REED 10-K & 10-Q changes, risk factors and insider trading

A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider the risks and uncertainties described below, as well as the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could adversely affect our business, results of operations, financial condition, reputation, and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. These are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future.

Risks Related to Our Business and Industry

We have incurred and may continue to incur losses, and we may be unable to achieve or maintain profitability.

We incurred net losses of $15,842 million and $13,152 million for the fiscal years ended December 31, 2025 and 2024, respectively. While we aim to reduce costs, our operating expenses may increase over time as we continue to invest in growing our business, increasing our customer base, contract manufacturers and distributors, and expanding our selling and marketing channels. Our expansion efforts may prove more expensive than we anticipate, and there is no guarantee that these efforts will translate into sufficient sales to cover our expenses and result in profits. In addition, if our efforts to increase the average selling price of our products over time result in outsized volume decreases, our net sales may be adversely impacted and it will be challenging to achieve profitability or maintain pace with cost increases over time. We incur significant expenses in developing our innovative products and delivering, handling and marketing our products. Accordingly, we may not be able to achieve or maintain profitability, and we may continue to incur significant losses in the future.

Our quarterly and annual operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts or any guidance we may publicly provide, each of which may cause our stock price to fluctuate or decline.

We expect our operating results to be subject to quarterly and annual fluctuations which may, in turn, cause the price of our common stock to fluctuate substantially. Our net loss and other operating results will be affected by numerous factors, including:

If our quarterly or annual operating results fall below the expectations of investors or securities analysts or any forecasts or guidance we may provide to the market, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide. We believe that quarterly or annual comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Our current indebtedness contains, and any future indebtedness may contain, restrictions on our business. If we are unable to secure additional financing on favorable terms, or at all, when we require it, our ability to continue to grow our business or react to market conditions could be impaired and in turn adversely affect our financial position and results of operations.

We intend to continue to expand, grow and develop our business, which may require additional capital to develop new products, enhance our platform, expand distribution, improve our operating infrastructure, react to market conditions and finance working capital requirements. Accordingly, we may need to engage in additional equity or debt financings to secure additional capital. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

On September 26, 2025, we entered into the first amendment (the “Amendment”) to our Senior Secured Loan and Security Agreement (as amended, the “Loan Agreement”) with certain funds affiliated with Whitebox Advisors, LLC (the “Lenders”) and Cantor Fitzgerald Securities, as administrative agent and collateral agent, with respect to our revolving credit facility (the “Senior Secured Facility”). The Amendment provides a revolving credit commitment in an aggregate amount of $9.25 million and, as of December 31, 2025, the principal amount outstanding was $9.25 million. The Senior Secured Facility is secured by substantially all of our assets, including all intellectual property. Our current and future indebtedness, including the revolving credit commitment under the Senior Secured Facility, may have significant negative effects on our operations, including:

We intend to satisfy our current and future debt service obligations with our then existing cash and cash equivalents. However, we may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under the Senior Secured Facility or any other debt instruments. In addition, the Senior Secured Facility contains, and the agreements governing our future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. These restrictive covenants include, among others, limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, investments (including acquisitions), dividends and other restricted payments and transactions with affiliates. Our failure to make payments under or comply with other covenants contained in the documents governing our indebtedness could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our debt and potentially the foreclosure on our assets in the event we are unable to repay all amounts owed.

If we are unable to secure additional funding on favorable terms, or at all, when we require it, our ability to continue to grow our business to react to market conditions could be impaired, which would adversely affect our financial position and results of operations.

We depend on a limited number of customers for most of our revenue. The loss of, or a significant reduction in orders from our key customers that are not replaced by other orders from new or existing customers, would significantly reduce our revenue and adversely impact our business, financial condition and results of operations.

Our largest customers historically have accounted for a large portion of our sales. During the year ended December 31, 2025, our three largest customers comprised 21%, 15% and 14% of net sales, respectively. During the year ended December 31, 2024, our two largest customers comprised 18% and 17% of net sales, respectively. We believe that our operating results for the foreseeable future will continue to depend to a significant extent on sales attributable to certain customers. While we anticipate revenue attributable to our top customers will fluctuate from period to period, we expect to remain dependent on a small number of customers for a meaningful portion of our revenue for the foreseeable future. If our customers were to choose to reduce their orders or cease to order products from us or if our relationships with our customers or our distributors are disrupted for any reason and we are unable to replace those orders with orders from new or existing customers, there could be a significant negative impact on our business. Any reduction in sales attributable to our largest customers would have a significant and disproportionate impact on our business, financial condition and results of operations.

