|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the Quarterly Period Ended June 30, 2012
|
|
OR
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from to
|
Washington
|
|
52-2336602
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or organization)
|
|
Identification No.)
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
þ
|
|
|
Page
|
3
|
|
3
|
|
|
|
|
|
5
|
|
6
|
|
7
|
|
8
|
|
9
|
|
14
|
|
20
|
|
|
|
20
|
|
21
|
|
EX-10.1
|
|
EX-31.1
|
|
EX-31.2
|
|
EX-32.1
|
|
•
|
Our ability to successfully execute on our 2012 operating plan, including streamlining operations, reducing operating expenses, and reducing and slowing our use of cash;
|
•
|
The impact of management changes and reductions in operating expenses and personnel on our business and results of operations;
|
•
|
Dilutive and other adverse effects on our existing shareholders and our stock price arising from future securities issuances;
|
•
|
The effect on the market price and liquidity of our common stock and our ability to raise capital if our common stock is delisted from the Nasdaq Capital Market;
|
•
|
Our ability to establish, maintain and expand distribution arrangements, given our reduced cost structure and availability of capital, with independent distributors, retailers, brokers and national retail accounts, most of whom sell and distribute competing products, and whom we rely upon to employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products, on which our business plan and future growth are dependent in part;
|
•
|
Changes in sales and distribution volumes through our independent distributors, retailers, brokers and national retail accounts, several of whom represent a significant portion of our revenue;
|
•
|
Our ability to successfully launch new products or our failure to achieve case sales goals with respect to existing products given our reduced cost structure and availability of capital;
|
•
|
Our ability to adequately market and distribute existing and new products on a national basis;
|
•
|
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, which could make management of our marketing and distribution efforts inefficient or unprofitable;
|
•
|
Our ability to secure a continuous supply and availability of raw materials, as well as other factors affecting our supply chain including rising raw material costs and shortages of glass in the supply chain;
|
•
|
Rising fuel and freight costs may have an adverse impact on our results of operations;
|
•
|
Our ability to source our flavors on acceptable terms from our key flavor suppliers;
|
•
|
Our ability to maintain brand image and product quality and the risk that we may suffer other product issues such as product recalls;
|
•
|
Our ability to attract, retain and motivate key personnel, given our reduced cost structure, which would directly affect our efficiency and results of operations;
|
•
|
Our ability to modify and execute on our business plan with the change in our chief executive officer and reductions in staff;
|
•
|
Our ability to secure additional financing to support our working capital needs;
|
•
|
Our use of the net proceeds from any future financings to improve our financial condition;
|
•
|
Our inability to protect our trademarks and trade secrets, 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 maintain effective disclosure controls and procedures and internal control over financial reporting;
|
•
|
Our ability to build and sustain proper information technology infrastructure;
|
•
|
Our ability to create and maintain brand name recognition and acceptance of our products, which are critical to our success in our competitive, brand-conscious industry;
|
•
|
Our ability to compete successfully against much larger, well-funded, established companies currently operating in the beverage industry;
|
•
|
Our ability to continue developing new products to satisfy our consumers’ changing preferences;
|
•
|
Global economic conditions that may adversely impact our business and results of operations; and
|
•
|
Our ability to comply with the many regulations to which our business is subject.
