10-Q 1 mojo063018form10q.htm FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended: June 30, 2018

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________

 

Commission file number: 000-55269

 

MOJO Organics, Inc.
(Exact name of registrant as specified in its charter)

 

Delaware   26-0884348
(State or other jurisdiction of   (IRS Employer Identification No.)
incorporation or organization)    

 

185 Hudson Street, Floor 25    
Jersey City, New Jersey   07302

(Address of principal executive

offices)

  (Postal Code)

 

Registrant’s telephone number: 201 633 6519

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large Accelerated Filer ☐ Accelerated Filer ☐
Non-Accelerated Filer ☐ Smaller reporting company ☒
(Do not check if a smaller reporting company)  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes ☐  No ☒

 

On June 30, 2018, there were 27,154,099 shares of the registrant's common stock, par value $0.001, issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

None. 

 

 i 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)  
Condensed Balance Sheets as of June 30, 2018 and December 31, 2017 1
Condensed Statements of Operations for the six months ended June 30, 2018 and June 30, 2017 2
Condensed Statements of Operations for the three months ended June 30, 2018 and June 30, 2017 3
Condensed Statements of Cash Flows for the six months ended June 30, 2018 and March 31, 2017 4
Condensed Statement of Changes in Stockholders’ Equity (Deficit) for the six months ended June 30, 2018 5
Notes to the Condensed Financial Statements 6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
ITEM 4. CONTROLS AND PROCEDURES 15
PART II – OTHER INFORMATION  
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 1a. RISK FACTORS 16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. MINE SAFETY DISCLOSURE 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS 17
SIGNATURES 19

  

 ii 

 

 

MOJO ORGANICS, INC.
(Unaudited) Condensed Balance Sheets
As of June 30, 2018 and December 31, 2017
       
      Audited
   June 30,
2018
  December 31, 2017
ASSETS   
CURRENT ASSETS:          
Cash and cash equivalents  $1,131   $22,357 
Accounts receivable   180,195    82,326 
Inventory   192,962    273,734 
Supplier Deposits   8,000    —   
Prepaid expenses   10,375    10,905 
Total Current Assets   392,663    389,322 
Security deposit   4,518    4,518 
TOTAL ASSETS  $397,181   $393,840 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $65,116   $29,508 
Accrued Payroll to related parties   15,000      
Total Current Liabilities   80,116    29,508 
           
Commitments and Contingencies          
           
STOCKHOLDERS' EQUITY          
Preferred stock, 10,000,000 shares authorized at $0.001 par value, no shares issued and outstanding   —      —   
Common stock, 190,000,000 shares authorized at $0.001 par value, 27,154,099 and 26,667,781 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively   27,154    26,667 
Additional paid in capital   23,054,071    22,963,323 
Accumulated deficit   (22,764,160)   (22,625,658)
Total Stockholders' Equity   317,065    364,322 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $397,181   $393,840 
           
 The accompanying notes are an integral part of these condensed financial statements.

 

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MOJO ORGANICS, INC.
(Unaudited) Condensed Statements of Operations
For the Six Months Ended June 30, 2018 and 2017
 
 
    2018    2017 
Revenue  $793,316   $586,037 
           
Cost of Revenue   442,858    369,505 
Gross Profit   350,458    216,532 
           
Operating Expenses          
Selling, general and administrative   488,960    1,244,511 
Total Operating Expenses   488,960    1,244,511 
           
Loss from Operations   (138,502)   (1,027,989)
           
Other Income   —      2,180 
           
Loss Before Provision for Income Taxes   (138,502)   (1,025,799)
           
Provision for Income Taxes   —      —   
           
Net Loss  $(138,502)  $(1,025,799)
           
Net loss per common share, basic and diluted  $(0.01)  $(0.05)
           
Basic and diluted weighted average number of common shares outstanding   26,890,117    20,700,686 
           
 The accompanying notes are an integral part of these condensed financial statements.

