EQUATOR Beverage Co - Annual Report: 2019 (Form 10-K)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For Fiscal Year Ended: December 31, 2019

OR

  ☐ TRANSITION REPORT PURSUANT TO UNDER 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: 929 264 7944

Securities registered under Section 12(b) of the Act: None           

Securities registered under Section 12(g) of the Act: Common Stock, $0.001 par value per share          

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes  ☐     No ☒

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ☒

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 ☒

As of December 31, 2019 (the last day of the registrant’s most recently completed third quarter), the aggregate market value of the registrant’s common stock (based on its reported last sale price on such date of $0.27 per share) held by non-affiliates of the registrant was $7,924,850.

On March 31, 2020 there were 29,723,544 shares of the registrant's common stock, par value $0.001, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements using words such as “expects,” “anticipates,” “intends,” “believes” and similar language.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the sections “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

All references in this Annual Report on Form 10-K to “MOJO,” “MOJO Organics,” the “Company,” “we,” “us” or “our” mean MOJO Organics, Inc.

PART I

ITEM 1.  BUSINESS

COMPANY OVERVIEW

MOJO Organics, Inc. (“MOJO” or the “Company”) a Delaware corporation is headquartered in Jersey City, NJ. The Company engages in new product development, production, marketing, distribution and sales of beverage brands that are natural, Non GMO Project verified, and USDA Organic.

CURRENT OPERATIONS

Sales and Distribution

The Company’s flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produced Sparkling Coconut Water, Coconut Water + Mango Juice and Coconut Water + Pineapple Juice in 2019. We seek to grow the market share of our products by expanding our hybrid distribution network through the relationships and efforts of our management and third party partners an improved broker network, and new products and packaging in 2020, including pH7 water (pH is a scale of acidity) and energy beverages which are both major sectors of the beverage industry. The company packages its beverages  in 100% recyclable, Eco-Friendly packaging that can be recycled infinite times and is not made from carbon oil based packaging. The packaging has a very low impact on the environment, and does not contribute to landfills and the pollution of our bodies of water. 

Production

The Company has multiple sources for its production.  The Company’s fruit sources are of high quality. The fruit is part of the overall taste and quality of our products.  Currently, the Company has multiple production facilities that it could source products from, each of the facilities could supply our forecasted demand for 2020 .

Competition

The beverage industry is competitive.  Competitors in our market compete for brand recognition, ingredient sourcing, product shelf space, and e-commerce page rankings.  Our competitors have similar distribution channels and retailers to deliver and sell their products.   

Government Regulation

Within the United States, beverages are governed by the U.S. Food and Drug Administration (the “FDA”).  As such, it is necessary for the Company to establish, maintain and make available for inspection records as well as to develop labels (including nutrition information) that meet FDA requirements.  The Company’s production facilities are subject to FDA regulation.

Employees

As of December 31, 2019, the Company had three employees.  The Company also uses the services of contractors, consultants and other third-parties. We contract with food brokers to represent our products to specific specialized sales channels. We utilize the services of direct sales and distribution companies that deliver and sell our products to their customers. We contract with manufacturing facilities to produce our products and outsource the storage and transportation of our products.

CORPORATE HISTORY AND DEVELOPMENT

The Company was incorporated in 2007 and began producing MOJO branded products in 2016. MOJO Organics Inc is headquartered in Jersey City, and our internet site is www.MojoOrganicsInc.com. MOJO’s stock is traded on the OTC Markets under the symbol MOJO.

ITEM 1A.   RISK FACTORS

In addition to the other information set forth in this report, you should consider the following factors, which could materially affect our business, financial condition or results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

If we are unable to expand our operations in the marketplace, our growth rate could be negatively affected.

Our success depends in part on our ability to grow our business. We have adopted and implemented a strategic plan to increase awareness of our products, secure additional distribution channels, and foster and strengthen our supply, manufacturing and distribution relationships.   Our strategic plan includes addressing changes in the market.  There can be no assurance that we will achieve the growth necessary to achieve our objectives.

We could need additional capital in the future to expand our operations and execute our business objectives.

Should we need additional capital to expand our operations, financing transactions may include the issuance of equity, debt securities, and credit facilities.

The challenges of competing with other beverage companies could result in reductions to our revenue and operating margins.

The nonalcoholic beverage segment of the beverage industry is competitive. We compete with numerous beverage companies, including those marketing similar products. All beverages companies are competing for stomach share on a daily basis which is approximately 64 oz. of fluid per day, per person. Our success depends on our ability to secure distribution channels for our products, our ability to make consumers aware of our products and the appeal of our products to consumers. 

