Jennifer Cue - Chief Executive Officer Max Schroedl - Controller Eric Chastain - Chief Operating Officer

Greg Rickman - Private Investor Gary Goad - Private Investor Chad Cooper - Digital Offering Tom Parks - Private Investor Brett Moll - Private Investor Daniel Baxter - Private Investor

Good day, ladies and gentlemen and thank you for standing by. Welcome to the Jones Soda Company Fourth Quarter and Year End 2015 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded. I would now like to turn the call over to Jennifer Cue, Chief Executive Officer of Jones Soda. Please go ahead, ma’am.

Thank you, Catherine and good afternoon everybody. I would like to formally introduce our new Controller of Jones Soda, Max Schroedl. Max comes to Jones with not only the right experience, including a CPA, Masters of Accounting and Deloitte audit experience, but also other public and private company financial roles. Not only does Max have the right pedigree, he comes with the very important quality that works with Jones, which is entrepreneurialism and a passion for our brands. Max will begin with the opening of the Safe Harbor communication and then review our numbers later in the call.

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 will 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 statements containing words such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects or targets and negatives of these words and similar words or expressions. Forward-looking statements are subject to certain risks 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 reports on Form 10-Q and our 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 day 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 Jennifer Cue, CEO of Jones Soda.

Again, good afternoon, everyone and thank you for joining us today. Included with me today for the call as well as Max is Eric Chastain, the company’s Chief Operating Officer. Today, we are very happy to report continued improvement in our operating results for our fourth quarter of 2015. Combined with case volume growth of 12% and a reduction in spending per case, our revenue for the fourth quarter was up 11% and this still occurred despite the weaker Canadian dollar for comparable periods. Had the Canadian dollar remained stable year-over-year, we estimate we would be showing 15% revenue growth for the fourth quarter of 2015. We are very pleased with both double-digit case volume and revenue growth from our core business as we close out the 2015 year. Driven by the case volume growth in the fourth quarter, we are pleased to show year-over-year volume growth of 3%, with a small increase to our annual revenues of 0.3%. Had the Canadian dollar remained stable year-over-year, we estimate we will be showing 4% revenue growth for the yearly comparison. The growth is impressive, given the completion of our turnaround efforts and our work to grow the business again, all while working within a much more streamlined program of spending. This return to volume growth in our core business, while small, is a very important milestone and the first year year-over-year volume growth since I rejoined the company as CEO in mid-2012 as well as our return to both volume and revenue growth year-over-year from as far back as 2007. For 2016, we are focused on profitable growth. With our core business growing again as well as new initiatives landing in 2016, we have a lot of promise for our future. I will now turn the call over to Max Schroedl, who will outline the details of the numbers and then I will return after to outline more about what we are set up to accomplish in 2016.

Thanks, Jennifer. Revenue growth in the fourth quarter – revenue in the fourth quarter increased 11% to $2.7 million from $2.4 million as compared to the fourth quarter of 2014. Case volume increased 12% compared to the same period in 2014 primarily due to increased sales of our core line of Jones Soda. In addition, revenue was affected by foreign exchange translation loss due to the weaker Canadian dollar impacting our Canadian business. Promotional allowances decreased in the quarter due to continued management of promotional programming. The accounting impact of these promotional allowances is a direct offset to gross revenues. Gross profit margin in the fourth quarter 2015 increased to 19% from 16% in the fourth quarter of 2014, favorably impacted by reduced expenses by shifting more production to Canadian operations, given the Canadian-U.S. dollar exchange rate during the quarter. Total operating expenses in the fourth quarter decreased to $938,000 from $1.1 million in the prior year, primarily due to tight management of sales operating expenses, the variable compensation plan in place as well as a decrease in administrative compensation and rent expenses. Operating expenses as a percentage of revenue decreased to 35% for the fourth quarter of 2015 from 44% during the same period in 2014. Loss from operations in the fourth quarter 2015 was $437,000 compared to a loss from operations of $669,000 in the fourth quarter 2014, primarily due to lower selling and marketing expenses. Net loss for the quarter ended December 31, 2015 was $546,000 or $0.01 per share, whereas for the fourth quarter of 2014, we had a net loss of $339,000 or $0.01 per share. Primarily as a result of other income earned in 2013 – ‘14 of $317,000 as a result of a reversal of amortization of the leasehold improvements directly related to our – exiting our previous headquarters lease in advance of term of the lease. For the full year 2015, revenue increased 0.3% or $36,000 to $13.6 million. Revenue was basically flat year-over-year despite increased case volume of 3% due primarily to foreign exchange impact on our Canadian business. For the full year ended 2015, promotional allowances decreased 10%, down to $1.5 million due to continued tight management of the promotional programming. For the year, gross profit margin increased to 24% from 22%, due mostly to favorable impact of shifting more production to Canadian operations given the Canadian-U.S. dollar exchange rate during the year. Operating expenses decreased 16% to $4 million from $4.8 million in the prior year primarily due to tight management of sales operating expenses as well as a decrease in administrative compensation and rent expense. Operating expenses also include non-cash expenses, depreciation, amortization and stock-based compensation, totaling $256,000 compared to $500,000 last year. Operating expenses as a percentage of revenue decreased to 29% for the year from 35% in 2014. Loss from operations for the year ended December 31, 2015 was $756,000 compared to a loss of $1.8 million for 2014, an improvement of 57%. Loss from operations has improved due to an increase in gross margins, combined with lower operating expenses. Net loss for the year improved 27% to a loss of $1.1 million or $0.03 per share compared to loss of $1.5 million or $0.04 per share a year ago. This is as a result of the increase in gross profit margins combined with reduced operating expenses, as mentioned previously, partially offset by an increase in other expenses such as foreign exchange loss. Turning to our balance sheet, as of December 31, 2015, we had working capital of $1.7 million and cash and cash equivalents of approximately $772,000. At this time, we believe that our current cash and cash equivalents, combined with our loan facility and anticipated cash from operations, will be sufficient to meet our anticipated cash needs through the end of 2016. Cash in operations during the year ended December 31, 2015, was $1.008 million compared to $1.245 million during 2014. During 2015, we utilized our asset based loan facility for working capital needs. As of December 31, 2015, our eligible borrowing base was approximately $1.4 million of which we had drawn down $908,000. In early January 2016, we renegotiated our line of credit with CapitalSource, effective December 18, 2015, where we increased our maximum aggregate amount available for borrowing under the loan facility from $2 million to $3 million, while reducing our rate underlying. In addition, through March 31, 2016, we may request up to $500,000 in principal advances against purchase order. As of the date of this call, we have need made in principal advances against those purchase orders and we expect $500,000 of purchase order line to go – expire unused. I will now turn the call back over to Jennifer for final wrap-up.