  

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MOJO ORGANICS, INC.
(Unaudited) Condensed Statements of Operations
For the Three Months Ended June 30, 2018 and 2017
 
 
    2018    2017 
Revenue  $442,422   $344,077 
           
Cost of Revenue   242,052    225,711 
Gross Profit   200,370    118,366 
           
Operating Expenses          
Selling, general and administrative   247,175    1,030,694 
Total Operating Expenses   247,175    1,030,694 
           
Loss from Operations   (46,805)   (912,328)
           
Other Income   —      —   
           
Loss Before Provision for Income Taxes   (46,805)   (912,328)
           
Provision for Income Taxes   —      —   
           
Net Loss  $(46,805)  $(912,328)
           
Net loss per common share, basic and diluted  $(0.00)  $(0.04)
           
Basic and diluted weighted average number of common shares outstanding   27,002,809    22,995,547 
           
 The  accompanying notes are an integral part of these condensed financial statements.

  

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MOJO ORGANICS, INC.
(Unaudited) Condensed Statements of Cash Flows
For the Six Months Ended June 30, 2018 and 2017
       
       
    2018    2017 
Cash flows from operating activities:          
Net loss  $(138,502)  $(1,025,799)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation - stock options   —      214,690 
Stock and warrants issued to directors and employees   104,371    1,246,123 
Changes in assets and liabilities:          
Decrease/(Increase) in accounts receivable   (97,869)   (119,571)
(Increase)/Decrease in inventory   90,294    21,366 
Increase in supplier deposits   (8,000)   —   
Decrease in prepaid expenses   530    11,425 
Increase in accounts payable and accrued expenses   26,085    74,108 
Increase/(Decrease) in accrued payroll to related parties   15,000    (448,086)
Net cash used in operating activities   (8,091)   (25,744)
           
Net cash from financing activities:          
Shares repurchased for cancellation   (13,135)   —   
Net cash used in financing activities   (13,135)   —   
           
Net decrease in cash and cash equivalents   (21,226)   (25,744)
           
Cash and cash equivalents at beginning of periods   22,357    38,668 
           
Cash and cash equivalents at end of periods  $1,131   $12,924 
           
The accompanying notes are an integral part of these condensed financial statements

 

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MOJO ORGANICS, INC.
Condensed Statements of Changes in Stockholders' Equity
For the Three Months Ended June 30, 2018
(Unaudited)
                
                
    Common Stock              

 

 

 
    Shares    Amount    

Additional Paid-In

Capital

    

Accumulated

Deficit

    

Stockholders’

Equity

 
Balance, December 31, 2017   26,667,781   $26,667   $22,963,323   $(22,625,658)  $364,332 
Stock based compensation                         
Stock options   —      —      —      —      —   
Stock and warrants issued to Directors and Employees   552,000    552    103,818    —      104,370 
Stock cancelled   (65,682)   (65)   (13,070)   —      (13,135)
Net loss   —      —      —      (138,502)   (138,502)
Balance, June 30, 2018   27,154,099   $27,154   $23,054,071   $(22,764,160)  $317,065 
                          
The accompanying notes are an integral part of these condensed financial statements.

 

 5 

 

 

MOJO ORGANICS, INC.

Notes to Condensed Financial Statements

June 30, 2018

 

NOTE 1 – BUSINESS

 

Overview

 

MOJO Organics, Inc. (“MOJO” or the “Company”) was incorporated in the State of Delaware on August 2, 2007. Headquartered in Jersey City, NJ, the Company engages in new product development, production, marketing, distribution and sales of beverage brands that are Non GMO Project Verified.

 

Interim Financial Statements

 

The accompanying unaudited interim condensed financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q and article 10 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited interim condensed financial statements included in this document have been prepared on the same basis as the annual audited financial statements, and in the Company’s opinion, reflect all adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the six months ended June 30, 2018 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K. 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The financial statements are prepared in conformity with GAAP. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

Cash equivalents include investment instruments and time deposits purchased with a maturity of three months or less. As of June 30, 2018 and December 31, 2017, the Company did not have any cash equivalents. For purposes of reporting cash flows, cash and cash equivalents include all highly liquid investments purchases with a maturity of three months or less.

