LOS ANGELES, April 24, 2017 (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 full-year ended December 31, 2016. In addition to the earnings results the Company announced today in a separate press release the appointment of Stefan Freeman as Interim Chief Executive Officer and Founder and former Chief Executive Officer Chris Reed to the newly created position of Founder and Chief Innovation Officer. The Company also issued a separate press release today announcing the closing of a $3.4 million private placement transaction.
Chris Reed, Founder and Chief Innovation Officer commented, “Reed’s has never had a more impressive portfolio of new products waiting to launch in the history of the Company. My transition from CEO to Chief Innovation Officer allows me to focus my full energies to bringing these exciting new products to fruition. We have developed the first natural soda fountain products and have it in trial at a large national fast casual restaurant chain. These soda fountain versions of our popular natural sodas allow restaurants and other fountain concessions to buy our products for significantly less than the full packaged bottled price and at competitive prices to other fountain products. This supports our strategy for opening up new markets and strengthening our brand equity. In addition, we have developed a compelling line of full flavor, all natural, low calorie sodas that we believe taste identical or better than their full calorie counterparts. I believe that these new product ideas have such significant potential that we will be reaching out to form strategic partnerships, including with larger beverage companies, to help with their implementation.”
Interim Chief Executive Officer, Stefan Freeman commented, “The Company is going through a critical transition. I would like to thank Chris Reed who did a phenomenal job building this business from scratch and is truly a pioneer in the craft soda industry. We are excited about his new role as Chief Innovation Officer and his exclusive focus on product development. We have the best craft sodas in the marketplace and we intend to be the growth leader in this space. We are targeting greater operational efficiencies and better margins and we believe that will translate into more profitability and accelerated marketing programs. I am excited to be here and look forward to reporting our progress and enhancing shareholder value.”
The 2016 audited financial results for the Company were as follows:
For the full year 2016 compared to the full year 2015:
- Net sales were $42.5 million versus $45.9 million
- Gross margin decreased to 21.1% from 25.3%
- Delivery and handling costs decreased 24% to $3.9 million
- Selling and marketing costs decreased 24% to $3.7 million
- General and administrative expenses increased 1.5% to $4.4 million
- Operating loss increased to ($3.1 million) from ($2.7 million)
- Interest expense increased to $2.0 million from $1.2 million
- Modified EBITDA was a loss of ($1.6 million) as compared to a loss of ($1.0 million) in the prior year period
- Net loss increased to a loss of ($0.36) per share from a loss of ($0.30) per share in the prior year period
Operational Highlights
- Reed’s branded product gross sales grew 2.0% driven by the growth of Reed’s Stronger Ginger Brew that grew 685%
- Virgil’s branded product gross sales declined -9.8% although Virgil’s Root Beer grew 1%
- Butterscotch Beer gross revenues grew more than 40% to $1.7MM
- Private label sales grew 3.6%
- Reed’s Ginger Brews are now available at more the 1,300 Target stores
- Reed’s and Virgil’s are now authorized and available in 1,135 CVS pharmacies throughout the country
- Reed’s partners with Barone Distribution headquartered in Reno, Nevada
- Reed’s expands distribution footprint in Southern California with John Lenore & Company
- Reed’s expands distribution in New England with Dari Farms Distribution
- Stronger Ginger available at Kroger and Kroger banners across the US
- Reed’s and Virgil’s available at Shopko Stores
- Reed’s and Virgil’s available at all Stater Bros stores in Southern Cal
- Reed’s started trial of its all natural fountain beverages product at a large national fast casual restaurant
- Two East coast back up plants on-board resulting in 95% of product in stock in 2016
Dan Miles, Chief Financial Officer of Reed’s, Inc. commented, “The supply chain issues in the third quarter of 2015 created residual and significant issues entering 2016 primarily related to lost shelf space at our retailers. Our supply chain recovered in 2016 and we shipped at 95% of orders, a significant year over year improvement. We focused our initial priority on our Reed’s Ginger Brew product line and it drove slight growth for the year. The Virgil’s product line was our next priority and was down about 10% for the year. Our Reed’s Culture Club Kombucha was hit the hardest and has taken longer to get back in stock and on the shelves. Gross sales of Kombucha were down 54% in 2016 and caused the most sales impact in our year over year comparison. A primary impact to gross margins in 2016 were packaging and ingredient costs that were not offset by price increases and by idle plant costs due to lower sales volumes of Kombucha produced exclusively at the LA plant as well as other products manufactured at the LA facility. Our current plans to improve margins in 2017 include a combination of plant projects coming online, better packaging pricing and innovations and better sourcing to save on raw materials. The $3.4 million financing transaction announced today strengthens our financial position significantly and will help us achieve our objectives. I look forward to working under the leadership of Stefan Freeman, our new Interim CEO, who has extensive operational experience to support our sales recovery.”
