JONES SODA CO (Form: 10-Q, Received: 05/12/2020 16:58:55)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

Form 10-Q

June 30, 2014
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended March 31, 2020
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File Number: 000-28820

_____________________________________________

JONES SODA CO.

(Exact name of registrant as specified in its charter)

_____________________________________________


Washington		52-2336602
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

66 South Hanford Street, Suite 150
Seattle, Washington		98134
(Address of principal executive offices)		(Zip Code)

(206) 624-3357

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	JSDA	OTCQB

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

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company. or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filer ☐		Accelerated Filer ☐
Non-accelerated Filer ☒		Smaller Reporting Company ☒
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

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

As of April 24, 2020, there were 61,667,668 shares of the registrant's common stock issued and outstanding.

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EXPLANATORY NOTE

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

In addition, unless otherwise indicated or the context otherwise requires, all references in this Report to “Jones Soda” refer to our premium beverages, including Jones® Soda and Lemoncocco® sold under the trademarked brand name “Jones Soda Co.®”

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This Report contains a number of forward-looking statements that reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this Report other than statements of historical fact, including statements that address operating performance, the economy, events or developments that management expects or anticipates will or may occur in the future, including statements related to case sales, revenues, profitability, distributor channels, new products, adequacy of funds from operations, cash flows and financing, our ability to continue as a going concern, potential strategic transactions, statements regarding future operating results and non-historical information, are forward-looking statements. In particular, the words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “can,” “plan,” “predict,” “could,” “future,” “continue,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions and apply only as of the date of this Report. Our actual results, performance or achievements could differ materially from historical results as well as from the results expressed in, anticipated or implied by these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In particular, our business, including our financial condition and results of operations and our ability to continue as a going concern may be impacted by a number of factors, including, but not limited to, the following:

Our ability to successfully execute on our growth strategy and operating plans;

The ongoing negative impact that the novel coronavirus (COVID-19) pandemic has had, and will likely continue to have, on our business operations and sales;

Our ability to effectively utilize the proceeds from our 2019 financing from Heavenly RX;

Our ability to manage our operating expenses and generate cash flow from operations, along with our ability to secure additional financing if our sales goals take longer to achieve than anticipated;

Our ability to create and maintain brand name recognition and acceptance of our products, which is critical to our success in our competitive, brand-conscious industry;

Our ability to effectively execute our marketing strategies in light of the various closures and event delays caused by the COVID-19 pandemic and the potential adverse impact on demand for our products caused by the COVID-19 pandemic;

Our ability to compete successfully against much larger, well-funded, established companies currently operating in the beverage industry generally, including in the fountain business, particularly from other major beverage companies;

Entrance into and increased focus on the craft beverage segment by other major beverage companies;

Our ability to respond to changes in the consumer beverage marketplace, including potential reduced consumer demand due to health concerns (including obesity) and legislative initiatives against sweetened beverages;

Our ability to successfully develop and launch new products that match consumer beverage trends, and to manage consumer response to such new products and new initiatives;

Our ability to maintain brand image and product quality and avoid risks from product issues such as product recalls;

Our ability to establish, maintain and expand distribution arrangements with independent distributors, retailers, brokers and national retail accounts, most of whom sell and distribute competing products, and upon whom we rely to employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products;

Our ability to respond to any changes in, and to maintain, our private label relationship with 7-Eleven;

The timing and amount of reorders for 7-Select®, including the impact on our inventory, revenue and cash flow;

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Our ability to manage our inventory levels and to predict the timing and amount of our sales;

Our reliance on third-party contract manufacturers of our products and the geographic locations of their facilities, which could make management of our distribution efforts inefficient or unprofitable;

Our ability to secure a continuous supply and availability of raw materials, as well as other factors that may adversely affect our supply chain, including increases in raw material costs, potential shortages of glass in the supply chain and the impact of the COVID-19 pandemic;

Our ability to source our flavors on acceptable terms from our key flavor suppliers;

Our ability to develop and commercialize CBD-infused beverages and comply with laws and regulations governing cannabis, hemp, or related products;

Our ability to attract and retain key personnel, the loss of whom would directly affect our efficiency and operations and could materially impair our ability to execute our growth strategy;

Our ability to protect our trademarks and trade secrets, the failure of which may prevent us from successfully marketing our products and competing effectively;

Litigation or legal proceedings, which could expose us to significant liabilities and damage our reputation;

Our ability to comply with the many regulations to which our business is subject;

Our ability to maintain an effective information technology infrastructure;

Fluctuations in fuel and freight costs;

Fluctuations in currency exchange rates, particularly between the United States and Canadian dollars;

Regional, national or global economic, political, social and other conditions that may adversely impact our business and results of operations, including the COVID-19 pandemic;

Our ability to maintain effective disclosure controls and procedures and internal control over financial reporting;

Dilutive and other adverse effects on our existing shareholders and our stock price arising from future securities issuances; and

Our ability to access the capital markets for any future equity financing, and any actual or perceived limitations to our common stock by being traded on the OTCQB Marketplace, including the level of trading activity, volatility or market liquidity.

For a discussion of some of the factors that may affect our business, results and prospects, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020 and in our other reports we file with the SEC, including our periodic reports on Form 10-Q and current reports on Form 8-K. Readers are also urged to carefully review and consider the various disclosures made by us in this Report and in our other reports we file with the SEC, including our periodic reports on Forms 10-Q and current reports on Form 8-K, and those described from time to time in our press releases and other communications, which attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

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PART 1 – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

JONES SODA CO.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2020		December 31, 2019
	(Unaudited)
ASSETS		(In thousands, except share data)
Current assets:
Cash and cash equivalents	$	4,904	$	5,969
Accounts receivable, net of allowance of $99 and $44		2,024		1,573
Inventory		2,293		1,788
Prepaid expenses and other current assets		169		310
Total current assets		9,390		9,640
Fixed assets, net of accumulated depreciation of $493 and $484		153		162
Other assets		33		33
Right of use lease asset		547		17
Total assets	$	10,123	$	9,852
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,234	$	554
Lease liability, current portion		96		18
Accrued expenses		639		663
Taxes payable		1		10
Total current liabilities		1,970		1,245
Convertible subordinated notes payable, net		1,346		1,333
Accrued interest expense		169		147
Lease liability, net of current portion		451		-
Total liabilities		3,936		2,725
Shareholders’ equity (deficit):
Common stock, no par value:
Authorized — 100,000,000; issued and outstanding shares — 61,667,668 shares and 61,566,076 shares, respectively		73,811		73,773
Accumulated other comprehensive income		255		342
Accumulated deficit		(67,879)		(66,988)
Total shareholders’ equity		6,187		7,127
Total liabilities and shareholders’ equity	$	10,123	$	9,852

See accompanying notes to condensed consolidated financial statements.

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JONES SODA CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,
	2020		2019
	(In thousands, except share data)
Revenue	$	2,792	$	2,824
Cost of goods sold		2,210		2,257
Gross profit		582		567
Operating expenses:
Selling and marketing		753		615
General and administrative		708		658
Total operating expenses		1,461		1,273
Loss from operations		(879)		(706)
Interest income		17		-
Interest expense		(38)		(89)
Other income, net		13		2
Loss before income taxes		(887)		(793)
Income tax expense, net		(4)		(3)
Net loss	$	(891)	$	(796)

Net loss per share - basic and diluted	$	(0.01)	$	(0.02)
Weighted average basic and diluted common shares outstanding		61,665,435		41,592,851

See accompanying notes to condensed consolidated financial statements.

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JONES SODA CO.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	Three months ended March 31,
	2020		2019
	(In thousands)
Net loss	$	(891)	$	(796)
Other comprehensive income (loss):
Foreign currency translation adjustment		(87)		19
Total comprehensive loss	$	(978)	$	(777)

See accompanying notes to condensed consolidated financial statements.

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JONES SODA CO.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


	Common Stock
		Number	Amount			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Shareholders’ Equity (Deficit)


Three months ended March 31, 2019
Balance as of December 31, 2018		41,464,373	$	63,211	$	296	$	(64,210)	$	(703)
Stock-based compensation		111,488		63		-		-		63
Common stock issuance on conversion of notes payable		438,013		141		-		-		141
Net loss		-		-		-		(796)		(796)
Other comprehensive income		-		-		19		-		19
Balance as of March 31, 2019		42,013,874	$	63,415	$	315	$	(65,006)	$	(1,276)

Three months ended March 31, 2020
Balance as of December 31, 2019		61,566,076	$	73,773	$	342	$	(66,988)	$	7,127
Stock-based compensation		101,592		35		-		-		35
Beneficial conversion feature on paid-in-kind interest				3		-		-		3
Net loss		-		-		-		(891)		(891)
Other comprehensive loss		-		-		(87)		-		(87)
Balance as of March 31, 2020		61,667,668	$	73,811	$	255	$	(67,879)	$	6,187

See accompanying notes to condensed consolidated financial statements.

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JONES SODA CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended March 31,
	2020		2019
	(In thousands)
OPERATING ACTIVITIES:
Net loss	$	(891)	$	(796)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation and amortization		26		41
Stock-based compensation		41		63
Change in allowance for doubtful accounts		55		29
Changes in operating assets and liabilities:
Accounts receivable		(550)		(515)
Inventory		(526)		(498)
Prepaid expenses and other current assets		107		87
Accounts payable		680		395
Accrued expenses		37		113
Taxes payable		(8)		4
Other liabilities		(1)		7
Net cash used in operating activities		(1,030)		(1,070)
INVESTING ACTIVITIES:
Purchase of fixed assets		-		(4)
Net cash used in investing activities		-		(4)
FINANCING ACTIVITIES:
Proceeds on line of credit, net of repayments		-		524
Payment of taxes on RSU withholding		(6)		-
Net cash provided by financing activities		(6)		524
Net increase in cash and cash equivalents		(1,036)		(550)
Effect of exchange rate changes on cash		(29)		18
Cash and cash equivalents, beginning of period		5,969		991
Cash and cash equivalents, end of period	$	4,904	$	459
Supplemental disclosure:
Cash paid during period for:
Interest	$	-	$	12
Income taxes		6		-
Supplemental disclosure of non-cash transactions:
Conversion of notes payable	$	-	$	141
Recognition of lease liability and right-of-use asset		556,000		-
Beneficial conversion feature on convertible notes		3		-

See accompanying notes to condensed consolidated financial statements.

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JONES SODA CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations and Summary of Significant Accounting Policies

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.

We are a Washington corporation and have two operating subsidiaries, Jones Soda Co. (USA) Inc. and Jones Soda (Canada) Inc. (together, our “Subsidiaries”).

