Reed's Inc. Announces Year-End 2012 Results

Reed's Inc. Announces Year-End 2012 Results 
LOS ANGELES, CA -- (Marketwire) -- 03/25/13 --  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 year
ending December 31, 2012. 
Financial Highlights for the Quarter: 


 
--  Revenues increased 20% to $30 million in 2012, compared to 2011.
--  Gross profit increased 23% to $9.1 million in 2012.
--  Earnings before non-cash items and finance costs (modified EBITDA)
    increased to $1 million during 2012. (See EBITDA table at end of this
    release for further non-GAAP information).
--  Net loss for the 2012 fiscal year was $524,000 compared to a loss of
    $941,000 a year earlier.
--  Working capital at December 31, 2012 was $2.3 million, as compared to
    $2.7 million at December 31, 2011.

  
Operational Highlights:  


 
--  Introduced our Culture Club Kombucha in July 2012 and increased
    distribution into a minimum of 800+ new retailers throughout the US
    and into select Whole Foods.
--  Volume of branded Reed's and Virgil's products shipped grew at a rate
    of 20% over last year
--  Expanded network of DSD distribution in numerous key regions
    increasing sales through this distribution channel by approximately
    50%.
--  Expanded distributor sales by over 30% by partnering in marketing
    efforts and focusing on sales support for distributors.
--  Secured three new private label brand contracts with some of the
    largest retailers in the US

  
"2012 represents another solid year of growth here at Reed's," stated
Chris Reed, Founder and CEO at Reed's Inc. "We have introduced an
entirely new product line in our Culture Club Kombucha while we also
expanded sales and distribution channels for our Reed's Ginger Brew
and Virgil's branded products. Our EBITDA positive results have
enabled us to fund our product rollouts and increased promotional
spend without the requirement of additional equity or debt financing.
We expect 2013 to be a great year." 
James Linesch, Chief Financial Officer, stated, "Our strong business
model is producing continually improving results in key areas. Our
branded product revenues continue to increase at strong organic
growth rates, while we also improved our gross margins. During 2012,
our direct gross margin percentage, before promotional discounts,
improved by an average of about 2%. Recurring general &
administrative costs, before one-time costs, increased by less than
10% in 2012 while sales and gross profit contribution increased at
over twice that rate, indicating improved economies of scale. Sales
and marketing costs in 2012 were approximately 10% of net revenues,
the same as in 2011. Our organizational structure is healthy and we
have excellent brands that we are promoting in effective ways. 
Linesch continued, "Our fourth quarter losses were primarily due to
continued production challenges on our kombucha, resulting in higher
unallocated plant costs, and to lighter than expected private label
revenues from one customer. We have addressed the production issues
surrounding our kombucha in our current quarter and we anticipate
increased margin contribution going forward. Our underlying business
is stronger than ever, however, and we feel that we have laid the
foundation for improved financial performance in 2013."  
The Company will conduct a conference call @ 4:15PM EDT on March 25th
to discuss its 2012 fiscal year end 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) 578-1005.
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/investors/. 
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 a top-selling cola line in natural foods, the China Cola product
line. In 2012, the Company launched Reed's Culture Club Kombucha line
of organic live beverages. 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.                                
                          STATEMENTS OF OPERATIONS                          
               For the Years Ended December 31, 2012 and 2011               
                                                                            
                                                                            
                                                     2012          20
11     
                                                 ------------  ------------ 
                                                                            
Sales                                            $ 30,007,000  $ 25,013,000 
                                                                            
Cost of tangible goods sold                        18,943,000    15,847,000 
Cost of goods sold - idle capacity                  1,920,000     1,761,000 
                                                 ------------  ------------ 
  Gross profit                                      9,144,000     7,405,000 
                                                 ------------  ------------ 
                                                                            
Operating expenses:                                                         
                                                                            
Delivery and handling expenses                      2,634,000     2,307,000 
Selling and marketing expense                       3,145,000     2,470,000 
General and administrative expense                  3,229,000     2,878,000 
                                                 ------------  ------------ 
  Total operating expenses                          9,008,000     7,655,000 
                                                 ------------  ------------ 
                                                                            
  Income (loss) from operations                       136,000      (250,000)
                                                                            
Interest expense                                     (660,000)     (691,000)
                                                 ------------  ------------ 
                                                                            
  Net loss                                           (524,000)     (941,000)
                                                                            
Preferred stock dividend                              (45,000)      (65,000)
                                                 ------------  ------------ 
                                                                            
