Reed's Inc. Announces Third Quarter 2011 Financial Results
Released: 11/14/11 04:04 PM EST
Sales Increase 18% While Gross Profit Increased 28%

LOS ANGELES, CA -- (Marketwire) -- 11/14/11 -- Reed's, Inc. (NASDAQ: REED) Maker of the top-selling sodas in natural food stores nationwide today announced the financial results for its third fiscal quarter ending September 30, 2011.

Financial Highlights:

  • Revenues during the third quarter of 2011 increased by 18% to 6.4 million from 5.5 million 2010. Branded product sales comprised over 90% of sales and expanded by 19% over the prior year.
  • Gross profit increased by 28% in the quarter to $2.0 million, as compared to $1.6 million in 2011. As a percentage of sales, gross profit margin improved to 32% during the third quarter, as compared to 29% in 2010.
  • Sales and marketing costs remained unchanged overall during the third quarter, as compared to 2010, resulting in a lowering of the ratio of sales costs to gross revenues to 9% of sales, from 11% in 2010.
  • General and administrative expenses, before one-time charges, decreased by approximately 10% during the third quarter, compared to 2010.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased to $269,000 during the third quarter, as compared to $32,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).
  • Net loss for the quarter was $174,000, or $0.02 per share, compared to a loss of $398,000 a year earlier.
  • Working capital at September 30, 2011 was $2.2 million, as compared to $1.8 million at December 31, 2010.

Operational Highlights:

  • Expanded distribution by adding key DSD distributors in Nevada, Michigan, Alabama and Louisiana
  • New private label partnerships with 2 retail chains in the greater Southeast marketplace
  • Completed initial production of Light 55 Calories Reed's Extra Ginger Brew
  • Established a stronger partnership with our largest natural foods distributor (UNFI), which is anticipated to lead continued brand growth for 2011 and beyond

"This is our eighth quarter of significant growth," stated Chris Reed, Founder, Chairman and CEO of Reed's Inc. "We believe we will see continued sales growth and increasing margins moving forward for the foreseeable future."

"Aside from one-time charges during the quarter, our ongoing business earned proforma net income," stated James Linesch, Reed's Chief Financial Officer. "We are moving into profitability at these sales levels, as we leverage our operations over a wider business base."

Conference Call

The Company will conduct a conference call @ 4:15 EST on Tuesday, November 15th to discuss its 2011 third quarter results and outlook for the rest of 2011. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time 1-877-283-1603. International Callers should dial 512-225-9559. The conference ID is 885913#. Conference Call will be recorded and be available on www.reedsinc.com.

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. 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. In 2009, Reed's started producing private label natural beverages for select national chains.

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/ReedsGingerBrew

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 Nine months Ended September 30, 2011 and 2010
                                (Unaudited)

                            Three months ended         Nine months ended
                               September 30,             September 30,
                         ------------------------  ------------------------
                             2011         2010         2011         2010
                         -----------  -----------  -----------  -----------

Sales                    $ 6,400,000  $ 5,428,000  $17,731,000  $14,345,000
Cost of tangible goods
 sold                      3,970,000    3,583,000   11,053,000    9,034,000
Cost of goods sold -
 idle capacity               405,000      268,000    1,300,000      822,000
                         -----------  -----------  -----------  -----------

    Gross profit           2,025,000    1,577,000    5,378,000    4,489,000
                         -----------  -----------  -----------  -----------

Operating expenses:
Delivery and handling
 expenses                    587,000      514,000    1,519,000    1,191,000
Selling and marketing
 expense                     570,000      570,000    1,751,000    1,632,000
General and
 administrative expense      867,000      742,000    2,198,000    2,066,000
                         -----------  -----------  -----------  -----------
  Total operating
   expenses                2,024,000    1,826,000    5,468,000    4,889,000
                         -----------  -----------  -----------  -----------

    Income (loss) from
     operations                1,000     (249,000)     (90,000)    (400,000)

Interest expense            (175,000)    (149,000)    (504,000)    (421,000)
                         -----------  -----------  -----------  -----------

