8-K - REED - Equibles

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): May 17, 2021

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.)

201 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: (310) 217-9400

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<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement<br> communications 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:

Title of Each Class	Trading<br><br> <br>Symbol(s)	Name of Each Exchanged on Which Registered
Common<br> Stock, $.0001 par value per share	REED	The<br> NASDAQ Stock Market LLC

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 May 17, 2021, Reed’s Inc., a Delaware corporation (the “company” or “Reed’s”) issued a press release announcing financial results for the first fiscal quarter ended March 31, 2021. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

The Company will conduct a conference call at 4:30 pm Eastern Time today, May 17, 2021 to discuss its first quarter 2021 results. This conference call can be accessed via a link on Reed’s investor website at https://investor.reedsinc.com/ under the “Events & Presentations” section or directly at http://public.viavid.com/index.php?id=144910. To listen to the live call over the Internet, please go to Reed’s website at least fifteen minutes early to register, download and install any necessary audio software. Additionally, the call may be accessed with the toll-free dial-in number, 1-(877) 300-8521 (U.S.); or 1-(412) 317-6026 (International). Please dial in at least fifteen minutes before the start of the conference call due to increased demand for conference calls.

A replay of the webcast will be archived on the Company’s website at https://investor.reedsinc.com under the “Events & Presentations” section for approximately 90 days.

Item 7.01.	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.

(d)Exhibits.

The following exhibit is furnished with this Current Report on Form 8-K:

Exhibit<br> No.	Description
99.1	Press Release of Reed’s Inc. dated May 17, 2021

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,<br> INC.,
	a<br> Delaware corporation
Dated:<br> May 17, 2021	By:	/s/ Thomas J. Spisak
		Thomas<br> J. Spisak
		Chief<br> Financial Officer

Exhibit99.1

Reed’s,Inc. Announces First Quarter 2021 Financial Results

Netsales increased 28%

Reaffirmsfiscal 2021 outlook

NORWALK, CT, May 17, 2021 (GLOBE NEWSWIRE) — Reed’s Inc. (Nasdaq:REED), owner of the nation’s leading portfolio of handcrafted, all-natural beverages, today announced financial results for the fiscal first quarter ended March 31, 2021.

Highlightsfor the First Quarter of 2021

●	Net<br> sales increased 28% to $12.1 million in the first quarter compared to $9.5 million in the prior year. The increase compared<br> to the prior year reflects continued volume growth of both the Reed’s®<br> and Virgil’s® brands, including the impact from the recent launch of<br> Reed’s Real Ginger Ale products;
●	Core<br> brand gross sales increased 27% versus prior year period primarily driven by 37% volume growth of the Reed’s®<br> brand and 29% growth of the Virgil’s® brand;
●	Gross<br> profit increased 34% to $3.9 million compared to $2.9 million in the prior year period. Gross margin increased to 32% from<br> 30% for the first quarter;
●	Operating<br> loss was $4.3 million compared to $2.3 million in the first quarter of 2020;
●	Net<br> loss was $4.5 million, or $0.05 per share, compared to $2.6 million, or $0.05 per share, in the prior year period; and
●	Non-GAAP<br> Modified EBITDA loss was $3.4 million in the first quarter of 2021 compared to a Modified EBITDA loss of $1.4 million in the<br> prior year.

ManagementCommentary

“Strong momentum continued throughout the first quarter as net sales increased by 28% to over $12 million, the highest quarterly level in Company history. Demand remained broad based and our increase in net sales was largely reflective of volume gains across existing and new customers,” said Norman E. Snyder, Chief Executive Officer of Reed’s, Inc. “We made further progress improving gross margin reporting a 160 basis point increase versus last year; however, this was more than offset by unexpectedly sharp increases in delivery expenses to ensure supply chain continuity due to very challenging conditions in the transportation markets. While many of these adverse factors were outside of our control during the first quarter, we are not satisfied with our net results and have identified several areas where we expect to realize immediate expense savings, drive scale related efficiencies and implement initiatives to mitigate freight and supply chain risks over the balance of the year. With net sales growth in the first three months of 2021 nicely ahead of our full-year guidance range, our recently completed financing transaction solidified our balance sheet, providing incremental working capital to support our anticipated trajectory. We remain comfortable we will meet or exceed the 2021 outlook we introduced in March and are confident in the significant long-term growth opportunity for our overall brand portfolio.”

