Attached files

file filename
EX-32.1 - EXHIBIT 32.1 - MOJO Organics, Inc.ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - MOJO Organics, Inc.ex31_1.htm

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

 

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

 

For the Quarterly Period Ended: June 30, 2020

 

OR

 

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

 

For the transition period from _______________ to _______________

 

Commission file number: 000-55269

 

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

 

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

 

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

(Address of principal executive

offices)

  (Postal Code)

 

Registrant’s telephone number: 929 264 7944

 

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

 

Yes ☒  No ☐ 

 

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

 

Yes ☒  No ☐

 

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

 

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

 

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

Yes ☐  No ☒

 

On June 30, 2020, there were 29,924,544 shares of the registrant's common stock, par value $0.001, issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

None. 

 

 1 

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION  Page
ITEM 1. FINANCIAL STATEMENTS (Unaudited)  
Condensed Balance Sheets as of June 30, 2020 and December 31, 2019 1
Condensed Statements of Operations for the six months ended June 30, 2020 and June 30, 2019 2
Condensed Statements of Operations for the three months ended June 30, 2020 and June 30, 2019 3
Condensed Statements of Cash Flows for the six months ended June 30,2020 and June 30, 2019 4
Condensed Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2020 5
Notes to the Condensed Financial Statements 6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
ITEM 4. CONTROLS AND PROCEDURES 15
PART II – OTHER INFORMATION  
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 1a. RISK FACTORS 16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. MINE SAFETY DISCLOSURE 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS 17
SIGNATURE 22

 

 
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS (Unaudited)

 

MOJO ORGANICS, INC.
Condensed Balance Sheets (Unaudited)
As of June 30, 2020 and December 31, 2019
       
   June 30,
2020
  December 31, 2019
ASSETS   
CURRENT ASSETS:          
Cash and cash equivalents  $14,878   $55,978 
Accounts receivable, net   96,627    75,087 
Inventory   213,142    175,719 
Supplier deposits   39,000    11,539 
Prepaid expenses   18,487    14,767 
Security deposit   4,518    4,518 
Total Current Assets  $386,652   $337,608 
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $125,413   $140,854 
Accrued payroll to related parties   14,135    25,394 
SBA Loans   35,508    —   
Total Current Liabilities   175,056    166,248 
STOCKHOLDERS' EQUITY          
Common stock, 190,000,000 shares authorized at $0.001 par value, 29,924,544 and 29,351,294 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively   29,924    29,352 
Additional paid in capital   23,580,192    23,488,626 
Accumulated deficit   (23,398,521)   (23,346,618)
Total Stockholders' Equity   211,596    171,360 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $386,652   $337,608 
           
The accompanying notes are an integral part of these condensed financial statements.

  

 
 

 

MOJO ORGANICS, INC.
Condensed Statements of Operations (Unaudited)
For the Six Months Ended June 30, 2020 and 2019
 
    2020    2019 
Revenue  $877,867   $843,235 
Cost of Revenue   446,462    430,113 
Gross Profit   431,505    413,122 
           
Operating Expenses          
Selling, general and administrative   483,633    588,705 
Loss from Operations   (52,128)   (175,584)
Other Income   2,219    —   
Loss Before Provision for Income Taxes   (49,909)   (175,584)
Provision for Income Taxes   (1,994)   —   
Net Loss  $(51,903)  $(175,584)
Net loss per common share, basic and diluted  $(0.00)  $(0.01)
Basic and diluted weighted average number of common shares outstanding   29,690,570    28,565,224 
           
 The accompanying notes are an integral part of these condensed financial statements.

