Delaware | 2086 | 35-2177773 |
(State or jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Ruba Qashu Qashu & Schoenthaler LLP 1801 Century Park East, Los Angeles, California 90067 Telephone: (310) 773-5953 Facsimile: (866) 313-3040 | Joseph A. Smith Weinstein Smith LLP 420 Lexington Avenue, Suite 2620 New York, NY 10170 Telephone: 212-616-3007 Direct: 212-931-8719 Fax: 212-401-4741 |
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Title of Each Class of Securities to be Registered | Amount to be Registered (1) | Proposed Maximum Offering Price per Share (1) | Estimated Proposed Maximum Aggregate Offering Price (4) | Amount of Registration Fee |
Transferable Subscription Rights (“Rights”) to purchase Series B Convertible Preferred Stock, $0.0001 par value per share (“Series B Preferred”) | 10,000,000 | — | — | — (2) |
Shares of Series B Preferred Stock underlying the Rights | 300,000 | $10.00 | $3,000,000 | $167.40 (3) |
Shares of common stock underlying the Series B Preferred | 1,500,000 | — | — | — (4) |
Total | 300,000 | $10.00 | $3,000,000 | $167.40 (5) |
(1) | This registration statement relates to (a) the subscription rights to purchase Series B Preferred (b) the shares of Series B Convertible Preferred Stock (“Series B Preferred”) deliverable upon the exercise of the rights and (3) the shares of common stock issuable upon conversion of the Series B Preferred . |
(2) | The rights are being issued without consideration. Pursuant to Rule 457(g), no separate registration fee is payable with respect to the rights being offered hereby since the rights are being registered in the same registration statement as the securities to be offered pursuant thereto. |
(3) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
(4) |
(5) | Calculated pursuant to Rule 457(g) based on the aggregate exercise price of the rights. |
Preliminary Prospectus | Subject To Completion, Dated |
Subscription Price | Dealer Manager Fee (1) | Proceeds, Before Expenses, to us | |
Per share | $10.00 | $0.70 | $9.30 |
Total (2) | $3,000,000 | $220,000 | $2,780,000 |
Q: | What is a rights offering? |
A: | A rights offering is a distribution of subscription rights on a pro rata basis to all existing common stockholders of a company. We are distributing to holders of our common stock, at no charge, as of the close of business on the record date |
Q: | Why are you undertaking the rights offering? |
A: | We are making the rights offering to raise funds primarily for production of inventory and marketing, plus for general working capital purposes. We had approximately |
Our board of directors has elected a rights offering over other types of financings because a rights offering provides our existing stockholders the opportunity to participate in this offering first, and our board believes this creates less percentage dilution of stockholder ownership interest in our company than if we issued shares to new investors. | |
Q: | How much money will Reed’s raise as a result of the rights offering? |
A: | Assuming full participation in the rights offering, we estimate that the net proceeds from the rights offering will be approximately |
Q: | What is a right? |
A: | Each right carries with it a basic subscription right and an over-subscription right. Four (4) rights entitle the holder of the rights the opportunity to purchase one share of Series B Preferred at the subscription price of $10.00 per share. Each right will be evidenced by a transferable rights certificate. |
Q: | How does a rights holder transfer a subscription right? |
A: | The subscription rights may be transferred or assigned during the subscription period. If your shares are held of record by a broker, custodian bank or other nominee on your behalf, you may sell your subscription rights by contacting your broker, custodian bank or other nominee through which you hold your common stock. If you are a record holder of a subscription rights certificate, you may transfer your subscription rights through the subscription agent, in which case, you must deliver your properly executed subscription rights certificate, with appropriate instructions, to the subscription agent. The subscription agent will only facilitate subdivisions, transfers or sales of subscription rights until 5:00 p.m., New York City time, on |
Q: | What is a basic subscription right? |
A: | Four (4) basic subscription rights give you the opportunity to purchase one share of our Series B Preferred. You may exercise any number of your basic subscription rights or you may choose not to exercise any subscription rights at all. |
For example, if you own 400 shares of our common stock on the record date and you are granted one right for every share of our common stock you own at that time, then you have the right to purchase up to 100 shares of Series B Preferred, subject to adjustment to eliminate fractional rights. If you hold your shares in the name of a broker, dealer, custodian bank, trustee or other nominee who uses the services of the DTC, then DTC will notify you of your right to cause them to be exercised. |
Q: | What is an over-subscription right? |
A: | If you elect to purchase all of the shares available to you pursuant to your basic subscription right, you may also concurrently elect to subscribe for any number of additional shares that may remain unsubscribed as a result of any other stockholders not exercising their basic subscription rights, subject to a pro rata adjustment if over-subscription requests exceed shares, as more fully described below. The over-subscription rights allow a holder to subscribe for an additional amount equal to up to 400% of the shares for which such holder was otherwise entitled to subscribe at the same exercise price per whole share as a basic subscription right. |
