Delaware
|
2086
|
35-2177773
|
(State
or jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
CALCULATION
OF REGISTRATION
FEE
|
||||
Title
of Each Class of
Securities
to be Registered
|
Amount
to
be
Registered(1)
|
Proposed
Maximum
Offering
Price
per
Share(2)
|
Proposed
Maximum
Aggregate
Offering
Price(2)
|
Amount
of
Registration
Fee(3)
|
Common
Stock, $0.0001 par value
|
1,500,000
|
$7.70
|
$11,550,000.00
|
|
Common
Stock, $0.0001 par value
|
914,995
|
7.70
|
7,045,461.50
|
|
TOTAL
|
2,414,995
|
$18,595,461.50
|
$570.88
|
(1)
2,414,995 shares, or the Shares, of common stock, par value $0.0001
per
share, of Reed’s, Inc., a Delaware corporation, or the Company, are being
registered hereunder. The Shares consist of: (A) 1,500,000 issued
and
outstanding shares of common stock, and (B) 914,995 shares underlying
certain of the Company's outstanding common stock purchase warrants.
Pursuant to Rule 416 under the Securities Act of 1933, as amended
(the
"Securities Act"), the amount registered hereunder includes an
indeterminate number of shares that may be issued in accordance
with the
provisions of such warrants in connection with any anti-dilution
provisions or in the event of any change in the outstanding shares,
including a stock dividend or stock split.
|
(2)
Estimated solely for the purpose of calculating the registration
fee
pursuant to Rule 457(h) and (c) of the Securities Act, based upon
the
closing sale price of the common stock of Reed’s, Inc. .on the OTC
Bulletin Board on September 11, 2007. Of this amount, $482.42 has
already
been paid with the filing of this registration
statement.
|
(3)
Computed in accordance with Section 6(b) of the Securities
Act.
|
Page
|
||||
Summary
|
1
|
|||
Special
Note Regarding Forward-Looking Statements
|
4
|
|||
Risk
Factors
|
5
|
|||
Use
of Proceeds
|
13
|
|||
Selling
Stockholders
|
13
|
|||
Plan
of Distribution
|
17
|
|||
Price
Range of Common Stock
|
19
|
|||
Dividend
Policy
|
19
|
|||
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20
|
|||
Business
|
30
|
|||
Management
|
44
|
|||
Certain
Relationships and Related Transactions
|
51
|
|||
Security
Ownership of Certain Beneficial Owners and Management
|
52
|
|||
Description
of Our Securities
|
53
|
|||
Shares
Eligible for Future Sale
|
56
|
|||
Legal
Matters
|
57
|
|||
Experts
|
58
|
|||
Where
You Can Find Additional Information
|
58
|
|||
Index
to Financial Statements
|
F-1
|
Securities
offered by the selling stockholders
|
2,414,995
shares of common stock 1
|
Common
stock outstanding as of the date of this prospectus
|
8,721,045
shares
|
Use
of Proceeds
|
We
will not receive any of the proceeds from the sale of the securities
owned
by the selling stockholders. We may receive proceeds in connection
with
the exercise of warrants for the underlying shares of our common
stock,
which may in turn be sold by the selling stockholders under this
prospectus. We intend to use any proceeds from the exercise of warrants
for working capital and other general corporate purposes. There is
no
assurance that any of the warrants will ever be exercised for cash,
if at
all.
|
Risk
Factors
|
An
investment in our securities involves a high degree of risk and could
result in a loss of your entire investment. Prior to making an investment
decision, you should carefully consider all of the information in
this
prospectus and, in particular, you should evaluate the risk factors
set
forth under the caption “Risk Factors” beginning on page
5.
|
OTC
Bulletin Board Symbol
|
REED
|
1.
|
Consists
of 1,500,000 issued and outstanding shares of our common stock and
914,995
shares of our common stock issuable upon the exercise of our outstanding
common stock purchase warrants.
|
Statements
of Operations Data:
|
Six
Months Ended June 30,
|
Years
Ended December 31,
|
|||||||||||
|
2007
(Unaudited)
|
2006
(Unaudited)
|
2006
|
2005
|
|||||||||
Sales
|
$
|
6,485,050
|
$
|
5,137,089
|
$
|
10,484,353
|
$
|
9,470,285
|
|||||
Gross
profit
|
1,220,050
|
858,348
|
2,057,579
|
1,724,786
|
|||||||||
Operating
expenses
|
2,341,760
|
1,616,829
|
3,864,169
|
2,241,237
|
|||||||||
Loss
from operations
|
(1,121,710
|
)
|
(758,481
|
)
|
(1,806,590
|
)
|
(516,451
|
)
|
|||||
Net
loss attributable to common stockholders
|
$
|
(1,208,763
|
)
|
$
|
(986,305
|
)
|
$
|
(2,243,079
|
)
|
$
|
(855,425
|
)
|
|
Net
loss per share attributable to common stockholders, basic and
diluted
|
$
|
(0.17
|
)
|
$
|
(0.19
|
)
|
$
|
(0.41
|
)
|
$
|
(0.18
|
)
|
|
Weighted
average shares used to compute net loss per share attributable
to common
stockholders, basic and diluted
|
7,274,201
|
5,239,913
|
5,522,753
|
4,885,151
|
Balance
Sheet Data:
|
June
30, 2007 (Unaudited)
|
December
31, 2006
|
|||||
Current
assets
|
$
|
12,382,545
|
$
|
6,103,639
|
|||
Total
assets
|
15,320,780
|
8,713,149
|
|||||
Current
liabilities
|
3,074,053
|
3,268,699
|
|||||
Long-term
liabilities, less current portion
|
830,205
|
821,362
|
|||||
Stockholders’
equity
|
$
|
11,416,522
|
$
|
4,623,088
|
·
|
Our
ability to generate sufficient cash flow to support capital expansion
plans and general operating
activities,
|
·
|
Decreased
demand for our products resulting from changes in consumer
preferences,
|
·
|
Competitive
products and pricing pressures and our ability to gain or maintain
our
share of sales in the marketplace,
|
·
|
The
introduction of new products,
|
·
|
Our
being subject to a broad range of evolving federal, state and local
laws
and regulations including those regarding the labeling and safety
of food
products, establishing ingredient designations and standards of identity
for certain foods, environmental protections, as well as worker health
and
safety. Changes in these laws and regulations could have a material
effect
on the way in which we produce and market our products and could
result in
increased costs,
|
·
|
Changes
in the cost and availability of raw materials and the ability to
maintain
our supply arrangements and relationships and procure timely and/or
adequate production of all or any of our
products,
|
·
|
Our
ability to penetrate new markets and maintain or expand existing
markets,
|
·
|
Maintaining
existing relationships and expanding the distributor network of our
products,
|
·
|
The
marketing efforts of distributors of our products, most of whom also
distribute products that are competitive with our
products,
|
·
|
Decisions
by distributors, grocery chains, specialty chain stores, club stores
and
other customers to discontinue carrying all or any of our products
that
they are carrying at any time,
|
·
|
The
availability and cost of capital to finance our working capital needs
and
growth plans,
|
·
|
The
effectiveness of our advertising, marketing and promotional
programs,
|
·
|
Changes
in product category consumption,
|
·
|
Economic
and political changes,
|
·
|
Consumer
acceptance of new products, including taste test
comparisons,
|
·
|
Possible
recalls of our products, and
|
·
|
Our
ability to make suitable arrangements for the co-packing of any of
our
products.
|
·
|
sales
of new products could adversely impact sales of existing
products,
|
·
|
we
may incur higher cost of goods sold and selling, general and
administrative expenses in the periods when we introduce new products
due
to increased costs associated with the introduction and marketing
of new
products, most of which are expensed as incurred,
and
|
·
|
when
we introduce new platforms and bottle sizes, we may experience increased
freight and logistics costs as our co-packers adjust their facilities
for
the new products.
|
·
|
our
largest co-packer, Lion Brewery, accounted for approximately 72%
of our
total case production in 2006,
|
·
|
if
any of those co-packers were to terminate our co-packing arrangement
or
have difficulties in producing beverages for us, our ability to produce
our beverages would be adversely affected until we were able to make
alternative arrangements, and
|
·
|
our
business reputation would be adversely affected if any of the co-packers
were to produce inferior quality
products.
|
·
|
price
and volume fluctuations in the stock
markets,
|
·
|
changes
in our earnings or variations in operating
results,
|
·
|
any
shortfall in revenue or increase in losses from levels expected by
securities analysts,
|
·
|
changes
in regulatory policies or law,
|
·
|
operating
performance of companies comparable to us,
and
|
·
|
general
economic trends and other external
factors.
|
·
|
a
description of the nature and level of risk in the market for penny
stocks
in both public offerings and secondary
trading,
|
·
|
a
description of the broker’s or dealer’s duties to the customer and of the
rights and remedies available to the customer with respect to violation
of
such duties or other requirements of securities
laws,
|
·
|
a
brief, clear, narrative description of a dealer market, including
“bid”
and “ask” prices for penny stocks and significance of the spread between
the “bid” and “ask” price,
|
·
|
a
toll-free telephone number for inquiries on disciplinary actions,
definitions of significant terms in the disclosure document or in
the
conduct of trading in penny stocks,
and
|
·
|
such
other information and is in such form (including language, type,
size and
format), as the SEC shall require by rule or
regulation.
|
·
|
the
bid and offer quotations for the penny
stock,
|
·
|
the
compensation of the broker-dealer and its salesperson in the
transaction,
|
·
|
the
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market
for such stock,
|
·
|
the
liquidity of the market for such stock,
and
|
·
|
monthly
account statements showing the market value of each penny stock held
in
the customer’s account.
|
·
|
the
number of shares of our common stock that the selling stockholders
beneficially owned prior to the offering for resale of any of the
shares
of our common stock being registered by the registration statement
of
which this prospectus is a part;
|
·
|
the
number of shares of our common stock that may be offered for resale
for
the selling stockholders’ account under this prospectus;
and
|
·
|
the
number and percent of shares of our common stock to be held by the
selling
stockholders after the offering of the resale securities, assuming
all of
the resale securities are sold by the selling stockholders and that
the
selling stockholders do not acquire any other shares of our common
stock
prior to their assumed sale of all of the resale
shares.
|
Shares
Beneficially
Owned
Before
Offering (1)
|
Number
of
Shares
|
Shares
Beneficially Owned
After
Offering (1)
|
||||||||||||||
Name
of Selling Security Holder
|
Number
|
Percent
|
Being
Offered (2)
|
Number
|
Percent
|
|||||||||||
Advantus
Capital LP (3)
|
60,000
|
*
|
60,000
|
0
|
0
|
|||||||||||
Airport
Inn of Las Vegas, Inc. (4)
|
75,000
|
*
|
75,000
|
0
|
0
|
|||||||||||
Eugene
Arrington
|
2,499
|
*
|
2,499
|
0
|
0
|
|||||||||||
Bruce
F. Bailey
|
2,499
|
*
|
2,499
|
0
|
0
|
|||||||||||
Tom
Bover
|
18,156
|
*
|
18,156
|
0
|
0
|
|||||||||||
Philip
L. & Shearon L. Breazeale
|
24,999
|
*
|
24,999
|
0
|
0
|
|||||||||||
Dr.
