Jones Soda Q3 revenue jumps 205% to $13.7M
Quarterly earnings and positive working capital coexist with substantial doubt about JSDA’s ability to continue as a going concern within one year.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Jones Soda Co. (JSDA) reported third-quarter revenue of $13.705 million, up 205% from $4.500 million, primarily from Fallout-branded products sold through club and direct-to-consumer channels. Gross margin was 34%, versus 29% a year earlier, and net income was $471,000, compared with a $1.428 million loss.
For the nine months ended September 30, 2026, revenue was $36.305 million, up 166%, while JSDA recorded a $64,000 net loss versus $331,000 net income a year earlier. Operating cash use was $2.288 million. As of September 30, 2026, cash was $4.363 million, working capital was approximately $2.1 million, and accumulated deficit was $94.792 million. Substantial doubt remains about the company’s ability to continue as a going concern within one year after the statements’ issuance.
JSDA issued 5,864,100 units on July 7, 2026 and August 5, 2026, for $1.9 million in gross proceeds. Each unit included one common share and half a warrant; each whole warrant is exercisable for one share at $0.45 for 36 months from issuance. Management expects to cease HD9 sales in the fourth quarter before December 11, 2026.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue reached $13.705 million, up 205% year over year.
- Moderate pointThird-quarter net income was $471,000, versus a $1.428 million loss.
Negative
- Major pointSubstantial doubt remains about continuation as a going concern within one year.
- Minor pointNine-month results shifted to a $64,000 net loss from $331,000 net income.
Filing Explained
As of September 30, 2026, about $3.5 million was outstanding under the secured facility; its $10.0 million maximum remained subject to borrowing conditions.
The report lists 14,457,243 options and 4,482,050 warrants outstanding at
If options or warrants are exercised and shares issued, those additional shares increase the share count and reduce existing holders’ percentage ownership, absent offsetting changes.
At
The facility’s advances carry
Key Figures
Key Terms
going concern financial
trade spend and promotional allowances financial
direct store delivery (“DSD”) channel technical
effective interest method financial
Black-Scholes option pricing model financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did JSDA report in the third quarter of 2026?
Was Jones Soda profitable for the first nine months of 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended
OR
| 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) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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 checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T 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, 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. (Check one):
| 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As
of November 10, 2026, there were
JONES SODA CO.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2026
TABLE OF CONTENTS
| Page | |
| Explanatory Note | 3 |
| Cautionary Notice Regarding Forward Looking Statements | 3 |
| PART I. FINANCIAL INFORMATION | 5 |
| Item 1. Financial Statements (Unaudited) | 5 |
| a) Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 | 5 |
| b) Condensed Consolidated Statements of Operations – three months and nine months ended September 30, 2026 and 2025 | 6 |
| c) Condensed Consolidated Statements of Comprehensive Income (Loss) – three months and nine months ended September 30, 2026 and 2025 | 7 |
| d) Condensed Consolidated Statements of Shareholders’ Equity for the three months and nine months ended September 30, 2026 and 2025 | 8 |
| e) Condensed Consolidated Statements of Cash Flows – three months and nine months ended September 30, 2026 and 2025 | 9 |
| f) Notes to Condensed Consolidated Financial Statements | 10 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | 25 |
| Item 4. Controls and Procedures | 25 |
| PART II. OTHER INFORMATION | 26 |
| Item 1. Legal Proceedings | 26 |
| Item 1A. Risk Factors | 26 |
| Item 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, ISSUER PURCHASES OF EQUITY SECURITIES | 26 |
| Item 5. Other Information | 26 |
| Item 6. Exhibits | 26 |
| 2 |
| Table of Contents |
EXPLANATORY NOTE
Unless otherwise indicated or the context otherwise requires, all references in this Quarterly Report on Form 10-Q (this “Report”) to “we,” “us,” “our,” “Jones,” and the “Company” are to Jones Soda Co., a Washington corporation, and our wholly-owned subsidiaries.
In addition, unless otherwise indicated or the context otherwise requires, all references in this Report to “Jones Soda” refer to our premium beverages, including Jones® Soda sold under the trademarked brand name “Jones Soda Co.®”
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This Report contains a number of forward-looking statements that reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this Report other than statements of historical fact, including statements that address operating performance, the economy, events or developments that management expects or anticipates will or may occur in the future, including statements related to case sales, revenues, profitability, distributor channels, new products or markets, adequacy of funds from operations, cash flows and financing, potential strategic transactions, statements regarding future operating results and non-historical information, are forward-looking statements. In particular, the words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “can,” “plan,” “predict,” “could,” “future,” “continue,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions and apply only as of the date of this Report. Our actual results, performance or achievements could differ materially from historical results as well as from the results expressed in, anticipated or implied by these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
In particular, our business, including our financial condition and results of operations and our ability to continue as a going concern may be impacted by a number of factors, including, but not limited to, the following:
| ● | Our ability to successfully execute on our growth strategy and operating plans; |
| ● | Our ability to continue to raise capital to finance our operations; |
| ● | Our revenues from our hemp-derived HD9 products could be negatively impacted if recent federal legislation that would prohibit the unregulated sale of intoxicating hemp-based or hemp derived products (including delta-8/HD9) is not amended; |
| ● | Our ability to manage our operating expenses and generate cash flow from operations, along with our ability to secure additional financing if our sales goals take longer to achieve than anticipated; |
| ● | Our ability to create and maintain brand name recognition and acceptance of our products, which is critical to our success in our competitive, brand-conscious industry; |
| ● | Our ability to compete successfully against much larger, well-funded, established companies currently operating in the beverage industry generally, including in the fountain business, particularly from other major beverage companies; |
| ● | Entrance into and increased focus on the craft beverage segment by other major beverage companies; |
| 3 |
| Table of Contents |
| ● | Our ability to respond to changes in the consumer beverage marketplace, including potential reduced consumer demand due to health concerns (including obesity) and legislative initiatives against sweetened beverages (including the imposition of taxes); |
| ● | Our ability to successfully develop and launch new products that match consumer beverage trends, and to manage consumer response to such new products and new initiatives; |
| ● | Our ability to maintain brand image and product quality and avoid risks from product issues such as product recalls; |
| ● | Our ability to establish, maintain and expand distribution arrangements with independent distributors, retailers, brokers and national retail accounts, most of whom sell and distribute competing products, and upon whom we rely to employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products; |
