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Operations and Liquidity
12 Months Ended
Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Operations and Liquidity

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, and Reed’s Hard Ginger Ales and Virgil’s Handcrafted Sodas. The Company was established in 1989 and is incorporated in the state of Delaware.

 

Liquidity

 

For the year ended December 31, 2023, the Company recorded a net loss of $15,523 and used cash in operations of $4,266. 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 $603, plus $4,100 of additional cash received subsequent to December 31, 2023, from investments with significant stockholders, 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.

 

Management’s assessment whether there is sufficient cash on hand, together with expected capital raises, to assure operations for a period of at least twelve months from the date these financial statements are issued, is based on conditions that are known and reasonably knowable to management, considering various scenarios, projections, and estimates and certain key assumptions. These assumptions include, among other factors, management’s ability to raise additional capital, and the expected timing and nature of the Company’s forecasted cash expenditures.

 

Historically, the Company has financed its operations through public and private sales of common stock, convertible debt instruments, credit lines from financial institutions, and cash generated from operations. As we seek additional sources of financing, there can be no assurance that such financing would 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.

 

Recent Trends – Market Conditions

 

Although the U.S. economy continued to grow throughout 2023, the higher inflation, the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our 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 companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. The Company has experienced moderation in inflation and anticipates this to continue throughout 2024.

 

During the year ended December 31, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022. The average cost of shipping and handling for year ended December 31, 2023, was $3.07 per case, as compared to $3.95 per case for the year ended December 31, 2022. Although the Company has experienced decreases in freight costs over the last three quarters, in the Company’s opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation. Mitigation plans have been implemented to manage this risk. The Company has been negatively impacted by supply chain challenges impacting our ability to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins.

 

 

Nasdaq Delisting and now trading on the OTCQX US Market

 

On August 16, 2021, the Company received a written notice from the Nasdaq Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”) that the bid price of the Company’s common stock had closed at less than $1 per share over the previous 30 consecutive business days and, as a result, did not comply with Listing Rule 5550(a)(2) (the “Bid Price Rule”).

 

Effective January 27, 2023, the Company achieved compliance with the Bid Price Rule after effecting a 1:50 reverse split (see Reverse Stock Split below). However, after evaluating options to achieve compliance with the Minimum Stockholders’ Equity Rule, the Company’s board of directors determined not to proceed with a dilutive capital raise. On February 14, 2023, the Company received a written notice that the Nasdaq’s Listing Qualifications staff has determined that the Company’s securities were to be delisted from Nasdaq, and trading in the Company’s common stock was suspended from the Nasdaq Capital Market on February 16, 2023. On February 16, 2023, the Company’s common stock began being quoted for trading on the OTCQX US Market, operated by OTC Markets, Inc. (“OTCQX”), and the Company continues to be a reporting company under the Securities Exchange Act of 1934, as amended.

 

Reverse Stock Split

 

On January 25, 2023, the Company effectuated a 1-for-50 reverse stock split of its issued and outstanding shares of common stock, par value $0.0001 per share.

 

The authorized number of shares of common stock were not affected by the reverse stock split. No fractional shares were issued in connection with the reverse stock split, and there was no effect on total stockholders’ deficit. All common shares, stock options, stock warrants and per share amounts presented herein have been adjusted retroactively to reflect the reverse stock splits for all periods presented.