JSDA 10-K/A
Jones Soda Co. (JSDA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Amendment No. 2)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act:
Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
Indicate
by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large, accelerated filer ☐ | Accelerated filer ☐ | Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. Yes ☐ No
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The
aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2025, the last business day of the
registrant’s most recently completed second fiscal quarter, was approximately $
As of May 21, 2026, there were shares of the registrant’s common stock issued and outstanding.
EXPLANATORY NOTE
We are filing this Amendment No. 2 solely to Amend Part II, Item 8 of the 2025 Annual Report to (i) furnish an audit report of Berkowitz Pollack Brant, Advisors + CPAs for the fiscal year ended December 31, 2024, which was inadvertently omitted, and to (ii) correct the PCAOB ID number of Davidson and Company LLP, which was incorrectly stated in the 2025 Annual Report.
In addition, the Company is filing (i) the consent of Berkowitz Pollack Brant, Advisors + CPAs, the Company’s former independent auditors, and a new consent from Davidson & Company LLP, the Company’s current independent auditor, in each case pursuant to Part IV, Item 15, and, (ii) as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Company’s Chief Executive Officer and Chief Financial Officer.
Except as set forth above, no other Items of our 2025 Annual Report, as amended by Amendment No. 1, have been amended or revised in this Amendment No. 2, and all such other Items shall be as set forth in such 2025 Annual Report and Amendment No. 1. Accordingly, this Amendment No. 2 should be read in conjunction with the 2025 Annual Report, Amendment No. 1, and our other filings with the SEC. Certain capitalized terms used and not otherwise defined in this Amendment No. 2 have the meanings given to them in the 2025 Annual Report or Amendment No. 1.
| -1- |
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| -2- |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of Jones Soda Co.
Opinion on the Consolidated Financial Statements
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
We have served as the Company’s auditor since 2025.
/s/
| Chartered Professional Accountants |
March 31, 2026
| -3- |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Jones Soda Co.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Jones Soda Co. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023 and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Promotional Allowances:
As described in Note 1 to the consolidated financial statements, the Company’s revenue is recorded net of promotional allowances. The recognition of these promotional allowances requires the Company to make estimates regarding the volume of sales, cost of the promotional allowances, and amount of the promotional allowances that are expected to be redeemed. These estimates are made using various information including historical and forecasted data. Significant judgment is exercised by the Company in determining the promotional allowances accrual and includes the following:
| ● | Determination of the completeness of the various promotional allowances with customers and the forecasted sales volume for the period. | |
| ● | Assessing the estimate of promotional allowances that are expected to be redeemed subsequent to period end. |
The primary procedures we performed to address this critical audit matter included the following:
| ● | We selected a sample of promotional allowance claims and performed the following procedures: |
| ○ | Obtained and tested the source documents for each selection, including promotional campaign and other documents that were part of the agreement to identify significant terms. | |
| ○ | Traced a sample of promotional allowance claims to a listing of promotional campaigns during the period for completeness. Assessed the terms in the promotional campaign and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of promotional allowance conclusions. |
| ● | We analyzed the customer base and historical promotional allowances offered to customers. | |
| ● | We evaluated the reasonableness and accuracy of management’s judgements and estimates used in accounting for promotional allowances. This included testing management’s estimate of calculating expected claims based on historical data, comparing the estimate to revenue in the current period, comparing current promotional offer redemptions to historical estimates, and comparing actual promotional allowances applied subsequent to December 31, 2024 to the promotional allowance accrual as of December 31, 2024. |
/s/ Berkowitz Pollack Brant Advisors + CPAs
We have served as the Company’s auditor since 2023.
New York, New York
March 31, 2025
| -4- |
JONES SODA CO.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 31, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Note receivable | ||||||||
| Current licensing fees receivable | ||||||||
| Inventories, net | ||||||||
| Prefunded insurance premiums from financing | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Deferred financing costs | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Long-term licensing fees receivable | ||||||||
| Fixed assets, net of accumulated depreciation of $ | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Revolving credit facility and loans | ||||||||
| Insurance premium financing | ||||||||
| Promissory notes | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, | ||||||||
| Authorized — . Issued and outstanding shares — shares and shares, respectively | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| -5- |
JONES SODA CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of goods sold | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Other income (expense), net | ( | ) | ||||||
| Loss on sale of note receivables | ( | ) | ||||||
| Gain on disposition of subsidiaries | ||||||||
| Total other income (expense) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ( | ) | ( | ) | ||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Earning (loss) per share – basic and diluted | ||||||||
| Loss from continuing operations | $ | ) | $ | ) | ||||
| Loss from discontinued operations | $ | ) | $ | ) | ||||
| Total | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||
See accompanying notes to consolidated financial statements.
