See accompanying notes to condensed consolidated financial statements.
See accompanying notes to condensed consolidated financial statements.
See accompanying notes to condensed consolidated financial statements.
See accompanying notes to condensed consolidated financial statements.
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.
In addition, following the closing of the Plan of Arrangement, we intend to use the proceeds from our recent financings exclusively for the purpose of expanding our business to the production of cannabis-containing beverages and related products.
We are a Washington corporation and have four operating subsidiaries, Jones Soda Co. (USA) Inc., Jones Soda (Canada) Inc., Pinestar Gold Inc., and Mary Jones Holdings Inc., and Mary Jones California, LLC (Subsidiaries).
Basis of presentation, consolidation and use of estimates
The accompanying condensed consolidated balance sheet as of December 31, 2021, which has been derived from our audited consolidated financial statements, and unaudited interim condensed consolidated financial statements as of June 30, 2022, 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, 2021.
Liquidity
As of June 30, 2022 and December 31 2021, we had cash and cash-equivalents of approximately $9.3 million and $4.7 million, respectively, and working capital of approximately $13.9 million and $6.0 million, respectively. Net cash used in operations during the six months ended June 30, 2022 and 2021 totaled approximately $4.9 million and $1.6 million, respectively. Net cash used in operations increased primarily due to the increase in expenses related to expanding our business to the production of cannabis-containing beverages and related products as of June 30, 2022.
During the six months ended June 30, 2022, we issued $3,000,000 in Contingent Convertible Debentures (See note 4), that fully converted into 6,022,192 shares of common stock on May 16, 2022.
Additionally, upon the consummation of a statutory plan of arrangement under the Business Corporations Act (British Columbia) (the “Plan of Arrangement”) with Pinestar Gold Inc. (“Pinestar”) the Company received $7.1 million in net proceeds from a subscription receipt offering completed by Pinestar (the “Pinestar Subscription Receipt Offering”) prior to the Plan of Arrangement. The Plan of Arrangement resulted in issuance of an aggregate of 20,000,048 shares of the Company’s common stock (the “Jones Shares”) which were issued in exchange for all ofthe outstanding common shares of Pinestar (the “Pinestar Shares”), including the Pinestar Shares issued in connection with the Pinestar Subscription Receipt Offering, on a one-for-one basis.
During the three and six months ended June 30, 2022, we received $0 from the cash exercise of stock options. During the three and six months ended June 30, 2021, we received $58,000 and $67,000, respectively, from the cash exercise of stock options. From time to time, we may receive additional cash through the exercise of stock options or stock warrants. However, we cannot predict the timing or amount of cash proceeds we may receive from the exercise, if at all, of any of the outstanding stock options or warrants.
We intend to continually monitor and adjust our operating plan as necessary to respond to developments in our business, our markets and the broader economy. In addition, the continuation of the COVID-19 pandemic and uncertain supply chain conditions, may reduce demand for certain products, and may negatively impact our business.
As of the date of this Report, as a result of our cash on hand, we believe that our current cash and cash equivalents will be sufficient to meet the Company’s funding requirements for one year after these condensed consolidated financial statements are issued.
10
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 stock keeping units (“SKU”) 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
Our contracts have a single performance obligation which is satisfied at the point in time when the customer has title and the significant risks and rewards of ownership of the product. Title and the significant risk and rewards of ownership are deemed to transfer when products are loaded onto a truck for shipment or Free on Board (“FOB”) shipping point. 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 $54,000 and $40,000 for the three months ended June 30, 2022 and 2021, respectively, and $86,000 and $55000 for the six months ended June 30, 2022 and 2021, respectively. Sales tax and other similar taxes are excluded from revenue.
See Note 1, on our most recently filed Form 10-K filed on March 14, 2022 for our revenue recognition policy.
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 product sales to customers. These estimates are based on contract terms and our historical experience with similar programs and require management judgement with respect to estimating customer participation and performance levels. Differences between estimated expense and actual costs are normally insignificant and are recognized in earnings in the period such differences are determined. The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue. The liability for promotional allowances is included in accrued expenses on the consolidated balance sheets. Amounts paid for slotting fees are recorded as prepaid expenses on the consolidated balance sheets and amortized over the corresponding term. For the quarters ended June 30, 2022 and 2021, our revenue was reduced by $451,000 and $454,000, respectively, and for the six months ended June 30, 2022 and 2021, by $759,000 and $804,000, respectively, in each case for slotting fees and promotion allowances.
