REED'S Q2 Losses Widen 65% Amid Sales Slump, Inventory Write-Offs

TL;DR

**REED'S is bleeding cash and drowning in inventory, making it a risky bet as its loan deadline looms.**

AI Summary

REED'S, INC. reported a significant decline in financial performance for the six months ended June 30, 2025, with net sales decreasing to $19,552 thousand from $21,469 thousand in the prior year, a 8.9% drop. The company's net loss widened substantially to $8,079 thousand, compared to a net loss of $4,885 thousand for the same period in 2024, representing a 65.4% increase in losses. A major contributor to this was a $1,661 thousand inventory write-off in 2025, which was absent in 2024. Gross profit plummeted to $4,209 thousand from $7,244 thousand, a 41.9% decrease. Operating expenses rose to $11,744 thousand from $8,563 thousand, driven by increases in delivery and handling, selling and marketing, and general and administrative expenses. Cash used in operations surged to $10,410 thousand, primarily due to a $6,728 thousand investment in inventory. The company's cash balance decreased from $10,391 thousand at December 31, 2024, to $2,677 thousand by June 30, 2025. REED'S completed a private placement on June 4, 2025, raising $3,000 thousand through the issuance of 3,225,807 common shares, with Era Regenerative Medicine Ltd, a majority stockholder, investing $1,000 thousand. The Senior Secured Loan of $10,000 thousand is due on November 14, 2025, and the company is evaluating refinancing alternatives.

Why It Matters

REED'S significant increase in net loss and declining sales signal deep operational challenges that could impact investor confidence and future growth prospects. The substantial inventory write-off of $1,661 thousand suggests inefficiencies in supply chain management or product demand forecasting, directly affecting profitability. For employees, continued losses and the need for refinancing could lead to job insecurity or operational restructuring. Customers might see impacts on product availability or pricing if the company struggles to optimize its supply chain and operating costs. In a competitive beverage market, REED'S inability to stem losses and improve cash flow puts it at a disadvantage against more financially stable rivals, potentially leading to market share erosion.

Risk Assessment

Risk Level: high — The company reported a net loss of $8,079 thousand for the six months ended June 30, 2025, and used $10,410 thousand in cash from operations, primarily due to a $6,728 thousand investment in inventory. Its Senior Secured Loan of $10,000 thousand is due on November 14, 2025, with only $100 thousand available under the facility, indicating significant refinancing risk and potential liquidity issues.

Analyst Insight

Investors should exercise extreme caution and consider divesting REED shares due to severe liquidity concerns, widening losses, and the imminent maturity of its Senior Secured Loan. Monitor closely for successful refinancing efforts or significant operational improvements before considering any new investment.

Financial Highlights

revenue

$19.55M

total Assets

$23.71M

total Debt

$21.97M

net Income

-$8.08M

gross Margin

21.5%

cash Position

$2.68M

revenue Growth

-8.9%

Key Numbers

• $19.55M — Net Sales (Decreased from $21.47M in 2024, an 8.9% decline for the six months ended June 30, 2025.)
• -$8.08M — Net Loss (Widened from -$4.89M in 2024, a 65.4% increase in losses for the six months ended June 30, 2025.)
• -$10.41M — Cash Used in Operations (Increased from -$3.31M in 2024, indicating significant cash burn for the six months ended June 30, 2025.)
• $1.66M — Inventory Write-offs (A new expense in 2025, significantly impacting cost of goods sold and gross profit.)
• $2.68M — Cash Balance (Decreased from $10.39M at December 31, 2024, highlighting liquidity challenges.)
• $10.00M — Senior Secured Loan (Due on November 14, 2025, posing a significant refinancing risk.)
• $3.00M — Proceeds from Common Stock Sale (Raised through a private placement on June 4, 2025, providing some capital but insufficient to cover losses.)
• 48,673,722 — Shares Outstanding (As of August 8, 2025, an increase from 45,371,247 at December 31, 2024, due to stock issuance.)

