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Lines of Credit

(7)

Lines of Credit

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

	December 31, 2018			December 31, 2017
Rosenthal Line of Credit	$	7,657		$	-
PMC Revolving Line of Credit		-			3,301
Term Loans		-			3,000
CAPEX loan		-			3,947
		7,657			10,248
Capitalized finance costs		(677	)		-
Net balance	$	6,980		$	10,248

On October 4, 2018, the Company entered into a financing agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”), for a line of credit to replace its existing credit facility. The Rosenthal line of credit is for a term of 2.5 years and provides for borrowings of up to $13,000. Borrowings are based upon eligible accounts receivable and inventory, plus up to $4,000 of additional borrowing beyond those amounts (the “Over-Advance”).

Borrowings under the Rosenthal financing agreement bear interest at the greater of prime or 4.75%, plus an additional 2% to 3.5% depending upon whether the borrowing is based upon receivables, inventory or is an Over-Advance. The effective interest rate as of December 31, 2018 on outstanding borrowings was 8.3%. Additionally, the line of credit is subject to monthly facility and administration fees, and aggregate minimum monthly fees (including interest) of $4.

The Company incurred $752 of direct costs of the transaction, consisting primarily of broker, bank and legal fees, and the $161 cost of the warrant modification discussed below and in Note 10. These costs have been capitalized and are being amortized over the 2.5 year life of the Rosenthal agreement. Amortization was $75 for the year ended December 31, 2018.

The line of credit is secured by substantially all of the assets of the Company. Additionally, the Over-Advance is 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”). Raptor beneficially owns 27.1% of the Company’s outstanding common stock as of December 31, 2018. Mr. Doherty is a member of the Company’s Board of Directors. In the event of a default under the financing agreement, Raptor has a put option to purchase from Rosenthal the entire amount of any outstanding Over-Advance plus accrued interest, prior to Rosenthal declaring an event of default under the financing agreement.

As part of the transaction, the Company issued an Amended and Restated Subordinated Convertible Non-Redeemable Secured Note to Raptor, to provide for additional advances of up to $4,000 in the event that Raptor exercises its put option described above. Consequently, the exercise price of 750,000 of Raptor’s outstanding warrants to purchase the Company’s common stock was reduced from $1.50 to $1.10, resulting in an increase in the fair value of the warrants of $161. This amount has been reflected as a capitalized finance cost, and is being amortized over the life of the financing agreement. See Note 10.

The financing agreement with Rosenthal includes customary restrictions that limit our ability to engage in certain types of transactions, including our ability to utilize tangible 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. As of December 31, 2018 we did not meet the working capital and tangible net worth requirements. Rosenthal granted us a waiver for the December 31, 2018 violation, and as a result of our February 2019 public offering (see Note 17) the violation was cured prior to the next measurement date of March 31, 2019. In all other respects, we were in compliance with the terms of our agreement with Rosenthal.

Prior to execution of the financing agreement with Rosenthal, the Company had a Loan and Security Agreement with PMC Financial Services Group, LLC (the “PMC Agreement”), which included a $6,000 Revolving Line of Credit, a $3,000 Term Loan, and a Capital Expansion Loan (“CAPEX Loan”). Upon execution of the financing agreement with Rosenthal, all obligations under the PMC Agreement were repaid in full in an aggregate amount of $8,758.

Interest rates on borrowings under the PMC Agreement were generally calculated on a sliding scale based on our trailing six month EBITDA. If unused cash availability met pre-established thresholds, interest rates were generally reduced to a contractual base rate plus any increase in the prime rate. The Revolving Line of Credit also bore a monthly collateral monitoring fee of .45%.

Interest expense on the Company’s credit facilities aggregated $1,153 and $1,458 for the years ended December 31, 2018 and 2017.

Financing Obligation

12 Months Ended

Dec. 31, 2018

Financing Obligation

(8)

Financing Obligation

Our financing obligation is comprised of the following (in thousands):

	December 31, 2018		December 31, 2017
Financing obligation	$	-	$	2,186
Unamortized valuation discount		-		(714	)
Net financing obligation	$	-	$	1,472
Less current portion		-		(222	)
Long term financing obligation	$	-	$	1,250

As the result of a 2009 sale-leaseback transaction, the Company leased two buildings and certain of its brewery equipment (the majority of the assets of our Los Angeles plant). The transaction was accounted for as a long-term financing arrangement, and the proceeds from the sale were recorded as a financing obligation in the initial amount of $3,056. Monthly payments of approximately $35 under the arrangement were recorded as a reduction in the financing obligation and as interest expense at an implicit rate of 9.9%.

In connection with the financing obligation and subsequent amendments, the Company issued an aggregate of 600,000 warrants to purchase its common stock. The 600,000 warrants were valued at an initial aggregate amount of $1,336, which was recorded as a valuation discount at the date of issuance. The discount was being amortized over fifteen years, the term of the purchase option. The balance of the unamortized valuation discount at December 31, 2017 was $714. Amortization of valuation discount was $110 for each of the years ended December 31, 2018 and 2017.

On December 31, 2018, the Company completed its Plant Sale (see Note 3). As part of the transaction the buyer assumed our financing obligation, which aggregated $1.3 million, net of unamortized valuation discount of $604, as of that date. By the terms of the sale CCB assumed the monthly payments on the obligation effective immediately upon closing of the sale. Our release from the obligation by the lessor, however, is dependent upon CCB’s deposit of $1.2 million of security with the lessor no later than December 31, 2019. Mr. Reed has placed 800,000 of his shares of Reed’s stock in escrow, to be sold by him during 2019 for the purpose of funding the required security deposit.

Leases Payable

12 Months Ended

Dec. 31, 2018

Leases [Abstract]

Leases Payable

(9)

Leases Payable

The Company adopted ASU 2016-02, Leases, effective October 1, 2018. 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. As a result, we recorded right-of-use assets aggregating $862 as of October 1, 2018, utilizing a discount rate of 12.6%. That amount consists of new leases on the Company’s Norwalk office and certain office equipment of $730, and existing capitalized leases reclassified to right of use assets of $132. The amount of such reclassification as of December 31, 2017 was $569.

ASU 2016-02 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. Had ASU 2016-02 been adopted as of the beginning of the earliest period presented, such rent expense for the years ended December 31, 2018 and 2017 would have aggregated $45 and $82, respectively.

In accordance with ASU 2016-02, the right-of-use assets are being amortized over the life of the underlying leases. Had ASU 2016-02 been adopted as of the beginning of the earliest period presented, amortization of right of use asset would have aggregated $49 and $182 during the years ended December 31, 2018 and 2017, respectively.

Future minimum lease payments under the leases are as follows (in thousands):

Years Ending December 31,
2019	$	185
2020		169
2021		202
2022		229
2023		233
thereafter		248
Total payments		1,266
Less: Amount representing interest		(414	)
Present value of net minimum lease payments		852
Less: Current portion		51
Non-current portion	$	801

Convertible Note to a Related Party

12 Months Ended

Dec. 31, 2018

Convertible Note to a Related Party

(10)

Convertible Note to a Related Party

The Convertible Note to a Related Party consists of the following (in thousands):

	December 31, 2018		December 31, 2017
12% Convertible Note Payable	$	3,400	$	3,400
Accrued Interest		761		290
Total obligation	$	4,161	$	3,690

On April 21, 2017, pursuant to a Securities Purchase Agreement, the Company issued to Raptor a Secured, Convertible, Subordinated, Non-Redeemable Note (the “Note”) in the original principal amount of $3,400 and warrants to purchase 1,416,667 shares of common stock. See Note 11 for further information regarding the warrants.

The Note bears interest at a rate of 12% per annum, compounded monthly. It is secured by the Company’s assets, subordinate to the first priority security interest of Rosenthal (see Note 7). The Note may not be prepaid and matures on April 21, 2021. It may be converted, at any time and from time to time, into shares of common stock of the Company. Net of transaction costs, the Company received proceeds from the Note of $3,083. The principal balance of the Note was $3,400 at December 31, 2018 and 2017.

The fair value of the warrants was initially determined to be $3,302 using the Black-Scholes-Merton option pricing model. Of this amount, $3,083 was recorded as a valuation discount, and the $219 excess of the fair value of the warrant liability at the issuance date over the amount allocated to valuation discount was accounted for as a financing cost. The Company recognized a total debt discount at issuance of $3,400 consisting of the fair value of the warrant liability of $3,083 and cash offering costs of $317. The debt discount was being amortized over the term of the note. Amortization of the note discount through December 12, 2017 was $1,191 and the unamortized debt discount at that date was $2,209.

On December 12, 2017, in connection with the reduction of the offering price in the Rights Offering (see Note 12) to $1.50, the Company amended the Note, reducing the conversion price from $3.00 to $1.50. The Company determined that, under the provisions of ASC Topic 470-50, such modification resulted in a change of more than 10% of the fair value of the Note, and the transaction should be recorded as an extinguishment. Accordingly, we removed the $3,400 original Note and $2,209 of unamortized discount from our Balance Sheet, and recorded the new note at fair value. The Company retained an independent third-party valuation firm to calculate the fair value of the new note. Using discounted cash flow and Black-Scholes methods the fair value was determined to be $4,823. Accordingly, a new obligation in the amount of $3,400 was recorded and the corresponding premium of $1,423, representing the excess of the fair value over the face value of the Note, was reflected as an increase in additional paid in capital. A loss of $3,632 was realized in connection with the extinguishment and was included in the Statement of Operations.

On October 4, 2018, in connection with the execution of the Rosenthal financing agreement (see Note 7), the Company issued an Amended and Restated Subordinated Convertible Non-Redeemable Secured Note to Raptor, to provide for additional advances of up to $4,000 (see Note 7). In consideration therefore, the exercise price of 750,000 of Raptor’s outstanding warrants was reduced from $1.50 to $1.10, resulting in an increase in the fair value of the warrants, determined in accordance with the Black-Scholes-Merton option pricing model, of $161. This amount will be amortized as interest expense over the life of the Rosenthal financing agreement.

