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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended June 30, 2007



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the Transition Period From  to

Commission File Number 0-28820



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Jones Soda
Co.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                                     
|-------------------------------------------------------------- |  | ----------------------------------------------------
|Washington                                                     |  | 91-1696175                                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)             
|                                                               | 
|234 9th Avenue North Seattle, Washington 98109                 |  | (206) 624-3357                                      
|(Address of principal executive office)                        |  | (Registrants telephone number, including area code)



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Indicate by check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file for such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated
filer ̈Accelerated filer  x    Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

As of June 30, 2007, the issuer had 26,128,046 shares of common stock outstanding.



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JONES SODA CO.

FORM 10-Q



|                                                       |  |                                                                                                                                                                     |  |     
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Index                                                  |  |                                                                                                                                                                     |  | Page
|EXPLANATORY NOTE                                       |  | 3                                                                                                                                                                  
|                                                       | 
|CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS |  | 3                                                                                                                                                                  
|                                                       | 
|PART I. FINANCIAL INFORMATION                          |  |                                                                                                                                                                    
|                                                       |  |                                                                                                                                                                    
|Item 1                                                 |  | Financial Statements                                                                                                                                                |  |     
|                                                       |  |                                                                                                                                                                    
|                                                       |  | a) Consolidated Balance Sheets as of June 30, 2007 (Unaudited) and December 31, 2006                                                                                |  | 4   
|                                                       |  |                                                                                                                                                                    
|                                                       |  | b) Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006 (Unaudited)                                                      |  | 5   
|                                                       |  |                                                                                                                                                                    
|                                                       |  | c) Consolidated Statements of Shareholders Equity and Comprehensive Income for the six months ended June 30, 2007 (Unaudited) and the year ended December 31, 2006 |  | 6   
|                                                       |  |                                                                                                                                                                    
|                                                       |  | d) Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (Unaudited)                                                                |  | 7   
|                                                       |  |                                                                                                                                                                    
|                                                       |  | e) Notes to Interim Consolidated Financial Statements                                                                                                               |  | 8   
|                                                       |  |                                                                                                                                                                    
|Item 2                                                 |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                               |  | 12  
|                                                       |  |                                                                                                                                                                    
|Item 3                                                 |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                                          |  | 20  
|                                                       |  |                                                                                                                                                                    
|Item 4                                                 |  | Controls and Procedures                                                                                                                                             |  | 20  
|                                                       | 
|PART II. OTHER INFORMATION                             |  |                                                                                                                                                                    
|                                                       |  |                                                                                                                                                                    
|Item 1A                                                |  | Risk factors                                                                                                                                                        |  | 20  
|                                                       |  |                                                                                                                                                                    
|Item 4                                                 |  | Submission of Matters to a Vote of Shareholders                                                                                                                     |  | 21  
|                                                       |  |                                                                                                                                                                    
|Item 6                                                 |  | Exhibits                                                                                                                                                            |  | 22  



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EXPLANATORY NOTE

Unless otherwise indicated or the context otherwise requires, all references in this Report on Form 10-Q to
we, us, our, and the Company are to Jones Soda Co., a Washington corporation, and its wholly owned subsidiaries Jones Soda Co. (USA) Inc., Jones Soda (Canada) Inc., myJones.com Inc. and Whoopass USA
Inc.

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

We desire to take advantage of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. This Report on Form 10-Q contains a number of forward-looking statements that reflect managements current views and expectations with respect to our business, strategies, products,
future results and events and financial performance. All statements made in this Report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates
will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results and
non-historical information, are forward looking statements. In particular, the words believe, expect, intend, anticipate, estimate, may, will, variations of such
words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.

Readers should not place undue reliance on these forward-looking statements, which are based on managements current expectations and projections about future
events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below) and apply only as of the date of this Report. Our actual results, performance or achievements could differ
materially from historical results as well the results expressed in, anticipated or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below in
Risk Factors as well as those discussed elsewhere in this Report, and the risks discussed in our most recently filed Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to
time which attempt to advise interested parties of the risks and factors that may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JONES SODA CO. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2007 with comparative figures for December 31, 2006



|                                                                      |  |               |            |   |                   |   |            |  
|--------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                      |  | June 30, 2007 |            |   | December 31, 2006 |  
|                                                                      |  | (Unaudited)   |            |   |                   |  
|Assets                                                                |  |               |            |   |                   |   |            |  
|Current assets:                                                       |  |               |            |   |                   |   |            |  
|Cash and cash equivalents                                             |  | $             | 15,167,271 |   |                   | $ | 13,905,870 |  
|Short-term investments                                                |  |               | 15,374,969 |   |                   |   | 16,318,510 |  
|Accounts receivable                                                   |  |               | 5,835,458  |   |                   |   | 6,914,422  |  
|Inventory (note 3)                                                    |  |               | 7,865,433  |   |                   |   | 5,783,067  |  
|Deferred income tax asset (note 7)                                    |  |               | 1,520,000  |   |                   |   | 1,507,145  |  
|Prepaid expenses                                                      |  |               | 1,926,952  |   |                   |   | 712,690    |  
|                                                                      |  |               |            |   |                   |   |            |  
|                                                                      |  |               | 47,690,083 |   |                   |   | 45,141,704 |  
|Deferred income tax asset (note 7)                                    |  |               | 3,714,719  |   |                   |   | 427,993    |  
|Capital assets                                                        |  |               | 1,580,573  |   |                   |   | 756,618    |  
|Other assets                                                          |  |               | 1,277,259  |   |                   |   | 1,414,138  |  
|Intangible assets                                                     |  |               | 186,923    |   |                   |   | 211,931    |  
|                                                                      |  |               |            |   |                   |   |            |  
|                                                                      |  | $             | 54,449,557 |   |                   | $ | 47,952,384 |  
|                                                                      |  |               |            |   |                   |   |            |  
|Liabilities and Shareholders Equity                                  |  |               |            |   |                   |   |            |  
|Current liabilities:                                                  |  |               |            |   |                   |   |            |  
|Accounts payable and accrued liabilities                              |  | $             | 6,746,362  |   |                   | $ | 5,446,953  |  
|Current portion of capital lease obligations                          |  |               | 169,279    |   |                   |   | 70,471     |  
|Taxes payable                                                         |  |               | 3,010      |   |                   |   | 150,141    |  
|                                                                      |  |               |            |   |                   |   |            |  
|                                                                      |  |               | 6,918,651  |   |                   |   | 5,667,565  |  
|                                                                      |  |              
|Capital lease obligations, less current portion                       |  |               | 544,436    |   |                   |   | 15,329     |  
|                                                                      |  |              
|Shareholders equity                                                  |  |               |            |   |                   |   |            |  
|Common stock:                                                         |  |               |            |   |                   |   |            |  
|Authorized: 100,000,000 common stock, no par value                    |  |               |            |   |                   |   |            |  
|Issued and outstanding: 26,128,046 common shares (2006  25,637,4911) |  |               | 43,224,509 |   |                   |   | 41,890,777 |  
|Additional paid-in capital                                            |  |               | 6,108,639  |   |                   |   | 2,832,865  |  
|Accumulated other comprehensive income                                |  |               | 104,451    |   |                   |   | 96,016     |  
|Deficit                                                               |  |               | (2,451,129 | ) |                   |   | (2,550,168 | )
|                                                                      |  |               |            |   |                   |   |            |  
|                                                                      |  |               | 46,986,470 |   |                   |   | 42,269,490 |  
|                                                                      |  |               |            |   |                   |   |            |  
|                                                                      |  | $             | 54,449,557 |   |                   | $ | 47,952,384 |  
|                                                                      |  |               |            |   |                   |   |            |  

See accompanying notes to interim consolidated financial statements.