 

Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company provides for probable uncollectible amounts based upon its assessment of the current status of the individual receivables and after using reasonable collection efforts. The allowance for doubtful accounts as of June 30, 2018 and December 31, 2017 was zero.

 

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Inventories

 

Inventories, consisting solely of finished goods, both on hand and in transit are stated at the lower of cost (first-in, first-out method) or net realizable value. When necessary, the Company provides allowances to adjust the carrying value of its inventories to the lower of cost or NRV. As of June 30, 2018 inventory consists solely of finished goods, with $112,826 on hand and $80,136 in transit.

 

Revenue Recognition

 

Revenue is recognized when ownership and risk of loss transfer to the customer, which is the date when the customer receives the product. Revenue transactions represent sales of inventory net of sales discounts and trade promotions consisting of customer pricing allowances and merchandising funds offered through various programs to consumers.

 

Deductions from Revenue

 

Costs incurred for sales incentives and discounts are accounted for as a reduction in revenue. These costs include payments to customers for performing merchandising activities on our behalf, including in-store displays, promotions for new items, and obtaining optimum shelf space.

 

Shipping and Handling Costs

 

Shipping and handling costs incurred to move finished goods from our sales distribution centers to customer locations are included in the line Selling, General and Administrative Expenses in our Statements of Operations.

  

Net Loss Per Common Share

 

The Company computes per share amounts in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “Earnings per Share”. ASC Topic 260 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the loss available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the periods.

 

The following potentially dilutive securities have been excluded from the computation of weighted average shares outstanding as they would have had an anti-dilutive impact on the Company’s net loss per common share:

 

   At June 30,
   2018  2017
Shares underlying options outstanding   2,476,559    1,491,865 
Shares underlying warrants outstanding   3,530,223    3,683,614 
Total   6,006,782    5,175,479 

 

Income Taxes

 

The Company provides for income taxes using the asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2018 and December 31, 2017, the Company had no accrued interest or penalties. The Company has had no Federal or state tax examinations in the past nor does it have any at the current time.

 

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Stock-Based Compensation

 

ASC Topic 718, “Accounting for Stock-Based Compensation” prescribes accounting and reporting standards for stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. ASC Topic 718 requires employee compensation expense to be recorded using the fair value method. The Company accounts for employee stock based compensation in accordance with the provisions of ASC Topic 718.

 

The Company accounts for equity based transactions with non-employees under the provisions of ASC Subtopic 505-50, “Equity-Based Payments to Non-Employees.”  ASC Subtopic 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if it is to pay cash or services instead of paying with or using the equity instrument.

 

Fair value of financial instruments

 

The carrying amounts of financial instruments, which include cash, accounts receivable, accounts payable and accrued expense, approximate their fair values due to their short-term nature.

   

Recent Accounting Pronouncements

 

On January 1, 2018 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. The ASC aims to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The FASB has been assisting stakeholders with implementation questions and issues as organizations prepare to adopt Topic 842. The new pronouncement will not have any material impact on the financial statements.

 

NOTE 3 – COMMITMENTS AND CONTINGENCIES

 

Employment Agreements

 

On April 6, 2017, the Company entered into Amended and Restated Employment Agreements with Mr. Glenn Simpson (the “Simpson Agreement”), the Company’s Chairman and Chief Executive Officer (the “CEO”) and Mr. Peter Spinner (the “Spinner Agreement”), the Company’s Chief Operating Officer (the “COO”). The Simpson Agreement and the Spinner Agreement were effective April 1, 2017 and have eight year terms.

 

On December 8, 2017, the Company entered into Amended and Restated Employment Agreement with Mr. Peter Spinner (the “Amended Spinner Agreement”). This agreement is effective January 1, 2018 and supersedes the Spinner Agreement. The Amended Spinner Agreement was terminated on March 31, 2018.