| ● | Our ability to manage our inventory levels and to predict the timing and amount of our sales; |
| ● | Our reliance on third-party contract manufacturers of our products and the geographic locations of their facilities, which could make management of our distribution efforts inefficient or unprofitable; |
| ● | Our ability to secure a continuous supply and availability of raw materials, as well as other factors that may adversely affect our supply chain, including increases in raw material costs, and the potential shortages of glass in the supply chain; |
| ● | Our ability to source our flavors on acceptable terms from our key flavor suppliers; |
| ● | Our ability to attract and retain key personnel, the loss of whom would directly affect our efficiency and operations and could materially impair our ability to execute our growth strategy; |
| ● | Our ability to protect our trademarks and trade secrets, the failure of which may prevent us from successfully marketing our products and competing effectively; |
| ● | Litigation or legal proceedings, which could expose us to significant liabilities and damage our reputation; |
| ● | Our ability to comply with the many regulations to which our business is subject; |
| ● | Our ability to maintain an effective information technology infrastructure; |
| ● | Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business; |
| ● | Fluctuations in fuel and freight costs; |
| ● | Fluctuations in currency exchange rates, particularly between the United States and Canadian dollars; |
| ● | Tariffs affecting raw materials or finished goods transported between the United States and Canada; |
| ● | Regional, national or global economic, political, social and other conditions that may adversely impact our business and results of operations; |
| ● | Dilutive and other adverse effects on our existing shareholders and our stock price arising from future securities issuances; and |
| ● | Our ability to access the capital markets for any future equity financing, and any actual or perceived limitations to our common stock by being traded on the OTCQB Marketplace and the Canadian Stock Exchange, including the level of trading activity, volatility or market liquidity. |
For a discussion of some of the factors that may affect our business, results and prospects, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on March 31, 2026 and in our other reports we file with the SEC, including our periodic reports on Form 10-Q and current reports on Form 8-K. Readers are also urged to carefully review and consider the various disclosures made by us in this Report and in our other reports we file with the SEC, and those described from time to time in our press releases and other communications, which attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.
| 4 |
| Table of Contents |
PART 1 – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
JONES SODA CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, 2026 (unaudited) | December 31, 2025 | |||||||
| 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 | ||||||||
| Total current assets | ||||||||
| Long-term licensing fees receivable | ||||||||
| Fixed assets, net of accumulated depreciation of $ | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Revolving credit facility and loans | ||||||||
| Insurance premium financing | - | |||||||
| Promissory notes | - | |||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | - | - | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, | ||||||||
| Authorized — | ||||||||
| Common stock, no par value: Authorized — 800,000,000. Issued and outstanding shares — 126,028,350 shares and 118,227,478 shares, respectively | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
| Table of Contents |
JONES SODA CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | - | ( | ) | ( | ) | ( | ) | |||||||||
| Other (expense) income, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on disposition of subsidiaries | - | - | - | |||||||||||||
| Total other (expenses) income | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax expense, net | - | ( | ) | ( | ) | ( | ) | |||||||||
| Income (loss) from continuing operations | ( | ) | ( | ) | ||||||||||||
| Income from discontinued operations | - | - | - | |||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Earning (loss) per share – basic and diluted | ||||||||||||||||
| Income (loss) from continuing operations | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Income from discontinued operations | $ | - | $ | - | $ | - | $ | |||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
| Table of Contents |
JONES SODA CO.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share data)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Reclassification of foreign currency translation differences upon disposal of the foreign operation | - | - | - | |||||||||||||
| Total comprehensive income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
| Table of Contents |
JONES SODA CO.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share data)
| Number | Amount | Income | Deficit | Equity | ||||||||||||||||
| Common Stock | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | Income | Deficit | Equity | ||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Shares issued for cash - private placement | - | - | ||||||||||||||||||
| Share issue costs | - | ( | ) | - | - | ( | ) | |||||||||||||
| Shares issued for cash - exercise of stock options | - | - | ||||||||||||||||||
| Shares issued for restricted share units | - | - | - | - | ||||||||||||||||
| Fair value of warrants issued | - | - | - | |||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Other comprehensive loss | - | - | ( | ) | - | ( | ) | |||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | Income | Deficit | Equity | ||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Shares issued for restricted share units | - | - | - | - | ||||||||||||||||
| Fair value of warrants issued | - | - | - | |||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Net Income | - | - | - | |||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | Income | Deficit | Equity | ||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Shares issued for cash - private placement | - | - | ||||||||||||||||||
| Share issue costs | - | ( | ) | - | - | ( | ) | |||||||||||||
| Shares issued for cash - exercise of stock options | - | - | ||||||||||||||||||
| Shares issued for restricted share units | - | - | - | - | ||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | Income | Deficit | Equity | ||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Shares issued for restricted share units | - | - | - | - | ||||||||||||||||
| Fair value of warrants issued | - | - | - | |||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Net income (loss) | - | - | - | ( | ) | ( | ) | |||||||||||||
| Other comprehensive loss | - | - | ( | ) | - | ( | ) | |||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 8 |
| Table of Contents |
JONES SODA CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except share data)
| 2026 | 2025 | |||||||
Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Less: Income from discontinued operations | - | ( | ) | |||||
| Net Income (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 | - | |||||||
| 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 | ( | ) | ||||||
| Prefunded insurance premiums from financing | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deferred financing costs | ( | ) | - | |||||
| Other assets | - | |||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in continuing operations | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Cash receipts from licensing fee receivables | - | |||||||
| Disposal of a subsidiary, net of cash disposed of | - | |||||||
| Proceeds from disposal of property, plant and equipment | - | |||||||
| Proceeds from sale of note receivable | - | |||||||
| 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 stock options | - | |||||||
| 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: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | - | $ | - | ||||
See accompanying notes to condensed consolidated financial statements.
