What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-04-01 compared with 2024-04-01 · 741 added, 407 removed, 33 unchanged (97% of the section changed)

We develop, produce, market and distribute premium beverages that we sell and distribute primarily in the United States and Canada through our network of independent distributors and directly to our national and regional retail accounts.

We also sell products in select international markets.

Our products are sold in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street” in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several large retailers.

We refer to our network of independent distributors as our direct store delivery (“DSD”) channel, and we refer to our national and regional accounts who receive shipments directly from us as our direct to retail (“DTR”) channel.

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

our network of independent distributors and directly to our national and regional retail accounts.

We also sell products in select international

Our products are sold in grocery stores, convenience and gas stores, on fountain in restaurants, “up and down the street”

in independent accounts such as delicatessens, sandwich shops and burger restaurants, as well as through our national accounts with several

large retailers.

We refer to our network of independent distributors as our direct store delivery (“DSD”) channel, and we

refer to our national and regional accounts who receive shipments directly from us as our direct to retail (“DTR”) channel.

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

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

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.

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 THC infused cannabis products

under the “Mary Jones” brand name in various U.S.

states that permitted the sale of THC infused products.

We also have a

royalty-free license in perpetuity to intellectual property related to Mary Jones for us to license Mary Jones products for use only

company is a Washington corporation formed in 2000 as a successor to Urban Juice and Soda Company Ltd., a Canadian company formed in

Our principal place of business is located at 4786 1st Avenue South, Suite 103, Seattle, WA 98134.

Our telephone number is (206)

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.

strategy is to evolve from a craft soda company (Jones Soda) to a diverse beverage company covering additional growing market segments

including modern soda (Pop Jones and Fiesta Jones) and the alternative adult beverages (Mary Jones).

Our product line-up currently consists

of the following:

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.

Over one million photos have been submitted to us.

We believe this unique interaction with our consumers distinguishes our brand and offers a strong competitive advantage for Jones Soda.

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

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.

Our fountain offerings include traditional flavors such as Cane Sugar Cola, Sugar Free Cola, as well as cane sugar sweetened Ginger Ale, Orange & Cream, Root Beer and Lemon Lime.

We believe this unique interaction with our consumers distinguishes

our brand and offers a strong competitive advantage for Jones Soda.

Additionally, we release various label campaigns that celebrate our

consumers and the positive impact such consumers have on the world.

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.

Jones and Fiesta Jones (Modern Soda market segment)

continue to see a growing market in in our health focused soda brands, which we consider to be the “modern soda” market.

Recent growth by industry competitors such as Poppi and Olipop have proven out the growing consumer demand for this market segment.

2024, Jones launched its Pop Jones and Fiesta Jones product lines to capitalize on this growing market opportunity.

Jones (Alternative Adult Beverages market segment)

February 2024 we received approval to operate in Ontario, Canada, and have launched, in that province, 10mg Tetrahydrocannabinol

(“THC”) infused sodas in a variety of flavors as well gummies and vapes.

We also launched in British Columbia in 2024

where we launched 10mg Tetrahydrocannabinol (“THC”) infused sodas.

We also recently received approval in the province of

Alberta to launch in June 2025 10mg Tetrahydrocannabinol (“THC”) infused sodas in a variety of flavors as well as

gummies and vapes.

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

The new Mary Jones products will continue Jones Soda’s tradition of using photographs submitted by consumers on their

bottle labels and printing quotes from fans under the bottle caps.

currently intend to expand both the products offered under the Mary Jones brand as well as the number of states and Canadian provinces

we offer such cannabis infused products in.

(food services market segment)

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.

Our fountain offerings

include traditional flavors such as Cane Sugar Cola, Sugar Free Cola, as well as cane sugar sweetened Ginger Ale, Orange & Cream,

Root Beer and Lemon Lime.

Rounding out the lineup are two of our most popular cane sugar flavors, Berry Lemonade and Green Apple.

We have developed other products in select markets that include teas, lemonade, vitamin enhanced waters, hydration beverages, as well as naturally flavored sparkling waters.

We continue to see growing interest from larger quick service restaurants, corporate accounts, retailers, celebrity chefs and a variety of other outlets looking for differentiated offerings in their fountain soda.

We feel that Jones on fountain enhances the consumer experience, while appealing to a broad demographic.

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 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.

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.

have developed other products in select markets that include teas, lemonade, vitamin enhanced waters, hydration beverages, as well as

naturally flavored sparkling waters.

continue to see growing interest from larger quick service restaurants, corporate accounts, retailers, celebrity chefs and a variety

of other outlets looking for differentiated offerings in their fountain soda.

We feel that Jones on fountain enhances the consumer experience,

while appealing to a broad demographic.

We believe our national brand awareness and customer-centric approach make us unique compared

to other craft soda competitors within this category.

and Private Label Products

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 2024.

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.

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

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

Expand the Jones Soda glass bottle business in existing and new sales channels;

Expand our fountain program 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

Premium Soda Beverages

Our core products are distributed and sold throughout the United States and Canada and in select international markets.

Our primary distribution channels are our direct store delivery (DSD) channel (sales and distribution through our network of independent distributors) and our direct to retail (DTR) channel (sales directly to national and regional retail accounts).

Expand our business in the modern soda category through our Pop Jones and Fiesta Jones brands;

Expand our fountain program in the United States and Canada; and,

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

Distribution and Sales Strategy

Soda Beverages

core products are distributed and sold throughout the United States and Canada and in select international markets.

Our primary distribution

channels are DSD channel (sales and distribution through our network of independent distributors) and our DTR channel (sales directly

to national and regional retail accounts).

We also have our online channel for internet sales of various products.

We strategically build our national and regional retailer network by focusing on distribution systems that we believe will provide top-line drivers for our products and increased availability and visibility of our products in our core markets.

