U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

 

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

 

For the Quarterly Period Ended:March 31, 20162017

 

OR

 

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

 

For the transition period from _______________ to _______________

 

Commission file number:000-55269

 

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

 

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

 

101185 Hudson Street, 21st Floor 25  
Jersey City, New Jersey 07302

(Address of principal executive

offices)

 (Postal Code)

 

Registrant’s telephone number:201 633 6519

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ☒  No  ☐

 

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

 

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

 

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

Yes  ☐  No  ☒

 

On April 29, 2016,May 1, 2017, there were 18,273,873shares22,768,576 shares of the registrant's common stock, par value $0.001, issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

None. 

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TABLE OF CONTENTS

 

Page
PART I – FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS (Unaudited) 
   
 Condensed Balance Sheets as of  March 31, 20162017 and December 31, 201520161
   
 Condensed Statements of Operations for the three months ended March 31, 20162017 and March 31, 201520162
   
 Condensed Statements of Cash Flows for the three months ended March 31, 20162017 and March 31, 201520163
   
 Condensed Statement of Changes in Stockholders’ EquityDeficit as of March 31, 2016201745
   
 Notes to the Condensed Financial Statements56
   
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS1314
   
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK1617
   
ITEM 4.CONTROLS AND PROCEDURES17
   
PART II – OTHER INFORMATION 
   
ITEM 1.LEGAL PROCEEDINGS18
   
ITEM 1.RISK FACTORS18
   
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS18
   
ITEM 3.DEFAULTS UPON SENIOR SECURITIES18
   
ITEM 4.MINE SAFETY DISCLOSURE18
   
ITEM 5.OTHER INFORMATION18
   
ITEM 6.EXHIBITS19
   
SIGNATURES2220

 

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MOJO ORGANICS, INC.
Condensed Balance Sheets
As of March 31, 2016 and December 31, 2015
(unaudited)
     
ASSETS        
         
   March 31, 2016   December 31, 2015 
  CURRENT ASSETS:        
    Cash and cash equivalents $54,207  $15,442 
    Accounts receivable, net  220,491   6,636 
    Prepaid expenses  3,204   10,350 
    Inventory  93,172   33,473 
    Supplier deposits  52,254   33,835 
        Total Current Assets  423,328   99,736 
         
    PROPERTY AND EQUIPMENT, net  1,627   1,811 
         
    Security deposit  2,778   2,778 
         
        TOTAL ASSETS $427,733  $104,325 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
  CURRENT LIABILITIES:        
    Accounts payable and accrued expenses $40,956  $16,730 
    Accrued payroll to related parties  —     3,050 
        Total Current Liabilities  40,956   19,780 
         
         
 Commitments and Contingencies        
         
  STOCKHOLDERS'  EQUITY        
         
Preferred stock, 10,000,000 shares authorized at $0.001 par value, no shares issued and outstanding  —     —   
Common stock, 190,000,000 shares authorized at $0.001 par value, 18,273,876 and 17,309,590 shares issued and outstanding, at March 31, 2016 and December 31, 2015, respectively  18,274   17,309 
    Additional paid in capital  20,874,918   20,192,089 
    Accumulated deficit  (20,506,415)  (20,124,853)
        Total Stockholders' Equity  386,777   84,545 
         
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $427,733  $104,325 
         
 The accompanying notes are an integral part of these condensed financial statements.

 

MOJO ORGANICS, INC.
Condensed Statements of Operations
For the Three Months Ended March 31, 2016 and 2015
(unaudited)
     
   2016   2015 
         
 Revenue $250,712  $68,885 
         
 Cost of Revenue  146,134   338,166 
         
 Gross Profit (Loss)  104,578   (269,281)
         
 Operating Expenses        
   Selling, general and administrative  486,140   619,944 
   License fee  —     1,775,862 
Total Operating Expenses  486,140   2,395,806 
         
 Loss from Operations  (381,562)  (2,665,087)
         
 Total Other Expense  —     (6,597)
         
 Loss Before Provision for Income Taxes  (381,562)  (2,671,684)
         
 Provision for Income Taxes  —     —   
         
 Net Loss $(381,562) $(2,671,684)
         
 Net loss per common share, basic and diluted $(0.02) $(0.16)
         
 Basic and diluted weighted average number of common shares outstanding  17,889,257   16,907,396 
         
 The  accompanying notes are an integral part of these condensed financial statements.
MOJO ORGANICS, INC.
Condensed Balance Sheets
As of March 31, 2017 and December 31, 2016
     
ASSETS
     
   

March 31, 2017

(unaudited)

   December 31, 2016 
CURRENT ASSETS:        
Cash and cash equivalents $11,215  $38,668 
Accounts receivable, net  58,748   29,872 
Inventory  271,130   312,029 
Supplier deposits  75,670   —   
Prepaid expenses  7,203   29,709 
Total Current Assets  423,966   410,278 
Security deposit  4,461   4,461 
TOTAL ASSETS $428,427  $414,739 
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
         
CURRENT LIABILITIES:        
Accounts payable and accrued expenses $62,262  $39,329 
Accrued payroll to related parties  588,100   484,600 
 Total Current Liabilities  650,362   523,929 
         
 Commitments and Contingencies        
         
  STOCKHOLDERS'  DEFICIT        
Preferred stock, 10,000,000 shares authorized at $0.001 par value, no shares issued and outstanding  —     —   
Common stock, 190,000,000 shares authorized at $0.001 par value, 18,380,326 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively  18,380   18,380 
Additional paid in capital  21,265,926   21,265,200 
Accumulated deficit  (21,506,241)  (21,392,770)
Total Stockholders'  Deficit  (221,935)  (109,190)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $428,427  $414,739 
         
 The accompanying notes are an integral part of these condensed financial statements.

 

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MOJO ORGANICS, INC.
Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2016 and 2015
(unaudited)
   
  2016 2015
     
 Cash flows from operating activities:        
 Net loss $(381,562) $(2,671,684)
         
 Adjustments to reconcile net loss to net cash used in operating activities:        
 Depreciation  184   664 
 License Fees  —     1,775,862 
 Accrued payroll to related parties converted to additional paid-in capital  95,500   —   
 Stock-based compensation - stock options  18,810   19,165 
 Stock and warrants issued to directors and employees  231,984   374,978 
         
 Changes in assets and  liabilities:        
 Decrease (increase) in accounts receivable  (213,855)  7,332 
 Decrease (increase) in inventory  (59,699)  252,436 
 Decrease (increase) in supplier deposits  (18,419)  1,782 
 Decrease in prepaid expenses  7,146   28,092 
 Increase (decrease) in accounts payable and accrued expenses  24,226   (9,839)
 Increase (decrease) in accrued payroll to related parties  (3,050)  34,855 
Net cash used in operating activities  (298,735)  (186,357)
         
 Net cash from financing activities:        
 Sale of common stock, net  337,500   —   
Net cash provided by financing activities  337,500   —   
         
 Net increase (decrease) in cash and cash equivalents  38,765   (186,357)
         
 Cash and cash equivalents at beginning of period  15,442   345,616 
         
 Cash and cash equivalents at end of period $54,207  $159,259 
         
         
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
 Interest paid $—    $—   
 Taxes paid $—    $—   
         
 The accompanying notes are an integral part of these condensed financial statements.
MOJO ORGANICS, INC.
Condensed Statements of Operations
For the Three Months  Ended March 31, 2017 and 2016
(unaudited)
     
   2017   2016 
 Revenue $241,960  $250,712 
         
 Cost of Revenue  143,794   146,134 
         
 Gross Profit  98,166   104,578 
         
 Operating Expenses        
Selling, general and administrative  213,817   486,140 
Total Operating Expenses  213,817   486,140 
         
Loss from Operations  (115,651)  (381,562)
         
Other Income  2,180   —   
         
 Loss Before Provision for Income Taxes  (113,471)  (381,562)
         
 Provision for Income Taxes  —     —   
         
 Net Loss $(113,471) $(381,562)
         
 Net loss per common share, basic and diluted $(0.01) $(0.02)
         
 Basic and diluted weighted average number of common shares outstanding  18,380,326   17,889,257 
         
 The  accompanying notes are an integral part of these condensed financial statements.

MOJO ORGANICS, INC.
Condensed Statements of Changes in Stockholders' Equity
For the Three Months Ended March 31, 2016
(unaudited)
           
          
   Common Stock           
   Shares   Amount   Additional Paid-In Capital   Accumulated Deficit   Stockholders’ Equity 
Balance, December 31, 2015  17,309,590  $17,309  $20,192,089  $(20,124,853) $84,545 
                     
Issuance of restricted Common Stock and Warrants:                    
Private Placement  964,286   965   336,535   —     337,500 
                     
Stock based compensation                    
Stock options  —     —     18,810   —     18,810 
Restricted Common Stock vesting  —     —     231,984   —     231,984 
                     
Accrued payroll to related parties - forgiven  —     —     95,500   —     95,500 
                     
Net loss  —     —     —     (381,562)  (381,562)
                     
Balance, March 31, 2016  18,273,876  $18,274  $20,874,918  $(20,506,415) $386,777 
                     
 The accompanying notes are an integral part of these condensed financial statements.

 

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MOJO ORGANICS, INC.
Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2017 and 2016
(unaudited)
 
  2017 2016
Cash flows from operating activities:        
Net loss $(113,471) $(381,562)
         
Adjustments to reconcile net loss to net cash used in operating activities:        
Stock-based compensation - stock options  726   18,810 
Stock and warrants issued to directors and employees  —     231,984 
         
Changes in assets and  liabilities:        
Increase in accounts receivable  (28,876)  (213,855)
Decrease (increase) in inventory  40,899   (59,699)
Increase in supplier deposits  (75,670)  (18,419)
Decrease in prepaid expenses  22,506   7,330 
Increase in accounts payable and accrued expenses  22,933   24,226 
Increase in accrued payroll to related parties  103,500   92,450 
Net cash used in operating activities  (27,453)  (298,735)
         
 Net cash from financing activities:        
Sale of common stock, net  —     337,500 
 Net cash provided by financing activities  —     337,500 
         
 Net (decrease) increase in cash and cash equivalents  (27,453)  38,765 
         
 Cash and cash equivalents at beginning of period  38,668   15,442 
         
 Cash and cash equivalents at end of period $11,215  $54,207 
         
         
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Interest paid $—    $—   
Taxes paid $—    $—   
         
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:        
Accrued payroll to related parties converted to additional paid-in capital $—    $95,500 
         
 The accompanying notes are an integral part of these condensed financial statements.

MOJO ORGANICS, INC.
Condensed Statements of Changes in Stockholders' Deficit
For the Three Months Ended March 31, 2017
(unaudited)
           
      Additional    
  Common Stock Paid-In Accumulated Stockholders'
  Shares Amount Capital Deficit Deficit
Balance, December 31, 2016  18,380,326  $18,380  $21,265,200  $(21,392,770) $(109,190)
                     
Stock based compensation                    
Stock options  —     —     726   —     726 
                     
Net loss  —     —     —     (113,471)  (113,471)
                     
Balance, March 31, 2017  18,380,326  $18,380  $21,265,926  $(21,506,241) $(221,935)
                     
The accompanying notes are an integral part of these condensed financial statements.

MOJO ORGANICS, INC.

Notes to Condensed Financial Statements

March 31, 20162017

 

NOTE 1 – BUSINESS

 

Overview

MOJO Organics, Inc. (“MOJO” or the “Company”) was incorporated in the State of Delaware on August 2, 2007. Headquartered in Jersey City, NJ, the Company develops emergingengages in new product development, production, marketing, distribution and sales of beverage brands that are natural, USDA Organic and Non GMO Project verified. Beginning in December 2015, the Company began selling its line of coconut water beverages.

Previously, the Company produced 100% tropical fruit juices under a license branding agreement (the “License Agreement”). The License Agreement was terminated effective September 27, 2015. See Note 5 in the Notes to the Condensed Financial Statements.

 

Interim Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q  and article 10 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited interim condensed financial statements included in this document have been prepared on the same basis as the annual audited financial statements, and in the Company’s opinion, reflect all adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 20162017 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 20152016 included in the Company’s Annual  Report on Form 10-K. 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

The financial statements are prepared in conformity with GAAP. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

Cash equivalents include investment instruments and time deposits purchased with a maturity of three months or less. As of March 31, 2017 and December 31, 2016, the Company did not have any cash equivalents.

 

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company provides for probable uncollectible amounts based upon its assessment of the current status of the individual receivables and after using reasonable collection efforts. The allowance for doubtful accounts as of March 31, 20162017 and December 31, 20152016 was zero and $3,000, respectively.zero.

 

Inventories

Inventories, consisting solely of finished goods, are stated at the lower of cost (first-in, first-out method) or market. When necessary, the Company provides allowances to adjust the carrying value of its inventories to the lower of cost or net realizable value. 

5

 

Supplier Deposits

Supplier Deposits consist of payments to manufacturers for future production.

Property and Equipment and Depreciation

Property and equipment are stated at cost.  Depreciation is computed using the straight line method over the estimated useful life of the respective assets.  Computer equipment is depreciated over a period of 3 to 5 years.  Computer Software is depreciated over a one year period.  Maintenance and repairs are charged to expense when incurred.  When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is credited or charged to income.  At March 31, 2016 and December 31, 2015, accumulated depreciation related to property and equipment was $1,119 and $935, respectively.

Revenue Recognition

Revenue from the salesales of products is recognized when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

Deductions from Revenue

Costs incurred for sales incentives and discounts are accounted for as a reduction in revenue. These costs include payments to customers for performing merchandising activities on our behalf, including in-store displays, promotions for new items and obtaining optimum shelf space.

 

Shipping and Handling Costs

Shipping and Handling Costs incurred to move finished goods from our sales distribution centers to customer locations are included in the line Selling, General and Administrative Expenses in our Statements of Operations.

 

Net Loss Per Common Share

The Company computes per share amounts in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “Earnings per Share”.  ASC Topic 260 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the periods.

 

The following potentially dilutive securities have been excluded from the computation of weighted average shares outstanding for the three months ended March 31, 20162017 and 2015,2016, as they would have had an anti-dilutive impact on the Company’s net loss per common share:

 

 2016 2015 2017 2016
Shares underlying options outstandingShares underlying options outstanding620,000 830,000  620,000   620,000 
Shares underlying warrants outstandingShares underlying warrants outstanding3,096,919 1,114,776  4,012,366   3,096,919 
TotalTotal3,716,919 1,944,776  4,632,366   3,716,919 

 

Start-Up Costs

In accordance with ASC topic 720-15, “Start-Up Costs,” the Company charges all costs associated with its start-up operations to expense as incurred.

6

Income Taxes

The Company provides for income taxes under ASC topic 740, “Income Taxes,” which requiresusing the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. ASC Topic 740 also requires the reduction of deferredDeferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Tax returns for the years from 2012 to 2015 are subject to examination by tax authorities.

 

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. As of March 31, 20162017 and December 31, 2015,2016, the Company had no accrued interest or penalties. The Company has had no Federal or state tax examinations in the past nor does it have any at the current time.

 

Stock-Based Compensation

ASC Topic 718, “Accounting for Stock-Based Compensation” prescribes accounting and reporting standards for stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. ASC Topic 718 requires employee compensation expense to be recorded using the fair value method. The Company accounts for employee stock based compensation in accordance with the provisions of ASC Topic 718.

 

The Company accounts for equity based transactions with non-employees under the provisions of ASC Subtopic 505-50, “Equity-Based Payments to Non-Employees.”  ASC Subtopic 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if it is to pay cash or services instead of paying with or using the equity instrument.

 

Fair value of financial instruments

The carrying amounts of financial instruments, which include cash, accounts receivable, accounts payable, accrued expenses and debt obligations, approximate their fair values due to their short-term nature and/or variable interest rates. The Company’s debt obligations bear interest at rates which approximate prevailing market rates for instruments with similar characteristics and, accordingly, the carrying values for these instruments approximate fair value.

The Company adopted ASC Topic 820, “Fair Value Measurement,” which established a framework for measuring fair value and expands disclosure about fair value measurements.  ASC Topic 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes the following three levels of inputs that may be used:nature.

 

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,, unrestricted assets or liabilities;
6

Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company did not have any assets or liabilities measured at fair value on a recurring basis at March 31, 2016 or December 31, 2015. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2016 or 2015.

New Accounting Pronouncements

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, which creates ASC Topic 606, “Revenue from Contracts with Customers”, and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts,” and creates new Subtopic 340-40, “Other Assets and Deferred Costs—Contracts with Customers.” In summary, the core principle of ASC Topic 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Therefore the amendments in ASU 2014-09 will become effective for us as of the beginning of our 2017 fiscal year. The Company is currently assessing the impact of implementing the new guidance.

In August 2014, FASB issued ASU 2014-15, “Presentation of Financial Statements Going Concern (Subtopic 205-40) –Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards.

Specifically, the amendments (1) provide a definition of the termsubstantial doubt,(2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of

management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. The Company adopted SU 2014-15 during the three months ended March 31, 2016.

Management does not believe that any other recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. 

 

Reclassifications

Certain amounts in the March 31, 20152016 Financial Statements have been reclassified to conform to the presentation used in the March 31, 20162017 Financial Statements.

NOTE 3 – ALLEVIATION OF GOING CONCERN QUALIFICATION

We have incurred net operating losses since our inception. The expansion and development of our business has been funded primarily through private equity. During the three months ended March 31, 2016, the Company raised $337,500 in a private placement (see Note 6 for further information). As of March 31, 2016, the Company had working capital of $382,372. The Company has received purchase orders to be fulfilled from both new customers and existing customers. As a result, the Company believes it has sufficient cash and revenue commitments to finance its operations over the next twelve month period. There is no assurance that the income generated from these and future purchase orders will meet our working capital requirements subsequent to the next twelve months. We continue to market our products in accordance with our business plan. There can be no assurances, however, that we will be successful in our efforts to generate sufficient revenues through our marketing efforts.

NOTE 4 – INVENTORY

As of March 31, 2016 and December 31, 2015, inventory consisted of finished goods of $93,172 and $33,473, respectively.