   

 2 

 

 

MOJO ORGANICS, INC.
Condensed Statements of Operations (Unaudited)
For the Three Months Ended June 30, 2020 and 2019
 
    2020    2019 
Revenue  $437,878   $ 434,738  
Cost of Revenue   209,412    229,480 
Gross Profit   228,465    205,257 
           
Operating Expenses          
Selling, general and administrative   223,981    302,694 
Income/(Loss) from Operations   4,485    (97,437)
Other Income   2,219    —   
Income/(Loss) Before Provision for Income Taxes   6,704    (97,437)
Provision for Income Taxes   (1,994)   —   
Net Income/(Loss)  $4,710   $(97,437)
Net income/(loss) per common share, basic and diluted  $0.00   $(0.00)
Basic and diluted weighted average number of common shares outstanding   29,889,203    28,699,846 
           
The accompanying notes are an integral part of these condensed financial statements.

   

 3 

 

 

MOJO ORGANICS, INC.
Condensed Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2020 and 2019
         
    2020   2019
         
Cash flows from operating activities:                
Net loss   $ (51,903 )   $ (175,584 )
Adjustments to reconcile net loss to net cash provided used in operating activities:                
Stock and warrants issued to directors and employees     97,389       154,390  
Changes in assets and liabilities:                
Increase in accounts receivable     (21,540 )     (16,876 )
Increase in inventory     (37,424 )     (34,280
Increase in supplier deposits     (27,461     (20,000 )
Increase in prepaid expenses     (3,720     (5,898 )
(Decrease)/Increase in accounts payable and accrued expenses     (17,435     80,257  
(Decrease)/Increase in accrued payroll to related parties     (11,259 )     7,674  
Net cash used in operating activities     (71,359     (10,317 )
Net cash from financing activities:                
    Proceeds from SBA Loan                                                                                   35,508       -  
Shares repurchased for cancellation     (5,250 )     (750 )
Net cash provided by/(used in) financing activities     30,258       (750 )
Net decrease in cash and cash equivalents     (41,101 )     (11,067 )
Cash and cash equivalents at beginning of periods     55,978       24,031  
Cash and cash equivalents at end of periods   $ 14,878     $ 12,963  
                 

Summary of non-cash investing and financing activity: During the six-month period ended June 30, 2020 the Company issued a total of 598,250 Restricted and Non-Trading shares with an implied value of $97,389 to directors and officers to settle obligations payable. During the six-month period ended June 30, 2019 the Company issued a total of 744,000 Restricted and Non-Trading shares with a value of $154,390 to directors and officers to settle obligations payable.

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

  

 4 

 

  

MOJO ORGANICS, INC.
Condensed Statements of Changes in Stockholders' Equity
For the Six Months Ended June 30, 2020
(Unaudited)
                     
    Common Stock   Additional Paid-In   Accumulated   Stockholders’
    Shares   Amount   Capital  
Deficit
 
Equity
                     
Balance, January 1, 2020     29,351,294     $ 29,352     $ 23,488,626     $ (23,346,618 )   $ 171,360  
Stock and warrants issued to Directors and Employees     598,250       598       96,791             97,389  
Stock repurchased and cancelled     (25,000 )     (25 )     (5,225 )           (5,250 )
Net loss                 -       (51,903 )     (51,903 )
Balance, June 30, 2020     29,924,544     $ 29,924       23,580,192     $ (23,398,521 )   $ 211,596  

 

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

  

 5 

 

 

MOJO ORGANICS, INC.

Notes to Condensed Financial Statements (Unaudited)

June 30, 2020 

 

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 natural, Non-GMO Project verified, and USDA Organic. The Company’s flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produces Sparkling Coconut Water, Coconut Water + Mango Juice and Coconut Water + Pineapple Juice. 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 improved broker network, and new products and packaging in 2020, including pH7 water (pH is a scale of acidity) and energy beverages which are both major sectors of the beverage industry. The company predominantly 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. 

 

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, 2020 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, 2019 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. On June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019 was zero.

 

 6 

 

 

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 NRV when NRV is below cost. There were no such adjustments in 2020 or 2019.

