S-1: Jones Soda Co. Files S-1 for Public Offering, Divests THC Cannabis Business Amidst Recurring Losses and Strategic Shift

Jones Soda Co. has filed an S-1 registration statement for a public offering of common stock, aiming to raise capital for working capital and strategic growth initiatives while navigating recurring operational losses and a significant divestiture of its THC cannabis business.

Summary

• A public offering of common stock is planned to raise capital for working capital and general corporate purposes, with an estimated total offering amount of $6,037,500.
• The company intends to apply to list its common stock on The Nasdaq Capital Market (Nasdaq) under the symbol JBEV, ceasing trading on the OTCQB.
• The THC infused cannabis business (Mary Jones Holdings and Mary Jones Beverage (Canada)) was divested on June 19, 2025, for $3,000,000 plus approximately $61,000 for inventory.
• The divestiture included an initial cash payment of $489,398.70 and a secured promissory note for $2,510,601.30 from the buyer, MJ Reg Disruptors, LLC.
• A trademark license agreement was established with MJ Holdings, granting an exclusive license for THC products (excluding hemp-derived Delta-9 THC) in exchange for annual licensing fees of $150,000 on the first anniversary and $225,000 on subsequent anniversaries.
• Exclusive rights to hemp-derived Delta-9 THC products under the Mary Jones brand are retained.
• A $450,000 loan was secured from the Chairman of the Board of Directors on May 7, 2025, at 12% interest, due by October 10, 2025, with an additional $22,000 loan fee.
• The company reported a net loss of $0.9 million for the three months ended March 31, 2025, $9.9 million for the year ended December 31, 2024, and $4.9 million for the year ended December 31, 2023.
• The accumulated deficit reached $93.8 million as of March 31, 2025.
• Net revenue increased 14.9% to $19.2 million in fiscal year 2024 from $16.7 million in fiscal year 2023, driven by 15% beverage segment growth and 9% cannabis (THC) business growth.
• Gross profit decreased 16.1% to $4.1 million in fiscal year 2024 from $4.9 million in fiscal year 2023, primarily due to $1.2 million in inventory impairment charges.
• First quarter 2025 revenue decreased 7.8% to $4.6 million compared to $5.0 million in the first quarter of 2024, attributed to a non-recurring large pipeline fill in Canada in the prior year.
• The net loss in Q1 2025 improved to $0.9 million from $1.2 million in Q1 2024, primarily due to reduced selling, marketing, and general and administrative expenses.
• The company is focusing on sales growth through expanding its glass bottle business, modern soda brands (Pop Jones, Fiesta Jones), fountain program, hemp-derived Delta-9 Mary Jones, and the planned launch of Spiked Jones (hard craft sodas).
• A material weakness in internal control over financial reporting was identified due to senior accounting personnel transition and insufficient resources.

Sentiment

Score: 3

Explanation: The company faces severe financial distress with recurring losses, negative cash flows, and a substantial accumulated deficit, explicitly stating "substantial doubt about our ability to continue as a going concern." While there are strategic initiatives like product diversification and new management, the underlying financial health is very weak, and the S-1 filing itself is a capital raise to address liquidity issues.

Positives

• Strategic divestiture of the THC cannabis business for $3 million, reducing exposure to a volatile regulatory environment and providing capital.
• Retention of the hemp-derived Delta-9 THC business under the Mary Jones brand, which is described as one of the fastest-growing segments.
• Expansion into modern soda (Pop Jones, Fiesta Jones) and planned launch of hard craft sodas (Spiked Jones) to diversify the product portfolio and tap into growing market segments.
• Net revenue growth of 14.9% in fiscal year 2024, driven by 15% beverage segment growth and 9% cannabis (THC) business growth.
• Improved net loss in Q1 2025 ($0.9 million) compared to Q1 2024 ($1.2 million) due to cost reductions in selling, marketing, and general and administrative expenses.
• Secured a $450,000 loan from the Chairman of the Board for working capital purposes.
• New CEO, Scott Harvey, and CFO, Brian Meadows, were appointed in February 2025, bringing extensive industry experience.
• The Core Manufacturing and P3 Capital Partner litigation matters were settled and dismissed in February 2025, resolving significant legal disputes.

