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Reed's Inc. Announces Second Quarter Results

LOS ANGELES, Aug. 04, 2016 (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 second quarter ending June 30, 2016.

Financial Highlights for Second Quarter 2016 versus Second Quarter 2015

  • Second quarter net sales decreased from $12.2 million to $11.0 million
  • Gross margin improved 500 basis points to 24% versus 19%
  • Operating expenses decreased 28% driven by delivery expenses down 26%, sales expenses down 29% and general and administrative expenses down 30%
  • Operating loss narrowed by 30% to $349,000 versus $493,000
  • Shareholder equity has increased to $1,082,000 as compared to $785,000 at year end 2015
  • Working capital increased $1,862,000 to $1,216,000 at quarter end as compared to ($646,000) at March 31, 2016
  • All debt maturities were extended until Q4 2017
  • Trailing twelve-month Idle Plant costs decreased $1.2 million to 3.8% of sales versus 5.8%
  • EBITDA continues to be positive for the year at $5,000

Operational Highlights

  • In stock order fill rate increased to 98.9% this year as compared to a low point of 58.8% during last year’s supply chain issues
  • L.A. Plant achieved level 2 SQF re-certification for the second year scoring 95 points versus 86 points in the prior year. This is an important differentiation certification for private label production
  • L.A. Plant equipment installation will occur during the months of November and December

Marketing Highlights:

  • Retail sales of Reed’s all-natural Bag in Box fountain soda will begin selling in a select store trial through one of the largest fast casual restaurant chains in the US in Q3
  • Reed’s Partnered with Dari Farms Distribution of New England
  • Stronger Ginger Brew authorized in 1,600+ Kroger stores and Kroger banners across the U.S.
  • Reed’s partnered with Pure Beverage and Zink Distributing in Indiana to complete coverage for entire state
  • Reed’s and Virgil’s now available at 350+ Shopko locations throughout the Midwest, West and Pacific North West regions
  • Chris Reed was a panel member at Maxim Groups Health and Wellness summit in New York
  • Reed’s demonstrated its new Bag in Box fountain at the National Restaurant Association tradeshow in Chicago
  • Reed’s attends the Summer Fancy Food Show in New York City

Chris Reed, Founder and CEO of Reed’s, Inc. commented, "We continue to see recovery in the marketplace from our supply chain issues of last year. Our delivery fill rate was as low as 58.8% last year, and now we are filling our orders at almost 100%. Demand for our brands continues to build as we open new markets and retailers across the country and re-introduce our products to those retailers affected by last year’s supply issues. Our recovery is fastest with our top product lines, Reed’s Ginger Brews and our Virgil’s Natural Sodas.

Progress with the development and rollout of our new all natural fountain sodas continues successfully, and our new flavors are scheduled to be test marketed with one of the largest fast casual chains in the country during the third quarter.

In the face of lower volumes, we showed significant discipline in our ability to control expenses during the second quarter. As our volume improves in the second half of the year, these disciplines will contribute to our bottom line improvement. Margin had been under pressure due to the supply chain issues faced last year that caused our tight cash situation. Margins should continue to improve as a result of our improved cash position, which is improving our purchasing and sourcing abilities. We also expect improvements in production efficiencies from our Los Angeles plant expansion that is anticipated to be up and running by year end.”

Dan Miles, Chief Financial Officer of Reeds’ Inc. stated, “We see margin growth opportunities as we maintain our cost containment initiatives in sales, general and administrative, and operational areas. We believe that we will achieve positive cash flow for the balance of the year as we continue to work on improving operating efficiencies while generating sales growth during the remainder of the peak summer selling season.”

The Company will conduct a conference call at 4:30 PM EDT on August 4th to discuss its 2016 fiscal second quarter results. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time:

Domestic callers should dial 877-246-4118
International callers should dial +1 212-231-2904
A replay of the call will be available by the following day 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 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 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.

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 BALANCE SHEETS
June 30, 2016 December 31,
2015
(Unaudited)
ASSETS
Current assets:
Cash$969,000 $1,816,000
Trade accounts receivable, net of allowance for doubtful accounts
and returns and discounts of $306,000 and $356,000, respectively
3,544,000 2,894,000
Inventory, net of reserve for obsolescence of $150,000 and
$290,000, respectively
7,723,000 7,927,000
Prepaid inventory 576,000 47,000
Prepaid and other current assets 573,000 769,000
Total Current Assets 13,385,000 13,453,000
Property and equipment, net of accumulated depreciation of
$4,574,000 and $4,216,000, respectively
6,479,000 5,369,000
Brand names 1,029,000 1,029,000
Total assets$20,893,000 $19,851,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable$5,673,000 $7,458,000
Accrued expenses 192,000 168,000
Line of Credit, net of discount of $11,000 and $0, respectively 5,646,000 4,443,000
Current portion of long term financing obligations 175,000 160,000
Current portion of capital leases payable 142,000 153,000
Current portion of capital expansion loan 341,000 341,000
Total current liabilities 12,169,000 12,723,000
Long term financing obligation, less current portion, net of discount of $880,000 and $953,000, respectively 1,408,000 1,443,000
Capital leases payable, less current portion 499,000 490,000
Capital expansion loan, less current portion 2,849,000 1,542,000
Term loan, net of discount $114,000 and $132,000 2,886,000 2,868,000
Total Liabilities 19,811,000 19,066,000
Stockholders’ equity:
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, 13,908,247 and 13,160,860 shares issued and outstanding, respectively 1,000 1,000
Additional paid in capital 30,044,000 27,399,000
Accumulated deficit (29,057,000) (26,709,000)
Total stockholders’ equity 1,082,000 785,000
Total liabilities and stockholders’ equity$20,893,000 $19,851,000


