As filed with the Securities and Exchange
Commission on September 12 , 2018
Registration No. 333- 212206
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 3 ON FORM S-3
TO
FORM S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
REED’S,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
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2086
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35-2177773
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(State
or jurisdiction of
incorporation or organization)
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(Primary
Standard Industrial
Classification Code Number)
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(I.R.S.
Employer
Identification Number)
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201 Merritt 7 Corporate
Park
Norwalk, Connecticut 06851
(310)
217-9400
(Address
and telephone number of principal executive offices and principal place of business)
Valentin
Stalowir
Chief
Executive Officer
13000
South Spring Street
Los
Angeles, California 90061
(310)
217-9400
(Name,
address and telephone number of agent for service)
With
copy to:
Ruba
Qashu
Libertas
Law Group, Inc.
225
Santa Monica Boulevard, 5
th
Floor
Santa
Monica, CA 90401
Telephone:
(949) 355-5405
Fax:
(310) 356-1922
Approximate
date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act, check the following box. [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective Registration Statement
for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b2 of the Exchange Act.
Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ]
(Do not check if a smaller reporting company)
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Smaller
reporting company [X]
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The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
We are filing this post-effective amendment
no. 3 on Form S-3 for the purpose of converting the registration statement on Form S-1 into a registration statement on Form S-3
because we are now eligible to use Form S-3 again. This registration statement on Form S-3 contains an updated prospectus relating
to the offering and sale of the shares that were registered for resale on the original registration statement. The Form S-1 was
declared effective on June 20, 2017.
The
information in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until
the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is prohibited.
Subject to completion, dated
September 12 , 2018
PRELIMINARY
PROSPECTUS
REED’S, INC.
1,111,321 Shares of Common Stock
This prospectus covers
the resale by the selling shareholders identified in the “Selling Shareholders” section of this prospectus of up to
an aggregate of 1,111,321 shares of our common stock, including 418,909 shares issuable upon the exercise of warrants. We will
not receive any of the proceeds from the sale of shares of our common stock by the selling shareholders. We will receive up to
$1,743,285 from the exercise of warrants.
Shares of our common stock are traded on the NYSE MKT under the symbol “REED”. On September 6,
2018, the closing sales price for our common stock was $3.30 per share.
Investing in our
common stock involves substantial risk. In reviewing this prospectus, you should carefully consider the matters described under
the heading “Risk Factors” beginning on page 8.
Neither we nor any
selling shareholder has authorized any dealer, salesman or other person to give any information or to make any representation
other than those contained or incorporated by reference in this prospectus. You must not rely upon any information or representation
not contained or incorporated by reference in this prospectus.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This is not an offer to sell
nor a solicitation of an offer to buy securities in any jurisdiction where it would be unlawful.
The date of this prospectus is [ ],
2018
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the “SEC”).
Unless
the context otherwise requires, “Reed’s,” “Company,” “we,” “us” and “our”
refer to Reed’s, Inc., and “selling shareholders” and “selling shareholder” refer to one or more
selling shareholders identified in the “Selling Shareholders” section of this prospectus. References to “securities”
include any security that we or the selling shareholders might offer under this prospectus or any prospectus supplement.
We
have filed or incorporated by reference exhibits to the registration statement of which this prospectus forms a part. You should
read the exhibits carefully for provisions that may be important to you.
We
have not authorized any dealer, salesperson or other person to give any information or to make any representation other than those
contained or incorporated by reference in this prospectus. You must not rely upon any information or representation not contained
or incorporated by reference in this prospectus. This prospectus does not constitute an offer to sell or the solicitation of an
offer to buy any securities other than the registered securities to which it relates, nor does this prospectus constitute an offer
to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. You should not assume that the information contained in this prospectus is accurate
on any date subsequent to the date set forth on its front cover or that any information we have incorporated by reference is correct
on any date subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or securities
are sold on a later date.
THE
COMPANY
Our
Products
We
manufacture our hand-crafted natural beverages using premium natural ingredients. Our products are free of genetically modified
organisms (GMO). Over the years, the Company has developed several product offerings. In 2017, we narrowed our focus to our core
product flavor offerings of Reed’s Ginger Beer flavors and Virgil’s Craft Sodas. We may re-introduce at a later date
our Kombucha and China Cola brands.
Reed’s
Ginger Beers
Ginger
ale is the oldest known soft drink. Before modern soft drink technology existed, non-alcoholic beverages were brewed at home directly
from herbs, roots, spices, and fruits. These handcrafted brews were highly prized for their taste, tonic, and health-giving properties.
Reed’s Ginger Beers are a revival of this lost art of home brewing sodas. We make them with care and attention to wholesomeness
and quality, using the finest fresh herbs, roots, spices, and fruits.
We
believe Reed’s Ginger Beers are unique in their kettle-brewed origin among all mass-marketed soft drinks. Reed’s Ginger
Beers contain between 17 and 39 grams of fresh ginger in every 12-ounce bottle. Our products differ from commercial soft drinks
in three characteristics: sweetening, carbonation, and coloring for greater adult appeal. We sweeten our products using pure cane
sugar. Instead of using injected-based carbonation, we produce our carbonation naturally, through slower, beer-oriented techniques.
This process produces smaller, longer lasting bubbles which do not dissipate rapidly when the bottle is opened. We do not add
coloring. The color of our products comes naturally from herbs, fruits, spices, roots, and juices.
Since
Reed’s Ginger Brews are pasteurized, they do not require or contain any preservatives. In contrast, modern commercial soft
drinks are typically produced using natural and artificial flavor concentrates prepared by flavor laboratories, tap water, and
highly refined sweeteners. Manufacturers make a centrally processed concentrate which lends itself to a wide variety of situations,
waters, and filling systems. The final product is generally cold-filled and requires preservatives for stability. Added colors
are either artificial, or if natural, they are often highly processed.
The
Reed’s Ginger Brews line contain the following products:
Reed’s
Original Ginger Brew
was our first creation and is a Jamaican recipe for homemade ginger ale using 17 grams of fresh
ginger root, lemon, lime, honey, raw cane sugar, pineapple, herbs and spices. Reed’s Original Ginger Brew is 20% fruit juice.
Reed’s
Premium Ginger Brew
is sweetened only with honey and pineapple juice. Reed’s Premium Ginger Brew is 20% fruit juice
and contains 17 grams of fresh ginger root.
Reeds
Extra Ginger Brew
is the same recipe as Original Ginger Brew, but has 26 grams of fresh ginger root for a stronger bite.
Reeds
Stronger Ginger Brew
has 50% more ginger than the Extra Ginger Brew and has the highest ginger content of any of our
beverage products.
Reed’s
Raspberry Ginger Brew
is brewed from 17 grams of fresh ginger root, raspberry juice, and lime. Reed’s Raspberry
Ginger Brew is 20% raspberry juice.
Reed’s
Light 55 Calories Extra Ginger Brew
is a reduced calorie version of our top selling Reed’s Extra Ginger Brew, made
possible by using Stevia. We use the same recipe of 26 grams of fresh ginger root, honey, pineapple, lemon and lime juices, and
exotic spices.
Reed’s
Natural Energy Elixir
is an energy drink infused with all-natural ingredients designed to provide consumers with a healthy
and natural boost to energy levels.
Virgil’s
Root Beer
Virgil’s
is a premium craft root beer made with natural ingredients. Our root beer contains filtered water, unbleached cane sugar, and
spices sourced from around the world such as anise from Spain, licorice from France, bourbon vanilla from Madagascar, cinnamon
from Sri Lanka, clove from Indonesia, wintergreen from China, sweet birch and molasses from the southern United States, nutmeg
from Indonesia, pimento berry oil from Jamaica, balsam oil from Peru, and cassia oil from China. We purchase these ingredients
from vendors who source these spices worldwide and gather them together at the brewing and bottling facilities. We combine these
ingredients under strict specifications and finally heat-pasteurize all Virgil’s sodas, to ensure quality. We sell Virgil’s
in 12-ounce bottles in both 4 packs and 12 pack boxes. The Virgil’s soda line is also GMO free.
In
addition to our Virgil’s Root Beer, we also offer a Virgil’s Cream Soda and Virgil’s Black Cherry Cream Soda,
Virgil’s Orange Cream Soda, and a Virgil’s ZERO line. In 2018 our Virgil’s ZERO line of 100% Stevia sweetened
and zero calorie sodas will be replaced by our NEW Virgil’s O Sugar line of craft sodas. This new natural line of Zero Sugar
flavors includes Root Beer, Cola, Lemon-lime, Orange, Black Cherry, and Cream soda.
Other
Products
We
have other popular brands with limited distribution including our Flying Cauldron Butterscotch Beer and Sonoma Sparkler brand
of sparkling juices designed to be celebratory drinks for holidays and special occasions.
Prior
Product Innovations
We
are experts in flavor and recipe development and have developed many innovative and award-winning products and line extensions.
With the expansion of our management team of beverage industry professionals and the added Chief Innovation Officer position,
we will continue to be at the forefront of developing flavor profiles and products.
While
product innovation will remain a top priority, we have discontinued some drinks in response to various market conditions including
changes in consumer preferences and price points in various markets.
These
innovations which have sold well in the past, may be reintroduced to the marketplace in the future given favorable market conditions.
These products include:
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Reed’s
Ginger Brews: Reed’s Spiced Apple Brew, Reed’s Cherry Ginger Brew, and Reed’s Nausea Relief.
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Reed’s
Kombucha: all flavors.
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Other
Products: China Cola, certain private label products, and Reed’s ice creams.
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Our
Primary Markets
We
target a niche in the estimated $100 billion carbonated and non-carbonated soft drink markets in the U.S., Canada, and international
markets. Our brands are generally regarded as premium and natural, with upscale packaging and are loosely defined as the artisanal
(craft), premium bottled carbonated soft drink category.
During
2017, management began simplifying operations in order to focus the Company on becoming a premier sales and marketing organization.
The new management team is currently assessing best strategies to augment our existing sales and marketing efforts by utilizing
industry brokers and outside advertising firms.
We
have an experienced and geographically diverse sales force promoting our products with senior sales representatives strategically
placed in five regions across the country, supported by local Reeds sales staff. Our sales managers are responsible for all activities
related to the sales, distribution, and marketing of our brands to our entire retail partner and distributor network in North
America. The Company also employs an internal sales force and engages from time to time and in limited circumstances, independent
sales brokers and outside representatives to promote our products.
We
sell to well-known popular natural food and gourmet retailers, large grocery store chains, club stores, convenience and drug stores,
liquor stores, industrial cafeterias (corporate feeders), and to on premise bars, gourmet restaurants, and delicatessens worldwide.
We also sell our products and promotional merchandise directly to consumers via the Internet through our Company website,
www.reedsgingerbrew.com.
Some
of our key customers include:
Natural
stores
: Whole Foods Market, Sprouts Farmers Market, Natural Grocers, Earth Fare, and Fresh Thyme Famers Market
Gourmet
& Specialty stores
: Trader Joe’s, Bristol Farms, The Fresh Market, and Central Market
Grocery
store chains
: Kroger, Safeway, Publix, Stop & Shop, H.E.B., and Wegmans
Club
and Mass Stores
: Costco Wholesale, Target, and Walmart
Liquor
stores
: BevMo!, Total Wine & More, and Spec’s
Convenience
& Drug stores
: Circle K, Rite Aid, and CVS Pharmacy
Our
Distribution Network
Our
products are brought to market through direct-store-delivery (DSD), customer warehouse, and distributor networks. The distribution
system used depends on customer needs, product characteristics, and local trade practices. Our products are brought to market
through an extremely flexible and fluid hybrid distribution model.
