8-K: Jones Soda Divests Cannabis Beverage Business, Shifts Focus to Core and Hemp-Derived Products

Jones Soda Co. has completed the sale of its marijuana-derived THC cannabis beverage business for $3 million, retaining its hemp-derived THC line and refocusing on core soda and adult beverage categories.

Summary

• Jones Soda Co. (Jones) sold its marijuana-derived THC cannabis beverage business, including Mary Jones brand assets, to MJ Reg Disruptors LLC (Buyer) for $3,000,000.
• The consideration included $489,398.70 in cash paid on June 19, 2025, and a secured promissory note for $2,510,601.30.
• The promissory note has a payment schedule: $510,601.30 by June 27, 2025; $500,000 by June 19, 2026; $750,000 by June 19, 2027; and $750,000 by June 19, 2028.
• Jones entered into a multi-year exclusive trademark licensing agreement with MJ Holdings, Inc. (a Buyer subsidiary) for the "Mary Jones" brand for THC-infused cannabis products, with annual licensing fees of $150,000 on the first anniversary and $225,000 on subsequent anniversaries, totaling an estimated $2,175,000 over 10 years.
• Jones retains exclusive rights to its hemp-derived THC (HD9) product line, which has shown four consecutive quarters of sales revenue growth through Q1 2025.
• Gabe Carimi, Vice President of Operations, departed the company via a separation agreement, receiving 166,666 fully vested stock options and accrued paid time off.
• Gabe Carimi was simultaneously retained as an advisor for two years, receiving an additional 333,334 stock options, vesting over two years.
• Pro forma financial statements indicate that for the year ended December 31, 2024, the divestiture would have reduced net revenue by $1,062,000 and net loss by $5,768,000, resulting in a pro forma net loss of $4,127,000.
• For the three months ended March 31, 2025, the divestiture would have reduced net revenue by $266,000 and increased net loss by $190,000, resulting in a pro forma net loss of $1,042,000.

Sentiment

Score: 7

Explanation: The divestiture of the marijuana-derived THC business, while reducing some revenue, allows Jones Soda to focus on its core and growing hemp-derived segments, which is a positive strategic realignment. The recurring licensing fees and the significant reduction in pro forma annual net loss (though influenced by a one-time gain) contribute to a positive outlook. However, the reliance on a promissory note for a large portion of the sale price and the increased pro forma net loss in Q1 2025 introduce some financial uncertainty.

Positives

• The divestiture of the marijuana-derived THC business allows Jones Soda to streamline operations and focus resources on core soda, functional beverages, and emerging adult beverage categories.
• The transaction provides $489,398.70 in immediate cash and a structured payment plan for the remaining $2,510,601.30 via a secured promissory note.
• Jones Soda retains its fast-growing hemp-derived THC (HD9) product line, which has demonstrated four consecutive quarters of sales revenue growth through Q1 2025.
• The licensing agreement for the "Mary Jones" brand for THC products provides a recurring revenue stream, estimated at $2,175,000 over 10 years.
• The pro forma financial statements for the year ended December 31, 2024, show a significant reduction in net loss by $5,768,000, improving the pro forma net loss to $4,127,000.
• The company maintains significant retail distribution and strong distributor networks comprised of over 26 top DSD distributors for its retained hemp-derived products.

Negatives

• The divestiture results in a reduction of net revenue, with pro forma net revenue for the year ended December 31, 2024, decreasing by $1,062,000 and for the three months ended March 31, 2025, decreasing by $266,000.
• The pro forma net loss for the three months ended March 31, 2025, increased by $190,000, resulting in a pro forma net loss of $1,042,000, indicating that the divested business was contributing positively to the bottom line in that specific quarter.
• A significant portion of the sale consideration ($2,510,601.30) is in the form of a promissory note, subject to payment schedule and potential suspension or reduction based on "Change of Law Events" related to cannabis legality.
• The promissory note accrues interest at a low rate (lower of 3% per annum or lowest permitted by law), which is waived if obligations are satisfied in full on time, limiting immediate interest income.
• The exercise price for the 166,666 fully vested stock options granted to Gabe Carimi in the separation agreement and the 333,334 options in the advisory agreement is not specified, which could imply a low or zero exercise price, potentially leading to dilution.

Risks

• Regulatory Risk: The legality of cannabis products (excluding hemp) is subject to state and local laws but remains illegal under U.S. federal law (Controlled Substances Act). A "Change of Law Event" could suspend or reduce payments from the promissory note and licensing fees, significantly impacting future revenue.
• Payment Risk: A substantial portion of the sale price is a promissory note, subject to the Buyer's ability to pay and potential reductions based on changes in cannabis laws.
• Market Risk: The success of the retained hemp-derived THC product line depends on continued market growth and consumer acceptance, which could be influenced by evolving regulations and competition.
• Operational Risk: The transition services provided by Jones Soda to the Buyer are limited to one year, requiring the Buyer to establish its own administrative services, which could impact the continuity of the divested business and indirectly affect licensing fee payments.
• Litigation Risk: The agreement includes provisions for indemnification for breaches of representations and warranties, and for third-party claims, which could lead to future liabilities.
• Intellectual Property Risk: While Jones Soda retains ownership of Licensed IP, the exclusive license granted to MJ Holdings for THC products means Jones Soda cannot use this IP for THC products unless agreed upon, limiting future opportunities in that specific segment.