 

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 sales distribution centers 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:

 

               As of June 30,
   Issued To  Expiration Date  No. of Days to Expiration  Exercise Price  2020  2019
Shares underlying options outstanding  GLENN SIMPSON  Apr   6, 2022   645   $0.16    505,608    901,796 
Shares underlying warrants outstanding  WYATTS TORCH  Aug 19, 2020   50   $0.40    1,500,000    1,500,000 
Total                   2,005,608    2,401,796 

 

 7 

 

 

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 penalties related to income tax matters in income tax expense. As of June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019, the Company had Net Operating Loss Carryforwards of approximately $4,660,000 and $4,700,000, respectively, and Deferred Tax Assets amounting to approximately $1,330,000 and $1,320,000, respectively, which have been fully reserved by valuation allowances. The Company does not expect any significant reversals in the valuation allowance 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 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.

   

Recent Accounting Pronouncements

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The ASC aims to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The Company is still assessing the impact of this pronouncement to the financial statements. 

 

 8 

 

 

NOTE 3 – COMMITMENTS AND CONTINGENCIES

 

The global coronavirus (COVID-19) pandemic has caused disruptions in supply chains, affecting production and sales across a range of industries. While this disruption is currently expected to be temporary, there is considerable uncertainty around the duration.

 

The extent of the impact of COVID-19 on our operational and financial performance will depend on the effect on our customers and vendors – all of which are uncertain and cannot be predicted. The related financial impact cannot be reasonably estimated at this time. 

 

Employment Agreements

 

On April 6, 2017, the Company entered into an Amended and Restated Employment Agreement with Mr. Glenn Simpson (the “Simpson Agreement”), the Company’s Chairman and Chief Executive Officer (the “CEO”). The Simpson Agreement was effective April 1, 2017 and has an eight year term.

 

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 the achievement of performance goals established by the Board of Directors of the Company and set forth in the Simpson Agreement. The cash bonus is established at $44,400 per year. The stock bonus is set at 200,000 shares of Common Stock per year through May 31, 2025 based upon achieving revenue performance goals. The revenue goals range from $900,000 to $19,200,000 per year. The bonus awards are accelerated when revenues exceed the annual target amounts.

 

During the six months ended June 30, 2020, the CEO was issued 402,000 Restricted and Non-Trading shares of Common Stock under the terms of the Simpson Agreement for the stock portion of his first and second quarter compensation. During the first quarter of 2020 and for the first and second quarters of 2019, Mr. Simpson did not receive cash payments. Mr. Simpson received cash payments for the second quarter of 2020. He was owed $5,000 and $10,000 as of June 30, 2020 and December 31, 2019, respectively, for the cash portion of his salary.

 

The “Simpson Agreement” is the only executive employment agreement in effect as of June 30, 2020.

 

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.

 

 9 

 

 

Lease Commitment

 

The Company maintains office space in Jersey City, NJ. The initial lease agreement was for the period March 1, 2019 to February 29, 2020 and was renewed for one year under the same terms. In April 2020, the Company was given a 50% discount on the rent for April and May 2020 as well as an optional lease extension for an additional three months under the same terms. The base rent under this agreement is $2,343 per month, and expires May 31, 2021. Lease expense amounted to $4,686 and $6,912 for the six months ended June 30, 2020 and 2019 respectively. The security deposit for the lease agreement is $4,518 and the lease expires on May 31, 2021.

 

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 authorization for the issuance of up to 10,000,000 shares of preferred stock. There were no shares of preferred stock issued or outstanding prior to this change. 

 

Common Stock outstanding at June 30, 2020 and December 31, 2019 includes a total of 367,204 restricted shares issued in certificate form to a former consultant which were ordered cancelled during 2014. Such shares cannot be cancelled until the physical shares are surrendered to the Company or the Company’s designee and are not otherwise transferable by the holder.

 

Restricted Stock Issuances

 

During the six months ended June 30, 2020, 598,250 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 or transfer. The CEO exercised options to purchase 156,250 shares at $0.16 per share for a total exercise price of $25,000 which reduced the accrued salary payable to the CEO by the same amount. The CEO was also issued 402,000 shares of Restricted and Non-Trading Common Stock for the stock portion of his salary for the first and second quarter. A Director was issued 40,000 shares of Common stock as an award for continuing to serve as a Director of the Company. The value of these shares was recorded as a component of compensation expense.