Our
product reaches the market in the following ways:
Direct
to Natural & Specialty Wholesale Distributors
Our
natural and specialty distributor partners operate a distribution network delivering thousands of SKUs of natural and gourmet
products to thousands of small, independent, natural retail outlets around the U.S., along with national chain customers, both
conventional and natural. This system of distribution allows our brands far reaching access to some of the most remote parts of
North America.
Direct
to Store Distribution (DSD) through alcoholic and non-alcoholic distributor network
Our
independent distributor partners operate DSD systems which deliver primarily beverages, foods, and snacks directly to retail stores
where the products are merchandised by their route sales and field sales employees. DSD enables us to merchandise with maximum
visibility and appeal. DSD is especially well-suited to products frequently restocked and respond to in-store promotion and merchandising.
Direct
to Store Warehouse Distribution
Some
of our products are delivered from our manufacturing plants and warehouses directly to customer warehouses. Some retailers mandate
we deliver directly to them, as it is more cost effective and allows them to pass savings along to their consumer. Other retailers
may not mandate direct delivery, but they recommend and prefer it as they have the capability to self-distribute and can realize
significant savings with direct delivery.
Wholesale
Distribution
Our
Wholesale Distributor network handles the wholesale shipments of our products. They have a warehouse, distribution center and
ship Reed’s and Virgil’s products directly to the Retailer (or to customers who opt for drop shipping).
International
Distribution
We
presently export Reed’s and Virgil’s brands throughout international markets via US based exporters. Some markets
are: Spain, Mexico, Puerto Rico, Canada, Philippines, U.K., Israel, South Africa, and Australia.
International
sales to some areas of the world are cost prohibitive, except for some specialty sales, since our premium sodas are packed in
glass, which drives substantial freight costs when shipping overseas. Despite these cost challenges, we believe there are good
opportunities for expansion of sales in Canada, the Middle East, England, and Australia and we are increasing our marketing focus
on these areas by adding freight friendly packages such as aluminum cans. We are open to exporting and co-packing internationally
and expanding our brands into foreign markets, and we have held preliminary discussions with trading companies and import/export
companies for the distribution of our products throughout Asia, Europe, Australia, and South America. We believe these areas are
a natural fit for Reed’s ginger products, because of the importance of ginger in international markets, especially the Asian
market, where ginger is a significant part of diet and nutrition.
We
believe the strength of our brands, innovation, and marketing, coupled with the quality of our products and flexibility of our
distribution network, allows us to compete effectively.
Corporate
Information
Our
principal executive offices are located at 13000 South Spring Street, Los Angeles, California 90061. Our telephone number is (310)
217-9400. Our corporate website is www.reedsinc.com. Information contained on our website or that is accessible through our website
should not be considered to be part of this prospectus. Our transfer agent is Transfer Online, Inc., telephone (503) 227-2950.
INCORPORATION
OF INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus the information we file with the SEC. This means
that we can disclose important information to you by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus.
We
are incorporating by reference the following documents that we have filed with the SEC (other than any filing or portion thereof
that is furnished, rather than filed, under applicable SEC rules):
●
our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 2, 2018;
● our
Quarterly Report s on Form 10-Q for the periods ended March 31, 2018 and June 30, 2018, filed with the SEC on
May 15, 2018 and August 13, 2018 respectively;
● our Current Reports
on Form 8-K dated March 28, 2018 , May 16, 2018 , August 2, 2018, August 13, 2018 and August 21, 2018 ;
● all other reports
filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act since the end of our 2016 fiscal year; and
● the description
of our common stock contained under the heading “Description of Securities” in the prospectus forming part of its registration
statement on Form S-1 (File No. 333-221059), originally filed with the Securities and Exchange Commission on October 23, 2017,
as amended on November 21, 2017, December 1, 2017 and December 4, 2017, and as may be further amended, including any amendment
or report filed for the purpose of updating such description.
We
also incorporate by reference into this prospectus additional documents that we file with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act Exchange Act of 1934 prior to the completion or termination of the offering, including
all such documents we may file with the SEC after the date of the initial registration statement and prior to the effectiveness
of the registration statement, but excluding any information deemed furnished and not filed with the SEC. Any statements contained
in a previously filed document incorporated by reference into this prospectus is deemed to be modified or superseded for purposes
of this prospectus to the extent that a statement contained in this prospectus, or in a subsequently filed document also incorporated
by reference herein, modifies or supersedes that statement.
Our Internet address is
www.reedsinc.com and the URL where incorporated reports and other reports may be accessed is http://reedsinc.com/investors/sec-filings/.
The reports incorporated
by reference into this prospectus are available from us upon request. We will provide a copy of any and all of the reports and
documents that are incorporated by reference, including exhibits to such reports and documents, in this prospectus to any person,
including a beneficial owner, to whom a prospectus is delivered, without charge, upon written or oral request. Requests for such
copies should be directed to the following:
Shareholder Services
Reed’s, Inc.
13000 South Spring Street
Los Angeles, California 90061
(310) 217-9400, extension 28 or dmiles@reedsinc.com
Except as expressly provided above, no other
information, including none of the information on our website, is incorporated by reference into this prospectus.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
You
can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at
www.sec.gov.
You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, NE, Washington,
D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the
SEC at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference facilities. We will also provide you with a copy of any or all of the reports or documents that have been
incorporated by reference into this prospectus or the registration statement of which it is a part upon written or oral request,
and at no cost to you. If you would like to request any reports or documents from the company, please contact:
Shareholder
Services
Reed’s,
Inc.
13000
South Spring Street
Los
Angeles, California 90061
(310)
217-9400, extension 28 or dmiles@reedsinc.com
We
are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, and we will file reports,
proxy statements and other information with the SEC. These reports, proxy statements and other information will be available for
inspection and copying at the public reference room and web site of the SEC referred to above. We also maintain a website at www.reedsinc.com,
at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with,
or furnished to, the SEC. Information contained on or accessible through our website is not a part of this prospectus, and the
inclusion of our website address in this prospectus is an inactive textual reference only.
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements, within the meaning of the Federal securities laws, which involve substantial risks
and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words “outlook”, “believes”, “plans”, “intends”,
“expects”, “goals”, “potential”, “continues”, “may”, “should”,
“seeks”, “will”, “would”, “approximately”, “predicts”, “estimates”,
“anticipates” and similar expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain these words. You should read statements that contain these words carefully because they discuss our plans,
strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters.
We believe that it is important to communicate our future expectations to our investors. There will be events in the future, however,
that we are not able to predict accurately or control. The factors listed under “Risk Factors” in this prospectus
and in any documents incorporated by reference into this prospectus as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. Such risks and uncertainties include, among other things, risks and uncertainties related to:
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Our
ability to generate sufficient cash flow to support capital expansion plans and general operating activities;
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Decreased
demand for our products resulting from changes in consumer preferences;
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Competitive
products and pricing pressures and our ability to gain or maintain its share of sales in the marketplace;
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The
introduction of new products;
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We
are subject to a broad range of evolving federal, state and local laws and regulations including those regarding the labeling
and safety of food products, establishing ingredient designations and standards of identity for certain foods, environmental
protections, as well as worker health and safety. Changes in these laws and regulations could have a material effect on the
way in which we produce and market our products and could result in increased costs;
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Changes
in the cost and availability of raw materials and the ability to maintain our supply arrangements and relationships and procure
timely and/or adequate production of all or any of our products;
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Our
ability to penetrate new markets and maintain or expand existing markets;
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Maintaining
existing relationships and expanding the distributor network of our products;
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The
marketing efforts of distributors of our products, most of whom also distribute products that are competitive with our products;
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Decisions
by distributors, grocery chains, specialty chain stores, club stores and other customers to discontinue carrying all or any
of our products that they are carrying at any time;
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The
availability and cost of capital to finance our working capital needs and growth plans;
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The
effectiveness of our advertising, marketing and promotional programs;
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Changes
in product category consumption;
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Economic
and political changes;
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Consumer
acceptance of new products, including taste test comparisons;
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Possible
recalls of our products;
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Our
ability to make suitable arrangements for the co-packing of any of our products;
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Our
ability to find alternative copacking and production facilities for our Kombucha and Private Label products if our Los Angeles
production facility is damaged by a disaster; and
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Our
ability to continue to meet continued listing requirements for the NYSE American.
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Before
you invest in our securities, you should be aware that the occurrence of the events described in these risk factors and elsewhere
in this prospectus under the heading “Risk Factors” could have a material adverse effect on our business, results
of operations and financial position. Any forward-looking statement made by us in this prospectus speaks only as of the date on
which we make it. Factors or events that could cause our actual results to differ will emerge from time to time, and it is not
possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise, except as required by law. All forward-looking statements
should be evaluated with the understanding of their inherent uncertainty. You are advised to consult any further disclosures we
make on related subjects in the reports we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
THE
OFFERING
This prospectus relates
to the resale by the selling shareholders identified in the “Selling Shareholders” section of this prospectus of up
to an aggregate of 1,111,321 shares of our common stock, including 418,909 shares issuable upon the exercise of warrants. The
selling shareholders acquired the shares and warrants in a private placement on June 2, 2016. See “Private Placement of
Securities” below. Subject to terms and conditions, we agreed to file a registration statement on behalf of the selling
shareholders to cover the resale of the shares.
Private Placement of Securities
On June 2, 2016, pursuant
to a Securities Purchase Agreement dated May 26, 2016 with institutional and accredited investors, Reed’s closed a private
financing transaction for the issuance and sale by Reed’s of 692,412 shares of common stock and warrants to purchase 346,206
shares of common stock, for gross proceeds to Reed’s of $2,354,200.
The warrants have an
exercise price of $4.25 per share and a term of 5 years. The exercise price of the Warrants is subject to customary adjustments
in the event of stock dividends and splits, and the warrants contain protective provisions in the event of fundamental transactions.
In addition, holders of the warrants shall be entitled to participate in distributions, dividends and subsequent rights offerings
to the same extent that the holders would have participated therein if the holders had held the number of shares of common stock
acquirable upon complete exercise of the warrants. Except upon at least 61 days’ prior notice from a holder of a warrant
to the Company, the holder will not have the right to exercise any portion of the warrant if the holder, together with its affiliates,
would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock (including securities convertible
into common stock) outstanding immediately after the exercise.
The Company entered
in to a registration rights agreement with the investors pursuant to which it agreed to file a resale registration statement for
the shares and the common stock underlying the Warrants within 30 days.
Maxim Group LLC (“Maxim”)
acted as the placement agent for the offering under a Placement Agent Agreement, dated May 26, 2016, between Maxim and Reed’s.
Upon the closing of the offering, Maxim received warrants to purchase up to 72,703 shares of common stock. The placement agent
warrants have an exercise price of $3.74 and are exercisable for a term of 5 years. The exercise price of the placement agent
warrants is subject to customary adjustments in the event of stock dividends and splits and contain protective provisions in the
event of fundamental transactions.
Each of the purchase
agreement and the placement agent agreement contains customary representations, warranties and covenants of the parties thereto.
