LOS ANGELES, May 15, 2017 (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 first quarter ended March 31, 2017.
Financial Results for the First Quarter 2017 versus First Quarter 2016
- As previously announced, first quarter net sales decreased from $10.0 million to $8.3 million
- Private label and kombucha sales were down significantly year over year and were the primary contributors to the sales
decline
- Gross profit decreased from $1.9 million to $1.1 million
- Gross margin decreased from 19% to 13%
- Operating expenses decreased 15% driven by:
• Delivery and handling expenses decreased 12% from $0.8 million to $0.7 million
• Selling and marketing expenses decreased 24% from $1.0 million to $0.8 million
• G&A expenses decreased 8% from $1.2 million to $1.1 million
- Net loss was ($2.0 million) versus ($1.6 million) in the year ago period
- Net loss per share was ($0.14) versus ($0.12) in the year ago period
“Our first quarter results were disappointing and we are actively rebuilding the business to return to growth and
profitability,” commented Reed’s Interim Chief Executive Officer Stefan Freeman. “We are in the process of a thorough evaluation of
the business and are establishing both short and long term goals to return to higher levels of profitability. In short, we
are simplifying the business without sacrificing our core brands or flavors. We have implemented a program to reduce the
number of product packaging options by more than 100. We believe this stock keeping unit (SKU) rationalization will be a
significant benefit to our co-packers, customers and our own production operations.”
Mr. Freeman continued, “We have made significant progress towards the launch of our new low calorie soda that we anticipate
introducing to the market this fall. The product tastes amazing and it is hard to believe that it has 10% of the calories of a
traditional sugar based soda. Consumers have been demanding it and we have developed it using all natural ingredients.
Simply put, it is fantastic. In addition, this fall we plan to relaunch Culture Club Kombucha in our best-selling five
flavors featuring new, simpler packaging that includes a new bottle, cap and label that will be more efficient and cost effective
to produce. Lastly, the field test of our natural fountain soda continues at one of the largest fast casual restaurant chains
and we intend to continue expansion of this program with additional customer pilots later this year. We believe the new
product offerings will better resonate with our customers who are looking for healthy alternatives to sugary soft drinks.
“We are focused on opening new channels of distribution including deeper conventional channel penetration as well as targeting
the up and down the street and on premise channels. We have better products than our competitors and we are going to fight to
regain our market share. We believe that there is significant opportunity for an all-natural product offering in the convenience
store channel. To better integrate into this new channel we are looking at making our products available in cans for
distribution where bottles are not appropriate. We are very excited about all the opportunities ahead for the various all natural
Reed’s beverage lines. Today, we are looking at the business with a new perspective and underlying goal of generating better
margins and driving improved profitability,” Mr. Freeman concluded.
Dan Miles, Chief Financial Officer of Reed's stated, “The majority of our sales decline was attributable to private label and
kombucha that were collectively down approximately $1 million versus the prior year period. We continued our discipline of
controlling expenses and realized operating expense savings of 15% during the quarter. We are targeting all aspects of our
cost of goods structure and anticipate additional savings by the end of the year. Additionally, our margins will begin to show the
implementation of our price increases in the third quarter.
“Early in the second quarter, we received a $3.4 million strategic investment that we believe will better position us to
capitalize on the peak soda selling season and the launch of our revolutionary and great tasting low calorie soda line. In
conclusion, we remain focused on driving improved margins and profitability through our core brands and incremental product
launches,” Mr. Miles concluded.
The Company will conduct a conference call today at 4:30 PM EDT to discuss its 2017 fiscal first 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 1-888 225 8011
International callers should dial 1-303 223 4375
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 also owns the
top-selling root beer line in natural foods, the Virgil’s Root Beer 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 previously 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 Instagram, Twitter and Facebook.
Reed’s Facebook Fan Page at https://www.facebook.com/ReedsGingerBrew
SAFE HARBOR STATEMENT
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995.
These statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to
other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and
other factors that could cause the actual results to differ materially from those contemplated by these statements. The
forward-looking statements contained in this press release are based on various factors and were derived using numerous
assumptions. In some cases, you can identify these forward-looking statements by the words “anticipate”, “estimate”, “plan”,
“project”, “continuing”, “ongoing”, “target”, “aim”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, or the
negative of those words and other comparable words.
Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of
which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct.
Forward-looking statements in this press release may include, without limitation, statements reflecting management’s expectations
for future financial performance and operating expenditures, expected growth, profitability and business outlook.
Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other
factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those
anticipated by such statements. These factors include, but are not limited to, the Company’s ability to manage growth; manage debt;
meet development goals; and other important risks and uncertainties referenced and discussed under the heading titled “Risk
Factors” in the Company’s filings with the Securities and Exchange Commission. Although we believe that the expectations reflected
in the forward-looking statements contained in this press release are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements.
The statements in this press release are made as of the date of this press release, even if subsequently made available by the
Company on its website or otherwise. The Company does not assume any obligations to update the forward-looking statements provided
to reflect events that occur or circumstances that exist after the date on which they were made.
|
|
|
| REED’S, INC. |
| CONDENSED BALANCE SHEETS |
| |
|
|
| |
March 31,
2017 |
December 31,
2016 |
| ASSETS |
(Unaudited) |
|
| Current assets: |
|
|
| Cash |
$ |
197,000 |
|
$ |
451,000 |
|
| Trade accounts receivable, net of allowance for doubtful accounts and
returns and discounts of $282,000 and $256,000, respectively |
|
2,414,000 |
|
|
2,485,000 |
|
| Inventory, net of reserve for obsolescence of $165,000 and $115,000,
respectively |
|
5,516,000 |
|
|
6,885,000 |
|
| Prepaid and other current assets |
|
377,000 |
|
|
500,000 |
|
| Total Current Assets |
|
8,504,000 |
|
|
10,321,000 |
|
| Property and equipment, net of accumulated depreciation of $4,984,000 and
$4,719,000, respectively |
|
7,934,000 |
|
|
7,726,000 |
|
| Brand names, net of reserve for impairment of $224,000 and $224,000,
respectively |
|
805,000 |
|
|
805,000 |
|
| Total assets |
$ |
17,243,000 |
|
$ |
18,852,000 |
|
| |
|
|
| LIABILITIES AND STOCKHOLDER'S DEFICIENCY |
|
|
| Current liabilities: |
|
|
| Accounts payable |
$ |
6,617,000 |
|
$ |
5,959,000 |
|
| Accrued expenses |
|
191,000 |
|
|
215,000 |
|
| Advances from officers |
|
380,000 |
|
|
- |
|
| Line of credit |
|
3,530,000 |
|
|
4,384,000 |
|
| Current portion of long term financing obligations |
|
197,000 |
|
|
190,000 |
|
| Current portion of capital leases payable |
|
187,000 |
|
|
183,000 |
|
| Current portion of bank notes |
|
953,000 |
|
|
953,000 |
|
| Total current liabilities |
|
12,055,000 |
|
|
11,884,000 |
|
| |
|
|
| Other long term liabilities |
|
|
| Other liabilities |
|
129,000 |
|
|
130,000 |
|
| Long term financing obligation, less current portion, net of discount
of $797,000 and $825,000, respectively |
|
1,337,000 |
|
|
1,363,000 |
|
| Capital leases payable, less current portion |
|
389,000 |
|
|
438,000 |
|
| Bank notes, net of discount $32,000 and $78,000, respectively |
|
6,077,000 |
|
|
5,919,000 |
|
| Warrant liability |
|
766,000 |
|
|
775,000 |
|
| Total Liabilities |
|
20,753,000 |
|
|
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, 19,500,000 shares authorized, 13,982,230
outstanding |
|
1,000 |
|
|
1,000 |
|
| Additional paid in capital |
|
30,111,000 |
|
|
29,971,000 |
|
| Accumulated deficit |
|
(33,716,000 |
) |
|
(31,723,000 |
) |
| Total stockholders' deficiency |
|
(3,510,000 |
) |
|
(1,657,000 |
) |
| Total liabilities and stockholders' deficiency |
$ |
17,243,000 |
|
$ |
18,852,000 |
|
| |
|
|
| |
| REED’S, INC. |
| CONDENSED STATEMENTS OF
OPERATIONS |
| |
| |
|
2017 |
|
|
2016 |
|
|
| Net sales |
$ |
8,295,000 |
|
$ |
10,004,000 |
|
|
| Cost of goods sold |
|
7,239,000 |
|
|
8,111,000 |
|
|
| Gross profit |
|
1,056,000 |
|
|
1,893,000 |
|
|
| |
|
|
|
| Operating expenses: |
|
|
|
| Delivery and handling expenses |
|
743,000 |
|
|
849,000 |
|
|
| Selling and marketing expense |
|
788,000 |