Edwin R. Buster, III
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
Chang-Fa
J. Cheng
|
12,000
|
*
|
12,000
|
0
|
0
|
|||||||||||
Fang-Chin
Chiang
|
3,750
|
*
|
3,750
|
0
|
0
|
|||||||||||
Russell
E. Davis
|
3,000
|
*
|
3,000
|
0
|
0
|
|||||||||||
Elias
Family Charitable Trust (5)
|
35,500
|
(4
|
)
|
30,000
|
5,500
|
(4
|
)
|
|||||||||
Alma
and Gabriel Elias JTWROS (5)
|
533,528
|
(4
|
)
|
472,585
|
60,943
|
(4
|
)
|
|||||||||
James
E. and Jennifer M. Fair Living Trust (6)
|
19,999
|
*
|
19,999
|
0
|
0
|
|||||||||||
Daniel
W. Fort
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
George
L. Fotiades
|
12,499
|
*
|
12,499
|
0
|
0
|
|||||||||||
Theza
& Robert Friedman
|
12,499
|
*
|
12,499
|
0
|
0
|
|||||||||||
Joseph
M. Graham, Jr.
|
12,525
|
*
|
12,525
|
0
|
0
|
|||||||||||
Great
Gable Master Fund, Ltd. (7)
|
381,402
|
4.31
|
375,000
|
6,402
|
*
|
|||||||||||
Darcy
& Edward H. Han
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
Henderson
Family Trust (8)
|
51,000
|
*
|
51,000
|
0
|
0
|
|||||||||||
John
Reginald Hill
|
12,499
|
*
|
12,499
|
0
|
0
|
|||||||||||
Hudson
Bay Fund LP (9)
|
19,350
|
*
|
19,350
|
0
|
0
|
|||||||||||
Hudson
Bay Overseas Fund Ltd. (9)
|
25,650
|
*
|
25,650
|
0
|
0
|
|||||||||||
Julian
Phillip Kemble
|
2,499
|
*
|
2,499
|
0
|
0
|
|||||||||||
Richard
Krahn
|
30,000
|
*
|
30,000
|
0
|
0
|
|||||||||||
Hui
Lin
|
7,500
|
*
|
7,500
|
0
|
0
|
|||||||||||
Jared
Lundgren
|
7,500
|
*
|
7,500
|
0
|
0
|
James
V. McKeon
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
D.
Herman Mobley
|
4,500
|
*
|
4,500
|
0
|
0
|
|||||||||||
Nite
Capital Master, Ltd. (10)
|
105,000
|
1.20
|
105,000
|
0
|
0
|
|||||||||||
Charles
Frank Nosal
|
7,500
|
*
|
7,500
|
0
|
0
|
|||||||||||
Stanley
Petsagourakis
|
60,000
|
*
|
60,000
|
0
|
0
|
|||||||||||
Carol
Quelland Trust (11)
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
Anthony
James Percy Reynolds
|
2,494
|
*
|
2,494
|
0
|
0
|
|||||||||||
Michael
Rogers
|
4,500
|
*
|
4,500
|
0
|
0
|
|||||||||||
Carl
Barth Rountree
|
75,000
|
*
|
75,000
|
0
|
0
|
|||||||||||
David
H. Sanders Revocable Trust (12)
|
49,999
|
*
|
49,999
|
0
|
0
|
|||||||||||
Gerald
C. Sloat
|
11,500
|
*
|
10,500
|
1,000
|
*
|
|||||||||||
Donald
W. Smith
|
12,499
|
*
|
12,499
|
0
|
0
|
|||||||||||
Leroy
Stevens
|
18,750
|
*
|
18,750
|
0
|
0
|
|||||||||||
Robert
Strougo
|
4,999
|
*
|
4,999
|
0
|
0
|
|||||||||||
William
J. Summers, Jr.
|
7,500
|
*
|
7,500
|
0
|
0
|
|||||||||||
Steve
Talley
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
John
Tandana
|
3,750
|
*
|
3,750
|
0
|
0
|
|||||||||||
Tres
Girls Limited Partnership (13)
|
50,001
|
*
|
50,001
|
0
|
0
|
|||||||||||
Bradley
Van Hull
|
35,000
|
*
|
30,000
|
5,000
|
*
|
|||||||||||
Thomas
Vermillion
|
2,499
|
*
|
2,499
|
0
|
0
|
|||||||||||
Doug
Waggoner
|
12,499
|
*
|
12,499
|
0
|
0
|
|||||||||||
Shi-Kuen
Wang
|
7,500
|
*
|
7,500
|
0
|
0
|
|||||||||||
Thomas
D. & Noranna B. Warner
|
15,000
|
*
|
15,000
|
0
|
0
|
|||||||||||
John
Way
|
2,499
|
*
|
2,499
|
0
|
0
|
|||||||||||
Wholesale
Realtors Supply (5)
|
749,696
|
(4
|
)
|
369,999
|
379,697
|
(4
|
)
|
|||||||||
The
Wondra/Klimen-Wondra Trust (14)
|
2,499
|
*
|
2,499
|
0
|
0
|
|||||||||||
Ming-Chen
Wu
|
7,500
|
*
|
7,500
|
0
|
0
|
|||||||||||
APS
Financial Corporation (15)
|
36,069
|
*
|
36,069
|
0
|
0
|
|||||||||||
Aegis
Capital Corp. (16)
|
8,000
|
*
|
8,000
|
0
|
0
|
|||||||||||
Peter
Aman (3)
|
31,403
|
*
|
31,403
|
0
|
0
|
|||||||||||
Neil
B. Michaelsen
|
18,035
|
*
|
18,035
|
0
|
0
|
|||||||||||
US
EURO Securities, Inc. (17)
|
7,000
|
*
|
7,000
|
0
|
0
|
|||||||||||
Westrock
Advisors, Inc. (18)
|
64,493
|
*
|
64,493
|
0
|
0
|
*
|
Less
than 1%.
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the SEC.
Shares of
common stock subject to options or warrants currently exercisable
or
exercisable within 60 days of the date of this prospectus, are deemed
outstanding for computing the percentage ownership of the stockholder
holding the options or warrants, but are not deemed outstanding for
computing the percentage ownership of any other stockholder. Unless
otherwise indicated in the footnotes to this table, we believe
stockholders named in the table have sole voting and sole investment
power
with respect to the shares set forth opposite such stockholder's
name.
Unless otherwise indicated, the officers, directors and stockholders
can
be reached at our principal offices. Percentage of ownership is based
on
8,721,045 shares of common stock outstanding as of the date of this
prospectus.
|
(2)
|
The
shares of common stock being offered by certain of the selling
stockholders include: (A) the number of shares underlying warrants
which
have an exercise price of $7.50 per share, and are fully vested
and may be
exercised any time through June 15, 2012, as follows: Advantus
Capital LP (60,000 shares), Airport Inn of Las Vegas, Inc. (25,000
shares), Eugene Arrington (833 shares), Bruce F. Bailey (833 shares),
Tom
Bover (6,052 shares), Philip L. & Shearon L. Breazeale (8,333 shares),
Dr. Edwin R. Buster, III (5,000 shares), Chang-Fa J. Cheng (4,000
shares),
Fang-Chin Chiang (1,250 shares), Russell E. Davis (1,000 shares),
Elias
Family Charitable Trust (10,000 shares), Alma and Gabriel Elias
JTWROS
(157,528 shares), James E. & Jennifer M. Fair Living Trust (6,666
shares), Daniel W. Fort (5,000 shares), George L. Fotiades (4,166
shares),
Theza & Robert Friedman (4,166 shares), Joseph M. Graham, Jr. (4,175
shares), Great Gable Master Fund, Ltd. (125,000 shares), Darcy
&
Edward H. Han (5,000 shares), Henderson Family Trust (17,000 shares),
John
Reginald Hill (4,166 shares), Hudson Bay Fund LP (6,450 shares),
Hudson
Bay Overseas Fund Ltd. (8,550 shares), Julian Phillip Kemble (833
shares),
Richard
Krahn (10,000 shares),
Hui Lin (2,500 shares),
Jared Lundgren (2,500 shares),
James V. McKeon (5,000 shares),
D. Herman Mobley (1,500 shares),
Nite Capital Master, Ltd. (35,000 shares),
Charles Frank Nosal (2,500 shares),
Stanley
Petsagourakis (20,000 shares), Carol Quelland Trust (5,000 shares),
Anthony James Percy Reynolds (831 shares), Michael Rogers (1,500
shares),
Carl Barth Rountree (25,000 shares), David H. Sanders Revocable
Trust
(16,666 shares), Gerald C. Sloat (3,500 shares), Donald W. Smith
(4,166
shares), Leroy Stevens (6,250 shares), Robert Strougo (1,666 shares),
William J. Summers, Jr. (2,500 shares), Steve Talley (5,000 shares),
John
Tandana (1,250 shares), Tres Girls Limited Partnership (16,667
shares),
Bradley Van Hull (10,000 shares), Thomas Vermillion (833 shares),
Doug
Waggoner (4,166 shares), Shi-Kuen Wang (2,500 shares), Thomas D.
