Ladies and gentlemen, thank you for joining Third Quarter Earning Call 2012. Your host for today Mr. James Linesch, you may begin.

Good afternoon everyone. My name is Jim Linesch, the Chief Financial Officer of Reed's Inc. I'd like to welcome all of you to our quarterly earnings conference call. With me today is Mr. Chris Reed, Reed's Chairman and CEO, and Neal Cohane, our Senior Vice President of Sales. First of all, I'd like to remind our listeners that in this call, management's remarks may contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for 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 not limited to risks relating to demand for the company's products, dependence on third-party distributors, changes in the competitive environment, access to capital, and other information detailed from time-to-time in the company’s filings with the United States Securities and Exchange Commission. And in addition, any projections as to the company’s future performance represent management's estimates as of today, November 14, 2012. Reed's Inc. assumes no obligation to update these projections and in the future as market conditions change. And now, I'd like to make a few brief comments about our financial performance for the quarter, which will be followed by Chris Reed who will give us an outlook of the company's business, and Neal will be here to participate in any questions you might have. Revenue growth continued at a good pace of 23% during the quarter over last year with both of our brands leading the way and increased private label business supporting it. The underlying margins on our sales have improved slightly despite general cost increase pressures. Private label margins are about 5% higher than last year mostly due to improved contract terms. Our overall gross margins eroded somewhat from last quarter primarily due to increased plant costs in our Los Angeles plant due to our Kombucha production. During Q3, we had 4 initial productions of our Kombucha, which turned out to be very plant and labor intensive. This created approximately 200,000 and additional plant cost during the quarter. Some of that excess cost will continue during the fourth quarter. However, we are improving our methods and the basic margins that we can achieve on our Kombucha sales are higher than those on our other brands. We also invested a little more heavily in marketing this quarter with a strong presence at Expo East and a first appearance at Expo Asia. We are selectively expanding our sales staff and we are trying new ways to promote our products. Sales costs are up by about $250,000 in the quarter compared to last year and roughly a 100,000 of that increase will likely be ongoing. General and administration costs were down by 20% mostly because we did not have the legal fees that we had last year. Aside from that, our G&A costs are about the same as last year and we did not anticipate any dramatic changes. Our profitable operations during the quarter generated $395,000 of EBITDA earnings. We acquired a $161,000 of those earnings to interest expense, invested $105,000 in plant improvements and paid down debt of $77,000. So, we generally contributed about $50,000 to working capital during the quarter. Considering what we accomplished during the quarter, we are pleased to have also preserved our working capital. Now, I'd like to turn this call over to Chris Reed, our President and CEO. Thank you.

