Reed's Inc. Continues Profitable Growth

Reed's Inc. Continues Profitable Growth 
23% Sales Improvement for Third Fiscal Quarter 
LOS ANGELES, CA -- (Marketwire) -- 11/14/12 --  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, 2012. 
Financial Highlights for the Quarter: 


 
--  Revenues increased 23% to $7.9 million in 2012, compared to 2011.
--  Gross profit increased to $2.5 million in 2012, an increase of 21%
    from 2011.
--  Earnings before non-cash items and finance costs (modified EBITDA)
    increased to $395,000 during 2012, as compared to $269,000 in the
    prior year period (See EBITDA table at end of this release for further
    non-GAAP information).
--  Net income for the 2012 second quarter was $22,000 compared to a loss
    of $175,000 a year earlier.
--  Working capital at June 30, 2012 was $3.2 million, as compared to $2.7
    million at December 31, 2011.

  
Operational Highlights:  


 
--  Volume of branded Reed's and Virgil's products shipped grew at a rate
    of 16% versus same quarter prior year and is up over 20% YTD over last
    year.
--  New distribution partnership with Central Beverage of Chicago.
--  New distribution arrangement with Geyser Beverage of the Greater San
    Francisco Bay area market.
--  Expanded Reed's and Virgil's into Tops Friendly Markets located
    upstate NY and PA.
--  New distribution agreement with Zip Beverage of Montana.
--  Secured three new private label brand contracts with some of the
    largest retailers in the US.
--  Introduced Reed's and Virgil's products to the Asian market attending
    the Natural Products Expo Asia show for first time.
--  Reed's introduces Culture Club Kombucha in Baltimore, MD, becoming a
    title sponsor of Natural Products Show Expo East and sampling more
    than 10,000 retailers, distributors and attendees.
--  Gained Culture Club Kombucha distribution into a minimum of 800+ new
    retailers throughout the US and into select Whole Foods regions with
    more to come.
--  Snoop Lion Partners With Reed's Ginger Brew and Causes.com to Raise
    Awareness for the Mind Gardens Project in Jamaica.
--  Continued Los Angeles plant upgrades designed to increase capacity and
    eff
iciency, including doubling tank capacity to accommodate fast
    expansion of the new Kombucha line.

  
"We have now expanded our business at over 20% for the last twelve
quarters. Brand growth continues to be the main driver for this
expansion. Our recent launch of Reed's Culture Club Kombucha has
taken off and could possibly be our biggest growth driver for 2013
and beyond. We have set our goal at being the number one or two in
this $250-300 million fast growing Kombucha category," stated Chris
Reed, Founder and CEO at Reed's Inc. 
Chris Reed further commented, "Additionally, our private label
business is accelerating as we become more accepted as a reliable
supplier. Revenues from private label brands grew twofold over same
quarter prior year due to the development of two new partnerships
with national retail chains."  
James Linesch, Chief Financial Officer, stated, "Our business has
continued its healthy organic expansion in the third quarter. Gross
margins on our branded products improved slightly over last year and
gross margins on our private label products are running about 5%
higher than last year. Our kombucha launch has involved an increase
in production costs as well as promotional costs, both of which
affected our overall margins and profitability in the quarter. As our
kombucha rollout progresses, however, these start-up costs will come
down. We anticipate that all of our product lines will contribute
strong net margins in 2013." 
The Company will conduct a conference call @ 4:15PM EST today,
November 14th, to discuss its 2012 third 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 (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:
http://www.reedsinc.com/investor-relations/. 
About Reed's, Inc.  
Reed's, Inc. makes the top-selling natural sodas in the natural foods
industry sold in over 13,000 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 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 STATEMENT
S OF OPERATIONS                     
      For the Three and Nine Months Ended September 30, 2012 and 2011       
                                (Unaudited)                                 
                                                                            
                            Three months ended         Nine months ended    
                               September 30,             September 30,      
                         ------------------------  ------------------------ 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
Sales                    $ 7,888,000  $ 6,400,000  $22,258,000  $17,731,000 
Cost of tangible goods                                                      
 sold                      4,810,000    3,970,000   13,691,000   11,053,000 
Cost of goods sold -                                                        
 idle capacity               621,000      405,000    1,428,000    1,300,000 
                         -----------  -----------  -----------  ----------- 
                                                                            
  Gross profit             2,457,000    2,025,000    7,139,000    5,378,000 
                         -----------  -----------  -----------  ----------- 
                                                                            
Operating expenses:                                                         
Delivery and handling                                                       
 expenses                    763,000      587,000    1,827,000    1,519,000 
Selling and marketing                                                       
 expense                     818,000      570,000    2,239,000    1,751,000 
General and                                                                 
 administrative expense      693,000      867,000    2,238,000    2,198,000 
                         -----------  -----------  -----------  ----------- 
  Total operating                                                           
   expenses                2,274,000    2,024,000    6,304,000    5,468,000 
                         -----------  -----------  -----------  ----------- 
                                                                            
  Income (loss) from                                                        
   operations                183,000        1,000      835,000      (90,000)
                                                                            
Interest expense            (161,000)    (175,000)    (493,000)    (504,000)
                         -----------  -----------  -----------  ----------- 
                                                                            
Net income (loss)             22,000     (174,000)     342,000     (594,000)
                                                                            
