Reed's Inc. Announces Second Quarter 2013 Results

Reed's Inc. Announces Second Quarter 2013 Results 
LOS ANGELES, CA -- (Marketwired) -- 08/14/13 --  Reed's, Inc. (NYSE
MKT: REED) maker of the top-selling sodas in natural food stores
nationwide today announced the financial results for its second
quarter ended June 30, 2013. 
Financial Highlights: 


 
--  Revenues increased 22% in the second quarter to $9.5 million in 2013,
    compared to 2012. Six month revenues increased 23% to $17.6 million.
--  The Company sustained a one-time loss on a private label contract in
    the amount of $412,000 during the second quarter.
--  Gross profit decreased 9% to $2.5 million in the second quarter 2013.
    Without the one-time loss, gross profit would have increased at 6%.
--  Net loss for the 2013 second quarter was $494,000 compared to net
    income of $444,000 a year earlier.
--  Loss before non-cash items and finance costs (modified EBITDA) was
    $147,000 during the 2013 second quarter. (See EBITDA table at end of
    this release for further non-GAAP information).
--  Working capital at June 30, 2013 was $1.8 million, as compared to $2.3
    million at December 31, 2012.

  
Operational Highlights:  


 
--  Reed's Culture Club Kombucha sales volume increased by 75% in the 2nd
    quarter over the 1st quarter 2013
--  Reed's and Virgil's 12oz case volume continues to show increased
    demand and momentum delivering over 20% growth for the quarter
--  Reed's Culture Club Kombucha gains approval for distribution into over
    1500 mainstream stores nationally
--  Reed's Culture Club Kombucha gains distribution in Sprouts Farmers
    Market, The Fresh Market, Giant Eagle, Natural Grocers by Vitamin
    Cottage, Bristol Farms, Lassen's and many more
--  Reed's and Virgil's gain distribution into WinCo Foods
--  Developed new national Canadian distribution partnership with Lassonde
    Inc.
--  Invested approximately $300,000 in plant improvements designed to
    increase productivity in the Los Angeles Brewery.

  
"All of our branded product categories are showing consistently strong
growth," stated Chris Reed, Founder and CEO at Reed's Inc. "Demand
for our brands outstripped our production capabilities leaving us
short of our true potential for the quarter. We are working quickly
to upgrade our operational efficiencies to capture all the increased
demand from around the country we are presently experiencing. The
investments that we've been making in rolling out our kombucha
nationally are just starting to pay off, and we anticipate that rapid
growth will continue in this category." 
James Linesch, CFO at Reed's Inc. commented, "Our second quarter
results were overshadowed by the loss reserve that we provided on a
private label contract. Had that contract been completed as planned,
our revenues for the quarter would have been close to $10 million and
we would have posted profits for the quarter." 
The Company will conduct a conference call @ 4:15PM EDT on August
14th to discuss its 2013 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 (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/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.                                
                     CONDENSED STATEMENTS OF OPERATIONS                     
          For the Three and Six Months Ended June 30, 2013 and 2012         
                                 (Unaudited)                                
                                                                            
                  Three months ended June 30,    Six months ended June 30,  
                 ----------------------------  ---------------------------- 
                      2013           2012           2013           2012     
                 -------------  -------------  -------------  ------------- 
Sales            $   9,519,000  $   7,831,000  $  17,645,000  $  14,370,000 
Cost of tangible                                                            
 goods sold          6,630,000      4,774,000     11,629,000      9,018,000 
Cost of goods                                                               
 sold - idle                                                                
 capacity              432,000        360,000      1,024,000        670,000 
                 -------------  -------------  -------------  ------------- 
                                                                            
    Gross profit     2,457,000      2,697,000      4,992,000      4,682,000 
                 -------------  -------------  -------------  ------------- 
                                                                            
Operating                                                                   
 expenses:                                                                  
Delivery and                                                                
 handling                                                                   
 expenses              954,000        585,000      1,860,000      1,064,000 
Selling and                                                                 
 marketing                                                                  
 expense               960,000        699,000      1,840,000      1,421,000 
General and                                                                 
 administrative                                                             
 expense               912,000        805,000      1,900,000      1,545,000 
                 -------------  -------------  -------------  ------------- 
  Total                                                                     
   operating                                                                
   expenses          2,826,000      2,089,000      5,600,000      4,030,000 
                 -------------  -------------  -------------  ------------- 
                                                                            
    Income                                                                  
     (loss) from                                                            
     operations       (369,000)       608,000       (608,000)       652,000 
                                                                            
Interest expense      (125,000)      (164,000)      (289,000)      (332,000)
                 -------------  -------------  -------------  ------------- 
                                                                            
Net income                                                                  
 (loss)               (494,000)       444,000       (897,000)       320,000 
                                                                            
Preferred stock                                                             
 dividends              (5,000)       (23,000)        (5,000)       (32,000)
                 -------------  -------------  -------------  ------------- 
Net income                                                                  
 (loss)                                                                     
 attributable to                                                            
 common                                                                     
 stockholders    $    (499,000) $     421,000  $    (902,000) $     288,000 
                 =============  =============  =============  ============= 
                                                                            