Thank you, Max. So we began 2016 with good momentum in our core business and several new exciting opportunities in front of us. We also begin the year in a new headquarters facility and I just want to apologize, we are a little bit close to the train tracks. It’s a wonderful place and great neighborhood that we do – you may hear the sound of the train. So bear with us on that. Anyway, back to 2016. First, our core brand Jones Soda is participating in increasingly growing segment of the beverage industry, that of the premium or craft soda segment. During our fourth quarter, we continued to build our core Jones Soda business and it showed with the double-digit growth we experienced. The fourth quarter is also a time for presentations to new retailers. And we will lbe looking forward to adding new retailer both in Canada and the United States in the spring-summer 2016 season as these new listings rollout. We are focused on continuing to build are core Jones Soda line in 2016 as we leverage off of increasing interest in the premium soda segment of the beverage industry. One of our innovations in 2015 is our Jones Cane Sugar Fountain program. While Fountain is still a very small part of our business, we are excited that consumer interest and seeks to build this program as new opportunities present themselves to us. We are seeing some truly innovative companies across a number of channels that have approached us to work with them to offer our cane sugar offerings on their Fountain programs. In May of this year, we will again be attending the National Restaurant Show with our Fountain offering and we will be giving some unique marketing around our Fountain program throughout the year. A second exciting opportunity for us clearly is our relationship with 7-Eleven, Inc. During 2015, our team also created a truly unique opportunity and product line with 7-Eleven U.S.A., a very big accomplishment and one of which I am very proud. As announced a few weeks ago in February, 7-Eleven and Jones Soda partnered to create 7-Select brand premium sodas crafted by Jones. These first premium co-branded products in the 7-Select private brand lineup. Our partnership with 7-Eleven, Inc. developed from our long-standing relationship with 7-Eleven Canada from over 20 years back. And we are excited about this new co-branded collaboration. This new offering and five unique flavors contained with cane sugar has on average, approximately 30% less sugar and calories than other national brands of similar size, contains some caffeine and is offered in a proprietary plastic package, offering convenience for the 7-Eleven guests. The co-branding on this new 7-Select package strongly showcases the Jones’ personality. With a collage of black and white photos and the Jones bold logo on the front label, along with the 7-Select logo and branding, we believe we and 7-Eleven have a completely unique co-branded offering in a premium private label. We and 7-Eleven sampled this new product line to the franchisees at the annual 7-Eleven experience in early February 2016 in Las Vegas where the product debuted and the response to the product line was incredible. We were profiled by 7-Eleven corporate to the entire U.S. network of franchisees and employees of 7-Eleven as an example of the kind of partner to work and collaborate with in their drive to include premium products in their expanding private label line up. During the fourth quarter 2015, we began sales of inventory of the new 7-Select by Jones Soda. And while there were no sales of this product line in the fourth quarter of 2015, our operations and marketing team are focused on the production and execution of this new piece of business for 2016. Currently, the product line is being rolled out to 7-Eleven locations around the United States. And while we do not provide any guidance on our numbers due to the difficult task of understanding how all initiatives will unfold, we expect this new large account to make a positive impact to our overall business. And finally, we have a third exciting opportunity before us. During 2015, the team was also quietly testing a completely new brand and one which is near and dear to my heart as well, Lemoncocco. Lemoncocco is a premium, all-natural, non-carbonated beverage offering that I had the personal opportunity to discover while living in Italy many years ago. The Italians definitely know how to create great food and beverage products and Lemoncocco was one of those that is offered on street stands in the neighborhoods of Rome and Italy. We created our version of Lemoncocco as they do in Rome, Italy, utilizing the cream of the coconut as well as the punch of Sicilian lemon. However, we did reduce the sugar content and I am sure it was not quite as sweet as that which is offered in Italy and ours has only 90 calories for each 12 ounce serving. Lemoncocco comes in a great looking package reminiscent of modern Italian design, with a strong yellow and white pattern to reinforce the color of the lemon and the coconut. We quietly launched this new brand on the streets of Seattle and the streets of San Francisco in December of 2015. And we were impressed with the feedback with only a few tweaks and adjustments to it. We formally announced the launch of this brand in early 2016 and are expanding it to multiple markets throughout this year. We have been very pleased with the enthusiastic response to Lemoncocco at pizzerias, boutique grocery chains and everywhere we sample it. The Lemoncocco team is separate from the Jones Soda team and is made up of team members that are either Italian or have Italian roots. And we have strategically been utilizing Italian distributors when we enter each market. All of these exciting initiatives are occurring in our 20th year of business. The creation of various new products and brands highlights the depth of skills we as a small team have in the beverage industry and we look forward to the evolution and continued improvement in our business in this milestone year. I will now open the call up for questions.

Thank you. [Operator Instructions] We will go to Greg Rickman with Private Investor.

Jennifer and team, I hope you are all smiling, because you should be. I have been listening to these calls for a long time, have been an investor and hung with it for a long time and I got a pretty big smile on my face today. A wonderful job really on all fronts, but obviously, the 7-Eleven deal at least presently is the crowned jewel. And I am sure it was a gigantic amount of work, so a nice job and congratulations on that.

Thank you very much. It was a lot of work, but very much well worth it. And we all do have smiles on our face for sure. We are really, really excited about what’s going on here.

Yes, I am too. So, let me just – I got a few questions and I hope you will bear with me. I will try to be brief. Lemoncocco, I recognized the value of the branding and the European flavor and those kinds of things in terms of boutique stores and marketing it to Italian groceries. The question that I have is can you give a little bit more detail on what the rollout is, because inevitably, I am sure you would like to have that product in the mainstream and everywhere, like we would like to have all the products. So, what’s the glide path for that? I understand it what it is in the near-term, because you explained it. But can you give a little bit more extended vision on how it gets there?

Yes. I mean, we have started out in sort of an evolution of going into say Seattle and San Francisco. Restaurants, boutique grocery chains through Italian and specialty distributors as well and then building it from there and its building in Seattle, building in San Francisco, we are taking it to Los Angeles. We have taken to Los Angeles. We are taking it to Toronto, Montréal, Chicago, New York. We were at the Fancy Food Show in early January and we are overwhelmed by the response and have decided to launch in a few more markets with the right partners. We want to do it in the right way. So, we are sort of launching with sales, but with the marketing edge by placing it in the right accounts. Jones Soda was really smart in its initial days with Jones Soda in the catching parlors, surf shops and skate shops and it really grounded the brand in a really strong way. This one, Lemoncocco, this is the sort of grounding of the brand with sales, but by all means, we want to be national. Probably, we won’t be national in 2016, but our goal is to get closer to national in 2017 and I have a strong feeling about this brand how far it can go outside of the U.S., Canada. It’s definitely going to go mainstream at some point, but it’s just a process.

Okay, I understand. Yes, I agree with you. I actually think it could be the biggest product at least that I am aware of to-date. I want to talk about Fountain for a minute. I didn’t hear anything particularly new about Fountain and I have one question that’s kind of glaring, which is, is it actually up and operating anywhere yet? I think the last call, you had mentioned that you had some chain retailers, some franchise retailers that were committed to putting it in their rollout, but that they were also in the process of just opening stores and things like that. I am wondering if there are operating units in the field today or will be shortly?

