U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-K

 

 

(Mark One)

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

 

For Fiscal Year Ended: December 31, 2018

 

OR

 

  ☐ TRANSITION REPORT PURSUANT TO UNDER 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

incorporation or organization)

  (IRS Employer Identification No.)

 

 

   

185 Hudson Street, Floor 25

Jersey City, New Jersey

  07302
(Address of principal executive offices)   (Postal Code)

 

Registrant’s telephone number: 201 633 6519

 

Securities registered under Section 12(b) of the Act: None           

Securities registered under Section 12(g) of the Act: Common Stock, $0.001 par value per share          

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes  ☐    No  ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes  ☐     No ☒

 

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  ☐

 

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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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ☒

 

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 ☒

 

As of December 31, 2018 (the last day of the registrant’s most recently completed third quarter), the aggregate market value of the registrant’s common stock (based on its reported last sale price on such date of $0.15 per share) held by non-affiliates of the registrant was $4,173,866.

 

On February 25, 2019, there were 27,821,606 shares of the registrant's common stock, par value $0.001, issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

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TABLE OF CONTENTS

 

  Page
Forward Looking Information 1
   
PART I    
Item 1. Business 2
Item 1A. Risk Factors 3
Item 1B. Unresolved Staff Comments 4
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Mine Safety Disclosures 4
     
PART II    
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 5
Item 6. Selected Financial Data 6
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 9
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes and Disagreements With Accountants on Accounting and Financial Disclosure 10
Item 9A. Controls and Procedures 10
Item 9B. Other Information 10
     
PART III    
Item 10. Directors, Executive Officer and Corporate Governance 11
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 15
Item 13. Certain Relationships and Related Transactions, and Director Independence 17
Item 14. Principal Accountant Fees and Services 19
     
PART IV    
Item 15. Exhibits, Financial Statement Schedules 20
SIGNATURES 22

 

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FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements using words such as “expects,” “anticipates,” “intends,” “believes” and similar language.

 

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the sections “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

 

All references in this Annual Report on Form 10-K to “MOJO,” “MOJO Organics,” the “Company,” “we,” “us” or “our” mean MOJO Organics, Inc.

 

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PART I

ITEM 1.  BUSINESS

 

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 natural and Non GMO Project Verified.

 

CURRENT OPERATIONS

 

Sales and Distribution

 

The Company flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produced Sparkling Coconut Water, Coconut Water + Peach Mango Juice and Coconut Water + Pineapple Juice in 2018. We seek to grow the market share of our products by expanding our hybrid distribution network through the relationships and efforts of our management and third party distribution relationships, an improved broker network, and new products and packaging in 2019.

 

Production

 

The Company has multiple sources for its production.  The Company’s fruit sources are of high quality and are part of the overall taste and quality of our products.  Currently, the Company has 3 production facilities that it could source products from, each of the facilities could supply our forecasted demand for 2019 .

 

Competition

 

The beverage industry is competitive.  Competitors in our market compete for brand recognition, ingredient sourcing, product shelf space, and e-commerce page rankings.  Our competitors have similar distribution channels and retailers to deliver and sell their products.   

 

Government Regulation

 

Within the United States, beverages are governed by the U.S. Food and Drug Administration (the “FDA”).  As such, it is necessary for the Company to establish, maintain and make available for inspection records as well as to develop labels (including nutrition information) that meet FDA requirements.  The Company’s production facilities are subject to FDA regulation.

 

Employees

 

As of December 31, 2018, the Company had three employees.  The Company also uses the services of contractors, consultants and other third-parties. We contract with food brokers to represent our products to specific specialized sales channels. We utilize the services of direct sales and distribution companies that deliver and sell our products to their customers. We contract with manufacturing facilities to produce our products and outsource the storage and transportation of our products.

 

CORPORATE HISTORY AND DEVELOPMENT

 

The Company was incorporated in 2007. MOJO Organics Inc is headquartered in Jersey City, and our internet site is www.mojoorganicsinc.com. MOJO’s stock is traded on the OTC Markets under the symbol “MOJO”.

 

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ITEM 1A.   RISK FACTORS

 

In addition to the other information set forth in this report, you should consider the following factors, which could materially affect our business, financial condition or results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

 

If we are unable to expand our operations in the marketplace, our growth rate could be negatively affected.

 

Our success depends in part on our ability to grow our business. We have adopted and implemented a strategic plan to increase awareness of our products, secure additional distribution channels, and foster and strengthen our supply, manufacturing and distribution relationships.   Our strategic plan includes addressing changes in the market.  There can be no assurance that we will achieve the growth necessary to achieve our objectives.

 

We could need additional capital in the future to expand our operations and execute our business objectives.

 

Should we need additional capital to expand our operations, financing transactions may include the issuance of equity, debt securities, and obtaining credit facilities.

 

The challenges of competing with other beverage companies could result in reductions to our revenue and operating margins.

 

The nonalcoholic beverage segment of the beverage industry is competitive. We compete with numerous beverage companies, including those marketing similar products. All beverages companies are competing for stomach share on a daily basis which is approximately 64 oz. of fluid per day, per person. Our success depends on our ability to secure distribution channels for our products, our ability to make consumers aware of our products and the appeal of our products to consumers. 

 

Disruption of supply, increase in costs or shortage of ingredients could affect our operating results.

 

Availability of supply and the prices charged by the producers of production inputs used in our products can be affected by a variety of factors, including the general demand by other buyers for the same fruits used by us in our products, and politics and economics in the regions in which our fruit is grown.  

 

The quality of fruit we seek trades on a negotiated basis, depending on supply and demand at the time of the purchase. An increase in the pricing of any fruit that we use in our products will have a negative effect on our margins. Higher energy costs may affect the cost of transporting our supplies, thereby increasing costs. Conversely, lower fruit prices and energy prices will have a positive result on transport and packaging costs.

 

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We use independent bottlers for the production of our products and, as such, are subject to the bottler’s production and quality control.