Negatives

• Recurring losses from operations and negative cash flows: $0.9 million net loss (Q1 2025), $9.9 million (FY 2024), and $4.9 million (FY 2023).
• A substantial accumulated deficit of $93.8 million as of March 31, 2025.
• Gross profit decreased by 16.1% in fiscal year 2024, significantly impacted by $1.2 million in inventory impairment charges due to slow-moving new products.
• Trade spending and promotional allowances increased by 156% in fiscal year 2024, totaling approximately $4.1 million.
• Selling and marketing expenses increased by 39.5% in fiscal year 2024 to $6.1 million.
• General and administrative expenses increased by 46.9% in fiscal year 2024 to $7.9 million, partly due to increased legal and regulatory expenditures.
• Q1 2025 revenue decreased by 7.8% compared to Q1 2024, attributed to a non-recurring large pipeline fill in Canada in the prior year.
• The company explicitly states that recurring losses and negative cash flows raise "substantial doubt about our ability to continue as a going concern."
• Significant reliance on a single large customer, with DOT Foods Inc. representing approximately 13% of revenue in 2024 and A. Lassonde Inc. representing 20% in 2023.
• The public offering will result in immediate and substantial dilution for new investors.

Risks

• Recurring losses from operations and negative cash flows raise substantial doubt about the ability to continue as a going concern.
• Additional financing may be required in the future, which may not be available when needed or may be costly and dilutive.
• The beverage industry is highly competitive, with larger, well-financed companies posing significant challenges.
• Success is dependent on brand name recognition and acceptance; inability to maintain a positive brand image could materially affect results.
• The company operates in an industry characterized by rapid changes in consumer preferences, requiring continuous new product development to maintain market share.
• Demand for products may be reduced due to health concerns (e.g., obesity) and legislative initiatives against sweetened beverages, including new taxes.
• Reliance on independent distributors, retailers, and brokers for efficient and profitable product distribution, with risks if these relationships are not maintained or if they do not adequately perform.
• Difficulty in predicting the timing and amount of sales because distributors are not required to place minimum orders.
• Inadequate inventory management could adversely affect operating results, leading to damaged relationships or lost sales opportunities.
• Reliance on independent contract manufacturers means failure to maintain relationships or capacity issues could harm the business.
• Increases in costs or shortages of raw materials (e.g., glass, sugar, flavors) could harm business and financial results.
• Increases in energy costs and increased regulations may adversely impact gross margin.
• Disruption within the supply chain, contract manufacturing, or distribution channels could have an adverse effect on business.
• Dependence on key flavor suppliers means disruptions could occur if unable to source flavors on acceptable terms.
• Reliance on suppliers, manufacturers, and contractors for hemp-derived Delta-9 THC products is subject to a novel and variable regulatory landscape.
• Inability to attract and retain key personnel, including management turnover, could adversely affect efficiency and operations.
• Failure to protect trademarks and trade secrets could harm the brand and competitive position.
• Product recalls or other product quality issues, real or imagined, could damage reputation and profitability.
• Exposure to product liability claims could materially damage reputation and brand image.
• Litigation or legal proceedings could expose the company to significant liabilities and damage its reputation.
• Sales in international markets are subject to risks including economic, political, and social conditions, and regulatory changes.
• Climate change may negatively affect the business through impacts on agricultural productivity, supply chain, and increased costs.
• Failure or interruption of information technology infrastructure or cybersecurity attacks could disrupt operations and negatively impact the business.
• Operating results may fluctuate significantly from quarter to quarter due to seasonality and other factors.
• Changes in tax laws or the imposition of additional duties, quotas, tariffs, and other trade restrictions could adversely affect the business.
• Currency rate fluctuations, particularly between the United States and Canadian dollars, may impact financial results.
• Changes in accounting standards and subjective assumptions, estimates, and judgments by management could significantly affect financial results.
• A material weakness in internal control over financial reporting exists, and if not effectively remediated, could adversely affect investor confidence.
• There is no assurance that acquisitions, investments, or expansions of existing relationships will have a beneficial impact on the business.
• Payments from the buyer of the THC business may be reduced or suspended if a 'Change of Law Event' occurs, which could materially affect financial condition.
• Some products, particularly hemp-derived Delta-9 THC products, are subject to developing and unpredictable regulations, with potential for future illegality or restrictions.
• The company may be subject to heightened scrutiny by regulatory authorities, especially concerning Delta-9 THC products.
• Anti-money laundering and other banking laws and regulations may limit access to financing for cannabis-related businesses.
• Maintaining the listing of common stock on The Nasdaq Capital Market, if obtained, is subject to meeting applicable listing criteria.
• The price of common stock may be volatile, and a shareholder's investment could suffer a decline in value.
• The company could be subject to securities class action litigation.
• Future sales and issuances of common stock could result in additional dilution of percentage ownership.
• Management has broad discretion in the use of net proceeds from the offering and may not use them effectively.
• Unstable market and economic conditions and adverse developments with financial institutions may have serious adverse consequences.
• Anti-takeover provisions in charter documents and Washington law could make an acquisition difficult.
• Reduced disclosure requirements applicable to smaller reporting companies may make common stock less attractive to investors.
• Maintaining a dual listing on the CSE and Nasdaq will require significant company resources and management attention.
• Lack of research coverage by securities industry analysts could negatively affect market price and trading volume.

Future Outlook

The company intends to apply for listing its common stock on The Nasdaq Capital Market under the symbol JBEV, expecting trading to commence around the prospectus date, at which point OTCQB trading will cease. Strategic plans include launching a line of hard craft sodas under the Spiked Jones brand in 2025 and Mary Jones zero sugar sodas in July 2025. Management believes current cash, projected sales, and funds from the Two Shores Capital Corp. loan are sufficient to fund operations for at least 12 months. A key focus for 2025 is reducing operating expenses, introducing new products with higher margins, and implementing tighter management of inventory, legal, and sales/marketing expenditures to drive profitable sales and reduce expense percentages relative to revenue. The company expects to continue recording a full valuation allowance on U.S. net deferred tax assets until sustained taxable income is achieved.

Management Comments

• "Our strategy is to evolve from a craft soda company (Jones Soda) to a diverse beverage company covering additional growing market segments including modern soda (Pop Jones and Fiesta Jones) and alternative adult beverages (Mary Jones and Spiked Jones)."
• "We 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. This brand trust allows us to enter the HD9-THC market with a built-in advantage, one that we believe most new and existing competitors cannot replicate."
• "We intend to manage selling and marketing expenses with our working capital resources and it is a major management focus to reduce this percentage of revenue in the coming quarters."
• "The Company is focused on tighter management of inventory, legal and sales and marketing expenditures in 2025."
• "We intend to continue to look for clear return on investment from our selling and marketing expenses to drive profitable sales."
• "We intend to continue to look for additional opportunities to reduce our general and administrative costs beyond the cost reductions achieved in the first quarter of 2025."
• "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."
• "Based on managements 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 Companys operations for a period of at least 12 months subsequent to the issuance of the condensed consolidated financial statements incorporated by reference herein."

Industry Context

The company operates in the highly competitive beverage industry, specifically targeting the craft soda market, which was estimated at $700.3 million in 2023 and is projected to grow to $915.4 million by 2030. There is a growing consumer demand for health-focused 'modern soda' brands, exemplified by competitors like Poppi and Olipop, which the company aims to capitalize on with its Pop Jones and Fiesta Jones lines. Additionally, the alternative adult beverages market, particularly hemp-derived Delta-9 THC products, is rapidly expanding as consumers shift away from traditional beer and wine. This segment is becoming increasingly crowded with new entrants, but the company believes its established brand equity from Jones Soda provides a unique competitive advantage over competitors like Keef Brands, Cann Social Tonics, and Cycling Frog, who lack national brand recognition in broader consumer packaged goods. The regulatory environment for hemp-derived Delta-9 THC is rapidly developing and unpredictable, with varying state laws posing ongoing challenges.