In building and expanding our DSD channel, we also consider international markets and look for regions that data suggests have a high affinity for the Jones brand and can be pursued within our financial resources.

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

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 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.

Distributors then sell and deliver our products either to sub-distributors or directly to retail accounts.

We recognize revenue upon receipt by our distributors and national account customers of our products, net of discounts and promotional allowances, and all sales are final;

however, in limited instances, due to credit issues, quality or damage issues, or distributor changes, we may accept returned product, which to date has not been material.

DSD (direct store delivery)

We maintain a network of independent distributors across the United States and Canada.

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.

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

In addition to the efforts of our independent distributors in obtaining distribution of our products, we actively seek to obtain listings for our products with key retail grocery, convenience and mass merchandiser accounts, which are serviced through our independent distributor network.

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.

Co-Brand and Private Label

We offer private label products directly to retailers.

Our expertise in innovation and managing the manufacturing process allow for efficiencies for both us and the customer.

We are able to produce these products with minimal sell through risk and ship them through our network of independent trucking companies or a preferred partner of the customer.

Fountain Distribution

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 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 large "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.

While we are known for our unique and innovative flavors, we also feature traditional flavors and feel that our broad appeal helps position us as a leader in the growing premium craft segment of the industry.

Additionally, through the labels on our bottles and our invitation to consumers to send in photographs to be featured on the Jones Soda labels, we focus on building brand loyalty and customer engagement.

We select photos throughout the year to be placed on our bottles and cans for distribution, and also invite consumers to celebrate special occasions and memories by creating their own label through myJones.com.

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” 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.

In addition to creative labeling on our products, we provide our distributors with point-of-sale promotional materials and branded apparel items.

We believe that our labeling, marketing and promotional materials are important elements to creating and increasing consumer appeal, as well as distributor and retailer awareness, and that our branding efforts have helped us achieve strong consumer connections and affinity levels for our products.

Brand Marketing

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 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.

We believe this effort to position our products in alternative accounts and venues helps draw a younger generation of customers that value their independence away from the larger soft drink brands.

Our core marketing pillar is the open access our consumers have to define the brand through our social media channels and our website at Jonessoda.com.

We actively participate in social media campaigns as a way of direct engagement with our consumers in order to listen to their voices and better understand their issues and changes in consumer trends.

Social media represents one of the largest shifts in modern business away from static advertising, and we have had success in creating social media hubs through forums such as Facebook, Twitter and Instagram.

Our consumers have responded by bringing us onto their social media pages and into their lives, creating a personal connection that we believe helps ensure they are actively engaged with our brand and our products.

Consumer-Submitted Photos

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

We also provide our Jones Soda customers, ranging from businesses to end consumers, customized and personalized 12-packs of Jones Soda (in bottles) that they can create with their own photos on the labels.

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” labels.

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

We believe our photo strategy has increased awareness for, as well as provided for increased consumer interactivity with, the Jones Soda brand.

Point of Sale and Consumer Awareness

We use point-of-sale materials such as posters, stickers, hats and T-shirts to create and increase consumer awareness of our proprietary products and brands.

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.

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

We currently have a licensing arrangement with a third party to manufacture and distribute Jones Soda Flavor Booster hard candy.

In addition to these marketing techniques, we also pursue cross-promotional campaigns with other companies.

In addition to all of the above marketing efforts, we are also investing in various events that are in alignment with our brand demographic.

We invest in skateboarding events and partner with like-minded companies that we believe maintain a similar connection to our core demographic.

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.

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.

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

We believe this is accomplished by keeping open dialog directly with our consumers through our website, blogs and social media as well as with our retail and distributor partners to ensure we are current with consumer trends in the beverage industry.

We develop the majority of our brands and products in-house.

We used a similar process initially to create the Jones Soda brand, and we intend to continue utilizing this process to create our future brands and products.

This process primarily consists of the following steps:

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.

We evaluate consumer price tolerance and sensitivity.

All new products must be able to scale and meet strict margin requirements.

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 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 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

The beverage industry is highly competitive.

Principal methods of competition in the beverage industry include:

brand name and image;

distribution;

shelf-management;

labeling and packaging;

product quality and taste;

trade and consumer promotions;

development of new brands, products and product extensions.

We compete with other beverage companies not only for consumer acceptance but also for shelf space in retail stores and for marketing focus by our distributors, all of whom also distribute other beverage brands.

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.

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.

Pricing of the products is also important.

We believe that our products are priced in the same price range or higher than competitive brands and products, and compete on quality as they are premium product offerings.

Cannabis Industry

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.

We are currently in direct competition with Keef Brands, Cann Social Tonics, and Tonik Beverages, none of which are national consumer packaged goods brands in the United States.

We are confident that our cannabis products will be highly competitive.

We seek a competitive advantage over our competitors by applying our Mary Jones brand name recognition and by offering quality cannabis products to our loyal customer base.

Because of the early stage of the cannabis industry in the United States and Canada, we also face additional competition from new entrants.

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, 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 strategically build

our national and regional retailer network by focusing on distribution systems that we believe will provide top-line drivers for our

products and increased availability and visibility of our products in our core markets.

In building and expanding our DSD channel, we

also consider international markets and look for regions that data suggests have a high affinity for the Jones brand and can be pursued

within our financial resources.

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

through alternate channels.

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.

the year ended December 31, 2024, DOT Foods Inc.

(“DOT”), one of our independent distributors and our top account by revenue

represented approximately 13% of revenue during 2024.

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 DOT) or national retail accounts.

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.

Distributors then sell and deliver our products either to sub-distributors

or directly to retail accounts.

We recognize revenue upon receipt by our distributors and national account customers of our products,

net of discounts and promotional allowances, and all sales are final; however, in limited instances, due to credit issues, quality

or damage issues, or distributor changes, we may accept returned product, which to date has not been material.

