SEC Info - Reed’s, Inc. - ‘10-Q’ for 6/30/23

Page	(sequential)		(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Condensed Balance Sheets -- June 30, 2023 (Unaudited) and December 31, 2022 Condensed Financial Statements Condensed Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited) Condensed Statements of Changes in Stockholders' Equity (Deficit) for the three and six months ended June 30, 2023 and 2022 (Unaudited) Condensed Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited) Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information June 30, 2023 (Unaudited) and December 31, 2022 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to Condensed Financial Statements three and six months ended June 30, 2023 and 2022 (Unaudited) Other Information Part I -- Financial Information Part Ii -- Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Part I -- Financial Information
"	Item 1. Condensed Financial Statements
"	Condensed Balance Sheets -- June 30, 2023 (Unaudited) and December 31, 2022
"	Condensed Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)
"	Condensed Statements of Changes in Stockholders' Equity (Deficit) for the three and six months ended June 30, 2023 and 2022 (Unaudited)
"	Condensed Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)
"	Notes to Condensed Financial Statements three and six months ended June 30, 2023 and 2022 (Unaudited)
"	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3. Quantitative and Qualitative Disclosures About Market Risk
"	Item 4. Controls and Procedures
"	Part Ii -- Other Information
"	Item 1. Legal Proceedings
"	Item 1A. Risk Factors
"	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
"	Item 3. Defaults Upon Senior Securities
"	Item 4. Mine Safety Disclosures
"	Item 6. Exhibits

