JSDA 10-K & 10-Q changes, risk factors and insider trading
Jones Soda Co. · OTC · Beverages · CIK 1083522 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to our Financial Condition and Capital Requirements”
New heading “We have experienced recurring losses from operations and negative cash flows from operating activities”
New heading “We depend on a limited number of significant customers for a substantial portion of our revenue.”
New heading “We depend upon licensed intellectual property to generate some our revenues.”
New heading “Regulatory Uncertainty For Hemp Derived Beverage Business”
Removed heading “Risk Factors Relating to our Cannabis Business in Canada”
Removed heading “Our plans to expand our cannabis operations may not be successful, which would have an adverse impact on our business, financial condition and results of operations.”
Removed heading “The cannabis industry is an evolving industry and we must anticipate and respond to changes.”
Removed heading “Any rescheduling of U.S. Schedule I cannabis to Schedule III would have an uncertain impact on our business.”
Largest changes
“On March 25, 2024, our indirect wholly owned subsidiary, Mary Jones Michigan LLC, received a Notice of Claims for arbitration from Core Manufacturing, LLC (“Core”), who claimed that the Company was in breach of its commitments under the agreement between the Company and Core. Core is seeking, amongst other damages, the enforcement of the break-up fee provision in such agreement, which they calculate to be $7,220,357. …”see in full comparison
“Our plans to expand our cannabis operations may not be successful, which would have an adverse impact on our business, financial condition and results of operations.”see in full comparison
“Any rescheduling of U.S. Schedule I cannabis to Schedule III would have an uncertain impact on our business.”see in full comparison
“A significant portion of our net revenue is derived from products and services associated with licensed intellectual property. Our ability to generate revenue from these licensed properties is dependent on the continuation of our licensing agreements and our ongoing compliance with the terms and conditions of those agreements. …”see in full comparison
“We have experienced recurring losses from operations and negative cash flows from operating activities”see in full comparison
“We depend on a limited number of significant customers for a substantial portion of our revenue.”see in full comparison
Full comparison: every changed paragraph (22)
Risks Related to our Financial Condition and Capital Requirements
We have experienced recurring losses from operations and negative cash flows from operating activities
Risks
Related to our Financial Condition and Capital Requirements We
have experienced recurring losses from operations and negative cash flows from operating activities We
have experienced recurring losses from operations and negative cash flows from operating activities. We incurred a net loss of
$9.9 $1.8 million
for the year ended December 31, 2024.2025. Our accumulated deficit increased to $92.9$94.7 million
as of December 31, 20242025 compared to the prior
year’s deficit of $83.1$92.9 million.
We depend on a limited number of significant customers for a substantial portion of our revenue.
A significant portion of our revenues is derived from a limited number of customers. For the year ended December 31, 2025, our two largest customers accounted for approximately 31.2% and 4.1% of our total revenues, respectively, and in the aggregate represented approximately 35.3% of our total revenues. For the year ended December 31, 2024, our two largest customers accounted for approximately 18.8% and 5.8% of our total revenues, respectively, and in the aggregate represented approximately 24.6% of our total revenues. This level of customer concentration may increase the volatility of our revenues and operating results. Our relationships with these customers are generally governed by contracts; however, such agreements may be subject to termination, non-renewal, or renegotiation on relatively short notice or upon the occurrence of certain events. In addition, these customers may reduce, delay, or cancel orders, seek to renegotiate pricing or other terms, or shift their business to competitors for a variety of reasons, including changes in their own business strategies, financial condition, or industry dynamics. The loss of, or a significant reduction in purchases by, any of our significant customers, or a deterioration in our relationships with such customers, could materially and adversely affect our business, financial condition, and results of operations. Additionally, our dependence on a limited number of customers may limit our ability to increase prices or negotiate favorable terms, which could adversely impact our margins. We may not be able to replace any lost revenue from these customers on comparable terms or within a reasonable period of time, if at all.
Our business relies on third-party transportation providers and logistics networks to deliver our products and materials. As a result, our cost structure is exposed to fluctuations in oil prices, which directly impact fuel costs, including diesel and gasoline, and, in turn, freight and shipping rates. Volatility in global oil markets, driven by factors such as geopolitical tensions, supply constraints, production decisions by oil-producing countries, and macroeconomic conditions, can result in significant and unpredictable increases in fuel prices. These increases are typically passed through to us by our transportation providers in the form of higher freight rates, fuel surcharges, and accessorial charges. Sustained increases in oil prices could materially increase our cost of goods sold and operating expenses, adversely affecting our gross margins and profitability. In addition, higher transportation costs may reduce demand for our products if we are unable to pass through such cost increases to customers, or if doing so makes our products less competitive. Our ability to mitigate the impact of higher fuel and freight costs may be limited. While we may seek to offset such increases through pricing actions, operational efficiencies, supply chain optimization, or contractual arrangements, these measures may not be sufficient or timely, and competitive or contractual constraints may limit our ability to fully recover increased costs. Accordingly, increases in oil prices and related transportation costs could have a material adverse effect on our business, financial condition, and results of operations. Recently, the war in Iran has significantly increased these fuel prices and it is likely these substantial increases will either need to be passed along to our customers or result in lower margins for our business.
Over
the past few years, volatility in the global oil markets has resulted in high fuel prices, which many shipping companies have passed
on to their customers by way of higher base pricing and increased fuel surcharges. If fuel prices increase, we expect to experience higher
shipping rates and fuel surcharges, as well as energy surcharges on our raw materials. It is hard to predict what will happen in the
fuel markets. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers.