Disruption of supply, increases in costs or shortages of ingredients could affect our operating results.

Availability of supply and the prices charged by the producers of production inputs used in our products can be affected by a variety of factors, including the general demand by other buyers for the same fruits used by us in our products, and country politics and country economics in the area in which our fruit is grown.  

The quality of fruit we seek trades on a negotiated basis, depending on supply and demand at the time of the purchase. An increase in the price of any fruit that we use in our products will have a negative effect on our margins should we be unable to increase our sales price. Higher energy costs may increase the cost of transporting our supplies. Changes in emission rules for maritime vessels will likely increase costs of shipping our products. Conversely, lower fruit prices and lower energy prices will have a positive result on transport and packaging costs.

We use independent bottlers for the filling of our products and, as such, are subject to the bottler’s production and quality control.

We use independent bottlers for the production of our products. Accordingly, we are dependent on the bottlers and their ability to meet production demands and to achieve product quality.   We play an active roll in the production of our beverages, which includes but is not limited to developing our formulations, maintaining control over the labeling and packaging of our beverates, independent Underwriters Laboratories testing of our products for safetly, and packaging and function of our packaging and correct FDA labeling. We also review and monitor the safety certifications of the factories including their status with the United States Food and Drug Administration. We also inspect the warehouses that our products are stored in, and monitor the trucking companies that deliver our goods.  

Litigation and publicity concerning food quality, health claims, and other issues could expose us to significant liabilities.

The packaged food industry can be adversely affected by litigation and complaints from customers and government authorities resulting from product quality, health claims, allergens, illness, and injury. Adverse publicity about these allegations may negatively affect the Company, regardless of whether the allegations are true. In addition, the food industry has been subject to a number of claims based on the nutritional content of food products they sell, and disclosure and advertising practices. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot predict the ultimate outcome of any such proceedings. An unfavorable outcome will have an adverse impact on our business. In addition, any litigation or regulatory proceedings may result in substantial costs.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.  PROPERTIES

The Company maintains office space in Jersey City, NJ. The lease agreement is for the period March 1, 2019 to February 29, 2020 and was renewed for one year under the same terms. The rent under this agreement is $2,343 per month, and expires February 28, 2021.

ITEM 3.  LEGAL PROCEEDINGS

We are not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against the Company in all material aspects. We could from time to time become a party to various legal or administrative proceedings arising in the course of our business. 

ITEM 4.  MINE SAFETY DISCLOSURE

Not applicable.

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Common Stock is currently quoted on the OTCQB under the symbol MOJO.

For the period January 1, 2018 to December 31, 2019, the following table sets forth the high and low closing bid prices by quarter, based upon information obtained from inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions : 

Holders

As of December 31, 2019, there were 29,351,294 shares of Common Stock issued and outstanding held by 944 shareholders of record.

Dividends

The Company has not declared a cash dividend with respect to its Common Stock. Future payment of dividends is within the discretion of the Board of Directors and will depend on earnings, capital requirements, financial condition and other relevant factors.

Recent Sales of Unregistered Securities, Use of Proceeds from Registered Securities

There were no sales of unregistered securities during the years ended December 31, 2019 and 2018.

Issuer Purchases of Equity Securities

During the year ended December 31, 2019, the Company repurchased 4,167 shares of MOJO Restricted Common Stock from shareholders at a cost of $750 with an average purchase price of $0.18. The shares were cancelled.

Equity Compensation Plans

2012 Incentive Plan

The 2012 Incentive Plan was terminated by the Board of Directors on February 18, 2019. The Company’s Board of Directors resolved that the 2012 Incentive Plan which allowed the issuance of up to 2,050,000 securities to officers, directors and consultants as incentive compensation would be terminated. It was further resolved that 70,000 options to purchase shares of common stock issued under the 2012 Incentive Plan be converted into 70,000 shares of Common Stock. Another resolution was made that Mr. Glenn Simpson be permitted to exercise his option to purchase 222,000 shares of Common Stock for $0.255 per share.

The 2012 Incentive Plan was approved by our shareholders in March 2013. The 2012 Incentive Plan provided the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or other stock-based awards for up to an aggregate of 2,050,000 shares of common stock.  In 2016, the Company issued 620,000 stock options to purchase shares of common stock that expire in August 2019, and issued 1,073,441,restricted common stock to its Directors and employees. In 2017, the Company granted stock options to purchase 356,559 shares that expire in April 2022. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2012 plan. As of December 31, 2018, issued stock options total 976,559. During 2018, 495,403 stock options had been cancelled due to termination of employment and were available for reissuance at that time.

