Reeds, Inc.(REED) - 2024 Q3 - Quarterly Report

Financial Performance - For the three months ended September 30, 2024, gross billing decreased by 33% to $8,901,000 compared to$ 13,219,000 in the same period of 2023[99]. - Net sales for the same period fell by 43% to $6,752,000 from$ 11,856,000 year-over-year[99]. - Gross profit dropped by 70% to $1,215,000, representing 18% of net sales, down from 34% in the prior year[99]. - The net loss for the three months ended September 30, 2024, was$ 4,150,000, a 189% increase from the loss of $1,436,000 in the same period of 2023[99]. - Core brand gross billing decreased by 33% to$ 8,901 compared to $13,197 during the same period last year, driven by a Reed's volume decrease of 37% and Virgil's volume decrease of 26%[106]. - Net sales revenue decreased 43% in the three months ended September 30, 2024, to$ 6,752, compared to $11,856 in the same period last year[107]. - The loss from operations was$ 3,138 for the three months ended September 30, 2024, compared to a loss of $143 in the same period last year[115]. - Modified EBITDA for the three months ended September 30, 2024, was$ (2,998), compared to $161 in the same period last year[119]. - The net loss for the nine months ended September 30, 2024, was$ 9,035 million, compared to $8,927 million in the same period last year[141]. Cost and Expenses - Total operating expenses increased by 4% to$ 4,353,000, with general and administrative expenses rising by 27% to $1,791,000[99]. - Cost of goods sold for the three months ended September 30, 2024, was 82% of net sales, compared to 66% for the same period last year[108]. - Total selling and marketing expenses increased by$ 422 to $1,283 during the three months ended September 30, 2024, as a percentage of net sales, rising to 19% from 7% in the same period last year[112]. - General and administrative expenses increased to$ 1,791 from $1,407, representing 27% of net sales compared to 12% in the same period last year[113]. - Cost of goods sold decreased by$ 4,016 million, representing 70% of net sales for the nine months ended September 30, 2024, compared to 72% in the same period last year[129]. - Delivery and handling expenses decreased by $1,510 million to$ 4,204 million, representing 15% of net sales[132]. - General and administrative expenses increased by $812 million to$ 5,239 million, driven by higher employee-related costs and legal settlements[134]. Operational Challenges - Supply chain challenges, including increased lead times and inflation of raw materials, have negatively impacted the company's operations[96]. - The company anticipates continued moderation in inflation throughout 2024, despite ongoing supply chain constraints[97]. Financial Position and Funding - As of September 30, 2024, the company had a working capital deficiency of $22,923 million and a stockholders' deficit of$ 21,953 million[141]. - The company is exploring various funding alternatives to address its financial challenges, including potential equity issuance and debt restructuring[143]. Accounting and Estimates - Management's estimates for financial statements are based on historical experience and reasonable assumptions, which may differ from actual results[146]. - Significant estimates include reserves for uncollectible accounts, inventory obsolescence, and impairments of long-term assets[146]. - Modified EBITDA does not account for future interest expenses or cash requirements for asset replacements[147]. - There were no changes to critical accounting policies that impacted the condensed financial statements in the 2023 10-K[146]. - Recent accounting pronouncements are discussed in Note 2 of the Notes to Condensed Financial Statements[148]. - A smaller reporting company is not required to provide quantitative and qualitative disclosures about market risk[149].