See Note 11 for further information regarding the warrants.

Warrants and Warrant Liability

12 Months Ended

Dec. 31, 2018

Warrants And Warrant Liability

Warrants and Warrant Liability

(11)

Warrants and Warrant Liability

Warrant activity during the years ended December 31, 2018 and 2017 is as follows:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value

Outstanding at December 31,2016		803,909			4.50		4.00		26
Granted		7,643,749			1.95
Exercised		(1,122,376	)		1.50
Forfeited or expired		-			-
Outstanding at December 31,2017		7,325,282		$	2.09		3.43
Granted
Exercised		428,005		$	2.03
Forfeited or expired		0
Outstanding at December 31, 2018		6,897,277		$	2.06		2.42	$	1,447
Exercisable at December 31, 2018		6,897,277		$	2.06		2.42	$	1,447

Warrants outstanding at December 31, 2018 and 2017, and their respective exercise price and expiration dates, are as follows:

December 31, 2018					December 31, 2017
Number		Price		Expiration Dates	Number		Price		Expiration Dates

	200,000	$	5.600	September 2019		200,000	$	5.600	September 2019
	125,000	$	4.100	May 2021		125,000	$	4.100	May 2021
	10,000	$	3.900	October 2021		10,000	$	3.900	October 2021
	50,000	$	4.100	November 2021		50,000	$	4.100	November 2021
	72,703	$	3.740	June 2021		72,703	$	3.740	June 2021
	66,059	$	4.250	June 2021		66,059	$	4.250	June 2021
	784,549	$	1.500	April 2022		784,549	$	1.500	April 2022
	87,745	$	1.550	July 2022		87,745	$	1.550	July 2022
	512,560	$	2.000	July 2022		512,560	$	2.000	July 2022
	4,238,661	$	2.025	December 2020		4,666,666	$	2.030	December 2020
	750,000	$	1.100	December 2022		750,000	$	1.500	December 2022
	6,897,277					7,325,282

Various financing transactions and stock sales made by the Company have been accompanied by the issuance of warrants. Generally, we record the fair market value of the warrants, as determined using the Black-Scholes-Merton option pricing model, as a financing cost at date of issuance. Such financing costs aggregated $0 and $1,480 during the years ended December 31, 2018 and 2017, respectively.

Certain of our warrant agreements, however, contain fundamental transaction provisions which may give rise to an obligation of the Company to pay cash to the warrant holders. For accounting purposes, in accordance with ASC 480, Distinguishing Liabilities from Equity, warrants with such fundamental transaction provisions are accounted for as liabilities. A summary of transactions that impacted our warrant liabilities is provided below under “Warrant Liability”.

Warrant Transactions

The aggregate intrinsic value of outstanding and exercisable warrants is calculated as the difference between the exercise price of the warrant and the market price of the Company’s common stock as of December 31, 2018, which was $2.07. Warrants for which the exercise price is higher than $2.07 have no intrinsic value as of December 31, 2018.

On April 21, 2017, in conjunction with the issuance of a Convertible Note to Related Party (see Note 10), the Company issued warrants for the purchase of 1,416,667 shares of common stock to Raptor. The warrants contain fundamental transaction provisions which may give rise to an obligation of the Company to pay cash to the warrant holders, accordingly these warrants are accounted for as liabilities. The fair value of the warrants was determined to be $3,302 using the Black-Scholes-Merton option pricing model. Of this amount, $3,083 was recorded as a debt valuation discount, and the $219 excess of the fair value of the warrant liability at the issuance date over the amount allocated to valuation discount was accounted for as a financing cost.

On April 19 2017, in anticipation of the April 21 transaction, warrants to purchase an additional 210,111 shares of the Company’s common stock at the exercise price of $3.00 were granted to three accredited investors that are party to a Securities Purchase Agreement dated May 26, 2016 and hold participation rights in the Company’s financing transactions. The warrants contain customary anti-dilution provisions and include fundamental transaction provisions resulting in the fair value of $571 to be classified as an increase to the warrant liability. Fair value was determined using the Black-Scholes-Merton option pricing model.

The three accredited investors referred to above agreed to waive their participation rights with regard to the April 21, 2017 financing. In consideration, these investors’ participation rights, expiring in May 2017, were extended for a period of two years. In addition, on April 21, 2017, the Company increased the terms of their outstanding 280,147 warrants by one year and reduced the exercise price from $4.25 to $3.00. The incremental change in the warrants’ fair value of $187 on the modification date was reported as an increase to the warrant liability and a cost of warrant modification.

On July 13, 2017, the Company entered into warrant exercise agreements with Raptor and the three accredited investors, by which the Company repriced previously issued warrants as an inducement to exercise. A total of 1,906,925 warrants were repriced, including those issued in April 2017. The warrants’ exercise prices were lowered from $3.00 and $4.00 per share to $1.50 per share, and the incremental cost before and after the modification of the warrants resulted in a charge against earnings of $1,109.

Upon modification, the investors exercised warrants for 1,122,376 shares of common stock at the repriced $1.50 per share, resulting in proceeds to the Company of $1,650. The fair value of the warrants at the date of exercise was $1,601, which was reclassified from the warrant liability to additional paid in capital as a result of the exercise. At the same time, the Company and the holders of the remaining 784,549 warrants agreed to modify the language of the fundamental transaction provision to require board approval, thus eliminating the need for the liability classification of the warrants. Accordingly, the fair value of these warrants, totaling $1,033, was reclassified from the warrant liability to additional paid in capital.

Pursuant to the July 13 warrant exercise agreements, the Company issued to the investors, pro rata based on the number of shares each investor exercised, a second tranche of warrants to purchase 512,560 shares of our common stock and on July 19, 2017 a third tranche of warrants to purchase 87,745 shares of our common stock. The second tranche of warrants have a term of 5 years, may be exercised commencing six months after issuance and have an exercise price of $2.00. The third tranche of warrants were exercisable immediately upon issuance for a term of five years and have an exercise price of $1.55. The newly issued warrants contain customary anti-dilution provisions. The aggregate fair value of the new warrants totaling $689 was determined using the Black-Scholes-Merton option pricing model with a volatility of 53.75% an interest free rate of 1.65% and a stock price of $2.35. The fair value of the warrants was reported as a financing cost on their respective issuance dates.

In December 2017, in accordance with a December 28, 2017 Rights Offering, the Company sold warrants to purchase 4,666,666 shares of common stock, at an exercise price of $2.025 per share. Additionally, as compensation for a definitive backstop commitment from Raptor, the Company issued to Raptor 750,000 five-year warrants. See Note 12 for additional information regarding the Rights Offering and backstop commitment.

On October 4, 2018, in connection with the execution of the Rosenthal financing agreement (see Note 7), the Company issued an Amended and Restated Subordinated Convertible Non-Redeemable Secured Note to Raptor, to provide for additional advances of up to $4,000 (see Note 7). In consideration therefore, the exercise price of 750,000 of Raptor’s outstanding warrants was reduced from $1.50 to $1.10, resulting in an increase in the fair value of the warrants, determined in accordance with the Black-Scholes-Merton option pricing model, of $161. This amount will be amortized to financing cost over the life of the Rosenthal financing agreement.

During the year ended December 31, 2018, a total of 428,005 warrants were exercised, including cashless exercises, resulting in the issuance of 414,857 shares of our common stock.

Warrant Liability

As stated above, certain of our warrant agreements contain fundamental transaction provisions which may give rise to an obligation of the Company to pay cash to the warrant holders. Such warrants are accounted for as liabilities at fair value. The fair value is remeasured at each reporting period, and the change in the fair value is recognized in earnings in the accompanying Statements of Operations. Following is a summary of the transactions described above that impacted our warrant liability.

The fair value of the warrant liability was determined at the following reporting, issuance, and modification dates using the Black-Scholes-Merton option pricing model and the following assumptions:

	As of December 31, 2016			Upon Issuance April 21, 2017			Upon Modification April 21, 2017			Upon Modification July 13, 2017			As of December 31, 2017			As of December 31, 2018
	(1)			(2)			(3)			(4)			(5)			(6)
Stock Price	$	4.10		$	4.75		$	4.75		$	2.35		$	1.55		$	2.07
Risk free interest rate		1.58	%		1.51	%		1.51	%		1.65	%		1.74	%		2.69	%
Expected Volatility		54.71	%		49.33	%		49.33	%		53.75	%		56.06	%		50.07	%
Expected life in years		4.42			5.00			5.00			4.77 to 4.89			3.42			2.42
Expected dividend yield		0	%		0	%		0	%		0	%		0	%		2.69	%
Number of Warrants		418,909			1,626,778			280,147			1,906,925			138,762			138,762
Fair Value of Warrants	$	775		$	3,873		$	187		$	1,109		$	36		$	38

(1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions.

(2) April 21, 2017 grant to Raptor of warrants to purchase 1,416,667 shares of the Company’s common stock in connection with the Company’s issuance of the Convertible Note to a Related Party (valued at $3,302) and April 19, 2017, grant of 210,111 warrants to three accredited investors that are party to a Securities Purchase Agreement dated May 26, 2016 and hold participation rights in the Company’s financing transactions (valued at $571).

(3) April 19, 2017, the three accredited investors referred to above waived their participation rights with regard to the April 21, 2017 financing. The Company increased the terms of their outstanding 280,147 warrants by one year and reduced the exercise price from $4.25 to $3.00. The incremental change in the warrants’ fair value of $187 on the modification date was reported as an increase to the warrant liability and a cost of warrant modification.

(4) July 13, 2017 warrant exercise agreements with Raptor and the three accredited investors to reprice warrants to purchase a total of 1,906,925 shares of our common stock. The incremental cost before and after the modification of the warrants resulted in a charge against earnings of $1,109. The warrants were also changed to modify language pertaining to a “fundamental transaction,” eliminating the need to classify the warrants as a warrant liability.

