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FOR IMMEDIATE RELEASE
CONTACT: | Christopher Reed, Founder and CEO |
310.217.9400 ext. 10
John Mills, Integrated Corporate Relations
310.954.1105• jmills@icrinc.com
REED’S INC ANNOUNCES FIRST QUARTER 2007 FINANCIAL RESULTS
--Achieves record sales growth in excess of 50%--
Los Angeles, CA ― May 17, 2007 ― Reed’s, Inc. (OTC BB: REED), today announced its financial results for the first quarter ended March 31, 2007.
First Quarter 2007 Highlights:
· | Net Sales increased 52.2% to approximately $3.0 million compared to the same period last year |
· | Gross Profit increased 85.8% to approximately $540,000 |
· | Gross Profit Margin increased 3.2% to 17.9% |
“We are very pleased with our first quarter results as we achieved record sales growth in excess of 50% over the prior year period validating the strong demand for our product offering within the mainstream marketplace,” commented Chris Reed, Founder and Chief Executive Officer. “During the first quarter, we benefited from the utilization of our IPO proceeds which enabled us to establish the necessary infrastructure to meet the significant demand for our product offering. Additionally, we began to invest in our sales force, the impact of which will be more heavily felt beginning in the second half of 2007 and beyond as we continue to extend the reach of the Reed’s brand into key national sales accounts.”
Mr. Reed continued, “Core to our growth strategy remains extending the reach of our brand through additional points of distribution. We recently announced exclusive distribution agreements with Manhattan Beer Distributors, Columbia Distribution and Great State Beverages which will enable us to expand our distribution beyond natural food accounts to the mainstream marketplace and generate additional brand awareness.”
Mr. Reed concluded, “Throughout the remainder of 2007 we will continue to build upon our leadership position within the high-growth ‘New Age’ beverage category. We are excited to launch our Virgil’s diet soda line during the second quarter of 2007 which will allow us to reach a larger audience and further expand our distribution network. Additionally, we see opportunity to further expand and enhance our product offering through specialty packaging and co-branding marketing opportunities. As a result, we believe we are well-positioned for growth for the remainder of 2007 and beyond.”
First Quarter 2007 Results
For the quarter ended March 31, 2007 net sales increased 52.2% to $3,012,690 from $1,979,272 for the same period in the prior year. Sales growth was driven by 37.2% and 38.0% increases in our core brands Reed’s Ginger Brews and Virgil’s Root Beer, respectively.
Gross profit for the quarter ended March 31, 2007 increased 85.8% to $539,622, or 17.9% of sales, from $290,396, or 14.7% of sales for the prior year.
Operating expenses for the quarter ended March 31, 2007 increased 79.4% to $1,003,508 from $559,386 from the prior year. The increase in general, administrative and selling expenses was primarily due to increased salaries and commissions as a result of an increase in the Company’s sales force, higher sales expenditures and expense associated with being a public company.
For the quarter ended March 31, 2007, interest expense decreased to $47,551 compared to interest expense of $100,607 in the first quarter of 2006. Interest expense decreased in the first quarter of 2007 principally due to the pay down of the Company’s lines of credit and certain long-term debt.
The net loss attributable to common stockholders for the quarter ended March 31, 2007 was $487,946 compared to a net loss of $369,597 for the quarter ended March 31, 2006. The net loss per share attributable to common stockholders - basic and fully diluted was $0.07 for each of the quarters ended March 31, 2007 and March 31, 2006.
For the quarter ended March 31, 2007, cash and cash equivalents were $469,643, working capital was $2,125,627, total debt (including long-term debt and obligations on lines of credit) was $2,365,856, stockholders’ equity was $4,115,270 and the accumulated deficit was $5,990,088.
About Reed’s, Inc.
Reed's develops, manufactures, markets and sells innovative, all natural, non-alcoholic beverages, candies and ice creams. Its non-alcoholic Ginger Brews are unique in the beverage industry being brewed from fresh ginger, spices and fruits. Award-winning gourmet product lines include: Reed's Ginger Brews, Reed's Ginger Juice Brews, Reed's Ginger Candies and Reed's Ginger Ice Creams. Additionally, the Company has acquired Virgil's Root Beer and China Cola product lines. Reed’s products are sold through specialty gourmet and natural food stores, supermarket chains, retail stores and restaurants nationwide and in Canada. For more information about Reed’s, please visit the company’s website at: www.reedsgingerbrew.com or call (800) 99-REEDS.
