What changed in this filing

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Item 1. Business

2024-04-01 compared with 2023-03-29 · 149 added, 185 removed, 291 unchanged (53% of the section changed)

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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.

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 do not directly manufacture our products, but instead outsource the manufacturing process to third-party contract manufacturers.

We also sell various products online, including soda with customized labels, wearables, candy and other items, and we license our trademarks for use on products sold by other manufacturers. In addition, during 2022 we developed and began to sell THC infused cannabis products under the “Mary Jones”

We also sell various products online, including soda with customized labels, wearables, candy and other items, and we license our trademarks for use on products sold by other manufacturers.

In addition, during 2022 we developed and began to license a THC infused cannabis products under the “Mary Jones” brand name.

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 4786 1st Avenue South, Suite 103, Seattle, WA 98134.

Our telephone number is (206) 624-3357.

Jones Soda Products

Our strategy is to continue to focus on our core brand, Jones Soda, while also investing in additional initiatives, including Mary Jones cannabis infused sodas and syrups, fountain related beverages, and Lemoncocco.

Our telephone number is (206) 624-3357.

Our strategy is to continue to focus on our core brand, Jones Soda, while also investing in additional initiatives including fountain related beverages and the Mary Jones brand for cannabis infused sodas, edibles, and syrups.

Our product line-up currently consists of the following:

Jones Soda is our premium carbonated soft drink.

We sell Jones Soda in premium glass bottles and cans, with labels featuring photos sent to us by our consumers.

We sell Jones Soda in premium glass bottles and cans, with labels featuring photos sent to us by our consumers.

Over one million photos have been submitted to us.

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Additionally, we release various label campaigns that celebrate our consumers and the positive impact such consumers have on the world.

Equally differentiating are the distinctive names of our products such as FuFu Berry, and the fact that our products are made from high quality ingredients, including cane sugar and natural colors and flavors when possible.

We also sell Jones Soda in more traditional flavors such as Cream Soda, Root Beer and Orange & Cream.

Our products are made from high quality ingredients, including cane sugar and natural colors and flavors when possible.

We also sell Jones Soda in more traditional flavors such as Cream Soda, Cola, Root Beer and Orange & Cream.

Drawing inspiration from our traditional bottles, our fountain equipment and cups are branded with an engaging collage of consumer-submitted photos that are inspired by the business themes of our retail partners and the regions in which they are located.

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We believe our national brand awareness and customer-centric approach make us unique compared to other craft soda competitors within this category.

We currently market and sell in California the following products under the Mary Jones brand name: 

10mg Cannabis-Infused sodas, 100mg cannabis-infused soda packaged in a 16oz, 10-serving can;

and a 100mg syrup cannabis tincture designed for mixing with other drinks, using as a food topping or sipping;

are now available in California.

We currently market and license through indirect subsidiaries our Mary Jones brand in California and Washington.

These licensed products include 10mg Cannabis-Infused sodas and 100mg cannabis-infused soda packaged in a 16oz, 10-serving can.

The flavor of these beverages are based on the Jones Soda original flavors.

The new Mary Jones products continue Jones Soda's tradition of using photographs submitted by consumers on their bottle labels and printing quotes from fans under the bottle caps. 

We currently intend to 

expand both the products offered under the Mary Jones brand as well as the number states we offer such cannabis infused products in.

We officially launched Lemoncocco®

Lemoncocco represents an entirely new beverage category that was inspired by the distinctive refreshment stands found along the streets of Rome, Italy.

Lemoncocco is a premium non-carbonated, naturally flavored beverage with the extracts of Sicilian lemons and a splash of coconut cream.

Lemoncocco is lightly sweetened with a touch of cane sugar and only 90 calories per 12-ounce serving.

Lemoncocco was designed to be on trend, beautifully bold in design and yield a higher gross profit margin than our current Jones bottle product offerings upon achieving a certain threshold of sales.

We feel that Lemoncocco is an ideal choice for food pairing, making cocktails and hydration.

We believe the overall appeal to the health channel and a wider age demographic makes Lemoncocco an exciting and diverse offering in the marketplace.

Additionally, in February 2024 we received approval to operate in Ontario, Canada, and intend to launch in that province 10mg THC infused sodas in a variety of flavors.

Manufacturing and distribution of Mary Jones products in Canada is intended to be done through Tilray Brands, Inc.

The new Mary Jones products continue Jones Soda's tradition of using photographs submitted by consumers on their bottle labels and printing quotes from fans under the bottle caps.

We currently intend to expand both the products offered under the Mary Jones brand as well as the number states and Canadian provinces we offer such cannabis infused products in.

Co-Brand and Private Label Products

From time to time, when opportunities meet our required financial and operational metrics, we utilize our industry expertise to provide private label products for customers.

No material examples of this opportunity occurred in 2023.

Sparkling Beverage Industry

Our Jones Soda beverages are classified in the sparkling beverage category, which encompasses carbonated soft drinks (CSD) and craft sodas.

According to a December 2022 special issue of Research and Markets, The World’s Largest Market Research Store, The size of the world's craft soda industry was estimated at $641.24 million in 2021, and it is anticipated to rise to $768.08 million by 2027.

"Craft sodas" refers to sodas produced in smaller quantities and using more natural ingredients. 

According to a December 2022 special issue of Research and Markets, The World’s Largest Market Research Store, the size of the world's craft soda industry was estimated at $641.24 million in 2021, and it is anticipated to rise to $768.08 million by 2027.

"Craft sodas" refers to sodas produced in smaller quantities and using more natural ingredients.

Our focus is sales growth through execution of the following key initiatives:

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Expand our fountain program in the United States and Canada;

Grow the new Mary Jones product line of Tetrahydrocannabinol (THC) and cannabidiol (CBD)-infused beverages, edibles, and other related products as well as the number of states where such products are sold;

Increase distribution of Lemoncocco in the United States and Canada.

