UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:April 30, 2012
ended December 31, 2017
or
[ ]_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________to ______________________________ to ____________
Commission file number:number 333-175003
Authentic TeasMojo Data Solutions, Inc.
(Exact name of registrant as specified in its charter)
| 66-0808398 | ||
| State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization | Identification No.) |
Suite 1801-1 Yonge Street, Toronto, Ontario M5E 2A3 Canada
39 Dorado Beach East
Dorado, Puerto Rico 00646
(Address of principal executive offices and Zipoffices) (Zip Code)
(631) 521-9700
Registrant’s telephone number, including area code:416.306.2493code
N/A(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the ActAct:
None
Securities registered pursuant to Sectionsection 12(g) of the ActAct:
Common Stock, noStock. $.001 par value
(Title of Class)class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [_] No [X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [_] No [X] No
Note -Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act from their obligations under those sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.[X] Yes [ ][_] No [X]
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). [X ] Yes [ ][_] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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. [X][_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
| Large accelerated filer | [_] | Accelerated filer | [ |
| Non-accelerated filer | Smaller reporting company | [X] | |
| Emerging growth company | [_] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [_] No [X] No
State the
The aggregate market value of the voting and non-voting common equitystock held by non-affiliates computed by reference to the price at which the common equitystock was last sold or the average bidon June 30, 2014, was $289,000. All (i) executive officers and asked price of such common equity, asdirectors of the last business dayregistrant and (ii) all persons who hold 10% or more of the registrant’s most recently completed second fiscal quarter.outstanding common stock, have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant. Accordingly, effective as of June 30, 2014, the registrant’s aggregate market value was less than $50 million and the registrant qualifies for “smaller reporting company” status under Rule 12b-2 of the Exchange Act and is subject to the disclosure requirements and filing deadlines for smaller reporting companies.
As of October 31, 2011, the last business daySeptember 9, 2018, there were 38,755,060 shares outstanding of the registrant’s most recently completed second fiscal quarter the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was approximately $252,900, based on 1,011,600 common shares held by non-affiliates and last sale prior to October 31, 2011 being $0.25.stock.
Note.—If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.4,011,600 shares of common stock as at July 17, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the PartNone.
MOJO DATA SOLUTIONS, INC.
Table of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).Not ApplicableContents
TABLE OF CONTENTS
PART I
This annual report on Form 10-K contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for future operations. In some cases, you can identify forward-looking statements by the use of terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this annual report on Form 10-K include statements about:
Our business plans,
Our ability to raise additional finances,
Our anticipated future marketplaces, and
Our anticipated sales and marketing strategy.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:
Our ability to continue as a going concern,
General economic and business conditions,
Our lack of operating history,
Our dependence on a sole manufacture and distributor to produce our products,
Our brand and reputation may be damaged, and
The risks in the section of this annual report entitled “Risk Factors”,
any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
As used in this report, the terms “we”, “us” and “our” mean Authentic Teas Inc., a Nevada corporation. In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
ITEM
Corporate HistoryBusiness
We were
Company’s History
Mojo Data Solutions Inc. (The Company) was incorporated under the laws ofon July 8, 2010 in the State of Nevada under the name of Authentic Teas, Inc. (“AUTT”). On September 16, 2013, the Company was re-domesticated in the Commonwealth of Puerto Rico by merging AUTT with Puerto Rico Corporation, “MOJO Data Solutions, Inc.”, which was formed on July 8, 2010.August 21, 2013 for the purpose of the re-domestication. Under the re-domestication, each outstanding share of AUTT common stock was automatically converted into one share of MOJO common stock. On October 11, 2013, the OTCBB symbol of the Company’s common stock was changed from AUTT to MJDS.
On September 27, 2013, the Company entered into an Asset Purchase Agreement with Mobile Data Systems, Inc. (“MDS”) pursuant to which MOJO agreed to purchase all of the intellectual property and substantially all of the tangible assets of MDS (the “MDS Asset Purchase”). On January 31, 2014, the Company closed on the MDS Asset Purchase in consideration of $190,000 in cash and a one-year unsecured 5% convertible promissory note in the principal amount of $80,000 payable to Joseph Spiteri, a sole officer and director which note is convertible at any time into shares of the Company’s common stock at $0.05 per share. The Cash Amount was utilized to repay and satisfy the outstanding indebtedness under a certain Loan Promissory Note dated September 19, 2011, by and between MDS, as the borrower, and the Long Island Development Corporation, a New York State not-for-profit corporation, as the lender.
Upon the closing of the acquisition with MDS, the business of MDS became the business of MOJO.
TheHead Office of the Company is situated at 39 Dorado Beach East, Dorado, Puerto Rico 00646.
Company Overview
The Company develops smartphone applications that enable brands and consumers to interact with traditional media delivering digital content back to the handset. We areembed proprietary visual and audible “tags” in products or print, TV and radio advertising. Consumers can use their smartphones to scan, touch or listen to the tags and interact with digital content, offers, and promotions to make immediate purchases and/or verify the authenticity of the product.
The Company focuses on retail, media and entertainment, and pharmaceutical verticals.
Through the proprietary and licensed intellectual property, the Company is engaged in developing technologies to deliver a specialty retailerfully integrated, multimedia mobile visual search, discovery, content delivery and consumer activation platform, combining a simple, elegant user experience on the handset, with sophisticated data processing and campaign management tools including its audio and digital watermarking technologies which enables the imperceptible transmission of premium loose-leaf teas. We currently offer 15 different typesdata within audio signals, allowing the attachment of teas through our online store www.authentic-teas.com. Eight new blends were developed last quarter 2011property rights or additional data to the customer of the audio material. Digital watermarks consist of indiscernible information that can be inserted into images, audio data or videos which can also be used to check the authenticity of copies by authorized persons and became available to consumers on June 2, 2012. Our initial focus will be to market directly to consumers through our online store. Our long-termprovide evidence whether the product was legally acquired or has been tampered with in some way.
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The goal is to start supplying specialty supermarketswork closely with our teas.large brands and the advertising and marketing agencies to serve them to enhance traditional advertising and marketing campaigns. The Company intend to achieve this by creating exciting consumer experiences enabled through all forms of mobile tags and barcodes, including the simplest UPC symbols, to the most advanced image recognition and audio watermarking, using its Mojo Tags multimedia reader.
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Our Business
We are a specialty retailer
The Company intends for its technologies to interoperate seamlessly with existing, large-scale systems, including retail point-of-sale, customer relationship management, campaign management, digital loyalty, inventory, track-and-trace and mobile operating systems.
In addition to having mastered the integration of premium loose-leaf teas. We currently offer our 15 different types of teas through our online store www.authentic-teas.com. Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K. Our initial focus will be to market directly to consumers through our online store. Our long-termmobile tags and barcode solutions onto popular smartphone operating systems (iOS and Android), the goal is to start supplying specialty supermarkets with our teas.specialize in helping its clients improve their financial performance by enabling practical and profitable business models and revenue streams.
We have entered into
Company Highlights
To date, the Company has achieved the following
| · | Developed the Mojo Campaign Management Suite encompassing several products, including Mojo Tags, Mojo Touch and Mojo Insights. The Mojo Campaign Management Suite with its carrier grade back-end can handle millions of simultaneous consumer transactions and provides brand protection for companies seeking anti-counterfeiting, diversion and track and trace capabilities. |
| · | Developed the innovative FadeMark process. FadeMark is one of few covert brand protection methods that thwart counterfeiters’ duplication efforts. |
Campaign Management Suite
The MOJO Campaign Management Suite offers a 5-year agreementcomplete solution for managing campaigns, activating consumers and protecting a company’s brand. The Mojo Campaign Management Suite covers tag and barcode creation, campaign management, real-time decision making, marketing analytics, data integration, content delivery and consumer engagement.
The Company’s Campaign Management Suite includes Mojo Tags, Mojo Touch and Mojo Insights.
Mojo Tags
Mojo Tags connects the physical world to the digital world. Mojo Tags are used in print, images, audio and packaging to allow consumers using smartphones to connect with the largest herbal tea producerdigital content and experiences of brands. It could be a “Play Video” button for product information, “Buy Now” button that a company places on a product or a “Check In” button on a storefront window. Mojo Tags are buttons for the physical world, which enable customer interaction using any Apple iOS or Android phone or tablet. There are a variety of Mojo Tags that can be created, managed and tracked with the Mojo Campaign Management Suite for use in Armenia: HAM Ltd. Co (“HAM”). We do not have the exclusive right to distribute HAM’s products in North Americamedia, i.e., Visual Tags including QR Code and HAM has no obligation to supply us withUPC, Audio Tags, Picture Tags, Invisible Tags, Secure Tags and NFC Tags.
Mojo Insights
Mojo Insights offers (to companies) innovative solutions for managing their products. HAM may not continue to supply us with our tea products or HAM may start to supply our competitors with tea products. HAM suspended their online sales program after they started selling to us.
We reach our customers through Google Adwordsmobile campaigns and advertising directlyconnecting consumers to Internet content from traditional media. We deliver a fully integrated, multimedia mobile visual search and content delivery platform, combining a simple, elegant user experience on tea related websitesthe handset, with sophisticated data processing and Facebook. We also targetcampaign management tools. The user friendly designed reports display everything a company needs to know about its campaigns with up-to-the-minute data and analytics.
In addition to time, place, and location-aware metrics, when the world-wide Armenian diaspora through community websitesMojo Tag App is used for scanning, additional demographic profile data is available including age, gender, geographic location, and direct email campaigns.income and language preference.
Hrant Isbeceryan, our Chief Executive Officer, resigned from his prior occupation as Account Manager on August 15, 2011 to work full-time on our business. He became our first employee. We anticipate that his focus will be on developing new blends and establishing a retail distribution network.
Our Products
Our Teas
Currently, the seven tea varieties offered by us are as follows:
We have developed eight new tea blends
Mojo Tags App
The Mojo Tags app is now available on the iTunes App Store and Google Play. Scanning a tag is as follows:simple as opening the Mojo Tags app and placing a tag within the sights or having the App listen to the audio track of any media.
How the Mojo Tags App works:
| 1. | Consumer uses a smartphone to scan or listen to tags found in print, audio, pictures and packaging. |
| 2. | The Mojo Tags App decodes the tag and transmits the data from the smartphone, over the network to the content server. |
| 3. | The content server performs a lookup of decoded data and responds with the correlated URL or action, based on campaign parameters, device-provided contextual data e.g., location, place, time, profile, etc. |
| 4. | URL or action is received by consumer’s smartphone. |
| 5. | Smartphone launches web browser and presents designated content and experience. |
The Mojo Tags app detects digital watermarks in print and audio and also reads QR Codes and UPC barcodes. The Mojo Tags app also does Image Recognition and BLE beacon detection. The Company’s proprietary FadeMark process makes it impossible for counterfeiters to successfully reproduce packaging, inserts or labels. FadeMarks cannot be counterfeited or replicated. The embedded FadeMark authenticates a product at every point in the supply chain. Counterfeit products are immediately exposed as frauds when scanned with a smartphone.
Technology
The MOJO Tags system consists of the following four proprietary integral pieces: (i) the Mobile Application(s) that resides on the mobile phone; (ii) the Content Server; (iii) the SQL Database; and (iv) the Campaign Manager.
Mobile Application. The Mobile Application reads the media presented (Audio, Video, Image, and Touch) and extracts the hidden data. The Application then submits this data along with demographic and location data to the MOJO Tags Content Server. The Application then processes the response from the Content Server and presents the digital content for the user to interact with.
Content Server. The Content Server processes the submitted code and, based on certain criteria, determines where to query a response from. The query can be directed to the MOJO Tags database or a third party customer database (i.e. Best Buy, Sears, etc.). Once a response is received, it is formatted and directed back to the Mobile Application that submitted the request.
SQL Database. The SQL Database is responsible for data processing and storage. The Content Server submits queries to the SQL Database by calling remote stored procedures. These stored procedures parse the data into its components parts. Demographic and location data are stored in the database and code payoff information is retrieved from the database. The database also receives remote procedure calls from the Campaign Manager in order to update code information or to report on code activity.
Campaign Manager. The Campaign Manager is the user interface into the data storage. It allows users to customize the response to a particular code in the system. The Campaign Manager also allows users to generate reports on code usage, generate analytics and manage campaigns on a daily basis.
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Watermarking and Retrieval Software. The technology incorporates and works with a third party’s software. Pursuant to a license agreement, dated October 9, 2013, between Fraunhofer Geselleschaft zür Forderung der angerwandten Forschung e.V. (“FhG”), Europe’s largest application-oriented research organization]based in Munich, Germany, for its Institute for Secured Information Technology and MDS which was assigned by MDS on the closing of the eight blendsMDS Asset Purchase with the consent of FhG. We have the non-exclusive worldwide right to use FhG’s “Audio and Video Watermarking Software” and “Watermark Detector Software” (collectively, the “Software”) to watermark and retrieve media files by embedding binary codes in advertisements and television programs transmitted via broadcast and to retrieve such embedded codes from such advertisements and television programs with the help of a mobile phone or similar device. The term of the license agreement commenced on November 1, 2013 and it may be terminated upon six months’ notice, effective at the end of a calendar quarter. Our royalty payments to FhG are uniquepayable every six months and are based upon revenues derived from the Software, with a mandatory minimum royalty payment. Our technology works with the Software and although our license for the Software is non-exclusive, we hold the exclusive rights to use our technology and products which are derivative works of the Software.
All of our products are currently fully developed and working. We will continue to update our products to newer operating environments.
Sources and Availability of Raw Materials
Everything the Company needs to develop and improve its products is readily available.
Intellectual Property
The Company do not currently hold any registered patents, copyrights or trademarks. The Company currently own its website’s domain namewww.mojotags.com. It has developed proprietary technologies around its multimedia reader for the Mojo Tags application. The multimedia reader is a one-of-a kind reader which the Company believes has no competition in the marketplace as blacktoday. The Company intends to apply for specific patents around its proprietary intellectual property and green teas from Georgia in combination with Armenian wild crafted herbs. trade secrets supporting the reader and the campaign management platform.
