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

Financial Performance - Net sales for Q3 2024 were $6.8 million, down 42% from$ 11.9 million in Q3 2023, primarily due to production limitations and short shipments impacting sales by over $4 million[3][6] - Gross profit decreased to$ 1.2 million with a gross margin of 18.0%, compared to $4.0 million and 34.0% in the same quarter last year[3][7] - Selling, general and administrative expenses rose to$ 3.1 million, representing 46% of net sales, compared to $2.3 million or 19% in Q3 2023[3][9] - The company reported an operating loss of$ 3.1 million, compared to a loss of $0.1 million in the prior year[3][9] - Modified EBITDA was$ (3.0) million in Q3 2024, down from $0.2 million in Q3 2023[3][10] - Net loss for the nine months ended September 30, 2024, was$ 9,035 million, compared to a net loss of $8,927 million for the same period in 2023, indicating a slight increase in losses[29] - Modified EBITDA for the nine months ended September 30, 2024, was$ (3,323) million, compared to $(3,711) million for the same period in 2023, showing an improvement in core operating performance[32] Cash Flow and Liquidity - The company generated approximately$ 1.1 million in cash from operating activities, a significant improvement from cash used of $1.8 million in Q3 2023[11] - Cash at the end of the period decreased from$ 1,004 million to $306 million, reflecting a net decrease of$ 698 million[29] - Proceeds from the line of credit amounted to $24,878 million, while payments on the line of credit were$ 29,367 million, resulting in a net cash outflow from financing activities[29] - The company has secured a new $10 million revolving credit facility with an interest rate of 8% to improve liquidity and inventory levels[2][4] - The majority stockholder, D&D, has acquired all outstanding secured notes, enhancing the company's liquidity position[2][4] Debt and Liabilities - As of September 30, 2024, total debt was approximately$ 27.1 million, including $21.8 million from a convertible note and$ 5.4 million from a revolving line of credit[12] - Current liabilities increased significantly from $27,190 million to$ 36,986 million, marking an increase of about 36%[27] - The company reported a significant increase in the current portion of convertible notes payable, rising from $6,737 million to$ 21,751 million, reflecting a change in debt structure[27] - Total stockholders' deficit increased from $(19,181) million to$ (21,953) million, indicating a deterioration in the company's equity position[27] - Interest expense for the nine months ended September 30, 2024, was $4,578 million, slightly higher than$ 4,459 million for the same period in 2023, reflecting ongoing financing costs[32] Inventory Management - Due to ongoing inventory challenges, the company has withdrawn its previously issued FY 2024 financial outlook[13] - Inventory write-downs for the nine months ended September 30, 2024, totaled $825 million, compared to$ 205 million in the same period of 2023, indicating increased challenges in inventory management[29] Asset Management - Total assets decreased from $18,883 million on December 31, 2023, to$ 15,033 million on September 30, 2024, representing a decline of approximately 20%[27]