Comparison to Industry Standards

• In the modern soda market, the company aims to capitalize on growing consumer demand, citing the recent growth of industry competitors such as Poppi and Olipop as benchmarks for this market segment.
• In the hemp-derived Delta-9 THC beverage segment, primary competitors include Keef Brands, Cann Social Tonics, and Cycling Frog, which have established multi-state operations and longer histories in cannabis-adjacent markets.
• The company believes these competitors have not achieved national brand recognition or broken into the broader consumer packaged goods landscape in a meaningful way, positioning Mary Jones with a 'built-in advantage' due to over two decades of brand equity from Jones Soda.
• The company's products are priced in the same range or higher than competitive brands, competing on quality as premium product offerings.

Management Changes

Corporate Governance

Legal Proceedings

• On March 25, 2024, Mary Jones Michigan LLC received a Notice of Claims for arbitration from Core Manufacturing, LLC, seeking $7,220,357 for alleged breach of commitments.
• On June 10, 2024, Mary Jones Michigan LLC filed a legal claim against P3 Capital Partner LLC, asserting fraud, conversion, and breach of contract related to a $155,700 deposit.
• In February 2025, a confidential settlement agreement was entered into between all parties to the Litigation Matters, resulting in their settlement and/or dismissal.
• In April 2025, the California Department of Public Health (CDPH) filed a Complaint, amended on June 27, 2025, in Los Angeles Superior Court naming Jones Soda and other businesses involved in the sale of infused soda in California in spring 2024. The company intends to dispute this.

Related Party Transactions

• On May 7, 2025, the company entered into a loan agreement with Paul Norman, the Chairman of the Board of Directors, for $450,000. The loan carries a 12% per annum interest rate and a $22,000 loan fee, with principal and accrued interest due in full by October 10, 2025.

Stakeholder Impact

• Shareholders face potential significant dilution from the public offering and the risk of losing their investment due to recurring losses and the stated "substantial doubt about our ability to continue as a going concern." No cash dividends are anticipated in the foreseeable future, meaning returns depend on share price appreciation.
• Employees are impacted by recent management changes, including a new CEO, CFO, and Chief Growth Officer, and the company's focus on attracting, developing, and retaining talent through its equity incentive plan.
• Customers may benefit from the company's strategic product diversification into modern soda and alternative adult beverages, with new product launches like Spiked Jones and zero sugar Mary Jones anticipated.
• Suppliers and contract manufacturers will continue to be critical partners, but face potential risks from increased raw material costs, shortages (e.g., glass), and disruptions in the supply chain.
• Creditors are affected by the company's financial health, with the secured promissory note from the THC business sale, a new credit facility with Two Shores Capital Corp. for up to $5 million, and a loan from the Chairman of the Board providing some liquidity, but the overall going concern risk remains.

Next Steps

• Complete the public offering of common stock.
• Apply to list common stock on The Nasdaq Capital Market (Nasdaq) under the symbol JBEV.
• Launch Spiked Jones hard craft sodas in 2025.
• Launch Mary Jones zero sugar sodas in July 2025.
• Continue to expand the Jones Soda glass bottle business in existing and new sales channels.
• Expand the business in the modern soda category through Pop Jones and Fiesta Jones brands.
• Expand the fountain program in the United States and Canada.
• Grow the Mary Jones brand of hemp-derived Delta-9 THC beverages, edibles, and other related products.
• Focus on reducing operating expenses and bringing new products to market with higher margins.
• Implement tighter management of inventory, legal, and sales and marketing expenditures in 2025.
• Remediate identified material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

Keywords

Beverage industry, Craft soda, Carbonated soft drinks, Jones Soda, Mary Jones, Spiked Jones, Hemp-derived Delta-9 THC, Public offering, S-1 filing, SEC, Financial performance, Risk factors, Corporate governance, Nasdaq listing, DSD, DTR, Contract manufacturing, Supply chain, Consumer packaged goods, CPG, Cannabis, Adult beverages, Liquidity, Going concern, Divestiture