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Item 8. Financial Statements and Supplementary Data

2024-04-01 compared with 2023-03-29 · 338 added, 629 removed, 315 unchanged (75% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Armanino LLP, Independent Registered Public Accounting Firm  

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements:

Consolidated balance sheets as of December  

31, 2022 and 2021

Consolidated statements of operations for the years ended December  

31, 2022 and 2021

Consolidated balance sheets as of December 31, 2023 and 2022

Consolidated statements of operations for the years ended December 31, 2023 and 2022

Consolidated statements of comprehensive loss for the years ended December 31, 2023 and 2022

Consolidated statements of shareholders ’

equity (deficit) for the years ended December  

31, 2022 and 2021

Consolidated statements of cash flows for the years ended December  

31, 2022 and 2021

Consolidated statements of shareholders’ equity for the years ended December 31, 2023 and 2022

Consolidated statements of cash flows for the years ended December 31, 2023 and 2022

Notes to consolidated financial statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

To the Shareholders and Board of Directors of

Jones Soda Co.

Seattle, Washington

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Jones Soda Co.

and its subsidiaries (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, shareholders' equity, and cash flows for each of the two years ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Restatement of Previously Issued Consolidated Financial Statements

As discussed in Note 1 to the consolidated financial statements, the 2021 consolidated financial statements have been restated to correct misstatements.

We have audited the accompanying consolidated balance sheet of Jones Soda Co.

and its subsidiaries (“the Company”) as of December 31, 2023 and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements.

Our responsibility is to express an opinion on the Company's consolidated financial statements.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. 

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. 

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. 

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Promotional Allowances —

 Refer to Note 1 to the Consolidated Financial Statements

Critical Audit Matter Description

As described in Note 1 to the consolidated financial statements, the Company's revenue is recorded net of promotional allowances.  The recognition of these promotional allowances requires the Company to make estimates regarding the volume of sales, cost of the promotional allowances, and amount of the promotional allowances that are expected to be redeemed.  These estimates are made using various information including historical and forecasted data.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Promotional Allowances:

As described in Note 1 to the consolidated financial statements, the Company's revenue is recorded net of promotional allowances.

The recognition of these promotional allowances requires the Company to make estimates regarding the volume of sales, cost of the promotional allowances, and amount of the promotional allowances that are expected to be redeemed.

These estimates are made using various information including historical and forecasted data.

Significant judgment is exercised by the Company in determining the promotional allowances accrual and includes the following:

●         Determination of the completeness of the various promotional allowances with customers and the forecasted sales volume for the period.

●         Assessing the estimate of promotional allowances that are expected to be redeemed subsequent to period end.

Given these factors, the related audit effort in evaluating management's judgments in determining promotional allowances for these customer agreements was extensive and required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company's promotional allowances for these customer agreements included the following:

●         We selected a sample of promotional allowance claims and performed the following procedures:

o         Obtained tested the source documents for each selection, including promotional campaign and other documents that were part of the agreement to identify significant terms.

o         Traced a sample of promotional allowance claims to a listing of promotional campaigns during the period for completeness Assessed the terms in the promotional campaign and evaluated the appropriateness of management's application of their accounting policies, along with their use of estimates, in the determination of promotional allowance conclusions.

●         We analyzed the customer base and historical promotional allowances offered to customers.

●         We evaluated the reasonableness and accuracy of management's judgements and estimates used in accounting for promotional allowances.

This included testing management's estimate of calculating expected claims based on historical data, comparing the estimate to revenue in the current period, current promotional offer redemptions to historical estimates, and comparing actual promotional allowances applied subsequent to December 31, 2022 to the promotional allowances as of December 31, 2022.

/s/ Armanino LLP

Determination of the completeness of the various promotional allowances with customers and the forecasted sales volume for the period.

Assessing the estimate of promotional allowances that are expected to be redeemed subsequent to period end.

The primary procedures we performed to address this critical audit matter included the following:

We selected a sample of promotional allowance claims and performed the following procedures:

Obtained and tested the source documents for each selection, including promotional campaign and other documents that were part of the agreement to identify significant terms.

Traced a sample of promotional allowance claims to a listing of promotional campaigns during the period for completeness.

Assessed the terms in the promotional campaign and evaluated the appropriateness of management's application of their accounting policies, along with their use of estimates, in the determination of promotional allowance conclusions.

We analyzed the customer base and historical promotional allowances offered to customers.

We evaluated the reasonableness and accuracy of management's judgements and estimates used in accounting for promotional allowances.

This included testing management's estimate of calculating expected claims based on historical data, comparing the estimate to revenue in the current period, comparing current promotional offer redemptions to historical estimates, and comparing actual promotional allowances applied subsequent to December 31, 2023 to the promotional allowances as of December 31, 2023.

/s/ Berkowitz Pollack Brant Advisors + CPAs, LLP (PCAOB ID:

We have served as the Company’s auditor since 2023.

Bellevue, Washington

April 1, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Jones Soda Co.

Seattle, Washington

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Jones Soda Co.

and its subsidiaries (the “Company”) as of December 31, 2022, and the related consolidated statements of operations, comprehensive loss, shareholders' equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and their cash flows for the year ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Armanino LLP

San Ramon, California

March 29, 2023

We began serving as the Company’s auditors in 2021.

In 2023, we became the predecessor auditor.

JONES SODA CO.

5 unchanged sentences

Cash and cash equivalents

$ 3,867 $ 7,971

Accounts receivable, net of allowance of $ 260 and $ 110 , respectively

Prefunded insurance premiums - Financing

Prefunded insurance premiums from financing

Prepaid expenses and other current assets

1 unchanged sentence

Fixed assets, net of accumulated depreciation of $ 366 and $ 309 , respectively

Right-of-use lease asset

LIABILITIES AND SHAREHOLDERS ’

$ 9,906 $ 15,102

LIABILITIES AND SHAREHOLDERS ’ EQUITY

Current liabilities:

Accounts payable

$ 716 $ 1,069

Accrued expenses

Insurance premium financing

Lease liability, current portion

Taxes payable

Current portion of convertible subordinated notes payable, net

Current portion of accrued interest expense

2022 Financing Proceeds Received, Net of Closing Costs

Total current liabilities

Net convertible subordinated notes payable, net of current portion

Lease liability, net of current portion

Total liabilities

Shareholders’

Shareholders’ equity:

Common stock, no par value:

Authorized —

800,000,000 issued and outstanding shares —

100,263,135 shares and 67,840,941 shares, respectively

Authorized — 800,000,000 issued and outstanding shares — 101,258,135 shares and 100,263,135 shares, respectively

90,273 89,680

Accumulated other comprehensive income

Accumulated deficit

Total shareholders’

Total liabilities and shareholders’

( 83,054 ) ( 78,200 )

Total shareholders’ equity

Total liabilities and shareholders’ equity

$ 9,906 $ 15,102

See accompanying notes to consolidated financial statements.

8 unchanged sentences

Total operating expenses

Loss from operations

Loss from operations

Interest income

Interest expense

Other income, net

Other income (expense), net

Loss before income taxes

Income tax expense

Net income (loss) per share - basic and diluted

Income tax expense, net

Net loss per share - basic and diluted

Weighted average common shares outstanding - basic and diluted

4 unchanged sentences

(In thousands)

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustment

2 unchanged sentences

JONES SODA CO.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’

Years Ended December  

31, 2022 and 2021

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY

Years Ended December 31, 2023 and 2022

(In thousands, except share data)

Other Comprehensive Income

Shareholders ’

Balance as of December 31, 2020

61,975,748  

$ 73,953  

$ ( 69,985 )  

$ 4,379  

Stock-based compensation expense

Common stock issued upon conversion of notes payable

5,064,137  

Issuance of common stock upon exercise of stock options

801,056  

( 1,811 )  

Other comprehensive income

( 15 )  

Accumulated Other Comprehensive Income

Accumulated Deficit

Total Shareholders’ Equity

(In thousands, except share data)

Balance as of December 31, 2021

67,840,941  

$ 76,017  

$ ( 71,796 )  

$ 4,617  

Stock-based compensation expense

1,950,000  

67,840,941 $ 76,017 $ 396 $ ( 71,796 ) $ 4,617

Stock-based compensation

1,950,000 1,364 - - 1,364

Common stock issued upon conversion of notes payable

10,472,146  

10,472,146 5,147 - - 5,147

Common stock and warrants issued, net of closing costs of $ 848

20,000,048  

( 6,404 )  

20,000,048 7,152 - - 7,152

- - - ( 6,404 ) ( 6,404 )

Other comprehensive loss

( 109 )  

- - ( 109 ) - ( 109 )

Balance as of December 31, 2022

100,263,135  

$ 89,680  

$ ( 78,200 )  

$ 11,767  

100,263,135 $ 89,680 $ 287 $ ( 78,200 ) $ 11,767

Stock-based compensation

1,275,000 694 - - 694

Shares withheld for taxes upon RSU vesting

( 480,000 ) ( 110 ) - - ( 110 )

Exercise of Pinestar Warrants

200,000 9 - - 9

- - - ( 4,854 ) ( 4,854 )

Other comprehensive gain

Balance as of December 31, 2023

101,258,135 $ 90,273 $ 331 $ ( 83,054 ) $ 7,550

See accompanying notes to consolidated financial statements.