| -6- |
JONES SODA CO.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share data)
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive (loss) income | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Reclassification of foreign currency translation differences upon disposal of the foreign operation | ||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to consolidated financial statements
| -7- |
JONES SODA CO.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2025 and 2024 (In thousands, except share data)
| Common Stock | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | Income | Deficit | Equity | ||||||||||||||||
| Balance as of December 31, 2023 | ( | ) | | |||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Shares withheld for taxes upon RSU vesting | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Exercise of Pinestar Warrants | ||||||||||||||||||||
| Private Placement Offering, net of issuance costs | ||||||||||||||||||||
| Exercise of Stock Options | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Shares issued for restricted share units | ||||||||||||||||||||
| Fair value of warrants issued | - | |||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
| -8- |
JONES SODA CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Add: Loss from discontinued operations | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash flows used in operating activities: | ||||||||
| Accretion of interest of note receivable | ( | ) | ||||||
| Finance income | ( | ) | ||||||
| Finance costs | ||||||||
| Licensing fees | ( | ) | ||||||
| Loss on disposal | ||||||||
| Loss on sale of note receivables | ||||||||
| Gain on disposition of subsidiaries | ( | ) | ||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Change in allowance for credit losses | ( | ) | ||||||
| Write-off of obsolete inventory | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Deferred financing costs | ( | ) | ||||||
| Prefunded insurance premiums from financing | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Net cash used in continuing operations | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Disposal of a subsidiary, net of cash disposed of | ||||||||
| Proceeds from disposal of property, plant and equipment | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| FINANCING ACTIVITIES: | ||||||||
| Net Proceeds from Private Placement Offering | ||||||||
| Net cash from revolving credit facility | ||||||||
| Proceeds on issuance of promissory notes | ||||||||
| Repayment of promissory notes | ( | ) | ||||||
| Proceeds from the exercise of Pinestar Warrants | ||||||||
| Proceeds from the exercise of stock options | ||||||||
| Payment of taxes on RSU withholding | ( | ) | ||||||
| Repayments on insurance financing | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| DISCONTINUED OPERATIONS: | ||||||||
| Net cash provided by operating activities of discontinued operations | ||||||||
| Net cash provided by discontinued operations | ||||||||
| Net change in cash | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Cash from continuing operations, beginning of period | ||||||||
| Cash from discontinued operations, beginning of period | ||||||||
| Less: Cash from discontinued operations, end of period | ( | ) | ||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure: | ||||||||
| Fair value of warrants issued | ||||||||
| Initial recognition of note receivable | ||||||||
| Initial recognition of licensing fee receivable | ||||||||
| Reclassification of current portion of note receivable | ||||||||
| Reclassification of current portion of licensing fee receivable | ||||||||
| Prepaid insurance financed through an insurance premium financing arrangement. | ||||||||
| Cash paid during the period for: | - | |||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| -9- |
JONES SODA CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2025 and 2024
| 1. | Nature of Operations and Summary of Significant Accounting Policies |
Jones Soda Co. develop, produce, market and distribute premium beverages that we sell and distribute primarily in the United States and Canada through our network of independent distributors and directly to our national and regional retail accounts. We also sell products in select international markets. Our products are sold 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 our products, but instead outsource the manufacturing process to third-party contract manufacturers. We also sell various 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, during 2022, we developed and began to license THC infused cannabis products under the “Mary Jones” brand name in various U.S. states that permitted the sale of THC infused products. We also have a royalty-free license in perpetuity to intellectual property related to Mary Jones for us to license Mary Jones products for use only in Canada.
We are a Washington corporation and have the following subsidiaries: Jones Soda Co. (USA) Inc., Jones Soda (Canada) Inc., Pinestar Gold Inc., and Mary Jones Holdco 2, Inc. (collectively, the “Subsidiaries”).
On June 19, 2025, the Company consummated a Share Purchase Agreement (the “SPA”), as amended, with MJ Reg Disrupters LLC (“MJ Reg”) pursuant to which it sold all of the issued and outstanding equity interests in its wholly owned subsidiaries that operate the cannabis (THC) beverage business (the “Cannabis Subsidiaries”) (Note 2).
Basis of presentation and consolidation
The accompanying consolidated financial statements 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 financial reporting. The consolidated financial statements include our accounts and accounts of our wholly owned subsidiaries. All intercompany transactions between us and our subsidiaries have been eliminated in consolidation.
Liquidity
As
of December 31, 2025 and 2024, we had cash and cash-equivalents of approximately $
For
the year ended December 31, 2025, cash used in operating activities decreased by approximately $
| -10- |
Financing
activities provided net cash inflows of approximately $
Investing
activities provided net cash of approximately $
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 changed its senior leadership and is focusing on reducing its operating expenses while bringing products to market
with higher margins and potentially higher customer demand. Additionally, on February 19, 2025, the Company, through a wholly-owned subsidiary
(the “Subsidiary”), entered into loan agreement (the “Loan Agreement”) with Two Shores Capital Corp (“Two
Shores”), pursuant to which the Subsidiary may borrow a maximum aggregate amount of up to $
Based on management’s current operating plan, the Company believes its cash on hand, projected cash generated from product sales and funds received from under the Loan Agreement are sufficient to fund the Company’s operations for a period of at least 12 months subsequent to the issuance of the accompanying Consolidated Financial Statements. There is no assurance that management’s current operating plan will be successful.
Use of estimates
The preparation of the consolidated financial statements requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, inventory valuation, depreciable lives and valuation of capital assets, accounts receivable credit loss reserve, 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.