Grow the new Mary Jones brand of Tetrahydrocannabinol (THC) and cannabidiol (CBD)-infused beverages, edibles, and other related products as well as the number of states where such products are sold;

Product Distribution and Sales Strategy

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Part of our strategy in building our distribution system is to blend our DSD and DTR distribution channels, delivering different offerings through alternate channels.

We have also introduced the JONES Cane Sugar Fountain program through a network of fountain distributors in select regions across the United States and Canada to provide our premium products and uniquely customized fountain equipment.

In addition to determining the most advantageous distribution channel, we work to ensure that our products are placed on shelves that are normally restricted to national mainstream brands and in the cold-aisle of stores, thus providing us access to the important “take home market.” We have also introduced the JONES Cane Sugar Fountain program through a network of fountain distributors in select regions across the United States and Canada to provide our premium products and uniquely customized fountain equipment.

For the year ended December 31, 2023, A.

Lassonde Inc.

(“Lassonde”), one of our independent distributors and our top account by revenue represented approximately 20% of revenue.

We intend to continue to expand our distributor network and DTR accounts, which we hope will result in a decreased dependence on any one or more of our independent distributors or national retail accounts.

(“Lassonde”), one of our independent distributors and our top account by revenue represented approximately 20% of revenue during 2023.

We intend to continue to expand our distributor network and DTR accounts, which we hope will result in a decreased dependence on any one or more of our independent distributors (including Lassonde) or national retail accounts.

In particular, it has been mutually decided to end our relationship with Lassonde in 2024 and have entered into an agreement with Dot Foods Canada, who we hope will become our largest distributor in 2024.

We contract with independent trucking companies to have our product shipped from our contract manufacturers to independent warehouses and then on to our distributors and national retail accounts.

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We have also secured distribution in select international markets and are evaluating other international opportunities for our products.

We choose our distributors based on our perception of their ability to build our brand franchise in convenience stores, grocery stores, on fountain in restaurants and “up and down the street”

in independent accounts such as delicatessens and sandwich shops.

Typically, we grant our independent distributors exclusive distribution rights in defined territories, which may include invasion fees in the event we provide any of our products directly to one of our national retailers located in the distributor’s region.

We are also obligated to pay termination fees for cancellations of most of these written distributor agreements, unless the termination is for “cause.

For example, we are party to a distribution agreement with Lassonde that, unless earlier terminated by either party for “cause,”

currently renews on an annual basis, unless either party gives notice to the other party of its intention not to renew the agreement not less than 90 days prior to the commencement of the next renewal term.

The distribution agreement grants Lassonde the exclusive right to sell our products throughout Canada, subject to certain exceptions for our national accounts, and imposes certain requirements on Lassonde, including obligations related to maintaining inventory levels and providing certain reports and prohibits “dumping”

We choose our distributors based on our perception of their ability to build our brand franchise in convenience stores, grocery stores, on fountain in restaurants and “up and down the street” in independent accounts such as delicatessens and sandwich shops.

We are also obligated to pay termination fees for cancellations of most of these written distributor agreements, unless the termination is for “cause.

We intend to continue our efforts to reinforce and expand our distribution network by partnering with new distributors and replacing underperforming distributors.

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Product availability at a specific store location for any of our retailers is subject to the retailer preference, consumer demand, and localized store variances.

To find a retailer that carries our products, our product locator is available on our website under “Store Locator.”

DTR (direct to retail)

Our direct to retail channel of distribution is an important part of our strategy to target large national or regional restaurant chains and retail accounts, including convenience store chains, mass merchandisers and premier food-service businesses.

Through these programs, we negotiate directly with the retailer to carry our products, and the account is serviced through the retailer’s appointed distribution system (rather than through our DSD network).

These arrangements are terminable at any time by these retailers or us and contain no minimum purchase commitments or termination fees.

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We sell direct to certain retailers in addition to working with a network of fountain distributors in select focus regions within the United States and Canada to provide our premium products, including our fountain and slush products, and uniquely customized fountain equipment.

Our premium beverage products are sold throughout the United States and Canada, primarily in grocery stores, convenience and gas stores, on fountain in restaurants and “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.

In 2022, sales in the United States represented approximately 80% of total sales, while sales in Canada represented approximately 19% (primarily through our distributor relationship with Lassonde), and we had approximately 1% in other international sales.

Our premium beverage products are sold throughout the United States and Canada, primarily in grocery stores, convenience and gas stores, on fountain in restaurants and “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.

In 2023, sales in the United States represented approximately 81% of total sales, while sales in Canada represented approximately 19% (primarily through our distributor relationship with Lassonde).

Mary Jones Brand

Our Mary Jones Brand is currently marketed and licensed through indirect subsidiaries in California and Washington.

We partner with different co-manufacturing and distribution partners in each respective state, region, or province in which we license these products.

Our Premium Soda Brands

Building our Brand

We have built our brand to a large extent on our fun and independent image as well as by providing what we believe to be unique and exciting flavors that appeal to consumers who prefer alternatives to the corporate carbonated soft drink brands.

We believe this market is driven by trendy, young consumers looking for a distinctive tonality and better ingredients in their beverage choices.

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In that space, consumers have the ability to customize their own label and product with a photo and short caption using a proprietary patented process.

We continue to attempt to “bring our labels to life”

with a series of augmented reality labels showcasing extreme athletes and artists in action that we believe builds on Jones Soda’s long-time association with action sports and creators of all kinds, involving influencers ranging from a gravity-defying professional scooter rider with 150,000 Instagram followers to a tattoo artist, jewelry designer and street muralist.

