Reed’s Inc. (Nasdaq:REED), owner of the nation’s leading portfolio
of handcrafted, all-natural beverages, today announced financial
results for the fiscal fourth quarter and full year ended December
31, 2019.
Highlights for the Fourth Quarter of
2019
- Net Sales were $7.2 million in the fourth quarter compared to
$9.6 million in the prior year. The decline compared to the prior
year reflects the sale of the private label business at the end of
2018 and the discontinuation of non-core products, which
collectively contributed $2.2 million of gross sales in the prior
year period;
- Core brand gross sales were flat versus prior year period
as strong 6% volume growth of the Virgil’s brand, offset a decline
in Reed’s;
- Gross profit was $0.6 million compared to $2.7 million in the
prior year period, reflecting discreet fourth quarter charges for
inventory write-downs and year end true-ups to inventory reserves.
Gross margin decreased to 8% from 28% in the prior year period.
Excluding the discrete items, gross margin was approximately 26% in
the fourth quarter of 2019;
- Operating loss was $3.5 million compared to $2.1 million in the
fourth quarter of 2018; and
- Net loss was $3.8 million, or $0.09 per share, compared to $2.7
million, or $0.10 per share, in the prior year period
Highlights for the Full Year of
2019
- Net Sales were $33.8 million in 2019 compared to $38.1 million
in the prior year, reflecting a 9% increase in gross sales of core
brands, offset by the sale of the private label business at the end
of 2018 and the discontinuation of non-core products, which
collectively contributed $6.0 million of gross sales in the prior
year;
- Gross profit decreased 26% to $7.9 million from $10.7 million
in the prior year period. Gross margin decreased 475 basis points
to 23% from 28% in the prior year period. Excluding the discrete
items noted above, gross margin was approximately 26% in fiscal
2019;
- Operating loss increased to $14.9 million from $8.1 million in
the prior year period; and
- Net loss was $16.1 million or $0.46 per share compared to $10.3
million or $0.41 per share in the prior year period.
Management Commentary
“We had a very productive fourth quarter,
accomplishing a significant amount in a short period of time. We
have strengthened our supply chain, upgrading and expanding our
copacker organization and adding capacity to the equivalent of
three times our current volume. We now have redundancies in each of
our package types, and are now operating with uninterrupted
fulfillment while driving higher quality standards. We have also
worked diligently to reduce costs, both in our supply chain and
SG&A, which should begin to be reflected in our margins during
fiscal 2020. We feel very good about where we stand heading into
the upcoming year,” stated Norman E. Snyder, Chief Executive
Officer of Reed’s, Inc. “During the fourth quarter, we continued to
drive growth of our core brands, led by continued strong volume
growth of Virgil’s while Reed’s volume improved to roughly flat
with the prior year period. The availability of Reed’s Zero Sugar
in both bottles and cans positions us to return to growth in our
largest brand. Our innovation continues, while more targeted and
manageable. Reed’s Wellness Ginger Shots launched during the fourth
quarter and we are focused on driving online sales and retail
distribution. Reed’s Craft Ginger Mules are now in test in specific
retailers and we are excited to begin production of Reed’s Real
Ginger Ale, which began today. I am very pleased with our
positioning, improved supply chain operations and how our
organization has adopted a culture of execution over the past
several months. We have the brands, and are now well equipped to
deliver upon our opportunity. We will continue to drive constant
improvement while focused on driving volume and margin enhancement
in fiscal 2020 and beyond.”
Financial Overview for the Fourth
Quarter of 2019 Compared to the Fourth Quarter of 2018
During the fourth quarter of 2019, net sales
decreased 26% to $7.2 million compared with $9.6 million in the
prior year. Core brand gross sales were flat compared to
the same period in 2018, driven by 6% volume growth of the Virgil’s
brand offsetting a decline in Reed’s. The decline in consolidated
net sales reflected the sale of the private label business at end
of fiscal 2018 and planned discontinued sales of exited and
non-core products, which collectively contributed $2.2 million of
gross sales in the prior year period.
Gross profit during the fourth quarter of 2019
decreased 77% to $0.6 million compared to the same period in 2018.
The decrease in gross profit relates to the discontinuation of
non-core and private label sales, an increase in accruals for trade
promotions, approximately $0.8 million of inventory write-downs and
a $0.4 million year end true-up to inventory reserves, reflecting a
reversal of estimates in prior year periods. Gross margin,
excluding the discrete items noted above, would have been 26%
during the fourth quarter of 2019 compared to 28% of net sales in
the same period in 2018.
Delivery and handling costs decreased 14% to
$1.6 million during the fourth quarter of 2019 compared to the same
period in 2018. As a percentage of net sales, delivery and handling
costs increased 305 basis points compared to the prior year,
reflecting additional freight required to rebalance inventory at
the needed warehouse locations, shipping innovation products
produced in limited locations and a higher portion of LTL (less
than truck load) shipments to support new retailer launches.
Reflecting expanded copacker production capabilities,
transportation costs are expected to be reduced in coming
quarters.
Selling and marketing costs increased 15% to
$1.5 million during the fourth quarter of 2019. As a percentage of
net sales, selling and marketing costs increased to 21%. The
increase was driven by investment in sales and marketing
initiatives and infrastructure, consistent with the Company’s
strategy to refresh the brands, increase brand awareness, launch
new products into the market, open new retail outlets and channels
and increase core brands sales velocity to accelerate growth of the
core brands.
General and administrative expenses (G&A)
decreased to $1.0 million during the fourth quarter of 2019
compared to $1.5 million in the prior year period. The decrease in
general and administrative expenses compared to the prior year
period was largely driven by the exit of the Los Angeles facility
and reduction of office expenses, leases, and utilities.
Operating loss during the fourth quarter of 2019
increased to $3.5 million from $2.1 million in the prior year
period.
Interest expense decreased to $0.3 million
during the fourth quarter of 2019 from $0.7 million during the
fourth quarter of 2018.
Net loss during the fourth quarter of 2019 was
$3.8 million, or $0.09 per share, compared to $2.7 million, or
$0.10 per share in the fourth quarter of 2018.
Modified EBITDA loss was $3.8 million in the
fourth quarter of 2019 compared to a loss $1.7 million in the
fourth quarter of 2018.
Financial Overview for the Full Year of
2019 Compared to the Full Year of 2018
During the full year of 2019, net sales
decreased 11% to $33.8 million compared with $38.1 million in the
prior year. The decrease in gross sales was 6% compared to the same
period in 2018 while core brand gross sales increased 9% compared
to the same period in 2018. The core brand growth was driven by 23%
volume growth of the Virgil’s brand, offset by the decline in
consolidated net sales reflecting the sale of the private label
business at end of fiscal 2018 and planned discontinued sales of
exited and non-core products, which collectively contributed $6.0
million of gross sales in the prior year period. Additionally,
reflecting the supply chain challenges during the full year, net
sales were negatively impacted by approximately $2.7 million as a
result of orders that were not shipped during the year.
Gross profit during the full year of 2019
decreased 26% to $7.9 million compared to the same period in 2018.
The decrease in gross profit primarily relates to discontinuation
of non-core and private label sales, incremental discounts and
increases in inventory write offs and obsolescence reserves. Gross
margin was 23% of net sales during the full year of 2019 compared
to 28% of net sales in the same period in 2018. Excluding the
fourth quarter inventory write-offs and reserves, and accrual for
incremental discounts, gross margin would have been 26% for the
full year.
Delivery and handling costs increased 9% to $6.0
million during the full year of 2019 compared to $5.5 million in
the same period in 2018. As a percentage of net sales, delivery and
handling costs increased 330 basis points compared to the prior
year, reflecting additional freight required to rebalance inventory
at the needed warehouse locations, shipping innovation products
produced in limited locations and a higher portion of LTL (less
than truck load) shipments to support new retailer launches.
Selling and marketing costs increased 88% to
$9.2 million during the full year of 2019. As a percentage of net
sales, selling and marketing costs increased to 27%. The increase
was driven by investment in sales and marketing initiatives and
infrastructure, consistent with the Company’s strategy to refresh
the brands, increase brand awareness, launch new products into the
market, open new retail outlets and channels and create new pull
campaigns to increase core brands sales velocity and lay the
groundwork to accelerate growth of the core brands.
General and administrative expenses (G&A)
decreased to $7.6 million during the full year of 2019 compared to
$8.4 million in the prior year period. The decrease in general and
administrative expenses compared to the prior year period was
largely driven by the exit of the Los Angeles facility and
reduction of office expenses, leases, and utilities.
Operating loss during the full year of 2019
increased to $14.9 million from $8.1 million in the prior year
period.
Interest expense decreased to $1.3 million
during the full year of 2019 from $2.2 million during the full year
of 2018.