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JONES SODA CO. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

Three months and six months ended June 30, 2007 and 2006



|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|-------------------------------------------------------------- |  | -------------------------------- | ---------- | - | -------------------------------- | - | ---------- | ------------------------------ |  | - | ------------------------------ | - |  | - | ---------- | -
|                                                               |  | Three months ended June 30, 2007 |            |   | Three months ended June 30, 2006 |   |            | Six months ended June 30, 2007 |  |   | Six months ended June 30, 2006 |  
|Revenue - net                                                  |  | $                                | 13,012,473 |   |                                  | $ | 10,025,978 |                                |  | $ | 22,200,512                     |   |  | $ | 18,786,358 |  
|Cost of goods sold                                             |  |                                  | 8,563,343  |   |                                  |   | 6,219,655  |                                |  |   | 14,235,221                     |   |  |   | 11,860,365 |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Gross profit                                                   |  |                                  | 4,449,130  |   |                                  |   | 3,806,323  |                                |  |   | 7,965,291                      |   |  |   | 6,925,993  |  
|Licensing revenue                                              |  |                                  | 47,797     |   |                                  |   | 146,481    |                                |  |   | 193,743                        |   |  |   | 284,052    |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|                                                               |  |                                  | 4,496,927  |   |                                  |   | 3,952,804  |                                |  |   | 8,159,034                      |   |  |   | 7,210,045  |  
|Operating expenses (1) :                                       |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Promotion and selling                                          |  |                                  | 3,474,142  |   |                                  |   | 1,992,670  |                                |  |   | 5,832,863                      |   |  |   | 4,107,493  |  
|General and administrative                                     |  |                                  | 1,526,638  |   |                                  |   | 1,124,430  |                                |  |   | 3,257,808                      |   |  |   | 2,222,016  |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|                                                               |  |                                  | 5,000,780  |   |                                  |   | 3,117,100  |                                |  |   | 9,090,671                      |   |  |   | 6,329,509  |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Earnings (loss) before interest income and income taxes        |  |                                  | (503,853   | ) |                                  |   | 835,704    |                                |  |   | (931,637                       | ) |  |   | 880,536    |  
|Interest income, net:                                          |  |                                  | 416,269    |   |                                  |   | 100,637    |                                |  |   | 857,356                        |   |  |   | 113,347    |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Earnings (loss) before income tax                              |  |                                  | (87,584    | ) |                                  |   | 936,341    |                                |  |   | (74,281                        | ) |  |   | 993,883    |  
|Income tax benefit (expense) (note 7)                          |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Current                                                        |  |                                  | (150,587   | ) |                                  |   | (105,480   | )                              |  |   | (146,860                       | ) |  |   | (160,480   | )
|Deferred                                                       |  |                                  | 278,897    |   |                                  |   | 1,482,934  |                                |  |   | 320,180                        |   |  |   | 1,482,934  |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|                                                               |  |                                  | 128,310    |   |                                  |   | 1,377,454  |                                |  |   | 173,320                        |   |  |   | 1,322,454  |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Earnings for the period                                        |  | $                                | 40,726     |   |                                  | $ | 2,313,795  |                                |  | $ | 99,039                         |   |  | $ | 2,316,337  |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Earnings per share, basic                                      |  | $                                | 0.00       |   |                                  | $ | 0.10       |                                |  | $ | 0.00                           |   |  | $ | 0.10       |  
|Earnings per share, diluted                                    |  | $                                | 0.00       |   |                                  | $ | 0.10       |                                |  | $ | 0.00                           |   |  | $ | 0.10       |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Weighted average number of common stock                        |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Basic                                                          |  |                                  | 25,771,972 |   |                                  |   | 22,891,891 |                                |  |   | 25,782,275                     |   |  |   | 22,321,479 |  
|Diluted                                                        |  |                                  | 26,385,734 |   |                                  |   | 23,991,489 |                                |  |   | 26,311,614                     |   |  |   | 23,324,830 |  
|(1)     Includes non-cash stock-based compensation as follows: |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  
|Promotion and selling                                          |  | $                                | 131,084    |   |                                  | $ | 102,530    |                                |  | $ | 199,088                        |   |  | $ | 218,540    |  
|General and administrative                                     |  | $                                | 194,334    |   |                                  | $ | 150,195    |                                |  | $ | 334,230                        |   |  | $ | 420,888    |  
|                                                               |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |   |            |  

See accompanying notes to interim consolidated financial statements.



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JONES SODA CO. AND SUBSIDIARIES

Consolidated Statements of Shareholders Equity and Comprehensive Income

Six months ended June 30, 2007 (Unaudited)

Year ended December 31,
2006



|                                                                                         |  |              |  |                            |            |  |                                               |           |   |         |   |         |                            |  |   |            |   |  |   |            |  
|---------------------------------------------------------------------------------------- |  | ------------ |  | -------------------------- | ---------- |  | --------------------------------------------- | --------- | - | ------- | - | ------- | -------------------------- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                         |  | Common stock |  | Additional paid-in capital |            |  | Accumulated other comprehensive income (loss) |           |   | Deficit |   |         | Total shareholders equity | 
|                                                                                         |  |              |  |                            |           
|                                                                                         |  | Number       |  | Amount                     |            |  |                                               |          
|Balance, December 31, 2005                                                               |  | 21,616,596   |  | $                          | 12,491,133 |  | $                                             | 764,622   |   |         | $ | 107,752 |                            |  | $ | (7,016,872 | ) |  | $ | 6,346,635  |  
|Cumulative effects of adjustments resulting from the adoption of SAB No. 108             |  |              |  |                            |            |  |                                               |           |   |         |   |         |                            |  |   | (107,735   | ) |  |   | (107,735   | )
|Shares issued for PIPE                                                                   |  | 3,157,895    |  |                            | 28,077,350 |  |                                               |          |   |         |   |        |                            |  |   |           |   |  |   | 28,077,350 |  
|Options exercised                                                                        |  | 863,000      |  |                            | 1,223,950  |  |                                               |          |   |         |   |        |                            |  |   |           |   |  |   | 1,223,950  |  
|Stock options exercised, including benefits                                              |  |             |  |                            | 98,344     |  |                                               | 1,011,116 |   |         |   |        |                            |  |   |           |   |  |   | 1,109,460  |  
|Stock-based compensation expense                                                         |  |             |  |                            |           |  |                                               | 1,057,127 |   |         |   |        |                            |  |   |           |   |  |   | 1,057,127  |  
|Other comprehensive income, unrealized loss on available-for-sale short-term investments |  |             |  |                            |           |  |                                               |          |   |         |   | (11,736 | )                          |  |   |           |   |  |   |           |  
|Earnings for the year                                                                    |  |             |  |                            |           |  |                                               |          |   |         |   |        |                            |  |   | 4,574,439  |   |  |   |           |  
|Comprehensive income for the year                                                        |  |             |  |                            |           |  |                                               |          |   |         |   |        |                            |  |   |           |   |  |   | 4,562,703  |  
|                                                                                         |  |              |  |                            |            |  |                                               |           |   |         |   |         |                            |  |   |            |   |  |   |            |  
|Balance, December 31, 2006                                                               |  | 25,637,491   |  | $                          | 41,890,777 |  | $                                             | 2,832,865 |   |         | $ | 96,016  |                            |  | $ | (2,550,168 | ) |  | $ | 42,269,490 |  
|Options exercised                                                                        |  | 490,555      |  |                            | 1,109,991  |  |                                               |          |   |         |   |        |                            |  |   |           |   |  |   | 1,109,991  |  
|Stock-based compensation expense                                                         |  |             |  |                            |           |  |                                               | 533,318   |   |         |   |        |                            |  |   |           |   |  |   | 533,318    |  
|Exercise of stock options                                                                |  |             |  |                            | 223,741    |  |                                               | (223,741  | ) |         |   |        |                            |  |   |           |   |  |   |           |  
|Tax benefit on option exercise                                                           |  |             |  |                            |           |  |                                               | 2,966,197 |   |         |   |        |                            |  |   |           |   |  |   | 2,966,197  |  
|Other comprehensive income, unrealized loss on available-for-sale short-term investments |  |             |  |                            |           |  |                                               |          |   |         |   | 8,435   |                            |  |   |           |   |  |   |           |  
|Earnings for the period                                                                  |  |             |  |                            |           |  |                                               |          |   |         |   |        |                            |  |   | 99,039     |   |  |   |           |  
|Comprehensive income for the period                                                      |  |              |  |                            |            |  |                                               |           |   |         |   |         |                            |  |   |            |   |  |   | 107,474    |  
|                                                                                         |  |              |  |                            |            |  |                                               |           |   |         |   |         |                            |  |   |            |   |  |   |            |  
|Balance, June 30, 2007                                                                   |  | 26,128,046   |  | $                          | 43,224,509 |  | $                                             | 6,108,639 |   |         | $ | 104,451 |                            |  | $ | (2,451,129 | ) |  | $ | 46,986,470 |  
|                                                                                         |  |              |  |                            |            |  |                                               |           |   |         |   |         |                            |  |   |            |   |  |   |            |  

See accompanying notes to interim consolidated financial statements.