4 unchanged sentences

OPERATING ACTIVITIES:

$ ( 6,404 )  

Adjustments to reconcile net loss to net cash flows from operating activities:

Adjustments to reconcile net loss to net cash flows used in operating activities:

Depreciation and amortization

Stock-based compensation

Change in allowance for doubtful accounts

Forgiveness of PPP SBA loan

Loss (gain) on sale of fixed asset

( 31 )  

Change in allowance for credit losses

Gain on sale of fixed asset

Gain on insurance claim

( 23 )  

Changes in operating assets and liabilities:

Accounts receivable

( 542 )  

( 714 )  

Prefunded insurance premiums from financing  

Prepaid expenses and other current assets

( 243 )  

Accounts payable

( 167 )  

Accrued expenses

1 unchanged sentence

Other liabilities

( 10 )  

Net cash used in operating activities

( 5,957 )  

INVESTING ACTIVITIES:

2 unchanged sentences

Purchase of fixed assets

( 29 )  

Net cash from investing activities

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES:

Proceeds from exercise of stock options

Proceeds from issuance of convertible notes, net

Proceeds from 2022 convertible notes prior to close, net

Repayments on Insurance financing, net of additional financing  

( 292 )  

Additional financing for insurance premiums, net of repayments  

Proceeds from issuance of common stock and warrants, net

Net cash provided by financing activities

Proceeds from the exercise of Pinestar Warrants

Repayments on insurance financing

Net cash (used in) provided by financing activities

Net change in cash and cash equivalents

Effect of exchange rate changes on cash

( 53 )  

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$ 7,971  

$ 4,667  

Supplemental disclosure:

2 unchanged sentences

Conversion of notes payable

$ 5,147  

$ 1,621  

Beneficial conversion feature on convertible notes and accrued interest

See accompanying notes to consolidated financial statements.

JONES SODA CO.

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2023 and 2022

1 unchanged sentence

Jones Soda Co.

develops, produces, markets and distributes premium beverages which it sells and distributes primarily in the United States and Canada through its network of independent distributors and directly to its national and regional retail accounts. 

In addition, following the closing of the Plan of Arrangement (See note 7 (d)), we intend to use the proceeds from our recent financings exclusively for the purpose of expanding our business to the production of cannabis-containing beverages and related products.

In addition, following the closing of the Plan of Arrangement (See note 7 (d)), we intend to use the proceeds from our recent financings exclusively for the purpose of expanding our business to the production of cannabis-containing beverages and related products.

We are a Washington corporation and have five subsidiaries, Jones Soda Co.

(USA) Inc., Jones Soda (Canada) Inc., Jones Soda Cannabis Inc., Mary Jones California, LLC, and Pinestar Gold Inc. (Subsidiaries).

(USA) Inc., Jones Soda (Canada) Inc., Jones Soda Cannabis Inc., Mary Jones California, LLC, and Pinestar Gold Inc.

(Subsidiaries).

Basis of presentation and consolidation

4 unchanged sentences

Net cash used in operations during fiscal years 2023 and 2022 totaled approximately $ 3.8 million and $ 6.0 million, respectively.

Net cash used in operations increased primarily due to the increase in net loss in 2022.

Our cash flows vary throughout the year based on seasonality.

For the year ended December 31, 2022, net cash provided by financing activities totaled approximately $ 9.2 million due to the issuance of $ 3,000,000 in Contingent Convertible Debentures (See note 5 ), that fully converted into 6,022,192 shares of common stock on May 16, 2022.Additionally, upon the consummation of a statutory plan of arrangement under the Business Corporations Act (British Columbia) (the “Plan of Arrangement”) with Pinestar Gold Inc.

(“Pinestar”) the Company received $ 7.1 million in net proceeds from a subscription receipt offering completed by Pinestar (the “Pinestar Subscription Receipt Offering”) prior to the Plan of Arrangement.

The Plan of Arrangement resulted in issuance of an aggregate of 20,000,048 shares of the Company’s common stock which were issued in exchange for all of the outstanding common shares of Pinestar (the “Pinestar Shares”), including the Pinestar Shares issued in connection with the Pinestar Subscription Receipt Offering, on a one -for- one basis.

We incurred a net loss of approximately $ 4.9 million for the year ended December 31, 2023 compared to a net loss of approximately $ 6.4 million for the year ended December 31, 2022.

Our accumulated deficit increased to $ 83.1 million as of December 31, 2023 compared to an accumulated deficit of $ 78.2 million as of December 31, 2022.

During 2022 and 2021, we received $ 0 and $ 296,000 , respectively, from the cash exercise of stock options.

For the year ended December 31, 2023, net cash used in financing activities totaled approximately $ 246,000 due to the repayments on our insurance financing agreement being partially offset by proceeds received by the exercise of outstanding warrants.

For the year ended December 31, 2022, net cash provided by financing activities totaled approximately $ 9.2 million which was driven by $ 7.1 million in net proceeds the Company received as part of the consummation of a statutory plan of arrangement under the Business Corporations Act (British Columbia) with Pinestar Gold Inc., combined with the net proceeds received from the issuance of $ 3,000,000 in Contingent Convertible Debentures (see Note 5 ), being partially offset by repayments on our insurance financing agreement in 2022.

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

These factors initially raised substantial doubt regarding the Company’s ability to continue as a going concern.

The Company has increased gross margins in 2023.

In 2024, the Company is restructuring its customer distribution channels and has partnered with certain distributors (primarily DOT Foods Canada, Note 14 ).

Year to date sales for 2024 with a certain distributor has resulted in more favorable margins and the trend should continue throughout 2024.

Additionally, the Company is concentrating on product mix and customer channels that yield higher sales and margins (such as the food service channel), focused on the sales growth in the Mary Jones Brand and monitoring and reducing operating costs when and if possible.

On March 29, 2024, the Company received a commitment letter from a creditor to provide the Company with a $ 2 million revolving credit facility for working capital needs (Note 14 ).

The maturity date will be three years from the date of initial funding.

Based on management's current operating plan, the Company believes its cash on hand, projected cash generated from product sales and funds received from the committed revolving credit facility are sufficient to fund the Company's operations for a period of at least 12 months subsequent to the issuance of the accompanying Consolidated Financial Statements and alleviates the conditions that initially raised substantial doubt regarding the Company's ability to continue as a going concern.

During 2023 and 2022, we received nil from the cash exercise of stock options.

From time to time, we may receive additional cash through the exercise of stock options or stock warrants.

However, we cannot predict the timing or amount of cash proceeds we may receive from the exercise, if at all, of any of the outstanding stock options or warrants.

We may require additional financing to support our working capital needs in the future.

The amount of additional capital we may require, the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and operating plans, the performance of our business and the market conditions for available debt or equity financing.

Additionally, the amount of capital required will depend on our ability to meet our sales goals and otherwise successfully execute our operating plan.

We believe it is imperative that we meet these sales objectives in order to lessen our reliance on external financing in the future.

We intend to continually monitor and adjust our operating plan as necessary to respond to developments in our business, our markets and the broader economy.

In addition, 

uncertain market conditions may limit our ability to access capital, may reduce demand for certain products, and may negatively impact our supply chain.

Although we believe various debt and equity financing alternatives will be available to us to support our working capital needs, financing arrangements on acceptable terms may not be available to us when needed.

Moreover, these alternatives may require significant cash payments for interest and other costs or could be highly dilutive to our existing shareholders.

Any such financing alternatives may not provide us with sufficient funds to meet our long-term capital requirements.

If necessary, we may explore strategic transactions that we consider to be in the best interest of our company and our shareholders, which may include, without limitation, public or private offerings of debt or equity securities, a rights offering, and other strategic alternatives;

however, these options may not ultimately be available or feasible when needed.

As of the date of this Report, as a result of our cash on hand from the beforementioned financings, we believe that our current cash and cash equivalents will be sufficient to meet the Company’s funding requirements for 

one  year after these condensed consolidated financial statements are issued.

Restatement of Previously Issued Consolidated Financial Statements for Errors surrounding short-term financing

As part of preparing our 

consolidated financial statements as at and for the year ended December 31, 2022, an error was identified in the accounting for a short-term financing agreement that had an impact on the financial statements for the year ended December 31, 2021, which had been previously filed.