 

Pursuant to the Simpson Agreement, Mr. Simpson will be paid a salary of $5,000 per month in cash and the right to receive 67,000 shares of Common Stock per month. Additionally, Mr. Simpson is entitled to an annual bonus comprised of cash and Common Stock based on performance goals established by the Board of Directors of the Company as set forth in the Simpson Agreement.  The cash bonus is established at $44,400 per year. The stock bonus is set at 200,000 shares of Common Stock per year through December 31, 2025 based upon revenue performance goals. The revenue goals range from $2,400,000 to $19,200,000 per year. The bonus awards may be accelerated should revenue exceed the annual target amounts.

 

Mr. Simpson and Mr. Spinner were issued 276,000 and 75,000 shares, respectively, of restricted Common Stock at $0.20 per share on February 27, 2018 as part of the Simpson Agreement and Amended Spinner Agreement for their first quarter compensation.

 

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Mr. Simpson was issued 201,000 shares of restricted Common Stock at $0.17 per share on June 15, 2018 as part of the Simpson Agreement for his second quarter compensation.

 

Lease Commitment

 

The Company maintains office space in Jersey City, New Jersey. The company leased the space pursuant to a lease agreement dated March 1, 2017 at a rate of $2,259 per month. The lease agreement was renewed on March 1, 2018 and the new rate is $2,304 per month. The new lease expires on February 28, 2019. Lease expense amounted to $13,750 and $14,415 for the six months ended June 30, 2018 and 2017, respectively.

 

NOTE 4 – STOCKHOLDERS’ EQUITY

 

The Company has authorized 190,000,000 shares of common stock (“Common Stock”) and 10,000,000 shares of preferred stock (“Preferred Stock”), each having a par value of $0.001.

 

In October 2015, the Company approved the 2015 Incentive Stock Plan (the “2015 Plan”), which provides the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.

  

In March 2013, the Company approved the 2012 Long-Term Incentive Equity Plan (the “2012 Plan”), which provides the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or stock based awards for up to an aggregate of 2,050,000 shares of Common Stock.

 

Restricted Stock Compensation

 

On May 9, 2018, the Company consented to lift the prior restrictions to 8,756,542 shares issued to the CEO and 4,709,022 shares issued to the COO of the Company.

 

In connection with the issuance of restricted Common Stock to certain of its directors, executive officers and employees, unvested restricted shares are subject to forfeiture. With the exception of 1,726,485 shares issued to employees and directors and 582,626 shares issued to a former director, which vest based upon achieving certain milestones, the Company records compensation expense over the vesting period based upon the fair market value on the date of grant for each share, adjusted for forfeitures.

 

The Company recorded $119,370 and $0 for restricted stock based compensation costs for the six months ended June 30, 2018 and June 30, 2017, respectively. 

 

A summary of the restricted stock issuances to directors, executive officers and employees is as follows:

 

   Number of Shares 

Weighted Average

Grant Date Fair Value

Unvested share balance, January 1, 2017   2,309,113   $0.21 
   Granted   7,112,119    0.19 
   Vested   (7,112,119)   0.19 
   Forfeited   —      —   
Unvested share balance, June 30, 2018   2,309,113   $0.21 

 

Stock Warrants

 

In connection with two private placement offerings in March 2014 (the “2014 Offerings”), investors received one purchase warrant at $0.91 per share for each share of Common Stock purchased. The warrants issued to Wyatts Torch Equity Partners, LP (“Wyatts”) were incorrectly calculated. On March 6, 2017, the Company issued warrants to purchase 915,447 shares of Common Stock at $0.91 per share to Wyatts to correct for this error. There was no financial impact resulting from this warrant understatement other than an understatement of potentially dilutive shares.

 

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In connection with the February 2016 Subscription, warrants to purchase 482,143 shares of Common Stock were issued at a price of $0.70 per share and are exercisable for a period of two years from the date of issuance. These warrants expired in February 2018.

