PART I - FINANCIAL INFORMATION [Item 1. Condensed Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Financial%20Statements) Q1 2025 condensed financial statements show a **$2.0 million net loss**, reduced equity, and significant cash usage from operations, primarily for inventory [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) As of March 31, 2025, cash and total assets decreased, while liabilities increased, reducing stockholders' equity to **$4.7 million** Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $22,669 | $23,311 | | Cash | $4,862 | $10,391 | | Inventory, net | $12,333 | $8,114 | | **Total Assets** | $24,519 | $25,140 | | **Total Current Liabilities** | $19,028 | $17,655 | | Senior secured loan, net | $9,648 | $9,571 | | **Total Liabilities** | $19,855 | $18,492 | | **Total Stockholders' Equity** | $4,664 | $6,648 | [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) Q1 2025 net sales rose 4.5% to **$10.0 million**, but increased operating expenses widened the net loss to **$2.0 million** Q1 Statement of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $10,029 | $9,595 | | Gross profit | $3,402 | $3,413 | | Total operating expenses | $5,144 | $4,063 | | Loss from operations | $(1,742) | $(650) | | Net loss | $(2,031) | $(1,673) | | Net loss per share | $(0.04) | $(0.40) | [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Q1 2025 cash flow shows **$5.4 million** used in operations, primarily for inventory, resulting in a **$5.5 million** net cash decrease Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,362) | $(2,395) | | Net cash used in investing activities | $(74) | $(18) | | Net cash provided by (used in) financing activities | $(93) | $2,124 | | **Net decrease in cash** | **$(5,529)** | **$(289)** | | **Cash at end of period** | **$4,862** | **$314** | [Notes to Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes detail liquidity concerns, the **$10 million** Senior Secured Loan maturity, customer concentration, ongoing arbitration, and CEO transition - The company's **$10 million** Senior Secured Loan is due on November 14, 2025, and management is currently evaluating refinancing alternatives[24](index=24&type=chunk) - In Q1 2025, three customers accounted for **21%**, **17%**, and **17%** of net sales, respectively, indicating significant customer concentration[37](index=37&type=chunk) - The company is in a consolidated arbitration process with California Custom Beverage, LLC (CCB), a former related party, over various disputed amounts[60](index=60&type=chunk) - Effective April 16, 2025, CEO Norman E. Snyder, Jr. retired and was succeeded by Cyril A. Wallace, Jr[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2025 net sales increased 5% to **$10.0 million**, but rising operating expenses led to a wider operating loss and negative Modified EBITDA [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Q1 2025 net sales increased 5% to **$10.0 million**, but a 27% rise in operating expenses led to a **$2.0 million** net loss Q1 2025 vs Q1 2024 Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $10,029 | $9,595 | 5% | | Gross profit | $3,402 | $3,413 | 0% | | Gross Margin % | 34% | 36% | -2 p.p. | | Total operating expenses | $5,144 | $4,063 | 27% | | Loss from operations | $(1,742) | $(650) | 168% | | Net loss | $(2,031) | $(1,673) | 21% | - Core brand gross billing increased by **6%**, driven by a **19%** volume increase for Virgil's, partially offset by a **2%** volume decline for Reed's, with the average price per case on core brands increasing by **2%**[80](index=80&type=chunk) [Modified EBITDA](index=22&type=section&id=Modified%20EBITDA) Q1 2025 Modified EBITDA, a non-GAAP metric, worsened to a loss of **$1.6 million** from **$0.4 million** in Q1 2024 Reconciliation of Net Loss to Modified EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(2,031) | $(1,673) | | Total EBITDA adjustments | $397 | $1,303 | | **Modified EBITDA** | **$(1,634)** | **$(370)** | [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Q1 2025 liquidity weakened, with **$5.4 million** cash used in operations, reducing cash to **$4.9 million** as the **$10 million** Senior Secured Loan nears maturity - As of March 31, 2025, the company had a cash balance of **$4,862 thousand** and availability of **$100 thousand** under its Senior Secured Loan[94](index=94&type=chunk) - Cash used in operations was **$5,362 thousand**, primarily for a **$4,194 thousand** investment in inventory to better fulfill customer demand[93](index=93&type=chunk) - Management is evaluating various funding alternatives, including equity or debt issuance, as it seeks to refinance its maturing credit facility and potentially fund additional growth initiatives[96](index=96&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Reed's, Inc. is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information required by this Item[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[105](index=105&type=chunk) - No material changes to the Company's internal control over financial reporting occurred during the three months ended March 31, 