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(Unaudited)
|
|
|
||||
ASSETS
|
(In thousands, except share data)
|
||||||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
2,500
|
|
|
$
|
1,709
|
|
Accounts receivable, net of allowance of $136 and $102
|
3,151
|
|
|
1,966
|
|
||
Inventory
|
2,258
|
|
|
2,386
|
|
||
Prepaid expenses and other current assets
|
203
|
|
|
204
|
|
||
Total current assets
|
8,112
|
|
|
6,265
|
|
||
Fixed assets, net of accumulated depreciation of $1,731 and $1,648
|
632
|
|
|
844
|
|
||
Other assets
|
526
|
|
|
548
|
|
||
Total assets
|
$
|
9,270
|
|
|
$
|
7,657
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
1,909
|
|
|
$
|
1,278
|
|
Accrued expenses
|
1,548
|
|
|
1,323
|
|
||
Taxes payable
|
25
|
|
|
64
|
|
||
Other current liabilities
|
51
|
|
|
48
|
|
||
Total current liabilities
|
3,533
|
|
|
2,713
|
|
||
Long-term liabilities — other
|
514
|
|
|
539
|
|
||
Shareholders’ equity:
|
|
|
|
|
|
||
Common stock, no par value:
|
|
|
|
|
|
||
Authorized — 100,000,000; issued and outstanding shares — 38,550,889 and 32,100,882 shares, respectively
|
52,904
|
|
|
50,090
|
|
||
Additional paid-in capital
|
7,252
|
|
|
7,116
|
|
||
Accumulated other comprehensive income
|
419
|
|
|
420
|
|
||
Accumulated deficit
|
(55,352
|
)
|
|
(53,221
|
)
|
||
Total shareholders’ equity
|
5,223
|
|
|
4,405
|
|
||
Total liabilities and shareholders’ equity
|
$
|
9,270
|
|
|
$
|
7,657
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(In thousands, except share data)
|
||||||||||||||
Revenue
|
$
|
5,257
|
|
|
$
|
4,914
|
|
|
$
|
9,119
|
|
|
$
|
9,001
|
|
Cost of goods sold
|
3,696
|
|
|
3,497
|
|
|
6,510
|
|
|
6,584
|
|
||||
Gross profit
|
1,561
|
|
|
1,417
|
|
|
2,609
|
|
|
2,417
|
|
||||
Licensing revenue
|
6
|
|
|
7
|
|
|
11
|
|
|
12
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||
Promotion and selling
|
920
|
|
|
1,873
|
|
|
2,277
|
|
|
3,153
|
|
||||
General and administrative
|
1,078
|
|
|
1,313
|
|
|
2,410
|
|
|
2,793
|
|
||||
|
1,998
|
|
|
3,186
|
|
|
4,687
|
|
|
5,946
|
|
||||
Loss from operations
|
(431
|
)
|
|
(1,762
|
)
|
|
(2,067
|
)
|
|
(3,517
|
)
|
||||
Other (expense) income, net
|
(5
|
)
|
|
6
|
|
|
(16
|
)
|
|
78
|
|
||||
Loss before income taxes
|
(436
|
)
|
|
(1,756
|
)
|
|
(2,083
|
)
|
|
(3,439
|
)
|
||||
Income tax expense, net
|
(23
|
)
|
|
(64
|
)
|
|
(48
|
)
|
|
(51
|
)
|
||||
Net loss
|
$
|
(459
|
)
|
|
$
|
(1,820
|
)
|
|
$
|
(2,131
|
)
|
|
$
|
(3,490
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss per share - basic and diluted
|
$
|
(0.01
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.11
|
)
|
Weighted average basic and diluted common shares outstanding
|
38,544,140
|
|
|
31,990,645
|
|
|
37,268,386
|
|
|
31,724,816
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
|
|
|
|
|
||||||||||
Net loss
|
$
|
(459
|
)
|
|
$
|
(1,820
|
)
|
|
$
|
(2,131
|
)
|
|
$
|
(3,490
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
(17
|
)
|
|
21
|
|
|
(1
|
)
|
|
60
|
|
||||
Total comprehensive loss
|
$
|
(476
|
)
|
|
$
|
(1,799
|
)
|
|
$
|
(2,132
|
)
|
|
$
|
(3,430
|
)
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
|
(In thousands)
|
||||||
OPERATING ACTIVITIES:
|
|
|
|
|
|
||
Net loss
|
$
|
(2,131
|
)
|
|
$
|
(3,490
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
151
|
|
|
86
|
|
||
Stock-based compensation
|
136
|
|
|
295
|
|
||
Change in allowance for doubtful accounts
|
34
|
|
|
138
|
|
||
Inventory write-down
|
110
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(1,224
|
)
|
|
(477
|
)
|
||
Taxes receivable
|
—
|
|
|
483
|
|
||
Inventory
|
19
|
|
|
(732
|
)
|
||
Prepaid expenses and other current assets
|
2
|
|
|
64
|
|
||
Other assets
|
22
|
|
|
23
|
|
||
Accounts payable
|
631
|
|
|
622
|
|
||
Accrued expenses
|
227
