Core Viewpoint - Reed's, Inc. has successfully closed a PIPE financing transaction, raising $5.0 million through the sale of 5,000,000 shares at $1.00 per share, aimed at enhancing working capital and supporting growth initiatives [1][2]. Group 1: Financing Details - The PIPE financing closed on September 15, 2025, generating gross proceeds of $5.0 million [1]. - The company sold 5,000,000 shares of common stock at a price of $1.00 per share [1]. Group 2: Strategic Intent - The proceeds from the financing will be used for working capital and general corporate purposes, allowing the company to invest in personnel, marketing, and product innovation [2]. - The CEO emphasized that the enhanced working capital position will provide greater flexibility to strengthen brand presence and expand market share [2]. Group 3: Leadership Changes - Michael Tu has been appointed to the Board of Directors as a corporate governance advisor and securities litigation expert, effective September 15, 2025, replacing Lee Edwards [2][3]. - Mr. Tu brings nearly three decades of experience in corporate governance and securities law, having previously worked as a partner at Orrick and Cooley [3]. Group 4: Company Overview - Reed's, Inc. is a leader in handcrafted, natural ginger beverages, with a portfolio that includes ginger beers, ginger ales, and a new functional soda line [5][6]. - The company was established in 1989 and its beverages are sold in over 32,000 stores nationwide [5].

Core Insights - Reed's, Inc. is undergoing a corporate reorganization to enhance operational efficiency and position the company for long-term success [2][4] - The company is making key investments to strengthen its commercial strategy, including the establishment of a dedicated field sales organization [2] - Tina Reejsinghani has been appointed as the new Chief Marketing Officer, bringing over 20 years of global marketing experience [3][4] Organizational Changes - The reorganization is part of a broader strategic realignment aimed at strengthening the company's foundation for future growth [2] - Chris Burleson, the Chief Commercial Officer, has resigned effective September 12, 2025, after contributing to strategic growth initiatives since February 2023 [4][5] Leadership Appointments - Tina Reejsinghani's previous experience includes leading marketing for a $500 million Cognac portfolio, achieving 30% year-over-year growth [3] - Reejsinghani's expertise in brand storytelling and experiential marketing is expected to play a crucial role in Reed's growth and brand expansion [3][4] Company Overview - Reed's is a leader in handcrafted, natural ginger beverages, with a portfolio that includes ginger beers, ginger ales, and a new functional soda line [6] - The company operates under the brand names Reed's®, Virgil's®, and Flying Cauldron®, with products sold in over 32,000 stores nationwide [5][6]

[General Information](index=1&type=section&id=General%20Information) [Cautionary Statement Regarding Forward-Looking Statements and Information](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements%20and%20Information) This disclaimer identifies forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially - The report contains 'forward-looking statements' identified by words like 'aim,' 'anticipate,' 'believe,' 'expect,' 'forecast,' 'intend,' 'may,' 'plan,' 'will,' or similar expressions, reflecting views about future performance[7](index=7&type=chunk) - These statements are based on currently available information, operating plans, and projections, but inherently involve risks and uncertainties that could cause actual results to differ materially[7](index=7&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements, and the Company undertakes no obligation to update them[7](index=7&type=chunk) [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Condensed Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Financial%20Statements) Presents Reed's, Inc.'s unaudited condensed financial statements and notes, detailing balance sheets, operations, equity, and cash flows [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets%20%E2%80%93%20June%2030%2C%202025%20(Unaudited)%20and%20December%2031%2C%202024) | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------------------- | :------------ | :---------------- | | Cash | $2,677 | $10,391 | | Accounts receivable, net | $5,002 | $3,979 | | Inventory, net | $13,180 | $8,114 | | Total current assets | $21,890 | $23,311 | | Property and equipment, net | $1,165 | $1,185 | | Intangible assets | $650 | $644 | | **Total assets** | **$23,705** | **$25,140** | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | Accounts payable | $8,478 | $6,956 | | Accrued expenses | $2,894 | $984 | | Senior secured loan, net | $9,736 | $9,571 | | Total current liabilities | $21,154 | $17,655 | | Total liabilities | $21,970 | $18,492 | | Total stockholders' equity | $1,735 | $6,648 | | **Total liabilities and stockholders' equity** | **$23,705** | **$25,140** | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) | (Amounts in thousands, except share and per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $9,523 | $11,874 | $19,552 | $21,469 | | Total cost of goods sold | $8,716 | $8,043 | $15,343 | $14,225 | | Gross profit | $807 | $3,831 | $4,209 | $7,244 | | Total operating expenses | $6,600 | $4,500 | $11,744 | $8,563 | | Loss from operations | $(5,793) | $(669) | $(7,535) | $(1,319) | | Interest expense | $(301) | $(1,150) | $(590) | $(2,173) | | Net loss | $(6,048) | $(3,212) | $(8,079) | $(4,885) | | Net Loss Attributable to Common Stockholders | $(6,053) | $(3,217) | $(8,084) | $(4,890) | | Loss per share – basic and diluted | $(0.13) | $(0.77) | $(0.18) | $(1.17) | | Weighted average number of shares outstanding | 46,367,047 | 4,187,291 | 45,871,898 | 4,187,291 | [Condensed Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) | (Amounts in thousands except share amounts) | Common Stock Shares | Common Stock Amount | Preferred Stock Shares | Preferred Stock Amount | Additional Paid In Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) | | :------------------------------------------ | :------------------ | :------------------ | :--------------------- | :--------------------- | :------------------------- | :------------------ | :----------------------------------- | | **Balance, December 31, 2024** | 45,371,247 | $5 | 9,411 | $94 | $158,433 | $(151,884) | $6,648 | | Fair value of vested options | - | - | - | - | $56 | - | $56 | | Dividends on Series A | - | - | - | - | - | $(5) | $(5) | | Common stock issued upon conversion of SAFE agreement | 76,668 | - | - | - | $115 | - | $115 | | Common stock issued for cash | 3,225,807 | - | - | - | $3,000 | - | $3,000 | | Net loss | - | - | - | - | - | $(8,079) | $(8,079) | | **Balance, June 30, 2025** | 48,673,722 | $5 | 9,411 | $94 | $161,604 | $(159,968) | $1,735 | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) | (Amounts in thousands) | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net cash used in operating activities | $(10,410) | $(3,307) | | Net cash used in investing activities | $(101) | $(34) | | Net cash provided by financing activities | $2,797 | $3,064 | | Net decrease in cash | $(7,714) | $(277) | | Cash