 

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 a private placement offering in August 2015 (the “2015 Offerings), warrants to purchase 1,500,000 shares of Common Stock were issued at a price of $0.40 per share. These warrants will expire on August 19, 2020.

 

The following table summarizes warrant activity during the period:

 

  

 

Issued To

  Expiration Date  No. of Days to Expiration  Exercise Price 

 

Options

Issued August 19, 2015  WYATTS TORCH  Aug 19, 2020   1,828   $0.40    1,500,000 
Outstanding, June 30, 2020  WYATTS TORCH  Aug 19, 2020   50   $0.40    1,500,000 
Exercisable, June 30, 2020  WYATTS TORCH  Aug 19, 2020   50   $0.40    1,500,000 

 

Stock Purchased for Cancellation

 

On January 23, 2020 the Company purchased 25,000 shares of its restricted common stock from one shareholder for cancellation. The Company paid $5,250 or $0.21 per share which was the average market price for its traded shares during the period. The shares were cancelled and are available for reissuance.

 

 10 

 

 

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 Incentive Plan and the 2015 Incentive Plan, respectively. The options were priced at the fair market value of the Common Stock and are immediately exercisable.

 

2012 Incentive Plan

 

On February 18, 2019, the Company’s Board of Directors signed an unanimous consent 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 consented the CEO of the Company to exercise options to purchase 222,000 Restricted and Non-Trading shares of Common Stock at $0.255 per share. The total exercise price was $56,610 and this reduced the loan payable to the CEO by the same amount.

 

The 2012 Incentive Plan was approved by our shareholders in March 2013. The 2012 Incentive Plan provided 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 had been cancelled due to termination of employment and were available for reissuance at that time. There are no options outstanding from this plan as of June 30, 2020 and December 31, 2019.

 

2015 Incentive Plan

 

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

 

The Company approved the 2015 Incentive Plan in October 2015. The 2015 Incentive Plan 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 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 were exercisable from the date of issuance. 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 had been cancelled due to termination of employment and were available for reissuance at that time. There are 505,609 options outstanding from this plan as of June 30, 2020, and 661,858 options outstanding as of December 31, 2019.

 

Stock Option Activity

 

During February 2019, 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 Restricted and Non-Trading shares of Common Stock.

 

On August 13, 2019, the Company’s Board of Directors consented the CEO to exercise options to purchase 93,750 Restricted and Non-Trading shares at $0.16 per share. The total exercise value of $15,000 was reduced the loan payable to the CEO to $0.

 

On November 1, 2019, the Company’s Board of Directors consented the CEO to exercise options to purchase 239,938 Restricted and Non-Trading shares at $0.16 per share. The total exercise value of $38,390 was reduced the accrued salary payable to the CEO by the same amount.

 

 11 

 

 

As of December 31, 2019, there are 661,858 options outstanding that were issued to Glenn Simpson. The exercise price is $0.16.

 

On January 14, 2020 the Company’s Board of Directors consented the CEO to exercise options to purchase 93,750 Restricted and Non-trading shares at $0.16 per share. The total exercise value of $15,000 was reduced the accrued salary payable to the CEO by the same amount.

 

On March 6, 2020 the Company’s Board of Directors consented the CEO to exercise options to purchase 62,500 Restricted and Non-Trading shares at $0.16 per share. The total exercise value was $10,000 and this reduced the accrued salary payable to the CEO to $0. 

 

The following table summarizes stock option activity under the Plans:

 

 

  

 

 

Issued To

 

 

 

Expiration Date

  No. of Days to Expiration 

 

Exercise Price

 

 

 

Options

Outstanding, December 31, 2019  GLENN SIMPSON  4/6/2022   827   $0.16    661,858 
Exercised  GLENN SIMPSON  4/6/2022   736   $0.16    (156,250)
Outstanding, June 30, 2020  GLENN SIMPSON  4/6/2022   645   $0.16    505,608 
Exercisable, June 30, 2020  GLENN SIMPSON  4/6/2022   645   $0.16    505,608 

 

During the six months ended June 30, 2020 and 2019, compensation expense related to stock options was $0. As of June 30, 2020, there was no unrecognized compensation cost related to non-vested stock options.

