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What changed in REED'S, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of REED'S, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+209 added−169 removedSource: 10-K (2025-03-28) vs 10-K (2024-04-01)

Top changes in REED'S, INC.'s 2024 10-K

209 paragraphs added · 169 removed · 132 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

54 edited+22 added−10 removed61 unchanged
Biggest changeThe global reduced-sugar-food and beverage market is expected to grow at an annual rate of 9% from 2022 to 2030. ● Plant Based : 70% of U.S. consumers are consuming plant-based foods and beverages. ● Craft: Appeal continues to grow of higher-quality, independent, and more authentic brands across many beverage categories. ● Premiumization: A trend towards embracing quality has accelerated during the pandemic with consumers splurging on premium beverages at retail, including premium mixers. 54% of 18 to 34 year olds are likely to choose a premium drink. ● Better-for-you Mocktails : More consumers are seeking non-alcoholic alternatives with bold and unique flavors.
Biggest changeThe global ginger market is expected to grow at an annual rate of 9% from 2024 to 2032. ● Premiumization: A trend towards embracing quality has accelerated with consumers splurging on premium beverages at retail, including premium mixers. The premium beverage market is expected to grow at an annual rate of 6% from 2024 to 2031.
We also offer three sweetener options: one with cane sugar, honey and fruit juices; one with honey and pineapple juice; and another without sugar (Zero Sugar) made from an innovative blend of natural sweeteners. In 2021, we expanded our Extra Ginger Beer portfolio into cans offerings.
We also offer three sweetener options: one with cane sugar, and fruit juices; one with honey and pineapple juice; and another without sugar (Zero Sugar) made from an innovative blend of natural sweeteners. In 2021, we expanded our Extra Ginger Beer portfolio into cans offerings.
As part of this agreement, Rootstock agreed to pay a royalty on a percentage of its net sales of licensed products. The royalty fees are 0% for 2023, 2% for 2024, 4% for 2025, and 5% thereafter. Ready to Drink: The RTD category refers to canned cocktails that offer convenience and quality for cocktail drinkers.
As part of this agreement, Rootstock agreed to pay a royalty on a percentage of its net sales of licensed products. The royalty fees are 0% for 2023, 2% for 2024, 4% for 2025, and 5% thereafter. Ready to Drink: The RTD (Ready to Drink) category refers to canned cocktails that offer convenience and quality for cocktail drinkers.
Certain jurisdictions have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products.
Certain jurisdictions have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products.
In 2021, we entered the alcohol space with the launch of our RTD Classic Mule that is 7% alcohol by volume (“ABV”) with Zero Sugar and Hard Ginger Ale which is 5% ABV and Zero Sugar Reed’s Craft Ginger Beer Reed’s Craft Ginger Beer is set apart from other ginger beers by its proprietary process of pressing fresh ginger root, its exclusive use of natural ingredients, and its authentic Jamaican-inspired recipe.
In 2021, we entered the alcohol space with the launch of our RTD Classic Mule that is 7% alcohol by volume (“ABV”) with Zero Sugar and Hard Ginger Ale which is 5% ABV and Zero Sugar. 2 Reed’s Craft Ginger Beer Reed’s Craft Ginger Beer is set apart from other ginger beers by its proprietary process of pressing fresh ginger root, its exclusive use of natural ingredients, and its authentic Jamaican-inspired recipe.
U.S. laws and regulations that apply to our business and the production, distribution and sale of our products include, but are not limited to: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety and food labeling; the Food Safety Modernization Act; the Occupational Safety and Health Act and various state laws and regulations governing workplace health and safety; various federal, state and local environmental protection laws, as discussed below; the Federal Motor Carrier Safety Act; the Federal Trade Commission Act; the Lanham Act and various state law statutory and common law duties regarding false advertising; various federal and state laws and regulations governing our employment practices, including those related to equal employment opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act and those related to overtime compensation, such as the Fair Labor Standards Act; various state and federal laws pertaining to sale and distribution of alcohol beverages; data privacy and personal data protection laws and regulations, including the California Consumer Privacy Act of 2018 (as modified by the California Privacy Rights Act); customs and foreign trade laws and regulations, including laws regarding the import or export of our products or ingredients used in our products and tariffs; laws regulating the sale of certain of our products in schools; and laws regulating the ingredients or substances contained in, or attributes of, our products.
U.S. laws and regulations that apply to our business and the production, distribution and sale of our products include, but are not limited to: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety and food labelling; the Food Safety Modernization Act; the Occupational Safety and Health Act and various state laws and regulations governing workplace health and safety; various federal, state and local environmental protection laws, as discussed below; the Federal Motor Carrier Safety Act; the Federal Trade Commission Act; the Lanham Act and various state law statutory and common law duties regarding false advertising; various federal and state laws and regulations governing our employment practices, including those related to equal employment opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act and those related to overtime compensation, such as the Fair Labor Standards Act; various state and federal laws pertaining to sale and distribution of alcohol beverages; data privacy and personal data protection laws and regulations, including the California Consumer Privacy Act of 2018 (as modified by the California Privacy Rights Act); customs and foreign trade laws and regulations, including laws regarding the import or export of our products or ingredients used in our products and tariffs; laws regulating the sale of certain of our products in schools; and laws regulating the ingredients or substances contained in, or attributes of, our products.
If we materially underestimate demand for our products, and/or are unable to secure sufficient ingredients or raw materials, and/or procure adequate packing arrangements and/or obtain adequate or timely shipment of our products, we are not be able to satisfy demand on a short-term basis.
If we materially underestimate demand for our products, and/or are unable to secure sufficient ingredients or raw materials, and/or procure adequate packing arrangements and/or obtain adequate or timely shipment of our products, we may not be able to satisfy demand on a short-term basis.
Reed’s Craft Ginger Beers are unique due to the proprietary process of using fresh ginger root combined with a Jamaican inspired recipe of natural spices, honey and fruit juices. Reed’s uses this same handcrafted approach in its Reed’s Real Ginger Ale and Virgil’s line of great tasting, bold flavored craft sodas, including its award-winning Virgil’s Root Beer.
Reed’s Craft Ginger Beers are unique due to the proprietary process of using fresh ginger root combined with a Jamaican inspired recipe of natural spices, honey and pineapple flavors, and fruit juices. Reed’s uses this same handcrafted approach in its Reed’s Real Ginger Ale and Virgil’s line of great tasting, bold flavored craft sodas, including its award-winning Virgil’s Root Beer.
Reed’s is poised to leverage these trends by bringing high-quality, crafted Mules made with real fresh ginger to the market. Top selling brands in the category are High Noon, Cutwater Spirits, On The Rocks, Jose Cuervo, 1800 Tequila, Buzzballz, Bacardi, The Long Drink Company, and Fisher’s Island.
Reed’s is poised to leverage these trends by bringing high-quality, crafted Mules and Hard Ginger Ale made with real fresh ginger to the market. Top selling brands in the category are High Noon, Cutwater Spirits, On The Rocks, Jose Cuervo, 1800 Tequila, Buzzballz, Bacardi, The Long Drink Company, and Fisher’s Island.
Despite these cost challenges, we believe there are good opportunities to expand internationally, and we are increasing our marketing focus on these areas by adding freight friendly packages such as aluminum cans and have secured manufacturing partnerships in local markets whereby we ship concentrate rather than finished goods.
Despite these cost challenges, we believe there are good opportunities to expand internationally, and we are increasing our marketing focus on these areas by adding freight friendly packages such as aluminium cans and have secured manufacturing partnerships in local markets whereby we ship concentrate rather than finished goods.
Our Primary Markets We target a smaller segment of the estimated $41 billion mainstream carbonated and non-carbonated soft drink markets in the United States. Our brands are generally considered premium and natural, with upscale packaging. They are loosely defined as the craft specialty bottled carbonated soft drink category.
Our Primary Markets We target a smaller segment of the estimated $45 billion mainstream carbonated and non-carbonated soft drink markets in the United States. Our brands are generally considered premium and natural, with upscale packaging. They are loosely defined as the craft specialty bottled carbonated soft drink category.
Item 1. Business Overview Reed’s, Inc., a Delaware corporation (“Reed’s”, the “Company,” “we,” or “us” throughout this report) owns a leading portfolio of handcrafted, natural beverages that is sold in over 45,000 outlets nationwide.
Item 1. Business Overview Reed’s, Inc., a Delaware corporation (“Reed’s”, the “Company,” “we,” or “us” throughout this report) owns a leading portfolio of handcrafted, natural beverages that is sold in over 32,000 outlets nationwide.
Our nonalcoholic products compete on the basis of brand recognition and loyalty, taste, price, value, quality, innovation, distribution, shelf space, advertising, marketing and promotional activity (including digital), packaging, convenience, service and the ability to anticipate and effectively respond to consumer preferences and trends, including increased consumer focus on health and wellness and sustainability and the continued acceleration of e-commerce and other methods of distributing and purchasing products.
Our non-alcoholic products compete on the basis of brand recognition and loyalty, taste, price, value, quality, innovation, distribution, shelf space, advertising, marketing and promotional activity (including digital), packaging, convenience, service and the ability to anticipate and effectively respond to consumer preferences and trends, including increased consumer focus on health and wellness and sustainability and the continued acceleration of e-commerce and other methods of distributing and purchasing products.
International markets where our brands are present are France, UK, South Africa, portions of the Caribbean, Canada, Spain, Philippines, Mexico, Vietnam, and Australia. International sales to some areas of the world are cost prohibitive, except for some specialty sales, since our premium sodas were historically packed in glass, which drives substantial freight costs when shipping overseas.
International markets where our brands are present are Germany, France, UK, South Africa, Canada, Spain, Philippines, Mexico, Vietnam, Australia, and portions of the Caribbean and Central America, International sales to some areas of the world are cost prohibitive, except for some specialty sales, since our premium sodas were historically packed in glass, which drives substantial freight costs when shipping overseas.
Competition Nonalcoholic Beverages Success in this competitive environment is dependent on effective promotion of existing products, effective introduction of new products and reformulations of existing products, increased efficiency in production techniques, effective incorporation of technology and digital tools across all areas of our business, the effectiveness of our advertising campaigns, marketing programs, product packaging and pricing, new vending and dispensing equipment and brand and trademark development and protection.
Competition Non-alcoholic Beverages Success in this competitive environment is dependent on effective promotion of existing products, effective introduction of new products and reformulations of existing products, increased efficiency in production techniques, effective incorporation of technology and digital tools across all areas of our business, the effectiveness of our advertising campaigns, marketing programs, product packaging and pricing, new vending and dispensing equipment and brand and trademark development and protection.