Demand for our products depends in part on our ability to innovate and anticipate and effectively respond to shifts in consumer trends and preferences, including the types of products our consumers want and how they browse for, purchase and consume them. Consumer preferences continuously evolve due to a variety of factors, including: changes in consumer demographics, consumption patterns, diet (whether due to changes in consumer behavior and eating habits, the use of weight-loss drugs or other factors) and channel preferences (including continued increases in the e-commerce and online-to-offline channels); pricing; product quality; concerns or perceptions regarding packaging and its environmental impact (such as single-use and other plastic packaging); and concerns or perceptions regarding the nutrition profile and health effects of, or location of origin of, ingredients or substances in our products or packaging, including due to the results of third-party studies (whether or not scientifically valid). Concerns with any of the foregoing could lead consumers to reduce or publicly boycott the purchase or consumption of our products. Pandemics, epidemics or other disease outbreaks, such as COVID-19, and geopolitical events, international trade relations and tariffs, wars and other military conflicts have also impacted and could continue to impact consumer preferences and demand for our products. Consumer preferences are also influenced by perception of our brand image or the brand images of our products, the success of our advertising and marketing campaigns, our ability to engage with our consumers in the manner they prefer, including through the use of digital media or assets, and the perception of our use of social media and our response to political and social issues, geopolitical events, wars and other military conflicts or catastrophic events. These and other factors have reduced and could continue to reduce consumers’ willingness to purchase certain of our products, including as a result of public boycotts. Any inability on our part to anticipate or react to changes in consumer preferences and trends, or make the right strategic investments to do so, including investments in data analytics to understand consumer trends, can lead to reduced demand for our products, lead to inventory write-offs or erode our competitive and financial position, thereby adversely affecting our business and preventing us from gaining market share and achieving long-term profitability. In addition, our business operations, including our supply chain, are subject to disruption by geopolitical events, international trade relations and tariffs, wars and other military conflicts, natural disasters, pandemics, epidemics or other events beyond our control that could negatively impact product availability and decrease demand for our products.

Consumers are concerned about health and wellness; public health officials and government officials are increasingly vocal about obesity and its consequences. There has been a trend among some public health advocates and dietary guidelines to recommend a reduction in sweetened beverages, as well as increased public scrutiny, new taxes on sugar-sweetened beverages (see also the risk factor captioned “Our effective tax rate or taxes aimed at our products can adversely affect our business or financial performance” for more information), and additional governmental regulations concerning the marketing and labelling/packing of the beverage industry. Additional or revised regulatory requirements, whether labelling, tax or otherwise, could have a material adverse effect on our financial condition and results of operations. Further, increasing public concern with respect to sweetened beverages could reduce demand for our beverages and increase desire for more low-calorie soft drinks, water, enhanced water, coffee-flavored beverages, tea, and beverages with natural sweeteners. We are continuously working to reduce calories and sugar in our products while launching additional products, to pair with existing brand extensions that round out our portfolio. However, there is no guarantee that our product lines will meet consumer expectations, shifting consumer preferences, or regulatory developments.

We have experienced supply chain challenges. The disruption and increased lead times caused by labor shortages, significant raw material cost inflation, logistics issues, increased freight costs and ongoing port congestion have resulted in suppressed margins. The average cost of shipping and handling of our products during each of the years ended December 31, 2025 and 2024 was $2.75 per case. Although we have experienced decreases in freight costs and have implemented mitigation plans to manage this risk, in our opinion there remains a volatile environment, and we will continue to monitor pricing and availability in transportation. Any increase in transportation costs (including increases in fuel costs), shipping costs or warehouse costs, port or supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure, decreased warehouse availability and unexpected delivery interruptions or delays may increase the cost of, and adversely impact, our logistics and our ability to provide quality and timely service to our distributors and customers.

