Business Context and Reporting Period
This Form 8-K Current Report was filed by REED's, INC. on July 14, 2017, regarding events occurring on July 13, 2017. The filing details the entry into material definitive agreements involving the repricing and exercise of warrants by the Lead Investor (Raptor/Harbor Reeds SPV LLC) and three other investors.
Key Financial Metrics and Transaction Details
- Warrant Exercise Proceeds: The company received aggregate gross proceeds of $1,640,625 from the exercise of 1,093,750 warrant shares.
- Repriced Warrants: Warrants to purchase 1,906,925 shares were repriced with an exercise price of $1.50 per share.
- New Warrant Issuance:
- Second Tranche: Warrants to purchase up to 512,560 shares at an exercise price of $2.00, exercisable after six months.
- Warrants to purchase up to 87,746 shares, exercisable immediately at the closing price on the fifth day post-closing.
- Use of Proceeds: Funds will be used for general corporate purposes.
- Financial Statements: This filing does not contain revenue, profit, cash flow, margin, debt, or liquidity metrics. The filing text does not provide a clear value for these operational metrics.
Material Changes and Corporate Actions
The filing reports the following material changes and agreements:
- Warrant Repricing: Modification of warrant terms including exercise price and "Fundamental Transactions" language.
- Board Observer Rights: The Lead Investor received the right to designate one non-voting observer to attend board of directors meetings.
- Upcoming Stockholder Meeting: Reed's agreed to hold a meeting on or before September 29, 2017 to propose:
- Authorization for non-public offerings with a maximum discount of up to 25% below market price.
- Amendment to the certificate of incorporation to increase authorized common stock by 5,000,000 shares.
- Proxy Voting: Management proxies are to be voted in favor of the aforementioned proposals.
Guidance, Risks, and Contingencies
- Unregistered Securities: The warrants issued were not registered under the Securities Act of 1933 but qualified for exemption under Section 4(a)(2) due to the insubstantial number of persons involved and the manner of the offering.
- Management Commentary: The company issued a press release on July 14, 2017, announcing the transaction. No specific forward-looking guidance on revenue or earnings was included in this text.
- Risks: The transaction involves potential dilution through the issuance of new warrants and the proposed increase in authorized shares.
Key Facts for Investor Verification
- Verify the impact of the $1.64 million cash infusion on the company's immediate liquidity position.
- Confirm the dilution effect of the 1,906,925 repriced warrants and the 600,306 new warrants (second and third tranches).
- Monitor the outcome of the stockholder meeting scheduled for September 29, 2017 regarding the 5 million share increase and future offering discounts.
- Review the full text of the Warrant Exercise Agreements (Exhibits 10.1 and 10.2) for specific covenants and "Fundamental Transaction" definitions.