(direct store delivery)

maintain a network of independent distributors across the United States and Canada that sell our portfolio of branded products.

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

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 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.

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

distributors.

In addition to the efforts of our independent distributors in obtaining distribution of our products, we actively seek

to obtain listings for our products with key retail grocery, convenience and mass merchandiser accounts, which are serviced through our

independent distributor network.

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.

(direct to retail)

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.

and Private Label Distribution

offer private label products directly to retailers.

Our expertise in innovation and managing the manufacturing process allow for efficiencies

for both us and the customer.

We are able to produce these products with minimal sell through risk and ship them through our network

of independent trucking companies or a preferred partner of the customer.

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.

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 2024, sales in the United States represented

approximately 83% of total sales, while sales in Canada represented approximately 17% (primarily through our distributor relationship

with Lassonde).

Jones (THC) Branded Products

Mary Jones Brand cannabis-infused line (THC) is currently marketed and licensed through indirect

subsidiaries in California, Michigan, Missouri and Washington in the US and through Mary Jones Beverage (Canada) Inc.

We partner with

different state-licensed co-manufacturing and distribution partners in each respective state,

region, or province in which we license these products.

Premium Soda Brands

have established our brand primarily through our fun and independent image, as well as by offering what we believe to be unique and exciting

flavors that appeal to consumers seeking alternatives to mainstream “corporate” carbonated soft drinks.

This market is largely

driven by young, trendy consumers who are looking for distinctive products with better ingredients.

While we are known for our innovative

flavors, we also offer traditional ones, which broadens our appeal and positions us as a leader in the growing premium craft beverage

the labels on our bottles, we also focus on building brand loyalty and customer engagement by inviting consumers to submit photographs

to be featured on Jones Soda labels.

Throughout the year, we select photos to place on our bottles and cans for distribution.

Additionally,

consumers can create personalized labels to celebrate special occasions and memories through myJones.com, where they can upload a photo

and caption using our proprietary patented process.

aim to “bring our labels to life” with augmented reality (AR) labels, showcasing athletes and artists in action.

builds on our long-time connection with action sports and creators.

Using the Jones Soda app, consumers can scan the “Reel Label”

icon on our bottles to view short videos that bring these creators’ worlds to life—whether it’s a time-lapse of a mural

being painted or an athlete performing a hardflip at the skatepark.

creative labeling, we provide distributors with point-of-sale materials and branded apparel to increase consumer appeal and awareness.

These marketing efforts, combined with our innovative labeling, have helped establish strong connections and loyalty to the Jones Soda

marketing team has developed a strong brand positioning and identity, which we believe is an essential asset that keeps our brand widely

recognized and positively viewed by a large demographic.

We’ve positioned ourselves as an alternative to mainstream soda brands,

often targeting locations where these brands are not sold.

We’ve also sponsored alternative sports athletes to promote our products

in youth-oriented sports, including UFC, auto racing, skateboarding, BMX biking, snowboarding, and skiing.

Additionally, we’ve

sponsored emerging musicians and artists.

This strategy helps us connect with a younger audience that values independence from larger

soft drink brands.

key marketing pillar for us is the open access our consumers have to define the brand via social media and our website, Jonessoda.com .

We engage with our consumers through social media campaigns to better understand their preferences and trends.

Social media has shifted

modern business away from traditional advertising, and we’ve had success creating social hubs on platforms like Facebook, X,

and Instagram.

Our consumers have welcomed us into their social media lives, creating a personal connection that we believe strengthens

their engagement with our brand and products.

Consumer-Submitted

are known for featuring consumer-submitted photos on our labels and cans.

We encourage consumers to send in photos of their lives, which

we select to feature on our labels.

These photos can be submitted through our “Jones Soda Photo Gallery” on our website.

offer Jones Soda customers—whether businesses or individuals—the chance to create personalized 12-packs with custom labels

featuring their own photos.

This program not only provides a unique product offering but also serves as an innovative marketing opportunity

for our brand.

Consumers can upload their photos through our website to create their own myJones labels, which are printed and delivered

believe this personalized approach has increased awareness and consumer interaction with the Jones Soda brand.

of Sale and Consumer Awareness

increase consumer awareness of our products, we use point-of-sale materials such as posters, stickers, hats, and T-shirts.

to consumer demand, we also sell our products and branded apparel on our website.

We participate in grassroots-level community and sporting

events in selected cities to build brand awareness and loyalty.

Our vehicles—painted in Jones colors and logos—help create

excitement and support distributors as they open new retail accounts.

Occasionally,

we partner with companies to manufacture Jones-related products, like the Jones Soda Flavor Booster hard candy, which extends and enhances

We also engage in cross-promotional campaigns with other companies to further our reach.

invest in events that align with our brand and core demographic, including skateboarding events and partnerships with like-minded companies.

These events allow us to display our logo, offer product samples, and encourage purchases at retail locations.

We plan to continue investing

in these events to strengthen the Jones Soda brand.

and Product Development – Premium Soda Beverages

recognize the importance of continually creating new beverages and enhancing existing products to meet evolving consumer tastes.

Jones Cane Sugar Fountain program, which offers our sodas “on tap” at restaurants and grocery stores, is a key part of this

We work with select fountain distributors to provide these innovative products to retail customers.

focus is on developing innovative products that resonate with consumers, retailers, and distributors.

We maintain open communication

with our consumers via our website, blogs, and social media, as well as with our retail and distributor partners to stay current with

industry trends.

majority of our brand and product development occurs in-house, using the same process that launched the Jones Soda brand.

We assess industry segments to identify potential opportunities.

We consider price sensitivity and the ability to meet margin requirements.

We analyze existing and potential distribution channels.

We assess contract packing capacity, strategic production locations, and

quality control.

Based on our evaluations, we develop brand concepts and work with flavor

houses to test and choose flavors.

and Product Development – Mary Jones

Mary Jones brand is inspired by the original Jones Soda flavors.

