Good morning, and welcome to Reed's Third Quarter 2024 Earnings Conference Call for the 3 months ended September 30, 2024. My name is Angeline, and I will be your conference call operator for today. We will have prepared remarks from Norman E. Snyder, Reed's Chief Executive Officer; and Joann Tinnelly, Reed's Chief Financial Officer. Following the remarks, they will take your questions. Before we begin, please take note of the company's cautionary statement. Today's call will include forward-looking statements including statements about Reed's, business plans and 2024 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect management's view as of today, November 14, 2024, and the company is under no obligation to update them. When discussing results, the presenters may refer to non-GAAP measures which exclude certain items from reported results. Please refer to Reed's third quarter 2024 earnings release on the Reed's Investor website at investor.reedsinc.com, and its third quarter 2024 Form 10-Q expected to be available on the website soon, for definitions and reconciliations of non-GAAP measures and additional information regarding results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. I will now turn the call over to Mr. Snyder.

Thank you, operator, and good morning, everyone. We appreciate you joining us today to discuss our third quarter 2024 results. We experienced strong order demand from our retail partners in the third quarter. However, production limitations and short shipments impacted net sales by more than $4 million. These persistent inventory challenges, although materially reduced during the second quarter, reemerged in Q3 due to restricted working capital. More specifically, our reduced collateral base limited our liquidity and affected our ability to purchase inventory. Our internal modeling projected an asset-backed line utilization of over $8 million. However, because of collateral restraints, our borrowing was capped at approximately $5 million. In response to this limitation, we intend to close on a 1-year revolving credit facility today with one of our trusted long-term partners Whitebox for an aggregate principal amount of $10 million. This capital offers more favorable and flexible terms that align with the needs of our business. We intend to use this capital to pay off the balance of our existing revolving line of credit and build our finished goods inventory levels to reduce short shipments and alleviate production challenges. We've struggled with our balance sheet and building inventory for an extended period. While we fully recognize the repetitive message of short shipments and production challenges, the reality is that we now truly have a deleveraged balance sheet and the funding that we need in a structure that allows us to properly utilize the capital in a way it was intended. And as a result, we can finally build inventory back to appropriate levels to meet our retail order demand. Now let's dive into the quarter. We have made progress in our new line of better-for-you beverages, featuring organic ginger, adaptogens, lower calorie and sugar content. These products are in the final…

Thanks, Norm. Diving into our results, all variance commentary is on a year-over-year basis, unless otherwise noted. Net sales for Q3 2024 were $6.8 million compared to $11.9 million in the year ago quarter. The decrease was primarily driven by tightened credit terms from several suppliers, coupled with the reduced collateral base that restricted liquidity and impacted our ability to purchase raw materials, which offset net sales by approximately $4.4 million in the third quarter of 2024. Gross profit for Q3 2024 was $1.2 million compared to $4 million in the year ago quarter. The gross margin of 18% versus 34% in the year ago quarter. The decrease was primarily driven by higher trade spend contributing to lower net sales as well as increased cost of goods sold as a percentage of net sales. Delivery and handling costs reduced to $1.3 million during the third quarter of 2024 compared to $1.9 million in the third quarter of 2023. Delivery and handling costs were 19% of net sales or $2.99 per case compared to 16% of net sales or $2.98 per case during the year ago period. This increase in the cost per case spend was driven by out-of-network shipments due to inventory availability. Selling, general and administrative costs were $3.1 million during the third quarter of 2024 compared to $2.3 million in the year ago quarter. Altogether, operating expenses were $4.4 million compared to $4.2 million in the year ago period. Operating loss during the third quarter of 2024 was $3.1 million or $0.62 per share compared to $0.1 million or $0.03 per share in the third quarter of 2023. Modified EBITDA was a loss of $3 million in Q3 2024 compared to $0.2 million in the year ago period. For the third quarter of 2024, we generated approximately $1.1 million of cash from operating activities compared to cash used of $1.8 million for the same period in 2023. The increase was primarily driven by lower inventory purchases compared to the year ago period. As of September 30, 2024, we had approximately $0.3 million of cash and $27.1 million of total debt, net of capitalized financing fees. The debt includes $21.8 million from the convertible notes and $5.4 million from our revolving line of credit, which had $7.5 million of additional borrowing capacity. These figures do not reflect the subsequent transactions related to Whitebox and D&D, which was discussed by Norm. I will now turn the call back to Norm for closing remarks.

Thanks, Joann. Over the past year, we have worked diligently to optimize our cost structure and build a solid foundation to support our future growth. With our new $10 million revolving credit facility, the purchase of all the secured notes held by Whitebox by our largest shareholder and the continued strong demand for Reed's products, we believe we now have the capital and runway we need to properly execute on our 2025 plan. Operator, we will now open the call for Q&A.

[Operator Instructions] Your first question comes from Sean McGowan from ROTH Capital Partners.

I have a couple of questions, Norm. How quickly would you be able to access this new line of capital? And how quickly would it be able to actually translate into additional revenue?

We'll have access to that today. We finalized all the documentation yesterday afternoon to the evening and expect to close shortly after this call. One of the -- I think one of the anticipation of this, we've worked hard with our key vendors and retailers to try to get the process started. So we've begun building and shipping inventory. And it's not going to happen overnight, but I see -- and the real goal is to be fully stocked by the end of this year, so we start 2025 with a full assortment on inventory on both coasts, so we can meet order demand and ship it within the established shipping orbits.

Okay. And how confident are you then that you'd be able to hold on to the listings that you currently have?

That's something that we've worked really hard behind the scenes, communicating with key retailers and being really transparent about our situation. So I believe we'll be able to hold on to it. I mean obviously, we're expanding current authorizations with retailers. I think we have a very short leash, and we have to deliver, but I'm confident we've done that. Like I've said, we've been proactive in terms of communication. And then how we've really distributed short shipments in terms of managing it, we protected certain customers around promotional periods. And I guess, I don't know if share of the wallet is a good term, but we've kind of spread or shared the pain. And so it's not a constant for one or several retailers, really trying to manage the process. And like I said, been very transparent and have communicated our plan and what we expect for 2025.

Okay. You may have said it and I missed it in the prepared remarks, but how is the RTD product doing, the alcohol?

Early last year, we scaled back our distribution to retailers where that consumers know the Reed's portfolio, and really focused on that and growing it. We've had success in those locations. And as a result of that success, we continue to build distribution. And I think I just mentioned in my remarks, Lowe's and there was one other -- where we just picked up that distribution. But we've continually to add with existing retailers that obviously have had success with Reed's and are building on that. So it's a slow build. Obviously, we want to -- we don't want to expand too quickly and use success to build on success. Giant Foods was the other one. And I have seen progress that way. So it's been a slow build, not a big rollout, but we think it's the prudent way to do it. And we're managing our resources well but also having success on which we can build.

Okay. And a question for Joann. Does the G&A line in this quarter include any expenses that are kind of onetime or not likely to recur?

This quarter, no.

Okay. So I was a little surprised to see it go up as much as it did. What drove that increase?

Just some general expenses, some additional consultants for...

Sean, the other thing is last quarter, we reversed out some accruals, which drove that a little bit lower. So it's not truly an apples-to-apples comparison. If you take those adjustments out, you'll see that our trends of our costs have continued to come down.

There are no questions at this time. I will now turn the call over to Mr. Snyder for closing remarks.

Thank you. I'd like to thank everyone for participating in this morning's earnings call as well as our employees, customers and, of course, our shareholders. We appreciate everyone's support. We look forward to providing an update when we report our fourth quarter and full year 2024 results early next year. Have a good day. .

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.