RISK
FACTORS
Our
business is influenced by many factors that are difficult to predict and that involve uncertainties that may materially affect
our actual operating results, cash flows and financial condition. Before making an investment decision in our securities, you
should carefully consider the specific factors set forth below together with all of the other information appearing in this prospectus
or incorporated by reference into this prospectus in light of your particular investment objectives and financial circumstances.
Risks
Relating to Our Business
We
have a history of operating losses. If we continue to incur operating losses, we eventually may have insufficient working capital
to maintain or expand operations according to our business plan.
For the six months
ended June 30 , 2018, the Company recorded a net loss of $4,991,000 and used cash from operations of $ 10,415 ,000.
As of June 30 , 2018, we had a stockholder’s deficit of $ 2,734 ,000 and working capital of $ 289,000 compared
to stockholder’s equity of $508,000 and working capital of $2,303,000 at December 31, 2017.
For the year ended December
31, 2017, the Company recorded a net loss of $18,373,000 and utilized cash in operations of $3,422,000. During the year ended December
31, 2017, the company experienced significant financing shortages and engaged in three separate transactions to raise capital.
As of June 30, 2018,
the Company had a cash balance of $1,807,000 and had available borrowing on our Revolving Line of Credit of $2,004,000 for a total
of $3,811,000 of cash availability. The Revolving Line of Credit matures in October 2018. The Company’s Term Loans and Capital
Expansion Loan (together, the “Bank Notes”), totaling $6,244,000 as of June 30, 2018, also become due in October 2018.
On July 19, 2018, the
Company executed a term sheet for refinancing of all of these amounts, and management anticipates that the refinancing will be
completed prior to October 2018
If
we continue to suffer losses from operations, our working capital may be insufficient to support our ability to expand our business
operations as rapidly as we would deem necessary at any time, unless we are able to obtain additional financing. There can be
no assurance that we will be able to obtain such financing on acceptable terms, or at all. If adequate funds are not available
or are not available on acceptable terms, we may not be able to pursue our business objectives and would be required to reduce
our level of operations, including reducing infrastructure, promotions, personnel and other operating expenses. These events could
adversely affect our business, results of operations and financial condition. If adequate funds are not available or if they are
not available on acceptable terms, our ability to fund the growth of our operations, take advantage of opportunities, develop
products or services or otherwise respond to competitive pressures, could be significantly limited.
Disruption
within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial
condition and results of operations.
Our
ability, through our suppliers, business partners, contract manufacturers, independent distributors and retailers, to produce,
transport, distribute and sell products is critical to our success. The Company is currently negotiating the sale of the LA Plant,
which may lead to significant changes in our current supply chain model.
Damage
or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion,
terrorism, pandemics such as influenza, labor strikes or other reasons, could impair the manufacture, distribution and sale of
our products. Many of these events are outside of our control. Failure to take adequate steps to protect against or mitigate the
likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our
business, financial condition and results of operations.
Failure
to realize the goal of discontinuing the allocation of capital to the LA Plant, could adversely affect our business, financial
condition and results of operations.
We
are currently seeking partners to sell LA Plant equipment that was impaired in our most recent quarter. The estimated value of
the impairment in our most recent quarter may not be sufficient to cover further losses. There can be no assurances we will timely
dispose of these assets, at expected prices. The sale of the equipment is subject to many variables that are difficult to forecast.
Failure to realize our goal of discontinuing the allocation of capital to the LA Plant could adversely affect our business, financial
condition and results of operations.
We
may need additional financing in the future, which may not be available when needed or may be costly and dilutive.
We
may require additional financing to support our working capital needs in the future. The amount of additional capital we may require,
the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including
our strategic initiatives and operating plans, the performance of our business and the market conditions for debt or equity financing.
Additionally, the amount of capital required will depend on our ability to meet our case sales goals and otherwise successfully
execute our operating plan. We believe it is imperative to meet these sales objectives in order to lessen our reliance on external
financing in the future. Although we believe various debt and equity financing alternatives will be available to us to support
our working capital needs, financing arrangements on acceptable terms may not be available to us when needed. Additionally, these
alternatives may require significant cash payments for interest and other costs or could be highly dilutive to our existing shareholders.
Any such financing alternatives may not provide us with sufficient funds to meet our long-term capital requirements. If necessary,
we may explore strategic transactions that we consider to be in the best interest of the Company and our shareholders, which may
include, without limitation, public or private offerings of debt or equity securities, a rights offering, and other strategic
alternatives; however, these options may not ultimately be available or feasible.
Restrictive
covenants related to our debt obligations may restrict our ability to obtain future financing.
We
are prohibited from entering into a Variable Rate Transaction (defined below) for a period of two years expiring April 21, 2019.
“Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities
that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock
either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities,
or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance
of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the
business of the Company or the market for the common stock (including a price based anti-dilution provision that resets the conversion,
exercise or exchange price due to the pricing of a financing that occurs after the date of such transaction) or (ii) enters into
any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined
price. We are also restricted from incurring future indebtedness pursuant to our current secured debt obligations.
In
addition, we granted certain investors rights of participation in future financings, in the aggregate, of up to 100%. These participation
rights could severely impact the Company’s ability to engage investment bankers to structure a financing transaction and
raise additional financing on favorable terms. Furthermore, negotiating and obtaining a waiver to these participation may either
not be possible or may be costly to the Company.
Our
indebtedness and liquidity needs could restrict our operations and make us more vulnerable to adverse economic conditions.
Our
existing indebtedness may adversely affect our operations and limit our growth, and we may have difficulty making debt service
payments on such indebtedness as payments become due. We may also experience the occurrence of events of default or breach of
financial covenants. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired.
If we violate any of the restrictions or covenants, a significant portion of our indebtedness may become immediately due and payable,
our lenders’ commitment to make further loans to us may terminate. We might not have, or be able to obtain, sufficient funds
to make these accelerated payments.
Our
reliance on distributors, retailers and brokers could affect our ability to efficiently and profitably distribute and market our
products, maintain our existing markets and expand our business into other geographic markets.
Our
ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution
areas, is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers and
brokers strategically positioned to serve those areas. Most of our distributors, retailers and brokers sell and distribute competing
products and our products may represent a small portion of their businesses. The success of this network will depend on the performance
of the distributors, retailers and brokers of this network. There is a risk that the mentioned entities may not adequately perform
their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products
in localities that may not be receptive to our product. Our ability to incentivize and motivate distributors to manage and sell
our products is affected by competition from other beverage companies who have greater resources than we do. To the extent that
our distributors, retailers and brokers are distracted from selling our products or do not employ sufficient efforts in managing
and selling our products, including re-stocking the retail shelves with our products, our sales and results of operations could
be adversely affected. Furthermore, such third-parties’ financial position or market share may deteriorate, which could
adversely affect our distribution, marketing and sales activities.
Our
ability to maintain and expand our distribution network and attract additional distributors, retailers and brokers will depend
on a number of factors, some of which are outside our control. Some of these factors include:
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the
level of demand for our brands and products in a particular distribution area;
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our
ability to price our products at levels competitive with those of competing products; and
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our
ability to deliver products in the quantity and at the time ordered by distributors, retailers and brokers.
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We
may not be able to successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution.
Our inability to achieve success with regards to any of these factors in a geographic distribution area will have a material adverse
effect on our relationships in that particular geographic area, thus limiting our ability to maintain or expand our market, which
will likely adversely affect our revenues and financial results.
We
incur significant time and expense in attracting and maintaining key distributors.
Our
marketing and sales strategy depends in large part on the availability and performance of our independent distributors. We currently
do not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments from some
of our distributors. We may not be able to maintain our current distribution relationships or establish and maintain successful
relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that we may
have to incur additional expenditures to attract and maintain key distributors in one or more of our geographic distribution areas
in order to profitably exploit our geographic markets.
If
we lose any of our key distributors or national retail accounts, our financial condition and results of operations could be adversely
affected.
We
depend in large part on distributors to distribute our beverages and other products. Most of our outside distributors are not
bound by written agreements with us and may discontinue their relationship with us on short notice. Most distributors handle a
number of competitive products. In addition, our products are a small part of our distributors’ businesses.
We
continually seek to expand distribution of our products by entering into distribution arrangements with regional bottlers or other
direct store delivery distributors having established sales, marketing and distribution organizations. Many of our distributors
are affiliated with and manufacture and/or distribute other soda and non-carbonated brands and other beverage products. In many
cases, such products compete directly with our products.
The
marketing efforts of our distributors are important for our success. If our brands prove to be less attractive to our existing
distributors and/or if we fail to attract additional distributors, and/or our distributors do not market and promote our products
above the products of our competitors, our business, financial condition and results of operations could be adversely affected.
It
is difficult to predict the timing and amount of our sales because our distributors are not required to place minimum orders with
us.
Our
independent distributors and national accounts are not required to place minimum monthly or annual orders for our products. In
order to reduce their inventory costs, independent distributors typically order products from us on a “just in time”
basis in quantities and at such times based on the demand for the products in a particular distribution area. Accordingly, we
cannot predict the timing or quantity of purchases by any of our independent distributors or whether any of our distributors will
continue to purchase products from us in the same frequencies and volumes as they may have done in the past. Additionally, our
larger distributors and partners may make orders that are larger than we have historically been required to fill. Shortages in
inventory levels, supply of raw materials or other key supplies could negatively affect us.
If
we do not adequately manage our inventory levels, our operating results could be adversely affected.
We
need to maintain adequate inventory levels to be able to deliver products to distributors on a timely basis. Our inventory supply
depends on our ability to correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise,
particularly for new products, seasonal promotions and new markets. If we materially underestimate demand for our products or
are unable to maintain sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term basis. If
we overestimate distributor or retailer demand for our products, we may end up with too much inventory, resulting in higher storage
costs, increased trade spend and the risk of inventory spoilage. If we fail to manage our inventory to meet demand, we could damage
our relationships with our distributors and retailers and could delay or lose sales opportunities, which would unfavorably impact
our future sales and adversely affect our operating results. In addition, if the inventory of our products held by our distributors
and retailers is too high, they will not place orders for additional products, which would also unfavorably impact our sales and
adversely affect our operating results.
Our
dependence on independent contract manufacturers could make management of our manufacturing and distribution efforts inefficient
or unprofitable.
We
are expected to arrange for our contract manufacturing needs sufficiently in advance of anticipated requirements, which is customary
in the contract manufacturing industry for comparably sized companies. Based on the cost structure and forecasted demand for the
particular geographic area where our contract manufacturers are located, we continually evaluate which of our contract manufacturers
to use. To the extent demand for our products exceeds available inventory or the production capacity of our contract manufacturing
arrangements, or orders are not submitted on a timely basis, we will be unable to fulfill distributor orders on demand. Conversely,
we may produce more product inventory than warranted by the actual demand for it, resulting in higher storage costs and the potential
risk of inventory spoilage. Our failure to accurately predict and manage our contract manufacturing requirements and our inventory
levels may impair relationships with our independent distributors and key accounts, which, in turn, would likely have a material
adverse effect on our ability to maintain effective relationships with those distributors and key accounts.
Increases
in costs of packaging and ingredients may have an adverse impact on our gross margin.
Over
the past few years, costs of organic ingredients and natural ingredients have increased due to increased demand and required the
company to obtain these ingredients from a wider population of qualified vendors. If the company is unable to pass on these costs,
the gross margin will be significantly impacted.
