NOTES
TO CONDENSED FINANCIAL STATEMENTS
Three
Months Ended March 31, 2022 and 2021 (Unaudited)
(In
thousands, except share and per share amounts)
1.
Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying condensed financial statements of Reed’s, Inc. (the “Company”, “we”, “us”, or
“our”), have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim
financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with
U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures contained in these condensed
financial statements are adequate to make the information presented herein not misleading. These condensed financial statements should
be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December
31, 2021, filed with the SEC on April 15, 2022. The accompanying condensed financial statements are unaudited, but in the opinion of
management contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial
position as of March 31, 2022, and the results of its operations and its cash flows for the three months ended March 31, 2022 and 2021.
The balance sheet as of December 31, 2021 is derived from the Company’s audited financial statements.
The
results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations to be expected
for the full fiscal year ending December 31, 2022.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the three
months ended March 31, 2022, the Company recorded a net loss of $4,980 and used cash in operations of $2,207. These factors raise substantial
doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are
issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December
31, 2021, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As
of March 31, 2022, we had a cash balance of $122, with no current availability, and $5,100 of additional borrowing capacity, stockholders’ equity of $4,616 and a working capital
of $3,402.
On May 9, 2022 the Company issued $11,250 of secured convertible notes
to certain institutional investors. The convertible notes mature May 9, 2025, bear interest at 10% per annum, and are secured by substantially
all of the Company’s assets. The initial conversion rate of the convertible notes is 4.1503 shares of the Company’s common
stock per one dollar of principal amount converted (See Note 11).
Historically,
we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible
debt instruments, term loans and credit lines from financial institutions, and cash generated from operations. To alleviate these conditions,
management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity,
mezzanine or debt securities, through arrangements with strategic partners or through obtaining credit from financial institutions. As
we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or
at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market
and economic conditions, our performance and investor sentiment with respect to us and our industry.
We
have also taken decisive action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product
portfolio, negotiating improved vendor contracts and restructuring our selling prices.
During the first
quarter of 2022, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies
in transportation and warehouse costs and reduce operating expenses.
The
Company remains focused on driving sales growth and improving margin. The sales growth focus is on channel expansion, new product introduction
and improved sales execution. The margin enhancement initiative is driven by co-packer upgrades, better leveraged purchasing and improved
efficiency. Underpinning these initiatives is a focus on strategically reducing operating costs, particularly delivery and handling expenses.
During 2021, the Company experienced elevated transportation costs over the prior year and anticipates these costs to remain elevated
for the balance of 2022. Plans have been implemented to mitigate the impact of these costs.
COVID-19
Considerations
During the period
ended March 31, 2022, the COVID-19 pandemic continued to impact our operating results and the Company anticipates a residual effect for
the balance of the year. In addition, the pandemic could cause reduced demand for our products if, for example, the pandemic results
in a recessionary economic environment which negatively effects the consumers who purchase our products. Based on the recent increase
in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.
Through March 31,
2022, the Company was able to lower its freight costs despite a higher transportation market as the capacity in the freight market has
not kept up with demand. The Company believes these challenges will continue throughout the year. In addition, the Company experienced
increases in the pricing of several of its raw materials and delays in procuring several of these items. However, mitigation plans have
been implemented to manage this risk. Additionally, the Company was negatively impacted by supply chain challenges impacting our ability
to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material
cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins and net income.
The Company anticipates a continued impact throughout 2022.
Our ability to operate
without significant incremental negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect
our employees and protect our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities
to protect our employees. Since the inception of the COVID-19 pandemic and through March 31, 2022, we maintained the consistency of our
operations during the onset of the COVID-19 pandemic. We will continue to innovate in managing our business, coordinating with our employees
and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers. However, the
uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability
of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.
We have not
observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19
pandemic.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence,
depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization
of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.
Revenue
Recognition
The
Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers
(“ASC 606”). Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally
occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time. The Company does not
have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives
or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the
customer obtains control of the goods and therefore represent a fulfilment activity rather than a promised service to the customer. All
of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment
for customers to derive the expected value from them.
The
Company does not allow for returns, except for damaged products when the damage occurred pre-fulfilment. Damaged product returns have
historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations
and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations.
We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
Loss
per Common Share
Basic
earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number
of shares of common stock outstanding during the year, excluding shares of unvested restricted common stock. Shares of restricted stock
are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted earnings (loss) per share
is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding
plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued,
using the treasury stock method. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding
from the date they are granted. Potential common shares are excluded from the computation when their effect is antidilutive.
