10-K: Jones Soda Co. Reports Increased Revenue but Widens Net Loss in 2024

Jones Soda Co. saw a revenue increase of 14.9% in 2024, driven by beverage and cannabis sales, but net losses widened due to inventory impairments and increased operating expenses.

Summary

• Jones Soda Co. reported a 14.9% increase in net revenue for the year ended December 31, 2024, reaching approximately $19.2 million, compared to $16.7 million in 2023.
• The revenue growth was primarily driven by a 15% increase in beverage segment sales volume and a 9% increase in the Cannabis (THC) business in the US and Canada.
• Gross profit decreased by 16.1% to approximately $4.1 million in 2024, compared to $4.9 million in 2023, due to one-time inventory impairment charges of $1.2 million.
• Gross margin decreased to 21.3% in 2024 from 29.1% in 2023, with the inventory impairment charges reducing gross margin by 6.5%.
• Selling and marketing expenses increased by 39.5% to approximately $6.1 million in 2024, driven by higher online marketing expenditure and expanded marketing initiatives.
• General and administrative expenses increased by 46.9% to approximately $7.9 million in 2024, primarily due to increased legal and regulatory expenditures and travel expenditures.
• Net loss for the year ended December 31, 2024, increased to approximately $9.9 million from $4.9 million in 2023.
• The company had cash and cash equivalents of approximately $1.5 million as of December 31, 2024, compared to $3.9 million as of December 31, 2023.
• The company has experienced recurring losses from operations and negative cash flows from operating activities, raising substantial doubt about its ability to continue as a going concern.
• On February 5, 2025, the company entered into a loan agreement for up to $5 million with Two Shores Capital Corp to address liquidity concerns.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with revenue growth offset by increased losses and liquidity concerns. The secured loan provides some stability, but the overall outlook is cautious.

Positives

• Net revenue increased by 14.9% in 2024, driven by beverage and cannabis sales growth.
• The company is focusing on reducing operating expenses and bringing products to market with higher margins.
• The company secured a loan agreement for up to $5 million with Two Shores Capital Corp in February 2025 to improve liquidity.
• The company has rationalized its product set and is focused on smaller production runs on a focused product set for its core soda business, the modern soda category and the adult beverages category.

Negatives

• Gross profit decreased by 16.1% to $4.1 million due to $1.2 million in inventory impairment charges.
• Selling and marketing expenses increased by 39.5% to $6.1 million.
• General and administrative expenses increased by 46.9% to $7.9 million.
• Net loss increased to $9.9 million in 2024 from $4.9 million in 2023.
• Cash and cash equivalents decreased to $1.5 million as of December 31, 2024.
• The company has experienced recurring losses from operations and negative cash flows from operating activities, raising substantial doubt about its ability to continue as a going concern.
• The company was not in compliance with a financial covenant related to net assets under the Revolving Financing and Assignment Agreement as of December 31, 2024.

Risks

• The company's ability to continue as a going concern is uncertain due to recurring losses and negative cash flows.
• Failure to comply with the financial covenant under the Revolving Financing and Assignment Agreement as of December 31, 2024.
• Increased operating expenses, including selling and marketing, and general and administrative costs, are impacting profitability.
• Inventory impairment charges are negatively affecting gross profit and gross margin.
• The company's success depends on its ability to manage inventory, control costs, and increase sales revenue.
• The company is subject to risks inherent in sales of products in international markets.
• The company is subject to heightened scrutiny by regulatory authorities.
• Anti-money laundering and other banking laws and regulations may limit our ability to access financing and hamper our growth.
• Any rescheduling of U.S. Schedule I cannabis to Schedule III would have an uncertain impact on our business.

Future Outlook

The company is focused on reducing operating expenses, bringing products to market with higher margins, and managing inventory more tightly. Management believes its cash on hand, projected cash generated from product sales, and funds received from the loan agreement are sufficient to fund operations for at least 12 months.

Management Comments

• The company is focusing on tighter management of inventory, legal and sales and marketing expenditures in 2025.
• The new leadership team will ensure previously effective controls are followed by the time we report the second quarter interim results and reinforced adherence to the set of internal controls that Company has previously successfully abided by over the past years.

Industry Context

The beverage industry is highly competitive, with Jones Soda competing against larger, well-funded companies. The company is also expanding into the cannabis-infused beverage market, which is subject to evolving regulations and intense competition.

Comparison to Industry Standards

• Jones Soda's performance can be compared to other small to mid-sized beverage companies, such as Reed's Inc. or National Beverage Corp., focusing on revenue growth, gross margins, and operating expenses.
• In the cannabis-infused beverage sector, competitors include Keef Brands and Cann Social Tonics, against whom Jones Soda's market penetration and brand recognition can be benchmarked.
• The company's gross margin of 21.3% is lower than the industry average for beverage companies, indicating potential inefficiencies in cost of goods sold or pricing strategies.
• The increase in operating expenses as a percentage of revenue suggests a need for improved cost management compared to industry benchmarks.

Legal Proceedings

• On March 25, 2024, Mary Jones Michigan LLC received a Notice of Claims for arbitration from Core Manufacturing, LLC.
• On June 10, 2024, MJM filed a legal claim against P3 Capital Partner LLC, asserting fraud, conversion, and breach of contract.
• In February 2025, a confidential settlement agreement was entered into between all the parties to the Litigation Matters, which has resulted in the settlement and/or dismissal of both Litigation Matters.

Related Party Transactions

• During the year ended December 31, 2023, 200,000 Pinestar Warrants were exercised by one of our Board members, Paul Norman, at the exercise price of $0.06 CAD, for total proceeds of $9,000.

Stakeholder Impact

• Shareholders face potential dilution from future securities issuances.
• Employees may be affected by cost-cutting measures and restructuring efforts.
• Customers may see changes in product offerings and pricing.
• Suppliers and distributors may be impacted by changes in the company's financial condition and operating plans.

Next Steps

• The company intends to manage selling and marketing expenses with working capital resources.
• The company intends to carefully manage general and administrative expenses in line with working capital resources.
• The company is focused on tighter management of inventory, legal and sales and marketing expenditures in 2025.

Key Dates

Keywords

Jones Soda, revenue, net loss, cannabis, THC, inventory impairment, operating expenses, liquidity, going concern, loan agreement