&
Noranna B. Warner (5,000 shares), John Way (833 shares), Wholesale
Realtors Supply (83,333 shares), The Wondra/Klimen-Wondra Trust
(833
shares) and Ming-Chen Wu (2,500 shares); and (B) the
number of shares underlying warrants which have an exercise price
of $6.60
per share, and are fully vested and may be exercised any time through
June
15, 2012, as follows: APS Financial Corporation (36,069 shares),
Aegis Capital Corp. (8,000 shares),
Peter Aman (31,403 shares),
Neil B. Michaelsen (18,035 shares),
US EURO Securities, Inc. (7,000 shares)
and Westrock Advisors, Inc. (64,493 shares).
|
(3)
|
Advantus
Capital LP and Peter Aman may be deemed to be affiliates of each
other for
purposes of calculating beneficial ownership of their securities
in this
table. The aggregate beneficial ownership of such stockholders
may be
deemed to include warrants to purchase up to 91,403 shares of common
stock, or 1.04% of the outstanding shares before the offering.
Peter Aman
directly
or indirectly alone or with others has power to dispose of the
shares that
Advantus
Capital LP owns.
|
(4)
|
Dario
Pini directly or indirectly alone or with others has power to dispose
of
the shares that this selling stockholder
owns.
|
(5)
|
Elias
Family Charitable Trust, Alma and Gabriel Elias JTWROS and Wholesale
Realtors Supply may be deemed to be affiliates of each other for
purposes
of calculating beneficial ownership of their securities in this
table. The
aggregate beneficial ownership of such stockholders may be deemed
to
include 1,067,863 shares of common stock and warrants to purchase
up to
250,861 shares of common stock, or 14.70% of the outstanding shares
before
the offering, and 4.97% of the outstanding shares after the offering
(assuming the sale of all of the shares held by such persons which
are
registered hereby). The aggregate number of shares which may be
deemed to
be beneficially owned by such stockholders and which are registered
hereby
includes 621,723 shares of common stock and warrants to purchase
up to
250,861 shares of common stock. Gabriel Ellis directly
or indirectly alone or with others has power to dispose of the
shares that
each of Elias
Family Charitable Trust and Wholesale Realtors Supply
owns.
|
(6)
|
James
E. Fair directly or indirectly alone or with others has power to
dispose
of the shares that this selling stockholder
owns.
|
(7)
|
Kevin
Goldstein directly or indirectly alone or with others has power
to dispose
of the shares that this selling stockholder
owns.
|
(8)
|
James
Henderson directly or indirectly alone or with others has power
to dispose
of the shares that this selling stockholder
owns.
|
(9)
|
Hudson
Bay Fund LP and Hudson Bay Overseas Fund Ltd. may be deemed to
be
affiliates of each other for purposes of calculating beneficial
ownership
of their securities in this table. The aggregate beneficial ownership
of
such stockholders may be deemed to include 30,000 shares of common
stock
and warrants to purchase up to 15,000 shares of common stock. Each
of Yoav
Roth and George Antonopoulos directly
or indirectly alone or with others has shared power to dispose
of the
shares that each of these selling stockholders
owns.
|
(10)
|
Keith
Goodman directly or indirectly alone or with others has power to
dispose
of the shares that this selling stockholder
owns.
|
(11)
|
Shaaron
Cissel directly or indirectly alone or with others has power to
dispose of
the shares that this selling stockholder
owns.
|
(12)
|
David
H. Sanders directly or indirectly alone or with others has power
to
dispose of the shares that this selling stockholder
owns.
|
(13)
|
Richard
Zitelman directly or indirectly alone or with others has power
to dispose
of the shares that this selling stockholder
owns.
|
(14)
|
Ralph
Wondra directly or indirectly alone or with others has power to
dispose of
the shares that this selling stockholder
owns.
|
(15)
|
APS
Financial Corporation is a wholly-owned subsidiary of American
Physicians
Service Group, Inc., a publicly traded
corporation.
|
(16)
|
Robert
Eide directly or indirectly alone or with others has power to dispose
of
the shares that this selling stockholder
owns.
|
(17)
|
Michael
Fugler directly or indirectly alone or with others has power to
dispose of
the shares that this selling stockholder
owns.
|
(18)
|
Each
of Greg Martino and Don Hunter directly or indirectly alone or
with others
has shared power to dispose of the shares that each of these selling
stockholders owns.
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
short
sales;
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
·
|
a
combination of any such methods of sale;
and
|
·
|
any
other method permitted
pursuant to applicable law.
|
Closing
Sale Price
|
|||||||
High
|
Low
|
||||||
Year
Ending December
31, 2007
|
|||||||
First
Quarter
|
$
|
7.17
|
$
|
3.00
|
|||
Second
Quarter
|
$
|
9.00
|
$
|
6.00
|
|||
Third
Quarter
|
$
|
10.55
|
$
|
6.75
|
Plan
Category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants
and Rights
(a)
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants
and Rights
(b)
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (excluding securities reflected in Column
(a))
(c)
|
|||
Equity
compensation plans approved by security holders
|
291,000
|
$4.00
|
209,000
|
|||
Equity
compensation plans not approved by security holders
|
240,451
|
$2.57
|
Not
applicable
|
|||
TOTAL
|
531,451
|
$3.35
|
209,000
|
·
|
Reed’s
Ginger Brews,
|
·
|
Virgil’s
Root Beer and Cream Sodas,
|
·
|
China
Colas,
|
·
|
Reed’s
Ginger Juice Brews,
|
·
|
Reed’s
Ginger Candies, and
|
·
|
Reed’s
Ginger Ice Creams
|
Direct
sales to large retailer accounts
|
%
of total sales
|
Local
direct distribution
|
%
of total sales
|
Natural,
gourmet and mainstream distributors
|
%
of total
|
Total
sales
|
||||||||||||||||
2006
|
$
|
1,853,439
|
18
|
$
|
1,039,966
|
10
|
$
|
7,590,948
|
72
|
$
|
10,484,353
|
|||||||||||
2005
|
1,536,896
|
16
|
751,999
|
8
|
7,181,390
|
76
|
9,470,285
|
|||||||||||||||
2004
|
1,983,598
|
22
|
395,601
|
4
|
6,599,166
|
74
|
8,978,365
|
·
|
large
retail accounts, such as Costco, BJ Wholesale, and Cost Plus World
Markets, and
|
·
|
the
natural food section of mainstream national supermarket chains, such
as
Safeway, Kroger’s, Ralph’s and Bristol
Farms.
|
2002
|
2003
|
2004
|
2005
|
2006
|
||||||||||||
Net
sales
|
$
|
6,400,000
|
$
|
6,800,000
|
$
|
9,000,000
|
$
|
9,500,000
|
$
|
10,500,000
|
·
|
successes
in our Southern California direct distribution
strategy,
|
·
|
increases
in our core of national distribution to natural and gourmet food
stores
and mainstream supermarket chains, and increases in the mainstream
distribution of our products. These include new distribution relationships
in the following areas: Washington state, Oregon, New York, Massachusetts,
New Hampshire, Connecticut, Pennsylvania, Ohio, Michigan, Minnesota
and
Colorado. We
also are
starting up a
co
branded marketing plan
with
these new distributors in these areas of the country.
We
hope to establish additional distributorship relationships in 10-20
new
areas by the end of 2007, and
|
·
|
increases
in our direct sales to large
retailers.
|
·
|
inefficiencies
relating to the operation of the Brewery, our West Coast production
facility, and
|
·
|
higher
freight, glass and production expenses due to the increase in the
cost of
fuel and increases in the price of ingredients in our
products.
|
·
|
We
have an unsecured $50,000 line of credit with US Bank which expires
in
December 2009. Interest is payable monthly at the prime rate, as
published
in the Wall Street Journal, plus 12% per annum. Our outstanding balance
was $23,662 at June 30, 2007 and there was $26,338 available under
the
line of credit. The interest rate in effect at June 30, 2007 was
20.25%.
|
·
|
We
have a line of credit with Merrill Lynch. Robert T. Reed, Jr., our
Vice
President and National Sales Manager - Mainstream and a brother of
our
Chief Executive Officer, Christopher J. Reed, has pledged certain
securities (which do not include any of our securities which are
owned by
Mr. Reed) in his personal securities account on deposit with Merrill
Lynch
as collateral for repayment of the line of credit. The amount of
the line
of credit is based on a percentage value of such securities. At June
30,
2007, the outstanding balance on the line of credit was $-0-, and
there
was approximately $701,000 available under the line of credit. The
line of
credit bears interest at a rate of 3.785% per annum plus LIBOR (9.1%
as of
June 30, 2007). In consideration for Mr. Reed’s pledging his stock account
at Merrill Lynch as collateral, we have agreed to pay Mr. Reed 5%
per
annum of the amount we borrow from Merrill Lynch, as a loan fee.
In
addition, Christopher J. Reed has pledged all of his shares of common
stock to Robert T. Reed, Jr. as collateral for the shares pledged
by
Robert T. Reed, Jr.
|
·
|
We
have a line of credit with California United Bank. This line of credit
allows us to borrow a maximum amount of $1,500,000. As of June 30,
2007,
the amount borrowed on this line of credit was $1,499,776. The interest
rate on this line of credit is prime, which was 8.25% at June 30,
2007.
The line of credit expires in June 2008. This revolving line of credit
is
secured by all of our assets, except real estate. In addition, we
have
assigned a security interest in a deposit account at the bank. The
amount
of the deposit and the security interest is $1,575,000 and may be
offset
by the bank against any balance on the line of credit. The deposit
cannot
be withdrawn during the term of the line of credit. We may terminate
the
line of credit arrangement at any time, without penalty. As of June
30,
2007, we had approximately $224 of availability on this line of credit.
