REEDS INC

For a description of our legal proceedings, please see Note 9 “*Transactions with California Custom Beverage, LLC, former related party”*and Note 10 “Commitments and Contingencies” in the Notes to Condensed Financial Statements set forth in Part I, Item 1 Condensed Financial Statements of this Quarterly Report.

We are also party to ordinary, routine litigation incidental to our business, including routine litigation matters tendered to our insurance carriers. 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. Although the results of such routine litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such routine litigation and claims will not have a material adverse impact on our financial position, liquidity, or results of operations.