Effective November 15, 2021, the Company entered into a one year financing agreement with IPFS Corporation (“IPFS”) to fund a portion of its insurance premiums in the amount of $ 903,000 . Repayments were made quarterly on January 15, 2022, April 15, 2022, and July 15, 2022 under the terms of this financing agreement with IPFS, and the entirety of the financing  was paid off in full on July 15, 2022.

Since under the terms of the financing agreement with IPFS, IPFS funded a portion of our insurance premiums a prepaid asset was required to be recognized on our balance sheet for the year ended December 31, 2021, along with an associated liability or obligation to pay down this financing per the quarterly payment schedule noted above.

The Company did not record this beforementioned asset or liability on the Company’s balance sheet as of December 31, 2021, which was previously filed with the SEC. 

As a result of the identification of this error, we concluded that the previously issued consolidated financial statements as at and for the year ended December 31, 2021, were misstated.

Accordingly, we have restated our 

consolidated financial statements as at and for the year ended December 31, 2021, to increase current assets and current liabilities by $ 903,000 on the balance sheet.

Additionally, recorded the $ 903,000 change in prepaid asset in the operating activity portion on the statement of cash flows and the $ 903,000 liability in the financing activity portion of the statement of cash flows. 

This error did not have any impact on our consolidated statement of operations, consolidated statements of comprehensive loss, or consolidated statement of shareholders' equity. 

The impacts of this correction to fiscal year 2021  is as follows:

December 31, 2021

(In thousands)

Consolidated Balance Sheet:

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance of $ 114

Prefunded insurance premiums from financing

Prepaid expenses and other current assets

Total current assets

Current liabilities:

Accounts payable

Accrued expenses

Insurance Premium Financing

Lease liability, current portion

Taxes payable

Current portion of convertible subordinated notes payable, net

Current portion of accrued interest expense

2022 Financing Proceeds Received, Net of Closing Costs

Total current liabilities

December 31, 2021

(In thousands)

Consolidated Statement of Cash flows:

OPERATING ACTIVITIES:

 (1,811)

Adjustments to reconcile net loss to net cash flows from

operating activities:

Depreciation and amortization 

Stock-based compensation 

Change in allowance for doubtful accounts 

Forgiveness of PPP SBA loan

Loss (gain) on sale of fixed asset

Changes in operating assets and liabilities:

Accounts receivable 

 (1,129)

Inventory 

Prefunded insurance premiums from financing

Prepaid expenses and other current assets 

Accounts payable 

Accrued expenses 

Taxes payable 

Other liabilities 

Net cash used in operating activities

 (2,528)

 (3,431)

FINANCING ACTIVITIES:

Proceeds from exercise of stock options 

Proceeds from issuance of convertible notes, net

Proceeds from 2022 convertible notes prior to close, net

Additional financing for insurance premiums, net of repayments

Net cash provided by financing activities

The impacts of this correction for the quarter-ending March 31, 2022 

is as follows:

March 31, 2022

(In thousands)

Consolidated Balance Sheet:

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance of $ 111

Prefunded insurance premiums from financing

Prepaid expenses and other current assets

Total current assets

Current liabilities:

Accounts payable

Accrued expenses

Insurance Premium Financing

Lease liability, current portion

Taxes payable

Current portion of convertible subordinated notes payable, net

Total current liabilities

Quarter Ended

March 31, 2022

(In thousands)

Consolidated Statement of Cash flows:

OPERATING ACTIVITIES:

 (1,664)

Adjustments to reconcile net loss to net cash flows from

operating activities:

Depreciation and amortization 

Stock-based compensation 

Change in allowance for doubtful accounts 

Changes in operating assets and liabilities:

Accounts receivable 

Inventory 

Prefunded insurance premiums from financing

Prepaid expenses and other current assets 

Accounts payable 

Accrued expenses 

Taxes payable 

Other liabilities 

Net cash used in operating activities

 (2,341)

 (2,035)

FINANCING ACTIVITIES:

Proceeds from issuance of convertible notes, net

Repayments on Insurance financing, net of additional financing 

Proceeds from issuance of common stock and warrants, net

Net cash provided by financing activities

The impacts of this correction for the six months ending June 30, 2022 

is as follows:

June 30, 2022

(In thousands)

Consolidated Balance Sheet:

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance of $ 119

Prefunded insurance premiums from financing

Prepaid expenses and other current assets

Total current assets

Current liabilities:

Accounts payable

Accrued expenses

Insurance Premium Financing

Lease liability, current portion

Taxes payable

Total current liabilities

Six months Ended

June 30, 2022

(In thousands)

Consolidated Statement of Cash flows:

OPERATING ACTIVITIES:

 (3,099)

Adjustments to reconcile net loss to net cash flows from

operating activities:

Depreciation and amortization 

Stock-based compensation 

Change in allowance for doubtful accounts 

Changes in operating assets and liabilities:

Accounts receivable 

 (1,428)

Inventory 

Prefunded insurance premiums from financing

Prepaid expenses and other current assets 

Accounts payable 

Accrued expenses 

Taxes payable 

Other liabilities 

Net cash used in operating activities

 (4,883)

 (4,269)

FINANCING ACTIVITIES:

Proceeds from issuance of convertible notes, net

Repayments on Insurance financing, net of additional financing 

Proceeds from issuance of common stock and warrants, net

Net cash provided by financing activities

The impacts of the restatement have been reflected throughout the financial statements, including the applicable footnotes, as appropriate.

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, but are not limited to, inventory valuation, depreciable lives and valuation of capital assets, valuation allowances for receivables, trade promotion liabilities, stock-based compensation expense, valuation allowance for deferred income tax assets, contingencies, and forecasts supporting the going concern assumption and related disclosures.

Significant items subject to such estimates and assumptions include, but are not limited to, inventory valuation, depreciable lives and valuation of capital assets, accounts receivable credit loss reserve, trade promotion liabilities, stock-based compensation expense, valuation allowance for deferred income tax assets, contingencies, and forecasts supporting the going concern assumption and related disclosures.

Actual results could differ from those estimates.

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Our accounts receivable balance primarily includes balances from trade sales to distributors and retail customers.

The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable.

We determine the allowance for doubtful accounts based primarily on historical write-off experience.

Account balances that are deemed uncollectible, are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Allowances for doubtful accounts of approximately $ 110,000 and $ 114,000 as of December 31, 2022 and 2021, respectively, are netted against accounts receivable.

The allowance for credit losses is our best estimate of the amount of probable credit losses in our existing accounts receivable.

We determine the allowance for credit losses based primarily on current trends and estimates.

The Company reserves a percentage of trade receivable balance based on collection history and current economic trends that the Company expects will impact the level of credit losses over the life of the receivables.

These reserves are re-evaluated on a regular basis and adjusted as needed.

Once a receivable is deemed to be uncollectible, such balance is charged against the reserve.

Allowances for credit losses of approximately $ 260,000 and $ 110,000 as of December 31, 2023 and 2022, respectively, are netted against accounts receivable.

Changes in accounts receivable are primarily due to the timing and magnitude of orders of products, the timing of when control of products is transferred to distributors and the timing of cash collections.

Activity in the allowance for doubtful accounts consists of the following for the years ended December 31 ( in thousands):

Activity in the allowance for credit losses consists of the following for the years ended December 31 ( in thousands):

Balance, beginning of year

Net charges to bad debt expense

Recoveries (write-offs)

Balance, end of year

As of December 31, 2022, two customers made up 22 % of our outstanding accounts receivable.

As of December 31, 2021, one customer made up 19 % of our outstanding accounts receivable.

As of December 31, 2023, there were no customers that make up a material concentration amount of our accounts receivable.

As of December 31, 2022, two customers that made up 22 % of our outstanding accounts receivable.

Inventories consist of raw materials and finished goods and are stated at the lower of cost or net realizable value and include adjustments for estimated obsolete or excess inventory.

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A significant change in demand for certain products as compared to forecasted amounts may result in recording additional provisions for obsolete inventory.

Provisions for obsolete or excess inventory are recorded as cost of goods sold and totaled $ 156,000 and $ 27,000 for the years ended 

December 31, 2022 and 2021, respectively.

Provisions for obsolete or excess inventory are recorded as cost of goods sold and totaled $ 73,000 and $ 156,000 for the years ended December 31, 2023 and 2022, respectively.

Fixed assets are recorded at cost less accumulated depreciation and are depreciated on the declining balance basis over the estimated useful lives of the assets as follows:

20 % to 30 %  

Vehicles and office and computer equipment

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The functional currency of our Canadian subsidiary is the Canadian dollar.

We translate assets and liabilities related to these operations to U.S. dollars at the exchange rate in effect at the date of the consolidated balance sheet;

we convert revenues and expenses into U.S. dollars using the average monthly exchange rates.

