LOS ANGELES, Nov. 13, 2017 (GLOBE NEWSWIRE) -- Reed’s Inc. (NYSE American:REED), owner of the nation’s leading portfolio of handcrafted, all-natural beverages, today announced financial results for the fiscal third quarter ended September 30, 2017.

Financial Overview:

For the third quarter 2017 compared to the third quarter 2016:

  • Net sales were $10.9 million versus $12.3 million or a decline of 11.7%
    •  On a volume basis, non-core and discontinued products were down 25.2% for the quarter, while core products were down 8.5%
  • The company took its first price increase on its core products in 7 years which temporarily suppressed volume in August and explains the decline for the quarter
  • On a monthly basis, core product volume was up 7.3% in July; 5.7% in September and the positive trend continued into October indicating that the market has absorbed the new pricing
  • Significant idle plant costs continued to impact gross profit margins which remained unchanged versus the prior quarter at 19% versus 23% for the prior year
  • Delivery and handling expenses increased to $1,119,000 from $901,000 driven temporarily by added shipping costs related to the increased private label production at the LA plant during the third quarter
  • Selling and marketing expenses decreased to $828,000 from $918,000
  • General and Administrative expenses increased to $3,109,000 from $871,000, $2.0 million of which was driven by a non-cash impairment charge on uninstalled plant equipment and the remainder by increased filing fees and the timing of the annual shareholder meeting.
  • Interest expense and bank related charges increased to $757,000 from $415,000 primarily driven by the cost of the convertible note accrued interest and debt discount amortization of $274,000
  • Financing costs and warrant modifications totaled $1,798,000 which offsets the gain reported in Q2 2017
  • Net loss was ($0.37) per diluted share versus ($0.02) per diluted share
  • Modified EBITDA was a loss of ($839,000) versus positive $557,000

Val Stalowir CEO of Reed’s, Inc. stated, “After my first quarter here at Reed’s I see even more opportunity than I originally anticipated. The team has responded well, and we continue to make progress to improve the company’s overall performance.  I am encouraged to see that some initiatives underway have already begun to have a positive impact on the business.  The current priority is to continue to significantly improve the company’s margins and re-accelerate growth of the core brands. There are several significant initiatives the company has been negotiating that will be concluded in the short-term which we believe will have a significant positive impact on the company’s performance.  We intend to press release these new developments and host business update calls over the coming weeks,” Stalowir concluded.

Q3 2017 Earnings Call Details:
The Company will conduct a conference call at 4:30 pm eastern time today, November 13, 2017 to discuss its 2017 third quarter results. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time (800) 942-2493. International callers should dial +1 (303) 223-0117.

A replay of the call will be available on the Reed’s website at www.reedsinc.com in the “Investors” section following the earnings call within a day.

About Reed’s, Inc.:
Established in 1989, Reed’s has sold over 500 million bottles of its category leading all-natural, handcrafted beverages. Reed’s is America’s #1 selling Ginger Beer brand and has been the leader and innovator in the ginger beer category for decades. Virgil’s is America’s #1 selling independent, all-natural craft soda brand. The Reed’s Inc. portfolio is sold in over 20,000 retail doors across the natural, specialty, grocery, drug, club and mass channels nationwide.  Reed’s Ginger Beers are unique to the category because of the proprietary process of hand brewing its award-winning products using fresh organic ginger combined with natural spices and fruit juices. Reed’s Ginger Beers come in three levels of increasing ginger intensity that deliver a delicious and powerful ginger bite and burn that can only come from fresh ginger root. The Company uses this same handcrafted approach and dedication to the highest quality ingredients in its award-winning Virgil’s line of great tasting, bold flavored craft sodas.

