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Item 8. Financial Statements and Supplementary Data

2026-03-31 compared with 2025-04-01 · 593 added, 369 removed, 525 unchanged (65% of the section changed)

STATEMENTS AND SUPPLEMENTARY DATA.

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements:

Consolidated Financial

Consolidated Balance Sheets as of December 31, 2025 and 2024

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of Jones Soda Co.

the Shareholders and Directors of Jones Soda Co.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Jones Soda Co.

and its subsidiaries (the “Company”) as of December

31, 2024 and 2023 and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows

for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as

of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December

31, 2024, in conformity with accounting principles generally accepted in the United States of America.

have audited the accompanying consolidated balance sheet of Jones Soda Co.

(the “Company”), as of December 31, 2025 and the

related consolidated statement of operations and comprehensive loss, shareholders’ equity, and cash flows for the year ended December

31, 2025, and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the

consolidated financial statements present fairly, in all material respects, the financial position of Jones Soda Co.

as of December 31,

2025 and the results of its operations and its cash flows for the year ended December 31, 2025 in conformity with accounting principles

generally accepted in the United States of America.

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency

that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also

described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this

consolidated financial statements are the responsibility of the Company’s management.

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We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that

was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are

not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or

disclosures to which it relates.

Promotional Allowances:

As described in Note

1 to the consolidated financial statements, the Company’s revenue is recorded net of promotional allowances.

The recognition of

these promotional allowances requires the Company to make estimates regarding the volume of sales, cost of the promotional allowances,

and amount of the promotional allowances that are expected to be redeemed.

These estimates are made using various information including

historical and forecasted data.

Significant judgment is exercised by the Company in determining the promotional allowances accrual and

includes the following:

● Determination

of the completeness of the various promotional allowances with customers and the forecasted

sales volume for the period.

the estimate of promotional allowances that are expected to be redeemed subsequent to period

primary procedures we performed to address this critical audit matter included the following:

selected a sample of promotional allowance claims and performed the following procedures:

and tested the source documents for each selection, including promotional campaign and other

documents that were part of the agreement to identify significant terms.

a sample of promotional allowance claims to a listing of promotional campaigns during the

period for completeness.

Assessed the terms in the promotional campaign and evaluated the

appropriateness of management’s application of their accounting policies, along with

their use of estimates, in the determination of promotional allowance conclusions.

analyzed the customer base and historical promotional allowances offered to customers.

● We evaluated the reasonableness and accuracy of management’s judgements and estimates used in accounting for promotional allowances.

This included testing management’s estimate of calculating expected claims based on historical data, comparing the estimate to revenue

in the current period, comparing current promotional offer redemptions to historical estimates, and comparing actual promotional allowances

applied subsequent to December 31, 2024 to the promotional allowance accrual as of December 31, 2024.

Berkowitz Pollack Brant Advisors + CPAs

We have served as the Company’s auditor since 2023.

New York, New York

March 31, 2025

critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required

to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements

and (2) involved our especially challenging, subjective, or complex judgments.

determined that there are no critical audit matters.

have served as the Company’s auditor since 2025.

DAVIDSON & COMPANY LLP

Professional Accountants

Vancouver, Canada

BALANCE SHEETS

thousands, except per share data)

December 31, 2024

December 31, 2023

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance of $ 50 and $ 77 , respectively

Note receivable

Current licensing fees receivable

Inventories, net

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Prepaid expenses and other current assets

Deferred financing costs

Current assets of discontinued operations

Total current assets

Long-term licensing fees receivable

Fixed assets, net of accumulated depreciation of $ 583 and $ 422 , respectively

Non-current assets of discontinued operations

LIABILITIES AND SHAREHOLDERS’ EQUITY

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Accrued expenses

Revolving credit facility

Revolving credit facility and loans

Insurance premium financing

Promissory notes

Current liabilities of discontinued operations

Total current liabilities

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Common stock, no par value:

Authorized — 800,000,000 issued and outstanding shares — 115,865,227 shares and 101,258,135 shares, respectively

Common stock, no par value:

Authorized — 800,000,000 issued and outstanding shares — 115,865,227 shares and 101,258,135 shares, respectively

Authorized — 800,000,000 .

Issued and outstanding shares — 118,227,478

shares and 115,867,659 shares, respectively

Common stock, no

Authorized — 800,000,000 .

Issued and outstanding shares — 118,227,478 shares and 115,867,659 shares,

Accumulated other comprehensive income

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Other income (expense), net

Loss on sale of note receivables

Gain on disposition of subsidiaries

Total other income (expense)

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Income tax provision

Net loss per share - basic and diluted

Loss from continuing operations

Loss from discontinued operations

Earning (loss) per share – basic and diluted

Loss from continuing operations

Loss from discontinued operations

Weighted average common shares outstanding - basic and diluted

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Foreign currency translation adjustment

Reclassification of foreign currency translation differences upon disposal of the foreign operation

Total comprehensive loss

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Ended December 31, 2025 and 2024 (In thousands, except share data)

Accumulated Other Comprehensive Income

Accumulated Deficit

Total Shareholders’ Equity

Comprehensive

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Exercise of Pinestar Warrants

Other comprehensive gain

Balance as of December 31, 2023

Stock-based compensation

Shares withheld for taxes upon RSU vesting

Exercise of Pinestar Warrants

Private Placement Offering, net of issuance costs

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Balance as of December 31, 2024

Shares issued for restricted share units

Fair value of warrants issued

Stock-based compensation

Other comprehensive income

Balance as of December 31, 2025

accompanying notes to consolidated financial statements.

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OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash flows used in operating activities:

Depreciation and amortization

Loss from discontinued operations

Net 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

Loss on sale of note receivables

Gain on disposition of subsidiaries

Stock-based compensation

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Accounts receivable

Deferred financing costs

Prefunded insurance premiums from financing

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Accrued expenses

Taxes payable

Net cash used in operating activities

Net cash used in continuing operations

INVESTING ACTIVITIES:

Purchase of fixed assets

Net cash used in investing activities

Disposal of a subsidiary, net of cash disposed of

Proceeds from disposal of property, plant and equipment

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 Pinestar Warrants

Repayments on insurance financing

Proceeds from the exercise of stock options

Net Proceeds from Private Placement Offering

Payment of taxes on RSU withholding

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

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 and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Cash from continuing operations, beginning of period

Cash from discontinued operations, beginning of period

Cash from discontinued operations, end of period

Cash, end of period

Supplemental disclosure:

Cash paid during the year for:

Supplemental Noncash Investing and Financing Activities

Fair value of warrants issued

Initial recognition of note receivable

Initial recognition of licensing fee receivable

Reclassification of current portion of note receivable

Reclassification of current portion of licensing fee receivable

Prepaid insurance financed through an insurance premium financing arrangement.

Supplemental disclosure:

Cash paid during the period for:

accompanying notes to consolidated financial statements.

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Ended December 31, 2025 and 2024

of Operations and Summary of Significant Accounting Policies

Nature of Operations

and Summary of Significant Accounting Policies

develop, produce, market and distribute premium beverages that we sell and distribute primarily in the United States and Canada

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Jones Soda Co.

(USA) Inc., Jones Soda (Canada) Inc Mary Jones Holdings

Inc., Mary Jones California, LLC, Mary Jones Michigan LLC, Pinestar Gold Inc.