i 0001140215 i false i Q2 i --12-31 i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i P4Y i i i i i 0001140215 2023-01-01 2023-06-30 0001140215 2023-08-01 0001140215 2023-06-30 0001140215 2022-12-31 0001140215 us-gaap:RelatedPartyMember 2023-06-30 0001140215 us-gaap:RelatedPartyMember 2022-12-31 0001140215 2023-04-01 2023-06-30 0001140215 2022-04-01 2022-06-30 0001140215 2022-01-01 2022-06-30 0001140215 us-gaap:CommonStockMember 2023-03-31 0001140215 us-gaap:PreferredStockMember 2023-03-31 0001140215 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001140215 us-gaap:RetainedEarningsMember 2023-03-31 0001140215 2023-03-31 0001140215 us-gaap:CommonStockMember 2022-12-31 0001140215 us-gaap:PreferredStockMember 2022-12-31 0001140215 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001140215 us-gaap:RetainedEarningsMember 2022-12-31 0001140215 us-gaap:CommonStockMember 2022-03-31 0001140215 us-gaap:PreferredStockMember 2022-03-31 0001140215 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001140215 us-gaap:RetainedEarningsMember 2022-03-31 0001140215 2022-03-31 0001140215 us-gaap:CommonStockMember 2021-12-31 0001140215 us-gaap:PreferredStockMember 2021-12-31 0001140215 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001140215 us-gaap:RetainedEarningsMember 2021-12-31 0001140215 2021-12-31 0001140215 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001140215 us-gaap:PreferredStockMember 2023-04-01 2023-06-30 0001140215 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001140215 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001140215 us-gaap:CommonStockMember 2023-01-01 2023-06-30 0001140215 us-gaap:PreferredStockMember 2023-01-01 2023-06-30 0001140215 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-06-30 0001140215 us-gaap:RetainedEarningsMember 2023-01-01 2023-06-30 0001140215 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001140215 us-gaap:PreferredStockMember 2022-04-01 2022-06-30 0001140215 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001140215 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001140215 us-gaap:CommonStockMember 2022-01-01 2022-06-30 0001140215 us-gaap:PreferredStockMember 2022-01-01 2022-06-30 0001140215 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-06-30 0001140215 us-gaap:RetainedEarningsMember 2022-01-01 2022-06-30 0001140215 us-gaap:CommonStockMember 2023-06-30 0001140215 us-gaap:PreferredStockMember 2023-06-30 0001140215 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001140215 us-gaap:RetainedEarningsMember 2023-06-30 0001140215 us-gaap:CommonStockMember 2022-06-30 0001140215 us-gaap:PreferredStockMember 2022-06-30 0001140215 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001140215 us-gaap:RetainedEarningsMember 2022-06-30 0001140215 2022-06-30 0001140215 srt:ScenarioForecastMember 2024-01-22 2024-01-24 0001140215 2023-01-23 2023-01-25 0001140215 2023-01-25 0001140215 REED:CustomerOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-04-01 2023-06-30 0001140215 REED:CustomerTwoMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-04-01 2023-06-30 0001140215 REED:CustomerThreeMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-04-01 2023-06-30 0001140215 REED:CustomerOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-01-01 2023-06-30 0001140215 REED:CustomerTwoMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-01-01 2023-06-30 0001140215 REED:CustomerOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-04-01 2022-06-30 0001140215 REED:CustomerTwoMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-04-01 2022-06-30 0001140215 REED:CustomerThreeMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-04-01 2022-06-30 0001140215 REED:CustomerOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-01-01 2022-06-30 0001140215 REED:CustomerTwoMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-01-01 2022-06-30 0001140215 REED:CustomerThreeMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-01-01 2022-06-30 0001140215 REED:CustomerOneMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-06-30 0001140215 REED:CustomerTwoMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-06-30 0001140215 REED:CustomerThreeMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-06-30 0001140215 REED:CustomerOneMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001140215 REED:CustomerTwoMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001140215 REED:VendorOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-04-01 2023-06-30 0001140215 REED:VendorOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-01-01 2023-06-30 0001140215 REED:VendorOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-04-01 2022-06-30 0001140215 REED:VendorOneMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-01-01 2022-06-30 0001140215 REED:VendorOneMember us-gaap:AccountsPayableMember us-gaap:CustomerConcentrationRiskMember 2023-04-01 2023-06-30 0001140215 REED:VendorOneMember us-gaap:AccountsPayableMember us-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001140215 us-gaap:WarrantMember 2023-01-01 2023-06-30 0001140215 us-gaap:WarrantMember 2022-01-01 2022-06-30 0001140215 us-gaap:StockOptionMember 2023-01-01 2023-06-30 0001140215 us-gaap:StockOptionMember 2022-01-01 2022-06-30 0001140215 us-gaap:ConvertibleNotesPayableMember 2023-01-01 2023-06-30 0001140215 us-gaap:ConvertibleNotesPayableMember 2022-01-01 2022-06-30 0001140215 REED:UnvestedRestrictedCommonStockMember 2023-01-01 2023-06-30 0001140215 REED:UnvestedRestrictedCommonStockMember 2022-01-01 2022-06-30 0001140215 REED:CommonStockEquivalentOfSeriesAConvertiblePreferredStockMember 2023-01-01 2023-06-30 0001140215 REED:CommonStockEquivalentOfSeriesAConvertiblePreferredStockMember 2022-01-01 2022-06-30 0001140215 REED:RightOfUseAssetsUnderOperatingLeasesMember 2023-06-30 0001140215 REED:RightOfUseAssetsUnderOperatingLeasesMember 2022-12-31 0001140215 REED:ComputerHardwareAndSoftwareMember 2023-06-30 0001140215 REED:ComputerHardwareAndSoftwareMember 2022-12-31 0001140215 us-gaap:MachineryAndEquipmentMember 2023-06-30 0001140215 us-gaap:MachineryAndEquipmentMember 2022-12-31 0001140215 REED:AlternaCapitalSolutionsMember 2023-06-30 0001140215 REED:AlternaCapitalSolutionsMember 2022-12-31 0001140215 REED:AlternaCapitalSolutionsMember 2022-03-01 2022-03-31 0001140215 REED:AlternaCapitalSolutionsMember 2022-03-31 0001140215 REED:AlternaCapitalSolutionsMember 2022-03-27 2022-03-28 0001140215 REED:AlternaCapitalSolutionsMember 2023-03-28 0001140215 REED:AlternaCapitalSolutionsMember 2022-03-28 0001140215 REED:AlternaCapitalSolutionsMember 2022-01-01 2022-12-31 0001140215 REED:AlternaCapitalSolutionsMember 2023-01-01 2023-06-30 0001140215 REED:NotePurchaseAgreementMember 2022-05-31 0001140215 REED:NotePurchaseAgreementMember 2022-05-01 2022-05-31 0001140215 REED:NotePurchaseAgreementMember REED:SeptemberTwoThousandTwentyTwoNotesMember 2022-09-30 0001140215 REED:NotePurchaseAgreementMember 2022-08-01 2022-08-31 0001140215 REED:NotePurchaseAgreementMember 2023-06-30 0001140215 us-gaap:ConvertibleNotesPayableMember 2022-12-31 0001140215 2023-02-28 0001140215 2023-05-31 0001140215 2022-05-31 0001140215 REED:WhiteBoxMember 2022-05-31 0001140215 us-gaap:ConvertibleNotesPayableMember 2023-06-30 0001140215 REED:NotePurchaseAgreementMember 2023-01-01 2023-06-30 0001140215 REED:SecuritiesPurchaseAgreementMember REED:DDSourceofLifeHoldingLtdMember 2023-05-24 2023-05-25 0001140215 REED:SecuritiesPurchaseAgreementMember REED:DDSourceofLifeHoldingLtdMember 2023-05-25 0001140215 srt:OfficerMember 2023-01-01 2023-06-30 0001140215 us-gaap:RestrictedStockMember 2022-12-31 0001140215 us-gaap:RestrictedStockMember 2023-01-01 2023-06-30 0001140215 us-gaap:RestrictedStockMember 2023-06-30 0001140215 us-gaap:RestrictedStockMember 2022-01-01 2022-06-30 0001140215 REED:TwoThousandTwentyEquityIncentivePlanMember 2023-01-01 2023-06-30 0001140215 REED:TwoThousandTwentyEquityIncentivePlanMember REED:EmployeesMember 2023-01-01 2023-06-30 0001140215 REED:BoardOfDirectorsMember 2023-01-01 2023-06-30 0001140215 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-06-30 0001140215 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-06-30 0001140215 us-gaap:EmployeeStockOptionMember 2023-06-30 0001140215 us-gaap:StockOptionMember 2022-12-31 0001140215 us-gaap:StockOptionMember 2023-01-01 2023-06-30 0001140215 us-gaap:StockOptionMember 2023-06-30 0001140215 us-gaap:WarrantMember 2022-12-31 0001140215 us-gaap:WarrantMember 2023-06-30 0001140215 REED:StockWarrantsMember 2023-06-30 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember 2018-12-31 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember us-gaap:RelatedPartyMember 2023-06-30 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember us-gaap:RelatedPartyMember 2022-06-30 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember 2023-06-30 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember 2022-06-30 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember 2022-12-31 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember 2023-01-01 2023-06-30 0001140215 REED:ChristopherJReedMember REED:CaliforniaCustomBeverageLLCMember 2022-01-01 2022-12-31 0001140215 REED:CaliforniaCustomBeverageLLCMember us-gaap:RelatedPartyMember 2022-12-31 0001140215 REED:CaliforniaCustomBeverageLLCMember 2022-12-31 0001140215 2022-01-01 2022-12-31 0001140215 REED:ChrisReedMember REED:CaliforniaCustomBeverageLLCMember 2018-12-31 0001140215 REED:ChrisReedMember REED:CaliforniaCustomBeverageLLCMember 2023-06-30 0001140215 REED:ChrisReedMember REED:CaliforniaCustomBeverageLLCMember 2023-01-01 2023-06-30 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure REED:Segment

