What changed in this filing

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Item 1A. Risk Factors

2021-11-10 compared with 2021-08-12 · 25 added, 22 removed, 120 unchanged (28% of the section changed)

1 unchanged sentence

in our Annual Report on Form 10-K for the year ended December 31, 2020, except as set forth below:

There can be no assurance that we will be able to consummate the transactions described in the Term Sheet and any such failure would have a material adverse impact on our financial condition, business results and prospects.

As previously disclosed, we recently entered into the Term Sheet and intends to consummate the Plan of Arrangement transaction and an offering of Subscription Receipts. 

The Term Sheet is intended to express only a mutual indication of interest in the Plan of Arrangement and corresponding offering of Subscription Receipts and does not represent a legally binding commitment or obligation on the part of the parties, and there can be no assurances that either the Plan of Arrangement or the offering of Subscription Receipts will be consummated.

The terms of the Plan of Arrangement and corresponding offering of Subscription Receipts must be set forth in a definitive agreement.

There are no assurances that we will be successful in negotiating an acceptable definitive agreement, when or whether a definitive agreement will be reached between the parties, or that the proposed Plan of Arrangement and/or corresponding offering of Subscription Receipts will be consummated.

Even if a definitive agreement is executed, the terms of the proposed Plan of Arrangement and/or corresponding offering of Subscription Receipts may change materially from the terms set forth in the Term Sheet.

There will be many conditions to closing, many of which are outside of the parties’

The recent resignation of our independent accounting firm could delay our future SEC filings and adversely affect our business.

As previously disclosed, on September 9, 2021, BDO USA, LLP resigned as our independent registered public accounting firm, and on September 30, 2021, through and with the approval of our audit committee, we appointed Armanino LLP as our new independent registered public accounting firm. 

The process of engaging and onboarding a new accounting firm can be costly and time consuming for management.  While we do not expect the change in auditors to delay our future filings with the SEC, such a delay is possible if we are unable to timely engage and onboard the new accounting firm.

These events could adversely affect our financial condition and results of operations or impact our ability to obtain financing.

There can be no assurance that we will be able to consummate the transactions described in the Arrangement Agreement and any such failure would have a material adverse impact on our financial condition, business results and prospects.

As previously disclosed, we recently entered into the Arrangement Agreement with Pinestar and we intend to consummate the Arrangement with Pinestar, and Pinestar intends to consummate an offering of Subscription Receipts. There are no assurances that the proposed Arrangement and/or corresponding offering of Subscription Receipts will be consummated.

There are many conditions to the closing of the Arrangement, many of which are outside of the parties’

control and it cannot be predicted whether these conditions will be satisfied.

There are no assurances when or if closing will occur, even if the parties successfully negotiate and sign a definitive agreement, and there are many factors that may cause the closing to not occur, including matters discovered by the parties as they complete their respective due diligence investigation of the other parties. 

In addition, the parties may not recognize the anticipated benefits of the Plan of Arrangement, which may be affected by, among other things, the ability to meet the listing standards of any Canadian stock exchange following the consummation of the Plan of Arrangement, costs related to the proposed Plan of Arrangement, the timing of the completion of the Plan of Arrangement, our ability to execute our plans to develop and market cannabis-infused beverages and edibles and the timing and costs of the development of this new product line, our estimates of the size of the markets for our potential cannabis products, potential litigation involving the company, global economic conditions, geopolitical events and regulatory changes, and access to additional financing.

Other factors include the possibility that the Plan of Arrangement does not close, including due to the failure to receive required security holder and/or court approvals, or the failure of other closing conditions. Any failure of the Plan of Arrangement and offering of Subscription Receipts to close would have a material adverse impact on our financial condition, business results and prospects.

There are no assurances when or if closing will occur, and there are many factors that may cause the closing to not occur. 

In addition, the parties may not recognize the anticipated benefits of the Arrangement, which may be affected by, among other things, the ability to meet the listing standards of any Canadian stock exchange following the consummation of the Arrangement, costs related to the proposed Arrangement, the timing of the completion of the Arrangement, our ability to execute our plans to develop and market cannabis-infused beverages and edibles and the timing and costs of the development of this new product line, our estimates of the size of the markets for our potential cannabis products, potential litigation involving the company, global economic conditions, geopolitical events and regulatory changes, and access to additional financing.

Other factors include the possibility that the Arrangement does not close, including due to the failure to receive required security holder and/or court approvals, or the failure of other closing conditions. Any failure of the Arrangement and offering of Subscription Receipts to close would have a material adverse impact on our financial condition, business results and prospects.

The terms of the Arrangement Agreement require changes in our board of directors, which may have a material adverse impact on our operations.

The Arrangement Agreement provides that upon the closing of the Arrangement, our board of directors will consist of Jamie Colbourne, Mark Murray, Clive Sirkin, Paul Norman, Alex Spiro and an additional director to be determined by us. 

This represents a material change in the composition of our board. 

Leadership transitions may cause disruption to our business, result in operational and administrative inefficiencies and added costs, and adversely affect our corporate governance, internal controls, enterprise risk management, business models and strategic priorities.