|
|
|
253
|
|
||
Taxes payable
|
(39
|
)
|
|
(89
|
)
|
||
Deferred rent
|
2
|
|
|
—
|
|
||
Other liabilities
|
(14
|
)
|
|
—
|
|
||
Net cash from operating activities
|
(2,074
|
)
|
|
(2,824
|
)
|
||
INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Purchase of certificate of deposit, restricted
|
—
|
|
|
(183
|
)
|
||
Purchase of fixed assets
|
(24
|
)
|
|
(173
|
)
|
||
Sale of fixed assets
|
85
|
|
|
3
|
|
||
Net cash provided by (used in) investing activities
|
61
|
|
|
(353
|
)
|
||
FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from issuance of common stock, net
|
2,815
|
|
|
2,185
|
|
||
Proceeds from exercise of stock options
|
—
|
|
|
17
|
|
||
Proceeds of capital lease obligations
|
—
|
|
|
122
|
|
||
Payment of capital lease obligations
|
(11
|
)
|
|
(6
|
)
|
||
Net cash from financing activities
|
2,804
|
|
|
2,318
|
|
||
Net increase (decrease) in cash and cash equivalents
|
791
|
|
|
(859
|
)
|
||
Effect of exchange rate changes on cash
|
—
|
|
|
39
|
|
||
Cash and cash equivalents, beginning of period
|
1,709
|
|
|
5,448
|
|
||
Cash and cash equivalents, end of period
|
$
|
2,500
|
|
|
$
|
4,628
|
|
Supplemental disclosure:
|
|
|
|
|
|
||
Cash paid (received) during period for:
|
|
|
|
|
|
||
Interest
|
$
|
7
|
|
|
$
|
(50
|
)
|
Income taxes
|
65
|
|
|
(361
|
)
|
1.
|
Nature of Operations and Summary of Significant Accounting Policies
|
•
|
Jones
®
Soda
, a premium carbonated soft drink;
|
◦
|
Jones Zilch
®
, with zero calories (and an extension of the
Jones
®
Soda
product line);
|
•
|
WhoopAss
™
Energy Drink
, an energy supplement drink; and
|
◦
|
WhoopAss Zero
™
Energy Drink
, with zero sugar (and an extension of the
WhoopAss
™
Energy Drink
product line).
|
2.
|
Equity Financing
|
3.
|
Inventory
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
Finished goods
|
$
|
1,436
|
|
|
$
|
1,819
|
|
Raw materials
|
822
|
|
|
567
|
|
||
|
$
|
2,258
|
|
|
$
|
2,386
|
|
4.
|
Line of Credit
|
5.
|
Stock-based Compensation
|
(a)
|
Stock options:
|
|
Outstanding Options
|
|||||
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|||
Balance at January 1, 2012
|
2,154,112
|
|
|
$
|
1.49
|
|
Options granted
|
190,000
|
|
|
0.51
|
|
|
Options exercised
|
—
|
|
|
—
|
|
|
Options cancelled/expired
|
(591,037
|
)
|
|
2.65
|
|
|
Balance at June 30, 2012
|
1,753,075
|
|
|
$
|
0.99
|
|
Exercisable, June 30, 2012
|
1,221,251
|
|
|
$
|
1.08
|
|
Vested and expected to vest
|
1,720,091
|
|
|
$
|
0.99
|
|
(b)
|
Restricted stock awards:
|
|
Restricted Shares
|
|
Weighted-Average Grant Date Fair Value
|
|
Weighted-Average Contractual Life
|
|||
Non-vested restricted stock at January 1, 2012
|
40,607
|
|
|
$
|
0.68
|
|
|
9.69 yrs
|
Granted
|
—
|
|
|
—
|
|
|
|
|
Vested
|
—
|
|
|
—
|
|
|
|
|
Cancelled/expired
|
(5,681
|
)
|
|
0.68
|
|
|
|
|
Non-vested restricted stock at June 30, 2012
|
34,926
|
|
|
$
|
0.68
|
|
|
9.19 yrs
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
Type of awards:
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Stock options
|
$
|
42
|
|
|
$
|
115
|
|
|
$
|
129
|
|
|
$
|
200
|
|
Restricted stock
|
4
|
|
|
5
|
|
|
7
|
|
|
95
|
|
||||
|
$
|
46
|
|
|
$
|
120
|
|
|
$
|
136
|
|
|
$
|
295
|
|
Income statement account:
|
|
|
|
|
|
|
|
|
|
||||||
Promotion and selling
|
$
|
19
|
|
|
$
|
28
|
|
|
$
|
43
|
|
|
$
|
86
|
|
General and administrative
|
27
|
|
|
92
|
|
|
93
|
|
|
209
|
|
||||
|
$
|
46
|
|
|
$
|
120
|
|
|
$
|
136
|
|
|
$
|
295
|
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
Expected dividend yield
|
—
|
|
|
—
|
|
||
Expected stock price volatility
|
102.0
|
%
|
|
99.4
|
%
|
||
Risk-free interest rate
|
1.2
|
%
|
|
2.5
|
%
|
||
Expected term (in years)
|
6.1 years
|
|
|
5.9 years
|
|
||
Weighted-average grant date fair-value
|
$
|
0.41
|
|
|
$
|
1.06
|
|
6.