FinancialOverview for the First Quarter of 2021 Compared to the First Quarter of 2020

During the first quarter of 2021, net sales increased 28% to $12.1 million compared with $9.5 million in the prior year. Core brand gross sales increased 27% compared to the same period in 2020, driven by 33% volume growth as the Reed’s® brand grew 37% and the Virgil’s® brand grew 29%. Growth reflected continued momentum across the Reed’s and Virgils portfolio including strong contribution from the Reed’s Real Ginger Ale line as well as both Reed’s® and Virgil’s® zero sugar prodcts.

Gross profit during the first quarter of 2021 increased 34% to $3.9 million compared to the same period in 2020. The increase in gross profit reflects increased revenue during the quarter driven by sales growth across Reed’s® and Virgil’s® brands and the benefits of improved procurement, process optimization and favorable product mix driven by recent innovation launches. Gross margin increased approximately 160 basis points to 32% versus the 30% in the first quarter of 2020.

Delivery and handling costs increased 160% to $3.3 million during the first quarter of 2021 compared to the same period in 2020. Delivery and handling costs were 27% of net sales and $4.43 per case, compared to 13% of net sales and $2.26 per case during the same period last year, reflecting increased volumes, ecommerce fulfillment costs, and increasing freight rates due to COVID-19.

Selling and marketing costs increased 15% to $2.2 million during the first quarter of 2021. The increase was driven by an increase in sales force headcount and marketing costs, partially offset by lower stock compensation expense and reduced expenditures on trade shows and sponsorships.

General and administrative expenses (G&A) increased to $2.6 million during the first quarter of 2021 compared to $1.9 million in the prior year period. The increase was driven by legal settlements, employee costs, consulting fees, public company and licensing costs, partially offset by lower stock compensation.

Operating loss during the first quarter of 2021 was $4.3 million from $2.3 million in the prior year period.

Interest expense of $0.3 million during the first quarter of 2021 was consistent with the first quarter of 2020.

Net loss during the first quarter of 2021 was $4.5 million, or $0.05 per share, compared to $2.6 million, or $0.05 per share in the first quarter of 2020.

Modified EBITDA loss was $3.4 million in the first quarter of 2021 compared to a loss of $1.4 million in the first quarter of 2020.

Liquidityand Cash Flow

During the first three months of 2021, the Company used $5.1 million of cash in operating activities compared to $2.4 million of cash used in operating activities in the prior year period. The increase in cash used in operating activities during the first three months of 2021 relates primarily to building inventory, elevated freight costs and legal settlemets. As of March 31, 2021, the Company had $0.2 million of cash and $2.5 million of available borrowing capacity on its revolving line of credit.

DirectOffering

On May 7, 2021, the Company closed a stock purchase agreement of 6.7 million shares of common stock, at a direct offering price of $1.18 per share. The nets proceeds from this offering were approximately $7.3 million, after deducting commissions and other offering expenses, and will be used for to fund working capital and general corporate purposes including supporting additional distribution opportunities.

FullYear 2021 Guidance

The Company is reaffirming its fiscal 2021 outlook. The Company continues to expect to generate net revenue growth in the range of 14% to 16% during the full year 2021 given the potential uncertainty arising from the recent pandemic. The Company anticipates a gross margin range of 32% to 33% for the full year 2021. Fiscal 2021 guidance reflects year-to-date business trends, including the ongoing operating environment related to COVID-19. The COVID-19 pandemic and its related impacts create many incremental potential business risks, including potential impacts to the Company’s ability to access raw materials, production, transportation and/or other logistics needs, as well as potential inflation related to all aspects of supply chain and logistics, which cannot be reasonably estimated and are not factored into current fiscal 2021 guidance.

