Daniel Miles - Chief Financial Officer Christopher Reed - Founder, Chairman, Chief Executive Officer and President.

Analysts:.

Good afternoon, and welcome to the Reed's Third Quarter 2015 Earnings Conference Call for the period ending September 30, 2015. My name is Edison, and I will be your conference call operator today. Participating today's call, we have Chris Reed, the CEO and Founder of Reed's Incorporated; and Dan Miles, Chief Financial Officer.

Following management’s remarks they will take questions. Before we begin today's call, I have Safe Harbor statement to read to our listeners.

I would like to remind our listeners that during today's call, management's remarks may contain forward-looking statements that are subject to risks and uncertainties, and that management may have additional forward-looking statements in response to your questions.

Therefore, the company claims protection of the Safe Harbor of forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today due to such risks, but are not limited to risks relating to demand for the company's products, dependence on third-party distributors, changes in the competitive environment, and access to capital, and other information detailed from time-to-time in the company's filings with the United States Securities and Exchange Commission.

In addition, any projections as to the company's future performance represents management's estimates as of today, November 12, 2015. Reed's Inc. assumes no obligations to update these projections in the future as market conditions change. I will now turn the call over to Mr. Miles, who will begin with his prepared remarks. Please go ahead..

Thank you, Edison. Hello, everyone. Thank you for your interest in Reed's Inc., and thank you for joining us today for Reed's 2015 third quarter earnings call. My name is Dan Miles and I am the CFO of Reed's.

In addition to the press release issued today, we’ve also filed our 10-Q for the third quarter of 2015 and then 8-K describing an exciting new lending agreement completed earlier this week. Let's turn to the results for the third quarter. Demand remains strong for Reed's beverages although our production operations could not meet that demand.

Total net sales for the third quarter ending September 30, 2015 were $10 million, a decrease of 13% versus the third quarter of 2014.

We believe that sales would have been substantially higher if were not continue to out-of-stock issues driven by significantly lower than expected production at our existing East Coast pack facility and the delay in our second East Coast facility coming online.

Our promotional expenses for the third quarter, which includes items such as promotional spends with retailers and slotting fees rose 13%, and accounted for 12% of gross sales or $1.2 million for the quarter compared to $1.2 million, but 9% of gross sales in the third quarter of 2014.

Promotions that were plan prior to the interruption had a disproportional negative impact on the margins. We been able to hit the $5 million in additional sales that we may have reached our promotional expenses would not have been the higher than 8% for the quarter.

Sales for the first nine months of 2015 increased 3.4% to $33.6 million as compared to $32.5 million for the first nine months of 2015. Gross profit for the first nine months of 2015 was $8.5 million as compared to $10.5 million for the first nine months of 2014. This was directly due to sales demand exceeding our supply on hand.

Net loss per diluted share for the nine months ended September 30 was a negative $0.26 versus a net gain of 4% per diluted share for the nine months ended September 30, 2014. Our gross profit of the third quarter was down $2.3 million as a result of loss production.

Our gross margin decreased from 32% to 15% in 2015 compared to the third quarter in 2014. While overall gross profit was down, the margin decrease was due to several factors as discussed about the promotional impact led to a 4% decrease in margin year-over-year.

And reorganizing the supply chain we experienced cost due to the simple disposal of inferior quality product of 7%, a reduction in obsolete raw materials of 4% and the production shift to higher cost items of 2%. The total dilution to the gross margin we believe is primarily related to the production interruption.

We are off to a fresh start and anticipate the gross profit margin to return to normalized levels in the fourth quarter.

Our idle plant cost for the LA plant in 2015 third quarter was down 9% from the third quarter in 2014, while the impact of 4% of net sales in the third quarter 2015 versus 3% versus the third quarter of 2014 was an increase this was due entirely to a lower sales base in 2015.

During the quarter the LA plant produced 20 hours a day, six and even sometimes seven days a week. We only stopped for maintenance. During the quarter the company reached agreement with co-packers that beginning in October 2015, our capacity has expanded to allow the LA plant to halt production while the facility is being upgraded.

Expenses, total operating expenses for the third quarter increased 2% to $3.7 million compared to the third quarter of 2014. Delivery and handling costs increased 3% to $1.4 million or 13% of sales in the three months ended December 30, 2015 compared to $1.3 million or 11% of sales over the same period in 2014.

During the quarter our freight efficiencies went down due to out of stock that caused us to have higher freight cost than planned. This was due in large part to shipping product across country that will go down with the multiple plants in operation now going forward.

The increase was primarily due to total cases delivered down 3%, 25% increase in the total number of deliveries. And an increasing 23% in mileage actually travel. To offset these increases the company was able to obtain significant rate decreases from vendors that insinuated the overall cost.

We anticipate that delivery cost will be back in line with Reed’s historic rate of 8% to 9% of sales. Selling and marketing costs decreased $238,000 overall to $1.2 million in the three months ended September 30, 2015 from $1.5 million in 2014.

This decrease over the last year’s period is primarily due to a reduction in nationwide advertising that was offset by its specific focus on trade activity.

G&A expenses increased to $259,000 primarily due to bad debt reserve adjustments of a 134 and additional compensation expenses of $158,000 that were offset by lower consulting and professional expenses of $43,000.

Our interest expense was $321,000 versus the $195,000 in the third quarter last year this $126,000 increase was due to the additional borrowings to bridge the production shortfall in the accompany and changing the rates.

For the third quarter we had a net loss of $2.465 million of $0.19 per diluted share, this compares to a net profit of $48,000 or no cents per diluted share in last year's third quarter. For the third quarter, our modified EBITDA was a negative $2,074,000 versus a positive $279,000 in the prior year.

We had a $712,000 EBITDA adjustment in Q3 that consisted of $235,000 in depreciation and amortization and $321,000 in interest expense and $156,000 in stock and compensation expenses.

The balance sheet; our cash and cash equivalents at September 30 were $1,203,000 compared to December 31 2014 of $959 and $215,000 at the end of the second quarter of June 30, 2015.

Net cash used for the operating activities was a negative $2 million for the nine months ended and this was primarily due to the operating loss of $2,144,000 increases in inventory levels consisting of raw materials of $1.6, accounts receivable of $1 million offset by accounts payable increases of $1.8.

As of September 30, the company has borrowing availability of $1.5 million under our $6 million revolving line of credit. Additionally, the company has another $1.5 million of future borrowing availability under our CapEx loan agreement. As of September 30, we had stockholders equity of $1 million.

In conclusion, the Company's demand continues to be very strong with the addition of the new co-packers we will meet our customers demand by producing the best natural soda money can buy. Now, I am going to turn the call over to Chris Reed..

Well. Thanks Dan, appreciated. Chris Reed, the CEO and Founder of Reeds, Inc. The third quarter is particularly difficult time, we are already deep into the fourth quarter and I would like to feel we are deep into the recovery from the last two quarters.

Production shortfalls for the third quarter causes to not fill at least $5 million of orders that we would typically filled.

And it seems that in the world of business the tough thing to do is to create products that customers want and to create the demand to get the awareness on your products and the easier thing to do business is to make the widgets and get them to market.

So it would have been nice to see a $16 million quarter, the same thing happened during the second quarter we posed I think $12.3 then we had about $2 million in orders that so we couldn't sell because the production shortfalls.

Not only that the new facility that we've been working on throughout the beginning of 2015, we anticipated having it up and running in May 2015, number of the expenses that showed up in the third quarter are this product didn't make the grade there were produced at the plant.

We tried to push a situation that was just going to take its time and trying to come to fruition when it could.

And finally, now in the beginning of October we have production – not full production actually we production from the second facility on East Coast than in the Midwest we have our third facility for the East Coast area producing the product that was part of the our backup to our backup, but the second and our third plant for mostly East Coast production.

For the two facilities combined along with our regular production in East Coast are now meeting demand. In October, we produced our annual rate of about 4 billion cases a year, which would support approximately 65 million in annual sales.

And October we sold – we had the record month for the largest sales month in the history of the company with over $5 million in sales I know November here it still early November but we can predict a very robust November I think we have over $9.5 million of orders for the fourth quarter right now I know we have another six weeks, but it is now you can just double the number and expect to be, but we can say that were probably back to growth were at least recover to 2014 levels and surely knocking doesn't seem possible for us to be have a negative growth or have a negative decline in the fourth quarter at all based on robustness.

So the lot of one-time things that have affected the margins and we’ve done a bit of analysis here feel comfortable that margins are recovering quickly to normal levels.

So with the production coming on board on the East Coast we’ve needed that to happen first before we could bring on production in Los Angeles because during the time that were converting the plant we have to be able to shut down two tranches of two weeks and the plan right now is to in the next six to eight weeks have the first shutdowns and then within a month of that time of the second shutdown and upon coming out of the second shutdown we should have the facility running with the new automated equipment in LA.

Dan referred we have a $3 million line that allows us to buy the equipment we utilized about 60% of the money and have earmarked the rest of it for equipment that's on order and so the equipment that we need its here physically around order being delivered in the next debt.

So there's a lot of infrastructure work going on to support the new line including utilities compressed a plant, electricity, gas, water et cetera. So that we will have everything ready to go shortly.

So by the end of the first quarter we should be getting benefits from the West Coast plant the benefits that we’re looking forward to getting include a tremendous amount of trends coastal shipment from East Coast plants to the West Coast.

The West Coast facility is running at about 90,000 to 100,000 cases a month, but we’re short about 50,000 pieces a month but we shipped across the country from the East Coast.

Dan has been analysis and field that will save approximately 80,000 or approximately $1 million a year on trends shipping freight are products in the East Coast to the West once the facilities on board, but we will be able to run production here at three times the speed we currently run with the same or less labor and labor is a big component of our cost here, when we have a number we report called Idle plant and that number represents what it cost for us to produce here versus outsourcing production.

We gone as highest 230,000 month and the new management here Mark Beaton, COO and his people have been able to create a bunch of efficiencies prior to the plant, new plant coming on board and we're trending down into the 120 to 150 range of 150,000 a month the idle plant.

We anticipate the new facility coming on board there is going to have significant savings and eventually bring us ourselves at least to parity within 12 to 18 months in other words idle plant going away and parity with outsourcing and production instead of having in under a roof.

But within 18 months will start moving into actually being a significant financial benefit have our own production over outsourcing it.

So that new East Coast facility is producing sodas considerably less expensive starting to then our current cost of production on the East Coast we anticipate seeing benefits financially from that probably in the first quarter and more prominently in the second quarter 2016.

So we look forward to second and third quarter results next year, where we anticipate having full production and picking up not only growth but $2 million in the second quarter and another $5 million in the third quarter.

But the thing that strikes me about these numbers, if we had production to handle the orders in the second and third quarter not only where we have had $7 million of more sales approximately and I think conservatively.

We also would've posted sales growth that were in acceleration from prior periods, we have seen a 25% to 30% growth and we’ve been trending between 15% and 25% for probably last four, five years.

So the time where we’re having accelerated demand, we have production hiccups and it’s been a tough time for the company, trying to affect every bit of the financials obviously we can and we didn't anticipate the third quarter being here, so we didn't unwind production or promotions.

So we got stuck with the expenses of promotions that would be appropriate for a $13 million, $14 million or $15 quarter but got paid against [$10.7] million quarter and the efficiencies freight made hiccups to ingredient purchasing and quality issues with new plants getting on board and working through issues to create the level of quality that we demand for products but with the new West Coast facility and the finishing of the East Coast facilities in the first quarter of 2016.

We anticipate an additional capacity of 2.5 million cases per annum, which will support combined with $4 million we’re currently able to produce, that should be able to support approximately $100 million of sales annually and we should be able to moving forward anticipate 6 to 12 months out the need for additional production above $100 million when that comes about and we already have relationships with the number of facilities in other regions of the country including Southeastern and the Midwest where we could bring on right now probably in the 3 to 6 month another couple million cases or approximately figure $16 a case another $30 million or $40 million sales.

So I feel like the production issues are behind us it's been challenging specific orders that we're not filling or some of the some very new customers and some of the largest retailers in the country who have had experienced tremendous demand our products one of the highlights of the last 52 weeks is Reed's Ginger Brews are up 37% in supermarkets and Reed's and Virgil’s are up 27% and we were the fastest-growing brands, soft drink brands in the top 50 soft drink company, I think were number 48 soft drink company in supermarkets.

And we are 27% growth has made us number one, so though we sorted our customers, some of our customers were down to 50% during the third quarter of demand of what they were fulfillment of orders and that and still with that we were able to keep a pretty good growth in supermarkets rate, also during the time the beer distribution network.

I like to say that we started out grocery, our core competencies grocery we’re now expanding more up-and-down street in the service bars convenience restaurants and going to those tradeshows for the first time in the third quarter we went to the national restaurant show that was actually a second quarter we went to the number restaurants shows the bar and nightclub show, convenience store show was the second time we were there.

We’re in the last third quarter and this third quarter. We saw a 43% increase in accounts through our beer network with a small team of our sales force and it kind of points to a large opportunity of growth. I could quantize it in a somewhere between a $50 million and $100 million opportunity for the company.

Moving forward we will be expanding as we get production on board, move back into the good economics that we anticipate in 2016 will be expanding that effort and putting more people onto the street to work with that DSD rollout into more mainstream up-and-down street business.

Of course, we started in the second quarter our relationship with Absolut Vodka to make the ultimate Moscow Mule great, conversations continue and we anticipate the network of people on the street and their network of salespeople that we will start to have a much stronger launch into the bar, and nightclub, and restaurant trade through that relationship and the new distribution that's coming on board through that.

So there is still a lot of exciting things going on.

The press for the quarter included the front cover of Bar Business Magazine goes out to the bar owners in America also Progressive Grocer named Reed’s Stronger Ginger Brew, Editors Pick and Beverage World announced this as one of the power players of the year in their September issue and selecting as one of five of the new movers and shakers in the industry and barges spirits competition awarded us the best targeted mixture.

Recently, I was invited also to participate in a conference in December in New York called Future Smarts and it's one of the highest level and most influential conferences in the beverage industry and I'll be on a panel that include the COO of Coca-Cola and CEO of Dr. Pepper/Snapple and the CEO of North America PepsiCo.

So this is a very prestigious magazine, it trying to shows you how people are viewing the company and what's going on in the normal operations of the company and I think this is more of the Status Quo of what's going on with us.

In addition to those highlights, last year around this time we were approached by one of the larger fast-casuals, who the CEO and his wife trying to [indiscernible] health kick and start getting a juicing, eating organically and he start looking at his business and his couple thousand restaurants and started to question.

What he was doing with his business and he started to put out press releases about how the cleaning of their food and kind of hitting, getting into the trend of healthy and Better For You Foods and made some serious announcement to the trade about what kind of things won't be in their foods moving forward.

And we have been asked to develop something that would be an alternative to the big soda companies and the high fructose corn syrup, sodium benzoate, cocktails that are normally served of the soda fountain and at the time we’ve offered them our bottled beverages and mentioned that brewing up ginger ales and root beers the way they were made 200 years ago is not something it lends itself to a kind of high tech equipment and high tech fluid going through the machine, but they insisted and we went through an R&D period.

And in the July 1 of this year, we showed the first bag in the box using our products. And what made them unique was not only were the high-quality products we have all natural about GMOs, cane sugar and fruit juice sweetened they also – we were able to come up and work through the R&D to produce a natural no chemical, no preservative soda.

This client was thrilled with the quality of the products, thrilled with the story they can help soda consumers not only their food getting cleaned up, but are drinks are fallen suite, but they then challenged us one more time to come up with versions of our products that would be calorie reduced from the normal 20 to 250 to 280 calorie drink to somewhere in the 150 to 180 range.

And we were able to work through a very tense R&D period. Right now, the first all-natural soda fountain is in our offices in LA, the second will be going into corporate headquarters of this large fast-casual, shortly we will be starting the sales to accounts - to start producing the soda fountain product here early 2016.

Right now we're meeting with a large chain restaurant owners around the country explaining to them that the next generation of sodas is here demoing then the quality of the products explaining the lack of chemicals and even the reduced sugar and extremely high quality and innovative products that we develop.

Now some of these products are existing products and some of them are brand-new products that will be under our brands that were co-developed through a group effort with the fast-casual and kind of it’s a combination of all of the work we did with private label over the years all the products we develop knocked off and all the intelligence that came out of even included some of the intelligence that is given raise to Kombucha line.

We have exciting sodas like a Grapefruit; Biscuits; Ginger soda very exciting some of them okay our brand-new never conceived the products that are already a big hit here.

We have a high level competence that once we show up on [draft on cap] at the large fast-casuals the corporate headquarters we want some big fan relatively quickly with their management.

Plants are moving forward in a number of other fast-casuals to put trial equipment and to test our products in the marketplace in real scenarios, real account in the selling the product.

One of the things that became clear is those soda equipment out in the field of represent to the public of prior to mom they say this is something unhealthy for my kids this the poison I don't want in their tender little bodies I wouldn’t serve off of that machine anything I wouldn't give it to any of my kids.

So we hear that we get that feedback well and clear. So we have decided that with this new next generation of sodas on fountain we need a new piece of equipment, new piece of hardware. So we’ve been working with the largest equipment manufacturers in the country that the CEO level.

And explain to the opportunity that this is going to cost and we think that we have the future of the soda fountain industry in our offices and often times when we’re presenting out not only the chasing drinks, but we are showing concepts of new not yet produced equipment some of its existing equipment from other parts of the world, some of its secured equipment that hasn't seen a lot of daylight but actually we have been better in the marketplace.

And we are showing them the new experience not only its new equipment experiences, it’s a new beverage experience, it’s clean, it’s natural what really makes this interesting you are currently like herself not there were forgetting that were in a accelerate demand time for our bottle beverage, but I look at a simplified version if an account, a lot of these accounts in Americas do not sell bottle, as they sell most of the drinks on high-margin off of this soda fountain equipment and I get a math on it a 5 gallon bag of concentrated Ginger Brew.

I get retail it or sell it to an account for somewhere lets say $60 to $80 and they wanted to buy the equivalent liquid in bottle form they be about 13 cases and they be about $25 a case. So I don't its like $300 plus.

So would you rather pay $60, $80 or $307 for the same product? So with this does for our brands is it opens up markets much larger market much higher volume markets that would never ever to be able to really bring in a bottle version for our product.

It's really when you look at the $60 billion soft drink industry it really looking at primarily I am don’t have exact numbers but its probably mostly of this less expensive more patience, economic, find tunes, avenue, kid channel of sodas coming through sodas foundation in America. So we were very excited about new I don’t give any numbers to it.

We weren’t fine, if this doesn't pan out, but we are pitching the largest chains of restaurants in the country, looking for one guy to anchor this well by the current individual we’re talking to with their fast-casual order 8,000 or 10,000 these a weeks, so that would get us into production and get the logistics done quickly.

It’s actually relatively easy to do, its lot easier than carbonating a beverage and bottling it, and labeling it and putting in cases and shipping around the country. Its many steps before that, they concentrate and bag it off.

So we’re excited about the simplicity of the business model, we are excited about the margins; we’re excited about the significantly higher opportunity. I figure headcount with the soda fountain is probably going to do 10 to 20 times as much business and profits and account or their bottle beverages.

So we are having a kind of good time running with that into the marketplace.

We’ll have to report, it’s still big and kind of we don't know, where it’s going go, it’s a huge opportunity, but it’s still very early, we think that the response time the bigger guys are going to have to was going to be very disruptive here, there's a huge barrier to entry, there is a lot of technical guidance that are going to just take a lack of nimbleness in a big organization a whole lot to wrap their minds around.

So we are kind of counting on that to have hopefully 1.5 to 2 year window here to hopefully secure some very big opportunities for the company, but that’s again it’s still kind of forming in the mist, it’s not as quite as solid here as our current business, the current opportunities of just putting out and producing all the bottled product that’s coming our way.

I think the cash situation of course anyone the quarter were a couple billion dollar loss.

I’m sure there is concern about cash, we of course the recovery that we are having here that is visible to our bank allowed us to renegotiate the bank and we were scheduled to return with the $1.5 million we borrowed to beef up inventory for the third and fourth quarter private label projects that we have each year.

And we’ve asked them to delay the repayment to April 2017.

So it really has freed up cash kind of given us a lot of breathing room to get it back on our feet, we’re not going to be raising money in the marketplace at least not so we have some really good news, the stock recovers to a much more historically higher level, we might consider that with some of the large opportunities we have like I mentioned the DSD was continuing to roll out.

But just everywhere outside of our grocery competency which is still going very strong and robust with and as I said 37% growth with Reed’s and 27% growth with our combined Reed’s and Virgil's. At the same time that we been shorting it for the last two quarters and we still have had that particular growth.

So anyway, we feel very confident we – don't ever want to have this conference call again.

We are passionate, we’re comfortable, we’re relaxed, we see the recovery, we just are enthusiastically going after the opportunities and looking forward to very robust fourth quarter to be great, we’re still bringing back product shows that we have did and that will continue to see the recovery improving through the first quarter.

I think about the second quarter with the economics of things and just having full production not having the $2 million we lost in 2015 for not having production.

I think we will trend very nicely against that, but more important then the results for Wall Street I think we will be generating capital to invest in some of what are very obvious opportunities for the company right now and we do not say that we will never raise money.

I think that are clearly opportunities the prudent businessman would be accelerating right now especially knowing the craft soda seems to be moving in a trajectory that feels a lot like the craft beer industry 20 years ago.

I think that’s partly why I’m being invited to one of the largest conferences of the year to be one of the leading thinkers in the beverage industry. Anyway, at this point I'm going to open up the call to questions..

[Operator Instructions] We do have a question from [indiscernible]. Please proceed..

Hello, Chris and congratulations on your product. I’m a team member of [Hope Foods] and have been for 10 years and I’ve seen your products fly out the doors people [indiscernible] and being a small investor I only have about 9000 shares I would like more. I love to see more consistent news about the company under…..

You want to hear more news on a more consistent basis on some of the wins that we are having..

Yes, exactly. I think that would help the small investor rather than and just wondering what’s going on when I see the stock up..

Yes, I appreciate that.

I think particularly during this time we are anticipating putting out more news and more interim kind of information on the recovery right now, we think - it’s definitely kind of a surprising quarter for us to post and I think people are really going to need to hear from us especially in the next few months, but I think that you'll see with the recovery of the finances in the company and the growth in second and third quarter of next year I think you'll see the response in stock and assuming that world’s still rolling and turning well in fact as we will see a nice recovery in the stock.

We are aware that we need to communicate more and it has been a deep focus right now there's been a big scramble to get the – we not only brought on the third facility, but the fourth facility during this time, but that was a huge effort for us and I think you might have been a little bit remiss and keeping the news coming..

Thank you..

[Operator Instructions] We do have a question from [indiscernible]. Please proceed..

Hi Chris, I was wondering if you can tell us a little bit about what’s going around with Kombucha and now what’s going on with that products line?.

All right, thanks for joining us today.

The Kombucha line –during the time we were down to somewhere close to 50% filling of order, production time where we produced Kombucha on the West Coast at our West Coast facility and we were definitely stretched very thin trying to keep up with everything and there wasn't a product that did not come to a place where it was being shorted in the marketplace.

So Kombucha sales in August were at 50% of where they were three months prior and ACV, the percentage of store is carrying at natural foods during this period of time went from like 76% down to around 47%. So we lost almost 30% ACV.

We are just getting back in stock on Kombucha, we did a bit more production in September so sales were up about 50% from August to September and October is recovering nicely. So we actually anticipate getting back on a growth curve with our Kombucha.

The consumers have voted where it is the 46% that we were down probably 40% in accounts, but our sales were only down 20%. So the account are kept it actually have a pretty good growth on a per account basis.

So the Kombucha still very strong in the consumer mind we are moving back into position to accelerate Kombucha you know its interesting if you watch the news on Kombucha, hear a lot of chatter in the press like the Wall Street Journal and an article I think was two days ago were they talked about the issue Kombucha’s having with the tobacco and firearms people of having to hire an alcohol level and the interesting thing about Reed’s is a public company and as a chemical engineer I wasn't willing to dance with the public regulatory people and produce our product that was definitely breaking the law by put out something over the legal limit for alcohol.

You can go to one proof for a 0.5% alcohol and I haven't pulled Kombucha off the market in the last two years are practically ever with my $16,000 alcohol testing equipment in my lab everything is over the legal limit except for one other company and there has been sharing of technology between your company.

So other chemical engineer I have designed Kombucha product that preferentially consumes the alcohol and converse it to vinegar or acetic acid which gives the sour and vinegary taste in Kombucha.

So our products are legal and marketplace is getting the tremendous amount of letters from big government bodies right now saying you going to have to clean up your act and I am going to tell you good luck with the technological the guy brings and know how and some trade secrets that created the position that we have in the marketplace.

I can tell you the other guy whose out there who has Kosher or alcohol safe product right now are legal is putting in the fastest line he can right now anticipating a meltdown in the supply chain of Kombucha So he could come in there and keep everybody in their Kombucha wall, the larger brands and many of the smaller brands have to go back to the drawing board, and something that will be very difficult to fix.

Just know a lot of the technical details, I know a lot of how their plants are designed and they are no in position to do this correctly. But we are and that’s why, it’s really important for us to get our new plan on in LA. So that we can at least grab a piece of this, if it comes down to another meltdown like happened a couple of years ago.

But aside from that potential issue coming up windfall for the Reed’s Kombucha I think we are just really confident that we’re going to have steady growth on the brands. We have reached down done some private label with it or some very large opportunities with it.

So one way or another we have a goal for Kombucha creating somewhere a dollar a share earnings at some point, but we still hold to our Kombucha and I think you'll see it recover in the marketplace as we get back into full production here over the next month..

Great, thanks..

The next question comes from the line of [indiscernible]. Please proceed..

Chris Reed how are you doing, [indiscernible] in San Antonio, Texas..

Hi, how are you doing?.

Doing great. Big fan of your product. And I had two questions if you don’t mind. I tried your Stronger Ginger Brew it’s fantastic I love it. But we don’t give out here..

It’s hard to launch a product that you get ready and you announce to the world and then you're sort on production on your core product. So it felt a little foolish to get it out in the market.

I think quite frankly every ginger - 90%, 95% of the Ginger Beer lovers prefer the stronger over the extra, the extras are number one SKU we just can't wait to unleash it. And we are starting to unleash it. So there is a big pent-up demand. We will get there, probably you will start getting it soon..

Yes, it’s phenomenal, you said some of 8 ounces and I tried it and that was great and just waiting for the bigger ones. The next question is I mean there is no Kombucha that even comes closer to yours, out there, I’ve tried them all, not only issue, just the packaging the label, where do you have that..

So you are saying a label, it looks right or what you think you need..

It’s still float and it doesn’t look good and I think that probably keep some of the folks out there that aren’t familiar with your product from purchasing it and….

I had to clarify, the packaging, we were pretty ambitious when we did a curvature of the bottles that like that, you won’t see too many bottles that curve in and we got a new material from every – that’s was flexible plastic and we got a machine, I guess to get ahead of myself with trying too hard to get the labels fixed.

I think there’s been improvements, we’ve learned to do it better, but still not perfect with the new plant that’s coming on board in LA, we have a very high-tech $600,000 label coming in here that I'm being told will be a label with perfection. And I tell you if this doesn't solve it and we won't see that till February.

So right now it's more important just to get it back in the stock and fully supplying the people who’ve currently tolerate the package look and feel right now, but we will see improvement, worst-case scenario we go to a flat sided bottle in February, March, or April of next year.

So it is clear to us also that we want to have a package that represents the liquid and sorry for that..

Okay, Chris I really appreciate and look forward to 2016..

Thank you..

You bet. Thank you. End of Q&A.

And Mr. Reed, there appear to be no further question on the telephone..

All right, thank you very much and look forward to much more exciting quarters coming up. Appreciate your time today. Bye..

Ladies and gentlemen, that does conclude the conference call for today. And we thank you for your participation and ask that you please disconnect your line..