NOTE 53 – COMMITMENTS AND CONTINGENCIES

 

Employment Agreements

On June 15, 2015, the Company entered into an Amended and Restated Employment Agreement (the "Simpson Agreement") with Glenn Simpson pursuant to which Mr. Simpson will continue to act as the Company's CEOChief Executive Officer (“CEO”) and Chairman for a term of five (5) years as extended in consideration of (i) a base salary of $5,000 per month from June 2015 through September 2015 and then increasing to $18,500 per month, (ii) 1,544,737 shares of common stock of the Company to be issued to Mr. Simpson upon the Company generating revenue of $3,000,000 during any consecutive twelve month period during the term (the “Simpson Shares”) and (iii) an annual bonus comprised of cash and Common Stock based on performance goals established by the Board of Directors of the Company as set forth in the Simpson Agreement.  The cash bonus is established at 20% of the annual salary. The stock bonus is set at 200,000 shares of Common Stock per year through December 31, 2021 based upon revenue performance goals. The revenue goals range from $900,000 to $19,200,000 per year. The bonus awards may be accelerated should revenue exceed the annual target amounts. On December 15, 2015, the Company and Mr. Simpson entered into an amendment to the Simpson Agreement increasing the Simpson Shares by 337,500.

On June 15, 2015, the Company entered into an Amended and Restated Employment Agreement (the "Spinner Agreement") with Peter Spinner pursuant to which Mr. Spinner will continue to act as the Company's COOChief Operating Officer (“COO”) for a term of five (5) years as extended in consideration of (i) a base salary of $8,000 per month from June 2015 through September 2015 and then increasing to $16,000 per month, (ii) 252,632 shares of common stock of the Company to be issued to Mr. Spinner upon the Company generating revenue of $3,000,000 during any consecutive twelve month period during the term (the “Spinner Shares”) and (iii) an annual bonus comprised of cash and Common Stock based on performance goals established by the Board of Directors of the Company as set forth in the Spinner Agreement.  The cash bonus is established at 20% of the annual salary. The stock bonus is set at 375,000 shares of Common Stock per year through December 31, 2018 and 200,000 shares of Common Stock per year from 2019 through December 31, 2021 based upon revenue performance goals. The revenue goals range from $900,000 to $19,200,000 per year. The bonus awards may be accelerated should revenue exceed the annual target amounts. On December 15, 2015, the Company and Mr. Spinner entered into an amendment to the Spinner Agreement increasing the number of Spinner Shares by 345,000.

 

On March 3, 2017, the Company amended the Spinner Agreement, reducing the eligible bonus shares by 1,500,000.

Lease Commitment

The Company maintains office space in Jersey City, New Jersey. The Company leases the space from a third-party pursuant to a lease agreement dated May 1, 2015September 15, 2016 at a rate of $1,389$2,230 per month.  ThisThe lease agreement will terminatewas terminated on April 30, 2016.February 28, 2017. The Company will continuesigned a new lease agreement for the period March 1, 2017 to maintain its office space on a month to month basis.February 28, 2018. The new rent under this agreement is $2,259 per month. Lease expense amounted to $5,389$8,146 and $4,820$5,389 for the three months ended March 31, 2017 and 2016, and 2015, respectively.

Licensing Agreement

On March 27, 2015, pursuant to the terms of the License Agreement, the Company was provided with written notice of termination effective September 27, 2015. The notice demanded payment by the Company of $2,283,085, comprised of liquidated damages amounting to $1,515,076 and outstanding royalties of $768,009.

On May 29, 2015, the liquidating damages and outstanding royalties were settled for $90,000. As a result, the Company reversed the license fees recorded during the three months ended March 31, 2015 of $1,775,862 and recorded net income amounting to $417,223 for the year ended December 31, 2015.

NOTE 64 – STOCKHOLDERS’ EQUITY

 

The Company has authorized 190,000,000 shares of common stock (“Common Stock”) and 10,000,000 shares of preferred stock (“Preferred Stock”), each having a par value of $0.001.

 

In October 2015, the Company approved the 2015 Incentive Stock Plan, which provides the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.

In March 2013, the Company approved the 2012 Long-Term Incentive Equity Plan (the “2012 Plan”), which provides the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or stock based awards for up to an aggregate of 2,050,000 shares of Common Stock.

 

Private Placement Offerings

On January 20, 2016, the Company approved a subscription agreement (the “2016 Subscription”) whereby 1,428,572 shares of Common Stock were offered to accredited investors for $0.35 per share. For every two shares purchased, the investor received a warrant to acquire one share of Common Stock at an exercise price of $0.70 per share exercisable for a period of two years from the date of issuance representing a potential aggregate of 714,286 shares of Common Stock. As of March 31, 2016, theThe Company issued a total of 964,286 shares of Common Stock and two year purchase warrants to acquire a total 482,143 shares of Common Stock to four accredited investors in consideration of $337,500.

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

 

Restricted Stock Compensation

The Company issued shares of restricted Common Stock to certain of its directors, executive officers and employees. Unvested restricted shares are subject to forfeiture. With the exception of 1,726,485 shares issued to employees and directors and 582,626 shares issued to a former director, which vest based upon achieving certain milestones, the Company records compensation expense over the vesting period based upon the fair market value on the date of grant for each share, adjusted for forfeitures.

 

In December 2015, the Company entered into a settlement with a former director of the Company whereby restricted Common Stock amounting to 1,165,251 shares was cancelled. The former director was issued 582,626 shares of restricted Common Stock subject to a lock up legend providing that the Company generate certain minimum revenues and providing for limitations on the amount of Common Stock that the former director can sell per quarter.

In June 2015, the Company awarded 2,023,854 shares of Common Stock to its officers and employees. The Company issued 226,485 shares in August 2015, which shares will vest upon the Company reaching a $3,000,000 revenue threshold during any twelve month period. The balance of 1,797,369 shares will be issued and will vest upon the Company reaching a $3,000,000 revenue threshold during any twelve month period. In December 2015, the Company awarded 682,500 shares of Common Stock to its officers and employees. These shares will be issued and will vest upon the Company reaching a $3,000,000 revenue threshold during any twelve month period. See Note 5 to the Notes to the Condensed Financial Statements.