Inability
to sustain price increases may have an adverse impact on our gross revenue.
The
Company has not historically raised prices. As the Company implements pricing corrections in the market place, volume may be negatively
impacted resulting in a net decrease in gross revenue.
Increased
market spending may not drive volume growth
The
Company’s marketing effort in the past have been limited. The anticipated increase in marketing spending may not generate
an increase in sales volume resulting in a net decrease in gross revenue.
Increases
in costs of energy and freight may have an adverse impact on our gross margin.
Over
the past few years, volatility in the global oil markets has resulted in high fuel prices, which many shipping companies have
passed on to their customers by way of higher base pricing and increased fuel surcharges. With recent declines in fuel prices,
some companies have been slow to pass on decreases in their fuel surcharges. If fuel prices increase again, we expect to experience
higher shipping rates and fuel surcharges, as well as energy surcharges on our raw materials. It is hard to predict what will
happen in the fuel markets in 2018. Due to the price sensitivity of our products, we may not be able to pass such increases on
to our customers.
Disruption
within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial
condition and results of operations.
Our
ability, through our suppliers, business partners, contract manufacturers, independent distributors and retailers, to make, move
and sell products is critical to our success. The Company is currently negotiating the sale of the LA Plant that may lead to significant
changes in our current supply chain model.
Damage
or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion,
terrorism, pandemics such as influenza, labor strikes or other reasons, could impair the manufacture, distribution and sale of
our products. Many of these events are outside of our control. Failure to take adequate steps to protect against or mitigate the
likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our
business, financial condition and results of operations.
If
we are unable to attract and retain key personnel our efficiency and operations would be adversely affected.
Our
success depends on our ability to attract and retain highly qualified employees in such areas as sales, marketing, product development
and finance. In general, we compete to hire new employees, and, in some cases, must train them and develop their skills and competencies.
Our operating results could be adversely affected by increased costs due to increased competition for employees, higher employee
turnover or increased employee benefit costs. Any unplanned turnover, particularly involving our key personnel, could negatively
impact our operations, financial condition and employee morale.
If
we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively.
We
rely on a combination of trademark and trade secrecy laws, confidentiality procedures and contractual provisions to protect our
intellectual property rights. Failure to protect our intellectual property could harm our brand and our reputation, and adversely
affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks,
copyrights, licenses and trade secrets, could result in the expenditure of significant financial and managerial resources. We
regard our intellectual property, particularly our trademarks and trade secrets to be of considerable value and importance to
our business and our success, and we actively pursue the registration of our trademarks in the United States and internationally.
However, the steps taken by us to protect these proprietary rights may not be adequate and may not prevent third parties from
infringing or misappropriating our trademarks, trade secrets or similar proprietary rights. In addition, other parties may seek
to assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any
such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of
infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit
our products or recoup our associated research and development costs.
Litigation
or legal proceedings could expose us to significant liabilities and damage our reputation.
We
may become party to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including
distraction of management attention away from our business operations. We evaluate litigation claims and legal proceedings to
assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments
and estimates, we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments
and estimates are based on the information available to management at the time and involve a significant amount of management
judgment. Actual outcomes or losses may differ materially from those envisioned by our current assessments and estimates. Our
policies and procedures require strict compliance by our employees and agents with all U.S. and local laws and regulations applicable
to our business operations, including those prohibiting improper payments to government officials. Nonetheless, our policies and
procedures may not ensure full compliance by our employees and agents with all applicable legal requirements. Improper conduct
by our employees or agents could damage our reputation or lead to litigation or legal proceedings that could result in civil or
criminal penalties, including substantial monetary fines, as well as disgorgement of profits.
We
are subject to risks inherent in sales of products in international markets.
Our
operations outside of the United States contribute to our revenue and profitability, and we believe that developing and emerging
markets present important future growth opportunities for us. However, there can be no assurance that existing or new products
that we manufacture, distribute or sell will be accepted or be successful in any particular foreign market, due to local or global
competition, product price, cultural differences, consumer preferences or otherwise. Here are many factors that could adversely
affect demand for our products in foreign markets, including our inability to attract and maintain key distributors in these markets;
volatility in the economic growth of certain of these markets; changes in economic, political or social conditions, imposition
of new or increased labeling, product or production requirements, or other legal restrictions; restrictions on the import or export
of our products or ingredients or substances used in our products; inflationary currency, devaluation or fluctuation; increased
costs of doing business due to compliance with complex foreign and U.S. laws and regulations. If we are unable to effectively
operate or manage the risks associated with operating in international markets, our business, financial condition or results of
operations could be adversely affected.
Changes
in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters
could significantly affect our financial results.
The
United States generally accepted accounting principles and related pronouncements, implementation guidelines and interpretations
with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, stock-based compensation,
trade spend and promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments
by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates or judgments
by our management could significantly change our reported results.
If
we are unable to maintain effective disclosure controls and procedures and internal control over financial reporting, our stock
price and investor confidence could be materially and adversely affected.
We
are required to maintain both disclosure controls and procedures and internal control over financial reporting that are effective.
Because of their inherent limitations, internal control over financial reporting, however well designed and operated, can only
provide reasonable, and not absolute, assurance that the controls will prevent or detect misstatements. Because of these and other
inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their
goals under all potential future conditions. The failure of controls by design deficiencies or absence of adequate controls could
result in a material adverse effect on our business and financial results, which could also negatively impact our stock price
and investor confidence.
If
we are unable to build and sustain proper information technology infrastructure, our business could suffer.
We
depend on information technology as an enabler to improve the effectiveness of our operations and to interface with our customers,
as well as to maintain financial accuracy and efficiency. If we do not allocate and effectively manage the resources necessary
to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies,
the loss of customers, business disruptions, or the loss of or damage to intellectual property through security breaches.
We
could be subject to cybersecurity attacks.
Cybersecurity
attacks are evolving and include malicious software, attempts to gain unauthorized access to data, and other electronic security
breaches that could lead to disruptions in business processes, unauthorized release of confidential or otherwise protected information
and corruption of data. Such unauthorized access could subject us to operational interruption, damage to our brand image and private
data exposure, and harm our business.
We must increase our stockholders’
equity to $6 million to meet continued listing standards of the NYSE American or meet the $50,000,000 market capitalization exception.
As of June 30 ,
2018, we had a stockholder’s deficit of $ 2,734 ,000 compared to stockholder’s equity of $508,000 at December
31, 2017.
A delisting of our common
stock and our inability to list the stock on another national securities exchange could negatively impact us by: (i) reducing the
liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock,
which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use a registration statement
to offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets; and (iv) impairing
our ability to provide equity incentives to our employees. While a delisting of our common stock would not constitute a specific
event of default under the documents governing our senior credit facilities, our lenders could claim that a delisting would trigger
a default under the material adverse change covenant or the cross-default provisions under such documents.
Risk Factors Relating to Our Industry
The current aluminum can shortage
could harm our ability to meet consumer demand.
As a craft brewer,
we do not meet requirements to have a requirements contract in place with our aluminum can supplier. Craft brewers such as are
facing an aluminum can shortage. The beverage industry has seen a 15 to 20 percent increase in the use of cans over bottles in
recent years. The three major can manufacturers in the U.S. didn't foresee that hike, and are now way behind on filling orders.
To make matters worse, the aluminum is more expensive because of federal tariffs. This aluminum can shortage could harm our ability
to timely produce enough product to meet consumer demand.
We
may experience a reduced demand for some of our products due to health concerns (including obesity) and legislative initiatives
against sweetened beverages.
Consumers
are concerned about health and wellness; public health officials and government officials are increasingly vocal about obesity
and its consequences. There has been a trend among some public health advocates and dietary guidelines to recommend a reduction
in sweetened beverages, as well as increased public scrutiny, potential new taxes on sugar-sweetened beverages, and additional
governmental regulations concerning the marketing and labeling/packing of the beverage industry. Additional or revised regulatory
requirements, whether labeling, tax or otherwise, could have a material adverse effect on our financial condition and results
of operations. Further, increasing public concern with respect to sweetened beverages could reduce demand for our beverages and
increase desire for more low-calorie soft drinks, water, enhanced water, coffee-flavored beverages, tea, and beverages with natural
sweeteners. We are continuously working to launch new products that round out our diversified portfolio.
Legislative
or regulatory changes that affect our products could reduce demand for products or increase our costs.
Taxes
imposed on the sale of certain of our products by federal, state and local governments in the United States, Canada or other countries
in which we operate could cause consumers to shift away from purchasing our beverages. Several municipalities in the United States
have implemented or are considering implementing taxes on the sale of certain “sugared” beverages, including non-diet
soft drinks, fruit drinks, teas and flavored waters to help fund various initiatives. These taxes could materially affect our
business and financial results.
Additional
taxes levied on us could harm our financial results.
Recent
legislative proposals to reform U.S. taxation of non-U.S. earnings could have a material adverse effect on our financial results
by subjecting a significant portion of our non-U.S. earnings to incremental U.S. taxation and/or by delaying or permanently deferring
certain deductions otherwise allowed in calculating our U.S. tax liabilities.
We
compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.
Our
business is substantially dependent upon awareness and market acceptance of our products and brands by our targeted consumers.
In addition, our business depends on acceptance by our independent distributors of our brands as beverage brands that have the
potential to provide incremental sales growth rather than reduce distributors’ existing beverage sales. Although we believe
that we have been relatively successful towards establishing our brands as recognizable brands in the New Age beverage industry,
it may be too early in the product life cycle of these brands to determine whether our products and brands will achieve and maintain
satisfactory levels of acceptance by independent distributors and retail consumers. We believe that the success of our product
name brands will also be substantially dependent upon acceptance of our product name brands. Accordingly, any failure of our brands
to maintain or increase acceptance or market penetration would likely have a material adverse affect on our revenues and financial
results.
Competition
from traditional non-alcoholic beverage manufacturers may adversely affect our distribution relationships and may hinder development
of our existing markets, as well as prevent us from expanding our markets.
We
target a niche in the estimated $100 billion carbonated and non-carbonated soft drink markets in the US, Canada and international
markets. Our brands are generally regarded as premium and natural, with upscale packaging and are loosely defined as the artisanal
(craft), premium bottled carbonated soft drink category. The soft drink industry is highly fragmented and the craft soft drink
category consists of such competitors as, Henry Weinhards, Thomas Kemper, Hansen’s, Izze, Boylan and Jones Soda, to name
a few. These brands have the advantage of being seen widely in the national market and being commonly known for years through
well-funded ad campaigns. Our products have a relatively high price for an artisanal premium beverage product, minimal mass media
advertising and a relatively small but growing presence in the mainstream market compared to many of our competitors.
The
beverage industry is highly competitive. We compete with other beverage companies not only for consumer acceptance but also for
shelf space in retail outlets and for marketing focus by our distributors, all of which also distribute other beverage brands.
Our products compete with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially
greater financial, marketing and distribution resources than ours. Some of these competitors are placing severe pressure on independent
distributors not to carry competitive sparkling brands such as ours. We also compete with regional beverage producers and “private
label” soft drink suppliers.
Increased
competitor consolidations, market-place competition, particularly among branded beverage products, and competitive product and
pricing pressures could impact our earnings, market share and volume growth. If, due to such pressure or other competitive threats,
we are unable to sufficiently maintain or develop our distribution channels, we may be unable to achieve our current revenue and
financial targets. As a means of maintaining and expanding our distribution network, we intend to introduce product extensions
and additional brands. We may not be successful in doing this and other companies may be more successful in this regard over the
long term. Competition, particularly from companies with greater financial and marketing resources than ours, could have a material
adverse effect on our existing markets, as well as on our ability to expand the market for our products.
We
compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue
developing new products to satisfy our consumers’ changing preferences will determine our long-term success.
Failure
to introduce new brands, products or product extensions into the marketplace as current ones mature and to meet our consumers’
changing preferences could prevent us from gaining market share and achieving long-term profitability. Product lifecycles can
vary and consumers’ preferences and loyalties change over time. Although we try to anticipate these shifts and innovate
new products to introduce to our consumers, we may not succeed. Customer preferences also are affected by factors other than taste,
such as health and nutrition considerations and obesity concerns, shifting consumer needs, changes in consumer lifestyles, increased
consumer information and competitive product and pricing pressures. Sales of our products may be adversely affected by the negative
publicity associated with these issues. If we do not adequately anticipate or adjust to respond to these and other changes in
customer preferences, we may not be able to maintain and grow our brand image and our sales may be adversely affected.
Global
economic conditions may continue to adversely impact our business and results of operations.
The
beverage industry, and particularly those companies selling premium beverages like us, can be affected by macro-economic factors,
including changes in national, regional, and local economic conditions, unemployment levels and consumer spending patterns, which
together may impact the willingness of consumers to purchase our products as they adjust their discretionary spending. The recent
disruptions in the overall economy and financial markets as a result of the global economic downturn have adversely impacted the
United States and Canada. This reduced consumer confidence in the economy has reduced consumers’ discretionary spending
and we believe this has negatively affected consumers’ willingness to purchase beverage products such as ours. Moreover,
adverse economic conditions may adversely affect the ability of our distributors to obtain the credit necessary to fund their
working capital needs, which could negatively impact their ability or desire to continue to purchase products from us in the same
frequencies and volumes as they have done in the past. If we experience similar adverse economic conditions in the future, sales
of our products could be adversely affected, collectability of accounts receivable may be compromised and we may face obsolescence
issues with our inventory, any of which could have a material adverse impact on our operating results and financial condition.
If
we encounter product recalls or other product quality issues, our business may suffer.
Product
quality issues, real or imagined, or allegations of product contamination, even when false or unfounded, could tarnish our image
and could cause consumers to choose other products. In addition, because of changing government regulations or implementation
thereof, or allegations of product contamination, we may be required from time to time to recall products entirely or from specific
markets. Product recalls could affect our profitability and could negatively affect brand image.
We
could be exposed to product liability claims.
Although
we have product liability and basic recall insurance, insurance coverage may not be sufficient to cover all product liability
claims that may arise. To the extent our product liability coverage is insufficient, a product liability claim would likely have
a material adverse effect upon our financial condition. In addition, any product liability claim brought against us may materially
damage the reputation and brand image of our products and business.
Our
business is subject to many regulations and noncompliance is costly.
The
production, marketing and sale of our beverages, including contents, labels, caps and containers, are subject to the rules and
regulations of various federal, provincial, state and local health agencies. If a regulatory authority finds that a current or
future product or production run is not in compliance with any of these regulations, we may be fined, or production may be stopped,
which would adversely affect our financial condition and results of operations. Similarly, any adverse publicity associated with
any noncompliance may damage our reputation and our ability to successfully market our products. Furthermore, the rules and regulations
are subject to change from time to time and while we closely monitor developments in this area, we cannot anticipate whether changes
in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements, whether labeling,
environmental, tax or otherwise, could have a material adverse effect on our financial condition and results of operations.
Significant
additional labeling or warning requirements may inhibit sales of affected products.
Various
jurisdictions may seek to adopt significant additional product labeling or warning requirements relating to the chemical content
or perceived adverse health consequences of certain of our products. These types of requirements, if they become applicable to
one or more of our products under current or future environmental or health laws or regulations, may inhibit sales of such products.
In California, a law requires that a specific warning appear on any product that contains a component listed by the state as having
been found to cause cancer or birth defects. This law recognizes no generally applicable quantitative thresholds below which a
warning is not required. If a component found in one of our products is added to the list, or if the increasing sensitivity of
detection methodology that may become available under this law and related regulations as they currently exist, or as they may
be amended, results in the detection of an infinitesimal quantity of a listed substance in one of our beverages produced for sale
in California, the resulting warning requirements or adverse publicity could affect our sales.
We
may not be able to develop successful new beverage products, which are important to our growth.
An
important part of our strategy is to increase our sales through the development of new beverage products. We cannot assure you
that we will be able to continue to develop, market and distribute future beverage products that will enjoy market acceptance.
The failure to continue to develop new beverage products that gain market acceptance could have an adverse impact on our growth
and materially adversely affect our financial condition. We may have higher obsolescent product expense if new products fail to
perform as expected due to the need to write off excess inventory of the new products.
Our
results of operations may be impacted in various ways by the introduction of new products, even if they are successful, including
the following:
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sales
of new products could adversely impact sales of existing products;
|
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●
|
we
may incur higher cost of goods sold and selling, general and administrative expenses in the periods when we introduce new
products due to increased costs associated with the introduction and marketing of new products, most of which are expensed
as incurred; and
|
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●
|
when
we introduce new platforms and bottle sizes, we may experience increased freight and logistics costs as our co-packers adjust
their facilities for the new products.
|
The
growth of our revenues is dependent on acceptance of our products by mainstream consumers.
We
have dedicated significant resources to introduce our products to the mainstream consumer. As such, we have increased our sales
force and executed agreements with distributors who, in turn, distribute to mainstream consumers at grocery stores and other retailers.
If our products are not accepted by the mainstream consumer, our business could suffer.
Our
failure to accurately estimate demand for our products could adversely affect our business and financial results.
We
may not correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly
with new products, and may be less precise during periods of rapid growth, particularly in new markets. If we materially underestimate
demand for our products or are unable to secure sufficient ingredients or raw materials including, but not limited to, glass,
labels, flavors or packing arrangements, we might not be able to satisfy demand on a short-term basis. Furthermore, industry-wide
shortages of certain juice concentrates and sweeteners have been and could, from time to time in the future, be experienced, which
could interfere with and/or delay production of certain of our products and could have a material adverse effect on our business
and financial results. We do not use hedging agreements or alternative instruments to manage this risk.
The loss of our largest customers would
substantially reduce revenues.
Our customers are material
to our success. If we are unable to maintain good relationships with our existing customers, our business could suffer.
During the three months
ended June 30, 2018, the Company’s largest three customers accounted for 24%, 11%, and 10% of gross sales, respectively.
During the six months then ended, two of these customers accounted for 25% and 10% of gross sales, respectively. During the three
and six months ended June 30, 2017, the Company’s largest customer accounted for 23% and 22% of gross sales, respectively.
No other customer exceeded 10% of sales for either period. As of June 30, 2018, the Company had accounts receivable from two customers
which comprised 25% and 10%, respectively, of its gross accounts receivable. As of December 31, 2017, accounts receivable from
two customers comprised approximately 23% and 16% of total accounts receivable, respectively.
No other customer exceeded
10% of sales for either period.
The loss of our largest vendors would
substantially reduce revenues.
Our vendors are material
to our success. If we are unable to maintain good relationships with our existing vendors, our business could suffer.
During the three months
ended June 30, 2018, the Company made 18% of its purchases from its largest vendor. During the six months then ended, 16% of all
purchases were made from this vendor. During both the three and six months ended June 30, 2017, a single vendor accounted for
approximately 18% of all purchases. As of June 30, 2018, a single vendor accounted for 24% of the Company’s total accounts
payable. As of December 31, 2017, this vendor accounted for 20% of total accounts payable. As of December 31, 2017, the Company
had one vendor which accounted for 20% of its total accounts payable.
The
loss of our third-party distributors could impair our operations and substantially reduce our financial results.
We
depend in large part on distributors to distribute our beverages and other products. Most of our outside distributors are not
bound by written agreements with us and may discontinue their relationship with us on short notice. Most distributors handle a
number of competitive products. In addition, our products are a small part of our distributors’ businesses.
We
continually seek to expand distribution of our products by entering into distribution arrangements with regional bottlers or other
direct store delivery distributors having established sales, marketing and distribution organizations. Many of our distributors
are affiliated with and manufacture and/or distribute other soda and non-carbonated brands and other beverage products. In many
cases, such products compete directly with our products.
The
marketing efforts of our distributors are important for our success. If our brands prove to be less attractive to our existing
distributors and/or if we fail to attract additional distributors, and/or our distributors do not market and promote our products
above the products of our competitors, our business, financial condition and results of operations could be adversely affected.
Price
fluctuations in, and unavailability of, raw materials and packaging that we use could adversely affect us.
We
do not enter into hedging arrangements for raw materials. Although the prices of raw materials that we use have not increased
significantly in recent years, our results of operations would be adversely affected if the price of these raw materials were
to rise and we were unable to pass these costs on to our customers.
We
depend upon an uninterrupted supply of the ingredients for our products, a significant portion of which we obtain overseas, principally
from Peru, Brazil and Fiji and Indonesia. We do not have agreements guaranteeing supply of our ingredients. Any decrease in the
supply of these ingredients or increase in the prices of these ingredients as a result of any adverse weather conditions, pests,
crop disease, interruptions of shipment or political considerations, among other reasons, could substantially increase our costs
and adversely affect our financial performance.
We
also depend upon an uninterrupted supply of packaging materials, such as glass for our bottles. We obtain our bottles both domestically
and internationally. Any decrease in supply of these materials or increase in the prices of the materials, as a result of decreased
supply or increased demand, could substantially increase our costs and adversely affect our financial performance.
The
loss of any of our co-packers could impair our operations and substantially reduce our financial results.
We
rely on third parties, called co-packers in our industry, to produce some of our beverages, to produce our glass bottles and to
bottle some of our beverages.
During
the year ended December 31, 2017, the Company had utilized three separate co-pack packers for most its production and bottling
of beverage products in the Eastern United States. Although there are other packers and the Company has outfitted our own brewery
and bottling plant, a change in packers may cause a delay in the production process, which could ultimately affect operating results.
Our
co-packing arrangements with other companies are on a short term basis and such co-packers may discontinue their relationship
with us on short notice. Our co-packing arrangements expose us to various risks, including:
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if
any of those co-packers were to terminate our co-packing arrangement or have difficulties in producing beverages for us, our
ability to produce our beverages would be adversely affected until we were able to make alternative arrangements; and
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our
business reputation would be adversely affected if any of the co-packers were to produce inferior quality.
|
We
compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue
to market our existing products and develop new products to satisfy our consumers’ changing preferences will determine our
long-term success.
Consumers
are seeking greater variety in their beverages. Our future success will depend, in part, upon our continued ability to develop
and introduce different and innovative beverages. In order to retain and expand our market share, we must continue to develop
and introduce different and innovative beverages and be competitive in the areas of quality and health, although there can be
no assurance of our ability to do so. There is no assurance that consumers will continue to purchase our products in the future.