Mary Jones Washington LLC, Mary Jones Beverage LLC, Mary

Jones Beverage (Michigan,) LLC Mary Jones Beverage (Canada) Inc.

and Mary Jones Holdco 2, Inc.

(USA) Inc., Jones Soda (Canada) Inc., Pinestar Gold

Inc., and Mary Jones Holdco 2, Inc.

(collectively, the “Subsidiaries”).

June 19, 2025, the Company consummated a Share Purchase Agreement (the “SPA”), as amended, with MJ Reg Disrupters LLC (“MJ

Reg”) pursuant to which it sold all of the issued and outstanding equity interests in its wholly owned subsidiaries that operate

the cannabis (THC) beverage business (the “Cannabis Subsidiaries”) (Note 2).

of presentation and consolidation

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capital of approximately ($ 0.5 ) million and $ 2.0 million, respectively.

Net cash used in operations during fiscal years 2024 and 2023 totaled

approximately $ 5.9 million and $ 3.8 million, respectively.

The $ 2.3 million increase in cash used in operations in fiscal 2024, was driven

by an increase in net loss after adjusting for non-cash items of $ 3.7 compared to the prior year which was offset by an increase in cash

generated from non cash working capital of $ 1.7 million compared to the prior year.

We incurred a net loss of approximately $ 9.9 million

for the year ended December 31, 2024 compared to a net loss of approximately $ 4.9 million for the year ended December 31, 2023.

Net cash used in continuing operations during fiscal years 2025

and 2024 totaled approximately $ 1.3 million and $ 6.2 million, respectively which is an improvement of $ 4.9 million for the year ended

December 31, 2025.

the year ended December 31, 2025, cash used in operating activities decreased by approximately $ 4.9 million compared to the prior year.

This change was primarily driven by an improvement in net loss after adjusting for non-cash items, which decreased by approximately $ 4.7

million relative to 2024.

Cash generated from changes in non-cash working capital compared to the prior year was improved by $ 0.2 million.

We incurred a net loss of approximately $ 1.7 million from continuing operations in 2025, compared to a net loss of approximately $ 9.7

million in 2024, reflecting the lower operating loss as well as the impact of the gain on the disposition of subsidiaries.

Our accumulated

deficit increased to $ 92.9 million as of December 31, 2024 compared to an accumulated deficit of $ 83.1 million as of December 31, 2023.

the year ended December 31, 2024, net cash inflow from financing activities totaled approximately $ 3.7 million, compared to a net cash

outflow of $ 0.2 million during the year ended December 31, 2023.

During 2024, the Company completed a private placement offering, resulting

in net cash proceeds of $ 3.6 million (Note 7), net proceeds from the revolving credit facility of $ 0.3 million and $ 0.1 million proceeds

received from the exercise of warrants and options.

This was offset by repayment on the insurance financing agreement amounting to $ 0.2

million and withholding taxes related to the RSUs of $ 0.2 million.

The cash outflow in 2023 was primarily due to repayments on our insurance

financing agreement, partially offset by proceeds received from the exercise of outstanding warrants.

deficit increased to $ 94.7 million as of December 31, 2025, compared to $ 92.9 million as of December 31, 2024.

activities provided net cash inflows of approximately $ 2.5 million for the year ended December 31, 2025, compared to net cash inflows

of $ 3.7 million in 2024.

The 2025 inflows were primarily attributable to proceeds from new loan financing and the issuance of promissory

notes, partially offset by repayments on existing debt and insurance financing arrangements.

In contrast, the 2024 inflows were driven

largely by the completion of a private placement offering, which generated net proceeds of $ 3.6 million, along with net borrowings under

the revolving credit facility and proceeds from the exercise of warrants and stock options.

These inflows were offset by repayments on

the insurance financing agreement and withholding taxes related to restricted share units.

activities provided net cash of approximately $ 0.4 million in 2025, compared to cash used of $ 27 thousand in 2024.

The increase was primarily

due to proceeds received from the disposal of a subsidiary, net of cash disposed, along with the proceeds from the sale of property,

plant and equipment.

have experienced recurring losses from operations and negative cash flows from operating activities.

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doubt regarding the Company’s ability to continue as a going concern.

To address this issue, the Company recently changed its senior

leadership and is focusing on reducing its operating expenses while bring products to market with higher margins and potentially higher

customer demand.

Additionally, on February 5, 2025, the Company, through a wholly-owned subsidiary (the “Subsidiary”), entered

into loan agreement (the “Loan Agreement”) with Two Shores Capital Corp, pursuant to which the Subsidiary may borrow a maximum

aggregate amount of up to $ 5,000,000 , subject to satisfaction of certain conditions.

All advances drawn under the Loan Agreement will

bear interest at a rate of 13.75 % per annum and all present and future obligations of the Subsidiary arising under the Loan Agreement

are secured by a first priority security interest in all of the assets of the Company, the Subsidiary and the Company’s other United

States subsidiaries.

The Loan Agreement replaces the $ 2 million revolving credit facility entered into by the Company in March 2024 (the

“2024 Credit Facility”).

The borrowing base under the Loan Agreement expands the assets that can be financed against from

only accounts receivable under the 2024 Credit Facility to accounts receivable, inventory and customer purchase orders.

To address this issue, in the first quarter of fiscal year

2025, the Company changed its senior leadership and is focusing on reducing its operating expenses while bringing products to market

with higher margins and potentially higher customer demand.

Additionally, on February 19, 2025, the Company, through a wholly-owned subsidiary

(the “Subsidiary”), entered into loan agreement (the “Loan Agreement”) with Two Shores Capital Corp (“Two

Shores”), pursuant to which the Subsidiary may borrow a maximum aggregate amount of up to $ 5 million, subject to satisfaction of

certain conditions.

All advances drawn under the Loan Agreement will bear interest at a rate of 13.75 % per annum and all present and

future obligations of the Subsidiary arising under the Loan Agreement are secured by a first priority security interest in all of the

assets of the Company, the Subsidiary and the Company’s other United States subsidiaries.

The Loan Agreement replaces the $ 2 million

revolving credit facility entered into by the Company in March 2024 (the “2024 Credit Facility”).

The borrowing base under

the Loan Agreement expands the assets that can be financed against from only accounts receivable under the 2024 Credit Facility to accounts

receivable, inventory and customer purchase orders.

The Loan Agreement was amended on December 1, 2025 to increase the facility to $ 10

on management’s current operating plan, the Company believes its cash on hand, projected cash generated from product sales and

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Net charges to credit loss

As of December 31, 2024, one customer accounted for approximately 10.2 %

of our accounts receivable, whereas as of December 31, 2023, no individual customer represented a material concentration of our accounts

of December 31, 2025, one customer accounted for approximately 44 % of our accounts receivable, whereas as of December 31, 2024, no individual

customer represented a material concentration of our accounts receivable.

consist of raw materials and finished goods and are stated at the lower of cost or net realizable value and include adjustments for estimated

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Identify the contract with the customer

Identify the performance obligations in the contract Step 3:

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies

a performance obligation

Recognize revenue when the company satisfies a performance obligation

Note 16, Segment information, for information on revenue disaggregated by geographic area.