Furthermore, periodic and often unpredictable industry-wide shortages of raw materials, including aluminum cans, glass bottles, and the principal ingredients used in our products, such as organic ginger and cane sugar, could disrupt or delay the production of certain products and adversely affect our operations and financial performance. The prices of the principal raw materials used in our products are subject to fluctuation. We are uncertain whether the prices of any of the foregoing or any other raw materials or ingredients we utilize will rise in the future and whether we will be able to pass any of such increases on to our customers. We do not use hedging agreements or alternative instruments to manage the risks associated with securing sufficient ingredients or other raw materials. 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, financial condition, results of operations, and cash flows.

We have in the past, and may in the future, use social media influencers and celebrities for product promotion and marketing, which may expose us to risk that such content could contain problematic, inaccurate, or misleading product or marketing claims. These influencers and celebrities could also engage in behavior that reflects poorly on our brand. Any claims or behavior by such influencers or celebrities may be attributed to us and expose us to fines, monetary liabilities, or could harm our brand reputation all of which could have an adverse impact on our business and operations. Although we take measures to confirm that public information about our company and brand is accurate, compliant with regulations and substantiated by factual analysis and research, we may be subject to claims that such information is false or misleading. Even if such claims are disproven, any negative publicity surrounding an assertion that our marketing materials are inaccurate could cause consumers to lose confidence in the safety and quality of our products. In addition, a judgment against us could lead to further litigation and have a material adverse effect on our business, financial condition, results of operations or liquidity.

Changes in the retail landscape or in sales to any key customer can adversely affect our business. Increased competitor consolidations, market-place competition, particularly among branded beverage products, and competitive product and pricing pressures could impact our earnings, market share and volume growth.

The retail industry is impacted by the actions and increasing power of retailers, including as a result of increased consolidation of ownership resulting in large retailers or buying groups with increased purchasing power, particularly in North America, Europe and Latin America. In this changing retail landscape, retailers and buying groups have impacted and may continue to impact our ability to compete in these jurisdictions by demanding lower prices or increased promotional programs. We may be required to grant retailers price concessions that negatively impact our margins and our profitability in order to compete with larger companies with significantly greater financial resources. If we are not able to lower our cost structure adequately in response to such competitive customer pricing, and if we are not able to attract and retain a profitable customer mix and a profitable product mix, our profitability could continue to be adversely affected. Furthermore, our inability to resolve a significant dispute with customers, a change in the business conditions (financial or otherwise) of either of these customers, even if unrelated to us, a significant reduction in sales to either of them, or the loss of either of them could adversely affect our business.

We may face difficulties as we expand our operations into new markets in which we have no prior operating experience.

As we work to grow our brand, we intend to enter into new markets, including eventually expanding into countries other than those in which we currently operate, including our recent expansion into new geographic markets in the Asia-Pacific region. It may be difficult for us to understand and accurately predict taste preferences and purchasing habits of consumers in these new geographic markets. We will also face increased competition with larger competitors who have stronger established brands in such markets. The political, legal and social systems of certain territories pose difficult challenges related to establishing and maintaining control and ownership of our brand and intellectual property, as well as mitigating the risk of diverted sales to other territories and/or sales diverted into the U.S. It is also costly to establish, develop and maintain international operations and develop and promote our brands in international markets and we may face adverse tax consequences, tariffs, and barriers to trade. As we expand our business into new countries, we may encounter regulatory, legal, personnel, technological and other difficulties that increase our expenses and/or delay our ability to become profitable and compete effectively in such countries, which may have a material adverse effect on our business and brand.

Our performance significantly depends on the contributions of key personnel. If we lose key personnel, our operations and ability to manage our business may be affected.

Similar risks exist with respect to our business partners and third-party providers, including suppliers, software and cloud-based service providers, that we rely upon for aspects of various business processes and activities, including procurement, supply chain, manufacturing, distribution, information technology support services and administrative functions (including payroll processing, health and benefit plan administration and certain finance and accounting functions) and the systems managed, hosted, provided and/or used by such third parties and their vendors. For example, malicious actors have employed and could continue to employ the information technology supply chain to introduce malware through software updates or compromised supplier accounts or hardware and exploit known or unknown hardware or software vulnerabilities in our systems or the systems of our vendors and third-party service providers. The need to coordinate with various third-party service providers, including with respect to timely notification and access to personnel and information concerning an incident, may complicate our efforts to address issues that arise. As a result, we are subject to the risk that the activities associated with our third-party service providers can adversely affect our business even if the attack or breach does not directly impact our systems or information.

