Reed's, Inc. Announces Record Second Quarter RevenuesReed's, Inc. Announces Record Second Quarter RevenuesCompany Cites Earnings Impacted by Increased Demand That Outpaced SupplyGLOBE NEWSWIREAugust 13, 2015

LOS ANGELES, Aug. 13, 2015 (GLOBE NEWSWIRE) -- Reed's, Inc. (NYSE MKT:REED), maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its fiscal second quarter ending June 30, 2015.

Financial Overview: Second Quarter 2015 Compared to Second Quarter 2014

  • Net revenue increased 9% to a record $12.2 million
  • Promotional spend decreased from 9.5% to 7.5% of gross sales
  • Gross profit decreased slightly to $3.6 million
  • Gross profit margin decreased 300 basis points to 30%
  • Company had a net loss of ($691,000) or ($0.05) per diluted share
  • Modified EBITDA was $94,000 during the 2015 second quarter (See EBITDA table at end of this release for further non-GAAP information).
  • Reed's Ginger Brew sales increased by 22%
  • Reed's Culture Club Kombucha sales increased by 15%
  • Successful launch of private label Kombucha offering

Operational Highlights:

  • Reed's enters into a marketing partnership with Pernod-Ricard (Absolut Vodka) to develop co-branding packages, advertising, distribution and promotions to launch into retail channels across the US.
  • Reed's entire Ginger Brew portfolio grew at +22%, lead by Reed's Extra Ginger Brew growing at +36%
  • SPINS syndicated scan data for conventional supermarkets in the latest 52 weeks ending 7/12/15 indicates that the  Reed's Ginger Brew portfolio growth is accelerating from +35% in the latest 52 weeks to +45% in the latest 4 weeks.
  • Enters Costco San Diego division with Reed's Extra Ginger Brew 12 pack. Early success opens up additional SKU's to be authorized in the remainder of the year.
  • Invited to attend and present at the annual BJ's Wholesale Club Supplier Summit in Orlando, FL. Presentation leads to various Reed's and Virgil's SKU's being authorized nationally.
  • Enters the South African marketplace with distribution through SpringBok Companies, a leading independent distributor with extensive supermarket, convenience store and drug store distribution experience.
  • Reed's Culture Club Kombucha gains authorization in Shaws Supermarkets. Successful store test leads to Reed's Kombucha being rolled out to 150 locations.
  • Invited to exhibit at the invitation-only 8th annual Fare Conference sponsored by Sysco in Nashville, TN.
  • Continues distribution expansion into south central region with RBI Beverages of Arkansas.
  • Reed's and Virgil's gain distribution into the Reasors Supermarket chain headquartered in Oklahoma.
  • Co-sponsored the 2015 Portland Rose festival and 2015 Molallo Buckeroo rodeo.
  • Exhibits at the 2015 Nightclub and Bar Show in Los Vegas, NV.
  • Exhibits at the 2015 National Restaurant Association (NRA) show in Chicago and the Summer Fancy Food Show in New York City in June.
  • Feature Story in June issue of Beverage World "Putting the pop back in Soda"  http://www.nxtbook.com/nxtbooks/macfadden/bw0615/index.php#/14

According to Chris Reed, Reed's Inc. Founder and CEO, "The numbers for the quarter do not reflect the true accomplishments of the company. Our new facility was not ready during the quarter and we shorted sales by approximately $2 million. We would have posted a 25% increase instead of 9%. The issue with making enough product should be solved shortly.

Behind the scenes, our new management is having a dramatic impact on the infrastructure of the company that will benefit us going forward. We are deep in R&D creating the next generation natural fountain beverages based on our popular brands with a prospective client that could double the size of the company. In addition, during this quarter our company exhibited at the trade shows for the Nightclub and Bar industry and National Restaurant Show introducing our brands to these industries for the first time to a great reception. Also, Absolut Vodka and the parent company Pernod Ricard began marketing our products together, our largest liquor partner ever.  We still feel the momentum of our brands and are as excited as ever."