2015 Incentive Plan

The 2015 Incentive Plan was terminated by the Board of Directors on January 24, 2019. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.

The Company approved the 2015 Incentive Plan in October 2015. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock. In April, 2017, the Company granted stock options to purchase 1,500,000 shares of Common Stock pursuant to the 2015 Plan. The options were priced at the fair market value of the Common Stock and were exercisable from the date of issuance. In 2018, there were no issuances under the 2015 plan. As of December 31, 2018, issued stock options total 1,500,000. During 2018, 693,610 stock options had been cancelled due to termination of employment.

The following tables sets forth certain information at December 31, 2019 and 2018 with respect to our equity compensation plans that provide for the issuance of options, warrants or rights to purchase our securities.

During 2019, the CEO exercised 222,000 options from the 2012 Plan and 333,688 from the 2015 Plan.

ITEM 6.  SELECTED FINANCIAL DATA 

Not applicable.

ITEM 7.   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.

Significant Accounting Policies

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

All of our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements, included elsewhere in this Annual Report. We have identified the following as our significant 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 significant 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.

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

In March 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-01, “Leases(Topic 842): Codification Improvements”. The ASC aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing essential information about leasing transactions. The Company has assessed that this pronouncement had no impact on the financial statements.

Results of Operations

Years Ended December 31, 2019 and 2018

Revenue

During the year ended December 31, 2019, the Company reported revenue of $1,743,021, an increase of $54,194 or 3% over revenue of $1,688,827 for the year ended December 31, 2018. The increase in revenue was due to higher dollar sales in MOJO branded products. We also saw growth in same store sales. Also, the addition of new accounts opened added to the growth of revenue in 2019.

Cost of Revenue

Cost of Revenue includes finished goods purchase costs, and freight in costs.  Also included in Cost of Revenue are adjustments made to inventory carrying amounts, if required.

For the year ended December 31, 2019, cost of revenue was $908,408 or 52% of revenue, compared to $898,806 or 53% of revenue for the year ended December 31, 2018. The positive decrease is due primarily to the lower purchase price of inventory.

Operating Expenses

For the year ended December 31, 2019, selling, general and administrative expenses was $1,131,812, a 6% decrease of $81,469 from the year ended December 31, 2018 of $1,213,281. 

This decrease in operating expenses was primarily comprised of a decrease in compensation costs and consulting fees. Compensation costs decreased by $34,247 in 2019 from 2018. This is primarily attributable to lower stock compensation costs. Selling costs, including freight and delivery expenses, broker fees and warehouse costs increased by $3,955 from 2018 to 2019. This was partially due to an increase in sales volume. Consulting fees also decreased in 2019 by $50,683 .

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 $8,400 for the year ended December 31, 2019, compared to $0 for the year ended December 31, 2018.  

Liquidity and Capital Resources

Liquidity

As of December 31, 2019, the Company had working capital of $171, 360 . Net cash provided by operating activities was $ 33,197 for the year ended December 31, 2019, an increase of $15,058 compared to net cash provided by operating activities for the year ended December 31, 2018 of $17,639 Net cash used in financing activities to repurchase MOJO Restricted Common Stock was $750 for the year ended December 31, 2019 compared to $15,965 for the year ended December 31, 2018.

Working Capital Needs

Our working capital requirements increase as demand grows for our products. During 2019 and 2018, the Company did not require additional funding. If the Company requires additional working capital during the next twelve months, it may seek to raise additional funds.  Financing transactions may include the issuance of equity, debt securities and obtaining credit facilities.

OFF BALANCE SHEET ARRANGEMENTS

The Company had no off balance sheet arrangements as of December 31, 2019. 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 8.   FINANCIAL STATEMENTS

The audited financial statements are included beginning immediately following the signature page to this report. See Item 15 for a list of the financial statements included herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A.  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 not operating effectively.

As previously reported, the Company does not have an audit committee and is not currently obligated to have one. Management does not believe that the lack of an audit committee is a material weakness.

Attestation Report

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as such report is not required for non-accelerated filers.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls over financial reporting during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.  OTHER INFORMATION

Not Applicable.

