Notes
to Condensed Financial Statements
March
31, 2019
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 Water
+ Mango Juice, and Coconut Water + Pineapple Juice. The Company sells its products to distributors, wholesalers and direct
to consumers through e-commerce platforms.
Interim
Financial Statements
The
accompanying unaudited interim condensed financial statements have been prepared pursuant to the rules and regulations for reporting
on Form 10-Q and article 10 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission
(“SEC”). Accordingly, certain information and disclosures required by accounting principles generally accepted in
the United States of America (“GAAP”) for complete financial statements have been condensed or omitted pursuant to
such rules and regulations. However, the Company believes that the disclosures included in these financial statements are adequate
to make the information presented not misleading. The unaudited interim condensed financial statements included in this document
have been prepared on the same basis as the annual audited financial statements, and in the Company’s opinion, reflect all
adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The
results for the three months ended March 31, 2019 are not necessarily indicative of the results that the Company will have for
any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial
statements and the notes to those statements for the year ended December 31, 2018 included in the Company’s Annual Report
on Form 10-K.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
financial statements are prepared in conformity with GAAP. Management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
equivalents include investment instruments and time deposits purchased with a maturity of three months or less. As of March 31,
2019 and December 31, 2018, the Company did not have any cash equivalents. For purposes of reporting cash flows, cash and cash
equivalents include all highly liquid investments purchases with a maturity of three months or less.
Accounts
Receivable
Accounts
receivable are stated at the amount management expects to collect from outstanding balances. The Company provides for probable
uncollectible amounts based upon its assessment of the current status of the individual receivables and after using reasonable
collection efforts. The allowance for doubtful accounts as of March 31, 2019 and March 31, 2018 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. If necessary,
the Company provides allowances to adjust the carrying value of its inventories to the lower of cost or NRV.
As of
March 31, 2019 inventory consists 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.
Shipping
and Handling Costs
Shipping
and handling costs incurred to move finished goods from our sales distribution centers to customer locations are included in the
line Selling, General and Administrative Expenses in our Statements of Operations.
Net
Loss Per Common Share
The
Company computes per share amounts in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 260,
“Earnings per Share”.
ASC Topic 260 requires presentation of basic
and diluted EPS. Basic EPS is computed by dividing the loss available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS is based on the weighted average number of shares of common stock
and common stock equivalents outstanding during the periods.
The
following potentially dilutive securities have been excluded from the computation of weighted average shares outstanding as they
would have had an anti-dilutive impact on the Company’s net loss per common share:
At
March 31, 2019
|
Issued
Date
|
|
Issued
To
|
|
Number
of Underlying Common Shares
|
|
Expiration
Date
|
|
Exercise
Price
|
August
19, 2015
|
|
Wyatts
Torch
|
|
|
1,500,000
|
|
|
August
19, 2020
|
|
$
|
0.40
|
|
April 6, 2017
|
|
Glenn Simpson
|
|
|
995,546
|
|
|
April 6, 2022
|
|
$
|
0.16
|
|
GRAND
TOTAL
|
|
|
|
|
2,495,546
|
|
|
|
|
|
|
|
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 March 31, 2019 and March
31, 2018, 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 next twelve months.
Stock-Based
Compensation
The Company accounts for equity based transactions
under the provisions of ASC Topic 718, “
Accounting for Stock-Based Compensation”.
The ASC prescribes accounting
and reporting standards for stock-based compensation plans, including employee stock options, restricted stock, employee stock
purchase plans and stock appreciation rights. ASC Topic 718 requires employee compensation expense to be recorded using the fair
value method.
Share based payment awards are measured at
grant date fair value of the equity instrument that an entity is obligated to issue when the service has been rendered and any
other conditions necessary to earn the right to benefit from the instruments have been satisfied.
Fair value of financial instruments
The carrying amounts of financial instruments,
which include cash, accounts receivable, accounts payable and accrued expense, approximate their fair values due to their short-term
nature.
Recent Accounting Pronouncements
In March 2019, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update No. 2019-01,
“Leases(Topic 842): Codification Improvements”.
The ASC aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities
on the balance sheet and disclosing essential information about leasing transactions. The Company has assessed that this pronouncement
has no impact to the financial statements.
NOTE
3 – COMMITMENTS AND CONTINGENCIES
Employment
Agreements
On
April 6, 2017, the Company entered into Amended and Restated Employment Agreements with Mr. Glenn Simpson (the “Simpson
Agreement”), the Company’s Chairman and Chief Executive Officer (the “CEO”) and Mr. Peter Spinner (the
“Spinner Agreement”), the Company’s 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 dated April 6, 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 May 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.
Mr.
Simpson was issued 201,000 shares of restricted Common Stock valued at $0.12 per share on February 25, 2018 as part of the Simpson
Agreement for his first quarter compensation. During 2018, he did not receive cash payments. Mr. Simpson received stock in lieu
of cash for the first quarter of 2018 and was owed $3,390 as of March 31, 2019.