The other two are new wild-crafted herbal blends. We began sellingCompany relies on trade secret protection and confidentiality agreements to protect proprietary market, business and technical information and know-how that is not or may not be patentable or that it elects not to be patent. However, confidential information and trade secrets can be difficult to protect. Moreover, the new blends on June 2, 2012.
Herbs such as oregano, mint, thyme, and many more are abundant in Armenian. All our teas are wild-harvested from the alpine regions of Armenia. Blending ancient and modern methods, we have derived our teas from traditional medieval Armenian manuscripts, which we believe have been refined for contemporary palates and health benefits.
Our teas are wild-crafted, meaning the herbs are harvested sustainablyinformation embodied in the wildCompany’s trade secrets and then processed entirelyconfidential information may be independently and legitimately developed or discovered by hand.third parties without any improper use of or reference to information or trade secrets. The tea crafting takes place in indigenous village areas, where most ofCompany seek to protect the economic benefits generated are returned to local artisans, which helps ensure that a lifestylemarket, technical and culture steeped in two thousand years of tradition can continue.
Skilled harvesting is the first step in producing an outstanding herbal tea, thus HAM begins rigorous quality control at this stage of the tea crafting process. Harvesters are carefully trained in herb collection and handling techniques in accordance with ancient Armenian traditions for tea crafting.
Due to popular demand, we recently developed three new sampler products: Highlands Sampler, Caucasus’ Sampler and Ancient Armenian Sampler with smaller 15g (as opposed to our regular 50g) pouches in a gift box. The Highlands Sampler is our biggest sellerbusiness information supporting its operations, as well as our most profitable item.the confidential information relating specifically to its products by entering into confidentiality agreements with parties to whom the Company needs to disclose its confidential information to, such as its employees, consultants, board members, contractors and investors. However, the Company cannot be certain that such agreements have been entered into with all relevant parties. The Company also seeks to preserve the integrity and confidentiality of its data and trade secrets by maintaining physical security of its premises and physical and electronic security of its information technology systems, but it is possible that these security measures could be breached. While the Company has confidence in these individuals, organizations and systems, agreements or security measures may be breached, and the Company may not have adequate remedies for those breaches. The confidential information and trade secrets thus may become known by its competitors in ways the Company cannot prove or remedy.
Packaging
We believe that effective packaging design is essential in premium product categories, as consumers equate distinctive packaging with a higher quality product. HAM has previously tried
The Company expect all of its employees and consultants to sell its teas in North America but we believe our packaging is improved from the packaging HAM used. To improve the packaging, we have commissioned an entirely new brand identity (including logo, visuals and a distinguishing style). We designed and produced a new line of contemporary, bilingual (French/English) 50g pouches made of textured rice paper. A band window across the front portion of the bag allows consumers to have a sneak peek of the product. Other important features are the closable zip top and stand-up capabilities to enhance display options for retailers.
Organic
We believe that the economic challenges faced by Armenia after establishing its independence from the Soviet Union have had a surprisingly positive impact on its environment and contribute directlyassign their inventions to the availabilityCompany, and all of its high-quality teas. We believe that fertilizeremployees, consultants, advisors and pesticide use was halted in some areas and scaled back in other regions due to its high prices. At the same time, a sharp drop in industrial activity, while detrimentalany third parties who have access to the economy, resulted in environmental improvements of both airshed and water supply. Four of our seven original are certified 100% organic, two are certified “made with organic ingredients” and only one tea lacksCompany’s proprietary know-how, information or technology to enter into confidentiality agreements, however, the Company cannot provide any organic credentials. We work with EcoGlobe LLC, the only organic certifier in Armenia recognized by the United States and Canadian governments, toassurances that all such agreements have each tea certified.been duly executed.
Currently our supplier is seeking organic certification for all new shipments from IFOAM, the worldwide umbrella organization for the organic agriculture movement. Our supplier has informed us that IFOAM certification will be delayed to Fall 2012
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From the eight new blends that were developed, all are designated “wild-crafted” as the black and Green teas have not been certified organic. Our supplier, HAM, is working with its Georgian counterpart to attain IFOAM certification.
Our Supply
We have entered into a 5-year agreement with the largest herbal tea producer in Armenia: HAM. We do not have the exclusive right to distribute HAM’s products in North America and HAM has no obligation to supply us with their products. WeThe Company cannot guarantee that HAMits trade secrets and other confidential proprietary information will continue to supply us with our tea productsnot be disclosed or that HAMcompetitors will not supplyotherwise gain access to the Company’s trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may breach their agreements and disclose the Company’s proprietary information, including its trade secrets, and the Company may not be able to obtain recourse for such breaches. Misappropriation or unauthorized disclosure of the Company’s trade secrets could impair its competitive position and may have a material adverse effect on its business. Additionally, if the steps taken to maintain the Company’s trade secrets are deemed inadequate, it may have insufficient recourse against the parties misappropriating those trade secrets.
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Marketing and Distribution
Principal Markets
The goal of the Company is to establish relationships and work closely with large brands and the advertising and marketing agencies who serve them to enhance traditional advertising and marketing campaigns. The Company intend to achieve this by creating exciting consumer experiences enabled through all forms of mobile tags and barcodes, including the simplest UPC symbols, to the most advanced image recognition and audio watermarking, using its Mojo Tags multimedia reader. The Company does not currently has any contractual arrangements with any such brands and/or agencies.
The Company intends for its technologies to interoperate seamlessly with existing, large-scale systems, including retail point-of-sale, customer relationship management, campaign management, digital loyalty, inventory, track-and-trace and mobile operating systems.
In addition to having mastered the integration of mobile tag and barcode solutions, the goal is to specialize in helping our clients improve their financial performance by enabling practical and profitable business models and revenue streams. The Company do not currently have any customer agreement.
Dependence on Specific Customer or Customers
The business of the Company is not currently dependent on specific customers, the loss of any one or more of which would have a material adverse effect on its business.
Industry and Competition
The Company operates in a highly competitive, consumer-driven and rapidly changing environment. The success of the Company is, to a large extent, dependent on its ability to acquire, develop, adopt, upgrade and exploit new and existing technologies to address consumers’ changing demands and distinguish its services from its competitors, with tea products. HAM had previously sold teas directlymost of which have greater resources than the Company and have a longer operating history. The Company may not be able to accurately predict technological trends or the success of new products and services. If the Company chooses technologies or equipment that are not as effective, cost-efficient or attractive to its customers than those chosen by its competitors, or if it offer services that fail to appeal to consumers, in North America but was unsuccessful primarily due toare not available at competitive prices or that do not function as expected, the high shipping costs to North American consumers. Currently HAM has cancelled its consumer program and redirects consumers to our website. HAM is currently our only supplier of tea products.
HAM has agreed that the products it ships must meet:
the Specifications Act for the Bureau of Standardizationcompetitive position of the RepublicCompany could deteriorate, and its business, financial condition and results of Armenia, regulated by DP 3721991.1814-99, dated 12/07/1999 and which shall not contradict the requirements in force for a similar product in the country of our company; andoperation could suffer.
products designated as Organic by the Organic Certification body in the Republic of Armenia, must be recognized as such by the United States (USDA) and by the Canadian Food Inspection Agency.
Conventional tea trading involves many players including tea estate holders, outgrowers, small holders, auction markets and factory-based processors. We purchase directly from our supplier bypassing conventional tea auctions and markets which many of our competitors rely upon. In conventional tea production, the typical supply chain timeline from harvesting leaves through processing to supermarket shelf is approximately 20 to 30 weeks. Our operational structure allows for this timeline to be shortened to as little as 4 weeks. Product quality for premium tea is significantly negatively impacted by lengthy timelines as teas degrade in taste and aroma over time. We believe that achieving timeline efficiencies help differentiate our tea’s quality and unique production approach from that of our competitors.
The unique nature of our product offerings limits supplier options. At this time, we are limited to working with one supplier; however we may obtain additional suppliers in the future.
Armenia
Our future operations couldCompany’s competitive position will be adversely affected by various factors includingthe introduction of new technologies, products and services by its competitors. Furthermore, advances in technology, decreases in the cost of existing technologies or changes in Armenia’s politicalcompetitors’ product and service offerings may require the Company in the future to make additional research and development expenditures or economic conditions.to offer at no additional cost or at lower prices, certain products and services that the Company currently offer to customers separately or at a premium. In addition, the uncertainty of the Company’s ability and the costs to obtain intellectual property rights from third parties could impact its ability to respond to technological advances in a timely and effective manner.
Technology in the Company’s industry changes rapidly which could cause its products and services to become obsolete. The political system of Armenia is currently stable with four political parties populating its emerging democratic landscape. Armenia has a functioning market economy.
Armenia has joined numerous international organizations including the United Nations, World Trade Organization, the Council of Europe, La Francophonie and many others.
Externally, the availability of only two export routes out of Armenia means the closing of borders or other trade restrictions imposed by Armenia’s neighbors are an operational risk. Although landlocked, Armenia maintains positive relations with Iran and Georgia through which many of its exports travel. The borders with its two other neighboring countries, Turkey and Azerbaijan, remain closed. We cannot guarantee that we willCompany may not be able to get ourkeep pace with technological developments. If the new technologies on which the Company intends to focus its research and development investments fail to achieve acceptance in the marketplace, the competitive position of the Company could be negatively impacted limiting or even preventing the Company from becoming profitable. The Company may also be at a competitive disadvantage in developing and introducing complex new products out of Armenia.
Target Market
We believe that for masses of people, gourmet tea is an affordable indulgence. Our goal is to provide our customers with a tea experience beyond that which is currently provided by purveyors of mass-produced hot beverage brands. We anticipate that we will target the following markets.
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Consumers and tea aficionados
We believe that high-quality herbal teas are especially attractive to wealthier consumers who make spending decisions based on cultivating a lifestyle of health and sustainability. We believe our customers will be generally well-educated, wealthier than average and willing to pay a premium price for a product which reinforces their lifestyle values.
Armenian diaspora
We believe that,services due to wars, civil unrestthe substantial costs that the Company may incur in producing these products or services, For example, its competitors could use proprietary technologies that are perceived by the market as being superior. Further, after the Company has incurred substantial costs, one or more of the products or services the Company or its strategic partners are developing could become obsolete prior to it being widely adopted.
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The Company expects to continue to face increased threats from companies who use the Internet to deliver services similar to the Company’s as the speed and economic challenges, Armenians have been dispersedquality of broadband and wireless networks continues to different regionsimprove. The industry is subject to rapid technological change, and the Company must make substantial investments in new products, services and technologies to compete successfully. Technological innovations generally require a substantial investment before they are commercially viable. The Company intends, subject to financing, to continue to make substantial investments in developing new products and technologies, and it is possible that the world. We believedevelopment efforts of the Company will not be successful and that there is athe Company’s new technologies will not result in meaningful revenues.
The Company’s products, services and technologies face significant population of Armenians living in North America, which may have a preference for teas from Armenia.
We believe that becausecompetition, and any revenues generated or the timing of their geopolitical circumstances, Armenians have become adept at preserving and promoting their ancient culture in meaningful ways. As a result, we believe that Armenians have developed a robust identity, which is celebrated through language, food, art and community and that thrives throughout the diaspora. Our goal is to bring the taste and aroma of the homeland to Armenians living abroad and to tap into their desire to have an authentic taste of ‘home’.
Future growth opportunities
We anticipate that the first phase of our business development should focus on direct-to-consumer sales thus allowing us to refine our product offerings and adapt pricing strategies as needed. We anticipate that the second phase of business development should be to introduce 10 to 12 new tea blends as well as a push into the specialty grocery store market. In the last quarter of 2011, we developed 8 new blends which we received May 2012. Another 4 blends are being developed presently and we anticipate delivery before the end of 2012. To meet the demands of the specialty store market, we anticipate further product development to produce larger packages, bulk quantities, boxed packs of bagged tea and other product optionsdeployment, which may be identified duringdependent on the first phaseactions of others, may not meet its expectations. Competition in the communications industry is affected by various factors that include, among others: evolving industry standards and business development.
Our Marketing Strategy
We believe our marketing strategy:
distinguishes us from larger, ‘big brand’ competitors,
educates consumers regarding our boutique herbal tea blendsmodels; evolving methods of transmission for voice and data communications; networking; value-added features that drive replacement rates and selling prices; turnkey, integrated product offerings that incorporate hardware, software, user interface and applications; and scalability and the overall benefits of herbal tea in general, and
contributes to the growth of tea culture and demand for more enriching, authentic tea experiences.
Last year, our central message to consumers was “From an authentic people comes…Authentic Teas”. Our goal was to captivate our audience with the ancient story of Armenian tea. To help make that connection, we commissioned a videoability of the tea crafting process in Armenia. Our website containssystem technology to meet customers’ immediate and future network requirements.
The Company intends that advertising will produce the video along with more aspectspredominant share of tea culture that we believe enhancesits revenues, if any. With the online tea buyers experience and educationcontinued development of our products.
In June 2012, we developed a new campaign called “PURE. ARMENIAN”. This new theme focuses directlyalternative forms of media, particularly electronic media including those based on the purity ofInternet, the teas,businesses may face increased competition. Alternative media sources may also affect the purity ofCompany’s ability to generate revenues. This competition may make it difficult for the source andCompany to grow or generate revenues, which the purity of the villagers harvesting and blending the teas.
We drive traffic to our ecommerce site through multiple channels, Google AdWords campaigns, Facebook ad campaigns, and press release campaigns distributed to media and important tea blogs. In addition, we place ads on selected websites that we believe appeal to our target markets.
To launch the new blends, weCompany believes will be participating in a few summer festivals with tasting booths throughout Ontario. In addition, we have purchased mailing lists that target affluent organic tea drinkers and we will conduct focused email campaigns to drive buyers to our purchase point.
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Competition
The tea market is highly fragmented. We compete directly with a large number of relatively small independently-owned tea retailers. Additionally, relatively low barriers to entry in the tea and beverage retail market may encourage other tea and beverage retailers who may have greater financial, marketing and operating resources than we do to enter the specialty tea retail market. As we continuechallenge it to expand we expect to encounter additional regional and local competitors.
