Reed's, Inc. Announces First Quarter 2009 Financial Results

LOS ANGELES, CA–(Marketwire – May 13, 2009) – Reed’s, Inc. (NASDAQ: REED), maker of the top-selling sodas in natural food stores nationwide, today announced its financial results for the first quarter ended March 31, 2009.

First Quarter 2009 Highlights:

 --  Gross Profit increases 63% over 2008 to $847,000 --  Gross Margin expands 1000 basis points to 25% --  Net Sales decreased 4% to $3,417,000 compared to Q1 2008 --  Operating expenses (OPEX) reduced 49% from $2.45 million in Q1 2008 to     $1.26 million --  EBITDA improved to a proforma negative $157,000 for the first quarter     2009, compared with a negative $1,881,000 in 2008. (See EBITDA table at end     of this release) --  Loss per share decreases from (0.23) to (0.06) --  Expanded product lines, including the new Virgil's Orange Cream Soda --  Announced two significant distribution relationships in the Pacific     Northwest and two major supermarket chain relationships --  Initiated social media marketing and outreach campaign     

“In 2008, we began transforming Reed’s by realigning our sales strategy, expanding our product lines, reducing our operating costs and increasing prices on select products. In 2009 this has yielded improvements in our gross margins of approximately 10% over the 2008 period. We have initiatives underway to further reduce our cost of sales, by obtaining better glass costs as well as additional reductions in co-packing costs,” stated Mr. Chris Reed. “We believe that with the sales from our new products, which include Virgil’s Orange Cream Soda and Reed’s Natural Energy Elixir, Reed’s will operate at profitable levels in 2009.”

Mr. Reed continued, “Historically and seasonally, Q1 is our slowest quarter, and although some people would not be excited about a 4% decrease in revenues, we are actually extremely pleased with our results. In the first quarter of 2008 our sales were impacted by a number of one-time promotions and were driven by a price increase we implemented April 1, 2008, with many customers buying heavy before its implementation. We trended against that this year and a bad economy; so, when you remove those one-time factors our results look good.”

“Looking ahead, we will continue to build upon the momentum that we’ve carried over from our 2008 initiatives. We’ll do this by growing our presence in mainstream grocery store accounts, expanding our revenues through new products like our Virgil’s Orange Cream Soda and Reed’s Natural Energy Elixir, and adding additional high-volume distribution to position Reed’s for continued market share growth in 2009,” concluded Mr. Reed.”

Reed’s Chief Financial Officer, Mr. James Linesch, commented, “We expect further gross margin expansion in future quarters and we are anticipating additional improvement in our overall 2009 gross profit by 20% – 40%. Under our current cost structure, we believe that gross profits generated over the next few quarters will enable us to realize positive cash flow so that we can expand our promotional efforts, product offerings and business development activities.”

About Reed’s, Inc.

Reed’s, Inc. makes the top selling sodas in natural food markets nationwide and is currently selling in 10,500 supermarkets in natural foods and mainstream. Its six 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. In addition, the Company owns the top selling root beer line in natural foods, the Virgil’s Root Beer product line, and the top selling cola line in natural foods, the China Cola product line. Other product lines include: Reed’s Ginger Candies and Reed’s Ginger Ice Creams.

Reed’s products are sold through specialty gourmet and natural food stores, mainstream supermarket chains, retail stores and restaurants nationwide, and in Canada. For more information about Reed’s, please visit the company’s website at: http://www.reedsgingerbrew.com or call 800-99-REEDS.

Follow Reed’s on Twitter at: http://www.twitter.com/reedsgingerbrew

View Reed’s YouTube channel at: http://www.youtube.com/reedsgingerbrew

Review Reed’s Delicious bookmarks at: http://www.delicious.com/reedsinc

Join Reed’s Facebook Fan Page at: http://www.facebook.com/pages/Reeds-Ginger-Brew-and-Virgils-Natural-Sodas/57143529039?ref=nf

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More information can be found at: http://www.irthcommunications.com/clients_REED.php

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.

