10-K 1 teo_10k-123120.htm FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2020

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________________ to _______________

333-226801

(Commission file number)

TEO FOODS INC.

(Exact name of registrant as specified in its charter)

Nevada		47-1209532
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Blvd Insurgentes 19801, unit 4-D

Tijuana, BC, 22225

(619) 758 1973

(Address and telephone number of principal executive offices)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
None	None	None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes x No o

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).. Yes x No o

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 the registrant’s knowledge, in the definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or, any amendment to Form 10-K. Yes x No o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2020, was $266,474.

As of March 31, 2021, there were 12,872,245 shares of the registrant’s common stock outstanding.

TEO Foods Inc.

Index

		Page Number
PART I.	FINANCIAL INFORMATION

Item 1.	Description of Business	3

Item 1A.	Risk Factors	7

Item 1B.	Unresolved Staff Comments	7

Item 2.	Properties	8

Item 3.	Legal Proceedings	8

Item 4.	Mine Safety Disclosures	8

PART II.
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8

Item 6.	Selected Financial Data	8

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 8.	Financial Statements and Supplementary Data	F-1

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	13

Item 9A.	Controls and Procedures	13

Item 9B.	Other Information	13

PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	14

Item 11.	Executive Compensation	16

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	17

Item 13.	Certain Relationships and Related Transactions, and Director Independence	17

Item 14.	Principal Accounting Fees and Services	17

PART IV.
Item 15.	Exhibits and Financial Statement Schedules	19

Item 16.	Form 10K Summary	19

SIGNATURES		20

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (including the section regarding Management's Discussion and Analysis and Results of Operation) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Annual Report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including but not limited to, our ability to obtain necessary equity or debt financing to continue operations, and ultimately our ability to generate profit from sales of packaged food products. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report.

PART I

Item 1. Description of Business

General

Teo Foods Inc. ("TEO Foods" or the "Company") intends to produce and sell packaged food products for retail in the frozen, refrigerated and shelf stable categories. The Company has a license to use the TEO name and logo on food products it sells and to apply the TEO pasteurization/sterilization processes to its products for improved shelf life and safety.

The Company intends to sell packaged food products under our brands in the refrigerated meal and meal component categories. The initial markets are domestically and in Mexico. We are also utilizing our production capacities to co-pack for other brands sold domestically and in Mexico.

Effective January 1, 2019, we completed an acquisition of Commercial Targa S.A. De C.V. ("Targa") and several brands of products which included the NERYS brand primarily sold in Mexico. Targa is located in Tijuana Mexico and produces and sells products in Mexico which include the NERYS line of imported California cheese products, along with the acquired brands of frozen pizzas, various pasta meals and other products sold in the major stores such as Wal-Mart, Soriana, Calimax, Smart & Final, OXXO and others.

In the acquired facility, we remodeled the cheese processing area, revised production processes, removed and replaced some obsolete equipment at the facility in Mexico. These improvements resulted in our being able to achieve higher food safety certifications, which were required by Walmart and OXXO in 2019.

At year-end 2019, we divested the pizza and pasta brands back to their creator in exchange for cancellation of the purchase equity paid.

The Company created a new subsidiary, BC TEO Foods S.A de C.V., in January 2020, which is operating new facilities where we have moved our cold processing and packaging equipment. The new facilities have been remodeled for higher productivity and to achieve a high food safety certification in support of access to global markets.

Effective April 1, 2020, we exchanged certain production equipment and facilities that we did not intend to transfer to the new facility for production or continue to use thereafter. We transferred the lease of the old production suite and licensed the Nerys Brand for cheese products in Mexico. In exchange we receive a royalty on the NERYS cheese products sold in Mexico, a portion of net revenue from all products and five percent of the proceeds of any sale of the business.

We transferred the TEO Pasteurizer/Sterilizer to the new facilities in Mexico for final R&D and validation for production. We have occupied two adjoining building units beginning in September 2020 and have been preparing to place the sterilizer near the processing and packaging operations.

We have new co-packing business beginning in the new facilities which is diverse from cheese processing. This new business is for new USA customers for products that will be shipped to the USA. We have begun to purchase processing equipment to expand our production capabilities. We are also providing warehousing services to offset costs while we grow into our expanded facilities. We have configured the entry offices of the center unit as the main entrances for the combined facility and are building them out with reception, conference and administration offices. The combined facilities are adjoining with forklift access internally between all 38,000 square feet and truck loading bays.

We will continue to develop our packaged products for initial retail placements in Mexico. We expect the expanding co-packing operations will also support production planning, formulation, equipment and supply lead times, testing, validation, branding and sales of new trayed meal products for a limited regional new product offering in 2021. This assumes that we are able to secure additional capital to purchase the necessary equipment, supplies (trays, film, carton/print materials, etc.), retain consultants/staff and provide for other costs of production.

We will maintain a website located at www.teofoods.com, and electronic copies of our filings with the SEC will be available on our website as soon as practicable after such material is filed with, or furnished to, the SEC.

Product Overview

Our product offering will be single serve and multi-serve entrees and side dishes focusing on convenience items that drive superior margins. We will offer varying levels of vegetarian, organic, all natural, ethnic and home-style entrees that command a premium price in the market place. Each meal will contain a starch and multiple vegetables with an exquisite sauce to compliment the meal. Sauce quality will help us differentiate our products along with our unique production process. The vegetables will be high quality vegetables such as broccoli florets with no stems. (Example: Teriyaki Rice Bowl with Vegetables or Home Style Garlic Mashed Potatoes). The meals will have universal appeal but will also target specific demographic groups such as vegetarians and consumers who value organic meals. This type of product was selected based on current trends, our unique production process and handling requirements needed to process USDA meat components. Secondarily, these products are expected to have higher pricing to consumers which supports the use of high-quality components and the limited initial production throughput.

This preliminary product mix may change prior to initial production based on additional market research and customer input. There is a unique opportunity to market multiple products, so consumers can "mix 'n match" meal components such as buying a side dish of garlic mashed potatoes and a serving of their favorite vegetable in sauce.

Management will initially produce single and multi-serve entrees & side dishes that have extended shelf life in a "refrigerated" format with the long-term intent to market shelf stable meals. The "refrigerated" status will allow us to create critical mass while simultaneously seeking Food and Drug Administration (“FDA”) approval for our new production process.

The total market for frozen, refrigerated and shelf stable entrees and side dishes is a very dynamic marketplace that welcomes new product ideas. We expect the extended shelf life will be embraced by wholesale customers due to supply chain issues of refrigerated foods and the application of a pasteurization/sterilization process in this category adds a food safety component that is not provided by other products in this category.

Benefits of the Licensed Process and Improved Products

Quality, safety and convenience are what we believe to be the primary benefits to the licensed process.

The process is expected to produce sterilized meals in less than 15 minutes of processing time with time at sterilization temperatures targeted to preserve quality and assure safety. Pasteurization is expected in less processing time. We believe that achieving rapid heat rise times to sterilization temperature and rapid cool time back to near ambient or refrigerated temperature will produce meals that have improved taste, texture, color and nutritional values over conventional retort sterilization methods which can subject the food to high temperatures for an hour or more.

Our process utilizes microwave energy to achieve rapid heating of packaged food products. Food packages are filled and sealed using standard industry systems and enter our system via conveyor. Multiple tuned cavities apply varying power levels to rapidly and evenly heat the food to the desired temperature.

Retort methods place the product in a steam chamber and must rely on thermal transfer of heat from the outer surfaces to reach the center. Like cooking a roast in a conventional oven, it can take a very long time for the center to reach the desired temperature.

Microwave energy penetrates the food and can heat throughout the product with some limitations on depth of penetration and the challenges of overheating patterns.

The currently licensed 200-kilowatt system we intend to use for our products is designed to process twelve-ounce rigid tray packages. The system may be utilized in different configurations to achieve different levels of pasteurization /sterilization. The tray passing through the exposure cavities is heated to the desired temperature in about two minutes.

We believe the quality related to pasteurized/refrigerated foods will be comparable as these products are not subjected to high sterilization temperatures for extended periods. These products have a consumer perception of being high quality, healthy and nearly fresh prepared foods. We believe our products will be of equal or better quality and have a near fresh taste.

