Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 001-32501

REED’S, INC.

(Exact name of registrant as specified in its charter)

Delaware

35-2177773

(State of

incorporation)

(I.R.S. Employer

Identification No.)

201 Merritt 7, Norwalk, CT. 06851

(Address of principal executive offices) (Zip Code)

(800) 997-3337

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were a total of 4,169,131 shares of Common Stock outstanding as of October 31, 2023.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		F-1

Item 1. Condensed Financial Statements		F-1

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

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

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

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

Notes to Condensed Financial Statements three and nine months ended September 30, 2023 and 2022 (Unaudited)		F-5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1

Item 3. Quantitative and Qualitative Disclosures About Market Risk		9

Item 4. Controls and Procedures		10

PART II – OTHER INFORMATION		10

Item 1. Legal Proceedings		10

Item 1A. Risk Factors		10

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		10

Item 3. Defaults Upon Senior Securities		10

Item 4. Mine Safety Disclosures		10

Item 5. Other Information		10

Item 6. Exhibits		11

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Quarterly Report on Form 10-Q as well as our other public filings or public statements include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and similar expressions and include references to assumptions and relate to our future prospects, developments, and business strategies.

These forward-looking statements involve known and unknown risks, assumptions and uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements. Management cautions that these forward-looking statements are qualified by their terms and/or important factors, many of which are outside of our control, and involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made, including, but not limited to, the following risk factors:

● We have a history of operating losses. Our estimates regarding the sufficiency of our cash resource and capital requirements and needs for additional financing raises substantial doubt about our ability to continue as a going concern.

● We may not be able to extend or repay our indebtedness owed to our secured lenders, which would have a material adverse effect on our financial condition and ability to continue as a going concern.

● We require additional financing to support our working capital and execute our operating plans for fiscal 2023, which may not be available or may be costly and dilutive.

● Our ability to absorb, mitigate or pass on cost increases to our bottlers/distributors and/or customers;

● The impact of rising costs, interest rates, and inflation on the discretionary income of our consumers, particularly the rising cost of energy;

● Uncertainties associated with an economic slowdown or recession that could negatively impact the financial condition of our customers and could result in a reduced demand for our products;

● The impact of the military conflicts in Ukraine and Israel, volatility in commodity prices, increased economic uncertainty and escalating geopolitical tensions;

● The impact of logistical issues and delays;

● Our ability to effectively manage our inventories and/or our accounts receivables;

● Our ability to continue to generate sufficient cash flows to support our expansion plans and general operating activities;

● Changes in demand that are weather, or season related and/or for other reasons, including changes in product category and/or package consumption and changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and poor or extreme weather conditions;

● The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by competitors;

● Our ability to implement and/or maintain price increases, including through reductions in promotional allowances;

● The effectiveness of sales and/or marketing efforts by us and/or by distributors of our products, most of whom distribute products that may be regarded as competitive with our products;

● The costs and/or effectiveness, now or in the future, of our advertising, marketing and promotional strategies;

● The failure of our co-packers to manufacture our products on a timely basis or at all;

● Our ability to make suitable arrangements and/or procure sufficient capacity for the co-packing of any of our products, the timely replacement of discontinued co-packing arrangements and/or limitations on co-packing availability;

● Volatility of stock prices which may restrict stock sales, stock purchases or other opportunities as well as negatively impact the motivation of equity award grantees;

● Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, which disrupts our business or negatively impacts customer relationships, as well as cybersecurity incidents involving data shared with third parties;

● The imposition of additional regulation imposing excise taxes and/or sales taxes on sweetened beverages or alcoholic beverages; and

● Recruitment and retention of senior management, other key employees and our employee base in general.

We undertake no obligation to update or revise the forward-looking statements included in this report, whether as a result of new information, future events or otherwise, after the date of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements.

iii

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

REED’S, INC,

CONDENSED BALANCE SHEETS

(Amounts in thousands, except share amounts)

	September 30, 2023			December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	1,004		$	533
Accounts receivable, net of allowance of $514 and $252, respectively		5,267			5,671
Inventory, net		15,964			16,175
Receivable from former related party		777			777
Prepaid expenses and other current assets		489			939
Total current assets		23,501			24,095

Property and equipment, net of accumulated depreciation of $1,001 and $787, respectively		559			766
Intangible assets		627			626
Total assets	$	24,687		$	25,487

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	9,067		$	9,805
Accrued expenses		873			233
Revolving line of credit, net of capitalized financing costs of $242 and $363, respectively		9,697			10,974
Convertible notes payable, current portion, net of debt discount of $0 and $414, respectively		7,380			2,434
Payable to former related party		452			2,025
Current portion of lease liabilities		209			187
Total current liabilities		27,678			25,658

Convertible note payable, net of debt discount of $252 and $562, respectively, less current portion		9,721			8,092
Lease liabilities, less current portion		48			207
Total liabilities		37,447			33,957

Stockholders’ deficit:
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding		94			94
Common stock, $.0001 par value, 180,000,000 shares authorized; 4,169,131 and 2,519,485 shares issued and outstanding, respectively		-			-
Additional paid in capital		119,277			114,635
Accumulated deficit		(132,131	)		(123,199	)
Total stockholders’ deficit		(12,760	)		(8,470	)
Total liabilities and stockholders’ deficit	$	24,687		$	25,487

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

F-1

REED’S, INC.

CONDENSED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

(Amounts in thousands, except share and per share amounts)

	2023			2022			2023			2022
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net Sales	$	11,856		$	12,094		$	33,018		$	38,001
Cost of goods sold		7,823			9,659			23,778			29,335
Gross profit		4,033			2,435			9,240			8,666

Operating expenses:
Delivery and handling expense		1,908			2,249			5,714			8,893
Selling and marketing expense		861			1,220			3,567			5,623
General and administrative expense		1,407			1,420			4,427			5,319
Total operating expenses		4,176			4,889			13,708			19,835

Loss from operations		(143	)		(2,454	)		(4,468	)		(11,169	)

Interest expense		(1,293	)		(777	)		(4,459	)		(2,119	)

Net loss		(1,436	)		(3,231	)		(8,927	)		(13,288	)

Dividends on Series A Convertible Preferred Stock		-			-			(5	)		(5	)

Net Loss Attributable to Common Stockholders	$	(1,436	)	$	(3,231	)	$	(8,932	)	$	(13,293	)

Loss per share – basic and diluted	$	(0.34	)	$	(1.43	)	$	(2.69	)	$	(6.54	)

Weighted average number of shares outstanding – basic and diluted		4,169,131			2,254,356			3,322,959			2,030,503

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

F-2

REED’S, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

(Amounts in thousands except share amounts)

	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
	Common Stock				Preferred Stock				Additional Paid In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance, June 30, 2023		4,169,131	$	-		9,411	$	94	$	119,138	$	(130,695	)	$	(11,463	)
Fair value of vested options										139					139
Net loss		-		-		-		-		-		(1,436	)		(1,436	)
Balance, September 30, 2023		4,169,131	$	-		9,411	$	94	$	119,277	$	(132,131	)	$	(12,760	)

	Common Stock					Preferred Stock				Additional Paid In			Accumulated			Total Stockholders’
	Shares			Amount		Shares		Amount		Capital			Deficit			Deficit
Balance, December 31, 2022		2,519,485		$	-		9,411	$	94	$	114,635		$	(123,199	)	$	(8,470	)
Fair value of vested options											351						351
Fair value of vested restricted shares granted to officers		750									3						3
Repurchase of common stock		(274	)								(1	)					(1	)
Common shares issued for financing costs		82,438									273						273
Issuance of shares for dividends on Series A Convertible Preferred Stock		-			-				-					(5	)		(5	)
Common shares issued for cash, net of offering costs		1,566,732			-						4,016						4,016
Net loss							-		-		-			(8,927	)		(8,927	)
Balance, September 30, 2023		4,169,131		$	-		9,411	$	94	$	119,277		$	(132,131	)	$	(12,760	)

	Common Stock					Preferred Stock				Additional Paid In		Accumulated			Total Stockholders’ Equity
	Shares			Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance, June 30, 2022		2,253,047		$	-		9,411	$	94	$	112,686	$	(113,199	)	$	(419	)
Fair value of vested options											185					185
Fair value of vested restricted shares granted to officers		2,010									29					29
Issuance of shares for dividends on Series A Convertible Preferred Stock		-			-				-							-
Common shares issued for cash, net of offering costs		(2	)		-
Net loss		-			-		-		-		-		(3,231	)		(3,231	)
Balance, September 30, 2022		2,255,055		$	-		9,411	$	94	$	112,900	$	(116,430	)	$	(3,436	)

	Common Stock					Preferred Stock				Additional Paid In			Accumulated			Total Stockholders’ Equity
	Shares			Amount		Shares		Amount		Capital			Deficit			(Deficit)
Balance, December 31, 2021		1,874,679		$	-		9,411	$	94	$	107,246		$	(103,137	)	$	4,203
Balance		1,874,679		$	-		9,411	$	94	$	107,246		$	(103,137	)	$	4,203

Fair value of vested options											448						448
Fair value of vested restricted shares granted to officers		6,748									137						137
Issuance of shares for dividends on Series A Convertible Preferred Stock		-												(5	)		(5	)
Repurchase of common stock		(265	)								(2	)					(2	)
Common shares issued for financing costs		2,000									37						37
Common shares issued for cash, net of offering costs		371,893									5,034						5,034
Net loss							-		-					(13,288	)		(13,288	)
Balance, September 30, 2022		2,255,055		$	-		9,411	$	94	$	112,900		$	(116,430	)	$	(3,436	)
Balance		2,255,055		$	-		9,411	$	94	$	112,900		$	(116,430	)	$	(3,436	)

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

F-3

REED’S, INC.