"I am excited to be at Reeds, the home of the #1 brand in natural soda and craft sodas," said Daniel Miles, Reed's, Inc. new Chief Financial Officer. "The second quarter challenges have been clearly identified and solutions implemented to correct supply chain deficiencies. The east coast operations impacted Reeds ability to grow sales while at the same time backed up the unwinding of raw material inventory. As of today, Reeds is optimizing the east coast supply chain so that delivery costs will decline in alignment with past freight costs. Reeds is not considering raising additional funds as we unwind the inventory."

The Company will conduct a conference call @ 4:30PM EST today, August 13th, to discuss its 2015 second quarter results and outlook for the future. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time (800) 768-2481. International callers should dial +1 (212) 231-2921.

A replay of the call will be available on the Reed's website at www.reedsinc.com in the "Investors" section following the earnings call within a day.

About Reed's, Inc.

Reed's, Inc. makes the top-selling natural sodas in the natural foods industry and is sold in over 15,000 natural and mainstream supermarkets nationwide. In addition, Reed's products are sold through specialty gourmet, natural food stores, retail stores, convenience stores and restaurants nationwide and select international markets. Its seven 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 a top-selling cola line in natural foods, the China Cola product line. In 2012, the Company launched its Reed's Culture Club Kombucha line of organic live beverages. Other product lines include: Reed's Ginger Candies and Reed's Ginger Ice Creams. The company celebrated 25 years of hand crafting the best sodas in the world, naturally, in 2014.

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 https://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-K 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.
CONDENSED BALANCE SHEETS
     
  June 30, 2015 December 31, 2014
  (Unaudited)  
ASSETS    
Current assets:    
Cash $ 215,000 $ 959,000
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $333,000 and $253,000, respectively 3,586,000 2,500,000
Inventory, net of reserve for obsolescence of $75,000 and $90,000, respectively 8,937,000 6,306,000
Prepaid inventory 1,301,000 1,287,000
Prepaid and other current assets 530,000 447,000
Total Current Assets 14,569,000 11,499,000
     
Property and equipment, net of accumulated depreciation of $3,817,000 and $3,405,000, respectively 5,057,000 4,572,000
Brand names 1,029,000 1,029,000
Total assets $ 20,655,000 $ 17,100,000
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities:    
Accounts payable $ 7,538,000 $ 5,894,000
Accrued expenses 155,000 130,000
Line of credit 4,635,000 3,009,000
Current portion of long term financing obligation 147,000 134,000
Current portion of capital leases payable 127,000 125,000
Total current liabilities 12,602,000 9,292,000
     
Long term financing obligation, less current portion, net of discount of $990,000 and $1,031,000, respectively 1,473,000 1,508,000
Capital leases payable, less current portion 411,000 476,000
Capital expansion loan 1,389,000 672,000
Term loan 1,500,000 1,500,000
Total Liabilities 17,375,000 13,448,000
     
Commitments and contingencies    
     
Stockholders' equity:    
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding 94,000 94,000
Common stock, $.0001 par value, 19,500,000 shares authorized, 13,117,573 and 13,068,058 shares issued and outstanding, respectively 1,000 1,000
Additional paid in capital 26,891,000 26,300,000
Accumulated deficit (23,705,000) (22,743,000)
Total stockholders' equity 3,281,000 3,652,000
Total liabilities and stockholders' equity $ 20,655,000 $ 17,100,000
     
The accompanying notes are an integral part of these condensed financial statements
     
         
REED'S, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
         
  Three months ended June 30, Six months ended June 30,
  2015 2014 2015 2014
         
Sales, net $ 12,178,000 $ 11,187,000 $ 22,850,000 $ 20,136,000
Cost of goods sold 8,538,000 7,483,000 15,950,000 13,530,000
         
Gross profit 3,640,000 3,704,000 6,900,000 6,606,000
         
Operating expenses:        
Delivery and handling expenses 1,429,000 926,000 2,597,000 1,821,000
Selling and marketing expense 1,335,000 1,049,000 2,528,000 2,117,000
General and administrative expense 1,369,000 913,000 2,338,000 1,885,000
Total operating expenses 4,133,000 2,888,000 7,463,000 5,823,000
         
Income (loss) from operations (493,000) 816,000 (563,000) 783,000
         
Interest expense (193,000) (178,000) (394,000) (365,000)
         
Net income (loss) (686,000) 638,000 (957,000) 418,000
         
Preferred stock dividends (5,000) (5,000) (5,000) (5,000)
         
Net income (loss) attributable to common stockholders $ (691,000) $ 633,000 $ (962,000) $ 413,000
         
Income (loss) per share available to common stockholders, basic $ (0.05) $ 0.05 $ (0.07) $ 0.03
Weighted average number of shares outstanding - basic 13,104,227 13,046,631 13,086,560 13,025,195
Income (loss) per share available to common stockholders, diluted $ (0.05) $ 0.05 $ (0.07) $ 0.03
Weighted average number of shares outstanding - diluted 13,104,227 13,256,624 13,086,560 13,298,114
         
The accompanying notes are an integral part of these condensed financial statements
         
     
REED'S, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2015 and 2014
(Unaudited)
     
  Six Months Ended June 30, 
  2015 2014
Cash flows from operating activities:    
Net Income (loss) $ (957,000) $ 418,000
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization 453,000 361,000
Fair value of stock options issued to employees 560,000 217,000
Fair value of common stock issued for services and bonus -- 10,000
(Decrease) increase in allowance for doubtful accounts (81,000) (14,000)
Changes in assets and liabilities:    
Accounts receivable (1,005,000) (724,000)
Inventory (2,631,000) 794,000
Prepaid Inventory (14,000) (630,225)
Prepaid expenses and other current assets 167,000 18,225
Accounts payable 1,644,000 519,000
Accrued expenses 20,000 4,000
Net cash provided by (used in) operating activities (1,844,000) 973,000
Cash flows from investing activities:    
Purchase of property and equipment (430,000) (155,000)
Net cash used in investing activities (430,000) (155,000)
Cash flows from financing activities:    
Proceeds from stock option and warrant exercises 31,000 26,000
Payment of deferred financing fees -- (7,000)
Principal repayments on long term financing obligation (64,000) (52,000)
Principal repayments on capital lease obligation (63,000) (56,000)
Principal repayments on term loan -- (79,000)
Net draw down (repayment) on line of credit 1,626,000 (541,000)
Net cash (used in) provided by financing activities 1,530,000 (709,000)
Net (decrease) increase in cash (744,000) 109,000
Cash at beginning of period 959,000 1,104,000
Cash at end of period $ 215,000 $ 1,213,000
     
Supplemental disclosures of cash flow information:    
Cash paid during the period for:    
Interest $ 395,000 $ 365,000
Non Cash Investing and Financing Activities    
Property and equipment acquired through capital expansion loan $ 466,000 $ --
Other current assets acquired through capital expansion loan 250,000 --
Dividends Payable in common stock 5,000 5,000
     
The accompanying notes are an integral part of these condensed financial statements
     
     
MODIFIED EBITDA SCHEDULE
     
  Three Months Ended June 30, 
  2015 2014
Net Income (loss)  $ (686,000) $ 638,000
     
Modified EBITDA adjustments:     
Depreciation and amortization  240,000 153,000
Interest expense  193,000 178,000
Stock option compensation  347,000 119,000
Other stock compensation for services -- 10,000
Total EBITDA adjustments  780,000 460,000
     
Modified EBITDA income from operations  $ 94,000 $ 1,098,000
     
The $1,004,000 decrease in modified EBITDA for the three months resulted from the increases in the EBITDA adjustments totaling $320,000 for the quarter ended June 30, 2015 less the $1,324,000 in net loss as described above. The $87,000 increase in Depreciation and amortization was due to the additional assets purchased, the increase in Interest expense was due to the increased loan balances and Stock option compensation was due to options granted to employees in transition.
CONTACT: Reed's, Inc.
         Investor Relations
         (310) 217-9400 ext. 18
         Email: ir@reedsinc.com
         www.reedsinc.com

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