10

A summary of the restricted stock issuances to directors, executive officers and employees is as follows:

 

  Number of Shares 

Weighted Average

Grant Date Fair Value

 Unvested share balance, January 1, 2015   6,091,992  $1.07 
    Granted   809,111   0.34 
    Vested   (1,525,546)  1.32 
    Forfeited   (1,165,251)  1.40 
 Unvested share balance, December 31, 2015   4,210,306  $0.75 
    Granted   —     —   
    Vested   (950,596)  1.33 
    Forfeited   —     —   
 Unvested share balance, March 31, 2016   3,259,710  $0.54 
  Number of Shares 

Weighted Average

Grant Date Fair Value

 Unvested share balance, January 1, 2016   4,210,306  $0.75 
    Granted   —     —   
    Vested   (1,901,193)  1.33 
    Forfeited   —     —   
 Unvested share balance, December 31, 2016   2,309,113  $0.21 
    Granted   —     —   
    Vested   —     —   
    Forfeited   —     —   
 Unvested share balance, March 31, 2017   2,309,113  $0.21 

 

 

In connection with the issuance of restricted stock, the Company recorded no share-based compensation expense of $231,984 and $374,978 for the three months ended March 31, 20162017 and 2015, respectively.$231,984 for the three months ended March 31, 2016.  As of March 31, 2016,2017, there was $950,596$490,426 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation.   As of March 31, 2016, there was $490,426 of unrecognized compensation expense related to unvested share-based compensation which vests only upon the achievement of certain performance criteria.

   

Stock Warrants

In connection with two private placement offerings in March 2014 (the “2014 Offerings”), investors received one purchase warrant at $0.91 per share for each share of Common Stock purchased. The warrants issued to Wyatts Torch Equity Partners, LP (“Wyatts”) were incorrectly calculated. On March 6, 2017, the Company issued warrants to purchase 915,447 shares of Common Stock at $0.91 per share to Wyatts to correct for this error. There was no financial impact resulting from this warrant understatement other than an understatement of potentially dilutive shares.

In connection with the 2016 Subscription, warrants to purchase 482,143 shares of Common Stock were issued at a price of $0.70 per share and are exercisable for a period of two years from the date of issuance.

Warrants to purchase 1,500,000 shares of Common Stock were issued as part of the 2015 Subscription at a price of $0.40 per share. The warrants are exercisable for five years from the date of issuance.

The following table summarizes warrant activity during the period:

Number of Warrants
Outstanding at January 1, 20151,114,776
Issued in connection with the 2015 Subscription1,500,000
Outstanding at December 31, 20152016  2,614,776 
Issued in connection with the 2016 Subscription  482,143 
Outstanding at MarchDecember 31, 2016  3,096,919 
Issued in connection with the 2014 Offerings915,447
Outstanding at March 31, 20174,012,366
Exercisable at March 31, 20162017  3,096,9194,012,366 

 

Advisory Services

On October 3, 2013, the Company entered into an agreement with Ian Thompson for strategic business advisory services, public relations services and investor relations services.services with Ian Thompson.  In connection with this agreement, the Company issued 167,204 shares of restricted Common Stock to Ian Thompson and recorded consulting fees of $501,612 induring 2013, which was the fair market value of the stock on the date of issue.  The stock is vested; however it is restricted from trading. Ian Thompson was also issued 200,000 shares of restricted Common Stock, for future services that included, but not limited to strategic business advisory services, public relations services and investor relations services which was to vest quarterly based upon the Company reaching certain market capitalization and revenue goals, in mid-2014.addition to providing the above services, with the last tranche vesting scheduled to vest on June 30, 2014. Consulting fees ofamounting to $105,000 and $280,000 were recorded in 2014 and 2013, respectively, related to the 200,000 shares of Common Stock issued to Ian Thompson.

DuringStock.  Throughout the term of the agreement, the Company requested that Ian Thompson to render performance under the agreement and to provide evidence of same. Ian Thompson failed to perform in all material respects under the terms of the agreement and failedrefused to provide evidence.

On June 27, 2014, by a unanimous written consent of the board of directors, the Company terminated the agreement and authorizedagreement.  The Company is taking all necessary steps for the cancellation of the 367,204 shares, due to lack of delivery of consideration and material breach of the agreement.

 

NOTE 75 – STOCK OPTIONS

 

In June 2015, the Company granted a director of the Company stock options to purchase 35,000 shares of Common Stock pursuant to the 2012 Plan. The exercise price is $0.255 per share and the options become exercisable in four equal tranches in December 2015, June 2016, December 2016 and June 2017. They expire in June 2020.

During the three months ended March 31, 20162017 and 2015,2016, compensation expense related to stock options of $18,809$726 and $19,165,$18,809, respectively, was recorded. As of March 31, 2016,2017, there was $27,618$604 of total unrecognized compensation cost related to non-vested stock options. That remaining cost is expected to be recognized in 2016 and 2017 in conjunction with the applicable vesting periods.by June 30, 2017.

 

NOTE 86 – RELATED PARTY TRANSACTIONS

 

During the three months endedAs of March 31, 2017, accrued payroll of $588,100 was payable to the CEO and the COO of the Company. This amount included unpaid salary as well as unpaid bonus. As of December 31, 2016, accrued payroll of $484,600 was payable to the CEO and COO, and such amount included unpaid salary as well as unpaid bonus.

During 2016, the Chief Executive Officer (the “CEO”)CEO and the Chief Operating Officer (the “COO”) of the CompanyCOO forgave unpaid salary due to them of $51,500$96,000 and $44,000,$81,000, respectively. This resulted in an increase to additional paid in capital of $95,500 for the three months ended March 31, 2016.

 

In January 2016, the Company entered into the 2016 Subscription with Wyatts Torch Equity Partners, LP (“Wyatt”) for the sale of 285,714sold 285,715 shares of Common Stock for $100,000 and warrants to purchase 142,857 shares of Common Stock at $0.70 per share.share to Wyatts for $100,000 pursuant to the 2016 Subscription. The managing member of WyattWyatts is the COO of the Company, as well as a Director of the Company. See Note 6 for further discussion.

 

AsNOTE 7 – SUBSEQUENT EVENTS

In accordance with ASC Topic 855,“Subsequent Events,”the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effects of December 31, 2015, accrued payrollall subsequent events that provide additional evidence of $3,050 was payable toconditions that existed at the CEO,balance sheet date are recognized in the COO and Controller (and Principal Accounting Officer) of the Company. There was no accrued payrollfinancial statements as of March 31, 2016.