at beginning of period | $10,391 | $603 | | Cash at end of period | $2,677 | $326 | | Cash paid for interest | $400 | $1,146 | | Non-cash investing and financing activities: Reclass SAFE agreement from accounts payable to equity | $115 | - | | Dividends on Series A Convertible Preferred Stock | $5 | $5 | [Notes to Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) Detailed notes for condensed financial statements, covering accounting policies, liquidity, asset/liability categories, equity, and commitments [1. Summary of Significant Accounting Policies](index=8&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) - The Company reported a net loss of **$8,079 thousand** and used **$10,410 thousand** in cash from operations for the six months ended June 30, 2025, primarily due to a **$6,728 thousand** investment in inventory[23](index=23&type=chunk) - As of June 30, 2025, the Company had a cash balance of **$2,677 thousand** and **$100 thousand** availability under its Senior Secured Loan, which is due on November 14, 2025[23](index=23&type=chunk) - On June 4, 2025, the Company completed a private placement, issuing **3,225,807 common shares** for **$3,000 thousand**, with the majority stockholder participating as lead investor[25](index=25&type=chunk) - Management expects existing cash, cash from operations, and committed financing to fund operations for at least twelve months, but additional funding may be required for growth initiatives[26](index=26&type=chunk) - The Company is implementing strategies to improve operating performance and cash generation, including product portfolio optimization, sales increases, supply chain improvements, and vendor contract negotiations[28](index=28&type=chunk) - Market conditions, including inflation, Federal Reserve actions, energy prices, tariffs, and geopolitical events, create uncertainty and have led to supply chain challenges, increased lead times, and higher raw material, logistics, and labor costs[30](index=30&type=chunk) | Customer Concentration (Gross Billing) | Q2 2025 | H1 2025 | Q2 2024 | H1 2024 | | :----------------------------------- | :------ | :------ | :------ | :------ | | Customer 1 | 26% | 21% | 20% | 18% | | Customer 2 | 17% | 19% | 15% | 15% | | Customer 3 | 11% | 14% | 13% | 12% | | Accounts Receivable Concentration | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Customer 1 | 48% | 17% | | Customer 2 | 17% | 14% | - The Company relies on seven co-packers for **100%** of its product production, with a change in co-packers potentially causing production delays[42](index=42&type=chunk) - A new accounting pronouncement (ASU 2024-03) on expense disaggregation disclosures is effective for annual periods beginning after December 15, 2026, and the Company is evaluating its potential impact[49](index=49&type=chunk) [2. Inventory](index=11&type=section&id=2.%20Inventory) | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Raw materials and packaging | $5,574 | $5,144 | | Finished products | $7,606 | $2,970 | | Total | $13,180 | $8,114 | | Inventory reserve | $2,245 | $1,296 | - During the six months ended June 30, 2025, the Company incurred **$1,661 thousand** in inventory write-offs due to product portfolio optimization by new management[51](index=51&type=chunk) [3. Property and Equipment](index=12&type=section&id=3.%20Property%20and%20Equipment) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Right-of-use assets under operating leases | $832 | $832 | | Leasehold improvements | $139 | $84 | | Computer hardware and software | $593 | $553 | | Machinery and equipment | $352 | $352 | | Total cost | $1,916 | $1,821 | | Accumulated depreciation and amortization | $(751) | $(636) | | Net book value | $1,165 | $1,185 | - Depreciation expense for the six months ended June 30, 2025, was **$92 thousand**, and amortization of right-of-use assets was **$23 thousand**[52](index=52&type=chunk) [4. Intangible Assets](index=12&type=section&id=4.%20Intangible%20Assets) | Intangible Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Brand names | $576 | $576 | | Trademarks | $74 | $68 | | Total | $650 | $644 | [5. Senior Secured Loan Payable](index=12&type=section&id=5.%20Senior%20Secured%20Loan%20Payable) - The Senior Secured Loan has an aggregate commitment of **$10,000 thousand**, accrues interest at **8.00%** per annum, and is due on November 14, 2025[54](index=54&type=chunk) - As of June 30, 2025, the principal outstanding was **$9,900 thousand**, with **$100 thousand** remaining availability[54](index=54&type=chunk) - The loan is secured by substantially all of the Company's assets, and the Company was in compliance with all terms as of June 30, 2025[55](index=55&type=chunk) [6. Lease Liabilities](index=13&type=section&id=6.%20Lease%20Liabilities) - Lease costs for the six months ended June 30, 2025, totaled **$46 thousand**, down from **$89 thousand** in the prior year[57](index=57&type=chunk) - As of June 30, 2025, operating lease liabilities totaled **$862 thousand**, with a weighted average remaining lease term of **10.42 years** and a weighted average discount rate of **8.0%**[57](index=57&type=chunk)[58](index=58&type=chunk) [7. Issuance of Common Stock](index=13&type=section&id=7.%20Issuance%20of%20Common%20Stock) - On April 3, 2025, SAFE investments totaling **$115 thousand** were converted into **76,668 common shares**[59](index=59&type=chunk) - On June 4, 2025, the Company completed a private placement, issuing **3,225,807 common shares** for **$3,000 thousand**, with the majority stockholder participating for **$1,000 thousand**[60](index=60&type=chunk) [8. Stock-Based Compensation](index=13&type=section&id=8.%20Stock-Based%20Compensation) - The new CEO, Cyril Wallace, will be granted a restricted stock award of **280,000 shares** (1-year vesting) and performance-based stock options for up to **1,388,166 shares** (tranches 2025-2027, subject to performance metrics)[61](index=61&type=chunk) | Stock Option Activity (Shares) | Outstanding at Dec 31, 2024 | Outstanding at Jun 30, 2025 | | :----------------------------- | :-------------------------- | :-------------------------- | | Shares | 324,202 | 324,202 | | Weighted Average Exercise Price | $17.47 | $17.47 | | Weighted Average Remaining Contractual Terms (Years) | 8.03 | 7.54 | - The Company recognized **$56 thousand** in compensation expense for vested stock options during the six months ended June 30, 2025, with **$49 thousand** of unvested compensation remaining[63](index=63&type=chunk) [9. Stock Warrants](index=14&type=section&id=9.%20Stock%20Warrants) | Stock Warrant Activity (Shares) | Outstanding at Dec 31, 2024 | Outstanding at Jun 30, 2025 | | :------------------------------ | :-------------------------- | :-------------------------- | | Shares | 549,292 | 549,292 | | Weighted Average Exercise Price | $8.77 | $8.77 | | Weighted Average Remaining Contractual Terms (Years) | 1.84 | 1.34 | | Aggregate Intrinsic Value | - | - | - As of June 30, 2025, the outstanding and exercisable warrants had no aggregate intrinsic value, given a closing market price of **$1.00**[65](index=65&type=chunk) [10. Transactions with California Custom Beverage, LLC, former related party](index=14&type=section&id=10.