All sales to distributors and customers are generally final. In limited instances we may accept returned product due to quality issues or distributor terminations, and in such situations we would have variable consideration. To date, returns have not been material. 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 $119,000 and $114,000 as of June 30, 2022 and December 31, 2021, respectively, were netted against accounts receivable. No impairment losses were recognized as of June 30, 2022 and December 31, 2021. 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 June 30, 2022, two of our independent customers made up 33% of our outstanding accounts receivable. As of December 31, 2021, one of our independent customers made up 19% of our outstanding accounts receivable.
Net loss per share
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Net income (loss) | | $ | (1,435 | ) | | $ | 309 | | | $ | (3,099 | ) | | $ | (410 | ) |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 95,303,482 | | | | 64,550,554 | | | | 87,539,631 | | | | 63,857,185 | |
| | | | | | | | | | | | | | | | |
Dilutive convertible notes | | | - | | | | 2,615,606 | | | | - | | | | - | |
Dilutive stock options | | | - | | | | 1,246,958 | | | | - | | | | - | |
Diluted | | | 95,303,482 | | | | 68,413,118 | | | | 87,539,631 | | | | 63,857,185 | |
Net income (loss) per share: | | | | | | | | | | | | | | | | |
Basic | | $ | (0.02 | ) | | $ | 0.00 | | | $ | (0.04 | ) | | $ | (0.01 | ) |
Diluted | | $ | (0.02 | ) | | $ | 0.00 | | | $ | (0.04 | ) | | $ | (0.01 | ) |
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 three and six months ended June 30, 2022, outstanding stock options amounting to 3,206,832 were anti-dilutive. Due to the net loss in the six months ended June 30, 2021, outstanding stock options amounting to 4,343,233 shares and shares issuable upon the conversion of the Convertible Notes of 2,615,606 were anti-dilutive and excluded from inclusion in diluted weighted shares outstanding.
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Recent accounting pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, “Debt-Debt with Conversion and other options” (“ASU 2020-06”), which simplifies the accounting for convertible debt instruments and convertible preferred stock. This ASU is effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are evaluating the impact ASU 2020-06 could have on our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses (“ASU 2016-13”), which changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU 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.
Inventory consisted of the following (in thousands):
| | June 30, 2022 | | | December 31, 2021 | |
Finished goods | | $ | 1,738 | | | $ | 1,361 | |
Raw materials | | | 1,095 | | | | 562 | |
| | $ | 2,833 | | | $ | 1,923 | |
Finished goods primarily include product ready for shipment, as well as promotional merchandise held for sale. Raw materials primarily include ingredients, concentrate and packaging. For the three months ended June 30, 2022 and 2021, we recorded obsolete inventory expenses of $9,000 and $8,000, respectively. For the six months ended June 30, 2022 and 2021, we recorded obsolete inventory expenses of $22,000 and $16,000, respectively.
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 lease was five years; in February 2020, we amended the lease to extend the term through February 28, 2025. As a result of the lease amendment, we recognized a lease liability and right-of-use asset of $556,000 which represents the remaining lease payments discounted at a rate of 4%. As of June 30, 2022, this lease had a remaining lease term of 2.67 years.
During the quarters ended June 30, 2022 and 2021, we incurred rental expenses of $45,000 and $38,000, respectively and during the six months ended June 30, 2022 and 2021, we incurred rental expenses of $88,000 and $80,000, respectively. During the quarters ended June 30, 2022 and 2021, we made cash payments of $45,000 and $38,000, respectively and during the six months ended June 30, 2022 and 2021, we made cash payments of $88,000 and $78,000, respectively.
Management fees and other operational expenses were immaterial. Cash payments on our operating lease are presented as operating cash outflows in the condensed consolidated statements of cash flows. As of June 30, 2022, 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):
2022 | | $ | 62 | |
2023 | | | 126 | |
2024 | | | 130 | |
2025 | | | 22 | |
Total lease payments | | | 340 | |
Less: imputed interest | | | (18 | ) |
Total remaining lease liability | | $ | 322 | |
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4. | Convertible Debentures |
2018 Convertible Subordinated Note 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 “2018 Convertible Notes”) to institutional investors and our management team, and other individual investors.
The 2018 Convertible Notes had a four-year term from the date of issuance and bear interest at 6% per annum until maturity on March 23, 2022, and April 18, 2022. The holders could convert the 2018 Convertible Notes at any time into the number of shares of our common stock equal to the quotient obtained by dividing (i) the amount of the unpaid principal and interest on such 2018 Convertible Note by (ii) $0.32 (the “Conversion Price”). The Conversion Price was subject to anti-dilution adjustment on a broad-based, weighted average basis if we issue shares or equity-linked instruments at a conversion price below $0.32 per share. No payments of principal or interest are due until the maturity.
