed’s affiliates pursuant to which the investors agreed to

purchase an aggregate of 1,566,732 shares of Reed’s common stock and warrants to purchase 313,346 shares of Common Stock.

price was $ 2.585 per share of Common Stock with the associated warrant.

The net proceeds to the Company, after deducting offering expenses,

was $ 4,016 .

The warrants are exercisable for a term of three years at an exercise price of $ 2.50 per share.

Common shares issued upon conversion of Notes Payable

On November 19, 2024, the Company issued 22,478,048

shares of its Common stock with a fair value of $ 20,232

to D&D upon conversion of Convertible Notes Payable and accrued interest of $ 22,478 .

The excess of the converted value of the convertible notes and accrued interest over the fair value of the shares issued of

was treated as a capital contribution.

Common stock repurchases

During the year ended December 31, 2023, the Company repurchased 274 shares of common stock from an officer for $ 1

based on the market value of share on the date repurchased.

The Company retired the shares.

Series A Convertible Preferred Stock

A Convertible Preferred Stock (the “Preferred Stock”) consists of $ 10 par value, 5 % non-cumulative, non-voting, participating

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

the years ended December 31, 2023 and 2022, the Company accrued dividends on the Preferred Stock of $ 5 and is included in accrued expenses

the years ended December 31, 2024 and 2023, the Company accrued dividends on the Preferred Stock of $ 5 which is included in accrued expenses

in the accompanying balance sheets.

No shares of Series A preferred stock were converted into common stock in 2024 and 2023.

of December 31, 2023, there were 180,000,000 shares authorized, and 4,187,291 shares of common stock outstanding.

As of December 31,

2022, there were 180,000,000 shares authorized, and 2,519,485 shares of common stock outstanding.

Stock Issuances

May 25, 2023, the Company entered into a Securities Purchase Agreement with D&D Source of Life Holding Ltd., as the lead investor,

and certain of Reed’s affiliates pursuant to which the investors agreed to purchase an aggregate of 1,566,732 shares of Reed’s

common stock and warrants to purchase 313,346 shares of Common Stock.

The purchase price was $ 2.585 per share of Common Stock with the

associated warrant.

The net proceeds to the Company, after deducting offering expenses, was $ 4,016 .

The warrants are exercisable for

a term of three years at an exercise price of $ 2.50 per share.

May 25, 2023, in order to induce the lead investor to subscribe, the Company granted the lead investor certain preemptive rights and

agreed to support the lead investor’s nomination of two board designees, one of which shall be an independent director.

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.

stock repurchases

the year ended December 31, 2023, the Company repurchased 274 shares of common stock from an officer for $ 1 based on the market value

of share on the date repurchased.

The Company retired the shares.

the year ended December 31, 2022, the Company repurchased 265 shares of common stock from an officer for $ 2 based on the market value

of share on the date repurchased.

The Company retired the shares.

Share-Based Payments

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

The options may constitute either

“incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or “non-qualified stock options”.

The options may constitute

either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or “non-qualified

stock options”.

The Plan is currently administered by the board of directors.

The exercise price of an option granted under the plan cannot be less than

100% of the fair market value per share of common stock on the date of the grant of the option.

Options may not be granted under the

plan on or after the tenth anniversary of the adoption of the plan.

Incentive stock options granted to a person owning more than 10%

of the combined voting power of the common stock cannot be exercisable for more than five years .

When an option is exercised, the purchase

price of the underlying stock is received in cash, except that the plan administrator may permit the exercise price to be paid in any

combination of cash, shares of stock having a fair market value equal to the exercise price, or as otherwise determined by the plan administrator.

following table summarizes restricted stock activity during the years ended December 31, 2023, and 2022:

of Restricted Stock Activity

Balance, December 31, 2021

Balance, December 31, 2022

Balance, December 31, 2023

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

of these restricted stock awards vested on February

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

The aggregate fair value of the stock awards was $ 150 based on the market

price of our common stock price which was $ 16.00

per share on the date of grants and is amortized

as shares vest.

total fair value of restricted common stock vesting during the year ended December 31, 2023, and 2022 was $ 3 and $ 158 , respectively,

and is included in general and administrative expenses in the accompanying statements of operations.

As of December 31, 2023, the amount

of unvested compensation related to issuances of restricted common stock was $ 0 .

When calculating basic loss per share, these shares

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

When calculating diluted net income per share, these

shares are included in weighted average common shares outstanding as of their grant date.

exercise price of an option granted under the plan cannot be less than 100% of the fair market value per share of common stock on

the date of the grant of the option.