We believe the popularity of Jones Soda has paved the way for growth

in the Mary Jones line.

Although we differentiate the two brands for safety and compliance reasons, we leverage the equity of the Jones

Soda brand to support and market Mary Jones products.

As the Mary Jones brand grows, we will continue to innovate and develop new products

Beverage Market Segment

beverage industry is highly competitive.

Our primary competitors include large soft drink manufacturers, regional premium beverage companies,

and private label suppliers.

Competition factors include brand image, distribution, price, product quality, and innovation.

compete not only for consumer acceptance but also for shelf space and marketing focus with our distributors.

While our products are premium

offerings priced similarly or higher than competitors, we believe our quality sets us apart.

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.

of the products is also important.

We believe that our products are priced in the same price range or higher than competitive brands

and products, and compete on quality as they are premium product offerings.

Market Segment

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 we do.

Competitors are primarily branded and private

label cannabis companies who are operating in multiple states.

We are currently in direct competition with Keef Brands, Cann Social Tonics,

and Tonik Beverages, none of which are national consumer packaged goods brands in the United States.

We are confident that our cannabis

products will be highly competitive.

We seek a competitive advantage over our competitors by applying our Mary Jones brand name recognition

and by offering quality cannabis products to our loyal customer base.

Because of the early stage of the cannabis industry in the United

States and Canada, we also face additional competition from new entrants.

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, 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.

Packing Arrangements

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.

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.

We continually review our contract packing needs in light of regulatory compliance and logistical requirements and may add or change co-packers based on those needs.

Raw Materials

The raw materials used in the manufacturing of our premium soda beverage products consist primarily of concentrate, flavors, supplements, sugar, bottles, cans, labels, trays, caps and packaging.

Substantially all of the raw materials used in the preparation, bottling and packaging of our bottle and can products are purchased by us or by our contract manufacturers in accordance with our specifications.

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.

We continually review our contract packing needs in light

of regulatory compliance and logistical requirements and may add or change co-packers based on those needs.

raw materials used in the manufacturing of our premium soda beverage products consist primarily of concentrate, flavors, supplements,

sugar, bottles, cans, labels, trays, caps and packaging.

Substantially all of the raw materials used in the preparation, bottling and

packaging of our bottle and can products are purchased by us or by our contract manufacturers in accordance with our specifications.

These raw materials are purchased from suppliers selected by us or by our contract manufacturers.

We believe that we have adequate sources of raw materials, which are available from multiple suppliers.

We purchase flavor concentrate from our suppliers.

We believe that we have adequate sources

of raw materials, which are available from multiple suppliers.

purchase flavor concentrate from our suppliers.

Generally, flavor concentrate suppliers own the proprietary rights to the flavors.

Although we do not have the list of ingredients or formulas for our flavors, we have exclusive rights to the use of the flavor concentrates developed with our suppliers.

In connection with the development of new soda products and flavors, independent suppliers bear a large portion of the expense for product development, thereby enabling us to develop new products and flavors at relatively low cost.

If we have to replace a flavor supplier, we could experience disruptions in our ability to deliver products to our customers, which could have a material adverse effect on our results of operations.

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

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.

Quality Control

Our premium soda beverage products are made from high-quality ingredients and natural and artificial flavors.

We seek to ensure that all of our products satisfy our high-quality standards.

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.

we do not have the list of ingredients or formulas for our flavors, we have exclusive rights to the use of the flavor concentrates developed

with our suppliers.

In connection with the development of new soda products and flavors, independent suppliers bear a large portion of

the expense for product development, thereby enabling us to develop new products and flavors at relatively low cost.

If we have to replace

a flavor supplier, we could experience disruptions in our ability to deliver products to our customers, which could have a material adverse

effect on our results of operations.

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

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 2025.

premium soda beverage products are made from high-quality ingredients and natural and artificial flavors.

We seek to ensure that all

of our products satisfy our high-quality standards.

Contract manufacturers are selected and monitored by our quality control representatives

in an effort to ensure adherence to our production procedures and quality standards.

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.

Samples from each production run are analyzed and categorized in a reference library.

For each product, the contract manufacturer must transmit all quality control test results to us for reference following each production run.

Testing also includes microbiological checks and other tests to ensure the production facilities meet the standards and specifications of our quality assurance program.

Water quality is monitored during production and at scheduled testing times to ensure compliance with beverage industry standards.

(Beginning, Middle, End) samples from each production run are analyzed and categorized in a reference library.

For each product, the

contract manufacturer must transmit all quality control test results to us for reference following each production run.

also includes microbiological checks and other tests to ensure the production facilities meet the standards and specifications of our

quality assurance program.

Water quality is monitored during production and at scheduled testing times to ensure compliance with beverage

industry standards.

The water used to produce our products is filtered and is also treated to reduce alkalinity.

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 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.

Premium Beverage Business

The production and marketing of our proprietary beverages are subject to the rules and regulations of various federal, provincial, state and local health agencies, including in particular Health Canada, Agriculture and Agri-Food Canada (AAFC) and the United States Food and Drug Administration (FDA).

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.

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 state licensed third parties with whom we enter licensing agreements with concerning

our cannabis products being manufactured and sold.

We operate our cannabis operations in California, Michigan, Missouri and Washington

under wholly-owned subsidiaries that are 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.

Beverage Business

production and marketing of our proprietary beverages are subject to the rules and regulations of various federal, provincial, state

and local health agencies, including in particular Health Canada, Agriculture and Agri-Food Canada (the “AAFC”) and the United

States Food and Drug Administration (the “FDA”).

The FDA and AAFC also regulate labeling of our products.

From time to time, we may receive notifications of various technical labeling or ingredient reviews with respect to our products.

We believe that we have a compliance program in place to ensure compliance with production, marketing and labeling regulations.