Our products will have an added safety benefit over many current offerings of refrigerated and frozen products because we will have subjected the products to pasteurization/sterilization temperatures; killing off resistant microorganisms that may remain viable in many traditional frozen and refrigerated products. Consumers often put themselves to health risks by failing to heat frozen and refrigerated products to safe temperatures prior to consumption. Consumers may not realize that the frozen or refrigerated products they are purchasing may not have undergone any sterilization processes. The importance of warning labels and instructions to cook thoroughly before eating can go ignored by a consumer heating a meal hastily during a lunch break.

We believe retailers and consumers will benefit from our distribution as a refrigerated product due to the extended shelf life we intend to provide. Our products can be processed at sterilization temperatures and will have packaging with high barrier properties; resulting in the ability to offer longer shelf life as a refrigerated product. This can result in less waste to the retailer and better quality to the consumer throughout the shelf life of the product.

We believe our products will be less susceptible to distribution variables that can affect safety and quality of frozen and refrigerated products. Frozen products can thaw and refreeze several times before they are eaten by the consumer. Variation of refrigeration temperatures during distribution and at the retailers can cause safety risks and quality issues to consumers refrigerated products.

Once our products are approved for shelf stable distribution, we expect consumers, customers and retailers to eventually prefer the convenience of the ambient ready to eat meal versus frozen or refrigerated meals.

When consumers become familiar and trust our products as refrigerated, we hope to transition those products out of refrigeration where we expect consumers to embrace the convenience of a high quality, healthy, ready to eat meal. The ambient meal can be warmed in 30 to 60 seconds. A typical comparable frozen meal can require 5 minutes or more and often requires multiple steps of heating and stirring.

We will likely maintain distribution as refrigerated products even after we are approved for shelf stable distribution due to the negative quality perception and low price point of the existing shelf stable products in the U.S. markets.

Market Overview

The global frozen food market size was valued at USD 291.3 billion in 2019. Growing importance of Ready-to-Eat (RTE) food products as a result of hectic lifestyles among working class individuals on a global level is expected to expand the industry size over the next few years. Moreover, increasing spending on shelf-stable foods among consumers is anticipated to expand the market for frozen food in the near future.

The frozen ready meals segment accounted for more than 30.0% of revenue share in 2019 in the frozen food market. The segment is expected to maintain its dominance over the forecast period [2020 to 2026] on account of pre-dominant consumption of ready meals among working class people around the globe.

Some of the manufacturers include Wawona Frozen Foods; Bellisio Foods; McCain Foods; ConAgra Foods, Inc.; General Mills, Inc.; and Nestle S.A. Industry participants have been focusing on ensuring the continuous stock access in the supermarkets and hypermarkets amid the coronavirus breakdown. In March 2020, the CEO of the Kraft Heinz Co. has officially announced that the company is working hard for filling the demand supply gap owning to the seismic changes in the food industry. The company confirmed that frozen food, macaroni, cheese, and vinegar are one of the largest selling products and their demand has been witnessing surge significantly amid coronavirus breakdown. (https://www.grandviewresearch.com/industry-analysis/frozen-food-market)

The global ready meals market size was valued at USD 159.15 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 5.5% from 2020 to 2027. Shifting consumers’ food preferences towards ready-to-eat food products owing to busy lifestyle of working individuals as well as hectic work schedules of college grads and students is expected to be a key factor for the market growth. Moreover, growing demand for minimally processed and additive-free food products with extended shelf life is expected to fuel the market growth.

In recent years, the employment has been growing across the globe, which has changed the food preferences of the consumers. Customers around the globe are more inclining towards food items that can easily be consumed without any efforts. Due to hectic work schedules, people around the globe are buying Ready-to-Eat (RTE) food products and meals, which are easy to cook and less time consuming. These consumer food preferences are propelling the demand for ready meals.

Frozen and chilled meals held the largest revenue share of more than 50.0% in 2019 and are expected to maintain their lead over the forecast period owing to a wide range of products with high shelf life. Frozen pizza is the most popular frozen ready meal, thereby significantly contributing to the global revenue.

Supermarket and hypermarket held the largest revenue share of 59.4% in 2019 and are expected to maintain their lead over the forecast period. Some of the largest chains of supermarket and hypermarket, such as Walmart, Tesco, 7Eleven, Apar, and Aldi, are expanding their stores across the globe. These market giants are increasing their product offerings in order to attract the customers. (https://www.grandviewresearch.com/industry-analysis/ready-meals-market)

We believe we can market long shelf life refrigerated and shelf stable Ready-to-Eat (RTE) food products and meals that capitalize on consumer trends with great nutrition, value, taste and texture.

The Consumer

We expect domestic consumers to have initial reservations regarding ambient ready to eat meals. Consumers are familiar with frozen products of this type and will likely have quality, taste, health and safety concerns related to sterilization and ambient storage.

We will initially market our products as refrigerated. Consumers can transition to accept our ambient product through familiarity with an extended life refrigerated product. Based on our success with consumers in the refrigerated category we envision having both refrigerated and shelf stable entrees and sides. Consumers will need to slowly transition to shelf stable entrees and sides once they gain trust in product quality. An example of this transition in the U.S. market was the marketing of UHT soy and dairy products in the chilled section of the supermarkets. These products are shelf stable for months but required marketing in the chilled dairy section to develop sales with U.S. consumers. Slowly we saw these products moved from chilled to the shelf.

We expect consumers, customers and retailers to eventually prefer the convenience of the ambient ready to eat meal versus frozen or refrigerated meals. The meal can be eaten as is or heated. We expect the most popularly used heating method will be in a common home microwave oven. Consumers are expected to enjoy a more appealing final reheated meal. The ambient meal can be warmed in 30 to 60 seconds. A typical comparable frozen meal requires 5 minutes or more and often requires multiple steps of heating and stirring.

Distribution

We anticipate using traditional supply chain partners to get to market. We expect to market products regionally based on our first production line. Upon regional success, we will add lines when needed to service customers on a national basis. Management believes our biggest distribution challenge will be creating critical mass to drive reasonable supply chain costs from storage to actual frequent shipments to customers, so they have acceptable inventory turns.

Other foodservice, c-store, vending and military customers may also place our product and force distribution accordingly, but we will still be faced with supporting reasonable supply chain costs.

We will initially distribute all our products as chilled. We have no domestic distribution agreements established at this time. We can distribute in Mexico through our subsidiary, BCTEO Foods Mexico, and our licensed Nerys brand placements in grocery and convenience stores.

Branding

We intend to build a new brand in refrigerated and shelf stable entrees and sides. We will also produce private label products for other brands and retailers.

We will be faced with the traditional challenges of introducing, marketing and gaining consumer acceptance of food products to consumers in highly competitive markets dominated by mega companies with generationally established brand recognition.

Management believes by changing the technology in refrigerated and shelf stable entree product life/shelf life, it is an ideal opportunity to carve out a new branded position. We view the use of extended refrigerated shelf life and subsequent introduction of quality long-life, high-quality shelf stable entrees as a means to establish a new brand in the market. The benefit of refining the sterilization process is a major point of differentiation in the marketplace. We expect to receive limited competitive response since "price" won't be a determining factor due to our extended shelf life and high quality.

We will brand and also offer private label to continue the current perception of "prepared on premise" with national retailers. In other segments such as military, c-store, etc., private label may be more prevalent.

Competition

We will be competing with major food companies that have substantially more resources and influence over retail placements, distribution and supply chain.

Mega companies like Con-Agra, Nestle, Tyson and others dominate the markets and have many brands and products competing for retail shelf space.

If we are able to gain a market presence with our unique products and process in the domestic refrigerated category these larger competitors could utilize their vast resources to develop and market products to compete.

There is room for new competitors in both refrigerated and shelf stable entrees & sides. Frozen competitors are not expected to view us as an immediate threat due to the convenience and long life of current frozen food formats. Once retailers embrace our product offerings due to their long shelf life and as we fine tune our process we expect competitors will then react to us more aggressively.

Certain Agreements

Our current agreements consist primarily of business to business agreements. These agreements enable and facilitate the introduction of our branded products into the market.

Royalty and License Agreement

Research and Development

We do not engage in research and development activities as part of our business at this time. We will cooperate with TEO Inc. in its research and development of its pasteurization/sterilization technology pursuant to the terms of the Master Agreement.

Intellectual Property and Licenses

We have a license agreement with TEO Inc. The Master Agreement provides the Company a license to use the TEO name and logo on food products it sells and to apply TEO's pasteurization/sterilization processes to its products for improved shelf life and safety. Additional provisions provide the Company production rights to TEO's pasteurizer/sterilizer and rights to lease its own system when certain sales/production increase.

We do not currently hold Patent rights. We may develop certain recipes and formulae related to our products in the ordinary course of business. We may develop additional trademark and other branding related intellectual property as we launch and market our products.

Government Regulation

We will be producing and selling food products in the domestic and international markets. We will be required to comply with various regulations in each jurisdiction related to food safety and consumer protection. We will be required to comply with regulations related to food handling, packaging, labeling, storage and shipping. International sales will have to comply with customs regulations.

We intend to introduce our initial products in the refrigerated category which does not require regulatory approval. When we choose to proceed with the introduction of products in the shelf stable category we will be required to have approval from the FDA to sell our products in the United States as shelf stable. Although, microwave sterilization technology for packaged shelf stable meals was accepted by FDA in 2010, each process and product application must be approved prior to any sales as shelf stable.

Obtaining these approvals can take more than a year and require extensive data and expert support to obtain an approval which with the application of any novel technology may never be granted. It was a concern for many years that any microwave-based sterilization process would ever be approved by the FDA given the challenges to validation data where many traditional temperature measurement methods are incompatible with the application of microwave energy.

We believe that the system production data from our sale of products in the refrigerated category will be supportive to an application to the FDA by TEO Inc. for shelf stable approval. TEO Inc. would make the determination of when to proceed with an application and bear the costs related to the application. TEO Inc. does not have an application for shelf stable approval pending with the FDA at this time.

We are not currently aware of any pending regulations that would materially impact our operations.

Employees

We currently have Jeffrey Mackay as CEO, President and Director and John O'Keefe as CFO and Director.

Jeffrey Mackay currently devotes approximately 95% of his time to the business of TEO Foods, Inc. and the remainder of his time on other business ventures.

John O'Keefe currently has made available approximately 20% of his time for the business of TEO Foods, Inc. based on the current business needs at this time.

We expect to increase our future employee levels on an as-needed basis in connection with our expected growth.

The Company utilizes two staffing agencies in Mexico that currently provide us with staffing as needed for production, warehouse, merchandising and administration. We currently have five people working in Tijuana. We are planning to bring on additional workers now that we have begun production operations in the new facility.

Item 1A. Risk Factors.

Not Applicable.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties.

In January of 2020, we took possession of an approximately 18,000 square foot facility located in Tijuana Mexico that leases for approximately $6,800 per month. The facility is predominantly configured for cold storage and production operations. It also has a large dry warehouse area and four truck loading docks. Office space is also included at the facility for management and accounting staff.

In September of 2020, we took possession of two adjoining approximately 10,000 square foot facilities located in Tijuana Mexico that each lease for approximately $3,800 per month. The facilities are predominantly configured for warehouse operations and include three truck loading docks. Office space is also included at the facility.

We have configured the entry offices of the center unit as the main entrances for the combined facility and are building them out with reception, conference and administration offices. The combined facilities are adjoining with forklift access internally between all 38,000 square feet and truck loading bays.

Item 3. Legal Proceedings.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our Common Stock is not currently listed for quotation or trading on any exchange. It is our intention to seek quotation on the OTCQB if we qualify for listing on the same. There can be no assurances that our Common Stock will be approved for trading on the OTCQB, or any other quotation or trading exchange.

Holders

As of the date of this report, an aggregate of 12,872,245 shares of common stock were issued and outstanding and held by approximately 45 holders of record.

Dividends

We have never paid or declared any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future but rather intend to retain future earnings, if any, for reinvestment in our future business. Any future determination to pay cash dividends will be in compliance with our contractual obligations and otherwise at the discretion of the board of directors and based upon our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.

Transfer Agent

Our registrar and transfer agent is Continental Stock Transfer & Trust Company.

Equity Compensation Plan Information

We did not have any equity compensation plans or arrangements for any director, officer, employee and/or consultant through December 31, 2020.

Our Board of Directors may adopt an equity compensation plan in the future to provide common stock option grants to selected employees, non-employee directors, consultants and advisors.

Issuer Purchase of Securities

None.

Recent Sales of Unregistered Securities

Common Shares

In February 2021, the Company sold a total of 250,000 common shares at $0.20 per share to one purchaser for a total of $50,000.

There were no other sales of unregistered securities during fiscal year ended December 31, 2020 and to date of this report that were not previously reported.

Item 6. Selected Financial Data.

Not required for smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management's Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto. The Management's Discussion and Analysis may contain “forward-looking statements.” Any statements that are not statements of historical fact are forward-looking statements.

These statements are based on the current expectations, forecasts, and assumptions of our management and are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are sometimes identified by language such as “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects,” “future” and similar expressions and may also include references to plans, strategies, objectives, and anticipated future performance as well as other statements that are not strictly historical in nature.

The risks, uncertainties, and other factors that could cause our actual results to differ materially from those expressed or implied in this Annual Report on Form 10-K include:

	●		our ability to successfully develop and sell our products;
	●		our ability to obtain additional financing at favorable rates to maintain and develop our operations;
	●		competitive conditions in our industry; and
	●		the ability to attract and retain key personnel.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. Readers should carefully consider this information as well as the risks and other uncertainties described in our other filings made with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements. They reflect opinions, assumptions, and estimates only as of the date they were made, and we undertake no obligation to publicly update or revise any forward-looking statements in this Annual Report on Form 10-K, whether as a result of new information, future events or circumstances, or otherwise.

Overview

The Company was incorporated in the state of Nevada on December 27, 2012 but did not commence operations until September of 2017.

Effective January 1, 2019, we completed an acquisition of Commercial Targa S.A. De C.V. ("Targa"). Targa is located in Tijuana Mexico and produced and sold the NERYS brand of imported California cheese products in Mexico.

The Company created a new subsidiary, BC TEO Foods S.A de C.V., in January 2020, which is operating our cold processing and packaging operations.

We will continue to develop our products and services. We expect that expanding co-packing operations will also support production planning, formulation, equipment and supply lead times, testing, validation, branding and sales of new products for a limited regional new product offering in 2021. This assumes that we are able to secure additional capital to purchase the necessary equipment, supplies (trays, film, carton/print materials, etc.), retain consultants/staff and provide for other costs of production.

We have received equity and debt investments both from insiders and from private investors. As we expand operational activities, we may continue to experience operating losses and/or negative cash flows from operations and may be required to obtain additional financing to fund operations. There can be no assurance that we will be able obtain additional financing, if at all, or upon terms that will be acceptable to us.

Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in our stage of development. Such risks include, but are not limited to, an evolving business model and the management of growth.

To address these risks we must, among other things, implement and successfully execute our business and marketing strategy and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

Results of Operations

Results of Operations for the Years Ended December 31, 2020 and 2019

During the years ended December 31, 2020 and 2019, the Company had $358,713 and $3,335,815 in sales revenue, respectively. Revenue was reduced by eliminating products that were either unprofitable or could not support the logistical cost of distributing from remote warehouses, effective December 31, 2019. The revenue reduction was partially offset by the licensing and royalty agreement covering the direct sales of the Nerys branded cheese products in Mexico that began on April 1, 2020. During the years ended December 31, 2020 and 2019, the Company had $21,388 and $0 in licensing and royalty revenue, respectively.

During the years ended December 31, 2020 and 2019, we had general and administrative expenses of $186,339 and $384,342, respectively. Payroll expenses were $218,424 and $486,451 during the years ended December 31, 2020 and 2019, respectively. These expenses were reduced throughout the time between the periods by reducing consultants and administrative staff. Rent and lease expenses were $126,543 and $143,157 for the years ended December 31, 2020 and 2019, respectively. Rent and lease expected to increase in 2021 due to the addition of two new building units in September 2020. Depreciation expenses were $13,034 and $19,676 for the years ended December 31, 2020 and 2019, respectively.

Interest expense was $25,944 and $36,385 for the years ended December 31, 2020 and 2019, respectively. This interest primarily related to notes payable. The decrease was due to notes being satisfied.

The Company's net loss for the years ended December 31, 2020 and 2019 was $631,724 and $254,765, respectively. The primary differences between the years were the recognition of a $222,217 gain on bargain purchase of Targa partially offset by the reduction in revenues. These were supplemented by large reductions in Payroll, G&A, Rent & Lease, Depreciation and Interest Expense offset by other P&L items.

Expenses are expected to increase as our operations develop and we begin to provide services and introduce new products into the market.

Liquidity and Capital Resources

During the years ended December 31, 2020 and 2019, the Company paid $58,267 and $182,000, respectively, toward the current portion of the license fee payable. During the years ended December 31, 2020 and 2019, we had total assets of $270,480 and $971,394, respectively. During the years ended December 31, 2020 and 2019, we had total liabilities of $1,889,216 and $1,842,029, respectively.

Net cash used in investing activities for the years ended December 31, 2020 and 2019was $25,312 and $26,516, respectively. The amounts are primarily property and equipment purchases.

Net used in financing activities for the years ended December 31, 2020 and 2019 was ($58,767) and ($138,500), respectively. The amounts are primarily payments on license.

Over the next twelve months, we believe that we will require additional capital and anticipated funds from operations to further develop and sustain our operations. The Company will need to seek additional financing to expand operations and create revenue with the introduction of its products to the market. The TEO license requires future payments and royalty payments on related revenue.

We believe that we will need to raise an additional $1,000,000 over the next 12 months and intend to seek additional investment through a private or a public equity offering. We will use the proceeds to cover our product development, auditing and accounting costs, licensing, necessary equipment, supplies (trays, film, carton/print materials, etc.), retain consultants/staff, provide for other costs of production and other working capital needs.

There can be no assurance that we will be able obtain additional financing, if at all or upon terms that will be acceptable to us. There can be no assurance of when, if ever, our operations become profitable.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements or financing activities with special purpose entities.

Going Concern

The Company financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has suffered recurring losses from operations and has insufficient working capital as of December 31, 2020 to develop its business plan and meet its obligation of the next 12 months. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the Company's ability to obtain necessary equity or debt financing to continue operations, and ultimately the Company's ability to generate profit from sales of packaged food products. These financial statements do not include any adjustments to classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have identified the following accounting policies that we believe are key to an understanding of our financial statements. These are important accounting policies that require management's most difficult, subjective judgments.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP. We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents.

Beneficial Conversion Feature of Convertible Notes Payable

The Company considers whether a beneficial conversion feature ("BCF") exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note. The BCF of a convertible note is a reduction of the carrying amount of the convertible note, as a debt discount, and is credited to additional paid-in-capital. Such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense. A contingent beneficial conversion feature in a convertible note payable with conversion terms that change upon the occurrence of a future event (ex: fair value of the underlying stock declines after the note issuance date) is recognized when the contingency is resolved. As of December 31, 2020, the Company has not recognized any beneficial conversion features on its convertible debt.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the company expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount:

Identification of the promised goods in the contract;

ii.

Determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract;

iii.

Measurement of the transaction price, including the constraint of variable consideration;

iv.

Allocation of the transaction price of the performance obligations; and

Recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods and services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligations when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time typically upon delivery.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent 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

Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

● Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.

● Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.

● Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity's assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company's financial instruments consist of advances from related party, notes payable, convertible notes payable and license fee payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of the respective instruments.

Loss Per Share of Common Stock

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. The calculation of diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Securities with anti-dilutive effects on net earnings (loss) per share are excluded. As of December 31, 2020 and 2019, none of the convertible preferred shares or convertible debt were included in the calculation of diluted weighted average shares as they were anti-dilutive. As of December 31, 2020 and 2019, preferred shares convertible to 90,229,000 common shares were included in the diluted weighted average shares; however, notes convertible into a maximum of 1,100,000 common shares were excluded from the calculation of loss per common share as the notes are anti-dilutive. As of December 31, 2020 and 2019, common shares outstanding totaled 12,622,245.

Accounting Pronouncements Recently Adopted and Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Under this new guidance, lessees (including lessees under leases classified as finance leases, which are to be classified based on criteria similar to that applicable to capital leases under current guidance, and leases classified as operating leases) will recognize a right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under current guidance, operating leases are not recognized on the balance sheet. However, the new guidance permits companies to make an accounting policy election not to apply the recognition provisions of the new guidance to short term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise). If this election is made, lease payments under short term leases will be recognized on a straight-line basis over the lease term. The Company has adopted the new guidance effective January 1, 2019: however, there was no impact to the financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F - 2
Consolidated Balance Sheets as of December 31, 2020 and 2019	F - 4
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2020 and 2019	F - 5
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019	F - 6
Consolidated Statement of Stockholders’ Deficit for the years ended December 31, 2020 and 2019	F - 7
Notes to Consolidated Financial Statements	F - 8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
TEO Foods Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of TEO Foods Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, 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 with 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 audits 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 control 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.

Critical Audit Matters

The critical audit matters below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue and Allowance for Doubtful Accounts

As described in Note 2 to the Company’s consolidated financial statements, the Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products. In addition, the Company has balances due related to IVA taxes paid in Mexico that are refundable upon filing returns with supporting documentation to the Mexican tax authorities.

The allowances for doubtful accounts are based on expected collectability of the trade and tax receivables, after considering the Company’s historical collection experience and the length of time an account is outstanding.

3001 N. Rocky Point Dr. East, STE 200 i Tampa, Florida 33607 i 813.367.3527

F-2

Royalty Agreement and Impairment of Long-Lived Intangible Assets

The Company entered into an agreement during 2020 where certain fixed assets were transferred to a third-party in exchange for future licensing and royalty fee income. The Company valued the equipment transferred at its net book value, which was estimated to approximate the fair value within reasonable limits. The fair market value could not be readily determined given the condition, age, and lack of market for many of the items. This amount was recorded as a royalty agreement on the consolidated balance sheet with an indefinite life.

In connection with the royalty agreement, the Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment.

Summary

We identified the Company’s estimates of the allowance for doubtful accounts, royalty agreement entered into during 2020 and impairment of the indefinite lived royalty agreement as critical audit matters. The principal considerations for our determination of these critical audit matters related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors. Auditing these judgments and assumptions by the Company involves auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address these critical audit matters included the following:

We evaluated the relevance and the reasonableness of assumptions related to the evaluation of the allowance for doubtful accounts, current economic conditions, and other risk factors used in development of the qualitative factors by comparing these data points to audit evidence gathered.

We obtained a listing of the Company’s fixed assets which were transferred in accordance with the royalty agreement and determined the net book value of the assets transferred to be reasonable given the historical cost and accumulated depreciation of the fixed assets at the date of the transaction.

We reviewed management’s estimate of the evaluation of possible impairment of the indefinite lived royalty agreement and determined that there was sufficient evidence to support that the royalty agreement was not impaired as of December 31, 2020.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has incurred net losses and has had insufficient working capital since inception. These factors, and the need for additional financing in order for the Company to meet its business plans, raise substantial doubt about the Company’s ability to continue as a going concern. Our opinion is not modified with respect to that matter.

/s/ Accell Audit & Compliance, P.A.

We have served as the Company’s auditor since 2019.

Tampa, Florida

March 31, 2021

F-3

TEO Foods, Inc.
CONSOLIDATED BALANCE SHEETS

	December 31,
	2020			2019
Assets
Current assets
Cash and cash equivalents	$	27,539		$	194,864
Accounts receivable , net		28,591			10,463
License and royalty income receivable		7,957			—
Inventories, net		13,386			164,229
Taxes receivable, net		96,321			446,972
Prepaid and other assets		13,301			67,749
Total current assets		187,095			884,277

Property and equipment , net		51,456			87,117
Royalty agreement		31,929			—

Total assets	$	270,480		$	971,394

Liabilities and stockholders' deficit
Current liabilities
Accounts payable and accrued expenses	$	934,483		$	828,755
Related party payables		—			274
License fee payable - related party		634,733			693,000
Notes payable		100,000			100,000
Convertible note payable - current portion		220,000			220,000
Total current liabilities		1,889,216			1,842,029

Total liabilities		1,889,216			1,842,029

Commitments and contingencies (Note 14)

Stockholders' deficit
Preferred stock, $0.001 par value, 10,000,000
shares authorized, 9,022,900 shares issued
and outstanding	$	9,023		$	9,023
Common stock , $0.001 par value, 490,000,000
shares authorized,12,622,245 and 12,622,245,
issued and outstanding, respectively		12,623			12,623
Additional paid-in-capital		277,229			277,229
Accumulated deficit		(1,917,183	)		(1,285,459	)
Other comprehensive income		(428	)		115,949
Total stockholders' deficit		(1,618,736	)		(870,635	)

Total liabilities and stockholders' deficit	$	270,480		$	971,394

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

F-4

TEO Foods, Inc
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	For the Years ended December 31,
	2020			2019

Sales	$	358,713		$	3,335,815
Cost of sales		(284,672	)		(2,708,317	)
Gross profit		74,041			627,498

Operating expense
Payroll		218,424			486,451
General and administrative		186,339			384,342
Rent and lease		126,543			143,157
Professional fees		107,588			93,724
Advertising and marketing		49,489			42,369
Depreciation		13,034			19,676
Total operating expenses		701,417			1,169,719

Operating loss		(627,376	)		(542,221	)

Other income (expense)
Licensing and royalty income		21,389			—
Interest income		—			6,081
Interest expense		(25,944	)		(36,385	)
Gain on bargain purchase		—			232,529
Other income		207			85,231
Total other income (expense)		4,348			287,456

Net loss		(631,724	)		(254,765	)

Foreign currency translation adjustment		(116,377	)		115,949
Comprehensive loss	$	(748,101	)	$	(138,816	)

Loss per common share -
basic and diluted	$	(0.05	)	$	(0.02	)

Weighted average common
shares outstanding - basic and diluted		12,662,245			12,430,122

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

F-5

TEO Foods Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years ended December 31,
	2020			2019

Cash flows from operating activities
Net loss	$	(631,724	)	$	(254,765	)
Adjustments to reconcile net loss to net
cash used in operations:
Depreciation expense		13,034			19,676
Bad debt expense		186,339			—
Loss of disposal of fixed assets		7,711			—
Gain on bargain purchase		—			(232,529	)
Changes in operating assets and liabilities:
Accounts receivable		64,741			(57,089	)
License and royalty income receivable		(7,957	)		—
Inventories		132,636			221,462
Tax receivable		41,144			113,639
Prepaid and other assets		3,799			—
Accounts payable and accrued expenses		218,769			407,218
Net cash provided (used) in operating activities		28,492			217,612

Cash flows from investing activities
Cash received in Targa acquisition		—			6,504
Purchase of property and equipment		(25,312	)		(33,020	)
Net cash (used) in investing activities		(25,312	)		(26,516	)

Cash flows from financing activities
Proceeds from issuance of common stock		—			7,500
Principal reduction in notes payable		—			(34,000	)
Proceeds from convertible notes payable		—			120,000
Principal reduction in convertible notes payable		—			(50,000	)
Payment of deemed dividend to Teo Inc. for license		(58,267	)		(182,000	)
Net cash (used) in financing activities		(58,267	)		(138,500	)

Effect of foreign currency exchange translation		(112,238	)		140,129

Net change for period	$	(167,325	)	$	192,725
Cash and cash equivalents at beginning of period		194,864			2,139
Cash and cash equivalents at end of period	$	27,539		$	194,864

Supplement Information:
Cash paid for:
Interest	$	—		$	5,394

Non-cash investing and financing activities
Issuance of 2,250,000 common shares in acquisition of Targa	$	—		$	225,000
Convertible notes issued in acquisition of Targa	$	—		$	552,000
Cancellation of related party accounts and notes receivable in exchange for cancellation of related party debt	$	—		$	1,460,035
Property and equipment exchanged for royalty agreement	$	31,929		$	552,000

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

F-6

TEO Foods, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT


									Additional					Other
	Preferred Stock				Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Shares		Amount		Capital		deficit			Income			Total

Balance - December 31, 2018		9,022,900		9,023		10,334,745		10,335		47,017		(1,030,694	)		—			(964,319	)
Stock issued in acquisition of Targa		—		—		2,250,000		2,250		222,750		—			—			225,000
Stock issued for cash		—		—		37,500		38		7,462		—			—			7,500
Foreign currency translation adjustment		—		—		—		—		—		—			115,949			115,949
Net loss		—		—		—		—		—		(254,765	)		—			(254,765	)
Balance - December 31, 2019		9,022,900	$	9,023		12,622,245	$	12,623	$	277,229	$	(1,285,459	)	$	115,949		$	(870,635	)
Foreign currency translation adjustment		—		—		—		—		—		—			(116,377	)		(116,377	)
Net loss		—		—		—		—		—		(631,724	)		—			(631,724	)
Balance - December 31, 2020		9,022,900	$	9,023		12,622,245	$	12,623	$	277,229	$	(1,917,183	)	$	(428	)	$	(1,618,736	)

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

F-7

TEO Foods Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

TEO Foods Inc. (“Company”) was incorporated in the state of Nevada on December 27, 2012.

The Company’s principal activity is to produce and sell food packaged products for retail sale in the frozen, refrigerated and shelf stable categories. The Company has a license to use the TEO name and logo on food products it sells and to apply the TEO pasteurization/sterilization processes to its products for improved shelf life and safety.

Effective January 1, 2019, the Company executed a Stock Purchase Agreement (“SPA”) with NERYS USA Inc. (“Nerys USA”). The Company issued the closing payments as described in Note 4. Pursuant to the terms of the SPA, Commercial Targa S.A. de C.V. (“Targa”) became a wholly owned subsidiary of the Company.

In January 2020, the Company created BC TEO Foods S.A. de C.V. (“BC TEO Foods”), a new 100% owned subsidiary in Mexico. The Company is in the process of setting up new production facilities to be operated by this subsidiary.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents.

Foreign Currency Translation

The Company’s subsidiarys’ primary functional currency is the Mexican peso, but it’s reporting currency is the U.S. dollar. The balance sheet accounts are translated at exchange rates in effect at the end of the period and income statement accounts are translated at average exchange rates for the period. Translation gains and losses are included as a separate component of stockholders’ deficit.

Accounts Receivable

Accounts receivable are reported at the customers’ outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The allowance for doubtful accounts at December 31, 2020 and 2019 was approximately, $393,000 and $475,000, respectively.

Inventory and Cost of Sales

Inventories are stated at the lower of cost or realizable value, using the average cost method. When an impairment indicator suggests that the carrying amounts of inventories might not be recoverable, the Company reviews such carrying amounts and estimates the net realizable value based on the most reliable evidence available at that time. An impairment loss is recorded if the net realizable value is less than the carrying value. Impairment indicators considered for these purposes are, among others, obsolescence, decrease in market prices, damage and a firm commitment to sell.

Property and Equipment

Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.

F-8

Impairment of Long-Lived and Intangible Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluate whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available, or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. The Company did not recognize impairment on its long-lived assets during the years ended December 31, 2020 or 2019. Identified intangible assets are reviewed for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s only intangible asset consist of the royalty agreement discussed in Note 8.

Beneficial Conversion Feature of Convertible Notes Payable

A contingent beneficial conversion feature in a convertible note payable with conversion terms that change upon the occurrence of a future event (ex: fair value of the underlying stock declines after the note issuance date) is recognized when the contingency is resolved. As of December 31, 2020, the Company has not recognized any beneficial conversion features on its convertible debt.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the company expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount:

Identification of the promised goods in the contract;

ii.

Determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract;

iii.

Measurement of the transaction price, including the constraint of variable consideration;

iv.

Allocation of the transaction price of the performance obligations; and

Recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods and services it transfers to the customer. Once a contract is determined to be within the scope of Topic 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligations when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time typically upon delivery. The Company primarily sells packaged food products to its customers. The Company’s performance obligation is satisfied when the goods have been delivered, which is at a point in time.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent 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

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

● Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.

● Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.

F-9

Loss Per Share of Common Stock

Accounting Pronouncements Recently Adopted and Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases”. Under this new guidance, lessees (including lessees under leases classified as finance leases, which are to be classified based on criteria similar to that applicable to capital leases under current guidance, and leases classified as operating leases) will recognize a right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under current guidance, operating leases are not recognized on the balance sheet. However, the new guidance permits companies to make an accounting policy election not to apply the recognition provisions of the new guidance to short term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise). If this election is made, lease payments under short term leases will be recognized on a straight-line basis over the lease term. The Company has adopted the new guidance effective January 1, 2019 and elected not to apply the standard to short-term leases. However, there was no impact to the financial statements.

NOTE 3 – GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has suffered recurring losses from operations and has insufficient working capital as of December 31, 2020 to develop its business plan and meet its obligation of the next 12 months. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the Company's ability to obtain necessary equity or debt financing to continue operations, and ultimately the Company's ability to generate profit from sales of packaged food products. These consolidated financial statements do not include any adjustments to classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company plans to obtain funds for operations through continued financial support from its stockholders, debt and private offerings of its equity.

NOTE 4 – STOCK PURCHASE AGREEMENT

On July 30, 2018, the Company entered into a SPA with NERYS USA Inc. to purchase all of the issued and outstanding equity of Commercial Targa S.A. de C.V. ("Targa"). The Company acquired Targa to expand its operations with the sale of packaged food products.

Effective January 1, 2019, the transaction closed with an adjusted purchase price consisting of $160,000 in cash, $220,000 and $552,000 in secured convertible promissory notes and 11,250,000 common shares valued at $.10 per share. In addition, an earn-out provision was added which, if certain conditions are met, would require an additional secured convertible promissory note of $310,000 and the issuance of an additional 3,750,000 common shares.

In May of 2019, the SPA was amended resulting in the earn-out provision being eliminated, the $220,000 (which had a principal balance remaining of $170,000) and $552,000 secured convertible notes payable, plus accrued interest, issued as part of the purchase price being assigned to Targa in exchange for an equal reduction of amounts owed to Targa by Nerys USA. In addition, Nerys USA assumed and settled an account payable balance due from Targa against amounts Targa owed to Nerys USA.

The assignment of the Nerys notes to Targa resulted in a $722,000 reduction in the convertible notes payable and reduction in liabilities for the accrued interest transferred of $17,110. This also resulted in an equal reduction of $739,110 of Related Party Receivable and Notes Receivable due to Targa from Nerys USA. In addition, $360,824 of Related Party Payables to Nerys USA were offset against Related Party Receivables from Nerys USA to Targa.

The Company entered into a Release Back Agreement effective December 31, 2019, whereby certain brands acquired pursuant to the SPA with NERYS USA were transferred back in exchange for cancellation of nine million common shares the Company originally issued pursuant to the SPA currently held by the transferee.

F-10

Due to the state of operations of Targa, along with the economic impact of U.S. tariffs, the Company believes it has acquired Targa for less than the estimated fair value of its net assets. In accordance with ASC 805, Business Combinations, the Company has conducted an evaluation to determine the fair value of Targa’s identifiable assets acquired and based on that evaluation the estimated fair value was $2,515,364 ($6,504 in cash, $1,992,112 in receivables, $382,237 in inventory, $21,833 in prepaid and other assets and $112,678 in property and equipment). This evaluation includes allowances for obsolete inventory, related party receivables that have become doubtful, non-related party receivables that have become doubtful, and tax credits that have become doubtful.

The Company did not assign additional value on customer relationships and know-how. Evaluation of the relationships indicated that they were in jeopardy at the time of acquisition and post-acquisition operations were necessary to stabilize existing placements. Evaluation of know-how existing at the time of acquisition did not identify any unique or proprietary processes.

The identifiable liabilities were $1,125,835 ($637,754 in accounts payable and accrued expenses and $488,081 in related party payables), resulting in a net value of $1,389,529. The purchase price was modified by subsequent amendments and the resulting consideration had an estimated fair value of $1,157,000. The resulting consideration consisted of cash, promissory notes and common shares. The Company has recorded a bargain purchase gain on the acquisition of Targa totaling $232,529, which is included in other income (expense) on the consolidated statements of operations and comprehensive income.

The Company has reviewed its procedures used to identify and measure the assets acquired, the liabilities assumed and the consideration transferred and concluded that the procedures followed and the resulting measurements were appropriate. The Company also performed a review and determined that the business combination did not include any transactions that should be accounted for separately from the business combination.

NOTE 5 – INVENTORY

Inventories consists of raw materials and finished goods located in the Company’s warehouse in Tijuana, Mexico. At December 31, 2020 and, 2019 Inventories were $13,386 and $164,229, respectively, which includes an allowance of $0 and $111,320 for obsolescence and shrinkage as of December 31, 2020 and December 31, 2019, respectively.

NOTE 6 – TAX RECEIVABLES

Tax Receivables represent credits from the Mexican taxing authority. Targa has accumulated IVA tax payments that exceeded its IVA tax liabilities over the past several years. The Company has applied for refunds of these accumulated overpayments and began receiving the first refunds in September of 2019. The tax receivable balance at December 31, 2020 and 2019 of $96,321 and $446,972, respectively is net of a reserve for the possible uncollectable portion of the tax credits totaling $418,953 and $175,599, respectively.

NOTE 7 – PROPERTY AND EQUIPMENT

At December 31, 2020 and 2019, property and equipment consisted of the following:

	2020			2019
Furniture and fixtures	$	356		$	1,810
Machinery and equipment		71,554			65,709
Transportation equipment		12,953			39,274
		84,863			106,793
Less accumulated depreciation		(33,407	)		(19,676	)
	$	51,546		$	87,117

Depreciation expense for the years ended December 31, 2020 and 2019 totaled $13,034 and $19,676, respectively. The estimated useful lives of fixed assets range from 3 to 10 years.

F-11

NOTE 8 – ROYALTY AND LICENSE AGREEMENT – RELATED PARTY

On September 30, 2017, the Company entered into a Master Agreement with TEO Inc. ("TEO"). TEO is the founder and majority controlling shareholder of the Company. The Master Agreement provides the Company a license to use the TEO name and logo on food products it sells and to apply TEO's pasteurization/sterilization processes to its products for improved shelf life and safety. Additional provisions provide the Company production rights to TEO's pasteurizer/sterilizer and rights to lease its own system when certain sales/production increase. Pursuant to the Master Agreement, the Company agreed to pay an initial $1 million fee in installments with $100,000 due on June 30, 2018, $300,000 due on December 31, 2018 and the remaining $600,000 due in 12 equal monthly payments with the first payment due on January 31, 2019. TEO Inc. has agreed to maintain the license through December 31, 2021 and accrue and accept payments due as funds are available. As of December 31, 2020, the Company has paid a total of $365,267 towards the license. TEO Inc. has agreed to extend the start date to January 1, 2022 of the use/royalty and service fee of 5.5% of the Company's gross revenue for food sales processed using TEO's intellectual property is payable quarterly. The ongoing licensing is maintained by meeting minimum annual use/royalty and service fees. The Company may pay for the difference between the actual use and the minimum to maintain the license. The annual minimum is listed as follows:

Year		Minimum Service Fee
	2022	$	500,000
	2023		750,000
	2024		1,000,000
	Thereafter		Increase 10% per year

As a result of TEO being the majority shareholder of the Company and TEO's basis in the license being $0, the Company recorded a deemed dividend of $1 million for the initial fee payable to TEO. As of December 31, 2020, and 2019, the outstanding balance of the license fee payable was $634,733 and $693,000, respectively

NOTE 9 – NOTES PAYABLE

Notes Payable

On July 31, 2018, the Company issued a note for $100,000 in principal bearing interest at 8% maturing on October 31, 2018. This note was subsequently amended to extend the maturity date to December 31, 2020. As of December 31, 2020 and 2019, the outstanding principal balance of the note was $100,000.

Convertible Note Payable

On June 28, 2018, the Company issued a note for $100,000. The note is for a two-year term and bears an 8% interest rate, due at maturity. The note is convertible into common shares at a 20% discount to the 30-day average bid price of the Company's common shares, as may be quoted on the OTCQB, OTCQX or listing on a national stock exchange, but at no rate lower than $0.20 per share.

On February 4, 2019, the Company entered into a purchase agreement with one investor for the purchase of up to an aggregate of $350,000 in convertible notes payable in three payments commencing with the first in the amount of $120,000 on February 4, 2019, the second on April 1, 2019 in the amount of $110,000 and the third on June 1, 2019 in the amount of $120,000. The investor did not make the second purchase on April 1, 2019 or the third purchase on June 1, 2019. The purchase provisions of the agreement have expired with only the first purchase executed. The $120,000 note purchased in February can be converted to common stock at $0.20 per share or the 30-day average bid price of the Company's common shares, as may be quoted on the OTCQB, OTCQX or listing on a national stock exchange, but at no rate lower than $0.20 per share and converts automatically upon certain conditions. The note bears no interest until June 30, 2019 and then bears 8% interest, if not converted to common stock. The note matured on June 30, 2020.

As of December 31, 2020 and 2019, there is not a quoted bid price available as the Company’s shares are not listed on any exchanges. As the minimum conversion rate at the time of issuance is greater than or equal to the current stock value based on other similar transactions, these notes are not deemed to have an embedded derivative associated with them.

The principal balance of convertible debt at December 31, 2020 and 2019 amounted to $220,000.

NOTE 10 – EQUITY

Preferred Stock

Each share of Class A Preferred Stock may be converted by the holder upon request of the holder into 10 shares of common stock. Each holder is entitled to 100 votes for each share of Class A Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Company for their action or consideration. The holders are entitled to dividends, if any, as declared by the Company and participate pari passu with the common stock of the Company at the conversion rate.

F-12

NOTE 11 - INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate is 21%.

The provision for Federal income tax consists of the following December 31:

Federal income tax benefit attributable to:	2020			2019
Current Operations	$	132,662		$	19,182
Less: valuation allowance		(132,662	)		(19,182	)
Net provision for Federal income taxes	$	—		$	—

The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows:

Deferred tax asset attributable to:	2020			2019
Net operating loss carryover	$	157,098		$	24,436
Less: valuation allowance		(157,098	)		(24,436	)
Net deferred tax asset	$	—		$	—

At December 31, 2020, the Company had net operating loss carry forwards of approximately $750,000 that may be offset against future taxable income and begin to expire in 2032. No tax benefit has been reported in the December 31, 2020 and 2019 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21% effective January 1, 2018.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than- not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions.

NOTE 12 - RELATED PARTY TRANSACTIONS

The Company has various related party receivables and payables derived from normal operating activities. These balances are non-interest bearing and are periodically settled as cash flow permits.

Master License Agreement

On September 30, 2017, the Company entered into a Master Agreement with TEO, the founder and majority controlling shareholder of the Company. See Note 8.

NOTE 13 –ROYALTY AND LICENSE AGREEMENT

Effective April 1, 2020, the Company entered into an agreement whereby it assigned half and licensed half of the Nerys Brand for cheese products in Mexico, along with certain production equipment and facilities that the Company did not intend to transfer to its new facility for production, to a third party. In exchange, the Company receives a portion of net revenue from all products sold, which includes bulk meats and other products, by the acquirer, a royalty on all NERYS cheese products sold in Mexico of $0.01 per pound and will also receive five percent of the proceeds of any sale of the related acquirer’s business.

As of December 31, 2020, the Company has received a total of $21,389 in licensing and royalty revenue from this agreement.

The Company valued the royalty agreement at the book value of the assets transferred of $31,929, which approximates the fair value and is recorded as an intangible asset on the balance sheet.

F-13

NOTE 14 – COMMITMENTS AND CONTINGENCIES

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of December 31, 2020, the Company is not aware of any contingent liabilities that should be reflected in the financial statements.

At December 31, 2020, the Company had three leases on commercial units that are contiguous in the same building located in Tijuana Mexico and comprising approximately 38,000 square feet total. The leases are 12 month leases with option to renew for additional 12 month periods. The total rents are approximately $14,000 per month gross with no additional common fees or other charges. The Company paid a total of $126,543 in the year ended December 31, 2020 related to is leases of commercial units in Tijuana.

NOTE 15 – CONCENTRATIONS

Cash Deposit

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At December 31, 2020 and 2019, no cash balances exceeded the federally insured limit.

NOTE 16 - SUBSEQUENT EVENTS

Common Shares

In February 2021, the Company sold a total of 250,000 common shares at $0.20 per share to one purchaser for a total of $50,000.

The Company has evaluated subsequent events for recognition and disclosure through March 31, 2021 which is the date the financial statements were available to be issued. No other matters were identified affecting the accompanying financial statements and related disclosures.

F-14

Item 9. Change in and Disagreement with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to ensure that information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate 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.

Our management evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, 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 management, with the participation of the CEO, concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following persons are our executive officers and directors, and hold the offices set forth opposite their names.

Name	Age	Position
Jeffrey Mackay	56	CEO, President and Director
John O'Keefe	71	CFO, Treasurer and Director

The following is a brief account of the business experience during the past five years of each of our directors and executive officers:

Jeffrey Mackay - CEO, President and Director

Jeffrey Mackay became our President and Director at inception in 2012 and has had primary responsibilities for our operations and business. Since inception in 2005, he has also been the CEO and a director of TEO Inc. Mackay is an inventor on several of the TEO patents and is majority shareholder of TEO Inc.

Mr. Mackay has a diverse entrepreneurial and technical background, starting as a prototype machinist in what came to be Silicon Valley and progressing to become a quality engineer for General Dynamics air defense systems division before transitioning to law.

Mr. Mackay is an attorney licensed in California for over 20 years with a practice in Corporate and Securities Law. He transitioned back to solo practice in 2020 due to devoting most of his time to TEO Foods. He has been Of Counsel at Borton Petrini LLP beginning September 2018 and Of Counsel at the firm of Rowe Mullen LLP beginning December 2014. Prior to 2014 he had a solo practice.

His practice includes mergers, acquisitions, private placements, registration statements, periodic and current reporting with the Securities and Exchange Commission, corporate governance and other compliance matters. He has had significant experience working with boards, executive management, accountants and auditing firms.

Mr. Mackay received his Juris Doctor at Thomas Jefferson School of Law in 1997, with a Certificate in International Legal Process.

John O'Keefe – CFO, Treasurer and Director

John O'Keefe became our CFO, Treasurer and Director in August 2018. He has also been the CFO, Treasurer and a director of TEO Inc. since 2006.

He is a highly seasoned senior executive with primary experience in all facets of the energy business. He is an accomplished veteran of running public companies in the US, Canada, and the UK with experience in many parts of the world. O'Keefe sits on the boards of two private corporations as well as being the Vice Chair of the Harvard Business School Club of Houston. He actively manages an unnamed private MLP energy fund that has no external shareholders with his company O'Keefe Capital Partners LP, where he has been the Managing partner since 2005 consisting of immediate family only.

During his career, O'Keefe has played key roles in $13.6 billion of mergers, acquisitions, divestments, spin offs, and stock buy backs. He also successfully accessed the capital markets, working with operating and technical people at all levels to create shareholder value. He has played key roles in raising $4.3B of equity and issued $4.2B of debt and convertibles in his career.

O'Keefe was Executive VP and CFO of Fram Exploration from 2011 to 2012, an early stage E&P company seeking to go public on the Oslo Stock Exchange. He was able to make the necessary board, corporate governance and financial reporting changes to get the Company qualified by the Norwegian securities authority. While there, O'Keefe managed a $25 million public company acquisition, a $40 million drilling joint venture, and raised $14 million of new funds.

O'Keefe was also a Partner in the Houston, Texas practice of Tatum, LLC from 2010 to 2011. During his tenure, O'Keefe has operated as interim CFO for Lucas Energy, Inc. as well as providing capital raising support to Rooster Petroleum LLC, both of which are independent oil and gas companies. He was able to raise $14 million in equity and warrants for Lucas during the financial crisis. O'Keefe also led Blast Energy Services as President and CEO (2007-2009). For the prior three years, O'Keefe served as Blast Co-CEO & CFO where he raised $62 million in new funding and, jointly with the COO, turned the company around.

From 2000 to 2003, O'Keefe served as CFO of Ivanhoe Energy, a dual listed public E&P company in which he raised $90 million in new equity. Prior to 2000, he was VP of Investor Relations & Corporate Communications with Santa Fe Snyder and Oryx Energy Companies, two upstream Texas based NYSE companies. He played a lead role in merging the companies whereupon stockholders realized gains of $930 and $585 million respectively.

O'Keefe had a 22-year career with Sun Oil and 7 years with BP in the Refining, Marketing, and Upstream segments. He was sponsored by Sun to attend the PMD executive program at Harvard Business School in 1985. He earned an honors degree in Business from Portsmouth University and qualified as a Chartered Accountant at the London South Bank University while doing management training with BP.

Involvement in Certain Legal Proceedings

During the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:

●	the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

●	convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

●	subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

●	found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

●	the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

●	the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Committees of the Board

The Company does not currently have independent committees. The Board currently acts in the roles of the various committees. As the Board is expanded to include independent members we expect to form and adopt charters for independent committees.

Code of Ethics

As of the date of this report we have not adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We expect to adopt a formal policy upon expanding the Board and executive management team.

Family Relationships

There are no family relationships among our executive officers and directors.

Compliance with Section 16(A) of the Exchange Act

Not Applicable

Changes in Nominating Procedures

None

Item 11. Executive Compensation

The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended December 31, 2020 to:

●

all individuals who served as our chief executive officer, chief financial officer or acted in a similar capacity for us at any time during the fiscal years ended December 31, 2020 and 2019.