 

We use independent bottlers for the production of our products.  We play an active  rold in the production of our beverages, which includes but is not limited to developing our formulations, maintaining control over the labeling and packaging of our beverates, independent UAL testing of our products for safetly, and packaging and function of our packaging and correct FDA labeling. We also review and monitor the safety certifications of the factories including their status with the United States Food and Drug Administration. We also inspect the warehouses that our products are stored in, and monitor the trucking companies that deliver our goods.  Accordingly, we are dependent on the bottlers and their ability to meet production demands and to achieve product quality.  

 

Litigation and publicity concerning food quality, health claims, and other issues could expose us to significant liabilities.

 

The packaged food industry can be adversely affected by litigation and complaints from customers and government authorities resulting from product quality, health claims, allergens, illness, and injury. Adverse publicity about these allegations may negatively affect the Company, regardless of whether the allegations are true. In addition, the food industry has been subject to a number of claims based on the nutritional content of food products they sell, and disclosure and advertising practices. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot predict the ultimate outcome of any such proceedings. An unfavorable outcome will have an adverse impact on our business. In addition, any litigation or regulatory proceedings may result in substantial costs.

 

ITEM 1B.   UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 2.  PROPERTIES

 

The Company maintains office space in Jersey City, NJ. The lease agreement is for the period March 1, 2018 to February 28, 2019 and was renewed for one year under the same terms. The rent under this agreement is $2,304 per month. 

 

ITEM 3.  LEGAL PROCEEDINGS

 

We are not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against the Company in all material aspects. We could from time to time become a party to various legal or administrative proceedings arising in the course of our business. 

 

ITEM 4.  MINE SAFETY DISCLOSURE

 

Not applicable.

 

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PART II

 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

The Company’s Common Stock is currently quoted on the OTCQB under the symbol “MOJO.”

 

For the period January 1, 2017 to December 31, 2018, the following table sets forth the high and low closing bid prices by quarter, based upon information obtained from inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions : 

 

  High   Low
First Quarter 2018  $   3.18    $    0.13
Second Quarter 2018  $   0.22    $    0.11
Third Quarter 2018  $   0.29    $    0.11
Fourth Quarter 2018  $   0.29    $    0.15
       
First Quarter 2017  $   0.40    $    0.18
Second Quarter 2017  $   0.35    $    0.12
Third Quarter 2017  $   0.20    $    0.16
Fourth Quarter 2017  $   0.34    $    0.13

 

Holders

 

As of December 31, 2018, there were 27,825,773 shares of Common Stock issued and outstanding held by 1,009   shareholders of record.

 

Dividends

 

The Company has not declared a cash dividend with respect to its Common Stock. Future payment of dividends is within the discretion of the Board of Directors and will depend on earnings, capital requirements, financial condition and other relevant factors.

 

Recent Sales of Unregistered Securities, Use of Proceeds from Registered Securities

 

There were no sales of unregistered securities during the years ended December 31, 2018 and 2017.

 

Issuer Purchases of Equity Securities

 

During the year ended December 31, 2018, the Company repurchased 79,832 shares of MOJO Restricted Common Stock from shareholders at a cost of $15,965 with an average purchase price of $0.20. The shares were returned to Treasury.

 

Equity Compensation Plans

 

2012 Plan

In March 2013, the 2012 plan was approved by our shareholders. The 2012 plan provides the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or other stock-based awards for up to an aggregate of 2,050,000 shares of common stock.  In 2016, the Company issued 620,000 stock options to purchase shares of common stock that expire in August 2019, and issued 1,073,441,restricted common stock to its Directors and employees. In 2017, the Company granted stock options to purchase 356,559 shares that expire in April 2022. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2012 plan. As of December 31, 2018, issued stock options total 976,559. During 2018, 495,403 stock options have been cancelled due to termination of employment. The remaining 495,403 options are available to be issued at December 31, 2018. The 2012 plan was terminated by the Board of Directors on February 18, 2019.

 

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2015 Plan

In October 2015, the Company approved 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. On April, 2017, the Company granted stock options to purchase 1,500,000 shares of Common Stock pursuant to the 2015 Plan. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2015 plan. As of December 31, 2018, issued stock options total 1,500,000. During 2018, 693,610 stock options have been cancelled due to termination of employment. The remaining 693,610 options are available to be issued at December 31, 2018. The 2015 plan was terminated by the Board of Directors on January 24, 2019.

 

 

  2012 Plan 2015 Plan Total
       
Authorized 2,050,000 1,500,000 3,550,000
Restricted Stock Issued 1,073,441   1,073,441
Stock Options Issued 976,559 1,500,000 2,476,559
Total Issued 2,050,000 1,500,000 3,550,000
Options Cancelled in 2018 495,403 693,610 1,189,013
Available for issuance as of Dec 31, 2018 495,403 - 495,403
Outstanding as of Dec 31 2018 1,554,597 806,390 2,360,987

 

 

The 2015 plan was terminated by the Board of Directors on January 24, 2019 and the 2012 plan was terminated by the Board of Directors on February 18, 2019.

  

The following table sets forth certain information at December 31, 2018 with respect to our equity compensation plans that provide for the issuance of options, warrants or rights to purchase our securities.

 

Plan category   No. of securities to be issued upon exercise of outstanding options   Weighted-average exercise price of outstanding options
2015 Plan   806,390   $0.18
2012 Plan   481,156   $0.18
Total   1,287,546   $0.18

 

ITEM 6.  SELECTED FINANCIAL DATA  

 

Not applicable.

 

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ITEM 7.   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:

 

  • Significant 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 year ended December 31, 2018 to 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.

 

Significant 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 significant 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 significant 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.

 

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.

 

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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.

 

Fair Value of Financial Instruments  — Our short-term financial instruments, including cash, accounts receivable, accounts payable and other liabilities, consist primarily of instruments without extended maturities. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts.

 

Recent Accounting Pronouncements

 

In June 2018 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASC aims to simplify several aspects of the accounting for nonemployee share-based payment transactions to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018. The Company has assessed the impact of this pronouncement to the financial statements.

 

Results of Operations

 

Years Ended December 31, 2018 and 2017

 

Revenue

 

During the year ended December 31, 2018, the Company reported revenue of $1,688,827, an increase of $374,105 or 28% over revenue of $1,314,722 for the year ended December 31, 2017. The increase in revenue was due to higher dollar sales in MOJO branded products and to a lesser extent the MOJO private label business. We also saw growth in same store sales. Also, the addition of new accounts opened added to the growth of revenue in 2018.

 

Cost of Revenue

 

Cost of Revenue includes finished goods purchase costs, and freight in costs.  Also included in Cost of Revenue are adjustments made to inventory carrying amounts, if required.

 

For the year ended December 31, 2018, cost of revenue was $898,806 or 53% of revenue, compared to $786,914 or 60% of revenue for the year ended December 31, 2017. The positive decrease is due primarily to the lower purchase price of inventory.

 

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Operating Expenses

 

For the year ended December 31, 2018, selling, general and administrative expenses was $1,213,281, a decrease of $549,630 from the year ended December 31, 2017 of $1,762,876. 

 

This decrease in operating expenses was primarily comprised of a decrease in compensation costs offset partially by an increase in selling costs, professional and consulting fees. Compensation costs decreased by $835,600 in 2018 from 2017. This is primarily attributable to lower stock compensation costs. Selling costs, including freight and delivery expenses, broker fees and warehouse costs increased by $168,150 from 2017 to 2018. This was partially due to an increase in sales volume. Professional fees and consulting fees also increased in 2018 by $22,276 and $50,683 respectively.

 

Stock-based compensation costs to directors and employees, which consist of charges to income for vesting in connection with restricted stock issuances, stock options and warrants, was $0  for the year ended December 31, 2018, compared to $1,235,463 for the year ended December 31, 2017.  

 

Liquidity and Capital Resources

 

Liquidity

 

As of December 31, 2018, the Company had working capital of $165,271. Net cash provided by operating activities was $17,639 for the year ended December 31, 2018, an increase of $33,950 compared to net cash used in operating activities for the year ended December 31, 2017 of ($16,311). Net cash used in financing activities to repurchase MOJO Restricted Common Stock was $15,965 for the year ended December 31, 2018 compared to $0 for the year ended December 31, 2017.

 

Working Capital Needs

 

Our working capital requirements increase as demand grows for our products. During 2018 and 2017, the Company did not require additional funding. If the Company requires additional working capital during the next twelve months, it may seek to raise additional   funds.  Financing transactions may include the issuance of equity, debt securities and obtaining credit facilities.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company had no off-balance sheet arrangements as of December 31, 2018. 

 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

Not applicable.

 

ITEM 8.   FINANCIAL STATEMENTS

 

The audited financial statements are included beginning immediately following the signature page to this report. See Item 15 for a list of the financial statements included herein.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None

 

ITEM 9A.  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 not operating effectively.

 

As previously reported, the Company does not have an audit committee and is not currently obligated to have one. Management does not believe that the lack of an audit committee is a material weakness.

 

Attestation Report

 

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as such report is not required for non-accelerated filers.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal controls over financial reporting during the year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

ITEM 9B.  OTHER INFORMATION

 

Not Applicable.

 

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PART III

 

ITEM 10.      DIRECTORS, EXECUTIVE OFFICER, AND CORPORATE GOVERNANCE

 

Executive Officer and Directors

 

Below are the names and certain information regarding our current executive officer and directors:

 

Name   Age   Title    Appointed
Glenn Simpson   66   Chairman and CEO   October 27, 2011
Jeffrey Devlin   71   Director   January 27, 2012
Robert Kaufman   62   Director   April 1, 2015
Peter Spinner   49   Director   March 17, 2014

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Biographical information of each current officer and director is set forth below.

 

Glenn Simpson is Chairman of the Board of Directors and Chief Executive Officer of the Company.  Mr. Simpson joined the Company in October 2011.  He has extensive experience in the beverage industry.   Mr. Simpson was Vice President and Chief Financial Officer of Coca-Cola Bottlers, Inc. in Uzbekistan from 1995 to 2000.  His primary responsibilities included corporate strategy, supervision of bottling and distribution operations and facilities construction.  His accomplishments included growing revenues from a base at $4 million to over $160 million annually.  The company was awarded “Bottler of the Year” by The Coca-Cola Company for two consecutive years under his leadership based upon product quality and revenue growth. From 2009 to 2011, Mr. Simpson was engaged in beverage projects on a consulting basis in Russia and Afghanistan.  Mr. Simpson is a Certified Public Accountant and holds an MBA from Columbia University School of Business.

 

Jeffrey Devlin has served on the Board of Directors of the Company since January 2012. Mr. Devlin has over 35 years of advertising and business development experience.  Mr. Devlin currently serves as Chairman, US Government Practice at WPP, which is a world leader in marketing communications services. He has held various other executive and creative positions over the course of his advertising career, including launching the introduction of Diet Coke for The Coca-Cola Company. Mr. Devlin currently serves on the board of directors of a number of private organizations, as well as on the board of directors of Location Based Technologies, Inc., a publicly traded company. Mr. Devlin received a Bachelor’s degree from Bethel University.

 

Robert Kaufman joined the Board of Directors of the Company in April 2015. Since 2012, Mr. Kaufman has served as the General Manager of Woodstock Farms Company. Woodstock Farms is a natural and organic food manufacturer with over 250 products in 10 categories selling to the natural and organic sector. Woodstock Farms is a division of United Natural Foods, Inc., a NASDAQ listed company with over $6 billion in annual revenue. From 1985 to 2011, Mr. Kaufman served in sales management roles at Performance Food Group, including Director of Special Segment Accounts. Performance Food Group is a broad line food distributor.