  

The following table summarizes warrant activity during the period:

 

Outstanding at January 1, 2017     3,096,919  
Issued in connection with the 2014 Offerings     915,447  
Outstanding at December 31, 2017     4,012,366  
Issued in connection with the 2016 Subscription – Expired in February 2018     (482,143 )
Outstanding at June 30, 2018     3,530,223  
Exercisable at June 30, 2018     3,530,223  

 

Advisory Services

 

On October 3, 2013, the Company entered into an agreement with Ian Thompson of Northern Ireland for strategic business advisory services, public relations services and investor relations services with Ian Thompson.  In connection with this agreement, the Company issued 167,204 shares of restricted Common Stock and recorded consulting fees of $501,612 during 2013, which was the fair market value of the stock on the date of issue.  The stock is vested; however it is restricted from trading. Ian Thompson was also issued 200,000 shares of restricted Common Stock, which was to vest quarterly based upon the Company reaching certain market capitalization and revenue goals, in addition to providing the above services, with the last tranche vesting scheduled to vest on June 30, 2014. Consulting fees amounting to $105,000 and $280,000 were recorded in 2014 and 2013, respectively, related to the 200,000 shares of Common Stock.  Throughout the term of the agreement, the Company requested that Ian Thompson render performance under the agreement and to provide evidence of same. Ian Thompson failed to perform in all material respects under the terms of the agreement and refused to provide evidence.

 

On June 27, 2014, the Company terminated the agreement.  The Company is taking all necessary steps for the cancellation of the 367,204 shares, due to lack of delivery of consideration and material breach of the agreement

 

Stock Purchased for Cancellation

 

During the period January 1, 2018 to June 30, 2018, the Company purchased 65,682 shares of its restricted common stock from six shareholders. The Company paid $0.20 per share which was the market price for its traded shares during the period.

 

NOTE 5 – STOCK OPTIONS

 

On April 6, 2017, the Company granted stock options to purchase 356,559 shares and 1,500,000 shares of Common Stock pursuant to the 2012 Plan and the 2015 Plan, respectively. See note 3. The options were priced at the fair market value of the Common Stock and are immediately exercisable.

 

The following table summarizes stock option activity under the Plans:

 

   Number of Shares 

Weighted Average

Exercise Price

  Weighted Average Remaining Contractual Term (in years)
Outstanding, December 31, 2017   2,476,559   $0.184    3.7 
   Granted                
   Expired   —      —      —   
   Forfeited   —      —      —   
Outstanding, June 30, 2018   2,476,559   $0.184    3.12 
Exercisable, June 30, 2018   2,476,559   $0.184    3.12 

 

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During the three months ended June 30, 2018 and 2017, compensation expense related to stock options of $0 and $214,690, respectively, was recorded. As of June 30, 2018, there was no unrecognized compensation cost related to non-vested stock options.

NOTE 6 – RELATED PARTY TRANSACTIONS

 

As of June 30, 2018, accrued payroll of $15,000 was payable to the CEO of the Company.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows:

 

  Critical Accounting Policies — Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

 

  Results of Operations — Analysis of our financial results comparing the six months ended June 30, 2018 to June 30, 2017.

 

  Results of Operations — Analysis of our financial results comparing the three months ended June 30, 2018 to June 30, 2017.

 

  Liquidity and Capital Resources — Analysis of changes in our cash flows, and discussion of our financial condition and potential sources of liquidity.

 

This report includes a number of forward looking statements that reflect our current views with respect to future events and financial performance.  Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events.  You should not place undue certainty on these forward looking statements, which apply only as of the date of this annual report.  These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

Critical Accounting Policies

 

We have prepared our financial statements in conformity with accounting principles generally accepted in the United States, which requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. We base these significant judgments and estimates on historical experience and other applicable assumptions we believe to be reasonable based upon information presently available. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Actual results could materially differ from our estimates under different assumptions, judgments or conditions.

 

All of our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements, included elsewhere in this Annual Report. We have identified the following as our critical accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions.

 

We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements:

 

Use of Estimates — The financial statements are prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

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Stock-based Compensation — ASC Topic 718, “Accounting for Stock-Based Compensation” prescribes accounting and reporting standards for employee stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. 