We also compete indirectly with other vendorsthe contributions of loose-leaf, bagged and ready-to-drink teas, such as supermarkets, club stores, wholesalers and internet suppliers, as well as with houseware retailers and suppliers.its business.
Governmental Regulations
We are subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers and/or govern the promotion and sale of merchandise and the operation of stores and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
Employees
As of the date hereof, we employ no full-time employees and no part-time employees.
Research and Development Expenditures
We have not incurred any research or development expenditures since our incorporation.
Patents and Trademarks
We do not own any patents or trademarks.
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Item 1A. RISK FACTORS.Risk Factors
An investment
The information to be reported under this Item is not required of smaller reporting companies. However, there have been no material changes from the risk factors previously disclosed in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this prospectus in evaluating our company and our business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks. You could lose all or part of your investment due to any of these risks. You should invest in our common stock only if you can afford to lose your entire investment.
Risks Associated With Our Financial Condition
The fact that we have generated minimal revenues since our inception raises substantial doubt about our ability to continue as a going concern.
We have generated minimal revenues since our inceptionReport on July 8, 2010. Since we are still in the early stages of operating company and because of the lack of operating history, we will, in all likelihood, continue to incur operating expenses with minimal revenuesForm 8-K for the foreseeable future.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.
We incurred a net loss of $71,943 for the period from July 8, 2010 (date of inception) to April 30, 2012. Because we have incurred losses from operations since inception, have not attained profitable operations and are dependent upon obtaining adequate financing to fulfill our business operations, in their report on our financial statements for the period from July 8, 2010 (date of inception) to April 30, 2012, our independent auditors included an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern.
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Our ability to continue as a going concern is depending upon our ability to generate future profitable operations and to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We will continue to incur operating expenses with minimal revenues for the foreseeable future. We cannot assure that we will be able to generate enough sales through our website to obtain significant revenues. In addition, if we are unable to establish and generate significant revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our commons stock.
If we are unable to obtain financing in the amounts and on terms and dates acceptable to us, we may not be able to expand or continue our operations and developments and so may be forced to scale back or cease operations or discontinue our business and you could lose your entire investment.
We do not currently have any arrangement for additional financing. For the foreseeable future, we intend to fund our operations and capital expenditures from our revenues, cash on hand and additional financings. Our capital resources are insufficient to fund our planned operations for the next 12 month period, as we estimate that we require an additional $139,543 in funds to implement our business plan for the next twelve months. We will have to raise additional funds for the continued development of our business and the marketing of our products. Such additional funds may be raised through the sale of additional stock, stockholder and director advances and/or commercial borrowing. There can be no assurance that a financing will continue to be available if necessary to meet these continuing development costs or, if the financing is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us will result in a significant dilution in the equity interests of our stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may not be able to expand or continue our operations and developments and so may be forced to scale back or cease operations or discontinue our business and you could lose your entire investment.
Risk Associated with our Business
We have only one office and if we encounter difficulties associated with our office or if it were forced to shut down for any reason, we could face shortages of inventory that would have a material adverse effect on our business operations.
Our only office is located in Toronto, Ontario, Canada. This office currently supports our entire business. All of our teas are shipped to this office from our vendor and then shipped from our office to our e-commerce customers. Our success depends on the timely and frequent receipt of merchandise by our e-commerce customers. The efficient flow of such merchandise requires that we have adequate capacity at our office to support our current level of operations and the anticipated increased levels that may follow from our growth plans. If the operation of our office were to be disrupted or if it were to shut down for any reason or its contents were to be destroyed or damaged, including due to fire, severe weather or other natural disaster, we could face shortages of inventory, resulting in “out-of-stock” conditions, and would incur additional cost to replace any destroyed or damaged product. Such an event may negatively impact our sales and may cause us to incur significantly higher costs and longer lead times associated with delivering products to e-commerce customers. This could have a material adverse effect on our business and harm our reputation.
Because our business is highly concentrated on a single, discretionary product category, premium loose-leaf teas, we are vulnerable to changes in consumer preferences and in economic conditions affecting disposable income that could harm our financial results.
Our business is not diversified and consists of developing, sourcing, marketing and selling premium loose-leaf teas. Consumer preferences often change rapidly and without warning, moving from one trend to another among many retail concepts. Therefore, our business is substantially dependent on our ability to educate United States consumers on the many positive attributes of tea, anticipate shifts in consumer tastes and help drive growth of the overall United States tea market. Any future shifts in consumer preferences away from the consumption of beverages brewed from premium looseleaf teas would also have a material adverse effect on our results of operations.
Consumer purchases of specialty retail products, including our products, are historically affected by economic conditions such as changes in employment, salary and wage levels, the availability of consumer credit, inflation, interest rates, tax rates, fuel prices and the level of consumer confidence in prevailing and future economic conditions. These discretionary consumer purchases may decline during recessionary periods or at other times when disposable income is lower. In addition, increases in utility, fuel, commodity price and corporate income tax levels could affect our cost of doing business, including transportation costs of our third-party service providers, causing our suppliers and such service providers to seek to recover these increases through increased prices charged to us. Our financial performance may become susceptible to economic and other conditions in regions or states where our tea is shipped. Our continued success will depend, in part, on our ability to anticipate, identify and respond quickly to changing consumer preferences and economic conditions.
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Our success depends, in part, on our ability to source, develop and market new varieties of loose-leaf teas that meet our high standards and customer preferences.
We currently offer seven varieties of loose-leaf teas. Our success depends in part on our ability to continually innovate, develop, source and market new varieties of loose-leaf teas that both meet our standards for quality and appeal to customers’ preferences. Failure to innovate, develop, source, market and price new varieties of tea that consumers want to buy could lead to a decrease in our sales and profitability.
We may experience negative effects to our brand and reputation from real or perceived quality or health issues with our teas, which could have an adverse effect on our operating results.
We believe our customers rely on us to provide them with premium loose-leaf teas. Concerns regarding the safety of our teas or the safety and quality of our supply chain could cause shoppers to avoid purchasing certain products from us or to seek alternative sources of tea, even if the basis for the concern has been addressed or is outside of our control. Adverse publicity about these concerns, whether or not ultimately based on fact, and whether or not involving our teas could discourage consumers from buying our teas and have an adverse effect on our brand, reputation and operating results.
Furthermore, the sale of tea entails a risk of product liability claims and the resulting negative publicity. Tea supplied to us may contain contaminants that, if not detected by us, could result in illness or death upon their consumption. We cannot assure you that product liability claims will not be asserted against us or that we will not be obligated to perform product recalls in the future.
We may also be subject to involuntary product recalls or may voluntarily conduct a product recall. The costs associated with any future product recall could, individually and in the aggregate, be significant in any given fiscal year. In addition, any product recall, regardless of direct costs of the recall, may harm consumer perceptions of our teas and have a negative impact on our future sales and results of operations.
Any loss of confidence on the part of our customers in the safety and quality of our teas would be difficult and costly to overcome. Any such adverse effect could be exacerbated by our position in the market as a purveyor of premium loose-leaf teas and could significantly reduce our brand value. Issues regarding the safety of any teas sold by us, regardless of the cause, could have a substantial and adverse effect on our sales and operating results.
A shortage in the supply, a decrease in quality or an increase in the price of teas as a result of weather conditions, earthquakes, crop disease, pests or other natural or manmade causes outside of our control could impose significant costs and losses on our business.
The supply and price of tea is subject to fluctuation, depending on demand and other factors outside of our control. The supply, quality and price of our teas can be affected by multiple factors in Armenia, including political and economic conditions, civil and labor unrest, adverse weather conditions, including floods, drought and temperature extremes, earthquakes, tsunamis, and other natural disasters and related occurrences. In extreme cases, entire tea harvests may be lost.
Armenia has in recent years suffered significant political and economic instability. These factors can increase costs and decrease sales, which may have a material adverse effect on our business, results of operations and financial condition.
We may have difficulty exporting our tea out of Armenia as it currently has only two export routes. The closing of either of these export routes would likely delay and increase the cost of our shipments. As we have closely associated our brand with teas from Armenia, our failure to obtain teas from Armenia may have a material adverse effect on our business, results of operations and financial condition.
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Tea may be vulnerable to crop disease and pests, which may vary in severity and effect. The costs to control disease and pest damage vary depending on the severity of the damage and the extent of the plantings affected. Moreover, there can be no assurance that available technologies to control such conditions will continue to be effective. These conditions can increase costs and decrease sales, which may have a material adverse effect on our business, results of operations and financial condition.
Because we rely on HAM Ltd. Co (“HAM”) to produce our teas, we may not be able to obtain quality products on a timely basis or in sufficient quantities.
Currently, we rely on HAM as our sole supplier to supply us with our teas on a continuous basis. Our financial performance depends in large part on our ability to purchase tea in sufficient quantities at competitive prices from HAM. We have a five year agreement with HAM. HAM may not decide to renew our agreement. We do not have the exclusive right to distribute HAM’s products in North American and HAM has no obligation to supply us with their products. HAM may decide to stop supplying us with our tea products or HAM may decide to supply our competitors with teas. If HAM stops supplying us or starts supplying our competitors with tea products, our business, financial condition and results of operations may be harmed.
Events that adversely affect HAM could impair our ability to obtain inventory in the quantities that we desire. Such events include difficulties or problems with our vendors’ businesses, finances, labor relations, ability to import raw materials, costs, production, insurance and reputation, as well as natural disasters or other catastrophic occurrences.
If we experience significant increased demand for our teas or need to replace HAM, there can be no assurance that additional suppliers, supplies or additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any vendor would allocate sufficient capacity to us in order to meet our requirements, fill our orders in a timely manner or meet our strict quality requirements. Even if HAM is able to expand their capacity to meet our needs or we are able to find new source of supply, we may encounter delays in production, inconsistencies in quality and added costs. Any delays, interruption or increased costs in the supply of loose-leaf teas could have an adverse effect on our ability to meet customer demand for our products and result in lower net sales and profitability both in the short and long term.
We may face increased competition from other tea and beverage retailers, which could adversely affect us and our growth plans.
As we continue to drive growth in our business, our success, combined with relatively low barriers to entry, may encourage new competitors to enter the market. The financial, marketing and operating resources of some of these new market entrants may be greater than our own. We must spend significant resources to differentiate our customer experience, which is defined by a wide selection of premium loose-leaf teas. Despite these efforts, our competitors may still be successful in attracting our customers.
Our ability to source our teas profitably or at all could be hurt if new trade restrictions are imposed or existing trade restrictions become more burdensome.
All of our loose-leaf teas are currently grown outside of North America. The United States and Canada have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty or tariff levels. Countries impose, modify and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost or reduce the supply of teas available to us or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition and results of operations.
Fluctuations in foreign currency exchange rates may affect the price we pay to HAM.
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The exchange rate between the Canadian or United States dollar to the Dram, the currency used in Armenia, may have a significant, and potentially adverse, effect on the price we pay HAM. We currently pay HAM in United States dollars. If the United States dollar weakens against the Dram, the price we pay to HAM will be increased, which may have a negative effect on our operating results.
We may not be able to protect our intellectual property adequately, which could harm the value of our brand and adversely affect our business.
We believe that our brand is important to our success and our competitive position, however we currently do not have any registered trademarks. We believe that we will be unable to trademark our name because it is too generic to register for trademark protection. We believe that we may be able to apply for trademark protection for our logo. If we are unable to register our trademarks in the future or that protection is inadequate for future products, our business may be materially adversely affected.
We cannot assure you that the steps we have taken to protect our intellectual property rights are adequate, that our intellectual property rights can be successfully defended and asserted in the future or that third parties will not infringe upon or misappropriate any such rights. Any future trademark rights and related registrations we may have may be challenged in the future and could be canceled or narrowed. Our failure to protect our trademarks could prevent us in the future from challenging third parties who use names and logos similar to our trademarks, which may in turn cause customer confusion, negatively affect customers’ perception of our brand and products, and adversely affect our sales and profitability. Moreover, intellectual property proceedings and infringement claims could result in a significant distraction for management and have a negative impact on our business.
We rely on third parties to ship our products.
We depend on Canada Post to deliver our products. Other courier services like Fedex or UPS are considerably more expensive. Any disruptions to Canada Post’s business may impact our ability to ship our products, which may cause our financial results to suffer. Further, if Canada Post raises their shipping rates, the cost of shipping our products would increase, which would force us to either increase the selling price of our products or reduce our margin, both of which will have a negative impact on our financial results.
Risks Associated with Our Management
Our executive officers devote only part time efforts to our business which may not be sufficient to successfully develop our business.
While as of August 15, 2011 our Chief Executive Officer now works full-time for our company, David Lewis Richardson, our Chief Financial Officer, currently devote approximately 40% of his working time to our company. All of our executive officers have other business interests. While we expect Mr. Richardson to increase the percentage of the working time he devotes to our company if our operations increase, the amount of time which he devotes to our business may not be sufficient to fully develop our business. In addition, there exist potential conflicts of interest including, among other things, time, effort, and corporate opportunity involved with participating in other business entities. We have no agreements with our executive officers as to how they allocate either their time to our company or how they handle corporate opportunities. As a result, we may be unable to implement our plan and our business might ultimately fail.
Our senior management has never managed a public company.
The individuals who now constitute our senior management have never had responsibility for managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. There can be no assurance that our senior management will be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements. Further, this could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our failure to do so could lead to the imposition of fines and penalties and further result in the deterioration of our business.
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The loss of the services of our executive officers would disrupt our operations and interfere with our ability to compete.
We depend upon the continued contributions of our executive officers. We only have two employees: Hrant Isbeceryan, our Chief Executive Officer, and David Lewis Richardson, our Chief Financial Officer. They handle all of the responsibilities in the area of corporate administration and business development. We do not carry key person life insurance on any of their lives and the loss of services of any of these individuals could disrupt our operations and interfere with our ability to compete with others.