2017. In August 2015,preparing these financial statements, the Company issued its Controller 226,485evaluated the events and transactions that occurred through the date these financial statements were issued. 

On April 6, 2017, the Company amended the Simpson Agreement. Effective April 1, 2017, Mr. Simpson will no longer be paid at a rate of $22,000 per month. He has agreed to a reduction in salary to $5,000 per month payable in cash and the right to receive 67,000 shares of restricted Common Stock per month. These restricted shares have no voting rights, are not eligible for dividends and are non-transferable. The restriction shall be lifted only upon the generation of $3,000,000 in revenue by the Company in consideration of her previous and continued services as Controller of the Company. These shares will vest upon the Company generating revenue of $3,000,000 during anya consecutive twelve month period on or prior to June 26, 2025.

Also in August 2015, theperiod. The Company entered into the 2015 Subscription with Wyatt for the sale of 750,000 shares of Common Stock for $150,000 and warrantsalso granted immediately exercisable stock options to purchase 1,500,000995,546 shares of Common Stock at $0.40the fair market value on the date of grant of $0.16 per share. See Note

On April 6, 2017, the Company amended the Spinner Agreement. Effective April 1, 2017, Mr. Spinner will no longer be paid at a rate of $18,500 per month. He has agreed to a reduction in salary to $5,000 per month payable in cash and the right to receive 55,000 shares of restricted Common Stock per month. These restricted shares have no voting rights, are not eligible for further discussion.dividends and are non-transferable. The restriction shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period. The Company also granted immediately exercisable stock options to purchase 861,013 shares of Common Stock at the fair market value on the date of grant of $0.16 per share.

The CEO and COO also agreed to receive shares of restricted Common Stock as payment for amounts owed to them as of March 31, 2017. They also agreed to receive shares of restricted Common Stock as payment for their cash salary for April 2017. On May 1, 2017, the Company issued 2,165,750 and 1, 822,500 shares of restricted Common Stock to the CEO and COO, respectively. Additionally, the Company issued 400,000 shares of restricted Common Stock to Mr. Simpson as payment for his stock bonus earned in 2016. All of the aforementioned shares issued have no voting rights, are not eligible for dividends and are non-transferable. The restrictions shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period. These issuances served, in part, as payment in full of the accrued payroll balance of $588,100 at March 31, 2017.

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

 

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

 

Critical Accounting Policies — Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

 

Results of Operations — Analysis of our financial results comparing the three months ended March 31, 20162017 to the three months ended March 31, 2015.2016.

 

Liquidity and Capital Resources — Analysis of changes in our cash flows, and discussion of our financial condition and potential sources of liquidity.

This report includes a number of forward looking statements that reflect our current views with respect to future events and financial performance.  Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events.  You should not place undue certainty on these forward looking statements, which apply only as of the date of this annual report.  These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

Critical Accounting Policies

 

We have prepared our financial statements in conformity with accounting principles generally accepted in the United States, which requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. We base these significant judgments and estimates on historical experience and other applicable assumptions we believe to be reasonable based upon information presently available. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Actual results could materially differ from our estimates under different assumptions, judgments or conditions.

 

All of our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements, included elsewhere in this Annual Report. We have identified the following as our critical accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions.

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

 

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

 

Stock-based Compensation — ASC Topic 718, “Accounting for Stock-Based Compensation” prescribes accounting and reporting standards for allemployee stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights.

ASC Topic 718 requires employee compensation expense to be recorded using the fair value method. The Company accounts for employee stock based compensation in accordance with the provisions of ASC Topic 718. For non-employee options and warrants, the company uses the fair value method as prescribed in ASC Topic 718. 

 

Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company uses the Black-Scholes option-pricing option model to value its stock option awards which incorporate the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life.

 

The Company accounts for equity based transactions with non-employees under the provisions of ASC SubtopicTopic 505-50, “Equity-Based“Equity-Based Payments to Non-Employees.Non-Employees.”  ASC SubtopicTopic 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if it is to pay cash or services instead of paying with or using the equity instrument.

 

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

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company's present or future financial statements.

14

 

COMPANY OVERVIEW

 

Headquartered in Jersey City, New Jersey, the Company engages in new product development, production, marketing, distribution and distributionsales of emerging beverage brands that are natural, USDA Organic and non-genetically modified.Non GMO Project Verified.

 

Results of Operations

 

Three Months Ended March 31, 20162017 and 20152016

 

Revenue

 

During the three months ended March 31, 2016,2017, the Company reported revenue of $250,712, an increase$241,960, a decrease of $181,827 or 264%$8,752 over revenue of $250,712 for the three months ended March 31, 2015. In 2016, revenue was comprised of sales of coconut water beverages.During the three months ended March 31, 2015, the Company reported revenue of $68,885. In 2015, revenue was comprised of sales from 100% juice products manufactured under the License Agreement.  2016.  

 

Cost of Revenue

 

Cost of Revenuerevenue includes finished goods purchase costs, production costs, raw material costs and freight in costs and slotting fees offered to customers.costs. Also included in Costcost of Revenuerevenue are adjustments made to inventory carrying amounts, including markdowns to market and write offs of expiring inventory.  As a result,market.

For the three months ended March 31, 2017, cost of revenue as a percentagewas $143,794 or 59% of sales can vary from period to period.

revenue. For the three months ended March 31, 2016, cost of revenue was $146,134 or 58% of revenue, compared to $338,166 or 491% of revenue for the three months ended March 31, 2015. During the three months ended March 31, 2015, Cost of Revenue included $145,747 for the write-off of expired inventory and $77,380 related to the discontinuance of its 100% juice products manufactured under the License Agreement.revenue.

 

Operating Expenses

 

For the three months ended March 31, 2016, selling, general and administrative2017, operating expenses were $213,817, a decrease of $272,323 over operating expenses of $486,140 of which $250,794 consisted of stock-based compensation costs. Forfor the three months ended March 31, 2015, selling, general and administrative expenses were $619,944, of which $394,143 consisted of stock-based compensation costs. The overall2016.

This decrease in selling, general and administrativeoperating expenses from 2016 to 2015 was $133,804. The decrease is attributable toprimarily comprised of a decrease in stock-based compensation costs of $143,349.