Key Players & Entities

• REED'S, INC. (company) — registrant
• Era Regenerative Medicine Ltd (company) — lead investor and majority stockholder in private placement
• D&D Source of Life Holding, Ltd. (company) — subsidiary of Era Regenerative Medicine Ltd
• SEC (regulator) — Securities and Exchange Commission
• $19,552 thousand (dollar_amount) — net sales for six months ended June 30, 2025
• $8,079 thousand (dollar_amount) — net loss for six months ended June 30, 2025
• $10,410 thousand (dollar_amount) — cash used in operations for six months ended June 30, 2025
• $6,728 thousand (dollar_amount) — investment in inventory for six months ended June 30, 2025
• $2,677 thousand (dollar_amount) — cash balance as of June 30, 2025
• $10,000 thousand (dollar_amount) — aggregate amount of Senior Secured Loan

FAQ

Risk Factors

• Liquidity and Going Concern [high — financial]: The company's cash balance has significantly decreased from $10.39 million at December 31, 2024, to $2.68 million as of June 30, 2025. This, coupled with a substantial increase in cash used in operations ($10.41 million for the six months ended June 30, 2025), raises concerns about the company's ability to meet its short-term obligations. The upcoming maturity of the $10 million Senior Secured Loan on November 14, 2025, without clear refinancing, exacerbates this risk.
• Inventory Management and Write-offs [medium — operational]: A significant inventory write-off of $1.66 million occurred in the six months ended June 30, 2025, which was absent in the prior year. This directly impacted cost of goods sold and led to a substantial decline in gross profit. The company also saw a $6.73 million investment in inventory during this period, contributing to the increased cash burn.
• Deteriorating Profitability [high — financial]: Net sales declined by 8.9% to $19.55 million for the six months ended June 30, 2025, compared to $21.47 million in the prior year. Gross profit plummeted by 41.9% to $4.21 million from $7.24 million. The net loss widened by 65.4% to $8.08 million, indicating a significant deterioration in the company's ability to generate profits.
• Increasing Operating Expenses [medium — financial]: Operating expenses increased to $11.74 million for the six months ended June 30, 2025, from $8.56 million in the prior year. This rise was driven by increases in delivery and handling, selling and marketing, and general and administrative expenses, further pressuring the company's bottom line.
• Debt Maturity and Refinancing Risk [high — financial]: The company has a $10 million Senior Secured Loan due on November 14, 2025. While the company is evaluating refinancing alternatives, there is no guarantee of successful refinancing, which could lead to a default or significant financial distress.

Industry Context

Reed's, Inc. operates in the beverage industry, specifically focusing on craft sodas and mixers. This sector is characterized by increasing consumer demand for premium and healthier beverage options, but also faces intense competition from established large beverage corporations and a proliferation of smaller craft producers. Trends include a shift towards natural ingredients, lower sugar content, and unique flavor profiles. The market is sensitive to marketing, distribution, and brand loyalty.

Regulatory Implications

As a food and beverage company, Reed's is subject to various regulations concerning product safety, labeling, and advertising. Changes in food and drug administration (FDA) regulations or state-specific beverage laws could impact product formulations, marketing claims, or distribution channels. Compliance with these regulations is essential to avoid penalties and maintain consumer trust.

What Investors Should Do

1. Monitor the company's progress on refinancing the $10 million Senior Secured Loan due November 14, 2025. A failure to secure refinancing could lead to severe liquidity issues.
2. Analyze the drivers behind the 8.9% decline in net sales and the 41.9% drop in gross profit. Understanding the sustainability of these negative trends is crucial.
3. Evaluate the effectiveness of management's strategies to address the significant increase in operating expenses and the $1.66 million inventory write-off.
4. Assess the company's ability to manage its cash burn, which resulted in a significant decrease in cash balance from $10.39 million to $2.68 million in six months.

Key Dates

• 2025-06-04: Completed a private placement raising $3,000 thousand. — Provided a capital infusion, though insufficient to fully offset the widening losses and cash burn. Era Regenerative Medicine Ltd invested $1,000 thousand.
• 2025-06-30: End of the six-month period for the reported financial statements. — Highlights a significant decline in net sales, a widening net loss, and a substantial decrease in cash balance compared to the prior year.
• 2025-11-14: Senior Secured Loan of $10,000 thousand is due. — Represents a critical near-term liquidity event. The company's ability to refinance this debt is paramount to its continued operations.
• 2024-12-31: End of the fiscal year. — Represents the prior year's financial position, showing a higher cash balance ($10.39 million) and a smaller net loss compared to the current period.

Glossary

Inventory write-offs

The reduction in the value of inventory when it becomes obsolete, damaged, or its market value falls below its cost. This is recognized as an expense. (A new expense of $1.66 million in the current period significantly impacted gross profit and indicated potential issues with inventory management or demand.)

Accumulated deficit

The total net losses of a company since its inception that have not been offset by net income. It represents a negative balance in retained earnings. (The accumulated deficit increased to $159.97 million as of June 30, 2025, reflecting the company's history of unprofitability and the recent widening losses.)

Senior Secured Loan

A type of debt that is backed by specific collateral and has priority over other unsecured debts in the event of bankruptcy or liquidation. (The $10 million loan due in November 2025 is a significant short-term liability that poses a refinancing risk.)

