Notes
to Condensed Financial Statements (Unaudited)
September
30, 2021
NOTE
1 – BUSINESS
Overview
MOJO
Organics, Inc. (“MOJO” or the “Company”) is a Delaware Corporation headquartered in Jersey City, NJ. The Company
engages in new product development, production, marketing, distribution and sales of beverage brands that are Non-GMO Project Verified
and USDA Organic.
The
Company’s flagship product is MOJO Coconut Water. In addition to Coconut Water, the Company produces Sparkling Coconut Water, Coconut
Water + Mango Juice, Coconut Water + Pineapple Juice and Organic Coconut Water. 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 partners and broker
network, and new products and packaging. The company packages its beverages in 100% recyclable, Eco-Friendly packaging
that can be recycled infinite times and is not made from carbon oil-based packaging. The packaging has a very low impact on the environment,
and does not contribute to landfills and the pollution of our bodies of water.
CURRENT
OPERATIONS
Sales
and Distribution
The
Company’s flagship product is MOJO Coconut Water. In addition to Coconut Water, the Company produces Sparkling Coconut Water, Coconut
Water + Mango Juice, Coconut Water + Pineapple Juice, and Organic Coconut Water. 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 partners and
broker network, and new products and packaging. The company packages its beverages in 100% recyclable, Eco-Friendly packaging
that can be recycled infinite times and is not made from carbon oil-based packaging. The packaging has a very low impact on the environment,
and does not contribute to landfills and the pollution of our bodies of water.
Production
The
Company has multiple sources for its production. The Company’s fruit sources are of high quality. The fruit is part of the overall
taste and quality of our products. Currently, the Company has multiple production facilities that it could source products from, each
of the facilities could supply our forecasted demand.
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 September 30, 2021, the Company has two 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 and began producing MOJO branded products in 2016. MOJO Organics Inc is headquartered in Jersey City,
New Jersey and our internet site is www.MojoOrganicsInc.com. MOJO’s stock is traded on the OTC Markets under the symbol
MOJO.
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 and nine months ended September 30, 2021 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,
2020 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 September 30, 2021,
and September 30, 2020, 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 September 30, 2021 and 2020 was zero.
Inventory
Inventory,
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 NRV when NRV is below cost. There were no such adjustments in 2021 or 2020.
Revenue
Recognition
Revenue
from sales of products is recognized when the related performance obligation is satisfied. The Company’s performance obligation
is satisfied upon the shipment or delivery of products to customers. The Company’s products are sold on cash and credit terms which
are established in accordance with standardized industry practices and typically require payment within 30 days of delivery. Costs incurred
for sales incentives and discounts are accounted for as reductions in revenue.
Deductions
from Revenue
Costs
incurred for sales incentives and discounts are accounted for as reductions 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 distribution center to customer locations are included in the line
Selling, General and Administrative Expenses in our Statements of Operations.
Net
Income/(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 income/(loss) per common share:
SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
|
|
|
|
Expiration
|
|
Days to
|
|
|
Exercise
|
|
|
As of September 30
|
|
|
|
Issued To
|
|
Date
|
|
Expiration
|
|
|
Price
|
|
|
2021
|
|
|
2020
|
|
Shares underlying options outstanding
|
|
Glenn Simpson
|
|
4/6/2024
|
|
|
918
|
|
|
$
|
0.16
|
|
|
|
318,108
|
|
|
|
505,608
|
|
Income
Taxes
The
Net Operating Loss Carryforwards for federal taxes was $3,695,829 at September 30, 2021 and $3,695,829 for the State of New Jersey. The
Deferred Tax Assets for federal taxes was $776,124 at September 30, 2021 and $332,625 for the State of New Jersey. The total Deferred
Tax Assets was $1,108,749 at September 30, 2021. The Deferred Tax assets have been fully reserved by valuation allowances beyond that
portion which is expected to offset current taxes. As of September 30, 2021, the Company’s Federal income tax payable at the corporate
tax rate of 21% would be $50,326 and State Income Tax payable at 9% tax rate would be $21,568 if this had not been offset by the deferred
tax assets.
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 did not have a deferred
tax liability at September 30, 2021 and September 30, 2020.
As
of September 30, 2021 and September 30, 2020, the Company had no accrued interest or penalties because there were none. The Company had
no Federal or State tax examinations in the past nor does it have any at the current time.
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 the month-end volume weighted average price (VWAP) 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.
NOTE
3 – COMMITMENTS AND CONTINGENCIES
Employment
Agreements
Pursuant
to the Amended and Restated Employment Agreement (“the Agreement”) dated April 6, 2017 date, Mr. Simpson is paid a salary
of $5,000 per month in cash and the Company is obligated to grant 67,000 shares of non-trading, restricted Common Stock per month. Additionally,
Mr. Simpson is entitled to an annual bonus comprised of cash and non-trading, restricted Common Stock based on the achievement of performance
goals established by the Board of Directors of the Company and set forth in the Agreement. The cash bonus is established at $44,400 per
year. The stock bonus is set at 200,000 shares of non-trading, restricted Common Stock per year through March 31, 2025.