$250,067 and a decrease in selling costs of $23,250. Stock-based compensation costs to directors and employees, which consist of charges to income for vesting in connection with restricted stock issuances, stock options and warrants. Although stock-based compensation costs reducewarrants, were $726 for the Company’s earnings, they do not reduce cash and have no effect on working capital.

The termination of the License Agreement resulted in zero license feesthree months ended March 31, 2017 compared to $250,793 for the three months ended March 31, 2016. See Note 5 ofSelling expenses, including freight and delivery expenses, broker fees and outside sales fees were $52,195 for the Notesthree months ended March 31, 2017 compared to $75,445 for the Condensed Financial Statements for a discussion of the license fee.three months ended March 31, 2016.

 

Liquidity and Capital Resources

 

Liquidity

 

As of March 31, 2016,2017, the Company had a working capital deficiency of $382,372.$226,396. Net cash used in operating activities was $298,735$27,453 for the three months ended March 31, 2017, a decrease of $271,282 over net cash used in operating activities for the three months ended March 31, 2016. Included in this amountNet cash provided by financing activities was zero for the three months ended March 31, 2016 is an increase in accounts receivable of $213,855 and an increase in inventory of $59,699. Net cash provided by financing activities was2017 compared to $337,500 for the three months ended March 31, 2016.

As a result of the settlement and subsequent payment of accrued payroll through restricted stock equity issuances in April 2017, the Company’s liabilities were reduced by $588,100. As discussed in Note 9 to the Notes to Condensed Financial Statements, the issuances are restricted, non-transferable, non-voting, and not eligible for dividends. The restriction will be lifted when the Company generates over $3,000,000 in revenue in a consecutive twelve month period. If these issuances had occurred on March 31, 2017, the Company’s working capital would have been in excess of $350,000 and not a deficit of $226,396.

Working Capital Needs

Our working capital requirements increase when we experience aas demand grows for our products. Due to an increased demand, the Company raised $337,500 of additional funds during the three months ended March 31, 2016 through the issuance of equity securities. See Note 6 of the Notes to the Condensed Financial Statements for further discussion. If during the next twelve months the Company requires additional working capital, it may seek to raise additional funds.  Financing transactions may include the issuance of equity or debt securities or obtaining credit facilities, or other financing mechanisms. Further, if the Company issues additional equity or convertible debt securities, stockholders may experience dilution and the new equity securities could have rights, preferences or privileges senior to those of existing holders of the Company’s Common Stock. If additional financing is not available or is not available on acceptable terms, the Company’s operations could be impacted.facilities.

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company had no off-balance sheet arrangements as of March 31, 2016.2017.  

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

 

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

Management’s Annual Report on Internal Control over Financial Reporting

 

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

 

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

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal controls over financial reporting during the three months ended March 31, 20162017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

  

ITEM 1.  LEGAL PROCEEDINGS

 

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

 

ITEM 1A.  RISK FACTORS

 

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

   

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

 

As of March 31, 2016, the Company issued 964,286 shares of common stock and a common stock purchase warrant to acquire 482,143 shares of common stock to four accredited investors in consideration of $337,500. The warrants are exercisable at an exercise price of $0.70 per share exercisable for a period of two years from the date of issuance.None.

The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act. The investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act.

  

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None. 

 

ITEM 4.  MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5.  OTHER INFORMATION

 

15

ITEM 6.  EXHIBITS

 

Exhibit No.SEC Report Reference NumberDescription
2.12.1Agreement and Plan of Merger by and among Specialty Beverage and Supplement, Inc., SBSI Acquisition Corp.  and MOJO Ventures, Inc. dated May 13, 2011 (1)
   
2.22.1Split-Off Agreement, dated as of October 27, 2011, by and among MOJO Ventures, Inc., SBSI Acquisition Corp., MOJO Organics, Inc., and the Buyers party thereto (2)
   
3.13.1Certificate of Incorporation of MOJO Shopping, Inc. (3)
   
3.23.1Amendment to Certificate of Incorporation of MOJO Ventures, Inc. (4)
   
3.33.1Certificate of Amendment to Certificate of Incorporation of MOJO Ventures, Inc. (5)
   
3.43.4Articles of Merger (1)
   
3.53.1Certificate of Amendment to Certificate of Incorporation of MOJO Organics, Inc. (9)
   
3.63.1Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (11)
   
3.73.1Amended and Restated Bylaws of MOJO Ventures, Inc. (6)
   
3.83.8Amendment No. 1 to Amended and Restated Bylaws of MOJO Organics, Inc. (13)
   
4.14.1Subscription Agreement by and between MOJO Organics, Inc. and Wyatts Torch Equity Partners, LP (17)
   
4.24.2Warrants issued to Wyatts Torch Equity Partners, (LP (17)
   
4.34.3Form of Common Stock Purchase Warrant issued to the March 2016 Investors*
   
10.110.1Form of Second Amended and Restated Restricted Stock Agreement (14)
   
10.210.62012 Long-Term Incentive Equity Plan (13)
   
10.310.7Form of Stock Option Agreement under the 2012 Long-Term Incentive Equity Plan (13) †
   
10.410.8Form of Indemnification Agreement with officers and directors (13)
   
10.510.1Form of Promissory Note issued to OmniView Capital LLC and Paul Sweeney (11)
   
10.610.2Advisor Agreement with OmniView Capital LLC (11)
   
10.710.3Amended and Restated Securities Purchase Agreement (11)
   
10.810.4Registration Rights Agreement (11)
   
10.910.5Commitment letter executed by each of Glenn Simpson, Jeffrey Devlin and Richard Seet (11)
   
10.1010.6Amendment to Richard X. Seet Restricted Stock Agreement (11)
10.11 10.7 Letter Agreement relating to nominee right of OmniView Capital LLC (11)
     
10.12 10.1  Juice License Agreement between Chiquita Brands L.L.C. and MOJO Organics, Inc. dated as of August 15, 2012 (12)
     
10.13 10.17 Form of Subscription Agreement for 2013 Offering (13)
     
10.14 10.18 Employment Agreement dated March 1, 2013 between MOJO Organics, Inc. and Glenn Simpson (13) †
     
10.15 10.15 Form of Advisor Agreement (14)
     