 

Peter Spinner joined the Board of Directors of the Company in March 2014 and was the Chief Operating Officer of the Company from August 2014 to March 2018.  He is the founder and managing director of Wyatts Torch Equity Partners LP, (“Wyatts”), a family business focused on public and private investments in the food and beverage industry. As General Partner and Portfolio Manager of Wyatts since 2011, Mr. Spinner is responsible for investing the assets of the Partnership.   From 2009 until Wyatts was founded in 2011, Mr. Spinner was the managing partner of Ardent Asset Management, a money management firm based in New York City.  From 2000 to 2009, Mr. Spinner was a portfolio manager and an equity analyst at Trellus Capital Management focusing on technology, media and telecommunications. During his tenure at Trellus Capital Management, assets under management expanded from $100 million to $2 billion. Prior thereto, Mr. Spinner has also previously served as an analyst and portfolio manager at Irvine Capital and Forstmann, Leff Associates. He began his career at Salomon Brothers Inc. in the equity trading division. Mr. Spinner received his undergraduate degree from Franklin and Marshall College and his MBA from Fordham University.

 

  11  

 

 

Board Committees

 

The Company has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations. Our four directors perform all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

 

Shareholder Communications

 

Currently, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

 

Code of Ethics

 

We have adopted a written code of ethics (the “Code of Ethics”) that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To request a copy of the Code of Ethics, please make written request to our Company at 185 Hudson Street, Floor 25, Jersey City, New Jersey 07302.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes in that ownership with the SEC.  To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2018 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.

 

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ITEM 11.   EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the total compensation paid or earned by each of our named executive officers (as defined under SEC rules). 

 

Name and Principal Position   Year   Salary   Total
Glenn Simpson     2018     $ 220,800 (1)   $ 220,800  
Chairman and CEO     2017     $ 225,790 (1)   $ 225,790  
Peter Spinner     2018     $ 15,000 (2)   $ 15,000  
COO (08/2014 – 03/2018)     2017     $ 195,850 (2)   $ 195,850  

 

The Summary Compensation Table omits columns for Option Awards, Non-Equity Incentive Plan Compensation, Non-Qualified Deferred Compensation Earnings and All Other Compensation as no such amounts were paid to the named executive officers during the fiscal years ended December 31, 2018 or 2017. 

 

(1) Pursuant to the Simpson Agreement revised in April 2017, Mr. Simpson will be paid a salary of $5,000 per month in cash and the right to receive 67,000 shares of restricted Common Stock per month. Pursuant to his employment agreement, Mr. Simpson is entitled to a salary of not less than $18,500 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 Amended 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 Decmeber 31, 2025 based upon revenue performance goals. The revenue goals range from $2,400,000 to $19,200,000 per year. The bonus awards are accelerated should revenue exceed the annual target amounts.
During 2018 and 2017, he did not receive cash payments. Mr. Simpson received stock in lieu of cash for the first quarter of 2018 and is owed $45,000 as of December 31, 2018. Mr. Simpson received stock in lieu of cash for 2017.
The “Simpson Agreement” is the only employment agreement in effect as of December 31, 2018.

 

(2) Pursuant to the Spinner Agreement revised in April 2017, Mr. Spinner was paid a salary of $5,000 per month in cash and the right to receive 55,000 shares of restriced common stock per month. Pursuant to his employment agreement, Mr. Spinner was entitled to a salary of not less than $16,000 per month. Mr. Spinner did not receive any cash payment in 2017. He received stock in lieu of cash in 2017. On December 8, 2017, the Company entered into an Amended and Restated Employment Agreement with Mr. Peter Spinner (the “Amended Spinner Agreement”). This agreement was effective January 1, 2018 and superseded the “Spinner Agreement”. Pursuant to the Amended Spinner Agreement, Mr. Spinner received $5,000 paid in stock each month for part-time employment. This agreement was terminated on March 31, 2018. Mr. Spinner’s employment with MOJO ended March 31, 2018.

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The Company has no other plans in place and has never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

Employment Agreements

 

The “Simpson Agreement” is the only employment agreement in effect as of December 31, 2018. See discussion above.

 

Outstanding Option Awards at December 31

 

The following table sets forth information regarding stock options held by executive officers at December 31, 2018.

 

                      Option awards
Name     Year       Securities underlying exercisable options       Option exercise price     Option expiration date
Glenn Simpson     2018 & 2017       995,546     $ 0.16     April 6, 2022
      2018 & 2017       222,000     $ 0.255     August 14, 2019
      Total       1,217,546              

 

 

The Outstanding Equity Awards Table omits Equity incentive plan awards: Number of securities underlying unexercised unearned options related to Option Awards and Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested and Equity incentive plan awards: Market value of payout value of unearned shares, units or other rights that have not vested  related to stock awards, as no such awards were outstanding as of December 31, 2018 and December 31, 2017.

 

Option Exercises in 2018

 

No options were exercised during the year ended December 31, 2018 or 2017.

 

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Director Compensation

 

The non-employee directors did not receive cash compensation for serving as such, for serving on committees (if any) of the Board of Directors or for special assignments. Board members are not reimbursed for expenses incurred in connection with attending meetings.  During the year ended December 31, 2018, there were no arrangements that resulted in our making payments to any of our non-employee directors for any services provided to us by them as directors.

 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth information with respect to the beneficial ownership of our Common Stock known by us as of December 31, 2018 by:

 

  • each person or entity known by us to be the beneficial owner of more than 5% of our Common Stock;
  • each director;
  • each named executive officer; and
  • all directors and executive officers as a group.

 

Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our Common Stock owned by them, except to the extent such power may be shared with a spouse.

