Reed's, Inc. Announces Third Quarter 2010 Financial Results

Company Delivers Record Revenues Driven by Strong Sales in All Product Categories

Marketwired

LOS ANGELES, CA--(Marketwire - 11/09/10) - Reed's, Inc. (NASDAQ:REED - News) (OTC.BB:REEDP - News), maker of the top-selling sodas in natural food stores nationwide, today announced its financial results for its third fiscal quarter and the nine months ended September 30, 2010.Financial Highlights:

  • Third quarter sales increased 35% to a record $5.4 million. Nine month 2010 sales were $14.3 million, 23% ahead of 2009.
  • Gross profit was 20% of sales during the third quarter, as compared to 25% in 2009, reflecting start up costs incurred during the period.
  • Operating expenses increased by 3% in the quarter due primarily to some non-recurring charges.
  • EBITDA income for the third quarter 2010 was $32,000, as compared to $15,000 in the third quarter of 2009. For the nine month period, EBITDA income was $400,000, as compared to a loss of $140,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).
  • Net loss for the quarter narrowed slightly to $398,000, or $0.04 per share, from $402,000 a year earlier.
  • Working capital at September 30, 2010 was $2.1 million, as compared to $2.0 million at December 31, 2009.
  • Cash availability was $1.1 million at September 30, 2010, as compared to $1.3 million at December 31, 2009.
Third Quarter Operational Highlights:
  • Introduced new ZERO line of Virgil's Stevia-sweetened diet sodas and gained authorization into Whole Foods
  • Continued expansion into Canada with new distribution and Bulk Barn penetration
  • Became first bottling plant in North America to launch swing-top bottles from U.S. factory
  • Expanded sales of 'Reed's Rx' Natural Ginger Nausea Relief into Publix Super Markets and Fred Meyer Stores
  • Launched first-ever marketing pull campaign utilizing Google AdWords and radio campaign with Clear Channel and Fresh & Easy Neighborhood Markets
"Sales are accelerating for our branded and private label products," stated Chris Reed, Founder, Chairman and CEO of Reed's, Inc. "We came in ahead of our revenue estimates. Profit margin on our new private label customers is expected to improve as we digest the start up costs. Our branded business is growing nicely with our private label business expanding faster. Our plan is to use private label to increase gross profits and invest these funds into the growth of our brands. For the record, we are only making non-competitive products for our private label customers." Mr. Reed added, "Our fourth quarter is going very strong. We see sales acceleration in 2011 for both our brands and private label business."James Linesch, Reed's Chief Financial Officer, said, "Our fiscal quarter results reflect a proof of concept on many levels. Our marketing efforts delivered sales of 23% more cases of branded sodas during the third quarter than last year, without margin erosion. Our Los Angeles plant produced record volumes as we continued to fulfill significant private label orders, with strong backlog, and we are successfully introducing our new ZERO product line with minimal product introduction costs." Mr. Linesch added, "Our third quarter margins were hit by costs associated with plant upgrades and product introductions, and this will continue in the fourth quarter to some extent. Our margins on our sales of branded sodas, however, have remained as strong as ever and are expected to increase in 2011 with new pricing and promotion plans. Private label margins will increase too, as we move into 2011 contracts. Operating expenses remain steady, despite our high growth, reflecting the scalability of our business."See financial statements and EBITDA schedule at the end of this release.Conference CallThe Company will conduct a conference call at 4:15 p.m. Eastern Standard Time on Tuesday, November 9, 2010 to discuss its third quarter 2010 results. To participate in the call, please dial the following number five to ten minutes prior to the scheduled call time: 888-240-4700. International callers should dial 512-225-9559. The conference ID for this call is 936603#.About Reed's, Inc. Reed's, Inc. makes the top selling natural sodas in the natural foods industry sold in over 10,500 natural food markets and supermarkets nationwide. In 2009, Reed's started producing Private Label natural beverages for select national chains. 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. Recently, Reed's introduced its Reed's All Natural Ginger Nausea Relief product for the over-the-counter stomach aisle for all retail channels and acquired the Sonoma Sparkler brand, a sparkling juice celebration drink with an established customer base. Other product lines include: Reed's Ginger Candies and Reed's Ginger Ice Creams.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/reedsgingerbrewReed's Facebook Fan Page at: http://www.facebook.com/pages/Reeds-Ginger-Brew-and-Virgils-Natural-Sodas/57143529039?ref=nfSubscribe to Reed's RSS feed at: http://www.irthcommunications.com/REED_rss.xmlMore information can be found at: http://www.irthcommunications.com/clients_REED.phpSAFE HARBOR STATEMENTSome 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-KSB 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.-- FINANCIAL TABLES FOLLOW --
 
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2010 and 2009
(Unaudited)


Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2010 2009 2010 2009
------------ ------------ ------------ ------------
Sales $ 5,428,000 $ 4,027,000 $14,345,000 $11,658,000
Cost of sales 4,365,000 3,038,000 11,047,000 8,722,000
------------ ------------ ------------ ------------