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

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 i 4,169,131 shares of Common Stock outstanding as of August 1, 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.

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). i 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.:

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 ☐ i No ☒

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 conflict in Ukraine, including supply chain disruptions, volatility in commodity prices, increased economic uncertainty and escalating geopolitical tensions;

● 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.

The accompanying notes are an integral part of these condensed financial statements.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report.

In addition to our GAAP results, the following discussion includes Modified EBITDA as a supplemental measure of our performance. We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, and one-time restructuring-related costs including employee severance and asset impairment.

The following discussion also includes the use of gross billing, a key performance indicator and metric. Gross billing represents invoiced amounts to distributors and retailers, excluding sales adjustments. Gross billing may include deductions from MSRP or “list price”, where applicable, and excludes promotional costs of generating such sales. Management utilizes gross billing to monitor operating performance of products and salespersons, which performance can be masked by the effect of promotional or other allowances. Management believes that the presentation of gross billing provides a useful measure of Reed’s operating performance.

During the period ended June 30, 2023, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies in transportation and warehouse costs and reduce operating expenses. In addition, it continues to build its innovation pipeline with sustained growth in Reed’s Real Ginger Ale, Virgil’s Zero Sugar handcrafted sodas, Reed’s Classic and Stormy Mule, and Reed’s Hard Ginger Ale.

The Company remains focused on driving sales growth, improving gross margin, and reducing freight costs. The sales growth focus is on channel expansion, increase in store placements, new product introduction and improved sales execution. The margin enhancement initiative is driven by packaging savings, co-packer upgrades, and better leveraged purchasing and improved efficiency. Underpinning these initiatives is a focus on strategically reducing operating costs particularly delivery and handling expenses.

During the period ended December 31, 2022, the COVID-19 pandemic continued to impact our operating results and the Company anticipates a residual effect for the balance of the year. In addition, the pandemic could cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively affects the consumers who purchase our products. Based on the recent increase in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.

Although the U.S. economy continued to grow during the second quarter of 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 in future periods. We have experienced supply chain challenges, including increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand. Although we regularly monitor companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. We expect the inflationary trends and supply chain pressures to continue throughout 2023.

During the three and six month period ended June 30, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022. The average cost of shipping and handling for the three month period ended June 30, 2023, was $3.04 per case, as compared to $5.00 per case for the three month period ended June 30, 2022. The average cost of shipping and handling for the six month period ended June 30, 2023, was $3.26 per case, as compared to $4.47 per case for the six month period ended June 30, 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. Mitigation 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. The Company has experienced moderation in inflation and anticipates this to continue throughout 2023.

Our ability to operate without significant incremental negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees and protect our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities to protect our employees. Since the inception of the COVID-19 pandemic and through June 30, 2023, we maintained the consistency of our operations during the onset of the COVID-19 pandemic. We will continue to innovate in managing our business, coordinating with our employees and suppliers to do our part to be responsible to our employees and business partners in responding to our customers and suppliers. However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.

