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REED
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Reed's Reports Fourth Quarter and Full Year 2024 Results

1. Q4 2024 sales decreased to $9.7M, down from $11.7M. 2. Gross profit increased to $2.9M, gross margin at 30%. 3. Management reported improved operating loss, now at $2.9M. 4. New product launches and stronger retail distribution underway. 5. Company optimistic about future growth and profitability in 2025.

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Why Bullish?

Despite declining sales, gross profit and margins improved significantly, reflecting operational efficiencies that could attract investors, similar to previous quarters where cost control led to recovery.

How important is it?

The article discusses crucial financial improvements and strategic plans that directly impact REED's market performance, though current sales decline is a concern.

Why Long Term?

The positive management outlook and planned product expansions indicate potential for sustained growth, mirrored by other companies in similar situations that saw long-term benefits from strategic restructuring.

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COKEPEP
Management to Host Conference Call Tomorrow at 8:30 a.m. Eastern Time March 25, 2025 16:05 ET  | Source: Reeds, Inc. NORWALK, Conn., March 25, 2025 (GLOBE NEWSWIRE) -- Reed’s, Inc. (OTCQX: REED) (“Reed’s” or the “Company”), owner of the nation’s leading portfolio of handcrafted, natural ginger beverages, is reporting financial results for the three months and twelve months ended December 31, 2024. Q4 2024 Financial Highlights (vs. Q4 2023): Net sales were $9.7 million compared to $11.7 million.Gross profit increased more than 5x to $2.9 million compared to $0.5 million, with gross margin of 30.0% compared to 4.0%. This includes one-time charges in the prior-year period related to a non-cash packaging inventory valuation adjustment and a provision for product hold related to the Company’s swing-lid program.Delivery and handling costs were reduced by 10% to $3.00 per case.Selling, general and administrative expenses were $4.1 million compared to $3.0 million.Operating loss improved to $2.9 million compared to $5.0 million.Modified EBITDA was $(0.7) million compared to $43,000.     FY 2024 Financial Highlights (vs. FY 2023): Net sales were $37.9 million compared to $44.7 million.Gross profit increased 18% to $11.4 million compared to $9.7 million, with gross margin up 830 basis points to 30.0% compared to 21.7%.Delivery and handling costs were reduced by 22% to $2.75 per case.Selling, general and administrative expenses were $12.9 million compared to $11.0 million.Operating loss improved to $7.4 million compared to $9.4 million.Modified EBITDA was $(4.1) million compared to $(3.7) million. Management Commentary “We are encouraged by the meaningful progress we made in 2024 as we implemented significant steps to strengthen our balance sheet, streamline operations, and drive efficiencies,” said Norman E. Snyder, Jr., CEO of Reed’s. “During the fourth quarter, we closed a $10 million private placement, in addition to the incremental capital, we sourced a new demand note, and completed the convertible debt restructuring during the third quarter, providing the necessary capital to invest in inventory, personnel, marketing, strategic partnerships, and international expansion — all of which we believe will position Reed’s for accelerated growth and profitability. We also increased retail penetration during the quarter, securing notable distribution gains across Kroger, Albertsons/Safeway, Harris Teeter, Stop and Shop, Giant Eagle, and Costco for multiple products, including Reed’s Ginger Ale, Virgil’s Root Beer and Vanilla Cream Cans. “Subsequent to year-end, we welcomed Douglas W. McCurdy as our new CFO. Doug brings extensive finance, operational and leadership experience to our team. We also appointed Salvatore Vassallo, a seasoned consumer packaged goods and supply chain executive, as our new Vice President of Operations. We believe their combined leadership in finance, supply chain and operations will help drive both efficiency and scalability at Reed’s. “Looking ahead, we remain focused on executing our growth strategy with a solid foundation and strengthened balance sheet. This year we are expanding our product portfolio with the launch of our new multi-functional beverage line, expected to hit shelves in April. We have already secured over 8,000 points of distribution across key retailers nationwide. With a de-leveraged balance sheet, improved financial flexibility, and growing retail momentum, we believe we are well positioned to deliver meaningful growth and profitability in 2025.” Fourth Quarter 2024 Financial Results During the fourth quarter of 2024, net