It contains 7% ABV, and a light-spice flavor profile with no artificial colors, gluten, GMOs or caffeine. It is the ultimate stormy, made with fresh ginger root, to be enjoyed anytime, anywhere.
It contains 7% ABV, and a light-spice flavor profile with no artificial colors, gluten, GMOs or caffeine. It is the ultimate mule, made with fresh ginger root, to be enjoyed anytime, anywhere.
Changes to the retail landscape, including increased consolidation of retail ownership, the continued growth of sales through e-commerce websites and mobile commerce applications, including through subscription services and other direct-to-consumer businesses, the integration of physical and digital operations among retailers and the current economic environment continue to increase the importance of major customers. 4 Some of our representative key customers include: ● Natural stores : Whole Foods Market, Sprouts, Natural Grocers by Vitamin Cottage, Fresh Thyme, NDG, INFRA, Earthfare. ● Gourmet & specialty stores : Trader Joe’s, Erewhon, Gelson’s, Harmon’s, Bristol Farms, The Fresh Market, Woodman’s Cost Plus World Market, Cracker Barrel. ● Grocery and mass chains : Kroger (and all Kroger banners), Albertson’s/Safeway, Publix, Food Lion, Stop & Shop, H.E.B., Wegmans, Walmart, Raley’s, Savemart, Ingles, Harris Teeter, Hannaford, SEG/Winn Dixie, Giant, Spartan Nash, Food Land, Lowes, Smart and Final, Winco, Bashes, Haggen, AFS, Market Basket, Meijer, Cub HvVee. ● Club stores : Costco ● Liquor stores : BevMo!, Total Wine & More. ● Convenience & drug stores : Rite Aid, All Town Fresh Markets.
Changes to the retail landscape, including increased consolidation of retail ownership, the continued growth of sales through e-commerce websites and mobile commerce applications, including through subscription services and other direct-to-consumer businesses, the integration of physical and digital operations among retailers and the current economic environment continue to increase the importance of major customers. 4 Some of our representative key customers include: ● Natural stores : Whole Foods Market, Sprouts, Natural Grocers by Vitamin Cottage, Fresh Thyme, NCG, and INFRA. ● Gourmet & specialty stores : Trader Joe’s, Erewhon, Gelson’s, Harmon’s, Bristol Farms, The Fresh Market, Woodman’s, Cost Plus World Market, and Cracker Barrel. ● Grocery and mass chains : Kroger (and all Kroger banners), Albertson’s/Safeway, Publix, Food Lion, Stop & Shop, H.E.B., Wegmans, Walmart, Raley’s, Savemart, Ingles, Harris Teeter, Hannaford, SEG/Winn Dixie, Giant, Spartan Nash, Food Land, Lowes, Smart and Final, Winco, Bashes, Haggen, AFS, Market Basket, Meijer, Cub, and HvVee. ● Club stores : Costco ● Liquor stores : BevMo!, ABC, and Total Wine and More. ● Convenience & drug stores : Duane Reed.
We are also subject to various federal, state and international laws and regulations related to privacy and data protection, including the California Consumer Privacy Act of 2018 (“CCPA”), which became effective on January 1, 2020, and its extension, the California Privacy Rights Act (“CPRA”), which will take effect on January 1, 2023.
We are also subject to various federal, state and international laws and regulations related to privacy and data protection, including the California Consumer Privacy Act of 2018 (“CCPA”), which became effective on January 1, 2020, and its extension, the California Privacy Rights Act (“CPRA”), which took effect on January 1, 2023.
We believe that 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. The nonalcoholic beverage segment of the commercial beverage industry is highly competitive, consisting of numerous companies ranging from small or emerging to very large and well established.
We believe that 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. 7 The non-alcoholic beverage segment of the commercial beverage industry is highly competitive, consisting of numerous companies ranging from small or emerging to very large and well established.
Reed’s products are sold across the country and internationally in the following major channels: natural food, specialty food, grocery, mass merchant, convenience, club, drug, liquor, and on-premises locations (bars and restaurants). Carbonated Soft Drink Industry Overview The retail CSD category grew 9% during 2023 and the ginger ale segment grew 7% and is now a $1.9 billion-dollar market.
Reed’s products are sold across the country and internationally in the following major channels: natural food, specialty food, grocery, mass merchant, convenience, club, drug, liquor, and on-premises locations (bars and restaurants). Carbonated Soft Drink Industry Overview The retail CSD category grew 6% during 2024 and the ginger ale segment grew 9% and is now a $2.1 billion-dollar market.
We currently have production facilities in the U.K. and will be expanding into the European Union during 2024. We are open to exporting and co-packing internationally and expanding our brands into foreign markets and believe that our new partnership with D and D Holdings will advance our ability to successfully penetrate the continent of Asia.
We currently have production facilities in the U.K. and will be expanding into the European Union during 2025. We are open to exporting and co-packing internationally and expanding our brands into foreign markets and believe that our new partnership with D&D Holdings Ltd (“D&D”) will advance our ability to successfully penetrate the continent of Asia.
As of the end of 2023, the Reed’s Craft Ginger Beer line included five major varieties with a mix of bottles and cans: Reed’s Original Ginger Beer – Our first to market product uses a Jamaican-inspired recipe that calls for fresh ginger root, lemon, lime, pineapple juice, honey, raw cane sugar, herbs and spices.
As of the end of 2024, the Reed’s Craft Ginger Beer line included five major varieties with a mix of bottles and cans: Reed’s Original Ginger Beer – O ur first to market product uses a Jamaican-inspired recipe that calls for fresh ginger root, lemon,and lime, juice, honey and pineapple flavors, raw cane sugar, herbs and spices.
Ginger ale growth, we believe, is driven primarily by a consumer perception of ginger ale as a healthier alternative to other sodas. Our new line of ginger ales made with real ginger deliver on this perception and are poised to breakout in the segment. As a result of the COVID-19 pandemic, consumers are shifting consumption to better-for-you products.
Ginger ale growth, we believe, is driven primarily by a consumer perception of ginger ale as a healthier alternative to other sodas. Our new line of ginger ales made with real ginger deliver on this perception and, as a result, we believe there is substantial growth in this segment. Consumers are shifting consumption to better-for-you products.
Over the years, Reed’s has developed several product offerings. In 2019, we streamlined our focus to our core categories of Reed’s Ginger Beverages and Virgil’s Craft Sodas. In April 2020, we launched our new line of Reed’s Real Ginger Ales, in both Full Sugar and Zero Sugar varieties, made with fresh organic ginger.
In 2019, we streamlined our focus to our core categories of Reed’s Ginger Beverages and Virgil’s Craft Sodas. In April 2020, we launched our new line of Reed’s Real Ginger Ales, in both Full Sugar and Zero Sugar varieties, made with fresh organic ginger.
Our agreement with Battle Co-Packaging serves to expand our production for both bottles and cans and will allows us to better serve our Southeast and south-central customers and grow our sales in the region. We are also in discussions and negotiations with additional co-packers to secure added capability for future production needs.
Our agreement with DrinkPak serves to expand our production for cans and will allows us to better serve our Southwest and club customers and grow our sales in the region. We are also in discussions and negotiations with additional co-packers to secure added capability for future production needs.
Reed’s Zero Sugar Real Ginger Ale – also launched in April 2020 in standard and slim cans. It uses a proprietary sweetening system to match the great taste of the cane sugar version in a zero-calorie drink. Reed’s Real Cranberry Ginger Ale – Seasonal product, launch in the fall of 2021 is our Real Ginger Ale with cranberry added.
Reed’s Zero Sugar Real Ginger Ale – also launched in April 2020 in standard and slim cans. It uses a proprietary sweetening system to match the great taste of the cane sugar version in a zero-calorie drink.
Each Zero Sugar soda is sweetened with a proprietary blend of natural sweeteners with no added sugars and is certified Keto. This natural line of Zero Sugar flavors includes Root Beer, Cola, Black Cherry, Vanilla Cream, Orange Cream, and Dr. Better.
Each Zero Sugar soda is sweetened with a proprietary blend of natural sweeteners with no added sugars and is certified Keto. This natural line of Zero Sugar flavors includes Root Beer, Cola, Vanilla Cream, Black Cherry, and Orange Cream. Flying Cauldron Soda Flying Cauldron is a non-alcoholic butterscotch beer prized for its creamy vanilla and butterscotch flavors.
Virgil’s Handcrafted line includes Root Beer, Vanilla Cream, Black Cherry, and Orange Cream. Beginning in 2023 Virgil’s Handcrafted soda will be offered in both glass and can formats. Zero Sugar Line: Virgil’s launched a new line of Zero Sugar, Zero Calorie craft sodas in 2019.
Virgil’s difference is using natural ingredients to craft bold, classic soda flavors. Virgil’s Handcrafted line includes Root Beer, Cola, Vanilla Cream, Black Cherry, and Orange Cream. Beginning in 2023 Virgil’s Handcrafted soda will be offered in both glass and can formats. Zero Sugar Line: V irgil’s launched a new line of Zero Sugar, Zero Calorie craft sodas in 2019.
Annual growth is expected to be 3% from 2024 to 2028. 2 Our strategies will remain responsive to these macro consumer trends as we concentrate our efforts on developing the Company’s sales and marketing functions. Our Products We make our hand-crafted beverages with only premium, natural ingredients. Our products are free of genetically modified organisms (“GMOs”) and artificial preservatives.
Our strategies will remain responsive to these macro consumer trends as we concentrate our efforts on developing the Company’s sales and marketing functions. Our Products We make our hand-crafted beverages with only premium, natural ingredients. Our products are free of genetically modified organisms (“GMOs”) and artificial preservatives. Over the years, Reed’s has developed several product offerings.
We are subject to various state and local statutes and regulations, including state consumer protection laws such as Proposition 65 in California, which requires that a specific warning appear on any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects, unless the amount of such substance in the product is below a safe harbor level.
We are subject to various state and local statutes and regulations, including state consumer protection laws such as Proposition 65 in California, which requires that a specific warning appear on any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects, unless the amount of such substance in the product is below a safe harbor level. 9 Certain jurisdictions have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products.
Seasonality Sales of our nonalcoholic beverages are somewhat seasonal with higher-than-average volume in the warmer months. The volume of sales in the beverage business is affected by weather conditions from time to time.
Seasonality Sales of our non-alcoholic beverages are somewhat seasonal with higher-than-average volume in the warmer months. The volume of sales in the beverage business is affected by weather conditions from time to time. Additionally, a portion of our products are only available at certain times of the year.