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JONES SODA CO. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

Six months ended June 30, 2007 and 2006



|                                                          |  |                                |            |   |                                |   |            |  
|--------------------------------------------------------- |  | ------------------------------ | ---------- | - | ------------------------------ | - | ---------- | -
|                                                          |  | Six months ended June 30, 2007 |            |   | Six months ended June 30, 2006 |  
|Cash flows from (used in) operating activities:           |  |                                |            |   |                                |   |            |  
|Earnings for the period                                   |  | $                              | 99,039     |   |                                | $ | 2,316,337  |  
|Items not involving cash:                                 |  |                                |            |   |                                |   |            |  
|Depreciation and amortization                             |  |                                | 288,728    |   |                                |   | 118,983    |  
|Deferred income taxes                                     |  |                                | (320,180   | ) |                                |   | (1,482,934 | )
|Stock based compensation expense                          |  |                                | 533,318    |   |                                |   | 639,428    |  
|Changes in assets and liabilities:                        |  |                                |            |   |                                |   |            |  
|Accounts receivable                                       |  |                                | 1,078,964  |   |                                |   | (1,079,943 | )
|Inventory                                                 |  |                                | (2,082,366 | ) |                                |   | 154,665    |  
|Prepaid expenses                                          |  |                                | (1,214,262 | ) |                                |   | (313,274   | )
|Taxes payable                                             |  |                                | (147,131   | ) |                                |   | 143,472    |  
|Accounts payable and accrued liabilities                  |  |                                | 1,299,409  |   |                                |   | 859,973    |  
|                                                          |  |                                |            |   |                                |   |            |  
|Net cash from operating activities                        |  |                                | (464,481   | ) |                                |   | 1,356,707  |  
|Cash flows from (used in) investing activities:           |  |                                |            |   |                                |   |            |  
|Sale of short-term investments                            |  |                                | 938,770    |   |                                |   |           |  
|Purchase of capital assets                                |  |                                | (278,056   | ) |                                |   | (177,009   | )
|Purchase of intangible assets                             |  |                                |           |   |                                |   | (160,027   | )
|                                                          |  |                                |            |   |                                |   |            |  
|Net cash from (used in) investing activities              |  |                                | 660,714    |   |                                |   | (337,036   | )
|Cash flows from (used in) financing activities:           |  |                                |            |   |                                |   |            |  
|Repayment of capital lease obligations                    |  |                                | (44,823    | ) |                                |   | (59,193    | )
|Net proceeds from PIPE                                    |  |                                |           |   |                                |   | 28,113,000 |  
|Proceeds from exercise of options                         |  |                                | 1,109,991  |   |                                |   | 688,065    |  
|                                                          |  |                                |            |   |                                |   |            |  
|Net cash from financing activities                        |  |                                | 1,065,168  |   |                                |   | 28,741,872 |  
|                                                          |  |                                |            |   |                                |   |            |  
|Net increase in cash and cash equivalents                 |  |                                | 1,261,401  |   |                                |   | 29,761,543 |  
|Cash and cash equivalents, beginning of period            |  |                                | 13,905,870 |   |                                |   | 1,176,101  |  
|                                                          |  |                                |            |   |                                |   |            |  
|Cash and cash equivalents, end of period                  |  | $                              | 15,167,271 |   |                                | $ | 30,937,644 |  
|                                                          |  |                                |            |   |                                |   |            |  
|Cash paid (received) during the period:                   |  |                                |            |   |                                |   |            |  
|Interest (received)                                       |  | $                              | (813,040   | ) |                                | $ | (117,562   | )
|Income tax paid                                           |  |                                | 288,405    |   |                                |   | 17,013     |  
|                                                          |  |                               
|Supplemental Disclosure of non-cash financing activities: |  |                                |            |   |                                |   |            |  
|Assets acquired under capital lease                       |  | $                              | 672,737    |   |                                |   |           |  

See accompanying notes to interim consolidated financial statements.



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JONES SODA CO. AND SUBSIDIARIES

Notes to Interim Consolidated Financial Statements

Six months ended June 30, 2007 and 2006 (Unaudited)



|1. | Nature and continuance of operations:
|-- | -------------------------------------

Jones Soda Co. develops, produces, markets, licenses and distributes premium beverages and related
products. Our primary product lines include the brands Jones Pure Cane Soda Co.®, Jones Organics, a ready to drink organic tea,
Jones Energy, a high energy drink, WhoopAss, a high energy drink, Jones Naturals, a non-carbonated juice and tea drink and Jones 24C, an enhanced water beverage. We are a Washington corporation and our corporate offices are located at
234 9thAvenue North, Seattle, Washington. We have three operating subsidiaries, Jones Soda Co. (USA) Inc., Jones Soda (Canada) Inc., and myJones.com Inc.,
as well as one non-operating subsidiary, Whoopass USA Inc.



|2. | Significant accounting policies:
|-- | --------------------------------



| | (a) | Basis of presentation:
| | --- | ----------------------

These interim consolidated
financial statements have been prepared using generally accepted accounting principles in the United States of America (GAAP) and United States Securities and Exchange Commission (SEC) rules and regulations applicable to
interim financial reporting.

The financial statements include our company and our wholly-owned subsidiaries accounts. All significant
inter-company accounts and transactions have been eliminated on consolidation.

The accompanying unaudited interim consolidated financial
statements are prepared in accordance with GAAP but do not include all information and footnotes required by GAAP for annual financial statements. However, in the opinion of management, all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for the relevant periods have been made. Results for the interim period are not necessarily indicative of the results to be expected for the full fiscal year or for any
other interim period. These financial statements should be read in conjunction with the summary of accounting policies and the notes to the consolidated financial statements for the year ended December 31, 2006, as amended by note 2(f) below,
included in our annual report on Form 10-K/A.



| | (b) | Use of estimates:
| | --- | -----------------

The preparation of the consolidated
financial statements requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include the carrying amount of inventory, capital assets and intangible assets, valuation allowances
for receivables, stock-based compensation expense, valuation allowance for deferred income tax assets and state and city taxes. Actual results could differ from those estimates.



| | (c) | Seasonality:
| | --- | ------------

Our sales are seasonal and we experience
significant fluctuations in quarterly results as a result of many factors. We generate a substantial percentage of our revenues during the warm weather months of April through September. Timing of customer purchases will vary each year and sales can
be expected to shift from one quarter to another. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or
results expected for the fiscal year.



| | (d) | Advertising:
| | --- | ------------

We expense advertising costs as incurred.
During the three-month period ended June 30, 2007, we incurred advertising costs of $2,130,698 (2006-$1,248,610).



| | (e) | Cash and cash equivalents:
| | --- | --------------------------

We consider all highly liquid
and short-term investments with a maturity date at purchase of three months or less to be cash equivalents.



| | (f) | Income taxes:
| | --- | -------------

In June 2006, the FASB issued
Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in a companys financial



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statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition threshold and
measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.

We and our subsidiaries file income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2003. However, net operating losses
not yet utilized can be subject to adjustment by the Internal Revenue Service (IRS). We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial
to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the financial statements as interest expense. There is no material interest expense or penalties accrued at June 30,
2007. We believe that we have appropriate support for the income tax positions taken and to be taken on our tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past
experience and interpretations of tax law applied to the facts of each matter. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48.

We adopted the provisions of FIN 48 on January 1, 2007. The adoption of FIN 48 did not impact the consolidated financial condition, results of
operations or cash flows. As of June 30, 2007, we are evaluating the deductibility of stock option expenses not included in previously filed tax returns. To the extent these unrecognized potential tax benefits may be ultimately recognized, they
will impact the effective tax rate in a future period.



| | (g) | Recently issued accounting Pronouncements
| | --- | -----------------------------------------

In February
2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 which is effective for
fiscal years beginning after November 15, 2007. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items
for which the fair value option has been elected will be reported in earnings. We are currently evaluating the potential impact of this statement.



| | (h) | Reclassifications
| | --- | -----------------

Certain prior year amounts have been
reclassified to conform to the presentation adopted in the current period.



|3. | Inventory:
|-- | ----------

Inventory has been stated at the lower
of cost and estimated net realizable value and include adjustments for estimated obsolescence. Cost is determined principally using actual cost on a first-in first-out basis. Finished goods inventory older than 12 months is considered obsolete and
expensed as cost of goods sold.



|               |  |               |           |                   |   |          
|-------------- |  | ------------- | --------- | ----------------- | - | ---------
|               |  | June 30, 2007 |           | December 31, 2006
|Finished goods |  | $             | 5,863,291 |                   | $ | 2,919,396
|Raw materials  |  |               | 2,002,142 |                   |   | 2,863,671
|               |  |               |           |                   |   |          
|               |  | $             | 7,865,433 |                   | $ | 5,783,067
|               |  |               |           |                   |   |          



|4. | Segmented information and export sales:
|-- | ---------------------------------------

We operate
in one industry segment, with operations during 2007 primarily in the United States and Canada. During the six-month period ended June 30, 2007 sales in the United States were approximately $19,395,000 (2006$16,027,000), sales in Canada
were approximately $2,531,000 (2006$2,720,000), and sales to other countries totaled approximately $274,000 (2006$39,000). Sales have been assigned to geographic locations based on the location of customers.