FirstQuarter 2021 Earnings Call Details

The Company will conduct a conference call at 4:30 pm Eastern Time today, May 17, 2021 to discuss its first quarter 2021 results. This conference call can be accessed via a link on Reed’s investor website at https://investor.reedsinc.com/ under the “Events & Presentations” section or directly at http://public.viavid.com/index.php?id=144910. To listen to the live call over the Internet, please go to Reed’s website at least fifteen minutes early to register, download and install any necessary audio software. Additionally, the call may be accessed with the toll-free dial-in number, (877) 300-8521 (U.S.) or (412) 317-6026 (International). Please dial in at least fifteen minutes before the start of the conference call due to increased demand for conference calls.

A replay of the webcast will be archived on the Company’s website at https://investor.reedsinc.com under the “Events & Presentations” section for approximately 90 days.

AboutReed’s, Inc.

Established in 1989, Reed’s® is America’s number 1 name in Ginger and America’s best-selling Ginger Beer brand and innovator for decades. Virgil’s® is America’s best-selling independent, full line of natural craft sodas. The Reed’s® portfolio is sold in over 40,000 retail doors nationwide. Reed’s core product line of Original, Premium, Extra and Strongest Craft Ginger Beers, along with the Certified Ketogenic Zero Sugar Extra Ginger Beer are unique due to the proprietary process of using fresh ginger root combined with a Jamaican inspired recipe of natural spices and fruit juices. The company uses this same handcrafted approach in its Reed’s® Real Ginger Ale and award-winning Virgil’s® line of great tasting, bold flavored craft sodas and Certified Ketogenic Zero Sugar Varieties.

For more information about Reed’s, please visit the Company’s website at: https://drinkreeds.com/ or call 800-99-REEDS. Follow Reed’s on Twitter, Instagram, and Facebook @drinkreeds.

For more information about Virgil’s, please visit Virgil’s website at: https://virgils.com/. Follow Virgil’s on Twitter and

Instagram @drinkvirgils and on Facebook @drinkvirgilssoda.

SafeHarbor 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, please see our most recent reports on Form 10-K 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.

CONTACTS:

Investor Relations

Reed Anderson, ICR

(800) 997-3337 Ext 2

Or (646) 277-1260

Email: ir@reedsinc.com

www.reedsinc.com

REED’S,INC.

CONDENSEDSTATEMENTS OF OPERATIONS

Forthe Three Months Ended March 31, 2021 and 2020

(Unaudited)

(Amountsin thousands, except share and per share amounts)

	March<br> 31,2021			March<br> 31,2020
Net<br> Sales	$	12,146		$	9,523
Cost<br> of goods sold		8,293			6,653
Gross<br> profit		3,853			2,870
Operating<br> expenses:
Delivery<br> and handling expense		3,286			1,263
Selling<br> and marketing expense		2,215			1,925
General<br> and administrative expense		2,603			1,932
Total<br> operating expenses		8,104			5,120
Loss<br> from operations		(4,251	)		(2,250	)
Interest<br> expense		(256	)		(336	)
Change<br> in fair value of warrant liability		-			6
Net<br> loss	$	(4,507	)	$	(2,580	)
Dividends<br> on Series A Convertible Preferred Stock		-			-
Net<br> Loss Attributable to Common Stockholders	$	(4,507	)	$	(2,580	)
Net<br> loss per common share - basic and diluted	$	(0.05	)	$	(0.05	)
Weighted<br> average common shares outstanding:
Basic<br> and Diluted		86,631,304			47,595,206

REED’SINC.