It is a consumer favorite during the holiday season and is available October through December. 3 Reed’s Harvest Spiced Apple Cider – This seasonal product launched in the fall of 2022 and is a delicious holiday offering available September through December.
Reed’s Real Cranberry Ginger Ale – This seasonal product launched in the fall of 2021 and is a delicious holiday offering available September through December. Reed’s Harvest Spiced Apple Cider – This seasonal product launched in the fall of 2022 and is a delicious holiday offering available September through December.
We have a long-standing relationship with two co-packers in Pennsylvania and one in California, one in Washington state and one in New York state. We are actively expanding co-packing capacity and building finished goods inventory. During 2023, we entered into co-packing agreements with a new facility in the Southeast United States and a co-packer in North Carolina, Battle Co-Packaging.
We have relationships with two co-packers in Pennsylvania and three in California, one in Washington state, one in Oregon, one in New York state, and one in North Carolina. We are actively expanding co-packing capacity and building finished goods inventory. During 2024, we entered into co-packing agreements with a new facility in Southern California, DrinkPak.
Risk Factors.” Employees As of December 31, 2023, we had 21 full-time equivalent employees on our corporate staff. We employ additional people on a part-time basis as needed. We have never participated in a collective bargaining agreement. We believe relations with our employees are good. Available Information The Company maintains a website at the following address: www.drinkreeds.com.
As of December 31, 2024, we had 24 full-time equivalent employees on our corporate staff. We employ additional people on a part-time basis as needed. We have never participated in a collective bargaining agreement. We believe relations with our employees are good.
The Virgil’s line includes the following products: Handcrafted Line: Virgil’s first Handcrafted soda was launched in 1994. It began as one man’s passion to create the finest root beer ever produced and has since won numerous awards. Virgil’s difference is using natural ingredients to craft bold, classic soda flavors.
We don’t use any artificial preservatives, any artificial colors, or any GMO-sourced ingredients, and our Virgil’s line is certified kosher. The Virgil’s line includes the following products: Handcrafted Line: Virgil’s first Handcrafted soda was launched in 1994. It began as one man’s passion to create the finest root beer ever produced and has since won numerous awards.
These suppliers provide expertise in emerging package and material innovation that can be leveraged to further expand marketing and package offerings. 8 Working Capital Practices 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.
Working Capital Practices 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.
This partnership supports planning and execution of all inventory movement, assessment of storage needs and cost management. We follow a “fill as needed” model to the best of our ability and have no significant order backlog.
We follow a “fill as needed” model to the best of our ability and have no significant order backlog.
Competitors in the ginger beer category include Goslings, Barrett’s, Fever Tree, Bundaberg, Cock ‘n Bull and Q; in the craft soda category we compete with brands such as Stewart’s, IBC, Zevia, Henry Weinhard’s, Boylan, Sprechers, and Jones Soda; In the Ginger Ale category we compete with Canada Dry, Schweppes, Seagram’s, Vernor’s, and Zevia. 7 We also compete for distributors who will concentrate on marketing our products over those of our competitors, provide stable and reliable distribution, and secure adequate shelf space in retail outlets.
Competitors in the ginger beer category include Goslings, Barritt’s, Fever Tree, Bundaberg, Cock ‘n Bull and Q; in the craft soda category we compete with brands such as Stewart’s, IBC, Zevia, Henry Weinhard’s, Boylan, Sprechers, and Jones Soda; In the Ginger Ale category we compete with Canada Dry, Schweppes, Seagram’s, Vernor’s, and Zevia.
Since our raw materials are common ingredients and supply is easily accessible, we have few long-term contracts in place with our suppliers. Many outside factors such as industry wide shortages, crop yield, weather, agricultural legislation, and the geopolitical climate impact supply and price; however, we do source certain ingredients from different regions and suppliers to mitigate some of this risk.
Many outside factors such as industry wide shortages, crop yield, weather, agricultural legislation, and the geopolitical climate impact supply and price; however, we do source certain ingredients from different regions and suppliers to mitigate some of this risk. 8 Glass Bottles and Aluminium Cans A significant component of our product cost is the purchase of glass bottles and aluminium cans.
They are made with fresh ginger root, to be enjoyed anytime, anywhere. Virgil’s Handcrafted Sodas Virgil’s is a premium handcrafted soda that uses only natural ingredients to create bold renditions of classic flavors. We don’t use any artificial preservatives, any artificial colors, or any GMO-sourced ingredients, and our Virgil’s line is certified kosher.
They contain 5% ABV, 100 calories and zero carbohydrates and have no added sugar, artificial colors, gluten, GMOs or caffeine. They are made with fresh ginger root, to be enjoyed anytime, anywhere. Virgil’s Handcrafted Sodas Virgil’s is a premium handcrafted soda that uses only natural ingredients to create bold renditions of classic flavors.
We continue to actively seek alternative and/or additional co-packing facilities with adequate capacity and capability for the production of our various products to minimize transportation costs and transportation-related damages as well as to mitigate the risk of a disruption. 6 Warehousing and Logistics are a significant portion of the Company’s operational costs.
We have experienced disruptions and delays in production that have impacted our operations and revenues and there can be no assurances that we will not encounter such disruptions in the future. 6 We continue to actively seek alternative and/or additional co-packing facilities with adequate capacity and capability for the production of our various products to minimize transportation costs and transportation-related damages as well as to mitigate the risk of a disruption.
Glass Bottles and Aluminum Cans A significant component of our product cost is the purchase of glass bottles and aluminum cans. We are generally responsible for arranging for the purchase and delivery to our third-party co-packers of the containers in which our beverage products are packaged.
We are generally responsible for arranging for the purchase and delivery to our third-party co-packers of the containers in which our beverage products are packaged. We source glass bottles directly from manufacturers or indirectly through brokers or co-packers, based on their cost and availability regionally.
We are in the process of formulating new products that leverage fresh organic ginger to create a portfolio of beverages targeting the “better-for-you” lifestyle category. We look forward to unveiling these products in the back half of the year with a soft launch during Q4.
We are in the process of formulating new products that leverage fresh organic ginger to create a portfolio of beverages targeting the “better-for-you” lifestyle category. We look forward to the release of our new line of multi-functional beverages during 2025 with a launch during Q1. This product is formulated with organic ginger, complex adaptogen mushroom extracts, and prebiotic fibre.
It is the ultimate mule, made with fresh ginger root, to be enjoyed anytime, anywhere. Reed’s Zero Sugar Stormy Mule – Launched in 2022 , the Stormy is the perfect companion to our Classic Mule, the Stormy Mule is the ultimate rum flavored alcohol and ginger beer.
Reed’s Zero Sugar Stormy Mule – Launched in 2022 , the Stormy is the perfect companion to our Classic Mule, the Stormy Mule is the ultimate rum flavored alcohol and ginger beer. It contains 7% ABV, and a light-spice flavor profile with no artificial colors, gluten, GMOs or caffeine.
Similarly, some measures apply a single tax rate per ounce/liter on beverages containing over a certain level of added sugar (or other sweetener) while others apply a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverage, 9 Certain jurisdictions have either imposed or are considering imposing regulations designed to increase recycling rates, encourage waste reduction, restrict the sale of products utilizing certain packaging or to carry warnings about the environmental impact of plastic packaging.
Similarly, some measures apply a single tax rate per ounce/liter on beverages containing over a certain level of added sugar (or other sweetener) while others apply a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverages.
We are a reporting company currently registered under section 12(g) of the Securities Exchange Act of 1934, as amended. 1 Industry Overview Reed’s offers its portfolio of natural hand-crafted beverages in the craft specialty foods industry as natural alternatives to the $41 billion mainstream carbonated soft drinks (“CSD”) market in the United States as measured by IRI Multi Outlet scan data.
On November 19, 2024, the Company and D&D entered into an exchange agreement, whereby D&D equitized the Notes, in full, for an aggregate of 22,478,074 shares of common stock of the Company. 1 Industry Overview Reed’s offers its portfolio of natural hand-crafted beverages in the craft specialty foods industry as natural alternatives to the $45 billion mainstream carbonated soft drinks (“CSD”) market in the United States as measured by IRI Multi Outlet scan data.
Reed’s Ready to Drink Reed’s Zero Sugar Classic Mule – Launched in 2020 and now sold in 23 states, Reed’s first-ever alcoholic offering is packed with REAL, fresh ginger root and made through a unique handcrafted brewing and fermentation process. It contains 7% ABV, and a light-spice flavor profile with no artificial colors, gluten, GMOs or caffeine.
Reed’s Real Blackberry Ginger Ale - This seasonal product launched in the fall of 2024 and is a delicious holiday offering available September through December Reed’s Ready to Drink Reed’s Zero Sugar Classic Mule – Launched in 2020 and currently sold in 14 states, Reed’s first-ever alcoholic offering is packed with REAL, fresh ginger root and made through a unique handcrafted brewing and fermentation process.
In order to drive efficiency and reduce costs, on February 1, 2019, we entered into a strategic partnership with FitzMark to manage all freight movement for the Company. FitzMark is one of the largest distribution service providers in North America and has expertise that will provide a competitive advantage in the movement of raw materials and finished goods.
FitzMark is one of the largest distribution service providers in North America and has expertise that will provide a competitive advantage in the movement of raw materials and finished goods. This partnership supports planning and execution of all inventory movements, assessment of storage needs and cost management.
Reed’s Zero Sugar Hard Ginger Ale – Launched in late 2002, our line of light refreshing hard ginger ales are available in four flavors: Mango, Cherry Lime, Strawberry Watermelon and Pineapple Coconut. They contain 5% ABV, 100 calories and zero carbohydrates and have no added sugar, artificial colors, gluten, GMOs or caffeine.
It is the ultimate stormy, made with fresh ginger root, to be enjoyed anytime, anywhere. 3 Reed’s Zero Sugar Hard Ginger Ale – Launched in late 2002, our line of light refreshing hard ginger ales are available in four flavors: Mango, Cherry Lime, Strawberry Watermelon and Pineapple Coconut.
It is possible that similar or more restrictive requirements may be proposed or enacted in the future. Certain jurisdictions have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products.
Certain jurisdictions have either imposed or are considering imposing regulations designed to increase recycling rates, encourage waste reduction, restrict the sale of products utilizing certain packaging or to carry warnings about the environmental impact of plastic packaging. It is possible that similar or more restrictive requirements may be proposed or enacted in the future.
We will continue to drive product development in the natural, no and low sugar offerings in the “better for you” beverage categories.
