Good afternoon, and welcome to the Reed's Fourth Quarter and Full Year 2022 Earnings Conference Call for the period ending December 31, 2022. My name is MJ and I will be your conference call operator for today. We will have prepared remarks from Norman Snyder, Reed's Chief Executive Officer; and Tom Spisak, Reed's Chief Financial Officer. Following their remarks, they will take your questions. I would like to remind listeners that this conference call will include forward-looking statements. Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, levels or activity, performance or achievements to be materially different from those anticipated by such statements. These factors include, but are not limited to, Reed's ability to manage growth, manage debt and meet development goals, Reed's ability to protect its supply chain in light of disruption caused by elevated freight costs and other impediments, the availability and cost of capital to finance our working capital needs and growth plans, reduction in demand for products, dependence on third-party manufacturers and distributors, changes in the competitive environment, future business outlook, including the economic impact of COVID-19 and the war in Ukraine and other information detailed from time to time in Reed's filings with the United States Securities and Exchange Commission. These statements, including financial guidance involve risks and uncertainties that may cause actual results or trends to differ materially from the company's forecast. The achievement or success of the matters covered by such forward-looking statements, including future financial guidance involves risks, uncertainties and assumptions, many of which involve factors or circumstances that are beyond Reed's control. Reed's 2023 guidance reflects year-to-date and expected future business trends and includes continuing impacts of COVID-19 on the supply chain and logistics as of the…

Thank you, and good afternoon, everyone. We appreciate you joining us today to discuss our fourth quarter and full year 2022 results. 2022 was a year of progress for Reed's as we contended with near-record inflation and supply chain challenges for much of the year. Despite these challenges, we had several significant accomplishments in 2022. A major focus has been to transition more retailers from glass to cans given the improved margin profile. Our canned product mix at year-end 2022 was 35% and is projected to grow to approximately 45% in 2023. We introduced 12 new SKUs with Sprouts as well as our new limited edition Harvest Spiced Apple Cider Swing-lid bottle. We made significant progress with our ready-to-drink alcohol line, including the rollout of our new Zero Sugar store renewal across our key West Coast markets in California, Arizona, Oregon and Washington. Our ready-to-drink Hard Ginger Ale also hit retail shelves in the second half of 2022. And we introduced our ready-to-drink Zero Sugar Classic Mules in over 50 Trader Joe's locations in the Northeastern United States. We now have distribution in over 300 stores throughout New York, New England, California, Minnesota and Wisconsin. Across our alcohol product portfolio, we expanded distribution with our most important channel partners, including Whole Foods, Sprouts, Total Wine, Ralphs, Roundy's and Trader Joe's, ultimately gaining more shelf space. We also introduced our Swing-lid to 630 new Cracker Barrel stores. In the aggregate, we increased product authorizations in over 10,000 points of distribution across all product lines. We also added 16 new DSD distributors across our network, bringing our total to 80 throughout the U.S. Several of these distributors cover multiple territories. And finally, we increased pricing across all SKUs, approximately 6% on a net sales basis in 2022 to offset the inflationary impacts…

Thanks, Norm. I'm truly appreciated for the opportunity that you and the Board gave me to serve as Reed's CFO over the past 3 years. I'm proud to have worked for a company that has continued to keep shareholder interest top of mind throughout a challenging backdrop and look forward to remaining a long-time shareholder as Reed's delivers on its profitability goals. Jumping into our results. All variances referenced are on a year-over-year basis unless otherwise noted. Net sales for Q4 increased 18% to $15 million compared to $12.8 million in the prior year. The increase was primarily driven by strong demand for Reed's Ginger Ale as well as our Swing-lid program. Gross profit for the fourth quarter of 2022 increased 32% to $3.5 million compared to $2.6 million in the same period in 2021. Gross margin increased 250 basis points to 22.9% compared to 20.4% in the year-ago quarter. The increase was driven by higher net sales as well as lower supply chain and improved input costs as a result of these initiatives that we've put in place to improve margin. Delivery and handling costs were reduced by 11% to $2.7 million during the fourth quarter of 2022 compared to $3.1 million in the fourth quarter of 2021. As Norm mentioned, the decline was due to renegotiated freight rates, improved throughput and initial streamlining of our distribution orbit model. Delivery and handling costs decreased 18% - decreased to 18% of net sales or $3.44 per case compared to 24% of net sales or $3.95 per case during the same prior period last year. Selling, general and administrative costs decreased 9% to $3.6 million during the fourth quarter of 2022 compared to $3.9 million in the year ago quarter. As a percentage of net sales, selling, general and administrative costs…

Thanks, Tom. I'm pleased with the hard work from our team to increase distribution and cut costs in 2022 despite the unprecedented inflation and supply chain challenges. The environment began to improve in the back half of 2022, and we have several operational initiatives in place to drive further cost savings and increased shelf space throughout our retail network. I'm confident we have the right team in place to execute and achieve our goals of turning Reed's modified EBITDA and cash flow positive later this year. Operator, we will now open the call for questions and answers.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]

Thanks, MJ. While we're waiting for the questions to pull in, we want to address a few questions that came in via e-mail over the past week. Norm, starting with this one from an individual investor named Jerry, what's the plan to increase sales and further build out the channel development in 2023?

Well, as I previously stated, there's really four pillars that we're focusing on for sales growth. Ginger Ale, Ginger Berry, Virgil Sugar cans and our alcohol portfolio. And what we're doing is we're going to stay more focused with our current network of retailers and distributors and gain additional shelf space and gain additional velocity through more disciplined and focused promotional activity. And you heard the old saying, rather than going a mile wide and an inch deep, we're going to try to stay real focused and penetrate in existing channels with those four product platforms.

Got it. And any plans to reduce interest expenses over the next couple of years?

Yes. That's actually going to happen organically as we pay down on the debt and it's amortized. And obviously, also as we gain cash flow breakeven, it's going to take - put less pressure on our line of credit. So that will also generate lower interest charges and savings on both fronts.

Understood. And do you have any plans to raise capital in 2023?

Look, one of our primary objectives is to avoid or minimize shareholder dilution. So we constantly evaluate our cash needs and in light of the impact of dilution. So it's something that we've been very focused on and something we'll continue to stay focused on, and we want to stay balanced where we are able to take advantage of opportunities and grow the company, but at the same time, as I said upfront, we really want to minimize or avoid any additional shareholder dilution.

Makes sense. MJ, that concludes the questions that came in via e-mail. We can turn back to the live Q&A.

Thank you very much. Our first question today comes from Gary Getz, Private Investor. Please go ahead.

Hi, good afternoon. First of all, I wanted to congratulate you on your progress and comment on the products. They're wonderful. The Ginger and Root Beers are like having a party in your mouth. They're really that great. My question concerns the interest expense. I realize you have a total of $21.5 million of debt all told outstanding. But the interest expense in the fourth quarter was $3 million. Now annualized, that's about a 60% interest rate. Could you comment on that? And also how is the interest being repaid?

Gary, nice to finally talk to you. I've seen a lot of e-mails that you sent into our Investor Relations department. So I'm glad that we now have a chance to actually talk. Fourth quarter is not a good indication of - and you shouldn't really annualize that. We did some borrowing during the latter part of the year that resulted in some extra interest expenses and other charges that we won't repeat and that won't go forward. So you'll start - you'll see in the first quarter that, that number comes down significantly. So there were some - obviously, some nonrecurring borrowings and other things that happened in the fourth quarter. Now the other part of that is interest, 5% of its cash and 5% of it is picked. So it adds on to the balance of the note. And so we're not - we'll pay off 5% is really truly an additional principle and 5% that is current, we have the option of paying either in cash or in shares.

Okay. And that's at the time that the note matures?

No. The interest is current, but the pick [ph] portion, the 5% is due when the note matures.

Got you. Okay. And also, it's - I'm very pleased to hear that you're trying to minimize shareholder dilution. And...

Yes.

That's really good to hear. And my daughter's family lives in Wilton.

Really...

Yes.

Did you know that I live there as well?

No.

Well, I think your daughter could be my neighbor.

Cheap Spring Road. Okay. Good. Good. Well, it's great speaking with you and...

Yes. Thank you for your comments. And again, I really believe in the quality of our products as well, not to disparage any of our competitors, but we really believe our products are the highest quality and have the best and the finest ingredients that are available.

They really are exceptional. And again, looking forward to the future.

Thank you.

Thank you.

At this time, we have no further questions in the queue. I would like to turn the conference back over to Norm Snyder for closing remarks.

I want to thank everyone for participating in today's call as well as our employees, customers and, of course, our shareholders. We appreciate everyone's support and hope you all have a wonderful day. Thank you.

The conference has now concluded. Thank you for your participation. You may now disconnect.