LOS ANGELES, May 11, 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 first quarter ending March 31, 2016.
Financial Highlights for First Quarter 2016 versus 2015
- First quarter net sales decreased from a record $10.7 million to $10.0 million.
- Gross profit decreased from $3.3 million to $1.9 million due to a one-time non-cash charge of $0.7 million.
- Gross margin decreased from 30.5% to 18.9%. Excluding non-cash charges gross margin would have been 26%.
- Operating expenses decreased 5.5% driven by:
- Idle Plant costs reduced by 59.1% to $0.3 million from $0.7 million
- Delivery and handling expenses decreased 27.4% to $0.85 million from $1.17 million.
- Sales and marketing expenses decreased 12.7% to $1.0 million from $1.2 million.
- G&A expenses increased to $1.2 million from $0.9 million.
- Net loss was ($1.6 million) versus ($0.3 million) in the year ago period.
Marketing Highlights:
- Company debuted first all-natural fountain sodas at Natural Products Expo West, the largest natural food show in the world, to strong positive reviews. New beverage format allows Reed's to sell premium craft sodas at 80% less cost than current bottle format and opens company's brands to much wider marketplace across the US. Already in talks with national and regional fast casual restaurant chains and supermarkets.
- Stater Bros Markets, a dominate Southern California retailer, authorized Reed's and Virgil's craft sodas for the chain
- Beverage World magazine named Reed's CEO Chris Reed #4 of top 50 Beverage World Disruptors in their January issue for our craft sodas
- Stronger Ginger Brew launched at Expo West. Gains national distribution at Kroger Supermarkets.
"Reed's continues to recover from supply chain issues that caused last year's 2nd and 3rd quarter out of stocks. New production partners are keeping us in stock now and we continue to reach out and bring back shelf placements. The Reed's Ginger Brew line is already back in a growth mode. The Virgil's soda line and our Kombucha line were hit harder from the 2015 supply chain issues and we have started their recovery from a bigger deficit.
Reeds was invited to develop and bid on an all natural soda fountain version of our brands with a large national chain of restaurants. We débuted our soda fountain products at the Natural Products Expo in March, the largest natural food trade show in the world. The reception was well received and we are negotiating placements with a number of large retailers.
Through soda fountain versions of our products, we can offer our beverages at 80% off every day prices while maintaining our margins due to the efficiencies of the soda fountain system. This opens up our sodas to a new marketplace that would ordinarily look at our products as too expensive for their customers or not profitable enough for them. We look forward to the new business in our soda fountain products in addition to driving growth for our packaged brands," commented Chris Reed, Founder and CEO of Reed's Inc.
Dan Miles, Chief Financial Officer of Reeds' Inc. stated, "Operating expenses decreased 5.5% during the quarter driven by more efficient shipping and handling, sales and marketing and production operations at our L.A. plant that experienced a 59% reduction in idle plant costs. We continue to work on improving operating efficiencies as we focus on sales growth during the peak summer selling season."
Mr. Miles continued, "Beginning this quarter we are presenting our results in industry standard 8-ounce serving equivalents. Additionally, we will begin the process to change our fiscal year from a calendar year to a 52-week fiscal year. We believe that this will help investors better understand our business results and the progress that we are making with our leading brands."
The Company will conduct a conference call at 4:30 PM EDT on May 11th to discuss its 2016 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 1-800-909-7944
International callers should dial 1-212-231-2901
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.
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
| REED'S, INC. | ||||||||||
| CONDENSED BALANCE SHEETS | ||||||||||
| March 31, 2016 | December 31, 2015 | |||||||||
| (Unaudited) | ||||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 648,000 | $ | 1,816,000 | ||||||
| Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $263,000 and $356,000, respectively | 2,675,000 | 2,894,000 | ||||||||
| Inventory, net of reserve for obsolescence of $220,000 and $290,000, respectively | 8,186,000 | 7,927,000 | ||||||||
| Prepaid inventory | 203,000 | 47,000 | ||||||||
| Prepaid and other current assets | 456,000 | 769,000 | ||||||||
| Total Current Assets | 12,168,000 | 13,453 ,000 | ||||||||
| Property and equipment, net of accumulated depreciation of $4,416,000 and $4,216,000, respectively | 5,788,000 | 5,369,000 | ||||||||
| Brand names | 1,029,000 | 1,029,000 | ||||||||
| Total assets | $ | 18,985,000 | $ | 19,851,000 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | ||||||||||
| Current Liabilities: | ||||||||||
| Accounts payable | $ | 7,721,000 | $ | 7,458,000 | ||||||
| Accrued expenses | 183,000 | 168,000 | ||||||||