Each serving contains only 5 grams of sugar, approximately 30 to 45 calories, 500 mg of adaptogens, and 2,000 to 5,000 mg of organic ginger. The flavor profile includes Berry Bubbly, Strawberry Vanilla, Lemongrass Ginger, and Root Beer. We will continue to drive product development in the natural, no and low sugar offerings in the “better for you” beverage categories.
We source glass bottles directly from manufacturers or indirectly through brokers or co-packers, based on their cost and availability regionally. During 2022 we entered into a three year agreement with a packaging broker to supply us with sleek and standard 12-ounce cans though the year 2025.
During 2022 we entered into a three-year agreement with a packaging broker to supply us with sleek and standard 12-ounce cans though the year 2025. These suppliers provide expertise in emerging package and material innovation that can be leveraged to further expand marketing and package offerings.
Today, Reed’s has 45 products that are sold throughout the United States, Canada, the United Kingdom, South Africa and the European Union. It produces its products through a network of nine independent manufacturers and distribution through five independent distribution centers.
Reed’s is the first ginger beer in the US; Virgil’s is an independent natural full line craft soda and is a leader in the craft soda category. Reed’s has 50 products that are sold throughout the United States, Canada, the United Kingdom, South Africa the Caribbean and the European Union.
Consumer Trends Driving Growth for Our Products The following is a list of consumer trends that are accelerating and support our brands. ● Natural : Interest in natural products has gone mainstream with annual growth expected to be 11.4% from 2022 through 2030. ● Clean Label : 31% of all food and beverage launches between 2022 and 2030 contained clean labels. ● Reduced Sugar : Most consumers – 72% are looking to limit or avoid sugar.
Consumer Trends Driving Growth for Our Products The following is a list of consumer trends that are accelerating and supporting our brands. ● Natural : Interest in natural products is growing and approximately 59% of shoppers think it’s important for their products to be natural.
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Reed’s is the first ginger beer in the US; Virgil’s is an independent natural full line craft soda and is a leader in the craft soda category. Historical Development Reed’s Original Ginger Brew, created in 1987, was introduced to the market in Southern California stores in 1989. By 1990, we began marketing our products through United Natural Foods Inc.
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It produces its products through a network of nine independent manufacturers and distribution through five independent distribution centers. Our common stock has been quoted on the OTCQX “Best Market” since February 16, 2023.
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(“UNFI”) and other natural food distributors and moved our production to a larger facility in Boulder, Colorado. In 1991, we incorporated our business operations in the state of Florida under the name of Original Beverage Corporation and moved all production to a co-pack facility in Pennsylvania. Throughout the 1990’s, we continued to develop and launch new Ginger Brew varieties.
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We are a “smaller reporting company”, meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. Our common stock is currently registered under section 12(g) of the Securities Exchange Act of 1934, as amended.
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Reed’s Ginger Brews reached broad placement in natural and gourmet foods stores nationwide through UNFI and other major specialty, natural/gourmet and mainstream food and beverage distributors. In 1997, we began licensing the products of China Cola and eventually acquired the rights to that product in 2000. In 1999, we purchased the Virgil’s Root Beer brand from the Crowley Beverage Company.
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Debt Restructuring and Change of Control During 2024, the Company experienced a change of control resulting from a series of investments by D&D Source of Life Holding Ltd., a Cayman Islands entity (“D&D”). D&D is currently the majority stockholder of Reed’s. D&D is currently 100% owned and controlled by Era Regenerative Medicine Ltd., a BVI company.
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In 2000, we moved into an 18,000-square foot warehouse property, the Brewery, in Los Angeles, California, as our headquarters. In 2001, pursuant to a reincorporation merger, we changed our state of incorporation to Delaware and also changed our name to “Reed’s, Inc.” In September 2018, we completed the relocation of its headquarters to Norwalk, Connecticut.
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On October 10, 2024, D&D purchased eight secured promissory notes of the company from funds affiliated with Whitebox Advisors, LLC (referred to herein as “Whitebox”) for a total purchase price of $17,878,248. On November 14, 2024, the Company entered into a new secured one-year term loan with a principal amount of $10 million with Whitebox.
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In December 2018, after a lengthy marketing and bidding process, we sold the Brewery to a company owned by Christopher J. Reed, our founder. The sale of the Brewery marked a fundamental shift in the nature of our operations and effectively eliminated our costs associated with excess manufacturing capacity.
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The term loan is secured by substantially all of the Company’s assets, including all intellectual property. The Company used part of the proceeds to pay off and close its then existing ABL revolving line of credit.
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Our Move to the OTCQX “Best Market” Our stock traded on the Nasdaq Capital Market from 2007 to 2013 and again form May 2019 through February 16, 2023. We voluntarily transferred to and from the NYSE American between 2013 and May 2019.
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The CSD market has been impacted by the emergence of functional or “modern soda” beverages that are formulated with functional ingredients to enhance hydration and provide additional benefits such as gut health, cognitive enhancement, immune support, and energy. Brands that have emerged and driving category growth are Olipop, Poppi, Celsius, Alani Nu, and Culture Pop.
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On August 16, 2021, we received a written notice from The Nasdaq Stock Market LLC (“Nasdaq”) that we were no longer in compliance with the bid price rule. On January 25, 2023, we effectuated a 1-for-50 reverse stock split of our issued and outstanding shares of common stock. On January 27, 2023, we achieved compliance with the bid price rule.
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These beverages are low in sugar and calories and contain minerals, vitamins, dietary fibers or adaptogens with an assortment of flavors. The primary consumers are Gen Z and Millennials seeking healthier alternatives to traditional soda. Reed’s is set to launch a new multi-functional soda line. This innovative lineup is formulated with organic ginger, complex adaptogen mushroom extracts, and prebiotic fiber.
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However, we fell out of compliance with Nasdaq’s minimum stockholders’ equity rule, and, after evaluating options to achieve compliance, our board of directors determined not to proceed with a dilutive capital raise. On February 14, 2023, we were delisted from the Nasdaq Capital Market. On February 16, 2023, our common stock began quotation on the OTCQX “Best Market”.
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Each serving contains only 5 grams of sugar, approximately 30 to 45 calories, 500 mg of adaptogens, and 2,000 to 5,000 mg of organic ginger. The flavor profile includes Berry Bubbly, Strawberry Vanilla, Lemongrass Ginger, and Root Beer.
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We have experienced disruptions and delays in production that have impacted our operations and revenues and there can be no assurances that we will not encounter such disruptions in the future.
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These beverages cater to the rising demand for health-conscious, functional refreshment options and position us at the forefront of the evolving beverage market. The debut of this line is set for April 2025 and continuing for the balance of the year. Presently the Company has secured approximately 8,000 points of distribution.
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The information on the Company’s website is not incorporated by reference in this report. 10
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Sales of natural products increased 6% in 2024 and are expected to continue in the 4-6% range for the next few years. ● Clean Label : The demand for clean label products has been steadily growing in recent years.
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This trend is driven by factors such as increased consumer awareness of food ingredients, rising health concerns, and a growing preference for natural and organic products. ● Reduced Sugar : 72% of U.S. consumers are looking to limit or avoid sugar.
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The global reduced-sugar food and beverage market is expected to grow at an annual rate of 9% through 2028. ● Plant Based : 52% of U.S. consumers have made dietary changes to include more plant-based foods and beverages. ● Ginger Based : Consumer demand for ginger-based products is growing due to increased awareness of ginger’s health benefits.
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The premium cocktail mixer market is expected to grow at an annual rate of 8% from 2024 to 2033. ● Nonalcoholic Beverages : More consumers are seeking nonalcoholic alternatives with bold and unique flavors. Nonalcoholic drink consumption is expected to increase by a third by 2026.
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Sought after by beverage aficionados, Flying Cauldron is made with natural ingredients and no artificial flavors, sweeteners, preservatives, gluten, caffeine, or GMOs. Flying Cauldron is available in 4-packs, single 12 oz bottles, and 16 oz swing-lid bottles.
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Warehousing and Logistics are a significant portion of the Company’s operational costs. In order to drive efficiency and reduce costs, on February 1, 2019, we entered into a strategic partnership with Fitz Mark to manage all freight movement for the Company.
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We also compete for distributors who will concentrate on marketing our products over those of our competitors, provide stable and reliable distribution, and secure adequate shelf space in retail outlets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDemand for our products can fluctuate significantly and our management’s estimates of future product demand may be inaccurate, particularly with new product. Further, we may are subject to a variety of other factors that impact timely production and shipment of our products. Our business and results of operations are impacted by product shortages as well as product surplus.
Biggest changeFurther, we may be subject to a variety of other factors that impact timely production and shipment of our products. Our business and results of operations are impacted by product shortages as well as product surplus. Management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory.
As such, D&D’s exercise of its right could serve to dissuade a new strategic investor from proposing an investment in the Company or significantly decrease the size of the new investor’s investment. Legal, Tax and Regulatory Risks Taxes aimed at our products can adversely affect our business or financial performance.
As such, D&D’s exercise of its right could serve to dissuade a new strategic investor from proposing an investment in the Company or significantly decrease the size of a new investor’s investment. Legal, Tax and Regulatory Risks Taxes aimed at our products can adversely affect our business or financial performance.
In addition, we cannot predict how current or future economic conditions will affect our business partners, including financial institutions with whom we do business, and any negative impact on any of the foregoing may also have an adverse impact on our business. 13 Future cyber incidents and other disruptions to our information systems can adversely affect our business.
In addition, we cannot predict how current or future economic conditions will affect our business partners, including financial institutions with whom we do business, and any negative impact on any of the foregoing may also have an adverse impact on our business. Future cyber incidents and other disruptions to our information systems can adversely affect our business.
Water scarcity and poor quality could negatively impact our costs and capacity. Water is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process.
Water scarcity and poor quality could negatively impact our costs and capacity. Water is a main ingredient in substantially all of our products, it is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process.
When we underestimate demand for our products, are unable to secure sufficient ingredients or raw materials or procure adequate packing arrangements to obtain adequate or timely shipment of our products, we are not be able to satisfy demand on a short-term basis.
When we underestimate demand for our products, are unable to secure sufficient ingredients or raw materials or procure adequate packing arrangements to obtain adequate or timely shipment of our products, we are not able to satisfy demand on a short-term basis.
The conduct of our business is subject to numerous laws and regulations relating to the production, storage, distribution, sale, display, advertising, marketing, labeling, content (including whether a product contains genetically engineered ingredients), quality, safety, transportation, supply chain, traceability, sourcing (including pesticide use), packaging, disposal, recycling and use of our products or raw materials, employment and occupational health and safety, environmental, social and governance matters and reporting (including climate change), machine learning and artificial intelligence and data privacy and protection.