For
the periods ended March 31, 2022 and 2021, the calculations of basic and diluted loss per share are the same because potential dilutive
securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:
Schedule of Potentially Dilutive Securities
| |
March 31, 2022 | | |
March 31, 2021 | |
Warrants | |
| 13,835,768 | | |
| 3,362,241 | |
Options | |
| 10,145,176 | | |
| 11,028,322 | |
Unvested restricted common stock | |
| 376,290 | | |
| 309,082 | |
Series A Convertible Preferred stock | |
| 37,644 | | |
| 37,644 | |
Total | |
| 24,394,878 | | |
| 14,737,289 | |
Stock
Compensation Expense
The
Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions
for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock
Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense
on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner
as if the Company had paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Statements
of Operations with classification depending on the nature of the services rendered.
The
fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain
assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future
dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based
on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense
recorded in future periods.
Advertising
Costs
Advertising
costs are expensed as incurred and are included in selling and marketing expense. Advertising costs aggregated $312 and $349 for the
three months ended March 31, 2022 and 2021, respectively.
Concentrations
Net
sales. During the three months ended March 31, 2022, the Company’s two largest customers accounted for 18% and 12% of net sales,
respectively. During the three months ended March 31, 2021, the Company’s two largest customers accounted for 23% and 12% of net
sales, respectively. No other customers exceeded 10% of net sales in either period.
Accounts
receivable. As of March 31, 2022, the Company had accounts receivable from one customer which comprised 23% of its gross accounts
receivable. As of December 31, 2021, the Company had accounts receivable from one customer which comprised 18% of its gross accounts
receivable. No other customers exceeded 10% of gross accounts receivable in either period.
Purchases
from vendors. During the three months ended March 31, 2022, the Company’s largest vendor accounted for approximately 13% of
all purchases. During the three months ended March 31, 2021, the Company’s two largest vendor accounted for approximately 13% and
13% of all purchases, respectively. No other vendors exceeded 10% of all purchases in either period.
Accounts
payable. As of March 31, 2022, the Company’s two largest vendors accounted for 11% and 10% of the total accounts payable, respectively.
As of December 31, 2021, no vendor accounted for more than 10% the total accounts payable. No other vendors exceeded 10% of gross accounts
payable in either period.
Fair
Value of Financial Instruments
The
Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring
basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure
their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:
Level
1—Quoted prices in active markets for identical assets or liabilities.
Level
2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level
3—Unobservable inputs based on the Company’s assumptions.
The
carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans,
accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments.
The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because interest rates
on these obligations are based on prevailing market interest rates.
Recent
Accounting Pronouncements
Recently
Adopted Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06 “Debt—Debt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU
2020-06”).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash
conversion and beneficial conversion models. The diluted net income per share calculation for convertible instruments will require the
Company to use the if-converted method. For contracts in an entity’s own equity, the type of contracts primarily affected by this
update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet
the settlement conditions of the derivative scope exception. This update simplifies the related settlement assessment by removing the
requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required
to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective January 1, 2024, for the Company and the provisions of this
update can be adopted using either the modified retrospective method or a fully retrospective method. Early adoption is permitted, but
no earlier than January 1, 2021, including interim periods within that year. Effective January 1, 2021, the Company early adopted ASU
2020-06 and that adoption did not have an impact on our financial statements and related disclosures.
In
May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”
(“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions
or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or
exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange
as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification
or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment
for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination
or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring
on or after the effective date. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any
impact on the Company’s financial statement presentation or disclosures.
Recently
Issued Accounting Pronouncements Not Yet Adopted
In
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to
use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types
of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13
is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact
of the new guidance and related codification improvements will be material to its financial position, results of operations and cash
flows.
Other
recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements.
2.
Inventory
Inventory
is valued at the lower of cost (first-in, first-out) or net realizable value, net of write downs, and is comprised of the following (in
thousands):
Schedule
of Inventory
| |
March 31, 2022 | | |
December 31, 2021 | |
Raw materials and packaging | |
$ | 11,853 | | |
$ | 11,221 | |
Finished products | |
| 8,995 | | |
| 5,828 | |
Total | |
$ | 20,848 | | |
$ | 17,049 | |
3.