2025[106](index=106&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in arbitration with a former related party and has a potential **$1.5 million** obligation to an investment bank - The company is party to legal proceedings, including an arbitration with former related party California Custom Beverage, LLC, and a potential contingency with an investment bank[107](index=107&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) Key risks include the impending maturity of the Senior Secured Loan and the potential need for additional, potentially dilutive, financing - The Senior Secured Loan matures on November 14, 2025; failure to secure refinancing on favorable terms, or at all, could adversely affect the company's financial position and operations[110](index=110&type=chunk) - The company may require additional capital for growth and operations; an inability to secure additional financing could impair business expansion and adversely affect financial results[111](index=111&type=chunk)[112](index=112&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities that have not been previously disclosed in a Current Report on Form 8-K - None that have not been previously disclosed in a Current Report on Form 8-K[113](index=113&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[114](index=114&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No changes to board nominee procedures or director/officer trading arrangements were reported during the quarter - No changes were made to the procedures for security holders to recommend board nominees, and no directors or officers modified trading arrangements under Item 408 of Regulation S-K[116](index=116&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and SEC certifications - This section lists all exhibits filed with the Form 10-Q, including certifications and material contracts[117](index=117&type=chunk)[118](index=118&type=chunk)

Financial Data and Key Metrics Changes - Net sales for Q1 2025 increased by 4.5% to $10 million compared to $9.6 million in the same quarter last year, primarily driven by higher volumes with recurring national customers [19] - Profit for Q1 2025 remained flat at $3.4 million compared to the previous year [20] - Gross margin decreased to 33.9% from 35.6% year-over-year, attributed to higher cost of goods sold as operating capacity and inventory increased [20] - Operating loss for Q1 2025 was $1.7 million, compared to a loss of $700,000 in Q1 2024 [21] - Cash used in operating activities increased to $5.4 million from $2.4 million year-over-year, driven by higher inventory purchases [22] Business Line Data and Key Metrics Changes - The company launched a new multifunctional soda line, which includes flavors like berry bubbly and strawberry vanilla, aimed at expanding its better-for-you portfolio [9][10] - Core product sales saw an expansion at Albertsons Safeway, adding over 1,100 new points of distribution for Reed's Ginger Ale [11] - Successful national offshoot program with Flying Cauldron at Albertsons exceeded internal projections and retail expectations [11] Market Data and Key Metrics Changes - The company secured national distribution in Sprouts Farmers Market and executed resets for all four Reed's functional SKUs across major retailers [10] - Distribution gains were noted in three states at Trader Joe's for classic new alcohol products, reflecting growing demand across core functional and alcohol portfolios [13] Company Strategy and Development Direction - The company is focused on sustainable growth and profitability, with immediate priorities on execution and operational improvements [17] - A strategic shift towards better inventory management and fulfillment rates is underway, supported by a recent capital infusion from a private placement [5][6] - The transition from glass bottles to cans is on track, enhancing cost structure and scalability [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about operational improvements and the potential for profitable growth, emphasizing a commitment to delivering premium, better-for-you beverages [23] - The company anticipates some modest gross margin pressure in Q2 due to seasonal promotion activity and higher trade spend [15] Other Important Information - The company appointed Rude Baker to the board of directors, bringing extensive experience in the beverage industry [8] - The company is actively evaluating alternative suppliers and sourcing strategies to mitigate potential disruptions from global trade dynamics [14] Q&A Session Summary Question: Operating expenses were higher than expected; what should be expected going forward? - Management indicated that the increase in SG&A is due to upfront investments in personnel and marketing to support growth initiatives, and they aim to remain disciplined in managing these expenses [25][27] Question: Will gross margins be pressured in Q2? - Management expects some seasonal compression in gross margins due to trade discounts and additional investments in the functional beverage launch [28] Question: Is there any revenue guidance for the year? - Management refrained from providing specific revenue guidance but emphasized a focus on growth and operating efficiency moving forward [33]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 increased by 4.5% to $10 million compared to $9.6 million in the same quarter last year, driven by higher volumes with recurring national customers [18] - Profit for Q1 2025 remained flat at $3.4 million compared to the previous year [19] - Gross margin decreased to 33.9% from 35.6% year-over-year, primarily due to higher cost of goods sold [19] - Operating loss for Q1 2025 was $1.7 million, compared to a loss of $700,000 in Q1 2024 [20] - Cash used in operating activities increased to $5.4 million from $2.4 million year-over-year, driven by higher inventory purchases [21] Business Line Data and Key Metrics Changes - The company launched a new multifunctional soda line, which includes flavors like berry bubbly and strawberry vanilla, and secured national distribution in Sprouts Farmers Market [8][9] - Expanded presence at Albertsons Safeway for Reed's Ginger Ale, adding over 1,100 new points of distribution [10] - Successfully launched a national offshoot program with Flying Cauldron at Albertsons, exceeding internal projections [10] Market Data and Key Metrics Changes - Distribution gains were noted in three states at Trader Joe's for classic new alcohol products, reflecting growing demand across core functional and alcohol portfolios [12] - The company executed national display programs across core product lines at Sprouts Farmers Market, strengthening visibility [11] Company Strategy and Development Direction - The company is focused on sustainable growth and profitability, with a commitment to delivering premium, better-for-you beverages [15] - A strategic initiative includes transitioning from glass bottles to cans, enhancing cost structure and scalability [13] - The company is taking a measured approach to innovation, prioritizing its heritage and brand credibility [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about operational improvements and the alignment across the team, laying groundwork for profitable growth [22] - The company expects some modest gross margin pressure in Q2 due to seasonal promotion activity and higher trade spend [14] - Management is focused on improving cash flow performance in the second half of 2025 [26] Other Important Information - The company appointed Rude Baker to the board of directors, bringing extensive experience in the beverage industry [7] - The company is actively evaluating alternative suppliers and sourcing strategies to mitigate potential disruptions from global trade dynamics [13] Q&A Session Summary Question: Operating expenses were higher than expected; what should be expected going forward? - The increase in SG&A is attributed to upfront investments in personnel and marketing to support strategic initiatives [26] Question: Will gross margins be pressured in Q2? - There may be seasonal compression in gross margins due to trade discounts and additional investment in the functional beverage launch [28] Question: Is there any revenue guidance for the year? - The company has not provided specific revenue guidance but is focused on growth and operating efficiency [33]

Financial Performance - Net sales increased by 4.5% to $10.0 million compared to $9.6 million in Q1 2024[5] - Gross profit remained flat at $3.4 million, with a gross margin of 33.9%, down from 35.6% in the previous year[7] - Operating loss increased to $1.7 million, compared to a loss of $0.7 million in Q1 2024[9] - The company reported a net loss of $2,031 million for the three months ended March 31, 2025, compared to a net loss of $1,673 million for the same period in 2024, representing an increase in loss of approximately 21.5%[30] - Modified EBITDA loss was $1.6 million, worsening from a loss of $0.4 million in the same quarter last year[10] - Modified EBITDA for the three months ended March 31, 2025, was $(1,634) million, a significant decline from $(370) million in the same period of 2024, indicating a deterioration in operational performance[30] Cash Flow and Liquidity - Cash used in operating activities was approximately $5.4 million, up from $2.4 million in Q1 2024[11] - As of March 31, 2025, the company had approximately $4.9 million in cash, down from $10.4 million at the end of 2024[11] - Net cash used in operating activities increased to $(5,362) million for the three months ended March 31, 2025, compared to $(2,395) million in the prior year, reflecting a worsening cash flow situation[29] - Cash at the end of the period was $4,862 million, a decrease from $10,391 million at the beginning of the period, highlighting liquidity challenges[29] - Cash paid for interest decreased to $199 million from $318 million year-over-year, indicating a potential reduction in debt obligations or interest rates[29] - The company incurred interest expenses of $289 million for the three months ended March 31, 2025, a decrease from $1,023 million in the prior year, indicating a reduction in debt servicing costs[30] Operational Efficiency and Management - Delivery and handling costs were $1.6 million, representing 