Through June 30, 2023, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain access to the capital markets. We did not observe any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic.

Results of Operations – Three Months Ended June 30, 2023, as compared to Three Months Ended June 30, 2022

The following table sets forth key statistics for the three months ended June 30, 2023 and 2022, respectively, in thousands.

(A) We define gross billing as the total sales for the Company unadjusted for costs related to generating those sales. Management utilizes gross billing as an indicator of and to monitor operating performance of products and salespersons before the effect of any promotional or other allowances, which are determined in accordance with GAAP, and can mask certain performance issues. We believe that the presentation of gross billing provides a useful measure of our operating performance. Additionally, gross billing may not be comparable to similarly titled measures used by other companies, as gross billing has been defined by our internal reporting practices.

(B) We define promotional and other allowances as costs deducted from gross billing which are associated with generating those sales. Management utilizes promotional and other allowances as an indicator of and to monitor operating performance of products, salespersons, and customer agreements. We believe that the presentation of promotional and other allowances provides a useful measure of our operating performance. The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and the spending levels incurred or correlated with such sales. The expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the disclosure thereof does not conform to GAAP presentation requirements. Additionally, our definition of promotional and other allowances may not be comparable to similar items presented by other companies. Promotional and other allowances primarily include consideration given to the Company’s distributors or retail customers including, but not limited to the following: (i) reimbursements given to the Company’s distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products; (ii) the Company’s agreed share of fees given to distributors and/or directly to retailers for in-store marketing and promotional activities; (iii) the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers; (iv) incentives given to the Company’s distributors and/or retailers for achieving or exceeding certain predetermined sales goals; and (v) discounted or free products. Promotional and other allowances constitute a material portion of our marketing activities. The Company’s promotional allowance programs with its numerous distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year.

The following chart sets forth key statistics for the transition of the Company’s top line activity from the second quarter of 2022 through the second quarter of 2023.

As part of the Company’s ongoing initiative to simplify and streamline operations the Company has identified core products on which to place its strategic focus. These core products consist of Reed’s and Virgil’s branded beverages. Non-core products consist primarily of Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs.

Core beverage volume for the three months ended June 30, 2023, represents 99% of all beverage volume.

Core brand gross billing decreased by 26% to $11,095 compared to $14,972 during the same period last year, driven by a Reed’s volume decline of 13% and Virgil’s volume decline of 44%. The result is a decrease in total gross billing of 26%, to $11,164 during the three months ended June 30, 2023, from $15,155 in the same period last year. Price on our core brands increased 2% to $20.10 per case. The decrease was a result of volume declines that have impacted the CSD segment as a result of price increases coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.

Discounts as a percentage of gross sales was 10% compared to 9% in the same period last year. As a result, net sales revenue decreased 27% in the three months ended June 30, 2023, to $10,005, compared to $13,725 in the same period last year.

Cost of goods sold decreased $2,930 during the three months ended June 30, 2023, as compared to the same period last year. As a percentage of net sales, cost of goods sold for the three months ended June 30, 2023, was 75% as compared to 76% for the same period last year.

The total cost of goods per case decreased to $13.51 per case in the three months ended June 30, 2023, from $13.61 per case for the same period last year. The cost of goods sold per case on core brands was $13.35 during the three months ended June 30, 2023, compared to $13.52 for the same period last year.

Gross margin was 25% for the three months ended June 30, 2023, compared to 24% for the same period last year.

Delivery and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production. Delivery and handling expenses decreased by $2,146 in the three months ended June 30, 2023, to $1,686 from $3,832 in the same period last year, driven by our efforts to mitigate inflationary costs. Delivery costs in the three months ended June 30, 2023, were 17% of net sales and $3.04 per case, compared to 28% of net sales and $5.00 per case during the same period last year.

Marketing expenses consist of direct marketing, marketing labor, and marketing support costs. Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $1,259 during the three months ended June 30, 2023, compared to $2,225 during the same period last year. As a percentage of net sales, selling and marketing costs was 13% during the three months ended June 30, 2023, as compared to 16% during the same period last year. The decrease was primarily driven by lower broker commissions, employee related costs, travel and entertainment expenses and marketing expenditures, partially offset by higher stock compensation expense.

General and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional fees. General and administrative expenses decreased in the three months ended June 30, 2023, to $1,311 from $1,778, a decrease of $467 over the same period last year. As a percentage of net sales, general and administrative expense was 13% during the three months ended June 30, 2023, as compared to 13% during the same period last year. The decrease was driven by lower stock compensation, employee related costs, consultant fees, and information technology expenditures.