 

Name Of Owner   Shares Owned   Options and Warrants   Strike Price   Expiration Date   Percent Of Common Stock including Warrants and Options (1)
Glenn Simpson     9,359,542                           29 %
Glenn Simpson             995,546     $ 0.16     4/6/22     3 %
Glenn Simpson             222,000     $ 0.26     8/14/19     1 %
Total - Glenn Simpson     9,359,542       1,217,546                   36 %
Chairman and CEO                                    
Jeffrey Devlin     367,953                           1 %
Jeffrey Devlin             35,000     $ 0.26     8/14/19     0 %
Total – Jeffrey Devlin     367,953       35,000                   1 %
Director                                    
Robert Kaufman     —         35,000     $ 0.26     8/14/19     0 %
Director                                    
Peter Spinner     5,262,948                           19 %
Director                                    
Wyatts Torch     2,684,066                           8 %
Wyatts Torch             1,648,751     $ 0.91     3/12/19     5 %
Wyatts Torch             1,500,000     $ 0.40     8/17/20     5 %
Total – Wyatts Torch     2,684,066       3,148,751                   19 %
All Officers and Directors as a group (4 Persons)     17,289,407       4,435,898                   68 %

 

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(1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of December 31, 2018 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.
(2) Includes (i) 9,359,542 shares of restricted Common Stock and (ii) 1,217,546 shares of Common Stock underlying stock options granted pursuant to the Company’s 2012 Plan.
(3) Includes (i) 367,953 shares of restricted Common Stock and (ii) 35,000 shares of Common Stock underlying stock options granted pursuant to the Company’s 2012 Plan.
(4) Includes 35,000 shares of Common Stock underlying stock options granted pursuant to the Company’s 2012 Plan.
(5) Includes (i) 4,877,846 shares of restricted Common Stock; (ii) 2,684,066 shares of Common Stock held by Wyatts, an entity of which Mr. Spinner is the general partner and portfolio manager; (iii) 3,148,751 shares of Common Stock underlying currently exercisable warrants held by Wyatts; (iv) 385,102 shares of Common Stock owned individually and/or jointly with his spouse.
(6) Includes (i) 17,289,407 shares of restricted Common Stock; (ii) 1,287,546 shares of Common Stock underlying stock options granted pursuant to the Company’s 2012 Plan and (iii) 3,148,751 shares of Common Stock underlying warrants, as described above.

 

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Securities Authorized For Issuance Under Equity Compensation Plans

 

2012 Plan

In March 2013, the 2012 plan was approved by our shareholders. The 2012 plan provides the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or other stock-based awards for up to an aggregate of 2,050,000 shares of common stock.  In 2016, the Company issued 620,000 stock options to purchase shares of common stock that expire in August 2019, and issued 1,073,441,restricted common stock to its Directors and employees. In 2017, the Company granted stock options to purchase 356,559 shares that expire in April 2022. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2012 plan. As of December 31, 2018, issued stock options total 976,559. During 2018, 495,403 stock options have been cancelled due to termination of employment. The remaining 495,403 options are available to be issued at December 31, 2018.

 

The 2012 Plan was terminated by the Board of Directors on February 18, 2019.

 

2015 Plan

In October 2015, the Company approved 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. On April, 2017, the Company granted stock options to purchase 1,500,000 shares of Common Stock pursuant to the 2015 Plan. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2015 plan. As of December 31, 2018, issued stock options total 1,500,000. During 2018, 693,610 stock options have been cancelled due to termination of employment. The remaining 693,610 options are available to be issued at December 31, 2018.

 

The 2015 Plan was terminated by the Board of Directors on January 24, 2019.

 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Other than as disclosed below and in this Form 10-K, there have been no transactions, since January 1, 2018, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years and in which any of our directors, executive officers or beneficial holders of more than 5% of our outstanding Common Stock, or any of their respective immediate family members, has had or will have any direct or material indirect interest. 

 

On March 2, 2017, the Company entered into an amendment to the Spinner Agreement effective December 31, 2016 reducing the Spinner Bonus Plan by 1,500,000 shares.

 

In connection with two private placement offerings in March 2014, investors received one purchase warrant at $0.91 per share for each share of stock purchased. The warrants issued to 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.

 

  17  

 

 

In January 2016, Wyatts purchased 285,715 shares of Common Stock pursuant to the 2016 Subscription. The purchase price of the shares was $0.35 per share, and included purchase warrants for 142,858 shares at a price of $0.70 per share. The two year warrant was immediately exercisable and expired on January 26, 2018.

 

In August 2015, the Company entered into a subscription agreement (the “2015 Subscription”) whereby 750,000 shares of Common Stock were sold to Wyatts, for a total of $150,000, along with a purchase warrant for 1,500,000 shares of Common Stock at a price of $0.40 per share. The five year warrant is immediately exercisable and expires on August 17, 2020.

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to (and we do not) have our Board of Directors comprised of a majority of “Independent Directors.”

 

Our Board of Directors has considered the independence of its directors in reference to the definition of “independent director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board of Directors has reviewed all commercial and other relationships of each director in making its determination as to the independence of its directors. After such review, the Board of Directors has determined that Mr. Devlin and Mr. Kaufman qualify as independent under the requirements of the Nasdaq listing standards.

 

  18  

 

  

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees

 

The Company appointed MSPC, Certified Public Accountants and Advisors, a Professional Corporation (“MSPC”) as its independent registered public accounting firm.

 

The aggregate fees billed to the Company for services rendered in connection with the years ended December 31, 2018 and 2017 are set forth in the table below:

 

Fee Category   2018   2017
Audit fee (1)   $ 54,000     $ 36,500  
Total   $ 54,000     $ 36,500  

 

  (1) Audit fees consist of fees incurred for professional services rendered for the audit of financial statements, for reviews of our interim financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.  For 2018 and 2017, audit fees represent fees billed by MSPC.  

 

Audit Committee’s Pre-Approval Practice

 

We do not have an audit committee. Our board of directors has approved the services described above.

 

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ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

Financial Statement Schedules

 

The financial statements of MOJO Organics, Inc. are listed on the Index to Financial Statements on this annual report on Form 10-K beginning on page F-1.

 

The following Exhibits are being filed with this Annual Report on Form 10-K:

 

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)
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)
10.28 10.1 Common Stock Purchase Agreement by and between MOJO Organics, Inc. and Wyatts Torch Equity Partners, LP dated March 6, 2017
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

   

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* Filed herewith.