For example, if you own 400 shares of our common stock on the record date, and exercise your basic subscription right to purchase all (but not less than all) 100 shares of Series B Preferred which are available for you to purchase, then, you may also concurrently exercise your over-subscription right to purchase up to 400 additional shares of Series B Preferred that remain unsubscribed as a result of any other stockholders not exercising their basic subscription rights, subject to the pro rata adjustments described below. Accordingly, if your basic and over-subscription rights are exercised and honored in full, you would receive a total of 500 shares of Series B Preferred in this offering. Payments in respect of over-subscription rights are due at the time payment is made for the basic subscription right. |
Q. | What happens if rights holders exercise their respective over-subscription rights to purchase additional shares of Series B Preferred? |
A: | We will allocate the remaining available shares pro rata among rights holders who exercised their respective over-subscription rights, based on the number of over-subscription shares of Series B Preferred to which they subscribed. The allocation process will assure that the total number of remaining shares available for basic and over-subscriptions is distributed on a pro rata basis. The percentage of remaining shares of Series B Preferred each over-subscribing rights holder may acquire will be rounded down to result in delivery of whole shares. |
Payments for basic subscriptions and over-subscriptions will be deposited upon receipt by the subscription agent and held in a segregated account with the subscription agent pending a final determination of the number of shares of Series B Preferred to be issued pursuant to the basic and over-subscription rights. If the pro rated amount of shares allocated to you in connection with your basic or over-subscription right is less than your basic or over-subscription request, then the excess funds held by the subscription agent on your behalf will be promptly returned to you without interest or deduction. We will deliver certificates representing your shares of our Series B Preferred or credit your account at your nominee holder with shares of our Series B Preferred that you purchased pursuant to your basic and over-subscription rights as soon as practicable after the rights offering has expired and all proration calculations and reductions contemplated by the terms of the rights offering have been effected. |
Q. | Are there any circumstances in which either Reed’s could be obligated to distribute subscription rights for a number of shares of Series B Preferred which exceeds its available shares of Series B Preferred? What would happen in this case? |
A: | If we receive a sufficient number of basic subscriptions, the aggregate number of exercises could exceed the 300,000 shares of Series B Preferred authorized and available in this offering for issuance. In such a case, we would reduce on a pro rata basis, the number of basic subscriptions we accept so that we will not become obligated to issue, upon exercise of the basic subscriptions, a greater number of shares of Series B Preferred than we have authorized and available for issuance. If we have a sufficient number of shares of Series B Preferred available to meet basic subscriptions but receive an excess of over-subscriptions, we would reduce on a pro rata basis, the number of over-subscriptions we accept so that we will not become obligated to issue, upon exercise of the over-subscriptions, a greater number of shares of Series B Preferred than we have authorized and available for issuance. |
Q: | Will the officers, directors and significant stockholders of Reed’s be exercising their rights? |
A: | Our officers, directors and greater than 5% beneficial stockholders may participate in this offering, but none of our officers, directors or greater than 5% beneficial stockholders are obligated to so participate. |
Q: | Will the subscription rights and the shares of Series B Preferred that I receive upon exercise of my rights be tradable on the NASDAQ Capital Market? |
A: | The subscription rights will be tradable and listed for trading on the NASDAQ Capital Market under the symbol “REEDR” during the term of this offering. We intend to apply to the OTC Bulletin Board for quotation of our Series B Preferred during the course of this offering. We cannot assure you that our Series B Preferred will meet the requirements for quotation or that there will be an active trading market for our Series B Preferred. However, the Series B Preferred will not be subject to any restrictions on transfer. |
Q: | How do I exercise my basic subscription right? |
A: | You may exercise your subscription rights by properly completing and signing your subscription rights certificate. Your subscription rights certificate, together with full payment of the subscription price, must be received by Continental Stock Transfer & Trust Company, the subscription agent for this rights offering, on or prior to the expiration date of the rights offering. We sometimes refer to Continental Stock Transfer & Trust Company in this prospectus as the subscription agent. Continental Stock Transfer & Trust Company is not the transfer agent and registrar for our common stock. |
If you use the mail, we recommend that you use insured, registered mail, return receipt requested. We will not be obligated to honor your exercise of subscription rights if the subscription agent receives the documents relating to your exercise after the rights offering expires, regardless of when you transmitted the documents. |
Q: | How do I exercise my over-subscription right? |
A: | In order to properly exercise your over-subscription right, you must: (i) indicate on your subscription rights certificate that you submit with respect to the exercise of the rights issued to you how many additional shares of Series B Preferred you are willing to acquire pursuant to your over-subscription right and (ii) concurrently deliver the subscription payment related to your over-subscription right at the time you make payment for your basic subscription right. All funds from over-subscription rights that are not honored will be promptly returned to investors, without interest or deduction. |