Net loss                    (174,000)    (398,000)    (594,000)    (821,000)

Preferred stock
 dividends                   (11,000)     (12,000)     (55,000)     (62,000)
                         -----------  -----------  -----------  -----------

Net loss attributable to
 common stockholders     $  (185,000) $  (410,000) $  (649,000) $  (883,000)
                         ===========  ===========  ===========  ===========

Loss per share available
 to common stockholders,
 basic and diluted       $     (0.02) $     (0.04) $     (0.06) $     (0.09)
                         ===========  ===========  ===========  ===========
Weighted average number
 of shares outstanding -
 basic and diluted        10,835,858   10,298,739   10,758,529   10,117,906
                         ===========  ===========  ===========  ===========



                          MODIFIED EBITDA SCHEDULE

                               Three months ended       Six months ended
                                  September 30,           September 30,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
  Net loss                   $ (174,000) $ (398,000) $ (594,000) $ (821,000)
                             ----------  ----------  ----------  ----------

Modified EBITDA adjustments:
  Depreciation and
   amortization                 164,000     160,000     472,000     465,000
  Interest expense              175,000     149,000     504,000     421,000
  Stock option and warrant
   compensation                  59,000      35,000     189,000     139,000
  Other stock compensation
   for services                  45,000      86,000     122,000     170,000
                             ----------  ----------  ----------  ----------
    Total EBITDA adjustments    443,000     430,000   1,287,000   1,195,000
                             ----------  ----------  ----------  ----------

  Modified EBITDA            $  269,000  $   32,000  $  693,000  $  374,000
                             ==========  ==========  ==========  ==========


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

                                               September 30,   December 31,
                                                    2011           2010
                                               -------------  -------------
ASSETS                                          (unaudited)
Current assets:
  Cash                                         $     554,000  $   1,084,000
  Inventory                                        6,121,000      4,555,000
  Trade accounts receivable, net of allowance
   for doubtful accounts and returns and
   discounts of $135,000 and $105,000,
   respectively                                    2,164,000      1,295,000
  Prepaid inventory                                  392,000        138,000
  Prepaid and other current assets                    77,000         78,000
                                               -------------  -------------
    Total Current Assets                           9,308,000      7,150,000

Property and equipment, net of accumulated
 depreciation of $1,586,000 and $1,178,000,
 respectively                                      3,606,000      3,650,000
Brand names                                        1,029,000      1,029,000
Deferred financing fees, net of amortization
 of $34,000 and $8,000, respectively                  55,000         47,000
                                               -------------  -------------
    Total assets                               $  13,998,000  $  11,876,000
                                               =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                             $   3,742,000  $   2,586,000
  Accrued expenses                                   177,000        162,000
  Dividends payable                                   96,000         44,000
  Recycling fees payable                             147,000        325,000
  Line of credit                                   2,789,000      2,038,000
  Current portion of long term financing
   obligation                                         67,000         55,000
  Current portion of capital leases payable           54,000         39,000
  Current portion of note payable                          -         71,000
                                               -------------  -------------
    Total current liabilities                      7,072,000      5,320,000

Long term financing obligation, less current
 portion, net of discount of $639,000 and
 $677,000, respectively                            2,254,000      2,268,000
Capital leases payable, less current portion         168,000        146,000
                                               -------------  -------------
    Total Liabilities                              9,494,000      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,
   80,415 and 85,766 shares issued and
   outstanding, respectively                         804,000        858,000
  Common stock, $.0001 par value, 19,500,000
   shares authorized, 10,859,813 and
   10,446,090 shares issued and outstanding,
   respectively                                        1,000          1,000
  Additional paid in capital                      22,766,000     21,701,000
  Accumulated deficit                            (19,533,000)   (18,884,000)
                                               -------------  -------------
    Total stockholders' equity                     4,504,000      4,142,000
                                               -------------  -------------
    Total liabilities and stockholders' equity $  13,998,000  $  11,876,000
                                               =============  =============

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Investor Relations Contact:
Reed's, Inc.
(310) 217-9400 ext.72
Email: Email Contact
www.reedsinc.com