The 2018 Convertible Notes were subordinated in right of payment to the prior payment in full of all of our Senior Indebtedness, which is defined as amounts due in connection with our indebtedness for borrowed money to banks, commercial finance lenders, or other lending institutions regularly engaged in the business of lending money, with certain restrictions.
During the quarter ended June 30 2022, 2018 Convertible Notes in the aggregate principal amount of $10,000 and related accrued interest were converted into an aggregate of 38,755 shares of common stock in accordance with the original terms of the 2018 Convertible Notes. As a result, the carrying amount of the converted principal amount of such 2018 Convertible Notes, along with the converted accrued interest, in an aggregate amount of $12,000, was credited to common stock. During the quarter ended June 30, 2021, Convertible Notes in the aggregate principal amount of $124,000 and related accrued interest were converted into an aggregate of 462,600 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 $148,000, was credited to common stock and unamortized discounts in an amount equal to $3,000 were recognized as interest expense for the three months ended June 30, 2021.
The fair value of our common stock on the March 23, 2018, closing date for the issuance of the 2018 Convertible Notes was $0.36 per share, therefore, the 2018 Convertible Notes contained a beneficial conversion feature with an aggregate intrinsic value of $350,000. The fair value of our common stock on the April 18, 2018, closing date for the issuance of the 2018 Convertible Notes was $0.30 per share, which did not result in an additional beneficial conversion feature. The resulting debt discount for the 2018 Convertible Notes issued on March 23, 2018 is presented as a direct deduction from the carrying value of the 2018 Convertible Notes and was recorded with an increase to additional paid-in capital. The discount along with the related closing costs amounting to $137,000 were amortized through interest expense over the term of the 2018 Convertible Notes. As of April 18, 2022 all convertible notes have been converted into shares and the current balance of the 2018 Convertible Subordinated Note Payable as of June 30, 2022 is $0.
2021 Unsecured Convertible Debenture
On July 14, 2021, we issued a $2,000,000 5.00% unsecured convertible debenture due July 14, 2023 (the “2021 Debenture”) to SOL Verano Blocker 1 LLC that was convertible into units of the Company (each a “Jones Unit”) at a conversion price of $0.50 per Jones Unit, with each Jones Unit consisting of one Jones Share and one share purchase special warrant of Jones (each a “Jones Special Warrant”). Each Jones Special Warrant will be exercisable into one Jones Share at a price of $0.625 per Jones Share for a period of 24 months from the date of issuance, conditional upon us increasing our authorized capital to an amount to cover the Jones Shares issuable pursuant to all of the outstanding Jones Special Warrants as well as the other Jones Shares issuable pursuant to our then-outstanding convertible/exercisable securities. The 2021 Debenture accrued interest at a rate of 5.00% and we had $47,000 of interest due to SOL Verano Blocker 1 LLC on December 31, 2021.
The closing of the Plan of Arrangement resulted in the automatic conversion of the 2021 Debenture into an aggregate of 4,025,035 Jones Shares and 4,025,035 Jones Special Warrants at a conversion price of $0.50 per Jones Share and Jones Special Warrant. As a result, the carrying amount of the converted principal amount of such 2021 Unsecured Convertible Debenture, in an aggregate amount of $2,000,000, was credited to common stock.
2022 Unsecured Convertible Debenture
On February 9, 2022, we issued $3,000,000 in aggregate principal amount of 3.00% unsecured convertible debentures due February 9, 2023 (the “Contingent Convertible Debentures”), which were converted into Jones Units of Jones at a conversion price of $0.50 per Jones Unit on May 16, 2022. The Contingent Convertible Debentures were automatically convertible into Jones Units upon Jones Soda increasing its authorized capital to an amount to cover the Jones Shares issuable pursuant to all of the outstanding Contingent Convertible Debentures as well as all of the other then outstanding convertible/exercisable securities of Jones (a “Conversion Event”). The Contingent Convertible Debentures were only convertible into Jones Units upon the occurrence of a Conversion Event. The Contingent Convertible Debentures were set to mature on February 9, 2023 (the “Convertible Debenture Maturity Date”) and began accruing interest at a rate of 3.00% commencing on April 1, 2022. Under the terms of the Contingent Convertible Debentures, the Company covenants to the holders of the Contingent Convertible Debentures that the Company will use their commercially reasonable efforts to cause the Conversion Event to occur as soon as practicable after the closing of the Plan of Arrangement . We received net proceeds of $538,000 prior to December 31, 2021 and the remaining of the total $3,000,000 during the quarter ended March 31, 2022. The related closing costs amounting to $108,000 are amortized through interest expense over the term of the Contingent Convertible Debentures. On May 16, 2022 all Contingent Convertible Debentures were converted into shares, all capitalized closing costs have been fully amortized into interest expense, and the current balance of the Contingent Convertible Debentures as of June 30, 2022 was $0.