16.2% of net sales, compared to 15.7% in Q1 2024[8] - Selling, general and administrative expenses rose to $3.5 million from $2.6 million, driven by investments in growth initiatives[9] - The company aims to improve operational efficiency, reducing short shipments from approximately 20% to roughly 2% by April 2025[3] - Total EBITDA adjustments for the three months ended March 31, 2025, amounted to $397 million, down from $1,303 million in the same period of 2024, suggesting increased operational inefficiencies[30] - The company experienced a decrease in accounts receivable by $125 million, while inventory saw a significant decrease of $4,194 million, indicating potential issues with sales or inventory management[29] - The company reported a significant write-down in inventory of $25 million, compared to $783 million in the previous year, reflecting improved inventory management practices[29] Investment Activities - The company’s cash flows from investing activities were $(74) million for the three months ended March 31, 2025, compared to $(18) million in the prior year, indicating increased investment activity despite cash flow challenges[29] - New product launches include functional beverages, which are expected to drive growth in 2025[2]

Core Insights - Reed's, Inc. reported a 4.5% increase in net sales for Q1 2025, reaching $10.0 million compared to $9.6 million in Q1 2024, driven by higher volumes with national customers [6][10] - The company is focused on improving operational efficiency, having reduced short shipments from approximately 20% to roughly 2% in April 2025, and is now producing in line with demand [4][5] - The new CEO, Cyril Wallace, emphasizes a commitment to quality and operational excellence, aiming for sustainable growth across existing and new product lines [3][5] Financial Performance - Gross profit for Q1 2025 remained flat at $3.4 million, with a gross margin of 33.9%, down from 35.6% in the previous year, primarily due to increased costs of goods sold [7][10] - Delivery and handling costs increased to $1.6 million, representing 16.2% of net sales, compared to 15.7% in Q1 2024 [8][10] - Selling, general, and administrative expenses rose to $3.5 million from $2.6 million, reflecting investments in personnel and marketing [9][10] Loss and Cash Flow - The operating loss for Q1 2025 was $1.7 million, compared to a loss of $0.7 million in Q1 2024, with a modified EBITDA loss of $1.6 million versus a loss of $0.4 million in the prior year [9][11][30] - The company used approximately $5.4 million in cash from operating activities in Q1 2025, compared to $2.4 million in the same period of 2024 [12][30] - As of March 31, 2025, Reed's had approximately $4.9 million in cash and $9.6 million in total debt, down from $10.4 million in cash at the end of 2024 [12][30] Strategic Outlook - The management is in the early stages of refining a long-term strategic plan, focusing on building scale, improving margins, and returning to profitability [5] - The company is expanding its distribution of core products and launching new functional beverages, which are expected to contribute to meaningful results in 2025 [4][5]

Core Insights - Reed's, Inc. has launched a new Multifunctional Soda Line featuring four flavors aimed at health-conscious consumers, incorporating functional ingredients alongside organic ginger [1][2][3] Product Details - The new soda line includes flavors: Berry Bubbly, Strawberry Vanilla, Root Beer, and Lemongrass Ginger, each designed with functional ingredients [1][6] - Each can contains an average of 5g of sugar, 2000-5000mg of organic ginger, and 30-45 calories, positioning it as a healthier alternative to traditional sodas [3][6] Market Positioning - Reed's emphasizes its commitment to plant-based and functional ingredients, aiming to redefine the beverage category with a focus on health and wellness [2][3] - The company has established itself as a leader in the craft beverage market, with products sold in over 32,000 stores nationwide [5][6] Availability - The Functional Soda Line is currently available at Sprouts Farmers Market and will soon be accessible through other retailers and online platforms [4]

Core Viewpoint - Reed's, Inc. will host a conference call on May 14, 2025, to discuss its financial results for Q1 2025, with results to be reported in a press release prior to the call [1] Company Overview - Reed's, Inc. is a leader in handcrafted, natural ginger beverages, established in 1989, and offers a portfolio under the Reed's®, Virgil's®, and Flying Cauldron® brand names [4] - The company is recognized as America's 1 name in natural, ginger-based beverages, with products including ginger beers, ginger ales, and ready-to-drink ginger mules [5] - Reed's has expanded into the zero-sugar segment with a proprietary natural sweetener system [5] Product Lines - Virgil's® offers an award-winning line of craft sodas made with natural ingredients, free from GMOs and artificial preservatives, available in various flavors including Root Beer and Vanilla Cream [6] - Flying Cauldron® is a non-alcoholic butterscotch beer made with natural ingredients, known for its creamy vanilla and butterscotch flavors, and contains no artificial additives [7] Conference Call Details - The conference call will take place at 8:30 a.m. Eastern time, with a toll-free dial-in number provided for participants [2] - The call will include a question-and-answer period following the management's discussion [2] - The conference call will be available for live broadcast and replay on the investor relations section of the company's website [3]