|
|
1,041,000 |
|
|
| General and administrative expense |
|
1,111,000 |
|
|
1,205,000 |
|
|
| Total operating expenses |
|
2,642,000 |
|
|
3,095,000 |
|
|
| |
|
|
|
| Loss from operations |
|
(1,586,000 |
) |
|
(1,202,000 |
) |
|
| Interest expense |
|
(416,000 |
) |
|
(378,000 |
) |
|
| Change in fair value of warrant liability |
|
9,000 |
|
|
|
| Net loss attributable to common stockholders |
$ |
(1,993,000 |
) |
$ |
(1,580,000 |
) |
|
| Loss per share – basic and diluted |
$ |
(0.14 |
) |
$ |
(0.12 |
) |
|
| Weighted average number of shares outstanding – basic and diluted |
|
13,982,230 |
|
|
13,184,000 |
|
|
| |
| |
| REED’S, INC. |
| CONDENSED STATEMENTS OF CASH
FLOWS |
| |
| |
|
March 31, 2017 |
|
|
March 31, 2016 |
|
| Cash flows from operating activities: |
|
|
| Net loss |
$ |
(1,993,000 |
) |
$ |
(1,580,000 |
) |
| Adjustments to reconcile net loss to net cash provided (used) in
operating activities: |
|
| Depreciation and amortization |
|
194,000 |
|
|
261,000 |
|
| Fair value of vested stock options issued to employees and
directors |
|
140,000 |
|
|
169,000 |
|
| Increase (decrease) in allowance for doubtful accounts |
|
26,000 |
|
|
(93,000 |
) |
| Increase in reserve for inventory |
|
50,000 |
|
|
| Change in fair value of warrant liability |
|
(9,000 |
) |
|
| Changes in operating assets and liabilities: |
|
|
| Accounts receivable |
|
45,000 |
|
|
313,000 |
|
| Inventory |
|
1,319,000 |
|
|
(415,000 |
) |
| Prepaid expenses and other assets |
|
124,000 |
|
|
312,000 |
|
| Accounts payable |
|
656,000 |
|
|
263,000 |
|
| Accrued expenses |
|
6,000 |
|
|
15,000 |
|
| Payment of other long term obligations |
|
(31,000 |
) |
|
0 |
|
| Net cash provided (used) by operating activities |
|
527,000 |
|
|
(755,000 |
) |
| Cash flows from investing activities: |
|
|
| Purchase of property and equipment |
|
(41,000 |
) |
|
(186,000 |
) |
| Net cash used in investing activities |
|
(41,000 |
) |
|
(186,000 |
) |
| Cash flows from financing activities: |
|
|
| Advances from officers |
|
380,000 |
|
|
0 |
|
| Proceeds from stock option and warrant exercises |
|
- |
|
|
45,000 |
|
| Principal payments on capital expansion loan |
|
(177,000 |
) |
|
| Principal repayments on long term financial obligation |
|
(44,000 |
) |
|
(37,000 |
) |
| Principal repayments on capital lease obligation |
|
(45,000 |
) |
|
(42,000 |
) |
| Net repayments on existing line of credit |
|
(854,000 |
) |
|
(193,000 |
) |
| Net cash used in financing activities |
|
(740,000 |
) |
|
(227,000 |
) |
| Net decrease in cash |
|
(254,000 |
) |
|
(1,168,000 |
) |
| Cash at beginning of period |
|
451,000 |
|
|
1,816,000 |
|
| Cash at end of period |
$ |
197,000 |
|
$ |
648,000 |
|
| |
|
|
| Supplemental disclosures of cash flow information: |
|
|
| Cash paid during the period for: |
|
|
| Interest |
$ |
400,000 |
|
$ |
364,000 |
|
| Non Cash Investing and Financing Activities |
|
|
| Property and equipment acquired through capital expansion loan |
$ |
288,000 |
|
$ |
354,000 |
|
| Property and equipment acquired through capital lease
obligations |
|
- |
|
|
86,000 |
|
| |
| |
| REED’S, INC. |
| MODIFIED EBITDA SCHEDULE |
| |
| |
March 31, |
| |
|
2017 |
|
|
2016 |
|
| |
(unaudited) |
(unaudited) |
| Net loss |
$ |
(1,993,000 |
) |
$ |
(1,580,000 |
) |
| |
|
|
| Modified EBITDA adjustments: |
|
|
| Depreciation and amortization |
|
194,000 |
|
|
261,000 |
|
| Interest expense |
|
416,000 |
|
|
378,000 |
|
| Stock option and warrant compensation |
|
140,000 |
|
|
169,000 |
|
| Change in fair value of warrant liability |
|
(9,000 |
) |
|
- |
|
| Total EBITDA adjustments |
$ |
741,000 |
|
$ |
808,000 |
|
| |
|
|
| Modified EBITDA |
$ |
(1,252,000 |
) |
$ |
(772,000 |
) |
| |
CONTACT: Reed's, Inc. Investor Relations (310) 217-9400 X6 Email: ir@reedsinc.com www.reedsinc.com