All of our assets and all of our directors and officers are outside the United States,ended December 31, 2013, filed with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.
All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under United States federal and state securities laws against us or any of our directors or officers.
Because Hrant Isbeceryan, our Chief Executive Officer, and one of our directors, controls a large percentage of our common stock, he has the ability to influence matters affecting our stockholders.
Hrant Isbeceryan, our Chief Executive Officer and one of our directors, beneficially owns 62.3% of our issued and outstanding shares of our common stock. As a result, he has the ability to influence matters affecting our stockholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because he controls such shares, investors will find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by Mr. Isbeceryan could result in management making decisions that are in his best interest and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.
Risks Associated with Our Common Stock
Because we do not intend to pay any dividendsSEC on our common stock, investors seeking dividend income or liquidity should not purchase shares of our common stock in this offering.October 29, 2014.
We do not currently anticipate declaring and paying dividends to our stockholders in the foreseeable future. It is our current intention to apply net earnings, if any, in the foreseeable future to increasing our working capital. Prospective investors seeking or needing dividend income or liquidity should, therefore, not purchase our common stock. We currently have no revenues and a history of losses, so there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of shares of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors, which currently do not intend to pay any dividends on shares of our common stock for the foreseeable future.
Our common stock has never been traded and, if a market ever develops for our common stock, the price of our common stock is likely to be highly volatile and may decline after the offering. If this happens, investors may have difficulty selling their shares and may not be able to sell their shares at all.
There is no public market for our common stock and we cannot assure you that a market will develop or that any stockholder will be able to liquidate his or her investment without considerable delay, if at all. A trading market may not develop in the future, and if one does develop, it may not be sustained. If an active trading market does develop, the market price of our common stock is likely to be highly volatile. The market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
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changes in market valuations of similar companies;
announcements by us or our competitors of significant new products;
the inability to obtain our teas; and
the loss of key management or personnel.
The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies’ securities that have been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
Because we can issue additional shares of our common stock or preferred stock, purchasers of our common stock may experience dilution in their ownership of our company in the future.
We are authorized to issue up to 100,000,000 shares of common stock and 100,000,000 shares of preferred stock. As of July 17, 2012, there were 4,011,600 shares of our common stock issued and outstanding and no shares of our preferred stock issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock or preferred stock without the consent of any of our stockholders. Consequently, our stockholders may experience dilution in their ownership of our company in the future.
Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines a “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
The Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority, which we refer to as FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.
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Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock and have an adverse effect on the market for shares of our common stock.
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Item 1B. UNRESOLVED STAFF COMMENTSUnresolved Staff Comments
Not Applicable
ITEM
Our
The principal offices are located 1801-1 Yonge Street, Toronto, Ontario M5E 2A3. On August 1, 2010, we entered intoplace of business of the Company is situated at 39 Dorado Beach East, Dorado, Puerto Rico, 00646 and is provided by Joseph Spiteri, our CEO at a month-to-month lease on a small office space with 10768 Canada Inc. dba Telsec Business Centres for $138.88 per month. Either party can terminate the lease with 60 days notice. Once we attain the necessary funding and increase our employee base, we will look for more spacious facilities to meet our growing needs.monthly rent of $ 2,500.
ITEM
Item 3. LEGAL PROCEEDINGS.Legal Proceedings
We know of no material pending legal proceedings to which our company or our subsidiary
The Company is not presently a party or of whichto any of our properties, or the properties of our subsidiary, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverselitigation nor, to our companyknowledge, is any litigation threatened against it, which may materially affect its business or our subsidiary or has a material interest adverse to our company or our subsidiary.its assets.
ITEM
Item 4. MINE SAFETY DISCLOSURESMine Safety Disclosures
Not Applicable
| 8 |
ITEM
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
There
Currently, the Common Stock of the Company is currently no trading marketquoted in the OTC Markets Pink Sheets under the Symbol MJDS. The reported high and low sales prices for our common stock. We do not have anyits common stock subject to outstanding optionsas reported thereon are shown below for the periods indicated. The quotations reflect inter-dealer prices without retail mark-up, markdown or warrantscommission and there are no securities outstanding that are convertible into our common stock. None of our issuedmay not represent actual transactions.
| High | Low | |||||||||
| 2017 | ||||||||||
| First quarter ended March 31, 2017 | $ | .30 | $ | .03 | ||||||
| Second quarter ended June 30, 2017 | $ | .03 | $ | .03 | ||||||
| Third quarter ended September 30, 2017 | $ | .01 | $ | .01 | ||||||
| Fourth quarter ended December 31, 2017 | $ | .02 | $ | .02 | ||||||
| 2016 | ||||||||||
| First quarter ended March 31, 2016 | $ | .25 | $ | .25 | ||||||
| Second quarter ended June 30, 2016 | $ | .10 | $ | .10 | ||||||
| Third quarter ended September 30, 2016 | $ | .05 | $ | .05 | ||||||
| Fourth quarter ended December 31, 2016 | $ | .05 | $ | .05 | ||||||
Dividends and outstanding common stock is eligible for sale pursuant to Rule 144 under the Securities Act of 1933.Dividend Policy
We have issued 4,011,600 shares of our common stock since our inception on July 8, 2010, of which 3,000,000 of which are restricted shares. There are no outstanding options or warrants or securities that are convertible into common shares.
Holders of Our Common Stock
As at July 17, 2012, we had 38 holders of our common stock. Our transfer agent is Nevada Agency and TransferThe Company with an office at 50 West Liberty Street, Suite 880, Reno NV 89501.
Registration Rights
We have not granted registration rights any person.
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Dividends
We havehas never declared or paid any cash dividends on our common stock. We currently intendits Common Stock and its present policy is to retain anticipated future earnings if any, to increase our working capitalfor use in its business.
Purchases of Equity Securities by the Issuer and do not anticipate paying any cash dividends in the foreseeable future.Affiliated Purchasers
We must not declare, pay or set apart
None
Securities Authorized for payment any dividend or other distribution (unless payable solely in shares of our common stock or other class of stock junior to our preferred stock as to dividends or upon liquidation) in respect of our common stock, or other class of stock junior to our preferred stock, nor must we redeem, purchase or otherwise acquire for consideration shares of any of the foregoing, unless dividends, if any, payable to holders of our preferred stock for the current period (and in the case of cumulative dividends, if any, payable to holders of our preferred stock for the current period and in the case of cumulative dividends, if any, for all past periods) have been paid, are being paid or have been set aside for payment, in accordance with the terms of our preferred stock, as fixed by our board of directors.Issuance under Equity Compensation Plans
Other than as stated above, there are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
we would not be able to pay our debts as they become due in the usual course of business; orNone
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
Recent Sales of Unregistered Securities
Since
In 2014, the beginningCompany sold 2,323,260 units of our fiscal year ended April 30, 2012, we have not sold any equityits securities that were not registered underat $0.25 per unit (the "Units") each Unit consisting of one (1) share of common stock and one (1) common stock purchase warrant exercisable for a period of five (5) years at $0.50 per share in an offering pursuant to Rule 506 of Regulation D of the Securities Act of 1933, thatas amended (the "Securities Act") to accredited investors.
In 2014, the Company also issued 85,000 shares of its common stock to two (2) individuals for services e pursuant to Section 4(a)(2) of the Securities Act.
All transactions were completed under Section 4(a)(2) of the Securities Act as they were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.connection with any public offering, and the investors were believed to be accredited and financially sophisticated.
Securities authorized for issuance under equity compensation plans.
We do not have any stock compensation plans.
Issuer Purchases of Equity Securities
During the fiscal year ended April 30, 2012, we did not purchase any of our equity securities.
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ITEM
Item 6. SELECTED FINANCIAL DATA.Selected Financial Data
Not applicable.
The information to be reported under this item is not required of smaller reporting companies.
ITEM
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Our management’s
Forward Looking Statements
The following discussion and analysis of the consolidated financial condition and consolidated results of operations provides a narrative about our financial performanceof the Company is for the years ended December 31, 2015 and condition that2014 and should be read in conjunction with our audited financial statements for the period ended April 30, 2012 and related notes thereto.
Plan of Operations
We were incorporated in the State of Nevada on July 8, 2010. We are a specialty retailer of premium loose-leaf teas. We currently offer our seven different types of teas through our online store www.authentic-teas.com. Our initial focus will be to market directly to consumers through our online store. Our goal is to start supplying specialty supermarkets with our teas.
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We have entered into a 5-year agreement with the largest herbal tea producer in Armenia: HAM Ltd. Co (“HAM”). We do not have the exclusive right to distribute HAM’s products in North American and HAM has no obligation to supply us with their products. We cannot guarantee that HAM will continue to supply us with our tea products or that HAM will not supply our competitors with tea products. HAM is currently our only supplier of tea products.
Armenia is currently blockaded on two of its four borders by Azerbaijan and Turkey. This situation is a result of a territorial dispute between Armenia and Azerbaijan leading to the Nagorno-Karabakh War (1988–1994). Although Russia, France and the United States are currently attempting to broker an end to this crisis, we believe that this dispute may continue. We believe that this blockade has severely hurt the Armenia economy. If war restarts, our supplies may be interrupted indefinitely. If we cannot obtain our supplies, we will be unable to implement our business plan.
We depend on Canada Post to deliver our products. Other courier services like Fedex or UPS are considerably more expensive. Any further disruptions to Canada Post’s business will impact our ability to ship our products, which will cause our financial results to suffer. Further, if Canada Post raises their shipping rates, the cost of shipping our products would increase, which would force us to either increase the selling price of our products or reduce our margin, both of which will have a negative impact on our financial results.
The US dollar is the agreed upon currency between our company and our supplier. If the US dollar weakens against other currencies, our products will become more expensive to import forcing us to either increase the selling price or reduce our margin, both of which will have a negative impact on our financial condition. Due to our large profit margins, we do not believe that inflation will have any impact on our net sales or income from continuing operations.
We have not made any material or significant accounting estimates or assumptions.
Milestones
The following is a detailed description of the actions and timing of our planned operations over the next 12 months:
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|
In May 2012, we developed eight new blends of tea. We purchased our 1stQuarter order of tea and launched a French version of our website in April 2012. We did not attend the world tea expo in Las Vegas in June 2012 due to budget constraints.
If our revenues are insufficient, we anticipate the other milestones will be financed by shareholders or by management. We do not currently have any formal arrangement in place with any of our shareholders or management and we may be unable to obtain additional funds. The purchase of additional inventory will take priority over all other milestones. If we are unable to obtain additional funds, we plan to delay all of our milestones, other than the purchase of additional products, until we have the funds necessary to complete the next milestone. If we delay our milestones, we anticipate that we would have decreased sales, which may have a material adverse effect on our business, results of operations and financial condition. The impact on our business, results of operations and financial condition may be greater the longer our milestones are delayed.
Results of Operations
The following discussion of our financial condition and results of operations should be read together with the unaudited interimconsolidated financial statements, and the notes to the unaudited interimthose consolidated financial statements that are included elsewhere in this quarterly report. This discussion containsincludes forward-looking statements based upon current expectations that reflect ourinvolve risks and uncertainties, such as the Company's plans, estimatesobjectives, expectations and beliefs. Our actualintentions. Actual results mayand the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. The Company uses words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. As used in this report, the terms "MOJO," the "Company," "we," "us," "our," and similar terms mean MOJO Data Solutions, Inc., a Puerto Rico corporation.
Company Overview
Since the consummation of the Asset Purchase Agreement on January 31, 2014, the Company's has been refocusing its business plan and strategy to develop and monetize the intellectual property assets it purchased from MDS. Preceding the transaction, the Company served as a holding company for its predecessor's wholly-owned subsidiary, Authentic Teas Inc., a corporation incorporated in the province of Ontario, Canada on July 8, 2010 (“AUTT Canada”). AUTT Canada historically sold herbal teas online. The Company intends to sell the business of AUTT Canada in the near future.
MOJO develops smart-phone applications that enable brands and consumers to interact with media delivering digital content back to the handset. The Company focuses on retail, entertainment and pharmaceutical verticals.
Through the proprietary and licensed intellectual property, the Company is engaged in developing technologies to deliver a fully integrated, multimedia mobile visual search, discovery, content delivery and consumer activation platform, combining a simple, elegant user experience on the handset, with sophisticated data processing and campaign management tools including its audio and digital watermarking technologies which enables the imperceptible transmission of data within audio signals, allowing the attachment of property rights or additional data to the customer of the audio material. Digital watermarks consist of indiscernible information that can be inserted into images, audio data or videos which can also be used to check the authenticity of copies by authorized persons and provide evidence whether the product was legally acquired or has been tampered with in some way.
The goal is to work closely with large brands and the advertising and marketing agencies to serve them to enhance traditional advertising and marketing campaigns. The Company intend to achieve this by creating exciting consumer experiences enabled through all forms of mobile tags and barcodes, including the simplest UPC symbols, to the most advanced image recognition and audio watermarking, using its Mojo Tags multimedia reader.
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The Company intends for its technologies to interoperate seamlessly with existing, large-scale systems, including retail point-of-sale, customer relationship management, campaign management, digital loyalty, inventory, track-and-trace and mobile operating systems.
In addition to having mastered the integration of mobile tag and barcode solutions, our goal is to specialize in helping our clients improve their financial performance by enabling practical and profitable business models and revenue streams.
Consolidated Results of Operations
Year ended April 30, 2012December 31, 2017 compared to the year ended April 30, 2011December 31, 2016
Our operating results for the years ended April 30, 2012 and April 30, 2011 are summarized as follows:
| Year Ended April 30, 2012 ($) | Year Ended April 30, 2011 ($) | |
| Revenue | 5,920 | 4,657 |
| Cost of Sales | 2,290 | 3,069 |
| Expenses | 61,221 | 15,940 |
| Net Loss | 57,591 | 14,352 |
Revenue and Cost of Sales
During the year ended April 30, 2012, weDecember 31, 2017, the Company generated revenues of $5,920 with cost of sales of $2,290, resulting in gross margin of $3,630, compared to generating revenues of $4,657 with cost of sales of $3,069, resulting in gross margin of $1,588 for the year ended April 30, 2011. We generated revenues$00 from the sale of our tea products through our website. The cost of sales consists of the tea, the tea pouchesa related and labels and shipping costs for us to receive the product. Revenues increased during the year ended April 30, 2012, as compared to the year ended April 30, 2011, due to increased advertising and promotions.non-related party.
