Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Jones Soda Company First Quarter Fiscal 2012 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Jim Stapleton, Chief Financial Officer of Jones Soda. Please go ahead.

Thank you, and good afternoon, ladies and gentlemen. Before we begin, let me remind everyone of the company's Safe Harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, projects or targets and negatives of these words or similar words or expressions. Forward-looking statements are subject to certain risk and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC, including our Annual Report on Form 10-K, our quarterly report on Form 10-Q and current reports on Form 8-K. Listeners are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this earnings call. Except as required by law, we do not assume any obligation to update the forward-looking statements we make today. I will now turn the call over to Bill Meissner, President and Chief Executive Officer of Jones Soda.

Good afternoon, everyone. Thank you for joining us today. I'll begin with a brief review of our first quarter performance and then Jim will detail the first quarter financial results, then we'll be happy to take questions. We have also included a slide presentation that we will be referencing throughout today's call, which is available on our website below the dial-in information for the call. 2012 was off to a slightly slower start than our plan called for. Our revenue results were mixed with a handful of markets performing on or above plan and others slightly below plan. This translated into a 6% decline in our top line versus a year ago. We continue to make progress on improving the availability of our products but there are certain areas where our performance is still in need of consistent execution. To provide some context here, I'd like to review the slides detailing our efforts to build a pipeline to the consumer and what is required to build a consumer packaged goods company for traditional retail. If you refer to Slides #3 to 6, the illustration highlights the importance of route to market in building our beverage company with the metaphor of a pipeline. On the premise that you have products that people know, want and are willing to pay for, the objective is to increase their availability and scale the brand. Jones's has always had products that consumers adore, consumers will pay a premium for. We ultimately have been working hard to build this pipeline to them. Our first order of business, was to build a sales organization, convince distributors to take on our brand, establish shelf space, develop deal dynamics and battle other brands for focus. Once the distribution matrix is in place, if you're able to go to retail and then have the opportunity to increase your retail space and communicate with your consumers and against your competitors for that. And then ultimately, with that built, we can achieve the final piece, which is a route to the consumer where we can expand ultimately our SKUs within retailers and then in channels in multiple retailers. Addressing availability of our products through expanding points of distribution has been a pillar of our business strategy, which I will discuss in a few minutes. But in getting back to our need of consistent execution, we believe we've made the necessary adjustments to the team and/or promotional activity. Despite lower sales volumes, we were able to improve our operating performance through better expense management and deliver bottom line results similar to last year. We developed our 2012 operating plan with a focused and disciplined cost structure to work more within our available capital. To this end, we have made some reductions to our personnel and sales and marketing, as well as the back office. This focus on expense control and slowing our use of cash remains a priority for us. Some of the highlights in the quarter were: Sales of our 16-ounce Jones Soda can are growing nicely. Please refer to Slide 7. The 16-ounce cans were launched in the fourth quarter of 2011 to help us access the gas and convenience store channels. The initial results are very encouraging as we continue to develop this important channel for Jones. Additionally, back in November, we announced retail authorizations at a number of nationwide chains. We are pleased to report that as of the end of April, our products were beginning to be placed in U.S. Safeway stores across the company. Also in February, we debuted our Au Naturel product line at the Natural Foods Expo West. Au Naturel is aimed towards natural grocery retailers and is expected to begin gaining some retail availability in Q2. We are selectively rolling out this new product and the initial response has been very positive. During the quarter, we continued to increase our distribution capacity. Please refer to slides 8 to 12. Since year-end, we have expanded our network into 59 new counties in now serve every county in 20 states. Total covered counties increased 20% year-over-year to 2,207. The increased presence makes it easier for retail customers to authorize our planagram, our products so that ultimately, the end consumer can find our sparkling beverage brands. If you refer to the maps on the slide presentation, you'll see that the darkened areas are areas where the distribution is heaviest, at 75% plus of the counties covered. In the slide presentation, you'll find progression around April of 2010 to today. Our results are also being driven by increased productivity within our existing account base. Nielsen scan data, which measures retail performance by sales per point of distribution, also known as shelf velocity, continues to show that we are leaders in the premium soda category. Please refer to Slide 13. During the 12-week period, representing the first quarter and reported on by Nielsen, we held 6 of the top 10 SKUs for 12-ounce single bottles in this category. Turning to Slide 14. Our 4-pack SKUs are showing significant improvement over a year ago. Based on dollar and unit sales both, with 9 of 10 SKUs growing at a double-digit pace. Slide 15 further illustrates this point. I'll now turn the call over to Jim, who's going to review the financial results for the quarter ended March 31, 2012.