Private placement

The sale of securities to a select group of investors, rather than through a public offering. (The company raised $3 million through a private placement, indicating a need for capital and a reliance on private funding sources.)

Year-Over-Year Comparison

Compared to the prior year's six-month period, Reed's, Inc. has experienced a significant downturn. Net sales decreased by 8.9% to $19.55 million, while gross profit saw a sharp 41.9% decline to $4.21 million. The company's net loss has widened considerably by 65.4% to $8.08 million. A new factor impacting profitability was a $1.66 million inventory write-off. Operating expenses also rose, contributing to a substantial increase in cash used in operations and a depletion of the company's cash reserves.

Key Financial Figures

• $1,024 — th an aggregate US Dollar equivalent of $1,024 and $0 at June 30, 2025 and December 31
• $0 — gate US Dollar equivalent of $1,024 and $0 at June 30, 2025 and December 31, 2024,

Filing Documents

• form10-q.htm (10-Q) — 952KB
• ex10-4.htm (EX-10.4) — 218KB
• ex10-5.htm (EX-10.5) — 201KB
• ex31.htm (EX-31) — 24KB
• ex32.htm (EX-32) — 12KB
• 0001641172-25-023466.txt ( ) — 5001KB
• reed-20250630.xsd (EX-101.SCH) — 44KB
• reed-20250630_cal.xml (EX-101.CAL) — 53KB
• reed-20250630_def.xml (EX-101.DEF) — 141KB
• reed-20250630_lab.xml (EX-101.LAB) — 363KB
• reed-20250630_pre.xml (EX-101.PRE) — 274KB
• form10-q_htm.xml (XML) — 492KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION F-1

Condensed Financial Statements

Item 1. Condensed Financial Statements F-1 Condensed Balance Sheets – June 30, 2025 (Unaudited) and December 31, 2024 F-1 Condensed Statements of Operations for the three and six months ended June 30, 2025 and 2024 (Unaudited) F-2 Condensed Statements of Changes in Stockholders' Equity (Deficit) for the three and six months ended June 30, 2025 and 2024 (Unaudited) F-3 Condensed Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited) F-4 Notes to Condensed Financial Statements for the three and six months ended June 30, 2025 and 2024 (Unaudited) F-5

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 11

Controls and Procedures

Item 4. Controls and Procedures 11

– OTHER INFORMATION

PART II – OTHER INFORMATION 11

Legal Proceedings

Item 1. Legal Proceedings 11

Risk Factors

Item 1A. Risk Factors 12

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 12

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 12

Other Information

Item 5. Other Information 12

Exhibits

Item 6. Exhibits 12 i CAUTIONARY This report contains statements reflecting our views about our future performance that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as "aim," "anticipate," "believe," "drive," "estimate," "expect," "forecast," "future," "goal," "guidance," "intend," "may," "objective," "outlook," "plan," "position," "potential," "project," "seek," "should," "strategy," "target," "will" or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. These risks and uncertainties include, but are not limited to, those described in "Part I,

Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 ("2024 Form 10-K")

Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 ("2024 Form 10-K") as updated by "Part II, Item 1A" of this report, which should be considered when evaluating our trends and future results. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. The discussion of risks in this report is by no means all-inclusive but is designed to highlight what we believe are important factors to consider when evaluating our future performance. ii Part I – FINANCIAL INFORMATION Item 1. Condensed Financial Statements REED'S, INC., CONDENSED BALANCE SHEETS (Amounts in thousands, except share amounts) June 30, 2025 December 31, 2024 (Unaudited) ASSETS Current assets: Cash $ 2,677 $ 10,391 Accounts receivable, net of allowance of $ 1,091 and $ 859 , respectively 5,002 3,979 Inventory, net 13,180 8,114 Receivable from former related party 169 144 Prepaid expenses and other current assets 862 683 Total current assets 21,890 23,311 Property and equipment, net of accumulated depreciation of $ 751 and $ 636 , respectively 1,165 1,185 Intangible assets 650 644 Total assets $ 23,705 $ 25,140 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,478 $ 6,956 Accrued expenses 2,894 984 Senior secured loan, net of deferred financing costs of $ 164 and $ 329 , respectively 9,736 9,571 Payable to former related party - 144 Current portion of lease liabilities 46 - Total current liabilities 21,154 17,655 Lease liabilities, less current portion 816 837 Total liabilities 21,970 18,492 Stockholders' equity: Series A Convertible Preferred stock, $ 10 par value, 500,000 shares authorized, 9,411 shares issued and

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