Jones Soda Co. (OTCMKTS:JSDA) Can’t Break the Fall

On November 8 Jones Soda Co. (OTCMKTS:JSDA) filed the 10-Q covering the three months ended September 30. This was an important document since it presented the performance of the company during the fifth quarter since the start of the Turnaround plan which was put together when the current CEO, Ms. Jennifer Cue, took the helm.

If you’ve been following JSDA throughout the years, you’ll know that they have been through some quite serious financial difficulties in the past. Millions of dollars in annual losses led to the ticker’s delisting from NASDAQ and it was pretty clear that someone had to do something about it. Ms. Cue came up with the strategy to change all that and turn JSDA into a profitable venture. Everyone was well aware that it won’t be an easy task, but it’s clear that the management team rolled up their sleeves and set to work immediately. Quite a lot of restructuring was done and the reports started to look a lot better. Unfortunately, as a side effect, the revenues plummeted.

Still, Ms. Cue and the rest of the people steering JSDA convinced investors that the growth will come in due time and that the company is well positioned to weather all the difficulties. Most shareholders believed her and the price was actually doing rather well – back in February, the ticker was hovering around the $0.25 per share mark while in July, it managed to reach a 52-week high of $0.90. It hesitated a bit during the following months, but the Q3 results were supposed to send JSDA on another run. After all, this is the first report since the start of the turnaround plan which sports a revenue growth quarter-over-quarter.

Yet, it failed to impress investors. In fact, out of the fourteen sessions since the publishing of the 10-Q, only three are not marked with a red candle (two of them ended with 0% in terms of price movement). Nearly a third of the value has been wiped out and yesterday, for reasons that are not immediately obvious, JSDA slid another 5% registering some impressive volumes – more than 1 million shares changed hands bringing the trade value up to $505 thousand. What’s more, it registered an intraday low of just $0.40 for the first time since May.

While the increased volumes from yesterday are not easily explainable, we can definitely see that there are some things in the 10-Q that are pushing the price down. As we mentioned in our previous article, the net loss is three times bigger than the one registered during the second quarter and is even higher than the one logged during the same period of 2012 when the turnaround plan was still in its infancy.

During the earnings call, the management team tried to put the emphasis on the revenue growth and said that increased expenses are due to promotional activities (for their products, not for the stock) which have been well accepted by the soda-drinking public, but it’s clear that investors are not happy with the results.

We can’t say that we can blame them. After all, some of the shareholders have been with the company for quite some time, they have lost a major part of their investment already and when they saw the Q2 results (featuring a net loss of “just” $95 thousand), they thought that JSDA might just be profitable by the end of September.

Their hopes turned out to be in vain unfortunately and it’s clear that the share price is suffering. Of course, if the wind is fair and if the management team succeed in sticking to the turnaround strategy, we could eventually see a positive bottom line which will probably propel the ticker towards the higher end of the charts. Predictions of when this will happen, however, can only be based on guesswork at the moment and the slide from the last couple of weeks goes to show that you should never be too optimistic around penny stocks.

Speaking of which, when the promotion for Fresh Healthy Vending International Inc (OTCBB:VEND) started, investors seemed just that – overly optimistic. Now, about a week later, things look a lot different. There isn’t a paid promotion for JSDA at the moment which is good, but even so, treading carefully and thinking through every move might not be a bad call.