sales were $9.7 million compared to $11.7 million in the year-ago period. This decrease was primarily driven by short order shipments due to prior inventory constraints. Gross profit for the fourth quarter of 2024 increased to $2.9 million compared to $0.5 million for the same period in 2023. Gross margin was 30.0% compared to 4.0% in the year-ago quarter. The increase was driven by one-time charges in the prior-year period, including a $1.8 million non-cash packaging inventory valuation adjustment and a $1.3 million provision for product holds related to the Company’s swing-lid program. Delivery and handling costs were reduced by 10% to $1.7 million during the fourth quarter of 2024 compared to $1.8 million in the fourth quarter of 2023. Delivery and handling costs were 17% of net sales or $3.00 per case, compared to 16% of net sales or $2.82 per case during the same period last year. Selling, general and administrative costs were $4.1 million during the fourth quarter of 2024 compared to $3.0 million in the year-ago quarter. Operating loss during the fourth quarter of 2024 improved to $2.9 million or $(0.20) per share, compared to $5.0 million or $(1.55) per share in the fourth quarter of 2023. Modified EBITDA was $(0.7) million in the fourth quarter of 2024 compared to $43,000 in the fourth quarter of 2023. Liquidity and Cash Flow For the fourth quarter of 2024, the Company used approximately $3.9 million of cash from operating activities compared to cash used of $0.2 million for the same period in 2023. As of December 31, 2024, the Company had approximately $10.4 million of cash and $9.6 million of total debt net of capitalized financing fees. This compares to $0.6 million of cash and $27.4 million of total debt net of capitalized financing fees at December 31, 2023. Conference Call The Company will conduct a conference call tomorrow, March 26, 2025, at 8:30 a.m. Eastern time to discuss its results for the three months and twelve months ended December 31, 2024. Reed’s management will host the conference call, followed by a question-and-answer period. Date: Wednesday, March 26, 2025Time: 8:30 a.m. Eastern timeToll-free dial-in number: (800) 717-1738International dial-in number: (646) 307-1865Conference ID: 31278Webcast: Reed’s Q4 & FY 2024 Conference Call Please dial into the conference call 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact the company’s investor relations team at (720) 330-2829. The conference call will also be broadcast live and available for replay on the investor relationssection of the Company’s website at https://investor.reedsinc.com. About Reed's, Inc. Reed’s is an innovative company and category leader that provides the world with high quality, premium and naturally bold™ better-for-you beverages. Established in 1989, Reed's is a leader in craft beverages under the Reed’s®, Virgil’s® and Flying Cauldron® brand names. The Company’s beverages are now sold in over 45,000 stores nationwide. Reed’s is known as America's #1 name in natural, ginger-based beverages. Crafted using real ginger and premium ingredients, Reed’s portfolio includes ginger beers, ginger ales, ready-to- drink ginger mules and hard ginger ales. The brand has recently successfully expanded into the zero-sugar segment with its proprietary, natural sweetener system. Virgil's® is an award-winning line of craft sodas, made with the finest natural ingredients and without GMOs or artificial preservatives. The brand offers an array of great tasting, bold flavored sodas including Root Beer, Vanilla Cream, Black Cherry, Orange Cream, and Cola. These flavors are also available in five zero sugar varieties which are naturally sweetened and certified ketogenic. Flying Cauldron® is a non-alcoholic butterscotch beer prized for its creamy vanilla and butterscotch flavors. Sought after by beverage aficionados, Flying Cauldron is made with natural ingredients and no artificial flavors, sweeteners, preservatives, gluten, caffeine, or GMOs. For more information, visit drinkreeds.com, virgils.com and flyingcauldron.com. To receive exclusive perks for Reed’s investors, please visit the Company’s page on the Stockperks app here. Forward-Looking Statements Statements in this release that are not historical are forward-looking statements. These forward- looking statements are typically identified by terms such as "believe," "expected,” "looking ahead," “remain focused,” “growing retail momentum,” “will position,” “expanding,” “well-positioned” and similar expressions. These forward-looking statements are based on current expectations. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties, and assumptions, many of which involve factors or circumstances that are beyond our control. These risks could materially impact our ability to access raw materials, production, transportation and/or other logistics needs. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, Reed’s actual results could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties referred to above include, but are not limited to: inventory shortages; risks associated with new product releases; the impacts of further inflation; risks that customer demand may fluctuate or decrease; risks that we are unable to collect unbilled contractual commitments, particularly in the current economic environment; our ability to compete successfully and manage growth; our ability to attract and retain qualified management and personnel; our ability to develop and expand strategic and third party distribution channels; our dependence on third party suppliers, brewers and distributors; third party co-packers meeting contractual commitments; risks related to our business expansion and international operations; our ability to continue to innovate; our strategy of making investments in sales to drive growth; increasing costs of fuel and freight, protection of intellectual property; competition; general political or destabilizing events, including the wars in Ukraine and Israel, conflict or acts of terrorism; financial markets, commodity and currency impacts of the wars; the effect of evolving domestic and foreign government regulations, including those addressing data privacy and cross-border data transfers; and other risks detailed from time to time in Reed’s public filings, including Reed’s annual report on Form 10-K expected to be filed on or before April 1, 2025, which will be available on the Securities and Exchange Commission’s web site at www.sec.gov. These forward-looking statements are based on current expectations and speak only as of the date hereof. Reed’s assumes no obligation and does not intend to update these forward-looking statements, except as required by law. Investor Relations Contact Sean Mansouri, CFA or Aaron D’SouzaElevate IRir@reedsinc.com(720) 330-2829 REED’S, INC.STATEMENTS OF OPERATIONSFor the Three Months and Year Ended December 31, 2024 and 2023(Amounts in thousands, except share and per share amounts)               Three Months Ended December 31, Year Ended December 31,  2024  2023  2024  2023 Net Sales$9,733  $11,693  $37,954  $44,711 Cost of goods sold 6,816   8,106   26,578   31,884 Inventory write-offs associated with exited categories and major packaging and formula changes -   1,848   -   1,848 Product quality hold write-down -   1,267   -   1,267 Gross profit 2,917   472   11,376   9,712               Operating expenses:             Delivery and handling expense 1,659   1,847   5,863   7,561 Selling and marketing expense 932   1,298   4,405   4,865 General and administrative expense 3,120   1,691   8,359   6,118 Provision for receivable with former related party 115   585   115   585 Total operating expenses 5,826   5,421   18,742   19,129               Loss from operations (2,909)  (4,949)  (7,366)  (9,417)              Other Income 445   -   445   - Interest expense, net (903)  (1,647)  (5,481)  (6,106)              Net loss (3,367)  (6,596)  (12,402)  (15,523)              Dividends on Series A Convertible Preferred Stock -   -   (5)  (5)              Net loss attributable to common stockholders$(3,367) $(6,596) $(12,407) $(15,528)              Loss per share – basic and diluted$(0.23)  $(2.07)  $(1.54) $(4.39)              Weighted average number of shares outstanding – basic and diluted 14,608,867   3,179,661   8,041,496   3,537,882                  REED’S, INC, BALANCE SHEETS (Amounts in thousands, except share amounts)            December 31,  December 31, 20242023ASSETS        Current assets:        Cash $10,391  $603 Accounts receivable, net of allowance of $859 and $860, respectively  3,979   3,571 Inventory, net  8,114   11,300 Receivable from former related party  144   259 Prepaid expenses and other current assets  683   2,028 Total current assets  23,311   17,761          Property and equipment, net of accumulated depreciation of $636 and $1,068, respectively  1,185   493 Intangible assets  644   629 Total assets $25,140  $18,883          LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        Current liabilities:        Accounts payable $6,206  $9,133 Accrued expenses  984   1,096 Revolving line of credit, net of capitalized financing costs of $201  -   9,758 Senior secured loan, net of capitalized financing costs of $329  9,571   - Payable to former related party  144   259 Current portion of convertible notes payable, net of debt discount of $424  -   6,737 Current portion of lease liabilities  -   207 Total current liabilities  16,905   27,190          Convertible note payable, net of debt discount of $148 less current portion  -   10,874 Lease liabilities, less current portion  837   - Total liabilities  17,742   38,064          Commitments and Contingencies  0   0          Stockholders’ equity (deficit):        Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding  94   94 Common stock, $.0001 par value, 180,000,000 shares authorized; 45,371,247 and 4,187,291 shares issued and outstanding, respectively  3   - Additional paid in capital  158,435   119,452 Accumulated deficit  (151,134)  (138,727)Total stockholders’ equity (deficit)  7,398   (19,181)Total liabilities and stockholders’ equity $25,140  $18,883           REED’S, INC.STATEMENTS OF CASH FLOWSFor the Years Ended December 31, 2024 and 2023(Amounts in thousands)           December 31, 2024  December 31, 2023 Cash flows from operating activities:        Net loss $(12,402) $(15,523)Adjustments to reconcile net loss to net cash used in operating activities:        Depreciation  125   142 Loss on disposal of property & equipment  -   8 Amortization of debt discount  1,057   1,137 Fair value of vested options  528   490 Fair value of vested restricted shares granted to directors and officers for services  -   3 Common shares issued for compensation  -   36 Product quality hold write-down  -   1,267 Allowance for estimated credit losses  -    608 Provision for receivable with former related party  115   585 Inventory write down  277   955 Accrued interest on convertible note  3,409   2,831 Lease liability  (205)  (187)Changes in operating assets and liabilities:        Accounts receivable  (408)  275 Inventory  2,909   2,653 Prepaid expenses and other assets  561   528 Decrease in right of use assets  169   140 Accounts payable  (2,143)  (1,073)Accrued expenses  (116)  859 Net cash used in operating activities  (6,124)  (4,266)Cash flows from investing activities:        Intangible asset trademark costs  (15)  (3)Purchase of property and equipment  (152)  (85)Sale of property and equipment  -   68 Net cash used in investing activities  (167)  (20)Cash flows from financing activities:        Proceeds from line of credit  29,195   43,836 Payments on the line of credit  (39,153)  (45,213)Proceeds from sale of common stock  -   4,016 Proceeds from senior secured loan payable, net of expenses  9,524   - Proceeds from convertible note payable, net of expenses  1,400   3,751 Proceeds received from SAFE agreement  4,096   - Proceeds received from rights offering  11,883   - Payment of convertible note payable  (514)  (200)Amounts from former related party, net  (115)  (1,833)Payment of costs recorded as debt discount  (237)  - Repurchase of common stock  -   (1)Net cash provided by financing activities  16,079   4,356          Net increase in cash  9,788   70 Cash at beginning of period  603   533 Cash at end of period $10,391  $603          Supplemental disclosures of cash flow information:        Cash paid for interest $870  $1,046 Non-cash investing and financing activities:        Dividends on Series A Convertible Preferred Stock $5  $5 Common Shares issued for financing costs $-   273 Common Shares issued upon conversion of convertible notes payable $22,478  $- Common Shares issued upon conversion of SAFE agreement $4,096  $- Initial recognition of right of use asset and operating lease liability upon execution of new lease $835  $-           Modified EBITDA In addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional fees, inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment.  Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Set forth below is a reconciliation of net loss to Modified EBITDA for the three and twelve months ended December 31, 2024, and 2023 (unaudited; in thousands):   Three Months Ended December 31, Year Ended December 31,  2024  2023  2024  2023 Net loss $(3,367) $(6,596) $(12,402) $(15,523)             Modified EBITDA adjustments:            Depreciation and amortization  80   67   289   281 Interest expense  903   1,647   5,481   6,106 Tax expense  43   251   111   251 Stock option and other noncash compensation  260   139   528   493 Provision for receivable with former related party  115   585   115   585 Product quality hold write-down  (2)  1,267   42   1,267 Inventory write-offs associated with exited categories and major packaging and formula changes  -   1,848   -   1,848 Impairment of assets  473   -   473   - One-time change in policy for discounts  -   756   -   756 Professional fees  59   -   393   - Legal settlement  673   0   843   12 Severance costs  15   79   57   256 Total EBITDA adjustments $2,619  $6,639  $8,332  $11,855              Modified EBITDA $(748) $43  $(4,070) $(3,668)              We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following: Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs;Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; andAlthough depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements.

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