Upon modification, the investors exercised warrants for 1,122,376 shares of common stock at the repriced $1.50 per share, resulting in proceeds to the Company of $1,650. The fair value of the warrant liability at the date of exercise was $1,601, which was reclassified from the warrant liability to additional paid in capital as a result of the exercise. At the same time, the Company and the holders of the remaining 784,549 warrants agreed to modify the language of the fundamental transaction clause to require board approval, thus eliminating the need for the liability classification of the warrants. Accordingly, the fair value of these warrants, totaling $1,033, was reclassified from the warrant liability to additional paid in capital.

(5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The decrease in the fair value of the warrant liability was $3,275 for the year ended December 31, 2017.

(6) Warrant valuation on December 31, 2018 for 138,762 warrants containing fundamental transaction provisions. The increase in the fair value of the warrant liability was $2 for the year ended December 31, 2018.

The risk-free interest rate used in the valuation calculations was based on rates established by the Federal Reserve Bank. The Company used the historical volatility of its common stock to estimate the expected volatility. The expected life of the warrants was determined by the remaining contractual life of the warrant instrument. The expected dividend yield was determined to be zero since the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the foreseeable future.

Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Stockholders' Equity

(12)

Stockholders’ Equity

Series A Convertible Preferred Stock - Series A Convertible Preferred Stock (the “Preferred Stock”) consists of $10 par value, 5% non-cumulative, non-voting, participating preferred stock, with a liquidation preference of $10.00 per share. 500,000 shares are authorized. As of December 31, 2018 and 2017, there were 9,411 shares outstanding. Each share of Preferred Stock can be converted into four shares of the Company’s common stock.

Dividends are payable at the rate of 5% annually, pro-rata and non-cumulative. The dividend can be paid in cash or, at the discretion of our board of directors, in shares of common stock based on its then fair market value. The Company cannot declare or pay any dividend on shares of our securities common stock until the holders of the Preferred Stock have received their annual dividend. In addition, the holders of the Preferred Stock are entitled to receive pro rata distributions of dividends on an “as converted” basis with the holders of our common stock.

In the event of any liquidation, dissolution or winding up of the Company, or if there is a change of control event as defined, the holders of the Preferred Stock are entitled to receive, prior to distributions to the holders of common stock, $10.00 per share plus all accrued and unpaid dividends. Thereafter, all remaining assets are distributed pro rata among all security holders. Since June 30, 2008, the Company has the right, but not the obligation, to redeem all or any portion of the Preferred Stock at $10.00 per share, the original issue price, plus all accrued and unpaid dividends.

The Preferred Stock may be converted at any time, at the option of the holder, into four shares of common stock, subject to adjustment in the event of stock splits, reverse stock splits, stock dividends, recapitalization, reclassification, and similar transactions. The Company is obligated to reserve authorized but unissued shares of common stock sufficient to affect the conversion of all outstanding shares of Preferred Stock.

Except as provided by law, the holders of the Preferred Stock do not have the right to vote on any matters, including the election of directors. However, so long as any shares of Preferred Stock are outstanding, the Company shall not, without the approval of a majority of the preferred stockholders, authorize or issue any equity security having a preference over the Preferred Stock with respect to dividends, liquidation, redemption or voting, including any other security convertible into or exercisable for any senior preferred stock.

During the years ended December 31, 2018 and 2017, the Company paid dividends on the Preferred Stock through the issuance of 1,734 and 1,640 shares of its common stock, respectively, which based upon the then-current market price of the stock equated to dividends of $5 in each of the years. No shares of Series A preferred stock were converted into common stock in 2018 and 2017.

Common Stock - The Company’s common stock has a par value of $.0001. On December 13, 2018 our shareholders approved an increase in the authorized number of common shares from 40,000,000 to 70,000,000. As of December 31, 2018 and 2017, 70,000,000 and 40,000,000 shares were authorized, respectively. As of December 31, 2018 and 2017, 25,729,461 and 24,619,591 shares were outstanding, respectively.

Common Stock Issued in Connection with a Rights Offering – In December 2017, the Company conducted a public offering of rights to purchase up to $14 million of units, each unit consisting of one share of the Company’s common stock and one-half warrant to purchase one share of common stock (the “Rights Offering”). Pursuant to the Rights Offering, the Company sold an aggregate of 9,333,333 units consisting of 9,333,333 shares of common stock and warrants to purchase 4,666,666 shares of common stock, with each warrant exercisable for one share of common stock at an exercise price of $2.025 per share. The net proceeds to the Company were $12,887 after deducting all offering costs, dealer-manager fees of $830, and expenses.

As compensation for the backstop commitment the Company issued to Raptor five-year warrants to purchase a minimum of 750,000 shares of the Company’s common stock. The offering was oversubscribed; accordingly Raptor did not purchase any unregistered units in a private placement under the provisions of the Backstop Agreement. In connection with the offering, the Company also agreed to register the shares of common stock underlying the units (including shares of common stock underlying the warrants contained in the units) and shares of common stock underlying the backstop warrants. The Company registered the shares in February 2018.

Private Sale to a Director - During the year ended December 31, 2017, the Company sold 117,647 shares of its common stock to a member of the board of directors at $1.70 per share with total proceeds of $200.

Common Stock Issued to Directors and Officers for Services Rendered – During the year ended December 31, 2018 the Company issued 37,057 shares of its common stock to an officer of the Company as compensation for services rendered. The shares had an aggregate value on date of issuance of $100, which was recorded as compensation expense during the year ended December 31, 2018.

During the year ended December 31, 2017, the Company issued 62,365 shares of its common stock to certain directors and officers of the Company as compensation for services rendered. The shares had an aggregate value of $90 at dates of issuance.

Exercises of Warrants – During the years ended December 31, 2018 and 2017, the Company issued 414,857 and 1,122,376 shares of its common stock, respectively, upon the exercise of outstanding warrants, resulting in cash proceeds to the Company of $828 and $1,150, respectively.

Common Stock Issuable – On March 28, 2018, the Company awarded 412,736 shares of restricted common stock with an aggregate fair value of $660 to Valentin Stalowir, Chief Executive Officer of the Company, pursuant to his employment agreement with the Company. The shares are subject to vesting requirements; accordingly they are reflected Common Stock Issuable as of December 31, 2018. Half of the award, or 206,368 shares, will vest during 2019 and the remaining 206,368 shares will vest during 2020.

On January 10, 2018, Mr. Stalowir was awarded 371,268 shares of restricted common stock with an aggregate fair value of $631, pursuant to his employment agreement with the Company. Half of the award, or 185,634 shares vested and were issued during 2018. The remaining 185,634 shares will vest in 2019.

Also on January 10, 2018, the Company’s independent directors were awarded a total of 70,588 shares of restricted common stock, with an aggregate fair value of $120, as compensation for services rendered during 2018. The shares vested and were issued at the rate of 25% per quarter during each fiscal quarter of 2018.

Effective December 31, 2017, the Company issued to its independent directors an aggregate of 400,000 shares of common stock valued at $1.70 per share, or $680 in total, for services provided in 2017. These shares were reflected as Common Stock Issuable at December 31, 2017, and were issued during 2018.

Subsequent to December 31, 2018, the Company entered into an agreement for an underwritten public offering of its common stock. See Note 17.

Share-Based Compensation

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

(13) Share-Based Compensation

Management believes that the ability to issue equity compensation, in order to incentivize performance by employees, directors, and consultants, is essential to the Company’s growth strategy.

On September 29, 2017, the 2017 Compensation Plan (the “Plan”) was approved by our shareholders. Initially it provided for the issuance of up to 3,000,000 shares. On December 13, 2018 our shareholders approved a 3,500,000 share increase in the number of shares issuable under the Plan. Options issued and forfeited under the 2017 plan contain an Evergreen provision and cannot be re-priced without shareholder approval.

As of December 31, 2018, 1,947,715 shares are issuable under the Plan, and 27,500 shares remain issuable under the Company’s predecessor 2015 Compensation Plan.

The plans permit the grant of options and stock awards to our employees, directors and consultants. The options may constitute either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or “non-qualified stock options”. The Plan is currently administered by the board of directors. The exercise price of an option granted under the plan cannot be less than 100% of the fair market value per share of common stock on the date of the grant of the option. Options may not be granted under the plan on or after the tenth anniversary of the adoption of the plan. Incentive stock options granted to a person owning more than 10% of the combined voting power of the common stock cannot be exercisable for more than five years. When an option is exercised, the purchase price of the underlying stock is received in cash, except that the plan administrator may permit the exercise price to be paid in any combination of cash, shares of stock having a fair market value equal to the exercise price, or as otherwise determined by the plan administrator.

Stock Options

Stock option activity consists of the following:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2016		1,048,500		$	4.68
Granted		60,000			2.20
Exercised		-			-
Forfeited or expired		(431,000	)		4.88
Outstanding at December 31, 2017		677,500		$	4.35		4.14
Granted		3,596,954			1.88
Exercised		-			-
Unvested Forfeited or expired		(406,300	)		2.65
Vested Forfeited or expired		(123,750	)		4.26
Outstanding at December 31, 2018		3,744,404		$	2.16		8.53	$	1,026
Exercisable at December 31, 2018		678,059		$	3.03		5.20	$	116

The aggregate intrinsic value was calculated as the difference between the closing market price as of December 31, 2018, which was $2.07, and the exercise price of the outstanding stock options.

On December 17, 2018, options to purchase 311,000 shares of common stock were issued to certain employees of the Company pursuant to the Plan. One half of these options vest annually over a four-year period; the other half of will vest based on performance criteria to be established by the Board at its discretion. The $386 fair value of the options is being amortized through December 31, 2022.

On July 19, 2018, the Company issued options to purchase 748,000 shares of common stock to certain employees, officers and Directors pursuant to the Plan. One half of these options vest annually over a four-year period; the other half of these options will vest based on performance criteria to be established by the Board at its discretion. The $1,190 fair value of the options is being amortized through July 31, 2022.