Additionally, many of our products are considered premium products and to maintain market share during recessionary periods, we
may have to reduce profit margins, which would adversely affect our results of operations. In addition, there is increasing awareness
and concern for the health consequences of obesity. This may reduce demand for our non-diet beverages, which could affect our
profitability. Product lifecycles for some beverage brands and/or products and/or packages may be limited to a few years before
consumers’ preferences change. The beverages we currently market are in varying stages of their lifecycles and there can
be no assurance that such beverages will become or remain profitable for us. The beverage industry is subject to changing consumer
preferences and shifts in consumer preferences may adversely affect us if we misjudge such preferences. We may be unable to achieve
volume growth through product and packaging initiatives. We also may be unable to penetrate new markets. If our revenues decline,
our business, financial condition and results of operations will be materially and adversely affected.
Our
quarterly operating results may fluctuate significantly because of the seasonality of our business.
Our
highest revenues occur during the summer and fall, the third and fourth quarters of each fiscal year. These seasonality issues
may cause our financial performance to fluctuate. In addition, beverage sales can be adversely affected by sustained periods of
bad weather.
Our
manufacturing process is not patented.
None
of the manufacturing processes used in producing our products are subject to a patent or similar intellectual property protection.
Our only protection against a third party using our recipes and processes is confidentiality agreements with the companies that
produce our beverages and with our employees who have knowledge of such processes. If our competitors develop substantially equivalent
proprietary information or otherwise obtain access to our knowledge, we will have greater difficulty in competing with them for
business, and our market share could decline.
If
we are not able to retain the full time services of our management team, it will be more difficult for us to manage our operations
and our operating performance could suffer.
Our
business is dependent, to a large extent, upon the services of our management team. We depend on our management team. We do have
a written employment agreement with two of five members of our management team. In addition, we do not maintain key person life
insurance on any of our management team. Therefore, in the event of the loss or unavailability of any member of the management
team to us, there can be no assurance that we would be able to locate in a timely manner or employ qualified personnel to replace
him. The loss of the services of any member of our management team or our failure to attract and retain other key personnel over
time would jeopardize our ability to execute our business plan and could have a material adverse effect on our business, results
of operations and financial condition.
The
price of our common stock may be volatile, and a shareholder’s investment in our common stock could suffer a decline in
value.
There
has been significant volatility in the volume and market price of our common stock, and this volatility may continue in the future.
In addition, factors such as quarterly variations in our operating results, litigation involving us, general trends relating to
the beverage industry, actions by governmental agencies, national economic and stock market considerations as well as other events
and circumstances beyond our control could have a significant impact on the future market price of our common stock and the relative
volatility of such market price.
A
prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction
in our ability to raise capital. If we are unable to raise the funds required for all of our planned operations and key initiatives,
we may be forced to allocate funds from other planned uses, which may negatively impact our business and operations, including
our ability to develop new products and continue our current operations.
Many
factors that are beyond our control may significantly affect the market price of our shares. These factors include:
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price
and volume fluctuations in the stock markets;
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changes
in our revenues and earnings or other variations in operating results;
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any
shortfall in revenue or increase in losses from levels expected by us or securities analysts;
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changes
in regulatory policies or law;
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operating
performance of companies comparable to us; and
|
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general
economic trends and other external factors.
|
Even
if an active market for our common stock is established, stockholders may have to sell their shares at prices substantially lower
than the price they paid for it or might otherwise receive than if a broad public market existed.
There
has been a very limited public trading market for our securities and the market for our securities, may continue to be limited,
and be sporadic and highly volatile.
There
is currently a limited public market for our common stock. Holders of our common stock may, therefore, have difficulty selling
their shares, should they decide to do so. In addition, there can be no assurances that such markets will continue or that any
shares, which may be purchased, may be sold without incurring a loss. Any such market price of our shares may not necessarily
bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria
of value, and may not be indicative of the market price for the shares in the future.
Future
financings could adversely affect common stock ownership interest and rights in comparison with those of other security holders.
Our
board of directors has the power to issue additional shares of common or preferred stock up to the amounts authorized in our certificate
of incorporation without stockholder approval, subject to restrictive covenants contained in the Company’s contracts. If
additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our existing
stockholders will be reduced, and these newly issued securities may have rights, preferences or privileges senior to those of
existing stockholders. If we issue any additional common stock or securities convertible into common stock, such issuance will
reduce the proportionate ownership and voting power of each other stockholder. In addition, such stock issuances might result
in a reduction of the book value of our common stock. Any increase of the number of authorized shares of common stock or preferred
stock would require board and shareholder approval and subsequent amendment to our certificate of incorporation.
Risk
Factors Related to this Offering and Our Common Stock
If
we are not able to achieve our objectives for our business, the value of an investment in our company could be negatively affected.
In
order to be successful, we believe that we must, among other things:
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increase
the sales price and volume for our products;
significantly
reduce co-packer fees, packaging and ingredient costs;
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|
resolve
supply chain facility operation;
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manage
our operating expenses to sufficiently support operating activities;
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reduce
fixed costs at or near current levels by eliminating inefficient operations; and
|
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avoid
significant increases in variable costs relating to production, marketing and distribution.
|
We
may not be able to meet these objectives, which could have a material adverse effect on our results of operations. We have incurred
significant operating expenses in the past and may do so again in the future and, as a result, will need to increase revenues
in order to improve our results of operations. Our ability to increase sales volume will depend primarily on success in marketing
initiatives with industry brokers, improving our distribution base with DSD companies, introducing new no sugar brands, and focus
on the existing core brands in the market. Our ability to successfully enter new distribution areas and obtain national accounts
will, in turn, depend on various factors, many of which are beyond our control, including, but not limited to, the continued demand
for our brands and products in target markets, the ability to price our products at competitive levels, the ability to establish
and maintain relationships with distributors in each geographic area of distribution and the ability in the future to create,
develop and successfully introduce one or more new brands, products, and product extensions.
We
do not intend to pay any cash dividends on our shares of common stock in the near future, so our shareholders will not be able
to receive a return on their shares unless they sell their shares.
We
intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any
cash dividends on our common stock in the foreseeable future. There is no assurance that future dividends will be paid, and if
dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our shareholders
will not be able to receive a return on their shares unless they sell such shares.
Anti-takeover
provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our
stockholders to replace or remove our current management and limit the market price of our common stock.
Provisions
in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in
our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
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authorize
our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock;
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specify
that special meetings of our stockholders can be called only upon the request of a majority of our board of directors or our
Chief Executive Officer;
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establish
an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations
of persons for election to our board of directors; and
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prohibit
cumulative voting in the election of directors.
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These
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it
more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members
of our management, and may discourage, delay or prevent a transaction involving a change of control of our company that is in
the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may
adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts.
Furthermore,
we are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for
a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination
is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock
sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder”
is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested
stockholder status, 15% or more of the corporation’s voting stock. Under Section 203, a business combination between a corporation
and an interested stockholder is prohibited unless it satisfies one of the following conditions:
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before
the stockholder became interested, the board of directors approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
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upon
consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee
stock plans, in some instances; or
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at
or after the time the stockholder became interested, the business combination was approved by the board of directors of the
corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds
of the outstanding voting stock which is not owned by the interested stockholder.
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The
existence of this provision may have an anti-takeover effect with respect to transactions the Company’s board of directors
does not approve in advance. Section 203 may also discourage attempts that might result in a premium over the market price for
the shares of Common Stock held by stockholders.
These
provisions of Delaware law and the Certificate of Incorporation could have the effect of discouraging others from attempting hostile
takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of the Company’s common
stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing
changes in the Company’s management. It is possible that these provisions could make it more difficult to accomplish transactions
that stockholders may otherwise deem to be in their best interests.
Raptor/ Harbor Reeds SPV LLC (“Raptor),
our largest shareholder, holds approximately 2 7 % of our common stock and may greatly influence the outcome of all matters
on which stockholders vote.
Because Raptor controls
a large portion of our stock, approximately 2 7 %, it may greatly influence the outcome of all matters on which stockholders
vote. Daniel J. Doherty, III, a principal and shareholder of Raptor also serves as a director of Reed’s. Raptor’s
interests may not always coincide with the interests of other holders of our common stock.
Christopher
J. Reed, our founder, Chief Innovation Officer, and a member of our Board of Directors, holds approximately 12% of our common
stock and may greatly influence the outcome of all matters on which stockholders vote.
Because
Christopher J. Reed controls a large portion of our stock, approximately 12%, he may greatly influence the outcome of all matters
on which stockholders vote. Mr. Reed’s interests may not always coincide with the interests of other holders of our common
stock.
Management
controls greater than 40% of the Company’s outstanding common stock.
Because
our management controls greater than 40% of our outstanding common stock, management may greatly influence the outcome of all
matters on which stockholders vote. Management’s interests may not always coincide with the interests of other holders of
our common stock.
If
securities analysts or industry analysts downgrade our shares, publish negative research or reports, or do not publish reports
about our business, our share price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish
about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our shares or
our competitors’ stock, our share price would likely decline. If one or more analysts cease coverage of us or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading
volume to decline. As a result, the market price for our common stock may decline.
SELLING
SHAREHOLDERS
The shares of common
stock being offered by the selling shareholders are those previously issued to the selling shareholders, those issuable to the
selling shareholders, upon exercise of the warrants, and those issuable to the placement agent upon exercise of placement agent
warrants. For additional information regarding the issuances of those shares of common stock and warrants, see “Offering
− Private Placement of Securities”. We are registering the shares of common stock in order to permit the selling shareholders
to offer the shares for resale from time to time. Except for the ownership of the shares of common stock and the warrants, the
selling shareholders, other than the placement agent, have not had any material relationship with us within the past three years.
The table below lists
the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the
selling shareholders. The second column lists the number of shares of common stock beneficially owned by each selling shareholder,
based on its ownership of the shares of common stock, notes and/ or warrants, as of August 14, 2018, assuming exercise of the
warrants held by the selling shareholders and conversion of the note on that date, without regard to any limitations on exercise
or conversion.
The third column lists
the shares of common stock being offered by this prospectus by the selling shareholders.
In accordance with
the terms of a registration rights agreement with the selling shareholders, this prospectus covers the resale of 1,111,321 shares
of common stock issued to the selling shareholders in the private placement, including 418,909 shares of common stock issuable
upon exercise of the related warrants and placement agent warrants, determined as if the outstanding warrants were exercised in
full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as
of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the
registration right agreement, without regard to any limitations on the exercise of the warrants. The fourth column assumes the
sale of all of the shares offered by the selling shareholders pursuant to this prospectus.
Under the terms of
the warrants, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder,
together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed
4.99% of our then outstanding common stock following such exercise, excluding for purposes of such determination shares of common
stock issuable upon exercise of the warrants which have not been exercised. The number of shares in the second column does not
reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering. See “Plan
of Distribution”.
Any selling shareholders
who are affiliates of broker-dealers and any participating broker-dealers are deemed to be “underwriters” within the
meaning of the Securities Act and any commissions or discounts given to any such selling stockholder or broker-dealer may be regarded
as underwriting commissions or discounts under the Securities Act.
The term “selling
shareholders” also includes any pledgees, assignees, or other successors in interest to the selling shareholders named in
the table below. Unless otherwise indicated, to our knowledge, each person named in the table below has sole voting and investment
power (subject to applicable community property laws) with respect to the shares of common stock set forth opposite such person’s
name. We will file a supplement to this prospectus (or a post-effective amendment hereto, if necessary) to name successors to
any named selling stockholders who are able to use this prospectus to resell the common stock registered hereby.