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2023 and 2022

(Unaudited)

(Amounts in thousands)

	September 30, 2023			September 30, 2022
Cash flows from operating activities:
Net loss	$	(8,927	)	$	(13,288	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		112			79
Loss on disposal of property and equipment		9			-
Amortization of debt discount		958			307
Amortization of prepaid financing costs		-			431
Fair value of vested options		351			448
Fair value of vested restricted shares granted to officers		3			137
Fair value of common shares issued as financing costs		-			37
Change in allowance for doubtful accounts		262			(152	)
Inventory write-downs		(205	)		35
Accrued interest		2,483			386
Changes in operating assets and liabilities:
Accounts receivable		142			(673	)
Inventory		417			(2,901	)
Prepaid expenses and other assets		450			(399	)
Decrease in right of use assets		102			86
Accounts payable		(738	)		(860	)
Accrued expenses		639			(62	)
Accrued dividend		(5	)		-
Lease liabilities		(137	)		(118	)
Net cash used in operating activities		(4,084	)		(16,507	)

Cash flows from investing activities:
Trademark costs		(1	)		(2	)
Purchase of property and equipment		(84	)
Proceeds from sale of property and equipment		68			-
Net cash used in investing activities		(17	)		(2	)

Cash flows from financing activities:
Proceeds from line of credit		32,686			40,576
Payments on line of credit		(34,085	)		(41,299	)
Payments of debt issuance costs		-			(483	)
Proceeds from sale of common stock		4,016			5,034
Proceeds from convertible note payable, net of expenses		3,797			12,430
Payment of convertible note payable		(268	)		(400	)
Repurchase of common stock		(1	)		(2	)
Amounts from former related party, net		(1,573	)		629
Net cash provided by financing activities		4,572			16,485

Net increase (decrease) in cash		471			(24	)
Cash at beginning of period		533			49
Cash at end of period	$	1,004		$	25

Supplemental disclosures of cash flow information:
Cash paid for interest	$	548		$	1,051

Non -cash investing and financing activities
Dividends on Series A Convertible Preferred Stock	$	5		$	5

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

F-4

REED’S, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)

(In thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed financial statements of Reed’s, Inc. (the “Company”, “we”, “us”, or “our”), have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. These condensed financial statements should be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on May 15, 2023. The accompanying condensed financial statements are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2023, and the results of its operations and its cash flows for the nine months ended September 30, 2023 and 2022. The balance sheet as of December 31, 2022 is derived from the Company’s audited financial statements.

The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the nine months ended September 30, 2023, the Company recorded a net loss of $8,927, and at September 30, 2023, had a stockholders’ deficit of $12,760. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2022, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of September 30, 2023, we had a cash balance of $1,004, with $14 of current availability on the line of credit, and $3,062 of additional borrowing capacity from the credit facility.

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

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

F-5

Recent Trends - Market Conditions

Although the U.S. economy continued to grow during the third quarter of 2023, the higher inflation, the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods. We have experienced supply chain challenges, including increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand. Although we regularly monitor companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. We expect the inflationary trends and supply chain pressures to continue throughout 2023.

During the three and nine period ended September 30, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022. The average cost of shipping and handling for the three month period ended September 30, 2023, was $2.98 per case, as compared to $3.38 per case for the three month period ended September 30, 2022. The average cost of shipping and handling for the nine month period ended September 30, 2023, was $3.17 per case, as compared to $4.13 per case for the nine month period ended September 30, 2022. Although the Company has experienced decreases in freight costs over the last three quarters, in the Company’s opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation. Mitigation plans have been implemented to manage this risk. The Company has been negatively impacted by supply chain challenges impacting our ability to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins. The Company has experienced moderation in inflation and anticipates this to continue throughout 2023.

Reverse Stock Split

At a special meeting of shareholders held on January 24, 2023, the Company’s shareholders granted the Company’s board of directors the discretion to effect a reverse stock split of the common stock through an amendment to the Company’s Certificate of Incorporation, as amended, at a ratio of any ratio not less than 1-for-6 and not more than 1-for-50, at any time on or prior to January 24, 2024, with the exact ratio to be set at a whole number within this range by the board of directors in its sole discretion. On January 25, 2023, the Company announced that its board of directors approved a 1-for-50 reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share.

The authorized number of shares of common stock were not affected by the reverse stock split. No fractional shares were issued in connection with the reverse stock split, as all fractional shares were rounded up to the next whole share. Accordingly, all share and per share amounts presented herein with respect to common stock have been retroactively adjusted to reflect the above-described reverse stock split for all periods presented.

F-6

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for credit loss reserves for accounts receivable, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in valuing warrant liabilities, and assumptions used in the determination of the Company’s liquidity.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfilment activity rather than a promised service to the customer. All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfilment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

Loss per Common Share

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year, excluding shares of unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted. Potential common shares are excluded from the computation when their effect is antidilutive.

For the periods ended September 30, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:

	September 30, 2023		September 30, 2022
Warrants		549,292		250,946
Options		145,012		176,737
Convertible note payable		1,475,725		449,156
Unvested restricted common stock		-		3,509
Common stock equivalent of Series A Convertible Preferred stock		753		753
Total		2,170,782		881,100
Antidilutive Securities		2,170,782		881,100

F-7

Stock Compensation Expense

The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Advertising Costs

Advertising costs are expensed as incurred and are included in selling and marketing expense. Advertising costs for the three months ended September 30, 2023 and 2022, aggregated $22 and $116, respectively. Advertising costs for the nine months ended September 30, 2023 and 2022, aggregated $82 and $539, respectively.

Concentrations

Net sales. During the three months ended September 30, 2023, three customers accounted for 22%, 14%, and 12% of gross billing, respectively, and during the nine months ended September 30, 2023, two customers accounted for 19% and 13% of gross billing, respectively. During the three months ended September 30, 2022, three customers accounted for 16%, 11%, and 10% of sales, respectively, and during the nine months ended September 30, 2022, three customers accounted for 19%, 11%, and 10% of sales, respectively. No other customers exceeded 10% of sales in either period.

Accounts receivable. As of September 30, 2023, the Company had accounts receivable from four customers which comprised 16%, 14%, 13%, and 10% of its gross accounts receivable. As of December 31, 2022, the Company had accounts receivable from two customers which comprised 19% and 11% of its gross accounts receivable, respectively. No other customers exceeded 10% of gross accounts receivable in either period.

The Company utilizes co-packers to produce 100% of its products. During the nine months ended September 30, 2023 and the year ended December 31, 2022, the Company utilized six separate co-packers for most its production and bottling of beverage products in the United States. The Company has long-standing relationships with two different co-packers, and a third co-packing agreement with California Custom Beverage LLC (“CCB”), a former related party (see Note 11). Although there are other packers, a change in co-packers may cause a delay in the production process, which could ultimately affect operating results.

Purchases from vendors. During the three and nine months ended September 30, 2023 and 2022, no vendor accounted for more than 10% of all purchases. During the three months ended September 30, 2022, one vendor accounted for 18% of purchases. During the nine months ended September 30, 2022, one vendor accounted for 15% of purchases. No other vendors exceeded 10% of all purchases in either period.

Accounts payable. As of September 30, 2023, the Company’s had one vendor which comprised 10% of total accounts payable. As of December 31, 2022, no vendor accounted for more than 10% of the total accounts payable. No other vendors exceeded 10% of gross accounts payable in either period.

F-8

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

Recent Accounting Pronouncements

In May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s financial statement presentation or disclosures.

In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company adopted this standard effective January 1, 2023 and there was no material impact of adopting this standard on the Company’s financial statements and related disclosures.

Other recent accounting pronouncements and guidance issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

2. Inventory

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value, net of write downs, and is comprised of the following (in thousands):

Schedule of Inventory

	September 30, 2023		December 31, 2022
Raw materials and packaging	$	8,732	$	8,526
Finished products		7,232		7,649
Total	$	15,964	$	16,175

F-9

3. Property and Equipment

Property and equipment is comprised of the following (in thousands):

Schedule of Property and Equipment

	September 30, 2023			December 31, 2022
Right-of-use assets under operating leases	$	724		$	724
Computer hardware and software		400			400
Machinery and equipment		414			429
Construction in progress		22			-
Total cost		1,560			1,553
Accumulated depreciation and amortization		(1,001	)		(787	)
Net book value	$	559		$	766

Depreciation expense for the nine months ended September 30, 2023 and 2022 was $112 and $79, respectively, and amortization of right-of-use assets for the nine months ended September 30, 2023 and 2022 was $102 and $86, respectively.

4. Intangible Assets

Intangible assets consist of the following (in thousands):

Summary of Intangible Assets

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

5. Line of Credit

Amounts outstanding under the Company’s credit facilities are as follows (in thousands):

	September 30, 2023			December 31, 2022
Line of credit – Alterna Capital Solutions	$	9,939		$	11,337
Capitalized financing costs		(242	)		(363	)
Total	$	9,697		$	10,974

In March, 2022, the Company entered into a financing agreement with Alterna Capital Solutions (“ACS”), for a line of credit to replace its former credit facility. The ACS line of credit is for a term of 3 years, provides for borrowings of up to $13,000, and is secured by eligible accounts receivable and inventory. An over advance rider provides for up to $400 of additional borrowing above the collateralized base (the “Over Advance”) up to a total borrowing of $13,000. At September 30, 2023, $14 of current availability and $3,062 of borrowing capacity was available under the financing agreement.

Borrowings based on receivables bears an interest of prime plus 4.75% but not less than 8.0% (13.25% at September 30, 2023 and 12.25% at December 31, 2022). Borrowings based on inventory bears an interest of prime plus 5.25% but not less than 8.5% (13.90 % at September 30, 2023 and 12.90% at December 31, 2022). The additional over advance rider bears a rate of prime plus 12.75%, but not less than 16.00% (18.00% at September 30, 2023 and 18.00% at December 31, 2022). Additionally, the line of credit is subject to monthly monitoring fee of $1 with a minimum usage requirement on the credit facility. A loan balance of less than $1,500 will bear interest at a rate in line with account receivables advances plus the monthly monitoring fee of $1.

F-10

The company incurred $483 of direct costs of the transaction, consisting primarily of broker, bank and legal fees. These costs have been capitalized and are being amortized over the 3-year life of the ACS agreement. The unamortized debt discount balance was $363 at December 31, 2022. For the nine months ended September 30, 2023, amortization of debt discount was $121, and as of September 30, 2023, the remaining unamortized debt discount balance is $242.