On March 28, 2018, the Compensation Committee granted options to purchase 1,653,950 shares of common stock to certain current employees, officers and Directors pursuant to the Plan. One half of these options vest annually over a four-year period; the other half of these options will vest based on performance criteria to be established by the Board at its discretion. The $1,540 fair value of the options is being amortized through March 31, 2022.

Also, on March 28, 2018, the Compensation Committee approved the repricing of 100,000 options issued to former Chief Financial Officer Dan Miles pursuant to the 2015 Plan to the market price of $1.60, and extended the option period an additional four years.

Also on March 28, 2018, pursuant to its employment agreement with Valentin Stalowir dated June 28, 2017, the Compensation Committee awarded Mr. Stalowir options to purchase 412,736 shares of common stock, which are subject to shareholder approval to increase the number of shares available under the Plan, and are not otherwise issuable until January 2019. One half of these options will vest annually over a four-year period; the other half of these options will vest based on performance criteria to be established by the Board. The fair value of these options of $389 is being amortized through March 31, 2022.

On January 10, 2018, the Compensation Committee granted to Mr. Stalowir options to purchase 371,268 shares of stock, pursuant to the Plan and his employment agreement with the Company. The options have an exercise price of $1.70, vest over 18 months, and have a 10 year life. The $370 fair value of the options is being amortized through June 2019.

During the year ended December 31, 2017, the Company granted 60,000 options, with a fair value of $39, to purchase the Company’s common stock at a weighted average exercise price of $2.20, to certain employees of the Company.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model using the assumptions noted in the following table. For purposes of determining the expected life of the option, an average of the estimated holding period is used. The risk-free rate for periods within the contractual life of the options is based on the U. S. Treasury yield in effect at the time of the grant.

	Year Ended December 31,
	2018			2017
Expected volatility		62	%		52	%
Expected dividends		—			—
Expected average term (in years)		6.00			2.00
Risk free rate - average		2.37% - 2.77	%		1.47	%
Forfeiture rate		0			0

Compensation cost resulting from option issuances aggregated $1,161 and $276 during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, the aggregate value of unvested options was $2,691 which will be amortized to compensation expense as the options vest, over one to four years.

Additional information regarding options outstanding and exercisable as of December 31, 2018, is as follows:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number of Shares Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Number of Shares Exercisable		Weighted Average Exercise Price
$1.60-2.19		2,573,954	$	1.67		9.15		285,609	$	1.67
$2.20-$3.74		940,450		2.81		8.72		202,450	$	3.22
$3.75 to $5.04		230,000		4.90		0.87		190,000	$	4.88
		3,744,404	$	2.16		8.53		678,059	$	3.03

Restricted Stock

The following table summarizes restricted stock activity during the years ended December 31, 2018 and 2017:

	Unvested Shares			Issuable Shares			Fair Value at Date of Issuance			Weighted Average Grant Date Fair Value
Balance, December 31, 2016		-			-		$	-			-
Granted		400,000			-			680			1.70
Vested		(400,000	)		400,000			-			1.70
Issued		-			-			-			-
Balance, December 31, 2017		-			400,000		$	680			1.70
Granted		854,592			-			1,412			1.65
Vested		(256,222	)		256,222			-			-
Issued		-			(656,222	)		(1,500	)		-
Balance, December 31, 2018		598,370			-		$	592		$	1.63

On March 28, 2018, in accordance with his employment agreement with the Company, the Compensation Committee awarded Mr. Stalowir 412,736 shares of restricted common stock with a fair value of $660 pursuant to the Plan. The fair value of these shares is being amortized to compensation expense through June 2019 when the shares vest.

On January 10, 2018, Mr. Stalowir was awarded 371,268 shares of restricted common stock with a fair value of $631, pursuant to the Plan and in accordance with his employment agreement with the Company. The award vests over eighteen months, and the fair value of the grant is being amortized to compensation expense through June 2019. During the year ended December 31, 2018, 185,634 shares of common stock with a fair value of $316 vested and were issued to Mr. Stalowir.

In the first quarter of 2018, the Compensation Committee granted an aggregate of 70,588 shares of restricted common stock to the Company’s independent Directors pursuant to the Plan. The shares vested and were issued in four equal installments during 2018, and the $120 fair value of the shares was amortized to compensation expense ratably over that period.

Restricted common stock issued pursuant to the Plan is subject to such restrictions as determined by the Compensation Committee of the Board, which may include restrictions on the sale of such shares or the right to receive dividends thereon. Additionally, the restricted common stock is subject to a risk of forfeiture, generally upon termination of employment or service during the vesting period. Vesting may be dependent upon the recipient’s continued relationship with the Company, or may depend upon the achievement of certain pre-established performance goals.

During the year ended December 31, 2018, an aggregate of $820 was recognized as compensation expense relative to restricted stock awards. As of December 31, 2018, the amount of unvested compensation related to restricted stock awards was $592, which will be recognized as an expense in future periods as the shares vest.

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

14) Income Taxes

At December 31, 2018 and 2017, the Company had available Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income. For Federal purposes the amounts available were approximately $42,000 million and $35,000, respectively. For state purposes approximately $18,000 was available at December 31, 2018 and 2017. The Federal carryforward expires on various dates through 2035 and the state carryforward expires in 2019. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit.

Due to the restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOL may be limited as a result of recent change in stock ownership. NOLs incurred subsequent to the latest change in control are not subject to the limitation.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 31, 2018 and 2017, the Company did not have a liability for unrecognized tax benefits.

The Company recognizes as income tax expense, interest and penalties on uncertain tax provisions. As of December 31, 2018, and 2017, the Company has not accrued interest or penalties related to uncertain tax positions. Tax years 2011 through 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the NOLs and will recognize the appropriate deferred tax asset at that time.

Significant components of the Company’s deferred income tax assets are as follows (in thousands):

	December 31, 2018			December 31, 2017
Deferred income tax asset:
Net operating loss carryforwards	$	10,429		$	8,927
Accounts receivable allowances		162			227
Inventory reserves		51			148
Deferred finance costs		(176	)		-
Reserve for asset impairment		31			655
Total deferred tax asset		10,496			9,957
Valuation allowance		(10,496	)		(9,957	)
Net book value	$	-		$	-

Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

	December 31, 2018			December 31, 2017
Federal statutory tax rate		(21	)%		(34	)%
State rate, net of federal benefit		(5	)%		(5	)%
		(26	)%		(39	)%
Effect of change in tax rate		-			10	%
Valuation allowance		26	%		29	%
Effective tax rate	$	-		$	-

Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

(15)

Commitments and Contingencies

Customer Commitments

The Company has entered into contracts with customers with clauses committing the Company to pay fees if the Company terminates the agreement early or without cause. The contracts call for the customer to have the right to distribute the Company’s products to a defined type of retailer within a defined geographic region. If the Company should terminate the contract or not automatically renew the agreements without cause, amounts would be due to the customer. As of December 31, 2018 and 2017, the Company has no plans to terminate or not renew any agreement with any of their customers; accordingly, no such fees have been accrued in the accompanying financial statements.

Legal Proceedings

From time to time, we are a party to claims and legal proceedings arising in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and provides for potential losses on such litigation if the amount of the loss is estimable and the loss is probable.

We believe there are no material litigation matters as of December 31, 2018. Although the results of such litigation matters and claims cannot be predicted with certainty, we believe the final outcome of such claims and proceedings will not have a material adverse impact on our financial position, liquidity, or results of operations.

Related Party Activity

12 Months Ended

Dec. 31, 2018

Related Party Activity

(16)

Related Party Activity

The Company paid Judy Reed, who is the Corporate Secretary and the wife of Chris Reed, to document minutes for the Board of Directors’ meetings. Amounts paid for her services during each of the years ended December 31, 2018 and 2017 aggregated less than approximately $1 thousand.

Winston Stalowir, son of Valentin Stalowir, Chief Executive Officer of the Company, was employed as a sales, merchandising and demo intern during the year ended December 31, 2018. He was paid approximately $2 thousand for his services.

Lisa Cohane, wife of Neal Cohane, our Senior Vice President of Sales, performed administrative and office management services for the Company during the year ended December 31, 2018. She was paid approximately $34 thousand for her services.

Lindsay Martin, daughter of a director of the Company, was employed as Vice President of Marketing during the year ended December 31, 2018. She was paid approximately $162 thousand for her services.

In 2017, Chris Reed (the former Chief Executive Officer and current Chief Innovation Officer), Robert Reed (the brother of Chris Reed), and Dan Miles (former Chief Financial Officer), collectively advanced approximately $571 thousand to the Company for working capital uses. In 2017, the Company repaid approximately $240 thousand of this amount and the remaining balance was repaid in January of 2018.

From time to time, the Company issues stock-based awards to employees, officers, and other related parties as compensation for services rendered. See Note 13 for information as to such transactions during the years ended December 31, 2018 and 2017.

On December 31, 2018, the Company sold its Los Angeles manufacturing facility to California Custom Beverage, LLC (“CCB”), an entity 100% owned by Chris Reed, the Company’s founder and Chief Innovation Officer (the “Plant Sale”). See Note 3.

During the years ended December 31, 2018 and 2017, the Company entered into the following transactions with Raptor:

On April 21, 2017, pursuant to a securities purchase agreement, Reed’s issued a secured convertible subordinated non-redeemable note to Raptor in the principal amount of $3,400, and warrants to purchase 1,416,667 shares of common stock. See Note 10. The Note bears interest at a rate of 12% per annum, compounded monthly. It is secured by the Company’s assets, subordinate to the first priority security interest of Rosenthal (see Note 7). The Note may not be prepaid and matures on April 21, 2021. It may be converted, at any time and from time to time, into shares of common stock of the Company. Net of transaction costs, the Company received proceeds from the Note of $3,083. In connection with the issuance of the note, the Company reimbursed Raptor direct costs totaling $157 incurred to issue the note.