%20Transactions%20with%20California%20Custom%20Beverage%2C%20LLC%2C%20former%20related%20party) - The Company has an ongoing arbitration with California Custom Beverage, LLC (CCB), a former related party, regarding disputed amounts[67](index=67&type=chunk) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Accounts receivable, net | $169 | $144 | | Accounts payable | - | $(144) | | Net (payable) receivable | $169 | - | - The Company believes the probability of realizing any loss on the demand from CCB is remote and has not recorded additional accruals[67](index=67&type=chunk) [11. Commitments and Contingencies](index=15&type=section&id=11.%20Commitments%20and%20Contingencies) - On July 1, 2025, the Company entered into a settlement agreement to pay an investment bank **$1,600 thousand**, releasing the Company from all liability[68](index=68&type=chunk) - Management evaluates routine claims and legal proceedings, providing for potential losses when estimable and probable, and believes no current matters will have a material adverse impact[69](index=69&type=chunk)[70](index=70&type=chunk) [12. Segment Information](index=15&type=section&id=12.%20Segment%20Information) - The Company operates and manages its business as a single reportable segment: a manufacturer of carbonated beverages under Reed's and Virgil's brand names[71](index=71&type=chunk) - The Chief Executive Officer, as the chief operating decision maker (CODM), reviews financial information and allocates resources based on net income (loss)[72](index=72&type=chunk) | Significant Segment Expenses (Six Months Ended June 30, in thousands) | 2025 | 2024 | | :------------------------------------------------------------------ | :--- | :--- | | Salaries | $2,449 | $1,892 | | Insurance | $250 | $259 | | Stock-based compensation | $57 | $222 | | Selling and marketing | $1,839 | $1,204 | | Freight and delivery | $2,549 | $2,222 | | Warehousing | $649 | $703 | | Other operating expenses | $3,951 | $2,061 | | Total operating expenses | $11,744 | $8,563 | | Interest and other expenses, net | $544 | $3,566 | | Net loss | $(8,079) | $(4,885) | [13. Subsequent Events](index=15&type=section&id=13.%20Subsequent%20Events) - On July 1, 2025, the Company entered into a settlement and release agreement with an investment bank, agreeing to pay **$1,600 thousand**[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results, detailing sales, costs, expenses, and liquidity [Overview](index=16&type=section&id=Overview) - The Company focused on driving sales growth through channel expansion, in-store placements, new product innovation, and improved sales execution[80](index=80&type=chunk) - Gross margin enhancement initiatives included product portfolio optimization, equitable supplier negotiations, streamlining co-packer processes, and efficient inventory management[80](index=80&type=chunk) - The Company began strategic expansion into new geographic markets in the Asia Pacific region, forming a wholly owned subsidiary (Reed's (Asia) Limited) and three additional subsidiaries in Hong Kong, Japan, and Hainan[81](index=81&type=chunk) [Recent Trends - Market Conditions](index=16&type=section&id=Recent%20Trends%20-%20Market%20Conditions) - Uncertainty in the economic environment persists due to inflation, Federal Reserve actions, energy price fluctuations, tariffs, and geopolitical events[82](index=82&type=chunk) - The Company experienced supply chain challenges, including increased lead times and inflation of raw materials, logistics, and labor costs[82](index=82&type=chunk) - Average shipping and handling costs increased to **$2.97 per case** for the six months ended June 30, 2025, compared to **$2.54 per case** for the same period in 2024, reflecting a volatile pricing environment[84](index=84&type=chunk) [Results of Operations – Three Months Ended June 30, 2025, as compared to Three Months Ended June 30, 2024](index=17&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20Months%20Ended%20June%2030%2C%202025%2C%20as%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) Q2 2025 financial performance declined significantly, with net sales down 20%, gross profit down 79%, and loss from operations up 766% [Sales, Cost of Sales, and Gross Margins](index=18&type=section&id=Sales%2C%20Cost%20of%20Sales%2C%20and%20Gross%20Margins_Q2) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :-------------------- | :------ | :------ | :------- | | Gross billing | $11,569 | $13,584 | -15% | | Promotional allowances | $2,046 | $1,710 | 20% | | Net sales | $9,523 | $11,874 | -20% | | Cost of goods sold | $8,716 | $8,043 | 8% | | Gross profit | $807 | $3,831 | -79% | | Gross margin % of Net sales | 8% | 32% | -24 p.p. | - Core brand gross billing decreased by **15%** due to volume declines in Virgil's (**-19%**) and Reed's (**-10%**), despite a **1%** price increase[92](index=92&type=chunk) - Discounts as a percentage of gross sales increased to **18%** in Q2 2025 from **13%** in Q2 2024[93](index=93&type=chunk) - Cost of goods sold increased by **$673 thousand**, primarily driven by **$1,606 thousand** in inventory write-offs related to product portfolio optimization[94](index=94&type=chunk) - Total cost of goods sold per case increased to **$15.70** in Q2 2025 from **$12.34** in Q2 2024[95](index=95&type=chunk) [Operating Expenses](index=19&type=section&id=Operating%20Expenses_Q2) | Operating Expense (in thousands) | Q2 2025 | Q2 2024 | % Change | | :------------------------------- | :------ | :------ | :------- | | Delivery and handling expense | $1,572 | $1,423 | 10% | | Selling and marketing expense | $1,271 | $1,097 | 16% | | General and administrative expense | $3,757 | $1,980 | 90% | | Total operating expenses | $6,600 | $4,500 | 47% | - Delivery and handling expenses increased due to transportation costs associated with increased finished goods production, rising to **$2.83 per case** from **$2.18 per case**[97](index=97&type=chunk) - Selling and marketing expenses increased primarily due to higher employee-related costs and marketing expenditures[98](index=98&type=chunk) - General and administrative expenses increased significantly due to contract proceedings costs and investments in personnel and services for growth initiatives[100](index=100&type=chunk) [Loss from Operations](index=20&type=section&id=Loss%20from%20Operations_Q2) - Loss from operations increased by **766%** to **$(5,793) thousand** in Q2 2025, compared to **$(669) thousand** in Q2 2024, driven by decreased gross profit and increased operating expenses[101](index=101&type=chunk) [Interest and Other Expense](index=20&type=section&id=Interest%20and%20Other%20Expense_Q2) - Interest expense decreased to **$(301) thousand** in Q2 2025 from **$(1,150) thousand** in Q2 2024[102](index=102&type=chunk) - The change in fair value of SAFE investments was **$0** in Q2 2025, compared to **$(1,393) thousand** in Q2 2024[102](index=102&type=chunk) [Modified EBITDA](index=20&type=section&id=Modified%20EBITDA_Q2) | Modified EBITDA Reconciliation (in thousands) | Q2 2025 | Q2 2024 | | :------------------------------------------ | :------ | :------ | | Net loss | $(6,048) | $(3,212) | | Total EBITDA adjustments | $3,103 | $3,257 | | Modified EBITDA | $(2,945) | $45 | - Modified EBITDA decreased significantly from **$45 thousand** in Q2 