The conduct of our business is subject to numerous laws and regulations relating to the production, storage, distribution, sale, display, advertising, marketing, labelling, content (including whether a product contains genetically engineered ingredients), quality, safety, transportation, supply chain, traceability, sourcing (including pesticide use), packaging, disposal, recycling and use of our products or raw materials, employment and occupational health and safety, environmental, social and governance matters and reporting (including climate change), machine learning and artificial intelligence and data privacy and protection.
The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins.
The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, has resulted in suppressed margins.
These laws, regulations and policies vary in form and scope and include extended producer responsibility policies, plastic or packaging taxes, minimum recycled content requirements, restrictions on certain products and materials, restrictions or bans on the use of certain types of packaging, including single-use plastics and packaging containing PFAS, restrictions on labeling related to recyclability, requirements to charge deposit fees and requirements to scale reusable or refillable packaging.
These laws, regulations and policies vary in form and scope and include extended producer responsibility policies, plastic or packaging taxes, minimum recycled content requirements, restrictions on certain products and materials, restrictions or bans on the use of certain types of packaging, including single-use plastics and packaging containing PFAS, restrictions on labelling related to recyclability, requirements to charge deposit fees and requirements to scale reusable or refillable packaging.
Responding to these matters, even those that are ultimately non-meritorious, requires us to incur significant expense and devote significant resources, and may generate adverse publicity that damages our reputation or brand image. Any of the foregoing can adversely affect our business. 15 Regulations concerning our alcohol beverages may adversely affect our business, financial condition or results of operations.
Responding to these matters, even those that are ultimately non-meritorious, requires us to incur significant expense and devote significant resources, and may generate adverse publicity that damages our reputation or brand image. Any of the foregoing can adversely affect our business. 17 Regulations concerning our alcohol beverages may adversely affect our business, financial condition or results of operations.
In addition, our business operations, including our supply chain, are subject to disruption by geopolitical events, wars and other military conflicts, natural disasters, pandemics, epidemics or other events beyond our control that could negatively impact product availability and decrease demand for our products. 12 Damage to our reputation or brand image can adversely affect our business.
In addition, our business operations, including our supply chain, are subject to disruption by geopolitical events, wars and other military conflicts, natural disasters, pandemics, epidemics or other events beyond our control that could negatively impact product availability and decrease demand for our products. 13 Damage to our reputation or brand image can adversely affect our business.
Climate change may also exacerbate water scarcity and cause a further deterioration of water quality in affected regions, which could limit water availability for our independent cop-packers. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain or impact demand for our products.
Climate change may also exacerbate water scarcity and cause a further deterioration of water quality in affected regions, which could limit water availability for our independent co-packers. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain or impact demand for our products.
Damage to our reputation or brand image could decrease demand for our products, thereby adversely affecting our business. Product recalls or other issues or concerns with respect to product quality and safety can adversely affect our business. We have recalled, and could in the future recall, products due to product quality or safety issues, such as mislabeling, spoilage or malfunction.
Damage to our reputation or brand image could decrease demand for our products, thereby adversely affecting our business. Product recalls or other issues or concerns with respect to product quality and safety can adversely affect our business. We have recalled, and could in the future recall, products due to product quality or safety issues, such as mislabelling, spoilage or malfunction.
If such governmental bodies require increased additional product labeling, warning requirements, or limitations on the marketing or sale of our alcohol products due to their contents or allegations concerning their potential to cause adverse health effects, our sales of alcohol beverages may be adversely affected.
If such governmental bodies require increased additional product labelling, warning requirements, or limitations on the marketing or sale of our alcohol products due to their contents or allegations concerning their potential to cause adverse health effects, our sales of alcohol beverages may be adversely affected.
Certain jurisdictions have imposed or are considering imposing color-coded labeling requirements where colors such as red, yellow and green are used to indicate various levels of a particular ingredient, such as sugar, sodium or saturated fat, in products.
Certain jurisdictions have imposed or are considering imposing color-coded labelling requirements where colors such as red, yellow and green are used to indicate various levels of a particular ingredient, such as sugar, sodium or saturated fat, in products.
Governmental agencies heavily regulate the alcohol beverage industry. In particular, they monitor and regulate licensing, warehousing, trade and pricing practices, permitted and required labeling, including warning labels, signage, advertising, relations with wholesalers and retailers, and, in control states, product listings.
Governmental agencies heavily regulate the alcohol beverage industry. In particular, they monitor and regulate licensing, warehousing, trade and pricing practices, permitted and required labelling, including warning labels, signage, advertising, relations with wholesalers and retailers, and, in control states, product listings.
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.
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.
This increased focus may result in new or increased legal and regulatory requirements, such as potential carbon pricing programs or revised product labeling requirements or other regulatory measures, which could, result in significant increased costs.
This increased focus may result in new or increased legal and regulatory requirements, such as potential carbon pricing programs or revised product labelling requirements or other regulatory measures, which could result in significant increased costs.
Changes in economic conditions can adversely impact our business. Many of the jurisdictions in which our products are sold have experienced and could continue to experience uncertain or unfavorable economic conditions, such as high inflation and adverse changes in interest rates, tax laws or tax rates, including as a result of geopolitical events.
Many of the jurisdictions in which our products are sold have experienced and could continue to experience uncertain or unfavorable economic conditions, such as high inflation and adverse changes in interest rates, tax laws or tax rates, including as a result of geopolitical events.
Failure to comply with these laws and regulations or to otherwise protect personal data from unauthorized access, use or other processing, have in the past and could in the future result in litigation, claims, legal or regulatory proceedings, inquiries or investigations, damage to our reputation, fines or penalties, all of which can adversely affect our business.
Failure to comply with these laws and regulations or to otherwise protect personal data from unauthorized access, use or other processing, have in the past and could in the future result in litigation, claims, legal or regulatory proceedings, inquiries or investigations, damage to our reputation, fines or penalties, all of which can adversely affect our business. 16 Our manufacturing process is not patented.
These laws and regulations have in the past increased and could continue to increase the cost of our products, impact demand for our products, result in negative publicity and require us and our business partners, including our independent co-packers, to increase capital expenditures to invest in reducing the amount of virgin plastic or other materials used in our packaging, to develop alternative packaging or to revise product labeling, all of which can adversely affect our business and financial performance. 14 Failure to comply with personal data protection and privacy laws can adversely affect our business.
These laws and regulations have in the past increased and could continue to increase the cost of our products, impact demand for our products, result in negative publicity and require us and our business partners, including our independent co-packers, to increase capital expenditures to invest in reducing the amount of virgin plastic or other materials used in our packaging, to develop alternative packaging or to revise product labelling, all of which can adversely affect our business and financial performance.
These uncertain or unfavorable economic conditions have resulted in and could continue to result in recessions or economic slowdowns; volatile commodity markets; labor shortages; highly inflationary economies; and stimulus measures,.
These uncertain or unfavorable economic conditions have resulted in and could continue to result in recessions or economic slowdowns; volatile commodity markets; labor shortages; highly inflationary economies; and stimulus measures. In 2024 we experienced moderate inflation.
These tax measures, whatever their scope or form, have in the past and could continue to increase the cost of certain of our products, reduce overall consumption of our products or lead to negative publicity, resulting in an adverse effect on our business and financial performance.
These tax measures, whatever their scope or form, have in the past and could continue to increase the cost of certain of our products, reduce overall consumption of our products or lead to negative publicity, resulting in an adverse effect on our business and financial performance. 15 Limitations on the marketing or sale of our products can adversely affect our business and financial performance.
Limitations on the marketing or sale of our products can adversely affect our business and financial performance. Certain jurisdictions in which our products are sold or may be sold have either imposed, or are considering imposing, limitations on the marketing or sale of our products as a result of ingredients or substances in our products or product packaging.
Certain jurisdictions in which our products are sold or may be sold have either imposed, or are considering imposing, limitations on the marketing or sale of our products as a result of ingredients or substances in our products or product packaging.
Our inability to resolve a significant dispute with either of these customers, a change in the business condition (financial or otherwise) of either of these customers, even if unrelated to us, a significant reduction in sales to either of them, or the loss of either of them could adversely affect our business.
Our inability to resolve a significant dispute with customers, a change in the business conditions (financial or otherwise) of either of these customers, even if unrelated to us, a significant reduction in sales to either of them, or the loss of either of them could adversely affect our business. 14 The beverage industry is highly competitive.
Failure to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our workforce can have an adverse effect on our business. Our business requires that we attract, develop and maintain a highly skilled and diverse workforce.
If we lose key personnel, our operations and ability to manage our business may be affected. Failure to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our workforce can have an adverse effect on our business. Our business requires that we attract, develop and maintain a highly skilled and diverse workforce.
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.
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. 12 Supply chain challenges have impacted our ability to benefit from strong demand for, and increased sales of our products and adversely impacted our business.
The effects of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. 16
The effects of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. 18 Item 1B. Unresolved Staff Comments Not applicable.
If we are unable to successfully implement our productivity initiatives as planned or do not achieve expected savings as a result of these initiatives, we may not realize all or any of the anticipated benefits, resulting in adverse effects on our financial performance.
If we are unable to successfully implement our productivity initiatives as planned or do not achieve expected savings as a result of these initiatives, we may not realize all or any of the anticipated benefits, resulting in adverse effects on our financial performance. 11 Demand for our products can fluctuate significantly and our management’s estimates of future product demand may be inaccurate, particularly with new products.
(“D&D”) holds a preemptive right to purchase its pro-rata share, based on the ratio of shares of the Company’s common it owns to all the outstanding share of the Company’s common stock, of any investment in the equity securities or equity- linked securities of the Company, D&D, an entity owned by our Vice Chairman, will beneficially own approximately 47% of our common stock after conversion of the SAFE investment.
Our largest stockholder, D&D, holds a preemptive right to purchase its pro-rata share, based on the ratio of shares of the Company’s common stock it owns to all the outstanding shares of the Company’s common stock, of any investment in the equity securities or equity-linked securities of the Company. D&D beneficially owns approximately 59.5% of our common stock.
We are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding personal data protection and privacy laws. These laws and regulations may be interpreted and applied differently from country to country or, within the United States, from state to state, and can create inconsistent or conflicting requirements.
These laws and regulations may be interpreted and applied differently from country to country or, within the United States, from state to state, and can create inconsistent or conflicting requirements.
If a co-packer terminates its relationship with us, we are have in the past, and will likely in the future, experience a delay finding a suitable replacement, which will negatively impact or business and financial results. 11 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.
If a co-packer terminates its relationship with us, we have in the past, and will likely in the future, experience a delay finding a suitable replacement, which will negatively impact or business and financial results.