Property and Equipment
Property
and equipment is comprised of the following (in thousands):
Schedule of Property and Equipment
| |
March 31, 2022 | | |
December 31, 2021 | |
Right-of-use assets under operating leases | |
$ | 724 | | |
$ | 724 | |
Computer hardware and software | |
| 400 | | |
| 400 | |
Machinery and equipment | |
| 429 | | |
| 429 | |
Total cost | |
| 1,553 | | |
| 1,553 | |
Accumulated depreciation and amortization | |
| (613 | ) | |
| (561 | ) |
Net book value | |
$ | 940 | | |
$ | 992 | |
Depreciation
expense for the three months ended March 31, 2022 and 2021 was $25
and $32,
respectively, and amortization of right-of-use assets for the three months ended March 31, 2022 and 2021 was $27
and $24,
respectively.
4.
Intangible Assets
Intangible
assets consist of the following (in thousands):
Summary of Intangible Assets
| |
March 31, 2022 | | |
December 31, 2021 | |
Brand names | |
$ | 576 | | |
$ | 576 | |
Trademarks | |
| 48 | | |
| 48 | |
Total | |
$ | 624 | | |
$ | 624 | |
5.
Line of Credit
Amounts
outstanding under the Company’s credit facilities are as follows (in thousands):
Schedule of Amount Outstanding Under Credit Facilities
| |
March
31, 2022 | | |
December
31, 2021 | |
Line of credit – Alterna Capital Solutions | |
$ | 7,945 | | |
$ | - | |
Line of credit – Rosenthal & Rosenthal | |
| - | | |
| 10,229 | |
Total | |
| - | | |
| 10,229 | |
Capitalized financing costs | |
| (470 | ) | |
| - | |
Total | |
$ | 7,475 | | |
$ | 10,229 | |
Alterna
Capital Solutions
On
March 28, 2022, the Company entered into a financing agreement with Alterna Capital Solutions (“ACS”), for a line of credit
to replace its existing credit facility. The ACS line of credit is for a term of 3 years, provides for borrowings of up to $13,000, and
is secured by eligible accounts receivable and inventory. An over advance rider provides for up to $400 of additional borrowing beyond
those amounts (the “Over Advance”). At March 31, 2022, no unused borrowing capacity was available under the financing agreement.
Borrowings
based on receivables bears an interest of prime plus 4.75% but not less than 8.0%. Borrowings based on inventory bears an interest of
prime plus 5.25% but not less than 8.5%. The additional over advance rider bears a rate of prime plus 12.75%, but not less than 16.00%.
Additionally, the line of credit is subject to monthly monitoring fee of $1 with a minimum usage requirement on the credit facility.
A loan balance of less than $1,500 will bear interest at a rate in line with account receivables advances plus the monthly monitoring
fee of $1.
The
Company incurred $503 of direct costs of the transaction, consisting primarily of broker, bank and legal fees. These costs have been
capitalized and are being amortized over the 3-year life of the ACS agreement. For the three months ended March 31, 2022, amortization
of debt discount was $33, and as of March 31, 2022, the remaining unamortized debt discount balance is $470.
Rosenthal
& Rosenthal (paid off in full on March 30, 2022)
In
2018, the Company entered into a financing agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”) that provided a maximum
borrowing capacity of $13,000, based on eligible accounts receivable and inventories (the “permitted borrowings”) plus advances
(an “over-advance” of up to $4,000) in excess of permitted borrowings. On March 30, 2022, the Company paid in full the outstanding
balance on its credit facility with Rosenthal with proceeds from ACS discussed above.
Borrowings
under the Rosenthal financing agreement bore interest at the greater of prime or 4.75%, plus an additional 2.0% to 3.5% depending on
whether the borrowing was based upon receivables, inventory or is an over-advance. Additionally, the Rosenthal line of credit was subject
to monthly facility and administration fees, and aggregate minimum monthly fees (including interest) of $4.
The
line of credit was secured by substantially all of the assets, excluding intellectual property, of the Company. The over-advance was
secured by all of Reed’s intellectual property collateral. On March 11, 2021, the Company entered into an amendment to the Rosenthal
agreement and replaced a standby letter of credit of $1,500 by a guarantor with a $2,000 pledge of securities to Rosenthal by John J.
Bello and Nancy E. Bello, as Co-Trustees of The John and Nancy Bello Revocable Living Trust. John J. Bello, current Chairman and former
Interim Chief Executive Officer of Reed’s, is a related party, and greater than 5% beneficial owner of Reed’s common stock.
