Good afternoon, and welcome to the Reed's Year-End 2015 Earnings Conference Call for the period ending December 31, 2015. My name is Scott, and I will be your conference call operator today. Participating in today's call, we have Chris Reed, the CEO and Founder of Reed's Incorporated; and Dan Miles, Reed’s Chief Financial Officer. Following management’s remarks they will take your 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 this call, management remarks may contain forward-looking statements that are subject to risks and uncertainties, that our management may make additional forward-looking statements in response to your questions. Therefore, the company claims 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. In addition, any projections as to the company's future performance represent management’s estimates as of today, March 23, 2016. Reed's Incorporated 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.

Hello, everyone. Thank you for your interest in Reed's Inc., and thank you for joining us today for Reed's Inc. 2015 year-end earnings call. My name is Daniel Miles, I am the CFO of Reed's Inc. In addition to today’s press release, we’ve also filed our 10-K for the 2015 fiscal year. Let me start with a recap of our results. I will turn it over to Chris Reed, the CEO and Founder of Reed’s Inc. afterwards. Fiscal 2015 was a challenging year for Reed’s as we were unable to meet customer demand for our products. The company’s metrics were directly impacted by the failure of our existing co-packers to produce as scheduled. Early in the fourth quarter of 2015, the company had up and running four production facilities and subsequently delivered record fourth quarter sales results. Sales grew by 3.4%, while net sales grew at a faster pace of 5.8% over 2014. Reed’s branded products grew by 19% while other categories decreased due to the supply chain interruption. Specifically the Virgil's brand decreased 5%, Kombucha 12% while the private labels were essentially flat. During the year, the company implemented beverage industry standard 8 ounce metric as a tool for measuring volume and volume related metrics to reflect a wide packaging diversity that Reed’s offers. So during this call, I will be referring to 8 ounce equivalents when discussing volumes unless specifically labeled otherwise. In 2015, case volume increased 9.1% to 3.9 million cases, while sales dollars decreased 5.2% to $12.90 per case. Promotions and allowances for beverage products decreased 19% to 3.765 million or 7.6% of gross sales from 9.7% in the prior year. Non-beverage products such as candy, [grassroot] [ph] sales and mail order are not in the preceding volume metric discussion. These items as a group totaled…

Thank you, Dan. 2015 was -- started out as a very fast moving year for us and by second quarter demand for a lot of our products were at a growth rate that we hadn’t seen before. And by the third quarter we are actually on pace to break - I think we were looking somewhere close to 30 plus percentage rate of growth. Some of it driven by the demands for the Moscow Mule and our Extra Ginger Brew, once the Number 1 mixture for the Moscow Mule nationwide. And at that time, we anticipated that our newer capacity, our plants, our production plants, which are near capacity would not be able to keep up with demand unless we brought on a third facility. The third facility was scheduled originally to come on in April, it got delayed till June and hiccupped and didn’t come online until the mid-to-end of the third quarter, which shorted us tremendously. But on top of that, our largest co-pack facility for 23 years had a big hiccup, and one of their fillers that fills our product went down at that time. So it was kind of a perfect storm that we didn’t bring on a new facility and we had our largest facility have their first ever month long meltdown. So during that quarter, we delivered to some of our largest customers at a rate of 50% of sales. So when I look at 2015 results, we probably – we estimate we left approximately $7 million of orders on the table that weren’t filled during the second and third quarter, and we would be reporting a significantly larger year if that had been the case. Also, a lot of inefficiencies were created during that time where we would ship in orders that wouldn’t…

[Operator Instructions] And our first question is from the line of Mitch Pinheiro from Wunderlich Securities, please proceed.

And I really appreciate the extra, the case equivalent data, really helps, so thank you. A couple of things on the top line. You're now pretty much done your first quarter. I was wondering if you could sort of give us an update as to how you know Reed’s is doing in this quarter that Reed’s brand, the Virgil’s brand or Kombucha, however you’d have that?

That's a great question, and thanks Mitch for initiating coverage of us the other day, I appreciate you following the company now, I know you follow it for a while but as an analyst. Again, during the supply chain interruptions of the second and third quarter of 2015, we made a conscious decision to preferentially supply the Reed’s line of products. And second preference if we had extra lifetime to produce Virgil’s and third was Kombucha, I mean, it wasn’t completely like we shut down those and ran every bit of Reed’s we needed. We tried to keep a little bit balanced with it but we did lean towards Reed’s. So in the first quarter you're seeing the Reed’s recovery faster and moving into growth mode and the Virgil’s is still in recovery. And Kombucha, Kombucha overall is probably going to be relatively flat although our Kombucha is down but we picked up some private label Kombucha during 2015. So we’ve kind of had that attitude towards Kombucha. It’s not that we don't think it's a great brand and it's not that we don't think that we’re making the best Kombucha on the planet because we are. We have big plans for own Kombucha but we also do recognize that there is an opportunity for private label there. So we’re creating plans for the Kombucha recovery and the Virgil’s recovery and Reed’s brand itself even though it’s in a growth mode isn't carrying all the gap showing up with Kombucha and Virgil’s. So we are experiencing something close to flat although we have another week here for the first quarter, so it’s kind of plus or minus here around that. There is still – we also know what’s coming in 2016 and we know that we are bringing on some new large customers and some acceleration in picking up. We kind of can see the gaps still there and some of our slower customers have said things to us like, well, I am sorry, but we can’t put it back into the planogram until July, so that’s the next time I can move things around. So there is still love for the product and we are still in a recovery mode on it, but we are already starting to grow again – well, we did that in the fourth quarter and the first quarter for the Reeds’ products.

So you have 13% revenue in the fourth quarter, so are you seeing – is that like a recovery of sort of lost sales and you made it up there and you are now flattish in the first quarter? Was that I sort of…?

Yeah, I think that’s kind of accurate. I mean, one way to look at it is the fact that many of our distributors are customers by the time we started up production basically at the cusp of, at the end of the third quarter. There was a tremendous amount just we have to stock the warehouse; we have to maintain some kind of inventory just to have these fast-moving items in here. So we probably picked up a bit of filled the warehouse that they have kind of covered for – caused this fourth quarter to be up higher than it might have been in a more steady state situation. But they are also trending in the first quarter against a number of private label projects that aren’t quite there or had a big launch. So there is other dynamics going on in the first quarter than just the simple thing that I have mentioned here. But it looks like our core brands are getting back in there and recovering nicely. The minimum we envisioned for the year is that we get back the $7 million we left on the table, but we also know there is just a lot of new business coming online with some very large customers. And of course, it doesn’t account for anything with bag in the box which is there are some very large projects that are long lead kind of projects.

Sure. So then looking – it was helpful to hear you talk about East and the West Coast projects and the savings. If I add them up right, it looks like - I mean it’s at least a 1,000 basis points of improvement or so and would that be a 1,000 basis points off of the fourth quarter level?

Actually, no, here is the way that I am looking at it. It doesn’t quite work out to 1,000 for me. So I will pull out my calculator. Dan and I, the CFO, kind of go back and forth on this a little, but it’s obviously a spread sheet pro forma, it’s not factual. But that being said, the West Coast facility saves approximately – okay, so what’s the basis? Currently we are running 25% and that’s the fourth quarter is always the – what was the fourth quarter? It wasn’t 25? Was it? Gross profits were 25.5% versus - 25.4% versus 22.9%, so fourth quarter is traditionally our worst quarter, so don’t look at the fourth quarter margins as representative. They typically have a lot more private label in there and we’ve always - traditionally if you go back through time, you will see somewhere between 4 and 5 percentage points, 400, 500 basis points of reduction in our gross profit margin. So the fact that we improved it during that quarter, so some of the hard work the new management team is putting in there. So we are seeing recovery without the new facilities coming onboard somewhere close to the 30% and we have programs and projects in place to get there. So we anticipate - I think that just the write-down alone was 1.5 points, so that alone would bring back – we are probably clearly not at 25 point whatever for the year, we are already 1.5 above that instantly out of the gate. There is another point somewhere else that I believe is coming in right now and we should be able to, without the improvement of the plants, get back between 29% and 30% by the third and fourth quarter of this year. And…

That’s helpful. So that’s sort of your longer term or intermediate term goal maybe mid-30s at some point?

Yeah, I think that – yeah, we are going to see an improvement right away once the East Coast plant is up – West Coast plant is up and running. And already we are seeing the benefits of the two new facilities and they are - reduced more normalized pricings to us. We see a big opportunity here. We know that a company like this functions just so much better at 35% to 40% margins and the 25s are just kind of held and 30%, it’s just barely making it okay, but we need to move into the higher margins. There is such motivation because at that point we start throwing off significant amount of money, not just we anticipate profitability in 2016 with just recovery of the supply chain and the margins, but with the new facilities onboard we move into to generating a lot of cash and what that can do to the growth in speeding and acceleration of things here, we are very clear in our vision of why we need to do it. It’s not just the throw down profits, it’s to just have the marketing that doesn’t happen yet around these brands that are waiting – for the world is waiting to hear about. There is still a cult classic in the kind of hidden gem thing.

If you look at 2016, as the conventional channel becomes more important to your revenue growth, do you have to spend some of that gross margin savings back in the form of marketing promotion? I don’t think whole foods and the independent channel really were heavy into like requiring that, but are you going to have the money to spend back in conventional or what’s your thought around that?

Well, I mean, we walk in the door to a conventional supermarket chain with them wanting to upgrade, seeing the gross profits of craft soda showing them the $300 million worth of data snapshot, statistically significant part of the demographics of the US basically proving up craft sodas in America is a really good economic move. But you have them already trying to getting at, trying to getting the story on that. And then we walk in there as the number one craft, we also walk in there as the number one natural soda, so we cover both industries, separate in a lot of ways, because a lot of craft soda have a lot of craft in it, still thinking sodium benzoate is a smart move in artificial flavors and colors. So we bring our naturalness into the soda arena and also dominating both fields. So that kind of gets us in – there is a demand for what we are doing. There is a kind of paved road in certain way other products have gotten there sooner, products like [indiscernible] bought by Pepsi has gone in there. Now that we are the fastest growing top 50 soft drink company in the grocery chains, there is just lot more profile. Yeah, we have been marketing there, it’s already more business in conventional than in natural supermarkets. I think we broke that threshold last year and we’ve been maintaining a pretty lower than traditionally promotional spend, so we were up as high as 14% in the fourth quarter of 2014 averaging I believe 12% for the year ‘14. We brought it down in ’15. We’ve kept it down. I think it’s probably – it’s always better if you’ve got more money to spend in marketing and all that, but I think we’ve been doing pretty well without it. But I do think that it’s kind of like we are in an enviable position and it’s not necessarily the right or smart thing to do to kind of not get aggressive here. So that’s why getting the margins back and then bringing these new facilities on in the West Coast and negotiated correctly or more normalized market rates on East Coast, these are big accelerators for the company and some of that may go into accelerating conventional supermarket. And at the same time we are accelerating up and down the street business. So we’ve been mostly grocery for a long time, but there is an equal opportunity outside of grocery.

Okay, thanks. And just two more quick questions. Well, first, Dan, the interest expense, is that the quarterly run rate that you experienced in Q4, is that what to expect in ’16?

No, it is not. It reflects some of the charges for the refinancing earlier in the year that are now being amortized off. So the run rate is above. Some are just south of 15% closer to 14%.

I think the dollar amount is less but more importantly when – once we are down in the second and third quarter and the recoveries as we believe it to be here, we will be throwing off significant money and the banks will be renegotiating at the end of ’16 more normalized rate, so this is kind of an unusual situation, anyway I am looking at this interest rate environment, I am hearing 14% or 15% is going – you go to be kidding me. So we expect a significant near future improvement in interest rates.

Yeah, we are using much of our cash to finish up the plant here. So we are at our maximum borrowing right now and have been for the last say four or five months. But as we come into what I call the selling days, 100 days of selling through the summer, we expect to accumulate cash.

Okay. And then final question is on fountain, so there are no tests currently going on, is that correct, but you feel like something I think you said maybe a trial soon. Is that correct?

I am sorry, ask again, Mitch.

So, regarding fountain, just I heard you said – trial soon, are there any tests happening like now or is it just – I mean there was a lot of buzz obviously at expo being there and having seen it and it is a fantastic product. I was just wondering what the after-the-show kind of things have happened.

We have trials going on with right now the testing and R&D still in the facility here and we are following upon leads of people who want to start up immediately with us and working through the newness of dealing with equipment issues and who buys the equipment and how leases all that stuff and supply chain and all that, so right now we are just starting the first initial talks with retailers out there to be carrying the products and the initiator of this whole project will be – is talking about scheduling in the next few months trial at specific locations for their retail stores.

Okay, well, thank you for your time. Appreciate the answers.

Thanks, Mitch.

Our next question is from Anthony Vendetti with Maxim Group. Please proceed.

Thanks. Good evening. Just, Chris, so I understand the margin improvement potential, so the 500 to 600 basis points, that’s off the 29% to 30%, right?

Yes.

And that’s more of a second half ’16 situation, right?

No, it’s pretty – I mean, it’s ongoing. I don’t know how the plot would look exactly, but linearly from here to October, November, it’s going to be a line drawn at maybe more jagged. I think we’ve already recovered a bit, but we will be seeing that and then we are also starting around somewhere in the third quarter there will be another line being drawn and that’s going to be starting to see some of the benefits of the West Coast plant improvement and then probably another [indiscernible] of recovery as we get not just our new suppliers, our new co-pack facilities to just keep us in the product [indiscernible] trying to feel to okay now let’s talk about long term relationship and let’s talk about getting the economics of this where we needed to be so that this big volume we offer you make sense for both of us. So that’s happening simultaneously, so it’s not going to be completely linear, but at the same time it’s almost like they are separate in our heads, but they are going to intermesh each other and influence that margin. So maybe we will even go beyond 30 in the third quarter, who knows, but we surely are doing every dance if we can to get there.

Okay, that’s a good segue just to update on the fourth quarter. I know it was pretty well laid out as a two-step process to take down the line for a couple of weeks and then get back up and running before your do the last final move. So have you finished the first phase and are you on to the second phase yet? And if not, when do you expect to start the second phase.

Well, right now what’s going – if I walk out there right now, you come visit the plant, you will see utilities - we had to put in a lot more utilities from plant area to new electrical power from our utility here in South California Edison to more steam for the larger pasteurizer because we don’t use sodium benzoate to preserve our stuff so all that – a lot of that peripheral is getting in over the next short period of time next 30 days. The equipment has been purchased, lot of it is brand new and part of the purchase is a contract to get in here and install it. So the electrical parts once it’s hooked up a lot of the equipment is going to start to be put on the floor, especially the equipment that can be put in place without interrupting any of the operations. The two week periods are scheduled between now and June 30 from what I hear from Mark Beaton, the new COO. And though the first one hasn’t happened with the -- a lot of the peripheral and utilities are going in and the equipments are here and staging, getting ready for its installation. So it's positioned -- and definitely all the engineering and all the planning has all been laid out and Gantt charted all that stuff that these project managers are doing. So we are working with a group that Mark Beaton worked with who has installed a lot of plants for companies like when he was working for Pepsi and they are just a great, very competent group. So, this is a new level of expertise at Reed’s and this plant going in is definitely in a level beyond my own ability to create and design plants. So we’re very excited about it.

I saw the plants when I was out there, it looked quite elaborate and looked like it's going to be a brand-new state-of-the-art facility when it's all done.

Yes. It’s state-of-the-art and I think that I've got lucky with some of the purchases I did before Mark came on and they’ve come in here and they changed my mind on a lot of things and they quite frankly thought through it at a level that an engineering firm like that can do with probably 30 or 40 years of just building 300 plants in different phases. So it's good to have them on board. And I can't wait till the plant is up, it will be a big differentiator and I'm hoping that the numbers that we are thinking about actually get to work. One of the interesting things that has happened since Mark Beaton has been on board, that's probably one thing I haven't mentioned is, I've got a new management because of these opportunities are coming out as relatively fast and Mark has already cut costs in existing plants significantly lower. I mean, it was $600,000 of savings in the 8 or 10 week -- months that he was on board in 2015. That's a really -- that's a great improvement, even before all this new equipment coming online. Also, they’ve gotten freight down without any new – anything, just freight better negotiated, better organized freights, but as these facilities come on board, more regional facilities, that’s the other thing everybody have to remember, when we started doing more regional south-west, south-east, hitting corners that we’re not in right now, Texas, I don’t know, mid-Country Kansas or Vegas or whatever the heck, once you start doing that, our freight is almost 10%. You started reducing it down to 3%. There is another, if we can get to 30 now, new facilities and negotiated rates get us down -- get us another 5%, then we have all the freight savings, which adds another 5. So there is a theoretical, I want to say, potential for a 40% margin on this and when you get there, when you are hitting about 100 million, so not too far off, you just have to get back into it here, it didn't help what we did in 2015, but it's happening and we are down the road ourselves on this and moving towards all the opportunities that we see. But then for your coverage there, Anthony at Maxim Group.

Sure. And just last question, so if we look at the base 2015 and put all the issues aside, and you had 7 million potential orders left on the table. If we add that in, it's reasonable to add that in and then put a little growth on that base for 2016, when coming up with our forecast for 2016, right?

Yes. That's kind of what we're doing for our pro formas, just so we can budget and make sure we are generating cash and moving into better and better situations and definitely getting to bankable situations that we’re getting great interest, better interest rates, but yes, that's kind of the way we’re doing it, but of course our goals are to go way beyond that, are becoming sexy and sexy means bigger players are more interested in us than ever before. And so there is a lot of things, a lot of unknowns that are very huge opportunities here, not just the Bag in the Box, just for our existing packaged goods. So we're hoping to see acceleration, but we're planning on at least steady in what you're talking about.

Okay. And then just last question on the first quarter, as we come off the fourth quarter, when you are saying relatively flat from the -- you're talking about relatively flat from the fourth quarter, not from the first quarter of ’15, right, you’re talking about -- when we’re looking at first quarter, somewhere in the $12.4 million range is -- or maybe 100,000 or so above that is a good number to look at in terms of the first quarter, is that right?

Actually, we’re looking at flat year-over-year over 2015.

Okay.

When we didn’t run Virgil's Root Beer and we didn't run, and even worse didn’t run the Kombucha, I think we had eight weeks with no Virgil's Root Beer during the third quarter and then we had almost 3 or 4 months with a Kombucha gap there. So there is a big catch-up going on right now, and the good news is that there is still a lot of love for the products and the catch-up is happening. Again, the recovery on the Reed’s products which were out of stock, but not as bad, has happened faster. So -- but, yeah, it's kind of -- it’s not over quarter-over-quarter, but year-over-year.

Thank you. And we have time for one more question from the line of Kevin Dede with Rodman. Please proceed.

Thanks. Good afternoon, Chris and Dan. Hi, Dan, just would you mind checking my arithmetic, I came up with 386,000 adjusted EBITDA for the fourth quarter. Does that number work for you positive?

Fourth quarter is 272 before the interest is removed. Of that [ph] 272, 242 depreciation, 405 interest, 163 stock. For 810, off 538 brings you back to 272.

All right. I’ll look at my math. Thanks for that. Chris, on the Absolut deal that you talked to it, curious, I mean you had mentioned in the past that there was an opportunity to work with them beyond vodka, do you still see that?

We haven't had conversations with them beyond vodka, but we still have ongoing events and we put together recently a retail pack with Absolut Vodka with our stronger Ginger Brew and a custom 750 and they are a follower of vodka, so that pack went out recently. So, there is a great conversation. We are negotiating talking to the largest liquor distributor in the country and Absolut Vodka joined us on the line to kind of endorse us and all that. So there is, but it hasn't gotten into full-fledged craziness where their 1200 salespeople are out selling in Museum Hill with our stuff yet. So we still have hopes for deeper relationships with them or someone else. So from time to time, we catch the attention of some of the larger liquor companies and I think at this point, they kind of know who we are and they kind of know that we make the greatest mixer ever. There is a lot of events that go on that where we are partnered up with them for a one-off like by Southwest or coachella kind of thing, but we try to -- nothing is formalized, just lots of here and there things going on.

Okay. Hey listen, with the opportunity of Bag in the Box, I know the formulation is a little bit different and the production is a little bit different and manufacturing that product, I'm just kind of wondering how you feel, given all the changes you’ve made on the East Coast and West Coast, how you feel you're able to meet demand should that ramp up this year?

Well, we are anticipating that and our first goal is to run the product here in LA, because we want to maintain strict control over every aspect of it, but in terms of production, effectively, you have to create the concentrate and the syrup, the syrup concentrate, get it into a box into the Bag in the Box, hence the name, Bag in the Box. But it's a hell of a lot more difficult to make a ginger brew and counter pressure it, fill it, pasteurize it, label, put it to an RSC and palletize and shift and it is to take it -- take it almost in the first step and then get it really -- get it ready for Bag in the Box. So we feel very ready to do this. We actually have equipment in house right now to run, but the kind of equipment that we would need to run for a large fast casual, that product, that equipment is being coded right now and it's relatively modest because it’s not really that complex equipment. You basically have a atmospheric filler for a bag. It just pumps it into the bag and then you close it off. So it's really relatively simple compared to anything we've ever done. The amount of gallons is relatively less right now. This is a concentrate. You get to run, you had a big gig like this one we’re looking at, you're looking at 40,000 gallons a week versus right now I’m running 300,000 cases a month and that’s about 700,000 gallons a month, divide that by four. So it's almost 160,000 gallons right now being produced. So it's a quarter of our gallonage that we're currently producing. And that will be a gig that will proactively double the company. So it's not giving us a lot of issues, it's definitely an issue, and definitely the client wants to make sure we’re very buttoned up on it, but I think we’ve told them if we needed to be up and running in 30 to 60 days, we could do it. But we wouldn't necessarily have the final line on board for that. But in the meantime, we're starting to gear up for launching into the marketplace. So I know there is a lot of pressure based on the show we just went to and conversations in the industry, the cat is out of the bag and I know that second quarter, there is going to be a lot of people knocking on our doors, saying, you promised.

Okay. Yeah. So the cat is out of the bag, but it might not be quite out of the box just yet?

Kevin, that's why you laughed. Okay. Thank you for that.

Yeah. So I'm kind of curious, I mean I know you've got to be discrete with regard to what you can offer to us, but I'm just kind of curious on how far you can talk to some of the other players and maybe even beyond that, Chris, just the general -- for the general scope of distribution like one-off bars and one-off restaurants?

Those one-offs aren’t really what we’re interested in right now though. We’re probably doing a number of one-offs, just to keep proving the concept to you shortly and make sure that everything that we are proving up through our third-party analysis and R&D and all the hard work we've done is going to happen and work out any bugs before we do it in front of a big client, but there is a lot of confidence, the equipment has been running here since last April, so you've almost got a full year on equipment and running it. We've got three different styles of equipment running here, another fourth going on. And so there is a lot of expertise here and so there is a certain amount of getting ready to leapfrog the one-off thing and go for some biggest chains here. But anyway, that being said, we are just, we’ve just committed to too many people who want to start up here, who may want to do one-off, but they have hundreds and hundreds of accounts. So there is a lot of trialing that's being asked for right now and that's just something we are gearing up for.