PART III

ITEM 10.      DIRECTORS, EXECUTIVE OFFICER, AND CORPORATE GOVERNANCE

Executive Officer and Directors

Below are the names and certain information regarding our current executive officer and directors:

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Biographical information of each current officer and director is set forth below.

Glenn Simpson is Chairman of the Board of Directors and Chief Executive Officer of the Company.  Mr. Simpson joined the Company in October 2011.  He has extensive experience in the beverage industry.   Mr. Simpson was Vice President and Chief Financial Officer of Coca-Cola Bottlers, Inc. in Uzbekistan from 1995 to 2000.  His primary responsibilities included corporate strategy, supervision of bottling and distribution operations and facilities construction.  His accomplishments included growing revenues from a base at $4 million to over $160 million annually.  The company was awarded “Bottler of the Year” by The Coca-Cola Company for two consecutive years under his leadership based upon product quality and revenue growth. From 2009 to 2011, Mr. Simpson was engaged in beverage projects on a consulting basis in Russia and Afghanistan.  Mr. Simpson is a Certified Public Accountant and holds an MBA from Columbia University School of Business.

Jeffrey Devlin has served on the Board of Directors of the Company since January 2012. Mr. Devlin has over 35 years of advertising and business development experience.  Mr. Devlin currently serves as Chairman, US Government Practice at WPP, which is a world leader in marketing communications services. He has held various other executive and creative positions over the course of his advertising career, including launching the introduction of Diet Coke for The Coca-Cola Company. Mr. Devlin currently serves on the board of directors of a number of private organizations, as well as on the board of directors of Location Based Technologies, Inc., a publicly traded company. Mr. Devlin received a Bachelor’s degree from Bethel University.

Board Committees

The Company has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations. Our two directors perform all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

Shareholder Communications

Currently, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

Code of Ethics

We have adopted a written code of ethics (the “Code of Ethics”) that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To request a copy of the Code of Ethics, please make written request to our Company at 185 Hudson Street, Floor 25, Jersey City, New Jersey 07302.

Section 16(a) Beneficial Ownership Reporting Compliance

Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes in that ownership with the SEC.  To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2018 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.

ITEM 11.   EXECUTIVE COMPENSATION

The following table sets forth information concerning the total compensation paid or earned by each of our named executive officers (as defined under SEC rules). 

The Summary Compensation Table omits columns for Option Awards, Non-Equity Incentive Plan Compensation, Non-Qualified Deferred Compensation Earnings and All Other Compensation as no such amounts were paid to the named executive officers during the fiscal years ended December 31, 2019 or 2018. 

(1) Pursuant his employment agreement (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. Pursuant to this agreement, Mr. Simpson is also entitled to an annual bonus comprised of cash and Common Stock based on performance goals established by the Board of Directors of the Company. The cash bonus is established at $44,400 per year. The stock bonus is set at 200,000 shares of Common Stock per year through May 31, 2025 based upon revenue performance goals. The revenue goals range from $900,000 to $19,200,000 per year. The bonus awards are accelerated should revenue exceed the annual target amounts.

During the twelve months ended December 31, 2019, 804,000 shares of Non-trading, Restricted Common Stock were issued to the CEO for the stock portion of his compensation. During 2018 and 2019, he did not receive cash payments. Mr. Simpson received non-trading, restricted stock in lieu of cash for the first quarter of 2018, and was owed $45,000 as of December 31, 2018.

During 2019, the CEO exercised stock options to purchase 555,688 non-trading, restricted shares. The total exercise price reduced the accrued salary owed to him by $95,000 and reduced a non-interest loan payable to the CEO by 15,000. He was owed $10,000 as of December 31, 2019 for the cash portion of his salary.

Mr. Simpson’s employment agreement is the only executive employment agreement in effect as of December 31, 2019.

(2) Mr. Spinner received $5,000 paid in stock each month for part-time employment under an employment agreement in force at that time. Mr. Spinner’s employment with MOJO ended on March 31, 2018.  

The Company has no other plans in place and has never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

Employment Agreements

The “Simpson Agreement” is the only employment agreement in effect as of December 31, 2019. See discussion above.

Outstanding Option Awards at December 31

The following table sets forth information regarding stock options held by executive officers at December 31.

The Outstanding Equity Awards Table omits the number of securities underlying unexercised unearned options related to Option Awards and Equity incentive plan awardsshares, units or other rights that have not vested  related to stock awards, as no such awards were outstanding as of December 31, 2019 and December 31, 2018.

