REED'S, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Three and Nine Months Ended September 30, 2025 and 2024 (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, 2024, filed with the SEC on March 28, 2025. 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, 2025, and the results of its operations and its cash flows for the nine months ended September 30, 2025 and 2024. The balance sheet as of December 31, 2024 is derived from the Company’s audited financial statements.

The results of operations for the nine months ended September 30, 2025, are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2025.

Reverse Stock Split

On October 31, 2025, the Company effected a 1-for-6 reverse stock split of its common stock (the “Reverse Stock Split). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All shares and per share amounts and information presented herein have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

Liquidity

As reflected in the accompanying financial statements, for the nine months ended September 30, 2025, the Company recorded a net loss of $12,061 and used cash in operations of $13,230. Cash used in operations was primarily from our operating losses as well as for working capital, as the Company invested $3,443 in inventory to more effectively fulfill customer demand, and investment in strategic growth initiatives. As of September 30, 2025, we had a cash balance of $4,136 andno remaining availability under our Senior Secured Loan, as discussed further below.

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 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 shares of common stock for total consideration of $5,000 (see Note 7).

On September 26, 2025, we entered into the first amendment to the loan agreement (as amended, the “Amended Loan Agreement”) governing our Senior Secured Loan (see Note 5). Pursuant to the Amended Loan Agreement, (i) the aggregate principal amount of the revolving credit commitment under the Senior Secured Loan was reduced to $9,250 from $10,000, (ii) interest payments became due on a monthly basis as of the last business day of each month, and (iii) the maturity date was extended to September 30, 2026. In connection with the Amended Loan Agreement, we repaid $650 of the aggregate outstanding principal balance, plus accrued interest.

Management expects that the Company’s existing cash of $4,136, 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 January 2025, for at least twelve months from the date of issuance of these financial statements; 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, or other uses of cash, the Company may require additional funding.

To alleviate any funding considerations, management periodically evaluates various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, strategic transactions, 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 are also continuing to take actions to improve the Company’s operating performance and cash generated from operations, including product portfolio optimization, implementing strategies to increase sales, streamlining operations, improving supply chains, negotiating equitable vendor contracts, and managing product price architecture. However, we may be unsuccessful in executing these actions in a timely manner or at all.

If the Company is unable to raise additional capital whenever necessary or otherwise improve its operating performance or generation of cash from operations, it may be forced to decelerate or curtail certain of its operations until such time as additional capital becomes available.

Recent Trends - Market Conditions

Inflation, actions by the Federal Reserve to address inflation, fluctuations in energy prices, and the potential impacts of tariffs, trade tensions and geopolitical events 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 vendors 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.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 realizability of deferred tax assets and the related valuation allowance, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, 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 period. Diluted earnings (loss) per share is computed by dividing the net income (loss) 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. Potential common shares are excluded from the computation when their effect is antidilutive.

For the nine months ended September 30, 2025 and 2024, 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:

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 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, 2025, and 2024, aggregated $50 and $8, respectively. Advertising costs for the nine months ended September 30, 2025, and 2024, aggregated $98 and $38, respectively.

Concentrations

Net sales. During the three months ended September 30, 2025, two customers accounted for 24% and 16% of net sales, respectively, and during the nine months ended September 30, 2025, three customers accounted for 20%,15%, and 14% of net sales, respectively. During the three months ended September 30, 2024, two customers accounted for 18% and 15% of net sales, respectively, and during the nine months ended September 30, 2024, three customers accounted for 18%,15%, and 11% of net sales, respectively. No other customers exceeded 10% of sales in either period.

Accounts receivable. As of September 30, 2025, the Company had accounts receivable with one customer which comprised 18% of its net accounts receivable. As of December 31, 2024, the Company had accounts receivable from two customers which comprised 17% and 14% of its net accounts receivable, respectively. No other customers exceeded 10% of net accounts receivable in either period.

The Company utilizes co-packers to produce 100% of its products. During the nine months ended September 30, 2025 and the year ended December 31, 2024, the Company utilized seven separate co-packers for most of its production and bottling of beverage products in the United States. The Company has established relationships with these co-packers, including a former related party (see Note 10). Although there are other co-packers available to the Company, a change in co-packers may cause a delay in the production process, which could adversely affect operating results.