Options may not be granted under the plan on or after the tenth anniversary of the adoption of

Incentive stock options granted to a person owning more than 10% of the combined voting power of the common stock cannot

be exercisable for more than five years.

When an option is exercised, the exercise is received

in cash, except that the plan administrator may permit the exercise price to be paid in any combination of cash, shares of stock

having a fair market value equal to the exercise price, or as otherwise determined by the plan administrator.

April 29, 2024, the 2024 Inducement Plan (the “2024 Plan”) was approved by the compensation committee of our board of directors.

The 2024 Plan provides for the issuance

of up to 250,000 shares.

Options issued and forfeited under the 2024 plan contain an Evergreen provision and cannot be re-priced without

shareholder approval.

As of December 31, 2024, shares issuable under the 2024 Plan were 44,007 .

2024 Plan permits the grant of options and stock awards to our employees, directors and consultants.

The options may constitute

either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or “non-qualified

stock options”.

The Plan is currently administered by the board of directors.

exercise price of an option granted under the plan cannot be less than 100% of the fair market value per share of common stock on

the date of the grant of the option.

Options may not be granted under the plan on or after the tenth anniversary of the adoption of

Incentive stock options granted to a person owning more than 10% of the combined voting power of the common stock cannot

be exercisable for more than five years.

When an option is exercised, the excise price is received

in cash, except that the plan administrator may permit the exercise price to be paid in any combination of cash, shares of stock

having a fair market value equal to the exercise price, or as otherwise determined by the plan administrator.

of December 31, 2024, the Company has issued stock options to purchase an aggregate of 239,651 shares of common stock.

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Exercisable at December 31, 2024

the year ended December 31, 2023, the Company approved options exercisable into 10,037 shares to be issued pursuant to Reed’s 2020

Equity Incentive Plan.

10,037 options were issued to employees, 5,016 options vesting annually over a four -year vesting period, and 5,021

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

the year ended December 31, 2024, the Company approved options exercisable into 205,669

shares to be issued pursuant to the 2024 Plan.

options were issued to employees, 148,714

vested immediately, 25,059

options vest annually over two to four -year

vesting periods, and 31,896

options vesting based on performance criteria

to be established by the board of directors.

stock options are exercisable at a price of $ 1.30 per share and expire in ten years .

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

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.

the year ended December 31, 2023, the Company approved options exercisable into 10,037 shares to be issued pursuant to the 2020

10,037 options were issued to employees, of which, 5,016 options vest annually over a four -year vesting period,

and 5,021 options vest based on performance criteria to be established by the board of directors.

stock options are exercisable at a price of $ 4.50 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:

The total fair value of these options at grant date

was approximately $ 32 , which was determined using a Black-Scholes-Merton option pricing model with the following average assumption:

stock price of $ 4.50 share, expected term of six years , volatility of 82 %, dividend rate of 0 %, and weighted average risk-free interest

9 unchanged sentences

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

the year ended December 31, 2023 and 2022, the Company recognized $ 490 and $ 701 of compensation expense relating to vested stock options.

As of December 31, 2023, the aggregate amount of unvested compensation related to stock options was approximately $ 443 which will be

recognized as an expense as the options vest in future periods through March 28, 2027.

the year ended December 31, 2024 and 2023, the Company recognized $ 528

of compensation expense relating to vested stock options.

As of December 31, 2024, the aggregate amount of unvested compensation

related to stock options was approximately $ 77

which will be recognized as an expense as the options vest in future periods through March 28, 2027.

of December 31, 2024, the outstanding and exercisable options have no intrinsic value.

3 unchanged sentences

of Information Regarding Stock Options

Options Outstanding

Options Exercisable

Range of Exercise Price

4.00 - $ 12.00

25.00 - $ 37.50

44.00 - $ 66.00

88.00 - $ 120.00

122.00 - $ 183.00

of Exercise Price

Stock Warrants

3 unchanged sentences

of Warrant Activity

-Average Exercise Price

Weighted-Average Remaining Contractual Terms (Years)

Aggregate Intrinsic Value

Exercise Price

Weighted-Average

Remaining Contractual Terms (Years)

Intrinsic Value

Outstanding at December 31, 2022

4 unchanged sentences

Exercisable at December 31, 2024

May 25, 2023, the Company entered into a Securities Purchase Agreement with D&D Source of Life Holding Ltd., as the lead investor,

May 25, 2023, the Company entered into a Securities Purchase Agreement with D&D, as the lead investor,

and certain of Reed’s affiliates pursuant to which the investors agreed to purchase an aggregate of 1,566,732 shares of Reed’s

3 unchanged sentences

The warrants are exercisable for a term of three years at a per share exercise price of $ 2.50 .

