REED'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. Operations and Liquidity

Reed’s, Inc., (the “Company”) is the owner and maker of Reed’s Craft Ginger Beer, Reed’s Real Ginger Ale, Reed’s Classic and Stormy Mules, Reed’s Hard Ginger Ales, and Virgil’s Handcrafted Sodas. The Company was established in 1989 and is incorporated in the state of Delaware.

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.

Liquidity

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 the Company’s operating losses, working capital, and investment in strategic growth initiatives. As of December 31, 2025, the Company had a cash balance of $10,424 and no remaining availability under the Company’s Senior Secured Loan. In accordance with Accounting Standards Codification (“ASC”) 205-40,Going Concern, the Company’s management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements were issued. As of the issuance date of these financial statements, management expects that the Company’s existing cash of $10,424 will be sufficient to fund the Company’s current operating plan for at least twelve months from the date of issuance of these financial statements. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Historically, the Company has financed its 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.

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; 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.

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 the Company seeks additional sources of financing, there can be no assurance that such financing will be available to the Company on favorable terms or at all. The Company’s ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, the Company’s performance and investor sentiment with respect to the Company and its industry.

The Company is 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, the Company 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 the Company’s business in future periods. The Company has 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 the Company regularly monitors vendors in its supply chain, and uses alternative suppliers when necessary and available, supply chain constraints could cause a disruption in the Company’s ability to obtain raw materials required to manufacture its products and adversely affect its operations.

Consolidation and Basis of Presentation

The accompanying consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Reed’s Inc. and its 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. All significant intercompany balances and transactions have been eliminated in consolidation.

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 consolidated financial statements have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.

2. Significant Accounting Policies

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.

Accounts Receivable

Accounts receivable are generally recorded at the invoiced amounts net of an allowance for credit losses, which is an estimate of amounts that may not be collectible. The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for credit losses is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential credit losses, credit losses are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding. As of December 31, 2025 and December 31, 2024, the allowance for credit losses was $980 and $859, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. The Company regularly reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on its estimated forecast of product demand and its ability to sell the product(s) concerned. Demand for the Company’s products can fluctuate significantly. Factors that could affect demand for the Company’s products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. During the years ended December 31, 2025, and 2024, inventory has been reduced by allowances for write-downs for inventory aggregating $2,013 and $277, respectively.

Property and Equipment

Property and equipment are stated at cost. Expenditures for major renewals and improvements that extend the useful lives of property and equipment or increase production capacity are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is calculated using accelerated and straight-line methods over the estimated useful lives of the assets as follows:

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is an indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended December 31, 2025 and 2024, the Company determined there wereno indicators of impairment of its property and equipment.

Intangible Assets

Intangible assets are comprised of indefinite-lived brand names acquired, so classified because the Company anticipates that these brand names will contribute cash flows to the Company perpetually. Indefinite-lived intangible assets are not amortized but are assessed for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired and evaluated annually to determine whether the indefinite useful life is appropriate. As part of its impairment test, the Company first assesses qualitative factors to determine whether it is more likely than not the asset is impaired. If further testing is necessary, the Company compares the estimated fair value of its asset with its book value. If the carrying amount of the asset exceeds its fair value, as determined by its discounted cash flows, an impairment loss is recognized in an amount equal to that excess. For the years ended December 31, 2025 and 2024, the Company determined there wasno impairment of its indefinite-lived brand names.

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 the Company’s customer, which generally occurs upon shipment from the Company’s 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 the Company’s products, and the Company’s assessment of performance obligations and transaction pricing for its sales contracts, the Company does not currently maintain a contract asset or liability balance for obligations. The Company assesses its contracts and the reasonableness of its conclusions on a quarterly basis.

Cost of Goods Sold

Cost of goods sold comprises the costs of raw materials and packaging utilized in the manufacture of products, co-packing fees, repacking fees, in-bound freight charges, as well as certain internal transfer costs. Additionally, cost of goods sold includes direct production costs in excess of charges allocated to finished goods in production. Charges for labor and overhead allocated to finished goods are determined on a market cost basis, which may be lower than the actual costs incurred. Plant costs in excess of production allocations are expensed in the period incurred rather than added to the cost of finished goods produced. Expenses not related to the production of the Company’s products are classified as operating expenses.