Yes, there are. We launched both in 2015, we launched with a couple of new startup QSR companies, Glaze in San Francisco and we expanded into from San Francisco into Chicago. We also launched with over-weighted food group, which is a grocery chain up in Western Canada. They are going to redesign their deli section and inserting the Jones Soda machines as they do these renovations. So, it’s a bit more of a slower build. We built it up based on the quality too of accounts distributor in each market. When we have a good strong partner, we can actually build off them. We have got some great partners in New Jersey, Chicago or West Coast. And I will wait till the train goes by. Each of these distributors are doing a pretty good job of getting into these independent accounts. I am really excited about some independent restaurants that are starting to build out their design with the Jones Soda fountain machine and we have got – obviously, Seattle is our home market. So, we are able to start there and do a few more of these. In Chicago, we have got a strong partner there. I look forward to the day when the large restaurants can see that there is something beyond number one and number two and provide us with an opportunity. I think it’s a little too premature right now, but we are going to continue and build this in a slow, methodical way. And I am convinced that there will be more and more restaurants that see this Jones Soda offering as a slightly better soda offering with cane sugar and really just a great, fun personality with the machines that we have on place, but again, it’s a slow build. We don’t have the resources that Coke and Pepsi have.

I understand. That makes sense. Okay. So 7-Eleven now I want to focus on that for a minute. There is a lot of information that you read when you look at public information, which is in my experience anyway typically not very reliable. Someone, I will try to ask just the questions that are more magnified that come to mind. And I don’t mean to make statements. I want to ask questions, but maybe it’s easier in some cases to do that. I am assuming the customer for this – for the orders that are shipped to 7-Eleven is the 7-Eleven corporate, not the individual franchisees. Is that right?

Yes, it is through the corporate, but they are appointed distributor. So yes, it is through corporate.

Okay. So in my mind, that means that you would have basically what I would refer to as a bond quality receivable, is that fair to say?

That’s fair to say.

Okay. So, I am guessing based on that many different platforms for financing in the event you get some giant order and you don’t have a liquidity to cover the order and you max out your credit line, I would suspect you have got lenders lined up down the block and around the corner at favorable rates to finance a bond quality receivable from 7-Eleven corporate, fair to say?

I mean, we witnessed what our current asset based lender was willing to do with the purchase order line knowing that it was 7-Eleven right behind there, yes. As we have some other very strong customers as well that we go direct to, up in Canada and that will be a similar receivable quality too, but yes, they definitely saw the strength of the customer for sure.

Okay. Yes, I do too. So, can you tell us how many stores eventually will be receiving the product when it’s fully delivered?

Yes. Well, what we know is the number of stores in the United States is approximately 8,000. And we are looking out – looking to rollout the line into all the participating 7-Eleven franchisees, which we believe will be the majority of them. However, we cannot give assurances. Franchisees have sort of independent decisions as well, but this kind of a program is definitely impressed upon to the franchisees to take it on. So, I don’t have the data yet as to how many locations we are in. We are all – all of us are searching around the country wherever we are to see if it plays yet, because it’s just rolling out now, so...

Okay. And does this go to Canada 7-Eleven stores as well, Canadian stores?

Actually, it’s not at this point. It’s through the U.S. program. Our core glass bottle lineup in 7 flavors is in 7-Eleven Canada, which is about 500 locations. So it’s not there yet. We want to make it our goal, all of us with 7-Eleven U.S.A. is to make this a huge success and then consider other markets after that.

Okay. So you got – these are calculated questions, I call them and I will use mine that I am sure you have already used yours and everybody else as well after this achievement. But you have got 8,000 potential stores, I recognize and understand what you said about and then obligated to take it. I can tell you that I was in one yesterday in Arizona and it was at the front by the register at eye level. It was in the freezer – refrigerator case at eye level, we had a long discussion with the owner of the store, who is franchisee and he loves it, he said it was very well received...

That’s awesome.

Very well received, it was priced properly and the comment he made was, look, it’s Jones, so you know it’s going to be a good product, just – the price point is great. And he is selling it very well and we tried every flavor last night, my wife and I and we thought it was great, so that was good. But as far as the – I am sorry?

I said good due diligence for us as well. So thank you for the feedback.

Yes, no problem. So 8,000 potential stores, five flavors at eye level and what would your expectation be to – I mean I would expect that this is available to all the franchisees now, would it be fair to – would your guess and I recognize you are not going to guess on public company conference calls, but my guess would be sometime within now and the next 90 days, those that are taking it will probably placing orders, I mean I imagine it wouldn’t take a year, right?

Yes. We expect within the next, say month we would ideally to have this lineup in as close to 100% it there might be odd ones. But yes, in terms of timing, we would expect in the next month, we are going to be going into summer selling season with some promotions coming up. So we all want to make sure that includes mostly 7-Eleven and us. We are partners in this. So yes, we want it ready to go for upcoming promotions that we are going to be doing.

Okay, good. So as I look at this deal and you look at all the challenges that you face on the grocery store shelves against the Cokes and Pepsis of the world sliding fees, this fee, that fee, backdoor payments to run a roadblock for competitors, I don’t see any of that with this deal, you got a bond quality receivable generated by 7-Eleven. You are not – it’s their product, so obviously, they are motivated to put it front in center. No sliding fees. None of the arm/leg breaker payments so to speak to get the tough end of the competition. I am trying to find what could possibly be bad about this. And I just don’t see it. As you look at the opportunity and the deal, do you see any potential challenges that may be – could be down the road with it?