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|5. | Earnings per share:
|-- | -------------------

The computation for basic and
diluted earnings per share is as follows:



|                                                     |  |                             |            |                           |   |            |  |      |            |  |   |           
|---------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                     |  | Three months ended June 30, |            | Six months ended June 30,
|                                                     |  | 2007                        |            | 2006                      |   | 2007       |  | 2006
|Earnings for the period                              |  | $                           | 40,726     |                           | $ | 2,313,795  |  | $    | 99,039     |  | $ | 2,316,337 
|Weighted average number of common stock outstanding: |  |                             |            |                           |   |            |  |      |            |  |   |           
|Basic                                                |  |                             | 25,771,972 |                           |   | 22,891,891 |  |      | 25,782,275 |  |   | 22,321,479
|Dilutive stock options                               |  |                             | 613,762    |                           |   | 1,099,598  |  |      | 529,339    |  |   | 1,003,351 
|                                                     |  |                             |            |                           |   |            |  |      |            |  |   |           
|Diluted                                              |  |                             | 26,385,734 |                           |   | 23,991,489 |  |      | 26,311,614 |  |   | 23,324,830
|Earnings per share:                                  |  |                             |            |                           |   |            |  |      |            |  |   |           
|Basic                                                |  | $                           | 0.00       |                           | $ | 0.10       |  | $    | 0.00       |  | $ | 0.10      
|Diluted                                              |  | $                           | 0.00       |                           | $ | 0.10       |  | $    | 0.00       |  | $ | 0.10      



|6. | Shareholders equity:
|-- | ---------------------



| | (a) | Common stock:
| | --- | -------------

On June 8, 2006, we completed a
private placement in public equity (PIPE) of 3,157,895 shares of our common stock at a price of $9.50 per share, and received $28,077,350 in net proceeds after underwriting costs and expenses.



| | (b) | Stock options:
| | --- | --------------

A summary of our stock option activity is
as follows:



|                             |  |                     |   |  |                        |        |  
|---------------------------- |  | ------------------- | - |  | ---------------------- | ------ | -
|                             |  | Outstanding options |  
|                             |  | Number of shares    |   |  | Average exercise price |       
|Balance at December 31, 2005 |  | 1,782,000           |   |  | $                      | 1.83   |  
|Option granted               |  | 585,400             |   |  |                        | 7.08   |  
|Options exercised            |  | (863,000            | ) |  |                        | (1.42  | )
|Options cancelled            |  | (80,375             | ) |  |                        | (5.02  | )
|                             |  |                     |   |  |                        |        |  
|Balance at December 31, 2006 |  | 1,424,025           |   |  |                        | 4.05   |  
|Option granted               |  | 339,500             |   |  |                        | 19.19  |  
|Options exercised            |  | (490,555            | ) |  |                        | (2.26  | )
|Options cancelled            |  | (23,375             | ) |  |                        | (13.98 | )
|                             |  |                     |   |  |                        |        |  
|Balance at June 30, 2007     |  | 1,249,595           |   |  | $                      | 8.68   |  
|                             |  |                     |   |  |                        |        |  
|Exercisable, June 30, 2007   |  | 738,774             |   |  | $                      | 4.28   |  
|                             |  |                     |   |  |                        |        |  

The following table summarizes information about stock options outstanding and exercisable under
the Plans at June 30, 2007:



|                |  |                    |  |                                                     |  |                                 |       |                    |         |                                                     |      |                                 |   |     
|--------------- |  | ------------------ |  | --------------------------------------------------- |  | ------------------------------- | ----- | ------------------ | ------- | --------------------------------------------------- | ---- | ------------------------------- | - | ----
|                |  | Number outstanding |  | Weighted average remaining contractual life (years) |  | Weighted average exercise price |       | Number exercisable |         | Weighted average remaining contractual life (years) |      | Weighted average exercise price
|$0.25 to $0.50  |  | 80,000             |  | 0.78                                                |  | $                               | 0.30  |                    | 80,000  |                                                     | 0.78 |                                 | $ | 0.30
|$1.10 to $2.99  |  | 142,500            |  | 1.38                                                |  | $                               | 2.00  |                    | 142,500 |                                                     | 1.38 |                                 | $ | 2.00
|$3.00 to $4.00  |  | 236,250            |  | 2.45                                                |  | $                               | 3.98  |                    | 236,250 |                                                     | 2.45 |                                 | $ | 3.98
|$4.01 to $5.01  |  | 11,875             |  | 3.11                                                |  | $                               | 5.01  |                    | 11,875  |                                                     | 3.11 |                                 | $ | 5.01
|$5.01 to $9.33  |  | 452,470            |  | 3.94                                                |  | $                               | 7.22  |                    | 268,149 |                                                     | 3.76 |                                 | $ | 6.90
|$9.34 to $22.95 |  | 326,500            |  | 4.85                                                |  | $                               | 19.21 |                    |        |                                                     |     |                                 |   |    
|                |  |                    |  |                                                     |  |                                 |       |                    |         |                                                     |      |                                 |   |     
|                |  | 1,249,595          |  |                                                     |  | $                               | 8.68  |                    | 738,774 |                                                     |      |                                 | $ | 4.28



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The total intrinsic value for options exercised during the three and six months ended June 30, 2007
was $7,465,000 and $9,325,000, respectively. The total intrinsic value for options exercised during the three and months ended June 30, 2006 was $195,000 and $1,883,000, respectively.

The aggregate intrinsic value of options outstanding at June 30, 2007 was $6,670,000 and for options exercisable was $7,198,000.

During the six-month period ended June 30, 2007, no modifications were made to outstanding stock options, and there were no stock-based compensation
costs capitalized as part of the cost of any asset.

(c) Stock-based compensation expense:

SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions. The expected life selected for options granted during the quarter represents the period of time that the options are expected to be outstanding based on historical data of option holder exercise and
termination behavior. Expected volatilities are based upon historical volatility of our monthly stock closing prices over a period equal to the expected life of each option grant. The risk-free interest rate was selected based on yields from
Government Bond yields with a term equal to the expected term of the options being valued.



|                                       |  |                             |  |                           |  |            |  |        
|-------------------------------------- |  | --------------------------- |  | ------------------------- |  | ---------- |  | -------
|                                       |  | Three months ended June 30, |  | Six months ended June 30,
|                                       |  | 2007                        |  | 2006                      |  | 2007       |  | 2006   
|Expected dividend yield                |  |                            |  |                          |  |           |  |       
|Expected stock price volatility Basic  |  | 55.0%                       |  | 48%                       |  | 55.0%      |  | 48%    
|Risk-free interest rate                |  | 4.87%                       |  | 5.16%                     |  | 4.87%      |  | 5.16%  
|Expected term (in years)               |  | 2.75 years                  |  | 3 years                   |  | 2.75 years |  | 3 years
|Weighted-average grant date fair-value |  | $4.88                       |  | $2.26                     |  | $4.88      |  | $1.86  

Under the terms of our stock option plan, our Board of Directors may grant options to employees,
officers, directors and consultants. The plan provides for granting of options at the fair market value of our stock at the grant date. Historically, options generally vested over a period of eighteen months, with the first 25% vesting at the date
of grant and the balance vesting in equal amounts every six months thereafter. Effective during the quarter ended September 30, 2006, we changed the vesting schedule for our prospective stock option grants, to vest over a period of forty-two
months, with the first 1/7 vesting six months from the grant date and the balance vesting in equal amounts every six months thereafter. We determine the term of each option at the time it is granted. Options granted generally have a five-year term.

At June 30, 2007, we had $2,529,000 of unrecognized compensation expense related to stock options, which we expect to recognize over a
weighted-average period of up to 34 months.



|7. | Income Taxes:
|-- | -------------

We account for income taxes in
accordance with SFAS 109, Accounting for Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements which
differ from our tax returns.

In assessing whether and to what extent we may realize deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during periods in which those
temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Historically, we did not believe we met the
criteria to recognize deferred tax assets, and accordingly, we provided a full valuation allowance.

During the second quarter of 2006, we
re-evaluated our valuation allowance after recording taxable income for two successive years and we determined that is more likely than not we would realize the deferred tax assets. Accordingly, during the three months ended June 30, 2006, we
recorded a tax benefit of $1,482,934 by reversing a significant portion of the valuation allowance and recording the tax benefit. No such tax benefit was recorded in the three-month period ended June 30, 2007.