Delivery and Handling Expense

Shipping and handling costs comprise purchasing and receiving, inspection, warehousing, transfer freight, and other costs associated with product distribution after manufacture and are included as part of operating expenses.

Advertising Costs

Advertising costs are expensed as incurred and are included in selling and marketing expense. Advertising costs aggregated $126 and $63 for the years ended December 31, 2025 and 2024, respectively.

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.

Income Taxes

The Company uses an asset and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

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. 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. Potential common shares are excluded from the computation when their effect is antidilutive.

For the years ended December 31, 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:

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.

Segments

The Company’s President and Chief Executive Officer is the Company’s Chief Operating Decision Maker (“CODM”) and evaluates performance and makes operating decisions about allocating resources based on internal financial data. The Company has determined that it operates in a single reportable segment, which consists of manufacturing carbonated beverages under Reed’s and Virgil’s brand names and comprises the financial results of the Company. The required segment information, including significant segment expenses, is presented at Note 15**.**

Concentrations

The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250. Generally, the Company’s policy is to minimize borrowing costs by immediately applying cash receipts to borrowings against its credit facility. From time to time, however, the Company may be exposed to risk for the amounts of funds held in bank accounts in excess of the FDIC limit. To minimize the risk, the Company’s policy is to maintain cash balances with high quality financial institutions.

Net sales. During the year ended December 31, 2025, the Company’s largest customers accounted for 21%,15% and 14% of net sales, respectively. During the year ended December 31, 2024, the Company’s largest customers accounted for 18% and 17% of net sales, respectively. For the years ending December 31, 2025 or 2024, no other customer accounted for more than 10% revenue.

Accounts receivable. As of December 31, 2025, the Company had accounts receivable from three customers which comprised 35%,24% and 11% of its net accounts receivable, respectively. As of December 31, 2024, the Company had accounts receivable from two customers which comprised 20% and 17% of its net accounts receivable, respectively. At December 31, 2025 or 2024, no other customers accounted for more than 10% of accounts receivable.

The Company utilizes co-packers to produce 100% of its products. During the year ended December 31, 2025 and 2024, the Company utilized seven separate co-packers for most 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 13). 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 year ended December 31, 2025, the Company’s largest vendor accounted for approximately 13% of all purchases. During the year ended December 31, 2024, no vendor accounted for more than 10% of all purchases. No other vendors exceeded 10% of all purchases in either period.

Accounts payable. As of December 31, 2025 and December 31, 2024, no vendor accounted for more than 10% of total accounts payable.

Foreign Currency

Cash denominated in Japanese Yen (JPY) with an aggregate US Dollar equivalent of $131 and $0 at December 31, 2025 and 2024, respectively, was held by the Company in accounts at a financial institution in Japan. The Company used the exchange 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. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on its 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.

3. Inventory

Inventory consisted of the following (in thousands):

As of December 31, 2025 and 2024, inventory was net of a reserve of $835 and $1,296, respectively. During the year ended December 31, 2025, the Company incurred $2,013 of inventory charges related to changes in product portfolio optimization made by new management. During the year ended December 31, 2024 the Company incurred $277 of inventory charges related to inventory obsolescence.

4. Property and Equipment

Property and equipment comprise the following (in thousands):

Depreciation expense for the years ended December 31, 2025, and 2024 was $160 and $125, respectively, and amortization of right-of-use assets for the years ended December 31, 2025, and 2024 as $46 and $169, respectively.

During the year ended December 31, 2025, the Company sold certain equipment, with original cost of $77 and accumulated depreciation of $57, for $25.