Well, I agree with you that it’s a perfect partnership for us, we are a small, innovative company. What we brought to the deal was we are known as a premium soda. We are known as flavor innovation and that’s what 7-Eleven has done so well and there are other private label products. So our flavor innovation, they warrant. They have the strength of distribution that we have dreamed of having for so long, so it’s almost like – I don’t want to say it, but it’s like a match made in heaven. We don’t – and we are going to be doing social media to assist it. We are not going to be sitting back and doing nothing. We are going to be providing. Our social engagement on our – with social media is extremely high. They love that about Jones Soda, so we are going to be doing some things that we can do best. They have the locations. They have the might and getting five SKUs, eye level across the United States...

You are smiling, aren’t you, I can hear it. You are smiling. I know you are.

Yes. I am very much smiling. I said when I first came back to Jones, our ideal – one of our ideal partners is 7-Eleven because it’s the right same demographic. It’s – and with 7-Eleven U.S.A., we are leveraging our individual strengths. And I mean sure, they make – if for some reason, it doesn’t sell, that could be – that would be – but it won’t. We are spending year and a half creating this as a team and we did a lot of research before we came out with our final recommendation on the product profile and everything. And we worked collaboratively with 7-Eleven. That was a great thing about 7-Eleven. They are a machine and they know how to do things. And we provide that to the entrepreneurial, scrapping us and design. Our design is phenomenal. So the combination of the two, again I could not be happier. You are right. I am smiling and I am – we are all super excited. I – Eric, our COO said – he works every day right now and this is the most exciting time that he has ever worked at Jones Soda. So yes, it’s pretty amazing.

Thank you. I appreciate that. It’s interesting because great companies, great CEOs like yourself and the team there, you evolve, right. So I am sure when you first took the helm many years ago, you didn’t say, Gee, let’s go – let’s try to make ourselves a company that does private labels for other people. But do you see – what I am thinking of and obviously on the other end of a phone in Arizona, it doesn’t matter much what I am thinking of, but do you think there would be an opportunity to pursue other private label business, because I can tell you that it seems to me like that’s – I walked into an auto parts store the other day and tried to buy some Valvoline transmission fluid and they don’t have any Valvoline products. They all would tell you, no, we get it from Valvoline, it’s just in our label. So maybe that – is that something that you re thinking about?

Well, you are right. I think to create this when I came back, the opportunity presented itself and we had to weigh this, does it make sense for our brand. And we determined that it really did make sense for our brand, especially when our brand is on it. That was a real great feature. 7-Eleven wanted to have that association with a premium soda like Jones nationally and there is a good natural awareness for it. We are going to focus on 7-Eleven. We don’t want to really go out and do this. 7-Eleven was our first customer in Vancouver, Canada on Kingsway Street. We have a long history. We are going to – yes, we are going to focus and get it done right. This year, maybe next year as well, we really – we want to use this opportunity, build it right with 7-Eleven to be able to continue to build our core brands, maybe get our core brand in glass bottles in 7-Eleven U.S.A. I think there is a lot of opportunity that can come from this without necessarily going off and doing private label right now with other people.

Great. I think that makes sense. Last question and thanks for allotting so much time. I apologize. I have heard on more than one call about the Canadian dollar impacting the balance sheet and profitability. And I guess I am wondering, is there anything you can do or have done to kind of backstop that, maybe to capitalize on it to some extent. And I don’t know whether it’s somehow and maybe it’s the wrong terminology, but buying some kind of colors or is there a way to deal with that, because it seems to be a reoccurring impediment on the balance sheet and on the financials?

Well, I think really where it came into play here was just really in the last year when the Canadian dollar crashed along with the price of oil. So what we were experiencing with the high price of oil a stronger Canadian dollar that came crashing down over the course of the year. And we are a company that – we started in Canada. Our biggest distribution partner is in Canada and a big part of our sales are in Canada. The best thing that we have done and we have always maintained is our co-packing up in Canada. So we sort of have a bit of a hedge there already. I don’t think the Canadian – of course, I am Canadian, originally. I don’t think the Canadian dollar is going to go down significantly more. I could be wrong. I don’t want to a currency forecaster or anything. But I don’t think the – now, the time it would take to do all of that is worse what we guess from it myself right now.

Okay, thank you very much. And again I am very impressed and appreciative of all the work that you have done. And I have hung in there for a long time. I am not planning on going anywhere now. I think we are just starting. So thanks again.

Well, I appreciate your comments. And I just want to say honestly, when I look at this 30,000 feet up and see where we have gone and over the last 3.5 years. And it’s been a tough, tough road, bringing expenses down and getting the expenses in line with the size of the business meanwhile while trying to grow is – but then in the background, working on some other large chains, I was here when I did the turnaround in 2002 when we landed Panera after doing the turnaround. And I just feel the same way that I did then that it was just – it’s a great, great time. And we have done all the right things in the last 3.5 years and 30,000 feet up to look at the improvement, it’s satisfying. I wanted to go quicker, but you know what, it is what it is.

