Reed's, Inc. Announces Second Quarter 2009 Financial Results

LOS ANGELES, CA--(Marketwire - August 14, 2009) - Reed's, Inc. (NASDAQ: REED), maker of the
top-selling sodas in natural food stores nationwide, today announced its
financial results for the second quarter ended June 30, 2009.

Second Quarter and Six Month 2009 Highlights:

-- Sale-leaseback agreement reduced long-term mortgage debt by $1.8
million and netted proceeds of $1 million to the Company;
-- Positive EBITDA of $134,000 in Q2 2009 versus a EBITDA loss of
$397,000 in Q2 2008 (see EBITDA schedule attached);
-- Gross profit margin increased to 26% of sales during the six months
ended June 30, 2009 from 22% in the same period of 2008;
-- Cash and cash equivalents increased to $421,000 as of June 30, 2009,
compared to $229,000 as of December 31, 2008;
-- Working capital increased to $1.8 million as of June 30, 2009, a $1.2
million improvement from December 31, 2008;
-- Continued to maintain a much lower cost structure in the first six
months of 2009, than in 2008, covering both operating expenses and per-unit
cost of sales;
-- Q2 2009 Net Sales decreased 8% to $4.2 million compared to Q2 2008 due
to a non-repeat specialty program in 2008. Sales from primary product
lines increased by 15% in Q2 2009 over Q2 2008;
-- Loss from operations of $752,000 in Q2 2009 was primarily due to non-
cash impairment write downs on fixed assets of $641,000. Before impairment
losses, the net loss from operations in Q2 2009 was $118,000, an
improvement from the loss of $441,000 in Q2 2008.

Additional Highlights:

-- Began shipments of all new Natural Energy Elixir;
-- Announced expanded relationship with 1,400 Kroger-owned (NYSE: KR)
supermarkets, and a number of other regional and nationwide chains;
-- Announced significant new distribution relationships on both coasts.

"We're pleased with our overall performance in Q2. Although our revenues
and gross profits were down slightly, we feel fortunate that our solid
brand identity and loyal customer base carried us through," commented Mr.
Chris Reed, Founder, Chairman and CEO of Reed's, Inc.

"Some of our peers experienced significant erosion in sales, with many
high-end brands declining 30% or more during one of the worst economic
times of our generation. Meanwhile, our core product line sales and volume
increased by over 15%, representing expansion of our sales channels. We
believe that our targeted promotional activities are producing good
results, and we plan to continue with these over the next year."

Mr. Reed continued, "The results for Q2 reflect a continued reduction in
our costs of goods sold, along with a decrease in our operating costs, as
compared to the prior year period. Price discounting eroded our gross
margins a bit this quarter, but our year-to-date gross margins are ahead of
the prior year period."

"In the last quarter we launched our all new Natural Energy Elixir, a
product that we feel is in a class by itself. We also expanded with some
key distribution agreements on both coasts. Our presence in Kroger stores
nationwide increased to over 1,400 stores, and we are making significant
inroads with getting our products displayed in the mainstream beverage
aisles of major chains," stated Mr. Reed.

"Looking ahead, we are launching our private label business initiative,
which is complementary to our branded lines and is expected to increase
overall revenues and margins. The funding from our completed
sale-leaseback transaction has improved our working capital position, while
we proceed on a path toward healthy income from operations. Also, early in
the third quarter we retained Pacific Capital Growth Advisors, a strategic
advisory firm focused on the natural products and healthy living space. We
feel that Reed's has reached a critical size where larger players look for
strategic relationships, and we are receiving a pretty healthy turnout of
national and international players looking at us. It's too soon to tell
what this will produce, but we are encouraged by the early feedback,"
concluded Mr. Reed.

See financial statements and EBITDA schedule at the end of this release.

About Reed's, Inc.

Reed's, Inc. makes the top-selling sodas in natural food markets nationwide
and is currently selling in 10,500 supermarkets in natural foods and
mainstream. Its six award-winning non-alcoholic Ginger Brews are unique in
the beverage industry, being brewed, not manufactured and using fresh
ginger, spices and fruits in a brewing process that predates commercial
soft drinks. In addition, the Company owns the top-selling root beer line
in natural foods, the Virgil's Root Beer product line, and the top-selling
cola line in natural foods, the China Cola product line. Other product
lines include: Reed's Ginger Candies and Reed's Ginger Ice Creams.

Reed's products are sold through specialty gourmet and natural food stores,
mainstream supermarket chains, retail stores and restaurants nationwide,
and in Canada. For more information about Reed's, please visit the
company's website at: http://www.reedsgingerbrew.com or call 800-99-REEDS.

Follow Reed's on Twitter at: http://www.twitter.com/reedsgingerbrew

View Reed's YouTube channel at: http://www.youtube.com/reedsgingerbrew

Review Reed's Delicious bookmarks at: http://www.delicious.com/reedsinc

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SAFE HARBOR 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 and a discussion of these and other risks and
uncertainties, please see our most recent reports on Form 10-KSB 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.

REED'S, INC.
CONDENSED BALANCE SHEETS

June 30, December 31,
2009 2008
------------ ------------
ASSETS (unaudited)
Current assets:
Cash $ 421,000 $ 229,000
Inventory 3,375,000 2,837,000
Trade accounts receivable, net of
allowance for doubtful accounts and
returns and discounts of $97,000 as of
June 30, 2009 and December 31, 2008 1,356,000 897,000
Prepaid and other current assets 178,000 68,000
------------ ------------
Total Current Assets 5,330,000 4,031,000

Property and equipment, net of accumulated
depreciation of $530,000 as of June 30, 2009
and $1,150,000 as of December 31, 2008 3,431,000 4,133,000
Brand names 800,000 800,000
Deferred offering costs 161,000 62,000
Deferred financing fees 651,000 77,000
------------ ------------

Total assets $ 10,373,000 $ 9,103,000
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,372,000 $ 1,929,000
Lines of credit 974,000 1,354,000
Current portion of long term debt - 16,000
Current portion of long term financing
obligation 19,000 -
Accrued interest 33,000 -
Accrued expenses 108,000 96,000
------------ ------------
Total current liabilities 3,506,000 3,395,000

Long term financing obligation, less current
portion 3,022,000 -
------------ ------------
Long term debt, less current portion - 1,747,000
------------ ------------
Total Liabilities 6,528,000 5,142,000
------------ ------------

Commitments and contingencies

Stockholders' equity:
Preferred stock, $10 par value, 500,000
shares authorized, 46,621 shares
outstanding at June 30, 2009 and 47,121
shares outstanding at December 31, 2008 466,000 471,000
Series B Convertible Preferred stock, $.0001
par value, no shares issued or outstanding
at June 30, 2009 and December 31, 2008 - -
Common stock, $.0001 par value, 19,500,000
shares authorized, 9,200,693 shares issued
and outstanding at June 30, 2009 and
8,979,341 shares issued and outstanding at
December 31, 2008 1,000 1,000
Additional paid in capital 19,691,000 18,408,000
Accumulated deficit (16,313,000) (14,919,000)
------------ ------------
Total stockholders' equity 3,845,000 3,961,000
------------ ------------

Total liabilities and stockholders'
equity $ 10,373,000 $ 9,103,000
============ ============

REED'S, INC.

CONDENSED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 2009 and 2008

(Unaudited)

Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------

Sales $ 4,214,000 $ 4,571,000 $ 7,631,000 $ 8,135,000
Cost of sales 3,114,000 3,302,000 5,684,000 6,346,000
------------ ------------ ------------ ------------

Gross profit 1,100,000 1,269,000 1,947,000 1,789,000
------------ ------------ ------------ ------------

Operating
expenses:
Selling and
marketing expense 548,000 1,051,000 1,207,000 2,175,000
General and
administrative
expense 670,000 659,000 1,273,000 1,990,000
Impairment of
assets 641,000 - 641,000 -
------------ ------------ ------------ ------------
Total operating
expenses 1,859,000 1,710,000 3,121,000 4,165,000
------------ ------------ ------------ ------------

Loss from
operations (759,000) (441,000) (1,174,000) (2,376,000)

Interest income - - - 1,000
Interest expense (114,000) (50,000) (197,000) (106,000)
------------ ------------ ------------ ------------

Net loss (873,000) (491,000) (1,371,000) (2,481,000)

Preferred stock
dividend (23,000) (24,000) (23,000) (24,000)
------------ ------------ ------------ ------------
Net loss
attributable to
common
stockholders $ (896,000) $ (515,000) $ (1,394,000) $ (2,505,000)
============ ============ ============ ============

Loss per share -
available to
common
stockholders -
basic and diluted $ (0.10) $ (0.06) $ (0.15) $ (0.28)
============ ============ ============ ============
Weighted average
number of shares
outstanding -
basic and diluted 9,119,099 8,911,327 9,080,506 8,837,956
============ ============ ============ ============

REED'S, INC.

EBITDA SCHEDULE
For the Three Months and Six Months Ended June 30, 2009 and 2008

(Unaudited)

Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
Net loss $ (873,000) $ (491,000) $ (1,371,000) $ (2,481,000)
------------ ------------ ------------ ------------

EBITDA
adjustments:
Depreciation and
amortization 130,000 77,000 239,000 165,000
Interest expense 114,000 50,000 197,000 105,000
Stock option
compensation 122,000 (33,000) 269,000 (61,000)
Impairment of
assets 641,000 - 641,000 -
------------ ------------ ------------ ------------
Total EBITDA
adjustments 1,859,000 1,710,000 3,121,000 4,165,000
------------ ------------ ------------ ------------

EBITDA income
(loss) from
operations $ 134,000 $ (397,000) $ (25,000) $ (2,272,000)
============ ============ ============ ============

The Company defines EBITDA as net loss before interest, taxes, depreciation
and amortization, and non-cash expense for securities. Other companies may
calculate EBITDA differently. Management believes that the presentation of
EBITDA provides a meaningful measure of performance that approximates cash
flow before interest expense, and is meaningful to investors.