UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 20212022

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 001-32501

REED’S, INC.

(Exact name of registrant as specified in its charter)

201 Merritt 7, Norwalk, CT. 06851

(Address of principal executive offices) (Zip Code)

(800) 997-3337

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were a total of 93,584,380112,652,320 shares of Common Stock outstanding as of May 11, 2021.2022.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Quarterly Report on Form 10-Q as well as our other public filings or public statements include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and similar expressions and include references to assumptions and relate to our future prospects, developments, and business strategies.

These forward-looking statements involve known and unknown risks, assumptions and uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements. These risks, assumptions and uncertainties include difficulty in marketing Reed’s products and services, maintaining and protecting brand recognition, the need for significant capital, our significant debt obligations, dependence on third party distributors, dependence on third party brewers, increasing costs of fuel and freight, protection of intellectual property, competition and other factors, any of which could have an adverse effect on the business plans of Reed’s, its reputation in the industry or its expected financial return from operations and results of operations. These risks, assumptions and uncertainties are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.

We undertake no obligation to update or revise the forward-looking statements included in this report, whether as a result of new information, future events or otherwise, after the date of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements.

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

REED’S, INC.INC,

CONDENSED BALANCE SHEETS

(Amounts in thousands, except share amounts)

The accompanying notes are an integral part of these condensed financial statements.

REED’S, INC.

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 20212022 and 20202021

(Unaudited)

(Amounts in thousands, except share and per share amounts)

The accompanying notes are an integral part of these condensed financial statements.

REED’S, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three Months Ended March 31, 20212022 and 20202021

(Unaudited)

(Amounts in thousands except share amounts)

The accompanying notes are an integral part of these condensed financial statements.

REED’S, INC.

CONDENSED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 20212022 and 20202021

(Unaudited)

(Amounts in thousands)

The accompanying notes are an integral part of these condensed financial statements.

REED’S, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Three Months Ended March 31, 20212022 and 20202021 (Unaudited)

(In thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies

Basis of Presentation and Liquidity

The accompanying interim condensed financial statements of Reed’s, Inc. (the “Company”, “we”, “us”, or “our”), are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments, necessary to present fairly our financial position at March 31, 2021 and the results of operations and cash flows for the three months ended March 31, 2021 and 2020. The balance sheet as of December 31, 2020 is derived from the Company’s audited financial statements.

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to(“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer toThese condensed financial statements should be read in conjunction with the financial statements and the notes thereto includedcontained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as2021, filed with the SecuritiesSEC on April 15, 2022. The accompanying condensed financial statements are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2022, and Exchange Commission onthe results of its operations and its cash flows for the three months ended March 30,31, 2022 and 2021. The balance sheet as of December 31, 2021 is derived from the Company’s audited financial statements.

The results of operations for the three months ended March 31, 20212022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021.2022.

COVID-19 ConsiderationsGoing Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the three months ended March 31, 2022, the Company recorded a net loss of $4,980 and used cash in operations of $2,207. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2021, financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of March 31, 2022, we had a cash balance of $122, with no current availability, and $5,100 of additional borrowing capacity, stockholders’ equity of $4,616 and a working capital of $3,402.

On May 9, 2022 the Company issued $11,250 of secured convertible notes to certain institutional investors. The convertible notes mature May 9, 2025, bear interest at 10% per annum, and are secured by substantially all of the Company’s assets. The initial conversion rate of the convertible notes is 4.1503 shares of the Company’s common stock per one dollar of principal amount converted (See Note 11).

Historically, we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible debt instruments, term loans and credit lines from financial institutions, and cash generated from operations. To alleviate these conditions, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners or through obtaining credit from financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry.

We have also taken decisive action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product portfolio, negotiating improved vendor contracts and restructuring our selling prices.

During the first quarter of 2022, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies in transportation and warehouse costs and reduce operating expenses.

The Company remains focused on driving sales growth and improving margin. The sales growth focus is on channel expansion, new product introduction and improved sales execution. The margin enhancement initiative is driven by co-packer upgrades, better leveraged purchasing and improved efficiency. Underpinning these initiatives is a focus on strategically reducing operating costs, particularly delivery and handling expenses. During 2021, the Company experienced elevated transportation costs over the prior year and anticipates these costs to remain elevated for the balance of 2022. Plans have been implemented to mitigate the impact of these costs.