Preferred stock                                                             
 dividends                    (8,000)     (11,000)     (39,000)     (55,000)
                         -----------  -----------  -----------  ----------- 
Net income (loss)                                                           
 attributable to common                                                     
 stockholders            $    14,000  $  (185,000) $   303,000  $  (649,000)
                         ===========  ===========  ===========  =========== 
                                                                            
Income (loss) per share                                                     
 available to common                                                        
 stockholders, basic               -  $     (0.02) $      0.03  $     (0.06)
                         ===========  ===========  ===========  =========== 
Weighted average number                                                     
 of shares outstanding -                                                    
 basic                    11,501,152   10,835,858   11,155,860   10,758,529 
                         ===========  ===========  ===========  =========== 
Income (loss) per share                                                     
 available to common                                                        
 stockholders, diluted             -  $     (0.02) $      0.03  $     (0.06)
                         ===========  ===========  ===========  =========== 
Weighted average number                                                     
 of shares outstanding -                                                    
 diluted                  12,288,503   10,835,858   11,706,186   10,758,529 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                                Reed's Inc.                                 
                          MODIFIED EBITDA SCHEDULE                          
                                                                            
                             Three months ended        Nine months ended    
                                September 30,            September 30,      
                           -----------------------  ----------------------- 
                               2012        2011         2012        2011    
                           ----------- -----------  ----------- ----------- 
  Net loss                 $    22,000 $  (174,000) $   342,000 $  (594,000)
                           ----------- -----------  ----------- ----------- 
                                                                            
Modified EBITDA                                                             
 adjustments:                                                               
  Depreciation and                                                          
   amortization                184,000     164,000      556,000     472,000 
  Interest expense             161,000     175,000      493,000     504,000 
  Stock option and warrant                                                  
   compensation                 26,000      59,000       81,000     189,000 
  Other stock compensation                                                  
   for services                  2,000      45,000       23,000     123,000 
                           ----------- -----------  ----------- ----------- 
    Total EBITDA                                                            
     adjustments               373,000     443,000    1,153,000   1,288,000 
                           ----------- -----------  ----------- ----------- 
                                                                            
  Modified EBITDA          $   395,000 $   269,000  $ 1,495,000 $   694,000 
                           =========== ===========  =========== =========== 

 
The Company defines modified EBITDA (a non-GAAP measurement) as net
loss before interest, taxes, depreciation and amortization, and
non-cash e
xpense 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, 
                                                    2012           2011     
                                               -------------  ------------- 
ASSETS                                          (unaudited)                 
Current assets:                                                             
  Cash                                         $   1,429,000  $     713,000 
  Inventory                                        5,963,000      6,099,000 
  Trade accounts receivable, net of allowance                               
   for doubtful accounts and returns and                                    
   discounts of $200,000 and $135,000,                                      
   respectively                                    2,899,000      1,626,000 
  Prepaid inventory                                  314,000        168,000 
  Prepaid and other current assets                   159,000        123,000 
                                               -------------  ------------- 
    Total Current Assets                          10,764,000      8,729,000 
                                                                            
Property and equipment, net of accumulated                                  
 depreciation of $2,199,000 and $1,739,000,                                 
 respectively                                      3,385,000      3,512,000 
Brand names                                        1,029,000      1,029,000 
Deferred financing fees, net of amortization                                
 of $78,000 and $50,000, respectively                 32,000         85,000 
                                               -------------  ------------- 
    Total assets                               $  15,210,000  $  13,355,000 
                                               =============  ============= 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current Liabilities:                                                        
  Accounts payable                             $   3,354,000  $   2,310,000 
  Accrued expenses                                   204,000        196,000 
  Dividends payable                                   71,000         83,000 
  Recycling fees payable                              21,000        111,000 
  Line of credit                                   3,574,000      3,095,000 
  Current portion of long term financing                                    
   obligation                                         85,000         71,000 
  Current portion of capital leases payable           64,000         56,000 
  Current portion of term loan                       170,000        152,000 
                                               -------------  ------------- 
    Total current liabilities                      7,543,000      6,074,000 
                                                                            
Long term financing obligation, less current                                
 portion, net of discount of $589,000 and                                   
 $626,000, respectively                            2,219,000      2,247,000 
Capital leases payable, less current portion         104,000        153,000 
Term loan, less current portion                      445,000        576,000 
                                               -------------  ------------- 
    Total Liabilities                             10,311,000      9,050,000 
                                               -------------  ------------- 
                                                                            
Commitments and contingencies                                               
Stockholders' equity:                                                       
  Series A Convertible Preferred stock, $10                                 
   par value, 500,000 shares authorized,                                    
   25,411 and 46,621 shares issued and                                      
   outstanding, respectively                         254,000        466,000 
  Series B Convertible Preferred stock, $10                                 
   par value, 500,000 shares authorized,                                    
   48,985 and 80,415 shares issued and                                      
   outstanding, respectively                         490,000        804,000 
  Common stock, $.0001 par value, 19,500,000                                
   shares authorized, 11,821,319 and                                        
   10,885,833 shares issued and outstanding,                                
   respectively                                        1,000          1,000 
  Additional paid in capital                      23,741,000     22,924,000 
  Accumulated deficit                            (19,587,000)   (19,890,000)
                                               -------------  ------------- 
    Total stockholders' equity                     4,899,000      4,305,000 
                                               -------------  ------------- 
    Total liabilities and stockholders' equity $  15,210,000  $  13,355,000 
                                               =============  ============= 

  
Contact:
Investor Relations 
Reed's, Inc.
(310) 217-9400 ext. 18
Email: ir@reedsinc.com 
www.reedsinc.com