Cash and cash equivalents
We consider all highly liquid short-term investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents.
Fair value measurements
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date, Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by market data by correlation or other means, and Level 3 includes unobservable inputs that reflect assumptions about what factors market participants would use in pricing the asset or liability and are developed based on the best information available, including our own data.
The carrying amounts for cash and cash equivalents, receivables, and payables approximate fair value due to the short-term maturity of these instruments.
| -11- |
Accounts receivable
Our
accounts receivable balance primarily includes balances from trade sales to distributors and retail customers. The allowance for credit
losses is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance for
credit losses based primarily on current trends and estimates. The Company reserves a percentage of trade receivable balance based on
collection history and current economic trends that the Company expects will impact the level of credit losses over the life of the receivables.
These reserves are re-evaluated on a regular basis and adjusted as needed. Once a receivable is deemed to be uncollectible, such balance
is charged against the reserve. Allowances for credit losses of approximately $
Activity in the allowance for credit losses consists of the following for the years ended December 31 (in thousands):
| 2025 | 2024 | |||||||
| Beginning of year | $ | $ | ||||||
| Net charges to credit loss | ||||||||
| Write-offs | ( | ) | ( | ) | ||||
| End of year | $ | $ | ||||||
As
of December 31, 2025, one customer accounted for approximately
Inventories
Inventories
consist of raw materials and finished goods and are stated at the lower of cost or net realizable value and include adjustments for estimated
obsolete or excess inventory. Cost is based on actual cost on a first-in first-out basis. Raw materials that will be used in production
in the next twelve months are recorded in inventory. The provisions for obsolete or excess inventory are based on estimated forecasted
usage of inventories. A significant change in demand for certain products as compared to forecasted amounts may result in recording additional
provisions for obsolete inventory. Provisions for obsolete or excess inventory are recorded as cost of goods sold and totaled $
Fixed assets
Fixed assets are recorded at cost less accumulated depreciation and are depreciated on the declining balance basis over the estimated useful lives of the assets as follows:
| Asset | Rate | |||
| Equipment | % | |||
| Vehicles and office and computer equipment | % | |||
| -12- |
Impairment of long-lived assets
Long-lived assets, which include fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Long-lived assets are grouped at the lowest level for which there are identifiable cash flows when evaluating for impairment. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
For
the years ended December 31, 2025, and 2024, the Company recorded
Foreign currency translation
The functional currency of our Canadian subsidiary is the Canadian dollar. We translate assets and liabilities related to these operations to U.S. dollars at the exchange rate in effect at the date of the consolidated balance sheet; we convert revenues and expenses into U.S. dollars using the average monthly exchange rates. Translation gains and losses are reported as a separate component of accumulated other comprehensive income. Transaction gains and losses arising from the transactions denominated in a currency other than the functional currency are included in other expense, net in the accompanying consolidated statements of operations.
Revenue recognition
The Company recognizes revenue under Accounting Standards Codification (“ASC”) (Topic 606): Revenue from Contracts with Customers, (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
See Note 16, Segment information, for information on revenue disaggregated by geographic area.
Because the Company’s agreements have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.
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. The Company primarily receives 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 approximately $
| -13- |
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 the Company is entitled to in exchange for the sale of products
to distributors. The Company estimates 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 years ended December 31, 2025
and 2024, our revenue was reduced by approximately $
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. The Company’s customers generally pay within
30 days from the receipt of a valid invoice. The Company offers prompt pay discounts of up to
Advertising costs
Advertising
costs, including promotions and sponsorships, are expensed as incurred. For the years ended December 31, 2025, and 2024, we incurred
advertising costs of $
Stock-Based Compensation Expense
The Company recognizes stock-based compensation expense within the operating expenses in the Consolidated Statements of Operations related to the fair value of employee stock-based awards ratably over the vesting period and only for awards expected to vest. Estimated forfeiture rates are based on historical data and are periodically reassessed.
Compensation cost is based on the grant-date fair value. The fair value of RSUs is determined based on the number of units granted and the grant date price of common stock.
Income taxes
We account for income taxes by recognizing the amount of taxes payable for the current year and deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We perform periodic evaluations of recorded tax assets and liabilities and maintain a valuation allowance, if considered necessary based on whether they are more likely than not to be realized. The determination of taxes payable for the current year includes estimates. We believe that we have appropriate support for the income tax positions taken, and to be taken, on our tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. No reserves for an uncertain income tax position have been recorded for the years ended December 31, 2025 or 2024.
The Company recognizes accrued interest and penalties related to uncertain tax positions, if any, as income tax expense. The Company’s tax returns for the years ended December 31, 2021 through 2025 remain subject to examination by their major tax jurisdictions.
| -14- |
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 2025 and 2024, outstanding stock options amounting to and , respectively, outstanding warrants of and , respectively, and outstanding restricted share units of and , respectively, were anti-dilutive.
Comprehensive loss
Comprehensive loss is comprised of net loss and translation adjustments. We do not provide income taxes on currency translation adjustments, as the historical earnings from our Canadian subsidiary is considered to be indefinitely reinvested.