These labels are “brought to life”

with a new Jones Soda app that shoppers simply download the Jones Soda app and use their phone camera to scan the image on any bottle carrying a “Reel Label”

We continue to attempt to “bring our labels to life” with a series of augmented reality labels showcasing extreme athletes and artists in action that we believe builds on Jones Soda’s long-time association with action sports and creators of all kinds, involving influencers ranging from a gravity-defying professional scooter rider with 150,000 Instagram followers to a tattoo artist, jewelry designer and street muralist.

These labels are “brought to life” with a new Jones Soda app that shoppers simply download the Jones Soda app and use their phone camera to scan the image on any bottle carrying a “Reel Label” icon.

The scan triggers a short video bringing the viewer inside the unique world of its creator, whether he or she is painting a mural in time-lapse or doing a hardflip at the skatepark.

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Our marketing team has developed brand positioning and brand identity that is an integral asset and we believe allows our brand to be widely known in a positive way among a large demographic.

We have focused on positioning ourselves as an alternative to mainstream soda brands and try to focus on locations where such brands areare not sold.

We also have a program of sponsoring alternative sport athletes to promote our products in youth alternative sports, including Ultimate Fighting Championship, auto-racing, skateboarding, BMX biking, snowboarding and skiing.

We have focused on positioning ourselves as an alternative to mainstream soda brands and try to focus on locations where such brands are not sold.

We also have a program of sponsoring alternative sport athletes to promote our products in youth alternative sports, including Ultimate Fighting Championship, auto-racing, skateboarding, BMX biking, snowboarding and skiing.

In addition, we completed a program of sponsoring up-and-coming musicians and artists.

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Consumer-Submitted Photos

We are well-known for the consumer submitted photos on our labels and cans.

We are well-known for the consumer submitted photos on our labels and cans.

We invite our consumers to send us photos of their lives, and we select from those photos for use on our labels.

Photos can be submitted through our website at our “Jones Soda Photo Gallery.” 

Customized Photo Labels

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The strategy of this program is to provide a customized and personalized product offering to our consumers as well as an innovative marketing opportunity for our Jones Soda brand.

Consumers can upload their photos through our website and create their own “myJones”

Consumers can upload their photos through our website and create their own “myJones” labels.

The personalized labels are downloaded at our headquarters, applied to 12-packs of Jones Soda and delivered to the consumer.

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In response to consumer demand, we also sell our products and our wearables on our website.

In selected cities, we participate at a “grassroots”

level at certain community and sporting events in an attempt to create and increase brand awareness and loyalty.

As noted above, we use recreational vehicles, vans and independent distributor vehicles painted with the Jones colors and logos to create consumer awareness and enthusiasm at these events and to assist distributors as they open new retail accounts and markets.

In selected cities, we participate at a “grassroots” level at certain community and sporting events in an attempt to create and increase brand awareness and loyalty.

As noted above, we use recreational vehicles, vans and independent distributor vehicles painted with the Jones colors and logos to create consumer awareness and enthusiasm at these events and to assist distributors as they open new retail accounts and markets.

From time to time, we partner with companies that will manufacture Jones-related products that we feel extend and enhance our Jones brand.

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At these events, we are able to display our logo and participate in sampling activities where we encourage the tasting of our products to encourage purchases of our brand at retail establishments where our products are sold.

We anticipate investing in more of these events as we focus on marketing efforts in support of our core brand, Jones Soda, subject to any ongoing restrictions that may be imposed by the COVID-19 pandemic or any other future pandemics. 

We anticipate investing in more of these events as we focus on marketing efforts in support of our core brand, Jones Soda.

Brand and Product Development - Premium Soda Beverages

We understand the importance of creating new beverage products and enhancing our existing products to meet the ever-changing consumer taste profile.

We continue to expand our Jones Cane Sugar Fountain program that allows for our Jones Soda product line to be offered “on tap.”

We partner with restaurants and grocery stores that prefer to offer new innovative and pure cane sugar fountain opportunities for their guests and we utilize a select group of fountain distributors to service these retail customers.

We continue to expand our Jones Cane Sugar Fountain program that allows for our Jones Soda product line to be offered “on tap.” We partner with restaurants and grocery stores that prefer to offer new innovative and pure cane sugar fountain opportunities for their guests and we utilize a select group of fountain distributors to service these retail customers.

Our strategy is to focus on innovative products that will be accepted by consumers, retailers and distributors.

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Market Evaluation.

  We evaluate the strengths and weaknesses of certain categories and segments of the beverage industry with a view to pinpointing potential opportunities.

Financial Evaluation.

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Distributor Evaluation.

  We analyze existing and potential distribution channels, whether DSD, DTR or a blend of these channels.

This analysis addresses, among other things, which companies will distribute particular beverage brands and products, where such companies may distribute such brands and products, and what will motivate these distributors to distribute such brands and products.

Production Evaluation.

  We review all aspects of production of our beverages, including contract packing capacity, strategic production locations, and quality control, and prepare a cost analysis of the various considerations that will be critical to producing our brands and products.

Image and Design.

  Based on our evaluation of the market, distributors and production issues, we create and develop the concept for a beverage brand, product or product extension.

Our technical services department then works with various flavor concentrate houses to test, choose and develop product flavors for the brand.

We believe that the ongoing process of creating new brands, products and product extensions will be an important factor in our long-term success.

For example, we recently completed a successful Q4 special release programs where we sold the products “Sugar Cookie”

and “Turkey and Gravy.”

Additionally, in 2022 we partnered with ICEE to create the popular Cherry flavor as the newest entry in our Special Release program featuring limited-edition flavors that combines the familiar Jones Soda label design with the ICEE logo and a whimsical drawing of ICEE’s bear mascot to facilitate brand recognition on the shelf. 

We also intend to continue to launch a line of cannabis-infused sodas, syrups and gummies under a new brand, “Mary Jones”.