The loss from operations was $1,747 for the three months ended June 30, 2023, as compared to a loss of $4,536 in the same period last year driven by decreased gross profit offset by decreases in operating expenses discussed above.

Interest and other expense for the three months ended June 30, 2023, consisted of $1,387 of interest expense. During the same period last year, interest and other expense consisted of $541 of interest expense.

In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, legal settlements, and one-time restructuring-related costs including employee severance and asset impairment.

Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Set forth below is a reconciliation of net loss to Modified EBITDA for the three months ended June 30, 2023 and 2022 (unaudited; in thousands):

We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:

Results of Operations – Six months ended June 30, 2023, as compared to Six Months Ended June 30, 2022

The following table sets forth key statistics for the six months ended June 30, 2023 and 2022, respectively, in thousands.

Core beverage volume for the six months ended June 30, 2023, represents 99% of all beverage volume.

Core brand gross billing decreased by 17% to $23,429 compared to $28,259 during the same period last year, driven by Reed’s volume decline of 12% and Virgil’s volume decline of 33%. The result is a decrease in total gross billing of 18%, to $23,618 during the six months ended June 30, 2022, from $28,791 in the same period last year. Price on our core brands increased 5% to $20.15 per case. The decrease was a result of volume declines that have impacted the CSD segment as a result of price increases coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.

Discounts as a percentage of gross sales was 10% compared to 10% in the same period last year. As a result, net sales revenue decreased 18% in the six months ended June 30, 2023, to $21,162, compared to $25,907 in the same period last year.

Cost of goods sold decreased $3,721 during the six months ended June 30, 2023, as compared to the same period last year. As a percentage of net sales, cost of goods sold for the six months ended June 30, 2022, was 75% as compared to 76% for the same period last year.

The total cost of goods per case increased to $13.66 per case in the six months ended June 30, 2023, from $13.23 per case for the same period last year. The cost of goods sold per case on core brands was $13.55 during the six months ended June 30, 2023, compared to $13.15 for the same period last year.

Gross margin increased to 25% for the six months ended June 30, 2023, compared to 24% for the same period last year.

Delivery and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production. Delivery and handling expenses decreased by $2,838 in the six months ended June 30, 2023, to $3,806 from $6,644 in the same period last year, driven by our efforts to mitigate inflationary costs. Delivery costs in the six months ended June 30, 2023, were 18% of net sales and $3.26 per case, compared to 26% of net sales and $4.47 per case during the same period last year.

Marketing expenses consist of direct marketing, marketing labor, and marketing support costs. Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $2,706 during the six months ended June 30, 2023, compared to $4,403 during the same period last year. As a percentage of net sales, selling and marketing were 13% of net sales during the six months ended June 30, 2023, as compared to 17% of net sales during the same period last year. The decrease was driven by lower headcount, broker commissions, marketing expenditures, information technology charges, travel and entertainment expenses partially offset by stock compensation and trade show expenses.

General and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional fees. General and administrative expenses decreased in the six months ended June 30, 2023, to $3,020 from $3,899, a decrease of $879 over the same period last year. The decrease was driven by lower stock compensation, employee related expenses, information technology charges, consulting fees, downtime charges.

The loss from operations was $4,325 for the six months ended June 30, 2023, as compared to a loss of $8,715 in the same period last year driven by decreased gross profit partially offset by decreases in operating expenses discussed above.

Interest and other income for the six months ended June 30, 2023, consisted of $3,166 of interest expense. During the same period last year, interest and other expense consisted of $1,342 of interest expense.

In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, and one-time restructuring-related costs including employee severance and asset impairment.

Set forth below is a reconciliation of net loss to Modified EBITDA for the six months ended June 30, 2022 and 2021 (unaudited; in thousands):

The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

For the six months ended June 30, 2023, we recorded a net loss of $7,491. As of June 30, 2023, we had a cash balance of $447, with $0 of current availability, and $6,158 of additional borrowing capacity, a stockholder’s deficit of $11,463 and negative working capital of $3,585, compared to a cash balance of $533, with $110 of current availability, and $1,633 of additional borrowing capacity, a stockholder’s deficit of $8,470 and negative working capital of $1,563 at December 31, 2022.

Historically, we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible debt instruments, term loans and credit lines from financial institutions, and cash generated from operations. To alleviate these conditions, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners or through obtaining credit from financial institutions. As we seek additional sources of financing, there can be no assurance that such financing will be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry.

We have taken decisive action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product portfolio, negotiating improved vendor contracts and restructuring our selling prices.

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. There were no changes to our critical accounting policies described in the condensed financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that impacted our condensed financial statements and related notes included herein.

See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.

A smaller reporting company is not required to provide the information required by this Item.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2023, to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

There have been no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We are subject to various legal proceedings from time to time in the ordinary course of business, none of which are required to be disclosed under this Item 1.