We
currently purchase our flavor concentrate from various flavor concentrate suppliers, and continually develop other sources of flavor
concentrate for each of our products. Generally, flavor suppliers hold the proprietary rights to their flavors. Although we have the
exclusive rights to flavor concentrates developed with our current flavor concentrate suppliers, we do not have the list of ingredients
or formulas for our flavors and concentrates. Consequently, we may be unable to obtain these same flavors or concentrates from alternative
suppliers on short notice. Furthermore, if we cannot replicate our most popular flavors with alternative supplies this may result in
a loss of customers who turn to our competitors’ beverage and have a negative impact on our brand loyalty in the long term. If
we have to replace a flavor supplier, we could experience disruptions in our ability to deliver products to our customers, or products
tofavored by our customers, which could have a material adverse effect on our results of operations.
We depend upon licensed intellectual property to generate some our revenues.
A significant portion of our net revenue is derived from products and services associated with licensed intellectual property. Our ability to generate revenue from these licensed properties is dependent on the continuation of our licensing agreements and our ongoing compliance with the terms and conditions of those agreements. These agreements are generally subject to fixed terms and may be terminated by the licensor under certain circumstances, including, but not limited to, our failure to satisfy contractual obligations such as minimum royalty payments, performance thresholds, or quality standards. In addition, licensors may elect not to renew these agreements upon expiration or may seek to renegotiate terms that are less favorable to us. If any of our key license agreements were to be terminated, not renewed, or materially modified on unfavorable terms, we could lose the right to use the associated intellectual property. Because a substantial portion of our revenue is concentrated in these licensed properties, the loss of one or more significant licenses could have a material adverse effect on our business, financial condition, and results of operations. For the year ended December 31, 2025, approximately 39% of our total net revenue was attributable to products utilizing one or more licensed properties, including the licensed property, Fallout. Such an event could result in a decline in revenue, inventory write-downs, and increased costs associated with transitioning to alternative products or brands. Furthermore, our reliance on licensed properties subjects us to risks associated with the licensors’ reputation, brand strength, and ability to maintain consumer demand. Any negative publicity, reputational harm, or decline in the popularity of a licensed property could adversely affect sales of our products associated with that property and, in turn, our operating results. We may not be able to replace licensed properties with alternative intellectual property or develop proprietary brands that achieve comparable levels of market acceptance, and any such efforts may require significant time and investment without assurance of success.
On
March 25, 2024, our indirect wholly owned subsidiary, Mary Jones Michigan LLC, received a Notice of Claims for arbitration from Core
Manufacturing, LLC (“Core”), who claimed that the Company was in breach of its commitments under the agreement between the
Company and Core. Core is seeking, amongst other damages, the enforcement of the break-up fee provision in such agreement, which they
calculate to be $7,220,357. In February 2025, a confidential settlement agreement was entered into
between all the parties to the Litigation Matters, which has resulted in the settlement and/or dismissal of both Litigation Matters.
Risk
Factors Relating to our Cannabis Business in Canada
Our
plans to expand our cannabis operations may not be successful, which would have an adverse impact on our business, financial condition
and results of operations.
Our
strategy for growth in the cannabis industry is dependent on, among other things, our ability to partner with local licensed cannabis
manufacturers to launch and market THC/CBD-infused and/or cannabis-infused beverages, tinctures, edibles and other products in various
provinces. Although we intend to devote significant financial and other resources to expand our business to the production of cannabis-containing
beverages and related products, these efforts may not be commercially successful or achieve the desired results. Our financial results
and our ability to maintain or improve our competitive position will depend on our ability to effectively gauge the direction of the
cannabis industry and successfully identify, develop, market and sell new or improved products and services in this changing marketplace.
Our inability to successfully implement our cannabis strategy could have a material adverse effect on our business, financial condition
and results of operations.
The cannabis industry is an evolving industry and we must anticipate and respond to changes.
The
cannabis industry is not yet well-developed, and many aspects of this industry’s development and evolution cannot be accurately
predicted. While we have attempted to identify any risks specific to the cannabis industry that would be applicable to our planned cannabis
operations, you should carefully consider that there are other risks that cannot be foreseen or are not described in this report, which
could materially and adversely affect the development of our cannabis business and our future financial performance. We expect that the
cannabis market and our business will evolve in ways that are difficult to predict. Our long-term success will depend on our ability
to successfully adjust our strategy to meet the changing market dynamics. If we are unable to successfully adapt to changes in the cannabis
industry, our operations could be adversely affected.
Regulatory Uncertainty For Hemp Derived Beverage Business
Federal regulators have not yet implemented a comprehensive regulatory framework governing intoxicating hemp products. Future rulemaking by the FDA or DEA could impose restrictions that significantly affect the market. Congress periodically revisits hemp policy through farm bill legislation. Future amendments could: redefine hemp using total THC rather than Delta-9 THC; impose milligram limits per product; and restrict intoxicating cannabinoids. Such changes could materially impact the HD9 industry. State regulatory regimes vary widely. Products legal in one state may be prohibited in another, requiring companies to maintain complex multi-state compliance programs. Companies may face enforcement actions related to: inaccurate labeling; unapproved health claims; synthetic cannabinoid production; and sales to minors.
The hemp-derived cannabinoid industry has seen increasing litigation involving consumer product liability; labeling disputes; and regulatory interpretation. The HD9 regulatory environment continues to evolve rapidly. Congress is periodically proposing legislation that would regulate intoxicating hemp products more strictly. The FDA has indicated that a new regulatory approach may be necessary to manage hemp-derived cannabinoids in consumer products. States continue to pass legislation regulating intoxicating hemp products, often focusing on product potency limits; youth access restrictions; and testing requirements.
Any
rescheduling of U.S. Schedule I cannabis to Schedule III would have an uncertain impact on our business.
In
August 2023, the U.S. Department of Health and Human Services recommended that the DEA move marijuana from Schedule I to Schedule III
under the CSA and on May 16, 2024, the DEA issued a proposed rule to reclassify marijuana from its current classification as a Schedule
I drug to a Schedule III drug. There can be no assurance that the proposed DEA rule will go into effect in its present form or at all,
and the impacts of any such adoption on our business and competitive position are unclear. For example, rescheduling marijuana from Schedule
I to Schedule III may be accompanied by additional regulatory obligations as prerequisite to participate in the U.S. market, and it may
provide a greater benefit to the businesses of our competitors than our business, including by providing favorable tax treatment to their
U.S. operations. The rescheduling of marijuana from Schedule I to Schedule III could result in significant volatility in the market for
our common stock. To the extent that market speculation results in an increase in the price of our common stock, the price of our common
stock could decline significantly thereafter if the DEA fails to act on the recommendation or investor optimism fades.
The
global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity
and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes,
increases in unemployment rates and uncertainty about economic stability. The financial markets and the global economy may also be adversely
affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, the United States,
Isreal and Iran, terrorism or other
geopolitical events. Sanctions imposed by the United States and other countries in response to such
conflicts, including the one in Ukraine,
Ukraine and in Iran, may also adversely impact the financial markets and the global economy, and any
economic countermeasures by the affected countries or
others could exacerbate market and economic instability. There can be no assurance
that future credit and financial market instability
and a deterioration in confidence in economic conditions will not occur. Our general
business strategy may be adversely affected by any
such economic downturn, liquidity shortages, volatile business environment or continued
unpredictable and unstable market conditions.
If the equity and credit markets deteriorate, or if adverse developments are experienced
by financial institutions, it may cause short-term
liquidity risk and also make any necessary debt or equity financing more difficult,
more costly and more dilutive. Failure to secure
any necessary financing in a timely manner and on favorable terms could have a material
adverse effect on our growth strategy, financial
performance and stock price and could require us to delay or abandon our business plans.
In addition, there is a risk that one or more
of our current customers, distributors, manufacturers, financial institutions or other
third parties with whom we do business may be
adversely affected by the foregoing risks, which may have an adverse effect on our business.
Management's Discussion & Analysis (MD&A)
Largest changes
General and administrative expenses for the year ended December 31,see in full comparison20242025 were approximately$7.9$6.3 million,anaincreasedecrease of$2.5$1.5 million, or46.9%,19.2%, compared to approximately$5.4$7.8 million for the year ended December 31,2023.2024. Thisincreasedecrease wasprimarilya result ofincreaseddecreased legal and regulatory expendituresexpendituresrelated to our Mary Jones business and the LitigationMatters.MattersIn($0.9addition, there was increasedmillion), travelexpendituresdecreasesrelated($0.3tomillion),therentdevelopmentdecreasesof($0.1amillion),newinsurancesupplydecreaseschain($0.3 million), professional services decreases ($0.1 million) andmeetingotherwith($0.2sponsorship partners. In February 2025, a confidential settlement agreement was entered into between all the parties to the Litigation Matters,million) whichhaswas offsetresultedby increases inthe settlement and/or dismissal of both Litigation Matters. In addition, the Company is focused on reducing travel expenses in 2025. Generalsalaries andadministrativewagesexpenses($0.4as a percentage of revenue increased to 41.1% for the year ended December 31, 2024, from 32.1% for the year ended December 31, 2023.million). We intend to carefully manage general and administrative expenses in line with our working capital resources and it is a major management focus to reduce this % of revenue in the coming quarters.
“For the year ended December 31, 2024, gross profit decreased by $0.8 million, or 16.1%, to approximately $4.1 million compared to approximately $4.9 million for the year ended December 31, 2023, driven by one time inventory impairment charges of $1.2 million in the fourth quarter of 2024 due to slow moving new products launched in 2024. The Company launched several innovative products in 2024, some of which have been slow moving in the Mary Jones (Adult Beverages market) and one in its Core soda business. …”see in full comparison
“For the year ended December 31, 2025, gross profit increased by $3.1 million, or 84.8%, to approximately $6.8 million compared to approximately $3.7 million for the year ended December 31, 2024 driven by the increase in net sales, and lower trade spend driven by product mix in the current year compared to the prior year. The Company made improvements in inventory management in 2025; however, it still had material inventory impairment charges related to the HD9 business driven by legislative changes made by the Federal Government in November 2025.”see in full comparison
Net loss for the year ended December 31,see in full comparison20242025increaseddecreased to approximately$9.9$1.8 million from a net loss of$4.9$9.9 million for the year ended December 31,20232024 oranaincreasedecrease of$5$8.1 million. The majority of theincreasedecrease in net loss in20242025 compared to20232024 was primarily driven byinventory impairmentthechargesgain on the sale of$1.2the Company’s Cannabis business ($3.9 milliondiscussed above, increased sales) andmarketingaexpendituresdecreaseofin$1.7the loss from operations ($5.0 millionand increased legal and travel costs of $1.5 million. The Company is focused on tighter management of inventory, legal and sales and marketing expenditures in 2025.).
As of December 31,see in full comparison20242025 and2023,2024, we had cash and cash-equivalents of approximately$1.5$3.6 million and$3.9$1.3 million, respectively, and working capital of approximately$2.0($0.5) million and$7.2$2.0 million, respectively. Net cash used in continuing operations during fiscal years 2025 and 2024andtotaled2023 totaledapproximately$5.9$1.3 million and$3.8$6.2 million,respectively.respectivelyThewhich$2.3 million increase in cash used in operations in fiscal 2024, was driven byis anincrease in net loss after adjusting for non-cash itemsimprovement of$3.7 compared to the prior year which was offset by an increase in cash generated from non cash working capital of $1.7 million compared to the prior year. We incurred a net loss of approximately $9.9 million for the year ended December 31, 2024 compared to a net loss of approximately$4.9 million for the year ended December 31,2023. Our accumulated deficit increased to $92.9 million as of December 31, 2024 compared to an accumulated deficit of $83.1 million as of December 31, 2023.2025.
