REED'S, INC. Stock Compensation Disclosure

10. Share-Based Payments

 

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 December 21, 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) was approved by the Company’s shareholders. The 2020 Plan provides for the issuance of up to 50,000 shares. Options forfeited under the 2020 plan were returned to the share reserve. Options issued cannot be re-priced without shareholder approval. As of December 31, 2025, shares available for issuance under the 2020 Plan were 36,657.

 

 

The 2020 Plan permits the grant of options and stock awards to the Company’s 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 exercise 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.

 

On April 29, 2024, the 2024 Inducement Plan (the “2024 Plan”) was approved by the compensation committee of the Company’s board of directors. The 2024 Plan provides for the issuance of up to 41,667 shares. Options forfeited under the 2024 plan are returned to the share reserve for future issuance. Options issued cannot be re-priced without shareholder approval. As of December 31, 2025, shares available for issuance under the 2024 Plan were 27,350.

 

The 2024 Plan permits the grant of options and stock awards to the Company’s 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 excise price 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

 

As of December 31, 2025, the Company had issued and outstanding stock options to purchase an aggregate of 29,028 shares of common stock. The Company’s stock option activity during the years ended December 31, 2025, and 2024 is as follows:

 

Schedule of Stock Option Activity

		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Terms (Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2023			19,196			$	260.75				6.75			$	-
Issued			31,355				7.80
Exercised			-				-
Unvested forfeited or expired			(865	)			99.75
Vested forfeited or expired			(2,295	)			277.67
Outstanding at December 31, 2024			47,391			$	95.51				8.15			$	-
Issued			-				-
Exercised			-				-
Unvested forfeited or expired			(6,103	)			7.80
Vested forfeited or expired			(12,260	)			40.43
Outstanding at December 31, 2025			29,028			$	137.22				6.08			$	-
Exercisable at December 31, 2025			27,005			$	145.47				5.96			$	-

 

 

During the year ended December 31, 2024, the Company approved options exercisable into 31,355 shares to be issued pursuant to the 2024 Plan. The stock options are exercisable at a price of $7.80 per share and expire in ten years. The total fair value of these options at grant date was approximately $253, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: stock price of $7.80 share, expected term of six years, volatility of 92%, dividend rate of 0%, and weighted average risk-free interest rate of 4.65%. The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.

 

During the year ended December 31, 2025 and 2024, the Company recognized $59 and $528 of compensation expense relating to vested stock options. As of December 31, 2025, the aggregate amount of unvested compensation related to stock options was approximately $10 which will be recognized as an expense as the options vest in future periods through April 30, 2028.

 

As of December 31, 2025, the outstanding and exercisable options have no intrinsic value. The aggregate intrinsic value was calculated as the difference between the closing market price as of December 31, 2025, which was $2.10, and the exercise price of the outstanding stock options.

 

Additional information regarding options outstanding and exercisable as of December 31, 2025, is as follows:

 

Schedule of Information Regarding Stock Options

		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
$7.80 - $24.00		14,483				$7.99				8.31				13,228				$7.95
$27.00 - $40.50			656				27.00				7.05				410				27.00
$72.00 - $108.00			2,088				72.00				6.35				1,566				72.00
$150.00 - $225.00			1,199				191.43				3.79				1,199				191.43
$264.00 - $396.00			9,850				297.59				3.31				9,850				297.59
$480.00 - $720.00			154				560.18				2.64				154				560.18
$732.00 - $1,098.00			598				756.47				0.95				598				756.47
			29,028			$	137.22				6.08				27,005			$	145.47