                                REED'S, INC.                          CONDENSED BALANCE SHEETS                                                       March 31,   December 31,                                                      2009         2008                                                   -----------  ----------- ASSETS                                            (unaudited) Current assets:   Cash                                            $   108,000  $   229,000   Inventory                                         2,873,000    2,837,000   Trade accounts receivable, net of allowance    for doubtful accounts and returns and    discounts of $97,000 as of March 31, 2009    and December 31, 2008                            1,050,000      897,000   Prepaid and other current assets                    187,000       68,000                                                   -----------  -----------       Total Current Assets                          4,218,000    4,031,000  Property and equipment, net                         4,056,000    4,133,000 Brand names                                           800,000      800,000 Deferred offering costs                                86,000       62,000 Deferred financing fees                                45,000       77,000                                                   -----------  -----------        Total assets                                $ 9,199,000  $ 9,103,000                                                   ===========  ===========  LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:   Accounts payable                                $ 2,301,000  $ 1,929,000   Lines of credit                                   1,274,000    1,354,000   Current portion of long term debt                    16,000       16,000   Accrued interest                                     16,000            -   Accrued expenses                                     96,000       96,000                                                   -----------  -----------       Total current liabilities                     3,703,000    3,395,000  Long term debt, less current portion                1,743,000    1,747,000                                                   -----------  -----------       Total Liabilities                             5,446,000    5,142,000                                                   -----------  -----------  Commitments and contingencies  Stockholders' equity:   Preferred stock, $10 par value, 500,000    shares authorized, 47,121 shares    outstanding at March 31, 2009 and December    31, 2008                                           471,000      471,000   Common stock, $.0001 par value, 19,500,000    shares authorized, 9,107,177 shares issued    and outstanding at March 31, 2009 and    8,979,341 shares issued and outstanding at    December 31, 2008                                    1,000        1,000   Additional paid in capital                       18,698,000   18,408,000   Accumulated deficit                             (15,417,000) (14,919,000)                                                   -----------  -----------       Total stockholders' equity                    3,753,000    3,961,000                                                   -----------  -----------        Total liabilities and stockholders'        equity                                     $ 9,199,000  $ 9,103,000                                                   ===========  ===========                                    REED'S, INC.                     CONDENSED STATEMENTS OF OPERATIONS             For the Three Months Ended March 31, 2009 and 2008                                 (Unaudited)                                                        2009          2008                                                 ------------  ------------  Sales                                           $  3,417,000  $  3,564,000  Cost of sales                                      2,570,000     3,044,000                                                 ------------  ------------        Gross profit                                   847,000       520,000                                                 ------------  ------------  Operating expenses:  Selling and marketing expense                        659,000     1,124,000 General and administrative expense                   603,000     1,330,000       Total operating expenses                     1,262,000     2,454,000                                                 ------------  ------------        Loss from operations                          (415,000)   (1,934,000)  Interest income                                            -         1,000 Interest expense                                     (83,000)      (57,000)                                                 ------------  ------------        Net loss                                  $   (498,000) $ (1,990,000)                                                 ============  ============   Loss per share - basic and diluted              $      (0.06) $      (0.23)                                                 ============  ============ Weighted average number of shares outstanding -  basic and diluted                                 9,041,483     8,764,683                                                 ============  ============                                     Reed's, Inc.                             Calculation EBITDA                         For the three months ended                           March 31, 2009 and 2008                                                        2009          2008                                                 ------------  ------------ Net Loss                                        $   (498,000) $ (1,990,000) Provision for Income Taxes                             1,000         2,000 Interest Expense (Income), net                        83,000        56,000 Depreciation and Amortization                        109,000        79,000 Stock Compensation                                   147,000       (28,000)                                                  ------------  ------------   EBITDA                                        $   (157,000) $ (1,881,000)                                                 ============  ============ 

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