8-K
REED'S, INC. (REED)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): March 25, 2025
REED’S,
INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-32501 | 35-2177773 |
|---|---|---|
| (State<br> or other jurisdiction<br><br> <br>of<br> incorporation) | (Commission<br><br> <br>File<br> Number) | (IRS<br> Employer<br><br> <br>Identification<br> No.) |
501 Merritt 7 Corporate Park, Norwalk, CT 06851
(Address of principal executive offices and zip code)
Not applicable
(Former name or former address if changed since last report)
Registrant’s telephone number, including area code: (800) 997-3337
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications<br> pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant<br> to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications<br> pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications<br> pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act: None
| Title of Each Class | Trading Symbol(s) | Name of Each Exchanged on Which Registered |
|---|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item2.02 Results of Operations and Financial Condition.
On March 25, 2025, Reed’s, Inc., a Delaware corporation (the “company” or “Reed’s”) issued a press release announcing financial results for the three months and twelve months ended December 31, 2024. The press release was corrected on March 27, 2025. The full text of the press release, as corrected, is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item7.01. Regulation FD Disclosure.
See “Item 2.02 Results of Operations and Financial Condition” above.
The information in this Current Report on Form 8-K under Items 2.02 and 7.01, including the information contained in Exhibit 99.1, is being furnished to the Securities and Exchange Commission, and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by a specific reference in such filing.
Item9.01 Financial Statements and Exhibits.
(d)Exhibits.
The following exhibit is furnished with this Current Report on Form 8-K:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of Reed’s, Inc. dated March 25, 2025, as corrected March 26, 2025 |
| 99.2 | Script of Reed’s, Inc. Conference Call conducted on March 25, 2025 |
| 104 | Cover Page Interactive Data File (embedded within the<br> Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| REEDS, INC., | ||
|---|---|---|
| a Delaware corporation | ||
| Dated:<br> March 27, 2025 | By: | /s/ Norman E. Snyder, Jr. |
| Norman E. Snyder, Jr. | ||
| Chief Executive Officer |
Exhibit 99.1
Reed’sReports Fourth Quarter and Full Year 2024 Results
Managementto Host Conference Call Tomorrow at 8:30 a.m. Eastern Time
Norwalk,CT, (March 25, 2025) — 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.
Q42024 Financial Highlights (vs. Q4 2023):
| ● | Net<br> sales were $9.7 million compared to $11.7 million. |
|---|---|
| ● | Gross<br> profit increased more than 5x to $2.9 million compared to $0.5 million, with gross margin<br> of 30.0% compared to 4.0%. This includes one-time charges in the prior-year period related<br> to a non-cash packaging inventory valuation adjustment and a provision for product hold related<br> to the Company’s swing-lid program. |
| ● | Delivery<br> and handling costs were reduced by 10% to $3.00 per case. |
| ● | Selling,<br> general and administrative expenses were $4.8 million compared to $3.0 million. |
| ● | Operating<br> loss improved to $3.7 million compared to $4.9 million. |
| ● | Modified<br> EBITDA was $(0.7) million compared to $43,000. |
FY2024 Financial Highlights (vs. FY 2023):
| ● | Net<br> sales were $38.0 million compared to $44.7 million. |
|---|---|
| ● | Gross<br> profit increased 18% to $11.4 million compared to $9.7 million, with gross margin up 830<br> basis points to 30.0% compared to 21.7%. |
| ● | Delivery<br> and handling costs were reduced by 22% to $2.75 per case. |
| ● | Selling,<br> general and administrative expenses were $13.5 million compared to $11.0 million. |
| ● | Operating<br> loss improved to $8.1 million compared to $9.4 million. |
| ● | Modified<br> EBITDA was $(4.1) million compared to $(3.7) million. |
ManagementCommentary
“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.”
FourthQuarter 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 $4.8 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 $3.7 million or $(0.25) 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.
Liquidityand 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.
ConferenceCall
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, 2025
Time: 8:30 a.m. Eastern time
Toll-free dial-in number: (800) 717-1738
International dial-in number: (646) 307-1865
Conference ID: 31278
Webcast: 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 relations
section of the Company’s website at https://investor.reedsinc.com.