In addition, we may experience a loss of institutional knowledge about our company and historical operations, which could have a material adverse impact on our business condition.

The terms of the Convertible Debenture limit our ability to take certain actions.

Under the terms of the Convertible Debenture, we are subject to certain affirmative covenants, including the requirement that we make payments in a timely manner, perform the other covenants under the Convertible Debenture, maintain our corporate existence, conduct our business in material compliance with applicable laws, use the proceeds for the costs and expenses related to the Plan of Arrangement and to pursue the production of cannabis-containing beverages and related products, maintain our books and records, pay our taxes, maintain our insurance, provide notice of any event of default, and reserve and keep available sufficient shares for issuance upon the conversion of the Convertible Debt and the warrants issued in connection with the Convertible Debenture. 

Under the terms of the Convertible Debenture, we are subject to certain affirmative covenants, including the requirement that we make payments in a timely manner, perform the other covenants under the Convertible Debenture, maintain our corporate existence, conduct our business in material compliance with applicable laws, use the proceeds for the costs and expenses related to the Arrangement and to pursue the production of cannabis-containing beverages and related products, maintain our books and records, pay our taxes, maintain our insurance, provide notice of any event of default, and reserve and keep available sufficient shares for issuance upon the conversion of the Convertible Debenture and the warrants issued in connection with the Convertible Debenture. 

In addition, we agreed not to take certain actions without the approval of the debentureholder.

3 unchanged sentences

(d) changing the strategy or principal lines of our business;

(e) liquidating, dissolving or winding up the affairs of the Company;

(e) liquidating, dissolving or winding up our affairs;

(f) entering into any transaction with any affiliate, officer, director, employee or holder of more than five percent (5%) of our capital stock, calculated on a fully diluted basis;

3 unchanged sentences

If requested by us, the debentureholder may elect not to allow us to take these actions.

In the event that we are unable to take these actions, the interests of the Company and our shareholders may be materially and adversely affected.

In the event that we are unable to take these actions, our interests and those of our shareholders may be materially and adversely affected.

We may  

7 unchanged sentences

If we cannot continue operations, our shareholders would likely lose most or all of their investment in us.

Our repayment obligations under the Convertible Debenture would be accelerated if the Plan of Arrangement is not completed.

If for whatever reason the Plan of Arrangement is terminated, or either we or Pinestar gives notice to the debentureholder that the Plan of Arrangement is unlikely to occur within seven months from the date of the Convertible Debenture, all outstanding principal and accrued and unpaid interest under the Convertible Debenture becomes due and payable within 60 days of such termination/notification date. 

Since there are no assurances that we will be successful in negotiating an acceptable definitive agreement concerning the Plan of Arrangement, and  even if a definitive agreement is negotiated and executed, completion of the Plan of Arrangement will be subject to several conditions, many of which are outside our control, there is a significant risk that the Plan of Arrangement will not be consummated, which would require us to repay the entire principal amount of the Convertible Debenture on an accelerated basis.

Our repayment obligations under the Convertible Debenture would be accelerated if the Arrangement is not completed.

If for whatever reason the Arrangement is terminated, or either we or Pinestar gives notice to the debentureholder that the Arrangement is unlikely to occur within seven months from the date of the Convertible Debenture, all outstanding principal and accrued and unpaid interest under the Convertible Debenture becomes due and payable within 60 days of such termination/notification date. 

Since completion of the Arrangement will be subject to several conditions, many of which are outside our control, there is a significant risk that the Arrangement will not be consummated, which would require us to repay the entire principal amount of the Convertible Debenture on an accelerated basis.

We may not have sufficient cash reserves or have access to sufficient liquid funds to be able to cover such an obligation within such accelerated timeline, which would materially adversely affect our business and impact our ability to continue our operations.

 Even if sufficient funds were then available, making such a large payment could materially adversely affect our financial condition or results of operations and we may not be able to continue operations. 

If we cannot continue operations, our shareholders would likely lose most or all of their investment in us.

76 unchanged sentences

(Previously filed with, and incorporated herein by reference to, Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, filed on November 8, 2013).

2011 Equity Incentive Plan, as readopted 

(Previously filed with, and incorporated herein by reference to, Exhibit 10.1 to our Current Report on Form 8-K, filed on May 19, 2021).

5.00% Senior Unsecured Convertible Debenture due July 14, 2023 (Previously filed with, and incorporated herein by reference to, Exhibit 10.1 to our Current Report on Form 8-K, filed on July 20, 2021).

Registration Rights Agreement dated July 14, 2021 between the Company and SOL Verano Blocker 1 LLC (Previously filed with, and incorporated herein by reference to, Exhibit 10.2 to our Current Report on Form 8-K, filed on July 20, 2021). 

Arrangement Agreement dated October 18, 2021 between the Company and Pinestar Gold Inc.

(Previously filed with, and incorporated herein by reference to, Exhibit 10.1 to our Current Report on Form 8-K, filed on October 22, 2021).

Certification of Chief Executive Officer, pursuant to Rules 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

13 unchanged sentences

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 thereunto duly authorized.

August 12, 2021

November 10, 2021

JONES SODA CO.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors