Reeds, Inc.(REED) - 2024 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2024, gross billing increased by 22% to $13,584,000 compared to$11,164,000 in the same period of 2023[93]. - Net sales for the same period rose by 19% to $11,874,000 from$10,005,000 year-over-year[93]. - Gross profit for the three months ended June 30, 2024, was $3,831,000, representing a 53$2,509,000 in the prior year[93]. - Core brand gross billing increased by 22% to $13,584 compared to$11,095 during the same period last year, driven by a 16% increase in Reed's volume and a 21% increase in Virgil's volume[99]. - Net sales revenue increased 19% in the three months ended June 30, 2024, to $11,874, compared to$10,005 in the same period last year[100]. - Cost of goods sold as a percentage of net sales decreased to 68% for the three months ended June 30, 2024, compared to 75% for the same period last year[101]. - Gross margin improved to 32% for the three months ended June 30, 2024, compared to 25% for the same period last year[102]. - Modified EBITDA for the three months ended June 30, 2024, was $45, compared to a loss of$1,606 in the same period last year[110]. - Net loss for the six months ended June 30, 2024, was $4,885, a 35$7,491 in the same period last year[112]. - Modified EBITDA for the six months ended June 30, 2024, was $(325) million, an improvement from$(3,871) million in the same period last year, with total EBITDA adjustments amounting to $4,560 million[130]. Operating Expenses - Total operating expenses for the three months ended June 30, 2024, were$4,500,000, a 6% increase from $4,256,000 in the same period of 2023[93]. - Delivery and handling expenses decreased by$263 to $1,423, representing 12$1,097 during the three months ended June 30, 2024, compared to $1,259 during the same period last year, representing 9$1,980 from $1,311, representing 17$2,190 million for the six months ended June 30, 2024, from $2,706 million in the same period last year, representing 10$3,448 million for the six months ended June 30, 2024, up from $3,020 million, driven by higher legal settlements and professional fees[125]. Loss and Improvement - The company reported a loss from operations of$669,000 for Q2 2024, a 62% improvement compared to a loss of $1,747,000 in Q2 2023[93]. - Loss from operations improved to$669 for the three months ended June 30, 2024, compared to a loss of $1,747 in the same period last year[106]. - Loss from operations improved to$1,319 million for the six months ended June 30, 2024, compared to a loss of $4,325 million in the same period last year, due to increased gross profit and decreased operating expenses[126]. Cash Flow and Funding - The company recorded a net loss of$4,885 million and utilized $3,307 million of cash in operations for the six months ended June 30, 2024, with a working capital deficiency of$19,378 million[131]. - As of June 30, 2024, the company had a cash balance of $326 million and no availability under its line of credit[132]. - The company is exploring various funding alternatives, including raising additional funds through equity issuance and restructuring debt with existing lenders[133]. Strategic Focus and Challenges - The company continues to focus on channel expansion, new product introductions, and improved sales execution to drive sales growth[88]. - Supply chain challenges, including increased lead times and inflation of raw materials, continue to pose risks to the company's operations[89]. - The company anticipates continued moderation in inflation throughout 2024, which may positively impact margins[90]. - The company has taken actions to improve margins by outsourcing manufacturing, streamlining the product portfolio, and negotiating better vendor contracts[134]. - The financial statements raise substantial doubt about the company's ability to continue as a going concern within one year due to significant losses and working capital deficiencies[131].