Name of Selling Shareholder
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|
Number
of
Shares Owned
Before Offering
|
|
|
Number
of
Shares
Being Offered
|
|
|
Number
of
Shares
Owned
After Offering
|
|
|
Percent
of
Shares
Owned
After
Offering
|
|
|
|
|
|
|
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|
|
|
|
|
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|
Intracoastal Capital, LLC (1)
|
|
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352,941
|
|
|
|
352,941
|
(2)
|
|
|
0
|
|
|
|
0
|
|
Anson Investments Master Fund LP (3)
|
|
|
225,000
|
|
|
|
225,000
|
(4)
|
|
|
0
|
|
|
|
0
|
|
CVI Investments, Inc. (5)
|
|
|
262,500
|
|
|
|
262,500
|
(6)
|
|
|
0
|
|
|
|
0
|
|
Blue Clay Capital Master Fund Ltd. (7)
|
|
|
284,829
|
|
|
|
132,000
|
(8)
|
|
|
152,829
|
|
|
|
*
|
|
John Villagrana
|
|
|
51,471
|
|
|
|
22,059
|
(9)
|
|
|
29,412
|
|
|
|
*
|
|
Barone Combustion Corporation (10)
|
|
|
102,942
|
|
|
|
44,118
|
(11)
|
|
|
58,824
|
|
|
|
*
|
|
Maxim Partners LLC (12)
|
|
|
72,703
|
|
|
|
72,703
|
(13)
|
|
|
0
|
|
|
|
0
|
|
(1) Mitchell P. Kopin and Daniel B. Asher,
each of whom are managers of Intracoastal Capital LLC (“Intracoastal”), have shared voting control and investment
discretion over the securities reported herein that are held by Intracoastal. As a result, each of Mr. Kopin and Mr. Asher may
be deemed to have beneficial ownership (as determined under Section 13(d) of the Exchange Act) of the securities reported herein
that are held by Intracoastal. Mr. Asher, who is a manager of Intracoastal, is also a control person of a broker-dealer. As a
result of such common control, Intracoastal may be deemed to be an affiliate of a broker-dealer. Intracoastal acquired the ordinary
shares being registered hereunder in the ordinary course of business, and at the time of the acquisition of the ordinary shares
and warrants described herein, Intracoastal did not have any arrangements or understandings with any person to distribute such
securities.
(2) Includes 117,647 shares of common stock
issuable upon exercise of warrants.
(3) M5V Advisors lnc. and Frigate Ventures
LP (“M5V’” and “Frigate”), the CoInvestment Advisers of Anson Investments Master Fund LP (“Anson”),
hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Admiralty Advisors
LLC, which is the general partner of Frigate. Moez Kassam and Adam Spears are directors of M5V. Mr. Winson, Mr. Kassam and Mr.
Spears each disclaim beneficial ownership of these shares of common stock except to the extent of their pecuniary interest therein.
(4) Includes 75,000 shares of common stock
issuable upon exercise of warrants.
(5) Heights Capital Management, Inc., the
authorized agent of CVI Investments, Inc. (“CVI”), has discretionary authority to vote and dispose of the shares of
common stock held by CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger, in his capacity as Investment
Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting power over the shares
held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares. CVI Investments, Inc. is affiliated with one
or more FINRA members, none of whom is currently expected to participate in the sale pursuant to the prospectus contained in this
registration statement of the shares purchased by CVI in the offering.
(6) Includes 87,500 shares of common stock
issuable upon exercise of warrants.
(7) Gary Kohler, member and Chief Investment
Officer of Blue Clay Capital Management, LLC, the Investment Manager of Blue Clay Capital Master Fund, Ltd. (“BCCM”),
has voting and investment discretion over the securities reported herein that are held by BCCM.
(8) Includes 44,000 shares of common stock
issuable upon exercise of warrants.
(9) Includes 7,353 shares of common stock
issuable upon exercise of warrants.
(10) David T. Barone, Chief Executive Officer
and President of Barone Combustion Corporation (“BCC”), has voting and investment discretion over the securities reported
herein that are held by BCC.
(11) Includes 14,706 shares of common stock
issuable upon exercise of warrants.
(12) Maxim Partners LLC is an affiliate
of Maxim Group, LLC, a registered broker dealer and the placement agent in the offering. Michael Rabinowitz has discretionary
authority to vote and dispose of the shares of common stock held by Maxim Partners LLC and may be deemed to be the beneficial
owner of these shares. Maxim Partners LLC did not acquire the warrants in the ordinary course of its business; rather its affiliate,
Maxim Group LLC, acquired the warrants through its participation as placement agent in the private placement of securities.
(13) Consists of 72,703 shares of common
stock issuable upon exercise of placement agent warrants.
*Less than 1%
USE
OF PROCEEDS
We will not receive
any of the proceeds from the sale of shares of our common stock by the selling shareholders. We will receive up to $1,743,285
from the exercise of warrants. The proceeds from the exercise of warrants will be used for working capital and general corporate
purposes.
PLAN
OF DISTRIBUTION
Each selling shareholder
of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their
securities covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling shareholder may
use any one or more of the following methods when selling securities:
●
|
ordinary brokerage transactions and transactions in which
the broker-dealer solicits purchasers;
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●
|
block trades in which the broker-dealer will attempt to sell
the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
●
|
purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
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●
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an exchange distribution in accordance with the rules of
the applicable exchange;
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●
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privately negotiated transactions;
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●
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settlement of short sales;
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●
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in transactions through broker-dealers that agree with the
selling shareholders to sell a specified number of such securities at a stipulated price per security;
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●
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through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
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●
|
a combination of any such methods of sale; or
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●
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any other method permitted pursuant to applicable law.
|
The selling shareholders
may also sell securities under Rule 144 or any other exemption form registration under the Securities Act, if available, rather
than under this prospectus.
Broker-dealers engaged
by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with FINRA IM-2440.
In connection with
the sale of the securities or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions
they assume. The selling shareholders may also sell securities short and deliver these securities to close out their short positions,
or loan or pledge the securities to broker-dealers that in turn may sell these securities. The selling shareholders may also enter
into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which
securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
The selling shareholders
and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within
the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each selling shareholder has informed the Company that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the securities.
The Company is required
to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed
to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
Because selling shareholders
may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus
that qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus.
The selling shareholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed
sale of the resale securities by the selling shareholders.
We agreed to keep this
prospectus effective until the earlier of (i) the date on which the securities may be resold by the selling shareholders without
registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for
the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule
of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers
if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not
be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules
and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the selling shareholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases
and sales of securities of the common stock by the selling shareholders or any other person. We will make copies of this prospectus
available to the selling shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser
at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act)
.
DESCRIPTION
OF OUR COMMON STOCK
The
following is a summary of the material terms of our common stock. This summary does not purport to be exhaustive and is qualified
in its entirety by reference to our amended and restated certificate of incorporation, amended and restated bylaws and to the
applicable provisions of Delaware law.
We
are authorized to issue 40,000,000 shares of common stock, $0.0001 par value. Holders of common stock are each entitled to cast
one vote for each share held of record on all matters presented to shareholders. Cumulative voting is not allowed; the holders
of a majority of our outstanding shares of common stock may elect all directors. Holders of common stock are entitled to receive
such dividends as may be declared by our board out of funds legally available and, in the event of liquidation, to share pro rata
in any distribution of our assets after payment of liabilities. Our directors are not obligated to declare a dividend. It is not
anticipated that dividends will be paid in the foreseeable future. Holders of common stock do not have preemptive rights to subscribe
to any additional shares we may issue in the future. There are no conversion, redemption, sinking fund or similar provisions regarding
the common stock. All outstanding shares of common stock are fully paid and nonassessable.
Anti-Takeover
Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws
We
are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. Subject to certain
exceptions, the statute prohibits a publicly held Delaware corporation from engaging in a “business combination” with
an “interested stockholder” for a period of three years after the date of the transaction in which the person became
an interested stockholder unless:
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●
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prior
to such date, the board of directors of the corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
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●
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upon
consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (1) by persons who are directors and also officers
and (2) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
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●
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on
or after such date, the business combination is approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
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For
purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in
a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years prior to the date of determination whether the person is an “Interested
Stockholder” did own, 15% or more of the corporation’s voting stock.
In
addition, our authorized but unissued shares of common stock are available for our board to issue without stockholder approval.
We may use these additional shares for a variety of corporate purposes, including future public or private offerings to raise
additional capital, corporate acquisitions and employee benefit plans The existence of our authorized but unissued shares of common
stock could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender
offer, merger or other transaction. Our authorized but unissued shares may be used to delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium
over the market price for the shares held by our stockholders. The board of directors is also authorized to adopt, amend or repeal
our bylaws, which could delay, defer or prevent a change in control.
LEGAL
MATTERS
The
validity of the shares of common stock offered by this prospectus have been passed upon for us by Libertas Law Group, Inc., Santa
Monica, California.
EXPERTS
The
financial statements of Reeds, Inc. as of and for the years ended December 31, 2017 and 2016 appearing in this prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 2017 have been audited by Weinberg & Company, PA, an independent
registered public accounting firm, to the extent and for the periods indicated in their report appearing herein, and are included
in reliance upon such report and upon authority of such firm as experts in accounting and auditing.
MATERIAL
CHANGES
There
have been no material changes in the Company’s affairs since its fiscal year ended December 31, 2017 that have not been
described in its Quarterly Reports on Form 10-Q or Current Reports on Form 8-K pursuant to the Securities Exchange Act of 1934.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling
us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable. In addition, indemnification may be limited by
state securities laws.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14.
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Other
Expenses of Issuance and Distribution
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The
following table sets forth the expenses payable by us in connection with this offering of securities described in this registration
statement. All amounts shown are estimates, except for the SEC registration fee. The Registrant will bear all expenses shown below.
SEC filing fee
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$
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342
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Accounting fees and expenses*
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10,000
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Legal fees and expenses*
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15,000
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Total
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25,342
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*Estimated
Item
15.
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Indemnification
of Directors and Officers.
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We
are subject to the laws of Delaware on corporate matters, including their indemnification provisions. Section 102 of the General
Corporation Law of Delaware (the “DGCL”) permits a corporation to eliminate the personal liability of directors of
a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except
where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated
a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained
an improper personal benefit.
Section
145 of the Delaware General Corporation Law (the “DGCL”), as the same exists or may hereafter be amended, provides
that a Delaware corporation may indemnify any persons who were, or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or
in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided
such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s
best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct
was illegal. A Delaware corporation may indemnify any persons who are, were or are threatened to be made, a party to any threatened,
pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director,
officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually
and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests,
provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged
to be liable to the corporation. Where an officer, director, employee, or agent is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or
director has actually and reasonably incurred.
Section
145 of the DGCL further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or enterprise, against any liability asserted against him or her and incurred by him
or her in any such capacity, arising out of his or her status as such, whether or not the corporation would otherwise have the
power to indemnify him or her under Section 145 of the DGCL.