6. Secured Convertible Notes Payable

Amounts outstanding under secured convertible notes payable are as follows (in thousands):

Schedule of Debt

	September 30, 2023			December 31, 2022
Secured Convertible Note Payable	$	14,500		$	10,450
Accrued interest (includes excess ABL fees of $2,152 and $648)		3,267			1,052
Capitalized financing costs		(666	)		(976	)
Total	$	17,101		$	10,526
Current portion		(7,380	)		(2,434	)
Long term portion	$	9,721		$	8,092

Secured Convertible Note Payable

In May 2022, the Company issued $11,250 of convertible notes payable to entities affiliated with Whitebox Advisors, LLC (collectively, “Whitebox”). The notes bear interest at a rate of 10% per annum (with 5% per annum payable in cash and 5% per annum payable in kind (“PIK”) by adding such PIK interest to the principal amount of the notes), are secured by substantially all of the Company’s assets (including all of its intellectual property) and are subject to a collateral sharing agreement with ACS, the Company’s existing secured lender (see Note 5). The notes mature on May 9, 2025. In September 2022, the Company issued an additional $2,500 of convertible notes payable to Whitebox, which were repaid in full in November 2022.

Beginning in August 2022, the convertible notes payable have an amortization feature which requires the Company to make monthly payments of principal of $200 plus accrued interest, payable in cash or in shares of the Company’s common stock at the option of the Company, based on 90% of the average prices of the Company’s common stock, as defined. In February 2023, May 2023, and again in September 2023, Whitebox waived the requirement for the December 2022 to October 2023 monthly amortization payments, and they are to resume November 1, 2023. Remaining amortization payments of principal are scheduled to total approximately $400 in 2023, $2,400 in 2024, and $1,000 in 2025, leaving a principal balance of the convertible notes of approximately $7.9 million due at maturity on May 9, 2025.

The convertible notes permit indebtedness to ASC (see Note 5) as an asset based loan (“ABL”) up to $8,000. In February 2023, May 2023 and again in September 2023, Whitebox waived the Company’s covenant violation of excess ABL amounts and deferred payment of such ABL fees. At September 30, 2023, the excess ABL fees totaled $2,152 and are due November 28, 2023.

If the Company experiences a fundamental change as defined in the convertible notes, the holders of the notes have the right to require the Company to repurchase the notes for cash at a repurchase price equal to 110% (amended from 100%) of the principal amount, plus accrued interest, and among other amendments.

At December 31, 2022, the principal balance of the Notes was $10,450. In February 2023 and May 2023, the Company issued an aggregate of $4,050 of additional convertible notes to Whitebox that substantially have the same terms as the notes issued in May 2022, except the $4,050 convertible notes do not require any amortization payments, and are due November 28, 2023. At September 30, 2023, the balance of all convertible notes payable to Whitebox was $14,500.

F-11

At December 31, 2022, the balance of accrued interest was $1,052. During the nine months ended September 30, 2023, the Company recorded interest of $2,483, made up of $979 of interest on the convertible notes, and $1,504 related to the excess ABL fees. In addition, accrued interest of $268 was paid. At September 30, 2023, the balance of accrued interest was $3,267.

At December 31, 2022, the unamortized debt discount was $976. During the nine months ended September 30, 2023, the Company incurred $253 of direct costs of issuing loans and issued 82,438 shares of the Company’s common stock valued at $273 as inducement for the aforementioned waivers. These costs have been capitalized and are being amortized over the term of the convertible notes or waiver period. For the nine months ended September 30, 2023, amortization of debt discount was $820, and as of September 30, 2023, the remaining unamortized debt discount balance is $666.

The convertible notes are convertible at an initial conversion rate of 0.08306 shares of the Company’s common stock per one dollar of principal converted, or approximately $12.04 per share, subject to customary anti-dilution adjustments. In addition, if certain corporate events occur that constitute a make-whole fundamental change as defined, then the note holders are, under certain circumstances, are entitled to an increase in the conversion rate, limited to 0.12155 shares of Common Stock per one dollar of principal, or approximately $8.23 per share.

Upon conversion, holders of the convertible notes are entitled to receive an interest make-whole payment, as defined. The make-whole amount is equal to the sum of the remaining scheduled payments of interest on the convertible notes to be converted that would be due at maturity, payable, at the Company’s option in cash or in shares of common stock. The Company’s ability to settle conversions and make amortization payments and interest make-whole payments using shares of the Company’s common stock is subject to certain limitations set forth in the convertible notes.

At September 30, 2023, the Notes, including accrued interest, are convertible into 1,475,725 shares of the Company’s common stock.

For clarity, under the terms of the Notes, a holder may not convert or be issued shares of common stock to the extent such conversion or issuance would cause such holder, together with its affiliates and attribution parties and any group of which it is a member, to beneficially own a number of shares of common stock which would exceed 9.9% of our then outstanding common stock following such conversion or issuance.

The Company is subject to a registration rights agreement with Whitebox dated May 9, 2023 pursuant to which the Company registered for resale by holders all shares potentially issuable upon conversion of, or in satisfaction of amortization or interest make-whole payments with respect to the Notes.

7. Leases Liabilities

During the nine months ended September 30, 2023 and 2022, lease costs totaled $67 and $56, respectively.

As of December 31, 2022, the operating lease liability totaled $394. During the nine months ended September 30, 2023, the Company made payments of $138 towards its operating lease liability. As of September 30, 2023, the operating lease liability totaled $256.

As of September 30, 2023, the weighted average remaining lease terms for an operating lease are 1.25 years. As of September 30, 2023, the weighted average discount rate on the operating lease is 12.60%.

8. Stockholder’s Equity

Common stock issuances

On May 25, 2023, the Company entered into a Securities Purchase Agreement with D&D Source of Life Holding Ltd., as the lead investor, and certain of Reed’s affiliates pursuant to which the investors agreed to purchase an aggregate of 1,566,732 shares of Reed’s common stock and warrants to purchase 313,346 shares of Common Stock. The purchase price was $2.585 per share of Common Stock with the associated warrant. The net proceeds to the Company, after deducting offering expenses, was $4,016. The warrants are exercisable for a term of three years at an exercise price of $2.50 per share.

On May 25, 2023, in order to induce the lead investor to subscribe, the Company granted the lead investor certain preemptive rights and agreed to support the lead investor’s nomination of two board designees, one of which shall be an independent director.

F-12

Common stock repurchases

During the nine months ended September 30, 2023, the Company repurchased 274 shares of common stock from an officer for $1 based on the market value of share on the date repurchased. The Company retired the shares.

9. Stock-Based Compensation

Restricted common stock

The following table summarizes restricted stock activity during the nine months ended September 30, 2023:

	Unvested Shares			Issuable Shares			Fair Value at Date of Issuance			Weighted Average Grant Date Fair Value
Balance, December 31, 2022		1,500			-		$	26.00			44.75
Granted		-			-			-			-
Vested		(750	)		750			-			-
Forfeited		(750	)		-			-			-
Issued		-			(750	)		(3.00	)		-
Balance, September 30, 2023		-			-		$	-		$	-

The total fair value of restricted common stock vesting during the nine months ended September 30, 2023 and 2022, was $3 and $137, respectively, and is included in general and administrative expenses in the accompanying statements of operations. As of September 30, 2023, the amount of unvested compensation related to issuances of restricted common stock was $0. When calculating basic loss per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.

Stock options

The following table summarizes stock option activity during the nine months ended September 30, 2023:

Schedule of Stock Option Activity

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2022		164,423		$	48.90		7.58	$	-
Granted		10,037			4.50
Exercised		-			-
Unvested forfeited		(10,497	)		48.74
Vested forfeited		(18,951	)		54.59
Outstanding at September 30, 2023		145,012		$	45.09		7.00	$	-
Exercisable at September 30, 2023		92,711		$	52.71		6.40	$	-

During the nine months ended September 30, 2023, the Company approved options exercisable into 10,037 shares to be issued pursuant to Reed’s 2020 Equity Incentive Plan. 10,037 options were issued to employees, 5,016 options vesting annually over a four-year vesting period, and 5,021 options vesting based on performance criteria to be established by the board of directors.

F-13

The stock options are exercisable at a price of $4.50 per share and expire in ten years. The total fair value of these options at grant date was approximately $32, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $4.50 share, expected term of six years, volatility of 82%, dividend rate of 0%, and weighted average risk-free interest rate of 3.59%. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.

During the nine months ended September 30, 2023 and 2022, the Company recognized $351 and $448 of compensation expense relating to vested stock options. As of September 30, 2023, the aggregate amount of unvested compensation related to stock options was approximately $582 which will be recognized as an expense as the options vest in future periods through March 28, 2027.

As of September 30, 2023, the outstanding and exercisable options have no intrinsic value. The aggregate intrinsic value was calculated as the difference between the closing market price as of September 30, 2023, which was $3.26, and the exercise price of the outstanding stock options.

10. Stock Warrants

The Company’s warrant activity during the nine months ended September 30, 2023 is as follows:

Schedule of Warrant Activity

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2022		235,946	$	16.99		4.20	$	-
Granted		313,346		2.59		2.64		-
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at September 30, 2023		549,292	$	8.77		3.09	$	238
Exercisable at September 30, 2023		549,292	$	8.77		3.09	$	238

As of September 30, 2023, the outstanding and exercisable warrants have an aggregate intrinsic value of $238. The aggregate intrinsic value was calculated as the difference between the closing market price as of September 30, 2023, which was $3.26, and the exercise price of the Company’s warrants to purchase common stock.

On May 25, 2023, the Company entered into a Securities Purchase Agreement with D&D Source of Life Holding Ltd., as the lead investor, and certain of Reed’s affiliates pursuant to which the investors agreed to purchase an aggregate of 1,566,732 shares of Reed’s common stock and warrants to purchase 313,346 shares of Common Stock. The purchase price per share of Common Stock and associated warrant was $2.585. The warrants are exercisable for a term of three years at a per share exercise price of $2.50.

11. Transactions with California Custom Beverage, LLC, former related party

In December 2018, the Company signed a co-packing agreement with California Custom Beverage, LLC’s (“CCB”), an entity owned by Christopher J. Reed, a former related party, pursuant to which CCB agreed to produce certain products for the Company for agreed fees. The co-packing agreement, as amended, includes certain provisions for product inputs, shrinkage, and quality assurance. Also beginning in 2019, CCB agreed to pay the Company a 5% royalty through 2021 on certain private label sales made by CCB.