Cyberattacks and other cyber incidents are occurring more frequently, the techniques used to gain access to information technology systems and data, disable or degrade service or sabotage systems are constantly evolving and becoming more sophisticated in nature and are being carried out by groups and individuals with a wide range of expertise and motives. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may increase our cybersecurity risks, including generative artificial intelligence augmenting threat actors’ technological sophistication to enhance existing or create new malware. We have not experienced a cyber security breach; however, a breach could have a material adverse effect on us in the future.

Tax rates at the federal, state and local levels may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, but not limited to, projected levels of taxable income in each jurisdiction, tax audits conducted and settled by various tax authorities, and adjustments to income taxes upon finalization of income tax returns.

During the year ended December 31, 2025, the Company began an expansion into new geographic markets in the Asia Pacific region. The Company formed a wholly owned subsidiary Reed’s (Asia) Limited (BVI). Reed’s (Asia) Limited subsequently formed five additional wholly owned subsidiaries, Reed’s (Hong Kong) Limited, Reed’s (Japan) Limited, Jiangzhi Beverage (Hainan) Co. Limited, Reed’s Beverages (Singapore) PTE Limited, and Shenshen Jiangzi Beverage Co. Limited. These subsidiaries are an early part of the Company’s strategic expansion in the Asia Pacific region. The Company expects continued investment in its Asia Pacific growth initiative. Reed’s (Asia) Limited did not generate sales in the year ended December 31, 2025.

Through December 31, 2025, we continued to finance our operations through existing cash balances, cash generated from operations, public and private issuance of common stock, and credit lines from financial institutions. As we seek additional 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 operating performance and investor sentiment with respect to us and our industry.

Recent Developments

Underwritten Public Offering

On December 4, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with A.G.P./Alliance Global Partners, as representative of the underwriters (the “Underwriters”), pursuant to which we agreed to sell and issue to the Underwriters, in a public offering (the “Offering”), an aggregate of (i) 2,500,000 shares of common stock and (ii) warrants to purchase up to 2,500,000 shares of common stock. The Offering closed on December 8, 2025. Each share of common stock and accompanying warrant to purchase one share of common stock were sold together at a combined public offering price of $4.00 less underwriting discounts and commissions. Additionally, the Company granted the Underwriters a 45-day option (the “Overallotment Option”) to purchase up to an additional 375,000 shares of common stock and/or warrants at the public offering price, less underwriting discounts and commissions.

On December 5, 2025, the Underwriters notified us of their determination to partially exercise the Overallotment Option for warrants to purchase an aggregate of 375,000 shares of common stock. On December 12, 2025, the Underwriters notified us of their determination to exercise the remaining Overallotment Option to purchase an aggregate of 375,000 shares of common stock. All of the securities in the Offering, including the Overallotment Option, were sold by the Company.

The net proceeds to the Company from the Offering, including the partial exercise of the Overallotment Option, were approximately $10.2 million, after deducting underwriting discounts and commissions and certain offering expenses. The Company currently intends to use the net proceeds from the Offering, together with its existing cash and cash equivalents, to fund growth initiatives, working capital and other general corporate purposes, which may include repayment of debt.

Each warrant issued in the Offering has an exercise price per share of common stock equal to $4.50, subject to certain adjustments. The warrants are immediately exercisable upon issuance and will expire on December 8, 2030 (the “Expiration Date”), provided that the holder will be prohibited, subject to certain exceptions, from exercising the warrant for shares of the Company’s common stock to the extent that immediately after giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 4.99% or 9.99% (as elected by the holder) of the total number of shares of the Company’s common stock then issued and outstanding, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess of 9.99% upon 61 days’ prior notice from the holder to the Company subject to the terms of the warrants. If, and only if, there is no effective registration statement at the time of exercise, the warrants may be exercised cashlessly.