Q: | Am I required to subscribe in the rights offering? |
A: | No. |
Q: | Will my voting and other rights be diluted if I do not exercise my subscription rights? |
A: | Yes. If you do not exercise your subscription rights in full, the percentage of our common stock that you own will decrease, and your voting and other rights will be diluted to the extent that other stockholders exercise their subscription rights to purchase shares of Series B Preferred and such Series B Preferred is converted to common stock. We will we raise no more than $3,000,000 in this offering. |
Q: | When will the rights offering expire? |
A: | The subscription rights will expire, if not exercised, at 5:00 p.m., New York City time, on October [ ], 2009, unless we decide to terminate the rights offering earlier or extend the expiration date for up to an additional 30 trading days in our sole discretion. If we extend the expiration date, you will have at least ten trading days during which to exercise your rights. Any rights not exercised at or before that time will expire without any payment to the holders of those unexercised rights. See “The Rights Offering — Expiration Date and Extensions.” The subscription agent must actually receive all required documents and payments before that time and date. |
Q: | Will Reed’s be requiring a minimum dollar amount of subscriptions to consummate the rights offering? |
A: | No. There is no minimum subscription requirement to consummate the rights offering. As such, proceeds from this rights offering may not be sufficient to meet the objectives we state in this prospectus, other corporate milestones that we may set, or to avoid a “going concern” modification in future reports of our auditors as to uncertainty with respect to our ability to continue as a going concern. |
Q: | Is exercising my subscription rights risky? |
A: | The exercise of your subscription rights and over-subscription rights (and the resulting ownership of our common stock) involves a high degree of risk. Exercising your subscription rights means buying shares of our Series B Preferred and should be considered as carefully as you would consider any other equity investment. You should carefully consider the information under the heading “Risk Factors” and all other information included in this prospectus before deciding to exercise your subscription rights. |
Q: | After I exercise my subscription rights, can I change my mind and cancel my purchase? |
A: | No. Once you send in your subscription rights certificate and payment, you cannot revoke the exercise of either your basic or over-subscription rights. You should not exercise your subscription rights unless you are certain that you wish to purchase shares of our Series B Preferred at the proposed subscription price. Any rights not exercised at or before that time will expire worthless without any payment to the holders of those unexercised rights. |
Q: | Can the board of directors cancel or terminate the rights offering? |
A: | Yes. Our board of directors may decide to cancel or terminate the rights offering at any time and for any reason before the expiration date. If our board of directors cancels or terminates the rights offering, we will issue a press release notifying stockholders of the cancellation or termination, and any money received from subscribing stockholders will be promptly returned, without interest or deduction. |
Q: | What should I do if I want to participate in the rights offering but my shares are held in the name of my broker, dealer, custodian bank, trustee or other nominee? |
A: | Beneficial owners of our shares whose shares are held by a nominee, such as a broker, dealer custodian bank or trustee, must contact that nominee to exercise their rights. In that case, the nominee will complete the subscription rights certificate on behalf of the beneficial owner and arrange for proper payment by one of the methods described above. |
Q: | What should I do if I want to participate in the rights offering, but I am a stockholder with a foreign address? |
A: | Subscription rights certificates will not be mailed to foreign stockholders whose address of record is outside the United States and Canada, or is an Army Post Office (APO) address or Fleet Post Office (FPO). If you are a foreign stockholder, you will be sent written notice of this offering. The subscription agent will hold your rights, subject to you making satisfactory arrangements with the subscription agent for the exercise of your rights, and follow your instructions for the exercise of the rights if such instructions are received by the subscription agent at or before 11:00 a.m., New York City time, on October [ ] , 2009, three business days prior to the expiration date (or, if this offering is extended, on or before three business days prior to the extended expiration date). If no instructions are received by the subscription agent by that time, your rights will expire worthless without any payment to you of those unexercised rights. |
Q: | Will I be charged a sales commission or a fee if I exercise my subscription rights? |
A: | We will not charge a brokerage commission or a fee to subscription rights holders for exercising their subscription rights. However, if you exercise your rights through a broker or nominee, you will be responsible for any fees charged by your broker or nominee. |
Q: | What is the recommendation of the board of directors regarding the rights offering? |
A: | Neither we, our board of directors, the information agent nor the subscription agent are making any recommendation as to whether or not you should exercise your subscription rights. You are urged to make your decision in consultation with your own advisors as to whether or not you should participate in the rights offering or otherwise invest in our securities and only after considering all of the information included in this prospectus, including the “Risk Factors” section that follows. |
