Note 3 - Shareholders' Equity

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Equity [Text Block]

3. Shareholders’ Equity

On May 16, 2022, our shareholders approved the adoption of the Jones Soda Co. 2022 Omnibus Equity Incentive Plan (the "2022 Plan"), which replaced the 2011 Plan (defined below) and provides for the granting incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire shares of Company common stock under the 2022 Plan. Under the terms of the 2022 Plan, the sum of (i) 10,000,000 shares of the Company’s common stock, plus (ii) the number of shares of common stock reserved, but unissued under the 2011 Plan, plus (iii) the number of shares of common stock underlying forfeited awards under the 2011 Plan are initially available for issuance as awards under the 2022 Plan.

1,936,074 shares of common stock reserved under the terms of our 2011 Incentive Plan (the “2011 Plan”) but unissued were transferred to the reserve for the 2022 Plan. Thus, the total number of shares of common stock authorized under the 2022 Plan was 11,936,074 shares. The 2022 Plan is subject to an annual increase on the first day of each calendar year beginning with the first January 1 following the effective date of the 2022 Plan and ending with the last January 1 during the initial ten-year term of the 2022 Plan, equal to the lesser of (A) four percent (4%) of the shares of the Company’s common stock outstanding (which shall include shares issuable upon the exercise or conversion of all outstanding securities or rights convertible into or exercisable for shares, including without limitation, preferred stock, warrants and employee options to purchase any shares) on the final day of the immediately preceding calendar year and (B) such lesser number of shares of common stock as determined by our Board of Directors.

Under the terms of the 2022 Plan, the Board may grant awards to employees, officers, directors, consultants, agents, advisors and independent contractors. Stock options are granted with an exercise price equal to the closing price of our stock on the date of grant, and generally have a ten-year term. As of March 31, 2024, there were 9,780,514 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 (Per Share)
Balance at January 1, 2024		11,407,772		$	0.26
Options granted		2,200,000			0.24
Options forfeited/expired		(41,250	)		0.41
Balance at March 31, 2024		13,566,522		$	0.25
Exercisable, March 31, 2024		4,459,388		$	0.30
Vested and expected to vest		11,519,254		$	0.26

	Outstanding Options
	Number of Shares		Weighted Average Exercise Price
Balance at January 1, 2023	3,369,322	$	0.41
Options granted	3,506,500		0.26
Options forfeited/expired	(108,542)		0.30
Balance at March 31, 2023	6,767,280	$	0.33
Exercisable, March 31, 2023	3,447,666	$	0.34
Vested and expected to vest	5,862,975	$	0.33

(b) Restricted stock awards:

In May of 2023, the Board determined that it was in the best interests of the Company to revise the Board of Director compensation structure to consist of an annual grant of 300,000 stock options to each non-employee director each year for service on the Board and an additional 150,000 stock options as annual compensation for non-employee directors who serve as chair of a Board committee. All stock options granted to non-employee directors will vest incrementally in equal amounts over a three year period from the date of issuance.

A summary of our restricted stock activity for the three months ended March 31, 2024 is as follows:

	Restricted Shares		Weighted-Average Grant Date Fair Value per share		Weighted-Average Contractual Life (years)
Non-vested restricted stock at January 1, 2024		600,000	$	0.26		-
Granted		-		-
Vested		-		-
Cancelled/expired		-		-
Non-vested restricted stock at March 31, 2024		600,000	$	0.26		9.1

(c) Stock-based compensation expense:

Stock-based compensation expense is recognized using the straight-line attribution method over the employees’ requisite service period, or the non-employee's service period based on the term of the contract. 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, 2024, we had unrecognized compensation expense related to stock options of $1.0 million to be recognized over a weighted-average period of 2.1 years.

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

	Three months ended March 31,
	2024		2023
Stock options	$	150	$	213
Common stock award		-		17
Restricted stock		8		36
	$	158	$	266
Income statement account:
Selling and marketing	$	20	$	22
General and administrative		138		244
	$	158	$	266

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,
	2024			2023
Expected dividend yield		—			—
Expected stock price volatility		89.3	%		88.4	%
Risk-free interest rate		4.2	%		4.0	%
Expected term (in years)		5.9			5.5
Weighted-average grant date fair-value	$	0.18		$	0.19

The aggregate intrinsic value of stock options outstanding at March 31, 2024 was approximately $95,000 and for options exercisable was $39,000. 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, 2024 and 2023.

(d) Closing of the Pinestar Gold Inc. - Plan of Arrangement:

On February 15, 2022, Jones issued an aggregate of 20,000,048 shares of our common stock in connection with the completion of the Plan of Arrangement whereby the outstanding common shares of Pinestar (“Pinestar Shares”) were exchanged for newly issued shares of our common stock on a one-for-one basis. The Plan of Arrangement had previously been approved by both Pinestar’s shareholders as well as by the Supreme Court of British Columbia after such court held a hearing on the fairness of the terms and conditions of the Plan of Arrangement at which all Pinestar shareholders had the right to appear.

In connection with the Plan of Arrangement, Pinestar completed a subscription receipt offering for aggregate net proceeds of $7,152,000, at a price per subscription receipt equal to $0.50. As part of the closing of the Plan of Arrangement, each such subscription receipt automatically converted into one Pinestar Share and one new common share purchase warrant of Pinestar, which were then immediately exchanged for shares of our common stock and Jones Special Warrants, respectively, in accordance with a 1:1 exchange ratio.

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

The following table summarizes the Company's outstanding warrants as of March 31, 2024:

	Number Outstanding		Remaining Contractual Life (Years)		Exercise Price Per Share			Number Exercisable
Jones Special Warrants (1)		6,022,102		0.13	$	0.63	USD		6,022,102
Pinestar Warrants (2)		-		-		0.06	CAD		-
		6,022,102							6,022,102

(1) Upon conversion of the beforementioned 2021 Debenture, 4,025,035 Jones Special Warrants were issued. In connection with the beforementioned Plan of Arrangement, Pinestar completed an offering for subscription receipts for aggregate gross proceeds of $8,000,000. Pursuant to the Plan of Arrangement, each subscription receipt automatically converted into 16,000,000 Jones Special Warrants. Lastly, Upon conversion of the beforementioned Contingent Convertible Debentures, 6,022,102 Jones Special Warrants were issued.

(2) In connection with the beforementioned Plan of Arrangement, 1,674,808 warrants to purchase Pinestar Shares at a price of $0.06 CAD per share were assumed by the Company and became exercisable into shares of our common stock. An aggregate of 600,000 of such warrants were subsequently transferred to two members of our Board of Directors as consideration for services provided by such directors to the Company during 2022.

During the three months ended March 31, 2024, Pinestar Warrants in the amount of 974,808 were exercised at the exercise price of $0.06 CAD, for total proceeds of $44,000. During the three months ended March 31, 2024, Pinestar Warrants in the amount of 500,000 expired on March 31, 2024. During the three months ended March 31, 2024, Jones Special Warrants in the amount of 20,025,035 expired during the three months ended March 31, 2024.