Reverse Stock Split

On October 31, 2025, the Company effected a 1-for-6 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock. The Reverse Stock Split reduced the number of shares of the Company’s issued and outstanding common stock, as well as the number of shares subject to then-outstanding warrants and the exercise price thereof and the number of shares available for future issuance under the Company’s equity plans, the number of shares subject to such awards and purchase rights and the exercise and purchase price of, and other terms and conditions relating to, such awards and purchase rights. The conversion terms of the Preferred Stock have also been adjusted automatically such that each share of Series A Convertible Preferred Stock will be convertible into the number of shares of common stock that would have been issuable if all of the outstanding shares of Preferred Stock were converted into common stock immediately prior to the Reverse Stock Split. No fractional shares were distributed as a result of the Reverse Stock Split, and stockholders were entitled to a cash payment in lieu of fractional shares. The Reverse Stock Split did not affect the par value or total number of authorized shares of common stock. The share and per share amounts included in this Annual Report on Form 10-K have been adjusted to account for the Reverse Stock Split.

Amended Senior Secured Loan

On September 26, 2025, the Company entered into the Amended Loan Agreement governing the Senior Secured Loan with certain funds affiliated with Whitebox Advisors LLC, as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent. The Amended Loan Agreement (i) reduced the aggregate principal amount of the revolving credit commitment to $9,250 from $10,000, (ii) changed interest payments on the revolving loan to be due monthly in arrears from quarterly in arrears, (iii) and extended the maturity date to September 30, 2026.

Private Placement

On September 12, 2025, we entered into a securities purchase agreement with six accredited investors for the issuance and sale in a private placement of 833,330 shares of our common stock, at a purchase price of $6.00 per share, for aggregate gross proceeds of $5,000 (the “September 2025 Private Placement”). The September 2025 Private Placement closed on September 15, 2025 (the “September 2025 PIPE Closing Date”).

In connection with the September 2025 Private Placement, we entered into a registration rights agreement, dated as of September 12, 2025, with the investors, pursuant to which we agreed to prepare and file a registration statement with the SEC registering the resale of the shares issued in September 2025 Private Placement. The registration statement was filed with the SEC on September 19, 2025, and declared effective on September 29, 2025.

Gross billing decreased by 8% to $40,847 during the year ended December 31, 2025, compared to $44,316 during the prior year, driven by Reed’s volume decline of 3%, and Virgil’s volume decline of 18%. Price on our brands increased 1% to $20.94 per case.

The total cost of goods per case increased to $13.89 per case in the year ended December 31, 2025, from $12.46 per case for the prior year.

As reflected in the financial statements included elsewhere in this Annual Report on Form 10-K, for the year ended December 31, 2025, the Company recorded a net loss of $15,842 and used cash in operations of $17,037. Cash used in operations was primarily from our operating losses, working capital, and investment in strategic growth initiatives. As of December 31, 2025, we had a cash balance of $10,424 and no remaining availability under our Senior Secured Loan.

Historically, we have financed our operations through existing cash balances, cash generated from operations, public and private issuance of common stock, preferred stock, convertible debt instruments, term loans and credit lines from financial institutions.

On December 4, 2025, we entered into the Underwriting Agreement with the Underwriters, pursuant to which the Company agreed to sell and issue to the Underwriters, in the Offering, an aggregate of (i) 2,500,000 shares of common stock and (ii) warrants to purchase up to 2,500,000 shares of common stock. The Offering closed on December 8, 2025. Each share of common stock and accompanying warrant to purchase one share of common stock were sold together at a combined public offering price of $4.00 less underwriting discounts and commissions. Additionally, the Company granted the Underwriters the Overallotment Option to purchase up to an additional 375,000 shares of common stock and/or warrants at the public offering price, less underwriting discounts and commissions.

On December 5, 2025, the Underwriters notified us of their determination to partially exercise the Overallotment Option for warrants to purchase an aggregate of 375,000 shares of common stock. On December 12, 2025, the Underwriters notified us of their determination to exercise the remaining Overallotment Option to purchase an aggregate of 375,000 shares of common stock. All of the securities in the Offering, including the Overallotment Option, were sold by the Company.

The net proceeds to the Company from the Offering, including the partial exercise of the Overallotment Option, were approximately $10.2 million, after deducting underwriting discounts and commissions and certain offering expenses. The Company currently intends to use the net proceeds from the Offering, together with its existing cash and cash equivalents, to fund growth initiatives, working capital and other general corporate purposes, which may include repayment of debt.