There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. Risks Related to Our Debt Service Obligations Our ability to service our indebtedness will depend on our ability to generate cash in the future.
There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. Business and Operational Risks Failure to realize benefits from our productivity initiatives can adversely affect our financial performance.
We could continue to experience disruption in our manufacturing operations and supply chain. Reduction in future demand for our products would adversely affect our business.
Although we regularly monitor companies in our supply chain and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. Reduction in future demand for our products would adversely affect our business.
Management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. At December 31, 2023, and 2022, inventory has been reduced by cumulative write-downs for inventory aggregating $1,848 and $479, respectively.
At December 31, 2024, and 2023, inventory has been reduced by cumulative write-downs for inventory aggregating $277 and $1,848, respectively.
Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. Although we have experienced decreases in freight costs over the last three quarters, we believe there remains a volatile environment, and we continue to monitor pricing and availability in transportation.
Although the company has experienced decreases in freight costs, in the company’s opinion there remains a volatile environment and the company will continue to monitor pricing and availability in transportation. Mitigation plans have been implemented to manage this risk.
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At December 31, 2023, our outstanding obligation our 10% Secured Convertible Notes (“Notes”) was approximately $18.1 million and the balance on our ABL line of credit was approximately $9.9 million.
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There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. Our disclosure controls and procedures may not prevent or detect all errors or acts of frau d. We are subject to the periodic reporting requirements of the Exchange Act.
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Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest and penalties on our indebtedness, and our inability to fund our other liquidity needs.
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We have designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
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If we are unable to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness.
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However, any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
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However, such alternatives may not be feasible or adequate. Holders of our 10% Secured Convertible Notes (“Notes”) have been amenable to making accommodations under the Notes by waiving conditions and financial covenants in exchange for certain negotiated penalties in lieu of declaring default.
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Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
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If do not meet our obligations under the Notes and are unable to negotiate accommodations in the future, the Note holders may declare a default, which would likely force us into bankruptcy. At December 31, 2023, our outstanding obligation under the Notes was approximately $18.1 million. The Notes are secured by substantially all of the company’s assets.
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Global economic uncertainty and unfavorable global economic conditions caused by political instability, changes in trade agreements and conflicts, such as the Russia-Ukraine conflict and the conflict in the Middle East, could adversely affect our business, financial condition, results of operations or prospects .
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We have negotiated an extension under the Notes, subject to meeting certain conditions and executing documentation. As such the maturity date will be in April 2024. The indebtedness under the Notes limits our growth, and management of the debt requires a significant amount of time and effort of our executive officers.
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Our business, financial condition, results of operations or prospects could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions, including as a result of an economic downturn and geopolitical events, such as changes in U.S. federal policy that affect the geopolitical landscape. Changes to policy implemented by the U.S.
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While we have been successful negotiating waivers and amendments under the Notes, we may not be able to continue to do so in the future. We have further been exploring our options to refinance these Notes.
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Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas.
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If we are unable to service or repay these obligations at maturity and we are otherwise unable to extend the maturity dates or refinance these obligations, we may default. A default would trigger acceleration under the Notes, and it is unlikely that we would have sufficient funds to make these payments.
Added
For example, during the prior Trump administration, increased tariffs were implemented on goods imported into the United States, particularly from China, Canada, and Mexico. On February 1, 2025, the United States imposed a 25% tariff on imports from Canada and Mexico, which were subsequently suspended for a period of one month, and a 10% additional tariff on imports from China.
Removed
Upon a default, the holders have the right to exercise their remedies to collect, including foreclosing on our assets. Accordingly, we would likely be forced to seek bankruptcy protection in the event of default. Business and Operational Risks Failure to realize benefits from our productivity initiatives can adversely affect our financial performance.
Added
Historically, tariffs have led to increased trade and political tensions, between not only the United States and China, but also between the United States and other countries in the international community. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods.
Removed
Supply chain challenges have impacted our ability to benefit from strong demand for, and increased sales of our products and adversely impacted our business. Disruption of our production or supply chain, including continued increased commodity, packaging, transportation, labor and other input costs, can adversely affect our business.
Added
Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets.
Removed
The raw materials and other supplies, including agricultural commodities, fuel and packaging materials, transportation, labor and other supply chain inputs that are required for the manufacturing, production and distribution of our products are subject to price volatility and fluctuations in availability caused by many factors, including changes in supply and demand, supplier capacity constraints, inflation, weather conditions (including potential effects of climate change), fire, natural disasters, disease or pests, agricultural uncertainty, health epidemics or pandemics or other contagious outbreaks (including COVID-19), labor shortages or changes in availability of our or our business partners’ workforce (including the lack of availability of truck drivers as a result of COVID-19), strikes or work stoppages (including by railway workers or other third parties involved in the manufacture, production and distribution of our products), governmental incentives and controls (including import/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers), port congestions or delays, transport capacity constraints, cybersecurity incidents or other disruptions, loss or impairment of key manufacturing sites, political uncertainties, geopolitical events, wars and other military conflicts, acts of terrorism, governmental instability or currency exchange rates.
Added
Any changes in political, trade, regulatory, and economic conditions, including U.S. trade policies, could have a material adverse effect on our financial condition or results of operations.
Removed
When input prices increase unexpectedly or significantly, we may be unwilling or unable to increase our product prices or unable to effectively hedge against price increases to offset these increased costs without suffering reduced volume, revenue, margins and operating results The disruption we experiences caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins.
Added
Until we know what policy changes are made, whether those policy changes are challenged and subsequently upheld by the court system and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.
Removed
During the year ended December 31, 2023, we had two customers that accounted for approximately 24% and 15% of its sales, respectively; and during the year ended December 31, 2022, we had two customers that accounted for approximately 17% and 16% of its sales, respectively. These two customers serve hundreds if not thousands of various retail chains and end customers.
Added
In addition, the current military conflict between Russia and Ukraine and the armed conflict in Israel and the Gaza Strip could disrupt or otherwise adversely impact our operations and those of third parties upon which we rely.
Removed
No other customer exceeded 10% of sales for either period.
Added
Related sanctions, export controls or other actions that may be initiated by nations including the United States, the EU or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could adversely affect our business and/or our supply chain and other third parties with which we conduct business.
Removed
We outsource cybersecurity to a third party provider.
Added
A severe or prolonged economic downturn or political unrest could result in a variety of risks to our business, including but not limited to weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all.
Removed
Our Chairman and Vice Chairman are significant stockholders and may greatly influence the outcome of all matters on which stockholders vote. After the conversion of the SAFE investment, Shufen Deng, our Vice Chairman, will beneficially own approximately 47% of our common stock and John J. Bello, our Chairman, will beneficially own approximately 9% of our common stock.
Added
A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current political and economic climate and financial market conditions could adversely impact our business.
Removed
They will exert significant influence on the outcome of stockholder votes. Furthermore, and the Union Square Entities, a related party, will own approximately 25% of our stock after conversion of the SAFE investment and will also have great influence on the outcome of a stockholder vote.
Added
We are a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to “smaller reporting companies” will make our common stock less attractive to investors .
Removed
(Beneficial ownership is calculated pursuant to Section 13d-3 of the Securities Exchange Act of 1934, as amended, and includes shares underlying derivative securities which may be exercised or converted within 60 days.) Our largest stockholder’s preemptive right could dissuade a strategic investor from making an investment in the Company. Our largest stockholder, D&D Source of Life Holding, Ltd.
Added
We are a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year.
Added
We may continue to be a “smaller reporting company” until (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million as of the prior June 30.
Added
Our designation as a “smaller reporting company,” allows us to take advantage of many of the same exemptions from disclosure requirements, including presenting only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K not being required to comply with the independent auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Added
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.
Added
The following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business or financial performance, which in turn can affect the price of our publicly traded securities. These are not the only risks we face.
Added
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.
Added
Supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. We have experienced supply chain challenges, including increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand.
Added
During the year ended December 31, 2024, the average cost of shipping and handling was $2.75 per case, as compared to $3.07 per case for the year ended December 31, 2023.
Added
Dependence on Key Personnel Our performance significantly depends on the contributions of our executive officers and key employees, both individually and as a group and our ability to retain and motivate them. Certain of our officers and key personnel have many years of experience with us and in our industry and it may be difficult to replace them.
Added
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 whom also distribute other beverage brands. Our products compete with all non-alcoholic beverages, most of which are marketed by companies with substantially greater financial resources than ours.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such ordinary, routine litigation will not have a material adverse impact on our financial position, liquidity, or results of operations. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeAlthough the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such ordinary, routine litigation will not have a material adverse impact on our financial position, liquidity, or results of operations.
Removed
Item 3. Legal Proceedings In 2018, California Custom Beverage, LLC’s (“CCB”), an entity owned by Christopher J. Reed, a former related party, assumed the monthly payments on our lease obligation for a Los Angeles manufacturing plant, and our release from the obligation by the lessor, however, is dependent upon CCB’s deposit of $1,200 of security with the lessor.
Added
Item 3. Legal Proceedings We are a party to ordinary, routine litigation incidental to our business, including routine litigations matters tendered to our insurance carriers.
Removed
As of December 31, 2023, $800 has been deposited with the lessor and Chris J. Reed has placed approximately 7,260 shares of the Company’s common stock valued at $12 that remain in escrow with the lessor. From time to time, we are a party to ordinary, routine litigation incidental to our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn January 24, 2023, our shareholders approved a up to a 1:50 reverse stock split of our common stock. Effective January 27, 2023, we effected the 1:50 reverse stock split of our common stock.
Biggest changeOn January 27, 2023, we effected the 1:50 reverse stock split of our common stock. On December 30, 2024, our majority stockholder approved the reduction in the number of authorized shares of common stock from 180 million to 60 million. The amendment was filed with the Delaware Secretary of State on February 5, 2025.
Item 5. Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock was delisted from The Nasdaq Capital Market on February 16, 2023. Concurrently, our common stock became quoted on the OTCQX Best Market. Our symbol remains “REED”. The OTCQX Best Market is an over-the-counter market.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock was delisted from The Nasdaq Capital Market on February 16, 2023. Concurrently, our common stock became quoted on the OTCQX Best Market. Our symbol remains “REED”. The OTCQX Best Market is an over-the-counter market.