For example, we recently completed successful special release programs in the fourth quarter of 2023 where we sold the products “Orange Chocolate” and “Turkey and Gravy.”

In addition to creating new brands, we believe we need to continuously improve our core product line, Jones Soda, as consumer tastes continue to change.

We intend that each new flavor of Jones Soda that we introduce will be made with less sugar and no artificial colors or flavors whenever possible.

In addition, we continue to re-formulate and re-introduce lower calorie content versions of each of our existing flavors of Jones Soda as and when we believe we have created an acceptable replacement that will appeal to existing customers and attract new customers.

Moreover, in addition to the above extensions to the Jones Soda brand, we have created and launched a brand with its own separate identity from the Jones Soda brand, Lemoncocco®.

We believe that Lemoncocco represents a new category in the non-carbonated beverage industry and that developing a separate all-natural beverage brand is an important opportunity for our company.

In addition, we intend to continue to re-formulate and re-introduce lower calorie content versions of each of our existing flavors of Jones Soda as and when we believe we have created an acceptable replacement that will appeal to existing customers and attract new customers.

Brand and Product Development – Mary Jones

Mary Jones products are influenced by the Jones Soda original flavors.

We believe the popularity of our main-line Jones Soda products have paved the way for growth for the Mary Jones brand and products.

It is important to us to differentiate our Mary Jones brand from our Jones Soda Brand for many reasons including safety and compliance, however, even with this differentiation, we are able to utilize the Jones Soda brand equity to market and grow the Mary Jones brand.

Additionally, we will continue to innovate and develop the Mary Jones products and flavors as the brand gains momentum.

Premium Beverage Industry

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product quality and taste;

trade and consumer promotions; and

trade and consumer promotions;

development of new brands, products and product extensions.

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Our products compete with all non-alcoholic beverages, most of which are marketed by companies with substantially greater financial resources than ours.

We also compete with regional beverage producers and “private label”

soft drink suppliers.

Our direct competitors in the sparkling beverage industry include traditional large soft drink manufacturers and distributors as well as regional premium soft drink companies.

We also compete with regional beverage producers and “private label” soft drink suppliers.

Our direct competitors in the sparkling beverage industry include traditional large soft drink manufacturers and distributors as well as regional premium soft drink companies.

In order to compete effectively in the beverage industry, from time to time we develop and introduce new products and product extensions.

Although we believe that we will be able to continue to create competitive and relevant brands and products to satisfy consumers’

changing preferences, there can be no assurance that we will be able to do so or that other companies will not be more successful in this regard over the long term.

Although we believe that we will be able to continue to create competitive and relevant brands and products to satisfy consumers’ changing preferences, there can be no assurance that we will be able to do so or that other companies will not be more successful in this regard over the long term.

Pricing of the products is also important.

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Cannabis Industry

We facing intense competition in the Cannabis industry from other companies, some of which have longer operating histories and more financial resources and longer history of the production and marketing of cannabis products than then we do.

We face intense competition in the Cannabis industry from other companies, some of which have longer operating histories and more financial resources and longer history of the production and marketing of cannabis products than then we do.

Competitors are primarily branded and private label cannabis companies who are operating in multiple states.

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If the number of users of medical and recreational cannabis increases, the demand for products will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products and pricing strategies.

To remain competitive, the believe we will be required to make a high level of investment in our planned licenses, partnerships, branding, products and technologies, distribution, research and development, marketing, sales and client support.

To remain competitive, we believe we will be required to make a high level of investment in our planned licenses, partnerships, branding, products and technologies, distribution, research and development, marketing, sales and client support.

We may not have sufficient resources to maintain its marketing, sales and client support efforts on a competitive basis which could materially and adversely affect our business, financial condition, and results of operations of our planned cannabis business.

Contract Packing Arrangements

We do not directly manufacture our premium soda beverage products, but instead outsource the manufacturing process to third-party bottlers and independent contract manufacturers (co-packers).

We do not directly manufacture our premium soda beverage products, but instead outsource the manufacturing process to third-party bottlers and independent contract manufacturers (co-packers).

We currently use primary co-packers located in Canada and the United States.

Once the product is manufactured, the finished products are stored either at the co-packer’s location or in nearby third-party warehouses.

Other than minimum case volume requirements per production batch or “run”

for most co-packers, we do not have annual minimum production commitments with our co-packers.

Once the product is manufactured, the finished products are stored either at the co-packer’s location or in nearby third-party warehouses.

Other than minimum case volume requirements per production batch or “run” for most co-packers, we do not have annual minimum production commitments with our co-packers.

Our co-packers may terminate their arrangements with us at any time, in which case we could experience disruptions in our ability to deliver products to our customers.

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The costs of raw materials fluctuate and in certain instances we enter into supply agreements to address these risks.

We have a three-year fixed price supply agreement with our primary glass supplier which expires at the end of 2023.

We have a fixed price supply agreement with our primary glass supplier which expires at the end of 2025.

The price of glass continues to increase each year due to the shortage of available glass in the industry;

however, our supply agreement with our glass supplier provides us with some price protection through 2024.

As the global supply chain continues to see disruptions, there is higher risk for continued labor shortages, raw material cost increases, and increased costs of transportation that could adversely impact our business.

The extent to which the global supply chain disruptions may continue to impact our results of operations, including the long-term nature of the impact, depends on numerous evolving factors, which are highly uncertain and difficult to predict. 

Quality Control

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Contract manufacturers are selected and monitored by our quality control representatives in an effort to ensure adherence to our production procedures and quality standards.

For every batch or “run”

of product, our contract manufacturer undertakes extensive testing of product quality and packaging.

For every batch or “run” of product, our contract manufacturer undertakes extensive testing of product quality and packaging.

This includes testing levels of sweetness, carbonation, taste, product integrity, packaging and various regulatory cross checks.