Thank you, Bill. Revenue in the first quarter decreased 6% to $3.9 million from $4.1 million in the prior year period. This decrease was related to softness in the Canadian and Eastern U.S. markets, partly offset by strength in the Western U.S. markets. Revenue also reflected a $90,000 year-over-year increase in promotion allowances and slotting fees due to our efforts to increase sales in certain grocery accounts and expand into the convenience and gas channels. Our profit margin this quarter increased to 27% from 24% the first quarter of 2011 due to decreased freight cost. Operating expense in the first quarter decreased 3% to $2.7 million from $2.8 million in the prior year period, reflecting a decrease in general and administrative expenses, offset by increases in promotion and selling expenses. Operating loss decreased 7% to $1.6 million from $1.8 million due to margin improvement and operating expense reductions. Net loss for the quarter ended March 31, 2012 was effectively flat at $1.7 million or $0.05 per diluted share, compared to a year ago. The 2011 period included a credit of $114,000, recorded in other income and tax benefit primarily relating to interest and tax relating to our 2010 Canadian tax refund. Turning to the balance sheet. As of March 31, we have working capital of $4.9 million and cash and cash equivalents of approximately $3.3 million. Cash used by operations from the 3 months ended March 31, 2012, was $1.3 million compared to $2.1 million in the prior year. On February 7, 2012, Jones Soda closed the registered direct offering we announced on February 2, issuing 6.4 million shares and warrants to purchase 3.2 million shares. The company received net proceeds of approximately $2.8 million. We believe our current cash and cash equivalents will be sufficient to meet our anticipated cash needs and support our operating plan in 2012. As I did in our last call, I'll share some non-financial metrics that showcase the consumer excitement around Jones products. As reported by Facebook, we have approximately 951,000 fans on our Facebook page as of this week. An increase in 62,000 fans since I last reported this on our March call. Slide 16 provides an example of some of the comments we received from our fans. Since inception, consumers have provided Jones with more than 1,150,200 photos for potential bottle labels, an increase of 10,200 photos since last quarter's call. With the Au Naturel offering and PET and being 100% natural, we have new market opportunities for Jones Soda. The scan data for single offerings in the quartile and the new 16-ounce can offering for convenience and gas markets provides additional growth drivers. These opportunities and international activity, in addition to better expense utilization, should provide improved results for the remainder of the year. I'll now turn the call back to the operator for questions.

[Operator Instructions] We will take our first question from Zoran Minnick [ph], private investor.

I just wanted to ask you a quick question. What type of retailers will we be targeting for the Au Naturel brand? It seems that that's going to be the brand in 2012 that's going to, so to speak, carry Jones. I'm just wondering, are we targeting customers more like, Whole Foods? Or are we targeting customers more like the channel that we have our regular Jones in right now?

Great question, Zoran [ph]. Let me clarify the launch strategy beyond Au Naturel. So to date, Jones itself is not Whole Foods-compliant, yet there's a consumer base that loves Jones Soda that can sometimes aid out of wanting to have a full calorie item or sugar content that we have. So we developed Au Naturel, to capture that consumer and have exclusively targeted for the natural foods channel. So it is designed for a two-year period to be only in those channels or in some mainstream retailers, in their natural foods section. So to your point about 2012 and carrying us, we are absolutely not counting on that for some time to really become a meaningful part of what we're doing. We have growth ahead of us on Jones Soda to the degree that we can allow what we're calling an incubation strategy in natural foods for the Au Naturel product line. Get trial, have consumers begin to understand and use the product. It is very different and let me recall for everyone, what that brand is all about. It is a very lightly flavored sparkling beverage. It is clear in nature and it is in PET and it is very unique to the point that we have very special technology that allows us to do it. To have an all natural sparkling product in PET with flavor and sweetness. That is very difficult to achieve and we have done it. And in the entire bottle, we have only 35 calories and in the entire bottle we only have 7 grams of sugar and we offer 5 grams of fiber and green tea. So it's a fantastic product sweetened with agave nectar, pure cane and a little bit of stevia. So by any health standard, this product really achieves and we built it after a challenge put out by the Harvard School of Public health to the beverage industry. And the Harvard School of Public Health said to the beverage industry, "We are asking you to produce a different class of beverage. And in this different class of beverage, we would like to see a 70% reduction in calories, less than 1 gram of sugar per ounce of beverage. And to do that, using some calories and not using an artificial sweetener. So ultimately, we feel like we have a product that's meeting the consumer right where they are in these natural foods channels. So we'll continue to update you as we go but what you should not count on is that having a big impact on revenue in the coming 24 months.

Okay. I just got one more question for you. What type of margins are we looking at Au Naturel producing as far as -- is it comparable to the 27% that we would achieved Q1 of this year?

I can only answer that in one way because we haven't provided that kind -- that level of guidance. But what I can tell you is that with all of our innovation, we're looking to bring our blended margins upward.

Okay. And on that also, as you stated, it does offer 5 grams of fiber, which, I mean it's phenomenal. Is that something we would target to maybe a specific sector, as well as all natural sector? I'm sure a lot of the older Jones consumers or at least the ones that used to be consumers and now are getting older, it seems like it could not be a substitute for something like Metamucil but possibly, something that the consumer can actually stomach as [indiscernible]metamucil? Is that something that we would consider or at least try to market towards that consumer as well to capture that space?

Well, I think that would pull away from the refreshment message behind it. This product is literally designed to capture the market loss from the big carbonated soft drink brands. They lose 1% to 3% per year and that's a lot of migrating consumer demand looking for something healthier. The people that leave those brands are saying, the #1 reason I'm leaving is I'm looking for something healthier. So ultimately, it's a refreshment based product so I wouldn't want to go in that route and the upside is replacement of the habits that people have on the other CSD brands.

[Operator Instructions] We'll go next to David Cohen [ph] with Raymond James.

So what do you guys have -- what are you using as a breakeven number on a quarterly basis?

We haven't provided our guidance. I was just going to say, I'll let Jim give you what we can.

As Bill mentioned, although we haven't provided that guidance, I think if you look at the numbers and do some basic math, you can see we'd be up in the $35 million to $40 million range on an annualized basis. One of the things, as we do produce more, we do have the opportunity that have some scale come in there to add to some gross margin. So it's somewhat of a moving target within that $35 million to $40 million, depending upon how quickly we get there with volume.

Okay. And that was roughly $9 million to $10 million was the number that I was using on a quarterly basis and we're still quite a bit aways from that breakeven level. The stock has been diluted fairly significantly over the last couple of years. Are there some other opportunities for you to generate revenues or to leverage your brand without having to further dilute the shareholders? Because at the current pace, it's still not growing fast enough to get you to where you need to be. So unless I'm missing something, and please point that out if I am, the business is still isn't growing in a fast-enough pace. You're growing to run out of money. We're going to have additional dilution at year-end. And then my last question would be, are you considering any type of reverse split so that at least you could get the valuation of the business to -- or the price of the stock to a level where investors are typically able to purchase it from a broker-dealer?

This is Jim, and I'll take the last question first about the reverse split. We do have a NASDAQ deadline out there. And we've been spending quite a bit of time evaluating the pros and cons of our listing and the reverse split and at this point right now, I just don't have any time period to provide for you or for shareholders. We will be out seeking their approval to do such an activity. I think Bill can step forward on some of the other things that we have going on.