Option Exercises in 2019

On February 25, 2019, Mr. Simpson exercised options to purchase 222,000 shares of Non-Trading, Restricted, Common Stock at $0.255 per share and the accrued payroll owed to him was reduced by $56,610. On the same date, two directors who had 35,000 options each were issued a total of 70,000 shares of Common Stock following the resolution to terminate the 2012 Incentive Plan.

On August 13, 2019, Mr. Simpson exercised options to purchase 93,750 shares of Non-Trading, Restricted, Common Stock at $0.16 per share. The total exercise value is $15,000 and this reduced a non interest loan payable balance to the CEO to $0.

On November 1, 2019, Mr. Simpson exercised options to purchase 239,938 shares of Non-Trading, Restricted, Common Stock at $0.16 per share. The total exercise value is $38,390 and the accrued payroll owed to him was reduced by the same amount.

Director Compensation

The non-employee directors did not receive cash compensation for serving as such, for serving on committees (if any) of the Board of Directors or for special assignments. Board members are not reimbursed for expenses incurred in connection with attending meetings.  During the year ended December 31, 2019, there were no arrangements that resulted in our making payments to any of our non-employee directors for any services provided to us by them as directors.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information with respect to the beneficial ownership of our Common Stock known by us as of December 31, 2019 by:

Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our Common Stock owned by them, except to the extent such power may be shared with a spouse.

Securities Authorized For Issuance Under Equity Compensation Plans

2012 Incentive Plan

The 2012 Incentive Plan was terminated by the Board of Directors on February 18, 2019. The Company’s Board of Directors resolved that the 2012 Incentive Plan which allowed the issuance of up to 2,050,000 securities to officers, directors and consultants as incentive compensation would be terminated. It was further resolved that 70,000 options to purchase shares of common stock issued under the 2012 Incentive Plan be converted into 70,000 shares of Common Stock. Another resolution was made that Mr. Glenn Simpson be permitted to exercise his option to purchase 222,000 shares of Common Stock for $0.255 per share.

The 2012 Incentive Plan was approved by our shareholders in March 2013. The 2012 Incentive Plan provided the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or other stock-based awards for up to an aggregate of 2,050,000 shares of common stock.  In 2016, the Company issued 620,000 stock options to purchase shares of common stock that expire in August 2019, and issued 1,073,441,restricted common stock to its Directors and employees. In 2017, the Company granted stock options to purchase 356,559 shares that expire in April 2022. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2012 plan. As of December 31, 2018, issued stock options total 976,559. During 2018, 495,403 stock options had been cancelled due to termination of employment and were available for reissuance at that time.

2015 Incentive Plan

The 2015 Incentive Plan was terminated by the Board of Directors on January 24, 2019. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.

The Company approved the 2015 Incentive Plan in October 2015. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock. In April, 2017, the Company granted stock options to purchase 1,500,000 shares of Common Stock pursuant to the 2015 Plan. The options were priced at the fair market value of the Common Stock and were exercisable from the date of issuance. In 2018, there were no issuances under the 2015 plan. As of December 31, 2018, issued stock options total 1,500,000. During 2018, 693,610 stock options had been cancelled due to termination of employment and were available for reissuance at that time.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than as disclosed below and in this Form 10-K, there have been no transactions, since January 1, 2019, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years and in which any of our directors, executive officers or beneficial holders of more than 5% of our outstanding Common Stock, or any of their respective immediate family members, has had or will have any direct or material indirect interest. 

Director Independence

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to (and we do not) have our Board of Directors comprised of a majority of “Independent Directors.”

Our Board of Directors has considered the independence of its directors in reference to the definition of “independent director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board of Directors has reviewed all commercial and other relationships of each director in making its determination as to the independence of its directors. After such review, the Board of Directors has determined that Mr. Devlin qualifies as independent under the requirements of the Nasdaq listing standards.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The Company appointed MSPC, Certified Public Accountants and Advisors, a Professional Corporation (“MSPC”) as its independent registered public accounting firm.

The aggregate fees billed to the Company for services rendered in connection with the years ended December 31, 2019 and 2018 are set forth in the table below:

Audit Committee’s Pre-Approval Practice

We do not have an audit committee. Our board of directors has approved the services described above.

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statement Schedules

The financial statements of MOJO Organics, Inc. are listed on the Index to Financial Statements on this annual report on Form 10-K beginning on page F-1.

The following Exhibits are being filed with this Annual Report on Form 10-K:

* Filed herewith.