AboutReed’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-LookingStatements
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.
InvestorRelations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
ir@reedsinc.com
(720) 330-2829
REED’S,INC.
STATEMENTSOF OPERATIONS
Forthe Three Months and Year Ended December 31, 2024 and 2023
(Amountsin thousands, except share and per share amounts)
| ThreeMonths Ended December 31, | YearEnded 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 | 3,870 | 1,691 | 9,109 | 6,118 | ||||||||
| Provision for receivable with former related party | 115 | 585 | 115 | 585 | ||||||||
| Total operating expenses | 6,576 | 5,421 | 19,492 | 19,129 | ||||||||
| Loss from operations | (3,659 | ) | (4,949 | ) | (8,116 | ) | (9,417 | ) | ||||
| Other Income | 445 | - | 445 | - | ||||||||
| Interest expense, net | (903 | ) | (1,647 | ) | (5,481 | ) | (6,106 | ) | ||||
| Net loss | (4,117 | ) | (6,596 | ) | (13,152 | ) | (15,523 | ) | ||||
| Dividends on Series A Convertible Preferred Stock | - | - | (5 | ) | (5 | ) | ||||||
| Net loss attributable to common stockholders | $ | (4,117 | ) | $ | (6,596 | ) | $ | (13,157 | ) | $ | (15,528 | ) |
| Loss per share – basic and diluted | $ | (0.28 | ) | $ | (2.07 | ) | $ | (1.64 | ) | $ | (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,
BALANCESHEETS
(Amountsin thousands, except share amounts)
| December 31, 2023 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| 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 | 6,956 | $ | 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 | 17,655 | 27,190 | |||
| Convertible note payable, net of debt discount of 148 less current portion | - | 10,874 | |||
| Lease liabilities, less current portion | 837 | - | |||
| Total liabilities | 18,492 | 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 | (151,884 | ) | (138,727 | ) | |
| Total stockholders’ equity (deficit) | 6,648 | (19,181 | ) | ||
| Total liabilities and stockholders’ equity | 25,140 | $ | 18,883 |
All values are in US Dollars.
REED’S,INC.
STATEMENTSOF CASH FLOWS
Forthe Years Ended December 31, 2024 and 2023
(Amountsin thousands)
| December 31, 2024 | December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| Cash flows from operating activities: | ||||||
| Net loss | $ | (13,152 | ) | $ | (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 | (1,393 | ) | (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 | $ | - |
ModifiedEBITDA
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, contract proceedings 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<br>Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net loss | $ | (4,117 | ) | $ | (6,596 | ) | $ | (13,152 | ) | $ | (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 | - | ||||||||
| Contract proceedings | 1,423 | 0 | 1,593 | 12 | ||||||||
| Severance costs | 15 | 79 | 57 | 256 | ||||||||
| Total EBITDA adjustments | $ | 3,369 | $ | 6,639 | $ | 9,082 | $ | 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<br> EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures<br> or contractual commitments; |
|---|---|
| ● | Modified<br> EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| ● | Modified<br> EBITDA does not reflect future interest expense, or the cash requirements necessary to service<br> interest or principal payments, on our debts; and |
| ● | Although<br> depreciation and amortization are non-cash charges, the assets being depreciated and amortized<br> will often have to be replaced in the future, and Modified EBITDA does not reflect any cash<br> requirements for such replacements. |
Exhibit99.2
TRANSCRIPT
Reed’s, Inc. (OTCQX:REED) Q4 2024 Earnings Conference Call March 26, 2025 8:30 AM ET
CompanyParticipants
Norman Snyder - CEO & Director
Douglas McCurdy - CFO & Secretary
ConferenceCall Participants
Sean McGowan - ROTH Capital Partners
Operator
Good morning, and welcome to Reed’s Fourth Quarter and Full Year 2024 Earnings Conference Call for the three months and 12 months ended December 31, 2024. My name is Joelle, and I will be your conference call operator for today. We will have prepared remarks from Norman E. Snyder, Reed’s Chief Executive Officer; and Doug McCurdy, Reed’s Chief Financial Officer. Following their remarks, they will take your questions. Before we begin, please take note of the company’s cautionary statement.