Legal requirements have been enacted in several jurisdictions in the United States and Canada requiring that deposits or certain eco-taxes or fees be charged for the sale, marketing and use of certain non-refillable beverage containers.

The precise requirements imposed by these measures vary.

Other beverage container-related deposit, recycling, eco-tax and/or product stewardship proposals have been introduced in various jurisdictions in the United States and Canada.

We anticipate that similar legislation or regulations may be proposed in the future at local, state and federal levels, both in the United States and Canada.

Cannabis Business

Application of Federal Law

Although certain states have legalized either medical marijuana or medical and adult use cannabis, at the federal level, cannabis currently remains a Schedule I drug under the Controlled Substances Act of 1970 (21 U.S.C.

From time to time,

we may receive notifications of various technical labeling or ingredient reviews with respect to our products.

We believe that we have

a compliance program in place to ensure compliance with production, marketing and labeling regulations.

requirements have been enacted in several jurisdictions in the United States and Canada requiring that deposits or certain eco-taxes

or fees be charged for the sale, marketing and use of certain non-refillable beverage containers.

The precise requirements imposed by

these measures vary.

Other beverage container-related deposit, recycling, eco-tax and/or product stewardship proposals have been introduced

in various jurisdictions in the United States and Canada.

We anticipate that similar legislation or regulations may be proposed in the

future at local, state and federal levels, both in the United States and Canada.

of Federal Law

certain states have legalized either medical marijuana or medical and adult use cannabis, at the federal level, cannabis currently remains

a Schedule I drug under the Controlled Substances Act of 1970 (21 U.S.C.

§§ 811 et seq.).

Under United States federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision.

As such, cannabis related practices or activities, including without limitation, the cultivation, manufacture, importation, possession, use, or distribution of cannabis, remain illegal under United States federal law.

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” to all U.S.

Attorneys’ offices (federal prosecutors).

The Cole Memorandum generally directed U.S.

Attorneys not to prioritize the enforcement of federal marijuana laws against individuals and businesses that rigorously comply with state regulatory provisions in states with strictly regulated medical or recreational cannabis programs.

While not legally binding, and merely prosecutorial guidance, the Cole Memorandum laid a framework for managing the tension between state and federal laws concerning state regulated marijuana businesses.

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 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.

Such discretion is firmly in the hands of U.S.

Attorneys in deciding whether to prosecute marijuana-related offenses.

Our outside U.S.

counsel continuously monitors all U.S.

Attorney comments related to regulated medical and adult-use cannabis laws to assess various risks and enforcement priorities within each jurisdiction.

Dozens of U.S.

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.

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.

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.

The federal government of the United States has always reserved the right to enforce federal law in regard to the sale and disbursement of medical or recreational marijuana, even if state law sanctioned such sale and disbursement.

From a regulatory and enforcement perspective, the criminal risk today remains identical to the risk on January 3, 2018.

It remains unclear whether the risk of enforcement has been altered.

Additionally, under U.S.

federal law it may potentially be a violation of federal money laundering statutes for financial institutions to take any proceeds from marijuana sales or any other Schedule I substance.

Banks and other financial institutions could be prosecuted and possibly convicted of money laundering for providing services to cannabis businesses.

federal law, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering or conspiracy.

Under United States federal law,

a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety

for the use of the drug under medical supervision.

As such, cannabis related practices or activities, including without limitation, the

cultivation, manufacture, importation, possession, use, or distribution of cannabis, remain illegal under United States federal law.

federally illegal, the U.S.

Department of Justice (the “DOJ”) has historically exercised enforcement discretion.

that while federal law technically prohibits cannabis, the DOJ has generally not prioritized prosecuting individuals or businesses that

comply with state cannabis regulations, especially in states with robust medical or recreational cannabis programs.

This approach stems

from guidance like the 2013 memorandum issued by the DOJ to all U.S.

Attorney’s Offices to generally direct all U.S.

not to prioritize the enforcement of federal marijuana laws against individuals and businesses that rigorously comply with state regulatory

provisions in states with strictly regulated medical or recreational cannabis programs (the “2013 Cole Memorandum”), which

was later rescinded in 2018 under Attorney General Jeff Sessions.

Despite the rescission, enforcement discretion remains, with U.S.

having the authority to decide whether to prosecute cannabis-related offenses based on factors like the seriousness of the offense and

available resources.

2022, former President Joe Biden announced a three-step approach to reforming federal cannabis policy.

This included pardoning federal

offenders convicted of simple cannabis possession, urging state Governors to take similar actions, and directing the Department of Health

and Human Services (“HHS”) and the Attorney General to review cannabis’s status as a Schedule I substance.

2024, HHS and the FDA recommended rescheduling cannabis, marking a significant step toward potential federal policy change.

These efforts

reflect broader momentum for reform, though cannabis remains a Schedule I drug until official changes are made to federal law.

now, given the change in administration, these actions do not alter the legal status of cannabis but represent steps toward reconsidering

its classification.

Attorney General Pam Bondi, who assumed office in 2025, the DOJ has indicated its focus is refining federal cannabis policy, with an

emphasis on prosecutorial discretion and greater alignment with state-level regulatory frameworks.

Attorney General Bondi has signaled

that her approach will be more tailored to individual jurisdictions, respecting state decisions to regulate cannabis while maintaining

federal oversight over interstate issues and illicit activity.

While the DOJ continues to prioritize resource allocation, it has stated

that state-compliant cannabis businesses operating under rigorous regulatory schemes will generally not be a target for federal prosecution.

However, federal law enforcement remains vigilant in addressing significant concerns such as money laundering, illegal trafficking, and

other criminal activities connected to cannabis.

Additionally,

federal law it may potentially be a violation of federal money laundering statutes for financial institutions to take any

proceeds from marijuana sales or any other Schedule I substance.

Banks and other financial institutions could be prosecuted and possibly

convicted of money laundering for providing services to cannabis businesses.

federal law, banks or other financial institutions

that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be found

guilty of money laundering or conspiracy.

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.

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.

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.

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 2013 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 2013 Cole Memorandum, removing guidance that enforcement of applicable

financial crimes was not a DOJ priority.

Attorney General Sessions’ revocation of the 2013 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 2013 Cole Memorandum.

As such, the FinCEN Memorandum remains intact.

Enforcement Proceedings under Federal Law

Although the Cole Memorandum and 2014 Cole Memo have been rescinded, the United States Congress has repeatedly enacted legislation to protect the medical marijuana industry from prosecution.

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.

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.

this guidance, many financial institutions remain hesitant to engage with the cannabis industry due to the risks of federal prosecution

and regulatory uncertainty.

Additionally, in 2021, some proposals were made to clarify or modify FinCEN’s stance to ease access

to banking services for cannabis businesses, but comprehensive reform has not yet been enacted.

Thus, while FinCEN provides a framework

for financial institutions, the cannabis industry’s access to banking remains limited and subject to ongoing regulatory and legal

Proceedings under Federal Law

the Cole Memorandum and 2014 Cole Memo have been rescinded, the United States Congress has repeatedly enacted legislation to protect

the medical marijuana industry from prosecution.

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.

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.

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

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.

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.

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.

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” below.

California Regulatory Landscape

In 1996, California was the first state to legalize medical marijuana through Proposition 215, the Compassionate Use Act of 1996.

This legalized the use, possession and cultivation of medical marijuana by patients with a physician recommendation for treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief.

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”).

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.

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, former 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.

The amendment remains

effective in March 2025.

Regulatory Environment

following sections describe the legal and regulatory landscape in California and Washington where we have commenced our 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” below.

Regulatory Landscape

1996, California was the first state to legalize medical marijuana through Proposition 215, the Compassionate Use Act of 1996.

This legalized

the use, possession and cultivation of medical marijuana by patients with a physician recommendation for treatment of cancer, anorexia,

AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief.

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

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.

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.

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.

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.

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.

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

The maximum fine is $5,000 per violation for licensees and $30,000 per violation for unlicensed persons.

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.

The maximum fine is $5,000 per violation for licensees and $30,000 per violation

for unlicensed persons.

Each day of a violation constitutes a separate violation.

97 also repeals a prior requirement that an applicant for a provisional license first hold a temporary license.

The bill also requires applicants for provisional licenses to submit evidence of compliance with the California Environmental Quality Act, limits the validity of a provisional license to 12 months with subsequent renewals as approved by the relevant licensing authority, and allows licensing authorities to revoke provisional licenses for failing to diligently pursue final licensure.

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.

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.

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.

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.

The bill also requires

applicants for provisional licenses to submit evidence of compliance with the California Environmental Quality Act, limits the validity

of a provisional license to 12 months with subsequent renewals as approved by the relevant licensing authority, and allows licensing

authorities to revoke provisional licenses for failing to diligently pursue final licensure.

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.

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.

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.

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 in March

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

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.

Therefore, cities in California are allowed to determine the number of licenses they will issue to marijuana operators or can choose to outright ban marijuana.

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.

Therefore, cities in California are allowed to

determine the number of licenses they will issue to marijuana operators or can choose to outright ban marijuana.

Licensing Requirements

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.

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

In the state of California, only cannabis that is grown in the state can be sold in the state.

Although California is not a vertically-integrated system, the state allows licensees to make wholesale purchase of cannabis from, or a distribution of cannabis and cannabis product to, another licensed entity within the state.

Holders of marijuana licenses in California are subject to a detailed regulatory scheme encompassing:

security, staffing, sales, manufacturing standards, inspections, inventory, advertising and marketing, product packaging and labeling, records and reporting, and more.

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.

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.

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.

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.

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.

the state of California, only cannabis that is grown in the state can be sold in the state.

Although California is not a vertically-integrated

system, the state allows licensees to make wholesale purchase of cannabis from, or a distribution of cannabis and cannabis product to,

another licensed entity within the state.

of marijuana licenses in California are subject to a detailed regulatory scheme encompassing:

security, staffing, sales, manufacturing

standards, inspections, inventory, advertising and marketing, product packaging and labeling, records and reporting, and more.

all jurisdictions, the full regulations, as promulgated by each applicable state agency, should be consulted for further information

about any particular operational area.

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.

Dispensary Requirements

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.

Cannabis retailers may only display cannabis goods for inspection and sale in the retail area.

Such goods may be removed from their packaging and placed in containers to allow for customer inspection, so long as the containers are not readily accessible to customers without assistance of retailer personnel.

A container must be provided to the customer by the licensed retailer or its employees, who must remain with the customer at all times that the container is being inspected by the customer.

Cannabis goods removed from their packaging in this way may not be sold or consumed.

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.

retailers may only display cannabis goods for inspection and sale in the retail area.

Such goods may be removed from their packaging

and placed in containers to allow for customer inspection, so long as the containers are not readily accessible to customers without

assistance of retailer personnel.

A container must be provided to the customer by the licensed retailer or its employees, who must remain

with the customer at all times that the container is being inspected by the customer.

Cannabis goods removed from their packaging in

this way may not be sold or consumed.

They must be destroyed appropriately when they are no longer being used for display.

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

Reporting Requirements

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.

Only licensees have access to METRC.

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;

contract for security guard services;

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;

store cannabis and cannabis product only in areas per the premises diagram submitted to the state of California during the licensing process;

store all cannabis and cannabis products in a secured, locked room or a vault;

report to local law enforcement within 24 hours after being notified or becoming aware of the theft, diversion, or loss of cannabis;

ensure the safe transport of cannabis and cannabis products between licensed facilities, maintain a delivery manifest in any vehicle transporting cannabis and cannabis products.