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).

of December 31, 2024, the outstanding and exercisable warrants have no intrinsic value.

4 unchanged sentences

of Warrants Outstanding and Exercisable

Warrants Outstanding

Warrants Exercisable

Range of Exercise Price

14.39 - $ 32.20

of Exercise Price

the years ended December 31, 2024 and 2023, a reconciliation of the effective income tax rate to the U.S.

2 unchanged sentences

Statutory Rate

December 31, 2023

December 31, 2022

Federal statutory tax rate

State rate, net of federal benefit

Federal statutory

rate, net of federal benefit

Federal and state tax rate

Effect of change in tax rate

Valuation allowance

Effective tax rate

of December 31, 2024 and 2023, significant components of the Company’s deferred tax assets and liabilities are as follows:

of Deferred Income Tax Assets

December 31, 2023

December 31, 2022

Deferred income tax asset:

Net operating loss carryforwards

Disqualified corporate interest expense

Net operating

loss carryforwards

Disqualified corporate interest

Stock-based compensation

1 unchanged sentence

Inventory reserves

Operating Leasr liability

Asset impairment

Operating lease liability

Gross deferred tax assets

Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Operating lease right-of-use asset

Deferred finance costs

Total deferred tax liabilities

Net deferred tax asset (liability)

Operating lease right-of-use

finance costs

deferred tax liabilities

deferred tax asset (liability)

December 31, 2024 and 2023, 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 $ 98,000 ] and $ 92,000 , respectively.

For state purposes

approximately $[ 62,000 ]and $ 49,000 was available at December 31, 2023 and 2022, respectively.

The Federal carryforward for NOLs arising

in years prior to 2018 is approximately $[ 32,000 ], which expires on various dates through 2037.

For Federal purposes the amounts available were approximately $ 104,000

and $ 97,000 ,

respectively.

For state purposes approximately $ 66,000

was available at December 31, 2024 and 2023,

respectively.

The Federal carryforward for NOLs arising in years prior to 2018 is approximately $ 31,000 ,

which expires on various dates through 2037.

NOLs originating after 2017 of approximately $ 73,000 ,

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

The state carryforward

expires on various dates through 2043.

Given the Company’s history of net operating losses, management has determined that it is

more likely than not that the Company will not be able to realize the tax benefit of the carryforwards.

Accordingly, the Company has

not recognized a deferred tax asset for this benefit.

The state carryforward expires

on various dates through 2044.

Given the Company’s history of net operating losses, management has determined that it is more likely

than not that the Company will not be able to realize the tax benefit of the carryforwards.

Accordingly, the Company has not recognized

a deferred tax asset for this benefit.

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

22 unchanged sentences

Also beginning

in 2019, CCB agreed to pay the Company a 5 % royalty through 2021 on certain private label sales made by CCB.

the years ended December 31, 2023 and 2022, the Company incurred co-packing fees due to CCB of $ 1,957 and $ 3,718 , respectively, of which

$ 259 and $ 2,205 , were payable to CCB as of December 31, 2023 and 2022.

At December 31, 2023 and 2022, the Company had also recorded receivables

from CCB of $ 1,382 and $ 1,315 , respectively, including royalty receivable of $ 297 , and the balance for charge backs of certain costs

management determined were permittable under the co-packing agreement.

December 31, 2022, CCB disputed 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, 2023 and 2022, due to the uncertainty about the ultimate amount that will be

settled, the Company has provided a reserve for $ 1,123 and $ 538 , respectively, based on management’s estimate.

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

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

December 31, 2024 and 2023, accounts receivable due from and accounts payable due to CCB were as follows:

of Related Parties

Accounts receivable, net of provision of $ 1,123 and $ 538 at December 31, 2023 and 2022, respectively

Accounts payable

Net (payable) receivable

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

the $ 452 and $ 2,025 outstanding at December 31, 2023 and 2022, respectively.

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.

Accounts receivable,

net of provision of $ 1,238

at December 31, 2024 and 2023, respectively

(payable) receivable

addition, on April 19, 2023, the Company received a letter from CCB demanding payment of various amounts outstanding at December 31,

2024 and 2023.

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.

During 2024, the Company

commenced arbitration proceedings with CCB in order to reach a settlement agreement, the arbitration is pending final judgement.

Commitments and Contingencies

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, 2023, $ 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

$ 12 that remain in escrow with the lessor.

May 1, 2023, the Company engaged an investment bank to explore financing options.

Subject to services provided by the investment bank,

we may have a remaining obligation not expected to exceed $ 1,500

related to this engagement.

Management believes it has provided an adequate provision for any amounts

due, if any, in the accompanying financial statements.

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.