F-14

During the nine months ended September 30, 2023 and 2022, the Company incurred co-packing fees due to CCB of $1,127 and $2,611, respectively. As of September 30, 2023 and 2022, the aggregate of co-packing fees payable to CCB were $452 and $2,025, respectively. At September 30, 2023 and December 31, 2022, the Company had also recorded receivables from CCB of $1,315 and $1,315, respectively, including royalty receivable of $297 and $297, and charge backs of certain costs management determined were permittable under the co-packing agreement of $1,018 and $1,018, respectively.

At September 30, 2023 and December 31, 2022, accounts receivable due from and accounts payable due to CCB were as follows:

Schedule of Related Parties

	September 30, 2023			December 31, 2022
Accounts receivable, net of provision of $538 and $538 at September 30, 2023 and December 31, 2022, respectively		777			777
Accounts payable		(452	)		(2,025	)
Net (payable) receivable		325			(1,248	)

At December 31, 2022, CCB disputes that it owes $1,043 of the $1,315 recorded as receivable by the Company. The Company believes that it will prevail in this dispute, however, as of September 30, 2023 and December 31, 2022, due to the uncertainty about the ultimate amount that will be settled, the Company has provided a reserve for $538 based on management’s estimate. In addition, on April 19, 2023, the Company received a letter from CCB demanding payment of various amounts, including the $452 and $2,025 outstanding at September 30, 2023 and December 31, 2022, respectively. The Company has determined that the probability of realizing any loss on the demand from CCB is remote and therefore has not recorded any additional accruals related to the demand.

12. Commitments and Contingencies

In 2018, CCB 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. As of September 30, 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 $24 that remain in escrow with the lessor.

From time to time, we are a party to claims and legal proceedings arising in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and provides for potential losses on such litigation if the amount of the loss is estimable and the loss is probable.

We believe that there are no material litigation matters at the current time. Although the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such claims and proceedings will not have a material adverse impact on our financial position, liquidity, or results of operations.

F-15

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

Cautionary Statement Regarding Forward-Looking Statements and Information

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

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

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

Overview

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

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

Recent Trends - Market Conditions

During the three and nine month period ended September 30, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022. The average cost of shipping and handling for the three month period ended September 30, 2023, was $2.98 per case, as compared to $3.38 per case for the three month period ended September 30, 2022. The average cost of shipping and handling for the nine month period ended September 30, 2023, was $3.17 per case, as compared to $4.13 per case for the nine month period ended September 30, 2022. Although the Company has experienced decreases in freight costs over the last three quarters, in the Company’s opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation. Mitigation plans have been implemented to manage this risk. The Company has been negatively impacted by supply chain challenges impacting our ability to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins. The Company has experienced moderation in inflation and anticipates this to continue throughout 2023.

Through September 30, 2023, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain access to the capital markets.

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

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

	Three Months Ended September 30,						Pct.
	2023			2022			Change
Gross billing (A)	$	13,219		$	14,101			-6	%
Less: Promotional and other allowances (B)		1,363			2,007			-32	%
Net sales	$	11,856		$	12,094			-2	%

Cost of goods sold		7,823			9,659			-19	%
% of Gross billing		59	%		68	%
% of Net sales		66	%		80	%
Gross profit	$	4,033		$	2,435			66	%
% of Net sales		34	%		20	%

Expenses
Delivery and handling	$	1,908		$	2,249			-15	%
% of Net sales		16	%		19	%
Dollar per case ($)	$	2.98		$	3.38
Selling and marketing		861			1,220			-29	%
% of Net sales		7	%		10	%
General and administrative		1,407			1,420			-1	%
% of Net sales		12	%		12	%
Total operating expenses		4,176			4,889			-15	%

Loss from operations	$	(143	)	$	(2,454	)		-94	%

Interest expense	$	(1,293	)	$	(777	)		66	%

Net loss	$	(1,436	)	$	(3,231	)		-56	%

Loss per share – basic and diluted	$	(0.34	)	$	(1.43	)		-76	%

Weighted average shares outstanding - basic & diluted		4,169,131			2,254,356			85	%

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

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

Sales, Cost of Sales, and Gross Margins

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

		2023																		2022												Q3 Per Case									Sept YTD Per Case
		Q1			Q2			Q3			YTD			Q3 vs PY			YTD vs PY			Q1			Q2			Q3			YTD			2023			2022			vs PY			2023			2022			vs PY
Cases:
	Reed’s		370			355			402			1,127			-13	%		-5	%		415			410			357			1,182
	Virgil’s		241			197			238			676			-22	%		-29	%		302			351			304			957
	Total Core		611			552			640			1,803			-3	%		-16	%		717			761			661			2,139
	Non Core		2			-			-			2			-100	%		-85	%		4			5			4			13
	Total		613			552			640			1,805			-4	%		-16	%		721			766			665			2,152

Gross Billing:
	Core	$	12,333		$	11,095		$	13,197		$	36,626			-5	%		-13	%	$	13,287		$	14,972		$	13,876		$	42,135		$	20.6		$	21.0			-2	%	$	20.3		$	19.7			3	%
	Non Core		120			69			22			211			-90	%		-72	%		274			167			178			619		$	-		$	56.3			-	%		105.5			58.2			81	%
	Total	$	12,453		$	11,164		$	13,219		$	36,837			-6	%		-14	%	$	13,636		$	15,155		$	14,101		$	42,892		$	20.7		$	21.2			-3	%		20.4			19.9			2	%

Discounts:	Total	$	(1,296	)	$	(1,159	)	$	(1,363	)	$	(3,819	)		-32	%		-22	%	$	(1,454	)	$	(1,430	)	$	(2,007	)	$	(4,891	)	$	(2.1	)	$	(3.0	)		-29	%	$	(2.1	)	$	(2.3	)		-7	%

COGS:
	Core	$	(8,422	)	$	(7,408	)	$	(7,820	)	$	(23,650	)		-18	%		-18	%	$	(9,150	)	$	(10,286	)	$	(9,548	)	$	(28,984	)	$	(12.2	)	$	(14.4	)		-15	%	$	(13.1	)	$	(13.6	)		-3	%
	Non Core		(87	)		(88	)		(3	)		(128	)		-97	%		-64	%		(87	)		(126	)		(106	)		(319	)		-			(27.8	)		-	%		(64.0	)		(27.0	)		-	%
	Total	$	(8,459	)	$	(7,496	)	$	(7,823	)	$	(23,778	)		-19	%		-19	%	$	(9,250	)	$	(10,426	)	$	(9,659	)	$	(29,335	)	$	(12.2	)	$	(14.5	)		-16	%	$	(13.2	)	$	(13.6	)		-3	%

Gross Margin:		$	2,698		$	2,509		$	4,033		$	9,240			66	%		7	%	$	2,932		$	3,299		$	2,435		$	8,666		$	6.3		$	3.7			72	%	$	5.1		$	4.0			27	%
as % Net Sales			24	%		25	%		34	%		28	%								24	%		24	%		20	%		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. These core products consist of Reed’s and Virgil’s branded beverages. Non-core products consist primarily of Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs.

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

Core brand gross billing decreased by 5% to $13,197 compared to $13,876 during the same period last year, driven by a Reed’s volume increase of 13% and Virgil’s volume decline of 22%. The result is a decrease in total gross billing of 5%, to $13,219 during the three months ended September 30, 2023, from $14,101 in the same period last year. Price on our core brands decreased 2% to $20.62 per case. The decrease was a result of volume declines that have impacted the CSD segment as a result of price increases coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.

Discounts as a percentage of gross sales was 10% compared to 14% in the same period last year. As a result, net sales revenue decreased 2% in the three months ended September 30, 2023, to $11,856, compared to $12,094 in the same period last year.

Cost of Goods Sold

Cost of goods sold decreased $1,836 during the three months ended September 30, 2023, as compared to the same period last year. As a percentage of net sales, cost of goods sold for the three months ended September 30, 2023, was 66% as compared to 80% for the same period last year. The decrease was primarily driven by lower supply chain and input costs.

The total cost of goods per case decreased to $12.22 per case in the three months ended September 30, 2023, from $14.52 per case for the same period last year. The cost of goods sold per case on core brands was $12.22 during the three months ended September 30, 2023, compared to $14.44 for the same period last year.

Gross Margin

Gross margin was 34% for the three months ended September 30, 2023, compared to 20% for the same period last year.

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 $341 in the three months ended September 30, 2023, to $1,908 from $2,249 in the same period last year, driven by our efforts to mitigate inflationary costs. Delivery costs in the three months ended September 30, 2023, were 16% of net sales and $2.98 per case, compared to 19% of net sales and $3.38 per case during the same period last year.

Selling and Marketing Expenses

Marketing expenses consist of direct marketing, marketing labor, and marketing support costs. Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $861 during the three months ended September 30, 2023, compared to $1,220 during the same period last year. As a percentage of net sales, selling and marketing costs was 7% during the three months ended September 30, 2023, as compared to 10% during the same period last year. The decrease was primarily driven by lower marketing expenditures, broker commissions, IT related charges, and travel and entertainment expenses, partially offset by higher employee related 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 three months ended September 30, 2023, to $1,407 from $1,420, a decrease of $13 over the same period last year. As a percentage of net sales, general and administrative expenses were 12% during the three months ended September 30, 2023, as compared to 12% during the same period last year. The decrease was driven by lower stock compensation, consultant fees, investor relation expenses and information technology expenditures, partially offset by higher employee related costs.

Loss from Operations

The loss from operations was $143 for the three months ended September 30, 2023, as compared to a loss of $2,454 in the same period last year driven by increased gross profit offset by decreases in operating expenses discussed above.

Interest Expense

Interest expense for the three months ended September 30, 2023, consisted of $1,293 of interest expense. During the same period last year, interest expense consisted of $777 of interest expense.

Modified EBITDA

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

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

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

	Three Months Ended September 30
		2023			2022
Net loss	$	(1,436	)	$	(3,231	)

Modified EBITDA adjustments:
Depreciation and amortization		68			58
Interest expense		1,293			777
Stock option and other noncash compensation		139			214
Severance		85			-
Legal settlements		12			-
Total EBITDA adjustments	$	1,597		$	1,049

Modified EBITDA	$	161		$	(2,182	)

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

	●	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.