5. Intangible Assets

Intangible assets consisted of the following (in thousands):

Intangible assets consist of acquired brand names, specifically Virgil’s, and costs related to trademarks. They have been assigned an indefinite life, as the Company currently anticipates that they will contribute cash flows to the Company perpetually. These indefinite-lived intangible assets are not amortized but are assessed for impairment annually and evaluated annually to determine whether the indefinite useful life remains appropriate. The Company first assesses qualitative factors to determine whether it is more likely than not that the asset is impaired. If further testing is necessary, the Company compares the estimated fair value of its asset with its book value. If the carrying amount of the asset exceeds its fair value, as determined by the discounted cash flows expected to be generated by the asset, an impairment loss is recognized in an amount equal to that excess. Based on management’s assessment, there were no indications of impairment at December 31, 2025.

During the years ended December 31, 2025, and 2024, the Company capitalized costs of $6 and $15, respectively, pertaining to legal and other fees incurred in applying for international trademarks for Reeds and Virgil’s brands.

6. Senior Secured Loan Payable

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 December 31, 2025 and 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 the Company’s 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. The Company was in compliance with the Amended Loan Agreement as of December 31, 2025 and 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 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.

7. Lease Liabilities

The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company leases its headquarters office, and certain office equipment and automobiles. Leases with an initial term of 12 months or less are not included on the balance sheets.

In May 2024, the Company entered into a long-term non-cancellable lease agreement for its new office facility that requires aggregate average monthly payments of $9 beginning December 2024. The lease terminates in November 2035. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $835, using a discount rate of 8.00%.

During the year ended December 31, 2024, the Company made aggregate payments of $205 towards its operating lease liability. As of December 31, 2024, operating lease liabilities totaled $837. During the year ended December 31, 2025, the Company made payments of $60 towards its operating lease liability. As of December 31, 2025, operating lease liabilities totaled $843, of which $40 was current. The Company’s right of use assets are presented as part of property and equipment (see Note 3).

During the years ended December 31, 2025, and 2024, lease costs totaled $46 and $134, respectively.

Future minimum lease payments under the leases are as follows (in thousands):

8. 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 shares of common stock.

Private Placements

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.

Public Offering

On December 4, 2025, the Company 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 the Company 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.

In December 2025, the Underwriters notified the Company of their determination to fully exercise the Overallotment Option to purchase an aggregate of 375,000 shares of common stock and warrants to purchase an aggregate of 375,000 shares of additional 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.

D&D Source of Life Holding Ltd., the controlling stockholder of the Company, and its affiliated entities purchased approximately $5.0 million of securities issued in the Offering at the public offering price.

The Offering was made pursuant to the Company’s registration statement on Form S-1 (File No. 333-291443) that was declared effective by the Securities and Exchange Commission on December 4, 2025 and a prospectus dated December 4, 2025.

2024 Transactions

During 2024, the Company received $4,096 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 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 consisted of 455,201 shares of common stock valued at $4,096 upon conversion of the SAFE investments and 211,466 common shares issued to D&D for consideration of $1,904.

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.

Other issuances of common stock for cash

On December 30, 2024, the Company entered into a Securities Purchase Agreement with accredited investors. The Company issued 2,450,980 shares of common stock for aggregate net proceeds of $10 million. The average price per share was $4.08.

Common shares issued upon conversion of Notes Payable

On November 19, 2024, the Company issued 3,746,345 shares of its common stock with a fair value of $20,232 to D&D upon conversion of outstanding convertible notes and in satisfaction of accrued interest of $22,480. The excess of the converted value of the convertible notes and accrued interest over the fair value of the shares issued of $2,248 was treated as a capital contribution.

9. Series A Convertible Preferred Stock

Series A Convertible Preferred Stock (the “Preferred Stock”) consists of $10 par value,5% non-cumulative, non-voting, participating preferred stock, with a liquidation preference of $10.00 per share.500,000 shares are authorized. As of December 31, 2025, and 2024, there were 9,411 shares outstanding. Each share of Preferred Stock can be converted into 0.08 shares of the Company’s common stock.

Dividends are payable at the rate of 5% annually, pro-rata and non-cumulative. The dividend can be paid in cash or, at the discretion of the Company’s board of directors, in shares of common stock based on its then fair market value. The Company cannot declare or pay any dividend on shares of the Company’s common stock until the holders of the Preferred Stock have received their annual dividend. In addition, the holders of the Preferred Stock are entitled to receive pro rata distributions of dividends on an “as converted” basis with the holders of the Company’s common stock.