Q: | How was the conversion rate of the Series B Preferred established? |
A: | Our Series B Preferred has a stated value equal to the subscription price of $10.00. Each share of Series B Preferred will be convertible into shares of our common stock at a conversion ratio of five (5) shares of common stock for each share of Series B Preferred held at the time of conversion, representing an initial conversion price of $2.00 per share, which is subject to adjustment. The conversion rate for the shares of Series B Preferred in this offering was set by our board of directors. The conversion price approximates a slight premium to the current trading value of our common stock as of the date of this prospectus. The subscription price does not necessarily bear any relationship to the book value of our assets, results of operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the subscription price as an indication of the value of the Series B Preferred. As of the date of this prospectus, our common stock traded below the conversion price. |
Q: | What if my rights result in fractional shares? |
A: | You may not purchase fractional shares of our Series B Preferred. If your rights would allow you to purchase a fractional share, you may exercise them only by rounding down to and paying for the nearest whole share, or paying for any lesser number of whole shares. |
Q: | If I also own shares of Reed’s Series A Convertible Preferred Stock, will I receive rights on those shares? |
A: | No, unless you convert one or more shares of your Series A Convertible Preferred Stock into shares of our common stock before |
Q: | Will the Series B Preferred be traded on any stock exchange or listed on a quotation service? |
A: | Yes. We intend to apply to the OTC Bulletin Board for quotation of our Series B Preferred during the course of this offering. We cannot assure you that our Series B Preferred will meet the requirements for quotation or that there will be an active trading market for our Series B Preferred. There is currently no trading market for the Series B Preferred. Conversion into the underlying shares of our common stock and sale of those shares may be the only way for you to liquidate your investment in any shares of Series B Preferred you purchase in the rights offering. |
Q: | What are the terms of the Series B Convertible Preferred Stock? |
Dividends. Subject to the prior payment in full of any dividends to which any stock specifically ranking by its terms senior to the Series B Preferred is entitled pursuant to the Certificate of Incorporation, the holders of the Series B Preferred shall be entitled to receive dividends payable quarterly , in kind, in common stock or in cash, in our sole discretion. Such dividends shall be cumulative and non-compounding and accrue on a daily basis for a period of three (3) years from the date of issuance of the Series B Preferred, at an annual rate equal to five percent | |
Conversion Rights. Each share of the Series B Preferred will be convertible at the election of the holder into shares of our common stock by dividing the $10.00 stated value of the Series B Preferred by a conversion price, which will initially be $2.00. The conversion price will be adjusted to reflect subdivisions or combinations of our common stock such as stock splits, stock dividends, recapitalizations or reverse splits. | |
Mandatory Conversion at Our Option. At any time after the original purchase date, if the closing price of our common stock as reported by the principal exchange or quotation system on which such common stock is traded or reported equals or exceeds $2.75 per share of common stock, for five (5) consecutive trading days, then we shall have the right to cause all (but not less than all) outstanding shares of Series B Preferred Stock to be automatically converted into shares of common stock. |
Mandatory Redemption. At any time after the | |
Voting. Holders of the Series B Preferred will have no voting rights, except as required by law. | |
For a detailed description of the rights, preferences and privileges of the Series B Preferred, see “Description of Securities to be Registered — the Series B Convertible Preferred Stock.” |
Q: | What are the U.S. federal income tax consequences of receiving or exercising my subscription rights? |
A: | A holder should not recognize income or loss for U.S. federal income tax purposes in connection with the receipt or exercise of subscription rights in the rights offering. You should consult your own tax advisor as to the particular consequences to you of the rights offering. See “Material U.S. Federal Income Tax Considerations.” |
Q: | How many shares of our common stock will be outstanding after the rights offering? |
A: | On September [ ], 2009, the record date for the rights offering, there were [ ] shares of common stock outstanding, and completion of the rights offering will not immediately affect the number of shares of common stock outstanding. Following completion of the rights offering, (assuming all shares are purchased including through exercise of over-subscription rights), there will be 300,000 shares of Series B Preferred outstanding, which will initially be convertible into 1,500,000 shares of common stock. Assuming conversion of all shares of Series B Preferred, (and excluding [ ] shares of common stock underlying currently outstanding options, warrants and Series A Convertible Preferred Stock), there would be [ ] shares of common stock outstanding. |
Q: | If I exercise my subscription rights, when will I receive shares of Series B Preferred purchased in the rights offering? |