Results of Operations – Nine Months ended September 30, 2023, as compared to Nine Months Ended September 30, 2022

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

	Nine months Ended September 30,						Pct.
		2023			2022			Change
Gross billing (A)	$	36,837		$	42,892			-14	%
Less: Promotional and other allowances (B)		3,819			4,891			-22	%
Net sales	$	33,018		$	38,001			-13	%

Cost of goods sold		23,778			29,335			-19	%
% of Gross billing		65	%		68	%
% of Net sales		72	%		77	%
Gross profit	$	9,240		$	8,666			7	%
% of Net sales		28	%		23	%

Expenses
Delivery and handling	$	5,714		$	8,893			-36	%
% of Net sales		17	%		23	%
Dollar per case ($)		3.17			4.13
Selling and marketing		3,567			5,523			-37	%
% of Net sales		11	%		15	%
General and administrative		4,427			5,319			-17	%
% of Net sales		13	%		14	%
Total operating expenses		13,708			19,835			-31	%

Loss from operations	$	(4,468	)	$	(11,169	)		-60	%

Interest expense		(4,459	)		(2,119	)		110	%

Net loss	$	(8,927	)	$	(13,288	)		-33	%

Loss per share – basic and diluted	$	(2.69	)	$	(6.54	)		-59	%

Weighted average shares outstanding - basic & diluted		3,322,959			2,030,503			64	%

(A)

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

(B)

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

Sales, Cost of Sales, and Gross Margins

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

Core brand gross billing decreased by 5% to $36,626 compared to $42,135 during the same period last year, driven by Reed’s volume decline of 5% and Virgil’s volume decline of 29%. The result is a decrease in total gross billing of 14%, to $36,837 during the nine months ended September 30, 2022, from $42,892 in the same period last year. Price on our core brands increased 3% to $20.3 per case. The decrease was a result of volume declines that have impacted the CSD segment as a result of price increases coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.

Discounts as a percentage of gross sales was 10% compared to 11% in the same period last year. As a result, net sales revenue decreased 13% in the nine months ended September 30, 2023, to $33,018, compared to $38,001 in the same period last year.

Cost of Goods Sold

Cost of goods sold decreased $5,557 during the nine months ended September 30, 2023, as compared to the same period last year. As a percentage of net sales, cost of goods sold for the nine months ended September 30, 2022, was 72% as compared to 77% for the same period last year. The decrease was primarily driven by lower supply chain and input costs.

The total cost of goods per case increased to $13.17 per case in the nine months ended September 30, 2023, from $13.63 per case for the same period last year. The cost of goods sold per case on core brands was $13.12 during the nine months ended September 30, 2023, compared to $13.55 for the same period last year.

Gross Margin

Gross margin increased to 28% for the nine months ended September 30, 2023, compared to 23% for the same period last year.

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 $3,179 in the nine months ended September 30, 2023, to $5,714 from $8,893 in the same period last year, driven by our efforts to mitigate inflationary costs. Delivery costs in the nine months ended September 30, 2023, were 17% of net sales and $3.17 per case, compared to 23% of net sales and $4.13 per case during the same period last year.

Selling and Marketing Expenses

Marketing expenses consist of direct marketing, marketing labor, and marketing support costs. Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $3,567 during the nine months ended September 30, 2023, compared to $5,623 during the same period last year. As a percentage of net sales, selling and marketing were 11% of net sales during the nine months ended September 30, 2023, as compared to 15% of net sales during the same period last year. 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

Loss from Operations

The loss from operations was $4,468 for the nine months ended September 30, 2023, as compared to a loss of $11,169 in the same period last year driven by increased gross profit offset by decreases in operating expenses discussed above.

Interest Expense

Interest expense for the nine months ended September 30, 2023, consisted of $4,459 of interest expense. During the same period last year, interest expense consisted of $2,119 of interest expense.

Modified EBITDA

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

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

	Nine months Ended September 30,
		2023			2022
Net loss	$	(8,927	)	$	(13,288	)

Modified EBITDA adjustments:
Depreciation and amortization		214			165
Interest expense		4,459			2,119
Stock option and other noncash compensation		354			585
Severance		177			66
Legal settlements		12			-
Total EBITDA adjustments	$	5,216		$	2,935

Modified EBITDA	$	(3,711	)	$	(10,353	)

	●	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.

Liquidity and Capital Resources

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

For the nine months ended September 30, 2023, we recorded a net loss of $8,927. As of September 30, 2023, we had a cash balance of $1,004, with $14 of current availability, and $3,062 of additional borrowing capacity, a stockholder’s deficit of $12,760 and negative working capital of $4,177, compared to a cash balance of $533, with $110 of current availability, and $1,633 of additional borrowing capacity, a stockholder’s deficit of $8,470 and negative working capital of $1,563 at December 31, 2022.

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

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

Critical Accounting Policies and Estimates

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

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None that have not been previously disclosed in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit

Filed

Incorporated by Reference

No.

Exhibit Title

Herewith

Form

Exhibit

File No.

Date Filed

3(i)

Certificate of Incorporation of Reed’s, Inc., as amended

10-K

3(i)

001-32501

5/15/2023

3(ii)

Amended and Restated Bylaws of Reed’s, Inc.

10-KA

3.8

001-32501

4/08/2020

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Label Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Label Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

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

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

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

SIGNATURES

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

	Reed’s, Inc. (Registrant)

Date: November 9, 2023	/s/ Norman E. Snyder, Jr.
	Norman E. Snyder, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

Date: November 9, 2023	/s/ Joann Tinnelly
	Joann Tinnelly
	Chief Financial Officer
	(Principal Financial Officer)

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Norman E. Snyder, Jr., certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Reed’s, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023	/s/ Norman E. Snyder, Jr.
	Norman E. Snyder, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Joann Tinnelly, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Reed’s, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023	/s/ Joann Tinnelly
	Joann Tinnelly
	Chief Financial Officer
	(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Reed’s, Inc., a Delaware corporation (the “Company”) for the period ending September 30, 2023 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), Norman E. Snyder, Jr., Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	REED’S, INC.

Date: November 9, 2023	By:	/s/ Norman E. Snyder, Jr.
		Norman E. Snyder, Jr.
		Chief Executive Officer
		(Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Reed’s, Inc., a Delaware corporation (the “Company”) for the period ending September 30, 2023 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), Joann Tinnelly, Interim Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	REED’S, INC.

Date: November 9, 2023	By:	/s/ Joann Tinnelly
		Joann Tinnelly
		Chief Financial Officer
		(Principal Financial Officer)

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2023	Oct. 31, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	001-32501
Entity Registrant Name	REED’S, INC.
Entity Central Index Key	0001140215
Entity Tax Identification Number	35-2177773
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	201 Merritt 7
Entity Address, City or Town	Norwalk
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06851
City Area Code	(800)
Local Phone Number	997-3337
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,169,131

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash	$ 1,004	$ 533
Accounts receivable, net of allowance of $514 and $252, respectively	5,267	5,671
Inventory, net	15,964	16,175
Prepaid expenses and other current assets	489	939
Total current assets	23,501	24,095
Property and equipment, net of accumulated depreciation of $1,001 and $787, respectively	559	766
Intangible assets	627	626
Total assets	24,687	25,487
Current liabilities:
Accounts payable	9,067	9,805
Accrued expenses	873	233
Revolving line of credit, net of capitalized financing costs of $242 and $363, respectively	9,697	10,974
Convertible notes payable, current portion, net of debt discount of $0 and $414, respectively	7,380	2,434
Current portion of lease liabilities	209	187
Total current liabilities	27,678	25,658
Convertible note payable, net of debt discount of $252 and $562, respectively, less current portion	9,721	8,092
Lease liabilities, less current portion	48	207
Total liabilities	37,447	33,957
Stockholders’ deficit:
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding	94	94
Common stock, $.0001 par value, 180,000,000 shares authorized; 4,169,131 and 2,519,485 shares issued and outstanding, respectively
Additional paid in capital	119,277	114,635
Accumulated deficit	(132,131)	(123,199)
Total stockholders’ deficit	(12,760)	(8,470)
Total liabilities and stockholders’ deficit	24,687	25,487
Related Party [Member]
Current assets:
Receivable from former related party	777	777
Current liabilities:
Payable to former related party	$ 452	$ 2,025

Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Accounts receivable, net of allowance	$ 514	$ 252
Property and equipment, accumulated depreciation	1,001	787
Capitalized financing costs	242	363
Debt discount current	0	414
Debt discount, noncurrent	$ 252	$ 562
Series A convertible preferred stock, par value	$ 10	$ 10
Series A convertible preferred stock, shares authorized	500,000	500,000
Series A convertible preferred stock, shares issued	9,411	9,411
Series A convertible preferred stock, shares issued	9,411	9,411
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	180,000,000	180,000,000
Common stock, shares issued	4,169,131	2,519,485
Common stock, shares outstanding	4,169,131	2,519,485

Condensed Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Net Sales	$ 11,856	$ 12,094	$ 33,018	$ 38,001
Cost of goods sold	7,823	9,659	23,778	29,335
Gross profit	4,033	2,435	9,240	8,666
Operating expenses:
Delivery and handling expense	1,908	2,249	5,714	8,893
Selling and marketing expense	861	1,220	3,567	5,623
General and administrative expense	1,407	1,420	4,427	5,319
Total operating expenses	4,176	4,889	13,708	19,835
Loss from operations	(143)	(2,454)	(4,468)	(11,169)
Interest expense	(1,293)	(777)	(4,459)	(2,119)
Net loss	(1,436)	(3,231)	(8,927)	(13,288)
Dividends on Series A Convertible Preferred Stock			(5)	(5)
Net Loss Attributable to Common Stockholders	$ (1,436)	$ (3,231)	$ (8,932)	$ (13,293)
Loss per share - basic	$ (0.34)	$ (1.43)	$ (2.69)	$ (6.54)
Loss per share - diluted	$ (0.34)	$ (1.43)	$ (2.69)	$ (6.54)
Weighted average number of shares outstanding - basic	4,169,131	2,254,356	3,322,959	2,030,503
Weighted average number of shares outstanding - diluted	4,169,131	2,254,356	3,322,959	2,030,503