Selling and marketing expenses for the year ended December 31,see in full comparison2024,2025, were approximately$6.1$5.3 million,anaincreasedecrease of$1.7$0.3 million, or39.5%,5.4%, fromfromapproximately$4.4$5.6 million for the year ended December 31,2023.2024.ThisThereincreasewerewaslargeprimarilyincreasesdrivento license fees paid ($0.6 million) on Fallout licensed products and increases to brokerage fees ($0.1 million) that were offset byhigherdecreasesonlineinmarketing expenditure for both the Jones Sodaadvertising andMarypromotionsJones($0.4brands.million), tradeAdditionally,showsweandexpandedsponsorshipsour($0.3marketingmillion),initiativesdecreaseswithtocompaniesconsultinginvolved($0.1inmillion),action sports,andincludingdecreasesantoagreementtravelwith($0.2Thrill One Sports & Entertainment, in the year ended December 31, 2024, which did not occur in the year ended December 31, 2023.million).
Full comparison: every changed paragraph (17)
We
develop, produce, market and distribute premium beverages that we sell and distribute primarily in North America through our network
of independent distributors and directly to our national and regional retail accounts. We also sell premium soda beverage products in
select international markets and license cannabis and hemp infused beverages and syrups in several states. Our premium soda beverage
products are sold primarily in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street”
in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several
large retailers. We refer to our network of independent distributors as our direct store delivery (“DSD”) channel, and we
refer to our national and regional accounts who receive shipments directly from us as our direct to retail (“DTR”) channel.
We do not directly manufacture any of our premium soda beverage products, but instead outsource the manufacturing process to third-party
contract manufacturers. We also sell various premium beverage soda products online, including soda with customized labels, wearables,
candy and other items, and we license our trademarks for use on products sold by other manufacturers. In addition, we currently market
and license several cannabis and hemp infused beverages and syrups in several states through third party manufacturers and distributors.
We plan to expand our cannabis and hemp product offerings and the states and provinces in which we offer such products.
For
the year ended December 31, 2024,2025, our net revenue was approximately $19.2$25.3 million, representing an increase of $2.5$7.5 million, or 42.2%,
14.9%, compared to approximately $16.7$17.8 million in revenue for the year ended December 31, 2023.2024. This growth in net sales revenue was
primarily driven
by anew highercore beverage segmentsoda sales volumethrough ofthe 15%club growthchannel, yearincremental overDirect yearto Consumer (DTC) sales, increased Food Service sales, increases
in Modern Soda sales and 9%
growthincreased inHD9 our Cannabis (THC) business in the US and Canada.sales. The percentage of our revenues generated in Canada for 20242025 and 20232024 was 18%
11.2% and 18%, 17.3%,
respectively.
For
the year ended December 31, 2024,2025, trade spending and promotional allowances, which reduced our gross revenue from product sales, totaled
totaled approximately $4.1$2.8 million. This represents ana increasedecrease of approximately $2.5$1.6 million, or 156%,36.3%, compared to approximately
$1.6 $4.4 million
for the year ended December 31, 2023.2024. ThisThe increaseprimary reason for the decrease was mainlydriven attributableby a higher mix of sales with lower trade spend
(club and DTC channels). These two channels accounted for 35% of 2025 gross sales compared to promotional and pricing programs related
to Mary Jones products and core Jones Soda sales5.6% in Canada, mostly due to the transition to a new distributor in Canada.2024.
For the year ended December 31, 2025, gross profit increased by $3.1 million, or 84.8%, to approximately $6.8 million compared to approximately $3.7 million for the year ended December 31, 2024 driven by the increase in net sales, and lower trade spend driven by product mix in the current year compared to the prior year. The Company made improvements in inventory management in 2025; however, it still had material inventory impairment charges related to the HD9 business driven by legislative changes made by the Federal Government in November 2025.
For
the year ended December 31, 2024, gross profit decreased by $0.8 million, or 16.1%, to approximately $4.1 million compared to approximately
$4.9 million for the year ended December 31, 2023, driven by one time inventory impairment charges of $1.2 million in the fourth quarter
of 2024 due to slow moving new products launched in 2024. The Company launched several innovative products in 2024, some of which have
been slow moving in the Mary Jones (Adult Beverages market) and one in its Core soda business. As a result for the year ended December
31, 2024, gross margin decreased to 21.3% from 29.1% for the year ended December 31, 2023. The impairment charges discussed above reduced
gross margin by 6.5% in 2024. The Company has subsequently rationalized its product set and is focused on smaller production runs on
a focused product set for its core soda business, the modern soda category and the adult beverages category.
Selling
and marketing expenses for the year ended December 31, 2024,2025, were approximately $6.1$5.3 million, ana increasedecrease of $1.7$0.3 million, or 39.5%,5.4%, from
from approximately $4.4$5.6 million for the year ended December 31, 2023.2024. ThisThere increasewere waslarge primarilyincreases drivento license fees paid ($0.6 million) on Fallout
licensed products and increases to brokerage fees ($0.1 million) that were offset by higherdecreases onlinein marketing expenditure
for both the Jones Sodaadvertising and Marypromotions Jones($0.4 brands.million),
trade Additionally,shows weand expandedsponsorships our($0.3 marketingmillion), initiativesdecreases withto companiesconsulting involved($0.1 inmillion), action
sports,and includingdecreases anto agreementtravel with($0.2 Thrill One Sports & Entertainment, in the year ended December 31, 2024, which did not occur
in the year ended December 31, 2023.million).
As
a result, selling and marketing expenses as a percentage of revenue increaseddecreased to 31.9%21.0% in the year ended December 31, 2024,2025, from 26.3%31.4%
in the year ended December 31, 2023.2024. We intend to continue to manage selling and marketing expenses with our working capital resources
and it is
a major management focus to continue to reduce this % of revenue in the coming quarters.
