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MOJO ORGANICS, INC. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows: · Critical Accounting Policies - Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. · Results of Operations - Analysis of our financial results comparing the year ended December 31, 2013 to 2012. Liquidity and Capital Resources - Analysis of changes in our cash flows, and discussion of our financial condition and potential sources of liquidity. This report includes a number of forward looking statements that reflect our current views with respect to future events and financial performance. Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward looking statements, which apply only as of the date of this annual report. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Critical Accounting Policies We have prepared our financial statements in conformity with accounting principles generally accepted in the United States, which requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. We base these significant judgments and estimates on historical experience and other applicable assumptions we believe to be reasonable based upon information presently available. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Actual results could materially differ from our estimates under different assumptions, judgments or conditions. 8-------------------------------------------------------------------------------- Table of Contents 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 consolidated 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 all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. ASC Topic 718 requires employee compensation expense to be recorded using the fair value method. The Company accounts for employee stock based compensation in accordance with the provisions of ASC Topic 718. For non-employee options and warrants, the company uses the fair value method as prescribed in ASC Topic 718. Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company uses the Black-Scholes option-pricing option model to value its stock option awards which incorporate the Company's stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. Fair Value of Financial Instruments - Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. Recent Accounting Pronouncements Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company's present or future financial statements. Results of Operations Years Ended December 31, 2013 and 2012 Revenues The Company commenced production of CHIQUITA TROPICALS™ in June 2013 and began selling its products in late July 2013 in the New York tri-state area. Revenues from its four exotic juices for the year ended December 31, 2013 were $159,144. The Company had no revenues for the year ended December 31, 2012. Cost of Revenues Cost of Revenues includes production costs and raw material costs. For the year ended December 31, 2013, cost of revenues was $139,741, or 88% of sales. Operating Expenses For the year ended December 31, 2013, operating expenses were $2,791,761, an increase of $1,193,695 or 75% over operating expenses for the year ended December 31, 2012 of $1,598,066. This increase was primarily the result of our launching commercial operations in the year ended December 31, 2013 and consisted primarily of increases in (a) advisory service fees and consulting fees, which were paid in stock, with the vested portion thereof having a fair market value of $964,162 for the year ended December 31, 2013 as compared to $157,500 during the year ended December 31, 2012, (b) marketing, promotional, licensing and related fees, which were $381,081 for the year ended December 31, 2013 as compared to zero during the year ended December 31, 2012 and (c) salaries and related payroll fees, which were $321,622 during the year ended December 31, 2013 as compared to $81,839 during the year ended December 31, 2012. 9 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources Liquidity During the year ended December 31, 2013, the Company received cash proceeds of $412,134 from the sale of its Series A Preferred Stock. In addition, cash proceeds of $448,681 were realized as a result of the Company's private placement offering in May and June 2013. The aggregate amount realized from these two offerings was $860,815. The Company utilized the majority of these funds for the development and production of its first production runs, as well as to promote and market the business. Additionally, the Company used some of the funds for administrative costs, including legal fees, audit fees and compensation costs. Subsequent to the year ended December 31, 2013, the Company received additional cash proceeds of $1,835,000 from the sale of Common Stock and warrants to purchase Common Stock in concurrent private placements consummated in March 2014. See Note 10 to the Consolidated Financial Statements for additional information about this transaction. Working Capital Needs As a result of the financing in March 2014, the Company believes it has sufficient cash to fund the operations of the Company for the next twelve months. Our business prospects are difficult to predict, however, due to our limited operating history. Our auditors have included an explanatory paragraph in their report on our consolidated financial statements relating to the uncertainty of our business as a going concern, due to our limited operating history and our lack of historical profitability. |