10.16 10.16 Form of Restricted Stock Agreement, dated December 4, 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Richard Seet, Jeffrey Devlin and Nicholas Giannuzzi.  (14) †
     
10.17 10.17 Form of Restricted Stock Agreement, dated March 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Richard Seet, Jeffrey Devlin, Peter Spinner and Marianne Vignone. (14) †
     
10.18 10.18 Form of Subscription Agreement for March 2014 Stock (with Warrants) Offering (14)
     
10.19 10.18 Form of Warrant (14)
     
10.20 10.20 Form of Subscription Agreement for March 2014 Stock Offering (14)
     
10.21 10.21 Form of Distribution Agreement
     
10.22 10.2 Form of Stock Option Agreement under the 2012 Long-Term Incentive Equity Plan, dated August 14, 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Peter Spinner, Richard Seet, Jeffery Devlin and Marianne Vignone. (15)
     
10.23 10.3 Employment Agreement, dated August 12, 2014, between MOJO Organics, Inc. and Peter Spinner. (15)
     
10.24 10.1 Form of Restricted Stock Agreement, dated August 12, 2014, between MOJO organics, Inc. and Peter Spinner. (15)
     
10.25 10.25 Amended and Restated Employment Agreement by and between MOJO Organics, Inc. and Glenn Simpson dated June 15, 2015 (16)
     
10.26 10.26 Amended and Restated Employment Agreement by and between MOJO Organics, Inc. and Peter Spinner dated June 15, 2015 (16)
     
10.27 10.1 Letter Agreement by and between MOJO Organics Inc. and Peter Spinner dated December 15, 2015(18)
     
16.1 16.1 Letter from Liggett, Vogt & Webb, P.A. (16)
     
16.2 16.1 Letter from Cowan, Gunteski & Co., P.C. dated April 21, 2016 (19)
     
31.1* 31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1* 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10.1110.7Letter Agreement relating to nominee right of OmniView Capital LLC (11)
   
10.1210.1Juice License Agreement between Chiquita Brands L.L.C. and MOJO Organics, Inc. dated as of August 15, 2012 (12)
   
10.1310.17Form of Subscription Agreement for 2013 Offering (13)
   
10.1410.18Employment Agreement dated March 1, 2013 between MOJO Organics, Inc. and Glenn Simpson (13) †
   
10.1510.15Form of Advisor Agreement (14)
   
10.1610.16Form of Restricted Stock Agreement, dated December 4, 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Richard Seet, Jeffrey Devlin and Nicholas Giannuzzi.  (14) †
   
10.1710.17Form of Restricted Stock Agreement, dated March 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Richard Seet, Jeffrey Devlin, Peter Spinner and Marianne Vignone. (14) †
   
10.1810.18Form of Subscription Agreement for March 2014 Stock (with Warrants) Offering (14)
   
10.1910.18Form of Warrant (14)
   
10.2010.20Form of Subscription Agreement for March 2014 Stock Offering (14)
   
10.2110.21Form of Distribution Agreement
   
10.2210.2Form of Stock Option Agreement under the 2012 Long-Term Incentive Equity Plan, dated August 14, 2014, between MOJO Organics, Inc. and each of Glenn Simpson, Peter Spinner, Richard Seet, Jeffery Devlin and Marianne Vignone. (15)
   
10.2310.3Employment Agreement, dated August 12, 2014, between MOJO Organics, Inc. and Peter Spinner. (15)
   
10.2410.1Form of Restricted Stock Agreement, dated August 12, 2014, between MOJO organics, Inc. and Peter Spinner. (15)
   
10.2510.25Amended and Restated Employment Agreement by and between MOJO Organics, Inc. and Glenn Simpson dated June 15, 2015 (16)
   
10.2610.26Amended and Restated Employment Agreement by and between MOJO Organics, Inc. and Peter Spinner dated June 15, 2015 (16)
   
10.2710.1Letter Agreement by and between MOJO Organics Inc. and Peter Spinner dated December 15, 2015(18)
   
16.116.1Letter from Liggett, Vogt & Webb, P.A. (16)
   
16.216.1Letter from Cowan, Gunteski & Co., P.C. dated April 21, 2016 (19)
   
31.131.1Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.132.1Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

*  Filed herewith.

† Management compensatory plan, contract or arrangement.

 (1)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the Securities and Exchange Commission (the “SEC”) on May 18, 2011.

 

 (2)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on November 2, 2011.

 

 (3)Incorporated by reference to the Registrant's Registration Statement on Form SB-2 as an exhibit, numbered as indicated above, filed with the SEC on December 19, 2007.

 

 (4)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on May 4, 2011.

 

 (5)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on January 4, 2012.

 

 (6)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on October 31, 2011.

 

 (7)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on August 12, 2011.

 

 (8)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on June 8, 2011.

 

 (9)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on April 2, 2013.

 

 (10)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q as an exhibit, numbered as indicated above, filed with the SEC on June 25, 2013.

 

 (11)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on February 1, 2013.

 

 (12)Incorporated by reference to the Registrant’s Current Report on Form 8-K/A as an exhibit, numbered as indicated above, filed with the SEC on February 7, 2013.  Portions of the exhibit and/or related schedules or exhibits thereto have been omitted pursuant to a request for confidential treatment, which has been granted by the Commission. 

 

 (13)Incorporated by reference to the Registrant’s Current Report on Form 10-K as an exhibit, numbered as indicated above, filed with the SEC on September 24, 2013.

 

 (14)Incorporated by reference to the Registrant’s Annual Report on Form 10-K as an exhibit, numbered as indicated above, filed with the SEC on April 16, 2014.

 

 (15)Incorporated by reference to the Registrant’s Annual Report on Form 10-Q as an exhibit, numbered as indicated above, filed with the SEC on October 2, 2014.

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

 (17)Incorporated by reference to the Registrant’s Annual Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on August 25, 2015.

 (18)Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on December 15, 2015.

 (19)

Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on April 22, 2016.

SSIGNATURESIGNATURES

 

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

 

 MOJO ORGANICS, INC.
   
Dated: April  29, 2016May 1, 2017By:/s/ Glenn Simpson
  

Glenn Simpson, Chief

Executive Officer and Chairman

(Principal Executive and Principal

Financial Officer)