General
and administrative expenses
for the year ended December 31, 20242025 were approximately $7.9$6.3 million, ana increasedecrease of $2.5$1.5 million, or 46.9%, 19.2%,
compared to approximately
$5.4 $7.8 million for the year ended December 31, 2023.2024. This increasedecrease was primarily a result of increaseddecreased legal and regulatory
expenditures expenditures
related to our Mary Jones business and the Litigation Matters.Matters In($0.9 addition, there was increasedmillion), travel expendituresdecreases related($0.3 tomillion), therent developmentdecreases
of($0.1 amillion), newinsurance supplydecreases chain($0.3 million), professional services decreases ($0.1 million) and meetingother with($0.2 sponsorship partners. In February 2025, a confidential settlement agreement was entered into between
all the parties to the Litigation Matters,million) which haswas
offset resultedby increases in the settlement and/or dismissal of both Litigation Matters. In addition,
the Company is focused on reducing travel expenses in 2025. Generalsalaries and administrativewages expenses($0.4 as a percentage of revenue increased to
41.1% for the year ended December 31, 2024, from 32.1% for the year ended December 31, 2023.million). We intend to carefully manage general and
administrative expenses in line with
our working capital resources and it is a major management focus to reduce this % of revenue in the
coming quarters.
Other income (expense) was $3.1 million for the years ended December 31, 2025 compared to other income (expense) of $12,000 for the years ended December 31, 2024. The increase of $3.1 million was due to the gain on the sale of the Company’s Cannabis business of $3.9 million which was offset by other expenses of $0.8 million.
We
earned approximately $22,000 of interest income for the year ended December 31, 2024, compared to $52,000 for the year ended December
31, 2023. We incurred $11,000 in interest expenses for the year ended December 31, 2024 compared to nil for the year ended December 31,
2023.
Net
loss for the year ended December 31, 20242025 increaseddecreased to approximately $9.9$1.8 million from a net loss of $4.9$9.9 million for the year ended
December 31, 20232024 or ana increasedecrease of $5$8.1 million. The majority of the increasedecrease in net loss in 20242025 compared to 20232024 was primarily driven
by inventory
impairmentthe chargesgain on the sale of $1.2the Company’s Cannabis business ($3.9 million discussed above, increased sales) and marketinga expendituresdecrease ofin $1.7the loss from operations ($5.0 million and increased legal and
travel costs of $1.5 million. The Company is focused on tighter management of inventory, legal and sales and marketing expenditures in
2025.).
As
of December 31, 20242025 and 2023,2024, we had cash and cash-equivalents of approximately $1.5$3.6 million and $3.9$1.3 million, respectively, and working
capital of approximately $2.0($0.5) million and $7.2$2.0 million, respectively. Net cash used in continuing operations during fiscal years 2025
and 2024 andtotaled 2023 totaled
approximately $5.9$1.3 million and $3.8$6.2 million, respectively.respectively Thewhich $2.3 million increase in cash used in operations in fiscal 2024, was driven
byis an increase in net loss after adjusting for non-cash itemsimprovement of $3.7 compared to the prior year which was offset by an increase in cash
generated from non cash working capital of $1.7 million compared to the prior year. We incurred a net loss of approximately $9.9 million
for the year ended December 31, 2024 compared to a net loss of approximately $4.9 million for the year ended
December 31, 2023. Our accumulated
deficit increased to $92.9 million as of December 31, 2024 compared to an accumulated deficit of $83.1 million as of December 31, 2023.2025.
For the year ended December 31, 2025, cash used in operating activities decreased by approximately $4.9 million compared to the prior year. This change was primarily driven by an improvement in net loss after adjusting for non-cash items, which decreased by approximately $4.7 million relative to 2024. Cash generated from changes in non-cash working capital compared to the prior year was improved by $0.2 million. We incurred a net loss of approximately $1.7 million from continuing operations in 2025, compared to a net loss of approximately $9.7 million in 2024, reflecting the lower operating loss as well as the impact of the gain on the disposition of subsidiaries. Our accumulated deficit increased to $94.7 million as of December 31, 2025, compared to $92.9 million as of December 31, 2024.
Financing activities provided net cash inflows of approximately $2.5 million for the year ended December 31, 2025, compared to net cash inflows of $3.7 million in 2024. The 2025 inflows were primarily attributable to proceeds from new loan financing and the issuance of promissory notes, partially offset by repayments on existing debt and insurance financing arrangements. In contrast, the 2024 inflows were driven largely by the completion of a private placement offering, which generated net proceeds of $3.6 million, along with net borrowings under the revolving credit facility and proceeds from the exercise of warrants and stock options. These inflows were offset by repayments on the insurance financing agreement and withholding taxes related to restricted share units.
Investing activities provided net cash of approximately $0.4 million in 2025, compared to cash used of $27 thousand in 2024. The increase was primarily due to proceeds received from the disposal of a subsidiary, net of cash disposed, along with the proceeds from the sale of property, plant and equipment.
For
the year ended December 31, 2024, net cash inflow from financing activities totaled approximately $3.7 million, compared to a net cash
outflow of $0.2 million during the year ended December 31, 2023. During 2024, the Company completed a private placement offering, resulting
in net cash proceeds of $3.6 million (Note 7), net proceeds from the revolving credit facility of $0.3 million and $0.1 million proceeds
received from the exercise of warrants and options. This was offset by repayment on the insurance financing agreement amounting to $0.2
million and withholding taxes related to the RSUs of $0.2 million. The cash outflow in 2023 was primarily due to repayments on our insurance
financing agreement, partially offset by proceeds received from the exercise of outstanding warrants.