We translate assets and liabilities related to these operations to U.S.

dollars at the exchange rate in effect at the date of the consolidated balance sheet;

we convert revenues and expenses into U.S.

dollars using the average monthly exchange rates.

Translation gains and losses are reported as a separate component of accumulated other comprehensive income.

Transaction gains and losses arising from the transactions denominated in a currency other than the functional currency are included in other expense, net in the accompanying consolidated statement of operations.

Net transaction loss was $ 7,000 for 2022 and a net transaction gain of $ 18,000 occurred in 2021.

Net transaction losses as of December 31, 2023 and 2022 were $ 1,000 and $ 7,000 , respectively.

Revenue recognition

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , (“ASC 606”

The Company recognizes 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.

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See Note 11, Segment information, for information on revenue disaggregated by geographic area.

Because the Company’s agreements have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606 - 10 - 50 - 14 (a) to not disclose information about its remaining performance obligations.

Our contracts have a single performance obligation which is satisfied at the point in time when the customer has title and the significant risks and rewards of ownership of the product.

Title and the significant risk and rewards of ownership are deemed to transfer when products are loaded onto a truck for shipment or Free on Board (“FOB”) shipping point.

The Company primarily receives fixed consideration for sales of product, subject to adjustment as described below.

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Discounts, slotting fees and promotional allowances vary the consideration the Company is entitled to in exchange for the sale of products to distributors.

The Company estimates these discounts, slotting fees and promotional allowances in the same period that the revenue is recognized for product sales to customers. These estimates are based on contract terms and our historical experience with similar programs and require management judgement with respect to estimating customer participation and performance levels.

Differences between estimated expense and actual costs are normally insignificant and are recognized in earnings in the period such differences are determined. The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue.

The Company estimates these discounts, slotting fees and promotional allowances in the same period that the revenue is recognized for product sales to customers.

These estimates are based on contract terms and our historical experience with similar programs and require management judgement with respect to estimating customer participation and performance levels.

Differences between estimated expense and actual costs are normally insignificant and are recognized in earnings in the period such differences are determined.

The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue.

The liability for promotional allowances is included in accrued expenses on the consolidated balance sheets.

Amounts paid for slotting fees are recorded as prepaid expenses on the consolidated balance sheets and amortized over the corresponding term.

For the years ended 

December 31, 2022 

2021, our revenue was reduced by approximately $ 1.6 million and $ 1.4 million, respectively, for slotting fees and promotion allowances.

For the years ended December 31, 2023 and 2022, our revenue was reduced by approximately $ 1.6 million for both years, for slotting fees and promotion allowances.

All sales to distributors and customers are generally final.

In limited instances we may accept returned product due to quality issues or distributor terminations, and in such situations we would have variable consideration.

To date, returns have not been material. The Company’s customers generally pay within 30 days from the receipt of a valid invoice.

To date, returns have not been material.

The Company’s customers generally pay within 30 days from the receipt of a valid invoice.

The Company offers prompt pay discounts of up to 2 % to certain customers typically for payments made within 15 days.

Prompt pay discounts are estimated in the period of sale based on experience with sales to eligible customers.

Early pay discounts are recorded as a deduction to the accounts receivable balance presented on the consolidated balance sheets.

Prompt pay discounts are recorded as a deduction to revenues in the accompanying consolidated statements of operations.

As of December 31, 2023 and 2022, prompt pay discounts to these certain customers were considered immaterial to the related accounts receivable balances presented on the accompanying consolidated balance sheets.

Advertising costs

Advertising costs, which also include promotions and sponsorships, are expensed as incurred.

During the years ended December 31, 2022 and 2021, we incurred advertising costs of $ 1.0 million and $ 731,000 , respectively.

During the years ended December 31, 2023 and 2022, we incurred advertising costs of $ 1.2 million and $ 1.0 million, respectively.

We account for income taxes by recognizing the amount of taxes payable for the current year and deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements.

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No reserves for an uncertain income tax position have been recorded for the years ended December 31, 2023 or 2022.

The Company recognizes accrued interest and penalties related to uncertain tax positions, if any, as income tax expense.

The Company’s tax returns for the years ended December 31, 2020 through 2022 remain subject to examination by their major tax jurisdictions.

Net loss per share

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Diluted earnings per share is computed by adjusting the weighted average number of common shares by the effective net exercise or conversion of all dilutive securities.

Due to the net loss in 2022 and 2021, outstanding stock options amounting to 3,369,332 and 3,405,511 shares, outstanding warrants of 

27,721,945 and 0 , and shares issuable upon the conversion of the 2018 Convertible Notes of 0 and 5,372,440 , respectively, were anti-dilutive.

Due to the net loss in 2023 and 2022, outstanding stock options amounting to 11,407,772 and 3,369,332 shares and outstanding warrants of 27,521,945 and 27,721,945 , respectively, were anti-dilutive.

Comprehensive loss

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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.

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Recent accounting guidance

No  new accounting pronouncements issued or effective during 2022 had, or are expected to have, a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016 - 13 , Financial Instruments:

Credit Losses (“ASU 2016 - 13 ”), which changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses.

The estimate of expected credit losses require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts.

This ASU was effective for us in the first quarter of 2023, however the impact on the consolidated financial statements are immaterial, thus no material changes were made to the consolidated financial statements as of December 31, 2023.

Recent Accounting Guidance Not Yet Adopted

In November 2023, the FASB issued ASU No.

2023 - 07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The updated standard is effective for our annual periods beginning after December 15, 2023 and interim periods beginning in the first quarter of fiscal 2025.

Early adoption is permitted.

We are currently evaluating the impact that the updated standard will have on our consolidated financial statements and financial statement disclosures.

Inventory consisted of the following as of December 31 ( in thousands):

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December 31, 2022

Finished goods 

Raw materials 

Finished goods

$ 1,380 $ 1,234

Raw materials

$ 2,392 $ 2,621

Finished goods primarily include product ready for shipment, as well as promotional merchandise held for sale.

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Accumulated depreciation

( 309 )  

( 366 ) ( 309 )

Depreciation expense was $ 63,000 and $ 66,000 , for the years ended December 31, 2023 and 2022, respectively.

Depreciation expense is primarily associated with the Company's equipment and vehicles.

The company recorded a gain on disposal of fixed assets of $ 54,000 during the year ended December 31, 2022. 

The company recorded a loss on disposal of fixed assets of $ 5,000 during the year ended December 31, 2022. 

The company did not record any gains or losses from the disposals of fixed assets during 2023.

The company recorded a gain on disposal of fixed assets of $ 54,000 during the year ended December 31, 2022.

Accrued Expenses

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Other accruals

$ 1,644  

$ 1,544  

$ 1,283 $ 1,644

Convertible Debentures

2018 Convertible Subordinated Note Payable

March 23, 2018, 

April 18, 2018, 

we issued and sold an aggregate principal amount of $ 2,920,000  of convertible subordinated promissory notes (the 

“2018  Convertible Notes”) to institutional investors and our management team, and other individual investors.

2018  Convertible Notes had a 

four -year term from the date of issuance and bear interest at 

6 % per annum until maturity on 

March 23, 2022 ,  and 

April 18, 2022. 

The holders could convert the 

2018  Convertible Notes at any time into the number of shares of our common stock equal to the quotient obtained by dividing (i) the amount of the unpaid principal and interest on such 

2018  Convertible Note by (ii) $ 0.32  (the “Conversion Price”).

The Conversion Price was subject to anti-dilution adjustment on a broad-based, weighted average basis if we issue shares or equity-linked instruments at a conversion price below 

$0.32  per share. 

No  payments of principal or interest were due until the maturity.

2018  Convertible Notes were subordinated in right of payment to the prior payment in full of all of our Senior Indebtedness, which is defined as amounts due in connection with our indebtedness for borrowed money to banks, commercial finance lenders, or other lending institutions regularly engaged in the business of lending money, with certain restrictions.

The fair value of our common stock on the 

March 23, 2018, 

closing date for the issuance of the 

2018  Convertible Notes was $ 0.36  per share, therefore, the 

2018  Convertible Notes contained a beneficial conversion feature with an aggregate intrinsic value of $ 350,000 .

The fair value of our common stock on the 

April 18, 2018, 

closing date for the issuance of the 

2018  Convertible Notes was $ 0.30  per share, which did 

not  result in an additional beneficial conversion feature.

The resulting debt discount for the 

2018  Convertible Notes issued on 

March 23, 2018  is presented as a direct deduction from the carrying value of the 

2018  Convertible Notes and was recorded with an increase to additional paid-in capital.

The discount along with the related closing costs amounting to $ 137,000  were amortized through interest expense over the term of the 

2018  Convertible Notes.

April 18, 2022 

all convertible notes have been converted into shares and the current balance of the 

2018  Convertible Subordinated Note Payable as of 

September 30, 2022 

On March 23, 2018, and April 18, 2018, we issued and sold an aggregate principal amount of $ 2,920,000 of convertible subordinated promissory notes (the “2018 Convertible Notes”) to institutional investors and our management team, and other individual investors.

