Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $9.5 million, down from $11.9 million in the same quarter last year, primarily due to lower volumes with recurring national customers [16] - Gross profit decreased to $800,000 from $3.8 million year-over-year, with gross margin dropping to 8% from 32% [16][17] - The company reported a net loss of $6 million or negative $0.13 per share, compared to a net loss of $3.2 million or negative $0.77 per share in Q2 2024 [19] - Modified EBITDA was negative $2.9 million in Q2 2025, compared to a positive $45,000 in Q2 2024 [19] Business Line Data and Key Metrics Changes - The company is focusing on streamlining operations and enhancing marketing approaches, despite softer order volumes during the quarter [4][5] - The new Reed's functional soda line has gained over 9,000 points of distribution since its launch in April, indicating positive market reception [7] - Sales team secured significant commitments, including over 25,000 cases for Safeway and a new product approval at Costco, which is expected to generate seven-figure sales [10][11] Market Data and Key Metrics Changes - The company is experiencing challenges in regaining lost placements with key retailers, which has impacted revenue [25][28] - Delivery and handling costs increased to $1.6 million, representing 17% of net sales, compared to 12% in the previous year [18] Company Strategy and Development Direction - The company aims to strengthen commercial execution and position itself for long-term growth by diversifying channel mix and pursuing new distribution opportunities [4][5] - A new Vice President of On Premise Sales has been appointed to lead expansion into food service and convenience channels [5][6] - The growth strategy includes channel expansion paired with ongoing product innovation, particularly in the functional beverage space [6][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges from operational issues that began in 2024, which have led to lost distribution and declining orders [25][28] - There is optimism about rebuilding relationships with retailers and regaining lost placements, although this process will take time [26][30] - The company is focused on improving margins and positioning for sustained growth and profitability, with a commitment to enhancing operational efficiencies [15][19] Other Important Information - The company has made significant investments in personnel and marketing to support growth initiatives, leading to increased selling, general, and administrative expenses [19] - The transition from glass to cans is expected to drive cost savings and has received positive feedback from retailers and consumers [14] Q&A Session Summary Question: Concerns about revenue decline despite having inventory and cash - Management indicated that operational challenges from 2024 have led to lost placements and distribution, impacting revenue [25][28] Question: Visibility on sales recovery timeline - Management stated that regaining placements is an ongoing process and could not provide a specific timeline, but positive conversations with retailers are happening [30] Question: Gross margin concerns - Management acknowledged that gross margin was affected by inventory write-offs and higher-than-expected trade spends, but they are working to improve this [31][32] Question: Delivery costs increase despite revenue decline - Management explained that increased delivery costs are tied to efforts to ensure timely fulfillment for customers and optimizing inventory distribution [33][36]

Financial Performance - Reeds reported a quarterly loss of $0.1 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.04, representing an earnings surprise of -150.00% [1] - The company posted revenues of $9.52 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 7.45%, and down from $11.87 million a year ago [2] - Over the last four quarters, Reeds has not surpassed consensus EPS estimates, although it has topped consensus revenue estimates twice [2] Stock Performance - Reeds shares have increased approximately 61.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.4% [3] - The current Zacks Rank for Reeds is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the coming quarter is -$0.03 on revenues of $10.91 million, and -$0.13 on revenues of $42.82 million for the current fiscal year [7] - The trend of estimate revisions for Reeds was mixed ahead of the earnings release, which could change following the recent report [6] Industry Context - The Beverages - Soft drinks industry, to which Reeds belongs, is currently in the top 28% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Reed's reported a challenging Q2 2025 with significant declines across key financial metrics, prompting management to outline strategic initiatives for future growth and profitability [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Reed's reported a challenging second quarter of 2025 with significant declines across key financial metrics, including net sales, gross profit, and a widened net loss, alongside a negative Modified EBITDA Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--------------------------------- | :------ | :------ | | Net sales | $9.5 million | $11.9 million | | Gross profit | $0.8 million | $3.8 million | | Gross margin | 8% | 32% | | Delivery and handling costs per case | $2.83 | $2.18 | | Selling, general and administrative expenses | $5.0 million | $3.1 million | | Net loss | $6.0 million | $3.2 million | | Modified EBITDA | $(2.9) million | $45,000 | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management outlined strategic initiatives for commercial execution, including sales talent and marketing, while addressing inventory write-offs and focusing on future growth and profitability - Strategic focus areas include strengthening commercial execution, investing in sales talent, refining marketing approach, and accelerating channel development initiatives to rebuild placements with key retail partners and unlock new growth opportunities in underpenetrated segments like convenience and food service[3](index=3&type=chunk) - The company evaluated inventory and determined that **$1.6 million of write-offs** were necessary based on product portfolio optimization, which impacted gross margin but is expected to improve inventory management and working capital efficiency[3](index=3&type=chunk) - Looking ahead, the focus is on driving sales growth within core Reed's and Virgil's portfolios, improving margins, positioning the Company for profitability, and expanding distribution into new channels and regions[3](index=3&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) The company experienced a comprehensive decline in Q2 2025 financial performance, marked by lower sales, reduced gross margins due to write-offs, increased operating expenses, and a significant increase in cash used from operations [Second Quarter 2025 Performance](index=2&type=section&id=Second%20Quarter%202025%20Performance) The second quarter of 2025 saw a detailed decline in financial performance, primarily driven by lower sales volumes, significant inventory write-offs impacting gross margin, and increased operating expenses due to growth initiatives and contract proceedings [Net Sales](index=2&type=section&id=Net%20Sales) Net sales experienced a decline, primarily attributed to reduced volumes from key national customers Net Sales (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------- | :------ | :------ | | Net sales | $9.5 million | $11.9 million | - The decrease in net sales was primarily driven by lower volumes with recurring national customers[5](index=5&type=chunk) [Gross Profit and Margin](index=2&type=section&id=Gross%20Profit%20and%20Margin) Gross profit and margin significantly decreased, primarily due to substantial inventory write-offs for product portfolio optimization Gross Profit and Margin (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :----------- | :------ | :------ | | Gross profit | $0.8 million | $3.8 million | | Gross margin | 8% | 32% | - The decrease in gross margin was primarily driven by **$1.6 million of inventory write-offs** related to changes in product portfolio optimization[6](index=6&type=chunk) Adjusted Gross Profit and Margin (Q2 2025, excluding write-offs) | Metric | Q2 2025 (Adjusted) | | :-------------------- | :----------------- | | Gross profit | $2.4 million | | Gross margin | 25% of net sales | [Delivery and Handling Costs](index=2&type=section&id=Delivery%20and%20Handling%20Costs) Delivery and handling costs increased both in total and on a per-case basis, rising as a percentage of net sales Delivery and Handling Costs (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------------------------- | :------ | :------ | | Total costs | $1.6 million | $1.4 million | | As % of net sales | 17% | 12% | | Per case | $2.83 | $2.18 | [Selling, General and Administrative Expenses](index=2&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Selling, general, and administrative expenses rose due to contract proceedings and investments in personnel and marketing for growth initiatives Selling, General and Administrative Expenses (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------- | :------ | :------ | | SG&A | $5.0 million | $3.1 million | - The increase in SG&A was primarily driven by contract proceedings costs and investments in personnel, marketing, and related services to support growth initiatives[8](index=8&type=chunk) [Net Loss and EPS](index=2&type=section&id=Net%20Loss%20and%20EPS) The company reported a widened net loss, yet loss per share decreased significantly due to a substantial increase in outstanding shares Net Loss and EPS (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Net loss | $6.0 million | $3.2 million | | Loss per share | $(0.13) | $(0.77) | - Despite a higher net loss, the loss per share decreased from **$(0.77) to $(0.13)** due to a significant increase in the weighted average number of shares outstanding (**46,367,047 in Q2 2025 vs. 4,187,291 in Q2 2024**)[8](index=8&type=chunk)[27](index=27&type=chunk) [Modified EBITDA](index=2&type=section&id=Modified%20EBITDA) Modified EBITDA turned significantly negative, reflecting a deterioration in operational profitability compared to the prior year Modified EBITDA (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Modified EBITDA | $(2.9) million | $45,000 | [Liquidity and Cash Flow](index=2&type=section&id=Liquidity%20and%20Cash%20Flow) The company experienced a significant increase in cash used from operating activities during Q2 2025, leading to a substantial decrease in its cash balance compared to the end of the previous fiscal year, while total debt remained relatively stable Cash Flow from Operating Activities (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Cash used from operating activities | $5.0 million | $0.9 million | Liquidity Position (as of June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | | :---------- | :------------ | :---------------- | | Cash | $2.7 million | $10.4 million | | Total debt | $9.7 million | $9.6 million | [Company Information](index=2&type=section&id=Company%20Information) This section provides details on the upcoming Q2 2025 earnings conference call and an overview of Reed's, Inc. as a leader in natural ginger beverages and craft sodas [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) Reed's, Inc. will host a conference call on August 13, 2025, to discuss its second-quarter 2025 financial results, providing dial-in numbers and a webcast link for participants - A conference call will be held on Wednesday, August 13, 2025, at 8:30 a.m. Eastern time to discuss the Q2 2025 results[11](index=11&type=chunk)[12](index=12&type=chunk) - Access to the conference call is available via toll-free dial-in **(800) 717-1738**, international dial-in **(646) 307-1865** (Conference ID: **89617**), and a live webcast on the investor relations section of the Company's website[12](index=12&type=chunk)[13](index=13&type=chunk) [About Reed's, Inc.](index=3&type=section&id=About%20Reed's%2C%20Inc.) Reed's, Inc. is a category leader in handcrafted, natural ginger beverages and craft sodas, established in 1989. The company markets its products under the Reed's®, Virgil's®, and Flying Cauldron® brand names, with distribution in over 32,000 stores nationwide, and recently launched a functional soda line - Reed's, Inc. is an innovative company and category leader providing high quality, premium, and better-for-you sodas, established in **1989**[14](index=14&type=chunk) - The company's brands include Reed's® (America's original ginger beer), Virgil's® (award-winning craft sodas), and Flying Cauldron® (non-alcoholic butterscotch beer)[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - Reed's beverages are sold in over **32,000 stores nationwide**, and the brand recently launched a new functional soda line featuring adaptogenic ingredients[14](index=14&type=chunk)[15](index=15&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section defines the company's non-GAAP financial measures, such as Modified EBITDA, explaining their rationale for use while also outlining their inherent analytical limitations [Definition and Rationale](index=3&type=section&id=Definition%20and%20Rationale) Reed's presents Modified EBITDA and gross profit/margin excluding inventory write-offs as supplemental non-GAAP measures. Modified EBITDA is defined by adjusting net income (loss) for various non-cash and non-recurring items, used by management and investors to compare performance consistently across periods and for internal strategic planning - The company presents Modified EBITDA and gross profit and gross margin excluding inventory write-offs as supplemental non-GAAP financial measures[19](index=19&type=chunk) - Modified EBITDA is defined as net income (loss) plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant/SAFE agreements, legal and insurance settlements, contract proceedings, non-recurring professional fees, inventory write-offs, one-time policy changes, accounting methodology impacts, and restructuring-related costs[19](index=19&type=chunk) - These non-GAAP measures assist investors and analysts in comparing performance consistently by excluding items not indicative of core operating performance, and are used internally for budgets, forecasts, strategic plans, acquisitions, compensation, and board communications[22](index=22&type=chunk) [Limitations](index=4&type=section&id=Limitations) The company acknowledges that its non-GAAP financial measures, particularly Modified EBITDA, have limitations as analytical tools. They do not reflect cash expenditures for capital, working capital needs, future interest or principal payments on debt, or cash requirements for asset replacements - Modified EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments[22](index=22&type=chunk) - Modified EBITDA does not reflect changes in, or cash requirements for, working capital needs[22](index=22&type=chunk) - Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments on debts, nor does it reflect cash requirements for asset replacements[22](index=22&type=chunk) [Forward-Looking Statements & Investor Relations](index=5&type=section&id=Forward-Looking%20Statements%20%26%20Investor%20Relations) This section includes a disclaimer regarding forward-looking statements, highlighting associated risks and uncertainties, and provides contact information for investor relations inquiries [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section serves as a disclaimer, identifying forward-looking statements by specific terminology and outlining the inherent risks, uncertainties, and assumptions that could cause actual results to differ materially from projections. The company assumes no obligation to update these statements - Forward-looking statements are identified by terms such as "aim," "believe," "look forward to," "can," "will," "realize," "deliver," and similar expressions, covering strategic initiatives, ability to achieve objectives, expand business, and generate long-term value[23](index=23&type=chunk) - The achievement of forward-looking statements involves risks, uncertainties, and assumptions beyond the company's control, including competition, growth management, refinancing, new product risks, inflation, customer demand, personnel, distribution, suppliers, innovation, intellectual property, inventory, geopolitical