Core Insights - Reed's, Inc. has announced the retirement of CEO Norman E. Snyder, Jr. and appointed Cyril Wallace as the new CEO and Director, with Ruud Bakker joining the Board of Directors [1][4] Leadership Changes - Cyril Wallace brings over 20 years of experience from PepsiCo, where he managed a $3.2 billion territory and has a strong track record in revenue and margin performance [2] - Ruud Bakker has over 25 years of global leadership experience in the beverage industry, having held senior roles at Red Bull, Diageo, and Heineken, and is the founder of a beverage innovation incubator [3] Company Background - Reed's, Inc. is a leader in handcrafted, natural ginger beverages, established in 1989, and offers products under the Reed's, Virgil's, and Flying Cauldron brand names, sold in over 32,000 stores nationwide [5] - The company is recognized as America's 1 name in natural, ginger-based beverages, with a portfolio that includes ginger beers, ginger ales, and has recently expanded into the zero-sugar segment [6] Product Offerings - Virgil's is an award-winning line of craft sodas made with natural ingredients, offering various flavors including Root Beer and Vanilla Cream, with zero sugar options available [7] - Flying Cauldron is a non-alcoholic butterscotch beer made with natural ingredients, appealing to beverage enthusiasts [8]

Product Portfolio and Market Trends - Reed's has a portfolio of 50 products sold in over 32,000 outlets across the US and internationally, including Canada, the UK, and the EU[11][13]. - The retail carbonated soft drink (CSD) market grew by 6% in 2024, with the ginger ale segment growing by 9%, now valued at $2.1 billion[21]. - The premium beverage market is projected to grow at an annual rate of 6% from 2024 to 2031, with the premium cocktail mixer market expected to grow at 8% from 2024 to 2033[27]. - The global ginger market is expected to grow at an annual rate of 9% from 2024 to 2032, driven by increased consumer awareness of ginger's health benefits[27]. - 72% of U.S. consumers are looking to limit or avoid sugar, and the global reduced-sugar food and beverage market is expected to grow at an annual rate of 9% through 2028[27]. - Reed's products are free of GMOs and artificial preservatives, aligning with the growing consumer trend towards natural products, which saw a 6% sales increase in 2024[27]. New Product Launches - Reed's is set to launch a new multi-functional soda line in April 2025, featuring organic ginger and adaptogen extracts, with 8,000 points of distribution secured[24]. - A new line of multi-functional beverages is set to launch in Q1 2025, featuring organic ginger and adaptogen mushroom extracts, with each serving containing only 5 grams of sugar and 30 to 45 calories[63]. Financial Performance - For the year ended December 31, 2024, gross billing decreased by 13% to $44,316,000 from $50,689,000 in 2023[169]. - Net sales fell by 15% to $37,954,000 compared to $44,711,000 in the previous year[169]. - Gross profit increased by 17% to $11,376,000, with a gross profit margin of 30% of net sales, up from 22%[169]. - The net loss for the year was $13,152,000, a 15% improvement from the previous year's loss of $15,523,000[169]. - Loss per share improved by 63% to $(1.64) from $(4.39) in 2023[169]. - The company recorded a net loss of $13.2 million and used cash in operations of $6.1 million during the year ended December 31, 2024[209]. Operational Challenges - Supply chain challenges have negatively impacted the company's ability to meet strong demand, with average shipping costs decreasing from $3.07 per case in 2023 to $2.75 per case in 2024[113]. - The company continues to face supply chain challenges, including increased lead times and inflation of raw materials, logistics, and labor costs[166]. - The company is actively seeking additional co-packing facilities to minimize transportation costs and mitigate production disruptions[59]. - The company has entered into a co-packing agreement with DrinkPak in Southern California to enhance production capacity for cans, aiming to better serve Southwest and club customers[56]. Strategic Partnerships and Agreements - D&D Source of Life Holding Ltd. became the majority stockholder of Reed's following a change of control in 2024[15]. - A strategic partnership with FitzMark was established to manage freight movement, enhancing efficiency in logistics and inventory management[60]. - The company has licensed its candy business to Rootstock Trading, with royalty fees structured at 0% for 2023, 2% for 2024, 4% for 2025, and 5% thereafter[70]. Regulatory and Compliance Issues - The company is subject to various federal, state, and local environmental laws and regulations, which could increase costs due to compliance mandates[92]. - The company anticipates additional legal requirements related to recycling and waste reduction may be proposed or enacted in the future[88]. - The company is monitoring pending and proposed legislation related to data privacy and protection, including the California Consumer Privacy Act[93]. - Certain jurisdictions are considering imposing new or increased taxes on the manufacture, distribution, or sale of the company's products[89]. Workforce and Employee Relations - As of December 31, 2024, the company had 24 full-time equivalent employees on its corporate staff[96]. - The company has never participated in a collective bargaining agreement and believes relations with employees are good[96]. - The company faces challenges in attracting and retaining a skilled workforce, which is critical for maintaining competitive advantage[120]. Market Competition and Consumer Trends - The non-alcoholic beverage segment is highly competitive, with the company competing on brand recognition, quality, and innovation against established brands[67]. - Changes in consumer preferences and public perception regarding health and nutrition could adversely affect demand for the company's products[125]. - Future demand for products is influenced by consumer trends, with potential reductions due to health concerns and legislative initiatives against sweetened beverages[126]. - The beverage industry is highly competitive, with significant pressure from larger companies and private label brands affecting market share and pricing strategies[122]. Financial Management and Future Outlook - Management believes that the Company's ongoing business, existing cash, and credit facilities are sufficient to fund operations for twelve months from the date of issuance of the financial statements[209]. - The company took significant steps to convert high-interest debt to equity and raise additional equity during 2024[192]. - Management's estimates of future product demand may be inaccurate, impacting inventory provisions, with cumulative write-downs for inventory at $277 for 2024[108]. - The company is classified as a smaller reporting company and is not required to provide certain disclosures about market risk[199].

Financial Performance - Q4 2024 net sales were $9.7 million, down 17% from $11.7 million in Q4 2023, primarily due to short order shipments from prior inventory constraints[4] - Q4 2024 gross profit increased to $2.9 million, up more than 5x from $0.5 million in Q4 2023, with a gross margin of 30.0% compared to 4.0%[4] - FY 2024 net sales totaled $38.0 million, a decrease of 15% from $44.7 million in FY 2023, while gross profit rose 18% to $11.4 million with a gross margin of 30.0%[4] - Operating loss improved to $3.7 million in Q4 2024 from $4.9 million in Q4 2023, with modified EBITDA at $(0.7) million compared to $43,000 in the prior year[11] - Net loss for the year ended December 31, 2024, was $13,152 million, an improvement from a net loss of $15,523 million in 2023, reflecting a reduction of 15.3%[28] - Modified EBITDA for the year ended December 31, 2024, was $(4,070) million, compared to $(3,668) million in 2023, indicating a decline in core operating performance[31] Cost Management - Delivery and handling costs per case decreased by 10% to $3.00 in Q4 2024, down from $2.82 in Q4 2023[10] - Total liabilities decreased to $18,492 million in 2024 from $38,064 million in 2023, a reduction of 51.5%[26] - Accounts payable decreased to $6,956 million from $9,133 million, a decline of 23.9%[26] - Inventory write-downs were recorded at $277 million in 2024, compared to $955 million in 2023, showing a decrease of 70.9%[28] Capital and Financing - The company closed a $10 million private placement in Q4 2024, enhancing its capital for inventory, personnel, and marketing[5] - Cash at the end of the period increased significantly to $10,391 million from $603 million, a rise of 1,623.9%[28] - Proceeds from the line of credit amounted to $29,195 million in 2024, down from $43,836 million in 2023, a decrease of 33.6%[28] Leadership and Strategy - The company appointed Douglas W. McCurdy as CFO and Salvatore Vassallo as Vice President of Operations to enhance leadership in finance and operations[6] - The company aims for accelerated growth and profitability in 2025, supported by a de-leveraged balance sheet and improved financial flexibility[7] Asset Management - Total assets increased to $25,140 million as of December 31, 2024, up from $18,883 million in 2023, representing a growth of 33.5%[26] - Current assets rose to $23,311 million, compared to $17,761 million in the previous year, marking a 31.2% increase[26] Product Development - A new multi-functional beverage line is set to launch in April 2025, with over 8,000 points of distribution secured across key retailers[7] Shareholder Activity - The company issued 22,478 million common shares upon conversion of convertible notes payable in 2024, compared to no such issuance in 2023[28]