The 2018 Convertible Notes had a four -year term from the date of issuance and bear interest at 6 % per annum until maturity on March 23, 2022 , and April 18, 2022.

The holders could convert the 2018 Convertible Notes at any time into the number of shares of our common stock equal to the quotient obtained by dividing (i) the amount of the unpaid principal and interest on such 2018 Convertible Note by (ii) $ 0.32 (the “Conversion Price”).

The Conversion Price was subject to anti-dilution adjustment on a broad-based, weighted average basis if we issue shares or equity-linked instruments at a conversion price below $0.32 per share.

No payments of principal or interest were due until the maturity.

The 2018 Convertible Notes were subordinated in right of payment to the prior payment in full of all of our Senior Indebtedness, which is defined as amounts due in connection with our indebtedness for borrowed money to banks, commercial finance lenders, or other lending institutions regularly engaged in the business of lending money, with certain restrictions.

The fair value of our common stock on the March 23, 2018, closing date for the issuance of the 2018 Convertible Notes was $ 0.36 per share, therefore, the 2018 Convertible Notes contained a beneficial conversion feature with an aggregate intrinsic value of $ 350,000 .

The fair value of our common stock on the April 18, 2018, closing date for the issuance of the 2018 Convertible Notes was $ 0.30 per share, which did not result in an additional beneficial conversion feature.

The resulting debt discount for the 2018 Convertible Notes issued on March 23, 2018 is presented as a direct deduction from the carrying value of the 2018 Convertible Notes and was recorded with an increase to additional paid-in capital.

The discount along with the related closing costs amounting to $ 137,000 were amortized through interest expense over the term of the 2018 Convertible Notes.

As of April 18, 2022 all convertible notes have been converted into shares and the current balance of the 2018 Convertible Subordinated Note Payable as of December 31, 2022 is $ 0 .

2021 Unsecured Convertible Debenture

July 14, 2021, 

we issued a $ 2,000,000  

5.00 % unsecured convertible debenture due 

July 14, 2023 ( the 

“2021  Debenture”) to SOL Verano Blocker 

1  LLC that was convertible into units of the Company (each a “Jones Unit”) at a conversion price of $ 0.50  per Jones Unit, with each Jones Unit consisting of 

Jones Share and 

one  share purchase special warrant of Jones (each a “Jones Special Warrant”).

Each Jones Special Warrant will be exercisable into 

one  Jones Share at a price of $ 0.625  per Jones Share for a period of 

24  months from the date of issuance, which was conditional upon us increasing our authorized capital to an amount to cover the Jones Shares issuable pursuant to all of the outstanding Jones Special Warrants as well as the other Jones Shares issuable pursuant to our then-outstanding convertible/exercisable securities.

2021  Debenture accrued interest at a rate of 

5.00 % and we had $ 47,000  of interest due to SOL Verano Blocker 

1  LLC on 

December 31, 2021.

The closing of the Plan of Arrangement resulted in the automatic conversion of the 

2021  Debenture into an aggregate of 

4,025,035  Jones Shares and 

4,025,035  Jones Special Warrants at a conversion price of $ 0.50  per Jones Share and Jones Special Warrant.

As a result, the carrying amount of the converted principal amount of such 

2021  Unsecured Convertible Debenture, in an aggregate amount of $ 2,000,000 , was credited to common stock.

On July 14, 2021, we issued a $ 2,000,000 5.00 % unsecured convertible debenture due July 14, 2023 ( the “2021 Debenture”) to SOL Verano Blocker 1 LLC that was convertible into units of the Company (each a “Jones Unit”) at a conversion price of $ 0.50 per Jones Unit, with each Jones Unit consisting of one Jones Share and one share purchase special warrant of Jones (each a “Jones Special Warrant”).

Each Jones Special Warrant will be exercisable into one Jones Share at a price of $ 0.625 per Jones Share for a period of 24 months from the date of issuance, which was conditional upon us increasing our authorized capital to an amount to cover the Jones Shares issuable pursuant to all of the outstanding Jones Special Warrants as well as the other Jones Shares issuable pursuant to our then-outstanding convertible/exercisable securities.

The 2021 Debenture accrued interest at a rate of 5.00 % and we had $ 47,000 of interest due to SOL Verano Blocker 1 LLC on December 31, 2021.

The closing of the Plan of Arrangement resulted in the automatic conversion of the 2021 Debenture into an aggregate of 4,025,035 Jones Shares and 4,025,035 Jones Special Warrants at a conversion price of $ 0.50 per Jones Share and Jones Special Warrant.

As a result, the carrying amount of the converted principal amount of such 2021 Unsecured Convertible Debenture, in an aggregate amount of $ 2,000,000 , was credited to common stock.

2022 Unsecured Convertible Debenture

February 9, 2022 ,  we issued $ 3,000,000  in aggregate principal amount of 

3.00 % unsecured convertible debentures due 

February 9, 2023 ( the “Contingent Convertible Debentures”), which were converted into Jones Units of Jones at a conversion price of $ 0.50  per Jones Unit on 

May 16, 2022 .

 The Contingent Convertible Debentures were automatically convertible into Jones Units upon Jones Soda increasing its authorized capital to an amount to cover the Jones Shares issuable pursuant to all of the outstanding Contingent Convertible Debentures as well as all of the other then outstanding convertible/exercisable securities of Jones (a “Conversion Event”).

The Contingent Convertible Debentures were only convertible into Jones Units upon the occurrence of a Conversion Event. The Contingent Convertible Debentures were set to mature on 

February 9, 2023 ( the “Convertible Debenture Maturity Date”) and began accruing interest at a rate of 

3.00 % commencing on 

April 1, 2022 .

 Under the terms of the Contingent Convertible Debentures, the Company covenants to the holders of the Contingent Convertible Debentures that the Company will use their commercially reasonable efforts to cause the Conversion Event to occur as soon as practicable after the closing of the Plan of Arrangement.

We received net proceeds of $ 538,000  prior to 

December 31, 2021 

and the remaining of the total $ 3,000,000  during the quarter ended 

March 31, 2022 .

 The related closing costs amounting to $ 108,000  were amortized through interest expense over the term of the Contingent Convertible Debentures.

May 16, 2022 

all Contingent Convertible Debentures were converted into common stock, and the remaining unamortized capitalized closing costs were expensed, and the current balance of the Contingent Convertible Debentures as of 

September 30, 2022 

Lease Obligations

During the year ended December 31, 2022 we terminated our lease of approximately 6,500 square feet of retail/office space in Seattle, Washington for our principal executive and administrative offices.

The initial term of the lease was five years;

in February 2020, we amended the lease to extend the term through February 28, 2025.

As a result of the lease amendment, we recognized a lease liability and right-of-use asset of $ 556,000 which represents the remaining lease payments discounted at a rate of 4 %.

Due to the termination, we derecognized the Right-of-Use asset and total lease liabilities of $ 310,000 and $ 322,000 , respectively from our consolidated balance sheet.

The remaining difference of $ 12,000 was recorded as Other Income.

Additionally, we incurred a net termination fee of $ 41,000 upon execution of the termination agreement.

 On September 1, 2022 we entered into a membership/licensing agreement with Saltbox Inc.

This agreement gives us right to our portion of a shared office (“Suite”) and warehouse facility in Seattle, WA.

On February 9, 2022 , we issued $ 3,000,000 in aggregate principal amount of 3.00 % unsecured convertible debentures due February 9, 2023 ( the “Contingent Convertible Debentures”), which were converted into Jones Units of Jones at a conversion price of $ 0.50 per Jones Unit on May 16, 2022 .

The Contingent Convertible Debentures were only convertible into Jones Units upon the occurrence of a Conversion Event.

The Contingent Convertible Debentures were set to mature on February 9, 2023 ( the “Convertible Debenture Maturity Date”) and began accruing interest at a rate of 3.00 % commencing on April 1, 2022 .

We received net proceeds of $ 538,000 prior to December 31, 2021 and the remaining of the total $ 3,000,000 during the quarter ended March 31, 2022 .

The related closing costs amounting to $ 108,000 were amortized through interest expense over the term of the Contingent Convertible Debentures.

On May 16, 2022 all Contingent Convertible Debentures were converted into common stock, and the remaining unamortized capitalized closing costs were expensed, and the current balance of the Contingent Convertible Debentures as of December 31, 2023 and 2022 was $ 0 .

Membership Agreement Obligation

On September 1, 2022 we entered into a membership/licensing agreement with Saltbox Inc.

This agreement gives us right to our portion of a shared office (“Suite”) and warehouse facility in Seattle, WA.