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Our revenues are affected by factors such as the success of our marketing efforts, the size of our customer base, consumer’s preferences and general economic conditions.
Expenses
During the year ended April 30, 2012, we incurred expenses of $61,221, consisting ofDecember 31, 2017, the Company had general and administrative expenses of $57,802 and advertising and promotion expenses of $3,419,$0 compared to incurring$36,659 during the year ended December 31, 2017. The majority of expenses of $15,940 for the year ended April 30, 2011. Our general and administrative expenses primarily consisted of legal and accountingDecember 31, 2016 were for professional fees rent and website construction. Our general and administrative expenses increased primarily duerelated to the fees that were incurred from our legal and auditing professionalsregulatory filings in connection with the courseconsummation of becoming a public company.the Asset Purchase Agreement.
Our supplier has agreed to keep the prices charged to us the same in the short term. However, due to the weakening US dollar, they have forewarned us that they may increase their prices next year. The weakening US dollar also puts us at a disadvantage when we buy Canadian dollars with our US dollar revenue to pay our expenses.
Management anticipates expenses to rise over the foreseeable future as marketing expenses increase as a result of our efforts to increase our revenues.
Since we only recently commenced business operations, management does not believe past performance is indicative of future performance.
Liquidity and Capital Resources
Working Capital as at April 30, 2012
| Working Capital | ||||||
| As at | As at April 30, | |||||
| April 30, 2012 | 2011 | |||||
| Current Assets | $ | 18,032 | $ | 14,655 | ||
| Current Liabilities | $ | 74,075 | $ | 13,107 | ||
| Working Capital (Deficiency) | $ | (56,043 | ) | $ | 1,548 |
OurThe Company’s working capital deficiency decreased from the year ended April 30, 2011 to April 30, 2012 primarily due to lower than expected sales.
| Cash Flows | ||||||
| Year ended | Year ended | |||||
| April 30, 2012 | April 30, 2011 | |||||
| Cash provided by (used in) Operating Activities | $ | (58,722 | ) | $ | (17,427 | ) |
| Cash provided by (used in) Investing Activities | $ | -- | $ | -- | ||
| Cash provided by (used in) Financing Activities | $ | 62,261 | $ | 26,400 | ||
| Net Increase (Decrease) in Cash | $ | 3,539 | $ | 8,973 |
We require funds to enable us to address our minimum currentas of December 31, 2017 and ongoing expenses. Presently, our revenue2016 is not sufficient to meet our operating and capital expenses. Management projects that we may require an additional $83,500 to fund our operating expendituressummarized as follows:
| December 31, 2017 | December 31, 2016 | |||||||
| Current Assets | $ | 21,474 | $ | 21,474 | ||||
| Current Liabilities | $ | 508,699 | $ | 508,699 | ||||
| Working Capital (Deficiency) | $ | (487,226 | ) | $ | (487,226 | ) | ||
The Company’s cash flow for the next twelve month period,years ended December 31, 2017 and 2016 is summarized as follows:
| December 31, 2017 | December 31, 2016 | |||||||
| Cash (used in) operating activities | $ | (68 | ) | $ | (68 | ) | ||
| Cash provided by (used in) investing activities | $ | – | $ | – | ||||
| Cash provided by financing activities | $ | – | $ | – | ||||
| Net increase (decrease) in cash and cash equivalents | $ | (68 | ) | $ | (68 | ) | ||
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As of April 30, 2012, we had working capital deficiency of $56,043. Hence, we anticipate
The Company anticipates that we will require $139,543 additional funds to implement our business plan for the next twelve months.
We anticipate that ourits cash on hand and the revenue that we anticipateit anticipates generating going forward from ourits operations will not be sufficient to satisfy all of ourits cash requirements for the next twelve month period. WeThe Company requires funds to enable it to address its minimum current and ongoing expenses as presently, the Company is not generating revenue to meet its operating and capital expenses. The Company currently dodoes not havehas committed sources of additional financing and may not be able to obtain additional financing, particularly, if the volatile conditions in the stock and financial markets persist. If we require anyfinancing. To acquire additional financing, we planthe Company plans to raise any such additional capital primarily through equity financing and loans from our directors,debt financing, provided that such funding continues to beis available to our company. We plan to continue to seek additional funds from our directors to fund our day-to-day operations until equity financing can be pursued. We have no guarantee that our directors will continue to fund our day-today operations.it. The issuance of additional equity securities by our companythe Company may result in a significant dilution in the equity interests of ourits current stockholders. There is no assurance that wethe Company will be able to obtain further funds required for ourits continued operations or that additional financing will be available to usit when needed or, if available, that it can be obtained on commercially reasonable terms. If we arethe Company is not able to obtain additional financing as required on a timely basis, weit will not be able to meet certain obligations as they become due and weit will be forced to scale down or perhaps even cease ourits operations.
Because we are in the development stage and are yet to attain profitable operations, in their report on our financial statements for the period from July 8, 2010 (date of inception) to April 30, 2012, our independent auditors included an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern. We have not yet achieved profitable operations, have accumulated losses since our inception and expect to incur further losses in the development of our business, all of which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Cash Used in Operating ActivitiesOff Balance Sheet Arrangements:
We used cash in operating activities in the amount of $58,722 during the year ended April 30, 2012 and $17,427 during the year ended April 30, 2011. Cash used in operating activities was funded primarily by cash from financing activities.
Cash Used in Investing Activities
No cash was used in investing activities during the year ended April 30, 2012 or during the year ended April 30, 2011.
Cash from Financing Activities
We generated cash of $62,261 from financing activities during the year ended April 30, 2012 from our initial public offering and loans from related parties compared to cash of $26,400 generated from financing activities during the year ended April 30, 2011.
Going Concern
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The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at April 30, 2012, our company has accumulated losses of $71,943 since inception. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above in their report on the financial statements for the year ended April 30, 2012, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Future Financings
We anticipate continuing to rely on equity sales of our shares of common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieveCompany does not has any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, that havefinancings, or are reasonably likely to have a currentother relationships with unconsolidated entities or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Product Research and Development
We do not anticipate that we will spend any significant sums on research and development over the twelve month period ending April 30, 2013.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the twelve month period ending April 30, 2013.
Contingencies and Commitments
We had no contingencies or long-term contractual obligationsother persons, also known as at April 30, 2012.“special purpose entities” (SPEs).
ITEM
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.Quantitative and Qualitative Disclosures about Market Risk
Not applicable
19The information to be reported under this item is not required of smaller reporting companies.
ITEM
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of Authentic Teas, Inc. (the “Company”) as of April 30, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the years then ended and the period from July 8, 2010 (inception) through April 30, 2012. TheseSupplementary Data
The Company’s financial statements are contained in the responsibilitypages beginning F-1, which appear at the end of this annual report.
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Item 9. Changes In, and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer ("CEO"), who is also its Principal Financial Officer ("PFO"), of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plandesign and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2012 and 2011, and the results of its operations and its cash flows for each of the years then ended and the period from July 8, 2010 (inception) through April 30, 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered losses from operations and has a working capital deficit. These conditions raise significant doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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| April 30, | April 30, | |||||
| 2012 | 2011 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 12,512 | $ | 8,973 | ||
| Accounts receivable | 163 | 163 | ||||
| Inventory | 3,312 | 5,519 | ||||
| Prepaid expenses and deposits | 2,045 | - | ||||
| Total current assets | $ | 18,032 | $ | 14,655 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 1,314 | $ | 2,607 | ||
| Related party loan | 72,761 | 10,500 | ||||
| Total current liabilities | 74,075 | 13,107 | ||||
| Stockholders’ Equity (Deficit): | ||||||
| Preferred stock, $0.001 par value, 100,000,000 shares authorized, none issued and outstanding | - | - | ||||
| Common stock, $0.001 par value, 100,000,000 shares authorized, 4,011,600 shares issued and outstanding | 4,012 | 4,012 | ||||
| Additional paid in capital | 11,888 | 11,888 | ||||
| Deficit accumulated during development stage | (71,943 | ) | (14,352 | ) | ||
| Total stockholders’ equity (deficit) | (56,043 | ) | 1,548 | |||
| Total liabilities and stockholders’ equity (deficit) | $ | 18,032 | $ | 14,655 | ||
See notes to audited consolidated financial statements.
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| July 8, | |||||||||
| 2010 (Date of | |||||||||
| Inception) to | |||||||||
| April 30, | April 30, | April 30, | |||||||
| 2012 | 2011 | 2012 | |||||||
| Revenue | $ | 5,920 | $ | 4,657 | $ | 10,577 | |||
| Cost of Sales | 2,290 | 3,069 | 5,359 | ||||||
| Gross margin | 3,630 | 1,588 | 5,218 | ||||||
| Expenses: | |||||||||
| Advertising and promotion | 3,419 | - | 3,419 | ||||||
| General and administrative expenses | 57,802 | 15,940 | 73,742 | ||||||
| Net loss | $ | (57,591 | ) | $ | (14,352 | ) | $ | (71,943 | ) |
| Basic and diluted net loss per common share | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.00 | ) |
| Weighted average number of common shares outstanding | 4,011,600 | 3,713,685 |
See notes to audited consolidated financial statements.
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| July 8, | |||||||||
| 2010 (Date of | |||||||||
| Year ended | Period ended | Inception) to | |||||||
| April 30, | April 30, | April 30, | |||||||
| 2012 | 2011 | 2012 | |||||||
| Cash Flows From Operating Activities: | |||||||||
| Net loss | $ | (57,591 | ) | $ | (14,352 | ) | $ | (71,943 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
| Change in operating assets and liabilities: | |||||||||
| Accounts receivable | - | (163 | ) | (163 | ) | ||||
| Inventory | 2,207 | (5,519 | ) | (3,312 | ) | ||||
| Prepaid expenses and deposits | (2,045 | ) | - | (2,045 | ) | ||||
| Accounts payable | (1,293 | ) | 2,607 | 1,314 | |||||
| Net cash used in operating activities | (58,722 | ) | (17,427 | ) | (76,149 | ) | |||
| Cash Flows From Financing Activities: | |||||||||
| Proceeds from sale of stock | - | 15,900 | 15,900 | ||||||
| Proceeds from related party loan | 62,261 | 10,500 | 72,761 | ||||||
| Cash provided by financing activities | 62,261 | 26,400 | 88,661 | ||||||
| Net change in cash | 3,539 | 8,973 | 12,512 | ||||||
| Cash, Beginning of Period | 8,973 | - | - | ||||||
| Cash, End of Period | $ | 12,512 | $ | 8,973 | $ | 12,512 | |||
| Supplemental Disclosures of Cash FlowInformation: | |||||||||
| Interest paid | $ | - | $ | - | $ | - |
See notes to audited consolidated financial statements.
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| Deficit | |||||||||||||||
| Accumulated | |||||||||||||||
| Additional | during | ||||||||||||||
| Common Stock | Paid-in | Development | |||||||||||||
| Shares | Par Value | Capital | Stage | Total | |||||||||||
| Common stock issued for cash at initial capitalization for $.001 per share | 3,000,000 | $ | 3,000 | $ | - | $ | - | $ | 3,000 | ||||||
| Common stock issued for cash for $.01 per share | 1,000,000 | 1,000 | 9,000 | - | 10,000 | ||||||||||
| Common stock issued for cash for $.25 per share | 11,600 | 12 | 2,888 | - | 2,900 | ||||||||||
| Net Loss | - | - | (14,352 | ) | (14,352 | ) | |||||||||
| Balance at April 30, 2011 | 4,011,600 | 4,012 | 11,888 | (14,352 | ) | 1,548 | |||||||||
| Net Loss | - | - | - | (57,591 | ) | (57,591 | ) | ||||||||
| Balance at April 30, 2012 | 4,011,600 | $ | 4,012 | $ | 11,888 | $ | (71,943 | ) | $ | (56,043 | ) | ||||
See notes to audited consolidated financial statements.
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Note 1 — Description of Business
Authentic Teas Inc. (“our”, “Authentic Teas” or the “Company”) incorporated in the State of Nevada on July 8, 2010. Authentic Teas’ wholly owned subsidiary was incorporated in the province of Ontario, Canada on July 8, 2010. Authentic Teas intends to sell through an on-line website, organically grown herbal teas, imported from the South Caucasus Region of the Armenian Highlands. Authentic Teas procures directly from Armenian growers, lands the bagged herbal tea in North America, and sells online primarily to the US, UK and Canada markets.
At April 30, 2012, substantially all of Authentic Teas assets and operations are located and conducted in Canada.
Note 2 — Going Concern
The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since inception, the Company has incurred, and may continue to incur, losses from operations. The Company will also require additional capital to finance the further development of its business operations and to finance inventory and working capital. These conditions raise substantial doubt about the company’s ability to continue as a going concern.
The Company may therefore need to seek additional capital through other issuances of our equity securities, strategic collaborations, grant funding, or any other means we deem appropriate. There is no assurance that such capital will be available on acceptable terms or at all. As a result, there is substantial doubt as to the Company’s ability to continue as a going concern.
In the event the Company is unable to successfully sustain and increase product sales and obtain additional capital, it is unlikely that the Company will have sufficient cash flows and liquidity to finance its business operations as currently contemplated. Accordingly, if the Company determines it will not be able to obtain the necessary financing to address its working capital needs for a reasonable period into the future, it may pursue alternative paths forward for the Company. These paths could include, but not be limited to, sale of the Company or its assets, merger, organized wind-down, going private/dark, fundamental shift in its strategic plan (e.g. abandon commercialization strategy and focus exclusively on licensing), bankruptcy, etc.
The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
Our officers and directors have agreed to provide resources to the company should it need them in the short term.