COVID-19 Considerations

During the period ended March 31, 2021,2022, the COVID-19 pandemic has impactedcontinued to impact our operating results and the Company anticipates a continued impactresidual effect for the balance of the year. In addition, the pandemic maycould cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products. Based on the recent increase in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.

Through March 31, 2021,2022, the Company has experiencedwas able to lower its freight costs despite a higher transportation expensesmarket as the capacity in the freight market has not kept up with demand. The Company believes that coststhese challenges will continue to increase throughout the year. In addition, the Company experienced increases in the pricing of several of its raw materials and delays in procuring several of these items. However, mitigation plans are beinghave been implemented to manage this risk. Additionally, the Company was negatively impacted by supply chain challenges impacting our ability to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins and net income. The Company anticipates a continued impact throughout 2022.

Our ability to operate without significant incremental negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees and protect our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities to protect our employees. Since the inception of the COVID-19 pandemic and through March 31, 2021,2022, we maintained the consistency of our operations during the onset of the COVID-19 pandemic. We will continue to innovate in managing our business, coordinating with our employees and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers. However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.

Net sales for the period ended March 31, 2021 were up 28% from the prior year period. Through March 31, 2021, we continue to generate cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets.

We have also not observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic.

Liquidity

The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2021, the Company recorded a net loss of $4,507 and used cash in operations of $5,059. As of March 31, 2021, we had a cash balance of $155 with borrowing capacity of $2,513, a stockholder’s equity of $6,770 and a working capital of $5,698, compared to a cash balance of $595 with borrowing capacity of $5,166, stockholders’ equity of $10,404 and a working capital of $9,528 at December 31, 2020. Notwithstanding the net loss for the three months ended March 31, 2021, management projects adequate cash from operations and available line of credit to ensure continuation of the Company as a going concern for at least one year from the date of this quarterly report.

Historically, we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible debt instruments, term loans and credit lines from financial institutions, and cash generated from operations. We have taken decisive action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product portfolio, negotiating improved vendor contracts and restructuring our selling prices.

2. Significant Accounting Policies

Use of estimatesEstimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying ourCompany’s performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

are satisfied at that time. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillmentfulfilment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.

All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment.pre-fulfilment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

Loss per Common Share

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.year, excluding shares of unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted. Potential common shares are excluded from the computation when their effect is antidilutive.

For the periods ended March 31, 20212022 and 2020,2021, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:

Schedule of Potentially Dilutive Securities

The Series A Convertible Preferred Stock is convertible into Common shares at the rate of 1:4.

Stock Compensation Expense

The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Advertising Costs

Advertising costs are expensed as incurred and are included in selling and marketing expense. Advertising costs aggregated $349312 and $302349 for the three months ended March 31, 20212022 and 2020,2021, respectively.

Concentrations

GrossNet sales. During the three months ended March 31, 2022, the Company’s two largest customers accounted for 18% and 12% of net sales, respectively. During the three months ended March 31, 2021, the Company’s two largest customers accounted for 2323%% and 1212%% of gross sales, respectively. During the three months ended March 31, 2020, the Company’s two largest customers accounted for 22% and 14% of grossnet sales, respectively. No other customers exceeded 10%10% of net sales in either period.

Accounts receivable. As of March 31, 2021, the Company had accounts receivable from two customers which comprised 18% and 10% of its gross accounts receivable, respectively. As of December 31, 2020,2022, the Company had accounts receivable from one customer which comprised 2323%% of its gross accounts receivable. As of December 31, 2021, the Company had accounts receivable from one customer which comprised 18% of its gross accounts receivable. No other customers exceeded 10%10% of gross accounts receivable in either period.

Purchases from vendors. During the three months ended March 31, 2022, the Company’s largest vendor accounted for approximately 13% of all purchases. During the three months ended March 31, 2021, the Company’s two largest vendor accounted for approximately 1313%% and 1313%% of all purchases, respectively. During the three months ended March 31, 2020, the Company’s largest vendor accounted for approximately 10% of all purchases. No other vendors exceeded 10%10% of all purchases in either periods.period.