The structure of the agreement is a revocable license to access the suite and warehouse.

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and Jones Soda is that of a licensor and licensee only, and not a landlord-tenant or lessor-lessee relationship.

The agreement does not give right, title, interest, easement, or lien in or to Saltbox Inc’s business, the Suite, the Premises, or anything contained therein, nor will the Agreement be interpreted or construed as a lease.

Thus, we will not be recording a lease liability or right-of-use asset associated with this agreement.

The term of the agreement is for 1 year with an option to renew and 12 monthly payments of $ 6,000 payable each month.

During the year ended December 31, 2022 and 2021, we incurred rental expenses on the previous lease of $ 109,000 and $ 122,000 , respectively.

During the year ended December 31, 2022, we incurred licensing expenses for right to our suite and warehouse of $ 29,000 . 

Shareholders ’

May 16, 2022, 

our shareholders approved the adoption of the Jones Soda Co. 

2022  Omnibus Equity Incentive Plan (the 

" 2022  Plan"), which replaced the 

2011  Plan (defined below) and provides for the granting incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire shares of Company common stock under the 

2022  Plan.

Under the terms of the 

2022  Plan, the sum of (i) 

10,000,000  shares of the Company’s common stock, plus (ii) the number of shares of common stock reserved, but unissued under the 

2011  Plan, plus (iii) the number of shares of common stock underlying forfeited awards under the 

2011  Plan are initially available for issuance as awards under the 

2022  Plan.

1,936,074  shares of common stock reserved under the terms of our 

2011  Incentive Plan (the 

“2011  Plan”) but unissued were transferred to the reserve for the 

2022  Plan.

Thus, the total number of shares of common stock authorized under the Plan was 

11,936,074  shares.

Under the terms of the 

2022  Plan, the Board 

grant awards to employees, officers, directors, consultants, agents, advisors and independent contractors.

Stock options are granted with an exercise price equal to the closing price of our stock on the date of grant, and generally have a 

ten -year term.

December 31, 2022, 

there were 

11,663,574  shares of unissued common stock authorized and available for future awards under the Plan.

Upon renewal, the company elected to enter into a month-to-month arrangement with Saltbox.

Under this arrangement, the Company pays $ 9,000 per month.

Shareholders ’ Equity

On May 16, 2022, our shareholders approved the adoption of the Jones Soda Co.

2022 Omnibus Equity Incentive Plan (the " 2022 Plan"), which replaced the 2011 Plan (defined below) and provides for the granting incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire shares of Company common stock under the 2022 Plan.

Under the terms of the 2022 Plan, the sum of (i) 10,000,000 shares of the Company’s common stock, plus (ii) the number of shares of common stock reserved, but unissued under the 2011 Plan, plus (iii) the number of shares of common stock underlying forfeited awards under the 2011 Plan are initially available for issuance as awards under the 2022 Plan.

1,936,074 shares of common stock reserved under the terms of our 2011 Incentive Plan (the “2011 Plan”) but unissued were transferred to the reserve for the 2022 Plan.

Thus, the total number of shares of common stock authorized under the Plan was 11,936,074 shares.

Under the terms of the 2022 Plan, the Board may grant awards to employees, officers, directors, consultants, agents, advisors and independent contractors.

Stock options are granted with an exercise price equal to the closing price of our stock on the date of grant, and generally have a ten -year term.

As of December 31, 2023, there were 6,330,250 shares of unissued common stock authorized and available for future awards under the Plan.

Stock options:

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Number of Shares

Weighted Average Exercise

Price (Per Share)

Weighted Average Exercise Price

Balance at January 1, 2023

3,405,511  

$ 0.38  

3,369,332 $ 0.41

Options granted

828,148  

9,659,000 0.23

Options forfeited/expired

( 864,327 )  

( 1,620,560 ) 0.41

Balance at December 31, 2023

3,369,332  

$ 0.41  

11,407,772 $ 0.26

Exercisable, December 31, 2023

2,460,674  

$ 0.34  

3,599,020 $ 0.32

Vested and expected to vest

3,116,129  

$ 0.40  

9,561,702 $ 0.26

Outstanding Options

Number of Shares

Weighted Average Exercise

Price (Per Share)

Weighted Average Exercise Price

Balance at January 1, 2022

3,589,783  

$ 0.36  

3,405,511 $ 0.38

Options granted

1,423,450  

Options exercised

( 797,306 )  

Options forfeited/expired

( 810,416 )  

( 864,327 ) 0.41

Balance at December 31, 2022

3,405,511  

$ 0.38  

3,369,332 $ 0.41

Exercisable, December 31, 2022

1,616,439  

$ 0.34  

2,460,674 $ 0.34

Vested and expected to vest

2,808,039  

$ 0.37  

3,116,129 $ 0.40

The following table summarizes information about stock options outstanding and exercisable under our stock incentive plans at December 31, 2023:

Remaining Contractual Life (Years)

Weighted Average

Exercise Price Per

Remaining Contractual Life (Years)

Weighted Average

Exercise Price Per

to $ 0.50  

2,835,258  

$ 0.34  

2,240,258  

$ 0.31  

to $ 1.09  

529,074  

215,416  

to $ 2.99  

3,369,332  

2,460,674  

Number Outstanding

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price Per Share

to $ 0.50 11,188,698 8.70 $ 0.25 3,395,572 7.25 $ 0.30

to $ 1.09 214,074 7.35 0.64 198,448 7.29 0.63

to $ 2.99 5,000 7.59 1.33 5,000 7.59 1.33

11,407,772 8.67 0.26 3,599,020 7.25 0.32

Restricted stock awards:

Beginning on May 13, 2022 the Company’s board of directors (the “Board”) determined that it was in the best interests of the Company to periodically award restricted stock units as equity compensation for non-employee directors  upon the recommendation of the Compensation and Governance Committee of the Board in lieu of stock options.

Each restricted stock unit granted vests incrementally over the period in the specific award agreement, and certain restricted stock awards will immediately vest upon the occurrence of a "Change in Control" as defined in the 

For the period from January 1, 2020 through February 15, 2022, equity compensation for non-employee director service consisted of the grant of an annual non-qualified stock option award that vested on the first anniversary of the date of grant (subject to the director’s continuing service as of such anniversary date), with the number of shares underlying such award being determined by dividing $ 25,000 by the closing share price (as quoted on the OTCQB marketplace) on the date of grant (which was the first trading day in January in each calendar year), and such stock option award had an exercise price equal to our closing share price (as quoted on the OTCQB marketplace) on the date of grant.

Prior to February 15, 2022, when joining the Board, each non-employee director was previously granted a non-qualified stock option award that vested on the first anniversary of the date of grant (subject to the director’s continuing service as of such anniversary date), with the number of shares underlying such award being determined by dividing $25,000 by our closing stock price on the first trading day following the date on which such director is appointed), prorated based on the date on which such director is appointed, and which stock option shall be granted as of the first trading day following the date on which such director was appointed, and had an exercise price equal to our closing share price (as quoted on the OTCQB marketplace) on the date of grant.

Beginning on May 13, 2022, the Company’s board of directors (the “Board”) determined that it was in the best interests of the Company to periodically award restricted stock units as equity compensation for non-employee directors upon the recommendation of the Compensation and Governance Committee of the Board in lieu of stock options.

The stock option and restricted stock unit awards described above are governed by either the 2022 Plan or the 2011 Plan (if granted prior to the adoption of the 2022 Plan) and standard form of stock option grant notice and agreement and standard form of restricted stock unit grant notice and agreement.

On December 30, 2022, the Company entered into rescission agreements (the “Rescission Agreements”) with the certain non-employee directors on the Board who were awarded restricted stock units during 2022 as well as the Company’s Chief Executive Officer and President who received restricted stock units during 2022 under the terms of his employment agreement with the Company.

Under the terms of the Rescission Agreements, each of the Company and the applicable RSU grantee agreed to rescind and cancel for no consideration all currently outstanding restricted stock units previously granted to each such grantee during 2022 as well as all shares of the Company’s common stock previously issued to any such grantee as a result of the vesting of any restricted stock units in August 2022.

There was no restricted stock activity during 2021.

A summary of our 2022 restricted stock activity is as follows:

A summary of our 2023 and 2022 restricted stock activity is as follows:

Restricted Shares

Weighted-Average Grant Date Fair Value per share

Weighted-Average Contractual Life (years)

Non-vested restricted stock at January 1, 2023

1,800,000 0.26

( 1,200,000 ) 0.26

Cancelled/expired

Non-vested restricted stock at December 31, 2023

600,000 $ 0.26 9.1

Restricted Shares

Weighted-Average Grant

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Non-vested restricted stock at January 1, 2022

4,920,000  

( 70,000 )  

4,920,000 0.20 -

( 70,000 ) 0.22

Cancelled/expired/rescinded

( 4,850,000 )  

( 4,850,000 ) 0.20

Non-vested restricted stock at December 31, 2022

Stock-based compensation expense:

Stock-based compensation expense is recognized using the straight-line attribution method over the employees’

requisite service period.

