Reed's, Inc. Announces Second Quarter 2010 Financial Results

LOS ANGELES, CA–(Marketwire – August 10, 2010) – Reed’s, Inc. (NASDAQ: REED) (OTCBB: REEDP), maker of the top-selling sodas in natural food stores nationwide, today announced its financial results for the second quarter and the six months ended June 30, 2010.

Financial Highlights:

 --  Second quarter sales increased 16% to a record $4.9 million. Fiscal six     month 2010 sales were 17% ahead of 2009. Branded product sales     represented approximately 75% of the overall sales increases. --  Gross profit was 24% of sales during the quarter and 25% for the six     month period, as compared to 26% in 2009. --  Operating expenses decreased during both the second quarter and six     month periods in 2010 as compared to 2009. --  EBITDA income for the second quarter 2010 was $209,000, as compared to     a loss of $488,000 in the second quarter of 2009. For the six month     period, EBITDA income was $414,000, as compared to a loss of $483,000     in the prior year period. (See EBITDA table at end of this release for     further non-GAAP information). --  Net loss for the quarter narrowed sharply to $164,000, compared to net     loss of $873,000 during 2009. --  Working capital increased by approximately $370,000 during the quarter     to $2.4 million. --  Cash was $1.1 million at June 30, 2010, as compared to $1.3 million at     December 31, 2009.  Additionally, there was $206,000 available on the     revolving line of credit at June 30, 2010. 

Second Quarter Developmental Highlights:

 --  Reached fourth private label agreement with a national wholesale     grocer. --  Began shipment of selected Reed's and Virgil's brands to all Fresh &     Easy locations. --  New Distribution agreement in South Korea. --  Expanded branded product sales in Canada, primarily to Quality Foods. --  Meijer Stores agreed to carry selected Reed's and Virgil's brands in     all of its stores. --  Expanded product placement into Harris Teeter Food Markets. --  Natural Ginger Nausea Relief product has experienced initial consumer     acceptance in CVS, with expansion into Fred Meyers, Publix and Ralphs. 

“Our positive results reflect the payoff from all the hard work of our seasoned sales team over the past year, as we gained a stronger foothold in mainstream grocery stores,” said Chris Reed, Founder, Chairman and CEO of Reed’s, Inc. “We achieved record second quarter revenues, driven primarily by increasing sales of our branded products, which we anticipate will continue for the balance of the year. Sales of all our brands continue to outpace last year. We have a very active private label program and expect to land a number of additional national accounts soon. This aspect of our business has not yet had a significant impact on our financials. We expect increasing sales of our private label products as we go into the third and fourth quarters. In addition, we will be introducing new diet sodas shortly, and we have several other new exciting product lines in development.” Added Mr. Reed, “Our basket of goods is expanding and improving, and we have the talent to execute our vision. We plan to continue our double-digit growth rates and accelerate into 2011.”

Reed’s Chief Financial Officer, Jim Linesch, commented, “We’ve held our operating costs low while increasing our revenues, indicating the scalability of our business. Our organization is nimble and opportunistic, taking full advantage of dynamic changes in the marketplace. The Company is adequately capitalized to execute the new business initiatives that are currently on our plate. We plan to finance our current growth through internally-generated funds, unless we have a super opportunity that needs additional financing. We took a little hit to our margins in Q2, as a percent of sales, primarily due to overhead costs as we improve and document our plant procedures for food quality and safety. Our direct margins on products sold, however, remained constant from last year despite a very competitive environment.”

Added Mr. Linesch, “EBITDA income in 2010 exceeded interest expense during both the three and six month periods, indicating the positive contribution made to working capital from our operations. As we proceed into Q3, we have experienced record sales for July and a strong backlog going into August.”

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 Daylight Time on Tuesday, August 10, 2010 to discuss its second quarter 2010 results. 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 the top-selling natural sodas in the natural foods industry sold in over 10,500 natural food markets and supermarkets nationwide. In 2009, Reed’s started producing Private Label natural beverages for select national chains. 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. 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. Recently, Reed’s introduced its Reed’s All Natural Ginger Nausea Relief product for the over-the-counter stomach aisle for all retail channels and acquired the Sonoma Sparkler brand, a sparkling juice celebration drink with an established customer base. 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, as well as through private label relationships with major supermarket chains. For more information about Reed’s, please visit the company’s website at: http://www.reedsgingerbrew.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 —