On July 13, 2017, the Company entered into a warrant exercise agreement with Raptor to induce Raptor to purchase 766,667 shares of our common stock. The warrants’ exercise prices were lowered from $3.00 and $4.00 per share to $1.50 per share. Upon modification, Raptor exercised the warrants at the repriced $1.50 per share, resulting in proceeds to the Company of $1,150. The Company also issued to Raptor an additional second tranche of warrants to purchase up to 350,000 shares of our common stock and a third tranche of warrants to purchase up to 60,000 shares of our common stock. Second tranche warrants have a term of five years, may be exercised commencing six months from the date of issuance and have an exercise price equal to $2.00. The third tranche warrants were exercisable immediately upon issuance for a term of five-years, with an exercise price equal to $1.55. Raptor was also granted the right to appoint a non-voting observer to our board of directors for so long as Raptor or its affiliates is a beneficial owner of our stock. As of the date hereof, Raptor SPV LLC has not made such an appointment.

Pursuant to a December 6, 2017 Rights Offering (see Note 12), Raptor exercised its rights to purchase 2,666,667 units, thereby acquiring 2,666,667 shares of common stock and warrants to purchase up to 1,333,333 shares of common stock for an aggregate purchase price of $4,000.

On December 6, 2017, the Company entered into a definitive backstop commitment agreement (“Backstop Agreement”) with Raptor whereby Raptor agreed to purchase a minimum of $6 million of unregistered units not subscribed in the Rights Offering in a private placement, subject to customary terms and conditions. Raptor had the right to exercise its basic subscription right and over-subscription privilege as a rights holder in the Rights Offering (subject to pro-ration) but had no obligation to do so. As compensation for the backstop commitment the Company issued to Raptor five-year warrants to purchase a minimum of 750,000 shares of the Company’s common stock. The offering was oversubscribed; accordingly Raptor did not purchase any unregistered units in a private placement under the provisions of the Backstop Agreement.

On October 4, 2018, in connection with the execution of the Rosenthal financing agreement (see Note 7), the Company issued an Amended and Restated Subordinated Convertible Non-Redeemable Secured Note to Raptor, to provide for additional advances of up to $4,000 (see Note 7). In consideration therefore, the exercise price of the 750,000 warrants issued to Raptor on December 6, 2017 was reduced from $1.50 to $1.10, resulting in an increase in the fair value of the warrants, determined in accordance with the Black-Scholes-Merton option pricing model, of $161. This amount will be amortized against earnings over the life of the Rosenthal financing agreement.

Subsequent Events

12 Months Ended

Dec. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

(17)

Subsequent Events

During 2019, our independent directors will be issued restricted common stock valued at $30,000 pursuant to the 2017 plan, in quarterly installments.

On February 15, 2019, the Company entered into an agreement for an underwritten public offering of 7,733,750 shares of its common stock, at $2.10 per share, including an overallotment option for 1,008,750 shares that was exercised in full. Proceeds of the offering, net of the underwriting discount and other transaction costs, aggregated $14,906. The proceeds will be used to fund our sales and marketing efforts, to develop and launch new products, and for general working capital purposes.

The following table presents an unaudited pro forma balance sheet for Reed’s, Inc. assuming the public offering described above occurred on December 31, 2018 (in thousands):

	Actual December 31, 2018			Adjustment (1)			Pro Forma December 31, 2018 (unaudited)

ASSETS
Current assets:
Cash	$	624			7,926		$	8,550
Accounts receivable, net		2,608			-			2,608
Inventory, net		195			-			195
Other current assets		7,511			-			7,511
Total Current Assets		10,938			7,926			18,864

Property and equipment, net		896			-			896
Equipment held for sale and intangible assets		658			-			658
Total assets	$	12,492			7,926		$	20,418

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	5,721			-		$	5,721
Accrued expenses		1,483			-			1,483
Line of credit		6,980			(6,980	)		-
Current portion of leases payable		51			-			51
Total current liabilities		14,235			(6,980	)		7,255

Leases payable, less current portion		801			-			-
Convertible note to a related party		4,161			-			-
Warrant liability and other long term liabilities		38			-			-
Total Liabilities		19,235			(6,980	)		12,255

Stockholders’ equity (deficit):
Series A Convertible Preferred stock		94			-			94
Common stock		3			1			4
Common stock issuable		-			-			-
Additional paid in capital		53,591			14,905			68,496
Accumulated deficit		(60,431	)		-			(60,431	)
Total stockholders’ equity (deficit)		(6,743	)		14,906			8,163
Total liabilities and stockholders’ equity (deficit)	$	12,492			7,926		$	20,418

(1)

Adjustment reflects the sale of 7,733,750 shares of the Company’s common stock for net proceeds of $14,906, of which $6,980 was used to repay the outstanding balance on the line of credit.

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Use of Estimates

A)	*Use of Estimates*

Accounts Receivable

B)	*Accounts Receivable*

Inventory

C)	*Inventory*

Property and Equipment and Related Depreciation

D)	*Property and Equipment and Related Depreciation*

Property and Equipment Type		Years of Depreciation
Building		39 years
Machinery and equipment		5-12 years
Vehicles		5 years
Office equipment		5-7 years

Intangible Assets and Impairment Policy

E)	*Intangible Assets and Impairment Policy*

Concentrations

F)	*Concentrations*

Fair Value of Financial Instruments

G)	*Fair Value of Financial Instruments*

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.

As of December 31, 2018, and December 31, 2017, the Company’s balance sheets included warrant liabilities aggregating $38 and $36 respectively, measured at fair value based on Level 2 inputs.

Segments

H)	*Segments*

Cost of Goods Sold

I)	*Cost of Goods Sold*

The Company terminated its manufacturing operation effective with the December 31, 2018 Plant Sale. See Note 3.

Delivery and Handling Expense

J)	*Delivery and Handling Expense*

Income Taxes

K)	*Income Taxes*

Revenue Recognition

L)	*Revenue Recognition*

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.

Net Loss Per Share

M)	*Net Loss Per Share*

	December 31, 2018		December 31, 2017
Convertible note to a related party		2,266,667		2,266,667
Warrants		6,897,277		7,325,282
Common stock equivalent of Series A Convertible Preferred Stock		37,644		37,644
Unvested restricted common stock		598,370		-
Options		3,744,404		677,500
Total		13,544,362		10,307,093

Advertising Costs

N)	*Advertising Costs*

Advertising costs are expensed as incurred and are included in selling and marketing expense. Advertising costs aggregated $300 and $285 for the years ended December 31, 2018 and 2017, respectively.

Stock Compensation Expense

O)	*Stock Compensation Expense*

Warrant Liabilities

P)	*Warrant Liabilities*

Leases

Q)	*Leases*

Recent Accounting Pronouncements

R)	*Recent Accounting Pronouncements*

Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Schedule of Estimated Useful Lives of Property and Equipment and Related Depreciation

Depreciation is calculated using accelerated and straight-line methods over the estimated useful lives of the assets as follows:

Property and Equipment Type		Years of Depreciation
Building		39 years
Machinery and equipment		5-12 years
Vehicles		5 years
Office equipment		5-7 years

Schedule of Potentially Dilutive Securities

The potentially dilutive securities consisted of the following:

	December 31, 2018		December 31, 2017
Convertible note to a related party		2,266,667		2,266,667
Warrants		6,897,277		7,325,282
Common stock equivalent of Series A Convertible Preferred Stock		37,644		37,644
Unvested restricted common stock		598,370		-
Options		3,744,404		677,500
Total		13,544,362		10,307,093

Inventory (Tables)

12 Months Ended

Dec. 31, 2018

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory is valued at the lower of cost (first-in, first-out) or market, and is comprised of the following (in thousands):

	December 31, 2018		December 31, 2017
Raw Materials and Packaging	$	3,053	$	2,670
Finished Goods		4,327		3,261
Total	$	7,380	$	5,931

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

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

	December 31, 2018			December 31, 2017
Right-of-use assets under operating leases	$	934		$	569
Computer hardware and software		304			404
Total cost		1,238			973
Accumulated depreciation		(342	)		(799	)
Net book value	$	896		$	174

Schedule of Equipment Held for Sale

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

	December 31, 2018			December 31, 2017
Equipment held for sale	$	200		$	8,474
Reserve		(118	)		(5,925	)
Net book value	$	82		$	2,549

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets Trademarks

Intangible assets consist of trademarks for the Company’s brand names (in thousands):

	December 31, 2018		December 31, 2017
Virgil’s		576	$	576
Sonoma Sparkler		-		229
Brand names	$	576	$	805

Lines of Credit (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Amount Outstanding Under Credit Facilities

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

	December 31, 2018			December 31, 2017
Rosenthal Line of Credit	$	7,657		$	-
PMC Revolving Line of Credit		-			3,301
Term Loans		-			3,000
CAPEX loan		-			3,947
		7,657			10,248
Capitalized finance costs		(677	)		-
Net balance	$	6,980		$	10,248

Financing Obligation (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Financing Obligation

Our financing obligation is comprised of the following (in thousands):

	December 31, 2018		December 31, 2017
Financing obligation	$	-	$	2,186
Unamortized valuation discount		-		(714	)
Net financing obligation	$	-	$	1,472
Less current portion		-		(222	)
Long term financing obligation	$	-	$	1,250

Leases Payable (Tables)

12 Months Ended

Dec. 31, 2018

Leases [Abstract]

Schedule of Future Minimum Lease Payments Under Capital Leases

Future minimum lease payments under the leases are as follows (in thousands):

Years Ending December 31,
2019	$	185
2020		169
2021		202
2022		229
2023		233
thereafter		248
Total payments		1,266
Less: Amount representing interest		(414	)
Present value of net minimum lease payments		852
Less: Current portion		51
Non-current portion	$	801

Convertible Note to a Related Party (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Convertible Notes

The Convertible Note to a Related Party consists of the following (in thousands):

	December 31, 2018		December 31, 2017
12% Convertible Note Payable	$	3,400	$	3,400
Accrued Interest		761		290
Total obligation	$	4,161	$	3,690