Each warrant issued in the Offering has an exercise price per share of common stock equal to $4.50, subject to certain adjustments. The warrants are immediately exercisable upon issuance and will expire on December 8, 2030 (the “Expiration Date”), provided that the holder will be prohibited, subject to certain exceptions, from exercising the warrant for shares of the Company’s common stock to the extent that immediately after giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 4.99% or 9.99% (as elected by the holder) of the total number of shares of the Company’s common stock then issued and outstanding, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess of 9.99% upon 61 days’ prior notice from the holder to the Company subject to the terms of the warrants. If, and only if, there is no effective registration statement at the time of exercise, the warrants may be exercised cashlessly.

On September 26, 2025, the Company entered into the Amended Loan Agreement governing the Senior Secured Loan with certain funds affiliated with Whitebox Advisors LLC, as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent. The Amended Loan Agreement (i) reduced the aggregate principal amount of the revolving credit commitment to $9,250 from $10,000, (ii) changed interest payments on the revolving loan to be due monthly in arrears from quarterly in arrears, (iii) and extended the maturity date to September 30, 2026. The Senior Secured Loan accrues interest at a per annum rate equal to 8.00% on the principal amount outstanding, payable monthly in arrears. The Senior Secured Loan also accrues an unused fee at a rate per annum equal to 3.00% on the excess, if any, of the revolving credit commitment over the average principal amount outstanding from time to time during the preceding fiscal quarter, payable monthly in arrears. The Senior Secured Loan is secured by substantially all of the Company’s assets, including all intellectual property.

In connection with the entry into the Amended Loan Agreement, the Company repaid $650 of the aggregate outstanding principal balance, plus accrued interest.

As of December 31, 2025, the principal amount outstanding on the Senior Secured Loan was $9,250 and the remaining availability was $0.

The financing agreement with Whitebox includes customary restrictions that limit our ability to engage in certain types of transactions. Additionally, the agreement contains a financial covenant that requires us to meet a certain minimum cash balance and liquidity threshold as of the end of each month. We were in compliance with the terms of our agreement with Whitebox as of December 31, 2025.

The Company incurred $410 of direct costs associated with the Senior Secured Loan transaction, consisting primarily of broker, bank and legal fees. These costs have been deferred and are being amortized over the life of the agreement. The unamortized debt discount balance was $329 at December 31, 2024. For the year ended December 31, 2025, the Company incurred $34 of additional fees, and the amortization of debt discount was $295. The unamortized debt discount balance was $68 at December 31, 2025. Additionally, in connection with the Amended Loan Agreement, the Company incurred $40 of direct costs, which were expensed.

On September 15, 2025, the Company completed a private placement with certain accredited investors, pursuant to which the Company issued and sold to the investors an aggregate of 833,330 common shares for total consideration of $5,000.

Management expects that the Company’s existing cash of $10,424, cash generated from operations, and access to committed financing will be sufficient to fund the Company’s operating plan, which was approved by the board of directors in February 2026, for at least twelve months from the date of issuance of the financial statements included elsewhere in this Annual Report on Form 10-K; however, if the Company’s management and board of directors approve additional growth initiatives and related investment in human resources, working capital, new geographic markets, information technology, and other uses of cash, the Company may require additional funding.

Our current indebtedness contains, and any future indebtedness may contain, restrictions on our business. We have historically had negative cash flow from operating activities, and continued losses could have a material negative effect on our business and prospects and impact our ability to continue as a going concern. If we are unable to secure additional financing on favorable terms, or at all, when we require it, our ability to continue to grow our business or react to market conditions could be impaired and in turn adversely affect our financial position and results of operations.

As of June 30, 2026, we had an accumulated deficit of $178.5 million and a cash balance of $2.4 million. For the six months ended June 30, 2026, we recorded a net loss of $10.7 million, used cash in operations of $8.0 million, and as of June 30, 2026, had a stockholders’ deficiency of $1.5 million. In addition, as of June 30, 2026, the principal amount outstanding on our Senior Secured Loan with the Lenders, as defined and described below, was approximately $9.3 million, with no remaining availability under such Senior Secured Loan, and a maturity date on the Senior Secured Loan of September 30, 2026. Our cash flow and net losses for the six months ended June 30, 2026 are indicators that raise substantial doubt about our ability to continue as a going concern for at least one year from the date of this Quarterly Report. If we become unable to continue as a going concern, we may have to curtail or suspend our operations and/or dispose of assets and might realize significantly less than the values at which they are carried on its consolidated financial statements. These actions may cause our stockholders to lose all or part of their investment in the Company’s common stock.