Stock-based compensation expense is recognized using the straight-line attribution method over the employees’ requisite service period.

We recognize compensation expense for only the portion of stock options or restricted stock expected to vest.

1 unchanged sentence

If the actual number of forfeitures differs from those estimated by management, additional adjustments to stock-based compensation expense may be required in future periods.

At December 31, 2022, we had unrecognized compensation expense related to stock options and non-vested stock of $ 212,000 to be recognized over a weighted-average period of 2.7  years.

At December 31, 2023, we had unrecognized compensation expense related to stock options and non-vested stock of $ 808,000 to be recognized over a weighted-average period of 2.16 years.

The following table summarizes the stock-based compensation expense (in thousands):

Year Ended  

 December 31,

Stock options 

Year Ended December 31,

Stock options

Common stock award

Pinestar warrants (defined below)

Restricted stock 

$ 694 $ 1,364

Income statement account:

Selling and marketing

General and administrative 

We employ the following key weighted-average assumptions in determining the fair value of stock options, using the Black-Scholes option pricing model and the simplified method to estimate the expected term of “plain vanilla”

Year Ended December 31,  

Expected dividend yield  

Expected stock price volatility  

79.3 %  

Risk-free interest rate  

Expected term (in years)  

Weighted-average grant date fair-value  

$ 0.35  

$ 0.32  

General and administrative

$ 694 $ 1,364

Year Ended December 31,

Expected dividend yield

Expected stock price volatility

87.5 % 79.3 %

Risk-free interest rate

Expected term (in years)

Weighted-average grant date fair-value

$ 0.17 $ 0.35

During the year ended December 31, 2023, no material modifications were made to outstanding stock options.

The aggregate intrinsic value of stock options outstanding at December 31, 2022 and 2021 was $ 77,000 and $ 1.3 million, respectively and for options exercisable was $ 77,000 and $ 690,000 , respectively.

The aggregate intrinsic value of stock options outstanding at December 31, 2023 and 2022 was $ 0 and $ 77,000 , respectively and for options exercisable was $ 0 and $ 77,000 , respectively.

The intrinsic value of outstanding and exercisable stock options is calculated as the quoted market price of the stock at the balance sheet date less the exercise price of the option.

The total intrinsic value of options exercised during the year ended December 31, 2022 and 2021 was zero and $ 435,000 , respectively.

During the years ended December 31, 2022 and 2021, there were zero and 

797,306 options exercised, respectively. The Company’s policy is to issue new shares upon exercise of options.

The total intrinsic value of options exercised during the year ended December 31, 2023 and 2022 was zero for both years.

During the years ended December 31, 2023 and 2022, there were zero options exercised during both years.

The Company’s policy is to issue new shares upon exercise of options.

Closing of the Pinestar Gold Inc.

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On February 15, 2022, Jones issued an aggregate of 20,000,048 Jones Shares in connection with the completion of the Plan of Arrangement whereby the outstanding Pinestar Shares were exchanged for newly issued Jones Shares on a one -for- one basis.

The Plan of Arrangement had previously been approved by both Pinestar’s shareholders as well as by the Supreme Court of British Columbia after such court held a hearing on the fairness of the terms and conditions of the Plan of Arrangement at which all Pinestar shareholders had the right to appear.

In connection with the Plan of Arrangement, Pinestar completed the Pinestar Subscription Receipt Offering for aggregate net proceeds of $ 7,152,000 , at a price per subscription receipt equal to $ 0.50 .

As part of the closing of the Plan of Arrangement, each such subscription receipt automatically converted into one Pinestar Share and one new common share purchase warrant of Pinestar, which were then immediately exchanged for Jones Shares and Jones Special Warrants, respectively, in accordance with a 1:1 exchange ratio.

The issuance of Jones Shares to the holders of Pinestar Shares (including Pinestar Shares received upon the conversion of the subscription receipts issued in the Pinestar Subscription Receipt Offering) in the Plan of Arrangement was exempt from the registration requirements under the United States Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3 (a)( 10 ) of the Securities Act, which exempts from the registration requirements under the Securities Act any securities that are issued in exchange for one or more bona fide outstanding securities where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court expressly authorized by law to grant such approval. 

The following table summarizes the Company's outstanding warrants as of December 31, 2023:

Number Outstanding

Remaining Contractual Life (Years)

Exercise Price Per Share

Number Exercisable

Exercise Price

Jones Special Warrants (1)

26,047,137 0.20 $ 0.63 USD 26,047,137

Pinestar Warrants (2)

Outstanding Warrants as of December 31, 2022  

( 1 ) Upon conversion of the beforementioned 

2021  Unsecured Convertible Debenture, 

4,025,035 Jones Special Warrants were issued.

1,474,808 0.25 0.06 CAD 1,474,808

27,521,945 27,521,945

( 1 ) Upon conversion of the beforementioned 2021 Unsecured Convertible Debenture, 4,025,035 Jones Special Warrants were issued.

In connection with the beforementioned Plan of Arrangement, Pinestar completed an offering for Subscription Receipts for aggregate gross proceeds of $ 8,000,000 .

Pursuant to the Plan of Arrangement, each Subscription Receipt automatically converted into 16,000,000 Jones Special Warrants.

Lastly, Upon conversion of the beforementioned 

2022  Unsecured Convertible Debenture, 

6,022,102 Jones Special Warrants were issued. 

( 2 ) In connection with the beforementioned Plan of Arrangement, Pinestar, Pinestar had outstanding 16,800,000 existing common share purchase warrants and as a result of the consolidation, and the number of Pinestar Shares issuable pursuant to the Pinestar warrants as adjusted in accordance with their terms to account for the consolidation ( 10.031 pre consolidation shares to 1 post consolidation), resulting in an aggregate of approximately 1,674,808 post-consolidated Pinestar warrants, subject to rounding, each exercisable for the purchase of one post-consolidation Pinestar Share at a price of $ 0.06  CAD per share.

600,000 warrants were transferred to two Board of Director members for 2022 services, thus resulting in $ 76,000 in stock compensation expense incurred during the year ended December 31, 2022. 

Lastly, upon conversion of the beforementioned 2022 Unsecured Convertible Debenture, 6,022,102 Jones Special Warrants were issued.

( 2 ) In connection with the beforementioned Plan of Arrangement, Pinestar, Pinestar had outstanding 16,800,000 existing common share purchase warrants and as a result of the consolidation, and the number of Pinestar Shares issuable pursuant to the Pinestar warrants as adjusted in accordance with their terms to account for the consolidation ( 10.031 pre consolidation shares to 1 post consolidation), resulting in an aggregate of approximately 1,674,808 post-consolidated Pinestar warrants, subject to rounding, each exercisable for the purchase of one post-consolidation Pinestar Share at a price of $ 0.06 CAD per share.

600,000 warrants were transferred to two Board of Director members for 2022 services, thus resulting in $ 76,000 in stock compensation expense incurred during the year ended December 31, 2022.

During the year ended December 31, 2023 , Pinestar Warrants in the amount of 200,000 were exercised at the exercise price of $ 0.06 CAD, for total proceeds of $ 9,000 .

Employee 401 (k) Plan

We have a 401 (k) plan whereby eligible employees who have completed at least one hour of service per month in three consecutive months of employment may enroll.

Employees can elect to contribute up to 100 % of their eligible compensation to the 401 (k) plan subject to Internal Revenue Service’s limitations.

As currently established, we are not required to make and have not made any contributions to the 401 (k) plan during the years ended December 31, 2022 and 2021.

We did accrue and fund our employees’

401 (k) accounts in 2023 for matching contributions related to 2022 in the amount of $ 42,000 .

Employees can elect to contribute up to 100 % of their eligible compensation to the 401 (k) plan subject to Internal Revenue Service’s limitations.

As currently established, we are not required to make any contributions to the 401 (k) plan.

During the years ended December 31, 2023 and 2022 we did accrue and fund our employees’ 401 (k) accounts in 2023 and 2022 for matching contributions in the amount of $ 36,000 and $ 42,000 , respectively.

Commitments and Contingencies

4 unchanged sentences

In the opinion of our management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

On March 25, 2024, our indirect wholly owned subsidiary, Mary Jones Michigan LLC, received a Notice of Claims (“Core Claim”) for arbitration from Core Manufacturing, LLC (“Core”), who claimed that the Company was in breach of its commitments under the agreement between the Company and Core.

Core is seeking, amongst other damages, the enforcement of the break-up fee provision in such agreement, which they calculate to be $ 7,220,357 .