A: | If your shares are held of record by Cede & Co. or by any other depository or nominee through the facilities of DTC on your behalf or on behalf of your broker, dealer, custodian bank, trustee or other nominee, you will have any shares that you acquire credited to the account of Cede & Co. or the other depository or nominee. With respect to all other stockholders, stock certificates for all shares acquired will be mailed promptly after payment for all the shares subscribed for has cleared. |
Q: | Who is the subscription agent for the rights offering? |
A: | The subscription agent is Continental Stock Transfer & Trust Company. The address for delivery to the subscription agent is as follows: |
Your delivery to an address other than the address set forth above will not constitute valid delivery and, accordingly, may be rejected by us. |
Q: | What should I do if I have other questions? |
A: | If you have any questions or need further information about this rights offering, please contact |
MacKenzie Partners, Inc., our information agent for the rights offering, at (212) 929-5500 (call collect) or (800) 322-2885 (toll-free) or via email at reedrights@mackenziepartners.com. |
In addition, Source Capital Group, Inc. will act as dealer-manager for the rights offering. Under the terms and subject to the conditions contained in the dealer-manager agreement, the dealer-manager will provide marketing assistance and advice to our company in connection with this offering and will act as sole placement agent for any Series B Preferred shares that are not take up through the exercise of the Rights. We have agreed to pay Source Capital Group, Inc. 7% of the gross proceeds of this offering in cash and warrants to purchase 5% of the shares of common stock underlying Series B Preferred sold in this offering priced at 125% of the effective initial conversion price. The warrants will not be redeemable. The warrants and the shares issuable upon exercise of the warrants will be non-transferable for a period of six months following the expiration date of the offering, except that they may be transferred in accordance with the rules of the Financial Industry Regulatory Authority, Inc., or FINRA (formerly the NASD). The warrants may be exercised in full or in part as of the date of issuance and provide for cashless exercise, customary anti-dilution rights and contain provisions for one demand registration of the sale of the underlying shares of common stock for a period of five years after the expiration date of the offering at our expense, an additional demand registration at the warrant holder’s expense and piggyback registration rights for a period of five years after the expiration date of the offering at our expense. In addition, we have agreed to pay Source Capital Group, Inc. a non-accountable expense allowance of $10,000 upon completion of this offering. We have also agreed to indemnify Source Capital Group, Inc. and their respective affiliates against certain liabilities arising under the Securities Act of 1933, as amended. Source Capital Group, Inc. is not underwriting any of the securities (including the rights) issued in this offering. |
Securities Offered | We are distributing at no charge to the holders of our common stock on September |
Basic Subscription Right | We will distribute one right to the holder of record of every share of common stock that is held by the holder of record on the record date. Four (4) rights entitle the holder to purchase one share of Series B Preferred at the subscription price of $10.00 per share, which we refer to as the basic subscription right. |
Over-Subscription Right | Holders who fully exercise their basic subscription rights will be entitled to subscribe for additional shares that may remain unsubscribed as a result of any unexercised basic subscription rights, which we refer to as the over-subscription rights. The over-subscription rights allow a holder to concurrently subscribe for an additional amount equal to up to 400% of the shares of Series B Preferred which such holder was otherwise entitled to subscribe. Oversubscription rights are exercisable at the same price per whole share as basic subscription rights. Rights may only be exercised for whole numbers of shares; no fractional shares of Series B Preferred will be issued in this offering. The percentage of remaining shares of Series B Preferred each over-subscribing rights holder may acquire will be rounded down to result in delivery of whole shares. |
Record Date | Close of business on September [ ], 2009. |
Dealer-Manager | Source Capital Group, Inc. |
Commencement Date of Subscription Period | |
Expiration Date of Subscription Period | 5:00 p.m., New York City time, on October [ ], 2009, unless extended by us as described in this summary below under “—Extension, termination and cancellation.” Any rights not exercised at or before that time will have no value and expire without any payment to the holders of those unexercised rights. |
Subscription Price | $10.00 per share, payable in immediately available funds. |
Use of Proceeds | The proceeds from the rights offering, less fees and expenses incurred in connection with the rights offering, will be used primarily for production of inventory and marketing, as well as for general working capital purposes. |
Transferable | The rights being distributed to the holders are transferable and will be listed for trading on the NASDAQ Capital Market under the symbol “REEDR” during the course of this offering. |
No Recommendation | Our board of directors makes no recommendation to you about whether you should exercise any rights. You are urged to consult your own financial advisors in order to make an independent investment decision about whether to exercise your rights. Please see the section of this prospectus entitled “Risk Factors” for a discussion of some of the risks involved in investing in our securities. |
No Minimum Subscription Requirement | There is no minimum subscription requirement. We will consummate the rights offering regardless of the amount raised from the exercise of basic and over-subscription rights by the expiration date. |