| Line of credit | 4,250,000 | 4,443,000 | ||||||||
| Current portion of long term financing obligations | 167,000 | 160,000 | ||||||||
| Current portion of capital leases payable | 151,000 | 153,000 | ||||||||
| Current portion of term loans | 341,000 | 341,000 | ||||||||
| Total current liabilities | 12,813,000 | 12,723,000 | ||||||||
| Long term financing obligation, less current portion, net of discount of $907,000 and $953,000, respectively | 1,427,000 | 1,443,000 | ||||||||
| Capital leases payable, less current portion | 536,000 | 490,000 | ||||||||
| Capital expansion loan | 1,896,000 | 1,542,000 | ||||||||
| Term loan, less current portion, net of discount $106,000 and $132,000, respectively | 2,894,000 | 2,868,000 | ||||||||
| Total Liabilities | 19,566,000 | 19,066,000 | ||||||||
| Commitments and contingencies | ||||||||||
| Stockholders' equity (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, 13,184,331 and 13,160,860 shares issued and outstanding, respectively | 1,000 | 1,000 | ||||||||
| Additional paid in capital | 27,613,000 | 27,399,000 | ||||||||
| Accumulated deficit | (28,289,000 | ) | (26,709,000 | ) | ||||||
| Total stockholders' equity (deficiency) | (581,000 | ) | 785,000 | |||||||
| Total liabilities and stockholders' equity (deficiency) | $ | 18,985,000 | $ | 19,851,000 | ||||||
| REED'S, INC. | ||||||||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||||||||
| For the Three Months Ended March 31, 2016 and 2015 | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended March 31, | ||||||||||
| 2016 | 2015 | |||||||||
| Sales | $ | 10,004,000 | $ | 10,672,000 | ||||||
| Cost of goods sold | 8,111,000 | 7,413,000 | ||||||||
| Gross profit | 1,893,000 | 3,259,000 | ||||||||
| Operating expenses: | ||||||||||
| Delivery and handling expenses | 849,000 | 1,169,000 | ||||||||
| Selling and marketing expense | 1,041,000 | 1,193,000 | ||||||||
| General and administrative expense | 1,205,000 | 914,000 | ||||||||
| Total operating expenses | 3,095,000 | 3,276,000 | ||||||||
| Loss from operations | (1,202,000 | ) | (17,000 | ) | ||||||
| Interest expense | (378,000 | ) | (254,000 | ) | ||||||
| Net loss | $ | (1,580,000 | ) | $ | (271,000 | ) | ||||
| Loss per share – basic and diluted | $ | (0.12 | ) | $ | (0.02 | ) | ||||
| Weighted average number of shares outstanding – basic and diluted | 13,184,331 | 13,068,675 | ||||||||
| REED'S, INC. | ||||||||||||||||||||||||||||
| CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) | ||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2016 | ||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
| Series A | Additional | Total | ||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-In | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficiency) | ||||||||||||||||||||||
| Balance, January 1, 2015 | 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 | 169,000 | 169,000 | ||||||||||||||||||||||||||
| Net loss | (1,580,000 | ) | (1,580,000 | ) | ||||||||||||||||||||||||
| Balance, March 31, 2016 | 13,184,331 | $ | 1,000 | 9,411 | $ | 94,000 | $ | 27,613,000 | $ | (28,289,000 | ) | $ | (581,000 | ) | ||||||||||||||
| REED'S, INC. | ||||||||
| CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
| For the Three Months Ended March 31, 2016 and 2015 | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,580,000 | ) | $ | (271,000 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 261,000 | 213,000 | ||||||
| Fair value of stock options issued to employees | 169,000 | 212,000 | ||||||
| (Decrease) increase in allowance for doubtful accounts | (93,000 | ) | 1,000 | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 313,000 | (479,000 | ) | |||||
| Inventory | (259,000 | ) | (2,054,000 | ) | ||||
| Prepaid Inventory | (156,000 | ) | 474,000 | |||||
| Prepaid expenses and other current assets | 312,000 | 168,000 | ||||||
| Accounts payable | 263,000 | 1,267,000 | ||||||
| Accrued expenses | 15,000 | 11,000 | ||||||
| Net cash used in operating activities | (755,000 | ) | (458,000 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (186,000 | ) | (351,000 | ) | ||||
| Net cash used in investing activities | (186,000 | ) | (351,000 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from warrant exercises | 45,000 | 31,000 | ||||||
| Principal repayments on long term financing obligation | (37,000 | ) | (31,000 | ) | ||||
| Principal repayments on capital lease obligation | (42,000 | ) | (33,000 | ) | ||||
| Net draw down (repayment) on line of credit | (193,000 | ) | 1,104,000 | |||||
| Net cash (used in) provided by financing activities | (227,000 | ) | 1,071,000 | |||||
| Net increase (decrease) in cash | (1,168,000 | ) | 262,000 | |||||
| Cash at beginning of period | 1,816,000 | 959,000 | ||||||
| Cash at end of period | $ | 648,000 | $ | 1,221,000 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 364,000 | $ | 201,000 | ||||
| Non Cash Investing and Financing Activities | ||||||||
| Property and equipment acquired through capital expansion loan | $ | 354,000 | $ | 311,000 | ||||
| Property and equipment acquired through capitalized leases | 86,000 | 250,000 | ||||||
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