REED’S, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 2016 and 2015
(Unaudited)
Three months ended Six months ended
2016 2015 2016 2015
Net Sales $10,992,000 $12,178,000 $20,996,000 $22,850,000
Cost of goods sold 8,390,000 8,538,000 16,501,000 15,950,000
Gross profit 2,602,000 3,640,000 4,495,000 6,900,000
Operating expenses:
Delivery and handling expenses 1,064,000 1,429,000 1,913,000 2,597,000
Selling and marketing expense 954,000 1,335,000 1,995,000 2,528,000
General and administrative expense 931,000 1,369,000 2,136,000 2,338,000
Total operating expenses 2,949,000 4,133,000 6,044,000 7,463,000
Loss from operations (347,000) (493,000) (1,549,000) (563,000)
Interest expense (416,000) (193,000) (794,000) (394,000)
Net loss (763,000) (686,000) (2,343,000) (957,000)
Preferred Stock Dividends (5,000) (5,000) (5,000) (5,000)
Net loss attributable to common
stockholders, basic and diluted
$(768,000) $(691,000) $(2,348,000) $(962,000)
Weighted average number of shares
outstanding – basic 13,424,796 13,104,227 13,305,821 13,086,560
Loss per share – basic and diluted $(0.06) $(0.05) $(0.18) $(0.07)


REED’S, INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2016
(Unaudited)
Common Stock Preferred Stock Additional
Paid
Accumulated Total
Stockholder’s
Shares Amount Shares Amount In Capital Deficit Equity
Balance, January 1, 2016 13,160,860 $1,000 9,411 $94,000 27,399,000 (26,709,000) 785,000
Common shares issued upon
exercise of warrants
16,260 45,000 45,000
Common shares issued upon
exercise of options
7,211 - -
Fair value vesting of options
issued to employees &
consultant
302,000 302,000
Common shares issued upon
sale of securities
722,412 2,239,000 2,239,000
Fair value of warrants issued
as debt discount
54,000 54,000
Series A Preferred Stock
Dividend
1,504 5,000 (5,000) -
Net loss (2,343,000) (2,343,000)
Balance June 30, 2016 13,908,247 $1,000 9,411 $94,000 $30,044,000 $(29,057,000) $1,082,000


REED’S, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2016 and 2015
(Unaudited)
Six Months Ended June 30,
2016 2015
Cash flows from operating activities:
Net loss $(2,343,000) $(957,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 477,000 453,000
Fair value of stock options issued to employees & consultant 302,000 560,000
(Decrease) increase in allowance for doubtful accounts (50,000) (81,000)
Changes in assets and liabilities:
Accounts receivable (600,000) (1,005,000)
Inventory 204,000 (2,631,000)
Prepaid Inventory (529,000) (14,000)
Prepaid expenses and other current assets 196,000 167,000
Accounts payable (1,785,000) 1,644,000
Accrued expenses 24,000 20,000
Net cash used in operating activities (4,104,000) (1,844,000)
Cash flows from investing activities:
Purchase of property and equipment (78,000) (430,000)
Net cash used in investing activities (78,000) (430,000)
Cash flows from financing activities:
Proceeds from sale of common stock 2,239,000 -
Proceeds from stock option and warrant exercises 45,000 31,000
Principal repayments on long term financial obligation (76,000) (64,000)
Principal repayments on capital lease obligation (87,000) (63,000)
Net draw down (repayment) on line of credit 1,214,000 1,626,000
Net cash provided by financing activities 3,335,000 1,530,000
Net decrease in cash (847,000) (744,000)
Cash at beginning of period 1,816,000 959,000
Cash at end of period $969,000 $215,000
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 843,000 395,000
Non Cash Investing and Financing Activities
Property and equipment acquired through capital expansion loan 1,307,000 486,000
Property and equipment acquired through capital lease obligations 86,000 -
Other current assets acquired through capital expansion loan - 250,000
Fair value of warrants granted as debt discount 54,000 -
Dividends payable in common stock 5,000 5,000


MODIFIED EBITDA SCHEDULE
Three Months Ended June 30,
2016 2015
Net loss $(763,000) $(686,000)
Modified EBITDA adjustments:
Depreciation and amortization 219,000 240,000
Interest expense 416,000 193,000
Stock option compensation 133,000 347,000
Total EBITDA adjustments 768,000 780,000
Modified EBITDA $5,000 $94,000


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

Source:Reed's Inc.