Income (loss)                                                               
 per share                                                                  
 available to                                                               
 common                                                                     
 stockholders,                                                              
 basic           $       (0.04) $        0.04  $       (0.07) $        0.03 
                 =============  =============  =============  ============= 
Weighted average                                                            
 number of                                                                  
 shares                                                                     
 outstanding -                                                              
 basic              12,543,983     11,041,558     12,413,958     10,981,317 
                 =============  =============  =============  ============= 
Income (loss)                                                               
 per share                                                                  
 available to                                                               
 common                                                                     
 stockholders,                                                              
 diluted         $       (0.04) $        0.04  $       (0.07) $        0.02 
                 =============  =============  =============  ============= 
Weighted average                                                            
 number of                                                                  
 shares                                                                     
 outstanding -                                                              
 diluted            12,543,983     11,940,343     12,413,958     11,647,148 
                 =============  =============  =============  ============= 
                                                                            
                                                                            
                                                                            
                          MODIFIED EBITDA SCHEDULE                          
                                                                            
                                               Three Months Ended June 30,  
                                            --------------------------------
                                                  2013             2012     
                                            ---------------  ---------------
Net (loss) income                           $      (494,000) $       444,000
                                            ---------------  ---------------
                                                                            
Modified EBITDA adjustments:                                                
Depreciation and amortization                       153,000          189,000
Interest expense                                    125,000          164,000
Stock option compensation                            69,000           29,000
Other stock compensation for services                     -            5,000
                                            ---------------  ---------------
  Total EBITDA adjustments                          347,000          387,000
                                            ---------------  ---------------
                                                                            
Modified EBITDA (loss) income from                                          
 operations                                 $      (147,000) $       831,000
                                            ===============  ===============
                                                                            
                                                Six Months Ended June 30,   
                                            --------------------------------
                                                  2013             2012     
                                            ---------------  ---------------
Net income (loss)                           $      (897,000) $       320,000
                                            ---------------  ---------------
                                                                            
Modified EBITDA adjustments:                                                
Depreciation and amortization                       298,000          372,000
Interest expense                                    289,000          332,000
Stock option compensation                           188,000           55,000
Other stock compensation for services                 5,000           20,000
                                            ---------------  ---------------
  Total EBITDA adjustments                          780,000          779,000
                                            ---------------  ---------------
                                                                            
Modified EBITDA (loss) income from                                          
 operations                                 $      (117,000) $     1,099,000
                                            ===============  ===============

 
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.                                
                          CONDENSED BALANCE SHEETS                          
                                                                            
                                             June 30,        December 31,   
                                               2013              2012       
                                         ----------------  ---------------- 
ASSETS                                      (unaudited)                     
Current assets:                                                             
  Cash                                   $        816,000  $      1,163,000 
  Inventory                                     6,385,000         5,794,000 
    Trade accounts receivable, net of                                       
     allowance for doubtful accounts and                                    
     returns and discounts of $365,000                                      
     and $399,000, respectively                 3,235,000         1,961,000 
  Prepaid inventory                               330,000           201,000 
  Prepaid and other current assets                295,000           212,000 
                                         ----------------  ---------------- 
  Total Current Assets                         11,061,000         9,331,000 
                                                                            
Property and equipment, net of                                              
 accumulated depreciation of $2,600,000                                     
 and $2,351,000, respectively                   3,472,000         3,422,000 
Brand names                                     1,029,000         1,029,000 
Deferred financing fees, net of                                             
 amortization of $49,000 and $26,000,                                       
 respectively                                      31,000            54,000 
                                         ----------------  ---------------- 
  Total assets                           $     15,593,000  $     13,836,000 
                                         ================  ================ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current Liabilities:                                                        
  Accounts payable                       $      4,730,000  $      3,368,000 
  Accrued expenses                                154,000           233,000 
  Dividends payable                                 5,000            74,000 
  Line of credit                                4,072,000         3,023,000 
  Current portion of long term financing                                    
   obligation                                     100,000            90,000 
  Current portion of capital leases                                         
   payable                                         80,000            69,000 
  Current portion of term loan                    155,000           176,000 
                                         ----------------  ---------------- 
  Total current liabilities                     9,296,000         7,033,000 
                                                                            
Long term financing obligation, less                                        
 current portion, net of discount of                                        
 $550,000 and $576,000, respectively            2,181,000         2,208,000 
Capital leases payable, less current                                        
 portion                                           67,000            98,000 
Term loan, less current portion                   556,000           399,000 
                                         ----------------  ---------------- 
  Total Liabilities                            12,100,000         9,738,000 
                                         ----------------  ---------------- 
                                                                            
Commitments and contingencies                                               
Stockholders' equity:                                                       
    Series A Convertible Preferred                                          
     stock, $10 par value, 500,000                                          
     shares authorized, 10,411 and                                          
     10,411 shares issued and                     
                          
     outstanding, respectively                    104,000           104,000 
    Series B Convertible Preferred                                          
     stock, $10 par value, 500,000                                          
     shares authorized, 0 and 45,062                                        
     shares issued and outstanding,                                         
     respectively                                       -           456,000 
    Common stock, $.0001 par value,                                         
     19,500,000 shares authorized,                                          
     12,666,117 and 12,084,673 shares                                       
     issued and outstanding,                                                
     respectively                                   1,000             1,000 
  Additional paid in capital                   24,749,000        23,996,000 
  Accumulated deficit                         (21,361,000)      (20,459,000)
                                         ----------------  ---------------- 
  Total stockholders' equity                    3,493,000         4,098,000 
                                         ----------------  ---------------- 
  Total liabilities and stockholders'                                       
   equity                                $     15,593,000  $     13,836,000 
                                         ================  ================ 

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