2024 to **$(2,945) thousand** in Q2 2025[105](index=105&type=chunk) [Results of Operations – Six Months Ended June 30, 2025, as compared to Six Months Ended June 30, 2024](index=21&type=section&id=Results%20of%20Operations%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202025%2C%20as%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) H1 2025 financial performance deteriorated, with net sales down 9%, gross profit down 42%, and loss from operations up 471% [Sales, Cost of Sales, and Gross Margins](index=22&type=section&id=Sales%2C%20Cost%20of%20Sales%2C%20and%20Gross%20Margins_H1) | Metric (in thousands) | H1 2025 | H1 2024 | % Change | | :-------------------- | :------ | :------ | :------- | | Gross billing | $22,582 | $23,963 | -6% | | Promotional allowances | $3,030 | $2,494 | 21% | | Net sales | $19,552 | $21,469 | -9% | | Cost of goods sold | $15,343 | $14,225 | 8% | | Gross profit | $4,209 | $7,244 | -42% | | Gross margin % of Net sales | 22% | 34% | -12 p.p. | - Core brand gross billing decreased by **6%** due to volume declines in Reed's (**-6%**) and Virgil's (**-4%**), despite a **1%** price increase[113](index=113&type=chunk) - Discounts as a percentage of gross sales increased to **13%** in H1 2025 from **10%** in H1 2024[115](index=115&type=chunk) [Cost of Goods Sold](index=23&type=section&id=Cost%20of%20Goods%20Sold_H1) - Cost of goods sold increased by **$1,118 thousand**, primarily driven by **$1,661 thousand** in inventory write-offs related to product portfolio optimization[116](index=116&type=chunk) - Total cost of goods per case increased to **$14.27** in H1 2025 from **$12.36** in H1 2024[117](index=117&type=chunk) [Gross Margin](index=23&type=section&id=Gross%20Margin_H1) - Gross margin decreased to **22%** in H1 2025 from **34%** in H1 2024[118](index=118&type=chunk) [Operating Expenses](index=23&type=section&id=Operating%20Expenses_H1) | Operating Expense (in thousands) | H1 2025 | H1 2024 | % Change | | :------------------------------- | :------ | :------ | :------- | | Delivery and handling expense | $3,199 | $2,925 | 9% | | Selling and marketing expense | $2,773 | $2,190 | 27% | | General and administrative expense | $5,772 | $3,448 | 67% | | Total operating expenses | $11,744 | $8,563 | 37% | - Delivery and handling expenses increased due to transportation costs, rising to **$2.98 per case** from **$2.54 per case**[119](index=119&type=chunk) - Selling and marketing expenses increased due to higher employee-related costs and marketing expenditures[120](index=120&type=chunk) - General and administrative expenses increased significantly due to contract proceedings costs and investments in personnel and services for growth initiatives[121](index=121&type=chunk) [Loss from Operations](index=23&type=section&id=Loss%20from%20Operations_H1) - Loss from operations increased by **471%** to **$(7,535) thousand** in H1 2025, compared to **$(1,319) thousand** in H1 2024, driven by decreased gross profit and increased operating expenses[122](index=122&type=chunk) [Interest and Other Expense](index=23&type=section&id=Interest%20and%20Other%20Expense_H1) - Interest expense decreased to **$(590) thousand** in H1 2025 from **$(2,173) thousand** in H1 2024[123](index=123&type=chunk) - The change in fair value of SAFE investments was **$0** in H1 2025, compared to **$(1,393) thousand** in H1 2024[123](index=123&type=chunk) [Modified EBITDA](index=24&type=section&id=Modified%20EBITDA_H1) | Modified EBITDA Reconciliation (in thousands) | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | | Net loss | $(8,079) | $(4,885) | | Total EBITDA adjustments | $3,550 | $4,560 | | Modified EBITDA | $(4,529) | $(325) | - Modified EBITDA decreased significantly from **$(325) thousand** in H1 2024 to **$(4,529) thousand** in H1 2025[127](index=127&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) - For the six months ended June 30, 2025, the Company reported a net loss of **$8,079 thousand** and used **$10,410 thousand** in cash from operations, primarily due to a **$6,728 thousand** investment in inventory[130](index=130&type=chunk) - As of June 30, 2025, the Company had a cash balance of **$2,677 thousand** and **$100 thousand** availability under its Senior Secured Loan, which matures on November 14, 2025, and is currently being evaluated for refinancing[130](index=130&type=chunk) - The Company completed a private placement on June 4, 2025, raising **$3,000 thousand** through the issuance of common shares[132](index=132&type=chunk) - Management expects current cash, cash from operations, and committed financing to be sufficient for at least twelve months, but additional funding may be required for growth initiatives[133](index=133&type=chunk) - Net cash used in operating activities increased to **$10,410 thousand** in H1 2025 from **$3,307 thousand** in H1 2024, mainly due to increased inventory[137](index=137&type=chunk) - Net cash provided by financing activities was **$2,797 thousand** in H1 2025, primarily from the sale of common stock, compared to **$3,064 thousand** in H1 2024, which was mainly from a SAFE agreement[138](index=138&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management's financial statements rely on estimates and assumptions for areas such as credit loss reserves, inventory valuation, asset impairment, deferred tax assets, and potential liabilities[140](index=140&type=chunk) - There were no changes to the critical accounting policies described in the Company's 2024 Form 10-K that impacted the condensed financial statements[140](index=140&type=chunk) [Recent Accounting Pronouncements](index=26&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Reed's, Inc. is exempt from detailed quantitative and qualitative market risk disclosures - The Company is a smaller reporting company and is not required to provide the information required by this Item[142](index=142&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures, concluding effectiveness as of June 30, 2025, with no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The Company's disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective as of June 30, 2025[143](index=143&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There have been no changes in the Company's internal control over financial reporting during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[144](index=144&type=chunk) [PART II – OTHER INFORMATION](index=26&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in routine litigation, including arbitration, with management believing no material adverse financial impact - The Company is a party to ordinary, routine litigation incidental to its business, including matters tendered to insurance carriers[145](index=145&type=chunk) - Management evaluates exposure to claims and provides for potential losses if estimable and probable, believing that current litigation will not materially adversely impact financial position, liquidity, or results of operations[145](index=145&type=chunk)[146](index=146&type=chunk) - Additional information regarding legal proceedings is available in Note 10 ('Transactions with California Custom Beverage, LLC, former related party') and Note 11 ('Commitments and Contingencies')[146](index=146&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) Updates 