Basis of presentation, consolidation and use of estimates

The accompanying condensed consolidated balance sheet as of December 31, 2019, which has been derived from our audited consolidated financial statements, and unaudited interim condensed consolidated financial statements as of March 31, 2020, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. The condensed consolidated financial statements include our accounts and the accounts of our Subsidiaries. All intercompany transactions between us and our Subsidiaries have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments, consisting only of those of a normal and recurring nature, considered necessary for a fair presentation of our financial position, results of operations and cash flows at the dates and for the periods presented. Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. 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. Actual results could differ from those estimates. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Going Concern

We have experienced recurring losses from operations and negative cash flows from operating activities. This situation creates uncertainties about our ability to execute our business plan, finance operations, and indicates substantial doubt about our ability to continue as a going concern.

We continue to experience negative cash flows from operations, as well as an ongoing requirement for additional capital to support working capital needs. Therefore, currently, based upon our near-term anticipated level of operations and expenditures, management believes that cash on hand is not sufficient to enable us to fund operations for twelve months from the date the consolidated financial statements included in this Report are issued. These conditions raise substantial doubt as to our ability to continue as a going concern. Our ability to continue operations is dependent upon achieving a profitable level of operations and on our ability to obtain necessary financing to fund ongoing operations. The continued spread of COVID-19 and uncertain market conditions may limit our ability to access capital, may reduce demand for our products, and may negatively impact our supply chain. Subsequent to March 31, 2020, our Board approved a restructuring plan that included the termination of nine employees and the furloughing of four employees to be effective on April 17, 2020. This will reduce our operating expenses but does cause further uncertainty as it relates to growing the business through previously planned sales initiatives. The condensed consolidated financial statements included in this Report do not give effect to any adjustments which will be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

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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. The continued spread of COVID-19 and uncertain market conditions may limit our ability to access capital, may reduce demand for our products, and may negatively impact our supply chain. 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. 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. Additionally, 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.

Seasonality and other fluctuations

Our sales are seasonal and we experience fluctuations in quarterly results as a result of many factors. 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 results may also fluctuate based on the number of SKUs selected or removed by our distributors and retail partners through the normal course of serving consumers in the dynamic, trend-oriented beverage industry. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year.

Revenue recognition

We recognize revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the company satisfies a performance obligation

See Note 6, Segment information, for information on revenue disaggregated by geographic area.

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

Our performance obligations are satisfied at the point in time when products are received by the customer, which is when the customer has title and the significant risks and rewards of ownership. Therefore, our contracts have a single performance obligation (delivery of product). We primarily receive fixed consideration for sales of product, subject to adjustment as described below. Shipping and handling amounts paid by customers are primarily for online orders, and are included in revenue, and totaled $7,000 and $32,000 for the three months ended March 31, 2020 and 2019, respectively.

Revenue is recorded net of provisions for discounts, slotting fees payable by us to retailers to stock our products and promotion allowances. Discounts, slotting fees and promotional allowances vary the consideration we are entitled to in exchange for the sale of products to distributors. We estimate these discounts, slotting fees and promotional allowances in the same period that the revenue is recognized for products sales to customers. 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 quarters ended March 31, 2020 and 2019, our revenue was reduced by $297,000 and $328,000 respectively, for slotting fees and promotion allowances.

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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. Our customers generally pay within 30 days from the receipt of a valid invoice. We offer 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 condensed consolidated balance sheets.

The accounts receivable balance primarily includes balances from trades sales to distributors and retail customers. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in 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 $99,000 and $44,000 as of March 31, 2020 and December 31, 2019, respectively, were netted against accounts receivable. No impairment losses were recognized as of March 31, 2020 and December 31, 2019. Changes in accounts receivable are primarily due to the timing and magnitude of orders for products, the timing of when control of products is transferred to distributors and the timing of cash collections.

As of March 31, 2020, one customer made up 17% of our outstanding accounts receivable. As of December 31, 2019, two customers made up 26% of our outstanding accounts receivable.

Net loss per share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the periods. 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 the quarters ended March 31, 2020 and 2019, outstanding stock options amounting to 3,969,952 and 3,890,184, shares issuable upon the conversion of the Convertible Notes of 5,164,212 and 9,244,627, unvested restricted stock units of 30,304 and 490,300, and stock warrants of 15,000,000 and zero at March 31, 2020 and 2019, respectively, were anti-dilutive.

Deferred financing costs

We defer costs related to the issuance of debt which are included on the accompanying balance sheets as a deduction from the debt liability. Deferred financing costs are amortized over the term of the related loan and are included as a component of interest expense on the accompanying condensed consolidated statements of operations.

Operating leases

At lease commencement, we record a lease liability based on the present value of lease payments over the expected lease term. We calculate the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily determined. In that case, we use our incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized basis an amount equal to the lease payments over the expected lease term. We record a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date.

After lease commencement, we measure our leases as follows: (i) the lease liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement; and (ii) the right-of use lease asset based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement. Any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Rent expense is recorded on a straight-line basis over the expected lease term.

Recent accounting pronouncements

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 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 will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 is effective for us in the first quarter of 2023 and must be adopted using a modified retrospective transition approach. We are currently evaluating the potential impact that the adoption of ASU 2016-13 will have on our consolidated financial statements.

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2. Inventory

Inventory consisted of the following (in thousands):


	March 31, 2020		December 31, 2019
Finished goods	$	1,383	$	1,120
Raw materials		910		668
	$	2,293	$	1,788

Finished goods primarily include product ready for shipment, as well as promotional merchandise held for sale. Raw materials primarily include ingredients, concentrate and packaging.

3. Lease Obligations

We currently lease approximately 6,500 square feet of retail/office space in Seattle, Washington for our principal executive and administrative offices. The initial term of the five-year lease was set to expire in February 2020. On February 4, 2020, we amended the lease to continue to occupy the same premises for our headquarters through February 28, 2025. As a result of the lease amendment, we recognized on March 1, 2020, a lease liability and right-of-use asset of $556,000 which represents the remaining lease payments discounted at 4%. As of March 31, 2020, this lease has a remaining lease term of 4.92 years.

During the quarters ended March 31, 2020 and 2019, we incurred rental expenses of $37,000 and $34,000 respectively. During the quarters ended March 31, 2020 and 2019, we made cash payments of $38,000 and $35,000, respectively. Cash payments on our operating lease are presented as operating cash outflows in the condensed consolidated statement of cash flows.

As of March 31, 2020, our scheduled lease payments excluding management fees and other operational expenses for the remainder of the lease term for the years ending December 31 will be as follows (in thousands):


2020	$	87
2021		119
2022		122
2023		126
2024		130
2025		22
Total lease payments		606
Less: imputed interest		(59)
Total remaining lease liability	$	547

4. Convertible Subordinated Notes Payable

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

The Convertible Notes have a four-year term from the date of issuance and bear interest at 6% per annum until maturity. The holders can convert the 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 Convertible Note by (ii) $0.32 (the “Conversion Price”). The Conversion Price is 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 are due until maturity.

The Convertible Notes are 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.

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There were no Convertible Notes converted during the three months ended March 31, 2020. During the three months ended March 31, 2019, Convertible Notes in the aggregate principal amount of $125,000 and related accrued interest were converted into 438,013 shares of common stock in accordance with the original terms of the Convertible Notes. As a result, the carrying amount of the converted principal amount of such Convertible Notes, along with the converted accrued interest, in an aggregate amount of $141,000, was credited to common stock and additional paid-in capital, and unamortized discounts in an amount equal to $34,000 were recognized as interest expense.

The fair value of our common stock on March 23, 2018, the initial closing date for the issuance of the Convertible Notes, was $0.36 per share; therefore, the Convertible Notes contained a beneficial conversion feature with an aggregate intrinsic value of $350,000. The fair value of our common stock on April 18, 2018, the second closing date for the issuance of the Convertible Notes, was $0.30 per share, which did not result in an additional beneficial conversion feature. The resulting debt discount for the Convertible Notes issued on March 23, 2018 is presented as a direct deduction from the carrying value of the Convertible Notes and was recorded with an increase to additional paid-in capital. This discount, along with the related closing costs amounting to $137,000, are amortized through interest expense over the term of the Convertible Notes. The balance of notes payable is presented net of unamortized discounts amounting to $128,000 and $141,000 at March 31, 2020 and December 31, 2019, respectively. The principal balance of notes payable to related parties amounted to $120,000 at March 31, 2020 and December 31, 2019.

Principal payments on the Convertible Notes are as follows for the following years ending December 31 (in thousands):


2020	$	-
2021		-
2022		1,474
	$	1,474

5. Shareholders’ Equity

Under the terms of our 2011 Incentive Plan (the “Plan”), the number of shares authorized under the Plan may be increased each January 1st by an amount equal to the lesser of (a) 1,300,000 shares, (b) 4.0% of our outstanding common stock as of the end of our immediately preceding fiscal year, and (c) a lesser amount determined by the Board of Directors (the “Board”), provided that the number of shares that may be granted pursuant to awards in a single year may not exceed 10% of our outstanding shares of common stock on a fully diluted basis as of the end of the immediately preceding fiscal year. As of March 31, 2020, the total number of shares of common stock authorized under the Plan was 12,084,032 shares.

Under the terms of the Plan, the Board may grant awards to employees, officers, directors, consultants, agents, advisors and independent contractors. Awards may consist of stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance awards or other stock or cash-based awards. 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 and vest over a period of 48 months with the first 25% of the shares subject to the option vesting one year from the grant date and the remaining 75% of the shares subject to the option vesting in equal monthly increments over the subsequent 36 months. Restricted stock awards generally vest over one year. As of March 31, 2020, there were 7,115,473 shares of unissued common stock authorized and available for future awards under the Plan.

(a)

Stock options:

A summary of our stock option activity is as follows:


	Outstanding Options
	Number of Shares	Weighted Average Exercise Price
Balance at January 1, 2020	3,495,601	$	0.46
Options granted	492,580		0.28
Options cancelled/expired	(18,229)		0.28
Balance at March 31, 2020	3,969,952	$	0.44
Exercisable, March 31, 2020	3,063,812	$	0.47
Vested and expected to vest	3,756,712	$	0.44

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(b)

Restricted stock awards:

Previously, effective as of January 1, 2018, equity compensation for non-employee director service consisted of the grant of an annual restricted stock unit award that vested over one year, with the number of shares underlying such award being determined by dividing $15,000 by the closing share price on the date of grant (which was the first business day in January in each calendar year); when joining the Board each non-employee director received an initial restricted stock unit award that vested over one year, with the number of shares underlying such award being determined by dividing $15,000 by our closing stock price on the date of grant (which was the first trading day following the date on which such director was appointed), prorated based on the date on which such director was appointed.