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Shipping and handling amounts paid by customers are primarily for online

orders, and are included in revenue, and totaled approximately $ 114,000 and $ 147,000 for the years ended December 31, 2024 and 2023, respectively.

orders, and are included in revenue, and totaled approximately $ 0.4 million and $ 0.1 million for the years ended December 31, 2025 and

2024, respectively.

Sales tax and other similar taxes are excluded from revenue.

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Differences between

estimated expense and actual costs are normally insignificant and are recognized in earnings in the period such differences are

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.

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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 2 % to certain

customers typically for payments made within 15 days.

Prompt pay discounts are recorded as a deduction to revenues in the accompanying

consolidated statements of operations.

As of December 31, 2024 and 2023, prompt pay discounts to these certain customers were considered

immaterial to the related accounts receivable balances presented on the accompanying consolidated balance sheets.

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 2 % to certain customers typically for payments

made within 15 days.

Prompt pay discounts are recorded as a deduction to revenues in the accompanying consolidated statements of operations.

As of December 31, 2025 and 2024, prompt pay discounts to these certain customers were considered immaterial to the related accounts

receivable balances presented on the accompanying consolidated balance sheets.

costs, including promotions and sponsorships, are expensed as incurred.

For the years ended December 31, 2025, and 2024, we incurred

advertising costs of $ 1.6 million and $ 1.2

million, respectively.

advertising costs of $ 0.7 million and $ 1.2 million, respectively.

Compensation Expense

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share is computed by adjusting the weighted average number of common shares by the effective net exercise or conversion of all dilutive

Due to the net loss in 2024 and 2023, outstanding stock options amounting to 8,647,984 and 11,407,772 , respectively, and

outstanding warrants of 5,945,400 and 27,521,945 , respectively, were anti-dilutive.

Due to the net loss in 2025 and 2024, outstanding stock options amounting to 15,373,243 and 8,647,984 , respectively, outstanding

warrants of 6,945,400 and 5,945,400 , respectively, and outstanding restricted share units of 553,439 and nil , respectively, were anti-dilutive.

Comprehensive

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of future performance or results expected for the fiscal year.

accounting guidance

November 2023, the FASB issued ASU No.

2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable

segments, primarily through enhanced disclosures about significant segment expenses.

The updated standard is effective for our annual

periods beginning after December 15, 2023 and interim periods beginning in the first quarter of fiscal 2025.

Early adoption is permitted.

Accounting Guidance Not Yet Adopted

December 2023, the FASB issued ASU 2023-09:

Adopted Accounting Pronouncements

December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09:

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This guidance requires

entities to provide more detailed disclosures about income tax expenses (or benefits), including components of the expense (or benefit)

and the nature of significant reconciling items.

Entities must also disclose information about unrecognized tax benefits, including a

tabular reconciliation of beginning and ending balances of unrecognized tax benefits, and details about valuation allowances, including

the nature and amount of valuation allowances recorded and released during the period.

The guidance is effective for fiscal years beginning

after December 15, 2025, including interim periods within those fiscal years.

This guidance requires entities to provide more detailed disclosures

about income tax expenses (or benefits), including components of the expense (or benefit) and the nature of significant reconciling items.

Entities must also disclose information about unrecognized tax benefits, including a tabular reconciliation of beginning and ending balances

of unrecognized tax benefits, and details about valuation allowances, including the nature and amount of valuation allowances recorded

and released during the period.

The guidance is effective for fiscal years beginning after December 15, 2024, including interim periods

within those fiscal years.

Early adoption is permitted.

We are currently evaluating

the impact of the updated standard on our consolidated financial statements and disclosures.

The adoption of ASU 2023-09 did not have a material impact on the Company’s

consolidated financial statements.

March 2024, the FASB issued ASU 2024-01:

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the amendments are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods.

all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those

annual periods.

Early adoption is permitted.

We are currently evaluating the impact of the updated standard on our consolidated financial

statements and disclosures.

adoption of ASU 2024-01 did not have a material impact on the Company’s consolidated financial statements.

Accounting Guidance Not Yet Adopted

November 2024, the FASB issued ASU 2024-03:

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statements and disclosures.

Discontinued Operations

disclosed in Note 1, on June 19, 2025 (the “Date of Disposition”), the Company entered into the SPA to sell of all issued

and outstanding equity interests in its cannabis beverage subsidiaries (the “Cannabis Subsidiaries”) pursuant to a share

purchase agreement, as amended, with MJ Reg and discontinued the Cannabis-Derived (THC) Beverage.

Subsequent to the transaction, the

Company’s former VP of Operations was appointed as the CEO of MJ Reg.

disclosed in Note 1, on June 19, 2025 (the “Date of Disposition”), the Company entered into the SPA with its cannabis beverage

subsidiaries (the “Cannabis Subsidiaries”) and the MJ Reg pursuant to which, on the Date of Disposition, the MJ Reg purchased

all of the issued and outstanding shares of the Cannabis Subsidiaries from the Company for the Share Purchase Price of $ 3.0 million promissory

notes and inventory for approximately $ 0.06 million as set forth in the SPA (the “Sale Transaction”).

The Share Purchase

Price was paid as follows:

$ 3.0 million promissory note, payable as follows:

$ 0.5 million at the Date of Disposition

$ 0.5 million due on June 27, 2025 (received);

$ 0.5 million due on June 19, 2026;

$ 0.75 million due on June 19, 2027;

$ 0.75 million due on June 19, 2028.

promissory note accrues interest at the lower of 3 % per annum and the lowest amount permitted by law;

provided, however, if MJ Reg satisfies

its obligations under the promissory note, in full, pursuant to the terms thereof, any interest accrued pursuant to the promissory note

shall be waived.

Notwithstanding the foregoing, upon the occurrence of an Event of Default (as defined in the promissory note), the outstanding

principal amount of the promissory note together with any accrued and unpaid interest thereon shall accrue interest at a rate of 10 %

The promissory note shall mature upon the earlier of (i) June 19, 2028 and (ii) in the event of prepayment of the promissory

note, the date that the principal amount of the promissory note together with the interest accrued thereon is paid in full by MJ Reg.

June 19, 2025 (the “License Effective Date”), in connection with the SPA, the Company entered into a trademark license agreement

(the “License Agreement”) with 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

0.3 % by dry weight and any Licensed IP in connection therewith.

Furthermore, MJ Holdings shall own all Licensee Modified Formulas (as

defined in the License Agreement) and such Licensee Modified Formulas may be incorporated and/or otherwise used in connection with a

Licensed Product during the term of such agreement and at any time thereafter;

provided, however, the Company shall be entitled to license

the Licensee Modified Formulas on mutually agreeable terms and conditions.

Notwithstanding the foregoing, the Company shall maintain

exclusive rights to products containing Hemp (as defined in the SPA).

Pursuant to the License Agreement, MJ Holdings shall pay the Company

$ 0.15 million on the one year anniversary of the License Effective Date and $ 0.255 million on each subsequent anniversary of the License

Effective Date (the “Licensing Fee”).

The Licensing Fee shall be fixed and non-adjustable during the term of the License.

to ASC 820, the Company utilized its weighted average cost of capital (WACC) of 11.6 % to discount future cash flows and determined the

fair values as follows:

Promissory Note:

$ 2.59 million

Licensing Agreement:

$ 1.70 million

costs incurred in connection with the disposition totaled $ 0.05 million.