In addition to other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K (our Form 10-K) for the year ended December 31, 2022 and any subsequent filings with the Securities and Exchange Commission (SEC) made prior to the date hereof, which could materially affect our business, financial condition, results of operations or future results. These risks and uncertainties discussed in our Form 10-K and in any subsequent filings with the SEC made prior to the date hereof are not the only ones facing our business. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, cash flows, financial condition and/or results of operations. Please also read the Cautionary Notice Regarding Forward-Looking Statements and Information of this Quarterly Report on Form 10-Q.

+Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulations S-K. The Company will furnish supplementally an unredacted copy of such exhibit to the Securities and Exchange Commission or its staff upon request.

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

Furnished herewith, XBRL (Extensive Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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

	June 30, 2023			December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	i 447		$	i 533
Accounts receivable, net of allowance of $ i 306 and $ i 252, respectively		i 3,734			i 5,671
Inventory, net		i 13,690			i 16,175
Receivable from former related party		i 777			i 777
Prepaid expenses and other current assets		i 880			i 939
Total current assets		i 19,528			i 24,095

Property and equipment, net of accumulated depreciation of $ i 933 and $ i 787, respectively		i 543			i 766
Intangible assets		i 627			i 626
Total assets	$	i 20,698		$	i 25,487

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	i 7,201		$	i 9,805
Accrued expenses		i 798			i 233
Revolving line of credit, net of capitalized financing costs of $ i 282 and $ i 363, respectively		i 6,560			i 10,974
Convertible notes payable, current portion, net of debt discount of $ i 505 and $ i 414, respectively		i 7,241			i 2,434
Payable to former related party		i 1,111			i 2,025
Current portion of lease liabilities		i 202			i 187
Total current liabilities		i 23,113			i 25,658

Convertible note payable, net of debt discount of $ i 355 and $ i 562, respectively, less current portion		i 8,945			i 8,092
Lease liabilities, less current portion		i 103			i 207
Total liabilities		i 32,161			i 33,957

Stockholders’ deficit:
Series A Convertible Preferred stock, $ i i 10 / par value, i i 500,000 / shares authorized, i i i i 9,411 / / / shares issued and outstanding		i 94			i 94
Common stock, $ i i .0001 / par value, i i 180,000,000 / shares authorized; i i 4,169,131 / and i i 2,519,485 / shares issued and outstanding, respectively		-			-
Additional paid in capital		i 119,138			i 114,635
Accumulated deficit		( i 130,695	)		( i 123,199	)
Total stockholders’ deficit		( i 11,463	)		( i 8,470	)
Total liabilities and stockholders’ deficit	$	i 20,698		$	i 25,487

	June 30, 2023			June 30, 2022
Cash flows from operating activities:
Net loss	$	( i 7,491	)	$	( i 10,057	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		i 79			i 51
Loss on disposal of property and equipment		i 9			-
Amortization of debt discount		i 712			i 164
Amortization of prepaid financing costs		-			i 431
Fair value of vested options		i 213			i 263
Fair value of vested restricted shares granted to officers		i 3			i 108
Fair value of common shares issued as financing costs		-			i 37
Change in allowance for doubtful accounts		i 54			i 10
Inventory write-downs		( i 207	)		( i 3	)
Accrued interest		i 1,773			i 160
Changes in operating assets and liabilities:
Accounts receivable		i 1,882			( i 2,532	)
Inventory		i 2,692			( i 7,141	)
Prepaid expenses and other assets		i 59			( i 495	)
Decrease in right of use assets		i 67			i 56
Accounts payable		( i 2,603	)		i 2,249
Accrued expenses		i 565			i 446
Accrued dividend		( i 5	)		-
Lease liabilities		( i 90	)		( i 77	)
Net cash used in operating activities		( i 2,288	)		( i 16,330	)

Cash flows from investing activities:
Trademark costs		( i 1	)		-
Proceeds from sale of property and equipment		i 68			-
Net cash provided by investing activities		i 67			-

Cash flows from financing activities:
Proceeds from line of credit		i 19,099			i 29,292
Payments on line of credit		( i 23,594	)		( i 27,934	)
Payments of debt issuance costs		-			( i 483	)
Proceeds from convertible note payable, net of expenses		i 3,797			i 10,008
Payment of convertible note payable		( i 268	)		-
Proceeds from sale of common stock		i 4,016			i 5,034
Repurchase of common stock		( i 1	)		( i 2	)
Amounts from former related party, net		( i 914	)		i 646
Net cash provided by financing activities		i 2,135			i 16,561

Net increase (decrease) in cash		( i 86	)		i 231
Cash at beginning of period		i 533			i 49
Cash at end of period	$	i 447		$	i 280

Supplemental disclosures of cash flow information:
Cash paid for interest	$	i 658		$	i 621
Non -cash investing and financing activities
Dividends on Series A Convertible Preferred Stock	$	i 5		$	i 5

