x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT
OF 1934
|
ASSETS
|
|||||||
June
30,2006
(Unaudited)
|
December
31,
2005
|
||||||
CURRENT
ASSETS
|
|
||||||
Cash
|
$
|
54,768
|
$
|
27,744
|
|||
Inventory
|
1,275,819
|
1,208,019
|
|||||
Trade
accounts receivable, net of allowance for doubtful accounts and returns
and discounts of $101,000 as of June 30, 2006 and $70,000 as of December
31, 2005
|
982,484
|
534,906
|
|||||
Other
receivables
|
6,267
|
10,563
|
|||||
Prepaid
expenses
|
106,311
|
74,279
|
Total
Current Assets
|
2,425,649
|
1,855,511
|
|||||
|
|||||||
Property
and equipment, net of accumulated depreciation of $566,449 as of
June 30,
2006 and $508,136 as of December 31, 2005
|
1,864,011
|
1,885,354
|
|||||
OTHER
ASSETS
|
|||||||
Brand
names
|
800,201
|
800,201
|
|||||
Other
intangibles, net of accumulated amortization of $4,095 as of June
30, 2006
and $3,723 as of December 31, 2005
|
14,519
|
14,891
|
|||||
Deferred
stock offering costs
|
20,000
|
356,238
|
|||||
Total
Other Assets
|
834,720
|
1,171,330
|
|||||
TOTAL
ASSETS
|
$
|
5,124,380
|
$
|
4,912,195
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Accounts
payable
|
$
|
2,381,103
|
$
|
1,644,491
|
|||
Lines
of credit
|
1,463,461
|
1,445,953
|
|||||
Current
portion of long term debt
|
191,516
|
169,381
|
|||||
Accrued
interest
|
154,191
|
136,240
|
|||||
Accrued
expenses
|
75,769
|
54,204
|
|||||
Total
Current Liabilities
|
4,266,040
|
3,450,269
|
|||||
Loans
payable, related party
|
252,358
|
252,358
|
|||||
Long
term debt, less current portion
|
984,568
|
1,060,573
|
|||||
Total
Liabilities
|
5,502,966
|
4,763,200
|
|||||
|
|||||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS’
EQUITY (DEFICIENCY)
|
|||||||
Preferred
stock, $10.00 par value, 500,000 shares authorized, 58,940
outstanding
|
589,402
|
589,402
|
|||||
Common
stock, $.0001 par value, 11,500,000 shares authorized,
5,335,482 shares issued and outstanding at June 30, 2006 and
5,042,197 at December 31, 2005
|
533
|
503
|
|||||
Common
stock to be issued
|
—
|
29,470
|
|||||
Additional
paid in capital
|
3,276,847
|
2,788,683
|
|||||
Accumulated
deficit
|
(4,245,368
|
)
|
(3,259,063
|
)
|
|||
Total
stockholders’ equity (deficiency)
|
(378,586
|
)
|
148,995
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
$
|
5,124,380
|
$
|
4,912,195
|
|||
|
|||||||
Three
months ended (Unaudited)
|
Six
months ended (Unaudited)
|
||||||||||||
June
30,
|
June
30,
|
June
30,
|
June
30,
|
||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
SALES
|
$
|
3,157,818
|
$
|
2,582,273
|
$
|
5,137,089
|
$
|
4,399,608
|
|||||
COST
OF SALES
|
2,589,864
|
2,069,274
|
4,278,741
|
3,555,561
|
|||||||||
GROSS
PROFIT
|
567,954
|
512,999
|
858,348
|
844,047
|
|||||||||
|
|||||||||||||
OPERATING
EXPENSES
|
|||||||||||||
Selling
|
313,462
|
236,218
|
600,619
|
521,116
|
|||||||||
General &
Administrative
|
386,995
|
244,502
|
649,656
|
456,599
|
|||||||||
Expenses
associated with rescission offer on prior sales of common
stock
|
351,757
|
—
|
351,757
|
—
|
|||||||||
Legal
fees
|
5,230
|
—
|
14,797
|
—
|
|||||||||
Total
Operating Expenses
|
1,057,444
|
480,720
|
1,616,829
|
977,715
|
|||||||||
|
|||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
(489,490
|
)
|
32,279
|
(758,481
|
)
|
(133,668
|
)
|
||||||
OTHER
EXPENSES
|
|||||||||||||
Interest
Expense
|
(97,748
|
)
|
(90,327
|
)
|
(198,354
|
)
|
(161,534
|
)
|
|||||
NET
LOSS
|
(587,238
|
)
|
(58,048
|
)
|
(956,835
|
)
|
(295,202
|
)
|
|||||
Preferred
stock dividend
|
(29,470
|
)
|
(29,470
|
)
|
(29,470
|
)
|
(29,470
|
)
|
|||||
|
|||||||||||||
Net
loss attributable to common shareholders
|
$
|
(616,708
|
)
|
$
|
(87,518
|
)
|
$
|
(986,305
|
)
|
$
|
(324,672
|
)
|
|
LOSS
PER SHARE —
Basic and Diluted
|
$
|
(.12
|
)
|
$
|
(.02
|
)
|
$
|
(.19
|
)
|
$
|
(.07
|
)
|
|
|
|||||||||||||
WEIGHTED
AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
|
5,322,755
|
4,812,710
|
5,239,913
|
4,769,640
|
|||||||||
|
|||||||||||||
Common
Stock
|
Common
Stock
to be
|
Additional
Paid in
|
Preferred
Stock
|
Accumulated
|