Today’s call will include forward-looking statements, including statements about Reed’s business plans. Forward-looking statements inherently involve risks and uncertainties and only reflect management’s view as of today, March 26, 2025, and the company is under no obligation to update them. When discussing results, the presenters may refer to non-GAAP measures, which exclude certain items from reported results. Please refer to Reed’s fourth quarter 2024 earnings release on Reed’s investor website at investor.reedsinc.com, and its Annual Report on Form 10-K for the 2024 fiscal year expected to be available on the website soon.
For definitions and reconciliations of non-GAAP measures and additional information regarding results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. I will now turn the call over to Mr. Snyder.
NormanSnyder
Thank you, operator and good morning, everyone. We appreciate you joining us today to discuss our fourth quarter and full year 2024 results. Throughout this past year, we implemented strategic initiatives to strengthen our financial and operational foundation to position Reed’s for long-term success. We reinforced our balance sheet, streamline operations and enhanced efficiencies laying the groundwork for sustained growth and profitability. While net sales declined in 2024, due to inventory production constraints, vendor credit limits and short order shipments.
Our disciplined approach to operations, new product launches and targeted investments have set the stage for a return to growth. Gross margin enhancements and shareholder value creation in 2025. Turning to the fourth quarter. A key milestone for us was the completion of a $10 million private placement, which closed on December 30, 2024. We have begun to deploy the funds this year to both build inventory levels, enhance personnel and sales and marketing resources. As previously discussed, inventory constraints have post challenges and fully meeting customer demand, particularly during the second half of 2024.
However, with the completion of our private placement and strategic debt restructuring, we now have a delevered balance sheet and enhanced financial flexibility. This capital infusion will enable us to maintain inventory at optimal levels, ensuring consistent order fulfillment rates and reducing the short order shipments that previously hindered our growth.
As we move into 2025, although the process to rebuild inventory can take approximately 60 to 90 days, today, I am pleased to share that we are well positioned to capitalize on increased retail demand drive greater operational efficiency and expand our presence across key distribution channels to build sales momentum, as we progress throughout the year. Another important development, which took place after year-end, with the appointment of Douglas McCurdy as Chief Financial Officer; and Salvatorre Vassallo as Vice President of Operations.
Doug brings extensive experience in finance, corporate strategy and capital markets having served as both the Chief Financial Officer and Chief Operating Officer for multiple early-stage growth companies. His expertise in financial management, operational scaling and strategic capital allocation will be invaluable in optimizing our cost structure and driving sustained profitability. Salv joins us with a deep background in inventory management, strategic sourcing and supply chain optimization with leadership experience at Boylan Bottling Company, Ferrero, Snapple Beverages and Henkel.
It has proven ability to enhance procurement strategies and strengthen distribution networks will be an asset to Reed’s. Together, Doug and Salv will play instrumental roles in driving operational excellence, maximizing profitability and advancing the company’s growth objectives. In addition to reinforcing our leadership team this year, we are also expanding our product portfolio with the launch of our new multifunctional soda line, this innovative lineup is formulated with organic ginger, complex Adaptogen Mushroom extracts and prebiotic fiber. Each serving contains only 5 grams of sugar, approximately 30 to 45 calories, 500 milligrams of adaptogens and 2,000 to 5,000 milligrams of organic ginger. The flavor profile includes Berry Bubbly, strawberry vanilla, lemon grass ginger and Root Beer. These beverages cater to the rising demand for health-conscious functional refreshment options and position us at the forefront of the evolving beverage market. This launch is a natural extension of our legacy, leveraging Reed’s expertise in natural plant-based ingredients to create better-for-you beverages that deliver both great taste and functional benefits.
The early response from retailers has been overwhelmingly positive, reinforced by their expansion of shelf-space dedicated to the functional and better-for-you beverage category. We have already secured over 8,000 points of distribution for this new product line which is expected to hit the shelves between April and August 2025 across key national retailers, including Sprouts, Kroger, Walgreens, Duane Reade, Hannaford, Stop & Shop and National Co+op Grocers. Looking ahead, we expect strong momentum as we roll out this product line throughout 2025.
