UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 001-32501

REED’S, INC.

(Exact name of registrant as specified in its charter)

Delaware

35-2177773

(State of

incorporation)

(I.R.S. Employer

Identification No.)

201 Merritt 7, Norwalk, CT. 06851

(Address of principal executive offices) (Zip Code)

(800) 997-3337

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of Each Class		Trading Symbol		Names of each exchange on which registered

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were a total of 4,169,131 shares of Common Stock outstanding as of October 31, 2023.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer ☐	Accelerated Filer ☐	Non-Accelerated Filer ☒
Smaller Reporting Company ☒	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		F-1

Item 1. Condensed Financial Statements		F-1

Condensed Balance Sheets - September 30, 2023 (Unaudited) and December 31, 2022		F-1

Condensed Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited)		F-2

Condensed Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2023 and 2022 (Unaudited)		F-3

Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)		F-4

Notes to Condensed Financial Statements three and nine months ended September 30, 2023 and 2022 (Unaudited)		F-5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1

Item 3. Quantitative and Qualitative Disclosures About Market Risk		9

Item 4. Controls and Procedures		10

PART II – OTHER INFORMATION		10

Item 1. Legal Proceedings		10

Item 1A. Risk Factors		10

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		10

Item 3. Defaults Upon Senior Securities		10

Item 4. Mine Safety Disclosures		10

Item 5. Other Information		10

Item 6. Exhibits		11

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Quarterly Report on Form 10-Q as well as our other public filings or public statements include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and similar expressions and include references to assumptions and relate to our future prospects, developments, and business strategies.

These forward-looking statements involve known and unknown risks, assumptions and uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements. Management cautions that these forward-looking statements are qualified by their terms and/or important factors, many of which are outside of our control, and involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made, including, but not limited to, the following risk factors:

● We have a history of operating losses. Our estimates regarding the sufficiency of our cash resource and capital requirements and needs for additional financing raises substantial doubt about our ability to continue as a going concern.

● We may not be able to extend or repay our indebtedness owed to our secured lenders, which would have a material adverse effect on our financial condition and ability to continue as a going concern.

● We require additional financing to support our working capital and execute our operating plans for fiscal 2023, which may not be available or may be costly and dilutive.

● Our ability to absorb, mitigate or pass on cost increases to our bottlers/distributors and/or customers;

● The impact of rising costs, interest rates, and inflation on the discretionary income of our consumers, particularly the rising cost of energy;

● Uncertainties associated with an economic slowdown or recession that could negatively impact the financial condition of our customers and could result in a reduced demand for our products;

● The impact of the military conflicts in Ukraine and Israel, volatility in commodity prices, increased economic uncertainty and escalating geopolitical tensions;

● The impact of logistical issues and delays;

● Our ability to effectively manage our inventories and/or our accounts receivables;

● Our ability to continue to generate sufficient cash flows to support our expansion plans and general operating activities;

● Changes in demand that are weather, or season related and/or for other reasons, including changes in product category and/or package consumption and changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and poor or extreme weather conditions;

● The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by competitors;

● Our ability to implement and/or maintain price increases, including through reductions in promotional allowances;

● The effectiveness of sales and/or marketing efforts by us and/or by distributors of our products, most of whom distribute products that may be regarded as competitive with our products;

● The costs and/or effectiveness, now or in the future, of our advertising, marketing and promotional strategies;

● The failure of our co-packers to manufacture our products on a timely basis or at all;

● Our ability to make suitable arrangements and/or procure sufficient capacity for the co-packing of any of our products, the timely replacement of discontinued co-packing arrangements and/or limitations on co-packing availability;

● Volatility of stock prices which may restrict stock sales, stock purchases or other opportunities as well as negatively impact the motivation of equity award grantees;

● Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, which disrupts our business or negatively impacts customer relationships, as well as cybersecurity incidents involving data shared with third parties;

● The imposition of additional regulation imposing excise taxes and/or sales taxes on sweetened beverages or alcoholic beverages; and

● Recruitment and retention of senior management, other key employees and our employee base in general.

We undertake no obligation to update or revise the forward-looking statements included in this report, whether as a result of new information, future events or otherwise, after the date of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements.

iii

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

REED’S, INC,

CONDENSED BALANCE SHEETS

(Amounts in thousands, except share amounts)

	September 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	1,004	$	533
Accounts receivable, net of allowance of $514 and $252, respectively		5,267		5,671
Inventory, net		15,964		16,175
Receivable from former related party		777		777
Prepaid expenses and other current assets		489		939
Total current assets		23,501		24,095

Property and equipment, net of accumulated depreciation of $1,001 and $787, respectively		559		766
Intangible assets		627		626
Total assets	$	24,687	$	25,487

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	9,067	$	9,805
Accrued expenses		873		233
Revolving line of credit, net of capitalized financing costs of $242 and $363, respectively		9,697		10,974
Convertible notes payable, current portion, net of debt discount of $0 and $414, respectively		7,380		2,434
Payable to former related party		452		2,025

SEC Form 10-Q filed by Reeds Inc.