2024 Form 10-K risk factors, highlighting Senior Secured Loan maturity, refinancing uncertainty, capital needs, and international expansion - The Senior Secured Loan matures on November 14, 2025, with **$9,900 thousand** outstanding as of June 30, 2025, and the Company is evaluating refinancing alternatives, with no assurance of favorable terms or availability[148](index=148&type=chunk) - Failure to secure refinancing for the Senior Secured Loan could impair the Company's ability to operate and adversely affect its financial position[148](index=148&type=chunk) - The Company may require additional capital for business expansion, new products, and infrastructure, and future equity or debt financings could lead to significant stockholder dilution or restrictive covenants[149](index=149&type=chunk)[150](index=150&type=chunk) - Expansion into new geographic markets, including the Asia Pacific region, poses challenges such as understanding consumer preferences, increased competition, political/legal risks, and higher costs, which could adversely affect the business[151](index=151&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or uses of proceeds have occurred that were not previously disclosed in a Form 8-K - No unregistered sales of equity securities or use of proceeds have occurred that have not been previously disclosed in a Current Report on Form 8-K[152](index=152&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - There have been no defaults upon senior securities[153](index=153&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company as its operations do not involve mining activities - This item is not applicable to the Company[154](index=154&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - During the three months ended June 30, 2025, none of the Company's directors or executive officers adopted, modified, or terminated a 'Rule 10b5-1 trading arrangement' or a 'non-Rule 10b5-1 trading arrangement'[155](index=155&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of this Form 10-Q, including organizational documents, agreements, and certifications - The section lists all exhibits filed as part of this Form 10-Q, including the Certificate of Incorporation, Amended and Restated Bylaws, executive employment agreements, securities purchase agreements, and certifications[162](index=162&type=chunk) - Exhibits include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[162](index=162&type=chunk) - Many exhibits are incorporated by reference from previous SEC filings, such as Form 10-K and Form 8-K[162](index=162&type=chunk)

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $9.5 million, down from $11.9 million in the same quarter last year, primarily due to lower volumes with recurring national customers [16] - Gross profit decreased to $800,000 from $3.8 million year-over-year, with gross margin dropping to 8% from 32% [16][17] - The company reported a net loss of $6 million or negative $0.13 per share, compared to a net loss of $3.2 million or negative $0.77 per share in Q2 2024 [19] - Modified EBITDA was negative $2.9 million in Q2 2025, compared to a positive $45,000 in Q2 2024 [19] Business Line Data and Key Metrics Changes - The company is focusing on streamlining operations and enhancing marketing approaches, despite softer order volumes during the quarter [4][5] - The new Reed's functional soda line has gained over 9,000 points of distribution since its launch in April, indicating positive market reception [7] - Sales team secured significant commitments, including over 25,000 cases for Safeway and a new product approval at Costco, which is expected to generate seven-figure sales [10][11] Market Data and Key Metrics Changes - The company is experiencing challenges in regaining lost placements with key retailers, which has impacted revenue [25][28] - Delivery and handling costs increased to $1.6 million, representing 17% of net sales, compared to 12% in the previous year [18] Company Strategy and Development Direction - The company aims to strengthen commercial execution and position itself for long-term growth by diversifying channel mix and pursuing new distribution opportunities [4][5] - A new Vice President of On Premise Sales has been appointed to lead expansion into food service and convenience channels [5][6] - The growth strategy includes channel expansion paired with ongoing product innovation, particularly in the functional beverage space [6][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges from operational issues that began in 2024, which have led to lost distribution and declining orders [25][28] - There is optimism about rebuilding relationships with retailers and regaining lost placements, although this process will take time [26][30] - The company is focused on improving margins and positioning for sustained growth and profitability, with a commitment to enhancing operational efficiencies [15][19] Other Important Information - The company has made significant investments in personnel and marketing to support growth initiatives, leading to increased selling, general, and administrative expenses [19] - The transition from glass to cans is expected to drive cost savings and has received positive feedback from retailers and consumers [14] Q&A Session Summary Question: Concerns about revenue decline despite having inventory and cash - Management indicated that operational challenges from 2024 have led to lost placements and distribution, impacting revenue [25][28] Question: Visibility on sales recovery timeline - Management stated that regaining placements is an ongoing process and could not provide a specific timeline, but positive conversations with retailers are happening [30] Question: Gross margin concerns - Management acknowledged that gross margin was affected by inventory write-offs and higher-than-expected trade spends, but they are working to improve this [31][32] Question: Delivery costs increase despite revenue decline - Management explained that increased delivery costs are tied to efforts to ensure timely fulfillment for customers and optimizing inventory distribution [33][36]

Financial Performance - Reeds reported a quarterly loss of $0.1 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.04, representing an earnings surprise of -150.00% [1] - The company posted revenues of $9.52 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 7.45%, and down from $11.87 million a year ago [2] - Over the last four quarters, Reeds has not surpassed consensus EPS estimates, although it has topped consensus revenue estimates twice [2] Stock Performance - Reeds shares have increased approximately 61.