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The Company’s consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. They include the accounts of the company and our subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.
Consolidation Policy
These consolidated financial statements include the accounts of Authentic Teas, incorporated in Ontario, Canada which we have the ability to control either through voting rights or means other than voting rights.
26
Development Stage
Authentic Teas is a development stage company as defined in ASC 915, as it is devoting substantially all of its efforts to developing markets for its product and there have been no significant revenues from planned principal operations from inception through April 30, 2012. Consequently accumulated amounts are shown from the commencement of this development stage, July 8, 2010.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
Authentic Teas generates sales from on-line tea products. The vast majority of sales are prepaid and the Company anticipates carrying a very small amount of receivables at any one time. If there is a customer dispute and it is determined that an account may become uncollectible, an allowance for doubtful accounts for the disputed amount will be created. The accounts then are written off against the allowance for doubtful accounts when the Company determines that amounts are not collectable. Recoveries of previously written-off accounts are recorded when collected.
Inventory
Inventory is stated at the lower of cost or net realizable value. Inventory consists primarily of finished goods. Cost is determined on a first-in-first-out basis.
Income Taxes
The Company accounts for income taxes under the liability method, which requires companies to account for deferred income taxes using the asset and liability method. Under the asset and liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax rate changes are reflected in income during the period such changes are enacted.
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At April 30, 2012 we have accumulated net operating tax losses that are available to offset future taxable income and reduce future federal and state income taxes during the carry forward period. The utilization of available losses depends on the generation of future taxable income to absorb the losses. We may not be able to use available losses within the carry forward period. In addition, based on generally accepted accounting principles, we have determined for financial accounting and reporting purposes that it is unlikely that we will be able to apply or use the available losses to reduce future federal or state income taxes during the carry forward period. This assessment is updated annually or more frequently based on changes in circumstances.
A valuation allowance is recorded against deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment for a valuation allowance requires judgment on the part of management with respect to the benefits that may be realized. The Company has concluded, based upon available evidence, it is more likely than not that the deferred tax assets at April 30, 2012, will not be realized. No further provision was recorded as a full valuation allowance has been provided against deferred tax assets. The valuation allowance will be reversed at such time that realization is believed to be more likely than not. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.
The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. There were no such items during the periods covered in this report.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC 605,Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) consideration is fixed or determinable; and (4) collectability is reasonably assured.
Revenue from sales of the herbal teas are recognized upon delivery of products to the customers. The Company does not maintain a reserve for returned products as in the past those returns have been negligible.
Direct costs associated with product sales are recorded at the time that revenue is recognized.
Currency Translation
Authentic Teas’ functional and reporting currency is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates of exchange in effect at the balance sheet date in accordance with ASC 830, “Foreign Currency Translation”. Non-monetary assets, liabilities and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Foreign currency transactions are primarily undertaken in Canadian dollars. Authentic Teas has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. As of April 30, 2012, foreign currency translations were nominal.
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Loss Per Share
Loss per share is calculated in accordance with FASB ASC 260,Earnings Per Share. Basic loss per share is computed based upon the weighted average number of shares of Common stock outstanding for the period and excludes any potential dilution. Diluted earnings per share reflects potential dilution from the exercise of securities into Common stock. Outstanding options and warrants to purchase Common stock and the Common stock equivalents of convertible preferred stock are not included in the computation of diluted earnings per share because the effect of these instruments would be anti-dilutive (i.e. would reduce the loss per share). As at April 30, 2011, the were no options or share purchase warrants outstanding.
Note 4 — Income Taxes
The Company uses the asset and liability method of accounting for deferred income taxes wherein deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes at rates expected to be in effect when the differences are realized. During fiscal 2009, the Company incurred net losses and therefore has no current tax liability. The net deferred tax asset generated by the Company’s net operating loss carry-forwards has been fully reserved. The cumulative net operating loss carry-forward is approximately $79,000 as at April 30, 2012. Under current tax laws, the net operating loss is set to expire on April 30, 2032.
At April 30, 2012 and April 30, 2012, deferred tax assets consisted of the following:
| 2012 | 2011 | |||||
| Deferred tax assets | $ | 14,560 | $ | 2,153 | ||
| Less: valuation allowance | (14,560 | ) | (2,153 | ) | ||
| Net deferred tax assets | $ | - | $ | - |
Note 5 — Related Party Transactions
During the year ended April 30, 2012 the Company borrowed $62,261 from the President. As of April 30, 2012, $72,761 is due to the President and Chief Financial Officer. The loans are unsecured, non-interest bearing and have no specific terms for repayment.
Note 6 — Common Stock
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROL AND PROCEDURES
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer evaluated our disclosure"disclosure controls and proceduresprocedures" (as defined inunder Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act)Act of 1934) as of the end of the period covered by this Annual Report on Form 10-K.report. Based on this evaluation, managementthe CEO/PFO concluded that as of the end of the period covered by this Annual Report on Form 10-K,report, these disclosure controls and procedures were ineffective.
Becausenot effective. The conclusion that the disclosure controls and procedures were not effective was due to the presence of the inherent limitationsfollowing material weaknesses in all control systems, our management believes that no evaluationdisclosure controls and procedures which are indicative of many small companies with small staff:
| (i) | inadequate segregation of duties and effective risk assessment as the Company had only one officer; |
| (ii) | insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC Guidelines; and |
| (iii) | inadequate security and restricted access to computer systems including insufficient disaster recovery plans; and |
| (iv) | no written whistleblower policy. |
Once sufficient funds are available, the CEO/PFO plans to implement appropriate disclosure controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.procedures to remediate these material weaknesses, including:
| (i) | appointing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; |
| (ii) | adopt sufficient written policies and procedures for accounting and financial reporting and a whistle blower policy; and |
| (iii) | implement sufficient security and restricted access measures regarding our computer systems and implement a disaster recovery plan. |
(b) Management’s Annual Report on Internal Control Overover Financial Reporting
Management
The CEO/PFO is responsible for establishing and maintaining adequate internal control over financial reporting as defined under Rule 13a-15(f) and Rule 15d-15(f) under the Securities Exchange Act of 1934. As of December 31, 2014 our financial reporting. In order to evaluateCEO/PFO assessed the effectiveness of the Company’s internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, our management, with the participation of our principal executive officer and principal financial officer has conducted an assessment, including testing, usingbased on the criteria for effective internal control set forth in Internalthe 1992 report entitled "Internal Control —- Integrated Framework, issuedFramework" published by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission (“COSO”). Our systemCommission. Based on that evaluation, our CEO/PFO concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of the Company’s internal control over financial reporting is designedthat adversely affected its internal controls.
The matters involving internal controls and procedures that the Company’s CEO/PFO considered to provide reasonable assurance regardingbe material weaknesses under the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Our management, including our principal executive officer and our principal financial officer, conducted an evaluationstandards of the design and operation of our internal control over financial reporting as of April 30, 2012 based on the criteria set forth in Internal Control – Integrated Framework issuedPublic Company Accounting Oversight Board were:
| (a) | lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; |
| (b) | inadequate segregation of duties consistent with control objectives; |
| (c) | insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and |
| (d) | ineffective controls over period end financial disclosure and reporting processes. |
The aforementioned material weaknesses were identified by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation includedCompany's CEO/PFO in connection with his review of the documentationCompany’s financial statements as at the end of controls, evaluationreporting period.
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The CEO/PFO believes that the material weaknesses set forth above did not have an effect on the Company's financial results. However, the CEO/PFO believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, results in ineffective oversight of the designestablishment and monitoring of required internal controls and procedures.
The Company will continue to monitor and evaluate the effectiveness of controls, testing of the operating effectiveness ofits internal controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at April 30, 2012 due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of dutiesprocedures and ineffective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Our company plans to take steps to enhance and improve the design of ourits internal controls over financial reporting. During the period covered by this annual reportreporting on Form 10-K, we have not been ablean ongoing basis and are committed to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending April 30, 2013: (i) appointtaking action and implementing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) is largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing suchenhancements or improvements as funds remediation efforts may be adversely affected in a material manner.allow.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company
There have been detected. These inherent limitations includeno significant changes in the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
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This Annual Report does not include an attestation report of our independent registered public accounting firm regardingCompany’s internal control over financial reporting. Our internal controlcontrols over financial reporting was not subjectthat occurred during the current reporting period that have materially affected or are reasonably likely to attestation by our independent registered public accounting firm pursuant to rules ofmaterially affect, the SEC that permit us to provide only management’s report in this Annual Report.Company’s internal controls over financial reporting.
ITEM 9B OTHER INFORMATION
None
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ITEM
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.Directors, Executive Officers and Corporate Goverence
Our
The directors hold office until the next annual meeting of stockholders and until his or her successor istheir successors are elected and qualified. Any director may resign his or her office at any time and may be removed at any time by the holders of a majority of the shares then entitled to vote at an electionvote. The Board of directors. Our board of directorsDirectors appoints ourthe executive officers, and ourthe executive officers serve at the pleasure of our boardthe Company’s Board of directors.Directors.
Our
The directors and executive officers, their ages, positions held, and duration of such are as follows:
Name | Age | Title | Director Since: | |||
Joseph Spiteri | 60 | Chief Executive Officer, President, Secretary of the Board of Directors (Principal Executive Officer) | ||||
August 23, 2013 |
Business Experience
Professional Experience: The following is a brief account of the education and business experience of our directors and executive officers during at least the past five years.
Hrant attended the University of British Columbia, graduating with a Bachelor of Commerce specializing in marketing in 2000. He gained sales and marketing experience in the consumer product goods industry while working as a territory manager for Frito-Lay, a global leader in ready-to-eat snack foods. Through his employment with Frito-Lay, he gained knowledge regarding point of sale merchandising and other retail level marketing efforts while managing various territories within the drugstore, box store, and convenience channels. Mr. Isbeceryan then joined the competitive commercial flooring solutions market, working with some large carpet manufacturers, engaged in business to business sales with multinational companies. From December 2006 to February 2008, Mr. Isbeceryan worked for Beaulieu Canada as a Sales Executive, where he worked with the architecture and design community to offer flooring products geared towards the corporate end of the market. From February 2008 to January 2010, Mr. Isbeceryan worked for Tandus Flooring as an account manager. At Tandus, Mr. Isbeceryan worked with the architecture and design community as well as the property management industry and end users such as Cineplex cinemas and Toronto Dominion Bank.
In February 2010, Mr. Isbeceryan joined Roya Manufacturing, where he currently leads a sales team providing products to the commercial design, property management and construction markets. From July 2010, Mr. Isbeceryan has been our Chief Executive Officer, President, Secretary, and Treasurer.
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We believe Mr. Isbecerayn is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from previously working for our company as described above, in addition to his education and business experiences as described above.
After graduating with a Bachelor of Commerce from the University of British Columbia specializing in marketing, David started his career with Argent Software, a large US-based financial software firm. Within five years he was Director of National Sales, managing the Canadian sales team to drive an annual organic growth rate of thirty percent. Following that, he moved into financial management in a director’s role and assisted with implementing strategic initiatives within the company. Since 2006, Mr. Richardson has been a senior director at BPS Resolver, a financial software firm providing governance, risk, and compliance (GRC) solutions to over 350 top brand organizations in 100 countries. During his tenure at BPS Resolver, Mr. Richardson has working relationships with large clients including Avon, WestJet, Aeroplan, Yellow Pages, and Disney.
We believe Mr. Richardson is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from previously working for our company as described above, in addition to his education and business experiences as described above.
Mr. Hershfield is a graduate of Seneca College in computer engineering and technology. He was a principal founder of two specialty video production enterprises, where he honed both his business skills and technical operations expertise. From January 2006 to May 2007, Mr. Hershfield was the Video Production Manager at NGM Enterprises, where he focused on delivering fundraising and event promotion media for the charity industry in Canada. Since 2007, Mr. Hershfield has been employed by Honda Canada as a Used Vehicle Operations Coordinator. At Honda, Mr. Hershfield is involved in sales data analysis of the Canadian used vehicle market and manages aspects of the Honda Certified Used Vehicles program.
We believe Mr. Hershfield is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from previously working for our company as described above, in addition to his business experiences as described above.
Family Relationships
There are no family relationships between any director or executive officer.
Significant Employees
We do not currently have any significant employees other than our executive officers.
Committees of Board of Directors
We do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. Nor do we have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have not had operations to date, and with the limited expenditures we expect over the next two years, we believe the services of a financial expert are not yet warranted. As such, our Board of Directors act as our audit committee and handle matters related to compensation and nomination of directors.
Potential Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees has been performed by our Board of Directors. We will continue to not have an audit or compensation committees and thus there is a potential conflict of interest in that our Board of Directors has the authority to determine issues concerning management compensation and audit issues that may affect management decisions.
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We are not aware of any other conflicts of interest with our directors and officers.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our executive officers and directors is set forth below:
Joseph Spiteri is a software executive with over thirty years of experience in software architecture, engineering, research, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended April 30, 2012, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with.
Nomination Procedures For Appointment of Directors
As of July 17, 2012, we had not effected any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directorsmanagement. He has determined that it isspecialized in the best position to evaluate our company’s requirements as well asareas of wireless data communications, mobile computing, and multi-tier distributed computing architectures. Mr. Spiteri leads the qualificationsdesign, development, and implementation of each candidate when the board considersmobile enterprise applications and custom OEM contract software development.
Mr. Spiteri founded InVision Software in 1995 after a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.
Audit Committee Financial Expert
Our board of directors has determined that we do not have a board member that qualifieslong career as an “audit committee financial expert”electrical engineer in the defense electronics industry. In 2004, he founded Mobile Data Systems, a privately-held New York corporation where he served as defined in Item 401(e) of Regulation S-B or independent.
Since the commencement of our most recently completed financial year, we have not required any non-audit services to be provided by our auditor.
We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board of directors of our company does not believe that it is necessary to have an audit committee because we have one director and we believe that the functions of an audit committee can be adequately performed by the board of directors. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development, lack of operations and the fact that we have not generated any positive cash flows from operations to date.