 

ASC Topic 718 requires employee compensation expense to be recorded using the fair value method. The Company accounts for employee stock based compensation in accordance with the provisions of ASC Topic 718.

 

Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company uses the Black-Scholes option-pricing option model to value its stock option awards which incorporate the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life.

 

The Company accounts for equity based transactions with non-employees under the provisions of ASC Topic 505-50, “Equity-Based Payments to Non-Employees.”  ASC Topic 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if it is to pay cash or services instead of paying with or using the equity instrument.

 

Recent Accounting Pronouncements

 

New Accounting Pronouncements

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company's present or future financial statements.

 

COMPANY OVERVIEW

 

MOJO Organics, Inc. (“MOJO” or the “Company”) a Delaware Corporation is headquartered in Jersey City, NJ. The Company engages in new product development, production, marketing, distribution and sales of beverage brands that are Non GMO Project Verified.

 

Results of Operations

 

Six Months Ended June 30, 2018 and 2017

 

Revenue

 

During the six months ended June 30, 2018, the Company reported revenue of $793,316, an increase of $ 207,279 from revenue of $586,037 for the six months ended June 30, 2017.  The increase in revenue was primarily due to the growing demand for MOJO branded products.

 

Cost of Revenue

 

Cost of revenue includes finished goods purchase costs, production costs, raw material costs and freight in costs. Also included in cost of revenue are adjustments made to inventory carrying amounts, including markdowns to market.

 

For the six months ended June 30, 2018, cost of revenue was $442,858 or 56% of revenue. For the six months ended June 30, 2017, cost of revenue was $369,505 or 63% of revenue. The 6% decrease in cost as a percentage of sales was primarily due to lower purchase price of goods.

 

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Operating Expenses

 

For the six months ended June 30, 2018, operating expenses were $488,960 a decrease of $755,551 from operating expenses of $1,244,511 for the six months ended June 30, 2017.

 

This decrease in operating expenses was primarily comprised of a decrease in compensation expense offset with an increase in selling expenses. Total compensation expense decreased by $794,340 from the same period last year, while selling expenses increased by $42,572 due to increased sales of $207,279 for the six month period.

 

Three Months Ended June 30, 2018 and 2017

 

Revenue

 

During the three months ended June 30, 2018, the Company reported revenue of $442,422, an increase of $ 98,345 from revenue of $344,077 for the three months ended June 30, 2017.  The increase in revenue was primarily due to the growing demand for MOJO branded products.

 

Cost of Revenue

 

Cost of revenue includes finished goods purchase costs, production costs, raw material costs and freight in costs. Also included in cost of revenue are adjustments made to inventory carrying amounts, including markdowns to market.

 

For the three months ended June 30, 2018, cost of revenue was $242,052 or 55% of revenue. For the three months ended June 30, 2017, cost of revenue was $225,711 or 66% of revenue. The 11% decrease in cost as a percentage of sales was primarily due to lower purchase price of goods.

 

Operating Expenses

 

For the three months ended June 30, 2018, operating expenses were $247,175 a decrease of $783,519 from operating expenses of $1,030,694 for the three months ended June 30, 2017.

 

This decrease in operating expenses was primarily comprised of a decrease in compensation expense offset with an increase in selling expenses. Total compensation expense decreased by $801,730 from the same period last year. Selling expenses were $98,115 for the three months ended June 30, 2018 compared to $73,768 for the three months ended June 30, 2017. This $24,347 increase is attributable to the $98,345 growth in revenue for the quarter. Net loss for the period decreased to $46,805 from $912,328 for the same period last year.

 

Liquidity and Capital Resources

 

Liquidity

 

As of June 30, 2018, the Company had working capital of $312,547. Net cash used for operating activities was $8,091 for the three months ended June 30, 2018, a decrease of $17,653 over net cash used in operating activities for the three months ended June 30, 2017. Net cash used in financing activities was $13,135 for the three months ended June 30, 2018 and zero for the three months ended March 31, 2017.

 

Working Capital Needs

 

Our working capital requirements increase as demand grows for our products. Should the Company require additional working capital in the next twelve months, it may seek to raise funds.  Financing transactions could include the issuance of equity or debt securities or obtaining credit facilities.

  

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company had no off-balance sheet arrangements as of June 30, 2018.  

 

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

 

Not applicable.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 

Under the supervision and with the participation of the Company’s senior management, consisting of the Company’s principal executive and financial officer and the Company’s principal accounting officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the Company’s principal executive and financial officer concluded, as of the Evaluation Date, that the Company’s disclosure controls and procedures were effective.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

The management of MOJO Organics, Inc. is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rule 13a-15(f)) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

 

Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this evaluation, our officers concluded that, during the period covered by this annual report, our internal controls over financial reporting were operating effectively.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal controls over financial reporting during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

  

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PART II – OTHER INFORMATION

  

ITEM 1.  LEGAL PROCEEDINGS

 

We are currently not a party to any material legal or administrative proceedings and are not aware of any pending or threatened material legal or administrative proceedings arising in the ordinary course of business.  We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

 

ITEM 1A.  RISK FACTORS

 

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

   

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

  

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None. 

 

ITEM 4.  MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5.  OTHER INFORMATION

 

None. 

 

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ITEM 6.  EXHIBITS

 

Exhibit No. SEC Report Reference Number Description
2.1 2.1 Agreement and Plan of Merger by and among Specialty Beverage and Supplement, Inc., SBSI Acquisition Corp.  and MOJO Ventures, Inc. dated May 13, 2011 (1)
2.2 2.1 Split-Off Agreement, dated as of October 27, 2011, by and among MOJO Ventures, Inc., SBSI Acquisition Corp., MOJO Organics, Inc., and the Buyers party thereto (2)
3.1 3.1 Certificate of Incorporation of MOJO Shopping, Inc. (3)
3.2 3.1 Amendment to Certificate of Incorporation of MOJO Ventures, Inc. (4)
3.3 3.1 Certificate of Amendment to Certificate of Incorporation of MOJO Ventures, Inc. (5)
3.4 3.4 Articles of Merger (1)
3.5 3.1 Certificate of Amendment to Certificate of Incorporation of MOJO Organics, Inc. (9)
3.6 3.1 Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (11)
3.7 3.1 Amended and Restated Bylaws of MOJO Ventures, Inc. (6)
3.8 3.8 Amendment No. 1 to Amended and Restated Bylaws of MOJO Organics, Inc. (13)
4.1 4.1 Subscription Agreement by and between MOJO Organics, Inc. and Wyatts Torch Equity Partners, LP (17)
4.2 4.2 Warrants issued to Wyatts Torch Equity Partners, (LP (17)
4.3 4.3 Form of Common Stock Purchase Warrant issued to the March 2016 Investors*
10.1 10.1 Form of Second Amended and Restated Restricted Stock Agreement (14)
10.2 10.6 2012 Long-Term Incentive Equity Plan (13)
10.3 10.7 Form of Stock Option Agreement under the 2012 Long-Term Incentive Equity Plan (13) †
10.4 10.8 Form of Indemnification Agreement with officers and directors (13)
10.5 10.1 Form of Promissory Note issued to OmniView Capital LLC and Paul Sweeney (11)
10.6 10.2 Advisor Agreement with OmniView Capital LLC (11)
10.7 10.3 Amended and Restated Securities Purchase Agreement (11)
10.8 10.4 Registration Rights Agreement (11)
10.9 10.5 Commitment letter executed by each of Glenn Simpson, Jeffrey Devlin and Richard Seet (11)
10.10 10.6 Amendment to Richard X. Seet Restricted Stock Agreement (11)
10.11 10.7 Letter Agreement relating to nominee right of OmniView Capital LLC (11)
10.12 10.1 Juice License Agreement between Chiquita Brands L.L.C. and MOJO Organics, Inc. dated as of August 15, 2012 (12)
10.13 10.17 Form of Subscription Agreement for 2013 Offering (13)
10.14 10.18 Employment Agreement dated March 1, 2013 between MOJO Organics, Inc. and Glenn Simpson (13) †