The
“Simpson Agreement” is the only employment agreement in effect as of March 31, 2019.
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. Pursuant to the Amended Spinner Agreement, Mr. Spinner
received $5,000 paid in stock each month for part-time employment.
The
Spinner 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 was 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 $6,912
and $6,818 for the three months ended March 31, 2019 and 2018 respectively.
NOTE
4 – STOCKHOLDERS’ EQUITY
The
Company has authorized 190,000,000 shares of Common Stock 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.
2012
Plan
The 2012 plan was terminated by the Board of
Directors on February 18, 2019. The Company’s Board of Directors resolved that the 2012 Incentive Plan which allowed the
issuance of 2,050,000 securities to officers, directors and consultants as incentive compensation. It was resolved 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 for $0.255 per share.
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 were available to be issued at December 31, 2018.
2015 Plan
The 2015 Plan was terminated by the Board of
Directors on January 24, 2019. The 2015 Plan was approved in October 2015, and it provided the Company with the ability to issue
stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.
In 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.
Restricted Stock Compensation
On May 9, 2018, the Company’s Board of
Directors 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.
Stock
Warrants
In
connection with private placement offerings in March 2014 (the “2014 Offerings”), warrants to purchase 2,030,223 shares
of Common stock were issued at a price of $0.91 per share. These warrants expired 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, 2018
|
|
|
3,530,223
|
|
Expired
in March 2019
|
|
|
(2,030,223
|
)
|
Outstanding
at March 31, 2019
|
|
|
1,500,000
|
|
Exercisable
at March 31, 2019
|
|
|
1,500,000
|
|
|
|
Number
of Warrants
|
|
Expiration
Date
|
|
Exercise
Price
|
Issued
August 19, 2015
|
|
|
1,500,000
|
|
|
August
19, 2020
|
|
$
|
0.40
|
|
Exercisable at
March 31, 2019
|
|
|
1,500,000
|
|
|
|
|
|
|
|
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. Empire Stock Transfer, Inc, the Company’s transfer agent
was directed to process cancellation requests regarding the certificates listed below. The Board of Directors approved the Company’s
irrevocable agreement to indemnify the Transfer Agent for all loss, liability or expense in carrying out the authority and direction
contained on the terms of the Unanimous Written Consent to terminate the Thompson Agreement. The Transfer Agent shall maintain
the right to uphold the transfer in the event of forgery.
Certificate
No(s)
|
Registered
To
|
No.
of Shares
|
Transfer
to or CANCEL
|
No.
of Shares
|
605
|
Ian
Thompson
|
50,000
|
CANCEL
|
50,000
|
606
|
Ian
Thompson
|
50,000
|
CANCEL
|
50,000
|
607
|
Ian
Thompson
|
50,000
|
CANCEL
|
50,000
|
608
|
Ian
Thompson
|
50,000
|
CANCEL
|
50,000
|
610
|
Ian
Thompson
|
167,204
|
CANCEL
|
167,204
|
Stock
Purchased for Cancellation
During
the period January 1, 2019 to March 31, 2019, the Company purchased 4,167 shares of its restricted common stock from one shareholder
for cancellation. The Company paid $750 which was the market price for its traded shares during the period. The shares were returned
to Treasury.
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 on March 31, 2018 due to termination of employment.
On
February 18, 2019, the Company’s Board of Directors resolved to terminate the 2012 Incentive Plan, and it was resolved further
that 70,000 options to purchase shares of Common Stock be converted into 70,000 shares of Common Stock. It also allowed the CEO
of the Company to exercise his option to purchase 222,000 shares of Common Stock.
During
February, two of the Company’s Directors surrendered 70,000 stock options and were issued 70,000 shares of Common Stock
in exchange. The CEO of the Company was also issued 222,000 shares of Common Stock.
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, 2018
|
|
|
1,287,546
|
|
|
$
|
0.182
|
|
|
|
2.69
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(222,000
|
)
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
(70,000
|
)
|
|
|
—
|
|
|
|
—
|
|
Outstanding,
March 31, 2019
|
|
|
995,546
|
|
|
$
|
0.160
|
|
|
|
3.02
|
|
Exercisable,
March 31, 2019
|
|
|
995,546
|
|
|
$
|
0.160
|
|
|
|
3.02
|
|
During
the three months ended March 31, 2019 and 2018, compensation expense related to stock options of $0 and $0, respectively, was
recorded. As of March 31, 2019, there was no unrecognized compensation cost related to non-vested stock options.
NOTE
6 – RELATED PARTY TRANSACTIONS
On
February 25, 2018 the CEO of the Company exercised 222,000 stock options at $0.255. The accrued payroll owed to him was reduced
by $56,610. As of March 31, 2019, remaining accrued payroll of $3,390 was payable to the CEO.