| 9 |
| Table of Contents |
JONES SODA CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Nature of Operations and Summary of Significant Accounting Policies |
Jones Soda Co. develops, produces, markets and distributes 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.
We are a Washington corporation and have the following subsidiaries: Jones Soda Co. (USA) Inc., Jones Soda (Canada) Inc., Pinestar Gold Inc., Mary Jones Holdco 2, Inc. and Mary Jones Beverage LLC (collectively, the “Subsidiaries”).
Basis of presentation, consolidation and use of estimates
The unaudited interim condensed consolidated financial statements as of and for the period ending September 30, 2026, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial reporting. These condensed consolidated financial statements include our accounts and those of our subsidiaries, with all intercompany transactions eliminated in consolidation.
In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all material adjustments necessary for a fair presentation of our financial position, results of operations, and cash flows as of the dates and for the periods presented. These adjustments consist solely of normal and recurring items. The preparation of financial statements requires estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, and expenses. Key areas subject to such estimates and assumptions include, but are not limited to, inventory valuation, depreciation 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 may differ from these estimates.
The operating results for interim periods are not necessarily indicative of expected results for the full fiscal year. These financial statements should be reviewed in conjunction with the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Reclassifications
Certain amounts from prior periods have been reclassified to conform with the current period presentation.
Liquidity
As
of September 30, 2026, the Company had cash of approximately $
During
the three months ended September 30, 2026, the Company generated net income of approximately $
Net
cash used in operating activities decreased to approximately $
The Company continues to execute initiatives designed to improve operating performance, strengthen liquidity and support its long-term growth objectives. These initiatives include expanding distribution of its core beverage products, pursuing opportunities in consumer lifestyle products and functional health, managing operating expenditures, improving working capital efficiency and utilizing available financing arrangements, including its existing revolving credit facility.
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Notwithstanding the improvements in financial performance and liquidity during 2026, the Company has historically incurred operating losses and negative cash flows from operating activities. The Company’s ability to meet its obligations as they become due will depend upon its ability to sustain improvements in operating performance, generate sufficient cash flows from operations and maintain access to adequate sources of liquidity.
After consideration of management’s plans and the Company’s current financial condition, substantial doubt remains regarding the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
Revenue recognition
The Company’s 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 costs paid by customers, primarily related to online orders, are included in revenue and totaled approximately $
For further details on the Company’s revenue recognition policy, refer to Note 1 of the most recently filed Form 10-K, filed on March 31, 2026.
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 three months ended September 30, 2026 and 2025, our revenue was increased by $
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
Accounts Receivable
The
accounts receivable balance primarily consists of trade receivables from distributors and retail customers. The Company’s allowance
for credit losses represents management’s best estimate of probable credit losses in existing accounts receivable, determined primarily
based on current trends and historical collection data. To account for potential credit losses, the Company reserves a percentage of
trade receivable balances based on collection history and prevailing economic conditions expected to impact credit risk over the life
of the receivables. These reserves are regularly re-evaluated and adjusted as necessary. Account balances deemed uncollectible are written
off against the allowance after all collection efforts have been exhausted and the likelihood of recovery is considered remote. As of
September, 2026, and December 31, 2025, allowances for credit losses were approximately $
As
of September 30, 2026, one of the Company’s independent customers accounted for approximately
Net earnings (loss) per share
Basic net earnings (loss) per share is calculated using the weighted average number of common shares outstanding during the respective periods. Diluted earnings per share is computed by adjusting the weighted average number of common shares to reflect the potential net exercise or conversion of all dilutive securities.
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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): Disaggregation of Income Statement Expenses, as clarified by ASU 2025-01. The guidance requires public business entities to disclose additional disaggregated information about certain income statement expense captions in the notes to the financial statements. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statement disclosures.
In December 2025, the FASB issued Accounting Standards Update 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments clarify the scope of Topic 270, standardize the form and content requirements for interim financial statements, and consolidate interim disclosure requirements within Topic 270. The ASU also introduces a disclosure principle requiring entities to describe events occurring after the end of the most recent annual period that have a material effect on the interim financial statements. The amendments do not change the fundamental nature of interim reporting and are not expected to result in significant additional disclosures. ASU 2025-11 is effective for the Company for interim periods within fiscal years beginning after December 15, 2027, with a one-year deferral for entities that are not public business entities. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its interim financial statement presentation and disclosures, but does not expect the adoption to have a material effect on its consolidated financial statements.
| 2. | Discontinued Operations |
On June 19, 2025 (the “Date of Disposition”), the Company completed the sale of all issued and outstanding equity interests in its cannabis beverage subsidiaries (the “Cannabis Subsidiaries”) to MJ Reg pursuant to a share purchase agreement (“SPA”). As part of the transaction, the Company discontinued its Cannabis-Derived (THC) Beverage operations. The disposal group met the criteria for discontinued operations under ASC 205-20.
Under
the SPA, MJ Reg purchased the Cannabis Subsidiaries for (i) a $
In
connection with the SPA, the Company entered into a trademark license agreement with MJ Holdings granting exclusive rights to use certain
licensed intellectual property in connection with THC-based consumable products. The Company retains exclusive rights to Hemp-based products.