We intend to continue to expand, grow and develop our business, which may require additional capital to develop new products, enhance our platform, expand distribution, improve our operating infrastructure, react to market conditions and finance working capital requirements. Accordingly, we may need to engage in additional equity or debt financings to secure additional capital. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

On September 26, 2025, we entered into the first amendment (the “Amendment”) to our Senior Secured Loan and Security Agreement (as amended, the “Loan Agreement”) with certain funds affiliated with Whitebox Advisors, LLC (the “Lenders”) and Cantor Fitzgerald Securities, as administrative agent and collateral agent, with respect to our revolving credit facility (the “Senior Secured Facility”). The Amendment provides a revolving credit commitment in an aggregate amount of $9.25 million and, as of December 31, 2025, the principal amount outstanding was $9.25 million. The Senior Secured Facility is secured by substantially all of our assets, including all intellectual property. Our current and future indebtedness, including the revolving credit commitment under the Senior Secured Facility, may have significant negative effects on our operations, including:

We intend to satisfy our current and future debt service obligations with our then existing cash and cash equivalents. However, we may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under the Senior Secured Facility or any other debt instruments. In addition, the Senior Secured Facility contains, and the agreements governing our future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. These restrictive covenants include, among others, limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, investments (including acquisitions), dividends and other restricted payments and transactions with affiliates. Our failure to make payments under or comply with other covenants contained in the documents governing our indebtedness could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our debt and potentially the foreclosure on our assets in the event we are unable to repay all amounts owed.

If we are unable to secure additional funding on favorable terms, or at all, when we require it, our ability to continue to grow our business to react to market conditions could be impaired, which would adversely affect our financial position and results of operations.

We have failed, and may in the future fail, to meet the continued listing requirements of NYSE American, which could result in a de-listing of our common stock.

We may fail to satisfy the continued listing requirements of NYSE American LLC (“NYSE American”), such as the corporate governance requirements or the minimum stock price and stockholders’ equity requirements, and NYSE American may take steps to de-list our common stock. For example, numerous factors, such as negative financial or operational results, could adversely affect the market price of our common stock and our stockholders’ equity, and jeopardize our ability to meet or maintain NYSE American’s continued listing requirements, resulting in de-listing. On May 29, 2026, we received a notice (the “Notice”) from NYSE American stating that we are not in compliance with the continued listing standards set forth in Section 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”), which requires a company to have stockholders’ equity of at least $4.0 million if it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years, and Section 1003(a)(iii) of the Company Guide, which requires a company to have stockholders’ equity of at least $6.0 million if it has reported losses from continuing operations and/or net losses in its five most recent fiscal years. The Notice also indicated that we are not currently eligible for any exemption under Section 1003(a) of the Company Guide, including the exemption available to companies with a total market capitalization exceeding $50 million, among other requirements. A de-listing or the announcement of a potential de-listing will have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

In connection with this non-compliance, we submitted a plan (the “Plan”) to NYSE American on June 26, 2026 describing the actions we have taken or will take to regain compliance with the continued listing standards by November 29, 2027. If NYSE American accepts the Plan, we will be subject to periodic reviews, including quarterly monitoring, to assess our compliance with it. If NYSE American does not accept it, if we fail to regain compliance with the continued listing standards by November 29, 2027, or if we fail to make progress consistent with the Plan, NYSE American will initiate delisting proceedings as appropriate, subject to our right to appeal any staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.

The Notice has no immediate effect on the listing of our common stock, which continues to be listed and traded on NYSE American under the symbol “REED,” subject to our compliance with NYSE American’s other continued listing requirements, although our common stock now carries an added designation of “.BC” to indicate that its status is “below compliance.”

We are committed to regaining compliance with NYSE American’s continued listing standards. However, there can be no assurance that NYSE American will accept the Plan or that we will regain or maintain compliance with NYSE American’s continued listing requirements within the required timeframe or at all.