** Filed previously

† Management compensatory plan, contract or arrangement.

SIGNATURES 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

PART IV - FINANCIAL INFORMATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and directors of
MOJO Organics, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of MOJO Organics, Inc. (the “Company”) as of December 31, 2019 and 2018, the related statements of operations, changes in stockholders’ equity/deficit, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the “Company” as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent wih respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ MSPC

Certified Public Accountants and Advisors,

A Professional Corporation

We have served as the Company’s auditor since 2016. 

Cranford, New Jersey

March 30, 2020

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

MOJO ORGANICS, INC.

Notes to Financial Statements

December 31 2019 and 2018

NOTE 1 – BUSINESS

Overview

MOJO Organics, Inc. (“MOJO” or the “Company”) a Delaware Corporation is headquartered in Jersey City, NJ. The Company engages in new product development, production, marketing, distribution and sales of beverage brands that are Non GMO Project Verified and USDA Organic.

The Company’s flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produced Sparkling Coconut Water, Coconut Water + Mango Juice and Coconut Water + Pineapple Juice in 2019. We seek to grow the market share of our products by expanding our hybrid distribution network through the relationships and efforts of our management and third party distribution relationships, an improved broker network, and new products and packaging in 2020, including pH7 water and energy beverages which are both major sectors of the beverage industry. The company packages its beverages  in 100% recyclable, Eco Friendly packaging that can be recycled infinite times and is not made from carbon oil based packaging. The packaging has a very low impact on the environment, and does not contribute to landfills and the pollution of our bodies of water. 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("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 December 31, 2019 and December 31, 2018, 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 December 31, 2019 and 2018 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”). If necessary, the Company provides allowances to adjust the carrying value of its inventories to the lower of cost or NRV. There was no adjustment to lower of cost or NRV in 2019 and 2018.

Revenue Recognition

Revenue from sales of products is recognized when performance of obligation is satisfied. The Company’s performance obligation is satisfied upon the shipment or delivery of products to customers. The Company’s products are sold on cash and credit terms which are established in accordance with industry practices and typically require payment within 30 days of delivery. Costs incurred for sales incentives and discounts are accounted for as a reduction in revenue.

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 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 December 31, 2019 and December 31, 2018, the Company had no accrued interest or penalties. The Company has had no Federal or state tax examinations in the past nor does it have any at the current time. As of December 31, 2019, the Company has a Net Operating Loss Carryforward of $5,048,531 and recognized an Allowance for Deferred Tax Assets amounting to $1,319,434. The Company does not expect the allowance to be reversed within the coming periods.

In 2018, as a result of the 2017 Tax Cut and Jobs Act, we recognized a provisional tax benefit of $956,326 due to the re-measeurement of certain deferred taxes to the lower U.S. federal tax rate.

Fair value of financial instruments

The carrying amounts of financial instruments, which include cash, accounts receivable, accounts payable and accrued expenses approximate their fair values due to their short-term nature.

New Accounting Pronouncements

In March 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-01, “Leases(Topic 842): Codification Improvements”. The ASC aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing essential information about leasing transactions. The Company has assessed that this pronouncement has no impact on the financial statements and was not adopted by the Company.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

Employment Agreements

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

Pursuant to the Simpson Agreement dated April 6, 2017, Mr. Simpson will be paid a salary of $5,000 per month in cash and the right to receive 67,000 shares of restricted Common Stock per month. Pursuant to his employment agreement, Mr. Simpson is entitled to 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 May 31, 2025 based upon achieving revenue performance goals. The revenue goals range from $900,000 to $19,200,000 per year. The bonus awards are accelerated when revenues exceed the annual target amounts.

During the twelve months ended December 31, 2019, 804,000 shares of Non-Trading, Restricted Common Stock were issued to the CEO as part of the Simpson Agreement for the stock portion of his compensation. During 2018 and 2019, he did not receive cash payments. Mr. Simpson received Non-Trading, Restricted Common Stock in lieu of cash for the first quarter of 2018, and was owed $45,000 as of December 31, 2018.

During 2019, the CEO exercised stock options to purchase 555,688 non-trading, restricted common shares. The total exercise price reduced the accrued salary owed to him by $110,000. He was owed $10,000 as of December 31, 2019 for the cash portion of his salary.