Maximum Offering Size | We will we raise no more than $3,000,000 in this offering. |
No Revocation | If you exercise any of your basic or over-subscription rights, you will not be permitted to revoke or change the exercise or request a refund of monies paid. |
U.S. Federal Income Tax Considerations | A holder should not recognize income, gain, or loss for U.S. federal income tax purposes in connection with the receipt or exercise of subscription rights in the rights offering. You should consult your own tax advisor as to the particular consequences to you of the rights offering. For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.” |
Extension, Termination and Cancellation | Extension. If the rights offering is undersubscribed, our board of directors may extend the expiration date for exercising your subscription rights for up to an additional 30 trading days in their sole discretion. If we extend the expiration date, you will have at least ten trading days during which to exercise your rights. Any extension of this offering will be followed as promptly as practicable by an announcement, and in no event later than 9:00 a.m., New York City time, on the next business day following the previously scheduled expiration date. |
Termination; Cancellation. We may cancel or terminate the rights offering at any time and for any reason prior to the expiration date. Any termination or cancellation of this offering will be followed as promptly as practicable by announcement thereof, and in no event later than 9:00 a.m., New York City time, on the next business day following the termination or cancellation. | |
Procedure for Exercising Rights | If you are the record holder of shares of our common stock, to exercise your rights you must complete the subscription rights certificate and deliver it to the subscription agent, Continental Stock Transfer & Trust Company, together with full payment for all the subscription rights (pursuant to both the basic subscription right and the over-subscription right) you elect to exercise. The subscription agent must receive the proper forms and payments on or before the expiration date. You may deliver the documents and payments by mail or commercial courier. If regular mail is used for this purpose, we recommend using registered mail, properly insured, with return receipt requested. If you are a beneficial owner of shares of our common stock, you should instruct your broker, dealer, custodian bank, trustee or other nominee in accordance with the procedures described in the section of this prospectus entitled “The Rights Offering—Record Date Stockholders Whose Shares are Held by a Nominee.” |
Subscription Agent | Continental Stock Transfer & Trust Company |
Information Agent | MacKenzie Partners, Inc. |
Questions | If you have any questions or need further information about this rights offering, please contact MacKenzie Partners, Inc., our information agent for the rights offering, at (212) 929-5500 (call collect) or (800) 322-2885 (toll-free) or via email at reedrights@mackenziepartners.com. |
Shares Outstanding on the Record Date | [ ] shares as of |
Shares Outstanding after Completion of the Rights Offering | Up to [ ] shares of our common stock will be outstanding, assuming full participation in the rights offering and full conversion of Series B Preferred Stock into common stock. These amounts exclude outstanding options, warrants and Series A Convertible Preferred Stock convertible into or exercisable for shares of common stock. |
Issuance of our Series B Preferred | If you purchase shares pursuant to the basic or over-subscription right, we will issue certificates representing the shares of Series B Preferred to you or DTC on your behalf, as the case may be, promptly after receipt of payment after payment for all the shares subscribed for has cleared. |
Risk Factors | Investing in our securities involves a high degree of risk. Stockholders considering making an investment in our securities should consider the risk factors described in the section of this prospectus entitled “Risk Factors.” |
Fees and Expenses | We will bear the fees and expenses relating to the rights offering. |
Trading Symbol | Our common stock is quoted on the NASDAQ Capital Market under the ticker symbol “REED.” |
Distribution Arrangements | Source Capital Group, Inc. will act as dealer-manager for this rights offering. Under the terms and subject to the conditions contained in the dealer-manager agreement, the dealer-manager will act as sole placement agent and provide marketing assistance in connection with this offering. We have agreed to pay Source Capital Group, Inc. certain fees for acting as dealer-manager and to reimburse the dealer-manager for its reasonable expenses incurred in connection with this offering. Source Capital Group, Inc. is not underwriting any of the rights or the shares of Series B Preferred being sold in this offering. Source Capital Group, Inc. will not be subject to any liability to us in rendering the services contemplated by the dealer-manager agreement except for any act of bad faith or gross negligence Source Capital Group, Inc. |
● | 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. |
● | price and volume fluctuations in the overall stock market from time to time, including increased volatility due to the worldwide credit and financial markets crisis; |
● | significant volatility in the market price and trading volume of our securities, including increased volatility due to the worldwide credit and financial markets crisis; |
● | actual or anticipated changes or fluctuations in our operating results; |
● | material announcements by us regarding business performance, financings, mergers and acquisitions or other transactions; |
● | general economic conditions and trends; |
● | competitive factors; |
● | loss of key supplier or distribution relationships; or |