Warrants and Warrant Liability (Tables)

12 Months Ended

Dec. 31, 2018

Warrants And Warrant Liability

Schedule of Warrant Activity

Warrant activity during the years ended December 31, 2018 and 2017 is as follows:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value

Outstanding at December 31,2016		803,909			4.50		4.00		26
Granted		7,643,749			1.95
Exercised		(1,122,376	)		1.50
Forfeited or expired		-			-
Outstanding at December 31,2017		7,325,282		$	2.09		3.43
Granted
Exercised		428,005		$	2.03
Forfeited or expired		0
Outstanding at December 31, 2018		6,897,277		$	2.06		2.42	$	1,447
Exercisable at December 31, 2018		6,897,277		$	2.06		2.42	$	1,447

Schedule of Outstanding Warrants to Purchase Common Stock

Warrants outstanding at December 31, 2018 and 2017, and their respective exercise price and expiration dates, are as follows:

December 31, 2018					December 31, 2017
Number		Price		Expiration Dates	Number		Price		Expiration Dates

	200,000	$	5.600	September 2019		200,000	$	5.600	September 2019
	125,000	$	4.100	May 2021		125,000	$	4.100	May 2021
	10,000	$	3.900	October 2021		10,000	$	3.900	October 2021
	50,000	$	4.100	November 2021		50,000	$	4.100	November 2021
	72,703	$	3.740	June 2021		72,703	$	3.740	June 2021
	66,059	$	4.250	June 2021		66,059	$	4.250	June 2021
	784,549	$	1.500	April 2022		784,549	$	1.500	April 2022
	87,745	$	1.550	July 2022		87,745	$	1.550	July 2022
	512,560	$	2.000	July 2022		512,560	$	2.000	July 2022
	4,238,661	$	2.025	December 2020		4,666,666	$	2.030	December 2020
	750,000	$	1.100	December 2022		750,000	$	1.500	December 2022
	6,897,277					7,325,282

Schedule of Warrant Liability Using Assumptions

The fair value of the warrant liability was determined at the following reporting, issuance, and modification dates using the Black-Scholes-Merton option pricing model and the following assumptions:

	As of December 31, 2016			Upon Issuance April 21, 2017			Upon Modification April 21, 2017			Upon Modification July 13, 2017			As of December 31, 2017			As of December 31, 2018
	(1)			(2)			(3)			(4)			(5)			(6)
Stock Price	$	4.10		$	4.75		$	4.75		$	2.35		$	1.55		$	2.07
Risk free interest rate		1.58	%		1.51	%		1.51	%		1.65	%		1.74	%		2.69	%
Expected Volatility		54.71	%		49.33	%		49.33	%		53.75	%		56.06	%		50.07	%
Expected life in years		4.42			5.00			5.00			4.77 to 4.89			3.42			2.42
Expected dividend yield		0	%		0	%		0	%		0	%		0	%		2.69	%
Number of Warrants		418,909			1,626,778			280,147			1,906,925			138,762			138,762
Fair Value of Warrants	$	775		$	3,873		$	187		$	1,109		$	36		$	38

(1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions.

Upon modification, the investors exercised warrants for 1,122,376 shares of common stock at the repriced $1.50 per share, resulting in proceeds to the Company of $1,650. The fair value of the warrant liability at the date of exercise was $1,601, which was reclassified from the warrant liability to additional paid in capital as a result of the exercise. At the same time, the Company and the holders of the remaining 784,549 warrants agreed to modify the language of the fundamental transaction clause to require board approval, thus eliminating the need for the liability classification of the warrants. Accordingly, the fair value of these warrants, totaling $1,033, was reclassified from the warrant liability to additional paid in capital.

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock Option Activity

Stock option activity consists of the following:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2016		1,048,500		$	4.68
Granted		60,000			2.20
Exercised		-			-
Forfeited or expired		(431,000	)		4.88
Outstanding at December 31, 2017		677,500		$	4.35		4.14
Granted		3,596,954			1.88
Exercised		-			-
Unvested Forfeited or expired		(406,300	)		2.65
Vested Forfeited or expired		(123,750	)		4.26
Outstanding at December 31, 2018		3,744,404		$	2.16		8.53	$	1,026
Exercisable at December 31, 2018		678,059		$	3.03		5.20	$	116

Summary of Assumption Used to Estimate the Fair Value of Share Options Granted

	Year Ended December 31,
	2018			2017
Expected volatility		62	%		52	%
Expected dividends		—			—
Expected average term (in years)		6.00			2.00
Risk free rate - average		2.37% - 2.77	%		1.47	%
Forfeiture rate		0			0

Schedule of Information Regarding Stock Options

Additional information regarding options outstanding and exercisable as of December 31, 2018, is as follows:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number of Shares Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Number of Shares Exercisable		Weighted Average Exercise Price
$1.60-2.19		2,573,954	$	1.67		9.15		285,609	$	1.67
$2.20-$3.74		940,450		2.81		8.72		202,450	$	3.22
$3.75 to $5.04		230,000		4.90		0.87		190,000	$	4.88
		3,744,404	$	2.16		8.53		678,059	$	3.03

Summary Non-vested Restricted Stock Activity

The following table summarizes restricted stock activity during the years ended December 31, 2018 and 2017:

	Unvested Shares			Issuable Shares			Fair Value at Date of Issuance			Weighted Average Grant Date Fair Value
Balance, December 31, 2016		-			-		$	-			-
Granted		400,000			-			680			1.70
Vested		(400,000	)		400,000			-			1.70
Issued		-			-			-			-
Balance, December 31, 2017		-			400,000		$	680			1.70
Granted		854,592			-			1,412			1.65
Vested		(256,222	)		256,222			-			-
Issued		-			(656,222	)		(1,500	)		-
Balance, December 31, 2018		598,370			-		$	592		$	1.63

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Schedule of Deferred Income Tax Assets

Significant components of the Company’s deferred income tax assets are as follows (in thousands):

	December 31, 2018			December 31, 2017
Deferred income tax asset:
Net operating loss carryforwards	$	10,429		$	8,927
Accounts receivable allowances		162			227
Inventory reserves		51			148
Deferred finance costs		(176	)		-
Reserve for asset impairment		31			655
Total deferred tax asset		10,496			9,957
Valuation allowance		(10,496	)		(9,957	)
Net book value	$	-		$	-

Schedule of Reconciliation of Effective Income Tax Rate to U.S. Statutory Rate

Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

	December 31, 2018			December 31, 2017
Federal statutory tax rate		(21	)%		(34	)%
State rate, net of federal benefit		(5	)%		(5	)%
		(26	)%		(39	)%
Effect of change in tax rate		-			10	%
Valuation allowance		26	%		29	%
Effective tax rate	$	-		$	-

Subsequent Events (Tables)

12 Months Ended

Dec. 31, 2018

Subsequent Events Tables Abstract

Schedule of Unaudited Pro Forma Balance Sheet

The following table presents an unaudited pro forma balance sheet for Reed’s, Inc. assuming the public offering described above occurred on December 31, 2018 (in thousands):

	Actual December 31, 2018			Adjustment (1)			Pro Forma December 31, 2018 (unaudited)

ASSETS
Current assets:
Cash	$	624			7,926		$	8,550
Accounts receivable, net		2,608			-			2,608
Inventory, net		195			-			195
Other current assets		7,511			-			7,511
Total Current Assets		10,938			7,926			18,864

Property and equipment, net		896			-			896
Equipment held for sale and intangible assets		658			-			658
Total assets	$	12,492			7,926		$	20,418

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	5,721			-		$	5,721
Accrued expenses		1,483			-			1,483
Line of credit		6,980			(6,980	)		-
Current portion of leases payable		51			-			51
Total current liabilities		14,235			(6,980	)		7,255

Leases payable, less current portion		801			-			-
Convertible note to a related party		4,161			-			-
Warrant liability and other long term liabilities		38			-			-
Total Liabilities		19,235			(6,980	)		12,255

Stockholders’ equity (deficit):
Series A Convertible Preferred stock		94			-			94
Common stock		3			1			4
Common stock issuable		-			-			-
Additional paid in capital		53,591			14,905			68,496
Accumulated deficit		(60,431	)		-			(60,431	)
Total stockholders’ equity (deficit)		(6,743	)		14,906			8,163
Total liabilities and stockholders’ equity (deficit)	$	12,492			7,926		$	20,418

(1)

Adjustment reflects the sale of 7,733,750 shares of the Company’s common stock for net proceeds of $14,906, of which $6,980 was used to repay the outstanding balance on the line of credit.