On December 8, 2017, the Company entered into an Amended and Restated Employment Agreement with Mr. Peter Spinner (the “Spinner Agreement”), who was the Company’s Chief Operating Officer at that date. This agreement was effective January 1, 2018. Pursuant to the Spinner Agreement, Mr. Spinner received $5,000 paid in stock each month for part-time employment. The Spinner Agreement was terminated on March 31, 2018 when Mr. Spinner’s employment with MOJO ended. He served as a Consultant of the Company in June 2018 and his consulting contract ended in July 2018.

The “Simpson Agreement” is the only executive employment agreement in effect as of December 31, 2019.

The Company has no other plans in place and has never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

Lease Commitment

The Company maintains office space in Jersey City, NJ. The lease agreement is for the period March 1, 2019 to February 29, 2020 and was renewed for one year under the same terms. The rent under this agreement is $2,343 per month, and expires February 28, 2021.

NOTE 4 – STOCKHOLDERS’ EQUITY

The Company has authorized 190,000,000 shares of Common Stock having a par value of $0.001. On February 4, 2019, the Company by a vote of its majority shareholders cancelled the authorization for the issuance of up to 10,000,000 shares of preferred stock. There were no shares of preferred stock issued or outstanding prior to this change.

2012 Incentive Plan

The 2012 Incentive Plan was terminated by the Board of Directors on February 18, 2019. The Company’s Board of Directors resolved that the 2012 Incentive Plan which allowed the issuance of up to 2,050,000 securities to officers, directors and consultants as incentive compensation would be terminated. It was further resolved that 70,000 options to purchase shares of common stock issued under the 2012 Incentive Plan be converted into 70,000 shares of Common Stock. Another resolution was made that Mr. Glenn Simpson be permitted to exercise his option to purchase 222,000 shares of Common Stock for $0.255 per share.

The 2012 Incentive Plan was approved by our shareholders in March 2013. The 2012 Incentive Plan provided the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or other stock-based awards for up to an aggregate of 2,050,000 shares of common stock.  In 2016, the Company issued 620,000 stock options to purchase shares of common stock that expire in August 2019, and issued 1,073,441,restricted common stock to its Directors and employees. In 2017, the Company granted stock options to purchase 356,559 shares that expire in April 2022. The options were priced at the fair market value of the Common Stock and are exercisable. In 2018, there were no issuances under the 2012 plan. As of December 31, 2018, issued stock options total 976,559. During 2018, 495,403 stock options had been cancelled due to termination of employment and were available for reissuance at that time.

2015 Incentive Plan

The 2015 Incentive Plan was terminated by the Board of Directors on January 24, 2019. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock.

The Company approved the 2015 Incentive Plan in October 2015. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock. In April, 2017, the Company granted stock options to purchase 1,500,000 shares of Common Stock pursuant to the 2015 Plan. The options were priced at the fair market value of the Common Stock and were exercisable from the date of issuance. In 2018, there were no issuances under the 2015 plan. As of December 31, 2018, issued stock options total 1,500,000. During 2018, 693,610 stock options had been cancelled due to termination of employment and were available for reissuance at that time.

Restricted Stock Compensation

On May 9, 2018, the Company’s Board of Directors approved to the lifting of the prior restrictions on 8,756,542, shares issued to the CEO and 4,709,022, shares issued to the former COO of the Company. 

Restricted Stock Issuances

During the twelve months ended December 31, 2019, 1,088,750 shares of restricted Common Stock were issued to Directors and Officers of the Company. These shares have full voting rights but are restricted for sale or transfer.

During the quarter ended March 31, 2019, a total of 493,000 shares of restricted Common Stock were issued. The CEO exercised options to purchase 222,000 shares of Non-Trading, Restricted, Common Stock at $0.255 per share. The CEO was also issued 201,000 Non-Trading, Restricted Common shares for the stock portion of his salary for the first quarter. Two directors who had 35,000 options each were issued a total of 70,000 shares of Common Stock following the resolution to terminate the 2012 Incentive Plan as discussed in Note 4.

During the quarter ended June 30, 2019, a total of 251,000 shares of restricted Common Stock were issued. 201,000 shares of Non-Trading, Restricted, Common Stock were issued to the CEO for the stock portion of his salary for the second quarter and 50,000 shares were issued to the Corporate Controller as part of her annual stock bonus.

During the quarter ended September 30, 2019, a total of 344,750 shares of restricted Common Stock were issued. The CEO exercised options to purchase 93,750 shares of Non-Trading, Restricted, Common Stock at $0.16 per share. The total exercise value is $15,000 and this reduced the loan payable balance to the CEO to $0. The CEO was also issued 201,000 Non-Trading, Restricted, Common Stock for the stock portion of his salary for the third quarter. The Corporate Controller was also issued 50,000 shares as part of her annual stock bonus.