● | departures of key personnel. |
● | fund more rapid expansion, |
● | fund additional marketing expenditures, |
● | enhance our operating infrastructure, |
● | respond to competitive pressures, and |
● | acquire other businesses or engage in other strategic initiatives. |
● | 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 75% of our total case production for the year ended December 31, 2008 and 82% and 72% of our total case production in 2007 and 2006, respectively. |
● | 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 revenues and earnings or other variations in operating results, |
● | any shortfall in revenue or increase in losses from levels expected by us or securities analysts, |
● | changes in regulatory policies or law, |
● | operating performance of companies comparable to us, and |
● | general economic trends and other external factors. |
● | Insufficient disaster recovery or backup of core business functions, |
● | Lack of segregation of duties, and |
● | Lack of documented and reviewed system of internal control |
● | Insufficient disaster recovery or backup of core business functions. |
● | Lack of segregation of |
● | Lack of documented and reviewed system of internal control. |
● | authorizing the issuance of “blank check” preferred stock without any need for action by stockholders; and |
● | permitting stockholder action by written consent. |
● | the historical and current market price of our common stock; |
● | the fact that holders of rights will have an over-subscription right; |
● | the terms and expenses of this offering relative to other alternatives for raising capital, |
● | the size of this offering; and |
● | the general condition of the securities market. |
At June 30, 2009 | ||||
Actual (dollars in thousands) | ||||
Cash | $ | 421 | ||
Total liabilities | 6.528 | |||
Common stock, $.0001 par value, 19,500,000 shares authorized, 9,200,693 shares issued and outstanding at June 30, 2009 | 1 | |||
Series A Preferred Stock, $10 par value, 500,000 shares authorized, 46,621 shares outstanding at June 30, 2009 | 466 | |||
Series B Preferred Stock, $10 par value, 300,000 shares authorized, none issued and outstanding at June 30, 2009 | ||||
Additional paid-in capital | 19,691 | |||
Accumulated Deficit | (16,313 | ) | ||
Total stockholders’ Equity | 3,845 | |||
Total liabilities and stockholders’ equity | $ | 10,373 |
At March 31, 2009 | |||||
Actual (dollars in thousands) | |||||
Cash | $ | 108 | |||
Total liabilities | 5,446 | ||||
Common stock, $.0001 par value, 19,500,000 shares authorized, 9,107,177 shares issued and outstanding at March 31, 2009 | 1 | ||||
Series A Preferred Stock, $10 par value, 500,000 shares authorized, 47,121 shares outstanding at March 31, 2009 | 471 | ||||
Series B Preferred Stock, $10 par value, 300,000 shares authorized, none issued and outstanding at March 31, 2009 | |||||
Additional paid-in capital | 18,698 | ||||
Accumulated Deficit | (15,417 | ) | |||
Total stockholders’ Equity | 3,753 | ||||
Total liabilities and stockholders’ equity | $ | 9,199 |
Subscription price per share of common stock upon conversion of Series B Preferred | $ | 2.00 | ||
Net tangible book value per share of common stock prior to the rights offering | $ | 0.33 | ||
Increase per share of common stock attributable to the rights offering | $ | 0.19 | ||
Pro forma net tangible book value per share of common stock after the rights offering | $ | 0.52 | ||
Dilution in net tangible book value per share of common stock to purchasers | $ | 1.48 |
Subscription price per share of common stock upon conversion of Series B Preferred | $ | 2.00 | ||
Net tangible book value per share of common stock prior to the rights offering | $ | 0.32 | ||
Increase per share of common stock attributable to the rights offering | $ | 0.20 | ||
Pro forma net tangible book value per share of common stock after the rights offering | $ | 0.52 | ||
Dilution in net tangible book value per share of common stock to purchasers | $ | 1.48 |
● | 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 |
Number of Over-Subscription Shares Subscribed to by Exercising Rights Holder | X | Shares Available for Rights Holders Exercising Their Over-Subscription Right | ||
Total Number of Over-Subscription Shares Available for Rights Holders Exercising Their Over- Subscription Right |
● | the historical and current market price of our common stock; |
● | the fact that holders of rights will have an over-subscription right; |
● | the terms and expenses of this offering relative to other alternatives for raising capital, |
● | the size of this offering; and |
● | the general condition of the securities market. |
Subscription Rights Certificate Delivery Method | Address/Number | |
By Mail/Commercial Courier/Hand Delivery: | Continental Stock Transfer & Trust Company 17 Battery Place, 8th Floor New York, NY 10004 (212) 509-4000, x 536 |
· | Complete, date, and sign the acknowledgment of subscription. |
· | Make a check payable to “Reed’s, Inc.” in an amount equal to the subscription price of $10.00 times the number of shares of Series B Preferred subscribed for. |
· | Return the completed acknowledgment of subscription and check to Reed’s, Inc., 13000 South Spring Street, Los Angeles, California 90061, attention: Christopher J. Reed. |
● | an individual citizen or resident of the United States; |
● | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
● | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
● | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. |
● | a dealer in securities or currencies; |
● | a financial institution; |
● | a regulated investment company; |
● | a real estate investment trust; |
● | an insurance company; |
● | a tax-exempt organization; |
● | a person holding the Series B Preferred or our common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle; |
● | a trader in securities that has elected the mark-to-market method of accounting for your securities; |
