JONES SODA CO. 10-Q

ITEM 1A RISK FACTORS   There have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, except for as set forth below:   The announcement and pendency of the SBBC Transaction may have an adverse effect on our business results, and a failure to complete the SBBC Transaction could have a material adverse effect on our business, results of operations, financial condition, cash flows, and stock price.   On April 16, 2022, we entered into the LOI with SBBC, which provides for the acquisition of all of our outstanding shares of common stock in exchange for SBBC Shares at a ratio of 0.20548 SBBC Shares for each one (1) Jones Share outstanding. The SBBC Transaction is subject to a number of terms and conditions, including, but not limited to, the parties entering into a definitive agreement (the “Definitive Agreement”) with respect to the SBBC Transaction on or before June 30, 2022 (such agreement to include representations, warranties, conditions and covenants typical for a transaction of this nature), mutually favorable tax and corporate structuring, the approval by shareholders of both SBBC and the Company, and the approval of the TSX Venture Exchange or such other recognized stock exchange as the SBBC Shares may become listed after completion of the SBBC Transaction, and if applicable, disinterested shareholder approval.. There is no assurance that all of the various conditions will be satisfied, that the Company and SBBC will be successful in negotiating an acceptable Definitive Agreement, when or whether a Definitive Agreement will be reached between the parties, or that the SBBC Transaction will be completed on the proposed terms, within the expected timeframe, or at all.   The SBBC Transaction may be delayed, and may ultimately not be completed, due to a number of factors, including:     ● the results of either the due diligence investigations or tax analysis to be conducted by each of the Company and SBBC are determined by either party to be not satisfactory to such party for any reason in its sole discretion;     ● the failure of SBBC and the Company to successfully negotiate the Definitive Agreement or come to an agreement on the material terms of the Definitive Agreement;     ● the failure to obtain requisite stockholder approval of the SBBC Transaction from the stockholders of either SBBC or the Company;     ● the failure to obtain approvals from the applicable stock exchanges;     ● the failure of the SEC to declare effective any registration statement filed with the SEC to register under the Securities Act the SBBC Shares to be issued to the Company’s stockholders in the SBBC Transaction;     ● potential future stockholder litigation and other legal and regulatory proceedings, which could delay or prevent the SBBC Transaction; and     ● the failure to satisfy the other conditions to the completion of the SBBC Transaction, including the possibility that a material adverse effect would permit either party to terminate the LOI.   If the SBBC Transaction does not close, we may suffer other consequences that could adversely affect our business, financial condition, operating results, cash flows, and stock price, and our stockholders would be exposed to additional risks, including:     ● investor confidence in us could decline, stockholder litigation could be brought against us, relationships with existing and prospective business partners may be adversely impacted, we may be unable to retain key personnel, and our operating results and cash flows may be adversely impacted due to costs incurred in connection with the SBBC Transaction;   22 Table of Contents     ● to the extent that the current market price of the Jones Shares reflects an assumption that the SBBC Transaction will be completed, the price of the Jones Shares could decrease if the SBBC Transaction is not completed;     ● any disruptions to our business resulting from the announcement and pendency of the SBBC Transaction, including adverse changes in our relationships with employees and our business partners, may continue or intensify in the event the SBBC Transaction is not consummated or is significantly delayed; and     ● the requirement that we pay SBBC up to $500,000 as compensation for SBBC’s out-of-pocket expenses in connection with the SBBC Transaction under certain circumstances that give rise to the termination of the LOI.   Even if successfully completed, there are certain risks to our stockholders from the SBBC Transaction, including:     ● the ratio of SBBC Shares to be issued in exchange for outstanding Jones Shares is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, either our shares of common stock or the SBBC Shares; and     ● we may experience a departure of employees prior to the closing of the SBBC Transaction.   There can be no assurance that we will be able to negotiate the Definitive Agreement or consummate the SBBC Transaction.   Although the LOI is binding on both the Company and SBBC, there can be no assurances that the SBBC Transaction will be consummated. The SBBC Transaction is subject to each of the Company and SBBC completing a due diligence review of the other party and receiving acceptable tax analysis regarding the structure of the SBBC Transaction. The detailed terms of the SBBC Transaction must also be set forth in the Definitive Agreement, which must be negotiated between the parties. 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 SBBC Transaction will be consummated. Even if a Definitive Agreement is executed, there will be many conditions to closing, 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 each of the parties as they complete their respective due diligence investigation of the other party.    Litigation may arise in connection with the SBBC Transaction, which could be costly, prevent consummation of the SBBC Transaction, divert management ’ s attention and otherwise materially harm our business.   Regardless of the outcome of any future litigation related to the SBBC Transaction, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to the SBBC Transaction may materially adversely affect our business, results of operations, prospects, cash flows, and financial condition. If the SBBC Transaction is not consummated for any reason, litigation could be filed in connection with the failure to consummate the SBBC Transaction. Any litigation related to the SBBC Transaction may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our business partners, or otherwise materially harm our operations and financial performance   ITEM 6. EXHIBITS   2.1 Binding Offer to Purchase dated April 16, 2022, between the Company and Simply Better Brands Corp. (Previously filed with, and incorporated herein by reference to, Exhibit 10.1 to our Current Report on Form 8-K, filed on April 21, 2022). 3.1 Articles of Incorporation of Jones Soda Co. (previously filed with, and incorporated herein by reference to, Exhibit 3.1 to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000, filed on March 30, 2001). 3.2 Amended and Restated Bylaws of Jones Soda Co. (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). 10.1 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). 31.1 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). 31.2 Certification of Chief Financial Officer, pursuant to Rules 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.2 Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 101.INS* Inline XBRL Instance Document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.   23 Table of Contents   SIGNATURES   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.   May 13, 2022     JONES SODA CO. (Registrant)             By:  /s/  Joe Culp       Joe Culp       Interim Chief Financial Officer and Principal Financial Officer