Now turning to our fourth quarter sales and operational highlights. We experienced solid retail gains during the fourth quarter with new points of distribution secured across major retailers. We gained over 1,100 new placements across Albertsons/Safeway, for Reed’s Ginger Ale, Virgil’s Root Beer and Vanilla Cream Cans. Additionally, Flying Cauldron is now part of the national display program where sales have exceeded expectations. As we head into the summer selling season, we anticipate continued momentum. Our 4 pack — Reed’s Ginger Ale is now the #1 rent SKU and dollar sales within the expanded natural channel or the latest 52 weeks ending February 23, 2025, generating $1.9 million in sales. With a 6% market share in this category, we see substantial opportunities for further growth.
Virgil’s handcrafted cans have been added to NCG, Infra, Smart & Final, Harris Teeter, Giant Eagle, Stop & Shop with an expanded assortment launching in Sprouts after a strong 2024. This expansion brings an additional 3,000 points of distribution in 2025. We continue to transition from glass bottles to cans at key retail partners, including Whole Foods and H.E.B. This strategic shift underscores our efforts to improve delivery and handling costs on a per case basis and lower price points for consumers.
Our team successfully rotated our winter variety pack at Costco in Q4 2024 and secured commitments to expand our assortment into 2025. The winter variety pack includes Ginger Ale, Cranberry Ginger Ale and our new BlackBerry Ginger Ale. This expanded lineup features our ready-to-drink Classic Mules set to launch in Costco clubs across Los Angeles and Hawaii starting in late April 2025.
We secured placement at Walmart for our new 7.5-ounce mini eight pack cans for both Ginger Beer and Ginger Ale, marking the first major retailer take our new mini can format. In early 2025, secondary placements surged with a successful off-shelf completed at Sprouts, an upcoming shipper program with Kroger and a BOGO promotion at Publix, both set to launch in the second quarter of 2025. These placements are a testament to the strength of our brand and the growing demand for our premium craft beverages. As we continue to expand our distribution footprint, we are focused on ensuring that we can meet demand with improved inventory management and production efficiency.
Throughout the year, we continue to take proactive measures to streamline our distribution network, reduce input cost and improve our supply chain. These efforts have resulted in continued gross margin improvement that is currently in the low to mid-30% range quarter-to-date, driven by the optimization of our Ginger Beer formulation better pricing on key materials and supply chain improvements. Our co-packing partnerships with Battle co-packing and drink pack have strengthened our production capabilities for both bottles and cans ensuring consistent supply and mitigating freight inefficiencies. With these improvements in place, we expect to generate meaningful savings in delivering handling costs, which have already been reduced by 10% in Q4.
Additionally, our transition from glass bottles to cans across Reed’s and Virgil’s portfolio has been well received by both our retail partners and consumers, enabling us to offer more cost-effective format. We have successfully built our finished goods inventory during the current quarter, and we’ll be in a position to drive sales growth beginning in the second quarter. This increase in inventory will also contribute to improved service levels and to lower freight logistic costs improved gross margin, sales velocity and promotional sales performance.
Q1 customer orders are steady and are trending ahead of last year. During the four weeks ending February 23, 2025, the U.S. natural expanded channel as reported by SPINS, contained [8% dollar] (ph) sales and 13% unit sales growth, while IRI MULO data, which is defined as multi outlet, including grocery, convenience, drug, mass, club, dollar store military and Walmart had mixed results, although were several positive trends as we continue to see momentum in Ginger ale, as well as benefits from our continued transition from glass to cans with ginger beer.
The sales philosophy for Virgil’s is lagging as we are still working through the glass to can transition for our full sugar line. Looking ahead, our continued execution of strategic initiatives enhancing distribution, refining our cost structure and launching innovative functional products provides a solid framework for success in the evolving beverage market. We remain committed to delivering premium better-for-you beverages that resonate with consumers while driving value to our shareholders.