** Filed previously

† Management compensatory plan, contract or arrangement.

 

  (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 Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on October 23, 2015.

  

  (17) 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 9, 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 19, 2016.

  

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SIGNATURES  

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MOJO ORGANICS, INC.
   
Dated: February 25, 2019 By: /s/ Glenn Simpson
   

Glenn Simpson, Chief

Executive Officer and Chairman  

(Principal Executive and Principal Financial Officer)

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE   TITLE   DATE
         
/s/ Glenn Simpson   Director, Chief Executive Officer and Chairman  (Principal Executive and Principal Financial Officer)   February 25, 2019
Glenn Simpson        
         
/s/ Diane Cudia   Corporate Controller (Principal Accounting Officer)   February 25, 2019
Diane Cudia        

 

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PART IV - FINANCIAL INFORMATION

 

  Page
Report of Independent Registered Public Accounting Firm – MSPC Certified Public Accountants and Advisors, A Professional Corporation F-1
Statements of Operations for the years ended December 31, 2018 and 2017 F-2
Balance Sheets as of December 31, 2018 and 2017 F-3
Statements of  Changes in Stockholders’ Equity for the years ended December 31, 2018 and 2017 F-4
Statements of Cash Flows for the years ended December 31, 2018 and 2017 F-5
Notes to Financial Statements F-6

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the shareholders and directors of
MOJO Organics, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of MOJO Organics, Inc. (the “Company”) as of December 31, 2018 and 2017, the related statements of operations, changes in stockholders’ equity/deficit, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the “Company” as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent wih respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ MSPC

Certified Public Accountants and Advisors,

A Professional Corporation

 

We have served as the Company’s auditor since 2016. 

 

Cranford, New Jersey

February 25, 2019

 

  F- 1  

 

 

MOJO ORGANICS, INC.

Statements of Operations
For the Years Ended December 31, 2018 and 2017
     
      2018       2017  
Revenue   $ 1,688,827     $ 1,314,722  
Cost of Revenue     898,806       786,914  
Gross Profit     790,021       527,808  
                 
Operating Expenses                
Selling, general and administrative     1,213,281       1,762,876  
Loss from Operations     (423,260 )     (1,235,068 )
Other Income     —         2,180  
Loss Before Provision for Income Taxes     (423,260 )     (1,232,888 )
Provision for Income Taxes     —         —    
Net Loss   $ (423,260 )   $ (1,232,888 )
Net loss per common share, basic and diluted     (0.02 )     (0.05 )
Weighted average number of common shares outstanding, basic and diluted     27,213,778       26,667,781  
                 
The  accompanying notes are an integral part of these financial statements.

 

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MOJO ORGANICS, INC.
Balance Sheets
As of December 31, 2018 and 2017
         
      2018       2017  
ASSETS                
CURRENT ASSETS:                
Cash and cash equivalents   $ 24,031     $ 22,357  
Accounts receivable, net     128,342       82,326  
Inventory     159,531       273,734  
Prepaid expenses     8,299       10,905  
TOTAL CURRENT ASSETS     320,202       389,322  
Security deposit     4,518       4,518  
TOTAL ASSETS   $ 324,720     $ 393,840  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES:                
Accounts payable and accrued expenses   $ 109,931     $ 29,508  
Accrued payroll to related parties     45,000       —    
Total Current Liabilities     154,931       29,508  
                 
Commitments and Contingencies                
STOCKHOLDERS'  EQUITY                
Preferred stock, 10,000,000 shares authorized at $0.00 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,  27,825,773 and 26,667,781 shares issued and outstanding, at December 31, 2018 and December 31, 2017, respectively     27,826       26,667  
Additional paid in capital     23,190,882       22,963,323  
Accumulated deficit     (23,048,919 )     (22,625,658 )
Total Stockholders' Equity     169,789       364,332  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 324,720     $ 393,840  
                 
The accompanying notes are an integral part of these financial statements.

 

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MOJO ORGANICS, INC.
Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2018 and 2017
                     
      Common Stock                          
      Shares       Amount       Additional Paid-In Capital       Accumulated Deficit      

Stockholders’

Equity

(Deficit)

 
Balance, January 1, 2017     18,380,326     $ 18,380     $ 21,265,200     $ (21,392,770 )   $ (109,190 )
Stock options     —         —         214,690       —         214,690  
Stock and warrants issued
to directors and employees 		    8,287,455       8,287       1,483,433       —         1,491,720  
Net Loss     —         —         —         (1,232,888 )     (1,232,888 )
Balance, December 31, 2017     26,667,781     $ 26,667     $ 22,963,323     $ (22,625,658 )   $ 364,332  
                                         
Stock and warrants issued to Directors and employees     1,019,000       1,019       203,431               204,450  
Stock and warrants issued to Consultants     218,824       219       40,014               40,232  
Stock retired to treasury     (79,832 )     (79 )     (15,886 )             (15,965 )
Net Loss                             (423,260 )     (423,260 )
Balance, December 31, 2018     27,825,773     $ 27,826     $ 23,190,882     $ (23,048,918 )   $ 169,789  

 

The accompanying notes are an integral part of these financial statements.