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On May 16, 2022, our shareholders approved the adoption of the Jones Soda Co. 2022 Omnibus Equity Incentive Plan (the "2022 Plan"), which replaced the 2011 Plan (defined below) and provides for the granting incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire shares of Company common stock under the 2022 Plan. Under the terms of the 2022 Plan, the sum of (i) 10,000,000 shares of the Company’s common stock, plus (ii) the number of shares of common stock reserved, but unissued under the 2011 Plan, plus (iii) the number of shares of common stock underlying forfeited awards under the 2011 Plan are initially available for issuance as awards under the 2022 Plan.
1,936,074 shares of common stock reserved under the terms of our 2011 Incentive Plan (the “2011 Plan”) but unissued were transferred to the reserve for the 2022 Plan. Thus, the total number of shares of common stock authorized under the Plan was 11,936,074 shares.
Under the terms of the 2022 Plan, the Board may grant awards to employees, officers, directors, consultants, agents, advisors and independent contractors. Stock options are granted with an exercise price equal to the closing price of our stock on the date of grant, and generally have a ten-year term. As of June 30, 2022, there were 7,436,074 shares of unissued common stock authorized and available for future awards under the Plan.
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, 2022 | | | 3,405,511 | | | $ | 0.38 | |
Options granted | | | 625,648 | | | | 0.54 | |
Options forfeited/expired | | | (824,327 | ) | | | 0.41 | |
Balance at June 30, 2022 | | | 3,206,832 | | | $ | 0.41 | |
Exercisable, June 30, 2022 | | | 2,395,258 | | | $ | 0.32 | |
Vested and expected to vest | | | 2,975,046 | | | $ | 0.39 | |
| | Outstanding Options | |
| | Number of Shares | | | Weighted Average Exercise Price | |
Balance at January 1, 2021 | | | 3,589,783 | | | $ | 0.36 | |
Options granted | | | 998,450 | | | | 0.36 | |
Options exercised | | | (154,271 | ) | | | 0.43 | |
Options forfeited/expired | | | (90,729 | ) | | | 0.78 | |
Balance at June 30, 2021 | | | 4,343,233 | | | $ | 0.35 | |
Exercisable, June 30, 2021 | | | 2,707,124 | | | $ | 0.38 | |
Vested and expected to vest | | | 3,861,412 | | | $ | 0.35 | |
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(b) | Restricted stock awards: |
Beginning on May 13, 2022 the Company’s board of directors (the “Board”) determined that it was in the best interests of the Company to periodically award restricted stock units as equity compensation for non-employee directors at the discretion of the Compensation and Governance Committee of the Board in lieu of stock options. Each restricted stock unit granted vests incrementally over the period in the specific award agreement, and certain restricted stock awards will immediately vest upon the occurrence of a "Change in Control" as defined in the 2022 Plan. Previously, January 1, 2020 through February 15, 2022, equity compensation for non-employee director service consisted of the grant of an annual non-qualified stock option award that vested on the first anniversary of the date of grant (subject to the director’s continuing service as of such anniversary date), with the number of shares underlying such award being determined by dividing $25,000 by the closing share price (as quoted on the OTCQB marketplace) on the date of grant (which was the first trading day in January in each calendar year), and such stock option award had an exercise price equal to our closing share price (as quoted on the OTCQB marketplace) on the date of grant. Prior to February 15, 2022, when joining the Board, each non-employee director was previously granted a non-qualified stock option award that vested on the first anniversary of the date of grant (subject to the director’s continuing service as of such anniversary date), with the number of shares underlying such award being determined by dividing $25,000 by our closing stock price on the first trading day following the date on which such director is appointed), prorated based on the date on which such director is appointed, and which stock option shall be granted as of the first trading day following the date on which such director was appointed, and had an exercise price equal to our closing share price (as quoted on the OTCQB marketplace) on the date of grant. The stock option and restricted stock unit awards described above are governed by either the 2022 Plan or the 2011 Plan (if granted prior to the adoption of the 2022 Plan) and standard form of stock option grant notice and agreement and standard form of restricted stock unit grant notice and agreement.