The current and deferred tax provision rates are calculated at the effective federal statutory rate, taking into consideration expected permanent
differences, state income taxes, and alternative minimum taxes.



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A portion of our granted options qualify as incentive stock options (ISO) for income tax purposes. As
such, a tax benefit is not recorded at the time the compensation cost related to the options is recorded for book purposes due to the fact that an ISO does not ordinarily result in a tax benefit unless there is a disqualifying disposition. Stock
option grants of non-qualified options result in the creation of a deferred tax asset, which is a temporary difference, until the time the option is exercised. Due to the treatment of incentive stock options for tax purposes, our effective tax rate
during any quarter is subject to variability.

Tax deductions associated with stock option exercises related to grants vesting prior to
January 1, 2006 are credited to shareholders equity. Tax deductions in excess of prior book expenses under FAS123R associated with stock option exercises related to grants vesting on or after January 1, 2006 are also credited to
shareholders equity. The reductions of income taxes payable resulting from the exercise of employee stock option programs that were credited to shareholders equity were approximately $2,312,000 and $2,966,000 for the three and six months
ended June 30, 2007, respectively. There were no similar reductions for the same periods in 2006.



|8. | Commitments
|-- | -----------



|                        |  |       |        |                  |   |           |  |           |       |  |   |      
|----------------------- |  | ----- | ------ | ---------------- | - | --------- |  | --------- | ----- |  | - | -----
|Payments due by
period 
|(Dollars in Thousands ) |  | Total |        | Less than 1 Year |   | Years 2-3 |  | Years 4-5
|Purchase Obligations    |  | $     | 11,294 |                  | $ | 6,988     |  | $         | 2,068 |  | $ | 2,238
|                        |  |       |        |                  |   |           |  |           |       |  |   |      

During the quarter ended June 30, 2007 we had commitments aggregating approximately
$11,294,000, which represent commitments made by us to various suppliers of raw materials and finished goods, commitments to co-packers for production equipment and pouring rights at Qwest Field under our Sponsorship Agreement with the Seattle
Seahawks. These obligations vary in terms.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the
following discussion and analysis in conjunction with our consolidated financial statements and related notes included elsewhere in this Report. Except for historical information, the following discussion contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. See Cautionary Notice Regarding Forward Looking Statements above.

Overview

We develop, produce, market and distribute New Age or Premium beverages. We currently
produce, market and distribute six unique beverage brands:



| |  |  | Jones Pure Cane Soda, a premium soda;
| | - |  | ----------------------------------------



| |  |  | Jones Organics, a ready-to-drink organic tea;
| | - |  | ----------------------------------------------



| |  |  | Jones Energy, a citrus energy drink;
| | - |  | -------------------------------------



| |  |  | WhoopAss, a citrus energy drink;
| | - |  | ---------------------------------



| |  |  | Jones Naturals, a non-carbonated juice &
tea; and
| | - |  | --------------------------------------------------



| |  |  | Jones 24C, an enhanced water beverage.
| | - |  | ---------------------------------------

We currently sell and distribute our products throughout the United States and Canada through our network of independent
distributors (DSD) and our national retail accounts (DTR), as well as through licensing and distribution arrangements.

We also participate
in the carbonated soft drink (CSD) industry through distribution and sales of our 12-ounce cans of Jones Pure Cane Soda through National Beverage Corp. in grocery and mass merchant channels in the U.S.

We are a Washington corporation and our principal place of business is located at 234 Ninth Avenue North, Seattle, Washington 98109. Our telephone number
is (206) 624-3357.



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Critical Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates including, among others, those affecting revenues, the allowance for doubtful accounts, the salability of inventory and the useful lives of tangible and intangible assets, valuation
allowances for receivables, stock-based compensation expense, valuation allowances for deferred income taxes and liabilities and state and city taxes. The discussion below is intended as a brief discussion of some of the judgments and uncertainties
that can impact the application of these policies and the specific dollar amounts reported on our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions
or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many
risks and uncertainties, including those discussed below and elsewhere in this Report. We do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances.

We have identified below some of our accounting policies that we consider critical to our business operations and the understanding of our results of
operations. This is not a complete list of all of our accounting policies, and there may be other accounting policies that are significant to us. For a detailed discussion on the application of these and our other accounting policies, see Note 2 to
the Consolidated Financial Statements included in this report and the summary of accounting policies and notes to the financial statements for the year ended December 31, 2006, included in our annual report on Form 10-K/A.

Revenue Recognition

We recognize
revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured.

Our products are sold to distributors, various customers and retailers for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, typically require payment
within 30 days of delivery. We recognize revenue upon receipt by our customers of our products, in accordance with written sales terms, net of provisions for discounts and allowances. All sales to distributors and customers are final sales and we
have a no return policy; however, in limited instances, due to credit issues or distributor changes, we may take back product.

We recognize revenue from the sale of concentrate to National Beverage Corp. on a gross basis and recognize income upon receipt of concentrate by National Beverage. The selling price and terms of sale of concentrate to National Beverage are
determined in accordance with our agreement with them. Our credit terms from the sale of concentrate typically require payment within 30 days of delivery. All sales of concentrate to National Beverage are final sales and we have a no
return policy with them.

Licensing revenue is recorded when we receive a sale confirmation from the third party, and reflect amounts
realized net of provisions for sales returns.

We provide for slotting fees or similar arrangements in accordance with Emerging Issues Task
Force Issue (EITF) No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products). This incentive is recognized as a reduction in revenue when payment
is made to the customer (or at the time we have incurred the obligation, if earlier) unless we receive a benefit over a period of time, in which case the incentive is recorded as an asset and is amortized as a reduction of revenue over the term of
the arrangement. Typically, we amortize slotting fees over a period of 12 months.

Cash consideration and promotion allowances (including
slotting fees) that we pay to customers or distributors are accounted for as a reduction of revenue when expensed or amortized in our statements of operations. For the six-month period ended June 30, 2007, our revenue was reduced by $336,893 on
account of cash considerations and promotion allowances, compared to a reduction of $95,259 in the comparable six-month period in 2006.

Allowance for Doubtful Accounts; Bad Debt Reserve

Management routinely estimates the collectibility of our accounts
receivable. Management analyzes accounts receivable, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for
doubtful accounts. In general, we have



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historically and continue today to provide an allowance for doubtful accounts equal to 100% of any unpaid balance outstanding greater than 90 days since
invoice, unless considered collectible. We believe that in general bad debt reserves for other companies in the beverage industry represent approximately 2% of total sales. Historically, our bad debt reserve has represented approximately 0.3% of
total sales. Bad debt expense is classified within general and administrative expenses in our Consolidated Statements of Operations.

Additionally, if we receive notice of a disputed receivable balance, we accrue such additional amount as management determines is reflective of the risk of non-collection. In considering the amount of bad debt allowance we rely heavily on
our history of no material write-offs and that our revenue is not dependent on one or a few customers, but is spread among a number of customers. However, other factors which could cause management to change its estimates would be a downturn in the
economy that management determines has the potential to affect collections if we see a greater concentration of our receivables from fewer customers. In such events, we may be required to record additional charges to cover this exposure. Material
differences may result in the amount and timing of our bad debt expenses for any period if management made different judgments or utilized different estimates.

Inventory

We hold raw materials and finished goods inventories, which are manufactured and procured
based on our sales forecasts. We value inventory at the lower of cost and estimated net realizable value, and include adjustments for estimated obsolescence, on a first in-first out basis. These valuations are subject to customer acceptance and
demand for the particular products, and our estimates of future realizable values based on these forecasted demands. We regularly review inventory detail to determine whether a write-down is necessary. We consider various factors in making this
determination, including recent sales history and predicted trends, industry market conditions and general economic conditions. Differences could result in the amount and timing of write-downs for any period if we make different judgments or use
different estimates. We also determine an allowance for obsolescence based on products that are over 12 months from production date. During the six months ended June 30, 2007, we increased inventory obsolescence provisions for HFCS raw material
and finished goods inventory to allow for estimated obsolescence, as we have now converted our production to Pure Cane Sugar. At June 30, 2007 we had an inventory obsolescence provision of $291,000 (2006-$56,000).

Deferred Income Taxes

The
determination of our provision of income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing, among other things, the timing and amounts
of deductible and taxable items. Prior to the second quarter of 2006, we maintained a valuation allowance for all of the U.S. and foreign deferred taxes (in accordance with SFAS 109, Accounting for Income Taxes) due to the uncertainty
regarding the full utilization of our deferred tax asset. With our improved profitability over the past three years, during which time we generated taxable income to utilize some of these loss carry-forwards, management determined it was more likely
than not that the deferred tax asset would be realized and has, as such, reversed the valuation allowance against U.S. federal deferred tax assets in second quarter of 2006. As at December 31, 2006, we had loss carryforwards of approximately
$4,024,000 that can be deducted against income in future periods.

We adopted the provisions of FIN 48 on January 1, 2007. The
adoption of FIN 48 did not impact the consolidated financial condition, results of operations or cash flows. We believe that we have appropriate support for the income tax positions taken and to be taken on our tax returns and that our accruals for
tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. Therefore, no reserves for uncertain income tax
positions have been recorded for the six-month period ended June 30, 2007 pursuant to FIN 48.

As of June 30, 2007, we
are evaluating the deductibility of stock option expenses not included in previously filed tax returns. To the extent these unrecognized potential tax benefits may be ultimately recognized, they will impact the effective tax rate in a future period.

Stock-based compensation

We have adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment (SFAS 123R), using the modified prospective transition method in 2006. Under this method, stock-based compensation expense is
recognized using the fair-value based method for all awards granted on or after the date of adoption. We have adopted the Black-Scholes option pricing model to estimate fair value of each option grant.



14



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##### Table of Contents

SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates.

Results of Operations for the Three and Six Months Ended June 30, 2007

Revenue



|                       |  |                             |        |      |                           |        |  |      |      |  |      |        |        |   |        |  |      |  
|---------------------- |  | --------------------------- | ------ | ---- | ------------------------- | ------ |  | ---- | ---- |  | ---- | ------ | ------ | - | ------ |  | ---- | -
|                       |  | Three months ended June 30, |        |      | Six months ended June 30, |       
|(Dollars in Thousands) |  | 2007                        |        | 2006 |                           | Change |  |      | 2007 |  | 2006 |        | Change |  
|Revenue                |  | $                           | 13,012 |      | $                         | 10,026 |  | 29.8 | %    |  | $    | 22,201 |        | $ | 18,787 |  | 18.2 | %

For the three months ended June 30, 2007, revenues were approximately $13,012,000, an
increase of $2,986,000, or 29.8% over the $10,026,000 in revenues for the three months ended June 30, 2006. The increase in revenues was primarily attributable to a) increased case sales through our DTR and DSD networks and b) sales of
concentrate to National Beverage Corp.

For the six-month period ended June 30, 2007, revenues were approximately $22,201,000, an
increase of $3,414,000, or 18.2%, over the $18,787,000 in revenues for the six-month period ended June 30, 2006. In addition to the factors listed for the three months ended June 30, 2007, this increase in revenue reflects a higher overall
price per case in 2007.

The increase in revenues in our DTR network was due to increased case sales to Panera Bread, as well as initial
shipments of Jones Pure Cane Soda bottles to Wal-mart, Sams Club and Ruby Tuesday. This was offset by the reduction of sales to Starbucks during the quarter, as Starbucks stopped purchasing Jones Pure Cane Soda for its stores in the U.S.

The overall increase in revenues in our DSD network during the quarter was due to increased case sales in the Northeast, Southwest and
Western Canada, although these increases were partially offset by decreased case sales in the Midwest and Northwest.

In addition, revenues
for 2007 include sales of 24C, our enhanced water beverage, for which we had no sales in the first six months of 2006.

Consolidated case
sales of all products (finished products and concentrate) for the six months ended June 30, 2007 expressed as 288-ounce equivalent cases were 3,445,000. This represents an increase of 1,859,000 cases or 117% over total case sales for the
comparable six-month period in 2006.

Concentrate case sales for 2007 include sales for concentrate of Jones Pure Cane Soda and Jones
Energy to National Beverage during the quarter and year-to-date. Concentrate case sales in 2006 consisted solely of sales during the second quarter of 2006 of Jones Energy concentrate to National Beverage for sale through Costco.

288-ounce equivalent case sales



|                             |  |                           |  |           |  |        |  
|---------------------------- |  | ------------------------- |  | --------- |  | ------ | -
|                             |  | Six months ended June 30, | 
|                             |  | 2007                      |  | 2006      |  | Change |  
|Finished products case sales |  | 1,544,666                 |  | 1,310,063 |  | 17.9   | %
|Concentrate case sales       |  | 1,900,419                 |  | 276,000   |  | 588.6  | %
|                             |  |                           |  |           |  |        |  
|Total case sales             |  | 3,445,085                 |  | 1,586,063 |  | 117.2  | %



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##### Table of Contents

Gross Profit



|                       |  |                             |       |   |                           |   |       |        |  |      |      |  |   |       |   |  |        |       |   |  |    |  
|---------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ----- | ------ |  | ---- | ---- |  | - | ----- | - |  | ------ | ----- | - |  | -- | -
|                       |  | Three months ended June 30, |       |   | Six months ended June 30, |  
|(Dollars in Thousands) |  | 2007                        |       |   | 2006                      |   |       | Change |  |      | 2007 |  |   | 2006  |   |  | Change |      
|Gross profit           |  | $                           | 4,449 |   |                           | $ | 3,806 |        |  | 16.9 | %    |  | $ | 7,965 |   |  | $      | 6,926 |   |  | 15 | %
|Percentage of revenue  |  |                             | 34.2  | % |                           |   | 38.0  | %      |  |      |      |  |   | 35.9  | % |  |        | 36.9  | % |  |    |  

For the three-month period ended June 30, 2007, gross profit increased by approximately
$643,000 or 16.9% over the $3,806,000 in gross profit for the three-month period ended June 30, 2006. For the three-month period ended June 30, 2007, gross profit as a percentage of revenue decreased to 34.2% from 38.0% for the comparable
period in 2006. The increase in gross profit was primarily attributable to increased case sales of bottles and increased sales of concentrate, which have higher margins than sales of finished goods.

The decrease in gross profit as a percentage of revenue for the three-month period ended June 30, 2007, was due to product mix and channel mix. Our
gross margins on DTR are lower than DSD and during the quarter we sold a higher proportion of DTR than the same period in 2006. We also increased provisions for the obsolescence of our high-fructose corn syrup (HFCS) inventory during this period.
For the three-month period ended June 30, 2007 we increased our inventory provisions by $219,000.

For the six-month period ended
June 30, 2007, gross profit increased by approximately $1,039,000 or 15.0% over the $6,926,000 in gross profit for the six-month period ended June 30, 2006. For the six-month period ended June 30, 2007, gross profit as a percentage of
revenue decreased to 35.9% from 36.9% for the comparable period in 2006. The increase in gross profit was also attributable to increased case sales of our 12 ounce bottles and increased sales on concentrate, which have higher margins than sales of
finished products.

The decrease in gross profit as a percentage of revenue for the six-month period ended June 30 2007, was also
attributable to product and channel mix, and increased provisions for the obsolescence of our high-fructose corn syrup (HFCS) inventory during this period.

Licensing Revenue



|                       |  |                             |      |      |                           |        |  |       |      |  |      |     |        |   |     |  |       |   
|---------------------- |  | --------------------------- | ---- | ---- | ------------------------- | ------ |  | ----- | ---- |  | ---- | --- | ------ | - | --- |  | ----- | --
|                       |  | Three months ended June 30, |      |      | Six months ended June 30, |       
|(Dollars in Thousands) |  | 2007                        |      | 2006 |                           | Change |  |       | 2007 |  | 2006 |     | Change |  
|Licensing revenue      |  | $                           | 48.0 |      | $                         | 146    |  | (67.1 | )%   |  | $    | 194 |        | $ | 284 |  | (31.7 | )%

Licensing revenue during the second quarter of 2007 was primarily due to our exclusive
arrangements with Big Sky Brands for Jones Soda Flavor Booster Hard Candy. Licensing revenue for the six-month period ended June 30, 2007 also included royalties on the sale of remaining HFCS inventory through Target Corporation. In contrast,
for the comparable periods in 2006, licensing revenue consisted primarily of royalty payments on the sale of 12-ounce cans pursuant to our exclusive licensing arrangement with Target Corporation that expired on December 31, 2006, and to a
lesser extent our licensing arrangement with Big Sky Brands.

For the three-month period ended June 30, 2007 we received royalty
payments under these arrangements of approximately $48,000 representing a decrease of 67.1% from the same period last year. For the six-month period ended June 30, 2007 we received royalty payments under these arrangements of approximately
$194,000 representing a decrease of 31.7% from the same period last year.