|
Segment Information
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
3,332
|
|
|
$
|
3,678
|
|
|
$
|
6,307
|
|
|
$
|
6,842
|
|
Canada
|
1,622
|
|
|
1,227
|
|
|
2,451
|
|
|
2,106
|
|
||||
Other countries
|
303
|
|
|
9
|
|
|
361
|
|
|
53
|
|
||||
Total revenue
|
$
|
5,257
|
|
|
$
|
4,914
|
|
|
$
|
9,119
|
|
|
$
|
9,001
|
|
•
|
Jones
®
Soda
, a premium carbonated soft drink;
|
◦
|
Jones Zilch
®
, with zero calories (and an extension of the
Jones
®
Soda
product line);
|
•
|
WhoopAss
™
Energy Drink
, an energy supplement drink; and
|
◦
|
WhoopAss Zero
™
Energy Drink
, with zero sugar (and an extension of the
WhoopAss
™
Energy Drink
product line).
|
•
|
expanding points of distribution of
Jones Soda
throughout the entire U.S. in the grocery, mass and club channels;
|
•
|
growing our convenience and gas (C&G) distribution behind
WhoopAss Energy Drink
and our newly launched 16-ounce
Jones Soda
can format;
|
•
|
expanding the stock-keeping unit (SKU) offerings and space in the grocery stores where we are already present;
|
•
|
developing innovative beverage brands that will allow us to capture share in the growing natural carbonated drink segment; and
|
•
|
operating at the lowest cost structure while continuing to focus on top-line growth.
|
•
|
We use the phrase “sales velocity” to refer to the number of "stock keeping units" or "SKUs" sold per point of distribution within a specific period of time.
|
•
|
A SKU refers to individual variants of our products. For example, for our
Jones Soda
product line, each of our flavors is referred to as a different SKU.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
2012
|
|
% of Revenue
|
|
2011
|
|
% of Revenue
|
|
2012
|
|
% of Revenue
|
|
2011
|
|
% of Revenue
|
||||||||||||
Consolidated statements of operations data:
|
|
(Dollars in thousands, except share data)
|
||||||||||||||||||||||||||
Revenue
|
|
$
|
5,257
|
|
|
100.0
|
%
|
|
$
|
4,914
|
|
|
100.0
|
%
|
|
$
|
9,119
|
|
|
100.0
|
%
|
|
$
|
9,001
|
|
|
100.0
|
%
|
Cost of goods sold
|
|
(3,696
|
)
|
|
(70.3
|
)%
|
|
(3,497
|
)
|
|
(71.2
|
)%
|
|
(6,510
|
)
|
|
(71.4
|
)%
|
|
(6,584
|
)
|
|
(73.1
|
)%
|
||||
Gross profit
|
|
1,561
|
|
|
29.7
|
%
|
|
1,417
|
|
|
28.8
|
%
|
|
2,609
|
|
|
28.6
|
%
|
|
2,417
|
|
|
26.9
|
%
|
||||
Licensing revenue
|
|
6
|
|
|
0.1
|
%
|
|
7
|
|
|
0.1
|
%
|
|
11
|
|
|
0.1
|
%
|
|
12
|
|
|
0.1
|
%
|
||||
Promotion and selling expenses
|
|
(920
|
)
|
|
(17.5
|
)%
|
|
(1,873
|
)
|
|
(38.1
|
)%
|
|
(2,277
|
)
|
|
(25.0
|
)%
|
|
(3,153
|
)
|
|
(35.0
|
)%
|
||||
General and administrative expenses
|
|
(1,078
|
)
|
|
(20.5
|
)%
|
|
(1,313
|
)
|
|
(26.7
|
)%
|
|
(2,410
|
)
|
|
(26.4
|
)%
|
|
(2,793
|
)
|
|
(31.0
|
)%
|
||||
Loss from operations
|
|
(431
|
)
|
|
(8.2
|
)%
|
|
(1,762
|
)
|
|
(35.9
|
)%
|
|
(2,067
|
)
|
|
(22.7
|
)%
|
|
(3,517
|
)
|
|
(39.0
|
)%
|
||||
Other (expense) income, net
|
|
(5
|
)
|
|
(0.1
|
)%
|
|
6
|
|
|
0.1
|
%
|
|
(16
|
)
|
|
(0.2
|
)%
|
|
78
|
|
|
0.9
|
%
|
||||
Loss before income taxes
|
|
(436
|
)
|
|
(8.3
|
)%
|
|
(1,756
|
)
|
|
(35.8
|
)%
|
|
(2,083
|
)
|
|
(22.9
|
)%
|
|
(3,439
|
)
|
|
(38.1
|
)%
|
||||
Income tax expense, net
|
|
(23
|
)
|
|
(0.4
|
)%
|
|
(64
|
)
|
|
(1.3
|
)%
|
|
(48
|
)
|
|
(0.5
|
)%
|
|
(51
|
)
|
|
(0.6
|
)%
|
||||
Net loss
|
|
(459
|
)
|
|
(8.7
|
)%
|
|
(1,820
|
)
|
|
(37.1
|
)%
|
|