Jeff, relative to the first part of your question, the growth was a disappointment for us in Q1. But ultimately, all the fundamentals are there to provide it. And when we have some missed execution opportunities, we see them and correct them. So ultimately, we do see growth in the future and are -- highlighted on our call was also this reduced cost structure we have. You will see that going forward in Q2, Q3, Q4, in a more pronounced manner.

So do you think you have other opportunities to generate cash, which would mitigate the need for additional dilution to the shareholders?

I think some other opportunities above and beyond, selling more product to the retail channel, we're continuing to see strength with our my Jones direct sales opportunities to individuals who send us their own photo and their own capture and we ship the door product directly to their doorsteps. On top of that, we're finding we have some international opportunities that are maturing in addition to new opportunities that were presented to us on a monthly basis and we're seeing strength in those areas.

Is there a point in time where you consider other alternatives potentially maybe putting the business up for sale or considering a larger partner so that you don't have to continuously dilute the shareholders until you get to your breakeven point?

I think that's a great question and as a public company, every month, we have opportunities that are presented to us within that strategic range and we will evaluate those as they come to see what we feel is the best fit for shareholders.

And because from my perspective, the business is worth a heck of a lot more money then capitalization but you're beginning to be constrained by your cash and the continuous need to generate cash, and you really couldn't afford to have many more quarters where we don't meet expectations. We're running out of dough.

I agree and we're coming in to our 2 best quarters seasonally coming up that being a second and third quarter. At the same time, we have not touched our credit facility and I feel comfortable that as you can see in the 10-Q and our statements here, we feel comfortable where we are through the end of the year and we look forward to updating you on the future calls upon strategic initiatives and the growth in the base business.

I am a fan but there's still a couple of significant obstacles to the clean operations, I guess, of the business. So continued success, you've done a good job so far. You just need to go faster.

We'll go next to Greg Eccusan [ph] with Ardsley Capital Management [ph].

Question is, you mentioned earlier a little bit about PET in the Au Naturel product. And if you could maybe expand a little bit about classic or PET across the broad range of products that you have and how you're maybe thinking about it. Obviously, it'll be a capital need to -- or maybe it wouldn't if you had somebody to provide that for you, to roll this out. But it does seem like this could be a very high-ROI type of project to take place going forward. I'd like to get your thoughts about the PET opportunity across your broader product lineup.

Well, great question, and timely with the launch of Au Naturel and how we are also thinking about our base business. In the last 2 years, there have been a number of elements on the business that had to be corrected and ultimately, getting our products to sell well again at retail and building the distribution network. Now we're able to turn our attention towards what does Jones look like further down the road. And ultimately, I think there is an opportunity for PET. I'll give you an example, in Detroit, we have a distributor who sells 1 liter and 20-ounce PET Jones Soda. He sells that at retail, where he also sells glass bottles and in some cases in both 4-packs and singles. And we have been able to track that retail movement and we have not seen any cannibalization, any meaningful cannibalization. It is very much like our, we have certain Kroger divisions that now have us in 2, in 3 locations in the store in different pack types. So as the brand matures, I think that becomes a very big upside opportunity. Our consumer tends to be on the go and they tend to want portability, we can already see that in the success of the 16-ounce cans, which is delivering for us above expectation. So I think PET is a conversation for even our core line, Jones, and clearly now, we have that in Au Naturel. And I have some experience in the space and that we, at one of my former jobs where I was Chief Marketing Officer of Fuze Beverages, we were in glass and we were very concerned about the nature of the premium the consumer placed on the glass. And ultimately, when we switched to PET, we saw significant increases across the board. So I think there are opportunities. We have not refined how to go to market with that and the best way to do it without impacting our growing glass business.

Okay. It does very much seem to me that this would be a very nice opportunity for you to improve sales by moving towards a much more portable friendly product.

The other thing that's great about it is that there are some relatively significant freight advantages. Glass is very heavy and PET is significantly lighter. So you have that and then currently, PET costs a little bit less than glass as well. So there's some margin opportunities.

