Jones Soda Co. Announces Second Quarter 2005 Financial Results

Jones Soda Co. (OTC:JSDA)(TSX VENTURE:JSD)(the “Company” or “Jones”), announced financial results for the second quarter ended June 30, 2005.

Net sales for the second quarter of fiscal 2005 increased 20.5% to $8,984,808 compared to $7,458,022 for the second quarter of fiscal 2004. Net income for the quarter decreased to a loss of $160,433 versus net income of $554,312, a year ago, and diluted loss per share was $0.01 versus diluted earnings per share of $0.03 during the same period a year ago.

For the six months ended June 30, 2005, net sales increased approximately 19.6% to $15,858,984 compared to $13,260,269 for the six months ended June 30, 2004. Net income for the six months ended June 30, 2005, decreased to a loss of $143,506, compared to net income of $841,369 a year ago, and diluted loss per share was $0.01 versus diluted earnings per share of $0.04 during the same period a year ago.

Gross margin for the second quarter of 2005 was 34.1% compared to 35.5% for the second quarter of 2004. Operating expenses as a percentage of sales were 38.6% during the quarter compared to 28.4% for the corresponding period a year ago.

Peter van Stolk, President and CEO stated, “We continued to experience meaningful revenue gains during the second quarter driven by ongoing strength in our direct store distribution (DSD) and direct to retail (DTR) businesses. We are very pleased with our top-line performance which underscores the significant progress we have made broadening our geographic reach and expanding our channels of distribution.”

“Our relationship with Target continues to evolve, and we are excited about our premium carbonated soft drink (CSD) strategy and the future prospects for this business,” continued Mr. van Stolk. “During the second quarter we were invited to participate in a nationwide sampling program at all 1,350 Target locations to kick-off the summer selling season. It was a terrific event with tremendous exposure for our brand, and while we incurred some increased costs which impacted our bottom line results, we have already seen benefits in terms of increased sales and heightened brand awareness within Target. In addition, we will be initiating a number of unique programs with Target, starting this Halloween with our new, limited edition, decorated 8.50-ounce cans which will be sold in the Halloween section of every Target store.”

Mr. van Stolk further commented, “Our DSD business was up 10.4% during the quarter over the comparable quarter in 2004, led by solid growth in our Northeast, Southwest, and Eastern Canadian markets. At the same time, we witnessed strength in all our DTR channels — Starbucks, Panera Bread, and Barnes & Noble and our direct business with Target — with sales increasing 56.6% year-over-year. On the product development front, our new venture with Kroger for Jones Frozen Soda Pops is off to a great start. Furthermore, we are very excited and encouraged about the attention we are receiving from national retailers regarding our new Jones Organics tea line that was launched in mid May. While we realize that it is still early in the launch process, Jones Organics is exceeding our expectations, and we expect to continue to expand our presence in the fast growing Organic category during the back half of 2005.”

Mr. van Stolk concluded, “During the first six months of fiscal 2005 we made the strategic decision to further increase our sales and marketing expenditures in an effort to improve our operating platform and better position Jones Soda for long-term success. As we head into the back half of the year we are excited by the positive momentum we have created, and we look forward to leveraging our enhanced infrastructure to drive growth into the future.”

Headquartered in Seattle, Washington, Jones Soda Co. manufactures its Jones Soda, Jones Naturals, Jones Energy, Jones Organics and Whoopass brands and sells through its distribution network in select markets across North America and through several large national retail accounts. 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 “will”, “expect,” “believe,” “prospects”, “opportunities”, “look forward” and other similar expressions are intended to identify these forward-looking statements. In particular, statements in this release regarding potential growth opportunities and new product lines, working capital and cash flow management, operating and marketing expenses 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 operate profitably 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


                            JONES SODA CO. 
                           (Unaudited - $US) 
                      Three Months Ended         Six Months Ended 
                            June 30,                 June 30, 
                   ------------------------- ------------------------- 
                       2005         2004         2005         2004 
                    -----------  -----------  -----------  ----------- 
Revenue            $ 8,984,808  $ 7,458,022  $15,858,984  $13,260,269 
Cost of Goods Sold   5,916,407    4,809,001   10,559,592    8,697,662 
                    -----------  -----------  -----------  ----------- 
Gross Profit       $ 3,068,401  $ 2,649,021  $ 5,299,392  $ 4,562,607 
    Gross Margin        34.1%        35.5%        33.4%        34.4% 
Licensing Revenue      230,243                   333,791 
Operating  Expenses: 
   Promotion and 
    Selling        $ 2,576,892  $ 1,535,556  $ 4,158,165  $ 2,643,967 
   General & 
    Admin.             835,913      530,489    1,525,413    1,005,308 
   Dep'n & 
    Amortization        51,551       48,665      100,950       91,816 
   Non Cash Stock 
    Compensation           860        6,537        5,745        9,842 
                    -----------  -----------  -----------  ----------- 
                     3,465,216    2,121,247    5,790,273    3,750,933 
                    -----------  -----------  -----------  ----------- 
Earnings (loss) 
 from Operations      (166,572)     527,774     (157,090)     811,674 
Other income             6,139       26,538       13,584       29,695 
Earnings (loss)    $  (160,433) $   554,312  $  (143,506) $   841,369 
                    -----------  -----------  -----------  ----------- 
Earnings (loss) 
 per share: 
    Basic          $     (0.01) $      0.03  $     (0.01) $      0.04 
    Diluted        $     (0.01) $      0.03  $     (0.01) $      0.04 
Weighted average 
 number of 
 common stock: 
    Basic           21,419,157   20,507,047   21,273,578   20,415,386 
    Diluted         21,419,157   21,920,563   21,273,578   21,902,987 
                    -----------  -----------  -----------  ----------- 
                            JONES SODA CO. 
                      CONSOLIDATED BALANCE SHEET 
                                                 Jun. 30,    Dec. 31, 
                                                   2005        2004 
ASSETS                                        (unaudited) 
Current Assets: 
   Cash and cash equivalents                   $   50,810  $  333,533 
   Accounts Receivable                          4,040,046   2,834,882 
   Inventory                                    4,406,584   3,550,595 
   Prepaid Expenses                               244,354     399,779 
                                                ----------- ---------- 
                                               $8,741,794  $7,118,789 
Capital Assets                                    763,679     682,439 
Intangible Assets                                  49,306      49,444 
                                                ----------- ---------- 
                                               $9,554,779  $7,850,672 
                                                ----------- ---------- 
Current Liabilities: 
   Bank indebtedness                                    -     480,285 
   Accounts payable and accrued liabilities    $4,515,186  $2,745,602 
   Current portion of capital lease 
    obligations                                   116,478      63,549 
   Current portion of deferred revenue             52,273      50,000 
                                                ----------- ---------- 
                                               $4,683,937  $3,339,436 
Capital Lease Obligations                         148,040     113,509 
Deferred Revenue                                   25,000      50,000 
Shareholders' Equity                            4,697,802   4,347,727 
                                                ----------- ---------- 
                                               $9,554,779  $7,850,672 
                                                ----------- ---------- 

Contact for more info: Jones Soda Co. Jennifer Cue, 206-624-3357