Under the agreement, the Company is entitled to receive a fixed annual licensing fee of $
At
the Date of Disposition, the Company measured the consideration at fair value using a weighted average cost of capital of
| ● | Promissory
Note — $ | |
| ● | License
Agreement — $ |
Transaction
costs incurred totaled $
The Cannabis Subsidiaries’ operating results for the periods presented are classified as discontinued operations. No activity occurred during the nine months ended September 30, 2026, other than the ongoing assessment of collectability of the promissory note and licensing receivable. The Company continues to evaluate the carrying value of the related receivables each reporting period.
A summary of results from discontinued operations for the nine months ended September 30, 2025 is presented below:
Schedule of Discontinued Operations
| Net Revenue | $ | |||
| Cost of goods sold | ( | ) | ||
| Gross profit | ||||
| Operating expenses: | ||||
| Selling and marketing | ||||
| General and administrative | ||||
| Total operating expenses | ( | ) | ||
| Gain (Loss) from discontinued operations | ||||
| Tax expenses | ( | ) | ||
| Net income (loss) from discontinued operations | $ |
| 3. | Note receivable |
On
June 19, 2025, the Company issued a promissory note with an aggregate principal amount of $
| ● | $ | |
| ● | $ | |
| ● | $ | |
| ● | $ | |
| ● | $ |
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The
promissory note accrues interest at the lower of
In
accordance with ASC 820, the Company applied its weighted average cost of capital of
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
The valuation of the warrants was performed using the Black-Scholes option pricing model, applying the following weighted-average assumptions:
Schedule of Weighted Average Assumptions in Valuation of Warrants
| ● | Stock price per share | $ | ||
| ● | Risk free interest rate | |||
| ● | Expected volatility | |||
| ● | Expected life (in years) | |||
| ● | Expected dividend | nil |
The
fair value of $
| 4. | Licensing fees receivable |
In
connection with the disposition of the cannabis beverage subsidiaries during the year ended December 31, 2025, the Company entered into
the License Agreement (the “License Agreement”) with Mary Jones Holdings Inc. (“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 nine months ended September 30, 2026 and 2025, the Company recognized $
As
of September 30, 2026 and December 31, 2025, the carrying value of the License Agreement receivable was $
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| 5. | Inventory |
Inventory consisted of the following:
Schedule of Inventory
September 30, 2026 (in thousands) | December 31, 2025 (in thousands) | |||||||
| Finished goods | $ | $ | ||||||
| Raw materials | ||||||||
| Inventory, Net | $ | $ | ||||||
Finished
goods primarily consist of products ready for shipment and promotional merchandise held for sale. Raw materials include ingredients,
concentrate, and packaging materials. For the three months ended September 30, 2026 and 2025,
| 6. | Fixed Assets, net |
Schedule of Fixed Assets, Net
September 30, 2026 (in thousands) | December 31, 2025 (in thousands) | |||||||
| Equipment | $ | $ | ||||||
| Office and computer equipment | ||||||||
| Property, plant and equipment, gross | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
| 7. | Accrued Expenses |
Accrued expenses consisted of the following as of September 30, 2026 and December 31, 2025:
Schedule of Accrued Expenses
September 30, 2026 (in thousands) | December 31, 2025 (in thousands) | |||||||
| Employee benefits | $ | $ | ||||||
| Goods and services tax | ||||||||
| Sales and marketing | ||||||||
| Other accruals | ||||||||
| Accrued expenses | $ | $ | ||||||
| 8. | Revolving Credit Facility |
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 $
On
February 5, 2025, the Company, through one of its subsidiaries (the “Loan Subsidiary”), entered into 2Shores Credit Facility
with Two Shores, pursuant to which the Loan Subsidiary may borrow up to an aggregate maximum amount of $
During
the year ended December 31, 2025, in connection with the2Shores Loan Credit Facility, the Company issued total
Schedule of Weighted Average Assumptions Using the Black Scholes Valuation of Warrants
| ● | Stock price per share | $ | ||
| ● | Risk free interest rate | |||
| ● | Expected volatility | |||
| ● | Expected life (in years) | |||
| ● | Expected dividend | nil |
As
of September 30, 2026, the outstanding balance under the Loan Agreement, including accrued interest, was approximately $
| 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 $
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In
addition to the principal and interest payments, the Company was required to pay a loan origination fee of $
During
the year ended December 31, 2025, the Company recognized interest expense of $
During
the nine months ended September 30, 2026, the Company fully settled the outstanding principal balance and the related origination fee
of $
| 10. | Insurance Premium Financing |
During
the year ended December 31, 2025, the Company entered into various
As
of September 30, 2026, the outstanding balance related to insurance premium financing was $nil (December 31, 2025 – $
| 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 and warehouse facility located in Seattle, Washington. 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 |
The
Company issued
In
connection with the issuance of
Omnibus Equity Incentive Plan
On
March 15, 2022, our Board adopted the Jones Soda Co. 2022 Omnibus Equity Incentive Plan (the “2022 Plan”), which became effective
upon approval by our shareholders on May 16, 2022. Under the 2022 Plan, the sum of (i)
Under
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
| (a) | Stock options: |
A summary of our stock option activity is as follows:
Schedule of Stock Option Activity
| Outstanding Options | ||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||
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 | ||||||||||||||||
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The following table summarizes information about stock options outstanding and exercisable under our stock incentive plans as of September 30, 2026:
Schedule of Stock Options Outstanding And Exercisable
| Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price Per Share ($) | Number Exercisable | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price Per Share ($) | ||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| (b) | Restricted stock awards: |
A summary of our restricted stock awards activity is as follows:
Schedule of Restricted Stock Awards Activity
| Outstanding Options | ||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||
Number of Shares | Weighted Average Grant-Date Fair Value ($) | Number of Shares | Weighted Average Grant-Date Fair Value ($) | |||||||||||||
| Opening | ||||||||||||||||
| Granted | ||||||||||||||||
| Vested and settled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Forfeited / Expired | ( | ) | ( | ) | - | - | ||||||||||
| Closing | ||||||||||||||||
| Vested | ||||||||||||||||