Preliminary First Quarter 2017 Results:
The Company expects to report revenues for the first quarter of 2017 ended March 31, 2017 of approximately $8.3 million versus $10.0 million in the prior year period. The lower sales volume will have an impact on both gross margins and operating margins.
Conference Call Details
The Company will conduct a conference call at 10:30 am pacific time today, April 24, 2017 to discuss its 2016 results. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time (800) 683-3233. International callers should dial +1 (303) 223-2692.
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 sodas in the natural and specialty foods industry and are sold in over 15,000 natural and mainstream supermarkets nationwide. Reed’s products are sold through an additional estimated 40,000 accounts that include specialty gourmet, natural food stores, retail stores, convenience stores and restaurants nationwide and in select international markets. Reed’s has sold over 500 million bottles since inception in June 1989 and is considered the leader of the fast growing craft soda category. 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 previously Reed’s Ginger Ice Creams.
For more information about Reed’s, please visit the Company’s website at: http://www.reedsinc.com or call 800-99-REEDS.
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Reed’s Facebook Fan Page at https://www.facebook.com/ReedsGingerBrew
SAFE HARBOR STATEMENT
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by these statements. The forward- looking statements contained in this press release are based on various factors and were derived using numerous assumptions. In some cases, you can identify these forward-looking statements by the words “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “target”, “aim”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, or the negative of those words and other comparable words.
Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this press release may include, without limitation, statements reflecting management's expectations for future financial performance and operating expenditures, expected growth, profitability and business outlook.
Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include, but are not limited to, the Company's ability to manage growth; manage debt; meet development goals; and other important risks and uncertainties referenced and discussed under the heading titled “Risk Factors” in the Company's filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements contained in this press release are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligations to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
| REED’S INC. | ||||||||
| BALANCE SHEETS | ||||||||
| December 31, 2016 | December 31, 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 451,000 | $ | 1,816,000 | ||||
| Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $256,000 and $356,000, respectively | 2,485,000 | 2,894,000 | ||||||
| Inventory, net of reserve for obsolescence of $115,000 and $290,000, respectively | 6,885,000 | 7,974,000 | ||||||
| Prepaid and other current assets | 500,000 | 769,000 | ||||||
| Total Current Assets | 10,321,000 | 13,453,000 | ||||||
| Property and equipment, net of accumulated depreciation of $4,719,000 and $4,216,000, respectively | 7,726,000 | 5,369,000 | ||||||
| Brand names | 805,000 | 1,029,000 | ||||||
| Total assets | $ | 18,852,000 | $ | 19,851,000 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 5,959,000 | $ | 7,458,000 | ||||
| Accrued expenses | 215,000 | 168,000 | ||||||
| Line of credit | 4,384,000 | 4,443,000 | ||||||
| Current portion of long term financing obligations | 190,000 | 160,000 | ||||||
| Current portion of capital leases payable | 183,000 | 153,000 | ||||||
| Current portion of bank notes | 953,000 | 341,000 | ||||||
| Total current liabilities | 11,884,000 | 12,723,000 | ||||||
| Other Long Term Liabilities | 130,000 | - | ||||||
| Long term financing obligation, less current portion, net of discount of $825,000 and $935,000, respectively | 1,363,000 | 1,443,000 | ||||||
| Capital leases payable, less current portion | 438,000 | 490,000 | ||||||
| Bank notes, net of discount $78,000 and $132,000, respectively | 5,919,000 | 4,410,000 | ||||||
| Warrant liability | 775,000 | - | ||||||
| Total Liabilities | 20,509,000 | 19,066,000 | ||||||
| Stockholders’ equity (deficit): | ||||||||
| 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, 13,982,230 and 13,160,860 shares issued and outstanding, respectively | 1,000 | 1,000 | ||||||
| Additional paid in capital | 29,971,000 | 27,399,000 | ||||||
| Accumulated deficit | (31,723,000 | ) | (26,709,000 | ) | ||||
| Total stockholders’ equity (deficit) | (1,657,000 | ) | 785,000 | |||||