We
have experienced recurring losses from operations and negative cash flows from operating activities. These factors raise substantial
doubt regarding the Company’s ability to continue as a going concern. To address this issue, in the first quarter of fiscal year
2025, the Company recently changed its senior
leadership and is focusing on reducing its operating expenses while bringbringing products to market
with higher margins and potentially higher
customer demand. Additionally, on February 5,19, 2025, the Company, through a wholly-owned subsidiary
(the “Subsidiary”), entered
into loan agreement (the “Loan Agreement”) with Two Shores Capital Corp,Corp (“Two
Shores”), pursuant to which the Subsidiary may borrow a maximum
aggregate amount of up to $5,000,000,$5 million, subject to satisfaction of
certain conditions. All advances drawn under the Loan Agreement will
bear interest at a rate of 13.75% per annum and all present and
future obligations of the Subsidiary arising under the Loan Agreement
are secured by a first priority security interest in all of the
assets of the Company, the Subsidiary and the Company’s other United
States subsidiaries. The Loan Agreement replaces the $2 million
revolving credit facility entered into by the Company in March 2024 (the
“2024 Credit Facility”). The borrowing base under
the Loan Agreement expands the assets that can be financed against from
only accounts receivable under the 2024 Credit Facility to accounts
receivable, inventory and customer purchase orders. The Loan Agreement was amended on December 1, 2025 to increase the facility to $10
million.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Six months ending June 30, 2026 and 2025”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “Selling and Marketing Expenses”
New heading “General and Administrative Expenses”
New heading “Income Tax Expense”
New heading “Net Income (loss)”
Largest changes
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
Historically, we have experienced recurring losses from operations and negative cash flows from operating activities. These factors raise substantialsee in full comparisonsubstantialdoubt regarding the Company’s ability to continue as a going concern.We have significantly reduced these losses from operations in 2025 and the first quarter of 2026, the Company achieved a positive net income of $0.1 million.The Company continues to focus on reducing its operating expenses while bringing products to market with higher margins and potentially higher customer demand. Additionally, thetheCompany announcedathe$2.5closing of $1.74 million brokered private placement onAprilJuly30,7th,2026,2026 and has a $10 million credit facility with Two Shores Capital Corp (the “Credit Facility”). All advances drawn under the Credit Facility will bear interest at a rate of 13.75% per annum and all present and future obligations arising under the Credit Facility are secured by a first priority security interest in all of the assets of theCompany, Jones Soda Co (USA) Inc., the Company’s wholly-owned subsidiaryCompany and the Company’sotherUnited Statessubsidiaries.Subsidiaries (as defined in the Credit Facility).
Full comparison: every changed paragraph (36)
PopModern
Jones (Modern Soda market segment)
We
continue to see a growing market in our health and functional benefit focused soda brands, which we consider to be the “modern
soda” market. Recent
We believe that recent growth by industry competitors such as Poppi and Olipop have proven outdemonstrated the growing consumer
demand for this market segment. In 2024,
Jones launched its first product in this market - “Pop Jones” product lines to capitalize
on onwhat we believe to be this growing market opportunity.
.
Jones
started offering its hemp-derived Delta-9 THC (“HD9”) products in 2024 through the Mary Jones brand, including with a line
of four flavors of Mary Jones hemp-derived sodas. Since that time, Mary Jones has expanded its portfolio to include three flavors of
10mg Mary Jones shooters, four flavors of Mary Jones gummies, and a line of Mary Jones zero sugar sodas. We further believe Mary Jones
is uniquely positioned to lead in this emerging category. Backed by over two decades of
brand equity from Jones Soda, we believe we offer
an instantly recognizable name, a loyal consumer base, and a proven reputation for
flavor innovation and quality. Although we believe
there is currently a growing market for these products as consumers continue to migrate
away from traditional beer and wine products,
on November 12, 2025, the federal spending legislation passed to reopen the U.S. federal
government contained a provision, which when
implemented, would materially alter the federal treatment of hemp-derived products by prohibiting
the unregulated sale of intoxicating
hemp-based or hemp-derived products (including HD9 products), while also capping legal hemp products
at 0.4 milligrams of total THC (and
similar-effect cannabinoids) per product. The Company believes that when implemented, this legislation
would likely require the Company
to significantly reformulate or discontinue the Company’s current hemp-derived HD9 product lines.
Three
months ended MarchJune 31,30, 2026 and 2025
Quarter
Ended MarchJune 31,30, 2026 Compared to Quarter Ended MarchJune 31,30, 2025
For
the quarter ended MarchJune 31,30, 2026, revenue increased by approximately $8.2$5.3 million, or 193.9%,108%, to approximately $12.4$10.2 million compared to
to approximately $4.2$4.9 million for the quarter ended MarchJune 31,30, 2025. The increase in sales revenue was primarily the result of Fallout branded
branded products sold through our club channel. HD9 Sales declined from $0.9M to $0.2M$0.1M in the quarter ended MarchJune 31,30, 2026.2026 compared to the same
quarter in 2025.
For
the quarter ended MarchJune 31,30, 2026, trade spend and promotional allowances, which reduced the amount of revenue for the sales of our product,
totaled approximately $1.4$1.3 million, an increase of approximately $0.6$1.1 million, or 97%,450%, compared to approximately $0.7$0.2 million for the
quarter ended MarchJune 31,30, 2025, primarily driven trade spend associated with our Fallout branded products sold through our club channel.
While total trade spend increased, as a percentage of gross revenue it declined from 13.5% to 9.5% in the first quarter of 2026 compared
to the same quarter of 2025.
For
the quarter ended MarchJune 31,30, 2026, gross profit increased by approximately $2.5$1.2 million, or 179.4%,72%, to approximately $3.9$2.8 million compared
to approximately $1.4$1.6 million for the quarter ended MarchJune 31,30, 2025 as a result of higher sales revenue in the current quarter. For the
quarter ended MarchJune 31,30, 2026, gross margin decreased slightly to 31.3%28% from 32.9%33% in the quarter ended MarchJune 31,30, 2025. This 1.6five percentage
point decrease
in gross profit margin was primally driven by ahigher declinelogistics costs mainly due to higher world oil prices in salesthe revenuescurrent fromquarter. ourThis
increase HD9largely productsimpacted the first part of the second quarter and reductions in 2026,freight whichcosts generallywere seen in the latter part of the quarter.
have higher-margins than our other products. The Company continuesintends to lookcontinue forto focus on additional opportunities to decreasemanage its cost of goods sold with
its co-manufacturersfreight and ourwarehousing warehousecosts andwith freightthe providers.goal to get
such costs back in line with prior quarters.