Beginning May 13, 2022, the Board 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 $
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
On
July 16, 2026, the Company granted
During
the three months ended September 30, 2026 and 2025, the Company issued
During
the nine months ended September 30, 2026 and 2025, the Company issued
As
of September 30, 2026, and December 31, 2025, the Company had
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| (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 September 30, 2026, the Company had unrecognized compensation expense related to stock options of $
The following table summarizes the stock-based compensation expense (recovery) (in thousands):
Schedule of Stock-based Compensation Expense
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock options | $ | $ | $ | $ | ||||||||||||
| Restricted stock | ||||||||||||||||
| Allocated Stock-based compensation | $ | $ | $ | $ | ||||||||||||
| Consolidated Statements of Operations account: | ||||||||||||||||
| Selling and marketing | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
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:
Schedule of Weighted-average Assumptions in Fair Value of Stock Options
September
30, | September
30, | |||||||
| Expected dividend yield | - | - | ||||||
| Expected stock price volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Weighted-average grant date fair-value per share | $ | $ | ||||||
As
of September 30, 2026, the aggregate intrinsic value of outstanding stock options was approximately $
| (d) | Warrants |
A summary of our warrants activity is as follows:
Schedule of Warrants Activity
| Outstanding Warrants | ||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||
Number of Shares | Weighted Average Exercise Price ($) (Per Share) | Number of Shares | Weighted Average Exercise Price ($) (Per Share) | |||||||||||||
| Opening | ||||||||||||||||
| Granted | ||||||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Closing | ||||||||||||||||
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
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The following table presents a summary of the Company’s outstanding warrants as of September 30, 2026:
Schedule of Warrants Outstanding
| Expiry Date | Number Outstanding | Remaining Contractual Life (Years) | Exercise Price Per Share (in dollar) | Number Exercisable | ||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| 13. | Segment Information |
The
Company’s
The Chief Operating Decision Maker of the Company, who is also the Chief Executive Officer , 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 three months and nine months ended September 30, 2026 and 2025:
Net Sales by Geographic Location: The breakdown of the Company’s net sales by geographic location are as follows:
Schedule of Net Sales and Income (Loss) from Operations by Geographic Location
| For the three months ended | ||||||||
| (in thousands) | September 30, 2026 | September 30, 2025 | ||||||
| Segment Results – Net sales | ||||||||
| United States | $ | $ | ||||||
| Canada | ||||||||
| Total | $ | $ | ||||||
| Net sales | $ | $ | ||||||
| For the nine months ended | ||||||||
| (in thousands) | September 30, 2026 | September 30, 2025 | ||||||
| Segment Results – Net sales | ||||||||
| United States | $ | $ | ||||||
| Canada | ||||||||
| Total | $ | $ | ||||||
| Net sales | $ | $ | ||||||
Net
sales generated in the United States accounted for
Net
sales generated in the United States accounted for
Long-Lived Assets: All of the Company’s long-lived assets are located in the United States.
| 14. | Commitments and Contingencies |
Commitments
As
of September 30, 2026, we continue to have commitments to various suppliers of raw materials. Purchase obligations under these commitments
are expected to total $
Legal proceedings
From time to time, the Company may be involved in claims and legal actions arising in the ordinary course of business. Management is not aware of any pending legal proceedings that are material to the Company as of the date of this report.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (“SEC”) on March 31, 2026.
This Report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “can,” “plan,” “predict,” “could,” “future,” “continue,” variations of such words, and similar expressions. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined at the beginning of this Report under “Cautionary Notice Regarding Forward-Looking Statements” and in Item 1A of our most recent Annual Report on Form 10-K filed with the SEC, and in our other reports we file with the SEC, including our periodic reports on Form 10-Q and current reports on Form 8-K. These factors may cause our actual results to differ materially from any forward-looking statements. Except as required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Overview
We develop, produce, market and distribute premium beverages that we sell and distribute primarily in North America through our network of independent distributors and directly to our national and regional retail accounts. We also sell premium soda beverage products in select international markets. Our premium soda beverage products are sold primarily in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street” in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several large retailers. We refer to our network of independent distributors as our direct store delivery (“DSD”) channel, and we refer to our national and regional accounts who receive shipments directly from us as our direct to retail (“DTR”) channel. We do not directly manufacture any of our premium soda beverage products but instead outsource the manufacturing process to third-party contract manufacturers. We also sell various premium beverage soda products online, including soda with customized labels, wearables, candy and other items, and we license our trademarks for use on products sold by other manufacturers.
Our company is a Washington corporation formed in 2000 as a successor to Urban Juice and Soda Company Ltd., a Canadian company formed in 1986. Our principal place of business is located at 1522 Western Ave, STE 24150, Seattle, WA 98101. Our telephone number is (206) 624-3357.
| ● | Expand the Jones Soda glass bottle business in existing and new sales channels including its zero sugar line; | |
| ● | Expand its focus on lifestyle opportunities including new partnerships with iconic brands; | |
| ● | Expand into functional health and nutrition market. |
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Business Strategy
The Company is pursuing a strategy designed to strengthen its established premium craft soda business and broaden its portfolio through three complementary platforms: Core Beverages, Consumer Lifestyle and Functional Health and Nutrition. These platforms are intended to build on the recognition and distribution of the Jones brand, extend consumer engagement through product innovation and strategic collaborations, and address evolving demand for better-for-you beverages, nutrition and wellness products. The timing, scope and results of these initiatives will depend on market demand, access to capital, operating resources and execution.