Accounts payable. As of March 31, 2021,2022, the Company’s two largest vendors accounted for 1911%% and 1010%% of the total accounts payable, respectively. As of December 31, 2020 the Company’s largest two vendors2021, no vendor accounted for more than 1210%% and 10% of the total accounts payable, respectively.payable. No other vendors exceeded 10%10% of gross accounts payable in either period.

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.Recently Adopted Accounting Pronouncements

In August 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. The diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. For contracts in an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception. This update simplifies the related settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method or a fully retrospective method. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Effective January 1, 2021, the Company early adopted ASU 2020-06 and that adoption did not have an impact on our financial statements and related disclosures.

In May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s financial statement presentation or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.

Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

3.2. Inventory

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value, and net of reserveswrite downs, and is comprised of the following (in thousands):

Schedule of Inventory

The Company has recorded a reserve for slow moving and potentially obsolete inventory. The reserve at March 31, 2021, and December 31, 2020, was $174 and $194, respectively.

4.3. Property and Equipment

Property and equipment is comprised of the following (in thousands):

Schedule of Property and Equipment

Depreciation expense for the three months ended March 31, 20212022 and 20202021 was $3225 and $1232, respectively, and amortization of right-of-use assets for the three months ended March 31, 20212022 and 20202021 was $2427 and $3724, respectively. During the three months ended March 31, 2021, the Company disposed of right-of-use assets under finance leases with a cost of $48 and accumulated amortization of $38, and terminated $13 of related finance leases payable (see Note 8).

Equipment held for sale consists of the following (in thousands):

Schedule of Equipment Held for Sale

The balance as of March 31, 2021, and December 31, 2020, consists of residual manufacturing equipment, at estimated net realizable value, which management anticipates selling during 2021.

5.4. Intangible Assets

Intangible assets are comprised of brand names acquired, specifically Virgil’s, and costs related to trademarks. They have been assigned an indefinite life, as we currently anticipate that they will contribute cash flows to the Company perpetually. These indefinite-lived intangible assets are not amortized but are assessed for impairment annually and evaluated annually to determine whether the indefinite useful life remains appropriate. We first assess qualitative factors to determine whether it is more likely than not that the asset is impaired. If further testing is necessary, we compare the estimated fair value of our asset with its book value. If the carrying amount of the asset exceeds its fair value, as determined by the discounted cash flows expected to be generated by the asset, an impairment loss is recognized in an amount equal to that excess. Based on management’s assessment, there were 0 indications of impairment at March 31, 2021.

During the three months ended March 31, 2021, the Company capitalized costs of $2 pertaining to legal and other fees incurred in applying for international trademarks for Reeds and Virgil’s brands.

Intangible assets consist of the following (in thousands):

 Summary of Intangible Assets

6.5. Line of Credit

Amounts outstanding under the Company’s credit facilities are as follows (in thousands):

Schedule of Amount Outstanding Under Credit Facilities

Alterna Capital Solutions

On October 4,March 28, 2022, the Company entered into a financing agreement with Alterna Capital Solutions (“ACS”), for a line of credit to replace its existing credit facility. The ACS line of credit is for a term of 3 years, provides for borrowings of up to $13,000, and is secured by eligible accounts receivable and inventory. An over advance rider provides for up to $400 of additional borrowing beyond those amounts (the “Over Advance”). At March 31, 2022, no unused borrowing capacity was available under the financing agreement.

Borrowings based on receivables bears an interest of prime plus 4.75% but not less than 8.0%. Borrowings based on inventory bears an interest of prime plus 5.25% but not less than 8.5%. The additional over advance rider bears a rate of prime plus 12.75%, but not less than 16.00%. Additionally, the line of credit is subject to monthly monitoring fee of $1 with a minimum usage requirement on the credit facility. A loan balance of less than $1,500 will bear interest at a rate in line with account receivables advances plus the monthly monitoring fee of $1.