Segment Information

Company operates and manages its business as one

reportable and operating segment as a manufacturer

of carbonated beverages under Reed’s and Virgil’s brand names.

The measure of segment assets is reported on the balance sheet

as total assets.

Company’s CODM reviews financial information presented and decides how to allocate resources based on net income (loss).

(loss) is used for evaluating financial performance.

segment expenses include research and development, salaries, insurance, and stock-based compensation.

Operating expenses include

all remaining costs necessary to operate our business, which primarily include external professional services and other administrative

The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM.

of Segment Information

Stock-based compensation

Selling and marketing

Freight and delivery

operating expenses

and other expenses, net

Subsequent Events

Agreements for Future Equity (“SAFE”) investments

the first quarter of 2024, the Company received $ 4.1

million in gross proceeds from two significant

Simple Agreements for Future Equity (“SAFE”) investments .

the first quarter of 2024, the company received $ 4.1

million in gross proceeds from three significant stockholders of the Company, D&D Source of Life Holding LTD

(“D&D”) and Union Square Park Partners LLP, and John J.

Bello, the Company’s Chairman, pursuant to Simple

Agreements for Future Equity (“SAFE”) agreements.

The SAFE investments will convert into the next equity financing of

Reed’s on the same terms and conditions as investors in Reed’s next equity financing at the lesser of $ 1.50

per share or the per share price in the financing.

Until such time as the SAFE investments convert to equity the approximately

million received is recorded as a liability.

D&D was given the right to designate a second independent director nominee to the

board of directors of Reed’s and the company agreed to limit the size of its board of directors to nine (9) for so long as

D&D owns 25% or more of the equity securities of the company.

Waiver, Deferral, and Amendment and Restatement of Secured Convertible Notes Payable

February 12, 2024, Reed’s entered into a Limited Waiver, Deferral, and Amendment and Restatement Agreement (the “Waiver and

Amendment”) with each holder of the Notes payable to Whitebox (see Note 7).

Subject to the Waiver and Amendment, the holders agreed

to temporarily waive certain events of default under the Notes, including the failure to pay Excess ABL Amounts and the failure to pay

amortization payments due December 1, 2023 to April 30, 2024, and to waive the maturity date of the Option Notes originally due through

November 28, 2023, to April 30, 2024.

addition, as of the date of these financial statements, the Company and Whitebox have tentatively agreed to amend and restate the Notes

in full to provide, among other things, the following:

conversion price of the Original Notes will be amended to be between 125% and 145% of the effective

price of the company’s subsequent equity offering, with the premium set based on the

aggregate gross proceeds realized by the company in the offering and the conversion price

subject to a cap of $7.50 per share.

portion of the outstanding ABL accrued fees will be satisfied through payment of $ 132 in

cash and the issuance of shares of the company’s common stock (up to the beneficial

ownership limitation applicable to each holder) at a value per share equal to the lesser

of $ 1.50 or the per share price of securities issued in the company’s subsequent equity

The remaining balance of any outstanding accrued ABL fees will be added to the

principal amount of the Notes.

The $ 132 has not been paid nor any shares issued as of the

date of these financial statements

● The maturity date of the Option Notes will be amended to March 31, 2025.

conversion price of the Option Notes will be amended to 120% of the arithmetic average of the

Daily VWAP for the five (5) VWAP Trading Days beginning on, and including, the VWAP Trading

Day immediately following the consummation of an

equity offering undertaken for purposes of satisfying the terms and conditions of the Waiver

and Amendment .

Option Notes shall bear interest at a rate of 10% per annum, with 5% per annum payable in

cash and 5% per annum payable “in kind” by adding such PIK interest

to the unpaid principal amount.

company shall have the right at any time prior to the date that is the 180 th day

from the effective date to prepay the amended and restated Option Notes, in whole or in part,

at a price equal to 102% of the principal amount plus all accrued and unpaid interest thereon

to the date of prepayment.

On February 4, 2025, the Company formed a new subsidiary, Reed’s

(Asia) Limited (BVI).

The new subsidiary (“Reed’s Asia”) was formed as an early part of the Company’s expansion

into new geographic markets in the Asia Pacific region.

On February 20, 2025, Reed’s Asia reached an agreement to acquire

100 % of the outstanding common stock of Roci Labo Inc., a Japanese corporation (the “Reed’s Japan Transaction”).

On March 18, 2025, Reed’s Asia received Japanese government approval for the Reed’s Japan Transaction.

The new subsidiary,

operating as Reed’s Japan Co., Ltd (“Reed’s Japan”), was acquired as an early part of the Company’s strategic

expansion into new geographic markets in Japan.

The acquisition price for the Reed’s Japan Transaction was not material.

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