Reed's, Inc. Announces 2010 Year-End Results
Released: 03/22/11 07:00 AM EDT
Delivers Record Revenues on 34% Sales Rise With Solid Base for Continued Growth

LOS ANGELES, CA -- (Marketwire) -- 03/22/11 -- Reed's, Inc. (NASDAQ: REED) (OTCBB: REEDP), maker of the top-selling sodas in natural food stores nationwide, today announced its financial results for 2010.

Financial Highlights:

--  Sales increased 34% to $20.4 million.
--  Gross profit was 21% of sales during 2010, as compared to 24% in 2009,
    reflecting start up costs incurred during the period.
--  Operating expenses were about the same in 2010, compared to 2009.
--  Modified EBITDA was $456,000 in 2010, as compared to a modified EBITDA
    loss of $306,000 in 2009. (See modified EBITDA table at end of this
    release for further non-GAAP information).
--  Net loss for 2010 narrowed to $1,310,000, or $0.14 per share, from
    $2,559,000 in 2009.
--  Working capital at December 31, 2010 was $1.8 million, as compared to
    $2.0 million at December 31, 2009.
--  Cash availability was $1.1 million at December 31, 2010, as compared
    to $1.3 million at December 31, 2009.

"We are cautiously exuberant with our results for the year," stated Chris Reed, Founder, Chairman and CEO of Reed's, Inc. "Our growth has been the result of a lot of hard work developing the channels for our excellent brands." Mr. Reed added, "Our strategy of diversifying with private label production is serving to fill production capacity as well as advance our branded business. We have increased our capabilities, since we are constantly developing formulas, brands and packaging. As a result, we have some new branded products in the pipeline for 2011 that are exciting and unique."

James Linesch, Reed's Chief Financial Officer, said, "Our 34% sales growth was driven by an over 17% increase in our branded business. Margins for our branded business held constant overall in 2010, as compared to 2009, despite certain raw materials cost increases. Our second half 2010 margins were negatively impacted by start-up costs on our private-label business and, to a lesser extent; on product rollout costs on our new ZERO line. " Mr. Linesch added, "During 2010, our cash flow loss from operations was about $130,000. We also used $696,000 to build up inventory and increase accounts receivable, with our expanded base of business. We invested $383,000 in our plant. To fund our expansion, we sold $555,000 of stock and increased our borrowings by $417,000. We are currently well capitalized to execute our 2011 plans, as we look forward to another year of rapid growth."

See financial statements and EBITDA schedule at the end of this release.

Conference Call

The Company will conduct a conference call at 4:15 p.m. Eastern Standard Time (EST) on Tuesday, March 22, 2011 to discuss its 2010 financial results and outlook for 2011. To participate in the call, please dial the following number five to ten minutes prior to the scheduled call time: 888-240-4700. International callers should dial 512-225-9559. The conference ID for this call is 936603#.

About Reed's, Inc.

Reed's, Inc. makes several brands of top selling natural sodas and beverages. Their products are sold in over 10,500 stores throughout the natural foods industry and supermarkets nationwide. Reed's six award-winning, non-alcoholic Ginger Brews are unique in the beverage industry as they are made using fresh ginger, spices and fruits with a brewing process that predates commercial soft drinks. The Company also produces a Natural Energy Elixir and 'Reed's Rx', a Natural Ginger Nausea Relief product for the drug store and grocery retail channels. Reed's, Inc. owns China Cola and the Virgil's line of sodas that include the award-winning Virgil's Root Beer as well as Virgil's Cream Soda, Black Cherry Cream Soda, Orange Cream Soda and Real Cola. The Company has also introduced its new 'Virgil's Zero' line of Stevia-sweetened diet sodas in all these popular flavors. In 2009, Reed's acquired the Sonoma Sparkler brand and started producing Private Label natural beverages for select national chains. Other product lines include Reed's Ginger Candies and Reed's Ginger Ice Creams.

Reed's products are sold internationally in Canada and Mexico, along with a small presence in Europe, the Middle East, Africa, Japan and Singapore. For more information about Reed's, please visit the company's website at: or call 800-99-REEDS.

