SEC Comment Letter for REED'S, INC. (REED) (CIK 0001140215) (REED) — Jun 29, 2007
REED'S, INC. (REED) (CIK 0001140215)
Date: June 29, 2007 · CIK: 0001140215 · Accession: 0000000000-07-031992
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-32501
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-0404 DIVISION OF CORPORATION FINANCE Mail Stop 3561 June 29, 2007 By Facsimile and U.S. Mail Ms. Judy Holloway Reed Chief Financial Officer Reed’s Inc. 13000 South Spring Street Los Angeles, California
Re: Reeds, Inc. Form 10-KSB for the fiscal year ended December 31, 2006 Filed April 16, 2007 Form 10-QSB for the quarter ended March 31, 2007 Filed May 15, 2007 File No. 001-32501
Dear Ms. Reed:
We have reviewed your filings and have the following comments. We have limited our review to only your financial stat ements and related disclosures and do not intend to expand our review to other portions of your docum ent. Where indicated, we think you should revise your docum ents in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as deta iled as necessary in your expl anation. In some of our comments, we may ask you to provide us w ith information so we may better understand your disclosure. After reviewing this info rmation, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Ms. Judy Holloway Reed Reeds, Inc. June 29, 2007 Page 2 Form 10-KSB December 31, 2006
Item 6 – Management’s Discussion and Analysis
Net Sales, page 28
1. We note the west coast Brewery is on ly running at 40% capacity, negatively impacting gross margins. Please explain why the Brewery is operating at 40% capacity. Please clarify for us if your disc losure in the sectio n titled Liquidity and Capital Resources, page 34, that there are no material commitments for capital expenditures implies that currently ma nagement has no plans to fix and or increase capacity at the Brewery. If this is not accurate please include management’s course of action or proposal to remedy the deficiency. Further, we would expect events that materially a ffect operations to also be included in MD&A for the interim period ended Ma rch 31, 2006. Please explain why have chosen not to discuss the status of th e Brewery in your interim 10QSB for the period ended March 31, 2007.
Results of Operations, page 32
2. We note your disclosure that recycling fees increased 11.3% in 2006. To help us further understand the cost of recycling please explain to us how the program works and whether your cost is the diffe rence between what the Company pays into a state fund versus how many bottles are redeemed/recycled by consumers. In California for instance we were under the impression manufacturers and distributors paid into a Department of Conservation fund and were then reimbursed through the fund based on the number of bottles that were returned/redeemed.
Item 7 – Financial Statements
Balance Sheet, page F-2
3. We note 333,156 shares, less the 32 holders of 28, 420 shares who accepted the rescission rights, of your common stock i ssued in connection with the initial public offering may have been issued in violation of state and federal securities laws. Until the Company no longer has an obligation to the holders of these shares we believe the shares should be re classified as temporary equity. Please refer to EITF D-98, Regulation S-X 5-02(28) and SAB 107(E).
Statement of Cash Flows, page F-5
4. Please note that borrowings and repaymen ts of debt should be presented on a gross basis pursuant to SFAS 95.
Ms. Judy Holloway Reed Reeds, Inc. June 29, 2007 Page 3 Note 1 – Operations and Summary of Significant Accounting Policies
R – Recent Accounting Pronouncements, page F-11
5. Please clarify for us how SFAS 158 will be effective for the Company as of your year ending August 31, 2007. Please refer to SFAS 158 paragraphs 11-14.
Form 10QSB March 31, 2007
Condensed Balance Sheets, page 2
6. Please explain to us what is include d in deferred assets and support your conclusion for deferral.
As appropriate, please revise your filings and respond to these comments within 10 business days or tell us when you will provid e us with a response. You may wish to provide us with marked copies of the amendm ents to expedite our review. Please furnish a cover letter with your amendments that keys your responses to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review. Please understand that we may have additiona l comments after reviewing your responses to our comments. Please submit your re sponse letter on EDGAR as a correspondence file.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all information investors require for an info rmed decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in the filing;
• staff comments or changes to disclosu re in response to staff comments do not foreclose the Commission from ta king any action with respect to the filing; and
• the company may not assert staff comments as a defense in any proceeding initiated by the Commissi on or any person under the federal securities laws of the United States.
Ms. Judy Holloway Reed Reeds, Inc. June 29, 2007 Page 4 In addition, please be advi sed that the Division of En forcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Scott Stringer, Staff Accountant at (202) 551-3272 or me at (202) 551-3841 if you have any questions regarding the comments on the financial statements and related matters.