Only vehicles registered with the BCC that meet BCC distribution requirements are to be used to transport cannabis and cannabis products.

DCC Inspections

The DCC, and its authorized representatives, shall have full and immediate access to inspect and enter onto any premises licensed by the DCC.

Storage, Transportation, and Security Requirements

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:

a fully operational security alarm system;

for security guard services;

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

that the facility’s outdoor premises have sufficient lighting;

dispense from its premises outside of permissible hours of operation;

cannabis and cannabis product only in areas per the premises diagram submitted to the state

of California during the licensing process;

all cannabis and cannabis products in a secured, locked room or a vault;

to local law enforcement within 24 hours after being notified or becoming aware of the theft,

diversion, or loss of cannabis; and

the safe transport of cannabis and cannabis products between licensed facilities, maintain

a delivery manifest in any vehicle transporting cannabis and cannabis products.

Only vehicles

registered with the DCC that meet DCC distribution requirements are to be used to transport

cannabis and cannabis products.

DCC, and its authorized representatives, shall have full and immediate access to inspect and enter onto any premises licensed by the

Prior notice of an inspection, investigation, review, or audit is not required.

The DCC may also test any vehicle or equipment possessed by, in control of, or used by a licensee or their agents and employees for the purpose of conducting commercial cannabis activity.

Moreover, it may test any cannabis goods or cannabis-related materials, or products possessed by, in control of, or used by a licensee or their agents and employees for the purpose of conducting commercial cannabis activity.

The DCC may also copy any materials, books, or records of any licensee or their agents and employees.

Failure to cooperate with and participate in any DCC investigation pending against the licensee may result in a licensing violation subject to discipline.

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 ®” 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.

The DCC may also test any vehicle or equipment possessed

by, in control of, or used by a licensee or their agents and employees for the purpose of conducting commercial cannabis activity.

it may test any cannabis goods or cannabis-related materials, or products possessed by, in control of, or used by a licensee or their

agents and employees for the purpose of conducting commercial cannabis activity.

The DCC may also copy any materials, books, or records

of any licensee or their agents and employees.

Failure to cooperate with and participate in any DCC investigation pending against the

licensee may result in a licensing violation subject to discipline.

Regulatory Landscape

State’s cannabis regulatory regime has evolved significantly since the state first legalized cannabis.

In 2012, Washington voters

passed Initiative 502 (I-502), legalizing both medical and recreational cannabis for adults over the age of 21.

This marked a significant

shift in state policy, as Washington became one of the first states in the U.S.

to legalize recreational cannabis.

I-502 established

a framework for regulating the production, distribution, and sale of cannabis, creating a state-controlled system for licensing producers,

processors, and retailers.

The initiative also set strict limits on possession and consumption, ensuring cannabis was treated similarly

to alcohol in terms of regulation and enforcement.

the passage of I-502, the Washington State Liquor and Cannabis Board (the “WSLCB”) was tasked with developing detailed regulations

and implementing the cannabis market.

By 2014, the first legal cannabis stores opened, and the state began to collect significant tax

revenue from cannabis sales.

The WSLCB established rules regarding the licensing process, product testing, packaging, and labeling to

ensure consumer safety and prevent cannabis from being sold to minors.

Additionally, the state implemented robust tracking systems to

monitor cannabis products from cultivation through retail to prevent diversion to the black market.

Washington’s regulatory framework

was designed to maintain strict oversight while promoting a legal market for cannabis.

addition to recreational cannabis, Washington’s medical cannabis system has also undergone considerable changes.

Although medical

cannabis was legal in Washington before I-502, it lacked a clear regulatory structure.

After I-502’s passage, the state worked

to integrate medical cannabis into the new recreational system, ensuring that medical patients had access to regulated, quality products.

In 2015, the Washington State Legislature passed ESHB 2136, which unified the medical and recreational cannabis systems and created a

framework for medical cannabis patients to access cannabis through licensed dispensaries.

Under the new system, medical cannabis patients

benefit from certain tax exemptions and higher purchase limits, while the overall goal was to ensure both the recreational and medical

cannabis markets were properly regulated to protect public health and safety.

Today, Washington State’s cannabis laws continue

to evolve, focusing on further refinement and adjustments to the market as the state navigates challenges related to enforcement, taxation,

and equity in the cannabis industry.

Licensing Requirements

Washington State, cannabis manufacturing is regulated by the Washington State Liquor and Cannabis Board (the “WSLCB”), which

issues licenses for producers and processors involved in the production and manufacture of cannabis products.

The relevant regulatory

framework for cannabis manufacturing is governed primarily by Initiative 502 (I-502) and the rules set forth in Title 314 of the Washington

Administrative Code (the “WAC”).

Under I-502, the WSLCB is responsible for issuing licenses, enforcing compliance with regulations,

and overseeing the legal cannabis market in Washington.

obtain a cannabis manufacturing or retail license, applicants must meet several criteria, including demonstrating that they are 21 years

of age or older, are U.S.

citizens or legal residents, and have no felony convictions within the past 10 years, particularly those related

to controlled substances.

The licensing process involves submitting an application through the WSLCB’s online portal, paying application

fees, and passing a background check.

Manufacturers must also ensure that their operations meet local zoning requirements, as local municipalities

may have additional restrictions or bans on cannabis businesses.

Licenses are available for different types of manufacturing, such as

cannabis processing, which involves the creation of cannabis-infused products, and cannabis extraction, which includes methods of concentrating

cannabinoids like THC and CBD.

a license is granted, cannabis manufacturers and retailers must comply with ongoing regulatory requirements under the WSLCB’s rules.

These include maintaining a secure facility with proper surveillance and alarm systems, conducting regular product testing through state-approved

labs, and adhering to packaging and labeling standards outlined in WAC 314-55.