As consideration for the collateral support, Mr. Bello received 400,000 shares of Reed’s restricted stock, with a fair value of
$472 which was recorded a prepaid financing cost. During the three months ended March 31, 2022, $121 of the prepaid financing cost was
amortized, and as of March 31, 2022, there was no remaining unamortized prepaid finance cost balance.
The
Company annually incurs an additional $130
of fees from the bank, which is equal to 1%
of the $13,000
borrowing limit. Amortization of this debt discount
was $65 and
$162 for
the three months ended March 31, 2022, and 2021, respectively. At March 31, 2022, there was no remaining unamortized debt discount
balance.
6.
Leases Liabilities
During
the three months ended March 31, 2022 and 2021, lease costs totaled $27 and $24, respectively.
As
of December 31, 2021, operating lease liabilities totaled $555. During the three months ended March 31, 2022, the Company made payments
of $38 towards its operating lease liability. As of March 31, 2022, operating lease liabilities totaled $518.
As
of March 31, 2022, the weighted average remaining lease terms for an operating lease are 2.76 years. As of March 31, 2022, the weighted
average discount rate on the operating lease is 12.60%.
7.
Stockholder’s Equity
On
March 10, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant
to which the investors agreed to purchase 18,594,571
shares of the Company’s common stock and
warrants to purchase 9,297,289
shares of common stock in a private placement
(including 3,248,142 shares of the Company’s common stock and warrants to purchase 1,624,071 shares of common stock to investors
who are officers and directors of the Company). The warrants have an exercise price of $0.2877
per share for a period of five
years commencing six months from the closing date
of March 11, 2022. The purchase price per share of common stock and associated warrant was $0.28
for certain investors and was $0.3502
for investors who are officers and directors
of the Company in compliance with the rules of the Nasdaq Stock Market. The net proceeds to the Company, after deducting placement agent
fees and other offering expenses, was approximately $5.1
million. The officers and directors of the Company
purchased approximately $1.1
million of the securities in the offering.
In January 2022, the Company issued 100,000 shares
of common stock valued at $37 to John J. Bello and Nancy E. Bello, as Co-Trustees of The John and Nancy Bello Revocable Living Trust as consideration for the $2,000 pledge of securities to Rosenthal (see Note 5). John J. Bello, current Chairman and former
Interim Chief Executive Officer of Reed’s, is a related party, and greater than 5% beneficial owner of Reed’s common stock.
8.
Stock-Based Compensation
Restricted
common stock
The
following table summarizes restricted stock activity during the three months ended March 31, 2022:
Summary of Non-vested Restricted Stock Activity
| |
Unvested Shares | | |
Issuable Shares | | |
Fair Value at Date of Issuance | | |
Weighted Average Grant Date Fair Value | |
Balance, December 31, 2021 | |
| 111,164 | | |
| - | | |
$ | 54 | | |
| 0.89 | |
Granted | |
| 401,720 | | |
| - | | |
| 150 | | |
| 0.37 | |
Vested | |
| (136,594 | ) | |
| 136,594 | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| | | |
| | | |
| - | |
Issued | |
| - | | |
| (136,594 | ) | |
| (66 | ) | |
| - | |
Balance, March 31, 2022 | |
| 376,290 | | |
| - | | |
$ | 138 | | |
$ | 0.51 | |
On
January 26, 2022, the board of directors of Reed’s, pursuant to a joint recommendation from its governance and compensation
committees, set the cash compensation of its non-employee directors at $50,000
for fiscal 2021, payable quarterly in accordance
with the company’s policies for non-employee director compensation. In addition, the Company granted 401,720
restricted stock awards to five non-employee
directors. 100,430
of these restricted stock awards vested on
February1, 2022. The remaining 301,290
restricted stock awards will vest equally
on May 1, 2022, August 1, 2022, and November 1, 2022. The aggregate fair value of the stock awards was $150
based on the market price of our common stock
price which was $0.32
per share on the date of grants and is amortized
as shares vest.
The
total fair value of restricted common stock vesting during the three months ended March 31, 2022 and 2021, was $66
and $98,
respectively, and is included in general and administrative expenses in the accompanying statements of operations. As of March 31, 2022,
the amount of unvested compensation related to issuances of restricted common stock was $138,
which will be recognized as an expense in future
periods as the shares vest. When calculating basic loss per share, these shares are included in weighted average common shares outstanding
from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding
as of their grant date.
Stock
options
The
following table summarizes stock option activity during the three months ended March 31, 2022: