EQUATOR Beverage Co - Quarter Report: 2017 September (Form 10-Q)

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: September 30, 2017

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

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 ☐

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:

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

Yes ☐  No ☒

On September 30, 2017, there were 26,181,781 shares of the registrant's common stock, par value $0.001, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None. 

TABLE OF CONTENTS

MOJO ORGANICS, INC.

Notes to Condensed Financial Statements

September 30, 2017

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 engages in new product development, production, marketing, distribution and sales of beverage brands that are natural, USDA Organic and Non GMO Project Verified.

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 nine months ended September 30, 2017 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, 2016 included in the Company’s Annual Report on Form 10-K. 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Cash and Cash Equivalents

Cash equivalents include investment instruments and time deposits purchased with a maturity of three months or less. As of September 30, 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 September 30, 2017 and December 31, 2016 was zero.

Inventories

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

Supplier Deposits

Supplier deposits consist of payments to manufacturers for future production.

Revenue Recognition

Revenue from sales of products is recognized when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Costs incurred for sales incentives and discounts are accounted for as a reduction in revenue.

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

Basic EPS is computed by dividing the loss available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the periods.

The following potentially dilutive securities have been excluded from the computation of weighted average shares outstanding as they would have had an anti-dilutive impact on the Company’s net loss per common share:

Income Taxes

The Company provides for income taxes using the asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. As of September 30, 2017 and December 31, 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.

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 all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2017. In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued. 

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09. Revenue from Contracts with Customers (Topic 606), which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition. The ASC is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. The new guidance will be effective for public companies for annual periods beginning after December 15, 2017. The ASU permits application of the new revenue recognition guidance to be applied using one of two retrospective application methods. The Company currently recognizes revenue as soon as delivery of goods has occurred. The new pronouncement will have no material impact on the financial statements.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

Employment Agreements

On April 6, 2017, the Company entered into Amended and Restated Employment Agreements with Mr. Glenn Simpson (the “Simpson Agreement”), the Company’s Chairman and Chief Executive Officer (the “CEO”) and Mr. Peter Spinner (the “Spinner Agreement”), the Company’s Chief Operating Officer (the “COO”). The Simpson Agreement and the Spinner Agreement were effective April 1, 2017 and have eight year terms.

Pursuant to the Simpson Agreement, Mr. Simpson will be paid a salary of $5,000 per month in cash and the right to receive 67,000 shares of restricted Common Stock per month. These shares have no voting rights, are not eligible for dividends and are non-transferable unless the restriction is lifted. The restriction shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period. Additionally, Mr. Simpson is entitled to an annual bonus comprised of cash and Common Stock based on performance goals established by the Board of Directors of the Company as set forth in the Simpson Agreement.  The cash bonus is established at $44,400 per year. The stock bonus is set at 200,000 shares of Common Stock per year through December 31, 2025 based upon revenue performance goals. The revenue goals range from $2,400,000 to $19,200,000 per year. The bonus awards may be accelerated should revenue exceed the annual target amounts.

Pursuant to the Spinner Agreement, Mr. Spinner will be paid a salary of $5,000 per month in cash and the right to receive 55,000 shares of restricted Common Stock per month. These shares have no voting rights, are not eligible for dividends and are non-transferable unless the restriction is lifted. The restriction shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period. Additionally, Mr. Spinner is entitled to an annual bonus comprised of cash and Common Stock based on performance goals established by the Board of Directors of the Company as set forth in the Spinner Agreement.  The cash bonus is established at $38,400 per year. The stock bonus is set at 200,000 shares of Common Stock per year beginning in the year 2020 through December 31, 2025 based upon revenue performance goals. The revenue goals range from $5,200,000 to $19,200,000 per year. The bonus awards may be accelerated should revenue exceed the annual target amounts.

Mr. Simpson was issued a one-time stock bonus equal to 1,882,237 shares of restricted Common Stock and stock options to purchase 995,546 shares of Common Stock at $0.16 per shares as part of the Simpson Agreement. The 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 during a consecutive twelve month period. See Notes 4 and 5.

 
Mr. Spinner was issued a one-time stock bonus equal to 597,632 shares of restricted Common Stock and stock options to purchase 861,013 shares of Common Stock at $0.16 per shares as part of the Spinner Agreement. The 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 during a consecutive twelve month period. See Notes 4 and 5.

Lease Commitment

The Company maintains office space in Jersey City, New Jersey. The company leased the space pursuant to a lease agreement dated September 15, 2016 at a rate of $2,230 per month. The lease agreement was terminated on February 28, 2017. The Company signed a new lease agreement for the period March 1, 2017 to February 28, 2018. The new rent under this agreement is $2,259 per month. Lease expense amounted to $23,488 and $17,488 for the nine months ended September 30, 2017 and 2016, respectively.

NOTE 4 – 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 (the “2015 Plan”), which provides the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.

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. The 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.

Restricted Stock Compensation

The CEO and COO agreed to forego the receipt of $598,100 owed to them for salary and bonus in exchange for shares of restricted Common Stock. In May 2017, the Company issued an aggregate 3,138,125 shares of restricted Common Stock as settlement of that liability. The shares issued have no voting rights, are not eligible for dividends and are non-transferable unless the restrictions are lifted. The restrictions shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period.

Also in May 2017, the Company issued an aggregate 2,479,869 restricted shares of Common Stock to the CEO and COO as part of the Simpson Agreement and Spinner Agreement, respectively. These shares have no voting rights, are not eligible for dividends and are non-transferable unless the restrictions are lifted. The restrictions shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period. See Note 3 for further discussion.

Pursuant to the Simpson Agreement and the Spinner Agreement, the Company issued 201,000 shares and 165,000 shares, respectively, to the CEO and COO for the stock portion of their monthly compensation for the quarter ended September 30, 2017. These restricted shares have no voting rights, are not eligible for dividends and are non-transferable unless the restrictions are lifted. The restriction shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period.

During the quarter ended September 30, 2017, the Company issued 1,128,125 shares of restricted Common Stock to certain of its executive officers. The shares issued have no voting rights, are not eligible for dividends and are non-transferable unless the restrictions are lifted. The restrictions shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period.

In connection with the issuance 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.

The Company recorded $577,281 and $463,970 for restricted stock based compensation costs for the nine months ended September 30, 2017 and September 30, 2016, respectively.  As of September 30, 2017, there was $490,426 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation which vests only upon the achievement of certain performance criteria.

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

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 February 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.

The following table summarizes warrant activity during the period:

Advisory Services

On October 3, 2013, the Company entered into an agreement with Ian Thompson of Northern Ireland for strategic business advisory services, public relations services and investor relations services with Ian Thompson.  In connection with this agreement, the Company issued 167,204 shares of restricted Common Stock and recorded consulting fees of $501,612 during 2013, which was the fair market value of the stock on the date of issue.  The stock is vested; however it is restricted from trading. Ian Thompson was also issued 200,000 shares of restricted Common Stock, which was to vest quarterly based upon the Company reaching certain market capitalization and revenue goals, in addition to providing the above services, with the last tranche vesting scheduled to vest on June 30, 2014. Consulting fees amounting to $105,000 and $280,000 were recorded in 2014 and 2013, respectively, related to the 200,000 shares of Common Stock.  Throughout the term of the agreement, the Company requested that Ian Thompson render performance under the agreement and to provide evidence of same. Ian Thompson failed to perform in all material respects under the terms of the agreement and refused to provide evidence.

On June 27, 2014, the Company terminated the agreement.  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 5 – STOCK OPTIONS

On April 6, 2017, the Company granted stock options to purchase 356,559 shares and 1,500,000 shares of Common Stock pursuant to the 2012 Plan and the 2015 Plan, respectively. See note 3. The options were priced at the fair market value of the Common Stock and are immediately exercisable.

The following table summarizes stock option activity under the Plans:

During the nine months ended September 30, 2017 and 2016, compensation expense related to stock options of $214,690 and $37,618, respectively, was recorded. As of September 30, 2017, there was no unrecognized compensation cost related to non-vested stock options.

NOTE 6 – RELATED PARTY TRANSACTIONS

In August 2017, the Company settled all of its accrued payroll balance at June 30, 2017. The CEO and the COO agreed to forego the receipt of cash owed to them as of June 30, 2017 of $10,000 each in exchange for shares of restricted Common Stock, which have no voting rights, are not eligible for dividends and are non-transferable unless the restrictions are lifted and the restrictions shall be lifted only upon the generation of $3,000,000 in revenue by the Company during a consecutive twelve month period. In addition, the Company paid its remaining accrued payroll balance of $16,514 in cash.

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 CEO and the COO forgave unpaid salary due to them of $96,000 and $81,000, respectively.

In January 2016, the Company sold 285,715 shares of Common Stock and warrants to purchase 142,857 shares of Common Stock at $0.70 per share to Wyatts for $100,000 pursuant to the 2016 Subscription. The managing member of Wyatts is the COO of the Company, as well as a Director of the Company.

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:

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 employee 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.

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 Topic 505-50, “Equity-Based Payments to Non-Employees.”  ASC Topic 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

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09. Revenue from Contracts with Customers (Topic 606), which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition. The ASC is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. The new guidance will be effective for public companies for annual periods beginning after December 15, 2017. The ASU permits application of the new revenue recognition guidance to be applied using one of two retrospective application methods. The Company currently recognizes revenue as soon as delivery of goods has occurred. The new pronouncement will have no material impact on the financial statements.

COMPANY OVERVIEW

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

Results of Operations

Nine Months Ended September 30, 2017 and 2016

Revenue

During the nine months ended September 30, 2017, the Company reported revenue of $1,025,597, a decrease of $ 147,576 from revenue of $1,173,173 for the nine months ended September 30, 2016.  The decrease in revenue was primarily due to promotional costs incurred in opening new accounts and transitioning the MOJO brand from private label business.

Cost of Revenue

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

For the nine months ended September 30, 2017, cost of revenue was $621,814 or 61% of revenue. For the nine months ended September 30, 2016, cost of revenue was $682,232 or 58% of revenue. The increase in cost was primarily due to higher freight in costs.

Operating Expenses

For the nine months ended September 30, 2017, operating expenses were $1,450,540, an increase of $130,666 over operating expenses of $1,319,874 for the nine months ended September 30, 2016.

This increase in operating expenses was primarily comprised of an increase in stock-based compensation costs of $281,448, partially offset by a decrease in selling costs of $130,971. 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, was $928,593 for the nine months ended September 30, 2017 compared to $501,588 for the nine months ended September 30, 2016. Selling expenses, including freight and delivery expenses, broker fees and outside sales fees were $182,721 for the nine months ended September 30, 2017 compared to $313,692 for the nine months ended September 30, 2016. Net loss for the period decreased to $18,779 from $97,499 for the same period last year. This is an improvement of $78,720 from the same quarter last year 

Three Months Ended September 30, 2017 and 2016

Revenue

During the three months ended September 30, 2017, the Company reported revenue of $439,560, a decrease of $71,098 from revenue of $510,658 for the three months ended September 30, 2016.  The decrease in revenue was primarily due to promotional costs incurred in opening new accounts and transitioning the MOJO brand from private label business.

Cost of Revenue

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

For the three months ended September 30, 2017, cost of revenue was $252,309 or 57% of revenue. For the three months ended September 30, 2016, cost of revenue was $298,606 or 58% of revenue.

Operating Expenses

For the three months ended September 30, 2017, operating expenses were $206,029, a decrease of $105,580 over operating expenses of $311,609 for the three months ended September 30, 2016. This decrease in operating expenses was primarily comprised of a decrease in selling costs of $73,990 and decrease in freight and delivery costs of $30,211.

Liquidity and Capital Resources

Liquidity

As of September 30, 2017, the Company had working capital of $426,626. Net cash used in operating activities was $7,719 for the nine months ended September 30, 2017, a decrease of $336,260 over net cash used in operating activities for the nine months ended September 30, 2016. Net cash provided by financing activities was zero for the nine months ended September 30, 2017 compared to $337,500 for the nine months ended September 30, 2016.

Working Capital Needs

Our working capital requirements increase as demand grows for our products. Should the Company require additional working capital in the next twelve months, it may seek to raise funds.  Financing transactions could include the issuance of equity or debt securities or obtaining credit facilities.

OFF-BALANCE SHEET ARRANGEMENTS

The Company had no off-balance sheet arrangements as of September 30, 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 September 30, 2017 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

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None. 

ITEM 4.  MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.  OTHER INFORMATION

ITEM 6.  EXHIBITS

*  Filed herewith.

† Management compensatory plan, contract or arrangement.

SIGNATURES

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