During the term of this line of credit, we are required to have a
minimum
stockholders’ equity balance of
$1,500,000.
|
·
|
fund
more rapid expansion,
|
·
|
fund
additional marketing expenditures,
|
·
|
enhance
our operating infrastructure,
|
·
|
respond
to competitive pressures, and
|
·
|
acquire
other businesses.
|
·
|
Reed’s
Ginger Brews,
|
·
|
Virgil’s
Root Beer and Cream Sodas,
|
·
|
China
Colas,
|
·
|
Reed’s
Ginger Juice Brews,
|
·
|
Reed’s
Ginger Candies, and
|
·
|
Reed’s
Ginger Ice Creams.
|
·
|
increased
national direct sales and
distribution,
|
·
|
increased
store placement with mainstream stores and
retailers,
|
·
|
strong
national distributorships,
|
·
|
stimulate
strong consumer demand for our existing brands and
products,
|
·
|
develop
additional unique alternative beverage brands and other products,
and
|
·
|
specialty
packaging like our 5-liter party kegs, our ceramic swing-lid bottle
and
our 750 ml. champagne bottle.
|
·
|
sales
to mainstream, natural and specialty food stores in the United States
and,
to a lesser degree, Canada, through our regional distributors and
sales
representatives,
|
·
|
direct
sales effort to large national retailers,
and
|
·
|
direct
distribution by our trucks and drivers to retailers in Southern
California.
|
·
|
supporting
in-store sampling programs of our
products,
|
·
|
generating
free press through public
relations,
|
·
|
advertising
in national magazines targeting our
customers,
|
·
|
maintaining
a company website (www.reedsgingerbrew.com);
and
|
·
|
participating
in large public events as sponsors.
|
·
|
Reed’s
Original Ginger Brew was
our first creation, and is a Jamaican recipe for homemade ginger
ale using
17 grams of fresh ginger root, lemon, lime, honey, fructose, pineapple,
herbs and spices. Reed’s Original Ginger Brew is 20% fruit
juice.
|
·
|
Reed’s
Extra Ginger Brew is
the same approximate recipe, with 26 grams of fresh ginger root for
a
stronger bite. Reed’s Extra Ginger Brew is 20% fruit
juice.
|
·
|
Reed’s
Premium Ginger Brew is
the no-fructose version of Reed’s Original Ginger Brew, and is sweetened
only with honey and pineapple juice. Reed’s Premium Ginger Brew is 20%
fruit juice.
|
·
|
Reed’s
Raspberry Ginger Brew is
brewed from 17 grams of fresh ginger root, raspberry juice and lime.
Reed’s Raspberry Ginger Brew is
20% raspberry juice and is sweetened with fruit juice and
fructose.
|
·
|
Reed’s
Spiced Apple Brew uses
8 grams of fresh ginger root, the finest tart German apple juice
and such
apple pie spices as cinnamon, cloves and allspice. Reed’s Spiced Apple
Brew is 50% apple juice and sweetened with fruit juice and
fructose.
|
·
|
Reed’s
Cherry Ginger Brew is
the newest addition to our Ginger Brew family, and is naturally brewed
from: filtered water, fructose, fresh ginger root, cherry juice from
concentrate and spices. Reed’s Cherry Ginger Brew is 22% cherry
juice.
|
·
|
Reed’s
Lemon Guava Ginger Juice Brew adds guava juice from concentrate and
lemon
juice from concentrate.
|
·
|
Reed’s
Strawberry Kiwi Ginger Juice Brew adds organic strawberry juice from
concentrate and organic kiwi juice from
concentrate.
|
·
|
Pineapple
Orange Ginger Juice Brew adds organic pineapple juice from concentrate,
organic orange juice from concentrate, and organic lime juice from
concentrate.
|
·
|
Reed’s
Cranberry Raspberry Ginger Juice Brew adds cranberry juice from
concentrate, and organic raspberry juice from
concentrate.
|
·
|
Reed’s
Original Ginger Ice Cream made
from milk, cream, raw cane sugar, Reed’s Crystallized Ginger Candy (finest
ginger root, raw cane sugar), ginger puree, and guar gum (a natural
vegetable gum),
|
·
|
Chocolate
Ginger Ice Cream made
from milk, cream, raw cane sugar, finest Belgian cocoa (used to make
Belgian chocolate), Reed’s Crystallized Ginger Candy (fresh baby ginger
root, raw cane sugar), chocolate shavings (sugar, unsweetened chocolate,
Belgian cocoa, soy lecithin and real vanilla), ginger puree, and
guar gum
(a natural vegetable gum) creating the ultimate chocolate ginger
ice
cream, and
|
·
|
Reed’s
Green Tea Ginger Ice Cream made
from milk, cream, the finest green tea, raw cane sugar, ginger puree,
Reed’s Crystallized Ginger Candy (fresh baby ginger root, raw cane sugar),
and guar gum (a natural vegetable gum) creating the ultimate green
tea
ginger ice cream.
|
·
|
a
facility that we own in Los Angeles, California, known as The Brewery,
at
which we produce certain soda products for the western half of the
United
States, and
|
·
|
a
packing, or co-pack, facility in Pennsylvania, known as the Lion
Brewery,
with which they contract to supply us with product we do not produce
at
The Brewery. The term of our agreement with Lion Brewery expires
on May
31, 2009 and renews automatically for successive two-year terms unless
terminated by either party. The Lion Brewery assembles our products
and
charges us a fee, generally by the case, for the products they
produce.
|
Name
|
Position
|
Age
|
Christopher
J. Reed
|
President,
Chief Executive Officer and Chairman of the Board
|
48
|
Thierry
Foucaut
|
Chief
Operating Officer
|
42
|
David
M. Kane
|
Chief
Financial Officer
|
44
|
Rory
Ahearn
|
Senior
Vice President - Sales
|
56
|
Neal
Cohane
|
Vice
President - Sales
|
47
|
Robert
T. Reed, Jr.
|
Vice
President and National Sales Manager - Mainstream
|
51
|
Eric
Scheffer
|
Vice
President and National Sales Manager - Natural Foods
|
39
|
Robert
Lyon
|
Vice
President Sales - Special Projects
|
57
|
Judy
Holloway Reed
|
Secretary
and Director
|
47
|
Mark
Harris
|
Director
|
50
|
Dr.
Daniel S.J. Muffoletto, N.D.
|
Director
|
52
|
Michael
Fischman
|
Director
|
51
|
·
|
selecting,
hiring and terminating our independent
auditors;
|
·
|
evaluating
the qualifications, independence and performance of our independent
auditors;
|
·
|
approving
the audit and non-audit services to be performed by our independent
auditors;
|
·
|
reviewing
the design, implementation, adequacy and effectiveness of our internal
controls and critical accounting
policies;
|
·
|
overseeing
and monitoring the integrity of our financial statements and our
compliance with legal and regulatory requirements as they relate
to
financial statements or accounting
matters;
|
·
|
reviewing
with management and our independent auditors, any earnings announcements
and other public announcements regarding our results of operations;
and
|
·
|
preparing
the audit committee report that the SEC requires in our annual proxy
statement.
|
·
|
approving
the compensation and benefits of our executive
officers;
|
·
|
reviewing
the performance objectives and actual performance of our officers;
and
|
·
|
administering
our stock option and other equity compensation
plans.
|
·
|
evaluating
the composition, size and governance of our Board of Directors and
its
committees and making recommendations regarding future planning and
the
appointment of directors to our
committees;
|
·
|
establishing
a policy for considering stockholder nominees for election to our
Board of
Directors; and
|
·
|
evaluating
and recommending candidates for election to our Board of
Directors.
|
Name
and Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive
Plan
Compensation
|
Non-Qualified
Deferred
Compensation
Earnings
|
All
Other
Compensation
|
Total
|
|||||||||||||||||||
Christopher
J. Reed, Chief Executive Officer
|
2006
|
$
|
150,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$
|
150,000
|
|||||||||||||||||
2005
|
$
|
150,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$
|
150,000
|
||||||||||||||||||
2004
|
$
|
150,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$
|
150,000
|
·
|
Any
breach of their duty of loyalty to our company or our
stockholders.
|
·
|
Acts
or omissions not in good faith or which involve intentional misconduct
or
a knowing violation of law.
|
·
|
Unlawful
payments of dividends or unlawful stock repurchases or redemptions
as
provided in Section 174 of the Delaware General Corporation
Law.
|
·
|
Any
transaction from which the director derived an improper personal
benefit.
|
Name
of Beneficial Owner
|
Number
of Shares
Beneficially
Owned
|
Percentage
of Shares
Beneficially
Owned (1)
|
|||||
Directors
and Named Executive Officers
|
|||||||
Christopher
J. Reed (2)
|
3,200,000
|
36.69
|
|||||
Judy
Holloway Reed (2)
|
3,200,000
|
36.69
|
|||||
Mark
Harris (3)
|
4,319
|
*
|
|||||
Dr.
Daniel S.J. Muffoletto, N.D.
|
0
|
0
|
|||||
Michael
Fischman
|
0
|
0
|
|||||
Directors
and executive officers as a group (12 persons) (4)
|
3,732,101
|
41.61
|
|||||
5%
or greater stockholders
|
|||||||
Joseph
Grace
|
500,000
|
5.74
|
|||||
Alma
and Gabriel Elias (5)
|
1,318,724
|
14.70
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the SEC.
Shares of
common stock subject to options or warrants currently exercisable
or
exercisable within 60 days of the date of this prospectus, are deemed
outstanding for computing the percentage ownership of the stockholder
holding the options or warrants, but are not deemed outstanding for
computing the percentage ownership of any other stockholder. Unless
otherwise indicated in the footnotes to this table, we believe
stockholders named in the table have sole voting and sole investment
power
with respect to the shares set forth opposite such stockholder's
name.