If afforded with more capital, let's just say, the opportunity to bring on more capital to the business. What would you say would be some of your highest priority needs at this point? Would it be to spend that money on greater distribution access, to roll out new brands, to move into a PET product lineup where you see high ROIs, how would you sort of characterize where would you spend that capital?

Well the #1 priority really for us is to begin to expand into other channels. With this demographic, it's interesting that grocery is our highest penetrated channel. With this demographic, convenience is your biggest opportunity and what a pressure point coming from capitalization would do in convenience, could be very significant. So if unscripted, I would channel it toward new channel penetration specifically convenience and also likely begin start working on the club store channel.

Okay. And maybe one last question. If you could -- you touched a little bit on distribution for the second quarter with Safeway, et cetera. So maybe if you could comment a little bit on second quarter trends, a little bit on the business, on distribution, on takeaway, and just some thoughts about what we should look forward to in terms of additional distribution in the quarter?

Well, I can tell you that the Safeway authorization is occurring as we speak. I would put us at about 35% of the roll out as it had gotten underway about 2 weeks ago. We see an increased base coming from that, so ultimately, we know that the overall base of the business is growing. Further, we know that our sales per point of distribution remain strong and in almost all cases is growing as well. So ultimately, with each instance, whether it's Safeway or the other chains that we've added, in each instance we should see that base growing. And when we talk about execution in Q4, what can impact a smaller company like us is a failure by 1 or 2 distributors to hit their plan if they happen to be sizable distributors. And that can be impacted by things going on within their business. So ultimately, as long as we continue to grow our base and grow it at the pace that you're seeing in our announcements as far as bringing on new chains, we believe we're on progress to deliver growth. I can't speak to Q2, we just don't do that but I can tell you that we're showing in all of our retail channels that the brands are healthy and that they're growing well.

We will take our last question from Zoran Minnick [ph], private investor.

I just got one last quick question for you. As far as retailers go, are there any other major retailers that we're looking at getting into something similar as Target on a more wider basis?

Well, that's the point behind the distribution that we built. Our distributors' service all classes of freight other than what I would call the club store channel that's typically done direct between manufacturer and retailer. So you bet you, we are in some other channels where we currently have little or no distribution in test and things are going quite well. But if you've heard us on previous calls or you've invested and learned the consumer packaged goods business, these are long-developing and once-per-year decisions. So what we do is we take our selling data and our new distributor matrix into retailers and they meet with us over the course of, let's say, July through September. They'll look at the data and then they'll usually let us know if they're going to expand us or bring us into their stores toward the end of the year. And then that takes place end of Q1, early Q2 as is happening right now with Safeway. So with the network being built, we are now focused not just on growing grocery but with 16-ounce cans and convenience. We also have the 16-ounce can opportunity in another channel where we're testing. So what has been created is the ability to access all of these channels and one thing to highlight also is that the grocery and convenience universe are hundreds of players. The mass and drug universe are -- drug is really 3 major players, maybe 4 if you add another of the smaller players. And that's far less complex in getting authorized. As we look at mass, you're talking about 2 or 3 large players. So some of these other channels, I believe, will happen a little bit more rapidly than convenience in gas because of the consolidation in those channels.

Okay. Great. And then I also noticed that I know that we had an authorization in all Wal-Marts and we have our assorted our 6-pack there as well. I also noted that Wal-Mart.com sells Jones in this glass 4-packs, in the traditional glass 4-packs. Is that something that the company is trying to work with Wal-Mart in getting those more assorted 4-packs flavors into their stores?

Very much so. That's a very big initiative of ours. Wal-Mart being a big box retailer, they tend to think more toward our bigger competitors but they also like to be innovative and they like to provide alternative options for their consumers and it was really an opportunity for us to bring in the variety pack into Wal-Mart stores. And as we work with the buyer at Wal-Mart, we're trying to expand that in an attempt to get him to bring or get them to bring in either our 16-ounce cans or our glass bottles.

And that does conclude our question-and-answer session. I'll turn the call back over to management for any additional or closing remarks.

I'll just finish by saying thank you, everyone, and we look forward to speaking to you following our Q2 results.

And that will conclude today's conference. We thank you for your participation.