Reed's, Inc. Announces Second Quarter 2011 Financial Results
Released: 08/11/11 09:15 AM EDT
Strong Organic Growth Continues to Accelerate

LOS ANGELES, CA -- (Marketwire) -- 08/11/11 -- Reed's, Inc. (NASDAQ: REED) Maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its second fiscal quarter ending June 30, 2011.

Financial Highlights:

  • Revenues during the second quarter of 2011 increased by 26% to 6.2 million from 4.9 million in the prior year period. Approximately 70% of the increase is due to branded products and 30% is due to an over twofold increase in private label products sold.
  • Gross profit margin in the quarter increased by 27%,or $407,000 to 1.9 million, from 1.5 million in 2010 despite increases in the costs of certain raw materials and packaging
  • Sales and administration costs increased by only 6% over the prior year period, indicating scalability of the business.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased to $395,000 during the second quarter, as compared to $210,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information)
  • Net loss for the quarter was $55,000, or $0.01 per share, compared to a loss of $164,000, a year earlier.
  • Working capital at June 30, 2011 was $2.3 million, as compared to $1.8 million at December 31, 2010.
  • Cash availability was $1.1 million at June 30, 2011, as compared to $1.1 million at December 31, 2010.

Operational Highlights:

  • Introduced Virgil's "Dr. Better" in both regular and ZERO calories.
  • Gained distribution in 350 Stop and Shop, Winn Dixie chains and increased distribution in Publix Supermarkets.
  • Expanded DSD distribution in Florida, Georgia, Arizona, Colorado and other markets.
  • Completed Safety Quality in Foods(SQF) certification for the Los Angles plant.
  • Continued Los Angeles plant upgrades designed to increase capacity and efficiency.

"This is our 7th quarter of back-to-back growth, with an average of 30%," stated Chris Reed, Founder, Chairman and CEO of Reed's, Inc. "We have a solid business model and see no reason why we won't continue to grow at a significant rate for years to come"

"We are committed to meeting the challenge of using high quality natural ingredients in our premium sodas while also preserving and growing the gross margin contributions from our sales," stated James Linesch, Reed's Chief Financial Officer. "Our overall EBITDA earnings before non-cash costs exceed our interest costs by about $100,000 during the second quarter, indicating a cash contribution from operations. We are just starting to gain economies of scale in our operations, in relation to our expanded sales base, bringing us above breakeven into profitable contributions that support our strong growth initiatives."

Conference Call

The Company will conduct a conference call at 4:15pm Eastern Daylight Time on August 11, 2011 to discuss its 2011 second quarter results and outlook for the rest 2011. To participate in the call, please dial the following number five to ten minutes prior to the scheduled call time: 1-877-852-0653 International callers should dial 1-512-225-9559. The conference ID for this call is 645933#.

About Reed's, Inc.

Reed's, Inc. makes the top selling natural sodas in the natural foods industry sold in over 10,500 natural food markets and supermarkets nationwide. In 2009, Reed's started producing Private Label natural beverages for select national chains. Its six award-winning non-alcoholic Ginger Brews are unique in the beverage industry, being brewed, not manufactured and using fresh ginger, spices and fruits in a brewing process that predates commercial soft drinks. The Company owns the top selling root beer line in natural foods, the Virgil's Root Beer product line, and the top selling cola line in natural foods, the China Cola product line. Other product lines include: Reed's Ginger Candies and Reed's Ginger Ice Creams.

Reed's products are sold through specialty gourmet and natural food stores, mainstream supermarket chains, retail stores and restaurants nationwide, and in Canada, as well as through private label relationships with major supermarket chains. For more information about Reed's, please visit the company's website at: http://www.reedsinc.com or call 800-99-REEDS.

Follow Reed's on Twitter at http://twitter.com/reedsgingerbrew

Reed's Facebook Fan Page at:
http://www.facebook.com/pages/Reeds-Ginger-Brew-and-Virgils-Natural-Sodas/57143529039

SAFE HARBOR STATEMENT

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.

-- FINANCIAL TABLES FOLLOW --

                                REED'S, INC.
                     CONDENSED STATEMENTS OF OPERATIONS
          For the Three and Six Months Ended June 30, 2011 and 2010
                                 (Unaudited)

                  Three months ended June 30,    Six months ended June 30,
                 ----------------------------  ----------------------------
                      2011           2010           2011           2010
                 -------------  -------------  -------------  -------------

Sales            $   6,191,000  $   4,905,000  $  11,331,000  $   8,917,000
Cost of tangible
 goods sold          3,762,000      3,062,000      7,083,000      5,450,000
Cost of goods
 sold - idle
 capacity              493,000        314,000        895,000        555,000
                 -------------  -------------  -------------  -------------

  Gross profit       1,936,000      1,529,000      3,353,000      2,912,000
                 -------------  -------------  -------------  -------------