10.15

10.15 Form of Advisor Agreement (14)
10.16 10.16 Form of Restricted Stock Agreement, dated December 4, 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Richard Seet, Jeffrey Devlin and Nicholas Giannuzzi.  (14) †
10.17 10.17 Form of Restricted Stock Agreement, dated March 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Richard Seet, Jeffrey Devlin, Peter Spinner and Marianne Vignone. (14) †
10.18 10.18 Form of Subscription Agreement for March 2014 Stock (with Warrants) Offering (14)
10.19 10.19 Form of Warrant (14)
10.20 10.20 Form of Subscription Agreement for March 2014 Stock Offering (14)
10.21 10.21 Form of Distribution Agreement
10.22 10.2 Form of Stock Option Agreement under the 2012 Long-Term Incentive Equity Plan, dated August 14, 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Peter Spinner, Richard Seet, Jeffery Devlin and Marianne Vignone. (15)
10.23 10.3 Employment Agreement, dated August 12, 2014, between MOJO Organics, Inc. and Peter Spinner. (15)
10.24 10.1 Form of Restricted Stock Agreement, dated August 12, 2014, between MOJO organics, Inc. and Peter Spinner. (15)
10.25 10.25 Amended and Restated Employment Agreement by and between MOJO Organics, Inc. and Glenn Simpson dated June 15, 2015 (16)
10.26 10.26 Amended and Restated Employment Agreement by and between MOJO Organics, Inc. and Peter Spinner dated June 15, 2015 (16)
10.27 10.1 Letter Agreement by and between MOJO Organics Inc. and Peter Spinner dated December 15, 2015(18)
16.1 16.1 Letter from Liggett, Vogt & Webb, P.A. (16)
16.2 16.1 Letter from Cowan, Gunteski & Co., P.C. dated April 21, 2016 (19)
31.1 31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  

*  Filed herewith.

† Management compensatory plan, contract or arrangement.

 

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  (1) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the Securities and Exchange Commission (the “SEC”) on May 18, 2011.

 

  (2) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on November 2, 2011.

 

  (3) Incorporated by reference to the Registrant's Registration Statement on Form SB-2 as an exhibit, numbered as indicated above, filed with the SEC on December 19, 2007.

 

  (4) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on May 4, 2011.

 

  (5) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on January 4, 2012.

 

  (6) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on October 31, 2011.

 

  (7) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on August 12, 2011.

 

  (8) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on June 8, 2011.

 

  (9) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on April 2, 2013.

 

  (10) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q as an exhibit, numbered as indicated above, filed with the SEC on June 25, 2013.

 

  (11) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on February 1, 2013.

 

  (12) Incorporated by reference to the Registrant’s Current Report on Form 8-K/A as an exhibit, numbered as indicated above, filed with the SEC on February 7, 2013.  Portions of the exhibit and/or related schedules or exhibits thereto have been omitted pursuant to a request for confidential treatment, which has been granted by the Commission. 

 

  (13) Incorporated by reference to the Registrant’s Current Report on Form 10-K as an exhibit, numbered as indicated above, filed with the SEC on September 24, 2013.

 

  (14) Incorporated by reference to the Registrant’s Annual Report on Form 10-K as an exhibit, numbered as indicated above, filed with the SEC on April 16, 2014.

 

  (15) Incorporated by reference to the Registrant’s Annual Report on Form 10-Q as an exhibit, numbered as indicated above, filed with the SEC on October 2, 2014.
     
  (16) Incorporated by reference to the Registrant’s Annual Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on June 30, 2015.
     
  (17) Incorporated by reference to the Registrant’s Annual Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on August 25, 2015.
     
  (18) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on December 15, 2015.
     
  (19) Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on April 22, 2016.

  

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SIGNATURES

 

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MOJO ORGANICS, INC.
     
Dated: July 13, 2018 By: /s/ Glenn Simpson
   

Glenn Simpson, Chief

Executive Officer and Chairman

(Principal Executive and Principal

Financial Officer)

 

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