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##### Table of Contents

Total Operating Expenses



|                           |  |                             |       |   |                           |   |       |        |  |      |      |  |   |       |   |  |        |       |   |  |      |  
|-------------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ----- | ------ |  | ---- | ---- |  | - | ----- | - |  | ------ | ----- | - |  | ---- | -
|                           |  | Three months ended June 30, |       |   | Six months ended June 30, |  
|(Dollars in Thousands)     |  | 2007                        |       |   | 2006                      |   |       | Change |  |      | 2007 |  |   | 2006  |   |  | Change |      
|Promotion and selling      |  | $                           | 3,474 |   |                           | $ | 1,993 |        |  | 74.3 | %    |  | $ | 5,833 |   |  | $      | 4,108 |   |  | 42   | %
|General and administrative |  | $                           | 1,527 |   |                           | $ | 1,124 |        |  | 35.8 | %    |  | $ | 3,258 |   |  | $      | 2,222 |   |  | 46.6 | %
|                           |  |                             |       |   |                           |   |       |        |  |      |      |  |   |       |   |  |        |       |   |  |      |  
|Total operating expenses   |  | $                           | 5,001 |   |                           | $ | 3,117 |        |  | 60.4 | %    |  | $ | 9,091 |   |  | $      | 6,330 |   |  | 43.6 | %
|Percentage of revenue      |  |                             | 38.4  | % |                           |   | 31.1  | %      |  |      |      |  |   | 40.9  | % |  |        | 33.7  | % |  |      |  

Total operating expenses for the three-month period ended June 30, 2006 were approximately
$5,001,000, an increase of $1,884,000 or 60.4% over operating expenses of $3,117,000 for the three-month period ended June 30, 2006.

For the three-month period ended June 30, 2007, total operating expenses as a percentage of revenue increased to 38.4% from 31.1% over the comparable period in 2006. The increase in total operating expenses was primarily attributable
to an increase in promotion and selling expenses, depreciation, stock-based compensation expenses and general and administrative expenses.

Total operating expenses for the six-month period ended June 30, 2007 were approximately $9,091,000, an increase of $2,761,000 or 43.6% over operating expenses of $6,330,000 for the six-month period ended June 30, 2006. For the
six-month period ended June 30, 2007, total operating expenses as a percentage of revenue increased to 40.9% from 33.7% over the comparable period in 2006. The increase in total operating expenses was primarily attributable to an increase in
promotion and selling expenses, depreciation, stock-based compensation expenses and general and administrative expenses. Changes in promotion and general and administrative expenses are explained in greater detail below.

Promotion and Selling Expenses



|                       |  |                             |       |   |                           |   |       |        |  |      |      |  |   |       |   |  |        |       |   |  |      |  
|---------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ----- | ------ |  | ---- | ---- |  | - | ----- | - |  | ------ | ----- | - |  | ---- | -
|                       |  | Three months ended June 30, |       |   | Six months ended June 30, |  
|(Dollars in Thousands) |  | 2007                        |       |   | 2006                      |   |       | Change |  |      | 2007 |  |   | 2006  |   |  | Change |      
|Promotion and selling  |  | $                           | 3,474 |   |                           | $ | 1,993 |        |  | 74.3 | %    |  | $ | 5,833 |   |  | $      | 4,108 |   |  | 42.0 | %
|Percentage of revenue  |  |                             | 26.7  | % |                           |   | 19.9  | %      |  |      |      |  |   | 26.3  | % |  |        | 21.9  | % |  |      |  

Promotion and selling expenses for the three months ended June 30, 2007 were $3,474,000
representing an increase of $1,481,000 over promotion and selling expenses of $1,993,000 for the three-month period ended June 30, 2006. Promotion and selling expenses as a percentage of revenue increased to 26.7% for the three-month period
ended June 30, 2007 from 19.9% over the comparable period in 2006. The increase in promotion and selling expenses for the three months ended June 30, 2007 was due to an increase in the number of sales and marketing employees in the first
six months of 2007, resulting in overall increased compensation expense. Expenses for 2007 also include salaries for our Executive Vice President Sales and Marketing and Vice President Marketing, both of whom were hired in the second quarter of
fiscal 2007 and for which there were no comparable executive expenses in 2006. In addition, we incurred increased promotion and selling expenses for our DSD and CSD channels, such as Zumiez Couch Tour and various other marketing initiatives. By
contrast, promotion and selling expenses for the comparable periods of 2006 reflected a decrease in distributor programs within the DSD network from prior periods.

At June 30, 2007, we had 45 employees in sales and marketing compared to 30 such employees at June 30, 2006.

Promotion and selling expenses for the six-months ended June 30, 2007 were $5,833,000, representing an increase of $1,725,000 over promotion and selling expenses of $4,108,000 for the six-month period ended
June 30, 2006. Promotion and selling expenses as a percentage of revenue increased to 26.3% for the six-month period ended June 30, 2007 from 21.9% over the comparable period in 2006. The increase in promotion and selling expenses for the
six months ended June 30, 2007 was also due to the increase in sales and marketing employees and increased programs within our DSD and CSD channels.



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##### Table of Contents

General and Administrative Expenses



|                           |  |                              |   |  |                           |   |  |        |   |  |        |   |  |        |   |  |        |  
|-------------------------- |  | ---------------------------- | - |  | ------------------------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | -
|                           |  | Three months ended June 30 , |   |  | Six months ended June 30, |  
|(Dollars in Thousands)     |  | 2007                         |   |  | 2006                      |   |  | Change |   |  | 2007   |   |  | 2006   |   |  | Change |  
|General and administrative |  | $1,527                       |   |  | $1,124                    |   |  | 35.8   | % |  | $3,258 |   |  | $2,222 |   |  | 46.6   | %
|Percentage of revenue      |  | 11.7                         | % |  | 11.2                      | % |  |        |   |  | 14.7   | % |  | 11.8   | % |  |        |  

General and administrative expenses for the three-month period ended June 30, 2007 were
$1,527,000, representing an increase of $403,000, or 35.8% compared to $1,124,000 for the three-month period ended June 30, 2006. General and administrative expenses as a percentage of revenue increased to 11.7% for the three months ended
June 30, 2007 from 11.2% for the comparable period in 2006. The increase in general and administrative expenses was due to an increased in hiring in our operations department, an increase in legal and compliance costs, consulting fees related
to Sarbanes-Oxley Section 404 compliance, depreciation and amortization, stock-based compensation expenses and insurance costs.

General and administrative expenses for the six-month period ended June 30, 2007 were $3,258,000, representing an increase of $1,036,000, or 46.6% compared to $2,222,000 for the six-month period ended June 30, 2006. General and
administrative expenses as a percentage of revenue increased to 14.7% for the six-months ended June 30, 2006 from 11.8% for the comparable period in 2006. The increase in general and administrative expenses was due to a significant increase in
audit fees, an increase in tax consulting fees, consulting fees related to Sarbanes-Oxley Section 404 compliance, depreciation and amortization, directors fees, legal fees and compliance costs. This was offset by a decrease in stock-based
compensation expenses from the same period last year.

Interest income, net

For the three-month period ended June 30, 2007, interest income was approximately $416,000 compared to interest income of approximately $101,000 in
same period in 2006. For the six months ended June 30, 2007, interest income was approximately $857,000 compared to interest income of approximately $113,000 in same period in 2006. Interest income consists of interest income earned on cash
on-hand and short-term investments and increased cash from operations. Currently, cash and cash from operations are invested in money market and short-term fixed-income instruments. The increase in interest income is due to interest income on
investments from the net proceeds from our PIPE financing in June 2006.

Income taxes

The tax recovery for the three and six months ended June 30, 2007, is based on an expected annual effective tax rate of 37.50%, compared to a U.S.
statutory rate of 34%. The actual effective tax rate for the three and six month period ended June 30, 2007 differs due to the effect of stock option exercises that are not predictable in nature.

The tax provision for the three months ended June 30, 2006, is based on an effective tax rate of 39% compared to a U.S. statutory rate of 34%. The
tax provision was reduced primarily due to the reversal of the valuation allowance of deferred taxes in the amount of $1,483,000.

Our
effective tax rate is based on recurring factors, including the geographical mix of income before taxes and the related effective tax rates in those jurisdictions. In addition, our effective tax rate will change based on discrete or other
nonrecurring events that may not be predictable.

Net Income

Net income for the three and six months ended June 30, 2007 were approximately $41,000 and $99,000 respectively. This compares to net income of
$2,314,000 and $2,316,000 respectively, for the three and six months ended June 30, 2006. The decrease in net income for the comparable periods was due to an increase in gross profit from increased sales and which were offset by an increase in
operating expenses. Operating expenses increased due to increased trade promotion spending, increased expenses related to increased hiring in sales, marketing and operations departments, depreciation and amortization and compliance costs.