Our
amended certificate of incorporation provides that, to the fullest extent permitted by Delaware law, as it may be amended from
time to time, none of our directors will be personally liable to us or our stockholders for monetary damages resulting from a
breach of fiduciary duty as a director. Our amended certificate of incorporation also provides discretionary indemnification for
the benefit of our directors, officers and employees, to the fullest extent permitted by Delaware law, as it may be amended from
time to time. Pursuant to our bylaws, we are required to indemnify our directors, officers, employees and agents, and we have
the discretion to advance his or her related expenses, to the fullest extent permitted by law.
We
do currently provide liability insurance coverage for our directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
See
Exhibit Index attached hereto and incorporated herein by reference.
(a)
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The
undersigned registrant hereby undertakes:
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(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act.
(ii)
To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement.
provided,
however
, that paragraphs (i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus required to be filed
pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the
Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date
such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering
described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date
an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities
in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof, provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part
of the registration statement or made in any such document immediately prior to such effective date.
(5)
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of an undersigned registrant relating to this offering required to be filed pursuant
to Rule 424;
(ii)
Any free writing prospectus relating to this offering prepared by, or on behalf of, the undersigned registrant or used or referred
to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to this offering containing material information about an undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in this offering made by the undersigned registrant to the purchaser.
(6)
That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(7)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the
requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and authorized this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Norwalk, State of Connecticut , on September 12 , 2018.
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REED’S,
INC.
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By:
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/s/
Valentin Stalowir
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Valentin
Stalowir
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Chief
Executive Officer
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KNOW
ALL PERSONS BY THESE PRESENTS, that each of the individuals whose signature appears below constitutes and appoints Valentin Stalowir,
as his true and lawful attorney-in-fact and agent, with full and several power of substitution, for him or her and in his name,
place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them,
or their substitutes, may lawfully do or cause to be done.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
Signature
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Title
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Date
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/s/ Valentin Stalowir
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Chief Executive Officer, Director
(Principal Executive Officer)
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September 12, 2018
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Valentin Stalowir
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/s/ Iris Snyder
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Chief Financial Officer
(Principal Accounting Officer, Principal Financial Officer)
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September 12, 2018
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Iris Snyder
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/s/ John Bello
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Chairman
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September 12, 2018
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John Bello
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/s/ James C. Bass
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Director
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September 12, 2018
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James C. Bass
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/s/ Lewis Jaffe
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Director
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September
12, 2018
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Lewis Jaffe
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/s/ Scott R. Grossman
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Director
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September 12, 2018
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Scott R. Grossman
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EXHIBIT
INDEX
Exhibit
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Description
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3.1
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Certificate
of Incorporation of Reed’s, Inc. as filed September 7, 2001 (Incorporated by reference to Exhibit 3.1 to Reed’s,
Inc.’s Registration Statement on Form SB-2 (File No. 333-120451))
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3.2
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Certificate
of Amendment of Certificate of Incorporation of Reed’s, Inc. as filed September 27, 2004 (Incorporated by reference
to Exhibit 3.2 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451))
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3.3
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Certificate
of Amendment of Certificate of Incorporation of Reed’s, Inc. as filed December 18, 2007 (Incorporated by reference to
Exhibit 3.3 to Reed’s, Inc.’s Registration Statement on Form S-1 (File No. 333-156908))
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3.4
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Certificate
of Designations, Preferences and Rights of Series A Preferred Stock of Reed’s, Inc. as filed October 12, 2004 (Incorporated
by reference to Exhibit 3.3 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451))
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3.5
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Certificate
of Correction to Certificate of Designations as filed November 10, 2004 (Incorporated by reference to Exhibit 3.4 to Reed’s,
Inc.’s Registration Statement on Form SB-2 (File No. 333-120451))
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3.6
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Certificate
of Amendment of Certificate of Incorporation of Reed’s, Inc., as filed October 10, 2017 (Incorporated by reference to
Exhibit 3.6 to Reed’s, Inc.’s Registration Statement on Form S-1 ( File No. 333-221059)
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3.7
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Bylaws
of Reed’s Inc., as amended (Incorporated by reference to Exhibit 3.6 to Reed’s, Inc.’s Registration Statement
on Form S-1 (File No. 333-220184))
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4.1
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Form
of common stock certificate (Incorporated by reference to Exhibit 4.1 to Reed’s, Inc.’s Registration Statement
on Form SB-2 (File No. 333-120451))
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4.2
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Form
of Series A preferred stock certificate (Incorporated by reference to Exhibit 4.2 to Reed’s, Inc.’s Registration
Statement on Form SB-2 (File No. 333-120451))
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4.3
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Form
of Warrant issued to investors dated June 2, 2016 (Incorporated by reference to exhibit 4.1 to Reed’s Inc.’s Current
Report on Form 8-K as filed June 3, 2016)
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4.4
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Placement
Agent Warrant issued to Maxim Group LLC dated June 2, 2016 (Incorporated by reference to exhibit 4.2 to Reed’s Inc.’s
Current Report on Form 8-K as filed June 3, 2016)
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4.5
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Form
of Common Stock Purchase Warrant issued November 9, 2015 (Incorporated by reference to exhibit 10.1 to Reed’s Inc.’s
Quarterly Report on Form 10Q for the period ended March 31, 2016, as filed May 11, 2016)
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4.6
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Form
of Common Stock Purchase Warrant issued October 1, 2014 (Incorporated by reference to exhibit 10.4 to Reed’s Inc.’s
Quarterly Report on Form 10Q for the period ended March 31, 2016, as filed May 11, 2016)
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4.7
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Form
of 2017-1 Warrant (Incorporated by reference to exhibit 4.1 to Reed’s Inc.’s Current Report on Form 8-K as filed
April 24, 2017)
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4.8
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Form
of 2017-2 Warrant (Incorporated by reference to exhibit 4.2 to Reed’s Inc.’s Current Report on Form 8-K as filed
April 24, 2017)
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4.9
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Form
of Subordinated Convertible Non-Redeemable Secured Promissory Note dated April 21, 2017 (Incorporated by reference to exhibit
4.3 to Reed’s Inc.’s Current Report on Form 8-K as filed April 24, 2017)
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4.10
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Form
of 2017-3 Warrant (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K, filed July 14, 2017)
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4.11
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Form
of 2017-4 Warrant (Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K, filed July 14, 2017)
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4.12
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Form
of Warrant Certificate issued in 2018 rights offering (Incorporated by reference to Exhibit 4.12 to Reed’s, Inc.’s
Registration Statement on Form S-1 (File No. 333-221059)
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4.13
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Form
of Warrant Agreement (Incorporated by reference to Exhibit 3.6 to Reed’s, Inc.’s Registration Statement on Form
S-1 (File No. 333-221059)
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4.14
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Form
of Form of Warrant issuable to Raptor/ Harbor Reeds SPV, LLC pursuant to Backstop Agreement (Incorporated by reference to
Exhibit 4.14 to Reed’s, Inc.’s Registration Statement on Form S-1 ( File No. 333-221059)
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5.1
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Opinion
of Libertas Law Group Inc., previously filed.
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10.1
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Placement
Agent Agreement by and between Maxim Group LLC and Reed’s Inc. dated May 26, 2016 (Incorporated by reference to exhibit
10.1 to Reed’s Inc.’s Current Report on Form 8-K as filed June 3, 2016)
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10.2
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Securities
Purchase Agreement by and between Reed’s Inc. and purchasers signatory thereto dated May 26, 2016 (Incorporated by reference
to exhibit 10.2 to Reed’s Inc.’s Current Report on Form 8-K as filed June 3, 2016)
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10.3
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Registration
Rights Agreement by and between Reed’s Inc. and purchasers signatory thereto dated May 26, 2016 (Incorporated by reference
to exhibit 10.3 to Reed’s Inc.’s Current Report on Form 8-K as filed June 3, 2016)
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10.4*
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2007
Stock Option Plan (Incorporated by reference to Exhibit 10.22 to Reed’s, Inc.’s Form 10-K filed March 27, 2009)
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10.5*
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2015
Incentive and Nonstatutory Stock Option Plan (Incorporated by reference to Exhibit 4.2 to Reed’s Inc.’s Registration
Statement on Form S-8 (File No. 333-203469), as filed April 17, 2015)
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10.6
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Amended
and Restated Loan and Security Agreement by and between Reed’s Inc. and PMC Financial Services, LLC dated December 5,
2014 (Incorporated by reference to exhibit 10.3 to Reed’s Inc.’s Quarterly Report on Form 10Q for the period ended
March 31, 2016, as filed May 11, 2016)
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10.7
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Amendment
Number One Standard Industrial Commercial Single Tenant Lease-Net by and between Reed’s Inc. and 525 South Douglas Street,
LLC dated May 7, 2009 (Incorporated by reference to exhibit 10.4 to Reed’s Inc.’s Quarterly Report on Form 10Q
for the period ended March 31, 2016, as filed May 11, 2016)
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10.8
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Securities
Purchase Agreement by and between Reed’s Inc. and Raptor/Harbor Reeds SPV LLC dated April 21, 2017 (Incorporated by
reference to exhibit 10.1 to Reed’s Inc.’s Current Report on Form 8-K as filed April 24, 2017)
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10.9
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Second
Lien Security Agreement by and between Reed’s Inc. and Raptor/Harbor Reeds SPV LLC dated April 21, 2017 (Incorporated
by reference to exhibit 10.2 to Reed’s Inc.’s Current Report on Form 8-K as filed April 24, 2017)
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10.10
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Form
of Registration Rights Agreement by and between Reed’s Inc. and Raptor/Harbor Reeds SPV LLC dated April 21, 2017 (Incorporated
by reference to exhibit 10.3 to Reed’s Inc.’s Current Report on Form 8-K as filed April 24, 2017)
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10.11
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Amendment
Number Fifteen to Amended and Restated Loan and Security Agreement between Reed’s Inc. and PMC Financial Services Group,
LLC dated April 21, 2017 (Incorporated by reference to exhibit 10.4 to Reed’s Inc.’s Current Report on Form 8-K
as filed April 24, 2017)
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10.12
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Warrant
Exercise Agreement by and between Reed’s Inc. and Raptor/Harbor Reeds SPV LLC dated July 13, 2017 (Incorporated by reference
to Exhibit 10.1 to Current Report on Form 8-K, filed July 14, 2017)
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10.13
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Form
of Warrant Exercise Agreement by and between Reed’s Inc. and three investors dated July 13, 2017 (Incorporated by reference
to Exhibit 10.2 to Current Report on Form 8-K, filed July 14, 2017)
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10.14*
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Executive
Employment Agreement effective as of June 28, 2017 by and between Reed’s Inc. and Valentin Stalowir (Incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K, filed July 13, 2017)
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10.15*
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2017
Incentive Compensation Plan (Incorporated by reference to Exhibit 4.2 to Reed’s, Inc.’s Registration Statement
on Form S-8 (File No. 333-222741))
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10.16
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Form
of Backstop Agreement by and between Reed’s Inc. and Raptor/ Harbor Reeds SPV, LLC, filed herewith (Incorporated by
reference to Exhibit 10.16 to Reed’s, Inc.’s Registration Statement on Form S-1 (File No. 333-220184))
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14.1
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Code
of Ethics (Incorporated by reference to Exhibit 14.1 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File
No. 333-157359))
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23.1
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Consent
of Weinberg & Company, PA, Independent Registered Public Accounting Firm, filed herewith.
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23.2
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Consent
of Libertas Law Group Inc. (included in Exhibit 5.1)
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*
Compensatory plan or arrangement.
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