Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | 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.
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| Reverse Stock Split | 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.
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| Liquidity | 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 and no 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 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.
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| Recent Trends - Market Conditions | 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.
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| Use of Estimates | 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.
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| Revenue Recognition | 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.
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| 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.
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| 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.
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| Advertising Costs | 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.
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| Concentrations | 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.
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| Fair Value of Financial Instruments | 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.
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| Foreign Currency | 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 the exchange rate in the following table to translate amounts denominated in non-USD currencies as of the periods noted:
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| Recent Accounting Pronouncements | 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. |
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