Our Focus: Sales Growth
Management’s principal commercial priorities are to strengthen core beverage distribution and innovation, leverage consumer lifestyle partnerships and product extensions, and develop the functional health platform with disciplined investment and integration. The Company will evaluate these initiatives based on demand, profitability, working capital requirements and available funding.
Core Beverages
Core Beverages remains the foundation of the Company’s business. Jones Soda offers premium craft sodas in distinctive flavors, with consumer-submitted photographs featured on its packaging, and distributes products through retail, foodservice, distributor and direct-to-consumer channels. The Company intends to support this business through distribution development, flavor innovation, packaging initiatives, fountain offerings and targeted marketing. The Company is also expanding its offerings to address consumers seeking alternatives to traditional sugar-sweetened soft drinks. Jones Zero Sugar, its zero-sugar, zero-calorie craft soda offering, was launched in Canada in 2026, and the Company is evaluating opportunities to expand the line in the United States. Additional innovation and selective opportunities to broaden the core beverage portfolio may support growth, although no particular level of sales or distribution is assured.
Consumer Lifestyle
The Consumer Lifestyle platform seeks to extend the Company’s brands and consumer relationships into adjacent beverage, food and lifestyle categories through product launches, brand collaborations, licensing and, where appropriate, acquisitions. The Company has developed collaborative products and marketing programs associated with Bethesda Softworks’ Fallout franchise, including collectible and specialty beverage offerings, and has announced a collaboration with Crayola. Such arrangements may involve limited-edition flavors, distinctive packaging, branded merchandise and cross-category product concepts. The Company believes these initiatives can deepen consumer engagement and create incremental distribution opportunities, although performance may depend on the terms, duration and renewal of the relevant partnerships. The Company may also evaluate additional lifestyle-oriented beverage and food products, including adult beverage offerings where commercially and legally appropriate.
Functional Health and Nutrition
The Functional Health and Nutrition platform is intended to broaden the Company’s portfolio into products addressing consumer interest in nutrition, sustained energy, active lifestyles, metabolic health and healthy aging. The Company is also evaluating a potential functional health product opportunity for a targeted launch in 2027, subject to product development, regulatory review and commercial considerations. The Company expects to assess additional opportunities involving differentiated formulations, established brands and strategic acquisitions. References to anticipated products or benefits reflect business objectives and do not constitute assurances of product efficacy, regulatory approval or future commercial results.
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Transition from Hemp-Derived Products
The Company has determined to exit its HD9 hemp-derived intoxicating beverage business in light of changes in federal law and its decision to concentrate resources on its Core Beverages, Consumer Lifestyle and Functional Health platforms. The Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (Public Law 119-37), enacted November 12, 2025, amended the federal statutory definition of hemp. Subsequent legislation (Public Law 119-103) established two relevant effective dates: November 12, 2026, for provisions excluding certain products containing cannabinoids that cannot be naturally produced by the cannabis plant; and December 11, 2026, for most other amendments, including restrictions applicable to certain intoxicating hemp-derived consumer products. The application of these provisions depends on product formulation and other applicable legal requirements. Management intends to cease HD9 sales before the applicable effective dates, consistent with its legal compliance obligations, and to wind down related inventory, distribution and commercial arrangements. The Company does not currently expect to pursue further investment in HD9 products. The exit could affect revenue, inventories, contractual obligations and transition costs, and the Company continues to evaluate these matters.
Results of Operations
The following selected financial and operating data are derived from our condensed consolidated financial statements and should be read in conjunction with our condensed consolidated financial statements.
Three months ended September 30, 2026 and 2025
| 2026 | 2025 | |||||||||||
(Dollars in thousands) | (Dollars in thousands) | % Change | ||||||||||
| Revenue | $ | 13,705 | $ | 4,500 | 205 | % | ||||||
| Cost of Goods Sold | (8,985 | ) | (3,201 | ) | 181 | % | ||||||
| Gross Profit | 4,720 | 1,299 | 263 | % | ||||||||
| % of Revenue | 34 | % | 29 | % | ||||||||
Quarter Ended September 30, 2026 Compared to Quarter Ended September 30, 2025
Revenue
For the quarter ended September 30, 2026, revenue increased by approximately $9.2 million, or 205%, to approximately $13.7 million compared to approximately $4.5 million for the quarter ended September 30, 2025. The increase in sales revenue was primarily the result of Fallout branded products sold through our club and DTC channels. HD9 Sales declined from $0.8M to $0.0M due to federal hemp THC ban that comes into effect December 11, 2026 in the quarter ended September 30, 2026 compared to the same quarter in 2025. The company expects to cease all HD9 product sales in the fourth quarter prior to the ban coming into effect December 11, 2026.
For the quarter ended September 30, 2026, trade spend and promotional allowances, which reduced the amount of revenue for the sales of our product, totaled approximately $1.6 million, an increase of approximately $0.9 million, or 128%, compared to approximately $0.7 million for the quarter ended September 30, 2025, primarily driven trade spend associated with our Fallout branded products sold through our club channel.
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Gross Profit
For the quarter ended September 30, 2026, gross profit increased by approximately $3.4 million, or 263%, to approximately $4.7 million compared to approximately $1.3 million for the quarter ended September 30, 2025 as a result of higher sales revenue in the current quarter. For the quarter ended September 30, 2026, gross margin increased to 34% from 29% in the quarter ended September 30, 2025. This five percentage point increase in gross profit margin was primally driven by better purchase economics on higher purchase volumes. Additionally, there was significantly increased DTC sales in the quarter compared to the prior year, which have a higher gross margin than the retail business. The Company intends to continue to focus on additional opportunities to reduce product costs & freight and warehousing costs.