The Company incurred $503 of direct costs of the transaction, consisting primarily of broker, bank and legal fees. These costs have been capitalized and are being amortized over the 3-year life of the ACS agreement. For the three months ended March 31, 2022, amortization of debt discount was $33, and as of March 31, 2022, the remaining unamortized debt discount balance is $470.

Rosenthal & Rosenthal (paid off in full on March 30, 2022)

In 2018, the Company entered into a financing agreement with Rosenthal & Rosenthal, Inc. The financing agreement provides(“Rosenthal”) that provided a maximum borrowing capacity of $13,000. Borrowings are, based on a formula of eligible accounts receivable and inventories (the “permitted borrowings”) plus advances (an “over-advance” of up to $4,000) in excess of permitted borrowings. At March 31, 2021, the unused borrowing capacity under the financing agreement was $2,513. The line of credit matured on On March 30, 2021,2022, the Company paid in full the outstanding balance on its credit facility with automatic yearly renewals thereafter until terminated.Rosenthal with proceeds from ACS discussed above.

Borrowings under the Rosenthal financing agreement bearbore interest at the greater of prime or 4.754.75%%, plus an additional 2.02.0%% to 3.53.5%% depending on whether the borrowing iswas based upon receivables, inventory or is an over-advance. Additionally, the Rosenthal line of credit iswas subject to monthly facility and administration fees, and aggregate minimum monthly fees (including interest) of $4.

The line of credit iswas secured by substantially all of the assets, excluding intellectual property, of the Company. The over-advance iswas secured by all of Reed’s intellectual property collateral. Additionally, any over-advance was guaranteed by an irrevocable stand-by letter of credit in the amount of $1,500, issued by Daniel J. Doherty III and the Daniel J. Doherty, III 2002 Family Trust, affiliates of Raptor/Harbor Reeds SPV LLC (“Raptor”). On March 11, 2021, the Company entered into an amendment to the financingRosenthal agreement releasing that irrevocableand replaced a standby letter of credit of $1,500$1,500 by Raptora guarantor with a $2,000 pledge of securities to Rosenthal by John J. Bello and Nancy E. Bello, as Co-Trustees of The John and Nancy Bello Revocable Living Trust.

John J. Bello, current Chairman and former Interim Chief Executive Officer of Reed’s, is a related party. He is also aparty, and greater than 55%% beneficial owner of Reed’s common stock. As consideration for the collateral support, Mr. Bello received 400,000 shares of Reed’s restricted stock. The Company determined thestock, with a fair value of the 400,000 restricted stock to be $472 which was recorded as a prepaid financing costs and included in prepaid expenses and other current assets on the condensed balance sheet at March 31, 2021. The prepaid financing fee is to be amortized over a twelve month period.cost. During the three months ended March 31, 2021, the company amortized2022, $25121 of the prepaid financing costs to interest expense.

The financing agreement with Rosenthal includes customary restrictions that limit our ability to engage in certain types of transactions, including our ability to utilize tangiblecost was amortized, and intangible assets as collateral for other indebtedness. Additionally, the agreement contains a financial covenant that requires us to meet certain minimum working capital and tangible net worth thresholds as of the end of each quarter. We were in compliance with the terms of our agreement with Rosenthal as of March 31, 2021.2022, there was no remaining unamortized prepaid finance cost balance.

The Company annually incurs an additional $130of fees from the bank, which is equal to 11% % of the $13,000borrowing limit. These costs have been capitalized and recorded as a debt discount and are amortized over the remaining lifeAmortization of the Rosenthal agreement. On December 31, 2020, the remaining unamortized debt discount of $162 is included in prepaid expense and other current assets on the balance sheet. Amortization ofthis debt discount was $16265 and $96162 for the three months ended March 31, 2022, and 2021, and 2020, respectively. OnAt March 31, 2021, 02022, there was no remaining unamortized debt discount remained.balance.

7. Note Payable

On April 20, 2020, the Company was granted a loan (the “PPP loan”) from City National Bank in the aggregate amount of $770, pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act. At December 31, 2020, the note payable balance was $770, of which $599 was reflected as the current portion of note payable. At March 31, 2021, the note payable balance was $770, of which $727 was reflected as the current portion of note payable.