The
term of the Agreement is through April 1, 2025. In the event that the Agreement is terminated for good reason, the Company shall pay
Mr. Simpson any accrued but unpaid salary for services rendered to the date of termination, and an amount equal to the salary at the
time of termination, payable for the remainder of the current term. As of September 30, 2021, there are 42 months remaining on the Agreement.
The Company’s liability on the remainder of the Agreement is $210,000 for the cash portion of Mr. Simpson’s salary, and 2,814,000
shares of non-trading, restricted Common Stock.
During
the nine months ended September 30, 2021, the Mr. Simpson was issued 603,000 Restricted and Non-Trading shares of Common Stock under
the terms of the Agreement for the stock portion of his compensation. Refer to Note 4 – Restricted Stock Issuances.
NOTE
4 – STOCKHOLDERS’ EQUITY
In
June 2021, the Company decreased its Authorized Shares from 190,000,000
to 40,000,000
shares. Currently, there are 30,809,080
shares outstanding and no other classes of stock.
This was a reduction of 150,000,000 in Authorized Shares.
Restricted
Stock Issuances
During
the nine months ended September 30, 2021, 929,666
shares of Restricted and Non-Trading Common Stock
were issued to Directors and Officers of the Company. These shares have full voting rights but are restricted for sale and transfer.
The
CEO exercised options to purchase 187,500 shares at $0.16 per share for a total exercise price of $30,000 which reduced the accrued salary
payable to the CEO by the same amount.
The
CEO was also issued 603,000 shares of Restricted and Non-Trading Common Stock for the stock portion of his salary.
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. (Ian Thompson has not complied with the Company’s demand to have the physical certificates returned.)
SCHEDULE
OF CANCELLATION OF SHARES
Certificates
|
|
|
Registered To
|
|
No. of Shares
|
|
|
Status
|
|
|
605
|
|
|
Ian Thompson
|
|
|
50,000
|
|
|
|
Cancelled
|
|
|
606
|
|
|
Ian Thompson
|
|
|
50,000
|
|
|
|
Cancelled
|
|
|
607
|
|
|
Ian Thompson
|
|
|
50,000
|
|
|
|
Cancelled
|
|
|
608
|
|
|
Ian Thompson
|
|
|
50,000
|
|
|
|
Cancelled
|
|
|
610
|
|
|
Ian Thompson
|
|
|
167,204
|
|
|
|
Cancelled
|
|
NOTE
5 – STOCK OPTIONS
Stock
Option Activity
On
September 24, 2021, the Company extended the expiration date of the options granted to Mr. Glenn Simpson from April 6, 2022
to April 6, 2024.
On
May 19, 2021, Mr. Simpson exercised options to purchase 93,750 Restricted and Non-trading shares at $0.16 per share. The total exercise
value was $15,000 and this reduced the accrued salary payable to the CEO by the same amount.
On
March 24, 2021, Mr. Simpson exercised options to purchase 93,750 Restricted and Non-trading shares at $0.16 per share. The total exercise
value was $15,000 and this reduced the accrued salary payable to the CEO by the same amount.
The
following table summarizes stock option activity under the Plans:
SCHEDULE OF STOCK OPTIONS ACTIVITY
|
|
Issued To
|
|
Expiration
Date
|
|
Days to Expiration
|
|
|
Exercise Price
|
|
|
Options
|
|
Outstanding, December 31, 2020
|
|
Glenn Simpson
|
|
4/6/2024
|
|
|
918
|
|
|
$
|
0.16
|
|
|
|
505,608
|
|
Exercised
|
|
Glenn Simpson
|
|
4/6/2024
|
|
|
918
|
|
|
$
|
0.16
|
|
|
|
(187,500
|
)
|
Exercisable, September 30, 2021
|
|
Glenn Simpson
|
|
4/6/2024
|
|
|
918
|
|
|
$
|
0.16
|
|
|
|
318,108
|
|
During
the nine months ended September 30, 2021 and 2020, compensation expense related to stock options was $0. As of September 30, 2021,
there was no unrecognized compensation cost related to non-vested stock options.
NOTE
6 – RELATED PARTY TRANSACTIONS
On
May 19, 2021 the CEO of the Company exercised 93,750 stock options at an exercise price of $0.16. The Company issued 93,750 Restricted
and Non-Trading shares of Common Stock, and the accrued payroll owed to him was reduced by $15,000.
On
March 24, 2021 the CEO of the Company exercised 93,750 stock options at an exercise price of $0.16. The Company issued 93,750 Restricted
and Non-Trading shares of Common Stock, and the accrued payroll owed to him was reduced by $15,000.
NOTE
7 – SBA LOANS “CARES ACT”
On
May 5, 2020, the Company received loan proceeds in the amount of $35,508 under the Paycheck Protection Program (“PPP”). On
December 18, 2020, the Company applied for the loan forgiveness for the loan proceeds amounting $35,508 under the Paycheck Protection
Program. The Company received the loan forgiveness decision from the SBA in January 2021. The full amount of the loan proceeds amounting
$35,508 was forgiven.