Reed’s, Inc. Announces 2010 Year-End Results

Reed’s, Inc. (NASDAQ: REED) (OTCBB: REEDP), maker of the top-selling sodas in natural food stores nationwide, today announced its financial results for 2010.

Financial Highlights:

 --  Sales increased 34% to $20.4 million. --  Gross profit was 21% of sales during 2010, as compared to 24% in 2009,     reflecting start up costs incurred during the period. --  Operating expenses were about the same in 2010, compared to 2009. --  Modified EBITDA was $456,000 in 2010, as compared to a modified EBITDA     loss of $306,000 in 2009. (See modified EBITDA table at end of this     release for further non-GAAP information). --  Net loss for 2010 narrowed to $1,310,000, or $0.14 per share, from     $2,559,000 in 2009. --  Working capital at December 31, 2010 was $1.8 million, as compared to     $2.0 million at December 31, 2009. --  Cash availability was $1.1 million at December 31, 2010, as compared     to $1.3 million at December 31, 2009. 

“We are cautiously exuberant with our results for the year,” stated Chris Reed, Founder, Chairman and CEO of Reed’s, Inc. “Our growth has been the result of a lot of hard work developing the channels for our excellent brands.” Mr. Reed added, “Our strategy of diversifying with private label production is serving to fill production capacity as well as advance our branded business. We have increased our capabilities, since we are constantly developing formulas, brands and packaging. As a result, we have some new branded products in the pipeline for 2011 that are exciting and unique.”

James Linesch, Reed’s Chief Financial Officer, said, “Our 34% sales growth was driven by an over 17% increase in our branded business. Margins for our branded business held constant overall in 2010, as compared to 2009, despite certain raw materials cost increases. Our second half 2010 margins were negatively impacted by start-up costs on our private-label business and, to a lesser extent; on product rollout costs on our new ZERO line. ” Mr. Linesch added, “During 2010, our cash flow loss from operations was about $130,000. We also used $696,000 to build up inventory and increase accounts receivable, with our expanded base of business. We invested $383,000 in our plant. To fund our expansion, we sold $555,000 of stock and increased our borrowings by $417,000. We are currently well capitalized to execute our 2011 plans, as we look forward to another year of rapid growth.”

See financial statements and EBITDA schedule at the end of this release.

Conference Call

The Company will conduct a conference call at 4:15 p.m. Eastern Standard Time (EST) on Tuesday, March 22, 2011 to discuss its 2010 financial results and outlook for 2011. To participate in the call, please dial the following number five to ten minutes prior to the scheduled call time: 888-240-4700. International callers should dial 512-225-9559. The conference ID for this call is 936603#.

About Reed’s, Inc.

Reed’s, Inc. makes several brands of top selling natural sodas and beverages. Their products are sold in over 10,500 stores throughout the natural foods industry and supermarkets nationwide. Reed’s six award-winning, non-alcoholic Ginger Brews are unique in the beverage industry as they are made using fresh ginger, spices and fruits with a brewing process that predates commercial soft drinks. The Company also produces a Natural Energy Elixir and ‘Reed’s Rx‘, a Natural Ginger Nausea Relief product for the drug store and grocery retail channels. Reed’s, Inc. owns China Cola and the Virgil’s line of sodas that include the award-winning Virgil’s Root Beer as well as Virgil’s Cream Soda, Black Cherry Cream Soda, Orange Cream Soda and Real Cola. The Company has also introduced its new ‘Virgil’s Zero’ line of Stevia-sweetened diet sodas in all these popular flavors. In 2009, Reed’s acquired the Sonoma Sparkler brand and started producing Private Label natural beverages for select national chains. Other product lines include Reed’s Ginger Candies and Reed’s Ginger Ice Creams.

Reed’s products are sold internationally in Canada and Mexico, along with a small presence in Europe, the Middle East, Africa, Japan and Singapore. For more information about Reed’s, please visit the company’s website at: http://www.reedsinc.com or call 800-99-REEDS.

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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-KSB 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.