Gross profit 1,063,000 989,000 3,298,000 2,936,000
------------ ------------ ------------ ------------

Operating expenses:
Selling and marketing
expense 570,000 646,000 1,632,000 1,853,000
General and
administrative expense 742,000 623,000 2,066,000 1,896,000
Impairment of assets - - - 641,000
------------ ------------ ------------ ------------
Total operating
expenses 1,312,000 1,269,000 3,698,000 4,390,000
------------ ------------ ------------ ------------

Loss from operations (249,000) (280,000) (400,000) (1,454,000)

Interest expense (149,000) (122,000) (421,000) (319,000)
------------ ------------ ------------ ------------

Net loss (398,000) (402,000) (821,000) (1,773,000)

Preferred stock dividend (12,000) - (62,000) (23,000)
------------ ------------ ------------ ------------

Net loss attributable to
common stockholders $ (410,000) $ (402,000) $ (883,000) $(1,796,000)
============ ============ ============ ============

Loss per share -
available to common
stockholders basic and
diluted $ (0.04) $ (0.04) $ (0.09) $ (0.20)
============ ============ ============ ============
Weighted average number
of shares outstanding -
basic and diluted 10,245,471 9,215,171 10,117,906 9,125,887
============ ============ ============ ============




EBITDA SCHEDULE
For the Three Months and Nine Months Ended September 30, 2010 and 2009

(Unaudited)


Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2010 2009 2010 2009
------------ ------------ ------------ ------------
Net loss $ (398,000) $ (402,000) $ (821,000) $(1,773,000)
------------ ------------ ------------ ------------

EBITDA adjustments:

Depreciation and
amortization 160,000 109,000 465,000 324,000
Interest expense 149,000 122,000 421,000 197,000
Stock option
compensation 35,000 122,000 189,000 269,000
Other stock compensation
for services 86,000 64,000 146,000 202,000
------------ ------------ ------------ ------------
Total EBITDA
adjustments 430,000 417,000 1,221,000 1,633,000
------------ ------------ ------------ ------------

EBITDA income (loss)
from operations $ 32,000 $ 15,000 $ 400,000 $ (140,000)
============ ============ ============ ============


The Company defines EBITDA (a non-GAAP measurement) as net loss before
interest, taxes, depreciation and amortization, and non-cash expense for
securities. Other companies may calculate EBITDA differently. Management
believes that the presentation of EBITDA provides a meaningful 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,
2010 2009
---------------- ----------------
ASSETS (unaudited)
Current assets:
Cash $ 958,000 $ 1,306,000
Inventory 3,957,000 2,884,000
Trade accounts receivable, net of
allowance for doubtful accounts and
returns and discounts of $105,000 and
$90,000, respectively 1,473,000 866,000
Prepaid and other current assets 625,000 99,000
---------------- ----------------
Total Current Assets 7,013,000 5,155,000

Property and equipment, net of accumulated
depreciation of $1,062,000 and $727,000,
respectively 3,693,000 3,655,000
Brand names 1,029,000 1,029,000
Deferred financing fees, net of
amortization of $102,000 and $10,000,
respectively 39,000 131,000
---------------- ----------------
Total assets $ 11,774,000 $ 9,970,000
================ ================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,643,000 $ 954,000
Accrued expenses 129,000 127,000
Dividends payable 36,000 -
Recycling fees payable 359,000 456,000
Line of credit 1,518,000 1,415,000
Current portion of long term financing
obligation 51,000 40,000
Current portion of capital leases payable 38,000 24,000
Current portion of note payable 97,000 102,000
---------------- ----------------
Total current liabilities 4,871,000 3,118,000

Long term financing obligation, less
current portion, net of discount of
$689,000 and $726,000, respectively 2,271,000 2,274,000
Capital leases payable, less current
portion 157,000 130,000
Note payable, less current portion - 71,000
---------------- ----------------
Total liabilities 7,299,000 5,593,000
---------------- ----------------

Commitments and contingencies

Stockholders' equity:
Series A Convertible Preferred stock, $10
par value, 500,000 shares authorized,
46,621 shares issued and outstanding,
respectively 466,000 466,000
Series B Convertible Preferred stock, $10
par value, 500,000 shares authorized,
91,442 and 120,820 shares issued and
outstanding, respectively 914,000 1,208,000
Common stock, $.0001 par value,
19,500,000 shares authorized, 10,353,884
and 9,606,127 shares issued and
outstanding, respectively 1,000 1,000
Additional paid in capital 21,478,000 20,203,000
Accumulated deficit (18,384,000) (17,501,000)
---------------- ----------------
Total stockholders' equity 4,475,000 4,377,000
---------------- ----------------

Total liabilities and stockholders'
equity $ 11,774,000 $ 9,970,000
================ ================


Contact:


Investor Relations Contact:
Mr. Andrew Haag
Managing Partner
IRTH Communications, LLC
Tel: +1-888-825-6456
E-mail: Email Contact
Website: www.irthcommunications.com
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