Jones Soda (OTCMKTS:JSDA) reported record third-quarter revenue of $13.7 million, up 204% from a year earlier, as sales of Fallout-branded products through club retailers helped the beverage maker return to profitability from continuing operations.
CEO Scott Harvey said the quarter also benefited from approximately $2 million in shipments originally planned for the second quarter. The company reaffirmed its 2026 outlook for revenue above $45 million and positive adjusted EBITDA.
Jones reported net income from continuing operations of $471,000 for the three months ended Sept. 30, compared with a loss of approximately $1.4 million a year earlier. Adjusted EBITDA from continuing operations, a non-GAAP measure, was $869,000, compared with a loss of $897,000 in the prior-year quarter.
Fallout Sales and Freight Savings Lift Results
Third-quarter revenue rose from $4.5 million a year earlier. CFO Brian Meadows said higher-volume Fallout sales through club retail channels were the primary driver, alongside the shipments shifted from the second quarter.
Gross profit increased to $4.7 million from $1.3 million, while gross margin rose to 34.4% from 28.9% a year earlier and 27.5% in the second quarter. Meadows attributed the sequential improvement in part to freight rate reductions, greater operating scale and sales mix. He said the gains came despite the wind-down of the company’s higher-margin hemp-derived beverage business, HD9.
Total operating expenses increased to approximately $4.3 million from $2.7 million, primarily because of higher selling and marketing costs, including broker fees and royalties tied to Fallout sales. Operating income was approximately $400,000, compared with an operating loss of $1.4 million a year earlier.
For the first nine months of 2026, revenue rose to $36.3 million from $13.6 million. Jones reported a net loss from continuing operations of approximately $64,000, compared with net income of $132,000 in the prior-year period. Meadows noted that the earlier period included a one-time $3.7 million gain on the disposition of the company’s cannabis business.
Building Beyond Fallout
Harvey said the company has two years remaining on its agreement with Bethesda and plans additional Fallout product rotations. He also said the partnership has helped Jones reach retailers it might not otherwise have accessed.
Jones is launching in more than 250 H-E-B stores in Texas, including with Zero Sugar products, Harvey said. The company has also introduced its Zero Sugar lineup in club stores in Western Canada as it seeks to attract consumers who had moved away from its products because of their sugar content.
Direct-to-consumer sales are another priority. Harvey said the channel generated approximately $1 million in revenue last year and is expected to reach approximately $5 million in 2026. The company is targeting January 2027 for a relaunch of its website, with plans to improve the shopping experience and introduce subscription offerings.
Meadows said direct-to-consumer sales have significantly higher gross margins than club or retailer sales. As that channel grows and the company seeks lower component costs, he said gross margins in the upper 30% range are a realistic target, while leaving open the possibility of reaching the 40% range.
New Products and Uplisting Plans
Jones has established a division called Jones Labs to develop functional health and nutrition products, with initial testing targeted for the first quarter of 2027. Harvey said the company is exploring areas including metabolic health, GLP-1 support, performance nutrition, gut health and healthy aging.
At the same time, Harvey said Jones has discontinued Spiked Jones because of sales velocity and consumer acceptance, and has exited POP Jones amid competition and declining shelf presence. He also pointed to the company’s decisions to exit HD9 and Modern Soda as examples of directing resources toward opportunities it believes can generate stronger returns.
Meadows said Jones is not yet issuing a 2027 outlook but could announce one early next year. He also said the company plans to update its S-1 filing with the Securities and Exchange Commission before the end of 2026 for a possible first-quarter 2027 uplisting to either the New York Stock Exchange or Nasdaq.
Cash and Working Capital
Jones ended September with approximately $4.4 million in cash, up from $3.6 million at the end of 2025. Meadows said two private placements completed during 2026 strengthened cash resources. The outstanding balance on the company’s revolving credit facility and loans was $3.5 million at quarter-end.
Inventory rose to approximately $6.5 million from $2.7 million at year-end, while accounts receivable increased to approximately $5.6 million from $3.6 million. Meadows said the inventory increase was largely connected to higher business volumes and products built to service club, retail and direct-to-consumer programs.
“Revenue growth alone does not create cash until we turn inventory into sales and collect the related receivables,” Meadows said.
About Jones Soda (OTCMKTS:JSDA)
Jones Soda Co. is a beverage company that develops, markets and distributes specialty soft drinks and other consumer beverages. Its flagship Jones Soda brand is known for craft-style carbonated drinks made with cane sugar and distinctive flavors, packaging and consumer-submitted artwork. The company’s product portfolio has included a range of sodas, including traditional and zero-calorie options, as well as limited-edition and seasonal flavors. Jones Soda also markets Mary Jones, a cannabis-infused beverage and edible brand, where permitted by applicable laws and regulations.