We dispute the allegations of Core in the Core Claim and intend to defend ourselves vigorously in this matter.

We have determined that it is too early in process to evaluate this Claim’s potential outcome, accordingly, the matter is being disclosed and no range of accrual, if any, can be determined.

The provision for income taxes consisted of the following for the years ended December 31 ( in thousands):

Provision for income taxes

Loss before provision for income taxes was as follows for the years ended December 31 ( in thousands):

Loss before income taxes was as follows for the years ended December 31 ( in thousands):

United States

$ ( 4,901 ) $ ( 6,469 )

$ ( 4,821 ) $ ( 6,376 )

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:

Federal statutory rate

21.00 % 21.00 %

Permanent differences

( 1.17 )  

( 0.13 ) ( 1.17 )

Stock Compensation

( 0.85 )  

( 1.15 ) ( 0.85 )

State income taxes, net of federal benefit

Change in valuation allowance

( 22.57 ) ( 16.20 )

0.83 ( 3.99 )

Provision for income taxes

( 0.68 )% ( 0.44 )%

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

1 unchanged sentence

Federal and state net operating loss carryforwards

$ 15,765  

$ 14,896  

$ 16,872 $ 15,765

Stock-based compensation

Total deferred tax asset

16,182  

15,178  

17,217 16,182

Valuation allowance

( 15,178  

( 17,217 ) ( 16,182 )

Net deferred tax asset

2 unchanged sentences

deferred tax assets.

This is due to the fact that the relevant accounting guidance puts more weight on the negative objective evidence of cumulative losses in recent years than the positive subjective evidence of future projections of pretax income. For the years ended December 31, 2022 and December 31, 2021, the valuation allowance increased by $ 1.0 million, and $ 185,000 , respectively. 

For the years ended December 31, 2023 and December 31, 2022, the valuation allowance increased by $ 1.03 million, and $ 1 million, respectively.

We continually analyze the realizability of our deferred tax assets, but we reasonably expect to continue to record a full valuation allowance on future U.S tax benefits until we sustain an appropriate level of taxable income through improved U.S.

3 unchanged sentences

Net operating loss carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue code.

There are no uncertain tax positions to recognize as of December 31, 2022 

The tax years that remain open to examination by the taxing authorities are 2017 - 2021, generally.

There are no uncertain tax positions to recognize as of December 31, 2023 and 2022.

We are no longer subject to U.S.

Federal examination for tax years ending before 2020, to state examinations before 2019, or to foreign examinations before 2019.

However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward and make adjustments up to the amount of the net operating losses or credit carryforward.

At December 31, 2023, we were not under examination by a tax authority.

The net operating losses for prior years are subject to adjustment under examination to the extent they remain unutilized in an open year.

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

There was no financial statement impact related to the CARES Act for the years ended December 31, 2022 

Segment Information

4 unchanged sentences

United States

$ 15,313  

$ 11,385  

$ 13,537 $ 15,313

Other countries

Total revenue

$ 19,085  

$ 14,792  

During the year ended December 31, 2022, one of our customers represented approximately 17 % of our revenues and during the year ended December 31, 2021 one  of our customers represented approximately 21 % of revenues.

Insurance Premium Financing 

Restatement of Previously Issued Consolidated Financial Statements for Errors surrounding short-term financing

Prior year amounts have been restated to reflect the correction of the error discussed in Note 1, "Nature of Operations and Summary of Significant Accounting Policies."

$ 16,669 $ 19,085

During each of the years ended December 31, 2023 and 2022 one of our customers represented approximately 17 % of our revenues for both years.

Insurance Premium Financing

Effective November 15, 2023, the Company entered into a one year financing agreement with IPFS Corporation to fund a portion of its insurance premiums in the amount of $ 357,000 .

Repayments are made quarterly on January 15, 2024, April 15, 2024, and by July 15, 2024, the entirety of the financing is paid off in full.

The interest rate is 4.75 % and there are no  covenants associated with this agreement. 

The interest rate is 8.49 % and there are no covenants associated with this agreement.

Effective November 15, 2022, the Company entered into a one year financing agreement with IPFS Corporation to fund a portion of its insurance premiums in the amount of $ 612,000 .

Repayments are made quarterly on January 15, 2023, April 15, 2023, and by July 15, 2023, the entirety of the financing is paid off in full.

The interest rate is 6.99 % and there are no  covenants associated with this agreement. 

Repayments were made quarterly on January 15, 2023, April 15, 2023, and by July 15, 2023, the entirety of the financing is paid off in full.

The interest rate is 6.99 % and there are no covenants associated with this agreement.

Related party Transactions

During the year ended December 31, 2023, 200,000 Pinestar Warrants, as described in Note 7 were exercised by one of our Board members, Paul Norman, at the exercise price of $ 0.06 CAD, for total proceeds of $ 9,000 .

On January 6, 2022 we executed a contract with Julianna Pena for Sponsorship services in which we paid Ms.

Pena $ 100,000 during 2022 along with a 10 % Royalty for the sale of the Julianna Pena “Crushed Melon”

Pena $ 100,000 during 2022 along with a 10 % Royalty for the sale of the Julianna Pena “Crushed Melon” product.

Julianna Pena is considered a related party of the Company due to the direct interest of Ms.

Pena’s current Manger, a member of our Board Members, Chad Bronstein.

Pursuant to the beforementioned contract with Julianna Pena, we paid Ms.

Pena approximately $ 136,000 during the year ended December 31, 2022 .

For the year ended December 31, 2021, except as set forth herein, we were not a party to any transactions in which the amount involved in the transaction in which was material.

3.00 % unsecured convertible debentures (“Contingent Convertible Debentures”) of the Company, which were convertible into units of our Company at a conversion price of $ 0.50 per unit, with each unit consisting of one share of our common stock and one  share purchase special warrant of our Company (“Jones Special Warrant”).

On February 9, 2022, current director Chad Bronstein and former director Alexander Spiro purchased, prior to becoming directors on our Board of Directors, an aggregate principal amount of $ 100,000 and $ 400,000 , respectively, of 3.00 % unsecured convertible debentures (“Contingent Convertible Debentures”) of the Company, which were convertible into units of our Company at a conversion price of $ 0.50 per unit, with each unit consisting of one share of our common stock and one share purchase special warrant of our Company (“Jones Special Warrant”).

Each Jones Special Warrant will be exercisable into one share of our common stock at a price of $ 0.625 per share for a period of 24 months from the date of issuance.

The Contingent Convertible Debentures were automatically convertible into our units upon us increasing our authorized capital in May of 2022.

Jamie Colbourne, a director and the former Chairman of our Board of Directors and former Interim Chief Financial Officer, Mark Murray, our President and Chief Executive Officer and a member our Board of Directors, former director Jeffrey Anderson, current director Clive Sirkin and current Chairman of the Board Paul Norman, each acquired $ 200,000 in subscription receipts in Pinestar Gold Inc., and consequently each of these related persons acquired 400,000 shares of our common stock and 400,000 Jones Special Warrants (exercisable into shares of our common stock at an exercise price of $ 0.625 per share) in connection with the closing of the plan of arrangement under the Business Corporations Act (British Columbia) on February 15, 2022.

The issuance of our shares of common stock and the Jones Special Warrants to these related parties was approved by the Company’s Audit Committee.

Additionally, during the year ended December 31, 2022, 400,000 and 200,000 Pinestar Warrants, as described in Note 7  were transferred to Jamie Colbourne and Paul Norman, respectively.

Jamie Colbourne, a former director and the former Chairman of our Board of Directors and former Interim Chief Financial Officer, Mark Murray, our former President and former Chief Executive Officer and a current member our Board of Directors, former director Jeffrey Anderson, current director Clive Sirkin and current Chairman of the Board Paul Norman, each acquired $ 200,000 in subscription receipts in Pinestar Gold Inc., and consequently each of these related persons acquired 400,000 shares of our common stock and 400,000 Jones Special Warrants (exercisable into shares of our common stock at an exercise price of $ 0.625 per share) in connection with the closing of the plan of arrangement under the Business Corporations Act (British Columbia) on February 15, 2022.

The issuance of our shares of common stock and the Jones Special Warrants to these related parties was approved by the Company’s Audit Committee.

Additionally, during the year ended December 31, 2022, 400,000 and 200,000 Pinestar Warrants, as described in Note 7 were transferred to Jamie Colbourne and Paul Norman, respectively.

Subsequent Events

Effective in Q1 of 2024, we decided to switch independent distributors from Lassonde to Dot Foods Canada.

For the year ended December 31, 2023, Lassonde was our top distributor and made up approximately 17 % of our sales revenue during 2023.

On March 29, 2024, the Company received a commitment letter from a creditor to provide the Company with a $ 2 million revolving credit facility for working capital needs.

The maturity date will be three years from the date of initial funding.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data