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Flavors are pre-tested by the flavor concentrate supplier before shipment to contract manufacturers.

We are committed to ongoing product improvement with a view towards ensuring the high quality of our product through a stringent co-packer selection, training and communication program. 

Cannabis Operations

During 2022, we began to develop, market and distribute cannabis-infused beverages and syrups under the “Mary Jones”

brand name in California to complement our existing soda beverage business.

Similar to the manufacturing process with our premium soda products we outsource the manufacturing and distribution of our products to third parties with whom we enter licensing agreement with concerning our cannabis products being manufactured and sold.

We operate our cannabis operations  in California under newly created California subsidiary that is separate from our current soda beverage business.

During 2022, we began to develop, market and license our cannabis-infused beverage brand under the “Mary Jones” brand name in California to complement our existing soda beverage business.

Similar to the manufacturing process with our premium soda products we outsource the manufacturing and distribution of our products to third parties with whom we enter licensing agreements with concerning our cannabis products being manufactured and sold.

We operate our cannabis operations in California and Washington under newly created California subsidiary that is separate from our current soda beverage business.

We currently plan to expand our cannabis operations into other states that have legalized the recreational use of cannabis using a similar structure to our operations in California.

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Although federally illegal, the U.S.

federal government’s approach to enforcement of such laws has trended toward non-enforcement.

On August 29, 2013, the U.S.

Department of Justice (“DOJ”) issued a memorandum known as the “Cole Memorandum”

Attorneys’

offices (federal prosecutors).

Department of Justice (“DOJ”) issued a memorandum known as the “Cole Memorandum” to all U.S.

Attorneys’ offices (federal prosecutors).

The Cole Memorandum generally directed U.S.

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However, on January 4, 2018, the Cole Memorandum was revoked by Attorney General Jeff Sessions.

While this did not create a change in federal law, as the Cole Memorandum was not itself law, the revocation removed the DOJ’s guidance to U.S.

Attorneys that state regulated cannabis industries substantively in compliance with the Cole Memorandum’s guidelines should not be a prosecutorial priority.

In addition to his revocation of the Cole Memorandum, Attorney General Sessions also issued a one-page memorandum known as the “Sessions Memorandum.”

The Sessions Memorandum confirmed the rescission of the Cole Memorandum and explained the rationale of the DOJ in doing so:

the Cole Memorandum, according to the Sessions Memorandum, was “unnecessary”

due to existing general enforcement guidance adopted in the 1980s, as set forth in the U.S.

Attorney’s Manual (the “USAM”).

the “seriousness”

of the alleged crimes, the “deterrent effect of criminal prosecution,”

and “the cumulative impact of particular crimes on the community.”

it does not otherwise indicate that the prosecution of marijuana-related offenses is now a DOJ priority.

While this did not create a change in federal law, as the Cole Memorandum was not itself law, the revocation removed the DOJ’s guidance to U.S.

Attorneys that state regulated cannabis industries substantively in compliance with the Cole Memorandum’s guidelines should not be a prosecutorial priority.

In addition to his revocation of the Cole Memorandum, Attorney General Sessions also issued a one-page memorandum known as the “Sessions Memorandum.” The Sessions Memorandum confirmed the rescission of the Cole Memorandum and explained the rationale of the DOJ in doing so:

the Cole Memorandum, according to the Sessions Memorandum, was “unnecessary” due to existing general enforcement guidance adopted in the 1980s, as set forth in the U.S.

Attorney’s Manual (the “USAM”).

The USAM enforcement priorities, like those of the Cole Memorandum, are also based on the federal government’s limited resources, and include “law enforcement priorities set by the Attorney General,” the “seriousness” of the alleged crimes, the “deterrent effect of criminal prosecution,” and “the cumulative impact of particular crimes on the community.”

While the Sessions Memorandum emphasizes that marijuana is a Schedule I controlled substance, and reiterates the statutory view that cannabis is a “dangerous drug and that marijuana activity is a serious crime,” it does not otherwise indicate that the prosecution of marijuana-related offenses is now a DOJ priority.

Furthermore, the Sessions Memorandum explicitly describes itself as a guide to prosecutorial discretion.

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Attorneys across the country have affirmed that their view of federal enforcement priorities has not changed, although a few have displayed greater ambivalence.

In his February 2021 confirmation hearing, current Attorney General Merrick Garland affirmed the principles of prosecutorial discretion from the rescinded Cole Memorandum. 

Attorney General, Merrick Garland, has not officially indicated any change in enforcement priority for state-compliant marijuana businesses, however, uncertainty regarding federal enforcement remains.

Most recently, on October 6, 2022, President Joe Biden announced a three-step program to bring broad changes to federal cannabis policy. 

As an initial step towards reform, President Biden began the process of pardoning all federal offenders convicted of simple cannabis possession. 

In his February 2021 confirmation hearing, current Attorney General Merrick Garland affirmed the principles of prosecutorial discretion from the rescinded Cole Memorandum.

He noted that “It does not seem to me a useful use of limited resources that we have to be pursuing prosecutions in states that have legalized and are regulating the use of marijuana either medically or otherwise.” Attorney General, Merrick Garland, has not officially indicated any change in enforcement priority for state-compliant marijuana businesses, however, uncertainty regarding federal enforcement remains.

Most recently, on October 6, 2022, President Joe Biden announced a three-step program to bring broad changes to federal cannabis policy.

As an initial step towards reform, President Biden began the process of pardoning all federal offenders convicted of simple cannabis possession.

As a second step, President Biden also encouraged Governors to take similar steps to pardon state simple cannabis possession charges.

Finally, President Biden directed the Department of Health and Human Services and Attorney General Merrick Garland to “expeditiously”

review cannabis’s status as a Schedule I controlled drug pursuant to the federal Controlled Substances Act.