Unless otherwise indicated, the officers, directors and stockholders
can
be reached at our principal offices. Percentage of ownership is based
on
8,721,045 shares of common stock outstanding as of the date of this
prospectus.
|
(2)
|
Christopher
J. Reed and Judy Holloway Reed are husband and wife. The same number
of
shares of common stock is shown for each of them, as they may each
be
deemed to be the beneficial owner of all of such shares. These shares
have
been pledged as collateral to Robert T. Reed, Jr. to secure a pledge
of
Mr. Reed of his shares as collateral for a line of credit extended
to
us.
|
(3)
|
Consists
of: (i) 319 shares of common stock, and (ii) 4,000 shares of common
stock,
which can be converted at any time from 1,000 shares of Series A
preferred
stock. The address for Mr. Harris is 160 Barranca Road, Newbury Park,
California 91320.
|
(4)
|
Includes
three executive officers (including Robert T. Reed, Jr., our Executive
Vice-President and National Sales Manager - Mainstream (282,282 shares
of
common stock, options exercisable into 50,000 shares of common stock,
and
60,000 shares of common stock, which can be converted at any time
from
15,000 shares of Series A preferred stock), Robert Lyon, our Vice
President Sales - Special Projects (options to purchase up to 60,000
shares) and Eric Scheffer, our Vice President and National Sales
Manager -
Natural Foods (500 shares and options to purchase up to 75,000 shares))
who beneficially own in the aggregate of 527,782 shares of common
stock.
Does not include options to purchase up to 310,000 shares of common
stock
which vest in portions through the period ending December
2010.
|
(5)
|
Elias
Family Charitable Trust, Alma and Gabriel Elias JTWROS and Wholesale
Realtors Supply may be deemed to be affiliates of each other for
purposes
of calculating beneficial ownership of their securities in this table.
The
registered ownership of such stockholders is as follows: (a) Elias
Family
Charitable Trust (25,500
shares
of common stock and warrants to purchase up to 10,000 shares of common
stock), (b) Alma and Gabriel Elias JTWROS (376,000 shares of common
stock
and warrants to purchase up to 157,528 shares
of common stock), and (c) Wholesale Realtors Supply (666,363 shares
of
common stock and warrants to purchase up to 83,333 shares of common
stock).
|
·
|
amend
our certificate of incorporation or bylaws in any manner which adversely
affects the rights of the Series A preferred stock, or
|
·
|
authorize
or issue, or obligate ourselves to issue, any other equity security
having
a preference over, or being on a parity with, the Series A preferred
stock
with respect to dividends, liquidation, redemption or voting, including
any other security convertible into or exercisable for any equity
security
other than shares of any senior class of preferred
stock.
|
·
|
allow
the Board of Directors to issue, without further action by the
stockholders, up to 500,000 shares of undesignated preferred
stock.
|
·
|
prior
to the date of the transaction, the board of directors of the corporation
approved either the business combination or the transaction which
resulted
in the stockholder becoming an interested
stockholder.
|
·
|
upon
completion of the transaction that resulted in the stockholder becoming
an
interested stockholder, the stockholder owned at least 85% of the
voting
stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding (1) shares owned by persons who are directors and also
officers and (2) shares owned by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer.
|
·
|
on
or subsequent to the date of the transaction, the business combination
is
approved by the board and authorized at an annual or special meeting
of
stockholders, and not by written consent, by the affirmative vote
of at
least 66 2/3%
of the outstanding voting stock which is not owned by the interested
stockholder.
|
·
|
1%
of the number of shares of common stock then outstanding, or approximately
87,210 shares as of the date of this prospectus,
or
|
·
|
The
average weekly trading volume of the common stock during the four
calendar
weeks preceding the filing of a notice on Form 144 with respect to
such
sale.
|
Index
to Financial Statements
|
F-1
|
|||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|||
Balance
Sheets
|
F-3
|
|||
Statements
of Operations
|
F-4
|
|||
Statements
of Changes In Stockholders’ Equity
|
F-5
|
|||
Statements
of Cash Flows
|
F-6
|
|||
Notes
to Financial Statements
|
F-7
|
June
30,
2007
|
December
31,
|
||||||
(unaudited)
|
2006
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
|
$
|
7,178,413
|
$
|
1,638,917
|
|||
Restricted
cash
|
1,590,929
|
1,580,456
|
|||||
Inventory
|
1,970,957
|
1,511,230
|
|||||
Trade
accounts receivable, net of allowance for doubtful accounts and
returns
and
discounts of $188,000 at June 30, 2007 and $173,253 at December 31, 2006 |
1,365,559
|
1,183,763
|
|||||
Other
receivables
|
143,388
|
24,811
|
|||||
Prepaid
expenses
|
133,299
|
164,462
|
|||||
Total
Current Assets
|
12,382,545
|
6,103,639
|
|||||
Property
and equipment, net of accumulated depreciation of $744,785 at June
30,
2007
and $663,251 at December 31, 2006 |
2,124,260
|
1,795,163
|
|||||
OTHER
ASSETS
|
|||||||
Brand
names
|
800,201
|
800,201
|
|||||
Other
intangibles, net of accumulated amortization of $4,840 at June
30, 2007
and $4,467 at December 31, 2006 |
13,774
|
14,146
|
|||||
Total
Other Assets
|
813,975
|
814,347
|
|||||
TOTAL
ASSETS
|
$
|
15,320,780
|
$
|
8,713,149
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Accounts
payable
|
$
|
1,421,222
|
$
|
1,695,014
|
|||
Lines
of credit
|
1,523,438
|
1,355,526
|
|||||
Current
portion of long term debt
|
43,936
|
71,860
|
|||||
Accrued
interest
|
8,703
|
27,998
|
|||||
Accrued
expenses
|
76,754
|
118,301
|
|||||
Total
Current Liabilities
|
3,074,053
|
3,268,699
|
|||||
Long
term debt, less current portion
|
830,205
|
821,362
|
|||||
Total
Liabilities
|
3,904,258
|
4,090,061
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
stock, $10 par value, 500,000 shares authorized, 55,540 shares
outstanding at June 30, 2007 and 58,940 shares at December 31, 2006 |
555,402
|
589,402
|
|||||
Common
stock, $.0001 par value, 11,500,000 shares authorized,
8,701,045 shares
issued and outstanding at June 30, 2007 and 7,143,185 at December 31, 2006 |
870
|
714
|
|||||
Additional
paid in capital
|
17,571,155
|
9,535,114
|
|||||
Accumulated
deficit
|
(6,710,905
|
)
|
(5,502,142
|
)
|
|||
Total
stockholders’ equity
|
11,416,522
|
4,623,088
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
15,320,780
|
$
|
8,713,149
|
Six
Months
Ended
June 30,
|
Years
Ended
December 31,
|
||||||||||||
2007
|
2006
|
2006
|
2005
|
||||||||||
(unaudited)
|
(unaudited)
|
||||||||||||
SALES
|
$
|
6,485,050
|
$
|
5,137,089
|
$
|
10,484,353
|
$
|
9,470,285
|
|||||
COST
OF SALES
|
5,265,000
|
4,278,741
|
8,426,774
|
7,745,499
|
|||||||||
GROSS
PROFIT
|
1,220,050
|
858,348
|
2,057,579
|
1,724,786
|
|||||||||
OPERATING
EXPENSES
|
|||||||||||||
Selling
|
1,442,269
|
600,619
|
1,352,313
|
1,124,705
|
|||||||||
General &
Administrative
|
899,491
|
1,016,210
|
2,508,856
|
992,322
|
|||||||||
Provision
for amounts due from director
|
—
|
—
|
3,000
|
124,210
|
|||||||||
Total
Operating Expenses
|
2,341,760
|
1,616,829
|
3,864,169
|
2,241,237
|
|||||||||
LOSS FROM
OPERATIONS
|
(1,121,710
|
)
|
(758,481
|
)
|
(1,806,590
|
)
|
(516,451
|
)
|
|||||
OTHER
INCOME (EXPENSE)
|
|||||||||||||
Interest
Income
|
52,600
|
—
|
7,773
|
—
|
|||||||||
Interest
Expense
|
(111,883
|
)
|
(198,354
|
)
|
(414,792
|
)
|
(309,504
|
)
|
|||||
Total
Other Income (Expense)
|
(59,283
|
)
|
(198,354
|
)
|
(407,019
|
)
|
(309,504
|
)
|
|||||
NET
LOSS
|
(1,180,993
|
)
|
(956,835
|
)
|
(2,213,609
|
)
|
(825,955
|
)
|
|||||
Preferred
stock dividend
|
(27,770
|
)
|
(29,470
|
)
|
(29,470
|
)
|
(29,470
|
)
|
|||||
Net
Loss Attributable to Common Stockholders
|
$
|
(1,208,763
|
)
|
$
|
(986,305
|
)
|
$
|
(2,243,079
|
)
|
$
|
(855,425
|
)
|
|
Net
Loss Per Share Available to Common
Stockholders —
Basic
and Fully Diluted
|
$
|
(.17
|
)
|
$
|
(.19
|
)
|
$
|
(0.41
|
)
|
$
|
(0.18
|
)
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING,
Basic and Fully Diluted |
7,274,201
|
5,239,913
|
5,522,753
|
4,885,151
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid
In
|
Preferred
Stock
|
Accumulated | |||||||||||||||||||||
|
Shares
|
Amount
|
Issued
|
Capital
|
Shares
|
Amount
|
Deficit
|
Total
|
|||||||||||||||||
Balance,
January 1, 2005
|
4,726,091
|
$
|
472
|
$
|
—
|
$
|
2,783,464
|
58,940
|
$
|
589,402
|
$
|
(2,403,638
|
)
|
$
|
969,700
|
||||||||||
Exercise
of warrants
|
262,500
|
26
|
—
|
5,224
|
—
|
—
|
—
|
5,250
|
|||||||||||||||||
Preferred
Stock Dividend
|
—
|
—
|
29,470
|
—
|
—
|
—
|
(29,470
|
)
|
—
|
||||||||||||||||
Common
stock issued for cash
|
53,606
|
5
|
—
|
196,570
|
—
|
—
|
—
|
196,575
|
|||||||||||||||||
Deferred
stock offering costs charged
to additional paid in capital |
—
|
—
|
—
|
(196,575
|
)
|
—
|
—
|
—
|
(196,575
|
)
|
|||||||||||||||
Net
loss for year ended December 31, 2005
|
—
|
—
|
—
|
—
|
—
|
—
|
(825,955
|
)
|
(825,955
|
)
|
|||||||||||||||
Balance,
December 31, 2005
|
5,042,197
|
503
|
29,470
|
2,788,683
|
58,940
|
589,402
|
(3,259,063
|
)
|
148,995
|
||||||||||||||||
|
|||||||||||||||||||||||||
Preferred
Stock Dividend
|
7,373
|
1
|
—
|
29,469
|
—
|
—
|
(29,470
|
)
|
—
|
||||||||||||||||
Common