Before wrapping up closing remarks, our new CFO, Doug McCurdy, will cover the financial highlights for the quarter in more detail. Doug, over to you.
DouglasMcCurdy
Thank you, Norman. I’m pleased to address our shareholders and prospective investors for the first time as Reed’s do CFO. I was drawn to Reed’s for its incredible brand heritage and the opportunity to return the company to sustainable growth and profitability. I’m very much looking forward to partnering with Norman and the entire Reed’s team in the journey ahead.
Turning to our results. All variance commentary is on a year-over-year basis unless otherwise noted. Net sales for the fourth quarter of 2024 were $9.7 million compared to $11.7 million in the year ago quarter. This decrease was primarily driven by short order shipments due to prior inventory constraints.
Gross profit for Q4 2024 increased to $2.9 million compared to $0.5 million for the same period in 2023. Gross margin was 30% compared to 4% 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 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 $4.8 million during the fourth quarter of 2024 compared to $3.0 million in the year ago quarter. Altogether, operating expenses were $6.6 million compared to $5.4 million in the year ago period.
Operating loss during the fourth quarter improved to $3.7 million or negative $0.25 per share compared to a loss of $5.0 million or negative $1.55 per share in the fourth quarter of 2023. Modified EBITDA was negative $0.7 million in Q4 2024 compared to positive 43,000 in the year ago period. 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. This was primarily driven by higher inventory purchases compared to the year ago period.
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.
I will now turn the call back to Norman for closing remarks.
NormanSnyder
Thanks, Doug. As I reflect on our journey over the past several years, I can’t help but feel incredibly proud of what this team has accomplished. Reed is navigated through both challenges and opportunities with resilience, creativity and a deep commitment to our mission. The foundation we’ve built financially, operationally and culturally is one I believe will support the company for years to come. With a vitalized product pipeline and meaningful growth initiatives underway, Reed’s is poised for an exciting future. Thank you to our employees, partners and shareholders for your continued belief in this company.
With that, operator, we’re ready to open the line for questions.
Question-and-AnswerSession
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Sean McGowan with Roth Capital Partners. Your line is now open.
SeanMcGowan
Good morning thanks. Norman, I was wondering if you could give us a little bit more color on some of the new products that you were describing sound pretty exciting that they’ve been received pretty well so far. But where do they fit in kind of the grander scheme of what’s happening in non-alc beverage right now in the industry? Are these — are you like gravitating towards almost probiotic or what’s the plan there?
NormanSnyder
Sean, great question. I think it addresses — from my perspective, there’s three key aspects one is that, obviously, my position with what Reed’s is has been plant-based. It’s been a forefront leader in the category, premium better-for-you. And it seems like we just haven’t received that recognition across the Board, particularly from the Millennial and Gen Z consumers. So to me, this was a perfect opportunity to really introduce Reed’s and the benefits of our products to those consumers. While at the same time, retailers are just creating more and more space for this functional or modern beverage category. It’s really amazing how much they’ve cut back from both the traditional and the premium and craft segments. So there’s a lot of space opening up that, obviously we want to play in.
And if you look at where the growth is in the category, everything else is staying fairly stagnant, and this is really the fastest growing category. So it was a natural extension for us. I don’t think it’s a forced creation, but it’s an extension of who we are and rather be a prebiotic, a one-dimensional prebiotic, as you recall in my earlier comments, I called multifunctional. So we have the impact and the efficacy of ginger, which by the way, we did a lot of research, and that really resonated with this consumer group, which quite frankly, surprised me but made me very happy.
So it’s Ginger based which is a big point of difference. We have the adaptogen-based, which is a big point of difference with functionality in both gut health and cognitive energy. And then obviously, we have the prebiotic fiber. So we are not just single dimensional, but multidimensional and really playing as to who we are. And we think we have a big point of difference with that. And last but not least, these products taste great. They fit with all the current key attributes, low sugar, a low-calorie range and all the other key attributes that you’re seeing. So I think we have a best-in-class entry into this category.
SeanMcGowan
Thank you. That helps. Thank you.
Operator
Your next question comes from Will Bendigo, an Investor. Your line is now open.
UnidentifiedAnalyst
Hey, Norm. Good morning. How are you?
NormanSnyder
Good morning how are you Will?
UnidentifiedAnalyst
Two quick questions. First one, what’s the deal with the alcohol portfolio? Is that really taken just kind of a backseat and maybe not taken off like you guys thought it would? Or unless I missed it, I didn’t hear any mention of it.
NormanSnyder
I don’t know if I’d call it a backseat. I think if you recall on earlier presentations, we decided that rather than trying to go a mile wide and an inch deep. We’re going to try to go a mile deep and an inch wide and really fell back to key retailer partners like Whole Foods and Trader Joe’s and others that Reed’s does very well, and there’s a high brand recognition. So we’ve really focused on that. However, the last half of 2024, we really struggled with billings and maintaining inventory. So unfortunately, that did fall back to the back burner. But we are gathering additional interest, this Costco rotation that’s coming up in L.A. and Hawaii is going to be huge.
And we are starting to reignite interest, particularly as the weather turns warmer and then we get into a much stronger inventory position, you’ll see that start to pick up, but the focus has really been on retailers where Reed’s done well. There is a high brand recognition. So we purposely slowed down, obviously, the inventory situation impacted that. But now we’re turning the jets back on as we build inventory, and I think you’ll see more growth coming into the warmer weather and later in 2025.
SeanMcGowan
Okay. And then just picking back off that with the inventory challenges. Looking at revenue, we’re down $16 million, call it, 30% over the last two years. Do you attribute that 100% to cash constraints and lack of inventory — or what do you think the poll for Reed’s products are outside of cash constraints and inventory, is there enough pull there to really get this company going? Like do you see this as a $75 million, $100 million revenue company? Or has it just been — because I feel like every call, we are adding 10,000 new doors here and there, but the pool just hasn’t been there. So do you attribute that solely to the constraint?
NormanSnyder
Yes. I do the majority of it because the orders have been there. Like I said earlier, even our Q1 orders are slightly ahead of last year. So the orders have been there and — we’ve really — I mean, our short shipments really got to a very dangerous level where I had to go out and spend time with a lot of key retailers assuring them that a fix within process, what we are doing what were some of the causes. And my takeaway is what kept us going with a lot of these partners were the strength of both Reed’s and Virgil’s and their belief and the success they’ve had. And I think you will see the numbers come back very strong.
I mean one of the things that I watch very closely is scan data and seeing when we replenished the natural category, the expanded natural category to see strong green numbers pop up, just reinforced my belief that it was a supply chain and not really a demand issue. We had probably one of the best four-week periods we’ve ever had with Sprouts. And I believe our dollar sales were up like 50%, and our unit sales were up 100%. Now granted we had some promotional activity involved there.
But when we are able to supply and keep a steady cadence, it generates into so much momentum, including promotional activity, which by the way, we had to walk away from which, quite frankly, was a smart decision because we would have been severely penalized if we didn’t. But we walked away from a lot of promotional activity because we didn’t have the ability to fulfill it which would have been very detrimental to our relationship.
So we have to turn off a lot of things that we normally did. And like I said, this is like the sales cycle, it is like a production line, you turn it off, when you start it up, it doesn’t go back to running very efficiently, you’ve got to get there. And we see that when we get to a steady cadence, we start picking up more momentum, our velocity numbers at retail pick up, our promotional activity picks up and it just builds on itself. So I think you’ll see that coming to fruition more in the second quarter. But like I said, just what we are able to replenish inventory in the natural channel, we saw a big boost at retail.
UnidentifiedAnalyst
All right. Last thing real quick, are you able to give any sort of guidance for this year of what your revenue targets are?
NormanSnyder
I think we are going to — we’ll do that in the next quarter. Obviously, we are believing strongly in growth — returning to growth. And the key — look at the two key things that we have to do to set the foundation, which the entire company has stayed focused on is reducing short shipments and raising our OTIF rates on time and in full to our customers. And every individual person in this company knows about that, knows where we are, knows the progress we’re making and are focused and that will lay the foundation to accomplish everything we want to. But what we expect to see is top-line growth, margin enhancement and reduction in freight logistic costs. And that’s something that we’ve been working on. We’ve been unable to accomplish, but I think you’ll see that generate positive cash flow and positive operating income.
