Overview of Financial Performance

In the year ended December 31, 2024, the Company continued to focus on strengthening its supply chain, improving gross margins, and reducing operating expenses. Despite facing challenges from inflation, supply chain disruptions, and macroeconomic uncertainty, the Company was able to generate $37,954 in net sales revenue, a 15% decrease from the prior year. However, the Company was able to improve its gross profit margin to 30% compared to 22% in the prior year.

The Company’s core beverage brands, Reed’s and Virgil’s, accounted for 100% of total beverage volume, as the Company streamlined its product portfolio to focus on its strategic priorities. Core brand gross billing decreased 9% year-over-year, driven by volume declines of 10% for Reed’s and 13% for Virgil’s. This was partially offset by a 2% increase in average price per case to $20.70.

Revenue and Profit Trends

As shown in the table below, the Company’s gross billing decreased 13% to $44,316 in 2024, down from $50,689 in 2023. This was primarily due to a decline in core brand volumes, which was partially offset by higher pricing. Promotional and other allowances increased 6% to $6,362, resulting in a 15% decrease in net sales to $37,954.

Metric	2024	2023	% Change
Gross Billing	$44,316	$50,689	-13%
Promotional and Other Allowances	$6,362	$5,978	6%
Net Sales	$37,954	$44,711	-15%

Despite the decline in revenue, the Company was able to improve its gross profit margin to 30% in 2024, up from 22% in the prior year. This was driven by a 17% decrease in cost of goods sold to $26,578, which more than offset the 15% decline in net sales. The reduction in cost of goods sold was primarily due to lower supply chain and input costs.

The Company’s operating expenses increased 2% to $19,492, with the largest increase coming from general and administrative expenses, which grew 49% to $9,109. This was partially offset by a 22% decrease in delivery and handling expenses to $5,863, and a 9% decrease in selling and marketing expenses to $4,405.

As a result of the improved gross margin and reduced operating expenses, the Company’s loss from operations decreased 14% to $8,116, compared to a loss of $9,417 in the prior year. Additionally, the Company’s interest expense and other expense decreased 18% to $5,036, leading to a 15% reduction in net loss to $13,152, or $1.64 per share, compared to a net loss of $15,523, or $4.39 per share, in 2023.

Strengths and Weaknesses

Strengths:

• Improved gross profit margin, up from 22% to 30%, driven by lower supply chain and input costs
• Reduced operating expenses, particularly in delivery and handling, and selling and marketing
• Streamlined product portfolio to focus on core beverage brands, Reed’s and Virgil’s
• Maintained access to capital markets to meet short-term liquidity needs

Weaknesses:

• Significant decline in core brand volumes, down 10% for Reed’s and 13% for Virgil’s
• Continued challenges from supply chain disruptions, inflation, and macroeconomic uncertainty
• Increase in general and administrative expenses, up 49% year-over-year
• Reliance on promotional and other allowances, which increased 6% and accounted for 14% of gross billing

Outlook and Future Prospects

The Company remains focused on driving sales growth, improving gross margins, and reducing freight costs. The sales growth strategy includes channel expansion, increased store placements, new product introductions, and improved sales execution. The margin enhancement initiatives are centered around packaging savings, co-packer upgrades, and better leveraged purchasing and improved efficiency.

The Company has experienced moderation in inflation and anticipates this continuing throughout 2025. However, the volatile economic environment and potential impacts of tariffs and geopolitical events create uncertainty about the future. The Company will continue to monitor pricing and availability in transportation and implement mitigation plans to manage this risk.

The Company’s ability to maintain access to the capital markets will be crucial in funding its operations and growth initiatives. While the Company has been able to generate cash flows to meet its short-term liquidity needs, its long-term success will depend on its ability to execute on its strategic priorities and navigate the ongoing macroeconomic challenges.

Conclusion

The Company’s financial performance in 2024 was marked by a decline in revenue, but an improvement in profitability. The Company was able to enhance its gross profit margin and reduce operating expenses, leading to a smaller net loss compared to the prior year. However, the Company continues to face headwinds from supply chain disruptions, inflation, and macroeconomic uncertainty, which have impacted its core brand volumes.

Going forward, the Company’s focus on sales growth, margin enhancement, and cost reduction will be crucial in navigating the challenging environment. The Company’s ability to maintain access to capital markets and execute on its strategic initiatives will be key determinants of its future success.