Seasonality
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 SKUs 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.
Recently Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance requires entities to provide more detailed disclosures about income tax expenses (or benefits), including components of the expense (or benefit) and the nature of significant reconciling items. Entities must also disclose information about unrecognized tax benefits, including a tabular reconciliation of beginning and ending balances of unrecognized tax benefits, and details about valuation allowances, including the nature and amount of valuation allowances recorded and released during the period. The guidance is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements.
In March 2024, the FASB issued ASU 2024-01: Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This update provides guidance on the scope application of profits interest and similar awards under Topic 718. The amendments improve clarity and understanding of paragraph 718-10-15-3, aiding entities in determining whether a profits interest award should be accounted for as a share-based payment arrangement or similar to a cash bonus or profit-sharing arrangement. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. The adoption of ASU 2024-01 did not have a material impact on the Company’s consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03: Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This update requires entities to disaggregate income statement expenses. The guidance is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of the updated standard on our consolidated financial statements and disclosures.
In December 2024, the FASB issued Accounting Standards Update (ASU) 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This update provides guidance on accounting for induced conversions of convertible debt instruments, clarifying the criteria for determining whether settlements should be accounted for as an induced conversion. The amendments specify that an inducement offer must provide the debt holder with consideration meeting or exceeding the conversion privileges outlined in the instrument’s original terms. Additionally, the update addresses convertible debt instruments that are not currently convertible but included substantive conversion features at issuance and at the time of the inducement. The guidance is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted for entities that have adopted ASU 2020-06. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements and disclosures.
| -15- |
| 2. | Discontinued Operations |
As disclosed in Note 1, on June 19, 2025 (the “Date of Disposition”), the Company entered into the SPA to sell of all issued and outstanding equity interests in its cannabis beverage subsidiaries (the “Cannabis Subsidiaries”) pursuant to a share purchase agreement, as amended, with MJ Reg and discontinued the Cannabis-Derived (THC) Beverage. Subsequent to the transaction, the Company’s former VP of Operations was appointed as the CEO of MJ Reg.
As
disclosed in Note 1, on June 19, 2025 (the “Date of Disposition”), the Company entered into the SPA with its cannabis beverage
subsidiaries (the “Cannabis Subsidiaries”) and the MJ Reg pursuant to which, on the Date of Disposition, the MJ Reg purchased
all of the issued and outstanding shares of the Cannabis Subsidiaries from the Company for the Share Purchase Price of $ million promissory
notes and inventory for approximately $
| ● | A
$ |
| ◌ | $ | |
| ◌ | $ | |
| ◌ | $ | |
| ◌ | $ | |
| ◌ | $ |
The
promissory note accrues interest at the lower of
On
June 19, 2025 (the “License Effective Date”), in connection with the SPA, the Company entered into a trademark license agreement
(the “License Agreement”) with MJ Holdings pursuant to which the Company granted MJ Holdings an exclusive, freely-usable
and non-transferable, fully sublicensable license to use the Licensed IP (as defined in the License Agreement) during the term of such
agreement in connection with the manufacture, sale, distribution, advertising, and promotion of all current and future products (the
“Licensed Products”) each consisting of a mutually agreed upon composition, formula, recipe, flavor necessary for the Licensed
Products and labeling, container size, and packaging, as applicable, to be made available by MJ Holdings for sale on-site at MJ Holdings’
places of business and/or by means of other distributors of MJ Holdings globally, including in any country or jurisdiction where the
sale, marketing, and distribution of the Licensed Products is lawful. Pursuant to the License Agreement, MJ Holdings shall retain the
exclusive right to any consumable product containing an emulsion derived from the cannabis plant with a THC concentration greater than
Pursuant
to ASC 820, the Company utilized its weighted average cost of capital (WACC) of
| ● | Promissory Note: $ | |
| ● | Licensing Agreement: $ |
| -16- |
Transaction
costs incurred in connection with the disposition totaled $
| Carrying value (in thousands) of net assets of the Cannabis Subsidiaries | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Other assets | ||||
| Accounts payable | ( | ) | ||
| Total consideration received, net of transaction costs | ||||
| Cash | ||||
| Fair value of Promissory Note | ||||
| Fair value of Licensing Agreement | ||||
| Less: Transaction costs | ( | ) | ||
| Gain on disposition | $ | |||
Following is the breakdown of the gain (loss) from discontinued operations:
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of goods sold | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ( | ) | ||||||
| Gain (Loss) from discontinued operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Interest income | ||||||||
| Other income (expense), net | ||||||||
| Total other income | ||||||||
| Tax expenses | ( | ) | ||||||
| Net income (loss) from discontinued operations | $ | ( | ) | $ | ( | ) | ||
| -17- |
| 3. | Note receivable |
As
disclosed in Note 2, in connection with the Sale Transaction, the Company issued a promissory note with an aggregate principal amount
of $
| ● | $ | |
| ● | $ | |
| ● | $ | |
| ● | $ | |
| ● | $ |
The
promissory note accrues interest at the lower of
In
accordance with ASC 820, the Company applied its weighted average cost of capital of
For