No, I agree. And I think you build shareholder value and value for the team and for the stakeholders by putting in a solid foundation. I would much rather see this than a little blip in the stock price because of some deal and your selling sizzle instead of stake, but you have got the stake here. And it’s kind of funny, because you say all our largest customers in Canada. I am pretty sure that’s not true anymore. But you just haven’t hit home yet, but yes, thanks again. I appreciate it.

Okay, thank you.

You bet.

Thank you. We will go to Gary Goad with Private Investor.

Yes, Jennifer, Max and Eric, again I wanted to add my congratulations on the – both the 7-Eleven and Lemoncocco developments. It sounds like a lot of work has gone into them and it sounds like you are making a lot of progress. And I also wanted to thank the previous caller who added a lot of insight or listed a lot of insight from you. Based on what I have heard thus far, correct me if I am wrong, it sounds like the 7-Eleven deal may have a material impact on Q1 revenues? I would like you to comment on that.

Well, Gary, we have really not provided guidance. We do believe obviously it’s going to make a positive impact. I don’t really want to quantify that at this point in time. But there is a few things going on and got 7-Eleven is a big, big project initiative of ours and yes, it will make a positive impact. We got Lemoncocco going. We got our core business gone back to growth. So, again, I would love to just give you the specifics, but I really can’t. I can’t. Yes, I want – yes, really I just think….

Okay, you don’t have to. At least, I thought I would ask and it seems that you have gone further in this area than you have in the past then. I and I am sure other investors appreciate that. And again, I just wanted to add my congratulations and looks like developments are finally coming to fruition. You have put a lot of work into it and it looks like it’s starting to pay off and will continue to pay off through 2016. And I wanted to congratulate the entire Jones team on that.

Okay, thank you, Gary. It’s a small team of 26 and a very passionate team. So, we have done a lot in the last year. And yes, we are – again, as I said, we are very excited for what 2016 or 20th birthday year is going to hold for us.

Great, thank you and happy birthday. Happy 20th.

Okay, thanks.

Thank you. [Operator Instructions] We will go to Chad Cooper with Digital Offering.

Hey, Jen.

Hi, Chad.

At the beginning of the call, there was a lot of background noise, but I guess, it’s just the train leaving the station.

Yes, yes. Our headquarters are right beside the train tracks. It makes it handy. We are in a good neighborhood though. Starbucks headquarters are right in Street 2, so they have chosen this.

Yes, they should be in the craft business too. So, I have a couple of questions. First, on 7-Eleven, kind of easy to do the math on what that sort of initial shipment will look like if you make some assumptions on how many cases they are ordering. But how have you as the CEO gotten comfortable in terms of like planning beyond that first order for follow-on orders and what that I guess consumption might look like? And I am not asking you for guidance, but more how are you thinking about follow-on orders and that kind of thing?

Well, fortunately, we have a strong team here and I would actually like Eric Chastain to answer that, because he is very much watching this everyday. And so I watch it with him, but he is the one that’s living, breathing. So, I am going to let Eric join the call.

Sure. Yes, thank you, Jennifer and nice to talk to you, Chad. So, we have – we have developed an intimate relationship with 7-Eleven. And we – it’s in the truth this is the word. We talk with them daily, sometimes, hourly. So, we are tracking it very, very, very closely and we are reacting and adjusting plans as necessary. We know there are levers that can be pulled and strings that can be pulled when we need to react depending on the regions that we are focusing on. So, we have got this tight connection with 7-Eleven and there is a constant flow of communication going back and forth. So, as the program unfolds and develops, we will be compared to react however we need to.

Yes. And we do have a long history of co-packing relationships, too, that Eric has built over the years and we are using – we can react pretty quickly.

Yes. Again, the relationships run deep on all parts of the supply chain. We have got again – the great thing about Jones is that we have got this emotional connection with our consumers, also with our supply chain partners and we have got partners that we have been with for the 20 years that we have been doing this who want to see us succeed and want to be a part of it. And they are an integral part of what we are doing here. So yes, Jennifer is absolutely right.

So I mean, look, this is a new product for you and 7-Eleven. It’s a new business line for you from a private label standpoint. I guess, the question is like do you guys know within a few thousand cases or whatever what demand beyond the first order is going to look like?

At this point, no, it’s just way too early to tell. It’s just way too early to tell. It’s, again, as you know, it’s just getting us there. So, it’s just we do not see...

But in like the discussions with 7-Eleven prior like did they give you some sort of indication of what they think this would look like on like a rollout basis or is this like look we have never done this and let’s just see what happens?

