What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-14 compared with 2021-03-24 · 59 added, 54 removed, 79 unchanged (59% of the section changed)

MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock currently trades on the OTCQB Marketplace under the symbol “JSDA.”

As of March 9, 2021, there were 64,360,806 shares of common stock issued and outstanding, held by approximately 226 holders of record, although there are a much larger number of beneficial owners.

Our common stock currently trades on the OTCQB Marketplace in the United States under the symbol “JSDA”

and on the Canadian Securities Exchange in Canada under the symbol “JSDA.”

As of March 7, 2022, there were 91,866,024 shares of common stock issued and outstanding, held by approximately 234 holders of record, although there are a much larger number of beneficial owners.

The last reported sale price per share on March 4, 2022 was $ 0.57.

SELECTED FINANCIAL DATA.

Not applicable.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We have not paid any dividends on our shares of common stock, and we do not anticipate paying any dividends in the foreseeable future.

Equity Compensation Plans

See “Equity Compensation Plan Information”

under “Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters”

for information on our equity compensation plans.

Recent Sales of Unregistered Securities

Issuer Purchases of Equity Securities

[RESERVED]. 

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

As described at the beginning of this Annual Report on Form 10-K, our actual results could differ materially from those anticipated in these forward-looking statements.

Factors that could contribute to such differences include those discussed at the beginning of this Report, below in this section and in the section above entitled “ Risk Factors.

As described at the beginning of this Annual Report on Form  

10-K, our actual results could differ materially from those anticipated in these forward-looking statements.

Factors that could contribute to such differences include those discussed at the beginning of this Report, below in this section and in the section above entitled “

Risk Factors.

You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Report.

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We also sell products in select international markets.

Our products are sold primarily in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street” in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several large retailers.

We refer to our network of independent distributors as our direct store delivery (“DSD”) channel, and we refer to our national and regional accounts who receive shipments directly from us as our direct to retail (“DTR”) channel.

Our products are sold primarily in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street”

in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several large retailers.

We do not directly manufacture our products, but instead outsource the manufacturing process to third-party contract manufacturers.

We also sell various products online, including soda with customized labels, wearables, candy and other items, and we license our trademarks for use on products sold by other manufacturers.

We also sell various products online, including soda with customized labels, wearables, candy and other items, and we license our trademarks for use on products sold by other manufacturers. In addition, following the closing of the Plan of Arrangement, we intend to use the proceeds from our recent financings for the purpose of expanding our business to the production of cannabis-containing beverages and related products.

Our focus is sales growth through execution of the following key initiatives:

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Expand our fountain program in the United States and Canada;

Release and grow the new product line of Tetrahydrocannabinol (THC) and cannabidiol (CBD)-infused beverages, edibles, and other related products;

Increase distribution of Lemoncocco in the United States and Canada.

In addition, we intend to pursue the development of new extensions to Jones products, including the potential commercialization of cannabidiol (CBD)-infused beverages.

Results of Operations

Years Ended December 31, 2021 and 2020

For the year ended December 31, 2020, revenue was approximately $11.9 million, an increase of $387,000, or 3.4%, from approximately $11.5 million in revenue for the year ended December 31, 2019.

This increase was primarily a result of increased DSD and DTR core bottled soda sales in the United States and Canada.

For the year ended December 31, 2021, revenue was approximately $14.8 million, an increase of $2.9 million, or 24.4%, from approximately $11.9 million in revenue for the year ended December 31, 2020.

This increase was primarily a result of increased core bottled soda sales in the United States and Canada.

Additionally, our fountain business returned to growth through increased sales in the food service channel.

For the year ended December 31, 2021, promotion allowances and slotting fees, which offset revenue, totaled approximately $1.4 million, a decrease of approximately $183,000, or 11.2%, from approximately $1.6 million in 2020.

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(Dollars in thousands)

For the year ended December 31, 2020, gross profit increased by $296,000, or 12.4%, to approximately $2.7 million compared to approximately $2.4 million for the year ended December 31, 2019, driven primarily by higher revenue during the year ended December 31, 2020 as compared to the year ended December 31, 2019 and more effective management over promotional allowance and slotting fees.

For the year ended December 31, 2021, gross profit increased by $1.7 million, or 64.2%, to approximately $4.4 million compared to approximately $2.7 million for the year ended December 31, 2020, driven primarily by higher revenue during the year ended December 31, 2021 as compared to the year ended December 31, 2020 and more effective management over promotional allowance and slotting fees.

For the year ended December 31, 2021, gross margin increased to 29.7% from 22.5% for the year ended December 31, 2020, due primarily to the decrease in trade spend and promotional allowances for the year ended December 31, 2021 in comparison to the year ended December 31, 2020.

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Selling and marketing expenses for the year ended December 31, 2021 were approximately $3.0 million, an increase of $424,000, or 16.4%, from approximately $2.6 million for the year ended December 31, 2020.