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

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.
Investor Relations
(310) 217-9400 Ext 6
Email: ir@reedsinc.com

  September 30,   December 31, 
  2017  2016 
Current assets:        
Cash $348,000  $451,000 
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $378,000 and $256,000, respectively  3,188,000   2,485,000 
Inventory, net of reserve for obsolescence of $290,000 and $115,000, respectively  7,815,000   6,885,000 
Prepaid and other current assets  301,000   500,000 
Total Current Assets  11,652,000   10,321,000 
Property and equipment, net of accumulated depreciation of $5,280,000 and $4,863,000, respectively  4,089,000   7,726,000 
Equipment held for sale, net of reserve of $2,000,000  2,465,000   - 
Brand names  805,000   805,000 
Total assets $19,011,000  $18,852,000 
Current liabilities:        
Accounts payable $6,992,000  $5,959,000 
Accrued expenses  181,000   215,000 
Advances from officers  277,000   - 
Line of credit  5,153,000   4,384,000 
Current portion of long term financing obligations  214,000   190,000 
Current portion of capital leases payable  194,000   183,000 
Current portion of bank notes  953,000   953,000 
Total current liabilities  13,964,000   11,884,000 
Other long term liabilities        
Long term financing obligation, less current portion, net of discount of $742,000 and $825,000, respectively  1,283,000   1,363,000 
Capital leases payable, less current portion  286,000   438,000 
Bank notes, net of discount $0 and $78,000, respectively  6,182,000   5,919,000 
Convertible note, net of discount $2,833,000 and $0, respectively  748,000   - 
Warrant liability  74,000   775,000 
Other long term liabilities  117,000   130,000 
Total Liabilities  22,654,000   20,509,000 
Stockholders' Deficiency        
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, 40,000,000 shares authorized, 15,286,258 and 13,982,230 shares outstanding  1,000   1,000 
Additional paid in capital  35,447,000   29,971,000 
Accumulated deficit  (39,185,000)  (31,723,000)
Total stockholders' deficiency  (3,643,000)  (1,657,000)
Total liabilities and stockholders' deficiency $19,011,000  $18,852,000 

The accompanying notes are an integral part of these condensed financial statements


  Three months ended   Nine months ended  
  September 30,  September 30, 
  2017  2016  2017  2016 
Net Sales $10,887,000  $12,329,000  $28,046,000  $33,326,000 
Cost of goods sold  8,825,000   9,443,000   23,216,000   25,945,000 
Gross profit  2,062,000   2,886,000   4,830,000   7,381,000 
Operating expenses:                
Delivery and handling expenses  1,119,000   901,000   2,731,000   2,815,000 
Selling and marketing expense  828,000   918,000   2,344,000   2,911,000 
General and administrative expense  1,105,000   871,000   3,402,000   3,007,000 
Impairment of assets  2,000,000   -   2,000,000   - 
Total operating expenses  5,052,000   2,690,000   10,477,000   8,733,000 
Income/(loss) from operations  (2,990,000)  196,000   (5,647,000)  (1,352,000)
Interest expense  (757,000)  (415,000)  (2,270,000)  (1,239,000)
Financing costs and warrant modification  (1,798,000)  -   (2,776,000)  - 
Change in fair value of warrant liability  (72,000)  -   3,236,000   - 
Net loss  (5,617,000)  (219,000)  (7,457,000)  (2,591,000)
Preferred Stock Dividends  -   -   (5,000)  (5,000)
Net loss attributable to common stockholders $(5,617,000) $(219,000) $(7,462,000) $(2,596,000)
Weighted average number of shares outstanding – basic  15,033,083   13,908,247   14,336,375   13,504,223 
Loss per share $(0.37) $(0.02) $(0.52) $(0.19)

The accompanying notes are an integral part of these condensed financial statements


Nine months ended September 30, 2017
                  Additional       Total  
  Common Stock  Preferred Stock  Paid In  Accumulated  Shareholders 
  Shares  Amount  Shares  Amount  Capital   Deficit   Deficiency  
Balance, December 31, 2016  13,982,230  $1,000   9,411  $94,000  $29,971,000  $(31,723,000) $(1,657,000)
Fair value of vesting of options to employees and directors                  199,000       199,000 
Fair value of common shares issued for services  62,365   -           99,000       99,000 
Common shares issued upon exercise of warrants, net  1,122,376   -           1,650,000       1,650,000 
Extinguishment of warrant liability                  2,634,000       2,634,000 
Fair value of warrants issued for financing costs                  689,000       689,000 
Common shares issued for cash  117,647   -           200,000       200,000 
Preferred dividends paid in Common stock  1,640   -           5,000   (5,000)  - 
Net loss                      (7,457,000)  (7,457,000)
Balance, September 30, 2017  15,286,258  $1,000   9,411  $94,000  $35,447,000  $(39,185,000) $(3,643,000)