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Some portions of this press release, particularly those describing Reed's goals and strategies, contain "forward-looking statements." These forward-looking statements can generally be identified as such because the context of the statement will include words, such as "expects," "should," "believes," "anticipates" or words of similar import. Similarly, statements that describe future plans, objectives or goals are also forward-looking statements. While Reed's is working to achieve those goals and strategies, actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. These risks and uncertainties include difficulty in marketing its products and services, maintaining and protecting brand recognition, the need for significant capital, dependence on third party distributors, dependence on third party brewers, increasing costs of fuel and freight, protection of intellectual property, competition and other factors, any of which could have an adverse effect on the business plans of Reed's, its reputation in the industry or its expected financial return from operations and results of operations. In light of significant risks and uncertainties inherent in forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by Reed's that they will achieve such forward-looking statements. For further details and a discussion of these and other risks and uncertainties, please see our most recent reports on Form 10-KSB and Form 10-Q, as filed with the Securities and Exchange Commission, as they may be amended from time to time. Reed's undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.


                             REED'S, INC.
                      STATEMENTS OF OPERATIONS
          For the Years Ended December 31, 2010 and 2009

                                                    2010          2009
                                                ------------  ------------

Sales                                           $ 20,376,000  $ 15,178,000
Cost of sales                                     16,041,000    11,566,000
                                                ------------  ------------

  Gross profit                                     4,335,000     3,612,000
                                                ------------  ------------

Operating expenses:
Selling and marketing expense                      2,319,000     2,412,000
General and administrative expense                 2,740,000     2,632,000
Impairment of assets                                       -       641,000
                                                ------------  ------------
  Total operating expenses                         5,059,000     5,685,000
                                                ------------  ------------

  Loss from operations                              (724,000)   (2,073,000)

Interest expense                                    (586,000)     (486,000)
                                                ------------  ------------

  Net loss                                        (1,310,000)   (2,559,000)

Preferred stock dividend                             (73,000)      (23,000)
                                                ------------  ------------

  Net loss attributable to common stockholders  $ (1,383,000) $ (2,582,000)
                                                ============  ============

Loss per share available to common stockholders
 - basic and diluted                            $      (0.14) $      (0.28)
                                                ============  ============
Weighted average number of shares outstanding -
 basic and diluted                                10,186,600     9,238,002
                                                ============  ============

                       MODIFIED EBITDA SCHEDULE
            For the Year Ended December 31, 2010 and 2009

                                                   Y ended December 31,
                                                     2010          2009
                                                ------------  ------------
Net loss                                        $ (1,310,000) $ (2,559,000)
                                                ------------  ------------

Modified EBITDA adjustments:
Depreciation and amortization                        616,000       469,000
Interest expense                                     586,000       486,000
Impairment expense                                         -       641,000
Stock option compensation                            198,000       421,000
Other stock compensation for services                366,000       236,000
                                                ------------  ------------
  Total EBITDA adjustments                         1,766,000     2,253,000
                                                ------------  ------------

Modified EBITDA income (loss) from operations   $    456,000  $   (306,000)
                                                ============  ============

The Company defines modified EBITDA (a non-GAAP measurement) as net loss before interest, taxes, depreciation and amortization, and non-cash expense for securities. Other companies may calculate modified EBITDA differently. Management believes that the presentation of modified EBITDA provides a measure of performance that approximates cash flow before interest expense, and is meaningful to investors.

                              REED'S, INC.
                             BALANCE SHEETS

                                             December          December
                                                31,               31,
                                               2010              2009
                                         ----------------  ----------------

Current assets:
  Cash                                  $      1,084,000  $      1,306,000
  Inventory                                    4,555,000         2,884,000
  Trade accounts receivable, net of
   allowance for doubtful accounts
   and returns and discounts of
   $105,000 and $90,000, respectively          1,295,000           866,000
  Prepaid inventory                              138,000             3,000
  Prepaid and other current assets                78,000            96,000
                                        ----------------  ----------------
    Total Current Assets                       7,150,000         5,155,000

Property and equipment, net of
 accumulated depreciation of
 $1,178,000 and $727,000, respectively         3,650,000         3,655,000
Brand names                                    1,029,000         1,029,000
Deferred financing fees, net of
 amortization of $8,000 and $10,000,
 respectively                                     47,000           131,000
                                        ----------------  ----------------
    Total assets                        $     11,876,000  $      9,970,000
                                        ================  ================