Selling and Marketing Expenses
Selling and marketing expenses for the quarter ended September 30, 2026 were approximately $2.3 million, an increase of approximately $1.3 million, or 130%, from approximately $1.0 million for the quarter ended September 30, 2025. This increase was primarily a result of an increase in broker and royalty payments related to Fallout product sales. Selling and marketing expenses as a percentage of revenue decreased to 17.0% in the third quarter ended September 30, 2026 from 22.5% in the same period in 2025. We intend to continue to look for clear return on investment from our selling and marketing expenses to drive profitable sales. For the three months ended September 30, 2026 and 2025, non-cash expenses included in selling and marketing expenses (stock compensation and depreciation) were approximately $0.1 million and $0.0 million, respectively.
General and Administrative Expenses
General and administrative expenses for the quarter ended September 30, 2026 were approximately $2.0 million compared to $1.7 million in the quarter ended September 30, 2025 or an increase of $0.3 million. This increase was primary related to increased salary and benefits during the current quarter compared to the same quarter in 2025. General and administrative expenses as a percentage of revenue decreased to 14.5% in the third quarter ended September 30, 2026 from 37.5% in the same quarter in 2025. We intend to continue to look for additional opportunities to reduce our G&A costs. For the three months ended September 30, 2026 and 2025, non-cash expenses included in general and administrative expenses (stock compensation and depreciation) were approximately $0.4 million and $0.4 million, respectively.
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Income Tax Expense
We incurred income tax expense of $nil and $0.002 million during the quarters ended September 30, 2026 and 2025, respectively. We have not recorded any tax benefit for the gain in our U.S. operations as we have recorded a full valuation allowance on our U.S. net deferred tax assets. We expect to continue to record a full valuation allowance on our U.S. net deferred tax assets until we sustain an appropriate level of taxable income through improved U.S. operations. Our effective tax rate is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a full valuation allowance on our U.S. net deferred tax assets.
Net Income
Net Income for the quarter ended September 30, 2026 was approximately $0.5 million compared to net loss of approximately $1.4 million for the quarter ended September 30, 2025, an improvement of $1.9 million. This increase in net income was primarily attributable to higher gross profit and selling, general, and administrative expenses being a much lower percentage of revenue as compared to the prior year.
Nine months ending September 30, 2026 and 2025
| 2026 | 2025 | |||||||||||
(Dollars in thousands) | (Dollars in thousands) | % Change | ||||||||||
| Revenue | $ | 36,305 | $ | 13,624 | 166 | % | ||||||
| Cost of Goods Sold | (24,895 | ) | (9,302 | ) | 168 | % | ||||||
| Gross Profit | 11,410 | 4,322 | 164 | % | ||||||||
| % of Revenue | 31 | % | 32 | % | ||||||||
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
Revenue
For the nine months ended September 30, 2026, revenue increased by approximately $22.7 million, or 166%, to approximately $36.3 million compared to approximately $13.6 million for the nine months ended September 30, 2025. The increase in sales revenue was primarily the result of Fallout branded products sold through our club and DTC channels. HD9 sales declined from $2.6M to $0.2M due to the federal hemp THC ban that comes into effect December 11, 2026 in the nine months ended September 30, 2026 compared to the same period in 2025. The company expects to cease all HD9 product sales in the fourth quarter prior to the ban coming into effect December 11, 2026.
For the nine months ended September 30, 2026, trade spend and promotional allowances, which reduced the amount of revenue for the sales of our product, totaled approximately $4.2 million, an increase of approximately $2.6 million, or 162%, compared to approximately $1.6 million for the nine months ended September 30, 2025, primarily driven by trade spend associated with our Fallout branded products sold through our club channel.
Gross Profit
For the nine months ended September 30, 2026, gross profit increased by approximately $7.1 million, or 164%, to approximately $11.4 million compared to approximately $4.3 million for the nine months ended September 30, 2025 as a result of higher sales revenue in the nine months period. For the nine months ended September 30, 2026, gross margin decreased to 31% from 32% in the prior period. A contributing factor to the change in gross margin was the significant decrease in high-margin HD9 sales over the nine months ended September 30, 2026, approximately 0% of net revenues, as compared to the same period in 2025, approximately 19% of net revenues.
Selling and Marketing Expenses
Selling and marketing expenses for the nine months ended September 30, 2026 were approximately $6.3 million, an increase of approximately $3.1 million, or approximately 97%, from approximately $3.2 million for the nine months ended September 30, 2025. This increase was primarily a result of an increase in broker and royalty payments related to Fallout product sale. Selling and marketing expenses as a percentage of revenue decreased to 17.3% in the nine months ended September 30, 2026 from 23.4% in the same period in 2025. We intend to continue to look for clear return on investment from our selling and marketing expenses to drive profitable sales. For the nine months ended September 30, 2026 and 2025, non-cash expenses included in selling and marketing expenses (stock compensation and depreciation) were approximately $0.3 million and $0.1 million, respectively.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2026 were approximately $4.9 million compared to $4.2 million in the nine months ended September 30, 2025 or an increase of $0.7 million. This increase was primary related to increased salary and benefits during the current nine month period compared to the same period in 2025. General and administrative expenses as a percentage of revenue decreased to 13.5% in the nine months ended September 30, 2026 from 31.0% in the same period in 2025. We intend to continue to look for additional opportunities to reduce our G&A costs. For the nine months ended September 30, 2026 and 2025, non-cash expenses included in general and administrative expenses (stock compensation and depreciation) were approximately $0.6 million and $0.7 million, respectively.