  Net loss attributable to common stockholders   $   (569,000) $ (1,006,000)
                                                 ============  ============ 
                                                                            
Loss per share attributable to common                                       
 stockholders - basic and diluted                $      (0.05) $      (0.09)
                                                 ============  ============ 
Weighted average number of shares outstanding -                             
 basic and diluted                                 11,361,053    10,785,719 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                          MODIFIED EBITDA SCHEDULE                          
                                                                            
                                                                            
                                                   Year ended December 31,  
                                                 -------------------------- 
                                                     2012          2011     
                                                  (unaudited)   (unaudited) 
                                                 ------------  ------------ 
Net loss                                         $   (524,000) $   (941,000)
                                                 ------------  ------------ 
                                                                            
Modified EBITDA adjustments:                                                
                                                                            
Depreciation and amortization                         738,000       653,000 
Interest expense                                      660,000       691,000 
Stock option and warrant compensation                 107,000       300,000 
Other stock compensation for services and                                   
 finance fees                                          23,000       131,000 
                                                 ------------  ------------ 
  Total EBITDA adjustments                          1,528,000     1,775,000 
                                                 ------------  ------------ 
                                                                            
Modified EBITDA income from operations           $  1,004,000  $    834,000 
                                                 ============  ============ 
                                                                            
                                                                            

 
The Company defines modified EBITDA (a non-GAAP measurement) as net loss    
before interest, taxes, depreciation and amortization, and non-cash expense 
paid with company 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, 
                                                     2012          2011     
                                                 ------------  ------------ 
ASSETS                                                                      
Current assets:                                                             
  Cash                                           $  1,163,000  $    713,000 
  Inventory                                         5,794,000     6,099,000 
  Trade accounts receivable, net of allowance                               
   for doubtful accounts and returns and                                    
   discounts of $399,000 and $135,000,                                      
   respectively                                     1,961,000     1,626,000 
  Prepaid inventory                                   201,000       168,000 
  Prepaid and other current assets                    212,000       123,000 
                                                 ------------  ------------ 
    Total Current Assets                            9,331,000     8,729,000 
                                                                            
Property and equipment, net of accumulated                                  
 depreciati
on of $2,351,000 and $1,739,000,                                 
 respectively                                       3,422,000     3,512,000 
Brand names                                         1,029,000     1,029,000 
Deferred financing fees, net of amortization of                             
 $50,000 and $8,000, respectively                      54,000        85,000 
                                                 ------------  ------------ 
                                                                            
    Total assets                                 $ 13,836,000  $ 13,355,000 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current Liabilities:                                                        
  Accounts payable                               $  3,368,000  $  2,310,000 
  Accrued expenses                                    214,000       196,000 
  Dividends payable                                    74,000        83,000 
  Recycling fees payable                               19,000       111,000 
  Line of credit                                    3,023,000     3,095,000 
  Current portion of long term financing                                    
   obligation                                          90,000        71,000 
  Current portion of capital leases payable            69,000        56,000 
  Current portion of term loan                        176,000       152,000 
                                                 ------------  ------------ 
    Total current liabilities                       7,033,000     6,074,000 
                                                                            
Long term financing obligation, less current                                
 portion, net of discount of $576,000 and                                   
 $626,000, respectively                             2,208,000     2,247,000 
Capital leases payable, less current portion           98,000       153,000 
Term loan, less current portion                       399,000       576,000 
                                                 ------------  ------------ 
    Total Liabilities                               9,738,000     9,050,000 
                                                 ------------  ------------ 
                                                                            
Commitments and contingencies                                               
                                                                            
Stockholders' equity:                                                       
  Series A Convertible Preferred stock, $10 par                             
   value, 500,000 shares authorized, 10,411 and                             
   46,621 shares issued and outstanding,                                    
   respectively                                       104,000       466,000 
  Series B Convertible Preferred stock, $10 par                             
   value, 500,000 shares authorized, 45,602 and                             
   80,415 shares issued and outstanding,                                    
   respectively                                       456,000       804,000 
  Common stock, $.0001 par value, 19,500,000                                
   shares authorized, 12,084,673 and 10,885,883                             
   shares issued and outstanding, respectively          1,000         1,000 
  Additional paid in capital                       23,996,000    22,924,000 
  Accumulated deficit                             (20,459,000)  (19,890,000)
                                                 ------------  ------------ 
    Total stockholders' equity                      4,098,000     4,305,000 
                                                 ------------  ------------ 
    Total liabilities and stockholders' equity   $ 13,836,000  $ 13,355,000 
                                                 ============  ============ 

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