Current Liabilities:
  Accounts payable                      $      2,586,000  $        954,000
  Accrued expenses                               162,000           127,000
  Dividends payable                               44,000                 -
  Recycling fees payable                         325,000           456,000
  Line of credit                               2,038,000         1,415,000
  Current portion of long term financing
   obligation                                     55,000            40,000
  Current portion of capital leases
   payable                                        39,000            24,000
  Current portion of note payable                 71,000           102,000
                                        ----------------  ----------------
    Total current liabilities                  5,320,000         3,118,000

Long term financing obligation, less
 current portion, net of discount of
 $677,000 and $726,000, respectively           2,268,000         2,274,000
Capital leases payable, less current
 portion                                         146,000           130,000
Note payable, less current portion                     -            71,000
                                        ----------------  ----------------
    Total Liabilities                          7,734,000         5,593,000
                                        ----------------  ----------------

Commitments and contingencies

Stockholders' equity:
  Series A Convertible Preferred stock,
   $10 par value, 500,000 shares
   authorized, 46,621 shares issued
   and outstanding                               466,000           466,000
  Series B Convertible Preferred stock,
   $10 par value, 500,000 shares
   authorized, 85,766 and 120,820
   shares issued and outstanding,
   respectively                                  858,000         1,208,000
  Common stock, $.0001 par value,
   19,500,000 shares authorized,
   10,446,090 and 9,606,127 shares
   issued and outstanding,
   respectively                                    1,000             1,000
  Additional paid in capital                  21,701,000        20,203,000
  Accumulated deficit                        (18,884,000)      (17,501,000)
                                        ----------------  ----------------
    Total stockholders' equity                 4,142,000         4,377,000
                                        ----------------  ----------------
    Total liabilities and stockholders'
     equity                             $     11,876,000  $      9,970,000
                                        ================  ================

                              REED'S, INC.
                        STATEMENTS OF CASH FLOWS
            For the Years Ended December 31, 2010 and 2009

                                                    2010          2009
                                                ------------  ------------
Cash flows from operating activities:
    Net loss                                    $ (1,310,000) $ (2,559,000)
    Adjustments to reconcile net loss to net
     cash used in operating activities:
      Depreciation and amortization                  616,000       469,000
      Fair value of stock options issued to
       employees                                     198,000       421,000
      Fair value of common stock issued for
       services                                      366,000       236,000
      Impairment loss on assets                            -       641,000
      Increase (decrease) in allowance for
       doubtful accounts                              15,000        (7,000)
      Changes in assets and liabilities:
        Accounts receivable                         (444,000)       38,000
        Inventory                                 (1,671,000)      (37,000)
        Prepaid expenses and inventory and
         other current assets                       (117,000)      (31,000)
        Accounts payable                           1,632,000      (638,000)
        Accrued expenses                              35,000        31,000
        Recycling fees payable                      (131,000)      119,000
                                                ------------  ------------
          Net cash used in operating
           activities                               (811,000)   (1,317,000)
                                                ------------  ------------
Cash flows from investing activities:
    Purchase of property and equipment              (383,000)     (356,000)
                                                ------------  ------------
            Net cash used in investing
             activities                             (383,000)     (356,000)
                                                ------------  ------------
Cash flows from financing activities:
    Proceeds from issuance of common stock in
     shelf offering, net of offering costs           432,000       563,000
    Proceeds from private sale of common stock             -       150,000
    Proceeds from stock option exercise                6,000             -
    Proceeds from the issuance of Series B
     preferred stock, net of offering costs          117,000       891,000
    Payments for deferred financing fees             (30,000)     (117,000)
    Proceeds received from long term financing
     obligation                                            -     3,056,000
    Principal repayments on long term
     financing obligation                            (42,000)      (16,000)
    Principal repayments on capital lease
     obligation                                      (32,000)       (9,000)
    Principal repayments on long term debt                 -    (1,763,000)
    Payoff of former line of credit                        -    (1,354,000)
    Net borrowings on existing lines of credit       623,000     1,415,000
    Principal repayments on note payable            (102,000)      (66,000)
                                                ------------  ------------
            Net cash provided by financing
             activities                              972,000     2,750,000
                                                ------------  ------------
            Net (decrease) increase in cash         (222,000)    1,077,000
Cash at beginning of year                          1,306,000       229,000
                                                ------------  ------------
Cash at end of year                             $  1,084,000  $  1,306,000
                                                ============  ============
Supplemental Disclosures of Cash Flow

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