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##### Table of Contents

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments were approximately $30,542,000 as of June 30, 2007 compared to approximately $30,224,000 as of December 31, 2006. Net cash used in operating activities was
approximately $464,000 for the six-month period ended June 30, 2007, primarily for working capital items, such as inventory and prepaid expenses. The increase in inventory is due a seasonal buildup of inventory. The increase in prepaid expenses
is due to prepayments of insurance and promotion expenses. Investing activities provided approximately $661,000 for the six-month period ended June 30, 2007, primarily due to sale of short-term investments offset by purchases of capital assets
and other assets. Net cash provided by financing activities was approximately $1,065,000 for the six-month period ended June 30, 2007, and consisted of proceeds from the exercise of stock options.

On June 27, 2007, we extended our existing $5,000,000 revolving credit facility with Greater Bay Business Funding, a division of Greater Bay Bank
N.A., for a further two-month period, expiring August 25, 2007. The amount available for borrowing from time to time under the revolving line of credit is dependent upon the levels of our accounts receivable and inventory. Borrowings under the
credit facility bear interest at prime plus 0.5% per annum (8.25% at June 30, 2007). As of June 30, 2007, we had no borrowings outstanding on this line of credit. As of June 30, 2007, $191,000 included in cash and cash
equivalents was subject to a one-day hold with Greater Bay Business Funding to allow for the application of funds.

As of June 30,
2007, we had working capital of approximately $40,771,000 compared to working capital of approximately $39,474,000 as of December 31, 2006. Increase in working capital was due to increased levels of inventory, deferred income tax asset and
prepaid expenses.

We expect cash flows from operations, cash, cash equivalents, short-term investments and our revolving line of credit
will provide sufficient liquidity to meet our foreseeable cash requirements for operations, planned capital expenditures and slotting fees for at least the next twelve months.

Accounts receivable decreased from December 31, 2006 to June 30, 2007 from approximately $6,914,000 to approximately $5,835,000. This decrease
was primarily due to increased collections of receivables at quarter-end. Accounts payable increased from December 31, 2006 to June 30, 2007 from approximately $5,447,000 to approximately $ 6,746,000. This increase was primarily due to
increased accruals for purchases of inventory, services and trade promotion expenses at June 30, 2007.

During the quarter ended
June 30, 2007 we had commitments aggregating approximately $11,294,000, which represent commitments made by us to various suppliers of raw materials and finished goods, commitments to co-packers for production equipment and pouring rights at
Qwest Field under our Sponsorship Agreement with the Seattle Seahawks. These obligations vary in terms and commits us to payments from 2007 to 2011.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Seasonality

We have experienced significant
fluctuations in quarterly results that have been the result of many factors. In particular, like many other companies in the beverage industry, we generate a substantial percentage of our revenues during the warm weather months of April through
September. Management believes that the demand for our products will continue to reflect such seasonal consumption patterns. In addition, our operating results are highly dependent upon the performance of our independent distributors and retailers,
as well as competition in the industry and general economic conditions.

Due to these and other factors, our results of operations have
fluctuated from period to period. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance. While we look to
expand our distribution network and increase market penetration, however, such seasonality may not be easily discernible from results of operations. Due to all of the foregoing factors, our operating results in a particular quarter may fail to meet
market expectations.

Investor Relations

During the three months ended June 30, 2007, we conducted our investor relations activities with in-house personnel and with our investor relations consulting firm, Integrated Corporate Relations Inc. We sent out copies of news or
press releases, corporate brochures, made presentations at investor conferences and held a quarterly investor conference call.



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##### Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of our business, our financial
position is routinely subject to a variety of risks. The principal market risks to which we are exposed are competition within the beverage industry and fluctuations in energy and commodity prices affecting the cost of raw materials and also the
limited availability of certain raw materials and co-packer capacity. We are also subject to market risks with respect to the cost of commodities because of our ability to recover increased costs through higher pricing is limited by the competitive
environment in which we operate. We are subject to foreign exchange risk due our sales and co-packing operations in Canada, for which we do not currently engage in any foreign currency hedging activities. We are also subject to other risks
associated with the business environment in which we operate, including the collectibility of accounts receivable and obsolescence of inventory due to changes in market conditions or new product initiatives.

At June 30, 2007, the majority of our debt consisted of variable rate debt under our capital leases and we have no long-term debt. During the three months ended
June 30, 2007, we did not make any draws on our line of credit.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in our filings under the Securities Exchange Act of 1934 is (a) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and
(b) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our Chief
Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are
effective.

There has been no material change in our internal controls over financial reporting in connection with this evaluation that occurred during our
last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

Please see the discussion under Risk Factors contained in our Annual
Report on Form 10-K/A for the fiscal year ended December 31, 2006. In particular, our operating results may fluctuate due to a number of factors, including, but not limited to, the following:



| |  |  | including our ability to secure favorable and timely listing arrangements with retailers in the CSD channel, our ability to manage expenses of the CSD roll-out, our
ability to execute our CSD marketing programs, market acceptance of our products, and the impact of the can expansion on our other distribution channels;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to (i) develop and expand distribution channels, (ii) develop favorable arrangements with third party distributors of our products and
(iii) minimize or reduce issues associated with engaging new distributors, including, but not limited to, transition costs and expenses and down time resulting from the initial deployment of our products in each new distributors network;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to manage our operating expenses to sufficiently support general operating activities, promotion and sales activities, and capital expansion, and our
ability to sustain profitability;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to develop, expand and implement our direct-to-retail sales channels and national retail accounts, as well as our myjones programs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to increase distribution in our four core regions consisting of the Northwest, the Southwest, the Midwest and Western Canada, and our ability to expand
and manage distributor growth in areas outside of the core regions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unilateral decisions by distributors, grocery store chains, specialty chain stores, club stores, mass merchandisers and other customers to discontinue carrying all
or any of our products that they are carrying at any time;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competitive products and pricing pressures and our ability to gain or maintain share of sales in the marketplace as a result of actions by competitors; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to develop and market various products under our agreement with the Seattle Seahawks.
| | - |  | -------------------------------------------------------------------------------------------------



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##### Table of Contents

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

We held our 2007 annual meeting of shareholders on May 31,
2007. At the meeting, the shareholders voted on the following matters:

The shareholders elected the following six directors, receiving the number of votes
set forth opposite their respective names:



|                       |  |            |  |               
|---------------------- |  | ---------- |  | --------------
|                       |  | Votes For  |  | Votes Withheld
|Peter M. van Stolk     |  | 22,416,434 |  | 186,082       
|Scott Bedbury          |  | 22,048,395 |  | 554,121       
|Michael M. Fleming     |  | 22,330,665 |  | 271,851       
|John J. Gallagher, Jr. |  | 22,321,339 |  | 281,177       
|Stephen C. Jones       |  | 22,399,316 |  | 204,500       
|Richard S. Eiswirth Jr |  | 22,395,334 |  | 207,182       
|Alfred W. Rossow, Jr.  |  | 22,391,694 |  | 210,822       

The shareholders ratified the amendment to our 2002 Stock Option Plan and Restricted Stock Plan, by a vote of
6,374,755 shares for, 1,037,965 shares against and 140,041 shares abstaining.

The shareholders approved the adoption of the Companys 2007 Employee
Stock Purchase Plan, by a vote of 6,812,816 shares for, 624,810 shares against and 115,308 shares abstaining.

Finally, the shareholders approved and the
appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2007, by a vote of 22,168,291 shares for, 38,500 shares against and 396,824 shares abstaining.



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##### Table of Contents

ITEM 6. EXHIBITS



|       |  |                                                                                                                                                                                  
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Sponsorship Agreement among Jones Soda Co., Football Northwest, LLC (d/b/a Seattle Seahawks) and First & Goal, Inc. entered into May 22, 2007.                                   
|       | 
|10.2   |  | Employment offer letter with Peter Burns, dated April 3, 2007                                                                                                                    
|       | 
|31.1   |  | Certification of Peter M. van Stolk, Chief Executive Officer                                                                                                                     
|       | 
|31.2   |  | Certification of Hassan N. Natha, Chief Financial Officer                                                                                                                        
|       | 
|32.1   |  | Certification of Peter M. van Stolk, Chief Executive Officer of Jones Soda Co., pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|       | 
|32.2   |  | Certification of Hassan N. Natha, Chief Financial Officer of Jones Soda Co., pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   

---

| | Certain portions of this exhibit have been omitted and filed with the Commission
pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as amended.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

August 9, 2007



JONES SODA CO.By:

/s/ Peter M. van StolkPeter M. van Stolk President and Chief Executive
Officer (principal executive officer)By:

/s/ Hassan N. NathaHassan N. Natha Chief Financial Officer (principal financial and accounting officer)




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