Condensed Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Preferred Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2021		$ 94	$ 107,246	$ (103,137)	$ 4,203
Balance, shares at Dec. 31, 2021	1,874,679	9,411
Fair value of vested options			448		448
Net loss				(13,288)	(13,288)
Fair value of vested restricted shares granted to officers			137		137
Fair value of vested restricted shares granted to officers, shares	6,748
Repurchase of common stock			(2)		(2)
Repurchase of common stock, shares	(265)
Common shares issued for financing costs			37		37
Common shares issued for financing costs, shares	2,000
Issuance of shares for dividends on Series A Convertible Preferred Stock				(5)	(5)
Issuance of shares for dividends on Series A Convertible Preferred Stock, shares
Common shares issued for cash, net of offering costs			5,034		5,034
Common shares issued for cash, net of offering costs, shares	371,893
Balance at Sep. 30, 2022		$ 94	112,900	(116,430)	(3,436)
Balance, shares at Sep. 30, 2022	2,255,055	9,411
Balance at Jun. 30, 2022		$ 94	112,686	(113,199)	(419)
Balance, shares at Jun. 30, 2022	2,253,047	9,411
Fair value of vested options			185		185
Net loss				(3,231)	(3,231)
Fair value of vested restricted shares granted to officers			29		29
Fair value of vested restricted shares granted to officers, shares	2,010
Issuance of shares for dividends on Series A Convertible Preferred Stock
Issuance of shares for dividends on Series A Convertible Preferred Stock, shares
Common shares issued for cash, net of offering costs
Common shares issued for cash, net of offering costs, shares	(2)
Balance at Sep. 30, 2022		$ 94	112,900	(116,430)	(3,436)
Balance, shares at Sep. 30, 2022	2,255,055	9,411
Balance at Dec. 31, 2022		$ 94	114,635	(123,199)	(8,470)
Balance, shares at Dec. 31, 2022	2,519,485	9,411
Fair value of vested options			351		351
Net loss				(8,927)	(8,927)
Fair value of vested restricted shares granted to officers			3		3
Fair value of vested restricted shares granted to officers, shares	750
Repurchase of common stock			(1)		(1)
Repurchase of common stock, shares	(274)
Common shares issued for financing costs			273		273
Common shares issued for financing costs, shares	82,438
Issuance of shares for dividends on Series A Convertible Preferred Stock				(5)	(5)
Issuance of shares for dividends on Series A Convertible Preferred Stock, shares
Common shares issued for cash, net of offering costs			4,016		4,016
Common shares issued for cash, net of offering costs, shares	1,566,732
Balance at Sep. 30, 2023		$ 94	119,277	(132,131)	(12,760)
Balance, shares at Sep. 30, 2023	4,169,131	9,411
Balance at Jun. 30, 2023		$ 94	119,138	(130,695)	(11,463)
Balance, shares at Jun. 30, 2023	4,169,131	9,411
Fair value of vested options			139		139
Net loss				(1,436)	(1,436)
Balance at Sep. 30, 2023		$ 94	$ 119,277	$ (132,131)	$ (12,760)
Balance, shares at Sep. 30, 2023	4,169,131	9,411

Condensed Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Cash flows from operating activities:
Net loss	$ (1,436)	$ (3,231)	$ (8,927)	$ (13,288)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			112	79
Loss on disposal of property and equipment			9
Amortization of debt discount			958	307
Amortization of prepaid financing costs				431
Fair value of vested options			351	448
Fair value of vested restricted shares granted to officers			3	137
Fair value of common shares issued as financing costs				37
Change in allowance for doubtful accounts			262	(152)
Inventory write-downs			(205)	35
Accrued interest			2,483	386
Changes in operating assets and liabilities:
Accounts receivable			142	(673)
Inventory			417	(2,901)
Prepaid expenses and other assets			450	(399)
Decrease in right of use assets			102	86
Accounts payable			(738)	(860)
Accrued expenses			639	(62)
Accrued dividend			(5)
Lease liabilities			(137)	(118)
Net cash used in operating activities			(4,084)	(16,507)
Cash flows from investing activities:
Trademark costs			(1)	(2)
Purchase of property and equipment			(84)
Proceeds from sale of property and equipment			68
Net cash used in investing activities			(17)	(2)
Cash flows from financing activities:
Proceeds from line of credit			32,686	40,576
Payments on line of credit			(34,085)	(41,299)
Payments of debt issuance costs				(483)
Proceeds from sale of common stock			4,016	5,034
Proceeds from convertible note payable, net of expenses			3,797	12,430
Payment of convertible note payable			(268)	(400)
Repurchase of common stock			(1)	(2)
Amounts from former related party, net			(1,573)	629
Net cash provided by financing activities			4,572	16,485
Net increase (decrease) in cash			471	(24)
Cash at beginning of period			533	49	$ 49
Cash at end of period	$ 1,004	$ 25	1,004	25	$ 533
Supplemental disclosures of cash flow information:
Cash paid for interest			548	1,051
Non -cash investing and financing activities
Dividends on Series A Convertible Preferred Stock			$ 5	$ 5

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Basis of Presentation

The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.

Going Concern

As of September 30, 2023, we had a cash balance of $1,004, with $14 of current availability on the line of credit, and $3,062 of additional borrowing capacity from the credit facility.

Recent Trends - Market Conditions

Reverse Stock Split

Use of Estimates

Revenue Recognition

Loss per Common Share

	September 30, 2023		September 30, 2022
Warrants		549,292		250,946
Options		145,012		176,737
Convertible note payable		1,475,725		449,156
Unvested restricted common stock		-		3,509
Common stock equivalent of Series A Convertible Preferred stock		753		753
Total		2,170,782		881,100
Antidilutive Securities		2,170,782		881,100

Stock Compensation Expense

Advertising Costs

Concentrations

Fair Value of Financial Instruments

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

Recent Accounting Pronouncements

Inventory

9 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

Inventory

2. Inventory

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value, net of write downs, and is comprised of the following (in thousands):

Schedule of Inventory

	September 30, 2023		December 31, 2022
Raw materials and packaging	$	8,732	$	8,526
Finished products		7,232		7,649
Total	$	15,964	$	16,175

Property and Equipment

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Property and Equipment

3. Property and Equipment

Property and equipment is comprised of the following (in thousands):

Schedule of Property and Equipment

	September 30, 2023			December 31, 2022
Right-of-use assets under operating leases	$	724		$	724
Computer hardware and software		400			400
Machinery and equipment		414			429
Construction in progress		22			-
Total cost		1,560			1,553
Accumulated depreciation and amortization		(1,001	)		(787	)
Net book value	$	559		$	766

Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

4. Intangible Assets

Intangible assets consist of the following (in thousands):

Summary of Intangible Assets

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

Line of Credit

9 Months Ended

Sep. 30, 2023

Line Of Credit

Line of Credit

5. Line of Credit

Amounts outstanding under the Company’s credit facilities are as follows (in thousands):

	September 30, 2023			December 31, 2022
Line of credit – Alterna Capital Solutions	$	9,939		$	11,337
Capitalized financing costs		(242	)		(363	)
Total	$	9,697		$	10,974

Secured Convertible Notes Payable

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Secured Convertible Notes Payable

6. Secured Convertible Notes Payable

Amounts outstanding under secured convertible notes payable are as follows (in thousands):

Schedule of Debt

	September 30, 2023			December 31, 2022
Secured Convertible Note Payable	$	14,500		$	10,450
Accrued interest (includes excess ABL fees of $2,152 and $648)		3,267			1,052
Capitalized financing costs		(666	)		(976	)
Total	$	17,101		$	10,526
Current portion		(7,380	)		(2,434	)
Long term portion	$	9,721		$	8,092

Secured Convertible Note Payable

At September 30, 2023, the Notes, including accrued interest, are convertible into 1,475,725 shares of the Company’s common stock.

Leases Liabilities

9 Months Ended

Sep. 30, 2023

Leases Liabilities

Leases Liabilities

7. Leases Liabilities

During the nine months ended September 30, 2023 and 2022, lease costs totaled $67 and $56, respectively.

Stockholder’s Equity

9 Months Ended

Sep. 30, 2023

Equity [Abstract]

Stockholder’s Equity

8. Stockholder’s Equity

Common stock issuances

Common stock repurchases

Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

9. Stock-Based Compensation

Restricted common stock

The following table summarizes restricted stock activity during the nine months ended September 30, 2023:

	Unvested Shares			Issuable Shares			Fair Value at Date of Issuance			Weighted Average Grant Date Fair Value
Balance, December 31, 2022		1,500			-		$	26.00			44.75
Granted		-			-			-			-
Vested		(750	)		750			-			-
Forfeited		(750	)		-			-			-
Issued		-			(750	)		(3.00	)		-
Balance, September 30, 2023		-			-		$	-		$	-

Stock options

The following table summarizes stock option activity during the nine months ended September 30, 2023:

Schedule of Stock Option Activity

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2022		164,423		$	48.90		7.58	$	-
Granted		10,037			4.50
Exercised		-			-
Unvested forfeited		(10,497	)		48.74
Vested forfeited		(18,951	)		54.59
Outstanding at September 30, 2023		145,012		$	45.09		7.00	$	-
Exercisable at September 30, 2023		92,711		$	52.71		6.40	$	-

Stock Warrants

9 Months Ended

Sep. 30, 2023

Stock Warrants

Stock Warrants

10. Stock Warrants

The Company’s warrant activity during the nine months ended September 30, 2023 is as follows:

Schedule of Warrant Activity

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2022		235,946	$	16.99		4.20	$	-
Granted		313,346		2.59		2.64		-
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at September 30, 2023		549,292	$	8.77		3.09	$	238
Exercisable at September 30, 2023		549,292	$	8.77		3.09	$	238

On May 25, 2023, the Company entered into a Securities Purchase Agreement with D&D Source of Life Holding Ltd., as the lead investor, and certain of Reed’s affiliates pursuant to which the investors agreed to purchase an aggregate of 1,566,732 shares of Reed’s common stock and warrants to purchase 313,346 shares of Common Stock. The purchase price per share of Common Stock and associated warrant was $2.585. The warrants are exercisable for a term of three years at a per share exercise price of $2.50.

