Jones Soda Co. Fiscal 2007 Third Quarter Results

Jones Soda Co. (the “Company” or “Jones”) today announced financial results for the third quarter ended September 30, 2007.

Third Quarter Review

Total quarterly case sales increased 119% to 1,565,000 cases (288 ounce equivalent) compared to 716,000 cases a year ago

Gross Revenues (before promotional allowances and slotting fees deduction) increased 27.1% to $13.0 million compared to $10.2 million a year ago

Net Revenues (after promotional allowances and slotting fees deduction) increased 15.1% to $11.7 million compared to $10.2 million a year ago

Gross margin (after promotional allowances and slotting fees) decreased to 28.6% versus 35.3% last year

Diluted loss per share of $0.06 compared to diluted earnings per share of $0.01 a year ago

Net Revenue for the third quarter of 2007 increased 15.1% to $11.7 million compared to $10.2 million in the third quarter of 2006. Net revenues reflect a reduction of $1.3 million on account of promotion allowances and slotting fees, compared to a reduction of $60,000 in the comparable three-month period in 2006. The slotting fees we are incurring are one time charges to gain distribution for CSD.

Gross margin (including deduction for promotional allowances and slotting fees) for the third quarter decreased to 28.6% versus 35.3% in the third quarter of the prior year.

Gross margin (excluding deduction for promotional allowances and slotting fees) for the third quarter increased to 35.8% versus 35.7% in the third quarter of the prior year.

Operating expenses as a percentage of net revenues for the third quarter increased to 52.1% from 36.8% in the corresponding period in the prior year. The company reported a net loss of $(1,523,476), or ($0.06) per diluted share, compared to net income of $195,000, or $0.01 in the third quarter ended September 30, 2006.

Peter van Stolk, President and CEO stated, “During the third quarter we decided to incur higher than planned promotional allowances and slotting fees associated with our significant expansion into the CSD market. This, coupled with higher expenses related to the addition of new sales and marketing personnel and an increase in promotional spending in the CSD channel, negatively impacted our results for the quarter. While the results are below plan for the quarter and we are disappointed with our recent performance, we believe, that in the long-term, that these investments and initiatives support our strategy to achieve increased shelf space at retail and heightened awareness of our brand and products.”

The Company also announced that the Nets have named Jones Soda Co. as the official carbonated soft drink, bottled water, enhanced water and GABA beverage provider for the Barclays Center, the Nets planned world-class arena in Brooklyn, NY. The agreement includes specific elements tailored to both Jones Soda and the Nets and Barclays Center and will be reflected in Nets themed retail packaging, in-arena branding exposure, customized flavors and player and team involvement. The agreement with the Nets is subject to approval by the NBA.

“We are honored to partner with the Nets as they prepare for their new proposed home in Brooklyn,” Mr. van Stolk commented. “Being associated with a team like the Nets and an organization like the NBA is an amazing opportunity for Jones Soda and we’re very excited about the potential of this relationship. Our ability to secure these types of partnerships with premiere professional sports teams like the Nets, and our previously announced agreement with the Seattle Seahawks, is testament to the power of the Jones brand and our commitment to finding unique and exciting ways to expand and diversify our business platform while continuing to build our brand equity.”

Mr. van Stolk, concluded, “While we have taken a number of important steps and investments to successfully position our company within the $70 billion CSD market–including distribution of our product in over 15,000 retail locations across the United States–we have not executed as well as we know we can. We are focused on driving more sales per door by broadening awareness of our canned business through more effective marketing and advertising programs. We remain committed to improving our operations across the board and fully capitalizing on the many opportunities that lie ahead.”

Included above is the non-GAAP financial measure of Gross Revenues (before slotting fees deduction). Management believes that the presentation of this non-GAAP financial measure provides useful information to investors regarding the Company’s gross revenues from operations and comparisons to prior years’ results, and highlights the significant increase in slotting fees the Company incurred. Under GAAP, the slotting fees are treated as a reduction to revenue. The consolidated statement of operations included below presents the GAAP financial measure of net revenues.

About Jones Soda Co.

Headquartered in Seattle, Washington, Jones Soda Co. manufactures its Jones Soda, Jones Pure Cane Soda, Jones Energy, Jones Organics, Jones Naturals, Jones 24C, and Whoopass brands and sells through its distribution network in select markets across North America. A leader in the premium soda category, Jones is known for its innovative labeling technique that incorporates always-changing photos sent in from its consumers. Jones Soda is sold through traditional beverage retailers and everywhere you’d never expect to find a soda.

This press release contains forward-looking statements and projections concerning the Company’s plans, strategies, expectations, predictions and financial projections concerning the Company’s future activities and results of operations and other future events or conditions, and are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Words such as “expect,”"believe,”"anticipate,”"may,”"will,”"plan,”"intend,”"estimate,”"could,” and other similar expressions are intended to identify these forward-looking statements. In particular, statements in this release regarding potential growth opportunities, working capital and cash flow management, operational and expense controls, future profitability and results of operations are forward looking. Statements in this press release, and elsewhere, that look forward in time or include anything other than historical information involve risks and uncertainties that may affect the Company’s actual results of operations. These statements by the Company are subject to certain risks, including, among others, future demand for its products, competition from other businesses providing similar products, the ability to maintain profitability and control expenses and the Company’s ability to successfully execute its business strategy. These and other risks and uncertainties are discussed in more detail in the Company’s periodic reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, which are available at the SEC website at www.sec.gov.