 

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MOJO ORGANICS, INC.
Statements of Cash Flows
For the Years Ended December 31, 2018 and 2017
         
      2018       2017  
Cash flows from operating activities:                
Net loss   $ (423,260 )   $ (1,232,888 )
                 
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     204,450       1,491,721  
Stock and warrants issued for Consulting Fees     40,232       —    
Changes in assets and  liabilities:                
Increase in accounts receivable     (46,016 )     (52,455 )
Decrease in inventory     114,203       38,295  
Decrease in supplier deposits     —         —    
Decrease in prepaid expenses     2,607       18,804  
Increase in security deposit     —         (57 )
Increase  in accounts payable and accrued expenses     80,423       (9,821 )
(Decrease) increase in accrued payroll to officers     45,000       (484,600 )
Net cash used in operating activities     17,639       (16,311 )
                 
Net cash from financing activities:                
Shares repurchased for cancellation     (15,965 )     —    
Net cash used in financing activities     (15,965 )     —    
                 
Net increase (decrease) in cash and cash equivalents     1,674       (16,311 )
Cash and cash equivalents at beginning of period     22,357       38,668  
Cash and cash equivalents at end of period   $ 24,031     $ 22,357  
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Interest paid     —         —    
Taxes paid     —         —    
                 
 SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:                
Accrued payroll to related parties settled with shares     —       $ 588,100  
                 
The accompanying notes are an integral part of these financial statements.

 

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MOJO ORGANICS, INC.

Notes to Financial Statements

December 31 2018 and 2017

 

NOTE 1 – BUSINESS

 

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 natural and Non GMO Project verified. The Company flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produced Sparkling Coconut Water, Coconut Wwater + Peach Mango Juice, and Coconut Water + Pineapple Juice in 2018.

  

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("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 December 31, 2018 and December 31, 2017, the Company did not have any cash equivalents.

 

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 December 31, 2018 and 2017 was zero.

 

Inventories

 

Inventories, consisting solely of finished goods, are stated at the lower of cost (first-in, first-out method) or net realizable value (“NRV”). If necessary, the Company provides allowances to adjust the carrying value of its inventories to the lower of cost or NRV.   As of December 31, 2018, inventories consist solely of purchased finished goods.

 

Revenue Recognition

 

Revenue from sales of products is recognized when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Costs incurred for sales incentives and discounts are accounted for as a reduction in revenue.

 

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.

 

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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 the 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 income (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 December 31, 2018
 
Issued   Options   Expiration Date   Exercise Price
  August 14, 2014       257,000     August 14, 2019   $ 0.255  
  June 15, 2015       35,000     June 15, 2020   $ 0.255  
  April 6, 2017       996,546     April 6, 2022   $ 0.160  
  TOTAL       1,287,546              
                         
Issued   Warrants   Expiration Date   Exercise Price
  March 13, 2014       2,030,223     March 12, 2019   $ 0.910  
  August 5, 2015       1,500,000     August 17, 2020   $ 0.400  
  TOTAL         3,530,223              
  GRAND TOTAL         4,817,769              

 

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 December 31, 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. As of December 31, 2018, the Company has a Net Operating Loss Carryforward of 4,736,851 and recognized an Allowance for Deferred Tax Assets amounting to 1,237,976. The Company does not expect the allowance to be reversed within the coming periods.

 

In 2018, as a result of the 2017 Tax Act, we recognized a provisional tax benefit of 956,326 due to the re-measeurement of certain deferred taxes to the lower U.S. federal tax rate.

 

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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.

 

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.

 

Fair value of financial instruments

 

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

 

New Accounting Pronouncements

 

In June 2018 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASC aims to simplify several aspects of the accounting for nonemployee share-based payment transactions to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018. The Company is assessing the impact of this pronouncement to the financial statements.

 

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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 then Chief Operating Officer (the “COO”). The Simpson Agreement and the Spinner Agreement were effective April 1, 2017 and has/had eight year terms.

 

Pursuant to the Simpson Agreement revised in April 2017, Mr. Simpson will be paid a salary of $5,000 per month in cash and the right to receive 67,000 shares of restricted Common Stock per month. Pursuant to his employment agreement, Mr. Simpson is entitled to a salary of not less than $18,500 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 Amended 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 Decmeber 31, 2025 based upon revenue performance goals. The revenue goals range from $2,400,000 to $19,200,000 per year. The bonus awards are accelerated should revenue exceed the annual target amounts.

 

During 2018 and 2017, he did not receive cash payments. Mr. Simpson received stock in lieu of cash for the first quarter of 2018 and is owed $45,000 as of December 31, 2018. Mr. Simpson received stock in lieu of cash for 2017.

 

The “Simpson Agreement” is the only employment agreement in effect as of December 31, 2018.

 

 Pursuant to the Spinner Agreement revised in April 2017, Mr. Spinner was paid a salary of $5,000 per month in cash and the right to receive 55,000 shares of restriced common stock per month. Pursuant to his employment agreement, Mr. Spinner was entitled to a salary of not less than $16,000 per month. Mr. Spinner did not receive any cash payment in 2017. He received stock in lieu of cash in 2017. On December 8, 2017, the Company entered into an Amended and Restated Employment Agreement with Mr. Peter Spinner (the “Amended Spinner Agreement”). This agreement was effective January 1, 2018 and superseded the “Spinner Agreement”. Pursuant to the Amended Spinner Agreement, Mr. Spinner received $5,000 paid in stock each month for part-time employment. This agreement was terminated on March 31, 2018. Mr. Spinner’s employment with MOJO ended March 31, 2018.

 

The Company has no other plans in place and has never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

Lease Commitment

 

The Company maintains office space in Jersey City, NJ. The lease agreement is for the period March 1, 2018 to February 28, 2019 and was renewed for one year under the same terms. The rent under this agreement is $2,304 per month. Lease expense amounted to $27,648 and $28,019 for the years ended December 31, 2018 and 2017 respectively.

 

NOTE 4 – STOCKHOLDERS’ EQUITY

 

The Company has authorized 190,000,000 shares of Common Stock and 10,000,000 shares of preferred stock (“Preferred Stock”), each having a par value of $0.001. On February 4, 2019, the Company by a vote of its majority shareholders cancelled the 10,000,000 shares of preferred stock.

 

  F- 9  

 

 

2012 Plan

In March 2013, the 2012 plan was approved by our shareholders. The 2012 plan provides the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or other stock-based awards for up to an aggregate of 2,050,000 shares of common stock.  In 2016, the Company issued 620,000 stock options to purchase shares of common stock that expire in August 2019, and issued 1,073,441,restricted common stock to its Directors and employees. In 2017, the Company granted stock options to purchase 356,559 shares that expire in April 2022. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2012 plan. As of December 31, 2018, issued stock options total 976,559. During 2018, 495,403 stock options have been cancelled due to termination of employment. The remaining 495,403 options are available to be issued at December 31, 2018.