The accompanying notes are an integral part of these condensed financial statements


  Nine months ended 
  9/30/2017  9/30/2016 
Cash flows from operating activities:        
Net loss $(7,457,000) $(2,591,000)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation  430,000   503,000 
Amortization  728,000   186,000 
Fair value of vested stock options issued to employees  199,000   449,000 
Fair value of common stock issued for services  99,000   - 
(Decrease) increase in allowance for doubtful accounts  122,000   (100,000)
Reserve for impairment on equipment held for sale  2,000,000   - 
Fair value of warrants issued as financing cost  908,000     
Modification cost of warrants  1,868,000   - 
Change in fair value of warrant liability  (3,236,000)  - 
Changes in operating assets and liabilities:        
Accounts receivable  (825,000)  (61,000)
Inventory  (930,000)  122,000 
Prepaid expenses and other assets  199,000   6,000 
Accounts payable  1,033,000   (301,000)
Accrued expenses  176,000   182,000 
Other long term liabilities  (43,000)  - 
Net cash used in operating activities  (4,729,000)  (1,605,000)
Cash flows from investing activities:        
Purchase of property and equipment  (535,000)  (585,000)
Net cash used in investing activities  (535,000)  (585,000)
Cash flows from financing activities:        
Net borrowings (repayments) on advances from officers  277,000   - 
Proceeds from sale of common stock  200,000   2,230,000 
Proceeds from warrant exercises  1,650,000   45,000 
Principal payments on capital expansion loan  (538,000)  (168,000)
Proceeds from issuance of convertible note  3,083,000   - 
Principal repayments on long term financial obligation  (139,000)  (117,000)
Principal repayments on capital lease obligation  (141,000)  (131,000)
Net borrowings (repayments) on existing line of credit  769,000   462,000 
Net cash provided by financing activities  5,161,000   2,321,000 
Net (decrease) increase in cash  (103,000)  131,000 
Cash at beginning of period  451,000   1,816,000 
Cash at end of period $348,000  $1,947,000 
Supplemental disclosures of cash flow information:        
Cash paid during the period for:        
Interest $2,074,000  $843,000 
Non Cash Investing and Financing Activities        
Property and equipment acquired through capital expansion loan $723,000  $1,307,000 
Property and equipment acquired through capital lease obligations  -   86,000 
Reclass of property to equipment held for sale  4,465,000   - 
Fair value of warrants granted as debt discount  3,083,000   54,000 
Dividends payable in common stock  5,000   5,000 
Extinguishment of warrant liability  2,634,000   - 

  Three months ended 
  Sept. 30, 
  2017  2016 
  (unaudited)  (unaudited) 
Net income (loss) $(5,617,000) $(219,000)
Modified EBITDA adjustments:        
Depreciation  171,000   214,000 
Interest expense  757,000   415,000 
Stock option and warrant compensation  (20,000)  147,000 
Impairment costs  2,000,000   - 
Financing costs and warrant modification  1,798,000   - 
Change in fair value of warrant liability  72,000   - 
Total EBITDA adjustments  4,778,000   776,000 
Modified EBITDA $(839,000) $557,000 

  Nine months ended Sept. 30, 
  2017  2016 
  (unaudited)  (unaudited) 
Net income (loss) $(7,457,000) $(2,591,000)
Modified EBITDA adjustments:        
Depreciation  430,000   689,000 
Interest expense  2,270,000   1,239,000 
Stock option and warrant compensation  298,000   449,000 
Impairment costs  2,000,000   - 
Financing costs and warrant modification  2,776,000   - 
Change in fair value of warrant liability  (3,236,000)  - 
Total EBITDA adjustments  4,538,000   2,377,000 
Modified EBITDA $(2,919,000) $(214,000)