During the quarter ended December 31, 2019, a total of 440,938 shares of restricted Common Stock were issued. The CEO exercised options to purchase 239,938 shares of Non-Trading, Restricted, Common Stock at $0.16 per share. The total exercise value is $38,390 and this reduced the accrued salary payable to the CEO by the same amount. The CEO was also issued 201,000 shares of Non-Trading, Restricted, Common Stock for the stock portion of his salary for the fourth quarter.

Stock Warrants

In connection with private placement offerings in March 2014 (the “2014 Offerings”), warrants to purchase 2,030,223 shares of Common Stock were issued at a price of $0.91 per share. These warrants expired on March 12, 2019.

In connection with the February 2016 Private Placement Offering, warrants to purchase 482,143 shares of Common Stock were issued at a price of $0.70 per share, these warrants expired on February 12, 2018.

The following table summarizes warrant activity during the period:

Advisory Services

On October 3, 2013, the Company entered into an agreement for strategic business advisory services, public relations services and investor relations services with Ian Thompson from Carricklee House, Strabane, Northern Ireland.  

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

On June 27, 2014, the Company terminated the agreement.  Empire Stock Transfer, Inc, the Company’s transfer agent was directed to process cancellation requests regarding the certificates listed below. The Board of Directors approved the Company’s irrevocable agreement to indemnify the Transfer Agent for all loss, liability or expense in carrying out the authority and direction contained on the terms of the Unanimous Written Consent to terminate the Thompson Agreement. The Transfer Agent shall maintain the right to uphold the transfer in the event of forgery.

Stock Purchased for Cancellation

During the period January 1, 2019 to December 31, 2019, the Company purchased 4,167 shares of its restricted common stock from one shareholder for cancellation. The Company paid $750 which was the market price for its traded shares during the period. During 2018, the Company purchased 79,832 shares from shareholders at a cost of $15,965 with an average purchase price of $0.20. The shares were cancelled and are available for reissuance.

NOTE 5 – STOCK OPTIONS

On April 6, 2017, the Company granted stock options to purchase 356,559 shares and 1,500,000 shares of Common Stock pursuant to the 2012 Incentive Plan and the 2015 Incentive Plan, respectively. See note 4. The options were priced at the fair market value of the Common Stock and are immediately exercisable.

On March 31, 2018, 1,189,013 stock options were forfeited due to a termination of employment.

On February 18, 2019, the Company’s Board of Directors resolved to terminate the 2012 Incentive Plan, and it was resolved further that 70,000 options to purchase shares of Common Stock be converted into 70,000 shares of Common Stock. It also allowed the CEO of the Company to exercise option to purchase 222,000 shares of Non-Trading, Restricted Common Stock.

During February, two of the Company’s Directors surrendered 70,000 stock options and were issued 70,000 shares of Common Stock in exchange. The CEO of the Company was also issued 222,000 shares of Non-Trading, Restricted Common Stock.

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

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

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

The following table summarizes stock option activity under the Plans:

During the years ended December 31, 2019 and 2018, no compensation expense related to stock options was recorded. As of December 31, 2019, there were no unrecognized compensation cost related to non-vested stock options.

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2019 and 2018 was $72,804 and $64,377, respectively.  Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $0.27 and $0.15 as of December 31, 2019 and 2018, respectively, and the exercise price multiplied by the number of options outstanding. 

NOTE 6 – CONCENTRATIONS

Major Customers

During the year ended December 31, 2019, the Company had two customers that accounted for approximately 48% of revenue. Revenue from Customer A accounted for 27%, and 21% for Customer B. Accounts receivable at December 31, 2019 from these two customers amounted to $24,000 and $26,784, respectively. The accounts receiveable were paid in full by February 7, 2020. For the year ended December 31, 2018, there were two major customers accounting for more than 50% of total revenue.

Major Suppliers

During the year ended December 31, 2019, the Company purchased its inventory from two suppliers. The Company has established relationships with other suppliers which management believes could meet its needs on similar terms. Accounts payable at December 31, 2019 to both suppliers was $44,917.

NOTE 7 – RELATED PARTY TRANSACTIONS 

As of December 31, 2019, accrued payroll of $10,000 was owed to the CEO of the Company.

NOTE 8– SUBSEQUENT EVENTS 

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

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