No, no, no, no, they are a well-oiled machine. They have given us some guidelines about what to expect, but we are – we know how to manage our build up of our inventory. In fact, we know how to do this. We have done it for so many years. We balance purchasing our raw materials with the expectations in volume. And then this is a new package in plastic. So, we – the carbonation can sweep out a little bit more. So, we need to make sure that we don’t produce too much initially, because we want absolutely fresh product, too. So, yes, it’s – no, they have given us numbers and we are working with those numbers, but also know how to try to analyze it ourselves, but make some assumptions, but just also make sure we have enough products for this whole launch and then just watch it as it goes and determine the pickup rate. And it’s – yes, we are not offering a complete darkness.

Okay. And this next question, I mean, obviously, it’s very early to talk about this, but I think it’s important. In the discussion, because you have been talking to 7-Eleven and working with them on this for, I think 18 months or something like that, have they talked about like that if this successful, a rollout beyond North America?

I mean, we are all – we are very – me and the private brand team are very excited with what we created. We are also trying to focus on the success of the U.S. and get and focus on that. We have got a big program of promotions and fun things that we are both going to be doing, and then I would love to think that if it’s super successful in the U.S. it can go elsewhere, but I don’t want to….

We are focused on the success of the current opportunity.

Yes.

Good, okay. Do you know how many global locations they have?

I believe it’s about 58,000.

Okay.

I mean – I don’t want to be – I don’t want to say that this exact product can roll into whether it would or not, it’s better also too, there is different formulations for different countries, but again, we are focused on the United States right now.

Yes, I understand. Shifting gears to Lemoncocco real quick, on like a unit basis, what is the gross margin of that product look like?

Well, we don’t give out specifics on the gross margin of each of our brands, but it was created to allow us a little bit more increase. We definitely created it to make sure that we could improve our gross margin, but it’s too early to tell all there. We don’t know – Jones Soda was created this way, too, with the stock package, but then you’d -- but you’ll learn how much. You got to be – provide deals for the retailers, which is the reduction to revenue. So again, I’d be remiss and say exactly what the gross profit margin would improve to or not based on this new product. Because again, there’s so many unknown variables right now.

Okay. I mean, is that like – I bought it here in Southern California in Bristol Farms. Like, can you talk about what that gross margin sale looks like? And we can make our own assumptions as to whether that will roll out beyond that or is that not something you are comfortable talking about?

Well, yes, I can’t sort of make an assumption. Bristol – we sell through a distributor that sells to Bristol Farms as the chain that takes a cut, and then we determine sales, but we – the price is right now what it is at Bristol Farms, but we will be supporting them with promotions throughout the year, which will be a reduction to revenue. And we are – we will be evaluating an ongoing rate to determine what it needs, again, I think as long as it’s too early to tell, but we are excited with what we created and the potential to work from both revenue and margin.

Last question for me would be, I guess, on just the core Jones product. You mentioned, 2016, you’ll see a return to growth. Can you just talk a little bit about that? I mean, is that a combination of sort of reinvigorating yield distribution channels? Is some of that direct accounts like whatever – is someone other than 7-Eleven, can you just add some color to that?

Well, yes, I mentioned that we do presentations in the fourth quarter every year and we are looking to add some new retailers. We are going to be testing – we have got – we are going to be testing to other new trade promotions now that we’ve got some stability and try to allow the price to the consumer to come down a little bit. But again, we are constantly presenting to retailers and again, the end of the year, 2016. We have been – we added some retailers in 2015, which obviously played a role in our growth. And we continue to do that with every year, we do this. And we are continually looking to add new distributors, looking to add new retailers. So yes, we are confident the business is going in the right direction, and yes.

Got it. Well, again, to echo the first two callers, congrats to you and the whole team there. Good to see the good guys winning.

Yes. Thank you, Chad. That’s a good way to say it. I agree. This team deserves a big win. It’s been a long, long haul. So I agree.

And we will go to Tom Parks.

Hi, Jennifer.

Hi.

Jennifer, thank you for reading you guys are done. I have been a long time investor. I just have a couple of questions and I hope that everybody realizes the sculling in that the enormity of this 7-Eleven thing is – it’s getting it right, I guess, is the main thing. And I’m sure that’s what you and your whole team are working on. Anytime you deal with 8,000 locations, that’s just not a walk in the park, and so you have to satisfy this people. I’ve been doing that type of business. I realize what you must be going through. So, but...

Yes, it’s – I want to say though, 7-Eleven has been a great partner. And yes, we have – everyone here has stood up and shown and show on, really I – 7-Eleven has definitely profiled us as a premium partner and a best-in-class and a lot of different things and that is by just us working 24 hours a day to really, really make it work.

Excellent. I just have a couple of quick questions. On occasion, I have seen you and Costco for periods of time. Is that something that is going to continue or you are still looking at that, number one? Number two, do you think there will ever be an opportunity for the fountain in Costco at anytime or is that being looked at?

I think that’s a great idea, Tom, the fountain in Costco.