UnidentifiedAnalyst
Okay. Awesome. Thanks. That’s all I got. Appreciate your time.
NormanSnyder
You’re welcome.
Operator
[Operator Instructions] Your next question comes from Jack Iyer with as a Private Investor.
UnidentifiedAnalyst
Yeah, hi. Norm Good morning. Yes. I wanted to ask about what you guys think the pathway might look like for getting off of [OTCQX and back] (ph) listed on an actively traded stock exchange. I know you guys have placed the debt and cash flow is not so much a concern — not so much a constraint having cash on hand to be able to fill the orders, the whole supply chain, half shipments, all that stuff. So with the financial metrics sounding like they’re going to be significantly improving over the next three quarters? Like have you guys given any thought to what your time line is for making a move to get relisted?
NormanSnyder
Yes. Trust me, that’s something we think about a lot. And I’ve done — I’ve actually written an internal memo and researched it. So there is — obviously, nobody — we don’t want to remain on the OTCQX, right? We want to uplift to a major exchange. And we evaluated that before we were delisted a couple of years ago and made the decision to delist because of the punitive nature of potentially raising enough equity to get to the threshold for positive net equity. Today, it’s a different story. Obviously, with the restructuring of our balance sheet, we now comply with those requirements.
And I think there’s like 4 or 5 other requirements, and we’re either there or very, very close. I think the last real key aspect is getting our stock price at the minimum level that the exchanges want and look at based on what has happened lately and I think with our continued performance, I think we can get there organically. So the question is how quickly we’ve talked to lawyers, bankers, accounts, et cetera, et cetera, everyone has their own opinion. But I think there’s just — I think the consensus that’s come back has been a couple of sustained quarters of operating performance, should get us pretty close to satisfying all the criteria. And once we do that, we’ll begin the application process to uplift. But it’s a goal that we have – we are monitoring where we are. We’ve evaluated the criteria and what we need to do. And we’ve come close on a lot of them. And we’re — we believe, like I said, after some sustained positive performance, we’ll be in a position to do that.
UnidentifiedAnalyst
Okay. Understood. I appreciate the commentary. I have 1 other quick question that I hope you might comment on looks like SG&A was up almost $1.1 million in comparison to last year for Q4. Do you know what the primary drivers of that was?
NormanSnyder
Yes. Yes. This is kind of a burn or my saddle. It’s a combination of timing with certain things, and it’s what we’ll call our typical non-cash reserves that our auditors required to record for various things. For example, we made an investment in equipment at a co-packer and we are reverse amortizing it. So we’re getting a credit back on a per case basis. And when they sort of extrapolate what the time period is, I think it extended past our 36-month target. So they make us reserve against the whole thing.
So going forward, when we get that reverse amortization, we’ll get a credit to COGS — my position is we’re going to recover it, but they force us to take a reserve against that equipment. So there are things like that, that are non-cash frustrating for me because I don’t think they really truly indicate our financial performance, and you’ll see that in our modified EBITDA reconciliation, we take those things out. So that’s really what’s driving it. It’s not like — we’re spending more money. There’s more cash going out the door. They’re really noncash accounting adjustments.
UnidentifiedAnalyst
Okay. Okay. That makes a lot more sense. Will they be reflected in the year-end or quarter-end financial statements where we can see the cash versus noncash?
NormanSnyder
Yes. Yes, they should be probably a note on it.
UnidentifiedAnalyst
Okay. All right. Great. Appreciate it very much.
NormanSnyder
You’re welcome.
Operator
There are no further questions at this time. I will now turn the call over to Norm for closing remarks.
NormanSnyder
I’d like to thank everyone for participating in this morning’s earnings call as well as our employees, customers and, of course, our shareholders. We appreciate everyone’s continued support. Have a wonderful day. Thank you.
Operator
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.