Thanks Jim. And thank you for joining us today on the conference call. Another great quarter at Reed's third quarter, each year typically I think we had less year-over-year growth in the third quarter when I look back over time, but it looks like we did pretty well for the quarter. The main driver - the main activity at the headquarters during the quarter has definitely been the launch of the Kombucha. It's kind of a brave thing we have done going into a category that has a large number of people who attempted to play and have not been successful. And the quarter I feel that the data that we are looking at, we have been reaching out to our accounts that have had the products, some of them for the full quarter, the new Kombucha line. The data is suggesting strongly right now that we have got a real winner and at soft category. The Kombucha category could give a little bit of a background is a probiotic fermented tea, that is non-alcoholic and has all kinds of health benefits according to the people that are Kombucha (indiscernible). And there is one company dominating the sales of it and it's the GT Synergy brand actually an LA-based company. And the way I like to describe it in terms of the size of it is, it's 4 or 5 times larger than the natural soda category in the natural food industry, which I estimate around $80 million to $100 million. And he got there in about 1/3 of the time, so probably 7 years it’s growing up to $300 million category. With one guy with 98% of the business, although I think that his sales are actually estimated somewhere between $150 million and $200 million sales. With no clear number 2 in the category, some of those numbers were retail, some of those are wholesale, but his actual wholesale numbers are running around $150 million to $200 million annually. And the rumor on the street it’s growing at significant double-digit growth. So, this category is not only up and coming fast, but no, not peaked by any means. And it’s just so difficult to compete in it, technologically huge challenges to it as you can see as Jim reflected here, we had ran a number of runs, and we are still trying to figure out some of the - how to get the product through the plant in a very efficient manner. We know that we'll figure that out. It’s nothing that has ever been done before although we technologically we pushed the limits of what we could handle in a certain way with the packaging design. We have a glass bottle with a curve that is opposite to anything any one has ever been able label on before. So, we were brave enough to try that, but the product itself is just a difficult labor-intensive product. And I believe what Jim says and we are seeing it already, the efficiencies are going way up quickly and the labeling issues are going away. The filling issues are still kind of with us, but we kind of - we know a bunch of stuff to try. So, we expect first quarter to be smoothing out this Kombucha, but more important than the logistics are getting it out, which are important is just the results coming in. And we didn’t ignore other brands during this whole quarter, we have an engine running a sales force that’s out there actively being paid commission on getting a lot of products out in the marketplace and bring on new accounts. And during the quarter, they brought on Zip Beverage in Montana. They brought on a distributor in Central Beverage, an Anheuser-Busch distributor in Chicago for that marketplace. And they also brought on a distributor in San Francisco, Geyser there. And the interesting thing about Geyser is they came because of the Kombucha. They actually - so they are picking up our products, but they picked us up initially for Kombucha, it was very fascinating. We also picked up a supermarket chain during the quarter called Tops Friendly Markets in Upstate New York 130 accounts. So, they are busy doing that kind of business, but on top of that, we probe Kombucha on them. And more importantly, lately, we basically told them starting this week or in the next couple of months, their whole commission structure is around one thing Kombucha. As we see ourselves just having an opportunity to grab a whole lot of real estate very fast. The data is only encouraging and it goes anywhere from the Kombucha line dollar sales equaling a third to a 100% or even a 150% to 200% of what are underlying core businesses doing in the accounts that we are going into. So, we added up everything we have done for 23 years into account and we are doing X. We are doing anywhere from 33% of that with the new Kombucha up to 200% of that. And there is plenty of data points showing that's about equal out there. And it's too early for us to make that determination that natural food stores with our products will double with Kombucha in there, but it is looking favorable that way. So, it's extremely significant, what it represents to the company. It’s another way to distract yourselves like we have with private label on some level. We are very focused on our brands. These are relatively brands related. It's Reed's Culture Club Kombucha with a Ginger Kombucha orientation. So, it fits somehow, but mostly it's just a huge opportunity for this company to hopefully have a new business that we are not just number 2, where we go to number one in a category, where number one is doing close to a couple of $100 million in sales. And I like to describe the margins on it cost a little more to make the Ginger Brews, but I get to charge twice as much. So, it’s got nice margins now as we play here. We are getting smarter. In private label, you saw us getting smarter. We are bidding more business with higher margin or we are bidding and changing contract, so we have better margin. And the improvement in margin you saw, I heard from Jim on the private label, will that trend is something I can say we are bidding smarter all the time and the early business is just to get in the door and prove your work, but now we get to go after more lucrative business. So, we anticipate better margins moving forward on that private label. And the interesting thing this year is private label, a lot of our existing accounts will come back to us in essence to develop new stuff. So, I think we announced everything that's going on. There is a lot of new business for 2013. There will be a significant improvement with private label branded. We continue to see growth the last 3, 4 years, we don’t any reason to stop, we are core brands. And Kombucha what is it represents probably hopefully by the first quarter we'll be telling you that it’s the strongest driver of new business for the company. I assure it looks that way from what we are seeing. I don’t think we've ever grabbed this much business so fast in the history of the company. And therefore it is taking a lot of our attention right now and we are staying extremely focused with that. We are over 800 new accounts by the end of October in our own B2B through our sales force of Kombucha accounts. The universe is probably 10,000 accounts that we are in that with Reed’s that we could put Kombucha into, but there is probably 3,500, they are just big format, supermarket format like a Whole Foods etcetera. And we are - I think right now we are probably in somewhere around 500 of those, but Whole Foods has given us the number of divisions around the countries that’s moving out very nicely Southeast, Southwest. And all of that it's interesting when you look at the numbers, the hard numbers that come in you see 23 years of being number one soda, Extra Ginger Brew in a natural food to see. Number 2, for many years, Virgil's Root Beer, and you see all 4 of these products in general selling more than our top selling stuff. I mean, it’s really interesting and I can say these are key predictions right now. We are going to have more flavors. And will we lauch some in the first quarter? Probably. I think we are already getting requests. Wow, you did a fantastic job. So, we are formulators. We were good, before we started private label. And private label finishes way over the top, 80 new products for supermarkets in 2 years brought on new staff, training up young guys chemical engineers to come in only formulate. And we have been pushed during this economy to create knockoff just about every one of our competitors from Italian soda to sparkling waters, to tea (indiscernible) where after we produce them and that skillset was not there before private label. So, you can see all of that coming to fruition in a private line like Kombucha. And you’re seeing that the new flavors coming to fruition in a product line like Kombucha. And you are seeing it in the new flavors coming out. Then what - some of the early first flavors are you haven’t heard already breakthrough to this gives ginger, goji ginger, cranberry ginger, lemon raspberry ginger. We have got some beauties [ph] coming out after this. People are loving the quality of our products. They are tasting Kombucha for the first time in a way that more foods, currently we have delicious [ph] and with more quality control and consistency than anyone in the marketplace. So, you guys have to trust me. It’s a difficult thing to enter this marketplace is a reason there is one guy that’s dominating it and so many people falling on their face. And I feel it would be shocking to me if the prediction that we are moved to this number 2 and are solid contender here isn’t actually true. I mean, I am not just trying to calculate, it would be shocking to us. We have - we went to the Natural Products Expo. We did have 10,000 bottles to people in the industry on the East Coast during September. We heard beautiful things and got reviewed by blogs saying the number one product in the show, Reed’s Hibiscus and for Ginger Kombucha. And so we kind of - we are on the street. We are seeing what’s happening. We have a lot of faith in it. I think we are being very accurate by saying that it’s an exciting time at Reed’s. And I believe going in 2013, we are at the most exciting point in the history of the company. We definitely - our horizons continue to expand. Our relationships with the largest retailers in the country continue to grow through private label and branded. And there is still a huge opportunity in up and down the street and convenience that we haven’t tapped into. The last thing is on top of all this, our DSD, we started doing some marketing promotions and early returns on that kind of marketing, score carding and showing that we have a huge upside in all the up and down the street business outside of grocery that we tend to do so well now. So, that’s starting more, but more importantly, you have seen some more marketing coming on. You’ve seen snoop dogs and snoop lions starting an organic gardening for inner city youth at risk starting at Kingston going through U.S. and John Paul from Petron and jumping in with money. And so Reed’s jumping into help and - but you are seeing very much the tip of the iceberg becoming a player. We are working with some hot shot marketing people that are transforming the waiver. We are thinking about the business and coming up with some really great model. So, I am going to stop rambling here and open the phone lines to questions, but it's a definitely exciting time for us and thanks for listening. At this time, I'd like the operator to open the lines to questions.