Future Outlook

Jones Soda Co. expects the divestiture of its marijuana-derived THC business to streamline operations, sharpen strategic priorities, and accelerate investment in its core soda, functional beverage, and adult beverage categories, including its fast-growing hemp-derived THC segment. The company aims to expand its footprint in North America through innovation, channel growth, and brand engagement.

Management Comments

• "The sale of the cannabis beverage business marks an important milestone in our effort to focus our resources on areas where we see the strongest long-term growth and profitability."
• "We are proud of the innovation behind the Mary Jones brand, but I believe this divestiture enables us to sharpen our strategic priorities and accelerate investment in our core soda, functional beverage, and adult beverage categories."
• "We are excited about the opportunity to build on the Mary Jones legacy and bring it to more consumers in the evolving cannabis beverage market. Jones Soda created a unique and high-quality product, and we are committed to continuing its innovation and reach."
• "Although we made the strategic decision to sell our marijuana-derived THC business, we are excited about the opportunity to increase our focus on and continue to expand our distribution of our Mary Jones HD9 products, which have been some of our fastest growing product categories."
• "This is a segment where we already have significant retail distribution and strong distributor networks comprised of over 26 of the top DSD distributors in the country."

Industry Context

This announcement reflects a strategic pivot within the beverage industry, where companies are increasingly specializing or divesting non-core assets to optimize performance. Jones Soda's move to exit the federally illegal marijuana-derived THC market while retaining its hemp-derived THC line highlights the complex regulatory landscape of the cannabis industry. This allows Jones to focus on segments with clearer legal pathways and established distribution networks, aligning with a trend of companies seeking to de-risk operations in highly regulated or nascent markets. The continued focus on hemp-derived products positions Jones to capitalize on the growing demand for alternative beverages within a more permissible legal framework.

Management Changes

Corporate Governance

Related Party Transactions

• The sale of Mary Jones Holdings, Inc. and Mary Jones Beverage (Canada) Inc. to MJ Reg Disruptors, LLC, an entity where Gabe Carimi (former VP of Operations for Jones Soda) and Joe Oblas are listed as Managers.
• An Advisory Agreement between Jones Soda Co. and Gabe Carimi, where Mr. Carimi provides consulting services to Jones Soda Co. after his separation as an executive.

Stakeholder Impact

• Shareholders: The divestiture aims to improve long-term growth and profitability by focusing on core businesses, potentially leading to increased shareholder value. The pro forma financial statements show a significant reduction in annual net loss, which could be viewed positively. However, the reliance on a promissory note for a large part of the sale price introduces payment risk.
• Employees: Gabe Carimi, a key executive, transitioned from an employee role to an advisory role, indicating a change in the management structure related to the divested business. The document does not detail impact on other employees.
• Customers: Customers of the marijuana-derived THC products will now be served by MJ Reg Disruptors, LLC under the "Mary Jones" brand, while customers of hemp-derived THC products will continue to be served by Jones Soda Co.
• Suppliers: The document mentions that the Buyer will reimburse Jones Soda for out-of-pocket expenses for transition services for up to one year, indicating a temporary continuation of some supplier relationships for the divested business.
• Creditors: Two Shores Capital Corp., a lender, consented to the sale and released former guarantors from obligations, terminating Liens on their assets, which clarifies and potentially simplifies the debt structure for the divested entities.

Next Steps

• Buyer to make scheduled payments on the secured promissory note: $510,601.30 by June 27, 2025; $500,000 by June 19, 2026; $750,000 by June 19, 2027; and $750,000 by June 19, 2028.
• MJ Holdings to pay annual licensing fees to Jones Soda Co., starting with $150,000 on June 19, 2026, and $225,000 on subsequent anniversaries.
• Jones Soda Co. to continue focusing on expanding its core soda, functional beverage, and adult beverage categories, including its hemp-derived THC segment.
• Jones Soda Co. to provide administrative transition services to MJ Reg Disruptors, LLC for up to one year after the closing date.
• Gabe Carimi to provide general business-related consulting services as an advisor for two years.

Key Dates

Recommendation

Keywords

Jones Soda Co., Mary Jones, cannabis beverage, THC, hemp-derived THC, divestiture, asset sale, promissory note, trademark license, executive separation, Gabe Carimi, MJ Reg Disruptors, financial reporting, SEC filing, beverage industry, corporate strategy, risk management