— FINANCIAL TABLES FOLLOW —

                              REED'S, INC.                       STATEMENTS OF OPERATIONS           For the Years Ended December 31, 2010 and 2009                                                         2010          2009                                                 ------------  ------------  Sales                                           $ 20,376,000  $ 15,178,000 Cost of sales                                     16,041,000    11,566,000                                                 ------------  ------------    Gross profit                                     4,335,000     3,612,000                                                 ------------  ------------  Operating expenses: Selling and marketing expense                      2,319,000     2,412,000 General and administrative expense                 2,740,000     2,632,000 Impairment of assets                                       -       641,000                                                 ------------  ------------   Total operating expenses                         5,059,000     5,685,000                                                 ------------  ------------    Loss from operations                              (724,000)   (2,073,000)  Interest expense                                    (586,000)     (486,000)                                                 ------------  ------------    Net loss                                        (1,310,000)   (2,559,000)  Preferred stock dividend                             (73,000)      (23,000)                                                 ------------  ------------    Net loss attributable to common stockholders  $ (1,383,000) $ (2,582,000)                                                 ============  ============  Loss per share available to common stockholders  - basic and diluted                            $      (0.14) $      (0.28)                                                 ============  ============ Weighted average number of shares outstanding -  basic and diluted                                10,186,600     9,238,002                                                 ============  ============                              MODIFIED EBITDA SCHEDULE             For the Year Ended December 31, 2010 and 2009                              (Unaudited)                                                      Y ended December 31,                                                 --------------------------                                                      2010          2009                                                 ------------  ------------ Net loss                                        $ (1,310,000) $ (2,559,000)                                                 ------------  ------------  Modified EBITDA adjustments: Depreciation and amortization                        616,000       469,000 Interest expense                                     586,000       486,000 Impairment expense                                         -       641,000 Stock option compensation                            198,000       421,000 Other stock compensation for services                366,000       236,000                                                 ------------  ------------   Total EBITDA adjustments                         1,766,000     2,253,000                                                 ------------  ------------  Modified EBITDA income (loss) from operations   $    456,000  $   (306,000)                                                 ============  ============ 

The Company defines modified EBITDA (a non-GAAP measurement) as net loss before interest, taxes, depreciation and amortization, and non-cash expense for securities. Other companies may calculate modified EBITDA differently. Management believes that the presentation of modified EBITDA provides a measure of performance that approximates cash flow before interest expense, and is meaningful to investors.