● | a person liable for alternative minimum tax; |
● | a partnership or other pass-through entity for U.S. federal income tax purposes; |
● | a person who is an investor in a pass-through entity; |
● | a U.S. holder whose “functional currency” is not the U.S. dollar; |
● | a “controlled foreign corporation”; |
● | a “passive foreign investment company”; or |
● | a United States expatriate. |
● | the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder); |
● | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition (or deemed to have been present in the United States for 183 days or more in such taxable year based on a weighted factor of the number of days present in the United States over the past three years), and certain other conditions are met; or |
● | we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes. |
(a) | Our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed March 27, |
(b) | Our Quarterly Report on Form 10Q for the quarterly period ended March 31, 2009, as filed May 13, 2009 and as amended August 19, 2009 and August 21, 2009 ; |
(c) | Our Quarterly Report on Form 10Q for the quarterly period ended June 30, 2009, as filed August 14, 2009 and as amended August 18, 2009; |
Our Current Reports on Form 8-K filed with the SEC January 6, 2009, January 26, 2009, May 5, 2009 and June 22, 2009; |
All other reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), since the end of the fiscal year covered by the annual report referred to in paragraph (a) above; and |
The description of our capital stock that is contained in our Registration Statement on Form S-1 (File No.), as filed November 20, 2008. |
SEC filing fee | $ | 558 | $ | 558 | ||||
FINRA filing fee | $ | 800 | $ | 800 | ||||
Accounting fees and expenses | $ | 20,000 | $ | 24,000 | ||||
Dealer-manager fees | $ | 220,000 | $ | 220,000 | ||||
Legal fees and expenses | $ | 85,000 | $ | 131,000 | ||||
Printing and engraving expenses | $ | 15,000 | $ | 16,000 | ||||
Other (including subscription and information agent fees) | $ | 50,000 | $ | 35,287 | ||||
Total | $ | 391,358 | $ | 427,645 |
REED’S, INC. | |||
By: | /s/ Christopher J. Reed | ||
Christopher J. Reed | |||
Chief Executive Officer | |||
Signature | Title | Date | ||
/s/ Christopher J. Reed | Chief Executive Officer, Chairman of the board of directors (Principal Executive Officer) | |||
Christopher J. Reed | ||||
/s/ James Linesch | Chief Financial Officer (Principal Accounting Officer) | September 15, 2009 | ||
James Linesch | ||||
/s/ Judy Holloway Reed | Director | September 15, 2009 | ||
Judy Holloway Reed | ||||
/s/ Mark Harris | Director | September 15, 2009 | ||
Mark Harris | ||||
/s/ Daniel S.J. Muffoletto | Director | September 15, 2009 | ||
Daniel S.J. Muffoletto | ||||
1.1 | Form of Dealer-Manager Agreement by and between Reed’s, Inc. and Source Capital Group, Inc. (Previously filed as Exhibit 1.1 to this Registration Statement on Form S-3 (File No. 333-156908)) |
3.1 | Certificate of Incorporation of Reed’s, Inc. as filed September 7, 2001 (Incorporated by reference to Exhibit 3.1 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
3.2 | Certificate of Amendment of Certificate of Incorporation of Reed’s, Inc. as filed September 27, 2004 (Incorporated by reference to Exhibit 3.2 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
3.3 | Certificate of Amendment of Certificate of Incorporation of Reed’s, Inc. as filed December 18, 2007 (Incorporated by reference to Exhibit 3.3 to Reed’s, Inc.’s Registration Statement on Form S-1 (File No. 333-156908)) |
3.4 | Certificate of Designations, Preferences and Rights of Series A Preferred Stock of Reed’s, Inc. as filed October 12, 2004(Incorporated by reference to Exhibit 3.3 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
3.5 | Certificate of Correction to Certificate of Designations, Preferences and Rights of Series A Preferred Stock of Reed’s, Inc. as filed November 10, 2004 (Incorporated by reference to Exhibit 3.4 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
3.6 | Bylaws of Reed’s Inc., as amended (Incorporated by reference to Exhibit 3.5 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
3.7 | Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock ( Incorporated by reference to Exhibit 3.1 to Reed’s Inc. Current Report on Form 8K dated May 5, 2009) |
3.8 | Form of Certificate of |
4.1 | Form of common stock certificate (Incorporated by reference to Exhibit 4.1 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
4.2 | Form of Series A Convertible Preferred Stock certificate (Incorporated by reference to Exhibit 4.2 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File No. 333-120451)) |
4.3 | Form of Subscription Rights Certificate (Previously filed as Exhibit 4.3 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.4 | Form of Notice to Stockholders who are Record Holders (Previously filed as Exhibit 4.4 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.5 | Form of Notice to Stockholders who are Acting as Nominees (Previously filed as Exhibit 4.5 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.6 | Form of Notice to Clients of Stockholders who are Acting as Nominees (Previously filed as Exhibit 4.6 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.7 | Form of Beneficial Owner Election Form (Previously filed as Exhibit 4.7 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.8 | Form of Prelminary Subscription Agreement (Previously filed as Exhibit 4.8 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.9 | Form of Acknowledgement of Subscription (Previously filed as Exhibit 4.9 to this Registration Statement on Form S-3 (File No. 333-156908)) |
4.10 | See exhibits 3.1 through 3.8 for provisions of Reed’s, Inc.’s Certificate of Incorporation and Bylaws Defining the Rights of Stockholders |
5.1 | |
Legal Opinion of Qashu & Schoenthaler |
23.1 | Consent of Weinberg & Co., P.A.* |
23.2 | Consent of Qashu & Schoenthaler LLP. (contained in Exhibit 5.1) |