Selling
and marketing expenses for the firstsecond quarter ended MarchJune 31,30, 2026 were approximately $2.0$1.9 million, an increase of approximately $0.9$0.8
million, or 82.9%,79%, from approximately $1.1 million for the firstsecond quarter ended MarchJune 31,30, 2025. This increase was primarily a result of
an increase Brokerin broker and Royaltyroyalty payments related to falloutFallout product sales.sales, salaries and marketing and promotions, being partially offset
by a reduction in consulting expenses in the current quarter compared to the same quarter last year. Selling and marketing expenses as
a percentage of revenue decreased
to 16.4%18.7% in the firstsecond quarter ended MarchJune 31,30, 2026 from 26.3%21.7% in the same period in 2025. We intend
to continue to look for clear return
on investment from our selling and marketing expenses to drive profitable sales. For the three months
ended MarchJune 31,30, 2026 and 2025,
non-cash expenses included in selling and marketing expenses (stock compensation and depreciation) were
approximately $0.1 million and
$0.01 $0.1 million, respectively.
General
and administrative expenses for the firstsecond quarter ended MarchJune 31,30, 2026 were approximately $1.5$1.4 million compared to $1.2$1.3 million in the
firstsecond quarter ended MarchJune 31,30, 2025 or an increase of $0.3$0.1 million. This increase was primary related to increased salary and benefits
during the current quarter compared to the same quarter in 2025. General and administrative expenses as a percentage of revenue decreased
to 12.1%13.9% in the firstsecond quarter ended MarchJune 31,30, 2026 from 28.4%27.1% in the same quarter in 2025. We intend to continue to look for additional
opportunities to reduce our G&A costs. For the three months ended MarchJune 31,30, 2026 and 2025, non-cash expenses included in general and
and administrative expenses (stock compensation and depreciation) were approximately $0.1 million and 0.1$0.2 million, respectively.
We
incurred no income tax expense during the quarters ended MarchJune 31,30, 2026 and 2025. We have not recorded any tax benefit for the loss in
our U.S. operations as we have recorded a full valuation allowance on our U.S. net deferred tax assets. We expect to continue to record
a full valuation allowance on our U.S. net deferred tax assets until we sustain an appropriate level of taxable income through improved
U.S. operations. Our effective tax rate is based on recurring factors, including the forecasted mix of income before taxes in various
jurisdictions, estimated permanent differences and the recording of a full valuation allowance on our U.S. net deferred tax assets.
Net
IncomeLoss
Net
incomeloss for the quarter ended MarchJune 31,30, 2026 was approximately $0.1$0.7 million compared to net lossincome of approximately $0.9$2.6 million for the
quarter ended MarchJune 31,30, 2025 or an improvement of $1.0 million.2025. This increasedecrease in net income was primarily due to the increase of $2.5
million inincreased gross profit in the current quarter being partiallymore
than offset by anthe increaseone-time gain on the disposition of $1.2the Company’s THC Cannabis operations in the second quarter of 2025, which
resulted in the recognition of $3.7 million in operating expenses, an approximately $0.2 million decrease
inother income from discontinued operations and an increase in othersuch expenses of approximately $0.1 million in the first quarter of 2026 compared
to the first quarter of 2025.period.
Six months ending June 30, 2026 and 2025
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Revenue
For the six months ended June 30, 2026, revenue increased by approximately $13.5 million, or 148%, to approximately $22.6 million compared to approximately $9.1 million for the six months ended June 30, 2025. The increase in sales revenue was primarily the result of Fallout branded products sold through our club channel. HD9 Sales declined from $1.8M to $0.2M during the six months ended June 30, 2026compared to the same period in 2025.
For the six months ended June 30, 2026, trade spend and promotional allowances, which reduced the amount of revenue for the sales of our product, totaled approximately $2.6 million, an increase of approximately $1.7 million, or 89%, compared to approximately $0.9 million for the six months ended June 30, 2025, primarily driven trade spend associated with our Fallout branded products sold through our club channel.
Gross Profit
For the six months ended June 30, 2026, gross profit increased by approximately $3.7 million, or 121%, to approximately $6.7 million compared to approximately $3.0 million for the six months ended June 30, 2025 as a result of higher sales revenue in the six months period. For the six months ended June 30, 2026, gross margin decreased to 30% from 33% in the prior period. This three percentage point decrease in gross profit margin was primally driven by higher logistics costs mainly due to higher world oil prices impacting the second quarter of 2026. This increase largely impacted the first part of the second quarter and reductions in freight costs were seen in the latter part of the quarter. The Company intends to continue to focus on additional opportunities to manage its freight and warehousing costs with the goal to get such costs back in line with prior quarters.