Transactions with California Custom Beverage, LLC, former related party

9 Months Ended

Sep. 30, 2023

Transactions with California Custom Beverage, LLC, former related party

11. Transactions with California Custom Beverage, LLC, former related party

At September 30, 2023 and December 31, 2022, accounts receivable due from and accounts payable due to CCB were as follows:

Schedule of Related Parties

	September 30, 2023			December 31, 2022
Accounts receivable, net of provision of $538 and $538 at September 30, 2023 and December 31, 2022, respectively		777			777
Accounts payable		(452	)		(2,025	)
Net (payable) receivable		325			(1,248	)

Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.

Going Concern

Going Concern

As of September 30, 2023, we had a cash balance of $1,004, with $14 of current availability on the line of credit, and $3,062 of additional borrowing capacity from the credit facility.

Recent Trends - Market Conditions

Recent Trends - Market Conditions

Reverse Stock Split

Reverse Stock Split

Use of Estimates

Use of Estimates

Revenue Recognition

Revenue Recognition

Loss per Common Share

Loss per Common Share

	September 30, 2023		September 30, 2022
Warrants		549,292		250,946
Options		145,012		176,737
Convertible note payable		1,475,725		449,156
Unvested restricted common stock		-		3,509
Common stock equivalent of Series A Convertible Preferred stock		753		753
Total		2,170,782		881,100
Antidilutive Securities		2,170,782		881,100

Stock Compensation Expense

Stock Compensation Expense

Advertising Costs

Advertising Costs

Concentrations

Concentrations

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Schedule of Potentially Dilutive Securities

	September 30, 2023		September 30, 2022
Warrants		549,292		250,946
Options		145,012		176,737
Convertible note payable		1,475,725		449,156
Unvested restricted common stock		-		3,509
Common stock equivalent of Series A Convertible Preferred stock		753		753
Total		2,170,782		881,100
Antidilutive Securities		2,170,782		881,100

Inventory (Tables)

9 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value, net of write downs, and is comprised of the following (in thousands):

Schedule of Inventory

	September 30, 2023		December 31, 2022
Raw materials and packaging	$	8,732	$	8,526
Finished products		7,232		7,649
Total	$	15,964	$	16,175

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment is comprised of the following (in thousands):

Schedule of Property and Equipment

	September 30, 2023			December 31, 2022
Right-of-use assets under operating leases	$	724		$	724
Computer hardware and software		400			400
Machinery and equipment		414			429
Construction in progress		22			-
Total cost		1,560			1,553
Accumulated depreciation and amortization		(1,001	)		(787	)
Net book value	$	559		$	766

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Intangible Assets

Intangible assets consist of the following (in thousands):

Summary of Intangible Assets

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

Line of Credit (Tables)

9 Months Ended

Sep. 30, 2023

Line Of Credit

Schedule of Amount Outstanding Under Credit Facilities

Amounts outstanding under the Company’s credit facilities are as follows (in thousands):

	September 30, 2023			December 31, 2022
Line of credit – Alterna Capital Solutions	$	9,939		$	11,337
Capitalized financing costs		(242	)		(363	)
Total	$	9,697		$	10,974

Secured Convertible Notes Payable (Tables)

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Schedule of Debt

Amounts outstanding under secured convertible notes payable are as follows (in thousands):

Schedule of Debt

	September 30, 2023			December 31, 2022
Secured Convertible Note Payable	$	14,500		$	10,450
Accrued interest (includes excess ABL fees of $2,152 and $648)		3,267			1,052
Capitalized financing costs		(666	)		(976	)
Total	$	17,101		$	10,526
Current portion		(7,380	)		(2,434	)
Long term portion	$	9,721		$	8,092

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Non-vested Restricted Stock Activity

The following table summarizes restricted stock activity during the nine months ended September 30, 2023:

	Unvested Shares			Issuable Shares			Fair Value at Date of Issuance			Weighted Average Grant Date Fair Value
Balance, December 31, 2022		1,500			-		$	26.00			44.75
Granted		-			-			-			-
Vested		(750	)		750			-			-
Forfeited		(750	)		-			-			-
Issued		-			(750	)		(3.00	)		-
Balance, September 30, 2023		-			-		$	-		$	-

Schedule of Stock Option Activity

The following table summarizes stock option activity during the nine months ended September 30, 2023:

Schedule of Stock Option Activity

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2022		164,423		$	48.90		7.58	$	-
Granted		10,037			4.50
Exercised		-			-
Unvested forfeited		(10,497	)		48.74
Vested forfeited		(18,951	)		54.59
Outstanding at September 30, 2023		145,012		$	45.09		7.00	$	-
Exercisable at September 30, 2023		92,711		$	52.71		6.40	$	-

Stock Warrants (Tables)

9 Months Ended

Sep. 30, 2023

Stock Warrants

Schedule of Warrant Activity

The Company’s warrant activity during the nine months ended September 30, 2023 is as follows:

Schedule of Warrant Activity

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2022		235,946	$	16.99		4.20	$	-
Granted		313,346		2.59		2.64		-
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at September 30, 2023		549,292	$	8.77		3.09	$	238
Exercisable at September 30, 2023		549,292	$	8.77		3.09	$	238

Transactions with California Custom Beverage, LLC, former related party (Tables)

9 Months Ended

Sep. 30, 2023

Schedule of Related Parties

At September 30, 2023 and December 31, 2022, accounts receivable due from and accounts payable due to CCB were as follows:

Schedule of Related Parties

	September 30, 2023			December 31, 2022
Accounts receivable, net of provision of $538 and $538 at September 30, 2023 and December 31, 2022, respectively		777			777
Accounts payable		(452	)		(2,025	)
Net (payable) receivable		325			(1,248	)

Schedule of Potentially Dilutive Securities (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	2,170,782	881,100
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	549,292	250,946
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	145,012	176,737
Convertible Notes Payable [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	1,475,725	449,156
Unvested Restricted Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities		3,509
Common Stock Equivalent of Series A Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	753	753

Summary of Significant Accounting Policies (Details Narrative) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 24, 2024	Jan. 25, 2023 $ / shares	Sep. 30, 2023 USD ($) $ / shares	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) $ / shares	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($) $ / shares	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Product Information [Line Items]
Net loss			$ 1,436	$ 3,231	$ 8,927	$ 13,288
Stockholders' deficit			12,760	$ 3,436	12,760	$ 3,436	$ 8,470	$ 11,463	$ 419	$ (4,203)
Cash			1,004		1,004		$ 533
Line of credit facility, borrowing capacity			14		14
Line of credit facility, additional borrowing capacity			$ 3,062		$ 3,062
Shipping and handling costs			2.98	3.38	3.17	4.13
Reverse stock split	1-for-6 and not more than 1-for-50	1-for-50 reverse stock split
Common stock par value \| $ / shares		$ 0.0001	$ 0.0001		$ 0.0001		$ 0.0001
Advertising costs			$ 22	$ 116	$ 82	$ 539
Customer One [Member] \| Revenue Benchmark [Member] \| Product Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage			22.00%	16.00%	19.00%	19.00%
Customer One [Member] \| Accounts Receivable [Member] \| Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage					16.00%		19.00%
Customer Two [Member] \| Revenue Benchmark [Member] \| Product Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage			14.00%	11.00%	13.00%	11.00%
Customer Two [Member] \| Accounts Receivable [Member] \| Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage					14.00%		11.00%
Customer Three [Member] \| Revenue Benchmark [Member] \| Product Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage			12.00%	10.00%		10.00%
Customer Three [Member] \| Accounts Receivable [Member] \| Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage					13.00%
Customer Four [Member] \| Accounts Receivable [Member] \| Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage					10.00%
Vendor One [Member] \| Revenue Benchmark [Member] \| Product Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage				18.00%		15.00%
Vendor One [Member] \| Accounts Payable [Member] \| Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage					10.00%

Schedule of Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials and packaging	$ 8,732	$ 8,526
Finished products	7,232	7,649
Total	$ 15,964	$ 16,175

Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Total cost	$ 1,560	$ 1,553
Accumulated depreciation and amortization	(1,001)	(787)
Net book value	559	766
Right-of-use Assets Under Operating Leases [Member]
Property, Plant and Equipment [Line Items]
Total cost	724	724
Computer Hardware and Software [Member]
Property, Plant and Equipment [Line Items]
Total cost	400	400
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total cost	414	429
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Total cost	$ 22

Property and Equipment (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 112	$ 79
Amortization of right-of-use assets	$ 102	$ 86

Summary of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Brand names	$ 576	$ 576
Trademarks	51	50
Total	$ 627	$ 626

Schedule of Amount Outstanding Under Credit Facilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Line of Credit Facility [Line Items]
Total	$ 9,697	$ 10,974
Capitalized financing costs	(242)	(363)
Alterna Capital Solutions [Member]
Line of Credit Facility [Line Items]
Total	$ 9,939	$ 11,337

Line of Credit (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended		12 Months Ended
Line of Credit (Details Narrative) - USD ($)	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Mar. 31, 2023
Line of Credit Facility [Line Items]
Line of credit maximum borrowing capacity		$ 3,062,000
Line of credit facility current borrowing capacity		14,000
Amortization of debt discount		958,000	$ 307,000
Alterna Capital Solutions [Member]
Line of Credit Facility [Line Items]
Debt instrument term	3 years
Line of credit maximum borrowing capacity	$ 13,000,000	3,062,000
Line of credit maximum borrowing amount outstanding	$ 400,000
Line of credit facility current borrowing capacity		14,000
Line of credit facility, interest rate description	Borrowings based on receivables bears an interest of prime plus 4.75% but not less than 8.0% (13.25% at September 30, 2023 and 12.25% at December 31, 2022). Borrowings based on inventory bears an interest of prime plus 5.25% but not less than 8.5% (13.90 % at September 30, 2023 and 12.90% at December 31, 2022). The additional over advance rider bears a rate of prime plus 12.75%, but not less than 16.00% (18.00% at September 30, 2023 and 18.00% at December 31, 2022). Additionally, the line of credit is subject to monthly monitoring fee of $1 with a minimum usage requirement on the credit facility
Line of credit					$ 1,500
Line of credit monitoring fee	$ 1,000
Direct operating costs	$ 483,000
Amortization of line of credit period	3 years
Amortization of debt discount		121,000		$ 363,000
Remaining unamortized debt discount amount		$ 242,000

Schedule of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
Secured Convertible Note Payable	$ 14,500	$ 10,450
Accrued interest (includes excess ABL fees of $2,152 and $648)	3,267	1,052
Capitalized financing costs	(666)	(976)
Total	17,101	10,526
Current portion	(7,380)	(2,434)
Long term portion	$ 9,721	$ 8,092