stock issued in connection with the June 30, 2005 preferred stock
dividend
|
7,362
|
1
|
(29,470
|
)
|
29,469
|
—
|
—
|
—
|
—
|
||||||||||||||||
Common
stock issued upon debt conversion
|
140,859
|
14
|
—
|
285,430
|
—
|
—
|
—
|
285,444
|
|||||||||||||||||
Common
stock issued for cash, net of offering costs
|
1,945,394
|
195
|
—
|
6,396,255
|
—
|
—
|
—
|
6,396,450
|
|||||||||||||||||
Fair
value of options issued to employees
|
—
|
—
|
—
|
5,808
|
—
|
—
|
—
|
5,808
|
|||||||||||||||||
Net
loss for the year ended
December
31, 2006
|
—
|
—
|
—
|
—
|
—
|
—
|
(2,213,609
|
)
|
(2,213,609
|
)
|
|||||||||||||||
Balance,
December 31, 2006
|
7,143,185
|
714
|
—
|
9,535,114
|
58,940
|
589,402
|
(5,502,142
|
)
|
4,623,088
|
||||||||||||||||
Fair
value of common stock issued
for services |
440
|
—
|
—
|
3,783
|
—
|
—
|
—
|
3,783
|
|||||||||||||||||
Preferred
stock dividend
|
3,820
|
1
|
—
|
27,769
|
—
|
—
|
(27,770
|
)
|
—
|
||||||||||||||||
Preferred
stock conversion
|
13,600
|
1
|
—
|
33,999
|
(3,400
|
)
|
(34,000
|
)
|
—
|
—
|
|||||||||||||||
Exercise
of warrants
|
40,000
|
4
|
—
|
104,996
|
—
|
—
|
—
|
105,000
|
|||||||||||||||||
Common
stock issued for cash,
net of offering costs |
1,500,000
|
150
|
—
|
7,862,074
|
—
|
—
|
—
|
7,862,224
|
|||||||||||||||||
Public
offering expenses
|
—
|
—
|
—
|
(45,000
|
)
|
—
|
—
|
—
|
(45,000
|
)
|
|||||||||||||||
Fair
value of options issued to employees
|
—
|
—
|
—
|
48,420
|
—
|
—
|
—
|
48,420
|
|||||||||||||||||
Net
loss for the six months ended
June 30, 2007 |
—
|
—
|
—
|
—
|
—
|
—
|
(1,180,993
|
)
|
(1,180,993
|
)
|
|||||||||||||||
Balance,
June 30, 2007 (Unaudited)
|
8,701,045
|
$
|
870
|
$
|
—
|
$
|
17,571,155
|
55,540
|
$
|
555,402
|
$
|
(6,710,905
|
)
|
$
|
11,416,522
|
For
The Six Months
Ended
June 30,
|
For
The Year
Ended
December 31,
|
||||||||||||
2007
|
2006
|
2006
|
2005
|
||||||||||
(unaudited)
|
(unaudited)
|
||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||||||||
Net
Loss
|
$
|
(1,180,993
|
)
|
$
|
(956,835
|
)
|
$
|
(2,213,609
|
)
|
$
|
(825,955
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||||||||
Compensation
expense from stock issuance
|
3,783
|
—
|
—
|
—
|
|||||||||
Fair
value of stock options issued to employees
|
48,420
|
—
|
5,808
|
—
|
|||||||||
Depreciation
and amortization
|
81,907
|
58,684
|
155,860
|
118,517
|
|||||||||
Provision
for amounts due from director
|
—
|
—
|
3,000
|
124,210
|
|||||||||
(Increase)
decrease in operating assets and increase (decrease)
in operating liabilities:
|
|||||||||||||
Accounts
receivable
|
(181,796
|
)
|
(447,578
|
)
|
(648,857
|
)
|
262,708
|
||||||
Inventory
|
(459,727
|
)
|
(67,800
|
)
|
(303,211
|
)
|
93,006
|
||||||
Prepaid
expenses
|
31,163
|
(32,032
|
)
|
(90,183
|
)
|
(68,627
|
)
|
||||||
Other
receivables
|
(118,576
|
)
|
4,296
|
(17,248
|
)
|
(7,400
|
)
|
||||||
Accounts
payable
|
(273,792
|
)
|
736,612
|
50,523
|
232,367
|
||||||||
Accrued
expenses
|
(41,547
|
)
|
21,565
|
64,097
|
2,655
|
||||||||
Accrued
interest
|
(19,296
|
)
|
17,951
|
(9,507
|
)
|
25,909
|
|||||||
Net
cash used in operating activities
|
(2,110,454
|
)
|
(665,137
|
)
|
(3,003,327
|
)
|
(42,610
|
)
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||||||
Purchase
of property and equipment
|
(410,631
|
)
|
(36,969
|
)
|
(64,924
|
)
|
(181,654
|
)
|
|||||
Due
from director
|
—
|
—
|
—
|
(33,013
|
)
|
||||||||
Increase
in restricted cash
|
(10,473
|
)
|
—
|
(1,580,456
|
)
|
—
|
|||||||
Net
cash used in investing activities
|
(421,104
|
)
|
(36,969
|
)
|
(1,645,380
|
)
|
(214,667
|
)
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||||||
Proceeds
received from warrants exercise
|
105,000
|
—
|
—
|
—
|
|||||||||
Proceeds
received from borrowings on long debt
|
163,276
|
—
|
—
|
295,900
|
|||||||||
Principal
payments on long debt
|
(182,356
|
)
|
(53,870
|
)
|
(327,734
|
)
|
(263,815
|
)
|
|||||
Proceeds
received on sale of common stock
|
9,000,000
|
1,002,779
|
7,004,611
|
196,575
|
|||||||||
Payments
for stock offering costs
|
(1,182,777
|
)
|
(237,287
|
)
|
(251,924
|
)
|
(332,858
|
)
|
|||||
Net
borrowings on lines of credit
|
167,911
|
17,508
|
1,081,140
|
367,731
|
|||||||||
Repayment
of previous line of credit
|
—
|
—
|
(1,171,567
|
)
|
—
|
||||||||
Payments
on debt to related parties
|
—
|
—
|
(74,646
|
)
|
(21,000
|
)
|
|||||||
Net
cash provided by financing activities
|
8,071,054
|
729,130
|
6,259,880
|
242,533
|
|||||||||
NET
INCREASE (DECREASE) IN CASH
|
5,539,496
|
27,024
|
1,611,173
|
(14,744
|
)
|
||||||||
CASH —
Beginning of period
|
1,638,917
|
27,744
|
27,744
|
42,488
|
|||||||||
CASH —
End of period
|
$
|
7,178,413
|
$
|
54,768
|
$
|
1,638,917
|
$
|
27,744
|
|||||
Supplemental
Disclosures of Cash Flow Information
|
|||||||||||||
Cash
paid during the period for:
|
|||||||||||||
Interest
|
$
|
131,176
|
$
|
180,403
|
$
|
424,298
|
$
|
283,595
|
|||||
Taxes
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
Non
cash Investing and Financing Activities
|
|||||||||||||
Long
term debt converted to common stock
|
$
|
—
|
$
|
—
|
$
|
9,000
|
$
|
—
|
|||||
Related
party debt converted to common stock
|
$
|
—
|
$
|
—
|
$
|
177,710
|
$
|
—
|
|||||
Accrued
interest converted to common stock
|
$
|
—
|
$
|
—
|
$
|
98,734
|
$
|
—
|
|||||
Common
stock issued in settlement of accrued interest on
related party debt upon exercise of warrants
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
5,250
|
|||||
Conversion
of a line of credit to a term loan
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
50,000
|
|||||
Deferred
stock offering costs charged to paid in capital
|
$
|
—
|
$
|
356,238
|
$
|
608,161
|
$
|
196,575
|
|||||
Preferred
stock converted to common stock
|
$
|
34,000
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
Common
stock issued in settlement of preferred stock
dividend
|
$
|
27,770
|
$
|
29,470
|
$
|
29,470
|
$
|
29,740
|
|||||
Common
stock to be issued in settlement of preferred stock
dividend
|
$
|
—
|
$
|
29,470
|
$
|
—
|
$
|
—
|
(1) |
Operations
and Summary of Significant Accounting
Policies
|
A) |
Nature
of Operations
|
B) |
Cash
and Cash Equivalents
|
C) |
Use
of Estimates
|
D) |
Accounts
Receivable
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
E) |
Property
and Equipment and Related
Depreciation
|
Property
and Equipment Type
|
Years
of
Depreciation
|
|
Building
|
|
39
years
|
Machinery
and
equipment
|
5-12
years
|
|
Vehicles
|
5
years
|
|
Office
equipment
|
5-7
years
|
F) |
Intangible
Assets
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
G) |
Concentrations
|
H) |
Fair
Value of Financial
Instruments
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
I) |
Cost
of sales
|
J) |
Income
Taxes
|
K) |
Deferred
Stock Offering Costs
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
L) |
Stock
-Based Compensation
|
|
|
|||
Net
loss as reported
|
$
|
(825,955
|
)
|
|
Stock
based compensation
|
(
530,955
|
)
|
||
|
||||
Pro
forma loss
|
$
|
(1,356,910
|
)
|
|
|
||||
Primary
and fully diluted loss per share, as reported
|
$
|
(0.18
|
)
|
|
Proforma
fully and diluted loss per share
|
$
|
(0.28
|
)
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
M) |
Revenue
Recognition
|
N) |
Net
Loss Per Share
|
June
30,
2007
|
December
31,
2006
|
||||||
(unaudited)
|
|||||||
Warrants
|
1,688,236
|
813,241
|
|||||
Preferred
Stock
|
222,160
|
235,760
|
|||||
Options
|
502,500
|
363,500
|
|||||
Total
|
2,412,896
|
1,412,501
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
O) |
Advertising
Costs
|
P) |
Reporting
Segment of the Company
|
Q) |
Comprehensive
Income
|
R) |
Adoption
of New Accounting
Policy
|
(1) |
Operations
and Summary of Significant Accounting
Policies—(continued)
|
S) |
Recent
Accounting Pronouncements
|
(2) |
Restricted
Cash
|
(3) |
Inventory
|
June
30,
2007
|
December
31,
2006
|
||||||
(unaudited)
|
|||||||
Raw
Materials
|
$
|
757,787
|
$
|
593,458
|
|||
Finished
Goods
|
1,213,170
|
917,772
|
|||||
$
|
1,970,957
|
$
|
1,511,230
|
(4) |
Fixed
Assets
|
June
30,
2007
|
December
31,
2006
|
||||||
(unaudited)
|
|||||||
Land
|
$
|
409,546
|
$
|
409,546
|
|||
Building
|
943,594
|
924,042
|
|||||
Vehicles
|
309,010
|
243,844
|
|||||
Machinery
and
equipment
|
985,505
|
757,511
|
|||||
Office
equipment
|
221,390
|
123,471
|
|||||
|
2,869,045
|
2,458,414
|
|||||
Accumulated
depreciation
|
(744,785
|
)
|
(
663,251
|
)
|
|||
$
|
2,124,260
|
$
|
1,795,163
|
(5) |
Intangible
Assets
|
(5) |
Intangible
Assets—(continued)
|
Asset
|
Gross
Amount
|
Accumulated
Amortization
|
Current
Year
Amortization
|
Useful
Life
|
|||||||||
Building
Loan Fees
|
$
|
18,614
|
$
|
4,467
|
$
|
745
|
300
months
|
Asset
|
Gross
Amount
|
Accumulated
Amortization
|
Current
Period
Amortization
|
Useful
Life
|
|||||||||
Building
Loan Fees
|
$
|
18,614
|
$
|
4,840
|
$
|
372
|
300
months
|
Year
|
Amount
|
||
Remainder
of 2007
|
|
$
|
373
|
2008
|
745
|
||
2009
|
745
|
||
2010
|
745
|
||
2011
|
745
|
(6) |
Lines
of Credit
|
(6) |
Lines
of Credit—(continued)
|
(7) |
Long-term
Debt
|
June
30,
2007
|
December
31,
2006
|
||||||
(unaudited)
|
|
||||||
Note
payable to SBA in the original amount of $748,000 with interest
at the
Wall
Street Journal prime rate plus 1% per annum, adjusted monthly
with no cap
or floor. The combined monthly principal and interest payments are
$6,062, subject to annual adjustments. The interest rate in effect
at
December 31, 2006 was 9.25%. The note is secured by land and building
and guaranteed by the majority stockholder. The note matures
November
2025.
|
$
|
657,312
|
$
|
662,349
|
|||
Notes
payable, unsecured, with interest at 10% per annum. Principal and
accrued interest are payable in full at the end of the note term.
This
note was issued with
warrants, exercisable at issuance. The warrants have an exercise
price of
$3 and a term of 5 years. The note is payable on
demand.
|
—
|
30,000
|
|||||
Building
improvement loan with a maximum draw of $168,000. The interest
rate is
at
the Wall Street Journal prime rate plus 1%, adjusted monthly
with no cap
or floor. The combined monthly principal and interest payments
are $1,175;
subject to annual adjustments. The rate in effect at December 31,
2006 was 9.25% per annum. The note is secured by land and building
and
guaranteed by the majority stockholder and matures
November 2025.
|
137,914
|
139,542
|
Note
payable to a bank, unsecured, interest rate is prime plus 3.25%.
The
interest rate
in effect at December 31, 2006 was 11.5%. The note matures in December
2009.
|
33,063
|
38,634
|
|||||
Notes
payable to GMAC, secured by automobiles, payable in monthly installments
of
$758 including interest at 0.0%, with maturity in 2008.
|
4,559
|
9,108
|
|||||
Notes
payable to Chrysler Financial Corp., secured by automobiles, payable
in
monthly installments of $658, including interest at 1.9% per annum,
with
maturity in 2008.
|
9,758
|
13,589
|
|||||
Note
payable to a bank, secured by a vehicle, payable in monthly installments
of $352 including interest at 9.4% per annum, with maturity in
2012
|
15,856
|
—
|
|||||
Note
payable to a bank, secured by a vehicle, payable in monthly installments
of $298 including interest at 8.85% per annum, with maturity in
2013
|
15,679
|
—
|
|||||
Total
|
874,141
|
893,222
|
|||||
Less
current portion
|
43,936
|
71,860
|
|||||
$
|
830,205
|
$
|
821,362
|
(7) |
Long-term
Debt—(continued)
|
Year
|
Amount
|
|||
2007
|
$
|
71,860
|
||
2008
|
31,827
|
|||
2009
|
25,496
|
|||
2010
|
20,750
|
|||
2011
|
14,651
|
|||
Thereafter
|
728,638
|
|||
Total
|
$
|
893,222
|
(8) |
Stockholders’
Equity
|
(8) |
Stockholders’
Equity — (continued)
|
(9) |
Stock
Options and Warrants
|
A) |
Stock
Options
|
Six
months ended
June
30, 2007
|
Year
ended
December
31, 2006
|
Year
ended
December
31, 2005
|
||||||||
Expected
volatility
|
70
|
%
|
70
|
%
|
70
|
%
|
||||
Weighted
average volatility
|
70
|
%
|
70
|
%
|
70
|
%
|
||||
Expected
dividends
|
—
|
—
|
—
|
|||||||
Expected
term (in years)
|
5
|
5
|
5
|
|||||||
Risk
free rate
|
4.83
|
%
|
4.49
|
%
|
4.05
|
%
|
(9) |
Stock
Options and Warrants —
(continued)
|
Shares
|
Weighted-Average
Exercise
Price
|
Weighted-Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at January 1, 2006
|
291,000
|
$
|
3.80
|
||||||||||
Granted
|
85,000
|
$
|
4.00
|
||||||||||
Exercised
|
—
|
||||||||||||
Forfeited
or expired
|
(12,500
|
)
|
$
|
4.00
|
|||||||||
Outstanding
at December 31, 2006
|
363,500
|
$
|
3.84
|
3.8
|
$
|
92,500
|
|||||||
Granted
|
139,000
|
$
|
5.90
|
||||||||||
Exercised
|
—
|
||||||||||||
Forfeited
or expired
|
—
|
||||||||||||
Outstanding
at June 30, 2007
|
502,500
|
$
|
4.41
|
3.71
|
$
|
1,441,225
|
|||||||
Exercisable
at December 31, 2006
|
278,500
|
$
|
3.79
|
3.5
|
$
|
92,500
|
|||||||
Exercisable
at June 30, 2007
|
278,500
|
$
|
3.79
|
3.01
|
$
|
962,625
|
Weighted-Ave
Grant
|
|||||||
Nonvested
shares
|
Shares
|
Date
Fair Value
|
|||||
Nonvested
at January 1, 2006
|
85,000
|
$
|
2.46
|
||||
Granted
|
—
|
||||||
Vested
|
—
|
||||||
Forfeited
|
—
|
||||||
Nonvested
at December 31, 2006
|
85,000
|
$
|
2.46
|
||||
Granted
|
139,000
|
$
|
3.65
|
||||
Vested
|
—
|
||||||
Forfeited
|
—
|
||||||
Nonvested
at June 30, 2007
|
224,000
|
$
|
3.20
|
(9) |
Stock
Options and Warrants —
(continued)
|
B)
|
Warrants
|
Six
months ended
June
30, 2007
|
Year
ended
December
31, 2006
|
||||||
Expected
volatility
|
70
|
%
|
70
|
%
|
|||
Weighted
average volatility
|
70
|
%
|
70
|
%
|
|||
Expected
dividends
|
—
|
—
|
|||||
Expected
term (in years)
|
5
|
5
|
|||||
Risk
free rate
|
5.10
|
%
|
4.45
|
%
|
(9) |
Stock
Options and Warrants —
(continued)
|
Shares
|
Weighted-Average
Exercise
Price
|
Weighted-Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at January 1, 2006
|
613,241
|
$
|
2.81
|
||||||||||
Granted
|
200,000
|
$
|
6.60
|
||||||||||
Exercised
|
—
|
||||||||||||
Forfeited
or expired
|
—
|
||||||||||||
Outstanding
at December 31, 2006
|
813,241
|
$
|
3.74
|
3.0
|
$
|
731,617
|
|||||||
Granted
|
914,995
|
$
|
7.34
|
||||||||||
Exercised
|
(40,000
|
)
|
$
|
2.63
|
|||||||||
Forfeited
or expired
|
—
|
||||||||||||
Outstanding
at June 30, 2007
|
1,688,236
|
$
|
5.72
|
3.81
|
$
|
2,776,900
|
|||||||
Exercisable
at December 31, 2006
|
613,241
|
$
|
2.80
|
2.4
|
$
|
731,617
|
|||||||
Exercisable
at June 30, 2007
|
1,448,236
|
$
|
5.60
|
3.74
|
$
|
2,646,900
|
Weighted-Ave
Grant
|
|||||||
Nonvested
shares
|
Shares
|
Date
Fair Value
|
|||||
Nonvested
at January 1, 2006
|
200,000
|
$
|
2.03
|
||||
Granted
|
—
|
||||||
Vested
|
—
|
||||||
Forfeited
|
—
|
||||||
Nonvested
at December 31, 2006
|
200,000
|
$
|
2.03
|
||||
Granted
|
914,995
|
$
|
4.26
|
||||
Vested
|
(914,995
|
)
|
$
|
4.26
|
|||
Forfeited
|
—
|
||||||
Nonvested
at June 30, 2007
|
200,000
|
$
|
2.03
|
(10) |
Income
Taxes
|
Deferred
income tax asset:
|
June
30,
2007
|
December
31,
2006
|
|||||
(unaudited)
|
|||||||
Net
operating loss carry forward
|
$
|
3,054,000
|
$
|
1,873,000
|
|||
Valuation
allowance
|
(3,054,000
|
)
|
(1,873,000
|
)
|
|||
Net
deferred income tax asset
|
$
|
—
|
$
|
—
|
Years
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Tax
expense at the U.S. statutory income tax
|
(34.00
|
)%
|
(34.00
|
)%
|
|||
Increase
in the valuation allowance
|
34.00
|
%
|
34.00
|
%
|
|||
Effective
tax rate
|
—
|
—
|
(11) |
Commitments
and Contingencies
|
Year
Ending December 31,
|
||||
Remainder
of 2007
|
$
|
15,216
|
||
2008
|
18,634
|
|||
2009
|
12,365
|
|||
2010
|
7,496
|
|||
2011
|
6,872
|
|||
Total
|
$
|
60,583
|
(11) |
Commitments
and Contingencies —
(continued)
|
(12) |
Related
Party Activity
|
(13) |
Subsequent
Events (unaudited)
|
Page
|
||||
Summary
|
1
|
|||
Special
Note Regarding Forward-Looking Statements
|
4
|
|||
Risk
Factors
|
5
|
|||
Use
of Proceeds
|
13
|
|||
Selling
Stockholders
|
13
|
|||
Plan
of Distribution
|
17
|
|||
Price
Range of Common Stock
|
19
|
|||
Dividend
Policy
|
19
|
|||
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20
|
|||
Business
|
30
|
|||
Management
|
44
|
|||
Certain
Relationships and Related Transactions
|
51
|
|||
Security
Ownership of Certain Beneficial Owners and
Management
|
52
|
|||
Description
of Our Securities
|
53
|
|||
Shares
Eligible for Future Sale