events, and evolving regulations[23](index=23&type=chunk)[24](index=24&type=chunk) - These statements are based on current expectations, and Reed's assumes no obligation to update them, except as required by law[24](index=24&type=chunk) [Investor Relations Contact](index=5&type=section&id=Investor%20Relations%20Contact) Contact information for investor relations inquiries is provided, including names, email, and phone number - For investor relations, contact Sean Mansouri, CFA or Aaron D'Souza at Elevate IR via email (**ir@reedsinc.com**) or phone (**720) 330-2829**[25](index=25&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) The unaudited condensed financial statements for Q2 2025 reveal a significant deterioration in operational results, a weakened balance sheet, and increased cash utilization from operating activities [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) The unaudited condensed statements of operations for the three and six months ended June 30, 2025, and 2024, show a significant increase in net loss and operating expenses, alongside a decrease in net sales and gross profit, particularly impacted by inventory write-offs in 2025 Condensed Statements of Operations (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net sales | $9,523 | $11,874 | | Total cost of goods sold | $8,716 | $8,043 | | Gross profit | $807 | $3,831 | | Total operating expenses | $6,600 | $4,500 | | Loss from operations | $(5,793) | $(669) | | Net loss | $(6,048) | $(3,212) | | Loss per share – basic and diluted | $(0.13) | $(0.77) | Condensed Statements of Operations (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net sales | $19,552 | $21,469 | | Total cost of goods sold | $15,343 | $14,225 | | Gross profit | $4,209 | $7,244 | | Total operating expenses | $11,744 | $8,563 | | Loss from operations | $(7,535) | $(1,319) | | Net loss | $(8,079) | $(4,885) | | Loss per share – basic and diluted | $(0.18) | $(1.17) | [Condensed Balance Sheets](index=7&type=section&id=Condensed%20Balance%20Sheets) The unaudited condensed balance sheets show a decrease in total assets and cash from December 31, 2024, to June 30, 2025, while total liabilities increased, leading to a significant reduction in total stockholders' equity Condensed Balance Sheets (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash | $2,677 | $10,391 | | Total current assets | $21,890 | $23,311 | | Total assets | $23,705 | $25,140 | | Total current liabilities | $21,154 | $17,655 | | Total liabilities | $21,970 | $18,492 | | Total stockholders' equity | $1,735 | $6,648 | [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the company significantly increased cash used in operating activities compared to the prior year, resulting in a substantial net decrease in cash, despite proceeds from the sale of common stock Condensed Statements of Cash Flows (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Net cash used in operating activities | $(10,410) | $(3,307) | | Net cash used in investing activities | $(101) | $(34) | | Net cash provided by financing activities | $2,797 | $3,064 | | Net decrease in cash | $(7,714) | $(277) | | Cash at end of period | $2,677 | $326 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) The reconciliation of GAAP net loss to Modified EBITDA shows that for both the three and six months ended June 30, 2025, Modified EBITDA was significantly negative, indicating a deterioration in operational performance even after adjusting for non-cash and non-recurring items Reconciliation of GAAP to Non-GAAP Financial Measures (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Net loss | $(6,048) | $(3,212) | | Total EBITDA adjustments | $3,103 | $3,257 | | Modified EBITDA | $(2,945) | $45 | Reconciliation of GAAP to Non-GAAP Financial Measures (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Net loss | $(8,079) | $(4,885) | | Total EBITDA adjustments | $3,550 | $4,560 | | Modified EBITDA | $(4,529) | $(325) |

Core Insights - Reed's, Inc. reported a decline in net sales for Q2 2025, with net sales of $9.5 million compared to $11.9 million in Q2 2024, primarily due to lower order volumes from national customers [4][7] - The company experienced a significant drop in gross profit, reporting $0.8 million in Q2 2025 versus $3.8 million in the same period last year, resulting in a gross margin of 8% compared to 32% [5][8] - Management is focused on long-term growth strategies, including enhancing commercial execution, improving inventory management, and expanding distribution channels [3][7] Financial Performance - Net sales decreased to $9.5 million in Q2 2025 from $11.9 million in Q2 2024 [4][8] - Gross profit for Q2 2025 was $0.8 million, with a gross margin of 8%, impacted by $1.6 million in inventory write-offs [5][8] - Selling, general and administrative expenses rose to $5.0 million in Q2 2025 from $3.1 million in Q2 2024, driven by costs related to contract proceedings and investments in personnel and marketing [7][8] Cash Flow and Liquidity - The company used approximately $5.0 million in cash from operating activities in Q2 2025, compared to $0.9 million in the same period in 2024 [10] - As of June 30, 2025, Reed's had approximately $2.7 million in cash and $9.7 million in total debt, a decrease from $10.4 million in cash and $9.6 million in total debt at the end of 2024 [10][29] Management Strategy - The CEO emphasized the importance of rebuilding relationships with key retail partners and exploring growth opportunities in underpenetrated segments such as convenience and food service [3] - The company aims to drive sales growth within its core Reed's and Virgil's portfolios while improving margins and positioning for profitability [3][7]

Core Points - Reed's, Inc. will host a conference call on August 13, 2025, at 8:30 a.m. Eastern time to discuss its financial results for the three months ended June 30, 2025 [1][2] - The conference call will include a question-and-answer period and will be accessible via toll-free and international dial-in numbers [2] - The call will also be available for live broadcast and replay on the investor relations section of the company's website [3] Company Overview - Reed's, Inc. is a leader in handcrafted, natural ginger beverages, established in 1989, and offers a portfolio of premium sodas under the Reed's®, Virgil's®, and Flying Cauldron® brand names [4] - The company's beverages are sold in over 32,000 stores nationwide, highlighting its extensive market reach [4] - Reed's is recognized as America's original ginger beer brand, with a product line that includes ginger beers, ginger ales, and a new functional soda line featuring adaptogenic ingredients [5] Product Lines - The Virgil's® brand offers an award-winning line of craft sodas made with natural ingredients, free from GMOs and artificial preservatives, featuring flavors like Root Beer and Vanilla Cream [6] - Flying Cauldron® is a non-alcoholic butterscotch beer known for its creamy vanilla and butterscotch flavors, made with natural ingredients and no artificial additives [7]

Summary of Reed's (REED) Conference Call - June 26, 2025 Company Overview - Reed's operates in the beverage industry, specifically focusing on ginger-based products such as ginger ale and ginger beer, as well as craft sodas under the Virgil's brand [4][6][25] - The company has a long-standing history since the 1980s and has expanded its product portfolio over the years [4][5] Core Points and Arguments Business Strategy and Product Innovation - The CEO expressed excitement about the company's direction and recent innovations, including a new functional beverage line launched in 2025 [3][15] - Reed's is focusing on expanding its product offerings in the flavored malt beverage (F&B) category, which is experiencing significant growth in the U.S. market [6][11] - The company is also introducing a zero-sugar ginger ale to align with consumer trends towards healthier options [10][11] Market Opportunities - There is a strong belief that the ginger beer and ginger ale segments have substantial growth potential, particularly in non-traditional channels such as convenience stores and dollar stores [9][10] - The company aims to enhance its distribution network, currently reaching 32,000 retail doors, with plans to expand further [16][17] Financial Performance and Strategic Initiatives - The company underwent a recapitalization in Q4 2024, which reduced debt and allowed for reinvestment in working capital [18][19] - The focus is on achieving profitable growth, with a target to reach breakeven and net profitability in the near future [20][21] - The management is closely monitoring sales velocity and channel expansion to drive top-line growth [21][24] Margin Improvement - Reed's is working on margin expansion, aiming to improve gross margins to the mid-30s percentage range, with aspirations to reach the high 30s or even 40% in the long term [24][25] Additional Important Insights - The company is committed to maintaining high-quality standards in its products, emphasizing the use of premium ingredients [25][26] - There is a strong focus on building brand strength and customer relationships, with plans to enhance marketing efforts for new products [30][32] - The management team is optimistic about the future, citing a clean balance sheet and a strong brand as key advantages [28][29] Conclusion - Reed's is positioned for growth in the beverage market, with a clear strategy focused on innovation, market expansion, and improving financial performance. The management is optimistic about capturing new opportunities while maintaining a commitment to product quality and customer satisfaction [27][33]

Core Insights - Reed's, Inc. is participating in the OTC Markets Virtual Investor Conference on June 26, 2025, where the management team will hold virtual 1x1 meetings and a presentation at 2:00 PM ET [1][2]. Company Overview - Reed's, Inc. is a leader in handcrafted, natural ginger beverages, established in 1989, and offers a portfolio that includes the Reed's®, Virgil's®, and Flying Cauldron® brands [4]. - The company is recognized as America's 1 name in natural, ginger-based beverages, with products crafted using real ginger and premium ingredients [5]. - Reed's beverages are sold in over 32,000 stores nationwide, indicating a strong market presence [4]. Product Offerings - The product portfolio includes ginger beers, ginger ales, ready-to-drink ginger mules, and hard ginger ales, with a recent expansion into the zero-sugar segment using a proprietary natural sweetener system [5]. - Virgil's® offers an award-winning line of craft sodas made with natural ingredients, available in five zero sugar varieties that are naturally sweetened and certified ketogenic [6]. - Flying Cauldron® is a non-alcoholic butterscotch beer made with natural ingredients, free from artificial flavors, sweeteners, preservatives, gluten, caffeine, or GMOs [7].

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]