Equity Compensation Plans Pursuant to the SEC’s Regulation S-K Compliance and Disclosure Interpretation 106.01, the information required by this Item pursuant to Item 201(d) of Regulation S-K relating to securities authorized for issuance under the Corporation’s equity compensation plans is located in Item 12 of Part III of this Annual Report and is incorporated herein by reference. Item 6. [Reserved]
Equity Compensation Plans Pursuant to the SEC’s Regulation S-K Compliance and Disclosure Interpretation 106.01, the information required by this Item pursuant to Item 201(d) of Regulation S-K relating to securities authorized for issuance under the Corporation’s equity compensation plans is located in Item 12 of Part III of this Annual Report and is incorporated herein by reference.
Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. On December 21, 2021, our shareholders approved an increase in the number of authorized shares of common stock from 120 million to 180 million.
Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. On December 21, 2021, our shareholders approved an increase in the number of authorized shares of common stock from 120 million to 180 million. On January 24, 2023, our shareholders approved a 1:50 reverse stock split of our common stock.
As of March 19, 2024there were approximately 165 holders of record of our common This number does not include “street name” or beneficial holders, whose shares are held of record by banks, brokers, financial institutions and other nominees.
As of March 17, 2025 there were approximately 170 holders of record of our common This number does not include “street name” or beneficial holders, whose shares are held of record by banks, brokers, financial institutions and other nominees. We currently have no expectation to pay cash dividends to holders of our common stock in the foreseeable future.
Except as set forth above, the information has previously been included on a Current Report on Form 8-K or Quarterly Report on Form10Q.
Unregistered Sales of Equity Securities None that have not previously been included on a Current Report on Form 8-K or Quarterly Report on Form10-Q.
Removed
During the twelve months ended December 31, 2023, we repurchased 274 shares of common stock from an officer for $1 based on the market value of share on the date repurchased. We retired the shares in the second quarter of 2023. We currently have no expectation to pay cash dividends to holders of our common stock in the foreseeable future.
Removed
Unregistered Sales of Equity Securities In March 2023, John J. Bello funded $300,000 to Reed’s through the SAFE investment. The SAFE investment convert into the next equity financing of Reed’s on the same terms and conditions as investors in Reed’s next equity financing, subject to certain limitations and conditions.
Removed
The SAFE has not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and instead was offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act on the basis that there was no public offering.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations – Year Ended December 31, 2023 The following table sets forth key statistics for the years ended December 31, 2023, and 2022, in thousands: Year Ended December 31, Pct. 2023 2022 Change Gross billing (A) $ 50,689 $ 59,464 -15 % Less: Promotional and other allowances (B) 5,978 6,423 -7 % Net sales $ 44,711 $ 53,041 -16 % Cost of goods sold 31,884 40,929 -22 % % of Gross billing 63 % 69 % % of Net sales 71 % 77 % Product quality hold write-down 1,848 - -22 % % of Gross billing 4 % 0 % % of Net sales 4 % 0 % Provision for product hold 1,267 - % of Gross billing 3 % 0 % % of Net sales 3 % 0 % Gross profit $ 9,712 $ 12,112 -20 % % of Net sales 22 % 23 % Expenses Delivery and handling $ 7,561 $ 11,603 -35 % % of Net sales 17 % 22 % Dollar per case ($) 3.07 3.95 Selling and marketing 4,865 7,316 -34 % % of Net sales 11 % 14 % General and administrative 6,118 7,489 -18 % % of Net sales 14 % 14 % Provision for receivable with former related party 585 538 9 % % of Net sales 1 % 1 % Total Operating expenses 19,129 26,946 -29 % Loss from operations $ (9,417 ) $ (14,834 ) -37 % Interest expense and other expense $ (6,106 ) $ (5,223 ) 17 % Net loss $ (15,523 ) $ (20,057 ) -23 % Loss per share – basic and diluted $ (4.39 ) $ (9.07 ) -52 % Weighted average shares outstanding – basic & diluted 3,537,882 2,211,319 60 % 20 (A) We define gross billing as the total sales for the Company unadjusted for costs related to generating those sales.
Biggest changeResults of Operations – Year Ended December 31, 2024 The following table sets forth key statistics for the years ended December 31, 2024, and 2023, in thousands: Year Ended December 31, Pct. 2024 2023 Change Gross billing (A) $ 44,316 $ 50,689 -13 % Less: Promotional and other allowances (B) 6,362 5,978 6 % Net sales $ 37,954 $ 44,711 -15 % Cost of goods sold 26,578 31,884 -17 % % of Gross billing 60 % 63 % % of Net sales 70 % 71 % Product quality hold write-down - 1,848 -100 % % of Gross billing 0 % 4 % % of Net sales 0 % 4 % Provision for product hold - 1,267 -100 % % of Gross billing 0 % 2 % % of Net sales 0 % 3 % Gross profit $ 11,376 $ 9,712 17 % % of Net sales 30 % 22 % Expenses Delivery and handling $ 5,863 $ 7,561 -22 % % of Net sales 15 % 17 % Dollar per case ($) 2.75 3.07 Selling and marketing 4,405 4,865 -9 % % of Net sales 12 % 11 % General and administrative 9 ,109 6,118 49 % % of Net sales 24 % 14 % Provision for receivable with former related party 115 585 -80 % % of Net sales 0 % 1 % Total Operating expenses 19,492 19,129 2 % Loss from operations $ (8,116 ) $ (9,417 ) -14 % Interest expense and other expense $ (5,036 ) $ (6,106 ) -18 % Net loss $ (13,152 ) $ (15,523 ) -15 % Loss per share – basic and diluted $ (1.64 ) $ (4.39 ) -63 % Weighted average shares outstanding – basic & diluted 8,041,496 3,537,882 127 % 22 (A) We define gross billing as the total sales for the Company unadjusted for costs related to generating those sales.
In addition, we use Modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance.
In addition, we use Modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance.
There were no changes to our critical accounting policies described in the consolidated financial statements included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that impacted our condensed consolidated financial statements and related notes included herein. Recent Accounting Pronouncements See Note 2 of the financial statements for a discussion of recent accounting pronouncements.
There were no changes to our critical accounting policies described in the financial statements included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024, that impacted our condensed consolidated financial statements and related notes included herein. Recent Accounting Pronouncements See Note 2 of the financial statements for a discussion of recent accounting pronouncements.
The Company has been negatively impacted by supply chain challenges impacting our ability to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins.
The Company has been negatively impacted by supply chain challenges affecting 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.
Results of Operations Overview During the year ended December 31, 2023, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies in transportation and warehouse costs and reduce operating expenses.
Results of Operations Overview During the year ended December 31, 2024, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies in transportation and warehouse costs and reduce operating expenses.
Sales, Cost of Sales, and Gross Margins The following chart sets forth key statistics for the transition of the Company’s top line activity through the years ended December 31, 2023.
Sales, Cost of Sales, and Gross Margins The following chart sets forth key statistics for the transition of the Company’s top line activity through the years ended December 31, 2024.
Although the Company has experienced decreases in freight costs over the last three quarters, in the Company’s opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation. Mitigation plans have been implemented to manage this risk.
Although the Company has experienced decreases in freight costs, in the Company’s opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation. Mitigation plans have been implemented to manage this risk.
We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, legal and insurance settlements, inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment.
We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional fees, inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment.
The Company has experienced moderation in inflation and anticipates this to continue throughout 2024. 19 Through December 31, 2023, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain access to the capital markets.
The Company has experienced moderation in inflation and anticipates this continuing throughout 2025. Through December 31, 2024, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain access to the capital markets.
Excluding the write-offs and provision for product quality hold write-down., total cost of goods sold per case would have been $12.96. Gross Margin Gross margin decreased to 22% for the year ended December 31, 2023, compared to 23% for the same period last year.
Excluding the write-offs and provision for product quality hold write-down, total cost of goods sold per case during the year ended December 31, 2023, would have been $12.96. Gross Margin Gross margin increased to 30% for the year ended December 31, 2024, compared to 22% for the same period last year.
Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $4,865 during the year ended December 31, 2023, compared to $7,316 during the same period last year.
Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $4,405 during the year ended December 31, 2024, compared to $4,865 during the same period last year.
The total cost of goods per case decreased to $14.22 per case for the year ended December 31, 2023, from $13.92 per case for the same period last year. The cost of goods sold per case on core brands was $12.82 during the year ended December 31, 2023, compared to $13.59 for the same period last year.
The total cost of goods per case decreased to $12.46 per case for the year ended December 31, 2024, from $14.22 per case for the same period last year. The cost of goods sold per case on core brands was $12.46 during the year ended December 31, 2024, compared to $12.82 for the same period last year.
During the three months ended December 31, 2023, the Company was made aware of a closure failure in our seasonal swing-lid products which resulted in a product quality hold write-down. The Company recorded expense of $1,267 related to costs associated with the product quality hold write-down. An insurance claim is pending.
During 2023 the Company discovered a closure failure in our seasonal swing-lid products which resulted in a product quality hold write-down. The Company recorded expense of $1,267 related to costs associated with the product quality hold write-down for the year ended December 31, 2023. An insurance claim is pending.
As a percentage of net sales, selling and marketing were 11% of net sales during the year ended December 31, 2023, as compared to 14% of net sales during the same period last year.
As a percentage of net sales, selling and marketing expenses were 12% of net sales during the year ended December 31, 2024, as compared to 11% of net sales during the same period last year.
Recent Trends – Market Conditions Although the U.S. economy continued to grow throughout 2023, the higher inflation, the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.
Recent Trends – Market Conditions Although the U.S. economy continued to grow throughout 2024 and 2023, inflation, actions by the Federal Reserve to address inflation, fluctuations in energy prices, and the potential impacts of tariffs and geopolitical events create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.
Price on our core brands increased 4% to $20.32 per case. The decrease was a result of volume declines that have impacted the CSD segment as a result of price increases coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.
Price on our core brands increased 2% to $20.70 per case. The lower gross billings was a result of volume declines that have impacted the carbonated soft drink segment as a result of price increases coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.
Modified EBITDA has limitations as an analytical tool, which includes, among others, the following: ● Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; ● Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ● Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and ● Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements. 24 Liquidity For the year ended December 31, 2023, the Company recorded a net loss of $15,523 and used cash in operations of $4,266.
Modified EBITDA has limitations as an analytical tool, which includes, among others, the following: ● Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; ● Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ● Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and ● Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements.