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.4% [3] - The current Zacks Rank for Reeds is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the coming quarter is -$0.03 on revenues of $10.91 million, and -$0.13 on revenues of $42.82 million for the current fiscal year [7] - The trend of estimate revisions for Reeds was mixed ahead of the earnings release, which could change following the recent report [6] Industry Context - The Beverages - Soft drinks industry, to which Reeds belongs, is currently in the top 28% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Reed's reported a challenging Q2 2025 with significant declines across key financial metrics, prompting management to outline strategic initiatives for future growth and profitability [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Reed's reported a challenging second quarter of 2025 with significant declines across key financial metrics, including net sales, gross profit, and a widened net loss, alongside a negative Modified EBITDA Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--------------------------------- | :------ | :------ | | Net sales | $9.5 million | $11.9 million | | Gross profit | $0.8 million | $3.8 million | | Gross margin | 8% | 32% | | Delivery and handling costs per case | $2.83 | $2.18 | | Selling, general and administrative expenses | $5.0 million | $3.1 million | | Net loss | $6.0 million | $3.2 million | | Modified EBITDA | $(2.9) million | $45,000 | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management outlined strategic initiatives for commercial execution, including sales talent and marketing, while addressing inventory write-offs and focusing on future growth and profitability - Strategic focus areas include strengthening commercial execution, investing in sales talent, refining marketing approach, and accelerating channel development initiatives to rebuild placements with key retail partners and unlock new growth opportunities in underpenetrated segments like convenience and food service[3](index=3&type=chunk) - The company evaluated inventory and determined that **$1.6 million of write-offs** were necessary based on product portfolio optimization, which impacted gross margin but is expected to improve inventory management and working capital efficiency[3](index=3&type=chunk) - Looking ahead, the focus is on driving sales growth within core Reed's and Virgil's portfolios, improving margins, positioning the Company for profitability, and expanding distribution into new channels and regions[3](index=3&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) The company experienced a comprehensive decline in Q2 2025 financial performance, marked by lower sales, reduced gross margins due to write-offs, increased operating expenses, and a significant increase in cash used from operations [Second Quarter 2025 Performance](index=2&type=section&id=Second%20Quarter%202025%20Performance) The second quarter of 2025 saw a detailed decline in financial performance, primarily driven by lower sales volumes, significant inventory write-offs impacting gross margin, and increased operating expenses due to growth initiatives and contract proceedings [Net Sales](index=2&type=section&id=Net%20Sales) Net sales experienced a decline, primarily attributed to reduced volumes from key national customers Net Sales (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------- | :------ | :------ | | Net sales | $9.5 million | $11.9 million | - The decrease in net sales was primarily driven by lower volumes with recurring national customers[5](index=5&type=chunk) [Gross Profit and Margin](index=2&type=section&id=Gross%20Profit%20and%20Margin) Gross profit and margin significantly decreased, primarily due to substantial inventory write-offs for product portfolio optimization Gross Profit and Margin (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :----------- | :------ | :------ | | Gross profit | $0.8 million | $3.8 million | | Gross margin | 8% | 32% | - The decrease in gross margin was primarily driven by **$1.6 million of inventory write-offs** related to changes in product portfolio optimization[6](index=6&type=chunk) Adjusted Gross Profit and Margin (Q2 2025, excluding write-offs) | Metric | Q2 2025 (Adjusted) | | :-------------------- | :----------------- | | Gross profit | $2.4 million | | Gross margin | 25% of net sales | [Delivery and Handling Costs](index=2&type=section&id=Delivery%20and%20Handling%20Costs) Delivery and handling costs increased both in total and on a per-case basis, rising as a percentage of net sales Delivery and Handling Costs (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------------------------- | :------ | :------ | | Total costs | $1.6 million | $1.4 million | | As % of net sales | 17% | 12% | | Per case | $2.83 | $2.18 | [Selling, General and Administrative Expenses](index=2&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Selling, general, and administrative expenses rose due to contract proceedings and investments in personnel and marketing for growth initiatives Selling, General and Administrative Expenses (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------- | :------ | :------ | | SG&A | $5.0 million | $3.1 million | - The increase in SG&A was primarily driven by contract proceedings costs and investments in personnel, marketing, and related services to support growth initiatives[8](index=8&type=chunk) [Net Loss and EPS](index=2&type=section&id=Net%20Loss%20and%20EPS) The company reported a widened net loss, yet loss per share decreased significantly due to a substantial increase in outstanding shares Net Loss and EPS (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Net loss | $6.0 million | $3.2 million | | Loss per share | $(0.13) | $(0.77) | - Despite a higher net loss, the loss per share decreased from **$(0.77) to $(0.13)** due to a significant increase in the weighted average number of shares outstanding (**46,367,047 in Q2 2025 vs. 4,187,291 in Q2 2024**)[8](index=8&type=chunk)[27](index=27&type=chunk) [Modified EBITDA](index=2&type=section&id=Modified%20EBITDA) Modified EBITDA turned significantly negative, reflecting a deterioration in operational profitability compared to the prior year Modified EBITDA (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Modified EBITDA | $(2.9) million | $45,000 | [Liquidity and Cash Flow](index=2&type=section&id=Liquidity%20and%20Cash%20Flow) The company experienced a significant increase in cash used from operating activities during Q2 2025, leading to a substantial decrease in its cash balance compared to the end of the previous fiscal year, while total debt remained relatively stable Cash Flow from Operating Activities (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Cash used from operating activities | $5.0 million | $0.9 million | Liquidity Position (as of June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | | :---------- | :------------ | :---------------- | | Cash | $2.7 million | $10.4 million | | Total debt | $9.7 million | $9.6 million | [Company Information](index=2&type=section&id=Company%20Information) This section provides details on the upcoming Q2 2025 earnings conference call and an overview of Reed's, Inc. as a leader in natural ginger beverages and craft sodas [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) Reed's, Inc. will host a conference call on August 13, 2025, to discuss its second-quarter 2025 financial results, providing dial-in numbers and a webcast link for participants - A conference call will be held on Wednesday, August 13, 2025, at 8:30 a.m. Eastern time to discuss the Q2 2025 results[11](index=11&type=chunk)[12](index=12&type=chunk) - Access to the conference call is available via toll-free dial-in **(800) 717-1738**, international dial-in **(646) 307-1865** (Conference ID: **89617**), and