The PPP loan agreement is dated April 20, 2020, matures on April 20, 2022, bears interest at a rate of 1% per annum, with the first six months of interest deferred, is payable monthly commencing on November 2020, and is unsecured and guaranteed by the U.S. Small Business Administration. We applied ASC 470, Debt, to account for the PPP loan. Funds from the PPP loan may only be used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, qualifying group health care benefits, qualifying rent and debt obligations, and qualifying utilities. The Company believes it used the entire loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses. The Company was in compliance with the terms of the PPP loan as of March 31, 2021.

If the conditions outlined in the PPP loan program are adhered to by the Company, all or part of such loan could be forgiven. The Company believes that all or a substantial portion of the PPP loan is eligible for forgiveness. The Company applied for full forgiveness of the PPP loan on March 17, 2021. As for the potential loan forgiveness, once the PPP loan is, in part or wholly, forgiven and a legal release is received, the liability would be reduced by the amount forgiven and a gain on extinguishment would be recorded. However, the Company cannot provide any assurance whether the PPP loan will ultimately be forgiven by the SBA.

8.6. Leases Liabilities

The Company accounts for leases under ASC 842, Leases. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease, initially measured at the present value of the lease payments.

ASC 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. During the three months ended March 31, 2022 and 2021, the Company reflected amortization of right of use asset oflease costs totaled $27 and $24 related to these leases, resulting in a net asset balance of $730 as of March 31, 2021.

In accordance with ASC 842, the right-of-use assets are being amortized over the life of the underlying leases., respectively.

As of December 31, 2020,2021, operating lease liabilities totaled $685, made up of finance lease liabilities of $16 and operating lease liabilities of $669555. During the three months ended March 31, 2021,2022, the Company terminated $13 of finance leases, and made payments of $2 towards its finance lease liability and $838 towards its operating lease liability. As of March 31, 2021,2022, operating lease liabilities totaled $663, made up of finance lease liability of $1 and operating lease liability of $662518.

As of March 31, 2021,2022, the weighted average remaining lease terms for an operating lease and finance lease are 3.762.76 years and 0.50 years, respectively. Theyears. As of March 31, 2022, the weighted average discount rate foron the operating lease is 12.612.60%% and 12.6% for finance lease..

On March 10, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant to which the investors agreed to purchase 18,594,571 shares of the Company’s common stock and warrants to purchase 9,297,289 shares of common stock in a private placement (including 3,248,142 shares of the Company’s common stock and warrants to purchase 1,624,071 shares of common stock to investors who are officers and directors of the Company). The warrants have an exercise price of $0.2877 per share for a period of five yearscommencing six months from the closing date of March 11, 2022. The purchase price per share of common stock and associated warrant was $0.28 for certain investors and was $0.3502 for investors who are officers and directors of the Company in compliance with the rules of the Nasdaq Stock Market. The net proceeds to the Company, after deducting placement agent fees and other offering expenses, was approximately $5.1 million. The officers and directors of the Company purchased approximately $1.1 million of the securities in the offering.

In January 2022, the Company issued 100,000 shares of common stock valued at $37 to John J. Bello and Nancy E. Bello, as Co-Trustees of The John and Nancy Bello Revocable Living Trust as consideration for the $2,000 pledge of securities to Rosenthal (see Note 5). John J. Bello, current Chairman and former Interim Chief Executive Officer of Reed’s, is a related party, and greater than 5% beneficial owner of Reed’s common stock.

9.8. Stock-Based Compensation

Restricted common stock

The following table summarizes restricted stock activity during the three months ended March 31, 2021:2022:

Summary of Non-vested Restricted Stock Activity

On January 26, 2021,2022, the board of directors of Reed’s, pursuant to a joint recommendation from its governance and compensation committees, set the cash compensation of its non-employee directors at $50,000for fiscal 2021, payable quarterly in accordance with the company’s policies for non-employee director compensation. In addition, the Company granted 245,900401,720 restricted stock awards to five non-employee directors. 61,475100,430 of these restricted stock awards vested on February1, 2021.2022. The remaining 184,425301,290 restricted stock awards will vest equally on May 1, 2021,2022, August 1, 2021,2022, and November 1, 2021.2022. The aggregate fair value of the stock awards was $226150 based on the market price of our common stock price which was $0.920.32 per share on the date of grants and is amortized as shares vest.