The gain on disposal of subsidiaries was calculated as follows:

Schedule Of Assets And Liabilities Operations Of Discontinued Operations

Carrying value (in thousands) of net assets of the Cannabis Subsidiaries

Accounts receivable

Accounts payable

and liabilities

Total consideration received, net of transaction costs

Fair value of Promissory Note

Fair value of Licensing Agreement

Transaction costs

Gain on disposition

is the breakdown of the gain (loss) from discontinued operations:

Year ended December 31,

Cost of goods sold

Operating expenses:

Selling and marketing

General and administrative

Total operating expenses

Gain (Loss) from discontinued operations

Other income (expenses):

Interest income

Other income (expense), net

Total other income

Net income (loss) from discontinued operations

Note receivable

disclosed in Note 2, in connection with the Sale Transaction, the Company issued a promissory note with an aggregate principal amount

of $ 3.0 million.

The note is payable in five installments as follows:

$ 0.5 million at the Date

of Disposition (received);

$ 0.5 million due on June

27, 2025 (received);

$ 0.5 million due on June

$ 0.75 million due on June

promissory note accrues interest at the lower of 3 % per annum and the lowest amount permitted by law;

provided, however, if MJ Reg satisfies

its obligations under the promissory note, in full, pursuant to the terms thereof, any interest accrued pursuant to the promissory note

shall be waived.

Notwithstanding the foregoing, upon the occurrence of an Event of Default (as defined in the promissory note), the outstanding

principal amount of the promissory note together with any accrued and unpaid interest thereon shall accrue interest at a rate of 10 %

The promissory note shall mature upon the earlier of (i) June 19, 2028 and (ii) in the event of prepayment of the promissory

note, the date that the principal amount of the promissory note together with the interest accrued thereon is paid in full by MJ Reg.

accordance with ASC 820, the Company applied its weighted average cost of capital of 11.6 % to discount the future cash flows associated

with the note and determined the initial fair value to be $ 2.59 million.

The resulting discount is being amortized over the term of the

note using the effective interest method.

the year ended December 31, 2025, the Company recognized $ 0.09 million in finance income related to the amortization of the discount.

of December 31, 2025, the carrying value of the promissory note was $ 1.68 million, of which $ 0.50 million was classified as current.

January 16, 2026, the Company entered into an Assignment and Assumption of Debt Agreement with Two Shores Capital Corp.

(“Two Shores”)

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 $ 2.0 million.

consideration for the assignment, the Company received cash proceeds of $ 1.4 million.

Upon execution of the agreement, the Company transferred

to Two Shores all rights and obligations associated with the promissory note, including the right to receive all future payments.

consented to the assignment and confirmed that the outstanding principal amount of the promissory note was $ 2.0 million as of January

connection with the transaction, the Company issued to Two Shores 550,000 common stock warrants.

Each warrant is exercisable for 1 one

share of the Company’s common stock at an exercise price of $ 0.40 per share and expires on January 16, 2029 .

a result of the assignment, the Company reduced the carrying amount of the note receivable to $ 1.4 million as of December 31, 2025 and

recognized a loss on sale of receivables of $ 0.28 million.

Licensing fees receivable

disclosed in Note 2, in connection with the Sale Transaction, the Company entered into the License Agreement with 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.

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 0.3 % by dry weight and any Licensed IP in connection therewith.

Furthermore, MJ

Holdings shall own all Licensee Modified Formulas (as defined in the License Agreement) and such Licensee Modified Formulas may be incorporated

and/or otherwise used in connection with a Licensed Product during the term of such agreement and at any time thereafter;

provided, however,

the Company shall be entitled to license the Licensee Modified Formulas on mutually agreeable terms and conditions.

Notwithstanding the

foregoing, the Company shall maintain exclusive rights to products containing Hemp (as defined in the SPA).

Pursuant to the License Agreement,

MJ Holdings shall pay the Company $ 0.15 million on the one-year anniversary of the License Effective Date and $ 0.255 million on each

subsequent anniversary of the License Effective Date (the “Licensing Fee”).

The Licensing Fee shall be fixed and non-adjustable

during the term of the License.

accordance with ASC 820, the Company utilized its weighted average cost of capital of 11.6 % to discount the expected future cash flows

associated with the Licensing Fee and determined the initial fair value of the License Agreement to be $ 1.70 million.

The resulting discount

is being amortized over the term of the License Agreement using the effective interest method.

the year ended December 31, 2025, the Company recognized $ 0.08 million in licensing revenue and $ 0.01 million in finance income related

to the amortization of the discount.

of December 31, 2025, the carrying value of the License Agreement receivable was $ 1.8 million, of which $ 0.15 million was classified

consisted of the following as of December 31 (in thousands):

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ingredients, concentrate and packaging.

Fixed Assets, net

assets, net consisted of the following as of December 31 (in thousands):

Schedule of Fixed Assets, Net

Office and computer equipment

2 unchanged sentences

Property, plant and equipment,

expense was $ 56,000 and $ 63,000 , for the years ended December 31, 2024 and 2023, respectively.

Depreciation expense is primarily associated

with the Company’s equipment and vehicles.

The Company did no t record any gains or losses from the disposals of fixed assets during

2024 and 2023.

expense was $ 0.2 million and $ 0.06 million, for the years ended December 31, 2025 and 2024, respectively.

Depreciation expense is primarily

associated with the Company’s equipment and vehicles.

Company disposed a vehicle with a proceed of $ 0.01 million and recorded a loss of disposal of $ 0.01 during the year ended December 31,

No gain or loss on disposal was recognized during the year ended December 31, 2024.

Accrued Expenses

expenses consisted of the following as of December 31 (in thousands):

Schedule of Accrued Expenses

Employee benefits

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Accrued expenses

Credit Facility

Company entered into a Revolving Financing and Assignment Agreement (the “RFAA”) which provides a revolving credit facility

up to an amount of $ 2,000,000 (the “Total Credit Facility”) with an interest rate equal to the prime rate plus 3.50 % per

annum, with a floor rate of 6.00 %.

This facility is intended to meet the working capital needs and general corporate purposes of the

Revolving Credit Facility and Loans

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 $ 2,000,000 (the “Total Credit Facility”) with an interest rate equal

to the prime rate plus 3.50 % per annum, with a floor rate of 6.00 %.

This facility is intended to meet the working capital needs and general

corporate purposes of the Company.

the RFAA, the Company may draw up to 80 % of the face amount of eligible accounts receivable.

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will automatically renew for additional 36-month periods unless terminated by either party with a minimum of 60 days’ prior written

The RFAA includes financial covenant

requiring the Company to maintain net assets, excluding intangible assets and amounts outstanding under the RFAA, in excess of $ 3.5 million.

RFAA includes financial covenant requiring the Company to maintain net assets, excluding intangible assets and amounts outstanding under

the RFAA, in excess of $ 3.5 million.

As of December 31, 2024, the Company was not in compliance with this financial covenant.

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accounts receivable, inventory, equipment, and intellectual property.

On February 24, 2025, the Company made a payment of $ 0.1 million to fully repay the Total Credit Facility and formally terminated the

February 24, 2025, the Company made a payment of $ 0.1 million to fully repay the Total Credit Facility and formally terminated the RFAA.

Following this payment, the Company was released from any further liabilities under the terms of the RFAA.

of December 31, 2024, the balance of the RFAA was $ 0.3 million (December 31, 2023 – $ nil ).