(2,131
|
)
|
|
(23.4
|
)%
|
|
(3,490
|
)
|
|
(38.7
|
)%
|
||||
Basic and diluted net loss per share
|
|
$
|
(0.01
|
)
|
|
|
|
$
|
(0.06
|
)
|
|
|
|
$
|
(0.06
|
)
|
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
Case sale data (288-ounce equivalent):
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||
Finished products cases
|
|
376,200
|
|
|
358,300
|
|
|
672,200
|
|
|
660,300
|
|
10.1*
|
|
Employment letter agreement between Jennifer L. Cue and Jones Soda Co., dated August 6, 2012
|
31.1
|
|
Certification by Jennifer Cue, Chief Executive Officer, pursuant to Rule 13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)
|
31.2
|
|
Certification by Carrie L. Traner, Vice President of Finance, pursuant to Rule 13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)
|
32.1
|
|
Certification by Jennifer Cue, Chief Executive Officer and Carrie L. Traner, Vice President of Finance, 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.
|
|
JONES SODA CO.
|
|
|
By:
|
/s/ Jennifer L. Cue
|
|
|
Jennifer L. Cue
|
|
|
Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Carrie L. Traner
|
|
|
Carrie L. Traner
|
|
|
Vice President of Finance
|
|
1000 1st Ave S, Suite 100
|
T
206-624-3357
|
Seattle, WA 98134
|
F
206-624-6857
|
|
www.jonessoda.com
|
Salary:
|
Your salary will be $96,000 per annum ($8,000 monthly), payable in regular installments in accordance with the Company’s normal payroll practices (subject to applicable withholdings and agreed-upon deductions).
|
|
|
Bonus:
|
Beginning with the Company’s 2013 fiscal year, you will be eligible for performance-based bonuses, in such amounts and based on such performance goals as determined by the Compensation and Governance Committee (“Committee”) (including such factors as revenue targets, achievement of annual budgets and other matters determined by the Committee).
|
|
|
Stock Options:
|
Effective on the date of this agreement, the Company will grant to you stock options for a total of 2,000,000 shares of common stock. The first stock option will be for 1,000,000 shares and will be fully vested upon grant, in recognition of your willingness to take a reduced cash salary compared to prior CEOs. The second stock option will be for an additional 1,000,000 shares, to vest over time subject to your continued employment, with 50% vesting on June 27, 2013 (the one-year anniversary of your start date) and the balance vesting on June 27, 2014 (the two-year anniversary of your start date). Your stock options will be subject to the terms and conditions of the 2011 Incentive Plan (“Plan”). The exercise price of your stock options will be equal to the fair market value of the Company’s common stock on the date of grant, as determined pursuant to the Plan. The date of grant will be the date that the stock options are approved by the Board. Your stock options will be documented by delivery to you of a stock option agreement specifying the terms and conditions of the options
|
|
|
Benefits:
|
You will be entitled to participate in any employee benefit plans that the Company may from time to time have in effect. The Company offers a very competitive heath care plan for you and your family including medical, dental, vision and prescriptions. You will be eligible for the plan the 1st of the month following 90 days of employment.
