Business Context and Reporting Period
Company: REED's, INC.
Filing Type: Form 8-K (Current Report)
Date of Report: May 17, 2016 (Earliest event reported: May 13, 2016)
Context: The filing reports the entry into material definitive agreements regarding the company's credit facilities with PMC Financial Services Group, LLC ("PMC").
Key Financial Metrics and Agreements
This filing does not contain standard financial performance metrics such as revenue, profit, cash flow, or margins. The primary financial data relates to debt restructuring and equity issuance:
- Debt Capacity Increase: Under Amendment Twelve (May 13, 2016), the Cap Ex Loan borrowing cap was increased by $210,000 to a total of $3,210,000.
- Maturity Extension: Maturity dates for the Revolving Loan, Cap Ex Loan, Term Loan, and Term Loan B were extended to October 1, 2017.
- Equity Issuance (Warrants):
- Amendment Twelve: Issued warrants for 50,000 shares at an exercise price of $4.50, expiring November 13, 2021.
- Amendment Eleven (April 25, 2016): Issued warrants for 10,000 shares at an exercise price of $3.90, expiring October 25, 2021.
- Lending Base Change: Amendment Eleven expanded the definition of "inventory" to include prepayments for glass subject to non-cancelable purchase orders, previously excluded from the revolver's lending base.
Material Changes Versus Prior Period
The filing details two specific amendments to the Amended and Restated Loan and Security Agreement dated December 5, 2014:
- Amendment Eleven (April 25, 2016): Modified the calculation of the borrowing base to include glass prepayments, changing the repayment structure from "repaid as purchase orders were filled" to inclusion in the lending base.
- Amendment Twelve (May 13, 2016): Increased the Cap Ex Loan limit and extended the maturity of all loan tranches by approximately one year.
Guidance, Outlook, Risks, and Contingencies
Conditions Precedent: In consideration for the terms of Amendment Twelve, Reed's agreed to provide proof of a capital raise of at least $1,500,000 by July 31, 2016. Failure to meet this condition could impact the validity of the agreement or trigger default provisions not detailed in this summary.
Regulatory Status: The warrant issuances were exempt from registration under Section 4(2) of the Securities Act of 1933, based on the absence of a public offering and a preexisting relationship with PMC.
Risks: The filing does not explicitly list risk factors beyond the implicit risk of failing to meet the capital raise requirement by the July 31, 2016 deadline.
Investor Verification Checklist
- Verify whether Reed's successfully raised the required $1,500,000 in capital by the July 31, 2016 deadline.
- Review the full text of Amendment Eleven and Amendment Twelve (Exhibits 10.1 and 10.2) for specific covenants, interest rates, and default triggers.
- Assess the impact of the expanded "inventory" definition on the company's actual borrowing availability under the revolver.
- Monitor the dilution impact of the 60,000 total warrants issued to PMC.