Operations and Liquidity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Oct. 04, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net loss		$ (10,325)	$ (18,373)
Net cash provided by (used in) operating activities		(9,258)	(3,422)
Cash balance		624	12,127	$ 451
Stock holders deficit		(6,743)	508	$ (1,657)
Working capital		3,297	2,303
Line of credit facility repaid		43,204	$ 39,438
Sale of assets		1,250
Annual lease payment		420
Financing Agreement [Member] \| Rosenthal and Rosenthal, Inc. [Member]
Amount of reduction in debt service requirement	$ 1,500
Debt instrument, term	2 years 6 months
Line of credit, borrowing capacity	$ 13,000
Line of credit facility repaid	$ 8,758
Line of credit facility unused borrowing		$ 1,201
Underwriters Agreement [Member] \| February 15, 2019 [Member]
Issuance of common stock		7,733,750
Common stock price per shares		$ 2.10
Proceeds from offering, net of underwriting discount and other transaction costs		$ 14,905
Underwriters Agreement [Member] \| February 15, 2019 [Member] \| Over-Allotment Option [Member]
Issuance of common stock		1,008,750

Significant Accounting Policies (Details Narrative) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) Segment	Dec. 31, 2017 USD ($)	Oct. 01, 2018 USD ($)
Allowance for doubtful accounts and returns and discounts	$ 623	$ 601
Reserve for inventory obsolescence	197	509
Impairment of assets		5,925
Impairment of intangible assets	229
Maximum cash deposit guaranteed by FDIC	$ 250
Percentage of co-packers products	100.00%
Warrant liabilities	$ 38	36
Number of operating segment \| Segment	1
Sales incentives	$ 3,872	4,004
Advertising costs	300	$ 285
Right-of-use assets			$ 862
Lease liabilities	$ 862
California Custom Beverage LLC [Member] \| Chris Reed [Member]
Ownership percentage	100.00%
Customer One [Member] \| Sales Revenue, Net [Member]
Percentage of sale accounted to customer	24.00%	23.00%
Customer One [Member] \| Accounts Receivable [Member]
Percentage of sale accounted to customer	36.00%	25.00%
Customer Two [Member] \| Sales Revenue, Net [Member]
Percentage of sale accounted to customer	17.00%	16.00%
Customer Two [Member] \| Accounts Receivable [Member]
Percentage of sale accounted to customer	19.00%	14.00%
Vendor One [Member]
Percentage of sale accounted to customer	16.00%	20.00%
Vendor One [Member] \| Accounts Payable [Member]
Percentage of sale accounted to customer	24.00%	20.00%
Vendor Two [Member]
Percentage of sale accounted to customer	13.00%

Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment and Related Depreciation (Details)	12 Months Ended
	Dec. 31, 2018
Building [Member]
Expected useful life of assets	P39Y
Machinery and Equipment [Member] \| Minimum [Member]
Expected useful life of assets	P5Y
Machinery and Equipment [Member] \| Maximum [Member]
Expected useful life of assets	P12Y
Vehicles [Member]
Expected useful life of assets	P5Y
Office Equipment [Member] \| Minimum [Member]
Expected useful life of assets	P5Y
Office Equipment [Member] \| Maximum [Member]
Expected useful life of assets	P7Y

Significant Accounting Policies - Schedule of Potentially Dilutive Securities (Details) - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Potentially dilutive securities	13,544,362	10,307,093
Convertible Note to a Related Party [Member]
Potentially dilutive securities	2,266,667	2,266,667
Warrants [Member]
Potentially dilutive securities	6,897,277	7,325,282
Common Stock Equivalent of Series A Convertible Preferred Stock [Member]
Potentially dilutive securities	37,644	37,644
Unvested Restricted Common Stock [Member]
Potentially dilutive securities	598,370
Options [Member]
Potentially dilutive securities	3,744,404	677,500

Plant Sale to a Related Party (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Impairment of assets		$ 5,925
Net book value	$ 896	174
Sales price of plant	1,050
Gain on sale of property plant and equipment	180
Total cost of goods sold	$ 27,424	$ 30,821
California Custom Beverage, LLC [Member]
Royalty percentage	5.00%
Referral fee percentage	5.00%
California Custom Beverage, LLC [Member] \| Current Shareholders Chairman Institutional Investors [Member]
Aggregate number of common stock shares granted in connection with sale of plant	350,000
California Custom Beverage, LLC [Member] \| Machinery Equipment Furniture and Fixtures [Member]
Net book value	$ 2,300
Sales price of plant	1,250
Lease obligation assumed from sale of plant	1,300
Gain on sale of property plant and equipment	180
Deposit of security with lessor	$ 1,200
Number of shares sold for escrow deposit	800,000
Aggregate costs reimbursed	$ 195
Total cost of goods sold	$ 200

Inventory (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Inventory, reserve for obsolescence net	$ 197	$ 509

Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Raw Materials and Packaging	$ 3,053	$ 2,670
Finished Goods	4,327	3,261
Total	$ 7,380	$ 5,931

Property and Equipment (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 86	$ 551
Impairment charges		$ 5,925

Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Property and equipment, total cost	$ 1,238	$ 973
Accumulated depreciation	(342)	(799)
Net book value	896	174
Right-of-use Assets Under Operating Leases [Member]
Property and equipment, total cost	934	569
Computer Hardware and Software [Member]
Property and equipment, total cost	$ 304	$ 404

Property and Equipment - Schedule of Equipment Held for Sale (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Equipment held for sale	$ 200	$ 8,474
Reserve	(118)	(5,925)
Net book value	$ 82	$ 2,549

Intangible Assets (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Impairment of intangible assets	$ 229

Intangible Assets - Schedule of Intangible Assets Trademarks (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Brand names	$ 576	$ 805
Virgil's [Member]
Brand names	576	576
Sonoma Sparkler [Member]
Brand names		$ 229

Lines of Credit (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Oct. 04, 2018	Dec. 31, 2018	Dec. 31, 2017	Apr. 21, 2017	Apr. 19, 2017
Cost of warrant modification			$ 1,868
Warrant outstanding shares				280,147
Warrant exercise price		$ 4.25	$ 2.025	$ 3.00	$ 3.00
Term loan			$ 1,472
Repayment of line of credit		43,204	$ 39,438
Monthly management fee percentage			0.45%
October 4, 2018 [Member]
Repayment of line of credit		$ 8,758
Daniel J. Doherty [Member]
Letter of credit	$ 1,500
Daniel J. Doherty [Member] \| Reeds Inc [Member]
Ownership percentage	27.10%
Raptor/Harbor Reeds SPV LLC [Member]
Amount of reduction in debt service requirement	$ 4,000
Warrant outstanding shares	750,000
Warrant exercise price	$ 1.50
Warrant exercise price, amount reduced	$ 1.10
Increase in fair value of warrants	$ 161
Financing Agreement [Member] \| Rosenthal and Rosenthal, Inc. [Member]
Debt instrument, term	2 years 6 months
Line of credit, borrowing capacity	$ 13,000
Minimum monthly fees	$ 4
Line of credit, interest rate	4.75%	8.30%
Direct costs for transaction		$ 752
Cost of warrant modification		$ 161
Amortization period		2 years 6 months
Amortization		$ 75
Amount of reduction in debt service requirement	$ 1,500
Repayment of line of credit	$ 8,758
Financing Agreement [Member] \| Rosenthal and Rosenthal, Inc. [Member] \| Minimum [Member]
Line of credit, interest rate	2.00%
Financing Agreement [Member] \| Rosenthal and Rosenthal, Inc. [Member] \| Maximum [Member]
Line of credit, interest rate	3.50%
New Financing Agreement [Member] \| Rosenthal and Rosenthal, Inc. [Member]
Line of credit, borrowing capacity	$ 13,000
Line of credit, additional borrowing capacity	$ 4,000
Loan and Security Agreement [Member] \| PMC Financial Services Group, LLC [Member]
Line of credit		6,000
Term loan		3,000
Interest expense		$ 1,153	$ 1,458

Lines of Credit - Schedule of Amount Outstanding Under Credit Facilities (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Net balance	$ 6,980	$ 3,301
Bank Notes [Member]
Term Loans		3,000
CAPEX loan		3,947
Net	7,657	10,248
Capitalized finance costs	(677)
Net balance	6,980	10,248
Bank Notes [Member] \| Rosenthal Line of Credit [Member]
Line of Credit	7,657
Bank Notes [Member] \| PMC Revolving Line of Credit [Member]
Line of Credit		$ 3,301

- Definition

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

Financing Obligation (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Sale leaseback transaction, monthly rental payment	$ 35
Percentage of interest expense and reduction in the financing obligation at implicit rate	9.90%
Unamortized valuation discount		$ 714
Amortization of valuation discount	$ 110	$ 110
Machinery Equipment Furniture and Fixtures [Member] \| California Custom Beverage, LLC [Member]
Unamortized valuation discount	604
Financing obligation	1,300
Deposit of security with lessor	$ 1,200
Number of shares sold for escrow deposit	800,000
Warrants [Member] \| Financing Obligation [Member]
Number of warrants to purchase of common stock	600,000
Actual fair value of warrant offered	$ 1,336
Valuation of discount amortized period	15 years
Los Angeles Plant [Member]
Initial amount of financing obligation	$ 3,056

Financing Obligation - Schedule of Financing Obligation (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Financing obligation		$ 2,186
Unamortized valuation discount		(714)
Net financing obligation		1,472
Less current portion		(222)
Long term financing obligation		$ 1,250

Leases Payable (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
Leases Payable (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Oct. 01, 2018
Leases [Abstract]
Right-of-use assets			$ 862
Discount rate, percent			12.60%
Office equipment value	$ 730
Capitalized leases reclassified to right of use assets	132
Capitalized leases reclassification		$ 569
Rent expense	45	82
Aggregate amortization of right of use asset	$ 49	$ 182

Leases Payable - Schedule of Future Minimum Lease Payments Under Capital Leases (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Leases [Abstract]
2019	$ 185
2020	169
2021	202
2022	229
2023	233
thereafter	248
Total payments	1,266
Less: Amount representing interest	(414)
Present value of net minimum lease payments	852
Less: Current portion	51	$ 198
Non-current portion	$ 801	$ 236

Convertible Note to a Related Party (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands				12 Months Ended
	Oct. 04, 2018	Dec. 12, 2017	Apr. 21, 2017	Dec. 31, 2018	Dec. 31, 2017	Apr. 19, 2017
Number of warrants to purchase of common stock			1,416,667		4,666,666	210,111
Valuation discount			$ 3,083
Excess of the fair value of the warrant liability accounted for as a financing cost			$ 219
Debt discount at issuance					$ 714
Amortization of valuation discount				$ 110	$ 1,379
Warrant outstanding shares			280,147
Warrant exercise price			$ 3.00	$ 4.25	$ 2.025	$ 3.00
Raptor/Harbor Reeds SPV LLC [Member]
Amount of reduction in debt service requirement	$ 4,000
Warrant outstanding shares	750,000
Warrant exercise price	$ 1.50
Warrant exercise price, amount reduced	$ 1.10
Increase in fair value of warrants	$ 161
Rights Offering [Member]
Warrant exercise price		$ 1.50			$ 2.025
Convertible Notes [Member]
Note bears interest rate				12.00%	12.00%
Fair value of new note		$ 4,823
New obligation, amount		3,400
Excess of the fair value over the face value of the note		1,423
Loss realized in connection with extinguishment of debt		$ 3,632
Convertible Notes [Member] \| Minimum [Member]
Warrant exercise price		$ 1.50
Convertible Notes [Member] \| Maximum [Member]
Warrant exercise price		$ 3.00
Securities Purchase Agreement [Member]
Secured convertible debt principal amount			$ 3,400
Number of warrants to purchase of common stock			1,416,667
Note bears interest rate			12.00%
Debt maturity date			Apr. 21, 2021
Proceeds from note			$ 3,083
Note principal balance				$ 3,400	$ 3,400
Fair value of warrants			3,302
Valuation discount			3,083
Excess of the fair value of the warrant liability accounted for as a financing cost			219
Debt discount at issuance		$ 2,209	3,400
Fair value of the warrant liability			3,083
Cash offering costs			$ 317
Amortization of valuation discount		$ 1,191