Purchases from vendors. During the nine months ended September 30, 2025, the Company’s largest vendor accounted for approximately 15% of all purchases. During the nine months ended September 30, 2024, the Company’s two largest vendors accounted for approximately 11% and 10% of all purchases. No other vendors exceeded 10% of all purchases in either period.

Accounts payable. As of September 30, 2025, one vendor accounted for 10% of total accounts payable. As of December 31, 2024, no vendor accounted for more than 10% of total accounts payable. No other vendors exceeded 10% of accounts payable in either period.

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. Accounting Standards Codification Section 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 in which there is little or no market data for the asset or liability which requires the Company to develop its own assumptions.

The Company believes the carrying amounts of certain financial instruments, including 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-term nature of such 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.

Foreign Currency

Cash denominated in Japanese Yen (JPY) with an aggregate US Dollar equivalent of $549 and $0 at September 30, 2025 and December 31, 2024, respectively, was held by the Company in accounts at a financial institution in Japan. We used theexchange rate in the following table to translate amounts denominated in non-USD currencies as of the periods noted:

Recent Accounting Pronouncements

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement 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 consisted of the following:

As of September 30, 2025 and December 31, 2024, inventory was net of a reserve of $1,185 and $1,296, respectively. During the nine months ended September 30, 2025, the Company incurred $1,775 of inventory charges related to changes in product portfolio optimization made by new management.

3. Property and Equipment

Property and equipment are comprised of the following:

Depreciation expense for the nine months ended September 30, 2025 and 2024 was $121 and $88, respectively, and amortization of right-of-use assets for the nine months ended September 30, 2025 and 2024 was $35 and $121, respectively.

4. Intangible Assets

Intangible assets consisted of the following:

5. Senior Secured Loan Payable

The following sets forth amounts in respect of our senior secured loan:

On November 14, 2024, the Company entered into a Senior Secured Loan and Security Agreement (the “Loan Agreement”) with certain funds affiliated with Whitebox Advisors LLC (“Whitebox”), as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent. The Loan Agreement provided a revolving credit commitment in an aggregate amount of $10,000 (the “Senior Secured Loan”). On September 26, 2025, the Company entered into an Amended Loan Agreement. 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 September 30, 2025, and December 31, 2024, the principal amount outstanding on the Senior Secured Loan was $9,250 and $9,900, respectively, and the remaining availability was $0 and $100, respectively.

The Amended Loan Agreement 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 Amended Loan Agreement as of September 30, 2025 and December 31, 2024.

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 nine months ended September 30, 2025, the company incurred $34 of additional fees, and the amortization of debt discount was $273. The unamortized debt discount balance was $90 at September 30, 2025. Additionally, in connection with the Amended Loan Agreement, the Company incurred $40 of direct costs, which were expensed.

6. Lease Liabilities

During the nine months ended September 30, 2025 and 2024, lease costs totaled $35 and $121, respectively.

As of December 31, 2024, operating lease liabilities totaled $837. During the nine months ended September 30, 2025, the Company made payments of $16 towards its operating lease liability. As of September 30, 2025, operating lease liabilities totaled $853, of which $48 was current. The Company’s right of use assets are presented as part of property and equipment (see Note 3).

As of September 30, 2025, the weighted average remaining lease term for the operating lease was 10.17 years. As of September 30, 2025, the weighted average discount rate on the operating lease was 8.0%.

7. Issuance of Common Stock

2025 Transactions

During 2024, the Company received $115 in gross proceeds from investors pursuant to Simple Agreements for Future Equity (“SAFE”) investments, which remained outstanding as of December 31, 2024. On April 3, 2025, the SAFE investments were converted to 12,778 common shares.

On June 4, 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 537,632 shares of common stock for total consideration of $3,000. D&D Source of Life Holding, Ltd. (“D&D”), the Company’s majority stockholder (a related party), served as lead investor, participating in this transaction in the amount of $1,000.

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 shares of common stock for total consideration of $5,000.