Because – we will talk – the thing is, Costco always wants. What they want is the best and you have the best. And so I don’t see why that would – obviously, I have dealt with Costco and I know how difficult it is to demand on what to do and so forth, but they are always looking for the best product. And of course, you have the best product. And I would love to see that in there, as would you, I’m sure, but is that being looked at with the buyers and so forth?

Well, to answer your first question, Costco is sort of a regional program review and we both – most of their...

Regional and corporate, yes.

Yes, region means you sort of go in and you go out and you determine which region or their price wants to play with. But yes, it’s I mean – yes, we will be definitely – Costco is in our neighborhood, so it would be great to do something. But again, we are not naïve. I am going to be honest, Tom. I am sure it’s Coke or Pepsi I am not sure which one. Pepsi, they have it. So again, I am really – I will look forward to the day that we can land those. But in the meantime, while we don’t have the pocketbooks that a Coke or Pepsi have, we just want to go softly and show what we do in a really good way for Jones and then land one of those down the road.

And as I realize they are very demanding. I put product in Costco myself in my business for 10 years. And so I know they are demanding and it’s very difficult. And I know how just to deal with him and so forth. But once you get it, of course, it’s a great business. But anyway, Jennifer, your whole crew, thank you. Appreciate what you are doing. I have been a stockholder for quite some time. I plan on continuing and I just thank you for all your efforts, guys.

Okay, thank you, Tom for sticking with us.

Take care. Okay, bye-bye.

Bye.

And we will go to Brett Moll.

Yes, how is it going guys?

Good. Thank you, Brett.

Yes, I just wanted to call actually in the past I talked about the website and I know you guys were struggling a bit. There were some out of stuff talk or whatnot. These were dating back probably a year or two and I have been checking it continuously. And I am – I got to commend you guys that you saw the recent website upgrades and whatnot. And my question is have you seen traction? Have you seen an uptick in sales on the website since all the upgrades?

Yes, I didn’t mention that on the call. We just completed it. We are just going through some final tweaks and conversion, but we are definitely – and I have to give credit to one of our employees, Cathy Smith. This is what Jones attract is you get people that are so passionate about it. She just took it upon herself, came to myself and Eric and presented a whole new concept for a website that she did on the weekends herself. She designed it. She did everything herself. She is motivated because she is on commission, and online business is what you’ll get. So she said she needed a new web presence, and she needed it quick. So she just went and created this beautiful lifestyle website and made it more functional. And definitely, our conversion is up. We are seeing the results of a better website.

Well, I respect that. I also – I guess, I respect the commission thing. That’s smart and that’s good for her that she did that. A great change there. So, I just want to congratulate you guys on the quarter. Congratulations on the good news.

Okay. Thanks a lot, Brett.

Got it.

[Operator Instructions] We will hear now from Daniel Baxter.

Hello, Jennifer.

Hi, Daniel.

Great conference call. Fantastic. The best I have heard in a long time.

Okay, great. Thank you.

I have a question for you. Have you locked up the pure cane sugar as far as the year goes, have you locked in the prices?

You know what I am going to pass this over to Eric who manages this whole thing for us.

Yes, we manage those commodities very, very closely. We watch them and track them daily and we are locked up for the year. We were fortunate enough to, through our efforts, secure our needs for the year and beyond at quite favorable rates, so yes.

Awesome, awesome. Yes, that’s what I was looking at, because I see that you guys have so much going on in, I think in the way the prices go up and down and they vary in different – from time-to-time wherever they are getting it from, the pure cane sugar or the fructose, whatever you are using in your products. So, I just was wondering about that and that’s a key thing. And how about your packaging, have you guys get that all under control as far as pricing goes and everything for the year or is that like based on orders or how do you work on that?

We – as I spoke to earlier, we have got great relationships throughout the supply chain with some key suppliers who we have worked with for years and years and years. And we work with them to negotiate the best possible pricing that we can ongoing. It’s not an annual thing for us. It’s something that we look at every single day. And we have got a network of resources that we can turn to. If we feel like something isn’t going in the right direction, we have got other levers we can pull to optimize what we are getting to our cost of raw materials.

Okay, fantastic. That’s awesome. Alright, I just want to thank you guys again for doing a great job and great conference call. Thank you so much.

Thank you. And with no additional questions in the queue, I will go ahead and turn things back over to our speakers for any additional or closing remarks.

Sorry, I didn’t quite hear what you were saying there, Catherine, but I presume you are going to send it back to us.

Yes, ma’am.

So okay, thank you. Anyway, we want to thank you all again for your interest in Jones Soda and we will – our conference calls, our quarterly earnings, I would like to talk with first Thursday of the month following the quarter. We will next regroup doing our first quarter 2016 results in May. Thanks a lot and we will talk to you in May.

Thank you. And ladies and gentlemen, once again, that does conclude today’s conference. Thank you all, again, for your participation.