SEATTLE – Jones Soda Co. (“Jones” or the “Company”) (OTCQB: JSDA), the original craft soda known for its unconventional flavors and user-designed label artwork, today announced that it has issued to SOL Global Investments Corp. (“SOL”) a US$2,000,000 unsecured convertible debenture (the “Convertible Debenture”) and has entered into a non-binding term sheet dated July 14, 2021 (the “Term Sheet”) with Pinestar Gold Inc. (“Pinestar”), a Canadian Reporting Issuer, and SOL. Jones intends to use the proceeds of the Convertible Debenture and transactions outlined in the Term Sheet exclusively for transaction costs and the expansion of Jones’ business to the production and sale of cannabis-containing beverages, edibles and related products.
Jones intends to operate its planned cannabis operations through one or more subsdiaries that are separate from its craft beverage business.
“We believe that Cannabis-infused beverages and edibles are a perfect fit for the iconic personality of the Jones brand, and that the proposed transactions will lay the groundwork for a strategic transformation of the Company to an additional business line that we feel builds on our current business model” said Mark Murray, President and CEO of Jones. ”We are also confident that SOL, along with certain large shareholders of Pinestar will provide Jones with the knowledge, expertise and resources necessary to help us deliver on our growth plans within the cannabis sector” added Mr. Murray.
The proposed transactions outlined in the Term Sheet are subject to, amongst other conditions, due diligence by the parties, the negotiation and execution of a definitive agreement, approval of any applicable regulators, including any applicable securities exchanges, and approval by both the shareholders of Pinestar and the Supreme Court of British Columbia.
Proposed Transaction Steps Outlined in Term Sheet
Under the terms of the Term Sheet, Jones intends to acquire all of the outstanding common shares of Pinestar (after a planned consolidation of such shares) and warrants exercisable into common shares of Pinestar in exchange for an aggregate of 4,000,000 shares of Jones common stock (the “Jones Shares”) and 1,674,808 warrants exercisable into Jones Shares as part of a statutory plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) and in reliance on applicable exemptions from the prospectus and registration requirements under Canadian and United States securities laws.
The Term Sheet also provides that Pinestar intends to complete an offering of subscription receipts (“Subscription Receipts”) that is expected to be subscribed for by SOL and certain significant shareholders of Pinestar, one of whom is Marc Lustig, a well-known and respected Canadian entrepreneur, capital markets executive and investor, or their respective contacts and partners, for minimum aggregate gross proceeds of US$8,000,000, at a price per Subscription Receipt equal to US$0.50. The Subscription Receipts are intended to automatically convert into units of Pinestar (the “Pinestar Units”) on a one-for-one basis if certain conditions relating to the Plan of Arrangement are met, with each Pinestar Unit expected to consist of one common share of Pinestar Share and one new share purchase warrant of Pinestar, which are then expected to be immediately exchanged for, or adjusted into, Jones Units (defined below) as part of the Plan of Arrangement in accordance with a 1:1 exchange ratio.
The Convertible Debenture is convertible into units of Jones (each a “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 US$0.625 per share for a period of 24 months from the date of issuance, conditional upon Jones increasing its 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 the then outstanding convertible/exercisable securities of Jones. Pursuant to the terms of the Convertible Debenture, upon satisfaction or waiver of the conditions precedent to the closing of the Plan of Arrangement, the entire principal amount on the Convertible Debenture and all accrued interest thereon shall automatically convert into Jones Units at a conversion price of US$0.50 per Jones Unit. The terms of the Convertible Debenture also provide that Jones shall use the principal amount of the Convertible Debenture exclusively for the costs and expenses associated with pursuing and completing the Plan of Arrangement, and for the purpose of expanding Jones’ business to the production of cannabis-containing beverages and related products.
Jones also signed a registration rights agreement with SOL, whereby Jones has agreed to register with the United States Securities and Exchange Commission (the “SEC”) the resale of the Jones Shares issuable upon the conversion of the Convertible Debenture and the exercise of the Jones Special Warrants.
Description of Jones and its Business
Headquartered in Seattle, Washington, Jones markets and distributes premium craft beverages under the Jones® Soda and Lemoncocco® brands. A leader in the premium craft soda category, Jones is made with cane sugar and other high-quality ingredients, and is known for packaging that incorporates ever-changing photos sent in from its consumers. Jones’ diverse product line offers something for everyone – cane sugar soda, zero-calorie soda and Lemoncocco non-carbonated premium refreshment. Jones is sold across North America in glass bottles, cans and on fountain through traditional beverage outlets, restaurants and alternative accounts. For more information, visit www.jonessoda.com