2024 Transactions

During 2024, the Company received $4,097 in gross proceeds from three significant stockholders of the Company, D&D, Union Square Park Partners LP, and John J. Bello, the Company’s former Chairman, pursuant to Simple Agreements for Future Equity (“SAFE”) investments. The SAFE investments were to convert into the next equity financing of Reed’s at the lesser of $9.00 per share or the per share price in the financing. D&D was given the right to designate a second independent director nominee to the board of directors of Reed’s and the company agreed to limit the size of its board of directors to nine (9) for so long as D&D owns 25% or more of the equity securities of the Company. The Company initially recorded the SAFE investments as a liability at $5,490 which was reflected on its June 30, 2024 balance sheet, and reflected a loss from change in fair value of SAFE investments of $1,393 at that date.

On September 9, 2024, the Company entered into a Securities Purchase Agreement with various purchasers for the issuance of 666,667 common shares for total consideration of $6,000. The various purchasers also held Company SAFE investments. The total capital raise was comprised of 455,201 shares of common stock valued at $4,097 upon conversion of the SAFE investments and 211,466 common shares issued to D&D for consideration of $1,903.

Upon conversion of the SAFE instruments during the three months ended September 30, 2024, the Company recorded a gain from change in fair value of SAFE investments of $1,393.

8. Stock-Based Compensation

Restricted common stock

On April 16, 2025, the Company’s board of directors appointed Cyril Wallace as Chief Executive Officer and member of the board of directors, pursuant to an executive employment agreement. Subject to the board of directors’ establishment of a new equity incentive plan and Mr. Wallace’s continued employment, Mr. Wallace will be granted a restricted stock award of 46,667 shares of common stock, vesting over aone-year term, and performance based stock options to purchase up to 231,361 shares of common stock. The performance-based stock options will be granted in tranches beginning in 2025 through 2027. Vesting of performance-based stock options will be subject to achievement of annual performance metrics established by the board of directors and agreed between the parties.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2025:

During the nine months ended September 30, 2025 and 2024, the Company recognized $60 and $268 of compensation expense relating to vested stock options, respectively. As of September 30, 2025, the aggregate amount of unvested compensation related to stock options was approximately $26, which will be recognized as an expense as the options vest in future periods through March 28, 2027.

As of September 30, 2025, the outstanding and exercisable options haveno aggregate intrinsic value. The aggregate intrinsic value was calculated as the difference between the closing market price as of September 30, 2025, which was $6.18, and the exercise price of the outstanding stock options.

9. Stock Warrants

The Company’s warrant activity during the nine months ended September 30, 2025 is as follows:

As of September 30, 2025, the outstanding and exercisable warrants have no aggregate intrinsic value. The aggregate intrinsic value was calculated as the difference between the closing market price as of September 30, 2025, which was $6.18, and the exercise price of the Company’s warrants to purchase common stock.

10. 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 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.

At September 30, 2025 and December 31, 2024, accounts receivable due from and accounts payable due to CCB were as follows:

In January 2024, CCB filed an arbitration demand alleging claims against the Company for various disputed amounts outstanding. Also in January 2024, the Company filed an arbitration demand alleging claims against CCB for various disputed amounts outstanding. The two cases were consolidated, and the arbitration process is expected to continue pending final judgment. 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.

11. Commitments and Contingencies

On July 1, 2025, the Company entered into a settlement and release agreement (the “Settlement”) related to an engagement letter with an investment bank dated May 1, 2023. Pursuant to the engagement letter, the Company agreed to pay the investment bank certain fees for services rendered. Pursuant to the Settlement, the Company paid the investment bank $1,600 and, effective immediately upon receipt of payment, the Company was released from any and all liability. The Company has provided for the Settlement in the accompanying financial statements.

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.

12. Segment Information

The Company operates and manages its business asone reportable and operating segment as a manufacturer of carbonated beverages under Reed’s and Virgil’s brand names. The measure of segment assets is reported on the balance sheet as total assets.

The Company’s chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, reviews financial information presented and decides how to allocate resources based on net income (loss). Net income (loss) is used for evaluating financial performance.

Significant segment expenses include research and development, salaries, insurance, and stock-based compensation. Operating expenses include all the remaining costs necessary to operate our business, which primarily include external professional services and other administrative expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM.

13. Subsequent Events

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. Accordingly, all share and per share amounts for all periods presented in the condensed consolidated financial statements have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.