Item 1.01 Entry into a Material Definitive Agreement
On February 10, 2023, Reed's, Inc., a Delaware corporation ("Reed's"), entered
into a Partial Option Exercise and Second Amendment to 10% Convertible Notes
("Exercise and Amendment Agreement") and a Limited Waiver and Deferral Agreement
("Waiver and Deferral Agreement") with Wilmington Savings Fund Society, FSB,
holder representative and collateral agent.
Pursuant to the Exercise and Amendment Agreement, holders ("Holders") of the
company's 10% Secured Convertible Notes dated May 9, 2022, as amended (the
"Original Notes"), exercised a partial option to purchase an aggregate of
approximately $2,550,025 notes (the "Option Notes," collectively with the
Original Notes, the "Notes"). The Option Notes are part of the same series as
the Original Notes although they are not identical. Interest on the Option Notes
is payable in cash, semi-annually in arrears. The Option Notes mature on June
20, 2023. No Amortization Payments (as defined in the Notes) are payable on the
Option Notes. The Option Notes may be prepaid without premium or penalty.
Further, no Holder will be entitled to receive any Interest Make-Whole Payments
(as defined in the Notes) in connection with a conversion of all or any portion
of the Option Notes. In addition, all of Notes were amended to increase the
repayment requirement, at the option of the Holder, in the event of a
Fundamental Change (as defined in the Notes) from 100% to 110%.
As an inducement, the company issued aggregate of 82,438 shares of common stock
to the holders ("Shares").
The Shares and shares of common stock issuable upon conversion of the Option
Notes are registrable and subject to that certain Registration Rights Agreement
by and between the parties dated May 9, 2023.
Pursuant to the Waiver and Deferral Agreement, Holders temporarily waived
certain specified events of default and temporarily waived any requirement that
the company conduct a repurchase of the Notes in the event of Fundamental Change
(as defined in the Notes), subject to the terms and conditions contained
therein.
The foregoing descriptions of the Exercise and Amendment Agreement, the Waiver
and Deferral Agreement and the Option Notes are qualified by reference to the
full text of such agreements, which will be attached to the company's Annual
Report on Form 10-K for the period ended December 31, 2022.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is incorporated herein by reference.
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
(a) Reed's received notice from The Nasdaq Stock Market LLC ("Nasdaq") on
February 14, 2023 that the staff of Nasdaq's Listing Qualifications department
has determined that the company's securities will be delisted from Nasdaq.
Trading in the Company's securities will be suspended from the Nasdaq Capital
Market at the opening of business on Thursday, February 16, 2023.
Reed's will continue to be a reporting company under the Securities Exchange Act
of 1943, as amended. Reed's has taken the steps necessary so that its common
stock may be quoted for trading on the OTCQX US Market, operated by OTC Markets,
Inc. ("OTCQX"), under its current trading symbol "REED" following the withdrawal
from trading on the Nasdaq Capital Market. The Company anticipates trading to
begin on the OTCQX on Thursday, February 16, 2023.
As previously disclosed, after a hearing with a Nasdaq panel on September 28,
2022, Reed's was given until February 13, 2023 to regain compliance with the
requirement to maintain a minimum bid price of $1.00 per share for continued
listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule
5550(a)(2) ("Bid Price Rule"), and the $2.5 million minimum stockholders' equity
requirement for continued listing on the Nasdaq Capital Market, as set forth in
Nasdaq Listing Rule 5550(b)(1) ("Minimum Stockholders' Equity Rule").
Reed's achieved compliance with the Bid Price Rule after effecting a 1:50
reverse split, which was effective January 27, 2023. However, after evaluating
options to achieve compliance with the Minimum Stockholders' Equity Rule, Reed's
board of directors determined not to proceed with a dilutive capital raise.
Item 3.02 Unregistered Sales of Equity Securities.
The disclosures set forth in Item 1.01 above related to the issuance of the
Option Notes and Shares are incorporated by reference into this Item 3.02. The
securities have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") and instead were offered pursuant to the exemption
provided in Section 4(a)(2) under the Securities Act on the basis that there was
no public offering.
Forward Looking Statements
Statements in this Current Report on Form 8-K that are not historical are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Words such as ""intend,"
"expect," "anticipate," and "will" and variations of such words and similar
expressions are intended to identify such forward-looking statements. Among
other things, the company's anticipated trading date on the OTCQX is a forward
looking statement. Such forward-looking information reflects management's
current beliefs and is based on information currently available to management.
The ability of Reed's management to predict future events or conditions or their
impact or the actual effect of existing or future plans or strategies is
inherently uncertain. These forward-looking statements are not guarantees and
involve risks, assumptions, and uncertainties, including those described in Item
1A (Risk Factors) of our most recent Annual Report on Form 10-K and in other
documents that we file or furnish with the Securities and Exchange Commission,
which you are encouraged to read. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those indicated or anticipated by such
forward-looking statements. Accordingly, you are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
they are made. We expressly disclaim any current intention to update publicly
any forward-looking statement after the distribution of this Current Report on
Form 8-K, whether as a result of new information, future events, changes in
assumptions or otherwise, except as required by applicable law.
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