                       CONDENSED STATEMENTS OF OPERATIONS         For the Three and Six Months Ended June 30, 2010 and 2009                                (Unaudited)                             Three months ended         Six months ended                                 June 30,                  June 30,                         ------------------------  ------------------------                             2010         2009         2010         2009                         -----------  -----------  -----------  -----------  Sales                   $ 4,905,000  $ 4,214,000  $ 8,917,000  $ 7,631,000  Cost of sales             3,736,000    3,114,000    6,682,000    5,684,000                         -----------  -----------  -----------  -----------    Gross profit            1,169,000    1,100,000    2,235,000    1,947,000                         -----------  -----------  -----------  -----------  Operating expenses:  Selling and marketing  expense                    538,000      548,000    1,062,000    1,207,000 General and  administrative expense     672,000      670,000    1,324,000    1,273,000 Impairment of assets              -      641,000            -      641,000                         -----------  -----------  -----------  -----------     Total operating      expenses             1,210,000    1,859,000    2,386,000    3,121,000                         -----------  -----------  -----------  -----------    Loss from operations      (41,000)    (759,000)    (151,000)  (1,174,000)  Interest expense           (123,000)    (114,000)    (272,000)    (197,000)                         -----------  -----------  -----------  -----------    Net loss                 (164,000)    (873,000)    (423,000)  (1,371,000)  Preferred stock  dividend                   (36,000)     (23,000)     (50,000)     (23,000)                         -----------  -----------  -----------  -----------  Net loss attributable  to common stockholders $  (200,000) $  (896,000) $  (473,000) $(1,394,000)                         ===========  ===========  ===========  ===========  Loss per share -  available to common  stockholders basic  and diluted            $     (0.02) $     (0.10) $     (0.05) $     (0.15)                         ===========  ===========  ===========  =========== Weighted average  number of shares  outstanding - basic  and diluted             10,215,185    9,119,099   10,025,991    9,080,506                         ===========  ===========  ===========  ===========                                   EBITDA SCHEDULE      For the Three Months and Six Months Ended June 30, 2010 and 2009                                (Unaudited)                          Three months ended           Six months ended                              June 30,                    June 30,                     --------------------------  --------------------------                         2010          2009          2010          2009                     ------------  ------------  ------------  ------------ Net loss            $   (164,000) $   (873,000) $   (423,000) $ (1,371,000)                     ------------  ------------  ------------  ------------  EBITDA adjustments:  Depreciation and  amortization            156,000       109,000       305,000       239,000 Interest expense         123,000       114,000       272,000       197,000 Stock option  compensation             46,000       122,000       154,000       269,000 Other stock  compensation for  services                 48,000        40,000       106,000       183,000                     ------------  ------------  ------------  ------------     Total EBITDA      adjustments         373,000       385,000       837,000       888,000                     ------------  ------------  ------------  ------------  EBITDA income  (loss) from  operations         $    209,000  $   (488,000) $    414,000  $   (483,000)                     ============  ============  ============  ============  

The Company defines EBITDA (a non-GAAP measurement) 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.

                                REED'S, INC.                         CONDENSED BALANCE SHEETS                                                    June 30,    December 31,                                                     2010         2009                                                 ------------  ------------ ASSETS                                           (unaudited) Current assets:   Cash                                          $  1,142,000  $  1,306,000   Inventory                                        3,609,000     2,884,000   Trade accounts receivable, net of allowance    for doubtful accounts and returns and    discounts of $105,000 and $90,000,    respectively                                    1,376,000       866,000   Prepaid and other current assets                   345,000        99,000                                                 ------------  ------------     Total Current Assets                           6,472,000     5,155,000  Property and equipment, net of accumulated  depreciation of $946,000 and $727,000,  respectively                                      3,671,000     3,655,000 Brand names                                        1,029,000     1,029,000 Deferred financing fees, net of amortization  of $71,000 and $10,000, respectively                 70,000       131,000                                                 ------------  ------------     Total assets                                $ 11,242,000  $  9,970,000                                                 ============  ============  LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:   Accounts payable                              $  1,506,000  $    954,000   Accrued expenses                                   137,000       127,000   Dividends payable                                   48,000             -   Recycling fees payable                             393,000       456,000   Line of credit                                   1,795,000     1,415,000   Current portion of long term financing    obligation                                         47,000        40,000   Current portion of capital leases payable           36,000        24,000   Current portion of note payable                    104,000       102,000                                                 ------------  ------------     Total current liabilities                      4,066,000     3,118,000  Long term financing obligation, less current  portion, net of discount of $702,000 and  $726,000, respectively                            2,274,000     2,274,000 Capital leases payable, less current portion         166,000       130,000 Note payable, less current portion                    18,000        71,000                                                 ------------  ------------     Total liabilities                              6,524,000     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,    respectively                                      466,000       466,000   Series B Convertible Preferred stock, $10 par    value, 500,000 shares authorized, 95,479    and 120,820 shares issued and outstanding,    respectively                                      955,000     1,208,000   Common stock, $.0001 par value,    19,500,000 shares authorized, 10,268,453    and 9,606,127 shares issued and    outstanding, respectively                           1,000         1,000   Additional paid in capital                      21,270,000    20,203,000   Accumulated deficit                            (17,974,000)  (17,501,000)                                                 ------------  ------------     Total stockholders' equity                     4,718,000     4,377,000                                                 ------------  ------------      Total liabilities and stockholders' equity  $ 11,242,000  $  9,970,000                                                 ============  ============