 

 12 

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

On January 14, 2020 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 12, 2020 the $10,000 accrued salary balance was used to pay for an option exercise made by the CEO of the Company. As a result of the transaction, the Company issued 62,500 Restricted and Non-Trading shares of Common Stock to the CEO and the accrued payroll then owed to the CEO was reduced to $0.

 

As of June 30, 2020, accrued payroll of $14,135 was owed to the CEO and the Controller of the Company.

 

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”).  The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.

If there were an unforgiven portion of the PPP loan, it would be payable over a period of up to two years at an interest rate of 1%, with a deferral of payments for the first six months.  The Company’s use of the proceeds is consistent with the PPP. The Company believes that its use of the loan proceeds has met the criteria for forgiveness of the loan. The Company believes that the loan will be forgiven on November 1, 2020 or sooner in accordance with the guidance from the PPP.

On May 27, 2020, the Company received grant proceeds in the amount of $2,000 under the Economic Injury Disaster Loan (“EIDL”) Program. The EIDL program was created to assist businesses, renters and homeowners located in regions affected by declared disasters. The Company applied for the EIDL Emergency Advance which provides $1,000 per employee up to a maximum of $10,000.

 

The EIDL Advances are 100% forgivable as long as it is used for providing sick leave benefits to employees, maintaining payroll to retain employees, payments on mortgage, rent and utilities, increased costs to obtain materials from the applicants original source due to interrupted supply chains, and repaying obligations that cannot be met due to revenue losses. The Company’s use of the advance has met the criteria for forgiveness of the advance.

 

 13 

 

 

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

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

 

  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 six months ended June 30, 2020 to June 30, 2019.

 

  Results of Operations — Analysis of our financial results comparing the three months ended June 30, 2020 to June 30, 2019.

 

  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 critical accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions.

 

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

 

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

 

 14 

 

 

Recent Accounting Pronouncements

 

New Accounting Pronouncements

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The ASC aims to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The Company is still assessing the impact of this pronouncement to the financial statements.

 

COMPANY 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.

 

The Company’s flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produces Sparkling Coconut Water, Coconut Water + Mango Juice and Coconut Water + Pineapple Juice. 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 improved broker network, and new products and packaging in 2020, including pH7 water (pH is a scale of acidity) and energy beverages which are both major sectors of the beverage industry. The company predominantly 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.  

 

Results of Operations

 

Six Months Ended June 30, 2020 and 2019

 

Revenue

 

For the six months ended June 30, 2020, the Company reported revenue of $877,967 an increase of $34,732 or 4% from revenue of $843,235 for the six months ended June 30, 2019.  The increase in revenue was due to higher demand for MOJO branded products. Cases sold for MOJO products in the first and second quarters of 2020 increased by 3,856 compared to the same period in 2019.

 

Cost of Revenue

 

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

 

For the six months ended June 30, 2020, cost of revenue was $446,462 or 51% of revenue. For the six months ended June 30, 2019, cost of revenue was $430,113 or 51% of revenue. The cost of revenue perception was the same for both periods.

 

Operating Expenses

 

For the six months ended June 30, 2020, operating expenses were $483,633, a decrease of $105,072 from operating expenses of $588,705 for the six months ended June 30, 2019.

 

This decrease in operating expenses was comprised of lower selling expenses and lower compensation expenses. Selling expenses were $220,078 for the six months ended June 30, 2020 compared to $254,230 for the six months ended June 30, 2019. This $34,152 decrease is attributable to the lower freight and delivery expenses and storage fees.

 

 15 

 

 

There were no trade show fees recorded and marketing fees decreased by $8,473 from the same period last year. Compensation expense also decreased by $60,291 compared to the same period last year.