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, 2022 | | | - | | | $ | - | | | | - | |
Granted | | | 4,920,000 | | | | 0.20 | | | | 9.9 | |
Vested | | | - | | | | - | | | | — | |
Non-vested restricted stock at June 30, 2022 | | | 4,920,000 | | | $ | 0.20 | | | | 9.9 | |
(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 June 30, 2022, we had unrecognized compensation expense related to stock options of $807,000 to be recognized over a weighted-average period of 2.5 years.
The following table summarizes the stock-based compensation expense (in thousands):
| | Three months ended June 30, | | | Six months ended June 30, 2022 | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | | | | | |
Stock options | | $ | 23 | | | $ | 28 | | | $ | 292 | | | $ | 81 | |
Restricted stock | | | 94 | | | | - | | | | 94 | | | | - | |
| | $ | 117 | | | $ | 28 | | | $ | 386 | | | $ | 81 | |
| | | | | | | | | | | | | | | | |
Income statement account: | | | | | | | | | | | | | | | | |
Selling and marketing | | $ | 18 | | | $ | 6 | | | $ | 109 | | | $ | 25 | |
General and administrative | | | 99 | | | | 22 | | | | 277 | | | | 56 | |
| | $ | 117 | | | $ | 28 | | | $ | 386 | | | $ | 81 | |
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:
| | Six months ended June 30, 2022 | |
| | 2022 | | | 2021 | |
Expected dividend yield | | | — | | | | — | |
Expected stock price volatility | | | 78.3 | % | | | 74.8 | % |
Risk-free interest rate | | | 1.7 | % | | | 0.7 | % |
Expected term (in years) | | | 5.9 | | | | 5.8 | |
Weighted-average grant date fair-value | | $ | 0.37 | | | $ | 0.23 | |
The aggregate intrinsic value of stock options outstanding at June 30, 2022 was approximately $82,000 and for options exercisable was also $82,000. 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 or six months ended June 30, 2022. There were 154,271 options exercised with an aggregate intrinsic value of $21,000 during the six months ended June 30, 2021.
(c) | Closing of the Pinestar Gold Inc. - Plan of Arrangement: |
On February 15, 2022, Jones issued an aggregate of 20,000,048 Jones Shares in connection with the completion of the Plan of Arrangement whereby the outstanding Pinestar Shares were exchanged for newly issued Jones Shares on a one-for-one basis. The Plan of Arrangement had previously been approved by both Pinestar’s shareholders as well as by the Supreme Court of British Columbia after such court held a hearing on the fairness of the terms and conditions of the Plan of Arrangement at which all Pinestar shareholders had the right to appear.
In connection with the Plan of Arrangement, Pinestar completed the Pinestar Subscription Receipt Offering for aggregate net proceeds of $7,152,000, at a price per subscription receipt equal to $0.50. As part of the closing of the Plan of Arrangement, each such subscription receipt automatically converted into one Pinestar Share and one new common share purchase warrant of Pinestar, which were then immediately exchanged for Jones Shares and Jones Special Warrants, respectively, in accordance with a 1:1 exchange ratio.
The issuance of Jones Shares to the holders of Pinestar Shares (including Pinestar Shares received upon the conversion of the subscription receipts issued in the Pinestar Subscription Receipt Offering) in the Plan of Arrangement was exempt from the registration requirements under the United States Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3(a)(10) of the Securities Act, which exempts from the registration requirements under the Securities Act any securities that are issued in exchange for one or more bona fide outstanding securities where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court expressly authorized by law to grant such approval.
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 June 30, | | | Six months ended June 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Revenue: | | | | | | | | | | | | | | | | |
United States | | $ | 4,810 | | | $ | 3,221 | | | $ | 8,440 | | | $ | 5,481 | |
Canada | | | 1,142 | | | | 1,195 | | | | 2,035 | | | | 1,775 | |
Other countries | | | 63 | | | | 42 | | | | 63 | | | | 59 | |
Total revenue | | $ | 6,015 | | | $ | 4,458 | | | $ | 10,538 | | | $ | 7,315 | |
During the three months ended June 30, 2022 and 2021, one of our customers (Lassonde) represented an aggregate of approximately 24% and 22% of our revenue, respectively. During the six months ended June 30, 2022 and 2021, one of our customers (Lassonde) represented an aggregate of approximately 24% and 22% of our revenue, respectively.
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