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MOJO ORGANICS, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) 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. Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows: · Critical Accounting Policies - Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. · Results of Operations - Analysis of our financial results comparing the three months ended March 31, 2014 to 2013. Liquidity and Capital Resources - Analysis of changes in our cash flows, and discussion of our financial condition and potential sources of liquidity. CRITICAL ACCOUNTING POLICIES We have prepared our financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"), 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 Quarterly 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 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. 3 -------------------------------------------------------------------------------- Table of Contents 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. COMPANY OVERVIEW Headquartered in Jersey City, New Jersey, the Company engages in product development, production, marketing and distribution of CHIQUITA TROPICALS™. CHIQUITA TROPICALS™ are 100% fruit juices produced under license agreement from Chiquita Brands L.L.C. ("Chiquita"). CHIQUITA TROPICALS™ contain zero added sugar and no preservatives. They are naturally low sodium, vegan, naturally gluten free, non-genetically modified and kosher. We believe such attributes are what consumers want today in a beverage. CHIQUITA TROPICALS™ require no refrigeration before opening and, as a result of the way the juice is bottled, have a longer shelf life than most other bottled juices. We believe in safe and sustainable corporate practices. We are proud to use Rainforest Alliance Certified fruits, which help the farmers and their families while being environmentally, socially and economically sustainable. RESULTS OF OPERATIONS Three Months Ended March 31, 2014 and 2013 Revenues During the three months ended March 31, 2014, the Company reported revenue of $85,478. Sales were primarily comprised of initial orders from major grocers, distributors and direct sales distributors in the southwest, mid-atlantic and northeast states, respectively. There were no sales for the three months ended March 31, 2013. Cost of Revenues Cost of Revenues includes production costs and raw material costs. For the three months ended March 31, 2014, cost of revenues was $80,631 or 94% of sales. There was no cost of revenues for the three months ended March 31, 2013. Operating Expenses For the three months ended March 31, 2014, operating expenses were $1,460,036, an increase of $939,534 or 181% over operating expenses for the three months ended March 31, 2013 of $520,502. Stock-based compensation costs, which consist of charges to income for vesting in connection with restricted stock issuances, stock options and warrants, were $874,434 for the three months ended March 31, 2014, compared to $427,154 for the corresponding period in 2013. This increase of $447,280 represents 48% of the increase in total operating expenses. Advisory service fees and consulting fees, which were primarily paid in stock and warrants, consisted of 32% of the increase. During the three months ended March 31, 2014, the Company incurred $299,836 in advisory service and consulting fees. There were no fees for the three months ended March 31, 2013. Marketing, promotional, selling and licensing fees were $116,839 for the three months ended March 31, 2014, compared to $0 for the corresponding period in 2013. This increase represents 12% of the total increase in operating costs. Net Loss For the three months ended March 31, 2014 and 2013, the Company had net losses of $1,455,189 and $523,646, respectively. This increase in net loss of $931,543 is primarily attributable to the increase in operating expenses. LIQUIDITY AND CAPITAL RESOURCES Liquidity During the three months ended March 31, 2014, the Company received 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. As of March 31, 2014, the Company had working capital of $1,496,097. 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. OFF-BALANCE SHEET ARRANGEMENTS The Company had no off-balance sheet arrangements as of March 31, 2014. 4 -------------------------------------------------------------------------------- Table of Contents GOING CONCERN The Company's financial statements are prepared using GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to successfully obtain and retain customers in order to achieve profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |