Good afternoon, and welcome to the Reed's Third Quarter 2017 Earnings Conference Call for the period ending September 30, 2017. My name is Scott, and I will be your conference call operator today. Today's call is limited to 1 hour, and we'll have the prepared remarks with Val Stalowir, Reed's Chief Executive Officer; and also by Dan Miles, Reed's Chief Financial Officer. Following management's remarks, they will take your question. Before we begin today's call, I have a Safe Harbor statement to read to our listeners. I would like to remind our listeners that during this call, management's remarks may contain forward-looking statements that are subject to risks and uncertainties and that management may take additional forward-looking statements in response to your questions. Additionally, please note non-GAAP financial measures referenced during this call are reconciled to their comparable GAAP financial measures in the press release and the supplemental materials filed with the SEC. Non-GAAP financial information is not meant as a substitute for GAAP results but is included solely for informational and comparative purposes. The company believes that the presentation of non-GAAP financial measures provides useful information to investors regarding the company's financial condition and results of operations. 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 manufacturers and 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, November 13, 2017. Reed's, Inc. assumes no obligation to update these projections in the future as market conditions change. I will now turn the call over to Dan Miles, who will begin with his prepared remarks. Please go ahead.

Thank you, Scott. And thank you investors for your continued interest in Reed’s Inc. My name is Daniel Miles, and I’m the CFO of Reed's. I will discuss the third quarter results and then turn the call over to Val for important information about Reed’s Inc. new initiatives. At the completion of these remarks, both Val and I will take your questions. In the prior quarter, the company announced the installation of a new Chief Executive Officer, a new Chief Operating Officer and created a new position of Chief Innovation Officer. These newly installed leadership team has been conducted a thorough review of the business including its current performance and core strategies. The company is now in the process of executing very significant changes to the company strategy that includes a prioritization on the Reed’s core and Virgil brands, a discontinuing of SKUs and potentially repositioning the company operationally for further to further outsource the manufacturing of its products. We anticipate by the coming weeks of announcements regarding the details of these initiatives, we believe that these major initiatives will provide needed capital to complete the transition from a manufacturing entity to a brand focused, sales organization. In the prior quarter call, we announced the new sales focus, here are the very initial results. Since 19, since 2016, the company has had sales and production of 111 separate SKUs. We will now focus on two brands, Reed’s and Virgil’s with 28 SKUs. We define these as our core. Our third quarter 2017 results reflect the first price increase in seven years, which compressed the volume but led to a core product increase in gross revenue as measured by 12 ounce cases of SKUs by $0.43 in the quarter just completed. Our total portfolio volume, the rate has declined slowed to…

Hi, thanks Dan. I’d like to report that management continues to make progress to improve the company’s overall performance and some of the initiatives underway have begun to deliver some positive impact on the business. The current priority really is very clear, it’s to significantly improve our current net in gross margins and to re-accelerate growth on the core brands. To that end as Dan pointed out, we’ve reduced the companies SKUs down to 28 versus four times that similar period prior year, so that you can really focus on our capital and our sales resources on getting that shot placement focusing volume growth on those core items. This renewed focus on Reed’s and Virgil brands has not only slowed the core of sales decline we saw earlier in the year, but we actually saw volume growth year-on-year for the core brands in July, September and that same trend continued in October. The quarter would’ve been out there if we didn’t have a price increase that hit us in August, and it was really a necessary price increase, though the company has not taken a price increase in over seven years while there were significant increases in input cost. So and what we feel good about that, given the volume increases in September/October we feel that the market has fully absorbed this needed price increase to improve our margins. I will continue looking at the availability to continue taking more pricing as we move forward into next year and the year hereafter to narrow the gap on the cost of good increases that we experienced earlier in the years. We have a number of initiatives underway that will continue to drive material improvements in our gross margins. That’s the big story here. We need to improve margins, to improve profitability…

Scott, we’ll turn it back to you.

Thank you. [Operator Instructions] Our first question is from Anthony Vendetti with Maxima Group. Please proceed.

Thanks. Good afternoon. So I just wanted to follow-up on the plans for the LA plant. Are you planning on closing that and going to -- go to the just the co-packer model? Or -- and if so what’s the timing of that?

So, we’ve been really focused on improving our margins. And one of the driving factors of depressing our gross margins is our significant idle plant costs. So, at this point we have internally developed some improvement options, but we’re also about to engage a professional services company that has done this for decades, knows the beverage space and we’re going to bring them in to help us evaluate what is going to be the best use of this, all of the operational assets we've invested here, the plants, the new equipment that we purchase to put into the plants, as well as some of our non-core businesses. So, too early to tell exactly what the future is. I think obviously the best use would be for continuation of production here, potentially as a co-packing relationship for us, but at this point I think it just too early to say where – what the future is until we've done a thorough analysis with this expert group.

Sure. That’s fair. And then, just a little more detail on the $2 million impairment charge. What does that entail?

Sure. Anthony, the $2 million charge was as we go through the process of looking at our assets and what is the core and what wasn’t. We were concerned that expanding the plant at this time would probably not be in the best interest, it might not be in the long term vision. Therefore when we made that decision we knew we had to look at the value of the assets that have not yet been installed. So we did our best estimate on to what would be the resale value of brand new equipment and we took a 2 million out of a – about a 40% impairment charge against that equipment. Will we use that equipment in the future? How we will use it. Will somebody else use it? We don't know. But we didn't know that at the time we were making the decisions on how we move forward, expanding the plant to a triple the speed here was probably not a good allocation of future capital.

Yes. When look at this, if we could they we’re doing it for sure, which right now we’re not sure. We want to go through the process of seeing with the best uses will be. What the future is going to be based on all of the options that potentially exist to us. If we couldn’t answer yes, we’re definitely installing that. We took the conservative position of, well, then we can't say we are, and thus we need to recognize an impairment. At the end of the day there could be a scenario where that equipment is purchased and is not impaired and is install here or elsewhere, but we want to be conservative from this standpoint and take impairment now.

Okay. Understood. And then lastly, is there going to be accrued interest in amortization of about 275,000 every quarter? Should we model that?

Yes. Yes, there is. The interest would be unpaid relative to the note. It is in the sources of uses on the S-1 to retire most of the other debt and replace it with more market-based rates.

Okay, great. Thanks. I’ll jump back in the queue. Appreciate it.

Thanks.

[Operator Instructions] Our next question is from Gerry Khermouch with Beverage Business Insights. Please proceed.

Hi, Val. Thanks for very informative call. Much appreciated.

Hey, Gerry. Thanks.

And I was wondering when you talk that you getting things down to a very compact 28 SKUs. Does that mean that you have formally discontinued any brands whether they’d be Culture Club Kombucha or China Cola or they just kind of on holds for now?

Yes, absolutely. We are not putting any focus or efforts on those brand that at this point. We’re selling out whatever inventories left and we don't plan on producing any additional inventory of those brands.

Okay, great. Thanks.

[Operator Instructions]

Scott, I think that’s it for us.

Okay. Very good. There’s no further questions. Now, I’ll turn it back to you for closing remarks.

Thank you very much investors and interested parties for listening to our quarterly announcement. As Val reiterated here, the future is going to have a lot of very, very interesting and helpful information for you in the next few weeks. We are completing up some very, very significant and positive changes for the company and we believe that we will return to the top of the craft soda business in a very, very short time both from a financial perspective and a continued volume beverage. Thank you again very much. Look forward to talking to you very soon.

Ladies and gentlemen, that does conclude your conference call for today. We thank you for participating, and ask that you please disconnect your line.