With these positive developments it is important to acknowledge that these policy directives have not yet changed the “laws on the books”

and so there remains uncertainty regarding whether such policies and enforcement priorities may change in the future.

Finally, President Biden directed the Department of Health and Human Services and Attorney General Merrick Garland to “expeditiously” review cannabis’s status as a Schedule I controlled drug pursuant to the federal Controlled Substances Act.

In early 2024, the Department of Health and Human Services and the Food and Drug Administration made a recommendation to reschedule cannabis.

With these positive developments it is important to acknowledge that these policy directives have not yet changed the “laws on the books” and so there remains uncertainty regarding whether such policies and enforcement priorities may change in the future.

Regardless, marijuana remains a Schedule I controlled substance at the federal level, and neither the Cole Memorandum nor its rescission has altered that fact.

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Despite these laws, the U.S.

Department of the Treasury issued a memorandum in February of 2014 (the “FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned marijuana businesses.

Under these guidelines, financial institutions must submit a “suspicious activity report”

(“SAR”) as required by federal money laundering laws.

Department of the Treasury issued a memorandum in February of 2014 (the “FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned marijuana businesses.

Under these guidelines, financial institutions must submit a “suspicious activity report” (“SAR”) as required by federal money laundering laws.

These marijuana related SARs are divided into three categories:

marijuana limited, marijuana priority, and marijuana terminated, based on the financial institution’s belief that the marijuana business follows state law, is operating out of compliance with state law, or where the banking relationship has been terminated.

On the same day the FinCEN Memorandum was published, the DOJ issued a memorandum (the “2014 Cole Memo”) directing prosecutors to apply the enforcement priorities of the Cole Memorandum in determining whether to charge individuals or institutions with crimes related to financial transactions involving the proceeds of marijuana-related conduct.

The 2014 Cole Memo has been rescinded as of January 4, 2018, along with the Cole Memorandum, removing guidance that enforcement of applicable financial crimes was not a DOJ priority.

However, Attorney General Sessions’

revocation of the Cole Memorandum and the 2014 Cole Memo has not affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself.

However, Attorney General Sessions’ revocation of the Cole Memorandum and the 2014 Cole Memo has not affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself.

Though it was originally intended for the 2014 Cole Memo and the FinCEN Memorandum to work in tandem, the FinCEN Memorandum can act as a standalone document which explicitly lists the eight enforcement priorities originally cited in the Cole Memorandum.

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The United States Congress has passed appropriations bills each of the last three years that included the Rohrabacher Amendment Title:

H.R.2578 —

Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016, which by its terms does not appropriate any federal funds to the U.S.

H.R.2578 — Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016, which by its terms does not appropriate any federal funds to the U.S.

DOJ for the prosecution of medical cannabis offenses of individuals who are in compliance with State medical cannabis laws.

Subsequent to the issuance of the Sessions Memorandum on January 4, 2018, the United States Congress passed its omnibus appropriations bill, SJ 1662, which for the fourth consecutive year contained the Rohrabacher-Blumenauer Amendment language (the “Leahy Amendment”) and continued the protections for the medical cannabis marketplace and its lawful participants from interference by the DOJ up and through the 2018 appropriations deadline of September 30, 2018.

The deadline has passed, but the Leahy Amendment has remained in effect by virtue of a series of short-term spending bills signed on September 28, 2018, December 7, 2018, January 25, 2019 and February 8, 2019.

On February 15 the amendment was renewed through the signing of the fiscal year 2019 omnibus spending bill, effective through September 30, 2019. 

On May 16, 2019, a House subcommittee released a base appropriations bill with the amendment included.

On September 26, 2019 the Senate Appropriations Committee approved a base appropriations bill with the amendment included.

On September 27, 2019 the amendment was renewed through a stopgap spending bill, and again on November 21, 2019. 

On December 20, 2019 the amendment was renewed through the signing of the fiscal year 2020 omnibus spending bill, effective through September 30, 2020. 

In July 2020, a House subcommittee introduced a base appropriations bill with the amendment included. 

On September 27, 2019 the amendment was renewed through a stopgap spending bill, and again on November 21, 2019.

On December 20, 2019 the amendment was renewed through the signing of the fiscal year 2020 omnibus spending bill, effective through September 30, 2020.

In July 2020, a House subcommittee introduced a base appropriations bill with the amendment included.

The amendment was then renewed through a series of stopgap spending bills on October 1, 2020 December 11, 2020, December 18, 2020, December 20, 2020, and December 22, 2020.

On December 27, 2020, the amendment was renewed through the signing of the fiscal year 2021 omnibus spending bill, effective through September 30, 2021. In 2021, President Joe Biden became the first president to propose a budget with the Leahy Amendment included.

On December 27, 2020, the amendment was renewed through the signing of the fiscal year 2021 omnibus spending bill, effective through September 30, 2021.

In 2021, President Joe Biden became the first president to propose a budget with the Leahy Amendment included.

The amendment was then renewed through a series of stopgap spending bills on September 30, December 3, February 18, and March 11.

On March 15 the amendment was renewed through the signing of the FY 2022 omnibus spending bill, effective through September 30, 2022.

As of December 29, 2022, the amendment is effective through September 30, 2023.

The amendment remains effective in March 2024.

State Regulatory Environment

The following sections describe the legal and regulatory landscape in California, which is the first state where we intend to  commence our planned cannabis operations.

While we will work to ensure that our operations comply with applicable state laws, regulations, and licensing requirements, for the reasons described above and the risks further described under the heading “Risk Factors”, there are significant risks associated with our planned cannabis business.

Readers are strongly encouraged to carefully read and consider all of the risk factors contained under the heading “Risk Factors”

The following sections describe the legal and regulatory landscape in California, which is the first state where we intend to commence our planned cannabis operations.