Agreement Obligation

September 1, 2022 we entered into a membership/licensing agreement with Saltbox Inc.

This agreement gives us right to our portion of

a shared office (“Suite”) and warehouse facility in Seattle, WA.

The structure of the agreement is a revocable license to

access the suite and warehouse.

of December 31, 2025, the balance of the RFAA was $ nil (December 31, 2024 – $ 0.3 million).

February 5, 2025, the Company, through its Subsidiary, entered into a Loan Agreement with Two Shores (the “2Shores Loan Agreement”),

pursuant to which the Subsidiary may borrow up to an aggregate maximum amount of $ 5.0 million which was amended to $ 10.0 million, subject

to the satisfaction of certain conditions.

On December 1, 2025, the Loan Agreement was amended to increase the maximum borrowing capacity

to $ 10.0 million.

Advances under the Loan Agreement bear interest at a rate of 13.75 % per annum.

All present and future obligations of

the Subsidiary under the Loan Agreement are secured by a first-priority security interest in all assets of the Company, the Subsidiary,

and the Company’s other U.S.

subsidiaries.

As of December 31, 2025, the outstanding balance under the Loan Agreement, including

accrued interest, was approximately $ 3.02 million.

The Company is obligated to provide periodic financial reporting, reporting of its

inventory and accounts receivable listings, maintenance of its subsidiaries in good legal standing, maintenance of its insurance policies

and payments of its tax obligations.

connection with the Loan Agreement with Two Shores Capital Corp., the Company issued total 1,000,000 warrants to Two Shores Capital Corp.,

exercisable at a price of $ 0.45 per share for a period of three years from the date of issuance.

The Company estimated the fair value

of the warrants at $ 65,215 on the issuance date.

This amount was recognized as finance costs in the consolidated statements of operations.

The valuation of the warrants was performed using the Black-Scholes option pricing model, applying the following weighted-average assumptions:

of Weighted Average Assumptions Using the Black Scholes Valuation of Warrants

Risk free interest rate

Expected volatility

Expected life (in years)

Expected dividend

of December 31, 2025, the balance of the 2Shores Loan Agreement was $ 3 million (December 31, 2024 – $ nil ).

Promissory Notes

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 $ 0.45 million.

The Note carries a fixed interest rate of 12 % per annum and is payable monthly in arrears.

principal, together with accrued interest, is due and payable in full by October 10, 2025.

addition to the principal and interest payments, the Company is required to pay a loan origination fee of $ 22,000 , which is due on the

date of maturity.

The Note permits the Company to make prepayments without penalty, provided there is no default in payment obligations.

the year ended December 31, 2025, the Company recognized interest expense of $ 0.02 million and repaid $ 0.30 million on the Notes.

of December 31, 2025, the outstanding balance of the Notes was $ 0.2 million (December 31, 2024 – $ nil ), which was fully settled

subsequent to December 31, 2025.

Insurance Premium Financing

the year ended December 31, 2025, the Company entered into various 1 one-year

financing agreements to fund a portion of its insurance premiums totaling $ 0.2 million, payable through monthly installments.

The applicable

interest rates ranged from 6.49 % to 8.99 %, and the agreements did not contain any financial or non-financial covenants.

November 15, 2024, the Company entered into a separate 1 one-year financing agreement with IPFS Corporation to fund insurance premiums

of $ 0.2 million.

Repayments were scheduled quarterly on January 15, 2025, April 15, 2025, and July 15, 2025, at which time the financing

was fully repaid.

The agreement bore interest at 8.99 % and did not include any covenants.

of December 31, 2025 and 2024, the outstanding balance related to insurance premium financing was $ 0.2 million.

Membership Agreement Obligation

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 (“Suite”) and warehouse facility located in Seattle, Washington.

The agreement is structured as a revocable

license granting access to the Suite and warehouse space.

The relationship between Saltbox Inc.

and Jones Soda is that of a licensor and licensee only, and not

a landlord-tenant or lessor-lessee relationship.

The agreement does not give right, title, interest, easement, or lien in or to Saltbox

Inc’s business, the Suite, the Premises, or anything contained therein, nor will the Agreement be interpreted or construed as a

Thus, we will not be recording a lease liability or right-of-use asset associated with this agreement.

The term of the agreement

year with an option to renew and 12 monthly payments

payable each month.

Upon renewal, the Company

elected to enter into a month-to-month arrangement with Saltbox.

Under this arrangement, the Company pays $ 9,000

The Company provided notice on February

28 th , 2025 that it will exit the month to month agreement as it found lower cost facilities.

Shareholders’

Company issued 7,535,000 units (“Units”) on July 26, 2024, 1,600,000 Units on July 31, 2024, and 1,875,000 Units on August

21, 2024, for total net proceeds of $ 3.6 million.

and the Company is that of licensor and

licensee only, and not landlord-tenant or lessor-lessee.

The agreement does not convey any right, title, interest, easement, or lien

in Saltbox Inc.’s business, the Suite, the premises, or any related assets, and is not considered a lease for accounting purposes.

Accordingly, no lease liability or right-of-use asset has been recognized in connection with this arrangement.

initial term of the agreement was 1 one year and required 12 monthly payments of $ 8,000 .

Upon expiration of the initial term, the Company

elected to renew the arrangement on a month-to-month basis at a monthly fee of $ 9,000 .

On February 28, 2025, the Company provided notice

of its intent to terminate the month-to-month arrangement after identifying lower-cost facilities.

Shareholders’ Equity

Company issued 7,535,000

units (“Units”) on July 26, 2024, 1,600,000

Units on July 31, 2024, and 1,875,000

Units on August 21, 2024, for total net proceeds of $ 3.6

Each Unit is composed of:

(i) one common share in the capital of the Company (each,

a “Common Share”);

and (ii) one-half of one detachable share purchase warrant (each whole warrant, a “Warrant”).

Each whole Warrant is exercisable into one Common Share (each, a “Warrant Share”) at a price of $ 0.50 per Warrant Share for

a period of 24 months from the date of issuance.

The Company has the right to accelerate the expiry date of the Warrants to the date

that is 30 days following delivery of a notice of acceleration to holders of Warrants if, at any time, the closing price of the Common

Shares exceeds $ 0.80 for five consecutive trading days.

The Warrants were classified as equity, and the Company recorded their fair value

of $ 1 million as part of common shares.

common share in the capital of the Company (each, a “Common

and (ii) 0.5 one-half

detachable share purchase warrant (each whole warrant, a “Warrant”).

Each whole Warrant is exercisable into one Common Share (each, a “Warrant Share”) at a price of $ 0.50

per Warrant Share for a period of 24 months from the date of

The Company has the right to accelerate the expiry date of the Warrants to the date that is 30 days following delivery of a

notice of acceleration to holders of Warrants if, at any time, the closing price of the Common Shares exceeds $ 0.80

for five consecutive trading days.

The Warrants were classified

as equity, and the Company recorded their fair value of $ 1

million as part of common shares.

connection with the offering, the Company paid Dominari Securities LLC (“Dominari”) an aggregate of $ 166,158 in cash commission,

7 unchanged sentences

The amount was recognized as share issuance costs.

May 16, 2022, our shareholders approved the adoption of the Jones Soda Co.

