EQUATOR Beverage Co 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) EQUATOR BEVERAGE COMPANY Condensed Balance Sheets (Unaudited) As of June 30, 2024 and December 31, 2023 June 30, 2024 December 31, 2023 Assets Current Assets Cash and cash equivalents $ 13,091 $ 87,339 Accounts receivable, net 237,189 135,061 Inventory 491,382 270,788 Supplier deposits 78,325 52,655 Prepaid expenses 43,600 35,650 Total Current Assets $ 863,587 $ 581,493 Total Assets $ 863,587 $ 581,493 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accrued expenses $ 202,093 $ 80,621 Related party loans 316,000 230,000 Total Current Liabilities 518,093 310,621 Commitments and Contingencies – Refer to Note 3 Stockholders’ Equity Common stock, 20,000,000 shares authorized at $ 0.001 par value, 17,410,346 and 16,933,346 shares issued and outstanding, at June 30, 2024 and December 31, 2023, respectively 17,411 16,934 Additional paid-in capital 24,300,479 24,063,176 Accumulated deficit ( 23,972,396 ) ( 23,809,238 ) Total Stockholders’ Equity 345,494 270,872 Total Liabilities and Stockholders’ Equity $ 863,587 $ 581,493 The accompanying notes are an integral part of these condensed financial statements. F-1 Table of contents EQUATOR BEVERAGE COMPANY Condensed Statements of Operations (Unaudited) For the Three Months Ended June 30, 2024 and June 30, 2023 2024 2023 Revenue $ 845,321 $ 588,478 Cost of Revenue 502,838 307,721 Gross Profit 342,483 280,757 Operating Expenses Selling, general and administrative 396,865 258,671 Total Operating Expenses 396,865 258,671 Income / (Loss) from Operations ( 54,382 ) 22,086 Interest Expense ( 5,041 ) ( 3,256 ) Income / (Loss) Before Provision for Income Taxes $ ( 59,423 ) $ 18,830 Provision for Income Taxes ( 715 ) - Net Income / (Loss) $ ( 60,138 ) $ 18,830 Net Income / (Loss) Per Common Share, Basic and Diluted $ 0.00 $ 0.00 Weighted Average Number of Common Shares Outstanding, Basic and Diluted 17,350,280 16,557,928 The accompanying notes are an integral part of these condensed financial statements. F-2 Table of contents EQUATOR BEVERAGE COMPANY Condensed Statements of Operations (Unaudited) For the Six Months Ended June 30, 2024 and June 30, 2023 2024 2023 Revenue $ 1,485,975 $ 1,104,113 Cost of Revenue 872,908 621,179 Gross Profit 613,067 482,934 Operating Expenses Selling, general and administrative 765,608 453,583 Total Operating Expenses 765,608 453,583 Income / (Loss) from Operations ( 152,541 ) 29,351 Interest Expense ( 9,261 ) ( 6,036 ) Income / (Loss) Before Provision for Income Taxes $ ( 161,802 ) $ 23,315 Provision for Income Taxes ( 1,356 ) ( 13,344 ) Net Income / (Loss) $ ( 163,158 ) $ 9,971 Net Income / (Loss) Per Common Share, Basic and Diluted $ ( 0.01 ) $ 0.00 Weighted Average Number of Common Shares Outstanding, Basic and Diluted 17,240,104 16,881,644 The accompanying notes are an integral part of these condensed financial statements. F-3 Table of contents EQUATOR BEVERAGE COMPANY Condensed Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2024 and 2023 2024 2023 Cash Flows from Operating Activities: Net income / (loss) $ ( 163,158 ) $ 9,971 Adjustments to Reconcile Net Income / (Loss) to Net Cash Provided by / (Used In) Operating Activities: Restricted, non-trading common stock issued to directors and employees 237,780 40,227 Changes in Assets and Liabilities: (Increase) / decrease in accounts receivable ( 102,128 ) ( 54,204 ) (Increase) / decrease in inventory ( 220,594 ) ( 10,963 ) (Increase) / decrease in supplier deposits ( 25,670 ) 13,272 (Increase) / decrease in prepaid expenses ( 7,950 ) ( 19,790 ) (Increase) / decrease in accounts payable and accrued expenses 121,472 18,814 Net Cash Provided by / (Used in) Operating Activities ( 160,248 ) ( 2,673 ) Net Cash Provided by / (Used in) Financing Activities: Proceeds from related party loan 264,000 170,000 Repayments of related party loan ( 178,000 ) ( 105,000 ) Shares purchased for cancellation - ( 38,002 ) Net Cash Provided by Financing Activities 