Net loss during the full year of 2019 was $16.1
million, or $0.46 per share, compared to $10.3 million, or $0.41
per share in the full year of 2018.
Modified EBITDA loss was $12.8 million in the
full year of 2019 compared to a loss $5.0 million in the full year
of 2018.
Liquidity and Cash Flow
During the full year months of 2019, the Company
used $18.2 million of cash in operating activities compared to $9.3
million of cash used in operating activities in the prior year
period. In the three months ending December 31, 2019, the Company
used $3.5 million of cash in operating activities compared to $1.2
million in the prior year period. The increase in cash used in
operating activities during the fourth quarter of 2019 relates
primarily to the increase in net loss and increases in inventory.
As of December 31, 2019, the Company had cash of $0.9 million and
$3.2 million of available borrowing capacity on its revolving line
of credit.
Full Year 2020 Guidance
During fiscal 2020, the Company expects to
generate core brand growth in the range of 10%+. The Company
anticipates a gross margin of 32% or greater for the full year
2020.
Fourth Quarter 2019 Earnings Call
Details
The Company will conduct a conference call at
4:30 pm Eastern Time today, March 12, 2020 to discuss its fourth
quarter 2019 results. This conference call can be accessed via a
link on Reed's investor website at http://investor.reedsinc.com/
under the "Events & Presentations" section or directly at
http://public.viavid.com/index.php?id=138285. To listen to the live
call over the Internet, please go to Reed's website at least
fifteen minutes early to register, download and install any
necessary audio software. Additionally, the call may be accessed
with the toll-free dial-in number, 1-(877) 425-9470 (U.S.); or
1-(201) 389-0878 (International). Please dial in at least five
minutes before the start of the conference call.
A replay of the webcast will be archived on the
Company’s website at http://investor.reedsinc.com/ under the
"Events & Presentations" section for approximately 90 days.
About Reed’s, Inc.
Established in 1989, Reed's is America's
best-selling Ginger Beer brand and has been the leader and
innovator in the ginger beer category for decades. Virgil's is
America's best-selling independent, full line of natural craft
sodas. The Reed's Inc. portfolio is sold in over 35,000 retail
doors nationwide. Reed's Ginger Beers are unique due to the
proprietary process of using fresh ginger root combined with a
Jamaican inspired recipe of natural spices and fruit juices. The
Company uses this same handcrafted approach in its award-winning
Virgil's line of great tasting, bold flavored craft sodas.
For more information about Reed’s, please visit
the Company’s website at: http://www.drinkreeds.com or call
800-99-REEDS. Follow Reed’s on Twitter, Instagram, and Facebook
@drinkreeds.
For more information about Virgil’s please visit
Virgil’s website at: http://www.virgils.com. Follow Virgil’s on
Twitter and Instagram @drinkvirgils and on Facebook
@drinkvirgilssoda.
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, please see our most recent reports on Form 10-K 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.
CONTACTS:
Investor RelationsScott Van Winkle, ICR(800) 997-3337 Ext 6Or
(617) 956-6736Email: ir@reedsinc.comwww.reedsinc.com
REED’S, INC.CONDENSED
STATEMENTS OF OPERATIONSFor the Three Months and
Full Year Ended December 31, 2019 and
2018(Unaudited)(Amounts in
thousands, except share and per share amounts)
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Net Sales |
$ |
7,151 |
|
|
$ |
9,629 |
|
|
$ |
33,820 |
|
|
$ |
38,102 |
|
Cost of goods sold |
|
6,554 |
|
|
|
6,977 |
|
|
|
25,944 |
|
|
|
27,424 |
|
Gross profit |
|
597 |
|
|
|
2,652 |
|
|
|
7,876 |
|
|
|
10,678 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Delivery and handling
expense |
|
1,624 |
|
|
|
1,890 |
|
|
|
5,993 |
|
|
|
5,489 |
|
Selling and marketing
expense |
|
1,470 |
|
|
|
1,278 |
|
|
|
9,188 |
|
|
|
4,879 |
|
General and administrative
expense |
|
1,009 |
|
|
|
1,535 |
|
|
|
7,596 |
|
|
|
8,388 |
|
Impairment of assets |
|
0 |
|
|
|
229 |
|
|
|
0 |
|
|
|
229 |
|
Gain on sale or disposal of
equipment |
|
(15 |
) |
|
|
(5 |
) |
|
|
(45 |
) |
|
|
(5 |
) |
Gain on sale of manufacturing
plant to related party |
|
0 |
|
|
|
(180 |
) |
|
|
|
|
(180 |
) |
Total operating expenses |
|
4,088 |
|
|
|
4,747 |
|
|
|
22,732 |
|
|
|
18,800 |
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(3,491 |
) |
|
|
(2,095 |
) |
|
|
(14,856 |
) |
|
|
(8,122 |
) |
|
|
|
|
|
|
|
|
Interest expense and other
financing related costs, net |
|
(339 |
) |
|
|
(659 |
) |
|
|
(1,286 |
) |
|
|
(2,201 |
) |
Financing costs and warrant
modification |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Change in fair value of
warrant liability |
|
7 |
|
|
|
95 |
|
|
|
30 |
|
|
|
(2 |
) |
Extinguishment of convertible
note |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Net loss |
|
(3,823 |
) |
|
|
(2,659 |
) |
|
|
(16,112 |
) |
|
|
(10,325 |
) |
|
|
|
|
|
|
|
|
Preferred Stock Dividends |
|
- |
|
|
|
- |
|
|
|
(5 |
) |
|
|
(5 |
) |
Net loss attributable to
common stockholders |
$ |
(3,823 |
) |
|
$ |
(2,659 |
) |
|
$ |
(16,117 |
) |
|
$ |
(10,330 |
) |
|
|
|
|
|
|
|
|
Loss per share – basic and
diluted |
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.41 |
) |
Weighted average number of
shares outstanding – basic and diluted |
|
43,597,097 |
|
|
|
25,705,555 |
|
|
|
35,058,004 |
|
|
|
25,357,566 |
|
REED’S, INC.BALANCE
SHEETSAs of December 31, 2019 and December 31,
2018(Amounts in thousands)
|
|
December 31, 2019 |
|
December 31, 2018 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash |
|
$ |
913 |
|
|
$ |
624 |
|
Accounts receivable, net of
allowance for doubtful accounts and returns and discounts of $623
and $601, respectively |
|
|
2,099 |
|
|
|
2,608 |
|
Receivable from related
party |
|
|
|
|
195 |
|
Inventory, net of reserve for
obsolescence of $197 and $509, respectively |
|
|
10,508 |
|
|
|
7,380 |
|
Prepaid expenses and other
current assets |
|
|
776 |
|
|
|
131 |
|
Total Current Assets |
|
|
14,296 |
|
|
|
10,938 |
|
|
|
|
|
|
Property and equipment, net of
accumulated depreciation of $342 and $799, respectively |
|
|
1,053 |
|
|
|
896 |
|
Equipment held for sale, net
of impairment reserves of $118 and $5,925, respectively |
|
|
67 |
|
|
|
82 |
|
Intangible assets |
|
|
576 |
|
|
|
576 |
|
Total
assets |
|
$ |
15,992 |
|
|
$ |
12,492 |
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable |
|
$ |
5,539 |
|
|
$ |
5,721 |
|
Accrued expenses |
|
|
646 |
|
|
|
1,483 |
|
Advances from officers |
|
|
|
|
- |
|
Line of credit |
|
|
3,177 |
|
|
|
6,980 |
|
Current portion of leases
payable |
|
|
49 |
|
|
|
51 |
|
Current portion of long term
financing obligation |
|
|
|
|
- |
|
Current portion of bank
notes |
|
|
|
|
- |
|
Total current liabilities |
|
|
9,411 |
|
|
|
14,235 |
|
|
|
|
|
|
Leases payable, less current
portion |
|
|
737 |
|
|
|
801 |
|
Long term financing
obligation, less current portion, net of discount of $714 at
December 31, 2017 |
|
|
|
|
- |
|
Convertible note to a related
party |
|
|
4,689 |
|
|
|
4,161 |
|
Warrant liability |
|
|
8 |
|
|
|
38 |
|
Other long term
liabilities |
|
|
|
|
- |
|
Total
Liabilities |
|
|
14,845 |
|
|
|
19,235 |
|
|
|
|
|
|
Stockholders’ equity
(deficit): |
|
|
|
|
Series A Convertible Preferred
stock, $10 par value, 500,000 shares authorized, 9,411 shares
issued and outstanding |
|
|
94 |
|
|
|
94 |
|
Common stock, $.0001 par
value, 70,000,000 and 40,000,000 shares authorized, respectively;
25,729,461 and 24,619,591 shares issued and outstanding,
respectively |
|
|
5 |
|
|
|
3 |
|
Common stock issuable, 400,000
shares at December 31, 2017 |
|
|
|
|
- |
|
Additional paid in
capital |
|
|
77,596 |
|
|
|
53,591 |
|
Accumulated deficit |
|
|
(76,548 |
) |
|
|
(60,431 |
) |
Total stockholders’
equity (deficit) |
|
|
1,147 |
|
|
|
(6,743 |
) |
Total liabilities and
stockholders’ equity (deficit) |
|
$ |
15,992 |
|
|
$ |
12,492 |
|
REED’S, INC.CONDENSED
STATEMENTS OF CASH FLOWSFor the Full Year Ended
December 31, 2019 and
2018(Unaudited)(Amounts in
thousands)
|
December 31, 2019 |
|
December 31, 2018 |
Cash flows from operating
activities: |
|
|
|
Net
loss |
$ |
(16,112 |
) |
|
$ |
(10,325 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
Depreciation |
|
61 |
|
|
|
86 |
|
(Gain)/loss on sale of property & equipment |
|
(45 |
) |
|
|
(185 |
) |
Loss on termination of leases |
|
8 |
|
|
|
94 |
|
Amortization of discount on long-term financing obligation |
|
323 |
|
|
|
110 |
|
Amortization of capitalized financings costs |
|
- |
|
|
|
75 |
|
Amortization of right of use assets |
|
91 |
|
|
|
22 |
|
Fair value of vested stock options issued to employees for
services |
|
790 |
|
|
|
1,161 |
|
Fair value of shares granted for services |
|
|
|
100 |
|
Fair value of vested restricted shares issued for services |
|
506 |
|
|
|
820 |
|
Increase (decrease) in allowance for doubtful accounts |
|
(248 |
) |
|
|
22 |
|
Increase (decrease) in inventory reserve |
|
449 |
|
|
|
(312 |
) |
Increase/(decrease) in fair value of warrant liability |
|
(30 |
) |
|
|
2 |
|
Accrual of interest on convertible note to a related party |
|
528 |
|
|
|
471 |
|
Write off of intangible
asset |
|
- |
|
|
|
229 |
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
757 |
|
|
|
61 |
|
Inventory |
|
(3,575 |
) |
|
|
(1,157 |
) |
Prepaid expenses and other assets |
|
(645 |
) |
|
|
68 |
|
Accounts payable |
|
(182 |
) |
|
|
(1,762 |
) |
Accrued expenses |
|
(837 |
) |
|
|
1,190 |
|
Other long term obligations |
|
- |
|
|
|
(28 |
) |
Net cash used in operating activities |
|
(18,161 |
) |
|
|
(9,258 |
) |
Cash flows from investing activities: |
|
|
|
Proceeds from sale of property and equipment |
|
45 |
|
|
|
1,101 |
|
Purchase of property and equipment |
|
(322 |
) |
|
|
(159 |
) |
Net cash used in investing activities |
|
(277 |
) |
|
|
942 |
|
Cash flows from financing activities: |
|
|
|
Borrowings on line of credit |
|
54,831 |
|
|
|
47,560 |
|
Repayments of line of credit |
|
(58,827 |
) |
|
|
(43,204 |
) |
Capitalization of financing cost |
|
(130 |
) |
|
|
(591 |
) |
Principal repayments on capital expansion loan |
|
- |
|
|
|
(3,947 |
) |
Principal repayments on bank notes |
|
- |
|
|
|
(3,000 |
) |
Principal repayments on long term financial obligation |
|
- |
|
|
|
(253 |
) |
Advances from officers |
|
- |
|
|
|
200 |
|
Repayment of amounts due to/from officers |
|
195 |
|
|
|
(472 |
) |
Principal repayments on capital lease obligation |
|
(48 |
) |
|
|
(312 |
) |
Exercise of warrants |
|
365 |
|
|
|
832 |
|
Proceeds from sale of common stock |
|
22,341 |
|
|
|
- |
|
Net cash provided by financing activities |
|
18,727 |
|
|
|
(3,187 |
) |
|
|
|
|
Net increase/(decrease) in cash |
|
289 |
|
|
|
(11,503 |
) |
Cash at beginning of period |
|
624 |
|
|
|
12,127 |
|
Cash at end of period |
$ |
913 |
|
|
$ |
624 |
|
|
|
|
|
Supplemental disclosures of cash flow
information: |
|
|
|
Cash paid for interest |
$ |
498 |
|
|
$ |
1,351 |
|
Non Cash Investing and Financing
Activities |
|
|
|
Dividends on Series A Convertible Preferred Stock |
$ |
5 |
|
|
$ |
5 |
|
Acquisition of lease asset and liability |
$ |
- |
|
|
$ |
730 |
|
Vendor credits issued for fixed asset purchases |
$ |
- |
|
|
$ |
108 |
|
Fair value of warrant modification recorded as debt discount |
$ |
- |
|
|
$ |
161 |
|
Modified EBITDA
In addition to our GAAP results, we present
Modified EBITDA as a supplemental measure of our performance.
However, Modified EBITDA is not a recognized measurement under GAAP
and should not be considered as an alternative to net income,
income from operations or any other performance measure derived in
accordance with GAAP, or as an alternative to cash flow from
operating activities as a measure of liquidity. We define Modified
EBITDA as net income (loss), plus interest expense, depreciation
and amortization, stock-based compensation, changes in fair value
of warrant expense, and one-time restructuring-related costs
including employee severance and asset impairment.
Management considers our core operating
performance to be that which our managers can affect in any
particular period through their management of the resources that
affect our underlying revenue and profit generating operations that
period. Non-GAAP adjustments to our results prepared in accordance
with GAAP are itemized below. You are encouraged to evaluate these
adjustments and the reasons we consider them appropriate for
supplemental analysis. In evaluating Modified EBITDA, you should be
aware that in the future we may incur expenses that are the same as
or similar to some of the adjustments in this presentation. Our
presentation of Modified EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or
non-recurring items.
Set forth below is a reconciliation of net loss
to Modified EBITDA for the three months ended December 31, 2019 and
2018 (unaudited; in thousands):
|
Three Months Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
Net loss |
$ |
(3,823 |
) |
|
$ |
(2,660 |
) |
|
|
|
|
Modified EBITDA adjustments: |
|
|
|
Depreciation and amortization |
|
44 |
|
|
|
(384 |
) |
Interest expense |
|
339 |
|
|
|
659 |
|
Stock option and other noncash compensation |
|
(301 |
) |
|
|
462 |
|
Change in fair value of warrant liability |
|
(7 |
) |
|
|
(95 |
) |
Gain on Plant Sale |
|
- |
|
|
|
(180 |
) |
Severance |
|
(39 |
) |
|
|
514 |
|
Total EBITDA adjustments |
$ |
36 |
|
|
$ |
976 |
|
|
|
|
|
Modified EBITDA |
$ |
(3,787 |
) |
|
$ |
(1,684 |
) |
We present Modified EBITDA because we believe it
assists investors and analysts in comparing our performance across
reporting periods on a consistent basis by excluding items that we
do not believe are indicative of our core operating performance. In
addition, we use Modified EBITDA in developing our internal
budgets, forecasts and strategic plan; in analyzing the
effectiveness of our business strategies in evaluating potential
acquisitions; and in making compensation decisions and in
communications with our board of directors concerning our financial
performance. Modified EBITDA has limitations as an analytical tool,
which includes, among others, the following:
|
● |
Modified EBITDA does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual
commitments; |
|
|
|
|
● |
Modified EBITDA does not reflect changes in, or cash requirements
for, our working capital needs; |
|
|
|
|
● |
Modified EBITDA does not reflect future interest expense, or the
cash requirements necessary to service interest or principal
payments, on our debts; and |
|
|
|
|
● |
Although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be
replaced in the future, and Modified EBITDA does not reflect any
cash requirements for such replacements. |
Set forth below is a reconciliation of net income (loss) to
Modified EBITDA for the 12 months ended December 31, 2019 and 2018
(unaudited; in thousands):
|
Year Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
Net loss |
$ |
(16,112 |
) |
|
$ |
(10,325 |
) |
|
|
|
|
Modified EBITDA adjustments: |
|
|
|
Depreciation and amortization |
|
152 |
|
|
|
108 |
|
Interest expense |
|
1,286 |
|
|
|
2,201 |
|
Stock option and other noncash compensation |
|
1,296 |
|
|
|
2,081 |
|
Change in fair value of warrant liability |
|
(30 |
) |
|
|
2 |
|
Gain on Plant Sale |
|
- |
|
|
|
(180 |
) |
Severance |
|
643 |
|
|
|
1,156 |
|
Total EBITDA adjustments |
$ |
3,347 |
|
|
$ |
5,368 |
|
|
|
|
|
Modified EBITDA |
$ |
(12,765 |
) |
|
$ |
(4,957 |
) |
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