Your participation shall be subject to the terms of the applicable plan documents, generally applicable policies of the Company, and applicable law.
|
|
|
Car Allowance:
|
$500.00 per month.
|
|
|
Cell Phone Allowance:
|
$150.00 per month.
|
|
|
401(k):
|
You will be eligible to participate in the Company’s 401(k) Plan after 90 days of employment.
|
|
|
Vacation:
|
4 weeks per annum
|
|
|
Location:
|
The Company acknowledges that you currently live in San Francisco and that you are not required to relocate to Seattle, Washington during the first year of employment. However, you acknowledge that you are expected to travel to and be in the Seattle office. The Company will reimburse your travel expense between San Francisco and Seattle, including reasonable car rental. Following June 2013, the Board may require you to move to Seattle as a condition to your continued employment. If you are required to move, the Company will reimburse up to $10,000 in moving and relocation expenses.
|
|
|
At Will Employment
|
Your employment with the Company will be “at will,” meaning that either you or the Company will be entitled to terminate your employment at any time and for any reason, with or without cause.
|
|
|
Severance:
|
If the Company or its successor terminates your employment without Cause (as defined below) in connection with a Change of Control (as defined in the Plan), you will receive a lump sum severance payment, payable within two and one-half (2-1/2) months following your termination date, in an amount equal to six months of your then current annual base salary.
Cause is defined as:
(i) Conviction of any felony or of a misdemeanor;
(ii) Breach of the Company’s Code of Ethics or Insider Trading Policy or the Company’s Regulation FD policies, as now in effect or as modified in the future;
(iii) Theft or embezzlement from the Company; or
(vi) Attempt to obstruct or failure to cooperate with any investigation authorized by the Company or any governmental or self-regulatory entity.
|
Withholding:
|
The Company may withhold (or cause to be withheld) from any payment or benefit provided in this letter any taxes that are required to be withheld under any applicable law.
|
|
|
Section 409A:
|
The payments and benefits provided for in this letter are intended to be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A is applicable to such payments and benefits, the parties intend that this letter (and such payments and benefits) shall comply with the deferral, payout and other limitations and restrictions imposed under Section 409A and the regulations, rulings and other guidance issued thereunder. Notwithstanding any other provision of this letter to the contrary, this letter shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any other provision of this letter to the contrary, with respect to any payments and benefits under this letter to which Section 409A applies, all references in this letter to termination of your employment are intended to mean your “separation from service,” within the meaning of Section 409A(a)(2)(A)(i). In addition, if you are treated as a “specified employee,” within the meaning of Section 409A(a) (2)(B)(i), then to the extent necessary to avoid subjecting you to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under this letter during the six-month period immediately following your separation from service shall not be paid to you during such period, but shall instead be accumulated and paid to you (or, in the event of your death, to your estate) in a lump sum on the first business day following the earlier of (a) the date that is six months after your separation from service or (b) your death.
|
Sincerely,
|
|
JONES SODA CO.
|
|
|
By:
/s/
Mills Brown
|
Mills Brown
|
Chairman, Compensation and Governance Committee
|
Confirmed and Agreed:
|
|
|
|
|
|
|
|
/s/
Jennifer L. Cue
|
|
|
|
JENNIFER L. CUE
|
|
Finance Approval
|
|
|
|
PFO: /s/
Carrie L. Traner
|
8/6/2012
|
Dated: August 6, 2012
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Jones Soda Co.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
a)
|
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;
|
b)
|
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;
|
c)
|
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
|
d)
|
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
|
5.
|
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):
|
a)
|
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
|
b)
|
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.
|
|
/s/ Jennifer L. Cue
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Jones Soda Co.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
a)
|
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;
|
b)
|
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;
|
c)
|
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
|
d)
|
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
|
5.
|
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):
|
a)
|
All significant deficiencies and material weacknesses 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
|
b)
|
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.
|
|
/s/ Carrie L. Traner
|
|
Vice President of Finance
|
(1)
|
The Report 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 Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Jennifer L. Cue
|
|
Jennifer L. Cue
|
|
Chief Executive Officer
|
|
|
|
/s/ Carrie L. Traner
|
|
Carrie L. Traner
|
|
Vice President of Finance
|
|