The total fair value of restricted common stock vesting during the three months ended March 31, 20212022 and 20202021, was $9866 and $28598, respectively, and is included in general and administrative expenses in the accompanying statements of operations. As of March 31, 2021,2022, the amount of unvested compensation related to issuances of restricted common stock was $220138, which will be recognized as an expense in future periods as the shares vest. When calculating basic loss per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.

Stock options

The following table summarizes stock option activity during the three months ended March 31, 2021:2022:

Schedule of Stock Option Activity

During the three months ended March 31, 2021, the Company received proceeds of $3 and issued 6,000 shares of common shares on the exercise of stock options.

During the three months ended March 31, 2021,2022, the Company approved options exercisable into 1,939,70060,000 shares to be issued pursuant to Reed’s 2020 Equity Incentive Plan. 1,939,70060,000 options were issued to employees, 969,85030,000 options vesting annually over a four-year vesting period, and 969,85030,000 options that will vestvesting based on performance criteria to be established by the board of directors.

The stock options are exercisable at a price of $1.010.29 per share and expire in ten years. The total fair value of these options at grant date was approximately $1,29412, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $1.01 per $0.29 share, expected term of six years, volatility of 7682%, dividend rate of 0%, and weighted average risk-free interest rate of 0.941.72%. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.

During the three months ended March 31, 20212022 and 2020,2021, the Company recognized $300 225and $495 300of compensation expense relating to vested stock options. As of March 31, 2021,2022, the aggregate amount of unvested compensation related to stock options was approximately $4,274 2,398which will be recognized as an expense as the options vest in future periods through March 28, 2025.2026.

As of March 31, 2021,2022, the outstanding and exercisable options have anno intrinsic value of $2,332 and $759, respectively.value. The aggregate intrinsic value was calculated as the difference between the closing market price as of March 31, 2021,2022, which was $1.170.30, and the exercise price of the outstanding stock options.

10.9. Stock Warrants

As of March 31, 2021,2022, the Company has issued warrants to purchase an aggregate of 3,362,24113,835,768 shares of common stock. The Company’s warrant activity during the three months ended March 31, 20212022 is as follows:

Schedule of Warrant Activity

There wereOn March 10, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant to which the investors agreed to purchase 018,594,571 shares of the Company’s common stock and warrants to purchase 9,297,289 shares of common stock in a private placement. The warrants have an exercise price of $0.2877 per share for a period of five years commencing six months from the closing date of March 11, 2022 (see Note 7).

On November 24, 2021, the Company granted John Bello, current Chairman, significant shareholder and former Interim Chief Executive Officer of Reed’s, who is a related party, a 5-year warrant transactions duringto purchase 1,500,000 shares of the Company common stock with an exercise price of $0.46. The fair value of the warrants granted was determined to be $458 and was recorded as a prepaid financing costs. The unamortized balance of prepaid financing costs was $310 on December 31, 2021. During the three monthsmonth ended March 31, 2021. 2022, the Company amortized $310 of prepaid financing costs to interest expense, leaving no remaining prepaid financing cost balance at March 31, 2022.

As of March 31, 2021,2022, the outstanding and exercisable warrants have anno aggregate intrinsic value of $526.value. The aggregate intrinsic value was calculated as the difference between the closing market price as of March 31, 2021,2022, which was $1.170.30, and the exercise price of the Company’s warrants to purchase common stock.

11.10. Related Party Activities

On December 31,In 2018, the Company completed the sale of its Los Angeles manufacturing plant to California Custom Beverage, LLC (“CCB”), an entity owned by Christopher J. Reed, a related party, and CCB assumed the monthly payments on our lease obligation for the Los Angeles manufacturing plant. Our release from the obligation by the lessor, however, is dependent upon CCB’s deposit of $1,200 of security with the lessor. The deposit is secured by Mr. Reed’s pledge of common stock to the lessor and guaranteed personally by Mr. Reed and his wife. As of March 31, 2021,2022, $800 has been deposited with the lessor and Mr. Reed has placed approximately 363,000 pledged shares valued at $425109 that remain in escrow with the lessor.

Beginning in 2019, we are to receive a 5% royalty on CCB’s private label sales to existing customers for three years and a 5% referral fee on CCB’s private label sales to referred customers for three years. The royalty agreement terminated December 31, 2021. During the three months ended March 31, 20212022 and 2020,2021, the Company recorded royalty revenue from CCB of $30 and $53, respectively.

At December 31, 2020,2021, the Company had an aggregate receivable balance from CCB of $682933 at December 3,1 2020.. During the quarterthree months ended March 31, 2021,2022, the Company recorded royalty revenue receivable of $3, and advanced expenses of $168, leaving an aggregate receivable balance of $701941 at March 31, 2021.2022.

At March 31, 20212022 and December 31, 2020,2021, the Company had accounts payable due to CCB of $557735 and $1,034614, respectively.

Lindsay Martin, daughter of a director of the Company, is employed as Vice President of Marketing. Ms. Martin was paid approximately $8746 and $4287, respectively, for her services during the three months ended March 31, 20212022 and 2020,2021, respectively.

13.11. Subsequent Events

Subsequent to March 31, 2022, the Company issued 100,430 shares of common stock on the vesting of restricted shares.

On May 5, 2021,9, 2022, the Company entered into a note purchase agreement and agreed to issue $11,250 of secured convertible promissory notes (the “Notes”). The net proceeds from the issuance of the Notes, after deducting placement agencyagent fees and other offering expenses, was approximately $10,013. The Notes will mature on May 9, 2025, bear interest at a rate of 10% per annum, and are secured by substantially all of the Company’s assets (including all of its intellectual property) and are subject to a collateral sharing agreement with Roth Capital Partners, LLC (the “Placement Agent”)ACS, the Company’s existing secured lender (see Note 5). The Notes also have an amortization feature beginning in August 2022, which, if elected by a majority of holders, would require the Company to make monthly payments of $200 of principal and a securities purchase agreement with a certain purchaser forinterest in cash or in shares of common stock.

The initial conversion rate of the purchase and sale ofNotes is 4.1503 shares of the Company’s common stock par value $0.0001per share,one dollar of principal converted, subject to customary anti-dilution adjustments. Upon conversion, holders of the Note are entitled to receive an interest make-whole payment, as defined, which is payable, at the Company’s election, in an offering of securities registered under an effective registration statement filed with the Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended (SEC File No. 333-229105). In the offering, the Company sold 6,680,000cash or in shares of common stock valued at a price10% discount to the 5-day volume-weighted average price. The Company’s ability to settle conversions and make amortization and interest make-whole payments using shares of $1.18 per share (the “Offering”). The offering closed on May 7, 2021.the Company’s common stock is subject to certain limitations set forth in the Notes.

ForThe Company entered into a period of 90 days afterregistration rights agreement with the closing date of the sale of the shares of common stock, the provisions of the securities purchase agreement generally prohibitholders, pursuant to which the Company from issuing or agreeingagreed to issueregister for resale shares of common stock or common stock equivalents other than under equity compensation plans, outstanding rights to acquire common stock or common stock equivalents, or in connection with certain acquisitions or strategic transactions. The placement agency agreement provides that the Company will indemnify the Placement Agent against certain liabilities, including liabilitiesissuable under the Securities ActNotes within 45 days of 1933, as amended. The Placement Agent agreed to use reasonable best efforts to arrange for the sale of the shares of common stock being issued and sold in the Offering. The Placement Agent will be paid a total cash fee at the closing of the Offering equal to 6.5% of the gross cash proceeds received by theNotes. The Company from the sale of the shares of common stockis currently in the offering.process of determining its accounting for the Notes.

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

Cautionary Statement Regarding Forward-Looking Statements and Information

This Quarterly Report on Form 10-Q as well as our other public filings or public statements include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.