Code of Ethics
We have not yet adopted a Code of Ethics. We believe that due to our size of our management, we do not require a code of ethics.
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” Our determination of independence of directors is made using the definition of “independent director” contained in Rule 4200(a)(15) of the Marketplace Rules of the NASDAQ Stock Market (“NASDAQ”), even though such definitions do not currently apply to us because we are not listed on NASDAQ. We have determined that ourPresident, Chief Executive Officer and Chief Financial Officer do not meetboard member prior to the definitionsale of “independent”its assets to the Company, In addition to Mr. Spiteri, Ralph M. Amato, age 62, was appointed to serve as a resultdirector of their positionsthe Company pursuant to a consulting agreement, dated as our executive officers. As such, we do not have a majority of independent directors.August 24, 2013 between the Company and Ventana Capital Partners, LLC (“Ventana”). The Company determined that Ventana failed to perform in accordance with the terms of that agreement which triggered the termination of the Ventana consulting agreement and the voluntary resignation of Mr. Amato, the appointed board designee of Ventana, from its Board of Directors.
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Involvement in Certain Legal Proceedings
Our directors and executive officers have not been involved in any of the following events during
During the past ten years:years, Mr. Spiteri, our sole director or executive officer has not been:
The subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
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ITEM
None of the Company’s directors or officers or, to its knowledge, any affiliates or any beneficial owner of 5% or more of our common stock, or any associate of such persons, is an adverse party in any material proceeding to, or has a material interest adverse to, us or any of our subsidiaries.
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Corporate Governance
The Company currently have no standing audit, compensation or nominating committees or committees performing similar functions, nor has it written audit, compensation or nominating committee charters. The Board of Directors believes it unnecessary to have such committees at this time because they can adequately perform the functions of such committees.
The Company do not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The Board of Directors believes that, given the stage of the Company’s development, a specific nominating policy would be premature until the business operations develop to a more advanced level. The Company currently do not have any specific or minimum criteria for the election of nominees to the Board of Directors and it does not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment. A shareholder who wishes to communicate with the Board of Directors may do so by directing a written request addressed to the director at the address on the cover of this report.
Code of Ethics
The Company has not yet adopted a code of ethics within the definition of Item 406 of Regulation S-K.
Currently, the Company has a single named executive officer, 3 employees, as well as a few part-time employees and additional consultants. As the Company’s business continues to grow, and the Company become more experienced as a fully-reporting public company, its Board of Directors plans to implement a code of ethics.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company is currently not subject to Section 16(a) of the Exchange Act as the Company do not have a class of equity securities registered pursuant to section 12 of the Exchange Act.
Item 11. EXECUTIVE COMPENSATION.Executive Compensation
As a “smaller reporting company”, the Company have elected to follow the scaled disclosure requirements for smaller reporting companies with respect to the disclosures required by Item 402 of Regulation S-K. Under such scaled disclosure, the Company is not required to provide a Compensation, Discussion and Analysis, Compensation Committee Report and certain other tabular and narrative disclosures relating to executive compensation.
Executive Compensation
The following table showssets forth information concerning the compensation received byof our principal executive officer for the current reporting period is as follows:
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | All Other Compensation ($) | Total($) | ||||
| Joseph Spiteri | 2014 | – | – | – | ||||
| President, Chief Executive Officer and Director |
No accrued compensation is due to any executive officer or director of the Company. Each executive officer and director will be entitled to reimbursement of expenses incurred while conducting Company business.
The former executive officers of our predecessor parent company, AUTT, did not receive any compensation during the current fiscal year ended April 30, 2012 and for the year ended April 30, 2011:nor was any compensation accrued.
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Employment Agreements or Arrangements
We have not entered into any employment (or consulting) agreements or arrangements, whether written or unwritten, with our directors or executive officers since our inception. See “Certain Relationships and Related Transactions; and Director Independence; Consulting Agreement” on page 16 of this Memorandum.
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Equity Awards
We
On October 3, 2013, the Company issued the following shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), and Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) and collectively with the Common Stock and the Series A Preferred Stock, the “Securities”), to the Company’s officers and directors. The securities were issued to each individual pursuant to a Stock Purchase Agreement, dated September 20, 2013, between the Company and each individual in consideration for services rendered and valued at $0.001 per share. The Company relied upon the exemption from the registration requirements of the Securities Act of 1933 available to the Company pursuant to Section 4(a) (2) (formerly Section 4(2)) promulgated under the Securities Act due to the fact that the individuals were officers and directors of the Company and the issuances did not involve a public offering of securities. The Securities are deemed to be “restricted securities” and “control securities” pursuant to Rule 144 promulgated under the Securities Act, and certificates evidencing the Securities bear the customary restrictive legends.
Joseph Spiteri (Chief Executive Officer, Chairman, President, Secretary and Treasurer)
| · | 3,000,000shares of Common Stock |
| · | 8,000,000 shares of Series A Preferred Stock which shares automatically converted into a like number of Common Stock on January 1, 2016. |
| · | 15,000,000 shares of Series B Preferred Stock which are to be released upon the Company’s achievement of certain financial milestones as set forth in the Stock Purchase Agreement between the Company and Mr. Spiteri. The first milestone pursuant to which 7,500,000 of such shares were to be released passed without reaching the milestone and those shares are deemed to be cancelled and no longer issued and outstanding. |
Nicholas P. DeVito (Former Chief Operating Officer)
| · | 1,500,000 shares of Common Stock. |
Ralph M. Amato (Former Director)
| · | 5,750,000 shares of Series B Preferred Stock, as set forth in the Stock Purchase Agreement between the Company and RDA Equities, LLC, an entity of which Mr. Amato has voting and dispositive control. The issuance of these shares was dependent upon satisfaction of certain conditions which were not satisfied and, accordingly, the shares are deemed cancelled and no longer issued or outstanding. |
Other than the foregoing, the Company have not awarded any shares of stock, options or other equity securities to ourits directors or executive officers since ourits inception. WeThe Company have not adopted any equity incentive plan. OurThe directors and executive officers may receive stock options at the discretion of our boardits Board of directorsDirectors in the future.
Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control Arrangements
We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement or other termination of our directors or executive officers, or a change in control of our company or a change in our directors’ or executive officers’ responsibilities following a change in control.
Director Compensation
No
Other than equity compensation set forth above, no director received or accrued any compensation for his or her services as a director since our inception.
We
The Company have no formal plan for compensating ourits directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocketout-ofpocket expenses incurred in connection with attendance at meetings of our boardthe Board of directors. Our boardDirectors.
The Board of directorsDirectors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
ITEM
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership
The following table sets forth, as of July 17, 2012,March 31, 2016, certain information known to usthe Company with respect to the beneficial ownership of ourits common stock, by (i) each of our directors, (ii) each of our named executive officers (as defined in the “Executive Compensation” section)Series A Preferred Stock and current executive officers, (iii) all of our directors and current executive officers as a group, and (iv) each shareholder known by us to be the beneficial owner of more than five percent (5%) of our common stock. Except as set forth in the table below, there is no person known to us who beneficially owns more than 5% of our common stock.Series B Preferred Stock by:
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each of its directors, | ||
| (ii) | each of the named executive officers and current executive officers, |
| (iii) | all of the directors and current executive officers as a group, and |
| (iv) | each shareholder known by us to be the beneficial owner of more than five percent (5%) of such class of securities. Beneficial ownership is determined in accordance with the rules of the |
Common Stock
| Name of Beneficial Owner (1) | Amount | Percent (2) | |||
| Joseph Spiteri | 13,200,000 | (3) | 52% | ||
| - CEO, Pres. & Chairman | (4) | ||||
| Ralph M. Amato | 6,610,070 | 28% | |||
| Ralph M. Amato | 5,803,260 | (5) | % | ||
| - Former Director | |||||
| All officers and directors as a group (1 person) | 13,200,000 | 52% |
Notes
| (1) | Unless otherwise noted, the address for each beneficial holder is c/o MOJO Data Solutions, Inc., 39 Dorado Beach East, Dorado, Puerto Rico 00646. | |
| (2) | Based on 16,745,800 shares of common stock issued and outstanding as of March 31, 2016. Shares of common stock subject to options, warrants and convertible securities currently exercisable or convertible, or exercisable or convertible within 60 days, would be counted as outstanding for computing the percentage of the person holding such options, warrants or convertible securities but not counted as outstanding for computing the percentage of any other person. | |
| (3) | Includes 8,000,000 shares of Common Stock issued upon the automatic conversion of the Series A Preferred Stock on January 1, 2016 and 1,600,000 shares that are issuable upon the conversion of an $80,000 outstanding convertible note. | |
| (4) |
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| (5) | Held indirectly through RDA Equities, LLC (5,803,260 shares) and |
Changes
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Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, dated September 27, 2013, between the Company and MDS, the Company agreed to purchase all of the intellectual property and substantially all of the tangible assets of MDS, constituting substantially all of the assets of MDS, in Controlconsideration for $190,000 and an unsecured promissory note for the principal amount of $80,000, bearing interest at a rate of 5% per year, maturing on the first anniversary date of the date of issuance and convertible by the holder thereof at any time and from time to time into shares of Common Stock of the Company for $0.05 per share. The shares of Common Stock of the Company issuable upon the conversion of the Promissory Note will not be registered under the Securities Act and will be deemed to be restricted pursuant to Rule 144 promulgated under the Securities Act. Joseph Spiteri, MOJO’s President, Chairman, Chief Executive Officer, Treasurer and Secretary, is also the President and Chief Executive Officer of MDS.
We are unaware of any contract or other arrangement the operation
Consulting Agreement. Pursuant to a Consulting Agreement, dated April 24, 2013, between MDS and Ventana Capital Partners, LLC, a Puerto Rico limited liability company of which may at a subsequent date result in a change of control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Director Independence
Under NASDAQ Marketplace Rule 5605(a)(2),Ralph M. Amato, a director is not considered to be independent if he is also an executive officer or employeeand significant beneficial owner of common stock of the company. David RichardsonCompany, has voting and Hrant Isbeceryan are not independent as they are also officers.dispositive control (“Ventana”), the Company had retained Ventana to provide it with certain services. In consideration for the services rendered by Ventana, the Company had agreed to issue to RDA Equities, LLC, a Puerto Rico limited liability company and affiliate of Ventana, up to 5,750,000 shares of Series B Preferred Stock upon the consummation of certain financial milestones. The term of the Consulting Agreement was to terminate on April 24, 2016, and was terminated prior thereto pursuant to early termination provisions in the agreement in certain circumstances. Accordingly, the Company is no longer obligated to provide such shares or board seat.
Transactions with related persons
Other than as disclosed below,above, there has been no transaction, since the beginning of the year ended April 30, 2012,Current reporting period, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of our total assets at year endyear-end for the last completed fiscal year, and in which any of the following persons had or will have a direct or indirect material interest:
| (i) | Any director or executive officer of our |
| (ii) | Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; |
| (iii) | Any of our promoters and control persons; and |
| (iv) | Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons. |
During
As at the year ended April 30, 2012 we borrowed $62,261 from Hrant Isbeceryan,end of current reporting period, there were warrants outstanding to purchase 2,323,260 shares of our Chief Executive Officer. As of April 30, 2012, $72,761 is due to David Richardsoncommon stock at $0.50 per share.
Item 14. Principal Accounting Fees and Hrant Isbeceryan. The loans are unsecured, non-interest bearing and have no specific terms for repayment.Services
For information regarding compensation for our executive officers and directors, see “Executive Compensation”.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
The following table sets forthBoard of Directors has selected Malone Bailey, LLP ("Malone Bailey") as the independent registered public accounting firm to audit the books and accounts for the current fiscal year. Malone Bailey has served as our independent accountant since 2013. The aggregate fees billed, or expected to our companybe billed, for the last two fiscal years, for professional services rendered by Malone Bailey LLP, ourwere $ 0.
"Audit fees" are fees billed for services provided related to the audit of the Company’s annual financial statements, quarterly reviews of the interim financial statements, and services normally provided by the independent registered public accounting firmaccountant in connection with statutory and regulatory filings or engagements for those fiscal periods.
"Tax fees" are fees billed, or to be billed, by the independent accountant for professional services rendered for tax compliance, tax advice and tax planning.
The Board of Directors pre-approves all services provided by the Company’s independent accountants. The Board of Directors reviewed and approved all of the above services and fees.
| 19 |
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of or are included in this Annual Report:
| 1. | Financial statements listed in the Index to Financial Statements, filed as part of this Annual Report beginning on page F-1; and |
| 2. | Exhibits listed in the Exhibit Index filed as part of this Annual Report. |
| 20 |
MOJO DATA SOLUTIONS
Financial Statements
For The Years Ended
December 31, 2016 and 2015
Table of Contents
| Page(s) | ||
| Consolidated Balance Sheets as of December 31, 2017 and 2016 | F-2 | |
| Consolidated Statements of Operations For the Years Ended December 31, 2017 and 2016 | F-3 | |
| Consolidated Statement of Changes in Stockholders’ Deficit For the Year Ended January 1, 2017 through December 31, 2017 | F-4 | |
| Consolidated Statements of Cash Flows For the Years Ended December 31, 2017 and 2016 | F-5 | |
| Notes to Consolidated Financial Statements | F-6 |
| F-1 |
Mojo Data Solutions, Inc.
December 31,
| Notes | 2017 | 2016 | ||||||
| Assets | ||||||||
| Assets: | ||||||||
| Cash | 4 | $ | 591 | $ | 591 | |||
| Accounts receivable | 5 | 15,477 | 15,477 | |||||
| Inventory | 6 | 2,961 | 2,961 | |||||
| Prepaid expenses | 7 | 2,445 | 2,445 | |||||
| Total current assets | 21,474 | 21,474 | ||||||
| Property and equipment, net | 8 | 10,887 | 10,887 | |||||
| Intangible assets | 4,615 | 4,615 | ||||||
| Other assets, net | 1,500 | 1,500 | ||||||
| Total Assets | $ | 38,476 | $ | 38,476 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Liabilities: | ||||||||
| Cash overdraft | $ | 4,137 | $ | 4,137 | ||||
| Accounts payable and accrued expenses | 9 | 444,472 | 444,472 | |||||
| Tax payable | 2,391 | 2,391 | ||||||
| Convertible note payable - net of discount | 10 | 57,699 | 57,699 | |||||
| Total current liabilities | 508,699 | 508,699 | ||||||
| Notes payable | 11 | 179,539 | 179,539 | |||||
| Total Liabilities | 688,238 | 688,238 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Series A Preferred stock, $0.001 par value; 100,000,000 shares authorized; 8,000,000 shares issued and outstanding | 8,000 | 8,000 | ||||||
| Series B Preferred stock, $0.001 par value; 100,000,000 shares authorized; 15,000,000 shares issued and outstanding | 15,000 | 15,000 | ||||||
| Common stock, $0.001 par value; 300,000,000 shares authorized; 15,755,060 shares issued and outstanding | 15 | 15,755 | 15,755 | |||||
| Additional paid in capital | 75,014 | 75,014 | ||||||
| Accumulated deficit | (763,531 | ) | (763,531 | ) | ||||
| Total Stockholders’ Deficit | (649,762 | ) | (649,762 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 38,476 | $ | 38,476 | ||||
See accompanying notes to the consolidated financial statements
| F-2 |
Mojo Data Solutions, Inc
Consolidated Statements of Operations
For The Year Ended December 31,
| Notes | 2017 | 2016 | ||||||
| Revenues | 12 | $ | 9,000 | $ | 9,000 | |||
| Cost of sales | 13 | (43,634 | ) | (43,634 | ) | |||
| Gross Profit | (34,634 | ) | (34,634 | ) | ||||
| Operating expenses | ||||||||
| General and administrative expenses | 13 | 3,469 | 3,469 | |||||
| Loss from operations | (38,103 | ) | (38,103 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | – | – | ||||||
| Total other income (expense) | (38,103 | ) | (38,103 | ) | ||||
| Net loss before provision for income taxes | (38,103 | ) | (38,103 | ) | ||||
| Provision for income tax | – | – | ||||||
| Net Profit/(Loss) | $ | (38,103 | ) | $ | (38,103 | ) | ||
| Net loss per common share - basic and diluted | $ | (0.00242 | ) | $ | (0.00242 | ) | ||
| Weighted average common shares outstanding -basic and diluted | 15,755,060 | 15,755,060 | ||||||
See accompanying notes to the consolidated financial statements
| F-3 |
Mojo Data Solutions, Inc.
Consolidated Statement of Changes in Stockholders’ Deficit
For The Year Ended December 31, 2017
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Shares | Par | APIC | Deficit | Total | ||||||||||||||||||||||||||||
| Balance at January 1, 2017 (Unaudited) | 8,000,000 | $ | 8,000 | 15,000,000 | $ | 15,000 | 15,755,060 | $ | 15,755 | $ | 75,014 | $ | (763,531 | ) | $ | (649,762 | ) | |||||||||||||||||||
| Net loss | – | – | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2017 (Unaudited) | 8,000,000 | $ | 8,000 | 15,000,000 | $ | 15,000 | 15,755,060 | $ | 15,755 | $ | 75,014 | $ | (763,531 | ) | $ | (649,762 | ) | |||||||||||||||||||
See accompanying notes to the consolidated financial statements
| F-4 |
Mojo Data Solutions, Inc.
Consolidated Statements of Cash Flows
For The Years Ended December 31,
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | – | $ | (5,794 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | – | – | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | – | (315 | ) | |||||
| Prepaid expenses | – | – | ||||||
| Other assets | – | – | ||||||
| Accounts payable and accrued expenses | – | 38,489 | ||||||
| Net Cash Used In Operating Activities | – | 130 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash received from sale of assets | – | – | ||||||
| Cash paid for property and equipment | – | – | ||||||
| Cash received from reverse merger | – | – | ||||||
| Net Cash Provided By (Used In) Investing Activities | – | – | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds (Repayments) on note payable | – | 320 | ||||||
| Proceeds from convertible notes payable | – | – | ||||||
| Net proceeds from (repayments to) related parties | – | – | ||||||
| Net Cash Provided By Financing Activities | – | 320 | ||||||
| Net Increase (Decrease) in Cash | – | 450 | ||||||
| Cash - Beginning of Period | (3,546 | ) | (3,996 | ) | ||||
| Cash - End of Period | $ | (3,546 | ) | $ | (3,546 | ) | ||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Period for: | ||||||||
| Income taxes | $ | – | $ | – | ||||
| Interest | $ | – | $ | – | ||||
See accompanying notes to the consolidated financial statements
| F-5 |
MOJO DATA SOLUTIONS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2017
| 1. | LEGAL STATUS AND OPERATIONS |
Mojo Data Solutions, Inc. (the“Company”or“Mojo”)was founded in Nevada on July 8, 2010 as Authentic Teas, Inc.(“Authentic”). Authentic’swholly-owned subsidiary was incorporated in the province of Ontario, Canada on July 8, 2010. On September 13, 2013, Authentic Teas, Inc., a Nevada corporation, merged with and into Mojo Data Solutions, Inc., a Puerto Rico corporation and a wholly-owned subsidiary of Authentic formed on August 21, 2013 solely for the years ended April 30, 2012 and April 30, 2011:purpose of reincorporating Authentic in Puerto Rico under the name Mojo Data Solutions, Inc. (the “Reincorporation”).
37
| Fees | 2012 | 2011 | ||||
| Audit Fees | $ | 12,000 | 13,040 | |||
| Audit Related Fees | ||||||
| Tax Fees | ||||||
| Other Fees | ||||||
| Total Fees | $ | 12,000 | 13,040 |
Policy on Pre-Approval by Audit CommitteeThe company is primarily engaged in the development of Services Performed by Independent Auditorssmartphone applications which enables consumers to interact with traditional media delivering digital content back to the handset.
We do not use Malone Bailey LLP for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying
The head office of the Company is situated 39 Dorado Beach East, Dorado, Puerto Rico, 00646.
| 2. | BASIS OF PREPARATION |
Statement of compliance
The accompanying financial statements or generates information that is significanthave been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant to our financial statements, are provided internally or by other service providers. We do not engage Malone Bailey LLP to provide compliance outsourcing services.
Effective May 6, 2003,the rules and regulations of the Securities and Exchange Commission adopted rules("SEC") on a going concern.
Accounting Convention
These financial statements have been prepared on the basis of 'historical cost convention using accrual basis of accounting except as otherwise stated in the respective accounting policies notes.
Going concern
The accompanying unaudited financial statements have been prepared on the assumption that require that before an external auditorthe Company will continue as a going concern. The Company historically has experienced significant losses and negative cash flows from operations. Further, the Company does not have a revolving credit facility with any financial institution. These factors raise substantial doubt about theCompany’sability to continue as a going concern.
The ability of the Company to continue as a going concern is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
approved by our audit committee (the functions of which are performed by our entire board of directors); or
entered into pursuant to pre-approval policiesdependent on raising additional capital, negotiating adequate financing arrangements and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedureson achieving sufficiently profitable operations. The financial statements do not include delegationany adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with the approved accounting standards require management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of the boardrevision and future periods.
| F-6 |
The areas involving higher degree of directors' responsibilitiesjudgment and complexity, or areas where assumptions and estimates made by the management are significant to management.the financial statements are as follows:
Our entire board
i) Equipment - estimated useful life of directors pre-approves all services provided by our independent auditors. Allequipment (note - 3.8)
ii) Provision for doubtful debts (note - 3.4)
iii) Provision for income tax (note - 3.1)
| 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Income tax
The tax expense for the year comprises of income tax, and is recognized in the statement of earnings. The income tax charge is calculated on the basis of the above servicestax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and fees were reviewed and approved by our directors beforeestablishes provisions where appropriate on the respective services were rendered.basis of amounts expected to be paid to the tax authorities.
Our board
Deferred income tax is accounted for using the balance sheet liability method in respect of directors has consideredall temporary differences arising from differences between the nature andcarrying amount of feesassets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred income tax liabilities are recognised for all taxable temporary differences and deferred income tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and unused tax losses can be utilized. Deferred income tax is calculated at the rates that are expected to apply to the period when the differences are expected to be reversed.
Trade and other payables
Liabilities for trade and other amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received, whether or not billed to the Company.
Provisions
A provision is recognized in the financial statements when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.
Accounts Receivable
Accounts receivable are non-interest bearing obligations due under normal course of business. The management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of period ended is adequate.
Contingent liabilities
A contingent liability is disclosed when the Company has a possible obligation as a result of past events, the existence of which will be confirmed only by MNP LLPthe occurrence or non-occurrence, of one or more uncertain future events, not wholly within the control of the Company; or when the Company has a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
| F-7 |
Financial liabilities
Financial liabilities are recognized when the Company becomes party to the contractual provision of the instruments and believethe Company loses control of the contractual right that comprise the financial liability when the obligation specified in the contract is discharged, cancelled or expired. The Company classifies its financial liabilities in two categories: at fair value through profit or loss and financial liabilities measured at amortized cost. The classification depends on the purpose for which the financial liabilities were incurred. Management determines the classification of its financial liabilities at initial recognition.
| (a) | Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss are financial liabilities held for trading. A financial liability is classified in this category if incurred principally for the purpose of trading or payment in the short-term. Derivatives (if any) are also categorized as held for trading unless they are designated as hedges. |
| (b) | Financial liabilities measured at amortized cost These are non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active market. These are recognized initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the profit and loss account. |
Property, plant and equipment
All equipment is stated at cost less accumulated depreciation and impairment loss. The cost of fixed assets includes its purchase price, import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use.
Depreciation on additions to property, plant and equipment is charged, using straight line method, on pro rata basis from the month in which the relevant asset is acquired or capitalized, up to the month in which the asset is disposed of. Impairment loss, if any, or its reversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value, over its estimated useful life.
Maintenance and normal repair costs are expensed out as and when incurred. Major renewals and improvements are capitalized and assets so replaced, if any are retired.
Gains and losses on disposal of fixed assets, if any, are recognized in statement of profit and loss.
| Category | Depreciation terms |
| Computer and equipment | 5 years |
| Furniture and fixtures | 7 years |
| Software | 3 years |
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks. For the purpose of the statement of cash flows, cash and cash equivalents bank balances and short term highly liquid investments subject to an insignificant risk of changes in value and with maturities of less than three months.
| F-8 |
Revenue recognition
Revenue is recognised to the extent it is probable that the provision of services for activities unrelatedeconomic benefits will flow to the auditCompany and the revenue can be measured reliably. Revenue is compatiblemeasured at the fair value of the consideration received or receivable for goods sold or services rendered, net of discounts and sales tax and is recognised when significant risks and rewards are transferred.
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates. The financial statements are presented in US (Dollars) which is the Company's presentation currency. All financial information presented in US Dollars has been rounded to the nearest dollar unless otherwise stated.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the exchange rate prevailing at the statement of financial position date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates are recognized in the profit and loss account.
Contingencies
The assessment of the contingencies inherently involves the exercise of significant judgment as the outcome of the future events cannot be predicted with maintaining MNP LLP’s independence.certainty. The Company, based on the availability of the latest information, estimates the value of contingent assets and liabilities, which may differ on the occurrence / non-occurrence of the uncertain future event(s).
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Exhibits requiredCash
This represent cash in hand and cash deposited in bank accounts (current) by Item 601 of Regulation S-K:the Company.
| Amount in $ | ||||
| – | ||||
| – | ||||
| 591 | ||||
| – | ||||
| 591 | ||||
Accounts Receivables
| Opening balance | 15,477 | |||
| – | ||||
| 15,477 |
| F-9 |
Inventory
| Opening balance | 2,961 | |||
| – | ||||
| 2,961 |
Prepaid expenses
| Opening balance | 2,445 | |||
| – | ||||
| 2,445 |
Property, plant and equipment
| Furniture and equipment | 13,607 | |||
| (2,720 | ) | |||
| 10,887 |
Accounts payable and accrued expenses
| Opening balance | 444,472 | |||
| – | ||||
| 444,472 |
38
Convertible notes - net of discount
On May 16, 2014, the Company issued a $50,000 convertible note bearing interest at 5% per year with a maturity date of May 15, 2018. The note is convertible at $0.25 per share. At December 31, 2017, there was $57,699 outstanding on this note.
| 80,000 | ||||
| Less: unamortized discount | (22,301 | ) | ||
| Closing balance | 57,699 |
Loans payable
| Amount in $ | ||||
| Opening balance | 179,539 | |||
| Net movement in liabilities during the period | – | |||
| Closing balance | 179,539 | |||
| F-10 |
Revenue
| Consulting Income | – | |||
| Sale of software | – | |||
| – |
Operating expenses
| Bank Service Charges | – | |||
| Filing fees | – | |||
| Payroll Expenses | – | |||
| Professional Fees | – | |||
| Rent Expense | – | |||
| Research and Development | – | |||
| Trade show and conventions | – | |||
| – |
Contingencies and Commitments
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As at the end of current reporting period, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of operations and there are no proceedings in which any directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to the Company’s interest.
Common Stock
On January 31, 2014, the Company issued 200,000 shares of its common stock and 200,000 warrants with an exercise price of $0.50 and a life of three years for consulting services for a fair value totaling $46,000 and $45,940, respectively. The warrants have been valued using the Black-Scholes model with the following assumptions; term of 3 years, volatility of 383%, risk-free interest rate of 0.69% and dividend yield of 0%. The expected warrant term is based on the remaining contractual term. The expected volatility is based on the historical volatility of the prior companies. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related warrant at the valuation date. Dividend yield is based on historical trends.
| F-11 |
39
SIGNATURES
Pursuant to
In accordance with the requirements of Section 13 or 15(d) of the SecuritiesExchange Act, of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, theretothereunto duly authorized.
Authentic Teas Inc.
| Mojo Data Solutions, Inc. | ||
| Date: | By: | /s/ Joseph Spiteri |
| Name: | Joseph Spiteri | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
40