CONDENSEDBALANCE SHEETS

(Amountsin thousands, except share amounts)

	March 31, 2021 (Unaudited)			December 31, 2020
Assets
Current assets:
Cash	$	155		$	595
Accounts receivable		5,032			4,718
Receivable from related party		701			682
Inventories		12,445			11,119
Prepaid expenses and other current assets		2,110			1,341
Total current assets		20,443			18,455
Property and equipment, net		949			920
Equipment held for sale		67			67
Intangible assets		617			615
Total assets	$	22,076		$	20,057
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,134		$	6,746
Accounts payable to related party		1,034			557
Accrued expenses		449			895
Revolving line of credit		4,256			(0	)
Current portion of note payable		727			599
Current portion of leases payable		145			130
Total current liabilities		14,745			8,927
Long-term liabilities:
Lease payable, net of current portion		518			555
Note payable, net of current portion		43			171
Warrant liability		0			0
Total liabilities		15,306			9,653
Stockholders’ equity:
Series A Convertible Preferred Stock		94			94
Common Stock		9			9
Additional paid-in capital		97,904			97,031
Accumulated deficit		(91,237	)		(86,730	)
Total stockholders’ equity		6,770			10,404
Total liabilities and stockholders’ equity	$	22,076		$	20,057

REED’S,INC.

CONDENSEDSTATEMENTS OF CASH FLOWS

Forthe Three Months Ended March 31, 2021 and 2020

(Unaudited)

(Amountsin thousands)

	March 31,2021			March 31,2021
Cash flows from operating activities:
Net Loss	$	(4,507	)	$	(2,580	)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		32			12
(Gain)/loss on termination of leases		(3	)		-
Amortization of debt discount		162			96
Amortization of prepaid financing costs		25			-
Amortization of right of use assets		24			37
Stock options issued to employees for services		292			495
Fair value of vested restricted shares granted to officers		106			285
Decrease in allowance for doubtful accounts		(69	)		(93	)
Decrease in inventory reserve		(20	)		(384	)
Increase in fair value of warrant liability		-			(6	)
Accrual of interest on convertible note to a related party		-			142
Lease Liability		(8	)		(7	)
Changes in operating assets and liabilities:
Accounts receivable		(244	)		(1,826	)
Inventory		(1,306	)		2,902
Prepaid expenses and other assets		(484	)		(365	)
Accounts payable		1,387			(1,038	)
Accrued expenses		(446	)		(22	)
Net cash used in operating activities		(5,059	)		(2,352	)
Cash flows from investing activities:
Patents cost		(2	)		-
Purchase of property and equipment		(95	)		(22	)
Net cash provided by (used in) investing activities		(97	)		(22	)
Cash flows from financing activities:
Borrowing on line of credit		16,154			9,188
Repayment of line of credit		(11,898	)		(7,677	)
Amounts from related party		459			0
Principal repayments on capital lease obligations		(2	)		(22	)
Exercise of options		3			-
Net cash provided by (used in) financing activities		4,716			1,489
Net increase/(decrease) in cash		(440	)		(885	)
Cash at beginning of period		595			913
Cash at end of period	$	155		$	28
		0
Supplemental disclosures of cash flow information:
Cash paid for interest	$	70		$	98

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, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense, legal settlements, 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 months ended March 31, 2021 and 2020 (unaudited; in thousands):

	Three Months ended March 31,
	2021			2020
Net loss	$	(4,507	)	$	(2,580	)
Modified EBITDA adjustments:
Depreciation and amortization		56			49
Interest expense		256			336
Stock option and other noncash compensation		398			780
Change in fair value of warrant liability		-			6
Legal settlements		353			-
Total EBITDA adjustments	$	1,063		$	1,171
Modified EBITDA	$	(3,444	)	$	(1,409	)

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 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 interest or principal payments,<br> on our debts; and
●	Although<br> depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced<br> in the future, and Modified EBITDA does not reflect any cash requirements for such replacements.