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Income Tax Expense
We incurred $0.0 million and $0.01 million of income tax expense during the nine months ended September 30, 2026 and 2025. We have not recorded any tax benefit for the loss in our U.S. operations as we have recorded a full valuation allowance on our U.S. net deferred tax assets. We expect to continue to record a full valuation allowance on our U.S. net deferred tax assets until we sustain an appropriate level of taxable income through improved U.S. operations. Our effective tax rate is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a full valuation allowance on our U.S. net deferred tax assets.
Net Income (loss)
Net loss for the nine months ended September 30, 2026 was approximately $0.1 million compared to net income of approximately $0.3 million for the nine months ended September 30, 2025. The $0.4 million year-over-year decrease in net income reflected the absence in 2026 of the gain on disposition of subsidiaries recognized in 2025, partially offset by improved operating results from higher revenue and gross profit. Refer to the accompanying consolidated statements of operations for additional detail.
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Seasonality and other fluctuations
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 stock keeping units (“SKU”) 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.
Liquidity and Capital Resources
As of September 30, 2026, and December 31, 2025, the Company had cash of approximately $4.4 million and $3.6 million, respectively, and working capital (deficiency) of approximately $2.1 million and ($0.5 million), respectively. The Company reported a net loss from continuing operations of approximately $0.1 million for the nine months ended September 30, 2026, compared to a net income from continuing operations of approximately $0.3 million for the nine months ended September 30, 2025. As of September 30, 2026, the Company’s accumulated deficit increased to approximately $94.8 million, compared to approximately $94.7 million as of December 31, 2025.
For the nine months ended September 30, 2026, net cash used in operating activities of continuing operations was approximately $2.3 million, compared with approximately $4.0 million in the corresponding period of 2025, an improvement of approximately $1.6 million. Operating cash flows in 2026 were affected by increased investment in working capital to support sales growth. The statement of cash flows reflects cash uses of approximately $3.9 million from inventory and $2.0 million from accounts receivable, partially offset by cash provided by increases of approximately $1.5 million in accrued expenses and $0.5 million in accounts payable. The increases in inventories and accounts receivable were associated with the higher level of business activity, although the timing of collections, inventory purchases and payments to suppliers may cause operating cash flows to fluctuate from period to period.
For the nine months ended September 30, 2026, investing activities provided net cash of approximately $1.5 million, compared to $1.0 million in 2025. The increase was primarily due to $1.4 million proceeds from sale of the note receivable.
For the nine months ended September 30, 2026, net cash provided by financing activities totaled approximately $1.6 million. This amount primarily reflects net proceeds of $1.7 million from private placement and $0.2 million proceeds from the exercise of stock options, which was partially offset by a payment of approximately $0.2 million on an outstanding promissory note and $0.2 million repayments under the Company’s insurance financing agreement.
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Although the Company generated net income during the third quarter of 2026 and improved its cash balance and working capital position, it has a history of operating losses and negative cash flows from operating activities. Management continues to pursue initiatives to improve operating performance and liquidity, including strengthening core beverage distribution, pursuing consumer lifestyle and functional health opportunities, controlling operating costs, and managing working capital. The Company also maintains a $10.0 million credit facility with Two Shores Capital Corp. (the “Credit Facility”), under which advances bear interest at 13.75% per annum. All present and future obligations of the Loan Subsidiary under the 2Shores Loan Credit Facility are secured by a first-priority security interest in all assets of the Company, the Loan Subsidiary, and the Company’s other U.S. subsidiaries. The amount of additional borrowing capacity, if any, is subject to the Credit Facility’s terms and applicable borrowing conditions. Notwithstanding improvements in financial performance and management’s plans, substantial doubt remains regarding the Company’s ability to continue as a going concern within one year after the issuance date of the financial statements, as further discussed in Note 1 to the condensed consolidated financial statements.
Critical Accounting Policies and Estimates
See the information concerning our critical accounting policies and estimates included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 31, 2026. There have been no material changes in our critical accounting policies during the nine months ended September 30, 2026.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES. |
(a) Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures (as such terms are defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of September 30, 2026.
(b) Changes in internal controls over financial reporting
There were no changes in our internal controls over financial reporting during the nine months ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
We are not currently involved in any material legal proceedings. We 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 and other general liability claims, 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.
| ITEM 1A. | RISK FACTORS |
There have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, ISSUER PURCHASES OF EQUITY SECURITIES. |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
None.
| ITEM 5. | OTHER INFORMATION |
None.
| ITEM 6. | EXHIBITS | |
| 3.1 | Articles of Incorporation of Jones Soda Co. (Previously filed as, and incorporated herein by reference to, Exhibit 3.1 to our annual report on Form 10-KSB for the fiscal year ended December 31, 2000, filed on March 30, 2001; File No. 333-75913). | |
| 3.2 | Amended and Restated Bylaws of Jones Soda Co. (Previously filed with, and incorporated herein by reference to, Exhibit 3.1 to our quarterly report on Form 10-Q, filed on November 8, 2013; File No. 000-28820). | |
| 3.3 | Articles of Amendment to Articles of Incorporation of Jones Soda Co. dated May 16, 2022. (Previously filed with, and incorporated herein by reference to, Exhibit 3.3 to our registration statement on Form S-1, filed on June 14, 2022; File No. 333-265598). | |
| 4.1 | Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K/A filed July 28, 2026). SEC exhibit | |
| 10.1 | Form of Registration Rights Agreement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed July 28, 2026). SEC exhibit | |
| 31.1 | Certification of Chief Executive Officer, pursuant to Rules 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
| 31.2 | Certification of Chief Financial Officer, pursuant to Rules 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
| 32.1 | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
| 32.2 | Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements 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.
| JONES SODA CO. (Registrant) | ||
| November 10, 2026 | ||
| By: | /s/ Brian Meadows | |
Brian Meadows Chief Financial Officer | ||
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