 

The 2012 plan was terminated by the Board of Directors on February 18, 2019.

 

2015 Plan

In October 2015, the Company approved 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. On April, 2017, the Company granted stock options to purchase 1,500,000 shares of Common Stock pursuant to the 2015 Plan. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2015 plan. As of December 31, 2018, issued stock options total 1,500,000. During 2018, 693,610 stock options have been cancelled due to termination of employment. The remaining 693,610 options are available to be issued at December 31, 2018.

 

The 2015 Plan was terminated by the Board of Directors on January 24, 2019.

 

Private Placement Offerings

 

On January 20, 2016, the Company approved a subscription agreement (the “2016 Subscription”) whereby 1,428,572 shares of Common Stock were offered to accredited investors for $0.35 per share. For every two shares purchased, the investor received a warrant to acquire one share of Common Stock at an exercise price of $0.70 per share exercisable for a period of two years from the date of issuance representing a potential aggregate of 714,286 shares of Common Stock. The Company issued a total of 964,286 shares of Common Stock and two year purchase warrants to acquire a total 482,143 shares of Common Stock to four accredited investors in consideration of $337,500. In 2018, 142,857 warrants expired in January and 339,286 expired in February.

 

  F- 10  

 

 

Restricted Stock Compensation

 

On May 9, 2018, the Company approved to the lifting of the prior restrictions to 8,756,542, shares issued to the CEO and 4,709,022, shares issued to the former 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 $0 and $805,403 for restricted stock based compensation costs for the twelve months ended December 31, 2018 and December 31, 2017, respectively.

 

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 will expire on March 12, 2019.

 

In connection with the February 2016 Private Placement Offering, warrants to purchase 482,143 shares of Common Stock were issued at a price of $0.70 per share, these warrants expired on February 12, 2018.

 

The following table summarizes warrant activity during the period:

 

Outstanding at December 31, 2017     4,012,366  
Expired     (482,143 )
Outstanding at December 31, 2018     3,530,223  
Exercisable at December 31, 2018     3,530,223  

  

    Number of Warrants Outstanding   Expiration Date  

Exercise

Price

Issued March 13, 2014     2,030,223     March 12, 2019     $ 0.91  
Issued August 5, 2015     1,500,000     August 17, 2020     $ 0.40  
Exercisable at December 31, 2018     3,530,223              

 

  F- 11  

 

 

Advisory Services

 

On October 3, 2013, the Company entered into an agreement for strategic business advisory services, public relations services and investor relations services with Ian Thompson from Carricklee House, Strabane, Northern Ireland.  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 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 to 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.  

 

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 4. The options were priced at the fair market value of the Common Stock and are immediately exercisable.

 

During 2018, 1,189,013 stock options were forfeited due to termination of employment.

 

The following table summarizes stock option activity under the Plans:

 

    Options  

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     (1,189,013 )     —         —    
Outstanding,December 31, 2018     1,287,546     $ 0.182       2.69  
Exercisable, December 31, 2018     1,287,546     $ 0.182       2.69  

 

During the years ended December 31, 2018 and 2017, compensation expense of $0 and $214,690, respectively, was recorded. As of December 31, 2018, there were no unrecognized compensation cost related to non-vested stock options.

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2018 and 2017 was $64,377 and $495,312, respectively.  Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $0.15 and $0.20 as of December 31, 2018 and 2017, respectively, and the exercise price multiplied by the number of options outstanding. 

 

  F- 12  

 

 

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued for the year ended December 31, 2017: 

    2017
Volatility     115 %
Expected term (years)     5  
Risk-free interest rate     1.87 %
Dividend yield     0 %

 

The exercise price on the grant date in relation to the market price during 2017 is as follows:

 

    2017
Exercise price lower than market price     —    
Exercise price equal to market price     —    
Exercise price exceeded market price   $ 0.184  
         

 

There were no new stock options issuances in 2018. Both plans have been terminated in 2019.

 

  F- 13  

 

 

NOTE 6 – CONCENTRATIONS

 

Major Customers

During the year ended December 31, 2018, the Company had two customers that accounted for approximately 51% of revenue. Revenue from Customer A accounted for 26%, and 25% for Customer B. Accounts receivable at December 31, 2018 from these two customers amounted to $0 and $78,167, respectively. The accounts receiveable was paid in full on January 2019. For the year ended December 31, 2017, there were two major customers accounting for more than 50% of total revenue.

 

Major Suppliers

During the year ended December 31, 2018, the Company purchased its inventory from two suppliers. The Company has established relationships with other suppliers which management believes could meet its needs on similar terms. Accounts payable at December 31, 2018 to both suppliers was $21,527.

 

NOTE 7 – RELATED PARTY TRANSACTIONS  

 

As of December 31, 2018, accrued payroll of $45,000 was payable to the CEO of the Company.

 

NOTE 8 – SUBSEQUENT EVENTS

 

On January 24, 2019, the Company’s Board of Directors resolved to terminate the 2015 Incentive Plan which allowed the issuance of 1,500,000 securities to officers, directors and consultants as incentive compensation.

 

On February 4, 2019, the Company’s Board of Directors resolved to cancel its authorized 10,000,000 shares of preferred stock, $.001 par value per share.

 

On February 18, 2019, the Company’s Board of Directors resolved that the Company terminated the 2012 Incentive plan which allowed the issuance of 2,050,000 securities to officers, directors and consultants as incentive compensation. It was resoloved further that 70,000 options to purchase shares of common stock be converted into 70,000 shares of Common Stock. Further resolved that Mr. Glenn Simpson be permitted to exercise his option to purchase 222,000 shares of Common Stock.

 

  F- 14  

 

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