Effective as of January 1, 2020, equity compensation for non-employee director service consists of the grant of an annual non-qualified stock option award that vests 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 shall be the first trading day in January in each calendar year), and such stock option award shall have an exercise price equal to our closing share price (as quoted on the OTCQB marketplace) on the date of grant. When joining the Board, each non-employee director shall be granted a non-qualified stock option award that vests 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 shall have an exercise price equal to our closing share price (as quoted on the OTCQB marketplace) on the date of grant. The stock option awards described above will be governed by our 2011 Incentive Plan and standard form of stock option grant notice and agreement. A summary of our restricted stock activity is as follows:


	Restricted Shares		Weighted-Average Grant Date Fair Value	Weighted-Average Contractual Life
Non-vested restricted stock at January 1, 2020	149,824	$	0.33	9.1
Vested	(119,520)		0.25	—
Non-vested restricted stock at March 31, 2020	30,304	$	0.66	9.4

We withheld a total of 17,928 shares as payment for withholding taxes due in connection with the vesting of restricted stock awards during the three months ended March 31, 2020, and the average price paid per share of $0.31 reflects the average market value per share of the shares withheld for tax purposes.

(c)Stock-based compensation expense:

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. Therefore, we apply estimated forfeiture rates that are derived from historical employee attrition. 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 March 31, 2020, we had unrecognized compensation expense related to stock options and non-vested restricted stock of $123,000 to be recognized over a weighted-average period of 1.9 years.

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


	Three months ended March 31,
	2020		2019
Type of awards:
Stock options	$	36	$	32
Restricted stock		5		31
	$	41	$	63

Income statement account:
Selling and marketing	$	9	$	15
General and administrative		32		48
	$	41	$	63

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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” options:


	Three months ended March 31,
	2020			2019
Expected dividend yield		—			—
Expected stock price volatility		65.4	%		67.0	%
Risk-free interest rate		2.6	%		2.6	%
Expected term (in years)		6.0	years		5.6	years
Weighted-average grant date fair-value	$	0.17		$	0.23

The aggregate intrinsic value of stock options outstanding at March 31, 2020 and 2019 was approximately $1,000 and $1.2 million, respectively, and for options exercisable was $0 and $941,000, 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. There were no options exercised during the three months ended March 31, 2020 and 2019.

6. Segment Information

We have one operating segment with operations primarily in the United States and Canada. Sales are assigned to geographic locations based on the location of customers. Sales by geographic location are as follows (in thousands):


	Three months ended March 31,
	2020		2019
Revenue:
United States	$	2,151	$	2,234
Canada		624		565
Other countries		17		25
Total revenue	$	2,792	$	2,824

During each of the three months ended March 31, 2020 and 2019, one and three of our customers represented an aggregate of approximately 22% and 36% of our revenue, respectively.

7. Subsequent Events

On April 24, 2020, we received loan proceeds of $334,500 (the “PPP Loan”) under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), provides for loans to qualifying companies in amounts up to 2.5 times their average monthly payroll expenses. The PPP Loan is evidenced by a promissory note, dated as of April 24, 2020 (the “Note”), between us and HomeStreet Bank (the “Lender”). The Note has a two-year term and bears interest at the rate of 1.0% per annum. No payments of principal or interest are due during the six-month period beginning on the date of the Note (the “Deferral Period”).

Under the terms of the CARES Act, the principal and accrued interest under the Note is forgivable after eight weeks if we use the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and otherwise complies with PPP requirements. We must repay any unforgiven principal amount of the Note, with interest, on a monthly basis following the Deferral Period. We intend to use the proceeds of the PPP Loan for eligible purposes and to pursue forgiveness, although actions taken by us in connection with our previously disclosed restructuring or otherwise could cause some or all of the PPP Loan to be ineligible for forgiveness. To the extent not forgiven, we will begin to pay principal and interest payments of approximately $19,000 every month following the Deferral Period.

In addition to the PPP loan previously discussed, the CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impacts and benefits that the CARES Act may have on our business.

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On April 16, 2020, our Board approved a restructuring plan that included the termination of nine employees and the furloughing of four employees to be effective on April 17, 2020. This restructuring was intended to reduce our operating expenses, and we do not anticipate incurring any material charges in connection with such restructuring.

Effective April 6, 2020, Jennifer Cue stepped down as the Company’s Chief Executive Officer, President and Acting Principal Financial Officer. Effective April 6, 2020, Jamie Colbourne, previously a consultant to the company, was appointed as our Interim Chief Executive Officer and Acting Principal Financial Officer. Ms. Cue transitioned to a consulting role and will remain on the Board.

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

You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Report and the 2019 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020.

This Report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “can,” “plan,” “predict,” “could,” “future,” “continue,” variations of such words, and similar expressions. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined at the beginning of this Report under “Cautionary Notice Regarding Forward-Looking Statements” and in Item 1A of our most recent Annual Report on Form 10-K filed with the SEC, and in our other reports we file with the SEC, including our periodic reports on Form 10-Q and current reports on Form 8-K. These factors may cause our actual results to differ materially from any forward-looking statements. Except as required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We develop, produce, market and distribute premium beverages that we sell and distribute primarily in the United States and Canada through our network of independent distributors and directly to our national and regional retail accounts. We also sell products in select international markets. Our products are sold in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street” in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several large retailers. We refer to our network of independent distributors as our direct store delivery (“DSD”) channel, and we refer to our national and regional accounts who receive shipments directly from us as our direct to retail (“DTR”) channel. We do not directly manufacture our products, but instead outsource the manufacturing process to third-party contract manufacturers. We also sell various products online, including soda with customized labels, wearables, candy and other items, and we license our trademarks for use on products sold by other manufacturers.

Our Focus: Sales Growth

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

Expand the Jones Soda glass bottle business in existing and new sales channels;

Expand our fountain program in the United States and Canada; and

Increase distribution of Lemoncocco in the United States and Canada.

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

Results of Operations

The following selected financial and operating data are derived from our condensed consolidated financial statements and should be read in conjunction with our condensed consolidated financial statements.

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		Three months ended March 31,
		2020		% of Revenue				2019		% of Revenue
Consolidated statements of operations data:		(Dollars in thousands, except per share data)
Revenue		$	2,792	100.0	%			$	2,824	100.0	%
Cost of goods sold			(2,210)	(79.2)	%				(2,257)	(79.9)	%
Gross profit			582	20.8	%				567	20.1	%
Selling and marketing expenses			(753)	(27.0)	%				(615)	(21.8)	%
General and administrative expenses			(708)	(25.4)	%				(658)	(23.3)	%
Loss from operations			(879)	(31.5)	%				(706)	(25.0)	%
Interest income			17	0.6	%				-	0.0	%
Interest expense			(38)	(1.4)	%				(89)	(3.2)	%
Other income, net			13	0.5	%				2	0.1	%
Loss before income taxes			(887)	(31.8)	%				(793)	(28.1)	%
Income tax expense, net			(4)	(0.1)	%				(3)	(0.1)	%
Net loss		$	(891)	(31.9)	%			$	(796)	(28.2)	%
Basic and diluted net loss per share		$	(0.01)					$	(0.02)

		As of
		March 31, 2020				December 31, 2019
Balance sheet data:	(Dollars in thousands)
Cash and cash equivalents and accounts receivable, net		$	6,928				$		7,542
Fixed assets, net			153						162
Total assets			10,123						9,852
Long-term liabilities			1,966						1,480
Working capital			7,420						8,395

Seasonality and Other Fluctuations

Quarter Ended March 31, 2020 Compared to Quarter Ended March 31, 2019

Revenue

For the quarter ended March 31, 2020, revenue remained flat at approximately $2.8 million compared to the same quarter in 2019. During the quarter ended March 31, 2020, fountain and bottled soda revenue increased $110,000 and $82,000, respectively, compared to the same quarter in 2019. These increases for fountain and bottled soda revenue in the quarter ended March 31, 2020 were offset by a decrease in 7-Select revenue of $206,000 compared to the quarter ended March 31, 2019.

For the quarter ended March 31, 2020, trade spend and promotion allowances, which offset revenue, totaled $297,000, an increase of $31,000, or 9.5%, compared to $328,000 for the quarter ended March 31, 2019, due to the timing of incentive and retailer programs.

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Gross Profit

For the quarter ended March 31, 2020, gross profit increased by $15,000, or 2.6%, to $582,000 compared to approximately $567,000 for the quarter ended March 31, 2019 due to lower promotional activity and an increase in fountain revenue, which yields higher gross margins. For the quarter ended March 31, 2020 gross margin increased for the same reasons to 20.8% from 20.1% for the quarter ended March 31, 2019.

Selling and Marketing Expenses

Selling and marketing expenses for the quarter ended March 31, 2020 were $753,000, an increase of $138,000, or 22.4%, from $615,000 for the quarter ended March 31, 2020. Selling and marketing expenses as a percentage of revenue increased to 27% for the quarter ended March 31, 2020, from 22% in 2019. This increase was due to a significant increase in hiring for our sales and marketing team during the first quarter of 2020. We will continue to balance selling and marketing expenses with our working capital resources. For the three months ended March 31, 2020 and 2019, non-cash expenses included in selling and marketing expense (stock compensation and depreciation) were $18,000 and $22,000, respectively.

General and Administrative Expenses

General and administrative expenses for the quarter ended March 31, 2020 were $669,000, an increase of $11,000, or 1.7%, compared to $658,000 for the quarter ended March 31, 2019. General and administrative expenses as a percentage of revenue increased to 24% in the quarter ended March 31, 2020 from 23% in 2019. We will continue to carefully manage general and administrative expenses with our working capital resources. For the three months ended March 31, 2020 and 2019, non-cash expenses included in general and administrative expense (stock compensation and depreciation) were $32,000 and $49,000, respectively.

Interest Income

We had $17,000 of interest income for the quarter ended March 31, 2020, compared to $0 for the quarter ended March 31, 2019. This increase is related to the increase in cash during 2019 resulting from financing activities, the proceeds of which were deposited in an interest-bearing money market account.

Interest Expense

We had $38,000 of interest expense for the quarter ended March 31, 2020, compared to $89,000 for the quarter ended March 31, 2019, primarily related to our line of credit balances in 2019. We allowed our line of credit to expire according to its terms in December 2019, thus no interest was owed on the line of credit during the quarter ended March 31, 2020. The interest expense incurred during the quarter ended March 31, 2020 is non-cash and primarily related to the amortization of the discount associated with the beneficial conversion feature on the Convertible Notes, along with the amortization of associated closing costs and interest related to the Convertible Notes.

Income Tax Expense

We had $4,000 and $3,000 of income tax expense for the quarters ended March 31, 2020, and 2019, respectively, primarily related to the tax provision on income from our Canadian operations. We have not recorded any tax benefit for the loss in our U.S. operations as we have recorded a full valuation allowance on our U.S. net deferred tax assets. We expect to continue to record a full valuation allowance on our U.S. net deferred tax assets until we sustain an appropriate level of taxable income through improved U.S. operations. Our effective tax rate is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a full valuation allowance on our U.S. net deferred tax assets.

Net loss

Net loss for the quarter ended March 31, 2020 was $891,000 compared to net loss of $796,000 for the quarter ended March 31, 2019, primarily due to the increase in sales and marketing expenses incurred in the quarter ended March 31, 2020.

