Borislav Tonev

Investors Are Still Not Impressed With Jones Soda Co. ( USA ) (OTCMKTS:JSDA)

by Borislav Tonev August 16, 2013
5JSDA.pngUnlike a large portion of the small cap ventures that we cover on these pages, Jones Soda Co. ( USA ) (OTCMKTS:JSDA, JSDA message board) is a solid company. They have worked long and hard and they have managed to market a brand that enjoys a strong support from the people who buy it and is easily recognizable. Jones Soda's Facebook page even has over a million likes.

Not that this should be the most important factor when you're making your investment decision but it goes to show that JSDA have a real product and people seem to be genuinely fond of it, which is more than can be said about other penny stocks like Arch Therapeutics Inc (OTCBB:ARTH) and Soul and Vibe Interactive Inc (OTCBB:SOULD). This, however, doesn't mean that JSDA are 100% problem-free.

They managed to put their brand on the market and the general public approved of it a while ago, however, the financial statements from years gone by provided a picture of a company working at a huge loss and that, in turn, put a lot of pressure on the price. How much exactly?

Well, consider this: back in March 2007 the ticker was hovering around $20 per share, whereas by March 2011, it had dropped to around $1.50. These are some colossal losses but not as colossal as the ones displayed in the SEC filings. The 10-K for the fiscal 2011, for example, revealed a net loss of around $7.1 million which in turn pushed the share price further down. Something had to be done.

In June 2012, JSDA appointed Ms. Jennifer Cue as a CEO. She had worked for the company between 1995 and 2005 and that, coupled with the fact that she is a Chartered Financial Analyst suggested that, after all, there may be some light at the end of the tunnel.

Shortly after accepting the position, she devised a special Turnaround strategy that was supposed to bring the company back to its feet. She took a number of steps aimed at cutting down on losses and relocation of resources and looking at the 10-K for the fiscal 2012, you can see that she has managed to make an impact. The net loss for last year amounted to around $2.9 million which is a decrease of around 60% year-over-year. That, you would agree is quite an achievement and when you look at one of our previous articles, you'll see that the losses during the first quarter of 2013 were around 77% lower compared to the same period of 2012.

Investors noticed the progress and, predictably enough, the ticker started climbing up the charts. The ascend was particularly noticeable when the date for the release of the Q2 results approached. Trading volumes steadily increased and at one point JSDA reached $0.90 per share - a price that hadn't been seen for years.

The long-awaited 10-Q came out on August 9 and it revealed a net loss of just $95 thousand which, once again, is a massive reduction compared to the figure form the same period of 2012. Yet, despite this, the ticker has lost around 28% since then and you would agree that wiping out around a third of the price in just five sessions is not an encouraging sign for a company supposedly making the right steps towards profitability. So, what's the problem?

5JSDA_logo.pngWell, it seems that the revenues are to blame. The period between March and June resulted in around $4.2 million in sales which is more than the first quarter, but apparently, the investors wanted more. They also don't seem particularly happy with the fact that the same period of 2012 resulted in a much bigger figure and although Ms. Cue and the rest of the management team are hard at work explaining that this is all due to the turnaround strategy, traders seem to be having none of it. Even the press release about the launch of the new limited-edition Michigan-only soda was not enough to soften the blow.

At this point, it's rather difficult to judge whether the expectations were set too high or whether it was the management team and their complex turnaround strategy that failed to deliver. One thing is for sure - if JSDA don't manage to turn the net loss into a net income really soon, they might burn through their cash reserves rather quickly. We're pretty sure that the next quarterly report will be an interesting read but unfortunately, we'll need to wait for a bit until we're able to see it. Until then, make sure you consider all the risks carefully before making your final decision on JSDA.

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