the year ended December 31, 2025, the Company recognized $
As
of December 31, 2025, the carrying value of the promissory note was $
On
January 16, 2026, the Company entered into an Assignment and Assumption of Debt Agreement with Two Shores Capital Corp. (“Two Shores”)
and MJ Reg. Pursuant to the agreement, the Company assigned to Two Shores all of its rights, title, and interest in the promissory note
with an outstanding principal balance of $
As
consideration for the assignment, the Company received cash proceeds of $
In
connection with the transaction, the Company issued to Two Shores common stock warrants. Each warrant is exercisable for one
share of the Company’s common stock at an exercise price of $
As
a result of the assignment, the Company reduced the carrying amount of the note receivable to $
| -18- |
| 4. | Licensing fees receivable |
As
disclosed in Note 2, in connection with the Sale Transaction, the Company entered into the License Agreement with MJ Holdings pursuant
to which the Company granted MJ Holdings an exclusive, freely-usable and non-transferable, fully sublicensable license to use the Licensed
IP (as defined in the License Agreement) during the term of such agreement in connection with the manufacture, sale, distribution, advertising,
and promotion of all current and future products (the “Licensed Products”) each consisting of a mutually agreed upon composition,
formula, recipe, flavor necessary for the Licensed Products and labeling, container size, and packaging, as applicable, to be made available
by MJ Holdings for sale on-site at MJ Holdings’ places of business and/or by means of other distributors of MJ Holdings globally,
including in any country or jurisdiction where the sale, marketing, and distribution of the Licensed Products is lawful. Pursuant to
the License Agreement, MJ Holdings shall retain the exclusive right to any consumable product containing an emulsion derived from the
cannabis plant with a THC concentration greater than
In
accordance with ASC 820, the Company utilized its weighted average cost of capital of
For
the year ended December 31, 2025, the Company recognized $
As
of December 31, 2025, the carrying value of the License Agreement receivable was $
| 5. | Inventory |
Inventory consisted of the following as of December 31 (in thousands):
| 2025 | 2024 | |||||||
| Finished goods | $ | $ | ||||||
| Raw materials | ||||||||
| $ | $ | |||||||
Finished goods primarily include product ready for shipment, as well as promotional merchandise held for sale. Raw materials primarily include ingredients, concentrate and packaging.
| -19- |
| 6. | Fixed Assets, net |
Fixed assets, net consisted of the following as of December 31 (in thousands):
| 2025 | 2024 | |||||||
| Vehicles | $ | $ | ||||||
| Equipment | ||||||||
| Office and computer equipment | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense was $
The
Company disposed a vehicle with a proceed of $
| 7. | Accrued Expenses |
Accrued expenses consisted of the following as of December 31 (in thousands):
| 2025 | 2024 | |||||||
| Employee benefits | $ | $ | ||||||
| Goods and services tax | ||||||||
| Legal settlement | ||||||||
| Sales and marketing | ||||||||
| Other accruals | ||||||||
| $ | $ | |||||||
| 8. | Revolving Credit Facility and Loans |
During
the year ended December 31, 2024, the Company entered into a Revolving Financing and Assignment Agreement (the “RFAA”) which
provides a revolving credit facility up to an amount of $
Under
the RFAA, the Company may draw up to
The
RFAA will expire under the following conditions: (a)
The
RFAA includes financial covenant requiring the Company to maintain net assets, excluding intangible assets and amounts outstanding under
the RFAA, in excess of $
The revolving credit facility is secured by a continuing security interest in the Company’s personal property and fixtures, including accounts receivable, inventory, equipment, and intellectual property.
| -20- |
On
February 24, 2025, the Company made a payment of $
As
of December 31, 2025, the balance of the RFAA was $ (December 31, 2024 – $
On
February 5, 2025, the Company, through its Subsidiary, entered into a Loan Agreement with Two Shores (the “2Shores Loan Agreement”),
pursuant to which the Subsidiary may borrow up to an aggregate maximum amount of $
In
connection with the Loan Agreement with Two Shores Capital Corp., the Company issued total
| ● | Stock price | $ | ||
| ● | Risk free interest rate | |||
| ● | Expected volatility | |||
| ● | Expected life (in years) | |||
| ● | Expected dividend |
As
of December 31, 2025, the balance of the 2Shores Loan Agreement was $
| 9. | Promissory Notes |
On
May 2, 2025, the Company entered into a Promissory Note (the “Note”) with the Chairman of the Board of the Company (the “Lender”)
for a principal amount of $
In
addition to the principal and interest payments, the Company is required to pay a loan origination fee of $
During
the year ended December 31, 2025, the Company recognized interest expense of $
As
of December 31, 2025, the outstanding balance of the Notes was $
| -21- |
| 10. | Insurance Premium Financing |
During
the year ended December 31, 2025, the Company entered into various one-year
financing agreements to fund a portion of its insurance premiums totaling $
On
November 15, 2024, the Company entered into a separate one-year financing agreement with IPFS Corporation to fund insurance premiums
of $
As
of December 31, 2025 and 2024, the outstanding balance related to insurance premium financing was $
| 11. | Membership Agreement Obligation |
On September 1, 2022, the Company entered into a membership and licensing agreement with Saltbox Inc. that provides the Company with access to a shared office (“Suite”) and warehouse facility located in Seattle, Washington. The agreement is structured as a revocable license granting access to the Suite and warehouse space. The relationship between Saltbox Inc. and the Company is that of licensor and licensee only, and not landlord-tenant or lessor-lessee. The agreement does not convey any right, title, interest, easement, or lien in Saltbox Inc.’s business, the Suite, the premises, or any related assets, and is not considered a lease for accounting purposes. Accordingly, no lease liability or right-of-use asset has been recognized in connection with this arrangement.