a live webcast on the investor relations section of the Company's website[12](index=12&type=chunk)[13](index=13&type=chunk) [About Reed's, Inc.](index=3&type=section&id=About%20Reed's%2C%20Inc.) Reed's, Inc. is a category leader in handcrafted, natural ginger beverages and craft sodas, established in 1989. The company markets its products under the Reed's®, Virgil's®, and Flying Cauldron® brand names, with distribution in over 32,000 stores nationwide, and recently launched a functional soda line - Reed's, Inc. is an innovative company and category leader providing high quality, premium, and better-for-you sodas, established in **1989**[14](index=14&type=chunk) - The company's brands include Reed's® (America's original ginger beer), Virgil's® (award-winning craft sodas), and Flying Cauldron® (non-alcoholic butterscotch beer)[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - Reed's beverages are sold in over **32,000 stores nationwide**, and the brand recently launched a new functional soda line featuring adaptogenic ingredients[14](index=14&type=chunk)[15](index=15&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section defines the company's non-GAAP financial measures, such as Modified EBITDA, explaining their rationale for use while also outlining their inherent analytical limitations [Definition and Rationale](index=3&type=section&id=Definition%20and%20Rationale) Reed's presents Modified EBITDA and gross profit/margin excluding inventory write-offs as supplemental non-GAAP measures. Modified EBITDA is defined by adjusting net income (loss) for various non-cash and non-recurring items, used by management and investors to compare performance consistently across periods and for internal strategic planning - The company presents Modified EBITDA and gross profit and gross margin excluding inventory write-offs as supplemental non-GAAP financial measures[19](index=19&type=chunk) - Modified EBITDA is defined as net income (loss) plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant/SAFE agreements, legal and insurance settlements, contract proceedings, non-recurring professional fees, inventory write-offs, one-time policy changes, accounting methodology impacts, and restructuring-related costs[19](index=19&type=chunk) - These non-GAAP measures assist investors and analysts in comparing performance consistently by excluding items not indicative of core operating performance, and are used internally for budgets, forecasts, strategic plans, acquisitions, compensation, and board communications[22](index=22&type=chunk) [Limitations](index=4&type=section&id=Limitations) The company acknowledges that its non-GAAP financial measures, particularly Modified EBITDA, have limitations as analytical tools. They do not reflect cash expenditures for capital, working capital needs, future interest or principal payments on debt, or cash requirements for asset replacements - Modified EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments[22](index=22&type=chunk) - Modified EBITDA does not reflect changes in, or cash requirements for, working capital needs[22](index=22&type=chunk) - Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments on debts, nor does it reflect cash requirements for asset replacements[22](index=22&type=chunk) [Forward-Looking Statements & Investor Relations](index=5&type=section&id=Forward-Looking%20Statements%20%26%20Investor%20Relations) This section includes a disclaimer regarding forward-looking statements, highlighting associated risks and uncertainties, and provides contact information for investor relations inquiries [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section serves as a disclaimer, identifying forward-looking statements by specific terminology and outlining the inherent risks, uncertainties, and assumptions that could cause actual results to differ materially from projections. The company assumes no obligation to update these statements - Forward-looking statements are identified by terms such as "aim," "believe," "look forward to," "can," "will," "realize," "deliver," and similar expressions, covering strategic initiatives, ability to achieve objectives, expand business, and generate long-term value[23](index=23&type=chunk) - The achievement of forward-looking statements involves risks, uncertainties, and assumptions beyond the company's control, including competition, growth management, refinancing, new product risks, inflation, customer demand, personnel, distribution, suppliers, innovation, intellectual property, inventory, geopolitical events, and evolving regulations[23](index=23&type=chunk)[24](index=24&type=chunk) - These statements are based on current expectations, and Reed's assumes no obligation to update them, except as required by law[24](index=24&type=chunk) [Investor Relations Contact](index=5&type=section&id=Investor%20Relations%20Contact) Contact information for investor relations inquiries is provided, including names, email, and phone number - For investor relations, contact Sean Mansouri, CFA or Aaron D'Souza at Elevate IR via email (**ir@reedsinc.com**) or phone (**720) 330-2829**[25](index=25&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) The unaudited condensed financial statements for Q2 2025 reveal a significant deterioration in operational results, a weakened balance sheet, and increased cash utilization from operating activities [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) The unaudited condensed statements of operations for the three and six months ended June 30, 2025, and 2024, show a significant increase in net loss and operating expenses, alongside a decrease in net sales and gross profit, particularly impacted by inventory write-offs in 2025 Condensed Statements of Operations (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net sales | $9,523 | $11,874 | | Total cost of goods sold | $8,716 | $8,043 | | Gross profit | $807 | $3,831 | | Total operating expenses | $6,600 | $4,500 | | Loss from operations | $(5,793) | $(669) | | Net loss | $(6,048) | $(3,212) | | Loss per share – basic and diluted | $(0.13) | $(0.77) | Condensed Statements of Operations (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net sales | $19,552 | $21,469 | | Total cost of goods sold | $15,343 | $14,225 | | Gross profit | $4,209 | $7,244 | | Total operating expenses | $11,744 | $8,563 | | Loss from operations | $(7,535) | $(1,319) | | Net loss | $(8,079) | $(4,885) | | Loss per share – basic and diluted | $(0.18) | $(1.17) | [Condensed Balance Sheets](index=7&type=section&id=Condensed%20Balance%20Sheets) The unaudited condensed balance sheets show a decrease in total assets and cash from December 31, 2024, to June 30, 2025, while total liabilities increased, leading to a significant reduction in total stockholders' equity Condensed Balance Sheets (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash | $2,677 | $10,391 | | Total current assets | $21,890 | $23,311 | | Total assets | $23,705 | $25,140 | | Total current liabilities | $21,154 | $17,655 | | Total liabilities | $21,970 | $18,492 | | Total stockholders' equity | $1,735 | $6,648 | [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the company significantly increased cash used in operating activities compared to the prior