These forward-looking statements involve known and unknown risks, assumptions and uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements. These risks, assumptions and uncertainties include difficulty in marketing Reed’s products and services, maintaining and protecting brand recognition, Reed’s ability to qualify for forgiveness of the PPP loan, the need for significant capital, dependence on third party distributors, dependence on third party brewers, increasing costs of fuel and freight, protection of intellectual property, competition and other factors, any of which could have an adverse effect on the business plans of Reed’s, its reputation in the industry or its expected financial return from operations and results of operations. These risks, assumptions and uncertainties are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.

We undertake no obligation to update or revise the forward-looking statements included in this report, whether as a result of new information, future events or otherwise, after the date of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report.

In addition to our GAAP results, the following discussion includes Modified EBITDA as a supplemental measure of our performance. We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, and one-time restructuring-related costs including employee severance and asset impairment.

The following discussion also includes the use of gross billing, a key performance indicator and metric. Gross billing represents invoiced amounts to distributors and retailers, excluding sales adjustments. Gross billing may include deductions from MSRP or “list price”, where applicable, and excludes promotional costs of generating such sales. Management utilizes gross billing to monitor operating performance of products and salespersons, which performance can be masked by the effect of promotional or other allowances. Management believes that the presentation of gross billing provides a useful measure of Reed’s operating performance.

Overview

During the first quarter of 2021,2022, the Company fully utilized their expanded network of co-packerscontinued to strengthen its supply chain, implement gross margin enhancement initiatives, drive efficiencies in transportation and warehouse costs and reduce operating expenses. In addition, it continues to adhere to strict setbuild its innovation pipeline with sustained growth in Reed’s Real Ginger Ale and Reed’s Classic Mule. At the end of quality protocols. In addition to our traditional sales channels,the quarter, the Company is expandingshipped its rebranded Virgil’s zero sugar line in the drug, convenience12 oz. sleek cans and ecommerce channels including their branded web sites and Amazon to offerproduced its new line of shots,hard ginger candy and drinks packaged in cans.ale for its pending launch.

TheAs noted above, the Company remains focused on driving sales growth and improving margin. The sales growth focus is on channel expansion, new product introduction and improved sales execution. The margin enhancement initiative is driven by co-packer upgrades, better leveraged purchasing and improved efficiency. Underpinning these initiatives is a focus on strategically reducing operating costs. However,costs particularly delivery and handling expenses. During 2021, the Company experienced elevated transportation costs over the prior year and anticipates these costs to remain elevated for the balance of the year.2022. Plans have been developedimplemented to mitigate the impact of these costs.

COVID-19 Considerations

During the period ended March 31, 2021,2022, the COVID-19 pandemic has impactedcontinued to impact our operating results and the Company anticipates a continued impactresidual effect for the balance of the year. In addition, the pandemic maycould cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products. Based on the recent increase in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.

Through March 31, 2021,2022, the Company has experiencedwas able to lower its freight costs despite a higher transportation expensesmarket as the capacity in the freight market has not kept up with demand. The Company believes that coststhese challenges will continue to increase throughout the year. In addition, the Company experienced increases in the pricing of several of its raw materials and delays in procuring several of these items. However, mitigation plans are beinghave been implemented to manage this risk. Additionally, the Company was negatively impacted by supply chain challenges impacting our ability to benefit from strong demand for, and increased sales of our product. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins and net income. The Company anticipates a continued impact throughout 2022.

Our ability to operate without significant incremental negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees and protect our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities to protect our employees. Since the inception of the COVID-19 pandemic and through March 31, 2021,2022, we maintained the consistency of our operations during the onset of the COVID-19 pandemic. We will continue to innovate in managing our business, coordinating with our employees and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers. However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.

Net sales for the period ended March 31, 2021 were up 28% from the prior year period. Through March 31, 2021,2022, we continuecontinued to generate cash flows to meet our short-term liquidity needs, and we expectexpected to maintain access to the capital markets. We have alsodid not observedobserve any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic.

Results of Operations – Three Months Ended March 31, 20212022, as compared to March 31, 20202021

The following table sets forth key statistics for the three months ended March 31, 20212022 and 2020,2021, respectively, in thousands.