Selling and marketing expenses as a percentage of revenue increased to 21.7% for the year ended December 31, 2020 from 21.3% in 2019.

This increase was primarily a result of increased social and digital marketing expenditures incurred during the year in an effort to expand customer engagement.

We will continue to balance selling and marketing expenses with our working capital resources.

As revenue continues to increase, we expect that selling and marketing expenses will increase to support this growth.

Selling and marketing expenses as a percentage of revenue decreased to 20.3% for the year ended December 31, 2021 from 21.7% in 2020.

We will continue to work on balancing selling and marketing expenses with our working capital resources.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2021 were approximately $3.3 million, an increase of $374,000, or 12.8%, compared to approximately $2.9 million for the year ended December 31, 2020.

The increase was primarily due to an increase in insurance premiums, board fees, and consulting expenses.

General and administrative expenses as a percentage of revenue increased to 24.6% for the year ended December 31, 2020 from 19.9% in 2019.

We will continue to balance general and administrative expenses with our working capital resources.

The increase was primarily due to an increase in insurance premiums and an increase in headcount.

General and administrative expenses as a percentage of revenue decreased to 22.3% for the year ended December 31, 2021 from 24.6% in 2020.

We will continue work on balancing general and administrative expenses with our working capital resources.

Interest Expense

We incurred $225,000 of interest expense for the year ended December 31, 2021 compared to $151,000 for the year ended December 31, 2020.

This decrease was related to the conversion of Convertible Notes that occurred during the year ended December 31, 2019 that resulted in a higher amortization of the discount associated with the beneficial conversion feature on the Convertible Notes.

Additionally, this decrease was also due to interest we paid on our line of credit balance in 2019, which we were not required to pay in 2020.

Specifically, we allowed our line of credit to expire according to its terms in December 2019 and thus no interest was owed on the line of credit during the year ended December 31, 2020.

The interest expense incurred during the year ended December 31, 2020 was non-cash and primarily related to the amortization of the discount associated with the beneficial conversion feature on the Convertible Notes, along with the amortization of associated closing costs and interest related to the Convertible Notes.

For the years ended December 31, 2020 and 2019, cash paid for interest was $0 and $45,000, respectively, and was primarily related to our line of credit, which expired by its terms in December 2019.

This increase was primarily related to the accrued interest associated with the 2021 Debenture entered into in July 2021.

The interest expense incurred during the year ended December 31, 2020 was non-cash and primarily related to the amortization of the discount associated with the beneficial conversion feature on the 2018 Convertible Notes (as defined below), along with the amortization of associated closing costs and interest related to the 2018 Convertible Notes.

For the years ended December 31, 2021 and 2020, cash paid for interest was $0.

Interest Income

We earned approximately $4,000 of interest income for the year ended December 31, 2021, compared to $24,000 for the year ended December 31, 2020.

We experienced an increase in cash during July 2019 resulting from financing activities, the proceeds of which were deposited in an interest-bearing money market account and earned $50,000 of interest during 2019.

For the year ended December 31, 2021, the interest rates associated with this money market account decreased significantly, resulting in $4,000 of interest income for the year ended December 31, 2021.

Income Tax Expense

We had income tax expense of $27,000 for the year ended December 31, 2020 compared to $29,000 for 2019, primarily related to the tax provision on income from our Canadian operations.

We have not recorded any tax benefit for the loss in our U.S.

operations as we have recorded a full valuation allowance on our U.S.

net deferred tax assets.

We expect to continue to record a full valuation allowance on our U.S.

net deferred tax assets until we sustain an appropriate level of taxable income through improved U.S.

Our effective tax rate is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a full valuation allowance on our U.S.

net deferred tax assets.

Net loss for the year ended December 31, 2020 increased to approximately $3.0 million from a net loss of $2.8 million for the year ended December 31, 2019.

The increase in net loss was primarily due to the increased general and administrative expenses incurred during the year ended December 31, 2020, as described above, in comparison to the year ended December 31, 2019.

We had income tax expense of $27,000 for each of the years ended December 31, 2021 and 2020 primarily related to the tax provision on income from our Canadian operations.

We have not recorded any tax benefit for the loss in our U.S. operations as we have recorded a full valuation allowance on our U.S. net deferred tax assets.

We expect to continue to record a full valuation allowance on our U.S. net deferred tax assets until we sustain an appropriate level of taxable income through improved U.S. operations.

Net loss for the year ended December 31, 2021 decreased to approximately $1.8 million from a net loss of $3.0 million for the year ended December 31, 2020.

The decrease in net loss was primarily due to the increased revenue and gross profit during the year ended December 31, 2021, as described above, in comparison to the year ended December 31, 2020.

Liquidity and Capital Resources

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Net cash used in operations during fiscal years 2021 and 2020 totaled approximately $2.5 million and $1.5 million, respectively.

Net cash used in operations decreased primarily due to the timing of receivables and payables.