 

Three Months Ended June 30, 2020 and 2019

 

Revenue

 

For the three months ended June 30, 2020, the Company reported revenue of $437,878, an increase of $ 3,140 or 1% from revenue of $434,738 for the three months ended June 30, 2019.  The increase was due to lower deductions from revenue during 2020 compared to the same period last year.

 

Cost of Revenue

 

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

 

For the three months ended June 30, 2020, cost of revenue was $209,412 or 48% of revenue. For the three months ended June 30, 2019, cost of revenue was $229,480 or 53% of revenue. The 5 percentage point decrease was primarily due to lower costs of packaging material and lower freight in costs.

 

Operating Expenses

 

For the three months ended June 30, 2020, operating expenses were $223,981 a decrease of $78,713 from operating expenses of $302,694 for the three months ended June 30, 2019.

 

This decrease in operating expenses was comprised of lower selling expenses as well as lower compensation expenses. Selling expenses were $105,132 for the three months ended June 30, 2020 compared to $121,435 for the three months ended June 30, 2019. This $16,303 decrease is attributable to the lower freight and delivery expenses and reduced storage and warehousing fees. Compensation expense also decreased by $60,289 from $137,470 for the quarter ended June 30, 2020.

 

 16 

 

 

Liquidity and Capital Resources

 

Liquidity

 

As of June 30, 2020, the Company had working capital of $213,590. Net cash used in operating activities was $71,359 for the six months ended June 30, 2020, an increase of $61,041 compared to $10,317 net cash used for the six months ended June 30, 2019. Net cash provided by financing activities was $30,258 for the six months ended June 30, 2020 compared to net cash used in financing activities of $750 for the six months ended June 30, 2019.

 

Working Capital Needs

 

Our working capital requirements increase as demand grows for our products. Should the Company require additional working capital in the next twelve months, it may seek to raise funds.  Financing transactions could include the issuance of equity or debt securities or obtaining credit facilities. The Company has not required additional financing since February 2016.

  

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company had no off-balance sheet arrangements as of June 30, 2020  

 

 17 

 

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

 

Not applicable.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

Management’s Annual Report on Internal Control over Financial Reporting

 

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

 

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

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal controls over financial reporting during the six months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 18 

 

 

PART II – OTHER INFORMATION

  

ITEM 1.  LEGAL PROCEEDINGS

 

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

 

ITEM 1A.  RISK FACTORS

 

The global coronavirus (COVID-19) pandemic has caused disruptions in supply chains, affecting production and sales across a range of industries. While this disruption is currently expected to be temporary, there is considerable uncertainty around the duration.

 

The extent of the impact of COVID-19 on our operational and financial performance will depend on the effect on our customers and vendors – all of which are uncertain and cannot be predicted. The related financial impact cannot be reasonably estimated at this time. 

   

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

 

None.

  

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None. 

 

ITEM 4.  MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5.  OTHER INFORMATION

 

None. 

 

 19 

 

 

ITEM 6.  EXHIBITS

 

Exhibit No. SEC Report Reference Number Description
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)
31.1 31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  

*  Filed herewith.

† Management compensatory plan, contract or arrangement.

  

  (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 Registration Statement on Form SB-2 as an exhibit, numbered as indicated above, filed with the SEC on December 19, 2007.

 

  (3) 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.

 

  (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 January 4, 2012.

 

  (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 October 31, 2011.

 

  (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 August 12, 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 April 2, 2013.

 

  (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 February 1, 2013.

 

  (9) 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. 

 

  (10) 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.

 

  (11) 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.
     
  (12) Incorporated by reference to the Registrant’s Annual Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on June 30, 2015.
     
  (13) 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.

 

 20 

 

 

SIGNATURES

 

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

 

    MOJO ORGANICS, INC.
     
Dated: August 14, 2020 By:  Glenn Simpson
    Glenn Simpson
    Chief Executive Officer and Chairman
    (Principal Executive and Principal Financial Officer)

 

 21