Operating
 expenses:
Delivery and
 handling
 expenses              544,000        360,000        932,000        677,000
Selling and
 marketing
 expense               601,000        538,000      1,181,000      1,062,000
General and
 administrative
 expense               676,000        672,000      1,331,000      1,324,000
                 -------------  -------------  -------------  -------------
  Total operating
   expenses          1,821,000      1,570,000      3,444,000      3,063,000
                 -------------  -------------  -------------  -------------

  Income (loss)
   from
   operations          115,000        (41,000)       (91,000)      (151,000)

Interest expense      (170,000)      (123,000)      (329,000)      (272,000)
                 -------------  -------------  -------------  -------------

Net loss               (55,000)      (164,000)      (420,000)      (423,000)

Preferred stock
 dividends             (33,000)       (36,000)       (44,000)       (50,000)
                 -------------  -------------  -------------  -------------

Net loss
 attributable to
 common
 stockholders    $     (88,000) $    (200,000) $    (464,000) $    (473,000)
                 =============  =============  =============  =============

Loss per share
 available to
 common
 stockholders,
 basic and
 diluted         $       (0.01) $       (0.02) $       (0.04) $       (0.05)
                 =============  =============  =============  =============
Weighted average
 number of shares
 outstanding -
 basic and
 diluted            10,818,170     10,215,185     10,719,256     10,025,991
                 =============  =============  =============  =============



                          MODIFIED EBITDA SCHEDULE


                    Three months ended June 30,   Six months ended June 30,
                    ---------------------------  --------------------------
                        2011           2010          2011          2010
                    ------------  -------------  ------------  ------------
  Net loss          $    (55,000) $    (164,000) $   (420,000) $   (423,000)
                    ------------  -------------  ------------  ------------

Modified EBITDA
 adjustments:
  Depreciation and
   amortization          165,000        156,000       308,000       305,000
  Interest expense       170,000        123,000       329,000       272,000
  Stock option and
   warrant
   compensation           80,000         47,000       129,000       104,000
  Other stock
   compensation for
   services               35,000         48,000        77,000        84,000
                    ------------  -------------  ------------  ------------
    Total EBITDA
     adjustments         450,000        374,000       843,000       765,000
                    ------------  -------------  ------------  ------------

  Modified EBITDA   $    395,000  $     210,000  $    423,000  $    342,000
                    ============  =============  ============  ============


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.
                          CONDENSED BALANCE SHEETS
                                          June 30,          December 31,
                                            2011                2010
                                     ------------------  ------------------
ASSETS                                   (unaudited)
Current assets:
  Cash                               $        1,114,000  $        1,084,000
  Inventory                                   4,578,000           4,555,000
  Trade accounts receivable, net of
   allowance for doubtful accounts
   and returns and discounts of
   $105,000 and $105,000,
   respectively                               2,006,000           1,295,000
  Prepaid inventory                             384,000             138,000
  Prepaid and other current assets              146,000              78,000
                                     ------------------  ------------------
    Total Current Assets                      8,228,000           7,150,000

Property and equipment, net of
 accumulated depreciation of
 $1,444,000 and $1,178,000,
 respectively                                 3,613,000           3,650,000
Brand names                                   1,029,000           1,029,000
Deferred financing fees, net of
 amortization of $25,000 and $8,000,
 respectively                                    29,000              47,000
                                     ------------------  ------------------
    Total assets                     $       12,899,000  $       11,876,000
                                     ==================  ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                   $        2,891,000  $        2,586,000
  Accrued expenses                              179,000             162,000
  Dividends payable                              87,000              44,000
  Recycling fees payable                        263,000             325,000
  Line of credit                              2,387,000           2,038,000
  Current portion of long term
   financing obligation                          63,000              55,000
  Current portion of capital leases
   payable                                       43,000              39,000
  Current portion of note payable                18,000              71,000
                                     ------------------  ------------------
    Total current liabilities                 5,931,000           5,320,000

Long term financing obligation, less
 current portion, net of discount of
 $651,000 and $677,000, respectively          2,261,000           2,268,000
Capital leases payable, less current
 portion                                        124,000             146,000
                                     ------------------  ------------------
    Total Liabilities                         8,316,000           7,734,000
                                     ------------------  ------------------

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, 81,866 and
   85,766 shares issued and
   outstanding, respectively                    819,000             858,000
  Common stock, $.0001 par value,
   19,500,000 shares authorized,
   10,824,708 and 10,446,090 shares
   issued and outstanding,
   respectively                                   1,000               1,000
  Additional paid in capital                 22,645,000          21,701,000
  Accumulated deficit                       (19,348,000)        (18,884,000)
                                     ------------------  ------------------
    Total stockholders' equity                4,583,000           4,142,000
                                     ------------------  ------------------
    Total liabilities and
     stockholders' equity            $       12,899,000  $       11,876,000
                                     ==================  ==================

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