Readers are strongly encouraged to carefully read and consider all of the risk factors contained under the heading “Risk Factors” below.

California Regulatory Landscape

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In 2003, Senate Bill 420 was signed into law establishing an optional identification card system for medical marijuana patients.

In September 2015, the California legislature passed three bills collectively known as the Medical Cannabis Regulation and Safety Act (“MCRSA”).

The MCRSA established a licensing and regulatory framework for medical marijuana businesses in California.

The system created multiple license types for dispensaries, infused products manufacturers, cultivation facilities, testing laboratories, transportation companies, and distributors.

Edible infused product manufacturers would require either volatile solvent or non-volatile solvent manufacturing licenses depending on their specific extraction methodology.

Edible infused product manufacturers would require either volatile solvent or non-volatile solvent manufacturing licenses depending on their specific extraction methodology.

Multiple agencies would oversee different aspects of the program and businesses would require a state license and local approval to operate.

However, in November 2016, voters in California overwhelmingly passed Proposition 64, the Adult Use of Marijuana Act (“AUMA”) creating an adult-use marijuana program for adults 21 years of age or older.

AUMA had some conflicting provisions with MCRSA, so in June 2017, the California State Legislature passed Senate Bill No. 94, known as Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which amalgamates MCRSA and AUMA to provide a set of regulations to govern a medical and adult-use licensing regime for cannabis businesses in the State of California.

The four agencies that originally regulated marijuana at the state level were the Bureau of Cannabis Control (“BCC”), California Department of Food and Agriculture (“DFA”), California Department of Public Health (“DPH”), and California Department of Tax and Fee Administration.

MAUCRSA went into effect on January 1, 2018.

On July 1, 2019, California enacted A.B.

However, in November 2016, voters in California overwhelmingly passed Proposition 64, the Adult Use of Marijuana Act (“AUMA”) creating an adult-use marijuana program for adults 21 years of age or older.

AUMA had some conflicting provisions with MCRSA, so in June 2017, the California State Legislature passed Senate Bill No.

94, known as Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which amalgamates MCRSA and AUMA to provide a set of regulations to govern a medical and adult-use licensing regime for cannabis businesses in the State of California.

MAUCRSA went into effect on January 1, 2018.

On July 1, 2019, California enacted A.B.

In relevant part, the bill authorizes licensing authorities to issue citations and fines to a licensee or an unlicensed person who violates MAUCRSA.

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Finally, the bill requires the DPH to establish a certification program for manufactured cannabis products comparable to the National Organic Program and the California Organic Food and Farming Act.

On October 12, 2019, California enacted A.B.

On October 12, 2019, California enacted A.B.

The bill mandates that all cannabis vaping cartridges and cannabis vaporizers must include a universal symbol identifying the product as a vaping product.

On July 12, 2021, California Governor Gavin Newsom signed into law Assembly Bill 141 (AB-141), which creates the Department of Cannabis Control (“DCC”).

The DCC  is in the process of consolidating the state’s cannabis program oversight from three of the existing agencies –

the BCC, the DFA, and the DPH –

under a single department in an effort to centralize and simplify regulatory and licensing oversight in California.

On July 12, 2021, California Governor Gavin Newsom signed into law Assembly Bill 141 (AB-141), which creates the Department of Cannabis Control (“DCC”).

The DCC is in the process of consolidating the state’s cannabis program oversight from three of the existing agencies – the BCC, the DFA, and the DPH – under a single department in an effort to centralize and simplify regulatory and licensing oversight in California.

DCC similarly announced its intention to create a single Licensing Division that would be responsible for licensing of all cannabis businesses.

On or about September 15, 2021, the DCC filed emergency regulations to consolidate, clarify, and make consistent cannabis regulations to the California Office of Administrative Law.

After a limited comment period, these consolidated emergency regulations were approved and became effective on or about September 27, 2021.

On or about September 15, 2021, the DCC filed emergency regulations to consolidate, clarify, and make consistent cannabis regulations to the California Office of Administrative Law.

After a limited comment period, these consolidated emergency regulations were approved and became effective on or about September 27, 2021.

These regulations created consistent standards for cannabis licensees across all license types, by aligning application requirements, unifying terminology, and clarifying ownership and financial interest requirements.

Further consolidated regulations and modifications of existing regulations were issued for public comment on March 4, 2022.

At present, to legally operate a medical or adult-use cannabis business in California, the operator must have both a local and state license.

Further consolidated regulations and modifications of existing regulations were issued in March 2024.

At present, to legally operate a medical or adult-use cannabis business in California, the operator must have both a local and state license.

This requires license holders to operate in cities with marijuana licensing programs.

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California Licensing Requirements

A medicinal retailer license permits the sale of medicinal cannabis and cannabis products to a medicinal cannabis patient in California who possesses a physician’s recommendation.

Only certified physicians may provide medicinal marijuana recommendations.

An adult-use retailer license permits the sale of cannabis and cannabis products to any individual age 21 years of age or older who presents a valid government-issued photo identification.

An adult-use or medicinal cultivation license permits cannabis cultivation activity which means any activity involving the planting, growing, harvesting, drying, curing, grading or trimming of cannabis.

Such licenses further permit the production of a limited number of non-manufactured cannabis products and the sales of cannabis to certain licensed entities within the state of California for resale or manufacturing purposes.

An adult-use or medical manufacturing license permits the manufacturing of cannabis products.

An adult-use retailer license permits the sale of cannabis and cannabis products to any individual age 21 years of age or older who presents a valid government-issued photo identification.

An adult-use or medicinal cultivation license permits cannabis cultivation activity which means any activity involving the planting, growing, harvesting, drying, curing, grading or trimming of cannabis.

Such licenses further permit the production of a limited number of non-manufactured cannabis products and the sales of cannabis to certain licensed entities within the state of California for resale or manufacturing purposes.