In the event of a de-listing, we may attempt to take actions to restore our compliance with the NYSE American listing requirements, but we can provide no assurance that any such action would allow our common stock to become re-listed, stabilize the market price or improve the liquidity of our common stock, or prevent future non-compliance with the NYSE American listing requirements. If our common stock is delisted from NYSE American, we and our stockholders could face significant material adverse consequences, including limited availability of market quotations for our common stock, reduced liquidity, a determination that our common stock is a “penny stock” subject to additional regulatory burdens, limited news and analyst coverage, and a decreased ability to issue additional securities or obtain additional financing in the future.

Results of Operations – Six Months Ended June 30, 2026, as compared to Six Months Ended June 30, 2025

The following table sets forth key statistics for the six months ended June 30, 2026 and 2025, respectively, in thousands.

(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 that 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

Gross billing decreased by 23% to $17,284 during the six months ended June 30, 2026, compared to $22,582 during the prior year, primarily driven by Reed’s volume decline of 10%, and Virgil’s volume decline of 30%. Prices on our brands decreased 8% to $19.84 per case, primarily driven by liquidation of select slow-moving product.

Discounts as a percentage of gross sales were 15% during the six months ended June 30, 2026, compared to 13% in the prior year. Net sales decreased 25% during the six months ended June 30, 2026, to $14,630, compared to $19,552 in the prior year, primarily driven by lower volumes with recurring national customers and higher promotional and other allowances.

Cost of Goods Sold

Cost of goods sold decreased $3,199 during the six months ended June 30, 2026, as compared to the prior year. As a percentage of net sales, cost of goods sold for the six months ended June 30, 2026, was 83% as compared to 78% for the prior year. The decrease in cost of goods sold was primarily driven by the net sales decrease discussed above and lower inventory write-offs. Inventory write-offs were $830 during the six months ended June 30, 2026 and $1,661 in the prior year period.

The total cost of goods per case decreased to $13.94 per case in the six months ended June 30, 2026, from $14.68 per case for the prior year.

Gross Margin

Gross margin was 17% for the six months ended June 30, 2026, compared to 22% for the prior 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 $972 in the six months ended June 30, 2026, to $2,227 from $3,199 in the prior year, primarily driven by continued improvements in logistics efficiency and freight optimization. Delivery costs in the six months ended June 30, 2026, were 15% of net sales and $2.56 per case, compared to 16% of net sales and $3.06 per case during the prior 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 $3,456 during the six months ended June 30, 2026, compared to $2,773 during the prior year. The increase was primarily driven by higher sales broker and marketing expenses. As a percentage of net sales, selling and marketing expenses were 24% of net sales during the six months ended June 30, 2026, as compared to 14% of net sales during the prior year.

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 were $7,082 during the six months ended June 30, 2026, an increase of $1,310 over the prior year. The increase was primarily driven by investments in personnel and related services to support our Asia growth initiative, offset by lower legal settlements and continuing efforts to optimize general and administrative expenses.

As a percentage of net sales, general and administrative expenses were 48% during the six months ended June 30, 2026, as compared to 30% during the prior year.

Loss from Operations

The loss from operations was $10,279 for the six months ended June 30, 2026, as compared to a loss of $7,535 in the prior year, primarily driven by lower gross profit and higher operating expenses discussed above.

Interest and Other Expense

Interest and other expense for the six months ended June 30, 2026, consisted of $408 of interest expense and $50 of other expense. During the prior year, interest and other expense consisted of $590 of interest expense, offset by $46 of other income.

EBITDA

In addition to our U.S. GAAP results, we present EBITDA as a supplemental measure of our performance. However, EBITDA is not a recognized measurement under U.S. GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define EBITDA as net income (loss), plus interest expense, tax expense, and depreciation and amortization.

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 U.S. GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating 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 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 EBITDA for the six months ended June 30, 2026 and 2025:

We present 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 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. EBITDA has limitations as an analytical tool, which includes, among others, the following:

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. For the six months ended June 30, 2026, the Company recorded a net loss of $10,737, used cash in operations of $8,014, and as of June 30, 2026, had a stockholders’ deficiency of $1,485. As of June 30, 2026, the Company had a cash balance of $2,410, principal amount outstanding on the Senior Secured Loan of $9,250, no remaining availability under the Senior Secured Loan, and a maturity date on the Senior Secured Loan of September 30, 2026 (see Note 6 Senior Secured Loan). In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, these factors, considered in the aggregate, 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. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.