Liquidity and Capital Resources

As of March 31, 2020, we had cash and cash-equivalents of approximately $4.9 million and working capital of approximately $7.4 million. Net cash used in operations during the three months ended March 31, 2020 totaled approximately $1.0 million compared to $1.1 million used in operations for the same period a year ago. The net decrease in cash used in operations compared to the same period a year ago is primarily due to the timing of payments on accounts payable, partially

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offset by the increase in net loss for the quarter ended March 31, 2020. We reported a net loss of $891,000 for the three months ended March 31, 2020, compared to a net loss of approximately $796,000 for the same period a year ago.

We continue to experience negative cash flows from operations, as well as an ongoing requirement for additional capital to support working capital needs. Therefore, currently, based upon our near-term anticipated level of operations and expenditures, management believes that cash on hand, is not sufficient to enable us to fund operations for 12 months from the date the financial statements included in this Report are issued. These conditions raise substantial doubt as to our ability to continue as a going concern. Our ability to continue operations is dependent upon achieving a profitable level of operations and on our ability to obtain necessary financing to fund ongoing operations. The continued spread of COVID-19 and uncertain market conditions may limit our ability to access capital, may reduce demand for our products, and may negatively impact our supply chain. The condensed consolidated financial statements included in this Report do not give effect to any adjustments which will be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

We will 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. The continued spread of COVID-19 and uncertain market conditions may limit our ability to access capital, may reduce demand for our products, and may negatively impact our supply chain. 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. 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. Additionally, 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.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies

See the information concerning our critical accounting policies included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 30, 2020. There have been no material changes in our critical accounting policies during the three months ended March 31, 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

(a)

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) that are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (or Interim Chief

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Executive Officer, as the case may be) and Chief Financial Officer (or Acting Principal Financial Officer, as the case may be), as appropriate, to allow timely decisions regarding required disclosure. Management, under the supervision and with the participation of our Interim Chief Executive Officer and Acting Principal Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Interim Chief Executive Officer and Acting Principal Financial Officer concluded that these disclosure controls and procedures were effective as March 31, 2020.

(b) Changes in internal controls

There were no changes in our internal controls over financial reporting during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

We are or may be involved from time to time in various claims and legal actions arising in the ordinary course of business, including proceedings involving employee claims, contract disputes, product liability and other general liability claims, as well as trademark, copyright, and related claims and legal actions. 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.

ITEM 1ARISK FACTORS

There have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our other reports we file with the Securities and Exchange Commission, including our periodic reports on Form 10-Q and current reports on Form 8-K, except as set forth below:

The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business, and such impacts may have a material adverse effect on our results of operations, financial condition and cash flows.

Our operations expose us to risks associated with the COVID-19 pandemic, which has resulted in challenging operating environments. COVID-19 has spread across the globe to almost all of the countries in which our products are made, manufactured, distributed or sold. Authorities in many of these markets have implemented numerous measures to stall the spread of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place orders, and business shutdowns. These measures have impacted and will further impact us, our customers (including our foodservice customers), consumers, employees, bottlers, contract manufacturers, distributors, suppliers and other third parties with whom we do business. There is considerable uncertainty regarding how these measures and future measures in response to the pandemic will impact our business, including whether they will result in further changes in demand for our products, further increases in operating costs (whether as a result of changes to our supply chain or increases in employee costs or otherwise), how they will further impact our supply chain and whether they will result in further reduced availability of air or other commercial transport, port closures or border restrictions, each or all of which can impact our ability to make, manufacture, distribute and sell our products. In addition, measures that impact our ability to access our office, distribution centers or other facilities, or that impact the ability of our customers (including our foodservice customers), consumers, employees, bottlers, contract manufacturers, distributors, suppliers and other third parties to do the same, may impact the availability of our and their employees, many of whom are not able to perform their job functions remotely. To date, we have not experienced a material disruption to our operations or supply chain, although we can reasonably envision that possibility.

Public concern regarding the risk of contracting COVID-19 impacts demand from consumers, including due to consumers not leaving their homes or otherwise shopping in a different manner than they historically have or because some of our consumers have lower discretionary income due to unemployment or reduced or limited work as a result of measures taken in response to the pandemic. Any reduced demand for our products or change in consumer purchasing and consumption patterns, as well as continued economic uncertainty, can adversely affect our customers’ and business partners’ financial condition, resulting in an inability to pay for our products, reduced or canceled orders of our products or the closing of restaurants or other locations in which our products are sold. In addition, economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global capital and credit markets which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

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While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols in an effort to try to mitigate the negative impact of COVID-19 to our employees and our business, the extent of the impact of the pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately predict and which all will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic and changes in consumer behavior in response to the pandemic, some of which may be more than just temporary.

ITEM 6. EXHIBITS



3.1		Articles of Incorporation of Jones Soda Co. (Previously filed with, and incorporated herein by reference to, Exhibit 3.1 to our annual report on Form 10-KSB for the fiscal year ended December 31, 2000, filed on March 30, 2001; File No. 333-75913).
3.2		Amended and Restated Bylaws of Jones Soda Co. (Previously filed with, and incorporated herein by reference to, Exhibit 3.1 to our quarterly report on Form 10-Q, filed on November 8, 2013).
10.1		Consulting and Separation Agreement between Jones Soda Co. and Jennifer Cue dated as of April 6, 2020 (Filed herewith).
10.2*		Consulting Agreement between Jones Soda Co. and Jamie Colbourne dated as of April 1, 2020 (Filed herewith).
31.1		Certification by Interim Chief Executive Officer and Acting Principal Financial Officer, pursuant to Rule 13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
32.1		Certification by Interim Chief Executive Officer and Acting Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
101.INS**		XBRL Instance Document.
101.SCH**		XBRL Taxonomy Extension Schema Document.
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document.

* Management contract or compensatory plan or arrangement.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

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SIGNATURES

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

May 12, 2020


		JONES SODA CO. (Registrant)
		By:	/s/ Jamie Colbourne
			Jamie Colbourne
			Interim Chief Executive Officer and Acting Principal Financial Officer (Duly Authorized Signatory)

JONES SODA CO.

SEPARATION AND CONSULTING AGREEMENT

This Separation and Consulting Agreement is made and entered into as of April 6, 2020 (“Effective Date”) between JONES SODA CO., a Washington corporation (“Company”), and Jennifer Cue, CEO of Company, who will become a consultant for the Company (“Consultant”). In consideration of the mutual promises contained in this Agreement, the parties agree as follows:

1. SEPARATION; SERVICES; COMPENSATION AND RELEASE

1.1 Separation. Consultant’s employment as an employee of the Company shall terminate effective April 6, 2020 (the “Termination Date”).

1.2 Services. Subject to the terms and conditions of this Agreement and at Company’s request and direction, Consultant will perform for Company the services (“Services”) described in Exhibit A and will report to the Company contact described in Exhibit A.

1.3Company Board of Directors. Neither the termination of Consultant’s employment with Company nor this Agreement shall affect Consultant’s status as a director on Company’s Board of Directors; provided, that Consultant acknowledges and agrees that she shall not be eligible to receive any fees for service on Company’s Board of Directors during the Term of this Agreement. Consultant’s resignation as a director on Company’s Board of Directors will not have any effect or impact on this Agreement which will continue in full force and effect.

1.1 Compensation. As consideration for Consultant’s proper performance of the Services, Company will pay Consultant the compensation set forth in Exhibit A.

1.5 Payment of Attorney’s Fees. As consideration for Consultant entering into this Agreement, Company agrees to pay the attorney’s fees Consultant incurs in the drafting, negotiating and finalizing of this Agreement, up to a maximum of $7,500.00. On or before April 24, 2020, Company agrees to provide to the law firm of Frank Freed Subit & Thomas LLP the sum of $7,500.00 as and for attorney’s fees. This $7,500.00 will be paid to Frank Freed Subit & Thomas LLP through an ACH payment or by wiring the funds.

Release.

(a) Nonadmission of Liability. This Agreement shall not be construed as an admission by Company that it acted wrongfully with respect to Consultant during her term as an employee of the Company. Additionally, this Agreement shall not be construed as an admission by Consultant of any misconduct during her term as an employee of the Company.

(b) Release of Claims: In exchange for the consideration and other benefits contained in this Agreement, which Consultant is not otherwise entitled to receive, Consultant and Consultant’s successors and assigns forever release and discharge Company, any of Company's subsidiaries or related or affiliated companies, and all of their respective officers, directors, shareholders, agents, employees, and all of their respective successors and assigns (collectively “Releasees”) from any and all claims, actions, causes of action, rights, or damages related in any way to Consultant’s employment by Company as an employee or the termination of such employment, including costs and attorneys' fees (collectively “Claims”) whether known, unknown, or later discovered, arising from any acts or omissions that occurred prior to the date Consultant signs this Agreement.

This release includes but is not limited to: (i) any Claims under any local, state, or federal laws regulating employment, including without limitation, the Age Discrimination in Employment Act, the Civil Rights Acts, the Americans with Disabilities Act, and the Washington Law Against Discrimination (RCW 49.60 et seq.); (ii) Claims under the Employee Retirement Income Security Act; (iii) Claims under any local, state, or federal wage and hour laws; (iv) Claims alleging any legal restriction on Company’s right to terminate its employees; (v) Claims under express or implied contracts; or (vi) Claims alleging personal injury, including without limitation defamation, tortious interference with business expectancy, black listing, or infliction of emotional distress.

(c) No Claims: Consultant represents that she has not filed any Claim with any court or agency against Company or Releasees concerning Claims released in this Agreement; provided, however, that this will not limit Consultant from filing an action to enforce the terms of this Agreement. Consultant further represents that she has not transferred or assigned, or purported to assign, to any person or entity any claim, or any portion thereof or interest therein, related in any way to Company, its officers, employees, or agents (including, without limitation, any Claims). Consultant waives any right she may have to recover any damages or any other relief in any claim or suit brought by the Equal Employment Opportunity Commission or anyone else.

(d) Consideration Period. Consultant acknowledges that she was advised that she has the right to have an attorney review this Agreement before signing it and that she has been given 21 calendar days in which to consider this Agreement and was given the option to sign the Agreement in fewer than 21 calendar days if she desired.

(e) Revocation Period. Consultant understands that this Agreement will not be effective for 7 calendar days after it is signed by Company and Consultant, and that she can revoke this Agreement at any time during that 7 calendar-day period. Company shall make no payments under this Agreement prior to expiration of this 7 calendar-day period.

(f) Voluntary Agreement. Consultant understands and acknowledges the significance and consequences of this Agreement, that it is voluntary, that it has not been given as a result of any coercion or duress, and expressly confirms that it is to be given full force and effect according to all of its terms, including those relating to unknown Claims. Consultant acknowledges that Company advised Consultant to consult with legal counsel regarding any and all aspects of this Agreement, and that she has availed herself of that opportunity to the extent desired. Consultant acknowledges that Consultant has carefully read and fully understands all of the provisions of this Agreement and has signed this Agreement only after full reflection and analysis.