In the event of any liquidation, dissolution or winding up of the Company, or if there is a change of control event as defined, the holders of the Preferred Stock are entitled to receive, prior to distributions to the holders of common stock, $10.00 per share plus all accrued and unpaid dividends. Thereafter, all remaining assets are distributed pro rata among all security holders. Since June 30, 2008, the Company has the right, but not the obligation, to redeem all or any portion of the Preferred Stock at $10.00 per share, the original issue price, plus all accrued and unpaid dividends.

The Preferred Stock may be converted at any time, at the option of the holder, into 0.08 shares of common stock, subject to adjustment in the event of stock splits, reverse stock splits, stock dividends, recapitalization, reclassification, and similar transactions. The Company is obligated to reserve authorized but unissued shares of common stock sufficient to affect the conversion of all outstanding shares of Preferred Stock.

Except as provided by law, the holders of the Preferred Stock do not have the right to vote on any matters, including the election of directors. However, so long as any shares of Preferred Stock are outstanding, the Company shall not, without the approval of a majority of the preferred stockholders, authorize or issue any equity security having a preference over the Preferred Stock with respect to dividends, liquidation, redemption or voting, including any other security convertible into or exercisable for any senior preferred stock.

During the years ended December 31, 2025 and 2024, the Company accrued dividends on the Preferred Stock of $5 which is included in accrued expenses in the accompanying balance sheets. No shares of Series A preferred stock were converted into common stock in 2025 and 2024.

10. Share-Based Payments

Management believes that the ability to issue equity compensation, in order to incentivize performance by employees, directors, and consultants, is essential to the Company’s growth strategy.

On December 21, 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) was approved by the Company’s shareholders. The 2020 Plan provides for the issuance of up to 50,000 shares. Options forfeited under the 2020 plan were returned to the share reserve. Options issued cannot be re-priced without shareholder approval. As of December 31, 2025, shares available for issuance under the 2020 Plan were 36,657.

The 2020 Plan permits the grant of options and stock awards to the Company’s employees, directors and consultants. The options may constitute either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or “non-qualified stock options”. The Plan is currently administered by the board of directors. The exercise price of an option granted under the plan cannot be less than 100% of the fair market value per share of common stock on the date of the grant of the option. Options may not be granted under the plan on or after the tenth anniversary of the adoption of the plan. Incentive stock options granted to a person owning more than 10% of the combined voting power of the common stock cannot be exercisable for more than five years. When an option is exercised, the exercise is received in cash, except that the plan administrator may permit the exercise price to be paid in any combination of cash, shares of stock having a fair market value equal to the exercise price, or as otherwise determined by the plan administrator.

On April 29, 2024, the 2024 Inducement Plan (the “2024 Plan”) was approved by the compensation committee of the Company’s board of directors. The 2024 Plan provides for the issuance of up to 41,667 shares. Options forfeited under the 2024 plan are returned to the share reserve for future issuance. Options issued cannot be re-priced without shareholder approval. As of December 31, 2025, shares available for issuance under the 2024 Plan were 27,350.

The 2024 Plan permits the grant of options and stock awards to the Company’s employees, directors and consultants. The options may constitute either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or “non-qualified stock options”. The Plan is currently administered by the board of directors. The exercise price of an option granted under the plan cannot be less than 100% of the fair market value per share of common stock on the date of the grant of the option. Options may not be granted under the plan on or after the tenth anniversary of the adoption of the plan. Incentive stock options granted to a person owning more than 10% of the combined voting power of the common stock cannot be exercisable for more than five years. When an option is exercised, the excise price is received in cash, except that the plan administrator may permit the exercise price to be paid in any combination of cash, shares of stock having a fair market value equal to the exercise price, or as otherwise determined by the plan administrator.