2022 Omnibus Equity Incentive Plan (the “ 2022

Plan”), which replaced the 2011 Plan (defined below) and provides for the granting incentive stock options, non-statutory stock

options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire

Equity Incentive Plan

March 15, 2022, our Board adopted the 2022 Plan, which became effective upon approval by our shareholders on May 16, 2022.

2022 Plan, the sum of (i) 10,000,000 shares of the Company’s common stock, plus (ii) the number of shares of common stock reserved,

but unissued under the 2011 Plan, plus (iii) the number of shares of common stock underlying forfeited awards under the 2011 Plan are

initially available for issuance of awards under the 2022 Plan.

Additionally, the number of shares of the Company’s common stock

available reserved under the 2022 Plan is subject to an annual increase on the first day of each calendar year beginning with the first

January 1 following the effective date of the 2022 Plan and ending with the last January 1 during the initial ten-year term of the 2022

Plan, equal to the lesser of (A) 4% of the shares of the Company’s common stock outstanding (which shall include shares issuable

upon the exercise or conversion of all outstanding securities or rights convertible into or exercisable for shares, including without

limitation, preferred stock, warrants and employee options to purchase any shares) on the final day of the immediately preceding calendar

year and (B) such lesser number of shares of common stock as determined by our Board.

The Company may grant incentive stock options,

non-statutory stock options, stock appreciation rights, restricted stock units and other stock-based awards to participants to acquire

shares of Company common stock under the 2022 Plan.

Under the terms of the 2022 Plan, the sum of (i) 10,000,000 shares of the Company’s

common stock, plus (ii) the number of shares of common stock reserved, but unissued under the 2011 Plan, plus (iii) the number of shares

of common stock underlying forfeited awards under the 2011 Plan are initially available for issuance as awards under the 2022 Plan.

shares of common stock reserved under the terms of our 2011 Incentive Plan (the “2011 Plan”) but unissued were transferred

to the reserve for the 2022 Plan.

Thus, the total number of shares of common stock authorized under the Plan was 11,936,074 shares.

the terms of the 2022 Plan, the Board may grant awards to employees, officers, directors, consultants, agents, advisors and independent

Stock options are granted with an exercise price equal to the closing price of our stock on the date of grant, and generally

have a ten -year term.

As of December 31, 2024, there were 2,938,539 shares of unissued common stock authorized and available for future

awards under the Plan.

The 2022 Plan will be administered by the plan administrator (as defined in the 2022

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 10 ten-year

As of December 31, 2025, 2,056,158

shares remained available for future awards under the Plan.

Stock options:

summary of our stock option activity for the years ended December 31, 2025 and 2024 is as follows:

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Weighted Average Exercise Price

Forfeited / Expired

( 1,929,741 )

Forfeited / Expired

( 3,823,538 )

following table summarizes information about stock options outstanding and exercisable under our stock incentive plans at December 31,

following table summarizes information about stock options outstanding and exercisable under our stock incentive plans as of December

Schedule of Stock Options Outstanding And Exercisable

Exercise Price

Number Outstanding

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price Per Share

Number Exercisable

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price Per Share

$ 0.165 to $ 0.25

$ 0.251 to $ 0.40

stock awards:

on May 13, 2022, the Company’s Board of Directors (the “Board”) determined that it was in the best interests of the

Company to periodically award restricted stock units as equity compensation for non-employee directors upon the recommendation of the

Compensation and Governance Committee of the Board in lieu of stock options.

Each restricted stock unit granted vests incrementally over

the period in the specific award agreement, and certain restricted stock awards will immediately vest upon the occurrence of a “Change

in Control” as defined in the 2022 Plan.

For the period from January 1, 2020 through February 15, 2022, equity compensation for

non-employee director service consisted of the grant of an annual non-qualified stock option award that vested on the first anniversary

of the date of grant (subject to the director’s continuing service as of such anniversary date), with the number of shares underlying

such award being determined by dividing $ 25,000 by the closing share price (as quoted on the OTCQB marketplace) on the date of grant

(which was the first trading day in January in each calendar year), and such stock option award had an exercise price equal to our closing

share price (as quoted on the OTCQB marketplace) on the date of grant.

Prior to February 15, 2022, when joining the Board, each non-employee

director was previously granted a non-qualified stock option award that vested on the first anniversary of the date of grant (subject

to the director’s continuing service as of such anniversary date), with the number of shares underlying such award being determined

by dividing $ 25,000 by our closing stock price on the first trading day following the date on which such director is appointed, prorated

based on the date on which such director is appointed, and which stock option shall be granted as of the first trading day following

the date on which such director was appointed, and had an exercise price equal to our closing share price (as quoted on the OTCQB marketplace)

on the date of grant.

The stock option and restricted stock unit awards described above are governed by either the 2022 Plan or the 2011

Plan (if granted prior to the adoption of the 2022 Plan) and standard form of stock option grant notice and agreement and standard form

of restricted stock unit grant notice and agreement.

December 30, 2022, the Company entered into rescission agreements (the “Rescission Agreements”) with the certain non-employee

directors on the Board who were awarded restricted stock units during 2022 as well as the Company’s Chief Executive Officer and

President who received restricted stock units during 2022 under the terms of his employment agreement with the Company.

Under the terms

of the Rescission Agreements, each of the Company and the applicable RSU grantee agreed to rescind and cancel for no consideration all

currently outstanding restricted stock units previously granted to each such grantee during 2022 as well as all shares of the Company’s

common stock previously issued to any such grantee as a result of the vesting of any restricted stock units in August 2022.

$ 0.401 to $ 0.55

$ 0.551 to $ 0.70

Restricted stock awards:

May 13, 2022, the Company’s Board of Directors 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.

incrementally per the award agreement, with certain awards vesting immediately upon a “Change in Control” as defined in the

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 $ 25,000 by the closing share

price on the grant date.

New directors joining the Board before February 15, 2022, received prorated stock option awards under similar

Stock option and RSU awards were governed by the 2011 Plan (prior to the 2022 Plan) and respective grant agreements.

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.

July 16, 2025, the Company granted 2,213,765 RSUs to members of its Board of Directors.

The aggregate grant-date fair value of the RSUs

was $ 0.4 million, determined in accordance with ASC 718, Compensation—Stock Compensation.

Under the terms of the award, 50 % of

the RSUs vested immediately upon grant.

The remaining 50 % are scheduled to vest in equal installments on September 30, 2025 and December

31, 2025, subject to continued service.

the year ended December 31, 2025, the Company issued 2,359,819 common shares to settle the vested RSUs.

of December 31, 2025 and 2024, the Company had 553,439 and 699,493 vested RSUs outstanding, respectively.

No RSUs remained unvested as

of either December 31, 2025 or December 31, 2024.

summary of our 2025 and 2024 restricted stock units activity is as follows:

1 unchanged sentence

Number of Units

Weighted-Average Grant Date Fair Value per share

Weighted-Average Contractual Life (years)

Weighted-Average

Grant Date Fair

Value per share

Weighted-Average

Number of Units

Weighted-Average Grant Date Fair Value per share

Weighted-Average Contractual Life (years)

Weighted-Average

Grant Date Fair

Value per share

Weighted-Average

Opening, Unvested Restricted Stock Units

2 unchanged sentences

Closing, Unvested Restricted Stock Units

compensation expense:

to December 31, 2025, the Company issued 553,439 common shares to settle the vested RSUs.

