8-K: Jones Soda Appoints New Auditor Amid Control Weaknesses

Jones Soda Co. has dismissed Berkowitz, Pollack Brant and appointed Davidson & Company LLP as its new independent registered public accounting firm, following identified material weaknesses in internal controls.

Summary

• Jones Soda Co. dismissed Berkowitz, Pollack Brant Advisors + CPAs, LLP (BPB) as its independent registered public accounting firm on October 9, 2025.
• Davidson & Company LLP (Davidson) was appointed as the new independent registered public accounting firm on the same date, with approval from the Company's Audit Committee.
• BPB's audit reports for fiscal years ended December 31, 2024, and 2023, did not contain adverse opinions, disclaimers, or qualifications.
• There were no disagreements between the Company and BPB on accounting principles, financial statement disclosure, or auditing scope.
• BPB did advise the Company of reportable events related to management's conclusion that internal controls over financial reporting were not effective as of December 31, 2024, March 31, 2025, and June 30, 2025.
• Material weaknesses identified included a transition of key senior accounting personnel from late 2024 through early 2025, leading to required year-end balance adjustments.
• The Company also lacked sufficient resources in its accounting department, both in terms of personnel numbers and training adequacy, during this transition period.
• No consultations occurred with Davidson prior to their engagement regarding accounting principles or audit opinions.

Sentiment

Score: 3

Explanation: The dismissal of an auditor and appointment of a new one due to identified material weaknesses in internal controls over financial reporting is a significant negative event. While the company is taking action, the underlying issues of personnel transition and inadequate resources in the accounting department indicate fundamental operational and governance challenges that could impact financial reliability and investor confidence.

Positives

• No adverse opinions or disclaimers were issued by the previous auditor, BPB, for the fiscal years 2023 and 2024.
• No disagreements on accounting principles or practices were reported between the Company and BPB.
• The Audit Committee approved the change, indicating formal governance oversight of the process.
• The Company is taking action to address identified internal control weaknesses by changing auditors.

Negatives

• Material weaknesses in internal controls over financial reporting were identified for periods ending December 31, 2024, March 31, 2025, and June 30, 2025.
• Key senior accounting personnel transitioned from late 2024 through early 2025, necessitating year-end balance adjustments.
• The accounting department lacked sufficient resources, both in terms of personnel numbers and training adequacy, during the transition period.

Risks

• Internal Control Deficiencies: The identified material weaknesses in internal controls over financial reporting pose a risk of financial misstatements and inaccurate reporting.
• Operational Disruption: Personnel transitions in the accounting department can lead to operational inefficiencies and errors.
• Reputational Damage: Weak internal controls can erode investor confidence and damage the Company's reputation.
• Regulatory Scrutiny: Persistent internal control issues could attract increased scrutiny from regulatory bodies like the SEC.

Future Outlook

The Company is expected to focus on remediating the identified material weaknesses in its internal controls over financial reporting to ensure accurate and reliable financial statements moving forward.

Management Comments

• "We have read the statements made by Jones Soda Co. under Item 4.01 of its Form 8-K dated October 9, 2025. We agree with the statements concerning our Firm in such Form 8-K; we are not in a position to agree or disagree with other statements of Jones Soda Co. contained therein." (From Berkowitz Pollack Brant Advisors + CPAs, LLP in Exhibit 16.1)

Industry Context

Changes in independent auditors are a routine part of corporate governance, often occurring due to contract expiration, fee negotiations, or a desire for fresh perspectives. However, a change explicitly following identified material weaknesses in internal controls, as seen here, signals a more significant issue that requires immediate attention. In the beverage industry, robust financial reporting is crucial for investor confidence, especially for smaller players like Jones Soda Co. competing against larger, more established brands.

Comparison to Industry Standards

• The identification of material weaknesses in internal controls over financial reporting is generally considered below industry best practices. Publicly traded companies are expected to maintain effective internal controls to ensure the reliability of financial reporting, as mandated by regulations like Sarbanes-Oxley.
• Companies like Coca-Cola (KO) or PepsiCo (PEP) typically maintain highly robust internal control environments, with any identified weaknesses being promptly remediated and disclosed. While Jones Soda Co. is a smaller entity, the expectation for control effectiveness remains.
• The specific issues of personnel transition and inadequate resources in the accounting department point to fundamental operational and governance challenges that are not typical for well-managed public companies.

Corporate Governance

Stakeholder Impact

• Shareholders: May experience decreased confidence due to concerns about the reliability of financial statements and the effectiveness of internal controls, potentially leading to negative share price impact.
• Employees: The accounting department employees are directly impacted by the identified resource and training deficiencies, potentially facing increased workload or scrutiny.
• Regulatory Authorities: The SEC will closely monitor the Company's remediation efforts regarding the material weaknesses.

Next Steps

• Jones Soda Co. must prioritize the remediation of the identified material weaknesses in its internal controls over financial reporting.
• The new auditor, Davidson & Company LLP, will commence its audit procedures, likely with a focus on the areas where weaknesses were identified.
• The Company will need to ensure adequate staffing and training for its accounting department.

Key Dates

Recommendation

The identification of material weaknesses in internal controls is a serious concern, indicating potential risks to the accuracy of financial reporting. While the company has taken a positive step by changing auditors to address these issues, the underlying problems of personnel transition and inadequate resources in the accounting department suggest fundamental operational challenges. Investors should hold their positions cautiously, awaiting further updates on the remediation of these control weaknesses and subsequent financial reporting, as the situation presents both risks and the potential for improvement if effectively managed.

Keywords

Jones Soda, auditor change, SEC filing, internal controls, financial reporting, accounting firm, 8-K, material weaknesses, corporate governance, public accounting