2. TERM AND TERMINATION

2.1 Term. This term of this Agreement (the “Term”) shall commence on the Effective Date and will continue until the earlier of April 6, 2021 or termination as provided below.

2.2 Termination. Company may terminate this Agreement immediately and without prior notice for “Cause.” For the avoidance of doubt, any termination by Company of the Services shall not be deemed to in any way terminate the release provided by Consultant hereunder, which shall remain in full effect in accordance with its terms. For purposes of this Agreement, “Cause” shall mean:

(a) Conviction of any or plea of guilty or nolo contendere to a crime that constitutes a felony or of a misdemeanor;

(b) Breach of Company’s Code of Ethics, Code of Conduct, Insider Trading Policy or Regulation FD Policy, or any other policy adopted by Company applicable to Consultant, as now in effect or as modified in the future;

(c) Breach and failure to cure within thirty (30) days of written notice by Company of any agreement between Consultant and Company (including, without limitation, this Agreement);

(d) Theft or embezzlement from Company; or

(e) Any attempt to obstruct or failure to cooperate with any investigation authorized by Company or any governmental or self-regulatory entity.

2.3 Survival. Upon termination, all rights and duties of the parties toward each other cease except that:

(a) Within 30 days of the effective date of termination, Company will pay all amounts owing to Consultant for Services through the date of termination; and

(b) Sections1.4, 2, 3, 4, 5, 6, 7, 8, 9 and 10 survive termination of this Agreement.

(c) This Agreement shall survive the filing for bankruptcy by the Company, a reverse merger of the Company, ,a merger or consolidation of the Company with or into any other Company, an acquisition by an entity of the Company or its successor, a change in the interim CEO of the Company or the appointment of a new CEO of the Company, a change in the current Chairman of the Board of the Company or the election of a new Chairman of the Board of the Company.

2.4 Return of Materials. Upon the termination of this Agreement, or upon Company’s earlier request, Consultant will deliver to Company all of Company’s property and Confidential Information (as defined in Section 3.1) that is in Consultant’s possession or control.

3. CONFIDENTIALITY

3.1 Definition. “Confidential Information” means any non‑public information that relates to the actual or anticipated business, research, or development of Company and any proprietary information, trade secrets, and know‑how of Company that is disclosed to Consultant by Company, directly or indirectly, in writing, orally, or by inspection or observation of tangible items. Confidential Information includes, but is not limited to, research, product plans, products, services, customer lists, development plans, inventions, processes, formulas, technology, designs, drawings, marketing, finances, and other business information. Confidential Information is the sole property of Company.

3.2 Exceptions. Confidential Information does not include any information that: was publicly known and made generally available in the public domain prior to the time Company disclosed the information to Consultant, became publicly known and made generally available, after disclosure to Consultant by Company, through no wrongful action or inaction of Consultant or others who were under confidentiality obligations, or was in Consultant’s possession, without confidentiality restrictions, at the time of disclosure by Company, as shown by Consultant’s files and records.

3.3 Nondisclosure and Nonuse. Consultant will not, during and after the term of this Agreement, disclose the Confidential Information to any third party or use the Confidential Information for any purpose other than the performance of the Services on behalf of Company. Consultant will take all reasonable precautions to prevent any unauthorized disclosure of the Confidential Information.

3.4 Former Client Confidential Information. Consultant will not improperly use or disclose any proprietary information or trade secrets of any former or concurrent client of Consultant prior to her employment as an employee of Company or other person or entity. Furthermore, Consultant will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any client, person, or entity unless consented to in writing by the client, person, or entity.

3.5 Third Party Confidential Information. Company has received, and in the future will receive, from third parties confidential or proprietary information subject to a duty on Company’s part to maintain the confidentiality of the information and to use it only for certain limited purposes. Consultant owes Company and these third parties, during and after the term of this Agreement, a duty to hold this confidential and proprietary information in the strictest confidence and not to disclose it to any person or entity, or to use it except as necessary in carrying out the Services for Company consistent with Company’s agreements with these third parties.

3.6DTSA Notice. Consultant is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Consultant will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Consultant is further hereby notified that if Consultant files a lawsuit for retaliation by an employer for reporting a suspected violation of law, Consultant may disclose the employer's trade secrets to Consultant’s attorney and use the trade secret information in the court proceeding if Consultant: (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.

4. OWNERSHIP

4.1 Assignment. All works of authorship, designs, inventions, improvements, technology, developments, discoveries, and trade secrets conceived, made, or discovered by Consultant during the period of this Agreement, solely or in collaboration with others, that relate in any manner to the business of Company (collectively, “Inventions”) will be the sole property of Company. In addition, Inventions that constitute copyrightable subject matter will be considered “works made for hire” as that term is defined in the United States Copyright Act. To the extent that ownership of the Inventions does not by operation of law vest in Company, Consultant will assign (or cause to be assigned) and does hereby assign fully to Company all right, title, and interest in and to the Inventions, including all related intellectual property rights.

4.2 Further Assurances. Consultant will assist Company and its designees in every proper way to secure Company’s rights in the Inventions and related intellectual property rights in all countries. Consultant will disclose to Company all pertinent information and data with respect to Inventions and related intellectual property rights. Consultant will execute all applications, specifications, oaths, assignments, and other instruments that Company deems necessary in order to apply for and obtain these rights and in order to assign and convey to Company, its successors, assigns, and nominees the sole and exclusive right, title, and interest in and to these Inventions, and any related intellectual property rights. Consultant’s obligation to provide assistance will continue after the termination or expiration of this Agreement.

4.3 Pre‑Existing Materials. If in the course of performing the Services, Consultant incorporates into any Invention any other work of authorship, invention, improvement, or proprietary information, or other materials owned by Consultant or in which Consultant has an interest, Consultant will grant and does now grant to Company a nonexclusive, royalty‑free, perpetual, irrevocable, worldwide license to reproduce, manufacture, modify, distribute, use, import, and otherwise exploit the material as part of or in connection with the Invention.

4.4 Attorney‑in‑Fact. If Consultant’s unavailability or any other factor prevents Company from pursuing or applying for any application for any United States or foreign registrations or applications covering the Inventions and related intellectual property rights assigned to Company, then Consultant irrevocably designates and appoints Company as Consultant’s agent and attorney in fact. Accordingly, Company may act for and in Consultant’s behalf and stead to execute and file any applications and to do all other lawfully permitted acts to further the prosecution and issuance of the registrations and applications with the same legal force and effect as if executed by Consultant.

5. CONSULTANT’S WARRANTIES

As an inducement to Company entering into and consummating this Agreement, Consultant represents, warrants, and covenants as follows:

5.1 Enforceability. This Agreement constitutes a valid and binding obligation of Consultant that is enforceable in accordance with its terms.

5.2 Compliance with Applicable Law and Company Policies. Consultant will comply with all applicable laws, rules, and regulations and will perform the Services in accordance with all policies and procedures provided by Company, including any third-party policies and procedures that Company is required to comply with.

5.3 No Conflict. The entering into and performance of this Agreement by Consultant does not and will not: violate, conflict with, or result in a material default under any other contract, agreement, indenture, decree, judgment, undertaking, conveyance, lien, or encumbrance to which Consultant is a party or by which it or any of Consultant’s property is or may become subject or bound, or violate any applicable law or government regulation. Consultant will not grant any rights under any future agreement, nor will it permit or suffer any lien, obligation, or encumbrances that will conflict with the full enjoyment by Company of its rights under this Agreement.

5.4 Right to Make Full Grant. Consultant has and will have all requisite ownership, rights, and licenses to fully perform her obligations under this Agreement and to grant to Company all rights with respect to the Inventions and related intellectual property rights to be granted under this Agreement, free and clear of any and all agreements, liens, adverse claims, encumbrances, and interests of any person or entity, including, without limitation, Consultant’s employees, agents, artists, and contractors and their contractors’ employees, agents, and artists, who have provided, are providing, or will provide services with respect to the development of the Inventions.

5.5 Pre‑existing Works and Third-Party Materials. Consultant will not, without Company’s prior written consent, incorporate any pre‑existing works or third-party materials into the Inventions. Additionally, Consultant has the right to assign and transfer rights to pre‑existing works and third-party materials as specified in this Agreement.

5.6 Noninfringement. Nothing contained in the Inventions or required in order for Consultant to create and deliver the Inventions under this Agreement does or will infringe, violate, or misappropriate any intellectual property rights of any third party. Further, no characteristic of any Invention does or will cause manufacturing, using, maintaining, or selling the Invention to infringe, violate, or misappropriate the intellectual property rights of any third party.

5.7 No Pending or Current Litigation. Consultant is not involved in litigation, arbitration, or any other claim and knows of no pending litigation, arbitration, other claim, or fact that may be the basis of any claim regarding any of the materials Consultant has used or will use to develop or has incorporated or will incorporate into the Inventions to be delivered under this Agreement.

5.8 No Harmful Content. The Inventions as delivered by Consultant to Company will not contain matter that is injurious to end‑users or their property, or which is scandalous, libelous, obscene, an invasion of privacy, or otherwise unlawful or tortious.

5.9 Inspection and Testing of Inventions. Prior to delivery to Company, Consultant will inspect and test each Invention and the media upon which it is to be delivered, if applicable, to ensure that the Invention and media contain no computer viruses, booby traps, time bombs, or other programming designed to interfere with the normal functioning of the Invention or Company’s or an end‑user’s equipment, programs, or data.

5.10 Services. The Services will be performed in a timely, competent, professional, and workmanlike manner by qualified personnel.

5.11 No Representations. Consultant warrants that, except as expressly set forth herein, no representations of any kind or character have been made to Consultant by Company or by any of its agents, representatives, or attorneys to induce the execution of this Agreement.

6. INDEMNIFICATION

6.1 Indemnification. Consultant will indemnify, defend, and hold harmless Company and its directors, officers, and employees from and against all taxes, losses, damages, liabilities, costs, and expenses, including attorneys’ fees and other legal expenses, arising directly or indirectly from or in connection with: any negligent, reckless, or intentionally wrongful act of Consultant or Consultant’s employees, or agents, any breach by Consultant or Consultant’s employees, or agents of any of the covenants, warranties, or representations contained in this Agreement, any failure of Consultant to perform the Services in accordance with all applicable laws, rules, and regulations, or any violation or claimed violation of a third party’s rights resulting in whole or in part from Company’s use of the work product of Consultant under this Agreement.

6.2 Intellectual Property Infringement. In the event of any claim concerning the intellectual property rights of a third party that would prevent or limit Company’s use of the Inventions, Consultant will, in addition to her obligations under Section 6.1, take one of the following actions at her sole expense:

(a) procure for Company the right to continue use of the Invention or infringing part thereof; or

(b) modify or amend the Invention or infringing part thereof, or replace the Invention or infringing part thereof with another Invention having substantially the same or better capabilities.

