Reed’s, Inc. Announces Third Quarter 2009 Financial Results

LOS ANGELES, CA–(Marketwire – November 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 third quarter ended September 30, 2009.

Third Quarter and Nine Month 2009 Highlights:

 --  Sales for the quarter ended September 30, 2009 were $4,027,000, a     decrease of 5%, as compared to the prior year same period amount of     $4,233,000.  Sales for the 2009 nine month year-to-date period were $11.7     million, compared to $12.4 million in 2008; --  Year-to-date EBITDA loss reduced to $129,000 versus an EBITDA loss of     $2,141,000 in 2008 (see table); --  Working capital increased to $1.5 million at 09/30/09, from $600,000     at 12/31/08; --  Continued to maintain a much lower cost structure in 2009, than in     2008, covering both operating expenses and per-unit product costs; --  Nine months gross 2009 profit margin consistent with prior year at 25%     of sales; --  Loss from operations during the nine months ended September 30, 2009     was $1,454,000 including non-cash impairment write downs on fixed assets of     $641,000.  Before impairment losses, the net loss from operations is     $813,000, an improvement from the loss of $2,457,000 in the 2008 year     period. Loss from operations in the three months ended September 30, 2009     was $280,000 mostly due to lower revenues with fixed plant costs, affecting     margins.     

Additional Highlights:

 --  Completed $300,000 brewery upgrade --  Began private label production and sales to national accounts --  Announced significant new distribution relationship in the Northeast --  Expanded Reed's and Virgil's presence in over 300 A&P stores     nationwide --  Expanded Reed's and Virgil's into another 100 plus Weis Market stores     

Mr. Chris Reed, Founder, Chairman and CEO of Reed’s, Inc. commented, “Our results for the quarter were impacted by the overall economic environment. In light of the dramatic recessionary climate and the sharp decreases in revenues that some other companies in our space have experienced, we feel that we fared rather well by outperforming the pack. This is a clear testament to our brand loyalty and the fact that we make some of the best natural sodas on the market.”

He added, “As a result of the changing environment we have discovered that we have a unique asset which we feel will be of significant long-term benefit to the Company. We can provide our customers with customized private label products. This is something they want and are ready to buy as we have already received commitments from two customers for product in 2010 from the few accounts we initially reached out to. We are now talking with roughly 30 additional customers regarding this private label opportunity and expect to see additional sales shortly.” Reed continued, “An interesting outcome of the private label expansion is that it is resulting in new orders for our branded products as well.” He ended stating, “The private label business has the potential to significantly increase Reed’s revenues over the next several quarters. Our goal is to generate enough private label revenues to direct significant funding to marketing and sales of our core Reed’s and Virgil’s products.”

Mr. Jim Linesch, CFO of Reed’s, Inc. stated, “Our financial results reflect our continued reduction in operating costs, as compared to the prior year period. While sales have fallen during this adverse economic period affecting the grocery industry, we believe that our customer relationships are expanding and will result in increasing sales of our branded products in 2010.”

Mr. Linesch added, “Margins during the third fiscal quarter have remained consistent with earlier fiscal quarters, considering overall sales levels and fixed production costs. As we enter the 4th quarter, the Company is well positioned for an increasing backlog of private label business as well as strong sales increases of our branded product lines in 2010.”

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.

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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.

                                REED'S, INC.                           CONDENSED BALANCE SHEETS                                                 September 30,  December 31,                                                     2009          2008                                                 ------------  ------------ ASSETS                                           (unaudited) Current assets:     Cash                                        $     76,000  $    229,000     Inventory                                      3,176,000     2,837,000   Trade accounts receivable, net of allowance    for doubtful accounts and returns and    discounts of $97,000 as of September 30,    2009 and December 31, 2008                      1,375,000       897,000     Prepaid and other current assets                 226,000        68,000                                                 ------------  ------------       Total Current Assets                         4,853,000     4,031,000  Property and equipment, net of accumulated  depreciation of $624,000 as of September 30,  2009 and $1,150,000 as of December 31, 2008       3,641,000     4,133,000 Brand names                                          800,000       800,000 Deferred offering costs                              177,000        62,000 Deferred financing fees, net of amortization of  $13,000 as of September 30, 2009 and $40,000  as of December 31, 2008                             660,000        77,000                                                 ------------  ------------       Total assets                              $ 10,131,000  $  9,103,000                                                 ============  ============  LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:     Accounts payable                            $  1,758,000  $  1,929,000     Lines of credit                                1,447,000     1,354,000     Current portion of long term debt                      -        16,000     Current portion of long term financing      obligation                                       37,000             -     Current portion capital leases                    23,000             -     Accrued interest                                  25,000             -     Accrued expenses                                  96,000        96,000                                                 ------------  ------------       Total current liabilities                    3,386,000     3,395,000  Long term financing obligation, less current  portion                                           3,011,000             - Capital leases payable, less current portion         136,000             - Long term debt, less current portion                       -     1,747,000                                                 ------------  ------------       Total Liabilities                            6,533,000     5,142,000                                                 ------------  ------------  Commitments and contingencies  Stockholders' equity:      Preferred stock, $10 par value, 500,000 shares      authorized, 46,621 shares outstanding at      September 30, 2009 and 47,121 shares      outstanding at December 31, 2008                466,000       471,000      Series B Convertible Preferred stock,      $.0001 par value, 1,846,738 shares authorized,      no shares issued or outstanding at September      30, 2009 and December 31, 2008                        -             -      Common stock, $.0001 par value, 19,500,000      shares authorized, 9,233,688 shares issued      and outstanding at September 30, 2009 and      8,979,341 shares issued and outstanding at      December 31, 2008                                 1,000         1,000       Additional paid in capital                   19,846,000    18,408,000      Accumulated deficit                         (16,715,000)  (14,919,000)                                                 ------------  ------------       Total stockholders' equity                   3,598,000     3,961,000                                                 ------------  ------------        Total liabilities and stockholders'        equity                                   $ 10,131,000  $  9,103,000                                                 ============  ============                                    REED'S, INC.                      CONDENSED STATEMENTS OF OPERATIONS   For the Three Months and Nine Months Ended September 30, 2009 and 2008                                 (Unaudited)                              Three months ended        Nine months ended                               September 30,             September 30,                           ----------------------  ------------------------                              2009        2008         2009         2008                           ----------  ----------  -----------  -----------  Sales                     $4,027,000  $4,233,000  $11,658,000  $12,368,000 Cost of sales              3,038,000   2,938,000    8,722,000    9,283,000                           ----------  ----------  -----------  -----------    Gross profit               989,000   1,295,000    2,936,000    3,085,000                           ----------  ----------  -----------  -----------  Operating expenses: Selling and marketing  expense                     646,000     819,000    1,853,000    2,994,000 General and  administrative expense      623,000     558,000    1,896,000    2,548,000 Impairment of assets               -           -      641,000            -                           ----------  ----------  -----------  -----------     Total operating      expenses              1,269,000   1,377,000    4,390,000    5,542,000                           ----------  ----------  -----------  -----------    Loss from operations      (280,000)    (82,000)  (1,454,000)  (2,457,000)  Interest income                    -           -            -        1,000 Interest expense            (122,000)    (92,000)    (319,000)    (199,000)                           ----------  ----------  -----------  -----------    Net loss                  (402,000)   (174,000)  (1,773,000)  (2,655,000)  Preferred stock dividend           -           -      (23,000)     (23,000)                           ----------  ----------  -----------  -----------  Net loss attributable to  common stockholders      $ (402,000) $ (174,000) $(1,796,000) $(2,678,000)                           ==========  ==========  ===========  ===========  Loss per share - available  to common stockholders  basic and diluted        $    (0.04) $    (0.02) $     (0.20) $     (0.30)                           ==========  ==========  ===========  =========== Weighted average number of  shares outstanding -  basic and diluted         9,215,171   8,928,591    9,125,887    8,868,381                           ==========  ==========  ===========  ===========                                    REED'S, INC.                                EBITDA SCHEDULE   For the Three Months and Nine Months Ended September 30, 2009 and 2008                                 (Unaudited)                               Three months ended       Nine months ended                                 September 30,           September 30,                             --------------------  ------------------------                               2009       2008         2009         2008                             ---------  ---------  -----------  ----------- Net loss                    $(402,000) $(174,000) $(1,773,000) $(2,655,000)                             ---------  ---------  -----------  -----------  EBITDA adjustments: Depreciation and amortization  85,000     92,000      324,000      257,000 Interest expense              122,000     92,000      319,000      199,000 Stock option compensation      91,000    119,000      360,000       57,000 Impairment of assets                -          -      641,000            -                             ---------  ---------  -----------  ----------- Total EBITDA adjustments      298,000    303,000    1,644,000      514,000                             ---------  ---------  -----------  -----------  EBITDA income (loss) from  operations                 $(104,000) $ 129,000  $  (129,000) $(2,141,000)                             =========  =========  ===========  ===========  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.