Set forth below is a reconciliation of net loss to Modified EBITDA for the year ended December 31, 2023, and 2022 (in thousands): Year Ended December 31, 2023 2022 Net loss $ (15,523 ) $ (20,057 ) Modified EBITDA adjustments: Depreciation and amortization 281 225 Interest expense 6,106 5,223 Tax expense 251 - Stock option and other noncash compensation 493 859 Provision for receivable with former related party 585 538 Product quality hold write-down 1,267 - Inventory write-offs associated with exited categories and major packaging and formula changes 1,848 One-time change in policy for discounts 756 - Legal settlement 12 - Severance costs 256 66 Total EBITDA adjustments $ 11,855 $ 6,911 Modified EBITDA $ (3,668 ) $ (13,146 ) We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
Set forth below is a reconciliation of net loss to Modified EBITDA for the year ended December 31, 2024, and 2023 (in thousands): Year Ended December 31, 2024 2023 Net loss $ (13,152 ) $ (15,523 ) Modified EBITDA adjustments: Depreciation and amortization 289 281 Interest expense 5,481 6,106 Tax expense 111 251 Stock option and other noncash compensation 528 493 Provision for receivable with former related party 115 585 Product quality hold write-down 42 1,267 Inventory write-offs associated with exited categories and major packaging and formula changes - 1,848 Impairment of assets 473 - One-time change in policy for discounts - 756 Professional fees 393 - Contract Proceedings 1,593 12 Severance costs 57 256 Total EBITDA adjustments $ 9,082 $ 11,855 Modified EBITDA $ (4,070 ) $ (3,668 ) 25 We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
In addition to our GAAP results, the following discussion includes Modified EBITDA as a supplemental measure of our performance. We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
Cost of Goods Sold Cost of goods sold decreased $9,045 during the year ended December 31, 2023, as compared to the same period last year. As a percentage of net sales, cost of goods sold for the year ended December 31, 2023, was 71% as compared to 77% for the same period last year.
Cost of Goods Sold Cost of goods sold decreased $5,306 during the year ended December 31, 2024, as compared to the same period last year. As a percentage of net sales, cost of goods sold for the year ended December 31, 2024, was 70% as compared to 71% for the same period last year.
Delivery costs in the year ended December 31, 2023, were 17% of net sales and $3.07 per case, compared to 22% of net sales and $3.95 per case during the same period last year. Selling and Marketing Expenses Marketing expenses consist of direct marketing, marketing labor, and marketing support costs.
Delivery costs for the year ended December 31, 2024, were 15% of net sales and $2.75 per case, compared to 17% of net sales and $3.07 per case during the same period last year. 24 Selling and Marketing Expenses Marketing expenses consist of direct marketing, marketing labor, and marketing support costs.
Loss from Operations The loss from operations was $9,417 for the year ended December 31, 2023, as compared to a loss of $14,834 in the same period last year driven by decreased gross profit and decreases in operating expenses discussed above. Interest Expense Interest expense for the year ended December 31, 2023, consisted of $6,106 of interest expense.
Loss from Operations The loss from operations was $8,116 for the year ended December 31, 2024, as compared to a loss of $9,417 in the same period last year driven by increased gross profit and decreased operating expenses discussed above.
Core brand gross billing decreased by 11% to $48,778 compared to $54,613 during the same period last year, driven by a Reed’s volume decline of 3% and Virgil’s volume decline of 28%. The result is a decrease in total gross billing of 15%, to $50,689 during the year ended December 31, 2023, from $59,464 in the same period last year.
Core brand gross billing decreased by 9% to $44,161 compared to $48,778 during the same period last year, driven by Reed’s volume decline of 10% and Virgil’s volume decline of 13%. The result is a decrease in total gross billing of 13%, to $44,316 during the year ended December 31, 2024, from $50,689 in the same period last year.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report. 18 In addition to our GAAP results, the following discussion includes Modified EBITDA as a supplemental measure of our performance.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report.
Total Total Per Case Per Case 2023 2022 vs PY 2023 2022 vs PY Cases: Reed’s 1,530 1,582 -3 % Virgil’s 870 1,209 -28 % Total Core 2,400 2,791 -14 % Non-Core 60 149 -60 % Total 2,460 2,940 -16 % Gross Billing: Core $ 48,778 $ 54,613 -11 % $ 20.32 $ 19.57 4 % Non-Core 1,911 4,851 -61 % 31.85 32.56 -2 % Total $ 50,689 $ 59,464 -15 % 20.61 20.23 2 % Discounts: Total $ (5,978 ) $ (6,423 ) -7 % $ (2.4 3) $ (2.18 ) 11 % COGS: Core $ (30,777 ) $ (37,931 ) -19 % $ (12.82 ) $ (13.59 ) -6 % Non-Core (4,222 ) (2,998 ) -41 % (70.46 ) $ (20.12 ) 250 % Total $ (34,999 ) $ (40,929 ) -14 % $ (14.22 ) $ (13.92 ) 2 % Gross Margin: $ 9,712 $ 12,112 -1 9 % $ 3.95 $ 4.1 2 -4 % as % Net Sales 22 % 23 % 21 Sales, Cost of Sales, and Gross Margins Sales As part of the Company’s ongoing initiative to simplify and streamline operations the Company has identified core products on which to place its strategic focus.
Total Total Per Case Per Case 2024 2023 vs PY 2024 2023 vs PY Cases: Reed’s 1,373 1,530 -10 % Virgil’s 760 870 -13 % Total Core 2,133 2,400 -11 % Non-Core - 60 -100 % Total 2,133 2,460 -13 % Gross Billing: Core $ 44,161 $ 48,778 -9 % $ 20.70 $ 20.32 2 % Non-Core 155 1,911 -92 % - 31.85 -100 % Total $ 44,316 $ 50,689 -13 % 20.78 20.60 1 % Discounts: Total $ (6,362 ) $ (5,978 ) 6 % $ (2.98 ) $ (2.43 ) 23 % COGS: Core $ (26,578 ) $ (30,777 ) -14 % $ (12.46 ) $ (12.82 ) -3 % Non-Core - (4,222 ) -100 % - $ (70.46 ) -100 % Total $ (26,578 ) $ (34,999 ) -24 % $ (12.46 ) $ (14.22 ) -12 % Gross Margin: $ 11,376 $ 9,712 17 % $ 5.33 $ 3.95 35 % as % Net Sales 30 % 22 % 23 Sales, Cost of Sales, and Gross Margins As part of the Company’s ongoing initiative to simplify and streamline operations the Company has identified core products on which to place its strategic focus.
We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, legal and insurance settlements, inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment. 23 Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period.
We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional fees, inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment.
Although we regularly monitor companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. During the year ended December 31, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022.
Although we regularly monitor companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. 21 During the year ended December 31, 2024, the average cost of shipping and handling was $2.75 per case, as compared to $3.07 per case for the year ended December 31, 2023.
As of the issuance date of these financial statements, management expects that the Company’s existing cash of $603, plus $4,100 of additional cash received subsequent to December 31, 2023, from investments with significant stockholders (See Note 15), will be sufficient to fund the Company’s current operating plan for at least twelve months from the date of issuance of these financial statements.
As of the issuance date of these financial statements, management expects that the Company’s existing cash of $10,391 will be sufficient to fund the Company’s current operating plan for at least twelve months from the date of issuance of these financial statements.
During the same period last year, interest expense consisted of $5,223 of interest expense. Modified EBITDA In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance.
Modified EBITDA In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance.
In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Discounts as a percentage of gross sales were 12% compared to 11% in the same period last year. As a result, net sales revenue decreased 16% for the year ended December 31, 2023, to $44,711, compared to $53,041 in the same period last year.
Discounts as a percentage of gross sales were 14% compared to 12% in the same period last year. As a result, net sales revenue decreased 15% during the year ended December 31, 2024, to $37,954, compared to $44,711 in the same period last year driven by lower sales and elevated trade spend.
Delivery and handling expenses decreased by $4,042 in the year ended December 31, 2023, to $7,561 from $11,603 in the same period last year, driven by our efforts to mitigate inflationary costs.
Operating Expenses Delivery and Handling Expenses Delivery and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production. Delivery and handling expenses decreased by $1,698 for the year ended December 31, 2024, to $5,863 from $7,561 in the same period last year, driven by our efforts to mitigate inflationary costs.
The decrease was driven by lower marketing related expenditures, headcount, broker commissions, information technology charges, travel and entertainment expenses partially offset by stock compensation and trade show expenses. General and Administrative Expenses General and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional fees.
The decrease was driven by lower employee related costs, syndicated data fees, customer fees, and product sampling expenses partially offset by higher broker fees and e-commerce delivery costs. General and Administrative Expenses General and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional fees.
General and administrative expenses decreased in the year ended December 31, 2023, to $6,118 from $7,489, a decrease of $1,371 over the same period last year. The decrease was driven by lower stock compensation, bad debt expense, co-packer and customer penalties, information technology charges, consulting fees, and investor relation charges partially offset by higher franchise tax expense.
General and administrative expenses increased in the year ended December 31, 2024, to $9,109 from $6,118, an increase of $2,991 over the same period last year. The increase was driven by contract proceedings, impairment of assets, professional fees, and quality assurance costs partially offset by lower bad debt and franchise tax expense.
Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis.
You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.
These core products consist of Reed’s and Virgil’s branded beverages. Non-core products consist primarily of Private Label, Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs. During 2023, the Company licensed its candy business to Rootstock Trading, a company founded and owned by our former Chief Sales Officer, Neal Cohane.
These core products consist of Reed’s and Virgil’s branded beverages. Non-core products consist primarily of Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs. Core beverage volume for the year ended December 31, 2024, represents 100% of all beverage volume.
Removed
The average cost of shipping and handling for year ended December 31, 2023, was $3.07 per case, as compared to $3.95 per case for the year ended December 31, 2022.
Added
Interest and Other Expense Interest and other expense was $5,036 for the year ended December 31, 2024, consisted of $5,481 of interest expense and $445 of other income related to the reversal of accrued expense from prior years. During the same period last year, interest and other expense consisted of $6,106 of interest expense.
Removed
As part of this agreement, Rootstock agrees to pay a royalty on a percentage of its net sales of licensed products. The royalty fees are 0% for 2023, 2% for 2024, 4% for 2025, and 5% thereafter. Core beverage volume for the year ended December 31, 2023, represents 98% of all beverage volume.
Added
Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below.
Removed
In December 2023, the Company made a one-time change in policy for discounts which resulted in an additional $756 of deductions in 2023. Excluding this adjustment, discounts as a percentage of sales would have been 10%.
Added
Liquidity For the year ended December 31, 2024, the Company recorded a net loss of $13,152 and used cash in operations of $6,124. During 2024, the Company took significant steps to convert high interest debt to equity, raise additional equity, and refinance its credit facility.
Removed
Excluding the one-time adjustments related to discounts, inventory write-offs, and provision for product quality hold write-down. discussed above, gross margin would have been 30% for the year ended December 31, 2023. 22 Operating Expenses Delivery and Handling Expenses Delivery and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production.

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