[Operator Instructions] Our first question is from Steven Moore [ph].

This is Steve. You guys are very - seem to be very enthusiastic about things and so much that you had 2 insiders brought enormous amount of stock equal to about 2 and 3 times their annual income. I was wondering is this because of the Kombucha, I can’t pronounce it, but I am so excited looking at the price of your stock and the volume and your guys I just I don’t know, I guess I need a little more clarity on what’s going on?

Let me handle that please.

Go ahead please.

There are a number of things going on. First, we were undervalued at the start of the year tremendously, maybe there was some tax selling at the end of last year. And we had switched IR to in-house. We started that in late 2011 and we go ahead of big improvement definitely the CEO has been out on the road a little more this year and now deal road shows, talking to institutions talking about the stock that’s happened, definitely lot more than it ever had in the past, he was out 5 or 6 days. It isn’t unusual at all. Both people give more than that on an annual basis, but I’m busy here with this Kombucha, but also being [ph] this natural went public in the middle - the early part of the year had a tremendous result. I think that took more focus on other public companies in natural arena. And then Kombucha I mean for those natural food investors who follow Reed's, they kind of know what Kombucha and what Reed's Kombucha can do to, and the product has been out in the market. So, the due diligence is out there for anyone who wants it truly created. And I think that definitely that has had some effect on the company, but you will notice that management is a large holder and is holding. We don’t - this is way too early for what we are about to do.

Well, thank you very much and congratulations again. And I have been a buyer for a while here and I just picked it up on the screen last spring and I said something was going on here. And then the more I watch it, the more I like it, then you guys are really exciting for me. So, well thank you very much.

Thank you, Steve.

[Operator Instructions] Our next question is from Eric Rose [ph].

I was wondering too, there is a finally a Trader Joe’s coming to Gainesville, Florida. I am an investor here in Florida. And I wondered if you are going to have a rollout of Kombucha with Trader Joe’s or any of the publics or are you concentrating now on just the natural food stores?

Well, natural foods, it definitely spills over in the grocery. And while we thought our initial launch would just be into the natural food markets in the only chain Whole Foods, we have actually already started picking up some of the supermarket chains. Some of them picking up Kombucha for the first time are bringing our product in over the number one, because of prior relationships, but the initial rollout in the Southeast will be Whole Foods and Trader Joe’s at this time is considering, but has now made a decision on Kombucha and we are in the conversation, so keep our fingers crossed there.

Our next question is from Ryan Mason [ph].

I wanted to ask a couple of questions. This Kombucha category is really exciting and just wanted to ask what was the spend to launch the product in those 800 stores? What do you expect in sales say over the next quarter for 2013? And then if any there is any insight on margin?

Well, the margin insight that I gave in a perfect Kombucha production world, we produced our Ginger Brews for acts and then a little bit more we produced Kombucha and then we get to charge twice as much. Early stages of our gearing up our plants and morph into a Kombucha production facility is quickly moving into those ideals, but we don’t expect those ideals to be there in the fourth quarter, but hopefully by some point at first or at the latest at second quarter, we should be able to move more to the ideals that we have done here. But anyway, we are trying to like the wall that we jump in knowing that we are going to figure things out. And quite frankly, we've had a lot of just aha movements that have come up, that have allowed us to reproduce this more efficiently than probably anyone in the industry as we have taken our brewing and chemical engineering backgrounds and been a little bit more scientific than the hippies are in there right now. So, but we are moving in that direction, so the margins should be definite. I'd like to say that we are running 30s. The Kombucha is probably running 45s to around that at least. What kind of prediction can I make? Let's say the third quarter we ran Kombucha at an annual rate of about $1 million a year. And they were definitely doubled that in the fourth quarter. So, what can we say -- the 800 stores we are in. It looks like we are running fallings that equal all the rest of our products combined in them. Anyway it’s hard to say how fast it’s growing. The numbers we are looking at hopefully next year, it will be very disappointing for us to be around worth of $5 million in the first 12 months of this product launch. We hope it will be closer to $15 million, but that will be on a very high side. So, somewhere between $5 million and $15 million is our best guess right now and that would make it the driver for the company definitely in 2013.

Our next question is from Ken Mass [ph].

This is a fabulous quarter and very interesting in both in the purchasing and your two guys have at the full marketplace. What kind of volume did you do in the first quarter in this introductory quarter that you just announced, and you had about 750 stores of your own sales force that you did and I know that you are doing it from UNFI, also have they contributed additional outlets to you. And are you doing any things really special and expensive as far as on the introduction level as far as bifurcations get for a case, and have you increased the volumes of what you are doing as far as production from what you last indicated to the marketplace? Sorry for all those questions. Hello.

Yes, are you there?

I think Chris had a drop off. I am not sure. This is Neal Cohane and I get to answer your question. I can tell you that we rolled out very aggressively with Kombucha and you will see things like buy 1, get 1 frees. You will see buy 3 get 1 frees. We keep it pretty specific, very targeted, most retailers want to see you when you enter in the stores, want to see you enter aggressively and that’s all we did. So, it’s really a one-time hit. There is no big slotting expense and that’s the beauty of Kombucha and what we are playing within these retailers. As we are playing in a whole another section of the store, our sodas end up in the soda aisle, and now we are ending up in the dairy aisle. So, it is more exposure for Reed’s, real nice exposure for Reed’s and it is not heavy slotting. So, everything is kind of one-time entry fee and then you start reaping the benefit as you see sell through and we are seeing lots of sell through. So, I hope I answered some of your questions.

Another comment Ken is that even during our first quarter rollout our promotional spend really has not exceeded its pain for being paid by sales. And we feel like we can grow this product line really by not having to have a net spend that is really going to fund itself as we get going and as we look through some of our production issues.

Great, have you been experiencing any secondary pull through on the reorder kind of basis, I know that it’s tough getting out there initially, and you have done a fabulous job on that. Is there a pull through with the actual consumer where these guys are coming back to you and saying hey we need more?

Yes, you know the pull through has been so far it’s been really, really positive. We are not only seeing secondary pull through, we are seeing 3x pull through, 4x pull through. Some stores are blowing us away by the volume they are doing and really it is all because of the taste. There is not a whole lot of marketing we are putting behind it besides just the initial promotion. So, soon we will have promotional materials out there. We are going to have point of sale materials out there, and a lot of more talking going on about our flavors. But right now we are seeing some really good positive results.

So, it sounds very exciting I must say. And I think that from watching it being it all shipping myself and seeing and assuming that Chris was in the same space in a way when he started as a young guy in this. The maturity of what’s going on is very impressive and is the UNFI are they really adding to it or is this really still self-generated by the company itself and its own sales force?

It’s a combination, it’s a combination of we have got a phenomenal force out there. And everybody jumped on this Kombucha launch, right from the start. So, we have got good strong field sales folks out there that are making it happen. And then you have got the UNFI sales folks that are doing the same thing. So, when Chris says there is 800, it’s something, it’s 800, but it’s definitely North of that because there is a lot that we are not capturing quick because UNFI doesn’t share all their information with us. So, that should answer your question.

And the volumes that you are producing or increasing let’s say even monthly or quarterly as far as the drops that were on the Kombucha?

Yes, each production that we have grows incrementally. So, our first production back call in at June was X and then incrementally from there each production has gotten bigger on Kombucha. So, it - we are in an aggressive period right now out in the field. And then next year you are going to start seeing us launch nationally with a couple of key retailers that are welcoming the product in the natural food retail arena. So, there is just more good news to come.

It sounds terrific. I know you were speaking of hoping to do $3 million to $7 million last - from the conversation we had and now you are talking $5 million to $15 million, I think you guys are on fire, and I am a very happy stockholder at this point even though it got a little bit weaker in the last couple of moments.

Good to hear.

Our next question is from George Santana.

A couple. You keep doing a great job in finding up new distributors. What is Reed’s reach at this moment, in other words how much of the U.S. population does Reed’s actually reach with their distributors or direct relationships and how many more significant markets are there to sign up?