Okay. So would you expect to run those trials concurrently with the lead driver of this project, the trial that you’re running or will hope to run?

Some of them will probably happen sooner to be honest with you.

Okay. When do you think you can talk to us about the pluses and minuses that you are experiencing?

Pluses and minuses of what?

The trials themselves.

I mean, we will have more experience obviously by the first earnings call for the first Q.

Okay, fair enough. Great.

I mean, it's moving very fast. Every week, if you talk to me and I was giving you information I’m allowed to share, every week, there is new things that are moving for us in a good way. But right now, we're ready to go with the client, but we keep -- we are like heavy in R&D, because it’s so much that we've learned about what we’re doing here. So we keep having, we are having breakthroughs still, which is kind of exciting. We thought we had it nailed and we have it nailed, but we haven’t even nailed better now. So it's like -- it’s not only flavor, but stability, all kinds of stuff. So we’re vetting our own staff and we’re spreading [ph] our people with a lot of technical skills that are helping a lot. So right now if you have a best casual somewhere Kevin and you want to put in a couple thousand of these, we're ready to go.

Okay, that's kind of I guess what I was hoping to hear. Yeah. So I’ve some questions for you on Kombucha, but given you've been on the line for a better part of an hour and a half, Chris, I'll defer to your judgment on whether or not you want to take them?

Kombucha, I think I mentioned it, it got hurt the hardest because it was the least preference -- it got the lowest priority for production during the supply chain issues of third quarter and partially second quarter. So it was a conscious choice to keep Reed’s line more viable and it's recovering and with the -- the private label actually stayed relatively the same year-over-year for -- quarter-over-quarter first quarter. So that is not too bad, but we have big plans for re-launch and where actually, there is a lot of stuff going on in R&D there. So we’re not still there with our Kombucha. Like everything else, it's got a plan and we are executing it to get back to where we are going. And a lot of the conventional supermarkets who didn’t get products for a couple of months were -- again, the conversations go like this, yeah, yeah, yeah, okay, okay, but the planogram is not open again until X symbol, we know we love you for our sodas and you do so much great stuff. So we'll get you in there. So, and there is other people we probably test off, and they’re saying, hey, you know what, don’t do that to us and we don't like it. But we will recover a lot of what we are doing and there is just no Kombucha out there like that. But some of the faith and belief and it is just how good this uptake compared to the crap out there. Everybody thinks Kombucha takes break, who beats us first, and then they go out pacing. So you have to believe there is a customer out there who is going to appreciate the quality of our Kombucha and we’ll get it together.

So, yeah, my question really is centered on the re-launch and how much attention you're able to give it with all the other things you have going on and the timing and whether or not you are re-engineering the bottle and labeling situation?

You do the math. If you’ve recovered your third quarter, you do it, 15 million to 17 million and if you had a 32% to 35% margin, when we get back to that, you will start to throw off significant amount of money and you can throw it the bottom line some of it and throw some of it into Kombucha advertising, but tell you what, if you start advertising Kombucha at 100K a month, you’re basically telling everybody in that world of Kombucha drinking, here is a coupon to the best Kombucha on earth and you’ll see the damping pick up again. So we try to know what to do, but right now, we are building facilities and stuff. So we’re not going to do it in the kind of money, in terms of way, but we may sacrifice margin for volume and ultimate more gross profits than we would generate here shortly with some kind of aggressive promotions. So we will be able to probably say a lot more about Kombucha by the May 15 announcement for the first quarter.

Okay, fair enough, Chris. I’ll look forward to that. Thanks so much for staying online for as long as you have.

No problem. Kevin. Thanks for covering us with Wainwright.

And those are all the questions we have for today.

All right. Thanks for joining us and look forward to seeing everybody in the future.

Thank you everyone and thank you Scott for hosting it.

Thank you very much. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.