Borislav Tonev

Jones Soda Co. (OTCMKTS:JSDA) Shows Signs Of Hesitation

by Borislav Tonev August 12, 2013
6JSDA.pngRunning a publicly traded company is not easy. You have to think about the development of the products, about signing of various agreements. You have to do a lot of due diligence, you have to make decisions that will be of benefit to the enterprise in the long run and all the while, you have to solve a host of different problems on the go. Probably the biggest challenge of them all, however, is keeping the shareholders happy - a point that was driven home by Jones Soda Co. (OTCMKTS:JSDA, JSDA message board)'s stock performance from Friday.

You can see from JSDA's chart that the ticker has been displaying an impressively steady (for a penny stock) performance since the beginning of the year but, unfortunately, it didn't manage to finish last week on a positive note. In fact, the daily losses on Friday amounted to around 12% and the trading volume was more than three times higher than the average figures. Naturally enough, we decided to find what the reason for all this is and it turns out that the drop was caused by the publishing of the new 10-Q covering the second quarter of 2013. In case you haven't had the chance to read through the report, we've summarized the most important figures below:

  • cash: $1.3 million
  • current assets: $6 million
  • current liabilities: $2.2 million
  • quarterly revenue: $4.2 million
  • quarterly net loss: $95 thousand

We cover quite a lot of penny stock companies on these pages and when we first saw the financials above, we were struggling to see why the shareholders seem so grumpy. After all, for most of the small cap ventures that we deal with like Xumanii, Inc. f/k/a Medora Corp (OTCMKTS:XUII) and Alkaline Water Company Inc (OTCBB:WTER), having revenues and millions of dollars in the bank is nothing but a distant dream.

In order to understand what made JSDA's shareholders so upset on Friday, you need to take a closer look at the latest 10-Q as well as the ones before it. If you do, you'll see that the revenues year-over-year have decreased by around 18% which, considering the fact that the second quarter should be among the stronger ones, is something of a red flag.

That said, JSDA are very careful to explain the reasons for the decline. Back in June 2012, they announced that they're starting to implement a turnaround strategy that is supposed to finally turn the venture into a profitable company. As you might imagine, these sort of plans are quite complex, they take some time to complete and there are some things that need to be sacrificed. JSDA had to relieve a portion of their workforce of their duties and had to shrink the manufacturing volume in order to cut down on the huge costs that have been plaguing their financial statement since the very beginning. The person standing behind the strategy is the current company CEO, Ms. Jennifer Cue and she explained to the shareholders that the decrease in revenues is due precisely because of the turnaround plan.

JSDA_logo.pngSometimes, taking the word of a penny stock CEO for granted is not the brightest of moves, but, in all fairness, JSDA have managed to reduce their net loss by a whopping 79% which, you would agree, is an astonishing achievement. If the trend continues, and everything goes according to plan, we might even see a net income in the financial statements to come, although, there can be no guarantees that this will happen.

A big problem right now is the shareholders' patience or, more precisely, the fact that it seems to be running out. As we mentioned in our previous article, the ticker was traded at $25 per share not that long ago which means that there are still investors who hold some rather expensive stakes in JSDA. What they want to see is sales going up rather than down. Of course, the management team assures us that this too will come in due time and if they turn out to be right, the company could be in for a bright future. Whether this will happen or not will be seen in the next financial statements. In the meantime, as with any other penny stock, doing your own due diligence and weighing the risks carefully is essential before making any decisions about JSDA.

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