SAFE HARBOR STATEMENT
Some potions of this press release, particularly those describing Reed’s goals and strategies, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 factors, including difficulties in marketing its products and services, need for capital, competition from other companies 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 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.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2007 and 2006
(Unaudited)
Three months ended | |||||||
March 31, | March 31, | ||||||
2007 | 2006 | ||||||
SALES | $ | 3,012,690 | $ | 1,979,272 | |||
COST OF SALES | 2,473,068 | 1,688,876 | |||||
GROSS PROFIT | 539,622 | 290,396 | |||||
OPERATING EXPENSES | |||||||
Selling | 554,165 | 287,158 | |||||
General & Administrative | 449,343 | 272,228 | |||||
Total Operating Expenses | 1,003,508 | 559,386 | |||||
LOSS FROM OPERATIONS | (463,886 | ) | (268,990 | ) | |||
OTHER INCOME (EXPENSES) | |||||||
Interest Income | 23,491 | - | |||||
Interest Expense | (47,551 | ) | (100,607 | ) | |||
Total Other Income (Expenses) | (24,060 | ) | (100,607 | ) | |||
NET LOSS | $ | (487,946 | ) | $ | (369,597 | ) | |
LOSS PER SHARE — Basic and Diluted | $ | (0.07 | ) | $ | (0.07 | ) | |
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED | 7,143,185 | 5,157,077 |
REED’S, INC.
BALANCE SHEET
(Unaudited)
March 31, 2007 | December 31, 2006 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash | $ | 469,643 | $ | 1,638,917 | |||
Restricted cash | 1,726,120 | 1,580,456 | |||||
Inventory | 1,990,554 | 1,511,230 | |||||
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $173,253 as of March 31, 2007 and December 31, 2006 | 1,369,389 | 1,183,763 | |||||
Other receivables | 36,461 | 24,811 | |||||
Prepaid expenses | 246,318 | 164,462 | |||||
Total Current Assets | 5,838,485 | 6,103,639 | |||||
Property and equipment, net of accumulated depreciation of $701,901 as of March 31, 2007 and $663,251 as of December 31, 2006 | 1,928,137 | 1,795,163 | |||||
OTHER ASSETS | |||||||
Brand names | 800,201 | 800,210 | |||||
Other intangibles, net of accumulated amortization of $4,653 as of March 31, 2007 and $4,467 as of December 31, 2006 | 13,960 | 14,146 | |||||
Deferred Costs | 82,585 | - | |||||
Total Other Assets | 896,746 | 814,347 | |||||
TOTAL ASSETS | $ | 8,663,368 | $ | 8,713,149 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable | $ | 1,823,811 | $ | 1,695,014 | |||
Bank overdraft | 224,872 | - | |||||
Lines of credit | 1,354,896 | 1,355,526 | |||||
Current portion of long term debt | 175,720 | 71,860 | |||||
Accrued interest | 7,818 | 27,998 | |||||
Accrued expenses | 125,741 | 118,301 | |||||
Total Current Liabilities | 3,712,858 | 3,268,699 | |||||
Long term debt, less current portion | 835,240 | 821,362 | |||||
Total Liabilities | 4,548,098 | 4,090,061 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
STOCKHOLDERS’ EQUITY | |||||||
Preferred stock, $10.00 par value, 500,000 shares authorized, 58,940 issued and outstanding at March 31, 2007 and December 31, 2006, liquidation preference of $10.00 per share | 589,402 | 589,402 | |||||
Common stock, $.0001 par value, 11,500,000 shares authorized, 7,143,185 shares issued and outstanding at March 31, 2007 and December 31, 2006 | 714 | 714 | |||||
Additional paid in capital | 9,515,242 | 9,535,114 | |||||
Accumulated deficit | (5,990,088 | ) | (5,502,142 | ) | |||
Total stockholders’ equity | 4,115,270 | 4,623,088 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 8,663,368 | $ | 8,713,149 |
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2007 and 2006
(Unaudited)
Three Months Ended | |||||||
March 31, | March 31, | ||||||
2007 | 2006 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net Loss | $ | (487,946 | ) | $ | (369,597 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 38,836 | 34,918 | |||||
Fair value of options issued to employees | 25,128 | ||||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (185,626 | ) | (207,103 | ) | |||
Inventory | (479,324 | ) | (212,673 | ) | |||
Prepaid Expenses | (81,856 | ) | 36,303 | ||||
Other receivables | (11,650 | ) | 1,200 | ||||
Accounts payable | 128,797 | 199,140 | |||||
Accrued expenses | 7,440 | 19,976 | |||||
Accrued interest | (20,180 | ) | 6,408 | ||||
Net cash used in operating activities | (1,066,381 | ) | (491,428 | ) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Increase in restricted cash | (145,664 | ) | - | ||||
Purchase of property and equipment | (171,624 | ) | (19,271 | ) | |||
Net cash used in investing activities | (317,288 | ) | (19,271 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds received from long term debt borrowings | 163,276 | - | |||||
Increase in bank overdraft | 224,872 | - | |||||
Principal payments on debt | (45,538 | ) | (28,703 | ) | |||
Proceeds received on sale of common stock | - | 811,955 | |||||
Net borrowing (payment) on lines of credit | (630 | ) | 93,993 | ||||
Payment for public offering expenses | (45,000 | ) | - | ||||
Deferred Costs | (82,585 | ) | (198,833 | ) | |||
Net cash provided by financing activities | 214,395 | 678,412 | |||||
NET (DECREASE)INCREASE IN CASH | (1,169,274 | ) | 167,713 | ||||
CASH — Beginning of period | 1,638,917 | 27,744 | |||||
CASH — End of period | $ | 469,643 | $ | 195,457 |