The initial term of the agreement was one year and required 12 monthly payments of $. Upon expiration of the initial term, the Company elected to renew the arrangement on a month-to-month basis at a monthly fee of $. On February 28, 2025, the Company provided notice of its intent to terminate the month-to-month arrangement after identifying lower-cost facilities.
| 12. | Shareholders’ Equity |
Private Placement
The
Company issued
units (“Units”) on July 26, 2024,
Units on July 31, 2024, and
Units on August 21, 2024, for total net proceeds of $
In
connection with the offering, the Company paid Dominari Securities LLC (“Dominari”) an aggregate of $
| -22- |
Omnibus Equity Incentive Plan
On March 15, 2022, our Board adopted the 2022 Plan, which became effective upon approval by our shareholders on May 16, 2022. Under the 2022 Plan, the sum of (i) 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 of awards under the 2022 Plan. Additionally, the number of shares of the Company’s common stock available reserved under the 2022 Plan is subject to an annual increase on the first day of each calendar year beginning with the first January 1 following the effective date of the 2022 Plan and ending with the last January 1 during the initial ten-year term of the 2022 Plan, equal to the lesser of (A) 4% of the shares of the Company’s common stock outstanding (which shall include shares issuable upon the exercise or conversion of all outstanding securities or rights convertible into or exercisable for shares, including without limitation, preferred stock, warrants and employee options to purchase any shares) on the final day of the immediately preceding calendar year and (B) such lesser number of shares of common stock as determined by our Board. The Company may grant incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units and other stock-based awards to participants to acquire shares of Company common stock under the 2022 Plan. The 2022 Plan will be administered by the plan administrator (as defined in the 2022 Plan).
The Board may grant awards to employees, officers, directors, consultants, agents, advisors, and independent contractors. Stock options are issued at the closing price on the grant date and generally have a ten-year term. As of December 31, 2025, shares remained available for future awards under the Plan.
a. Stock options:
| Outstanding Options | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Number of Shares | Weighted Average Exercise Price (Per Share) | Number of Shares | Weighted Average Exercise Price (Per Share) | |||||||||||||
| Opening | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Cancelled | ( | ) | ||||||||||||||
| Forfeited / Expired | ( | ) | ( | ) | ||||||||||||
| Closing | $ | $ | ||||||||||||||
| Exercisable | $ | $ | ||||||||||||||
| Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price Per Share | Number Exercisable | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price Per Share | ||||||||||||||||||
| $ to $ | ||||||||||||||||||||||||
| $ to $ | ||||||||||||||||||||||||
| $ to $ | ||||||||||||||||||||||||
| $ to $ | ||||||||||||||||||||||||
| -23- |
b. Restricted stock awards:
Beginning May 13, 2022, the Company’s Board of Directors determined that restricted stock units (RSUs) would be awarded as equity compensation for non-employee directors, replacing stock options, based on the recommendation of the Compensation and Governance Committee. RSUs vest incrementally per the award agreement, with certain awards vesting immediately upon a “Change in Control” as defined in the 2022 Plan.
Previously, from January 1, 2020, through February 15, 2022, non-employee directors received annual non-qualified stock option grants, which vested on the first anniversary of the grant date, subject to continued service. Grants were determined by dividing $ by the closing share price on the grant date. New directors joining the Board before February 15, 2022, received prorated stock option awards under similar terms. Stock option and RSU awards were governed by the 2011 Plan (prior to the 2022 Plan) and respective grant agreements.
On December 30, 2022, the Company entered into rescission agreements with certain non-employee directors and its Chief Executive Officer and President, rescinding and canceling all RSUs granted during 2022, including shares issued upon RSU vesting in August 2022, without consideration.
On
July 16, 2025, the Company granted RSUs to members of its Board of Directors. The aggregate grant-date fair value of the RSUs
was $
During the year ended December 31, 2025, the Company issued common shares to settle the vested RSUs.
As of December 31, 2025 and 2024, the Company had and vested RSUs outstanding, respectively. RSUs remained unvested as of either December 31, 2025 or December 31, 2024.
| 2025 | 2024 | |||||||||||||||||||||||
| Number of Units | Weighted-Average Grant Date Fair Value per share | Weighted-Average Contractual Life (years) | Number of Units | Weighted-Average Grant Date Fair Value per share | Weighted-Average Contractual Life (years) | |||||||||||||||||||
| Opening, Unvested Restricted Stock Units | $ | - | $ | |||||||||||||||||||||
| Granted | ||||||||||||||||||||||||
| Vested | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Closing, Unvested Restricted Stock Units | $ | - | $ | - | ||||||||||||||||||||
Subsequent to December 31, 2025, the Company issued common shares to settle the vested RSUs.
| -24- |
c. Stock-based compensation expense:
Stock-based compensation expense is recognized using the straight-line attribution method over the employees’ requisite service period. 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 termination behavior. 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.