Schedule of Debt (Details) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
ABL fees	$ 2,152	$ 648

Secured Convertible Notes Payable (Details Narrative) - USD ($) $ in Thousands	1 Months Ended		9 Months Ended		12 Months Ended
	Aug. 31, 2022	May 31, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	May 31, 2023	Feb. 28, 2023
Short-Term Debt [Line Items]
Principal amount			$ 2,152		$ 648
Convertible notes			17,101		10,526
Convertiable notes payable			7,380		2,434
Accrued interest			3,267		1,052
Amortization of debt discount			$ 958	$ 307
Convertible Notes Payable [Member] \| Whitebox Advisors LLC [Member]
Short-Term Debt [Line Items]
Principal amount		$ 11,250			$ 10,450
Debt instrument rate terms	May 9, 2025	The notes bear interest at a rate of 10% per annum (with 5% per annum payable in cash and 5% per annum payable in kind (“PIK”) by adding such PIK interest to the principal amount of the notes)	November 28, 2023		November 28, 2023
Debt interest rate		10.00%
Debt instrument maturity date		May 09, 2025
Convertible notes	$ 7,900			$ 2,500
Monthly payment	$ 200
Weighted average interest	90.00%
2023	$ 400
2024	2,400
2025	$ 1,000
Loans Payable			$ 8,000
Debt fees			$ 2,152
Repurchase price percentage			110.00%
Convertiable notes payable		$ 4,050	$ 14,500			$ 4,050	$ 4,050
Accrued interest			3,267		$ 1,052
Interest expenses			2,483
Interest on convertible notes			979
Excess of asset base loan fees			1,504
Accrued interest paid			268
Unamortized debt discount			666		$ 976
Direct costs of issuing loans			$ 253
Common shares issued for financing costs, shares			82,438
Common shares issued for financing costs			$ 273
Amortization of debt discount			$ 820
Debt instrument conversion, description			The convertible notes are convertible at an initial conversion rate of 0.08306 shares of the Company’s common stock per one dollar of principal converted, or approximately $12.04 per share, subject to customary anti-dilution adjustments. In addition, if certain corporate events occur that constitute a make-whole fundamental change as defined, then the note holders are, under certain circumstances, are entitled to an increase in the conversion rate, limited to 0.12155 shares of Common Stock per one dollar of principal, or approximately $8.23 per share.
Debt conversion into shares			1,475,725

Leases Liabilities (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Leases Liabilities
Lease cost	$ 67	$ 56
Operating leases liability	256		$ 394
Payments of operating lease liability	$ 138
Weighted average remaining lease term for operating lease	1 year 3 months
Weighted average discount rate for operating lease	12.60%

Stockholder’s Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	May 25, 2023	Sep. 30, 2023	Sep. 30, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Share price		$ 4.50
Stock repurchased, value		$ 1	$ 2
Officer [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Stock repurchased, shares		274
Stock repurchased, value		$ 1
Securities Purchase Agreement [Member] \| DD Source of Life Holding Ltd [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common shares issued for cash	1,566,732
Warrants to purchase stock	313,346
Share price	$ 2.585
Proceeds from issuance of private placement	$ 4,016
Exercise price of warrants	$ 2.50

Summary of Non-vested Restricted Stock Activity (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($) $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unvested Shares, Vested	(5,016)
Fair Value at Date of Issuance, Vested \| $	$ 32
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unvested Shares, beginning balance	1,500
Issuable Shares, beginning balance
Fair Value at Date of Issuance, beginning balance \| $	$ 26
Weighted Average Grant Date Fair Value, Unvested, beginning balance \| $ / shares	$ 44.75
Unvested Shares, Granted
Issuable Shares, Granted
Fair Value at Date of Issuance, Granted \| $
Unvested Shares, Vested	(750)
Issuable Shares, Vested	750
Fair Value at Date of Issuance, Vested \| $
Unvested Shares, Forfeited	(750)
Issuable Shares, Forfeited
Fair Value at Date of Issuance, Forfeited \| $
Unvested Shares, Issued
Issuable Shares, Issued	(750)
Fair Value at Date of Issuance, Issued \| $	$ (3)
Unvested Shares, ending balance
Issuable Shares, ending balance
Fair Value at Date of Issuance, ending balance \| $
Weighted Average Grant Date Fair Value, Unvested, ending balance \| $ / shares

Schedule of Stock Option Activity (Details) - Equity Option [Member] - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Offsetting Assets [Line Items]
Shares Outstanding, Beginning balance	164,423
Weighted-Average Exercise Price, Outstanding, Beginning	$ 48.90
Weighted-Average Remaining Contractual Terms (Years), Outstanding Ending	7 years	7 years 6 months 29 days
Aggregate Intrinsic Value, Shares Outstanding, Beginning
Shares, Granted	10,037
Weighted-Average Exercise Price, Granted	$ 4.50
Shares, Exercised
Weighted-Average Exercise Price, Exercised
Shares, Unvested forfeited	(10,497)
Weighted-Average Exercise Price, Unvested forfeited	$ 48.74
Shares, Vested forfeited	(18,951)
Weighted-Average Exercise Price, Vested forfeited	$ 54.59
Shares Outstanding, Ending Balance	145,012	164,423
Weighted-Average Exercise Price, Outstanding, Ending	$ 45.09	$ 48.90
Aggregate Intrinsic Value, Shares Outstanding, Ending
Shares, Exercisable	92,711
Weighted-Average Exercise Price, Exercisable Ending Balance	$ 52.71
Weighted-Average Remaining Contractual Terms (Years), Exercisable Ending Balance	6 years 4 months 24 days
Aggregate Intrinsic Value, Ending balance

Stock-Based Compensation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of stock option shares vested	5,016
Stock options exercisable price	$ 4.50
Expiration years	10 years
Options grant date	$ 32
Stock price	$ 4.50
Expected term	6 years
Volatility	82.00%
Dividend rate	0.00%
Weighted average risk-free interest rate	3.59%
Board of Directors [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of stock option shares vested	5,021
2020 Equity Incentive Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock issued during period shares employee benefit plan	10,037
2020 Equity Incentive Plan [Member] \| Employees [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock issued during period shares employee benefit plan	10,037
Vesting period	4 years
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of restricted shares, value	$ 3	$ 137
Aggregate value of unvested compensation	$ 0
Number of stock option shares vested	750
Options grant date
Share-Based Payment Arrangement, Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Aggregate value of unvested compensation	$ 582
Stock price	$ 3.26
Fair value of vested stock option	$ 351	$ 448

Schedule of Warrant Activity (Details) - Warrant [Member] $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($) $ / shares shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares Outstanding, Beginning Balance \| shares	235,946
Weighted-Average Exercise Price, Outstanding Beginning Balance \| $ / shares	$ 16.99
Weighted-Average Remaining Contractual Terms (Years), Outstanding Beginning Balance	4 years 2 months 12 days
Aggregate Intrinsic Value, Outstanding Beginning \| $
Shares, Granted \| shares	313,346
Weighted-Average Exercise Price, Granted \| $ / shares	$ 2.59
Weighted-Average Remaining Contractual Terms (Years), Outstanding Granted	2 years 7 months 20 days
Shares, Exercised \| shares
Weighted-Average Exercise Price, Exercised \| $ / shares
Shares, Forfeited \| shares
Weighted-Average Exercise Price, Forfeited \| $ / shares
Shares Outstanding, Ending Balance \| shares	549,292
Weighted-Average Exercise Price, Outstanding Ending Balance \| $ / shares	$ 8.77
Weighted-Average Remaining Contractual Terms (Years), Outstanding Ending Balance	3 years 1 month 2 days
Aggregate Intrinsic Value, Outstanding Ending \| $	$ 238
Shares Exercisable, Ending Balance \| shares	549,292
Weighted-Average Exercise Price, Exercisable Ending Balance \| $ / shares	$ 8.77
Weighted-Average Remaining Contractual Terms (Years), Exercisable Ending Balance	3 years 1 month 2 days
Aggregate Intrinsic Value, Exercisable \| $	$ 238

Stock Warrants (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	May 25, 2023	Sep. 30, 2023
Share price		$ 4.50
Securities Purchase Agreement [Member] \| DD Source of Life Holding Ltd [Member]
Share price	$ 2.585
Common shares issued for cash	1,566,732
Warrants to purchase stock	313,346
Exercise price of warrants	$ 2.50
Stock Warrants [Member]
Share price		$ 3.26
Warrant [Member]
Aggregate intrinsic value, exercisable		$ 238

Schedule of Related Parties (Details) - Related Party [Member] - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Accounts receivable, net of provision of $538 and $538 at September 30, 2023 and December 31, 2022, respectively	$ 777	$ 777
Accounts payable	(452)	(2,025)
Net (payable) receivable	$ 325	$ (1,248)

Schedule of Related Parties (Details) (Parenthetical) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Related Party Transactions [Abstract]
Net of provision	$ 538	$ 538

Transactions with California Custom Beverage, LLC, former related party (Details Narrative) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2018
Related Party Transaction [Line Items]
Provision for disputed receivable with former related party	$ 538	$ 538
California Custom Beverage, LLC [Member]
Related Party Transaction [Line Items]
Receivables		1,315
Related Party [Member]
Related Party Transaction [Line Items]
Accounts payable	452	2,025
Related Party [Member] \| California Custom Beverage, LLC [Member]
Related Party Transaction [Line Items]
Net receivable		1,043
Christopher J. Reed [Member] \| California Custom Beverage, LLC [Member]
Related Party Transaction [Line Items]
Royalty percentage				5.00%
Notes payable	452		$ 2,025
Receivables	1,315	1,315
Royalty receivable	297	297
Copacking fees	1,018	$ 1,018
Christopher J. Reed [Member] \| California Custom Beverage, LLC [Member] \| Related Party [Member]
Related Party Transaction [Line Items]
Copacking fees	$ 1,127		$ 2,611

Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2018
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Value of stock placed	$ 4,016	$ 5,034
Chris Reed [Member] \| California Custom Beverage, LLC [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Deposit of security with lessor	$ 800		$ 1,200
Number of common stock value placed	7,260
Value of stock placed	$ 24

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