7. NON-SOLICITATION; NON-DISPARAGEMENT

7.1 Non‑Solicitation. During the term of this Agreement, Consultant will not directly or indirectly, for herself or any third party other than Company, perform any of the following actions:

(a) entice or otherwise engage in any activity that would cause any customer, supplier or other vendor of Company or its affiliates or any other person or entity which has any business relationship with Company or its affiliates to cease its business relationship with Company or its affiliates; or

(b) solicit or encourage any employee or contractor of Company or its affiliates to terminate employment with, or cease providing services to, Company or its affiliates.

7.2 Non-Disparagement. Consultant agrees to refrain from any disparagement, defamation, libel, or slander of any of the Releasees, and agrees to refrain from any tortious interference with the contracts and relationships of any of the Releasees. Company agrees that all directors and management-level employees shall refrain from any disparagement, defamation, libel or slander of Consultant, and agrees to refrain from any tortious interference with the contracts and relationships of Consultant. This paragraph shall not in any way prohibit either party from making truthful statements in a legal or administrative proceeding, or as otherwise required by law or legal process.

7.3 Severability. The covenants contained in Section 7 will be construed as a series of separate covenants. If, in any judicial proceeding, a court refuses to enforce any of these separate covenants (or any part of a covenant), then the unenforceable covenant (or part) will be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions) to be enforced. If the provisions of this section are deemed to exceed the time, geographic, or scope limitations permitted by law, then the provisions will be reformed to the maximum time, geographic, or scope limitations permitted by law.

8. ARBITRATION AND EQUITABLE RELIEF

8.1 Arbitration. Except as provided in Section 8.3 below, any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance, or breach of this Agreement, will be settled by arbitration to be held in King County, Washington, in accordance with the rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in the dispute or controversy. The decision of the arbitrator will be final, conclusive, and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction. Company and Consultant will each pay one‑half of the costs and expenses of the arbitration, and each will separately pay their own counsel fees and expenses.

8.2 Waiver or Right to Jury Trial. This arbitration clause constitutes a waiver of Consultant’s right to a jury trial for all disputes relating to all aspects of the independent contractor relationship (except as provided in Section 8.3 below), including, but not limited to, the following claims:

(a) claims, both express and implied, for breach of contract, breach of the covenant of good faith and fair dealing, negligent or intentional infliction of emotional distress, negligent or

intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, and defamation;

(b) any and all claims for violation of any federal, state, or municipal statute.

8.3 Equitable Remedies. The parties may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this Agreement and without abridgement of the powers of the arbitrator.

8.4 Consideration. Each party’s promise to resolve claims by arbitration in accordance with the provisions of this Agreement, rather than through the courts, is consideration for the other party’s like promise.

9. INDEPENDENT CONTRACTOR; BENEFITS

9.1 Independent Consultant. It is the express intention of the parties that Consultant perform the Services as an independent contractor. Nothing in this Agreement will in any way be construed to constitute Consultant as an agent, employee, or representative of Company. Without limiting the generality of the foregoing, Consultant is not authorized to bind Company to any liability or obligation or to represent that Consultant has any authority. Consultant must furnish (or reimburse Company for) all tools and materials necessary to accomplish this contract, and will incur all expenses associated with performance, except as expressly provided for in Exhibit A. Consultant is obligated to report as income all compensation received by Consultant under this Agreement, and to pay all self‑employment and other taxes thereon. Consultant will indemnify and hold Company harmless to the extent of any obligation imposed on Company to pay in withholding taxes or similar items or resulting from a determination that Consultant is not an independent contractor.

9.2 Benefits. Except as expressly provided in Exhibit A, Consultant acknowledges that Consultant will not receive benefits from Company either as a contractor or employee, including without limitation paid vacation, sick leave, medical insurance, and 401(k) participation. If a Consultant is reclassified by a state or federal agency or court as an employee of Company, Consultant will become a reclassified employee and will receive no benefits except those expressly provided in Exhibit A or mandated by state or federal law, even if by the terms of Company's benefit plans in effect at the time of the reclassification Consultant would otherwise be eligible for benefits.

10. MISCELLANEOUS

10.1 Nonassignment and No Subcontractors. Neither this Agreement nor any rights under this Agreement may be assigned or otherwise transferred by Consultant, in whole or in part, whether voluntarily or by operation of law, without the prior written consent of Company. Consultant may not utilize a subcontractor or other third party to perform her duties under this Agreement without the prior written consent of Company. Subject to the foregoing, this Agreement will be binding upon and will inure to the benefit of the parties and their respective successors and assigns. Any assignment in violation of the foregoing will be null and void.

10.2 Notices. Any notice required or permitted under the terms of this Agreement or required by law must be in writing and must be: delivered in person, sent by first class registered mail, or air mail, as appropriate, or sent by overnight air courier, in each case properly posted and fully prepaid to the appropriate address as set forth below. Either party may change its address for notices by notice to the other party given in accordance with this Section. Notices will be deemed given at the time of actual delivery in person, three business days after deposit in the mail as set forth above, or one day after delivery to an overnight air courier service.

10.3 Waiver. Any waiver of the provisions of this Agreement or of a party's rights or remedies under this Agreement must be in writing to be effective. Failure, neglect, or delay by a party to enforce the provisions of this Agreement or its rights or remedies at any time, will not be construed as a waiver of the party's rights under this Agreement and will not in any way affect the validity of the whole or any part of this Agreement or prejudice the party's right to take subsequent action. Exercise or enforcement by either party of any right or remedy under this Agreement will not preclude the enforcement by the party of any other right or remedy under this Agreement or that the party is entitled by law to enforce.

10.4 Severability. If any term, condition, or provision in this Agreement is found to be invalid, unlawful, or unenforceable to any extent, the parties will endeavor in good faith to agree to amendments that will preserve, as far as possible, the intentions expressed in this Agreement. If the parties fail to agree on an amendment, the invalid term, condition, or provision will be severed from the remaining terms, conditions, and provisions of this Agreement, which will continue to be valid and enforceable to the fullest extent permitted by law.

10.5 Confidentiality of Agreement. Consultant will not disclose any terms of this Agreement to any third party without the consent of Company, except as required by applicable laws.

10.6 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed to be an original and together will constitute one and the same agreement.

10.7 Governing Law. The internal laws of Washington, but not the choice of law rules, govern this Agreement.

10.8 Headings. Headings are used in this Agreement for reference only and will not be considered when interpreting this Agreement.

10.9 Integration. This Agreement and all exhibits contain the entire agreement of the parties with respect to the subject matter of this Agreement and supersede all previous communications, representations, understandings, and agreements, either oral or written, between the parties with respect to said subject matter. No terms, provisions, or conditions of any purchase order, acknowledgement, or other business form that either party may use in connection with the transactions contemplated by this Agreement will have any effect on the rights, duties, or obligations of the parties under, or otherwise modify, this Agreement, regardless of any failure of a receiving party to object to these terms, provisions, or conditions. This Agreement may not be amended, except by a writing signed by both parties.


“Company” JONES SODA CO.	PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. “Consultant” Jennifer Cue
Name: Jeff Anderson	Name: Jennifer Cue
Title: Board Member and Audit Committee Chair	Signature: /s/ Jennifer Cue
Signature: /s/ Jeff Anderson
Address for Notice: 66 Hanford Street, #150, Seattle, WA 98134

EXHIBIT A

Services and Compensation

1. Contact; Reporting. Consultant’s principal contacts with Company, to whom Consultant will report:

Name: Jamie Colburn

Title: Interim CEO

Name: Michael M. Fleming

Title: Chairman of the Board

2. Services. Services include, but are not limited to, the following:

Consultant shall assist Company with the transition of Consultant’s former duties to Company’s interim and successor chief executive officer. Consultant and Company shall mutually agree on the press release and all internal and external communication with respect to her departure as CEO of Company. Consultant shall be available on an as-needed basis to answer questions, meet with vendors and customers, provide advisory services regarding Company’s products and its industry, and consult regarding sales and marketing plans and other strategic matters, in each case as directed by Company’s CEO and/or Chairman of the Board.

3. Compensation

3.1During the Term, Consultant will be paid a consulting fee equal to $13,750 per month on the first (1st) day of each month, commencing on May 1, 2020. The $13,750.00 monthly consulting fee will be paid each month by direct deposit or by ACH into Consultant’s bank account. If the $13,750.00 consulting fee is not paid by the fifth (5th) day of each month, then consultant will be entitled to receive from Company a $25.00 per day late fee for each day beyond the fifth (5th) day of each month that the consulting fee is not paid.

3.2PTO Pay: Any accrued Paid Time Off remaining as of the Termination Date will be paid on April 24, 2020, less applicable taxes and withholdings. Any and all accrued PTO pay will be paid by direct deposit or will be paid by ACH into Consultant’s bank account.

3.3Bonus: Consultant will not be entitled to receive any bonus for 2020 or 2021.

3.4Post-Termination COBRA Continuation: Effective May 1, 2020, Consultant and/or Consultant’s covered spouse and dependents may elect a temporary extension of medical, dental and vision plan coverage at group rates (called “COBRA continuation coverage”). Consultant must pay all applicable premiums for any such COBRA continuation coverage. Company will provide Consultant with a separate notice summarizing the COBRA continuation coverage rights and obligations, as well as an election form. So long as Consultant continues to elect COBRA continuation coverage, Company will subsidize Consultant’s monthly COBRA cost to the same extent Company subsidizes other employees of Company with similar benefit elections provided that Company’s subsidization shall cease effective March 31, 2021.

3.6Expenses. Company will reimburse Consultant for all reasonable expenses incurred by Consultant in performing Services pursuant to this Agreement, if Consultant receives written consent from an authorized agent of Company prior to incurring the expenses and submits receipts for the expenses to Company in accordance with Company policy.

3.7Unemployment Compensation. If Consultant files for unemployment compensation benefits, Company will not contest Consultant’s eligibility therefor.

JONES SODA CO.

INDEPENDENT CONTRACTOR AGREEMENT

This Independent Contractor Agreement is made and entered into effective as of April 1, 2020 (“Effective Date”) between Jones Soda Co., a Washington corporation (“Company”), and Jamie Colbourne and Mamba Foods, LLC, a Washington limited liability company (collectively, “Contractor”). In consideration of the mutual promises contained in this Agreement, the parties agree as follows:

1. SERVICES AND COMPENSATION

1.1 Services; Reporting. Subject to the terms and conditions of this Agreement and at Company’s request and direction, during the term of this Agreement Contractor will perform for Company the services (“Services”) described in Exhibit A and will report to the Company contact described in Exhibit A. For the avoidance of doubt, Services shall be performed on behalf of Contractor exclusively by Jamie Colbourne and it shall be Jamie Colbourne, in his individual capacity, who shall serve as the Company’s Interim Chief Executive Officer and Acting Principal Financial Officer.