Selling and Marketing Expenses
Selling and marketing expenses for the six months ended June 30, 2026 were approximately $3.9 million, an increase of approximately $1.7 million, or 81%, from approximately $2.2 million for the six months ended June 30, 2025. This increase was primarily a result of an increase in broker and royalty payments related to Fallout product sales, salaries and marketing and promotions, being partially offset by a material reduction in consulting expenses in the current period compared to the same period last year. Selling and marketing expenses as a percentage of revenue decreased to 18.7% in the six months ended June 30, 2026 from 21.7% in the same period in 2025. We intend to continue to look for clear return on investment from our selling and marketing expenses to drive profitable sales. For the three months ended June 30, 2026 and 2025, non-cash expenses included in selling and marketing expenses (stock compensation and depreciation) were approximately $0.1 million and $0.1 million, respectively.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2026 were approximately $2.9 million compared to $2.5 million in the six months ended June 30, 2025 or an increase of $0.4 million. This increase was primary related to increased salary and benefits during the current six month period compared to the same period in 2025. General and administrative expenses as a percentage of revenue decreased to 12.9% in the six months ended June 30, 2026 from 27.5% in the same period in 2025. We intend to continue to look for additional opportunities to reduce our G&A costs. For the six months ended June 30, 2026 and 2025, non-cash expenses included in general and administrative expenses (stock compensation and depreciation) were approximately $0.4 million and $0.2 million, respectively.
Income Tax Expense
We incurred no income tax expense during the six months ended June 30, 2026 and 2025. We have not recorded any tax benefit for the loss in our U.S. operations as we have recorded a full valuation allowance on our U.S. net deferred tax assets. We expect to continue to record a full valuation allowance on our U.S. net deferred tax assets until we sustain an appropriate level of taxable income through improved U.S. operations. Our effective tax rate is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a full valuation allowance on our U.S. net deferred tax assets.
Net Income (loss)
Net loss for the six months ended June 30, 2026 was approximately $0.5 million compared to net income of approximately $1.8 million for the six months ended June 30, 2025. This decrease in net income was primarily due to increased gross profit in the first half of 2026 being more than offset by the one-time gain on the disposition of the Company’s Cannabis THC operations in the first half of 2025, which resulted in the recognition of $3.7 million in other income in such period.
.
As
of MarchJune 31,30, 2026, and December 31, 2025, the Company had cash of approximately $4.4$2.4 million and $3.6 million, respectively, and working
capital deficiency of approximately $0.2$0.5 million and $0.5 million, respectively. The Company reported a net incomeloss from continuing operations
of approximately $0.1$0.5 million for the threesix months ended MarchJune 31,30, 2026, compared to a net lossincome from continuing operations of approximately
$1.1$1.6 million for the threesix months ended MarchJune 31,30, 2026.2025. As of MarchJune 31,30, 2026, the Company’s accumulated deficit decreasedincreased to approximately
$94.6$95.3 million, compared to approximately $94.7 million as of December 31, 2025.
For
the threesix months ended MarchJune 31,30, 2026, net cash used in continuing operating activities was approximately $0.8$2.9 million, aan decreaseincrease of about
about $1.0$0.3 million compared with $1.9$2.6 million used for the same period in 2025. Cash flow from continuing operations prior to the impact of
of non cashnon-cash working capital improved by $1.6$2.0 million comparing the firstsix quartermonths ofended June 30, 2026 to the prior period. FirstFor quarterthe six months
ended June 30, 2026 non-cash
working capital increased by $0.6$3 million driven by investment in inventories ($1.0$2.0 million increase) to support
the increase in sales
compared to the prior period whichand was partially offset by an increasedecrease in shortaccounts termpayable payablesof and$1 accrued expenses ($0.4 million increase).million.
For
the threesix months ended MarchJune 31,30, 2026, investing activities provided net cash of approximately $1.4$1.5 million, compared to $nil$0.6 million in
2025. 2025.
The increase was primarily due to $1.4 million proceeds from sale of the note receivable.
For
the threesix months ended MarchJune 31,30, 2026, net cash provided by financing activities totaled approximately $0.3$0.1 million. This amount primarily
reflects net proceeds of $0.6$0.5 million from funds received from the creditCredit facility,Facility (defined below), which was partially offset by a payment
of approximately $0.3$0.2 million on aan outstanding promissory
notes note and $0.1 million of repayments under the Company’s insurance financing
agreement.
Historically,
we have experienced recurring losses from operations and negative cash flows from operating activities. These factors raise
substantial substantial
doubt regarding the Company’s ability to continue as a going concern. We have significantly reduced these losses from operations
in 2025 and the first quarter of 2026, the Company achieved a positive net income of $0.1 million. The Company continues to focus on reducing
its operating expenses while bringing products to market with higher margins and potentially higher customer demand. Additionally,
the the
Company announced athe $2.5closing of $1.74 million brokered private placement on AprilJuly 30,7th, 2026,2026 and has a $10 million
credit facility with Two Shores
Capital Corp (the “Credit Facility”). All advances drawn under the Credit Facility will
bear interest at a rate of 13.75%
per annum and all present and future obligations arising under the Credit Facility are secured by
a first priority security interest
in all of the assets of the Company, Jones Soda Co (USA) Inc., the Company’s wholly-owned subsidiaryCompany and the Company’s other
United States subsidiaries.Subsidiaries (as
defined in the Credit Facility).
See
the information concerning our critical accounting policies and estimates included under “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operation – Critical Accounting Policies and Estimates” in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 31, 2026. There have been no material changes
in our critical accounting policies during the threesix months ended MarchJune 31,30, 2026.
JSDA insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (2 insiders, 2 trade dates, 606,060 shares, about $0) and open-market sales in 0 filings. Net open-market shares: 606,060 (purchases minus sales); net value about $0.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-06 | Meadows Brian |
Open-market purchase | 303,030 | — | — |
| 2026-07-31 | Sirkin Clive M |
Option exercise | 121,213 | — | — |
| 2026-07-31 | Reichman Gregg |
Option exercise | 121,213 | — | — |
| 2026-07-31 | Norman Paul T |
Option exercise | 121,213 | — | — |
| 2026-07-31 | Dissinger Ronald L |
Option exercise | 121,213 | — | — |
| 2026-07-15 | Murray Mark F. |
Grant/award | 98,485 | — | — |
| 2026-07-07 | Harvey Scott F. |
Open-market purchase | 303,030 | — | — |
Well-known investors holding JSDA (13F)
None of the 59 investors we track reported a position in their latest 13F.