Net cash used in operations increased primarily due to the timing of receivables and payables.

Our cash flows vary throughout the year based on seasonality.

For the year ended December 31, 2021, net cash provided by financing activities totaled approximately $2.6 million due to net proceeds we received of $1.7 million in connection with the issuance of the 2021 Debenture to SOL Verano Blocker 1 LLC.

In addition, we received net proceeds of $538,000 prior to December 31, 2021 of the total $3,000,000 in aggregate principal amount of the Contingent Convertible Debentures that closed on February 9, 2022.

For the year ended December 31, 2020, net cash provided by financing activities totaled approximately $329,000 due to the loan proceeds of approximately $335,000 under the Paycheck Protection Program, established as part of the Coronavirus Aid, Relief and Economic Security Act.

For the year ended December 31, 2019, net cash provided by financing activities totaled approximately $8.4 million as a result of the proceeds from our July 2019 private placement whereby we sold certain securities to Heavenly Rx for an aggregate purchase price of $9,000,000 in cash.

This loan was fully forgiven in May of 2021.

We incurred a net loss of approximately $1.8 million for the year ended December 31, 2021 compared to a net loss of approximately $3.0 million for the year ended December 31, 2020.

Our accumulated deficit increased to $71.8 million as of December 31, 2021 compared to an accumulated deficit of $70.0 million as of December 31, 2020.

We have experienced recurring losses from operations and negative cash flows from operating activities.

This situation creates uncertainties about our ability to execute our business plan, finance operations, and indicates substantial doubt about our ability to continue as a going concern.

We continue to experience negative cash flows from operations, as well as an ongoing requirement for additional capital to support working capital needs.

Therefore, currently, based upon our near-term anticipated level of operations and expenditures, management believes that cash on hand, is not sufficient to enable us to fund operations for 12 months from the date the financial statements included in this Report are issued.

These conditions raise doubt as to our ability to continue as a going concern.

Our ability to continue operations is dependent upon achieving a profitable level of operations and on our ability to obtain necessary financing to fund ongoing operations.

The consolidated financial statements included in this Report do not give effect to any adjustments which will be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

In addition to the 2021 Debenture issued to SOL Verano Blocker 1 LLC, we received proceeds from two separate transactions subsequent to December 31, 2021 as described below and in Note 13.

Specifically, on February 9, 2022 we issued $3,000,000 in aggregate principal amount of the Contingent Convertible Debentures and on February 15, 2022, upon the consummation of the Plan of Arrangement, we received the $8,000,000 in gross proceeds from the Pinestar Subscription Receipt offering completed prior to the closing of the Plan of Arrangement . 

The Plan of Arrangement resulted in issuance of an aggregate of 20,000,048 Jones Shares in connection with the completion of the previously announced acquisition of all the issued and outstanding common shares of Pinestar by way of a statutory plan of arrangement whereby the outstanding Pinestar Shares were exchanged for newly issued Jones Shares on a one-for-one basis.

Therefore, currently, based upon our near-term anticipated level of operations and expenditures, management believes that cash on hand, is sufficient to enable us to fund operations for 12 months from the date the financial statements included in this Report are issued.

During 2021 and 2020, we received $0 and $296,000, respectively, from the cash exercise of stock options.

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We historically have generated a greater percentage of our revenues during the warm weather months of April through September.

Sales may fluctuate materially on a quarter to quarter basis or an annual basis when we launch a new product or fill the “pipeline” of a new distribution partner or a large retail partner.

Sales may fluctuate materially on a quarter-to-quarter basis or an annual basis when we launch a new product or fill the “pipeline”

of a new distribution partner or a large retail partner.

Sales results may also fluctuate based on the number of SKUs selected or removed by our distributors and retail partners through the normal course of serving consumers in the dynamic, trend-oriented beverage industry.

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.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies

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.

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 based 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.

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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 1 to Consolidated Financial Statements of this Report.

For a detailed discussion on the application of these and our other accounting policies, see Note 1 to Consolidated Financial Statements of this Report.

Revenue Recognition

We recognize revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”).

We recognize revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

We only apply the five-step model (as described in Note 1 to the Consolidated Financial Statements of this Report) to contracts when it is probable that we will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer.

We only apply the five-step model (as described in Note 1 to the Consolidated Financial Statements of this Report) to contracts when it is probable that we will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer.

We hold raw materials and finished goods inventories, which are manufactured and procured based on our sales forecasts.

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The amount and timing of write-downs for any period could change if we make different judgments or use different estimates.

We also determine whether a provision for obsolete or excess inventory is required on products that are over 12 months from production date or any changes related to market conditions, slow-moving inventory or obsolete products.

We also determine whether a provision for obsolete or excess inventory is required on products that are over 12 months from production date or any changes related to market conditions, slow-moving inventory or obsolete products.

Trade Spend and Promotion Expenses

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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-K

Item 5. Market for Registrant’s Common Equity