Good question. I can tell you we are reaching right now with all our distributors our natural food distributors along with our new DSD distribution network reached quite frankly the entire U.S. But when it comes to DSD and signing up kind of distributors that are kind of your soft drink distributors out there, we have got pretty much the whole West Coast covered from Washington down to San Diego, Washington state down to San Diego. We are pretty much covered from really Maine soon to be down to Florida. And now we are just going to start filling in. We just opened up the Chicago market. We have opened up the Utah market, and we are now going to start filling in the center of the country. And it takes a little while, then a lot to negotiate, and it goes up and goes on and been trying to find the right folks that understand our brand and understand what we are trying to do. But it won’t be long before we have the entire country covered. And the beauty of that is we get calls everyday from folks saying, where can we find your stuff. And we are always pointing them to either a Whole Foods or Trader Joe’s or something that we - that stores that we know where the brand is. But having a DSD network allows you to point to a whole lot more places and allows you kind of ubiquitous reach and that’s what we are working on.

That’s great and now as you are…

Can I jump in, the CEO is back. I am actually - have joined you today I just want to say there were 99% of natural foods, that’s a channel of distribution and we are through north America. And in grocery, we are in about 24% of the grocery, but we are at our infancy in those stores in terms of marketing to build up clients just within each of those 24% of the market. And then the other big part of grocery that we are going after up and down the street is new to us. We have been bringing on the DSD. This is a long drawn out, and quite frankly a very cost - it’s expensive to do DSD properly. And that’s why we have been slowly dipping our toes into the up and down the street business that fills in the other 97% of the accounts in America outside the natural food industry. So, that’s my perspective on it. So, we are still very young on the West Coast with DSD in terms of the accounts that we are in versus how many we could be in and also the marketing in those accounts is relatively new compared to the mature industry we are in the natural food industry, where we have been the (indiscernible) for the last 10, 15 years.

That’s really helpful. Thanks Chris. And now of course you have so you are expanding the Reed distribution and all your DSD relationships and now you can continue with the penetration of the Kombucha products into that existing network right, and that’s just beginning from your - the numbers you gave earlier, right?

Kombucha tends to be a natural food phenomenon, although we think that we are looking at data out there it shows that they have spread far beyond natural foods. We were relatively surprised when San Francisco distributor approached us before own products even though we are trying to get into San Francisco for years. So, anyway it’s not that we can get someone in San Francisco with our own products, but we are picky and this is timing on things here like Chicago, that company took us 18 months to get going. So, I think that most of Kombucha is probably being sold in the natural food industry and that we consider it somewhat of a trend, just maybe there is strongest trend in natural foods. In fact our data shows when you walk into Whole Foods and say what’s the top selling products in the store, it’s I believe it’s not unusual answer to say our Kombucha. And it is all one guy doing it, so it is pretty starting to jump into that. So, I don’t see how - I mean there is probably another 10,000 accounts outside of natural foods, but they are not a substantial at Whole Foods. They are more mom and pops and trend you have cafes and it’s still significant new business.

As far as marketing do you feel at some point the company can accelerate sales growth with some more marketing or advertising spend or is it just way too early?

It’s always the dream you figured that we pushed to the 30 plus million you are going to eventually you think that if you actually told people about the products in the marketplace they go in and turn that real estate that we have faster. So, we are engaged with people that are experts in that area and some of them are hired consultants and some of them are outside ad agencies, branding experts that are consulting with us now. So, I am pleased we are moving into a more significant stage, will be less of the brick and mortar kind of twist to more building brand awareness around the products. That’s partly why when we go into Kombucha we are going to private label, we are being a little bit mercenary and we are just doing for things that will bring in a lot of money. So, we can do everything we want there.

Our next question is from Justin Smiley [ph].

Quick question on sort of the base business. I have heard Chris mention before kind of view this is a 3-leg stool you got the branded, the private label and now Kombucha. So, if you guys can do let’s call it $5 million and Kombucha next year on the low-end what do you guys think the base branded and private label business could do next year in revenue terms?

Guys, don’t know if am going to jump back in. I really forgot and signed up for jury duty during this week, it’s such an idiot. Anyway, I have to repeat. We - Kombucha we have got a number there, still very much a moving target although feeling better all the time, not going backwards as far as since we have been looking hard at the data for the last 8 weeks. The private label has accelerated and more of our large customers are asking for more from us and we got deals for next year that are going to move out a lot at least a couple million more, $2 million, $3 million more private label. That’s the feeling and bringing to this has been moving by somewhere around $4 million a year. I don’t know, hopefully, we’ll move fast $40 million next year, that’s the goal of next year. I think guys we said $50 million we are hoping at least $45 million. But this is - it’s really early for us to say yes with any certainty I am not giving it time, so I’m just those are the feelings that we have got. Hopefully that we are - we won’t be spending every penny of that extra growth profit they have but on just - you can spend hard to build that revenue. We have probably been a little more aggressive in the third quarter than normal for us, but I don’t see us having to do tremendous amount of spends to get this product out in the marketplace, because we are not really doing a lot of advertising or anything it's just we want trial Kombucha. So, mostly what we are doing is just doing and getting trial from Kombucha drinkers and that’s cheaper, because that’s why you have to be store shelves. We might put product on discount or put a little thing upon on the shelf as try me, I am new made with spring water instead of city water, made with Oolong and Yerba Mate tea, which affects here. And what else? We have another thing that we are aging our stuff longer, so it has more health properties to it. So, we have some great kind of distinction and I don’t see fairing has been hard for that, but eventually we are going to start spending on Reed's and Virgil's for our mainstream push of those brands until the positioning of the (indiscernible).

Our next question is from James Kurzawski [ph].

So I was going to ask you actually is about kind of the breakdown timing of your revenues with private label, it looks like that kind of seasonally in the fourth quarter you tend to get maybe 2 to 3 times of your private label fails of what you have been doing in the prior quarters each year? Is that just an affect of like holiday shopping, people buying more soda around the holidays? Maybe if you could give me some color on that?

I’ll jump in if Chris isn't...

Okay good.

What we find is some of the initial private label business that we have picked up over the last couple of years has been seasonal business. Lot of kind of champagne, but what we call the celebration bottle business, sparkling ciders, sparkling juices, they tend to skew very heavy in the fourth quarter. But what’s now is happening is we are now picking up some real good summer business. So, we are going to start a seeing kind of level out throughout the course of the year. There won’t be just this big spike in the fourth quarter. We’ll start seeing a nice bump throughout the course of the whole year and that’s coming soon.

Okay, great. Thank you. And then I was also going to ask if you could kind of give me just rough estimates of like the margin on private label versus branded and then versus Kombucha?

Jim, you want to jump in?

Yes. If you look at it generally, our private label runs maybe clearly not more than 3% to 4% behind our branded business. The important thing about private label is that we don’t have discounting, we don’t have promotions, it's just straight selling. And so when you bring it all in, they are not that far apart of margin. The Kombucha will be a higher margin business. Right now, it's somewhat labor-intensive, but as Chris mentioned earlier, once we work through that, we probably be driving maybe 5% to 10% higher margins on the Kombucha.

So yes when you bring it all in, you see that we are a little bit north of 30% margins. And that’s a mix of the branded being little higher and the private label little lower, but not necessarily private label contracts can’t be kind of all over, but we have a certain minimum to accept them, but they are averaging higher definitely than last year.

Yes, I noticed that. Yes, so it just sounds like they are all kind of clustered right around that 30% mark as of right now?

Yes.

Okay, great. That helps a lot.

We are learning how to do it better of course and the contracts are better. And people know that we can follow through to and so that makes the difference.

Our next question is from Sam Gravina [ph].

There is a question about the Kombucha and the chemistry. I have tried Kombucha 4 times. I live out here in Boston. I cannot find the Reed’s Kombucha on any of our shells. So, I have tried some of the other brands. I have tried it 6 to 7 times. And I have been very disappointed with every try I have, it just is not taste like a product anybody would want to buy it. So, it's always kind of jittery and it always has alcohol in it, I’m very sensitive to alcohol (indiscernible) I can’t get through a bottle, because there is just too much of it in there. Have you guys addressed this problem, are you brewing this stuff so its non-alcoholic, more watery?

Yes we are, of course our exact message is proprietary since we have been putting a lot of effort into that over the last year. But we have - we keep our alcohol under the 0.5 maximum. And frankly our alcohol levels are around 0.2 and under going out the doors so that we do have some room for that. And some of it also has to do with the culture and what type of culture you’re using and the message. We - our Kombucha is alive you could take a bottle of our Kombucha and you could make Kombucha out of it. And so it’s a balance with the alcohol. We want to put out a live product that we need to keep it low in alcohol. Our competitors, many others in the market have reduced their alcohol levels simply by diluting and that’s why you’re seeing inferior products, and we started out with the goal that we’re going to offer a very strong full body of Kombucha along with really, really great flavors and we feel like we have accomplished that.

It’s what things have been...

Sam, it’s Chris here. Now we’re not making this product for you. We don’t care if a single one of our customers or anyone knew about this product, we are going after $200 million in sales from a guy and we’re very targeted. We know exactly what their customer wants. They wanted (indiscernible), they want it intense, they don’t want it watered down. And we have also engineered the alcohol out of the equation better than anyone has. So, it’s definitely a legal non-alcoholic product and we are very tracing out the alcohol dealt with orange juice we have in it. If you let it sit for a day or it’s not refrigerated properly in your supermarket. So, it’s not about making the stuff too good, but it’s about selling a hell lot of Kombucha.

I have to say that the [indiscernible] here is not the turn off it’s the alcohol it is it seems.

Alright.

I know I have taste stuff that’s not legal, have you seen up with your competitor I know you guys, because this is a competitive advantage here, that you can make legal stuff and they are not?

Yes there is competitor stuff we’ve tested and I’m not going to say anything else. Anyway let’s just say we agree with your assessment.

It seems like a liability someday you’ll put something out there and somebody doesn’t refrigerate it and then its alcoholic, I mean have you thought about this?

Yes, I don’t think it’s really our problem. The product gives me -- if you buy orange juice better refrigerated, if you buy unpasteurized apple juice you better keep it in your refrigerator. So, we just understood you’ve - these products if you still leave them out you can hear alcoholic formation on them.

Sam where do you live?

I’m living in the Boston area and I’m not seeing it anywhere. Do you have it anywhere here?

Would sound, because I’d like to make sure we get some in there.

We have Whole Foods in Cambridge, Massachusetts and Bedford, Massachusetts in all over the place. I’d love to see some of your products.

Very good and Bedford, Massachusetts you said.

Bedford, Massachusetts is my hometown, I work in Cambridge.

Yes, very good look for it. We’ll have it up there shortly.

Our next question is from Vipul Sagare [ph].

One of the questions I had was I read all about this distribution whether it is in San Francisco and all, what are these distribution are they just like brand new distribution or are they renegotiation with the different company. I mean I would think you have Reed’s somewhere in San Francisco. So, are the - what is the nature of these distribution how - what does it endeavor?

Basically we are going after different channel sales. And with natural foods or in all the natural foods distributors, these Anheuser-Busch cores know our distributor network, are going up and down the street every account, every restaurant, every bar, every daily. So, it’s just - it’s allowing us to go after the 97% of the marketplace.

So, initially you had it through Anheuser-Busch you are saying and now you are going?

We started in natural foods and now we are going into mainstream distribution.

Got it.

Natural foods is 3% of the market, the rest, the other 97%. Now we have full access to the whole market not just the piece of it.

Okay. My next question is about how I’m seeing Reed everywhere as far as the Ginger Ale is concerned and the Virgil is concerned. But again and I am from Portland, Oregon and I have not seen Reed anywhere from, I thought by November, it would be at least somewhere from New Seasons or Whole Foods or any of these places. But whether I go to main stores to health food stores or organic stores, I see every Reed product from Trader Joe's to Whole Foods to New Seasons to Food Front, I see them everywhere. But I don’t see the Kombucha, and this is I would say about 3 months now, the only place I was able to get Kombucha was one store and that also because we wanted to try it and we special ordered it, but otherwise I am not seeing Kombucha anywhere from Reed. I see all your other products.

Well, if you send us an e-mail, we'll send you a list of the stores in your marketplace that have already picked up the product. But, we are at our infancy with it. We are probably in less than 15% of our accounts with it right now. But Portland is probably has 15 or 20 accounts right now with Kombucha.

And know that New Seasons Chris has authorized it and it's the just the matter that's got to go in to their planogramming. So it’s a timing issue. That’s all.

Right.

Yes. But I remember I talked to you guys last quarter and you said send me an e-mail I did, you send me a list of places and it's been 3 months to not see any of these stores have the Kombucha, everything else is there. So, what would be the holdup is it because you haven’t produced enough or is it I mean you dig at the Reed ginger ale and the Virgil, I would think that they would also have right next to it in the Kombucha area, I mean, wherever they have all the GT and Synergy and all that stuff. But I am not seeing that, that’s what I’m saying.

Alright. Well, we’ll get you a list of the accounts in Portland I have it now and we'll revisit your e-mail with that list, but we went into a hard launch on November 1. Which means that while the distributors may have had the product before November 1, this was the first month that was actively in their catalogs, actively being talked about we put out a consumer flyer to 1100 stores around the country to participate in the consumer flyer program with our distributor. So, it's just really done, but I can tell you that response on this product has been just everybody loves it and we are not having a lot of trouble selling it in the larger teams like the Whole Foods have a timing issue. They don’t just click a finger, but Southeast and Southwest, picked it up for those Whole Foods. Anyway, Neal tell me how many accounts we have in Portland so far. I have already seen a list with quite a few.

The list is long, because I have seen all the co-ops and natural stores that have Reed already, but it's just the Kombucha doesn’t show up.

Right. We have a different list for Kombucha.

I’ll just tell you if we have a guy that, that is dedicated in the Portland marketplace and in the Washington, he covers Portland and Seattle. So, he has got his hands full trying to get to all these places, but he is getting up one at a time and you will see it, I can assure you - you will see it.

Okay. So, like what is the timeframe I should be seeing it in the Kombucha shelf with the GTs of the world and Synergy and (Thompson)?

I can only tell you, I think you will see by the end of the year. You will start seeing it more and more. But as Chris said, we just kind of getting started and there is no - we don’t have a huge field sales team and that’s we keep our expenses low. And so sometimes things take a little bit longer than we like it to take, but it also we have got good people that are getting it done. So, you’ll see it there. I promise you that. I give you my word you’ll start seeing it show up.

Neal, you can also send the list of the accounts in Portland and have it right now right?

Yes.

Alright. It's just not the list that maybe this gentleman is actually visiting right now, but it's not like nobody wants it now. It's been highly successful and the accounts are in general enthusiastic about it, but you don't always thought you in, the day you walk in. Although we are probably bringing on 20 or 30 new accounts a day right now. That's my guess, based on the reports we are getting and the numbers that we have already generated.

And they retail for what like 350?

Sometimes we are going out full price, that’s a 399 and sometimes we are going out with 247 or 245 which would be around 249 aggressive.

Okay, okay. That’s between 3 and 350 the prices of the other ones. Okay.

It’s a beautiful thing.

Yes, no, no I mean I know a bunch of people who use that product and out of your 4 flavors that you have they all love 2 of them extremely - especially the hibiscus one?

Yes that’s the beauty.

Yes.

The only the grape fruit one was little vinegary but other ones all 3 of them are very well received. But it just that I’m not seeing it in the store, and but the other question was are you planning on more flavors because I’m seeing GT and Synergy they have like 17, 18 different flavors out there. And what is your strategy and how you introduce different flavors like is there a timetable that you have set up?

We’re just holding on to our head as we grow this thing quickly. But the flavors already being developed for a next round. There is - people already saying wow it’s amazing what you have done here we produce a - give us some more flavor. So, we’ll probably our next big trade show in March we have a new flavor to show at the show.

Okay, thank you for answering my question and congratulations.

Sure. Thank you for your interest in our stock.

Our next question is from Ken Mass [ph].

I think you’ve already covered, I appreciate it I guess, I do has 2 - I’m trying to understand do you do these things in a bulk brew, and how much do you target for to produce for a month of the4 flavors that you are currently doing in number of cases?

Well, we’re not saying that specifically in specific production.

Okay and I guess...

We’re running….

I’m getting an echo there, sorry.

Oh yes, alright.

I’m sorry I’m calling you by Skype from Italy.

Alright. We’re producing around 20,000 cases a month right now. And we’re gearing up for 30,000.

All right and once again I congratulate you on a wonderful quarter that you’ve done. And good luck to your COO and CFO on their big purchase here I found that to be heartwarming and very encouraging and doubled up myself.

All right. Thank you.

Our next question is from Chris Soteriou [ph].

I just wanted to ask for a little more clarity on the - when you first began to talk Chris you’ve talked about sales expanding 33% to 200% of your existing products. I mean in other words you’re selling more Kombucha than your existing products and the stores that you are in now, I’m just wondering if you can give me a general idea or an average that you would - number that you would put on sales multiple of Kombucha compared to your existing products in stores?

The data points come from probably for all regions of the country have gotten data, and I would say that its small piece that’s here and there in San Diego, LA, even North of Santa Barbara all the way to North Carolina shared some data. I’m trying to think of those different places. But it feels like its 33s on the low end and 200% is probably on the high end and probably running somewhere between 50% and 75%. Dealing on it right now, but we have to analyze which accounts bring just whole price, marketing which ones we’re on 245 o, we have to kind of discount it. But we have a mature account in North Carolina of 30 stores, 25 stores and it’s running about 80%. And we actually think thereby year-over-year it’s probably running at 100% that is just because it's just getting - going there and seems to be building momentum.

Well, I have to say congratulations on thinking of doing a knockoff on the Kombucha I don’t know whose idea was in your group, but I know you had mentioned that you weren’t so interested in doing it a couple of years ago, but I am quite impressed.

The first person is laughing is Jim Linesch. He is the CFO and he is the guy who pulled that off.

Well, that takes more than two to tango. So congratulations.

We have been tangling, no doubt, not in a weird way.

I understand. But I look forward to trying the product, but I haven’t seen it here in Berkeley, but I imagine that at Trader Joe's local or some of the other places. Well, carry on.

You shop at the Berkeley Bowl.

We do.

It should be right there.

That’s wonderful. I’ll be down there today.

There you go.

Our next question is from Ryan Mason [ph].

I think it's already been partially answered. Did you - did I hear correctly that you are currently producing 20,000 cases of the Kombucha per month and aiming for 30,000 and my question is how many bottles per case. Hello, can you hear me?

Yes, there is 12.

12 sorry, just came off speaker phone.

No problem.

But those, the numbers what I heard are correct?

Well, in the short-term, yes, that’s kind of where we are today and next month.

[Operator Instructions] Our next question is from Shirish Chaudhary.

I think Shirish isn't going to make it.

There are no further questions in queue.

Okay, great. Well, we’d like to thank everyone for attending our call. It was a very good informative call and thank you for your interest in Reed’s stock. Bye everybody.

Thank you ladies and gentlemen. This concludes today’s teleconference.