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JONES SODA CO. ( USA )

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JONES SODA CO : Entry into a Material Definitive Agreement, Unregistered Sale of Equity Securities, Regulation FD Disclosure, Financial Statements and Exhibits (form 8-K)

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07/12/2019 | 06:08am EDT

Item 1.01. Entry into a Material Definitive Agreement.

On July 11, 2019, Jones Soda Co., a Washington corporation (the "Company"), entered into a securities purchase agreement (the "Purchase Agreement") with Heavenly Rx Ltd. (the "Investor") pursuant to which the Company sold to the Investor in a private placement (the "Financing"): (a) 15,000,000 shares (the "Shares") of the Company's common stock (the "Common Stock") and (b) a warrant to purchase up to an additional 15,000,000 shares of Common Stock (the "Warrant"). The aggregate purchase price for the Shares and the Warrant was $9,000,000 in cash, which was paid to the Company at the closing of the purchase and sale on July 11, 2019 (the "Closing"). The Company intends to use the proceeds for general working capital and other purposes, including sales and marketing, product development and capital expenditures for its legacy business and new business initiatives.

The following summaries of the Purchase Agreement and the other agreements entered into by the parties are qualified in their entirety by reference to the text of the Purchase Agreement and agreements entered into in connection therewith, copies of which are attached as exhibits hereto and incorporated herein by reference.

The Purchase Agreement includes standard representations and warranties by the Company regarding the transaction and the Company's business and operations. In addition, pursuant to the Purchase Agreement, the Company has agreed to indemnify the Investor and its affiliates from any losses that may arise out of any inaccuracy of such representations or warranties or any breach of any covenant, agreement or obligation of the Company. These indemnification obligations survive for a period of 12 months following the Closing, are subject to standard limitations, and are capped at an amount equal to the aggregate purchase price, other than with respect to certain "company fundamental representations" (as defined in the Purchase Agreement) which survive for a period of 24 months following the Closing, are exempt from standard limitations and are uncapped.

The Warrant is immediately exercisable, has a term of one-year following the Closing, and provides the Investor with the right to purchase up to 15,000,000 shares of Common Stock ("Warrant Shares") at an exercise price of $0.78 per share, subject to adjustment in the event of certain stock splits, stock dividends or distributions, reorganizations, reclassifications or other similar events. The Warrant shall be automatically exercised as follows:

(i) If the Company's closing share price as reported on the OTCQB Marketplace, or its then primary trading market, is equal to or greater than $1.78 for at least five (5) consecutive trading days, the Warrant shall be automatically exercised with respect to 25% of the total number of the Warrant Shares;

(ii) If the Company's closing share price as reported on the OTCQB Marketplace, or its then primary trading market, is equal to or greater than $2.12 for at least five (5) consecutive trading days, the Warrant shall be automatically exercised with respect to an additional 25% of the total number of the Warrant Shares;

(iii) If the Company's closing share price as reported on the OTCQB Marketplace, or its then primary trading market, is equal to or greater than $2.36 for at least five (5) consecutive trading days, the Warrant shall be automatically exercised with respect to an additional 25% of the total number of the Warrant Shares; and

(iv) If the Company's closing share price as reported on the OTCQB Marketplace, or its then primary trading market, is equal to or greater than $2.60 for at least five (5) consecutive trading days, the Warrant shall be automatically exercised with respect to the remaining 25% of the total number of the Warrant Shares.

If the Investor fails to pay the exercise price upon the automatic exercise of the Warrant, then the Warrant shall thereafter terminate in its entirety.

After giving effect to the Investor's purchase of the Shares in the Financing, the Investor will own approximately 25% of the Company's outstanding Common Stock as of the Closing, and if the Investor exercises the Warrant in full, the Investor will own approximately 40% of the Company's outstanding Common Stock, assuming no further issuance by the Company of its Common Stock upon exercise of outstanding stock options, settlement of outstanding restricted stock awards or conversion of outstanding convertible notes or otherwise.

In connection with the Purchase Agreement, the Company, the Investor, Jennifer Cue, Eric Chastain and Michael Fleming (the "Shareholders") entered into an Investor Rights Agreement on July 11, 2019 (the "IRA"). Pursuant to the IRA, the Company and the Shareholders agreed to cause the Company's Board of Directors (the "Board") to be set at seven (7) directors, and the Investor has the right to designate two members of the Board (the "Investor Designees"), and the Shareholders have agreed to vote their shares of Common Stock in favor of the election of the Investor Designees. For so long as any Investor Designees serve on the Board, the Company must obtain the approval of the Board, including all of the Investor Designees, before taking certain actions, such as amending the Company's charter documents, offering to sell any new securities, creating any debt security, approving a change of control, changing the strategy or principal lines of business of the Company, liquidating or dissolving the Company or agreeing to make expenditures in excess of $1,000,000. The Investor also has the right to appoint a nonvoting observer to attend all meetings of the Board. In addition, in the event that the Company proposes to offer any new securities (subject to certain standard exceptions), the Investor has a right of first offer to purchase such securities. Under the IRA, the Investor and the Shareholders have agreed for a period of one year following the closing of the transaction that they will not sell or otherwise transfer any shares of Common Stock or other securities of the Company, subject to certain standard exceptions. In addition, pursuant to the IRA, the Company has granted to the Investor certain demand registration rights (after the expiration of the lock-up described in the preceding sentence) and piggyback registration rights with respect to the Shares and the Warrant Shares. The Company has also agreed to maintain director and officer insurance so long as any Investor Designee serves on the Board, and the Investor has agreed to introduce the Company to the Investor's network of quick service ("QSR") locations, and to encourage such QSR locations to stock and sell the Company's products.

In addition, in connection with the transactions contemplated by the Purchase Agreement, the Company and each of SOL Global Investments Corp., an Ontario corporation, of which the Investor is a portfolio company ("SOL"), and the Investor entered into Standstill Agreements pursuant to which SOL and the Investor, on behalf of themselves and each of their respective affiliates, agreed to not acquire, on the open market or otherwise, any loans, debt securities, equity securities, or assets of the Company or any of its subsidiaries, or rights or options to acquire interests in any of the Company's . . .

Item 3.02. Unregistered Sales of Equity Securities.

The information contained above in Item 1.01 is hereby incorporated by reference into this Item 3.02.

Item 7.01. Regulation FD Disclosure.

On July 11, 2019, the Company issued a press release announcing the closing of the Financing and the other transactions described herein. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit    Description

  10.1       Securities Purchase Agreement dated as of July 11, 2019, by and
           between the Company and Heavenly RX Ltd.
  10.2       Warrant dated July 11, 2019 to purchase up to 15,000,000 shares of
           Common Stock
  10.3       Investor Rights Agreement dated as of July 11, 2019 by and among
           the Company, Heavenly RX Ltd. and the shareholders named therein
  10.4       Standstill Agreement dated as of July 11, 2019 by and between the
           Company and Heavenly RX Ltd.
  10.5       Standstill Agreement dated as of July 11, 2019 by and between the
           Company and SOL Global Investments Corp.
  10.6       Form of Indemnification Agreement
  99.1       Press Release dated July 11, 2019

* The schedules and exhibits to the Securities Purchase Agreement have been omitted from this filing pursuant to 601(a)(5) of Regulation S-K.

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

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