	June 30, 2023		June 30, 2022
Warrants		i 549,292		i 262,149
Options		i 152,035		i 196,024
Convertible note payable		i 1,415,826		i 449,156
Unvested restricted common stock		-		i 5,517
Common stock equivalent of Series A Convertible Preferred stock		i 753		i 753
Total		i 2,117,906		i 913,599
Antidilutive Securities		i 2,117,906		i 913,599

	June 30, 2023		December 31, 2022
Raw materials and packaging	$	i 8,475	$	i 8,526
Finished products		i 5,215		i 7,649
Total	$	i 13,690	$	i 16,175

Reed’s, Inc. – ‘10-Q’ for 6/30/23

On: Thursday, 8/10/23, at 4:25pm ET · For: 6/30/23 · Accession #: 1493152-23-27566 · File #: 1-32501

Previous ‘10-Q’: ‘10-Q’ on 6/1/23 for 3/31/23 · Next & Latest: ‘10-Q’ on 11/9/23 for 9/30/23 · 8 References:

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

5 Subsequent Filings that Reference this Filing

3 Previous Filings that this Filing References

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

PART I - FINANCIAL INFORMATION		F-1

Item 1. Condensed Financial Statements		F-1

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

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

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

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

Notes to Condensed Financial Statements three and six months ended June 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		10

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		11

Item 3. Defaults Upon Senior Securities		11

Item 4. Mine Safety Disclosures		11

Item 5. Other Information		11

Item 6. Exhibits		11

	June 30, 2023			December 31, 2022
Right-of-use assets under operating leases	$	i 724		$	i 724
Computer hardware and software		i 400			i 400
Machinery and equipment		i 352			i 429
Total cost		i 1,476			i 1,553
Accumulated depreciation and amortization		( i 933	)		( i 787	)
Net book value	$	i 543		$	i 766

	June 30, 2023		December 31, 2022
Brand names	$	i 576	$	i 576
Trademarks		i 51		i 50
Total	$	i 627	$	i 626

	June 30, 2023			December 31, 2022
Line of credit – Alterna Capital Solutions	$	i 6,842		$	i 11,337
Capitalized financing costs		( i 282	)		( i 363	)
Total	$	i 6,560		$	i 10,974

	June 30, 2023			December 31, 2022
Secured Convertible Note Payable	$	i 14,500		$	i 10,450
Accrued interest (includes excess ABL fees of $ i 1,672 and $ i 648)		i 2,557			i 1,052
Capitalized financing costs		( i 871	)		( i 976	)
Total	$	i 16,186		$	i 10,526
Current portion		( i 7,241	)		( i 2,434	)
Long term portion	$	i 8,945		$	i 8,092

	June 30, 2023			December 31, 2022
Accounts receivable, net of provision of $ i 538 and $ i 538 at June 30, 2023 and December 31, 2022, respectively		i 777			i 777
Accounts payable		( i 1,111	)		( i 2,025	)
Net (payable) receivable		( i 334	)		( i 1,248	)

	Three Months Ended June 30,						Pct.
	2023			2022			Change
Gross billing (A)	$	11,164		$	15,155			-26	%
Less: Promotional and other allowances (B)		1,159			1,430			-19	%
Net sales	$	10,005		$	13,725			-27	%

Cost of goods sold		7,496			10,426			-28	%
% of Gross billing		67	%		69	%
% of Net sales		75	%		76	%
Gross profit	$	2,509		$	3,299			-24	%
% of Net sales		25	%		24	%

Expenses
Delivery and handling	$	1,686		$	3,832			-56	%
% of Net sales		17	%		28	%
Dollar per case ($)	$	3.04		$	5.00
Selling and marketing		1,259			2,225			-43	%
% of Net sales		13	%		16	%
General and administrative		1,311			1,778			-26	%
% of Net sales		13	%		13	%
Total operating expenses		4,256			7,835			-46	%

Loss from operations	$	(1,747	)	$	(4,536	)		-61	%

Interest expense and other income (expense)	$	(1,387	)	$	(541	)		156	%

Net loss	$	(3,134	)	$	(5,077	)		-38	%

Loss per share – basic and diluted	$	(0.99	)	$	(2.25	)		-56	%

Weighted average shares outstanding - basic & diluted		3,179,661			2,252,318			41	%

		2023															2022									Q2 Per Case									YTD Per Case
		Q1			Q2			YTD			Q2 vs PY			YTD vs PY			Q1			Q2			YTD			2023			2022			vs PY			2023			2022			vs PY
Cases:
	Reed’s		370			355			725			-13	%		-12	%		415			410			825
	Virgil’s		241			197			438			-44	%		-33	%		302			351			653
	Total Core		611			552			1,163			-27	%		-21	%		717			761			1,478
	Non Core		2			3			5			-40	%		-44	%		4			5			9
	Total		613			555			1,168			-28	%		-22	%		721			766			1,487

Gross Billing:
	Core	$	12,333		$	11,095		$	23,429			-26	%		-17	%	$	13,287		$	14,972		$	28,259		$	20.10		$	19.67			2	%	$	20.14		$	19.12			5	%
	Non Core		120			69			189			-62	%		-64	%		349			183			441			23.00			36.60			-37	%		37.80			59.11			-36	%
	Total	$	12,453		$	11,164		$	23,618			-26	%		-18	%	$	13,636		$	15,155		$	28,791		$	20.12			19.78			2	%		20.22			19.36			4	%

Discounts:	Total	$	(1,296	)	$	(1,159	)	$	(2,456	)		-19	%		-15	%	$	(1,454	)	$	(1,430	)	$	(2,884	)	$	(2.09	)	$	(1.87	)		12	%	$	(2.10	)	$	(1.94	)		8	%

COGS:
	Core	$	(8,422	)	$	(7,408	)	$	(15,830	)		-28	%		-19	%	$	(9,150	)	$	(10,286	)	$	(19,436	)	$	(13.35	)	$	(13.52	)		-1	%	$	(13.55	)	$	(13.15	)		3	%
	Non Core		(37	)		(88	)		(125	)		-37	%		-48	%		(100	)		(140	)		(213	)		(29.33	)		(28.00	)		5	%		(25.00	)		(26.67	)		-6	%
	Total	$	(8,459	)	$	(7,496	)	$	(15,956	)		-28	%		-19	%	$	(9,250	)	$	(10,426	)	$	(19,676	)	$	(13.51	)	$	(13.61	)		-1	%	$	(13.66	)	$	(13.23	)		3	%

Gross Profit:		$	2,698		$	2,509		$	5,207			-24	%		-16	%	$	2,932		$	3,299		$	6,231		$	4.52		$	4.31			5	%	$	4.46		$	4.19			6	%
as % Net Sales			24	%		25	%		25	%								24	%		24	%		24	%

	Three Months Ended June 30
	2023			2022
Net loss	$	(3,134	)	$	(5,077	)

Modified EBITDA adjustments:
Depreciation and amortization		66			55
Interest expense		1,387			541
Severance		92			66
Stock option and other noncash compensation		(17	)		80
Total EBITDA adjustments	$	1,528		$	742

Modified EBITDA	$	(1,606	)	$	(4,335	)

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

	●	Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

	●	Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and

	●	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements.

	Six Months Ended June 30,						Pct.
	2023			2022			Change
Gross billing (A)	$	23,618		$	28,791			-18	%
Less: Promotional and other allowances (B)		2,456			2,884			-15	%
Net sales	$	21,162		$	25,907			-18	%

Cost of goods sold		15,955			19,676			-19	%
% of Gross billing		68	%		68	%
% of Net sales		75	%		76	%
Gross profit	$	5,207		$	6,231			-16	%
% of Net sales		25	%		24	%

Expenses
Delivery and handling	$	3,806		$	6,644			-43	%
% of Net sales		18	%		26	%
Dollar per case ($)		3.26			4.47
Selling and marketing		2,706			4,403			-39	%
% of Net sales		13	%		17	%
General and administrative		3,020			3,899			-23	%
% of Net sales		14	%		15	%
Total operating expenses		9,532			14,946			-36	%

Loss from operations	$	(4,325	)	$	(8,715	)		-50	%

Interest expense and other income (expense)		(3,166	)		(1,342	)		136	%

Net loss	$	(7,491	)	$	(10,057	)		-26	%

Loss per share – basic and diluted	$	(2.59	)	$	(4.79	)		-46	%

Weighted average shares outstanding - basic & diluted		2,892,860			2,100,775			38	%

	Reed’s, Inc. (Registrant)

Date: August 10, 2023	/s/ Norman E. Snyder, Jr.
	Norman E. Snyder, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

Date: August 10, 2023	/s/ Joann Tinnelly
	Joann Tinnelly
	Interim Chief Financial Officer
	(Principal Financial Officer)

This ‘10-Q’ Filing	Date	Other Filings

	3/28/27
	5/9/25
	1/24/24
	12/31/23
	10/1/23
	9/29/23
Filed on:	8/10/23	8-K
	8/1/23
For Period end:	6/30/23
	5/25/23	3, 4, 8-K
	5/15/23	10-K
	4/19/23	3
	3/31/23	10-Q, 3, 8-K, NT 10-K, NT 10-Q
	1/25/23
	1/24/23	8-K
	1/1/23
	12/31/22	10-K, NT 10-K
	6/30/22	10-Q, 4, 8-K
	3/31/22	10-Q, 8-K
	1/1/22
	12/31/21	10-K, NT 10-K
	12/15/21	SC 13D
	6/30/21	10-Q
		List all Filings