Stock Options

As of December 31, 2025, the Company had issued and outstanding stock options to purchase an aggregate of 29,028 shares of common stock. The Company’s stock option activity during the years ended December 31, 2025, and 2024 is as follows:

During the year ended December 31, 2024, the Company approved options exercisable into 31,355 shares to be issued pursuant to the 2024 Plan. The stock options are exercisable at a price of $7.80 per share and expire inten years. The total fair value of these options at grant date was approximately $253, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $7.80 share, expected term of six years, volatility of 92%, dividend rate of 0%, and weighted average risk-free interest rate of 4.65%. 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 year ended December 31, 2025 and 2024, the Company recognized $59 and $528 of compensation expense relating to vested stock options. As of December 31, 2025, the aggregate amount of unvested compensation related to stock options was approximately $10 which will be recognized as an expense as the options vest in future periods through April 30, 2028.

As of December 31, 2025, 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 December 31, 2025, which was $2.10, and the exercise price of the outstanding stock options.

Additional information regarding options outstanding and exercisable as of December 31, 2025, is as follows:

11. Stock Warrants

As of December 31, 2025, the Company has issued warrants to purchase an aggregate of 2,963,215 shares of common stock. The Company’s warrant activity during the years ended December 31, 2025, and 2024 is as follows:

On December 4, 2025, the Company 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 (See Note 8). Pursuant to the Overallotment Option, the company also sold and issued to the Underwriters an aggregate of 375,000 shares of common stock and warrants to purchase an aggregate of 375,000 shares of additional common stock. 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.

As of December 31, 2025, the outstanding and exercisable warrants have no intrinsic value. The aggregate intrinsic value was calculated as the difference between the closing market price as of December 31, 2025, which was $2.10, and the exercise price of the Company’s warrants to purchase common stock.

Additional information regarding warrants outstanding and exercisable as of December 31, 2025, is as follows:

12. Income Taxes

The Company is subject to taxation in the United States and various foreign jurisdictions.

For the years ended December 31, 2025 and 2024, a reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

As of December 31, 2025 and 2024, significant components of the Company’s deferred tax assets and liabilities are as follows:

At December 31, 2025 and 2024, the Company had available Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income. For Federal purposes the amounts available were approximately $117,000 and $105,000, respectively. For state purposes approximately $73,000 and $59,000 was available at December 31, 2025 and 2024, respectively. Foreign net operating loss carryforwards are approximately $2,000 at December 31, 2025, with expiration dates ranging from 2035 to indefinite depending on the jurisdiction. The Federal carryforward for NOLs arising in years prior to 2018 is approximately $31,000, which expires on various dates through 2037. NOLs originating after 2017 of approximately $86,000, can be carried forward indefinitely, but are only able to offset 80% of taxable income in future years. The state carryforward expires on various dates through 2045. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit.

Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOL may be limited as a result of changes in stock ownership. NOLs incurred subsequent to the latest change in control are not subject to the limitation.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 31, 2025 and 2024, the Company did not have a liability for unrecognized tax benefits.

The Company recognizes as income tax expense, interest and penalties on uncertain tax provisions. As of December 31, 2025 and 2024, the Company has not accrued interest or penalties related to uncertain tax positions. As of the year ended December 31, 2025, the tax returns for 2022 through 2025 remain open to examination by the Internal Revenue Service and for 2021 to 2025 for various state taxing jurisdictions to which the Company is subject.

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the NOLs and will recognize the appropriate deferred tax asset at that time.

13. 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.

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.

In February 2026, the arbitration resulted in an interim award in favor of the Company. The interim award will become a final award after a final determination of the costs and prejudgment interest is made by the arbitrator. As of December 31, 2024, the Company recorded a receivable of $144 due from CCB and a corresponding payable due to CCB of $144. Given the interim award, the Company has extinguished all amounts due from and to CCB. The Company will account for the award once the ruling is final and collectability of the award, if any, becomes probable.

14. 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, the Company is a party to claims and legal proceedings arising in the ordinary course of business. The Company’s management evaluates its 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.

The Company believes 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, the Company believe that the final outcome of such claims and proceedings will not have a material adverse impact on the Company’s financial position, liquidity, or results of operations.

15. 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 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 the Company’s 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 the Company’s CODM.

16. Subsequent Events