1.2 Compensation. As consideration for Contractor’s proper performance of the Services, Company will pay Contractor the compensation set forth in Exhibit A.

2. TERM AND TERMINATION

2.1 Term. This Agreement commences on the Effective Date and will continue until June 30, 2020, unless (a) extended by the mutual agreement of the parties or (b) earlier terminated as provided below.

2.2 Termination. After June 30, 2020, Company may terminate this Agreement at any time by giving two weeks prior written notice to Contractor. Company may terminate this Agreement immediately and without prior notice if Contractor refuses to or is unable to perform the Services, is in breach of any material provision of this Agreement, or Company is dissatisfied with the quality of Contractor’s work.

2.3 Survival. Upon termination, all rights and duties of the parties toward each other cease except that:

(a) Within 30 days of the effective date of termination, Company will pay all amounts owing to Contractor for Services or Contractor will return to Company any amount paid to Contractor as a retainer that is not owed against Services; and

(b) Sections 2, 3, 4, 5, 6, 7, 8, and 10 survive termination of this Agreement.

2.4 Return of Materials. Upon the termination of this Agreement, or upon Company’s earlier request, Contractor will deliver to Company all of Company’s property and Confidential Information (as defined in Section 3.1) that is in Contractor’s possession or control.

3. CONFIDENTIALITY

3.1 Definition. “Confidential Information” means any non‑public information that relates to the actual or anticipated business, research, or development of Company and any proprietary information, trade secrets, and know‑how of Company that is disclosed to Contractor by Company, directly or indirectly, in writing, orally, or by inspection or observation of tangible items. Confidential Information includes, but is not limited to, research, product plans, products, services, customer lists, development plans, inventions, processes, formulas, technology, designs, drawings, marketing, finances, and other business information. Confidential Information is the sole property of Company.

3.2 Exceptions. Confidential Information does not include any information that: was publicly known and made generally available in the public domain prior to the time Company disclosed the information to Contractor, became publicly known and made generally available, after disclosure to Contractor by Company, through no wrongful action or inaction of Contractor or others who were under confidentiality obligations, or was in Contractor’s possession, without confidentiality restrictions, at the time of disclosure by Company, as shown by Contractor’s files and records.

3.3 Nondisclosure and Nonuse. Contractor will not, during and after the term of this Agreement, disclose the Confidential Information to any third party or use the Confidential Information for any purpose other than the performance of the Services on behalf of Company. Contractor will take all reasonable precautions to prevent any unauthorized disclosure of the Confidential Information including, but not limited to, having each employee of Contractor, if any, with access to any Confidential Information, execute a nondisclosure agreement containing terms that are substantially similar to the terms contained in this Agreement.

3.4 Former Client Confidential Information. Contractor will not improperly use or disclose any proprietary information or trade secrets of any former or concurrent client of Contractor or other person or entity. Furthermore, Contractor will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any client, person, or entity unless consented to in writing by the client, person, or entity.

3.5 Third Party Confidential Information. Company has received, and in the future will receive, from third parties confidential or proprietary information subject to a duty on Company’s part to maintain the confidentiality of the information and to use it only for certain limited purposes. Contractor owes Company and these third parties, during and after the term of this Agreement, a duty to hold this confidential and proprietary information in the strictest confidence and not to disclose it to any person or entity, or to use it except as necessary in carrying out the Services for Company consistent with Company’s agreements with these third parties.

3.6DTSA Notice. Contractor is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Contractor will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Contractor is further hereby notified that if Contractor files a lawsuit for retaliation by an employer for reporting a suspected violation of law, Contractor may disclose the employer's trade secrets to Contractor’s attorney and use the trade secret information in the court proceeding if Contractor: (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.

4. OWNERSHIP

4.1 Assignment. All works of authorship, designs, inventions, improvements, technology, developments, discoveries, and trade secrets conceived, made, or discovered by Contractor during the period of this Agreement, solely or in collaboration with others, that relate in any manner to the business of Company (collectively, “Inventions”) will be the sole property of Company. In addition, Inventions that constitute copyrightable subject matter will be considered “works made for hire” as that term is defined in the United States Copyright Act. To the extent that ownership of the Inventions does not by operation of law vest in Company, Contractor will assign (or cause to be assigned) and does hereby assign fully to Company all right, title, and interest in and to the Inventions, including all related intellectual property rights.

4.2 Further Assurances. Contractor will assist Company and its designees in every proper way to secure Company’s rights in the Inventions and related intellectual property rights in all countries. Contractor will disclose to Company all pertinent information and data with respect to Inventions and related intellectual property rights. Contractor will execute all applications, specifications, oaths, assignments, and other instruments that Company deems necessary

in order to apply for and obtain these rights and in order to assign and convey to Company, its successors, assigns, and nominees the sole and exclusive right, title, and interest in and to these Inventions, and any related intellectual property rights. Contractor’s obligation to provide assistance will continue after the termination or expiration of this Agreement.

4.3 Pre‑Existing Materials. If in the course of performing the Services, Contractor incorporates into any Invention any other work of authorship, invention, improvement, or proprietary information, or other materials owned by Contractor or in which Contractor has an interest, Contractor will grant and does now grant to Company a nonexclusive, royalty‑free, perpetual, irrevocable, worldwide license to reproduce, manufacture, modify, distribute, use, import, and otherwise exploit the material as part of or in connection with the Invention.

4.4 Attorney‑in‑Fact. If Contractor’s unavailability or any other factor prevents Company from pursuing or applying for any application for any United States or foreign registrations or applications covering the Inventions and related intellectual property rights assigned to Company, then Contractor irrevocably designates and appoints Company as Contractor’s agent and attorney in fact. Accordingly, Company may act for and in Contractor’s behalf and stead to execute and file any applications and to do all other lawfully permitted acts to further the prosecution and issuance of the registrations and applications with the same legal force and effect as if executed by Contractor.

5. CONTRACTOR’S WARRANTIES

As an inducement to Company entering into and consummating this Agreement, Contractor represents, warrants, and covenants as follows:

5.1 Organization Representations; Enforceability. If Contractor is a company, Contractor is duly organized, validly existing, and in good standing in the jurisdiction stated in the preamble to this Agreement, the execution and delivery of this Agreement by Contractor and the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Contractor, and this Agreement constitutes a valid and binding obligation of Contractor that is enforceable in accordance with its terms.

5.2 Compliance with Applicable Law and Company Policies. Contractor will comply with all applicable laws, rules, and regulations and will perform the Services in accordance with all policies and procedures provided by Company, including any third party policies and procedures that Company is required to comply with.

5.3 No Conflict. The entering into and performance of this Agreement by Contractor does not and will not: violate, conflict with, or result in a material default under any other contract, agreement, indenture, decree, judgment, undertaking, conveyance, lien, or encumbrance to which Contractor is a party or by which it or any of Contractor’s property is or may become subject or bound, or violate any applicable law or government regulation. Contractor will not grant any rights under any future agreement, nor will it permit or suffer any lien, obligation, or encumbrances that will conflict with the full enjoyment by Company of its rights under this Agreement.

5.4 Right to Make Full Grant. Contractor has and will have all requisite ownership, rights, and licenses to fully perform its obligations under this Agreement and to grant to Company all rights with respect to the Inventions and related intellectual property rights to be granted under this Agreement, free and clear of any and all agreements, liens, adverse claims, encumbrances, and interests of any person or entity, including, without limitation, Contractor’s employees, agents, artists, and contractors and their contractors’ employees, agents, and artists, who have provided, are providing, or will provide services with respect to the development of the Inventions.

5.5 Pre‑existing Works and Third Party Materials. Contractor will not, without Company’s prior written consent, incorporate any pre‑existing works or third party materials into the Inventions. Additionally, Contractor has the right to assign and transfer rights to pre‑existing works and third party materials as specified in this Agreement.

5.6 Noninfringement. Nothing contained in the Inventions or required in order for Contractor to create and deliver the Inventions under this Agreement does or will infringe, violate, or misappropriate any intellectual property rights of any third party. Further, no characteristic of any Invention does or will cause manufacturing, using, maintaining, or selling the Invention to infringe, violate, or misappropriate the intellectual property rights of any third party.

5.7 No Pending or Current Litigation. Contractor is not involved in litigation, arbitration, or any other claim and knows of no pending litigation, arbitration, other claim, or fact that may be the basis of any claim regarding any of the materials Contractor has used or will use to develop or has incorporated or will incorporate into the Inventions to be delivered under this Agreement.

5.8 No Harmful Content. The Inventions as delivered by Contractor to Company will not contain matter that is injurious to end‑users or their property, or which is scandalous, libelous, obscene, an invasion of privacy, or otherwise unlawful or tortious.

5.9 Inspection and Testing of Inventions. Prior to delivery to Company, Contractor will inspect and test each Invention and the media upon which it is to be delivered, if applicable, to ensure that the Invention and media contain no computer viruses, booby traps, time bombs, or other programming designed to interfere with the normal functioning of the Invention or Company’s or an end‑user’s equipment, programs, or data.

5.10 Services. The Services will be performed in a timely, competent, professional, and workmanlike manner by qualified personnel.

6. INDEMNIFICATION

6.1 Indemnification. Contractor will indemnify, defend, and hold harmless Company and its directors, officers, and employees from and against all taxes, losses, damages, liabilities, costs, and expenses, including attorneys’ fees and other legal expenses, arising directly or indirectly from or in connection with: any negligent, reckless, or intentionally wrongful act of Contractor or Contractor’s assistants, employees, or agents, any breach by Contractor or Contractor’s assistants, employees, or agents of any of the covenants, warranties, or representations contained in this Agreement, any failure of Contractor to perform the Services in accordance with all applicable laws, rules, and regulations, or any violation or claimed violation of a third party’s rights resulting in whole or in part from Company’s use of the work product of Contractor under this Agreement.

6.2 Intellectual Property Infringement. In the event of any claim concerning the intellectual property rights of a third party that would prevent or limit Company’s use of the Inventions, Contractor will, in addition to its obligations under Section 6.1, take one of the following actions at its sole expense:

(a) procure for Company the right to continue use of the Invention or infringing part thereof; or

(b) modify or amend the Invention or infringing part thereof, or replace the Invention or infringing part thereof with another Invention having substantially the same or better capabilities.

7. NON-SOLICITATION; NON‑COMPETITION

7.1 Non‑Solicitation. During the term of this Agreement, Contractor will not directly or indirectly, for itself or any third party other than Company, perform any of the following actions:

(b) solicit or encourage any employee or contractor of Company or its affiliates to terminate employment with, or cease providing services to, Company or its affiliates.

7.2 Non‑Competition. During the term of this Agreement and for one year after the termination of this Agreement, Contractor will not

directly or indirectly, for itself or any third party other than Company, perform any of the following actions:

(a) perform services for a business within the Geographic Area in connection with the development, manufacture, marketing, or sale of a Competing Product; or

(b) solicit sales of any Competing Product from any of Company’s customers.