| Total liabilities and stockholders’ equity (deficit) | $ | 18,852,000 | $ | 19,851,000 | ||||
| REED’S, INC. | ||||||||
| STATEMENTS OF OPERATIONS | ||||||||
| For the Years Ended December 31, 2016 and 2015 | ||||||||
| 2016 | 2015 | |||||||
| Net Sales | $ | 42,472,000 | $ | 45,948,000 | ||||
| Cost of goods sold | 33,490,000 | 34,343,000 | ||||||
| Gross profit | 8,982,000 | 11,605,000 | ||||||
| Operating expenses: | ||||||||
| Delivery and handling expenses | 3,902,000 | 5,100,000 | ||||||
| Selling and marketing expense | 3,701,000 | 4,867,000 | ||||||
| General and administrative expense | 4,208,000 | 4,368,000 | ||||||
| Impairment of assets | 224,000 | - | ||||||
| Total operating expenses | 12,035,000 | 14,335,000 | ||||||
| Loss from operations | (3,053,000 | ) | (2,730,000 | ) | ||||
| Interest expense | (1,724,000 | ) | (1,231,000 | ) | ||||
| Change in fair value of warrant liability | (232,000 | ) | - | |||||
| Net loss | (5,009,000 | ) | (3,961,000 | ) | ||||
| Preferred Stock Dividends | (5,000 | ) | (5,000 | ) | ||||
| Net loss attributable to common stockholders | $ | (5,014,000 | ) | $ | (3,966,000 | ) | ||
| Loss per share – basic and diluted | $ | (0.37 | ) | $ | (0.30 | ) | ||
| Weighted average number of shares outstanding – basic and diluted | 13,619,930 | 13,147,815 | ||||||
| REED’S, INC. | ||||||||
| STATEMENTS OF CASH FLOWS | ||||||||
| For the Years Ended December 31, 2016 and 2015 | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (5,009,000 | ) | $ | (3,961,000 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 642,000 | 933,000 | ||||||
| Fair value of vested stock options issued to employees | 658,000 | 877,000 | ||||||
| Fair value of common stock issued for services | 15,000 | 1,000 | ||||||
| (Decrease) increase in allowance for doubtful accounts | (100,000 | ) | 103,000 | |||||
| (Decrease) increase in reserve for impairment of assets | 484,000 | - | ||||||
| Change in fair value of warrant liability | 232,000 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 509,000 | (497,000 | ) | |||||
| Inventory | 1,089,000 | (381,000 | ) | |||||
| Prepaid expenses and other assets | 269,000 | (25,000 | ) | |||||
| Accounts payable | (1,499,000 | ) | 1,564,000 | |||||
| Accrued expenses | 17,000 | 38,000 | ||||||
| Increase in other long term obligations | 160,000 | - | ||||||
| Net cash used in operating activities | (2,533,000 | ) | (1,348,000 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (410,000 | ) | (532,000 | ) | ||||
| Net cash used in investing activities | (410,000 | ) | (532,000 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from stock option and warrant exercises | 116,000 | 75,000 | ||||||
| Principal payments on capital expansion loan | (375,000 | ) | - | |||||
| Proceeds from sale of common stock | 2,230,000 | - | ||||||
| Proceeds from borrowing on Term Loan B | - | 1,500,000 | ||||||
| Principal repayments on long term financial obligation | (160,000 | ) | (134,000 | ) | ||||
| Principal repayments on capital lease obligation | (174,000 | ) | (138,000 | ) | ||||
| Net borrowings (repayments) on existing line of credit | (59,000 | ) | 1,434,000 | |||||
| Net cash provided by financing activities | 1,578,000 | 2,737,000 | ||||||
| Net increase (decrease) in cash | (1,365,000 | ) | 857,000 | |||||
| Cash at beginning of period | 1,816,000 | 959,000 | ||||||
| Cash at end of period | $ | 451,000 | $ | 1,816,000 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 1,746,000 | $ | 1,187,000 | ||||
| Non Cash Investing and Financing Activities | ||||||||
| Property and equipment acquired through capital expansion loan | $ | 2,442,000 | $ | 915,000 | ||||
| Property and equipment acquired through capital lease obligations | 152,000 | 179,000 | ||||||
| Other current assets acquired through capital expansion loan | - | 297,000 | ||||||
| Fair value of warrants granted as debt discount | 91,000 | 141,000 | ||||||
| Dividends payable in common stock | 5,000 | 5,000 | ||||||
| Warrant liability from private financing | 543,000 | - | ||||||
| MODIFIED EBITDA SCHEDULE | ||||||||
| Year ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| (unaudited) | (unaudited) | |||||||
| Net loss | $ | (5,009,000 | ) | $ | (3,961,000 | ) | ||
| Modified EBITDA adjustments: | ||||||||
| Depreciation and amortization | 642,000 | 933,000 | ||||||
| Interest expense | 1,724,000 | 1,231,000 | ||||||
| Reserve for replacement on fixed assets | 260,000 | - | ||||||
| Stock option and warrant compensation | 658,000 | 877,000 | ||||||
| Stock compensation for services | 15,000 | 1,000 | ||||||
| Impairment loss on brand names | 224,000 | - | ||||||
| Change in fair value of warrant liability | 232,000 | - | ||||||
| Total EBITDA adjustments | $ | 3,755,000 | $ | 1,811,000 | ||||
| Modified EBITDA | $ | (1,254,000 | ) | $ | (2,150,000 | ) | ||