|||||||||||||||||||||
Shares
|
Amount
|
Issued
|
Capital
|
Shares
|
Amount
|
Deficit
|
Total
|
||||||||||||||||||
Balance,
January 1, 2006
|
5,042,197
|
$
|
503
|
29,470
|
$
|
2,788,683
|
58,940
|
$
|
589,402
|
$
|
(3,259,063
|
)
|
$
|
148,995
|
|||||||||||
Preferred
Stock Dividend
|
7,373
|
1
|
—
|
29,469
|
—
|
—
|
(29,470
|
)
|
—
|
||||||||||||||||
Common
stock issued in connection with the June 30, 2005 preferred stock
dividend
|
7,362
|
1
|
(29,470
|
)
|
29,469
|
—
|
—
|
—
|
—
|
||||||||||||||||
Common
stock issued for cash, net of offering costs
|
278,550
|
28
|
—
|
429,226
|
—
|
—
|
—
|
429,254
|
|||||||||||||||||
Net
Loss for the six months ended June 30, 2006
|
—
|
—
|
—
|
—
|
—
|
—
|
(956,835
|
)
|
(956,835
|
)
|
|||||||||||||||
Balance,
June 30, 2006
|
5,335,482
|
$
|
533
|
$
|
—
|
$
|
3,276,847
|
58,940
|
$
|
589,402
|
$
|
(4,245,368
|
)
|
$
|
(378,586
|
)
|
|||||||||
Six
Months Ended
(Unaudited)
|
|||||||
June
30,
2006
|
June
30,
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
||||||
Net
Loss
|
$
|
(956,835
|
)
|
$
|
(295,202
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|||||||
Depreciation
and amortization
|
58,684
|
46,610
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(447,578
|
)
|
(67,305
|
)
|
|||
Inventory
|
(67,800
|
)
|
103,424
|
||||
Prepaid
Expenses
|
(32,032
|
)
|
(33,264
|
)
|
|||
Other
receivables
|
4,296
|
(5,631
|
)
|
||||
Accounts
payable
|
736,612
|
252,032
|
|||||
Accrued
expenses
|
21,565
|
(6,684
|
)
|
||||
Accrued
interest
|
17,951
|
3,932
|
|||||
Net
cash used in operating activities
|
(665,137
|
)
|
(2,088
|
)
|
|||
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchase
of property and equipment
|
(36,969
|
)
|
(31,754
|
)
|
|||
Due
from director
|
—
|
(25,013
|
)
|
||||
Net
cash used in investing activities
|
(36,969
|
)
|
(56,767
|
)
|
|||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Repayment
of previous line of credit
|
—
|
(759,387
|
)
|
||||
Borrowings
on new line of credit
|
—
|
1,109,543
|
|||||
Borrowings
on debt
|
—
|
190,000
|
|||||
Principal
payments on debt
|
(53,870
|
)
|
(216,016
|
)
|
|||
Proceeds
received on sale of common stock
|
1,002,779
|
—
|
|||||
Payments
for stock offering costs
|
(237,287
|
)
|
(134,481
|
)
|
|||
Net
borrowing on lines of credit
|
17,508
|
78,112
|
|||||
Payments
of debt to related parties
|
—
|
(21,000
|
)
|
||||
|
|||||||
Net
cash provided by financing activities
|
729,130
|
246,771
|
|||||
|
|||||||
NET
INCREASE IN
CASH
|
27,024
|
187,916
|
|||||
CASH —
Beginning of period
|
27,744
|
42,488
|
|||||
CASH —
End of period
|
$
|
54,768
|
$
|
230,404
|
Supplemental
Disclosures of Cash Flow Information
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
180,403
|
$
|
157,602
|
|||
Taxes
|
$
|
—
|
$
|
—
|
|||
|
|||||||
Noncash
Investing and Financing Activities
|
|||||||
Common
stock to be issued in settlement of accrued interest
|
$
|
—
|
$
|
5,250
|
|||
Common
stock to be issued in settlement of preferred stock
dividend
|
$
|
29,470
|
$
|
29,470
|
|||
Common
stock issued in settlement of preferred stock dividend
|
$
|
29,470
|
$
|
—
|
|||
Deferred
stock offering costs charged to paid in capital
|
$
|
356,238
|
$
|
—
|
|||
1. |
BASIS
OF PRESENTATION
|
2. |
Concentrations
|
3. |
Inventory
|
Raw
Materials
|
$
|
649,873
|
||
Finished
Goods
|
625,946
|
|||
|
$
|
1,275,819
|
4. |
Lines
of credit
|
5. |
Long
term debt
|
6. |
Common
Stock Offering
|
7. |
Preferred
stock dividend
|
8. |
Legal
Proceedings and Litigation
Fees
|
·
|
Reed’s
Ginger Brews,
|
·
|
Virgil’s
Root Beer and Cream Sodas,
|
·
|
China
Colas,
|
·
|
Reed’s
Ginger Juice Brews,
|
·
|
Reed’s
Ginger Candies, and
|
·
|
Reed’s
Ginger Ice Creams
|
Exhibit |
Number | Description of Document |
31 |
Officer's
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
32 |
Officer's
Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
REEDS, INC. | ||
|
|
|
Date: September 13, 2006 | By: | /s/ CHRISTOPHER J. REED |
|
||
Name:
Christopher J. Reed
Title:
Chief Executive Officer, President
and Chief Financial Officer
|