Sincerely,
Michael Moran
Accounting Branch Chief
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0404
DIVISION OF
CORPORATION FINANCE
Mail Stop 3561
June 29, 2007
By Facsimile and U.S. Mail
Ms. Judy Holloway Reed
Chief Financial Officer
Reed’s Inc.
13000 South Spring Street
Los Angeles, California
Re: Reeds, Inc.
Form 10-KSB for the fiscal year ended December 31, 2006
Filed April 16, 2007
Form 10-QSB for the quarter ended March 31, 2007
Filed May 15, 2007
File No. 001-32501
Dear Ms. Reed:
We have reviewed your filings and have the following comments. We have
limited our review to only your financial stat ements and related disclosures and do not
intend to expand our review to other portions of your docum ent. Where indicated, we
think you should revise your docum ents in response to these comments. If you disagree,
we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as deta iled as necessary in your expl anation. In some of our
comments, we may ask you to provide us w ith information so we may better understand
your disclosure. After reviewing this info rmation, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Ms. Judy Holloway Reed
Reeds, Inc.
June 29, 2007 Page 2
Form 10-KSB December 31, 2006
Item 6 – Management’s Discussion and Analysis
Net Sales, page 28
1. We note the west coast Brewery is on ly running at 40% capacity, negatively
impacting gross margins. Please explain why the Brewery is operating at 40% capacity. Please clarify for us if your disc losure in the sectio n titled Liquidity and
Capital Resources, page 34, that there are no material commitments for capital
expenditures implies that currently ma nagement has no plans to fix and or
increase capacity at the Brewery. If this is not accurate please include management’s course of action or proposal to remedy the deficiency. Further, we
would expect events that materially a ffect operations to also be included in
MD&A for the interim period ended Ma rch 31, 2006. Please explain why have
chosen not to discuss the status of th e Brewery in your interim 10QSB for the
period ended March 31, 2007.
Results of Operations, page 32
2. We note your disclosure that recycling fees increased 11.3% in 2006. To help us
further understand the cost of recycling please explain to us how the program
works and whether your cost is the diffe rence between what the Company pays
into a state fund versus how many bottles are redeemed/recycled by consumers.
In California for instance we were under the impression manufacturers and
distributors paid into a Department of Conservation fund and were then reimbursed through the fund based on the number of bottles that were returned/redeemed.
Item 7 – Financial Statements
Balance Sheet, page F-2
3. We note 333,156 shares, less the 32 holders of 28, 420 shares who accepted the
rescission rights, of your common stock i ssued in connection with the initial
public offering may have been issued in violation of state and federal securities
laws. Until the Company no longer has an obligation to the holders of these
shares we believe the shares should be re classified as temporary equity. Please
refer to EITF D-98, Regulation S-X 5-02(28) and SAB 107(E).
Statement of Cash Flows, page F-5
4. Please note that borrowings and repaymen ts of debt should be presented on a
gross basis pursuant to SFAS 95.
Ms. Judy Holloway Reed
Reeds, Inc.
June 29, 2007 Page 3
Note 1 – Operations and Summary of Significant Accounting Policies
R – Recent Accounting Pronouncements, page F-11
5. Please clarify for us how SFAS 158 will be effective for the Company as of your
year ending August 31, 2007. Please refer to SFAS 158 paragraphs 11-14.
Form 10QSB March 31, 2007
Condensed Balance Sheets, page 2
6. Please explain to us what is include d in deferred assets and support your
conclusion for deferral.
As appropriate, please revise your filings and respond to these comments within
10 business days or tell us when you will provid e us with a response. You may wish to
provide us with marked copies of the amendm ents to expedite our review. Please furnish
a cover letter with your amendments that keys your responses to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review.
Please understand that we may have additiona l comments after reviewing your responses
to our comments. Please submit your re sponse letter on EDGAR as a correspondence
file.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all
information investors require for an info rmed decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in the filing;
• staff comments or changes to disclosu re in response to staff comments do
not foreclose the Commission from ta king any action with respect to the
filing; and
• the company may not assert staff comments as a defense in any
proceeding initiated by the Commissi on or any person under the federal
securities laws of the United States.
Ms. Judy Holloway Reed
Reeds, Inc.
June 29, 2007 Page 4
In addition, please be advi sed that the Division of En forcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Scott Stringer, Staff Accountant at (202) 551-3272 or me at (202) 551-3841 if you have any questions regarding the comments on the financial
statements and related matters.
Sincerely,
Michael Moran
Accounting Branch Chief