7.3 Geographic Area. “Geographic Area” means anywhere in the world where Company or any subsidiary of Company conducts business.

7.4 Company Product. “Company Product” means any product or service of Company that Contractor had access to Confidential Information related to the product or service, or a product or service that Contractor worked on.

7.5 Competing Product. “Competing Product” means any product or service that competes or competed with any Company Product sold, provided, or intended to be sold or provided by Company at any time during the term of this Agreement and for one year after its termination.

7.6 Earnings Threshold. The restrictive covenants set forth in Sections 7.2(a) and (b) shall apply only in the event that Contractor’s earnings per year from the Company exceed $250,000.00 or the then applicable adjusted earnings threshold established pursuant to RCW 49.62.040, as reported on IRS Form 1099-MISC. For purposes of this Section 7.6, Contractor’s annualized earnings shall be determined as of the date enforcement of the restrictive covenants is sought.

7.7 Severability. The covenants contained in Section 7 will be construed as a series of separate covenants, one for each country, city, state, or any similar subdivision in any Geographic Area. If, in any judicial proceeding, a court refuses to enforce any of these separate covenants (or any part of a covenant), then the unenforceable covenant (or part) will be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions) to be enforced. If the provisions of this section are deemed to exceed the time, geographic, or scope limitations permitted by law, then the provisions will be reformed to the maximum time, geographic, or scope limitations permitted by law.

7.8 Reasonableness. The nature of Company’s business is such that if Contractor were to become employed by, or substantially involved in the business of, a competitor to Company soon after the termination of this Agreement, it would be difficult for Contractor not to rely on or use Company’s trade secrets and Confidential Information. Therefore, Contractor enters into this Agreement to reduce the likelihood of disclosure of Company’s trade secrets and Confidential Information. Contractor acknowledges that the limitations of time, geography, and scope of activity agreed to above are reasonable because, among other things, Company is engaged in a highly competitive industry, Contractor will have access to the trade secrets and know‑how of Company, including without limitation the plans and strategy (and in particular, the competitive strategy) of Company, and these limitations are necessary to protect the trade secrets, Confidential Information, and goodwill of Company.

8. ARBITRATION AND EQUITABLE RELIEF

8.1 Arbitration. Except as provided in Section 8.3 below, any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance, or breach of this Agreement, will be settled by arbitration to be held in King County, Washington, in accordance with the rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in the dispute or controversy. The decision of the arbitrator will be final, conclusive, and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction. Company and Contractor will each pay one‑half of the costs and expenses of the arbitration, and each will separately pay their own counsel fees and expenses.

8.2 Waiver or Right to Jury Trial. This arbitration clause constitutes a waiver of Contractor’s right to a jury trial for all disputes relating to all aspects of the independent contractor relationship (except as provided in Section 8.3 below), including, but not limited to, the following claims:

(a) claims, both express and implied, for breach of contract, breach of the covenant of good faith and fair dealing, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, and defamation;

(b) any and all claims for violation of any federal, state, or municipal statute.

9. INDEPENDENT CONTRACTOR; BENEFITS

9.1 Independent Contractor. It is the express intention of the parties that Contractor perform the Services as an independent contractor. Nothing in this Agreement will in any way be construed to constitute Contractor as an agent, employee, or representative of Company. Without limiting the generality of the foregoing, Contractor is not authorized to bind Company to any liability or obligation or to represent that Contractor has any authority. Contractor must furnish (or reimburse Company for) all tools and materials necessary to accomplish this contract, and will incur all expenses associated with performance, except as expressly provided for in Exhibit A. Contractor is obligated to report as income all compensation received by Contractor under this Agreement, and to pay all self‑employment and other taxes thereon. Contractor will indemnify and hold Company harmless to the extent of any obligation imposed on Company to pay in withholding taxes or similar items or resulting from a determination that Contractor is not an independent contractor.

9.2 Benefits. Contractor acknowledges that Contractor’s employees will not receive benefits from Company either as a Contractor or employee, including without limitation paid vacation, sick leave, medical insurance, and 401(k) participation. If a Contractor employee is reclassified by a state or federal agency or court as an employee of Company, Contractor’s employee will become a reclassified employee and will receive no benefits except those mandated by state or federal law, even if by the terms of Company's benefit plans in effect at the time of the reclassification Contractor’s employee would otherwise be eligible for benefits.

10. MISCELLANEOUS

10.1 Services and Information Prior to Effective Date. All services performed by Contractor and all information and other materials disclosed between the parties prior to the Effective Date will be governed by the terms of this Agreement, except where the services are covered by a separate agreement between Contractor and Company.

10.2 Nonassignment and No Subcontractors. Neither this Agreement nor any rights under this Agreement may be assigned or otherwise transferred by Contractor, in whole or in part, whether voluntarily or by operation of law, without the prior written consent of Company. Contractor may not utilize a subcontractor or other third party to perform its duties under this Agreement without the prior written consent of Company. Subject to the foregoing, this Agreement will be binding upon and will inure to the benefit of the parties and their respective successors and assigns. Any assignment in violation of the foregoing will be null and void.

10.3 Notices. Any notice required or permitted under the terms of this Agreement or required by law must be in writing and must be: delivered in person, sent by first class registered mail, or air mail, as appropriate, or sent by overnight air courier, in each case properly posted and fully prepaid to the appropriate address as set forth below. Either party may change its address for notices by notice to the other party given in accordance with this Section. Notices will

be deemed given at the time of actual delivery in person, three business days after deposit in the mail as set forth above, or one day after delivery to an overnight air courier service.

10.4 Waiver. Any waiver of the provisions of this Agreement or of a party's rights or remedies under this Agreement must be in writing to be effective. Failure, neglect, or delay by a party to enforce the provisions of this Agreement or its rights or remedies at any time, will not be construed as a waiver of the party's rights under this Agreement and will not in any way affect the validity of the whole or any part of this Agreement or prejudice the party's right to take subsequent action. Exercise or enforcement by either party of any right or remedy under this Agreement will not preclude the enforcement by the party of any other right or remedy under this Agreement or that the party is entitled by law to enforce.

10.5 Severability. If any term, condition, or provision in this Agreement is found to be invalid, unlawful, or unenforceable to any extent, the parties will endeavor in good faith to agree to amendments that will preserve, as far as possible, the intentions expressed in this Agreement. If the parties fail to agree on an amendment, the invalid term, condition, or provision will be severed from the remaining terms, conditions, and provisions of this Agreement, which will continue to be valid and enforceable to the fullest extent permitted by law.

10.6 Confidentiality of Agreement. Contractor will not disclose any terms of this Agreement to any third party without the consent of Company, except as required by applicable laws.

10.7 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed to be an original and together will constitute one and the same agreement.

10.8 Governing Law. The internal laws of Washington, but not the choice of law rules, govern this Agreement.

10.9 Headings. Headings are used in this Agreement for reference only and will not be considered when interpreting this Agreement.

10.10 Integration. This Agreement and all exhibits contain the entire agreement of the parties with respect to the subject matter of this Agreement and supersede all previous communications, representations, understandings, and agreements, either oral or written, between the parties with respect to said subject matter. No terms, provisions, or conditions of any purchase order, acknowledgement, or other business form that either party may use in connection with the transactions contemplated by this Agreement will have any effect on the rights, duties, or obligations of the parties under, or otherwise modify, this Agreement, regardless of any failure of a receiving party to object to these terms, provisions, or conditions. This Agreement may not be amended, except by a writing signed by both parties.


“Company” JONES SODA CO.	“Contractor” MAMBO FOODS, LLC
Name: Jeff Anderson	Name: Jamie Colbourne
Title: Board Member and Audit Committee Chair	Title: Member and Manager
Signature: /s/ Jeff Anderson Address for Notice: 66 Hanford Street, #150, Seattle, WA 98134	Signature: /s/ Jamie Colbourne Jamie Colbourne (in his individual capacity
	Signature: /s/ Jamie Colbourne

EXHIBIT A

Services and Compensation

1. Contact; Reporting. Contractor’s principal contact with Company, to whom Contractor will report:

Name: Michael M. Fleming

Title: Chairman of the Board

Name: Jeffrey Anderson

Title: Chairman of the Company’s Audit Committee

2. Services. Services include, but are not limited to, the following:

Services include working with the Company’s existing Chief Executive Officer to transition her duties to Contractor through her departure date; as of April 6, 2020, serving as the Company’s Interim Chief Executive Officer and Acting Principal Financial Officer. In this role, Contractor shall report to the Board of Directors and shall, among other things, be responsible for creating, planning, implementing and integrating the strategic direction of the Company; leading, guiding and evaluating the Company’s executive and management-level employees; acting as a liaison with the Company’s Board of Directors; assisting the Company with the selection and hiring of a permanent Chief Executive Officer; managing the Company’s finances and being responsible for financial reporting; overseeing and managing the Company’s accounting team; and certifying, as necessary, the Company’s periodic filings with the SEC.

3. Compensation

(a) Company will pay Contractor $25,000 per month.

(b) Company will reimburse Contractor for all reasonable expenses incurred by Contractor in performing Services pursuant to this Agreement if Contractor submits receipts for the expenses to Company in accordance with Company policy; provided that Contractor will get prior approval by either Jeffrey Anderson or Michael Fleming for any reimbursable expense in excess of $5,000.

EXHIBIT 31.1

CERTIFICATION OF INTERIM CHIEF EXECUTIVE OFFICER

AND ACTING PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13(a)-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Jamie Colbourne, certify that:

I have reviewed this report on Form 10-Q of Jones Soda Co.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2020


	/s/ Jamie Colbourne
	Jamie Colbourne
	Interim Chief Executive Officer and Acting Principal Financial Officer

EXHIBIT 32.1

CERTIFICATION OF INTERIM CHIEF EXECUTIVE OFFICER

AND ACTING PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jones Soda Co. (the “Company”) on Form 10-Q for the fiscal quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Jamie Colbourne, Interim Chief Executive Officer and Acting Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.


	/s/ Jamie Colbourne
	Jamie Colbourne
	Interim Chief Executive Officer and Acting Principal Financial Officer

May 12, 2020


	Page
Explanatory Note	3
Cautionary Notice Regarding Forward Looking Statements	3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
a) Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	5
b) Condensed Consolidated Statements of Operations – three months ended March 31, 2020 and 2019	6
c) Condensed Consolidated Statements of Comprehensive Income (Loss) – three months ended March 31, 2020 and 2019	7
d) Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three months ended March 31, 2020 and 2019	8
e) Condensed Consolidated Statements of Cash Flows – three months ended March 31, 2020 and 2019	9
f) Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures about Market Risk	20
Item 4. Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	21
Item 1A. Risk Factors	21
Item 6. Exhibits	22