                               REED'S, INC.                              BALANCE SHEETS                                                 December          December                                                 31,               31,                                                2010              2009                                          ----------------  ----------------  ASSETS Current assets:   Cash                                  $      1,084,000  $      1,306,000   Inventory                                    4,555,000         2,884,000   Trade accounts receivable, net of    allowance for doubtful accounts    and returns and discounts of    $105,000 and $90,000, respectively          1,295,000           866,000   Prepaid inventory                              138,000             3,000   Prepaid and other current assets                78,000            96,000                                         ----------------  ----------------     Total Current Assets                       7,150,000         5,155,000  Property and equipment, net of  accumulated depreciation of  $1,178,000 and $727,000, respectively         3,650,000         3,655,000 Brand names                                    1,029,000         1,029,000 Deferred financing fees, net of  amortization of $8,000 and $10,000,  respectively                                     47,000           131,000                                         ----------------  ----------------     Total assets                        $     11,876,000  $      9,970,000                                         ================  ================  LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:   Accounts payable                      $      2,586,000  $        954,000   Accrued expenses                               162,000           127,000   Dividends payable                               44,000                 -   Recycling fees payable                         325,000           456,000   Line of credit                               2,038,000         1,415,000   Current portion of long term financing    obligation                                     55,000            40,000   Current portion of capital leases    payable                                        39,000            24,000   Current portion of note payable                 71,000           102,000                                         ----------------  ----------------     Total current liabilities                  5,320,000         3,118,000  Long term financing obligation, less  current portion, net of discount of  $677,000 and $726,000, respectively           2,268,000         2,274,000 Capital leases payable, less current  portion                                         146,000           130,000 Note payable, less current portion                     -            71,000                                         ----------------  ----------------     Total Liabilities                          7,734,000         5,593,000                                         ----------------  ----------------  Commitments and contingencies  Stockholders' equity:   Series A Convertible Preferred stock,    $10 par value, 500,000 shares    authorized, 46,621 shares issued    and outstanding                               466,000           466,000   Series B Convertible Preferred stock,    $10 par value, 500,000 shares    authorized, 85,766 and 120,820    shares issued and outstanding,    respectively                                  858,000         1,208,000   Common stock, $.0001 par value,    19,500,000 shares authorized,    10,446,090 and 9,606,127 shares    issued and outstanding,    respectively                                    1,000             1,000   Additional paid in capital                  21,701,000        20,203,000   Accumulated deficit                        (18,884,000)      (17,501,000)                                         ----------------  ----------------     Total stockholders' equity                 4,142,000         4,377,000                                         ----------------  ----------------     Total liabilities and stockholders'      equity                             $     11,876,000  $      9,970,000                                         ================  ================                                   REED'S, INC.                         STATEMENTS OF CASH FLOWS             For the Years Ended December 31, 2010 and 2009                                                       2010          2009                                                 ------------  ------------ Cash flows from operating activities:     Net loss                                    $ (1,310,000) $ (2,559,000)     Adjustments to reconcile net loss to net      cash used in operating activities:       Depreciation and amortization                  616,000       469,000       Fair value of stock options issued to        employees                                     198,000       421,000       Fair value of common stock issued for        services                                      366,000       236,000       Impairment loss on assets                            -       641,000       Increase (decrease) in allowance for        doubtful accounts                              15,000        (7,000)       Changes in assets and liabilities:         Accounts receivable                         (444,000)       38,000         Inventory                                 (1,671,000)      (37,000)         Prepaid expenses and inventory and          other current assets                       (117,000)      (31,000)         Accounts payable                           1,632,000      (638,000)         Accrued expenses                              35,000        31,000         Recycling fees payable                      (131,000)      119,000                                                 ------------  ------------           Net cash used in operating            activities                               (811,000)   (1,317,000)                                                 ------------  ------------ Cash flows from investing activities:     Purchase of property and equipment              (383,000)     (356,000)                                                 ------------  ------------             Net cash used in investing              activities                             (383,000)     (356,000)                                                 ------------  ------------ Cash flows from financing activities:     Proceeds from issuance of common stock in      shelf offering, net of offering costs           432,000       563,000     Proceeds from private sale of common stock             -       150,000     Proceeds from stock option exercise                6,000             -     Proceeds from the issuance of Series B      preferred stock, net of offering costs          117,000       891,000     Payments for deferred financing fees             (30,000)     (117,000)     Proceeds received from long term financing      obligation                                            -     3,056,000     Principal repayments on long term      financing obligation                            (42,000)      (16,000)     Principal repayments on capital lease      obligation                                      (32,000)       (9,000)     Principal repayments on long term debt                 -    (1,763,000)     Payoff of former line of credit                        -    (1,354,000)     Net borrowings on existing lines of credit       623,000     1,415,000     Principal repayments on note payable            (102,000)      (66,000)                                                 ------------  ------------             Net cash provided by financing              activities                              972,000     2,750,000                                                 ------------  ------------             Net (decrease) increase in cash         (222,000)    1,077,000 Cash at beginning of year                          1,306,000       229,000                                                 ------------  ------------ Cash at end of year                             $  1,084,000  $  1,306,000                                                 ============  ============ Supplemental Disclosures of Cash Flow  Information: Cash paid during the year for:   Interest                                      $    561,000  $    457,000   Taxes                                         $          -  $          - Non Cash Investing and Financing Activities   Series B preferred stock converted to common    stock                                        $    478,000  $      5,000   Fair value of warrants granted as valuation    discounts                                               -  $    752,000   Common Stock issued in settlement of Series A    and Series B preferred stock dividend        $     29,000  $     23,000   Series B preferred stock dividend payable in    common stock                                 $     50,000             -   Property and equipment acquired through    capital lease obligation                     $     64,000  $    163,000   Note payable issued for brand names                      -  $    229,000   Note payable issued for inventory                        -  $     10,000   Common stock issued for deferred financing    fees                                                    -  $     24,000   Deferred stock offering costs charged to paid    in capital                                              -  $     62,000