Stock-based compensation expense:

compensation expense is recognized using the straight-line attribution method over the employees’ requisite service period.

4 unchanged sentences

estimated by management, additional adjustments to stock-based compensation expense may be required in future periods.

December 31, 2024, we had unrecognized compensation expense related to stock options and non-vested stock of $ 467,886 to be recognized

over a weighted- average period of 0.61 years.

of December 31, 2025 and 2024, the Company had unrecognized compensation expense related to stock options of $ 1.2 million and $ 0.5 million,

respectively, and related to RSUs of $nil and $nil, respectively.

These amounts are expected to be recognized over the remaining vesting

following table summarizes the stock-based compensation expense (in thousands):

1 unchanged sentence

Stock options

Common stock award

Restricted stock

Allocated Stock-based compensation

Consolidated Statements of Operations account:

4 unchanged sentences

pricing model and the simplified method to estimate the expected term of “plain vanilla” options:

of Weighted-average Assumptions in Fair Value of Stock Options

Schedule of Weighted-average Assumptions in Fair Value of Stock Options

Expected dividend yield

1 unchanged sentence

74.98 % to 80.30 %

85.90 % to 89.60 %

Risk-free interest rate

4.1 % to 4.6 %

4.20 % to 4.30 %

Expected term (in years)

1 unchanged sentence

$ 0.15 to 0.22

$ 0.17 to 0.20

the year ended December 31, 2025 and 2024, no material modifications were made to outstanding stock options.

of December 31, 2024, and December 31, 2023, the aggregate intrinsic value of stock options outstanding was $ 7,000 and $ nil , respectively.

For stock options exercisable, the aggregate intrinsic value as of these dates was also $ 7,000 and $ nil , respectively.

The intrinsic

value of both outstanding and exercisable stock options is determined as the difference between the quoted market price of the Company’s

stock at the balance sheet date and the exercise price of the option.

total intrinsic value of options exercised during the years ended December 31, 2024, and December 31, 2023, was $ 17,300 and $ nil , respectively.

During these periods, the number of options exercised totaled 136,250 and nil , respectively.

The Company maintains a policy of issuing

new shares upon the exercise of stock options.

of December 31, 2025, and December 31, 2024, the aggregate intrinsic value of stock options outstanding was $ 0.8 million and $ 0.01 million,

respectively.

For stock options exercisable, the aggregate intrinsic value as of December 31, 2025, and December 31, 2024 was also $ 0.24

million and $ 0.01 million, respectively.

The intrinsic value of both outstanding and exercisable stock options is determined as the difference

between the quoted market price of the Company’s stock at the balance sheet date and the exercise price of the option.

total intrinsic value of options exercised during the years ended December 31, 2025, and December 31, 2024, was $ nil and $ 0.02 million,

respectively.

During these periods, the number of options exercised totalled nil and 136,250 , respectively.

The Company maintains a policy

of issuing new shares upon the exercise of stock options.

of the Pinestar Gold Inc.

17 unchanged sentences

the right to appear, by any court expressly authorized by law to grant such approval.

the year ended December 31, 2024 , Pinestar Warrants in the amount of 974,808 were

exercised at the exercise price of $ 0.06 CAD,

the year ended December 31, 2024 , Pinestar Warrants in the amount of 974,808 were exercised at the exercise price of $ 0.06 CAD,

for total proceeds of $ 44,000 .

As of December 31, 2024, there were no warrants

discussed above the Company issued 5,505,000 warrants, each priced at $ 0.50 per Warrant Share, exercisable for a period of 24 months

from the issuance date.

Additionally, 440,400 Broker’s Warrants were issued in relation to private placements completed during

the year ended December 31, 2024.

As of December 31, 2024, these warrants remained outstanding.

following table summarizes the Company’s outstanding warrants as of December 31, 2024:

As of December 31, 2024, there were no warrants outstanding.

discussed in Note 8, during the year ended December 31, 2025, in connection with the Loan Agreement with Two Shores Capital Corp., the

Company issued 1,000,000 warrants to Two Shores Capital Corp., exercisable at a price of $ 0.45 per share for a period of three years

from the date of issuance.

the year ended December 31, 2024, the Company issued 5,505,000 warrants, each with an exercise price of $ 0.50 per warrant, exercisable

for a period of 24 months from the issuance date.

Additionally, 440,400 broker’s warrants were issued in connection with private

placements completed during the year ended December 31, 2024.

discussed in Note 3, on January 16, 2026, in connection with the Assignment and Assumption of Debt Agreement, the Company issued to Two

Shores 550,000

common stock warrants, each exercisable for 1 one

share of the Company’s common stock at an exercise price of $ 0.40

per share and expiring on January 16, 2029 .

following table presents a summary of the Company’s outstanding warrants as of December 31, 2025:

of Warrants Outstanding

Number Outstanding

Remaining Contractual Life (Years)

Exercise Price Per Share

Number Exercisable

July 26, 2026

1 unchanged sentence

August 21, 2026

August 5, 2028

Employee 401(k) Plan

have a 401(k) plan whereby eligible employees who have completed at least one hour of service per month in three consecutive months of

5 unchanged sentences

contributions in the amount of $ 33,284 and $ 32,000 , respectively.

and Contingencies

Commitments and Contingencies

of December 31, 2025, we continue to have commitments to various suppliers of raw materials.

Purchase obligations under these commitments

are expected to total $ 1.6 million in 2025.

are expected to total $ 8.7 million.

California Department of Public Health (“CDPH”) issued a cease-and-desist letter to the sale and distribution of Mary Jones

hemp infused sodas in California through Jones Soda’s wholly owned subsidiary Mary Jones Michigan, LLC.

The state alleged that

the Company’s products violated California law by failing to properly label the products and that the products contained hemp-derived

THC isolate, which they did not.

The Company disputed the CDPH position, however, it voluntarily agreed to cease distribution of its

hemp infused soda in California.

While CDPH requested additional information from the Company regarding the status of the recall for

distributed products, the action appeared to be resolved by September 2024.

In April 2025, shortly before the statute of limitations

expired for any further action by CDPH relating to Mary Jones sodas, CDPH filed a Complaint, and on June 27, 2025, the CDPH filed an

amended complaint, in Los Angeles Superior Court naming Jones Soda and other businesses who were involved in the sale of infused soda

in California in the spring of 2024.

On December 17, 2025, the California Department of Public Health filed a “Notice of Entry

of Dismissal and Proof of Service” and we are waiting for the Judge to grant the dismissal.

Company has been served with a lawsuit by a supplier on August 11, 2025 concerning an alleged breach of contract and unjust enrichment

in the amount of $ 342,373 .

The Company intends to file a counterclaim against the plaintiff for an amount in excess of the damages alleged

in the complaint.

The Company filed a motion to dismiss and on October 27, 2025, the United States Central District Court of California,

the Court dismissed the action without prejudice.

are or 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, other general liability claims and government and regulatory actions, as well as trademark, copyright,

and related claims and legal actions.

In the opinion of our management, the ultimate disposition of these matters will no t have a material

adverse effect on our consolidated financial position, results of operations or liquidity.

March 25, 2024, our indirect wholly owned subsidiary, Mary Jones Michigan LLC (“MJM”), received a Notice of Claims (“Core

Claim”) for arbitration from Core Manufacturing, LLC (“Core”), who claimed that the Company was in breach of its commitments

under the agreement between the Company and Core.

