UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 17, 2016 (May 13, 2016)
Reed’s Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-32501 | 35-2177773 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1300 South Spring Street, Los Angeles, California 90061
(Address of principal executive offices and zip code)
Not applicable
(Former name or former address if changed since last report)
Registrant’s telephone number, including area code: (310) 217-9400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement
On May 13, 2016, Reed’s Inc., a Delaware corporation (“Reed’s”) entered into Amendment Number Twelve (“Amendment Twelve”) to the Amended and Restated Loan and Security Agreement dated December 5, 2014 (“PMC Loan Agreement”) with PMC Financial Services Group, LLC (“PMC”). Pursuant to Amendment Twelve, PMC agreed to add $210,000 to the Cap Ex Loan for a total borrowing cap of $3,210,000 and extended the maturity dates of the Revolving Loan, Cap Ex Loan, Term Loan and term Loan B to October 1, 2107. In consideration, Reed’s agreed to provide proof of a capital raise in the amount of at least $1,500,000 by July 31, 2016 and to issue to PMC warrants to purchase 50,000 shares of common stock with an exercise price of $4.50 and an expiration date of November 13, 2021.
Previously, on April 25, 2016, Reed’s entered into Amendment Number Eleven to the PMC Loan Agreement. Amendment Eleven changed the definition of ‘inventory” to include prepayments for glass subject to non-cancelable purchase orders that were previously excluded from the lending base of the revolver and was entered into in the ordinary course of business. Prior to Amendment Eleven, the glass was to be repaid as purchase orders were filled. In consideration, Reed’s granted PMC warrants to purchase 10,000 shares of common stock with an exercise price of $3.90 per share and an expiration date of October 25, 2021.
The disclosures set forth herein are qualified by reference to the full text of Amendment Eleven and Amendment Twelve, attached hereto as Exhibits 10.1 and 10.2 respectively.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosures set forth in Item 1.01 describing Amendment 11 and Amendment Twelve are incorporated herein by reference.
Item 3.02 Unregistered Sale of Equity Securities
The disclosures set forth in Item 1.01 are incorporated herein by reference. The issuances are exempt from registration under section 4(2) Securities Act of 1933, as amended, on the basis that there was no public offering and Reed’s has a preexisting relationship with PMC.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description | |
| 10.1 | Amendment Number Eleven to Loan and Security Agreement by and between Reed’s Inc. and PMC Financial Services Group, LLC dated April 25, 2016 | |
| 10.2 | Amendment Number Twelve to Loan and Security Agreement by and between Reed’s Inc. and PMC Financial Services Group, LLC dated May 13, 2016 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| REEDS, INC., | ||
| a Delaware corporation | ||
| Dated: May 17, 2016 | By: | /s/ Daniel Miles |
| Daniel Miles, | ||
| Chief Financial Officer | ||
AMENDMENT NUMBER ELEVEN TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ELEVEN TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of April 25, 2016, is entered into between PMC FINANCIAL SERVICES GROUP, LLC, a Delaware limited liability company (“Lender”), and REEDS, INC., a Delaware corporation (“Borrower”), in light of the following:
RECITALS
WHEREAS, Borrower and Lender have previously entered into that certain Amended and Restated Loan and Security Agreement, dated as of December 5, 2014, as amended from time to time (the “Agreement”).
WHEREAS, Lender previously extended financial accommodations via the Revolving Loans pursuant to terms of the Agreement.
WHEREAS, Borrower and Lender wish to amend the Agreement by changing the Borrowing Base on terms and conditions set forth in this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. All terms which are defined in the Agreement shall have the same definition when used herein unless a different definition is assigned to such term under this Amendment.
2. AMENDMENTS. Effective as of the date first set forth above, the Agreement is amended as follows:
2.1 Definition. The following new definitions are added to Section 8 of the Agreement.
“Prepayments on Temporary Eligible Glass” means prepayments made by Borrower for the purchase of Temporary Eligible Glass that is not yet reflected in the inventory of Borrower. Evidence of such prepayments and related purchase orders to be provided if requested by Lender.
“Temporary Eligible Glass” means the glass bottles purchased between 3/31/16 and 9/30/16 exclusively for the seasonal promotional program for Trader Joe’s, and other customer programs approved by Lender.
2.2 Borrowing Base. The following new clause “(d)” is added to the end of the definition of “Borrowing Base” is Section 1 of the Schedule as follows:
(d) 100% (the “Temporary Glass Advance Rate” and also an Advance Rate) of the value of Temporary Eligible Glass and Prepayments on Temporary Eligible Glass. The maximum amount calculated from this clause “(d)” of the Borrowing Base shall not exceed $550,000 and shall expire on 12/31/16.
3. WARRANT.
3.1 For consideration of the terms of this Amendment, Borrower shall provide Lender with a Common Stock Purchase Warrant to purchase up to 10,000 Shares of Common Stock of Reeds, Inc.
4. CONDITIONS PRECEDENT.
4.1 Each of the following is a condition precedent to the effectiveness of this Amendment:
A. Lender shall have received a fully executed copy of this Amendment.
B. Lender shall have received a fully executed copy of the Common Stock Purchase Warrant.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Lender that all of Borrower’s representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof.
6. LIMITED EFFECT. Except for the specific amendment contained in this Amendment, the Agreement shall remain unchanged and in full force and effect.
7. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of this Amendment by each of the parties hereto.
[signatures are on the next page]
| 2 |
IN WITNESS WHEREOF, Lender and Borrower have executed this Amendment
| REEDS, INC., | ||
| By: | ||
| Name: | ||
| Title: | ||
| PMC FINANCIAL SERVICES GROUP, LLC | ||
| By: | /s/ Walter E. Buttkus, III | |
| Name: | Walter E. Buttkus, III | |
| Title: | President | |
Signature Page to Amendment Number Eleven to Loan and Security Agreement
AMENDMENT NUMBER TWELVE TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER TWELVE TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of May 13, 2016, is entered into between PMC FINANCIAL SERVICES GROUP, LLC, a Delaware limited liability company (“Lender”), and REEDS, INC., a Delaware corporation (“Borrower”), in light of the following:
RECITALS
WHEREAS, Borrower and Lender have previously entered into that certain Amended and Restated Loan and Security Agreement, dated as of December 5, 2014, as amended from time to time (the “Agreement”).
WHEREAS, Lender previously extended financial accommodations via the Revolving Loans pursuant to terms of the Agreement.
WHEREAS, Borrower and Lender wish to amend the Agreement by modifying the repayment of the Cap Ex Loans on terms and conditions set forth in this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. All terms which are defined in the Agreement shall have the same definition when used herein unless a different definition is assigned to such term under this Amendment.
2. AMENDMENTS. Effective as of the date first set forth above, the Agreement is amended as follows:
2.1 Cap Ex Loans. The first and third paragraphs of Section 1(c), Cap Ex Loans, of the Schedule, dated December 5, 2014, are replaced in their entirety as follows:
“Subject to the terms and conditions of this Agreement, from the Effective date through June 30, 2016 (the “Draw Period”), Lender agrees to make Capital Expenditures Loans (each a “Cap Ex Loan” and collectively, the “Cape Ex Loans”) in an aggregate outstanding amount, including any amounts funded under the existing Master Lease Agreement, not to exceed $3,210,000 at any time. No Cap Ex Loans may exceed one hundred percent (100%) of the total invoice for Eligible Equipment (excluding taxes, shipping, warranty charges, freight discounts, and installation expenses relating to such Eligible Equipment).”
“Interest only shall be payable on any and all Cap Ex Loans outstanding from time to time until June 30, 2016, at which time, the principal amount of each outstanding Cap Ex Loan, plus any accrued but unpaid interest thereon, will be aggregated and repaid in equal monthly payments of principal and interest (based on a 48-month amortization) commencing on July 31, 2016 and continuing on the same day of each month thereafter until the earliest of the following dates (“Cap Ex Loan Maturity Date): (i) the date the Cap Ex Loan has been paid in full; or (ii) October 1, 2017; or (iii) the date this Agreement terminated by its terms or is terminated, as provided in this Agreement. On the Cap Ex Loan Maturity Date (or, if earlier, upon acceleration of the Obligations in accordance with the terms of this Agreement), the entire unpaid principal balance of the Cap Ex Loan, plus all other Obligations relating to the Cap Ex Loan (including accrued and unpaid interest thereon, and, if applicable, the Cap Ex Loan Prepayment Fee) shall be due and payable. Any portion of the Cap Ex Loan that is repaid may not be reborrowed.
2.4 Extension of Maturity Dates. Sections 1 and 4 of the Schedule to the Loan and Security Agreement dated December 5, 2014 (Revolving Loans, Term Loan and Cap Ex Loans) and Schedule #2 to the Loan and Security Agreement dated September 1, 2015 (Term Loan B), as amended from time to time, are hereby amended to extend the Revolving Loan Maturity Date, Term Loan Maturity Date, Cap Ex Loan Maturity Date and Term Loan B Maturity Date from April 1, 2017 to October 1, 2017.
3. WARRANT.
3.1 For consideration of the terms of this Amendment, Borrower shall provide Lender with a Common Stock Purchase Warrant to purchase up to 50,000 Shares of Common Stock of Reeds, Inc.
4. CONDITIONS PRECEDENT.
4.1 Each of the following is a condition precedent to the effectiveness of this Amendment:
| A. | Lender shall have received a fully executed copy of this Amendment. | |
| B. | Lender shall have received a fully executed copy of the Common Stock Purchase Warrant. |
5. CONDITIONS SUBSEQUENT.
4.1 Consistent with past Reeds Inc. funding practices, Borrower shall provide evidence to Lender that it has raised capital outside of this Agreement of no less than $1,500,000 on terms acceptable to Lender by no later than July 31, 2016.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Lender that all of Borrower’s representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof.
7. LIMITED EFFECT. Except for the specific amendment contained in this Amendment, the Agreement shall remain unchanged and in full force and effect.
8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of this Amendment by each of the parties hereto.
[signatures are on the next page]
| 2 |
IN WITNESS WHEREOF, Lender and Borrower have executed this Amendment.
| REEDS, INC., | ||
| By: | ||
| Name: | ||
| Title: | ||
| PMC FINANCIAL SERVICES GROUP, LLC | ||
| By | /s/ Walter E. Buttkus, III | |
| Name: | Walter E. Buttkus, III | |
| Title: | President | |
Signature Page to Amendment Number Twelve to Loan and Security Agreement