An adult-use or medical manufacturing license permits the manufacturing of cannabis products.

Manufacturing includes the compounding, blending, extracting, infusion, packaging or repackaging, labeling or relabeling, or other preparation of a cannabis product.

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As with all jurisdictions, the full regulations, as promulgated by each applicable state agency, should be consulted for further information about any particular operational area.

Licensed cannabis businesses may partner with non-licensed business entities pursuant to intellectual property licensing agreements subject to certain disclosure requirements and approvals by the DCC. 

California Dispensary Requirements

Cannabis retailers may only sell cannabis products that were received by the retail licensee from a licensed distributor or licensed microbusiness authorized to engage in distribution, and the licensed retailer must verify that the cannabis goods have not exceeded their best-by, sell-by, or expiration date if one is provided.

Cannabis retailers may only sell cannabis products that were received by the retail licensee from a licensed distributor or licensed microbusiness authorized to engage in distribution, and the licensed retailer must verify that the cannabis goods have not exceeded their best-by, sell-by, or expiration date if one is provided.

The goods must have undergone appropriate laboratory testing, and the batch number labeled on the package of cannabis goods must match the batch number on the corresponding certificate of analysis for regulatory compliance testing.

The packaging and goods must comply with all applicable laws in order for the goods to be sold at the retail location.

In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and licensee’s branded merchandise.

A licensed retailer may not provide free cannabis goods except for in certain limited circumstances.

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California Reporting Requirements

The state of California uses METRC as the state’s track-and-trace (“T&T”) system used to track commercial cannabis activity and movement across the distribution chain for all state-issued annual licensees.

The state of California uses METRC as the state’s track-and-trace (“T&T”) system used to track commercial cannabis activity and movement across the distribution chain for all state-issued annual licensees.

The system allows for other third-party system integration via application programming interface.

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California Storage, Transportation, and Security Requirements

To ensure the safety and security of cannabis business premises and to maintain adequate controls against the diversion, theft, and loss of cannabis or cannabis products, California’s marijuana businesses are required to do the following:

maintain a fully operational security alarm system;

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maintain a video surveillance system that records continuously 24 hours a day;

ensure that the facility’s outdoor premises have sufficient lighting;

not dispense from its premises outside of permissible hours of operation;

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Trademarks, Flavor Concentrate Trade Secrets and Patent Rights

In the United States, we own a number of trademark registrations (designated by the ®

symbol) and pending trademark applications (designated by the ™

symbol) for use in connection with our products, including “JONES®,”

“JONES SODA CO.®

“LEMONCOCCO ®”

MARY JONES®,”.

In general, trademark registrations expire 10 years from the filing date or registration date, with the exception in Canada, where trademark registrations expire 15 years from the registration date.

In the United States, we own a number of trademark registrations (designated by the ® symbol) and pending trademark applications (designated by the ™ symbol) for use in connection with our products, including “JONES®,” “JONES SODA CO.® “LEMONCOCCO ®” and “ MARY JONES®,”.

In general, trademark registrations expire 10 years from the filing date or registration date, with the exception in Canada, where trademark registrations expire 15 years from the registration date.

All trademark registrations may be renewed for a nominal fee.

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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 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 or "SKUs" selected or removed by our distributors and retail partners through the normal course of serving consumers in the dynamic, trend-oriented beverage industry.

As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year.

As of the date of this Report, we have 29 employees, all of which are full-time,  and with the exception of one employee located in Canada are all located in the United States.

Human Capital

We believe the strength of our workforce is one of the significant contributors to our success.

Attracting, developing and retaining talent with the right skills to drive our business is central to our purpose, mission and long-term growth strategy.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

The principal purposes of our equity incentive plan is to attract, retain and reward personnel through the granting of stock-based compensation awards, in order to increase shareholder value and the success of our Company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

As of the date of this Report, we have 27 employees, all of which are full-time, and with the exception of one employee located in Canada are all located in the United States.

Of our 27 employees, 15 are employed in sales and marketing capacities, 6 are employed in administrative capacities and 6 are employed in customer service, manufacturing and quality control capacities.

None of our employees are represented by labor unions.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase shareholder value and the success of our Company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Securities Exchange Act Reports and other Available Information

As a public company, we are required to file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and other information (including any amendments) with the Securities and Exchange Commission (the “SEC”).

You can find our SEC filings at the SEC’s website at www.sec.gov.

Our Internet address is www.jonessoda.com.

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We make available on or through our website at www.jonessoda.com our SEC filings free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.

In addition, the following corporate governance materials are also available on our website under “Investor Relations —

Corporate Governance:”

In addition, the following corporate governance materials are also available on our website under “Investor Relations — Corporate Governance:”

Audit Committee Charter

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Code of Ethics for our CEO and senior financial officers.

A copy of any of the materials filed with or furnished to the SEC or copies of the corporate governance materials described above are available free of charge and can be mailed to you upon request to Jones Soda Co., 4786 1 st Avenue South, Suite 103, Seattle, Washington 98134.

A copy of any of the materials filed with or furnished to the SEC or copies of the corporate governance materials described above are available free of charge and can be mailed to you upon request to Jones Soda Co., 4786 1st Avenue South, Suite 103, Seattle, Washington 98134.

Executive Officers

Mark Murray, President and Chief Executive Officer

Eric Chastain, Chief Operating Officer, President of Jones Soda Beverage Division, and Corporate Secretary

David Knight, President and Chief Executive Officer

Eric Bittner, Chief Operating Officer and Corporate Secretary

Jerry Goldner, Chief Growth Officer

Joe Culp, Director of Finance, Interim Chief Financial Officer and Principal Financial Officer

Jamie Colbourne, Chairman

Paul Norman, Chairman

Chad Bronstein

Gregg Reichman

Ronald Dissinger

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business