As of December 31, 2025 and 2024, the Company had unrecognized compensation expense related to stock options of $ million and $ million, respectively, and related to RSUs of $nil and $nil, respectively. These amounts are expected to be recognized over the remaining vesting periods.
| 2025 | 2024 | |||||||
| Stock options | $ | $ | ||||||
| Restricted stock | ||||||||
| $ | $ | |||||||
| Consolidated Statements of Operations account: | ||||||||
| Selling and marketing | $ | $ | ||||||
| General and administrative | ||||||||
| $ | $ | |||||||
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:
| 2025 | 2024 | |||||||
| Expected dividend yield | ||||||||
| Expected stock price volatility | % to % | % to % | ||||||
| Risk-free interest rate | % to % | % to % | ||||||
| Expected term (in years) | to | |||||||
| Weighted-average grant date fair-value | $ | to | $ | to | ||||
During the year ended December 31, 2025 and 2024, material modifications were made to outstanding stock options.
As of December 31, 2025, and December 31, 2024, the aggregate intrinsic value of stock options outstanding was $ million and $ million, respectively. For stock options exercisable, the aggregate intrinsic value as of December 31, 2025, and December 31, 2024 was also $ million and $ million, respectively. The intrinsic value of both outstanding and exercisable stock options is determined as the difference between the quoted market price of the Company’s stock at the balance sheet date and the exercise price of the option.
The total intrinsic value of options exercised during the years ended December 31, 2025, and December 31, 2024, was $ and $ million, respectively. During these periods, the number of options exercised totalled and , respectively. The Company maintains a policy of issuing new shares upon the exercise of stock options.
| -25- |
d. Warrants
Closing of the Pinestar Gold Inc. - Plan of Arrangement:
On February 15, 2022, Jones issued an aggregate of 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
$
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.
During
the year ended December 31, 2024, Pinestar Warrants in the amount of
Others:
As
discussed in Note 8, during the year ended December 31, 2025, in connection with the Loan Agreement with Two Shores Capital Corp., the
Company issued
During
the year ended December 31, 2024, the Company issued warrants, each with an exercise price of $
As
discussed in Note 3, on January 16, 2026, in connection with the Assignment and Assumption of Debt Agreement, the Company issued to Two
Shores
common stock warrants, each exercisable for one
share of the Company’s common stock at an exercise price of $
The following table presents a summary of the Company’s outstanding warrants as of December 31, 2025:
| Expiry Date | Number Outstanding | Remaining Contractual Life (Years) | Exercise Price Per Share (in dollar) | Number Exercisable | ||||||||||||
| $ | ||||||||||||||||
| -26- |
| 13. | Employee 401(k) Plan |
We
have a 401(k) plan whereby eligible employees who have completed at least
| 14. | Commitments and Contingencies |
Commitments
As
of December 31, 2025, we continue to have commitments to various suppliers of raw materials. Purchase obligations under these commitments
are expected to total $
Legal proceedings
The California Department of Public Health (“CDPH”) issued a cease-and-desist letter to the sale and distribution of Mary Jones hemp infused sodas in California through Jones Soda’s wholly owned subsidiary Mary Jones Michigan, LLC. The state alleged that the Company’s products violated California law by failing to properly label the products and that the products contained hemp-derived THC isolate, which they did not. The Company disputed the CDPH position, however, it voluntarily agreed to cease distribution of its hemp infused soda in California. While CDPH requested additional information from the Company regarding the status of the recall for distributed products, the action appeared to be resolved by September 2024. In April 2025, shortly before the statute of limitations expired for any further action by CDPH relating to Mary Jones sodas, CDPH filed a Complaint, and on June 27, 2025, the CDPH filed an amended complaint, in Los Angeles Superior Court naming Jones Soda and other businesses who were involved in the sale of infused soda in California in the spring of 2024. On December 17, 2025, the California Department of Public Health filed a “Notice of Entry of Dismissal and Proof of Service” and we are waiting for the Judge to grant the dismissal.