year, resulting in a substantial net decrease in cash, despite proceeds from the sale of common stock Condensed Statements of Cash Flows (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Net cash used in operating activities | $(10,410) | $(3,307) | | Net cash used in investing activities | $(101) | $(34) | | Net cash provided by financing activities | $2,797 | $3,064 | | Net decrease in cash | $(7,714) | $(277) | | Cash at end of period | $2,677 | $326 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) The reconciliation of GAAP net loss to Modified EBITDA shows that for both the three and six months ended June 30, 2025, Modified EBITDA was significantly negative, indicating a deterioration in operational performance even after adjusting for non-cash and non-recurring items Reconciliation of GAAP to Non-GAAP Financial Measures (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Net loss | $(6,048) | $(3,212) | | Total EBITDA adjustments | $3,103 | $3,257 | | Modified EBITDA | $(2,945) | $45 | Reconciliation of GAAP to Non-GAAP Financial Measures (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Net loss | $(8,079) | $(4,885) | | Total EBITDA adjustments | $3,550 | $4,560 | | Modified EBITDA | $(4,529) | $(325) |

Core Insights - Reed's, Inc. reported a decline in net sales for Q2 2025, with net sales of $9.5 million compared to $11.9 million in Q2 2024, primarily due to lower order volumes from national customers [4][7] - The company experienced a significant drop in gross profit, reporting $0.8 million in Q2 2025 versus $3.8 million in the same period last year, resulting in a gross margin of 8% compared to 32% [5][8] - Management is focused on long-term growth strategies, including enhancing commercial execution, improving inventory management, and expanding distribution channels [3][7] Financial Performance - Net sales decreased to $9.5 million in Q2 2025 from $11.9 million in Q2 2024 [4][8] - Gross profit for Q2 2025 was $0.8 million, with a gross margin of 8%, impacted by $1.6 million in inventory write-offs [5][8] - Selling, general and administrative expenses rose to $5.0 million in Q2 2025 from $3.1 million in Q2 2024, driven by costs related to contract proceedings and investments in personnel and marketing [7][8] Cash Flow and Liquidity - The company used approximately $5.0 million in cash from operating activities in Q2 2025, compared to $0.9 million in the same period in 2024 [10] - As of June 30, 2025, Reed's had approximately $2.7 million in cash and $9.7 million in total debt, a decrease from $10.4 million in cash and $9.6 million in total debt at the end of 2024 [10][29] Management Strategy - The CEO emphasized the importance of rebuilding relationships with key retail partners and exploring growth opportunities in underpenetrated segments such as convenience and food service [3] - The company aims to drive sales growth within its core Reed's and Virgil's portfolios while improving margins and positioning for profitability [3][7]

Date: Wednesday, August 13, 2025 Time: 8:30 a.m. Eastern time Toll-free dial-in number: (800) 717-1738 International dial-in number: (646) 307-1865 Conference ID: 89617 Webcast: Reed's Q2 2025 Conference Call Please dial into the conference call 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact the company's investor relations team at (720) 330-2829. The conference call will also be broad ...

Summary of Reed's (REED) Conference Call - June 26, 2025 Company Overview - Reed's operates in the beverage industry, specifically focusing on ginger-based products such as ginger ale and ginger beer, as well as craft sodas under the Virgil's brand [4][6][25] - The company has a long-standing history since the 1980s and has expanded its product portfolio over the years [4][5] Core Points and Arguments Business Strategy and Product Innovation - The CEO expressed excitement about the company's direction and recent innovations, including a new functional beverage line launched in 2025 [3][15] - Reed's is focusing on expanding its product offerings in the flavored malt beverage (F&B) category, which is experiencing significant growth in the U.S. market [6][11] - The company is also introducing a zero-sugar ginger ale to align with consumer trends towards healthier options [10][11] Market Opportunities - There is a strong belief that the ginger beer and ginger ale segments have substantial growth potential, particularly in non-traditional channels such as convenience stores and dollar stores [9][10] - The company aims to enhance its distribution network, currently reaching 32,000 retail doors, with plans to expand further [16][17] Financial Performance and Strategic Initiatives - The company underwent a recapitalization in Q4 2024, which reduced debt and allowed for reinvestment in working capital [18][19] - The focus is on achieving profitable growth, with a target to reach breakeven and net profitability in the near future [20][21] - The management is closely monitoring sales velocity and channel expansion to drive top-line growth [21][24] Margin Improvement - Reed's is working on margin expansion, aiming to improve gross margins to the mid-30s percentage range, with aspirations to reach the high 30s or even 40% in the long term [24][25] Additional Important Insights - The company is committed to maintaining high-quality standards in its products, emphasizing the use of premium ingredients [25][26] - There is a strong focus on building brand strength and customer relationships, with plans to enhance marketing efforts for new products [30][32] - The management team is optimistic about the future, citing a clean balance sheet and a strong brand as key advantages [28][29] Conclusion - Reed's is positioned for growth in the beverage market, with a clear strategy focused on innovation, market expansion, and improving financial performance. The management is optimistic about capturing new opportunities while maintaining a commitment to product quality and customer satisfaction [27][33]

Core Insights - Reed's, Inc. is participating in the OTC Markets Virtual Investor Conference on June 26, 2025, where the management team will hold virtual 1x1 meetings and a presentation at 2:00 PM ET [1][2]. Company Overview - Reed's, Inc. is a leader in handcrafted, natural ginger beverages, established in 1989, and offers a portfolio that includes the Reed's®, Virgil's®, and Flying Cauldron® brands [4]. - The company is recognized as America's 1 name in natural, ginger-based beverages, with products crafted using real ginger and premium ingredients [5]. - Reed's beverages are sold in over 32,000 stores nationwide, indicating a strong market presence [4]. Product Offerings - The product portfolio includes ginger beers, ginger ales, ready-to-drink ginger mules, and hard ginger ales, with a recent expansion into the zero-sugar segment using a proprietary natural sweetener system [5]. - Virgil's® offers an award-winning line of craft sodas made with natural ingredients, available in five zero sugar varieties that are naturally sweetened and certified ketogenic [6]. - Flying Cauldron® is a non-alcoholic butterscotch beer made with natural ingredients, free from artificial flavors, sweeteners, preservatives, gluten, caffeine, or GMOs [7].