●

all individuals who served as executive officers of ours at any time during the fiscal years ended December 31, 2020 and 2019 and received annual compensation during the fiscal year ended December 31, 2020 and 2019 in excess of $100,000.

Summary Compensation Table

Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Total ($)

Jeffrey Mackay Chief Executive Officer (1)	2020 2019		120,000 20,000		- -		- -		- -		120,000 20,000

John O’Keefe Chief Financial Officer (2)	2020 2019		- -		- -		- -		- -		- -

Note: The table above includes only the value of options that vested during the periods indicated. The listed executives may have also received unvested options that may vest in a future period. See “Outstanding Equity Awards at Fiscal Year-End” below.

(1) Jeffrey Mackay became our President and Director at inception in 2012. Not included in the chart above are 6,337,500 common shares received by TEO Inc. shareholders from TEO Inc. after its conversion of preferred shares in March of 2018.

(2) John O’Keefe became our CFO, Treasurer and Director in August 2018. Not included in the chart above are 370,000 common shares received by TEO Inc. shareholders from TEO Inc. after its conversion of preferred shares in March of 2018.

Employment Agreements and Benefits

We do not currently provide any employee benefit or retirement programs. Our officers’ salaries are determined by the Board of Directors. Officers and employees may receive bonuses from time to time in the form of cash or equity at the sole discretion of the Board of Directors.

We have no plans in place and have 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.

We have not entered into any employment agreements with our officers.

Outstanding Equity Awards

The following table reflects options granted to our executive officers named in the Summary Compensation Table.

Outstanding Equity Awards at Fiscal Year-End

Name	Number of securities underlying unexercised options exercisable (#)	Number of securities underlying unexercised options unexercisable (#)	Option exercise price ($)	Option expiration date
Jeffrey Mackay	-	-	-	-

John O’Keefe	-	-	-	-

Director Compensation

The Company currently has two Directors Jeffrey Mackay and John O'Keefe.

We do not have any independent, non-executive directors. We currently do not pay any cash remuneration for acting as a Director but expect to do so in the future as the Board is expanded. We intend to reimburse Independent Directors for their expenses, if any, for attendance at meetings of the Board of Directors.

The following table sets forth compensation received by our directors in the fiscal year ended December 31, 2020.

Name

Fees earned or

paid in cash

($)

Stock awards

($)

Option awards

($)

All other

compensation

($)

Total

($)

Jeffrey Mackay⁽¹⁾

John O’Keefe⁽²⁾

⁽¹⁾	This table includes only his compensation which was expressly for service as a director. Mr. Mackay did not receive any other compensation as an executive officer—see the Summary Compensation Table above.
⁽²⁾	This table includes only his compensation which was expressly for service as a director. Mr. O’Keefe did not receive any other compensation as an executive officer—see the Summary Compensation Table above.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of March 31, 2021 , the beneficial ownership of TEO Foods Inc. common stock by each of our directors and named executive officers, each person known to us to beneficially own more than 5% of our common stock, and by the officers and directors of the Company as a group. Except as otherwise indicated, all shares are owned directly. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power (subject to applicable community property laws) and that person's address is c/o TEO Foods, Inc., Blvd Insurgentes 1980, suite 4-D, Tijuana, BC 22225. Shares of common stock subject to options, warrants, convertible notes or preferred stock currently exercisable or convertible or exercisable or convertible within 60 days after March 31, 2021 are deemed outstanding for computing the share ownership and percentage of the person holding such options, warrants, or convertible notes but are not deemed outstanding for computing the percentage of any other person.

	Shares		Percentage
Jeffrey H. Mackay (1)		97,566,500		93.8	%
John O'Keefe (2)		370,000		*

Officers and Directors as a Group (3 persons)		97,936,500		93.8	%

(1)	Includes 6,337,500 shares held directly and 1,000,000 shares held by his spouse. Also includes 90,229,000 shares of common stock that are issuable upon conversion of 9,022,900 preferred shares held by TEO Inc. which are included since he is able to control the voting of those shares.
(2)	Includes 300,000 shares held by O'Keefe Capital Partners, LLP
(*)	Less than 1%.

Item 13. Certain Relationships and Related Transactions, and Director Independence

In addition to the cash and equity compensation arrangements of our directors and executive officers discussed above under "Director Compensation" and "Executive Compensation," the following is a description of transactions since December 27, 2012 (inception), to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.

There have not been any transactions meeting the criteria of the paragraph above.

Director Independence

Our Board of Directors presently consists of two members. Our Board of Directors has determined that Mr. Mackay and Mr. O'Keefe are not "independent," as defined by SEC rules adopted pursuant to the requirements of the Sarbanes-Oxley Act of 2002. Although our stock is not listed for trading on the Nasdaq Stock Market at this time, we are required to determine the independence of our directors by reference to the rules of a national securities exchange. In accordance with these requirements, we have determined that Jeffrey Mackay and John O'Keefe are not an "independent director," as determined in accordance with Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market, Inc.

Mr. Mackay and Mr. O'Keefe are executive officers of the Company, and therefore are not independent directors.

Item 14. Principal Accounting Fees and Services

Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements and review of financial statements included in the registrant's Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ending December 31, 2020 and 2019 were: $28,500, and $38,000, respectively.

Audit-Related Fees

No aggregate fees were billed in either of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under item (1) for the fiscal years ending December 31, 2020 and 2019.

Tax Fees

No aggregate fees were billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning for the fiscal years ending December 31, 2020 and 2019.

All Other Fees

Other fees billed for professional services provided by the principal accountant, other than the services reported above, for the fiscal years ending December 31, 2020 and 2019 were $0 and $0.

Audit Committee Pre-Approval Policies

The Board acting as our Audit Committee has approved the principal accountant's performance of services for the audit of the registrant's annual financial statements and review of financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending December 31, 2020. Audit-related fees, tax fees, and all other fees, if any, are approved by the Board.

Work Performed by Others

The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than 50 percent.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Exhibit No.	Description

3.1		Amended and Restated Articles of Incorporation of TEO Foods, Inc. (Incorporated by reference to Exhibit 3.1 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
3.2		Bylaws of TEO Foods, Inc. (Incorporated by reference to Exhibit 3.2 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.1		Master Agreement with TEO Inc. effective September 30, 2017 (Incorporated by reference to Exhibit 10.1 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.2		Co-Pack Agreement with TARGA. Effective April 20, 2018 (Incorporated by reference to Exhibit 10.2 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.3		Form of Securities Purchase Agreement. We entered into respective agreements on this form with 1 purchaser in June 2018. (Incorporated by reference to Exhibit 10.3 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.3.1		Form of Secure Convertible Note. (Incorporated by reference to Exhibit 10.3.1 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.4		Promissory Note July 31, 2018. (Incorporated by reference to Exhibit 10.4 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.5		Stock Purchase Agreement between NERYS USA Inc. and TEO Foods, Inc effective July 30, 2018 (Incorporated by reference to Exhibit 10.5 from the registrant’s registration statement on Form S-1/A filed with the SEC on October 11, 2018)
10.5.1		Amendment to Stock Purchase Agreement between NERYS USA Inc. and TEO Foods, Inc. (incorporated by reference to Exhibit 10.1 from the registrant’s Current Report on form 8-K filed with the SEC on February 6, 2019)
10.5.2		Amendment 3 to Stock Purchase Agreement between NERYS USA Inc. and TEO Foods, Inc. (incorporated by reference to Exhibit 10.1 from the registrant’s Quarterly Report on form 10-Q filed with the SEC on August 19, 2019)
21*		List of Subsidiaries.
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934
32.1*		Certification of Chief Executive Officer pursuant to Section 1350
32.2*		Certification of Chief Financial Officer pursuant to Section 1350
101.INS**		XBRL Instance Document.
101.SCH**		XBRL Taxonomy Extension Schema Document.
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith
**	Furnished herewith
+	Each of these Exhibits constitutes a management contract, compensatory plan, or arrangement.

Item 16. Form 10K Summary

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TEO Foods Inc.

March 31, 2021	By:	/s/ Jeffrey Mackay
		Jeffery Mackay
		Chief Executive Officer
		(Principal Executive Officer)

March 31, 2021	By:	/s/John O’Keefe
		John O’Keefe
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 31, 2021	/s/ Jeffrey Mackay
	Jeffrey Mackay, Director,
	Principal Executive Officer

Date: March 31, 2021	/s/ John O'Keefe
	John O'Keefe, Director,
	Principal Accounting Officer