Reed's Inc. Announces 2011 Financial Results
Released: 03/26/12 09:00 AM EDT
Sales Increase 23% While Gross Profit Increased 22%

LOS ANGELES, CA -- (Marketwire) -- 03/26/12 -- Reed's, Inc. (NASDAQ: REED), maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its fiscal year ending December 31, 2011.

Financial Highlights:

  • Revenues increased to over $25 million in 2011, a 23% increase from 2010. The overall revenue increase of $4.6 million was derived from a $3.3 million increase in branded business and $1.3 million increase in private label business.
  • Our top ten branded SKUs, which drive almost 70% of our business, grew more than 24% in 2011.
  • Overall, gross profit of 30% remained the same vs. 2010, despite cost increase pressures in 2011.
  • Sales and marketing costs increased by 7%, to $2.5 million in 2011. As a percentage of revenues, selling and marketing costs decreased to 10% in 2011, compared to 11% in 2010.
  • General and administrative expenses, before one-time charges of $327,000, decreased by approximately 7% in 2011, as compared to 2010.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased 83% to $834,000 during 2011, as compared to $456,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).
  • Net loss for 2011 decreased 28% to $941,000, or $0.09 per share, compared to a loss of $1,310,000 a year earlier.
  • Working capital as of December 31, 2011 increased 44% to $2.6 million, as compared to $1.8 million at December 31, 2010.

Operational Highlights:

  • New credit facility obtained, expanding available access to capital at lower interest rates
  • Achieved quality control standard SQF 2000 plant certification for expanded Private Label capability
  • New branded product releases include Flying Cauldron Butterscotch Cream Soda and Virgil's Dr. Better
  • New introduction of Virgil's Sparkling 100% Juices in 3 flavors and launches in Whole Foods
  • New introduction of Reed's Extra 55 Light Ginger Brew, the low calorie version of our #1 SKU Reed's Extra Ginger Brew
  • Strengthened our private label capabilities introducing new Tea and Sparkling Mineral Water flavors to retail customers, expanding our current private label brand mix
  • Expanded our mainstream DSD distribution model to include Las Vegas, regions of Michigan, full state of Florida, Arizona, Louisiana and Georgia
  • Gained new retail penetration for our brands, opening Winn-Dixie Stores, Stop & Shop Supermarket, Total Wine & More, while gaining increased ACV presence in Publix, Kroger, Harris Teeter, The Fresh Market

"Our multi-front strategies for increasing revenues are paying off," stated Chris Reed, Founder, Chairman and CEO of Reed's Inc. "We are taking bold steps to capitalize on our many capabilities and to introduce new products and extend the reach of our great brands."

"Our business is accelerating, and all systems are firing," stated James Linesch, Reed's Chief Financial Officer. "Our sales and distribution network is expanding, our production capabilities are increasing and improving, and we have a great pipeline of new products. 2012 will be a pivotal year for our company."

Conference Call

The Company will conduct a conference call @ 4:15PM EDT on Monday, March 26th to discuss its 2011 results and outlook for the rest of 2012. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time (866) 240-5139. International callers should dial (713) 481-0091.

A replay will be available within a few days after the meeting in the investor relations section of the Company's website at:

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: 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. -- FINANCIAL TABLES FOLLOW

                                REED'S, INC.
                          STATEMENTS OF OPERATIONS
               For the Years Ended December 31, 2011 and 2010

                                                    2011           2010
                                               -------------  -------------
Sales                                          $  25,013,000  $  20,376,000
Cost of tangible goods sold                       15,847,000     13,118,000
Cost of goods sold - idle capacity                 1,761,000      1,195,000
                                               -------------  -------------
  Gross profit                                     7,405,000      6,063,000
                                               -------------  -------------

Operating expenses:
Delivery and handling expenses                     2,307,000      1,728,000
Selling and marketing expense                      2,470,000      2,319,000
General and administrative expense                 2,878,000      2,740,000
                                               -------------  -------------
  Total operating expenses                         7,655,000      6,787,000
                                               -------------  -------------

  Loss from operations                              (250,000)      (724,000)

Interest expense                                    (691,000)      (586,000)
                                               -------------  -------------

  Net loss                                          (941,000)    (1,310,000)

Preferred stock dividend                             (65,000)       (73,000)
                                               -------------  -------------

  Net loss attributable to common stockholders $  (1,006,000) $  (1,383,000)
                                               =============  =============

Loss per share available to common
 stockholders - basic and diluted              $       (0.09) $       (0.14)
                                               =============  =============
Weighted average number of shares outstanding
 - basic and diluted                              10,785,719     10,186,600
                                               =============  =============

                          MODIFIED EBITDA SCHEDULE

                                                   Year ended December 31,
                                                     2011          2010
                                                  (unaudited)   (unaudited)
                                                 ------------  ------------
Net loss                                         $   (941,000) $ (1,310,000)
                                                 ------------  ------------

Modified EBITDA adjustments:
Depreciation and amortization                         653,000       616,000
Interest expense                                      691,000       586,000
Stock option and warrant compensation                 300,000       198,000
Other stock compensation for services and
 finance fees                                         131,000       366,000
                                                 ------------  ------------
  Total EBITDA adjustments                          1,775,000     1,766,000
                                                 ------------  ------------

Modified EBITDA income from operations           $    834,000  $    456,000
                                                 ============  ============

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 31,   December 31,
                                                    2011           2010
                                               -------------  -------------
Current assets:
  Cash                                         $     713,000  $   1,084,000
  Inventory                                        6,099,000      4,555,000
  Trade accounts receivable, net of allowance
   for doubtful accounts and returns and
   discounts of $135,000 and $105,000,
   respectively                                    1,626,000      1,295,000
  Prepaid inventory                                  168,000        138,000
  Prepaid and other current assets                   123,000         78,000
                                               -------------  -------------
    Total Current Assets                           8,729,000      7,150,000

Property and equipment, net of accumulated
 depreciation of $1,739,000 and $1,178,000,
 respectively                                      3,512,000      3,650,000
Brand names                                        1,029,000      1,029,000
Deferred financing fees, net of amortization
 of $50,000 and $8,000, respectively                  85,000         47,000
                                               -------------  -------------
    Total assets                               $  13,355,000  $  11,876,000
                                               =============  =============

Current Liabilities:
  Accounts payable                             $   2,310,000  $   2,586,000
  Accrued expenses                                   196,000        162,000
  Dividends payable                                   83,000         44,000
  Recycling fees payable                             111,000        325,000
  Line of credit                                   3,095,000      2,038,000
  Current portion of long term financing
   obligation                                         71,000         55,000
  Current portion of capital leases payable           56,000         39,000
  Current portion of note payable                          -         71,000
  Current portion of term loan                       152,000              -
                                               -------------  -------------
    Total current liabilities                      6,074,000      5,320,000

Long term financing obligation, less current
 portion, net of discount of $626,000 and
 $677,000, respectively                            2,247,000      2,268,000
Capital leases payable, less current portion         153,000        146,000
Term loan, less current portion                      576,000              -
                                               -------------  -------------
    Total Liabilities                              9,050,000      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, 10,885,833 and
   10,446,090 shares issued and outstanding,
   respectively                                        1,000          1,000
  Additional paid in capital                      22,924,000     21,701,000
  Accumulated deficit                            (19,890,000)   (18,884,000)
                                               -------------  -------------
    Total stockholders' equity                     4,305,000      4,142,000
                                               -------------  -------------
    Total liabilities and stockholders' equity $  13,355,000  $  11,876,000
                                               =============  =============

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