JONES SODA CO.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited – $US)

 

 

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

 

2007

 

2006

 

2007

 

2006

 

Gross revenue (a)

13,047,462

10,262,843

35,585,419

29,145,200

Less: Promotional allowances and slotting fees (b)

(1,310,000

)

(62,000

)

(1,653,000

)

(158,000

)

Net Revenue

$

11,737,462

$

10,200,843

$

33,932,419

$

28,987,200

 

Cost of Goods Sold

 

 

8,374,986

 

 

6,598,942

 

 

22,770,207

 

 

18,489,308

 

 

Gross Profit

3,362,476

3,601,901

11,162,212

10,497,892

 

Gross Margin

28.6

%

35.3

%

32.9

%

36.2

%

 

Licensing Revenue

87,082

274,593

280,824

558,645

 

Operating Expenses(1):

Promotion and Selling

4,276,215

2,688,530

10,103,523

6,814,705

General & Admin.

 

 

1,842,969

 

 

1,061,143

 

 

4,940,776

 

 

3,234,476

 

 

 

 

6,119,184

 

 

3,749,673

 

 

15,044,299

 

 

10,049,181

 

Earnings (loss) before interest

& taxes

(2,669,626

)

126,821

(3,601,263

)

1,007,356

Interest/Other income, net

 

 

492,359

 

 

438,958

 

 

1,349,715

 

 

552,305

 

Earnings (loss) before income taxes

(2,177,267

)

565,779

(2,251,548

)

1,559,661

Income tax benefit(provision)

 

 

653,791

 

 

(371,005

)

 

827,111

 

 

951,450

 

Earnings (loss) for the period

 

 

(1,523,476

)

 

194,774

 

 

(1,424,437

)

 

2,511,111

 

 

Earnings(loss) per share:

Basic

$

(0.06

)

$

0.01

$

(0.05

)

$

0.11

Diluted

$

(0.06

)

$

0.01

$

(0.05

)

$

0.10

 

Weighted average number of common stock:

Basic

26,136,560

25,345,494

25,902,076

23,344,126

Diluted

26,136,560

26,276,553

25,902,076

24,251,625

 

(1) Includes non-cash stock based compensation:

Promotion and selling

$

160,400

$

63,970

$

359,488

$

282,850

General and administrative

$

234,600

 

$

123,130

 

$

568,830

 

$

543,678

 

a : Gross revenue is an internal indicator of operating performance and should not be considered as an alternative to Net Revenue., which is determined in accordance with GAAP. The use of gross sales allows evaluation of sales performance before the effect of any promotional items.

b : Altough the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the disclosure thereof does not conform with GAAP presentation.

JONES SODA CO.

CONSOLIDATED BALANCE SHEET

($US)

 

 

 

Sept. 30, 2007

 

Dec. 31, 2006

(unaudited)

ASSETS

 

 

Current Assets:

Cash and equivalents

$

18,736,416

$

13,905,870

Short-term investments

9,627,662

16,318,510

Accounts receivable

6,943,239

6,914,422

Taxes receivable

162,438

–

Inventory

6,761,745

5,783,067

Deferred income tax asset

126,190

1,507,145

Prepaid expenses

 

 

1,705,497

 

 

712,690

44,063,187

45,141,704

Deferred income tax asset

2,955,886

427,993

Capital assets

981,741

756,618

Other assets

1,670,496

1,414,138

Intangible assets

 

 

176,883

 

 

211,931

 

 

$

49,848,193

 

$

47,952,384

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

Current Liabilities:

Accounts payable and accrued liabilities

$

6,046,391

$

5,446,953

Current portion of capital lease obligations

164,387

70,471

Taxes payable

 

 

–

 

 

150,141

6,210,778

5,667,565

Capital lease obligations — less current portion

510,653

15,329

Shareholders’ equity

 

 

43,126,762

 

 

42,269,490

 

 

$

49,848,193

 

$

47,952,384

JONES SODA CO.

CONSOLIDATED STATEMENT OF CASH FLOWS

($US)

 

 

 

 

 

 

Nine months ended

 

Nine months ended

 

 

Sept. 30, 2007

 

Sept. 30, 2006

(unaudited)

(unaudited)

Cash flows from(used in) operating activities :

Earnings (loss) for the period

$

(1,424,437

)

$

2,511,111

Items not involving cash:

Depreciation and amortization

670,106

185,628

Deferred income taxes

(1,113,192

)

(1,253,804

)

Stock based compensation

928,318

826,528

Change in working capital

 

 

(1,713,443

)

 

 

691,911

 

Net cash from (used in) operating activities

(2,652,648

)

2,961,374

 

 

Cash flows from (used in) investing activities:

Sale of short-term investments

6,690,848

(16,397,174

)

Purchase of capital assets

(441,415

)

(358,834

)

Purchase of intangible assets

 

 

–

 

 

 

(177,277

)

Net cash from (used in) investing activities

6,249,433

(16,933,285

)

 

 

Cash flows from (used in) financing activities:

Repayment of capital lease obligations

(84,272

)

(86,473

)

Net proceeds from PIPE

–

28,080,142

Proceeds from exercise of options

 

 

1,318,033

 

 

 

809,693

 

Net cash from financing activities

 

 

1,233,761

 

 

 

28,803,362

 

Net increase in cash and cash equivalents

4,830,546

14,831,451

Cash and cash equivalents, beginning of period

 

 

13,905,870

 

 

 

1,176,101

 

Cash and cash equivalents, end of period

$

18,736,416

$

16,007,552

Supplemental Disclosure of Non-cash financing activities

Assets acquired under capital lease

$

672,737

The Toronto Venture Exchange has not reviewed and does not accept responsibility for the adequacy of the content of the information herein.