Core is seeking, amongst other damages, the enforcement of the break-up fee provision

in such agreement, which they calculate to be $ 7,220,357 .

is also seeking from P3 Capital Partner LLC ( “P3” ), an entity related to Core, the return of a $ 155,700 deposit

previous paid to P3 in connection with the license and manufacturing agreement between MJM and P3.

MJM filed for litigation

in Michigan federal court asserting claims for fraud, conversion, and breach of contract against P3 (the “P3 Litigation”

and together with the Core Claim, the “Litigation Matters”).

February 2025, a confidential settlement agreement was entered into between all the parties to the Litigation Matters, which has resulted

in the settlement and/or dismissal of both Litigation Matters.

involving employee claims, contract disputes, product liability, other general liability claims and government and regulatory actions,

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.

provision for income taxes consisted of the following for the years ended December 31 (in thousands):

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Permanent differences

Foreign taxes

Stock Compensation

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objective evidence of cumulative losses in recent years than the positive subjective evidence of future projections of pretax income.

For the years ended December 31, 2024 and December 31, 2023, the valuation allowance increased by $ 2.4 million, and $ 1.03 million, respectively.

For the years ended December 31, 2025 and December 31, 2024, the valuation allowance increased by $ 0.7 , and $ 0.5 , respectively.

continually analyze the realizability of our deferred tax assets, but we reasonably expect to continue to record a full valuation allowance

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operations and tax planning

At December 31, 2024, we had net operating loss carryforwards for federal

and state income tax purposes of $ 54.9 million, and $ 22.6 million respectively, which expire at various times commencing 2025.

had net operating loss carryforwards for federal and state income tax purposes of $ 28.1 million, and $ 2.8 million, respectively, that

may be carried forward indefinitely.

Net operating loss carryforwards may be subject to certain limitations under Section 382 of the Internal

Revenue code.

December 31, 2025, we had net operating loss carryforwards for federal and state income tax purposes of $ 54,865,311 and $ 21,438,990 respectively,

which expire at various times commencing 2026.

We also had net operating loss carryforwards for federal and state income tax purposes

of $ 28,433,173 , and $ 3,094,477 respectively, that may be carried forward indefinitely.

Net operating loss carryforwards may be subject

to certain limitations under Section 382 of the Internal Revenue code.

are no uncertain tax positions to recognize as of December 31, 2025 and 2024.

4 unchanged sentences

were generated and carried forward and make adjustments up to the amount of the net operating losses or credit carryforward.

As of December

31, 2025, we were not under examination by a tax authority.

1 unchanged sentence

examination to the extent they remain unutilized in an open year.

Company’s operating and reportable segments consist of the following:

This segment includes both Jones Soda’s traditional craft sodas, known for their unique flavors, pure cane sugar formulation,

and consumer-driven branding as well as our modern soda’s such as Pop Jones, Fiesta Jones and hemp derived products such as HD9.

The products are distributed through various channels, including retail stores, foodservice outlets, and direct-to-consumer platforms.

Cannabis-Derived

(THC) Beverages:

This segment features beverages and edibles infused with cannabis-derived THC compounds.

These products cater

to alternative lifestyle markets and are distributed through regulated channels such as licensed dispensaries.

Each State in the US has

specific regulations to the sales and distribution of these products.

In Canada these products are federally regulated.

Our distribution

relationships typically involve licensing our THC formulated products to Cannabis companies that hold licenses in a specific state or

Segment Information

to the disposition of the Cannabis-Derived (THC) Beverages segment, the Company’s only operating and reportable segment is beverages.

This segment includes both Jones Soda’s traditional craft sodas, known for their unique flavors, pure cane sugar formulation, and

consumer-driven branding as well as our modern soda’s such as Pop Jones, Fiesta Jones and hemp derived products such as HD9.

products are distributed through various channels, including retail stores, foodservice outlets, and direct-to-consumer platforms.

Chief Operating Decision Maker (“CODM”) of the Company, who is also the Chief Executive Officer (“CEO”), is responsible

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the Company does not present additional segment information in its financial disclosures.

regarding the Company’s operations by reportable segment are presented as follows:

of Reporting Segment

(in thousands)

Segment Results – Net sales

Cannabis-Derived (THC) Beverages

Segment Results – Net sales

Segment Results – Income (loss) from operations

Cannabis-Derived (THC) Beverages

Segment Results – Income (loss) from operations

in accordance with ASC 280, the Company provides the following entity-wide disclosures for the years ended December 31, 2024, and 2023:

in accordance with ASC 280, the Company provides the following entity-wide disclosures for the year ended December 31, 2025 and 2024:

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

of Net Sales and Income (Loss) from Operations by Geographic Location

(in thousands)

For the year ended

(in thousands)

Segment Results – Net sales

United States

Other countries

sales generated in the United States accounted for 82 % and 81 % of total revenue in 2024 and 2023, respectively.

sales generated in the United States accounted for 89 % and 83 % of total revenue during the year ended December 31, 2025, and 2024, respectively.

(loss) from Operations by Geographic Location :

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(in thousands)

Segment Results – Income (loss) from operations

For the year ended

(in thousands)

Segment Results – Income (loss) from continuing operations

United States

Other countries

Income (loss) from operations

Income (loss) from continuing operations

All of the Company’s long-lived assets are located in the United States.

Premium Financing

November 15, 2024, the Company entered into a one year financing agreement with IPFS Corporation to fund a portion of its insurance premiums

in the amount of $ 191,000 .

Repayments are made quarterly on January 15, 2025, April 15, 2025, and by July 15, 2025, the entirety of the

financing is paid off in full.

The interest rate is 8.99 % and there are no covenants associated with this agreement.

party Transactions

the year ended December 31, 2023, 200,000 Pinestar Warrants, as described in Note 7 were exercised by one of our Board members, Paul

Norman, at the exercise price of $ 0.06 CAD, for total proceeds of $ 9,000 .

to December 31, 2024, the Company entered into a $ 5 million facility (the “Facility”) with Two Shore Capital Corp.

The funds available under the Facility are expected to be used for working capital purposes, and the Facility itself

is secured by all of the assets of the Company and its subsidiaries.

Advances drawn under the Facility will bear an interest rate of

13.75 % per annum.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Related party Transactions

discussed in Note 9, on May 2, 2025, the Company issued the Note to the Chairman of the Board in the principal amount of $ 0.45 million.

The note bears interest at a fixed rate of 12 % per annum, with interest payable monthly in arrears.

The principal balance, together with

any accrued but unpaid interest, is due and payable in full on October 10, 2025.

Subsequent Events

to December 31, 2025:

discussed in Note 3, 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.

Under the agreement, the Company assigned to Two Shores all of its rights,

title, and interest in a promissory note with an outstanding principal balance of $ 2.0 million

in exchange for cash consideration of $ 1.4 million.

In connection with the transaction, the Company issued to Two Shores 550,000 common

stock warrants, each exercisable for 1 one

share of the Company’s common stock at an exercise price of $ 0.40 per

share and expiring on January 16, 2029.

discussed in Note 9, the Company fully settled the Notes for total consideration of $ 0.2 million.

discussed in Note 12, the Company issued 553,439 common shares to settle the vested RSUs.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data