The
Company has been served with a lawsuit by a supplier on August 11, 2025 concerning an alleged breach of contract and unjust enrichment
in the amount of $
We are or may be involved from time to time in various claims and legal actions arising in the ordinary course of business, including proceedings involving employee claims, contract disputes, product liability, other general liability claims and government and regulatory actions, as well as trademark, copyright, and related claims and legal actions. In the opinion of our management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.
| -27- |
| 15. | Income Taxes |
The provision for income taxes consisted of the following for the years ended December 31 (in thousands):
| 2025 | 2024 | |||||||
| Current | ||||||||
| State | $ | $ | ||||||
| Foreign | ||||||||
| Provision for income taxes | $ | $ | ||||||
Loss before income taxes was as follows for the years ended December 31 (in thousands):
| 2025 | 2024 | |||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Foreign | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:
| 2025 | 2024 | |||||||
| Federal statutory rate | % | % | ||||||
| Effect of: | ||||||||
| Permanent differences | ( | ) | ||||||
| Foreign taxes | ||||||||
| Stock Compensation | ( | ) | ||||||
| True up | ( | ) | ||||||
| State income taxes, net of federal benefit | ||||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||
| Other, net | ( | ) | ||||||
| Provision for income taxes | ( | )% | ( | )% | ||||
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred income taxes were as follows (in thousands):
| 2025 | 2024 | |||||||
| Federal and state net operating loss carryforwards | $ | $ | ||||||
| Stock-based compensation | ||||||||
| Other, net | ||||||||
| Total deferred tax asset | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
We
continue to experience significant losses in our U.S. operations that are material to our decision to maintain a full valuation allowance
against our net U.S. deferred tax assets. This is due to the fact that the relevant accounting guidance puts more weight on the negative
objective evidence of cumulative losses in recent years than the positive subjective evidence of future projections of pretax income.
For the years ended December 31, 2025 and December 31, 2024, the valuation allowance increased by $
We continually analyze the realizability of our deferred tax assets, but we reasonably expect to continue to record a full valuation allowance on future U.S tax benefits until we sustain an appropriate level of taxable income through improved U.S. operations and tax planning strategies.
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At
December 31, 2025, we had net operating loss carryforwards for federal and state income tax purposes of $
There
are
We are no longer subject to U.S. Federal examination for tax years ending before 2021, to state examinations before 2020, or to foreign examinations before 2020.
However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward and make adjustments up to the amount of the net operating losses or credit carryforward. As of December 31, 2025, we were not under examination by a tax authority. The net operating losses for prior years are subject to adjustment under examination to the extent they remain unutilized in an open year.
16. Segment Information
Subsequent to the disposition of the Cannabis-Derived (THC) Beverages segment, the Company’s only operating and reportable segment is beverages. This segment includes both Jones Soda’s traditional craft sodas, known for their unique flavors, pure cane sugar formulation, and consumer-driven branding as well as our modern soda’s such as Pop Jones, Fiesta Jones and hemp derived products such as HD9. The products are distributed through various channels, including retail stores, foodservice outlets, and direct-to-consumer platforms.
The Chief Operating Decision Maker (“CODM”) of the Company, who is also the Chief Executive Officer (“CEO”), is responsible for evaluating the performance of the Company’s operations. The evaluation focuses primarily on key financial metrics such as net operating revenues and operating income (loss). Based on this consolidated approach to assessing performance and allocating resources, the Company does not present additional segment information in its financial disclosures.
Furthermore, in accordance with ASC 280, the Company provides the following entity-wide disclosures for the year ended December 31, 2025 and 2024:
Net Sales by Geographic Location: The breakdown of the Company’s net sales by geographic location are as follows:
| For the year ended | ||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||
| Segment Results – Net sales | ||||||||
| United States | $ | $ | ||||||
| Canada | ||||||||
| Total | $ | $ | ||||||
Net
sales generated in the United States accounted for
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Income (loss) from Operations by Geographic Location: The breakdown of the Company’s income (loss) from operations by geographic location is as follows:
| For the year ended | ||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||
| Segment Results – Income (loss) from continuing operations | ||||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Canada | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
Long-Lived Assets: All of the Company’s long-lived assets are located in the United States.
| 17. | Related party Transactions |
As
discussed in Note 9, on May 2, 2025, the Company issued the Note to the Chairman of the Board in the principal amount of $
| 18. | Subsequent Events |
Subsequent to December 31, 2025:
As
discussed in Note 3, on January 16, 2026, the Company entered into an Assignment and Assumption of Debt Agreement with Two Shores
Capital Corp. (“Two Shores”) and MJ Reg. Under the agreement, the Company assigned to Two Shores all of its rights,
title, and interest in a promissory note with an outstanding principal balance of $
As
discussed in Note 9, the Company fully settled the Notes for total consideration of $
As discussed in Note 12, the Company issued common shares to settle the vested RSUs.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
| (a) | Documents filed as part of this Annual Report are as follows: |
| 1) | Financial Statements: Incorporated by reference to the consolidated financial statements, related notes and report of independent registered public accounting firm are included in Item 8 of Part II of the 2024 Annual Report. | |
| 2) | Financial Statement Schedules: All schedules have been omitted because they are not applicable or not required, or the required information is included in the financial statements or notes thereto. | |
| 3) | Exhibits: The required exhibits are included at the end of this Annual Report on Form 10-K and are described in the exhibit index. |
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Exhibit Index
| -32- |
| -33- |
| * | Management contract or compensatory plan or arrangement. | |
| + | Certain portions of this exhibit (indicated by asterisks) have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. | |
| # | Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request. The Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
May 22, 2026 |
JONES SODA CO. | |
| By: | /s/ Brian Meadows | |
| Chief Financial Officer | ||
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