|
56
|
|||
Legal
Matters
|
57
|
|||
Experts
|
58
|
|||
Where
You Can Find Additional Information
|
58
|
|||
Index
to Financial Statements
|
F-1
|
Description
|
Amount
to be Paid
|
|||
SEC
registration fee
|
$
|
570.88
|
||
Postage
and printing expenses
|
$
|
1,000.00
|
||
Legal
fees
|
$
|
100,000.00
|
||
Accounting
fees
|
$
|
12,500.00
|
||
TOTAL
|
$
|
114,070.88
|
3.1
|
Certificate
of Incorporation 1
|
|
3.2
|
Amendment
to Certificate of Incorporation 1
|
|
3.3
|
Certificate
of Designations 1
|
|
3.4
|
Certificate
of Correction to Certificate of Designations 1
|
|
3.5
|
Bylaws,
as amended 1
|
|
4.1
|
Form
of common stock certificate 1
|
|
4.2
|
Form
of Series A preferred stock certificate 1
|
|
4.3
|
2001
Employee Stock Option Plan 1
|
|
4.4
|
Form
of Common Stock Purchase Warrant *
|
|
4.5
|
Form
of Placement Agent Common Stock Purchase Warrant *
|
|
5.1
|
Legal
opinion of Baker & Hostetler LLP
|
|
10.1
|
Purchase
Agreement for Virgil’s Root Beer 1
|
|
10.2
|
Brewing
Agreement dated as of May 15, 2001 between the Company and The
Lion
Brewery, Inc. 1
|
|
10.3
|
Loan
Agreement with U.S. Bank National Association for purchase of the
Brewery
1
|
|
10.4
|
Loan
Agreement with U.S. Bank National Association for improvements
at the
Brewery 1
|
|
10.5
|
Loan
Agreement with California United Bank *
|
|
10.6
|
Credit
Agreement with Merrill Lynch 1
|
|
10.7
|
Form
of Promotional Share Lock-In Agreement 1
|
|
10.7(a)
|
Promotional
Share Lock-In Agreement For Christopher J. Reed 1
|
|
10.7(b)
|
Promotional
Share Lock-In Agreement For Robert T. Reed, Jr. 1
|
|
10.7(c)
|
Promotional
Share Lock-In Agreement For Robert T. Reed, Sr. 1
|
|
10.7(d)
|
Promotional
Share Lock-In Agreement For Peter Sharma, III 1
|
|
10.7(e)
|
Promotional
Share Lock-In Agreement For Joseph Grace 1
|
|
10.7(f)
|
Promotional
Share Lock-In Agreement for Judy Holloway Reed 1
|
|
10.7(g)
|
Promotional
Share Lock-In Agreement for Eric Scheffer 1
|
|
10.7(h)
|
Promotional
Share Lock-In Agreement for Mark Harris 2
|
|
10.8
|
Agreement
to Assume Repurchase Obligations 2
|
|
14.1
|
Code
of Ethics 2
|
21
|
Subsidiaries
of Reed’s, Inc. 3
|
23.1
|
Consent
of Weinberg & Co., P.A.
|
23.2
|
Consent
of Baker & Hostetler LLP (contained in Exhibit 5.1)
|
24
|
Power
of Attorney (included in the signature page to the Registration
Statement)
|
# |
To
be filed by amendment.
|
* |
Previously
filed as part of this Registration
Statement.
|
1 |
Filed
as part of the Registrant’s Registration Statement on Form SB-2 (File No.
333-120451).
|
2. |
Filed
as part of the Registrant’s Registration Statement on Form SB-2 (File No.
333-135186).
|
3. |
Filed
as part of the Registrant’s Annual Report on Form 10-KSB for the year
ended December 31, 2006.
|
(i) |
Include
any prospectus required by Section 10(a)(3) of the Securities Act
of
1933;
|
(ii) |
Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration
statement; and notwithstanding
the forgoing, any increase or decrease in volume of securities offered
(if
the total dollar value of securities offered would not exceed that
which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospects
filed with the SEC pursuant to Rule 424(b) (§230.424(b) of this chapter)
if, in the aggregate, the changes in the volume and price represent
no
more than a 20% change in the maximum aggregate offering price set
forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
|
(iii) |
Include
any additional or changed material information on the plan of
distribution.
|
REED’S,
INC.
|
||
|
|
|
By: | /s/ Christopher J. Reed | |
Christopher
J. Reed
|
||
Chief
Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/
Christopher J. Reed
Christopher
J. Reed
|
Chief
Executive Officer and Chairman of the Board of Directors (Principal
Executive Officer)
|
November
2, 2007
|
||
|
||||
/s/
David M. Kane
David
M. Kane
|
Chief
Financial Officer (Principal Accounting Officer)
|
November
2, 2007
|
||
|
||||
/s/
Judy Holloway Reed
Judy
Holloway Reed
|
Director
|
November
2, 2007
|
||
|
||||
/s/
Mark Harris
Mark
Harris
|
Director
|
November
2, 2007
|
||
|
||||
/s/
Daniel S.J. Muffoletto
Daniel
S.J. Muffoletto
|
Director
|
November
2, 2007
|
||
|
||||
/s/
Michael Fischman
Michael
Fischman
|
Director
|
November
2, 2007
|
3.1
|
Certificate
of Incorporation 1
|
|
3.2
|
Amendment
to Certificate of Incorporation 1
|
|
3.3
|
Certificate
of Designations 1
|
|
3.4
|
Certificate
of Correction to Certificate of Designations 1
|
|
3.5
|
Bylaws,
as amended 1
|
|
4.1
|
Form
of common stock certificate 1
|
|
4.2
|
Form
of Series A preferred stock certificate 1
|
|
4.3
|
2001
Employee Stock Option Plan 1
|
|
4.4
|
Form
of Common Stock Purchase Warrant *
|
|
4.5
|
Form
of Placement Agent Common Stock Purchase Warrant *
|
|
5.1
|
Legal
opinion of Baker & Hostetler LLP
|
|
10.1
|
Purchase
Agreement for Virgil’s Root Beer 1
|
|
10.2
|
Brewing
Agreement dated as of May 15, 2001 between the Company and The
Lion
Brewery, Inc. 1
|
|
10.3
|
Loan
Agreement with U.S. Bank National Association for purchase of the
Brewery
1
|
|
10.4
|
Loan
Agreement with U.S. Bank National Association for improvements
at the
Brewery 1
|
|
10.5
|
Loan
Agreement with California United Bank *
|
|
10.6
|
Credit
Agreement with Merrill Lynch 1
|
|
10.7
|
Form
of Promotional Share Lock-In Agreement 1
|
|
10.7(a)
|
Promotional
Share Lock-In Agreement For Christopher J. Reed 1
|
|
10.7(b)
|
Promotional
Share Lock-In Agreement For Robert T. Reed, Jr. 1
|
|
10.7(c)
|
Promotional
Share Lock-In Agreement For Robert T. Reed, Sr. 1
|
|
10.7(d)
|
Promotional
Share Lock-In Agreement For Peter Sharma, III 1
|
|
10.7(e)
|
Promotional
Share Lock-In Agreement For Joseph Grace 1
|
|
10.7(f)
|
Promotional
Share Lock-In Agreement for Judy Holloway Reed 1
|
|
10.7(g)
|
Promotional
Share Lock-In Agreement for Eric Scheffer 1
|
|
10.7(h)
|
Promotional
Share Lock-In Agreement for Mark Harris 2
|
|
10.8
|
Agreement
to Assume Repurchase Obligations 2
|
|
14.1
|
Code
of Ethics 2
|
|
21
|
Subsidiaries
of Reed’s, Inc. 3
|
|
23.1
|
Consent
of Weinberg & Co., P.A.
|
|
23.2
|
Consent
of Baker & Hostetler LLP (contained in Exhibit 5.1)
|
|
24
|
Power
of Attorney (included in the signature page to the Registration
Statement)
|
# |
To
be filed by amendment.
|
* |
Previously
filed as part of this Registration
Statement.
|
1 |
Filed
as part of the Registrant’s Registration Statement on Form SB-2 (File No.
333-120451).
|
2. |
Filed
as part of the Registrant’s Registration Statement on Form SB-2 (File No.
333-135186).
|
3. |
Filed
as part of the Registrant’s Annual Report on Form 10-KSB for the year
ended December 31, 2006.
|