Convertible Note to a Related Party - Schedule of Convertible Notes (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Convertible Note Payable, Net	$ 4,161	$ 3,690
Convertible Notes [Member]
12% Convertible Note Payable	3,400	3,400
Accrued Interest	761	290
Convertible Note Payable, Net	$ 4,161	$ 3,690

Convertible Note to a Related Party - Schedule of Convertible Notes (Details) (Parenthetical)	Dec. 31, 2018	Dec. 31, 2017
Convertible Notes [Member]
Percentage of convertible note	12.00%	12.00%

Warrants and Warrant Liability (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands					12 Months Ended
	Oct. 04, 2018	Jul. 13, 2017	Apr. 21, 2017	Apr. 19, 2017	Dec. 31, 2018	Dec. 31, 2017	Jul. 19, 2017
Warrant exercise price			$ 3.00	$ 3.00	$ 4.25	$ 2.025
Warrant to purchase shares of common stock			1,416,667	210,111		4,666,666
Fair value of warrants			$ 3,302		$ 2
Valuation discount			3,083
Excess of the fair value of the warrant liability accounted for as a financing cost			$ 219
Increase in fair value of warrant liability				$ 571
Warrant term description				Expiring in May 2017, were extended for a period of two years
Warrants outstanding			280,147
Warrant exercise price description	Reduced from $1.50 to $1.10	The warrants' exercise prices were lowered from $3.00 and $4.00 per share to $1.50 per share.	Warrants by one year and reduced the exercise price from $4.25 to $3.00.
Cost of the modifications of warrants			$ 187
Proceeds from warrant exercise					832	$ 1,650
Warrant liability to additional paid in capital					$ 1,033
Number of warrants exercised					428,005
Warrant Exercise Agreements [Member]
Warrant exercise price		$ 1.50
Warrant to purchase shares of common stock		1,906,925
Charge against earnings		$ 1,109
Proceeds from warrant exercise		1,650
Warrant liability to additional paid in capital		$ 1,601			$ 1,033
Modification of warrants		784,549
Maximum [Member]
Debt face amount	$ 4,000
Raptor SPV LLC [Member]
Warrant to purchase shares of common stock						750,000
Warrant term						5 years
Raptor/Harbor Reeds SPV LLC [Member]
Warrant exercise price	$ 1.50
Warrant exercise price, amount reduced	$ 1.10
Fair value of warrants	$ 161
Warrants outstanding	750,000
Second Tranche [Member]
Warrant exercise price		$ 2.00
Warrant to purchase shares of common stock		512,560
Warrant term		5 years
Third Tranche [Member]
Warrant exercise price							$ 1.55
Warrant to purchase shares of common stock							87,745
Warrant term							5 years
Warrant [Member]
Aggregate financing costs					$ 0	$ 1,480
Warrant exercise price					$ 2.07
Market price of common stock					$ 2.07
Warrant intrinsic value					$ 0
Common Stock [Member]
Exercise of warrants, shares					414,857	1,122,376
New Warrants [Member]
Fair value of warrants					$ 689
Expected volatility					53.75%
Risk free interest rate					1.65%
Stock price					$ 2.35

Warrants and Warrant Liability - Schedule of Warrant Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Shares Outstanding, Beginning Balance	4,666,666
Shares Outstanding, Ending Balance		4,666,666
Warrants [Member]
Shares Outstanding, Beginning Balance	7,325,282	803,909
Shares, Granted		7,643,749
Shares, Exercised	428,005	(1,122,376)
Shares, Forfeited or expired	0
Shares Outstanding, Ending Balance	6,897,277	7,325,282
Shares Exercisable, Ending Balance	6,897,277
Weighted-Average Exercise Price, Outstanding Beginning Balance	$ 2.09	$ 4.50
Weighted-Average Exercise Price, Granted		1.95
Weighted-Average Exercise Price, Exercised	2.03	1.50
Weighted-Average Exercise Price, Forfeited or expired
Weighted-Average Exercise Price, Outstanding Ending Balance	2.06	$ 2.09
Weighted-Average Exercise Price, Exercisable Ending Balance	$ 2.06
Weighted-Average Remaining Contractual Terms (Years), Outstanding Beginning Balance	3 years 5 months 5 days	4 years
Weighted-Average Remaining Contractual Terms (Years), Outstanding Ending Balance	2 years 5 months 1 day	3 years 5 months 5 days
Weighted-Average Remaining Contractual Terms (Years), Exercisable Ending Balance	2 years 5 months 1 day
Aggregate Intrinsic Value Shares Outstanding Beginning		$ 26
Aggregate Intrinsic Value Shares Outstanding Ending	$ 1,447
Aggregate Intrinsic Value Shares Exercisable	$ 1,447

Warrants and Warrant Liability - Schedule of Outstanding Warrants to Purchase Common Stock (Details) - $ / shares	Dec. 31, 2018	Dec. 31, 2017	Apr. 21, 2017	Apr. 19, 2017	Dec. 31, 2016
Number of Warrants		4,666,666	1,416,667	210,111
Warrants Exercise Price	$ 4.25	$ 2.025	$ 3.00	$ 3.00
Warrants [Member]
Number of Warrants	6,897,277	7,325,282			803,909
Warrants One [Member]
Number of Warrants	200,000	200,000
Warrants Exercise Price	$ 5.600	$ 5.600
Expiration Dates	Sep. 30, 2019	Sep. 30, 2019
Warrants Two [Member]
Number of Warrants	125,000	125,000
Warrants Exercise Price	$ 4.100	$ 4.100
Expiration Dates	May 31, 2021	May 31, 2021
Warrants Three [Member]
Number of Warrants	10,000	10,000
Warrants Exercise Price	$ 3.900	$ 3.900
Expiration Dates	Oct. 31, 2021	Oct. 31, 2021
Warrants Four [Member]
Number of Warrants	50,000	50,000
Warrants Exercise Price	$ 4.100	$ 4.100
Expiration Dates	Nov. 30, 2021	Nov. 30, 2021
Warrants Five [Member]
Number of Warrants	72,703	72,703
Warrants Exercise Price	$ 3.740	$ 3.740
Expiration Dates	Jun. 30, 2021	Jun. 30, 2021
Warrants Six [Member]
Number of Warrants	66,059	66,059
Warrants Exercise Price	$ 4.250	$ 4.250
Expiration Dates	Jun. 30, 2021	Jun. 30, 2021
Warrants Seven [Member]
Number of Warrants	784,549	784,549
Warrants Exercise Price	$ 1.500	$ 1.500
Expiration Dates	Apr. 30, 2022	Apr. 30, 2022
Warrants Eight [Member]
Number of Warrants	87,745	87,745
Warrants Exercise Price	$ 1.550	$ 1.550
Expiration Dates	Jul. 31, 2022	Jul. 31, 2022
Warrants Nine [Member]
Number of Warrants	512,560	512,560
Warrants Exercise Price	$ 2.000	$ 2.000
Expiration Dates	Jul. 31, 2022	Jul. 31, 2022
Warrants Ten [Member]
Number of Warrants	4,238,661	4,666,666
Warrants Exercise Price	$ 2.025	$ 2.030
Expiration Dates	Dec. 31, 2020	Dec. 31, 2020
Warrants Eleven [Member]
Number of Warrants	750,000	750,000
Warrants Exercise Price	$ 1.100	$ 1.500
Expiration Dates	Dec. 31, 2022	Dec. 31, 2022

Warrant Liability - Schedule of Warrant Liability Using Assumptions (Details) - USD ($)
$ / shares in Units, $ in Thousands

12 Months Ended

Jul. 13, 2017

Apr. 21, 2017

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

^[6]

280,147

$ 2

$ (3,275)

Issuance Date [Member]

Stock Price

^[1]

$ 4.75

Risk free interest rate

^[1]

1.51%

Expected Volatility

^[1]

49.33%

^[1]

5 years

Expected dividend yield

^[1]

0.00%

^[1]

1,626,778

Modification Date [Member]

^[1]

$ 3,873

Stock Price

$ 2.35

^[2]

$ 4.75

^[3]

Risk free interest rate

1.65%

^[2]

1.51%

^[3]

Expected Volatility

53.75%

^[2]

49.33%

^[3]

^[3]

5 years

Expected dividend yield

0.00%

^[2]

0.00%

^[3]

1,906,925

^[2]

280,147

^[3]

Modification Date [Member] | Minimum [Member]

$ 1,109

^[2]

$ 187

^[3]

Modification Date [Member] | Maximum [Member]

^[2]

4 years 9 months 7 days

^[2]

4 years 10 months 21 days

Warrants [Member]

Stock Price

$ 2.07

^[4]

$ 1.55

^[5]

$ 4.10

Risk free interest rate

2.69%

^[4]

1.74%

^[5]

1.58%

Expected Volatility

50.07%

^[4]

56.06%

^[5]

54.71%

2 years 5 months 1 day

^[4]

3 years 5 months 1 day

^[5]

4 years 5 months 1 day

Expected dividend yield

2.69%

^[4]

0.00%

138,762

418,909