All participants in the Washington cannabis industry are

also required to use the state’s seed-to-sale tracking system, called the Marijuana Tracking System (the “MTS”), to

monitor the movement of cannabis products from cultivation to sale.

Compliance with these regulations is essential for ensuring the safety,

security, and legality of cannabis manufacturing in Washington State.

Failure to comply with the licensing requirements and regulations

can result in fines, suspension, or revocation of the manufacturer’s license.

Dispensary Requirements

dispensaries in Washington State are permitted to sell a variety of cannabis products, including flower (dried cannabis), pre-rolls,

concentrates, extracts, edibles, tinctures, and topicals.

These products must be sourced from licensed producers and processors who comply

with state regulations regarding testing, labeling, and quality control.

According to WAC 314-55, all cannabis products sold in dispensaries

must undergo testing for potency and contaminants (e.g., pesticides, mold, and residual solvents) at state-certified laboratories to

ensure they meet health and safety standards before they reach consumers.

Additionally, dispensaries can only sell cannabis products

that are appropriately packaged and labeled, following WSLCB rules.

Labels must include information such as product potency (THC/CBD

content), ingredients, serving size, and health warnings.

display of cannabis products within dispensaries is tightly regulated.

Under WAC 314-55-155, cannabis products must be kept behind a

counter or in a secure area that is not accessible to customers without the assistance of a licensed employee.

Retailers are prohibited

from displaying cannabis products in an open manner or allowing customers to handle the products without first engaging with a staff

Edibles and concentrates, in particular, must be stored in child-resistant, tamper-evident packaging, and products must not be

displayed in a way that is attractive to minors.

Additionally, the law prohibits retailers from using advertising or packaging that could

appeal to children, such as cartoon characters or candy-like packaging.

are required to maintain robust security measures to prevent theft and ensure public safety.

According to WAC 314-55-083, dispensaries

must have a security system in place that includes 24/7 surveillance with video cameras covering key areas such as entrances, exits,

cash handling areas, and storage areas.

All video footage must be retained for a minimum of 45 days and be available to law enforcement

upon request.

Dispensaries must also maintain a secure inventory system to track cannabis products from producers and processors to the

final sale, using the state’s MTS.

Furthermore, physical security measures, such as locked storage for cannabis products, safes

for cash, and alarm systems, are required to safeguard both the products and the dispensary’s premises.

Employees must be trained

in security protocols, including how to handle potential theft, customer disputes, and other emergency situations.

rules aim to maintain a controlled, secure, and compliant cannabis retail environment in Washington State, ensuring the legal market

operates safely while protecting public health and preventing unauthorized access to cannabis products.

Non-compliance with these regulations

can result in fines, suspension, or revocation of a dispensary’s license.

Reporting Requirements

participants in the Washington cannabis industry are also required to use the MTS to monitor the movement of cannabis products from cultivation

Flavor Concentrate Trade Secrets and Patent Rights

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®,”.

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.

Although our flavor concentrate suppliers generally own the proprietary rights to the flavors, we have the exclusive rights to our flavor concentrates developed with our current flavor concentrate suppliers, which we protect as trade secrets.

We will continue to take appropriate measures to maintain the secrecy and proprietary nature of our flavor concentrates.

We consider our trademarks and trade secrets to be of considerable value and importance to our business.

Our sales are seasonal and we experience fluctuations in quarterly results as a result of many factors.

We historically have generated a greater percentage of our revenues during the warm weather months of April through September.

Sales may fluctuate materially on a quarter to quarter basis or an annual basis when we launch a new product or fill the “pipeline” of a new distribution partner or a large retail partner.

Sales results may also fluctuate based on the number of stock keeping units 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.

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.

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”).

our flavor concentrate suppliers generally own the proprietary rights to the flavors, we have the exclusive rights to our flavor concentrates

developed with our current flavor concentrate suppliers, which we protect as trade secrets.

We will continue to take appropriate measures

to maintain the secrecy and proprietary nature of our flavor concentrates.

consider our trademarks and trade secrets to be of considerable value and importance to our business.

sales are seasonal and we experience fluctuations in quarterly results as a result of many factors.

We historically have generated a

greater percentage of our revenues during the warm weather months of April through September.

Sales may fluctuate materially on a quarter

to quarter basis or an annual basis when we launch a new product or fill the “pipeline” of a new distribution partner or

a large retail partner.

Sales results may also fluctuate based on the number of stock keeping units or “SKUs” selected or

removed by our distributors and retail partners through the normal course of serving consumers in the dynamic, trend-oriented beverage

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.

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.

of the date of this Report, we have 27 employees, all of which are full-time, and with the exception of two employees located in Canada

are all located in the United States.

Of our 27 employees, 15 are employed in sales and marketing capacities, 4 are employed in finance

and accounting capacities and 8 are employed in customer service, manufacturing and quality control capacities.

None of our employees

are represented by labor unions.

Exchange Act Reports and other Available Information

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.

Information contained on our website is not part of this annual report on Form 10-K.

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:”

Audit Committee Charter

Compensation and Governance Committee Charter

Code of Conduct applicable to all directors, officers and employees of Jones Soda Co.

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 1st Avenue South, Suite 103, Seattle, Washington 98134.

Executive Officers

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

Paul Norman, Chairman

Chad Bronstein

Gregg Reichman

Ronald Dissinger

Internet address is www.jonessoda.com.

Certain information contained on our website is not part of this annual report on Form

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:”

Committee Charter

● Compensation

and Governance Committee Charter

of Conduct applicable to all directors, officers and employees of Jones Soda Co.

of Ethics for our CEO and senior financial officers.

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.

Harvey, President and Chief Executive Officer

Meadows, Chief Financial Officer

Carimi, Chief Operating Officer

Goldner, Chief Growth Officer

Norman, Chairman

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