86,000 26,998 Net Increase / (Decrease) in Cash and Cash Equivalents ( 74,248 ) 24,325 Cash and Cash Equivalents at Beginning of Period 87,339 10,738 Cash and Cash Equivalents at End of Periods $ 13,091 $ 35,063 Supplemental Disclosure of Cash Flow Information: Cash Paid for Interest $ 9,261 $ 6,036 Summary of non-cash investing and financing activity: During the six-month period ended June 30, 2024 the Company issued a total of 477,000 restricted and non-trading shares with an implied value of $237,780 to directors and officers as a result of contractual stock awards. During the three-month period ended June 30, 2023 the Company issued a total of 276,000 restricted and non-trading shares with an implied value of $115,170 to directors and officers as a result of contractual stock awards. The accompanying notes are an integral part of these condensed financial statements. F-4 Table of contents EQUATOR BEVERAGE COMPANY Condensed Statements of Changes in Stockholders’ Equity (Unaudited) For the Six Months Ended June 30, 2024 and 2023 Common Stock Additional Paid-In Accumulated Shares Amount Capital Deficit Total Balance, December 31, 2023 16,933,346 $ 16,934 $ 24,063,176 $ ( 23,809,238 ) $ 270,872 Restricted, Non-Trading Stock issued to Directors and employees 201,000 201 122,409 122,610 Stock Retired to Treasury - - - - - Net Loss ( 103,020 ) ( 103,020 ) Balance, March 31, 2024 17,134,346 $ 17,135 $ 24,185,585 $ ( 23,912,258 ) $ 290,462 Restricted, Non-Trading Stock issued to Directors and employees 276,000 276 114,894 115,170 Stock Retired to Treasury - - - - - Net Loss ( 60,138 ) ( 60,138 ) Balance, June 30, 2024 17,410,346 $ 17,411 $ 24,300,479 $ ( 23,972,396 ) $ 345,494 Common Stock Additional Paid-In Accumulated Shares Amount Capital Deficit Total Balance, December 31, 2022 16,230,615 $ 16,231 $ 23,758,917 $ ( 23,629,281 ) $ 145,867 Restricted, Non-Trading Stock issued to Directors and employees 238,500 239 13,753 13,992 Stock Retired to Treasury - Net Income 4,485 4,485 Balance, March 31, 2023 16,469,115 $ 16,470 $ 23,772,670 $ ( 23,624,796 ) $ 164,344 Restricted, Non-Trading Stock issued to Directors and employees 238,500 239 25,996 - 26,235 Stock Retired to Treasury ( 380,019 ) ( 380 ) ( 37,622 ) - ( 38,002 ) Net Income - - - 18,830 18,830 Balance, June 30, 2023 16,237,596 $ 16,238 $ 23,761,045 $ ( 23,605,966 ) $ 171,407 The accompanying notes are an integral part of these condensed financial statements. F-5 Table of contents EQUATOR BEVERAGE COMPANY Notes to Condensed Financial Statements (Unaudited) June 30, 2024 NOTE 1 – BUSINESS Overview EQUATOR Beverage Company, headquartered in Jersey City, NJ, is a Delaware corporation that specializes in developing, producing, distributing, and marketing new beverage products. Our beverages have been certified Non-GMO Project Verified and USDA Organic, and we offer both nonalcoholic and ready-to-drink alcoholic options. In addition, we have a line of sparkling energy beverages. Our beverages can be found in North America, the Caribbean, and Bermuda. We are committed to sustainability and use 100% recyclable, eco-friendly packaging that has a minimal impact on the environment. Furthermore, our products are plant-based, renewable, and eco-friendly. Coconut water is nature's super hydration drink for skin and body. In each 11 oz serving, there are five essential electrolytes totaling 1043 mg more than other sports drinks. It is a fast rehydration recovery drink which performs faster than water. Coconut water has natural nutrients for skin and hair and vitamins B & C natural - not added. Coconut water is plant based and renewable; great for vegan, kosher, paleo keto and low carb diets. All this comes with a fresh crisp coconut taste. There are no preservatives in this coconut water and it is packaged in an eco-friendly container. CURRENT OPERATIONS Sales and Distribution The Company’s main product is MOJO Coconut Water. In addition to Coconut Water, the Company produces Coconut Water + Pineapple Juice, Coconut Water + Mango Juice, Organic Coconut Water, Sparkling Coconut Water Citrus, Sparkling Coconut Water Blood Orange, Sparkling Coconut Water Pink Grapefruit, Energy Sparkling Citrus, Energy Sparkling Blood Orange, Energy Sparkling Pink Grapefruit, Cubano Blue Agave Tequila Organic Sparkling Coconut Water Citrus and Cubano Blue Agave Tequila Organic Sparkling Coconut Water Blood Orange. We seek to grow the market share of our products by expanding our hybrid distribution network through the relationships and efforts of our management and third-party partners and broker network, and new products and packaging. The Company packages its beverages in 100% recyclable, Eco-Friendly packaging that can be recycled infinite times and is not made from carbon oil-based packaging. The packaging has a very low impact on the environment, and does not contribute to landfills and the pollution of our bodies of water. Also, our products are plant-based, Eco-friendly and renewable. Production The Company has multiple sources for its production. The Company’s fruit sources are of high quality. The fruit is part of the overall taste and quality of our products. Currently, the Company has multiple production facilities that it could source products from, each of the facilities could supply our forecasted demand. Competition The beverage industry is competitive. Competitors in our market compete for brand recognition, ingredient sourcing, product shelf space, and e-commerce page rankings. Our competitors have similar distribution channels and retailers to deliver and sell their products. Government Regulation Within the United States, beverages are governed by the U.S. Food and Drug Administration (the “FDA”). As such, it is necessary for the Company to establish, maintain and make available for inspection records as well as to develop labels (including nutrition information) that meet FDA requirements. The Company’s production facilities are subject to FDA regulation. F-6 Table of contents Employees As of June 30, 2024, the Company had two employees. The Company also uses the services of contractors, consultants and other third-parties. The Company uses third party bottlers to produce its products which is standard industry practice for every beverage company. We also use trucking and logistics companies to transport and store our products. We use brokers to sell our product and other professionals for accounting, legal and marketing support, to do all these functions internally would take hundreds of employees and not be cost effective. CORPORATE HISTORY AND DEVELOPMENT The Company began producing MOJO branded products in 2015. EQUATOR Beverage Company is headquartered in Jersey City, New Jersey and our internet site is www.EquatorBeverage.com. EQUATOR’s stock is traded on the OTCQB under the symbol MOJO. Interim Financial Statements The accompanying unaudited interim condensed financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q and article 10 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited interim condensed financial statements included in this document have been prepared on the same basis as the annual audited financial statements, and in the Company’s opinion, reflect all adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the six months ended June 30, 2024 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash equivalents include investment instruments and time deposits purchased with a maturity of three months or less. As of June 30, 2024, and June 30, 2023, the Company did not have any cash equivalents. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company provides for probable uncollectible amounts based upon its assessment of the current status of the individual receivables and after using reasonable collection efforts. The allowance for doubtful accounts as of June 30, 2024 and 2023 was zero. F-7 Table of contents Inventory Inventory, consisting solely of finished goods, are stated at the lower of cost (first-in, first-out method) or net realizable value (“NRV”). If necessary, the Company provides allowances to adjust the carrying value of its inventories to NRV when NRV is below cost. There were no such adjustments in 2024 or 2023. Revenue Recognition Revenue from sales of products is recognized when the related performance obligation is satisfied. The Company’s performance obligation is satisfied upon the shipment or delivery of products to customers. The Company’s products are sold on cash and credit terms which are established in accordance with standardized industry practices and typically require payment within 30 days of delivery. Shipping and Handling Costs Shipping and Handling Costs incurred to move finished goods from our distribution center to customer locations are included in the line Selling, General and Administrative Expenses in our Statements of Operations. Net Income/(Loss) Per Common Share The Company computes per share amounts in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “ Earnings per Share”. ASC Topic 260 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income/(loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the periods. Income Taxes The Company provides for income taxes using the asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company did not have a deferred tax liability at June 30, 2024 and 2023. As of June 30, 2024, and June 30, 2023, the Company had no accrued interest or penalties. The Company had no Federal or State tax examinations in the past nor does it have any at the current time. The table below shows the details of the Net Operating Loss Carryforward and Deferred Tax Assets for 2024 and 2023: 2024 2023 Net Operating Loss Carryforward, January 1 $ 3,616,513 $ 3,796,573 Taxable Income, January 1 to June 30 75,978 69,867 Net Operating Loss Carryforward, June 30 $ 3,540,535 $ 3,726,706 Federal Deferred Tax Asset, January 1 759,468 797,280 Federal Tax Expense as of June 30 (21% Tax Rate) ( 15,955 ) ( 14,672 ) Federal Deferred Tax Asset, June 30 $ 743,512 $ 782,608 State of New Jersey Deferred Tax Asset, January 1 324,678 341,692 State of New Jersey Tax Expense as of June 30 (9% Tax Rate) ( 6,838 ) ( 6,288 ) State of New Jersey Deferred Tax Asset, June 30 $ 317,840 $ 335,404 Total Deferred Tax Asset, June 30 $ 1,061,352 $ 1,188,012 Total Tax Expense $ 22,793 20,960 The table below shows the reconciliation of Net Income / (Loss) per Books to Taxable Income: 2024 2023 Net Income/(Loss) before Taxes $ ( 161,802 ) $ 23,315 Stock Awards 237,780 46,552 Taxable Net Income $ 75,978 $ 69,867 F-8 Table of contents Fair value of financial instruments The carrying amounts of financial instruments, which include cash, accounts receivable, accounts payable and accrued expense, approximate their fair values due to their short-term nature. NOTE 3 – COMMITMENTS AND CONTINGENCIES Employment Agreement Pursuant to Mr. Simpson’s Employment Agreement (“the Agreement”) dated January 1, 2024 Mr. Simpson is paid a salary of $ 9,000 per month and a stock award of 67,000 shares of non-trading, restricted Common Stock. The employment agreement expires on December 31, 2029. Pursuant to the Agreement, should Mr. Simpson’s employment be terminated without cause, the Company is obligated to pay Mr. Simpson all amounts from the contract immediately for the remaining term of 66 months. At June 30, 2024, the potential liability to EQUATOR Beverage Company was $ 627,000 and 4,422,000 shares of non-trading, restricted Common Stock. NOTE 4 – STOCKHOLDERS’ EQUITY The Company has authorized 20,000,000 shares of Common Stock having a par value of $ 0.001 . F-9 Table of contents Restricted Stock Issuances The table below summarizes the restricted, non-trading stock awards during the first six months of 2024 and 2023: Restricted, Non-trading Stock Awards Officers and Directors January 1 to June 30 2024 2023 Price Shares Amount Price Shares Amount Q1 Q1 Glenn Simpson $ 0.61 201,000 $ 122,610 Glenn Simpson $ 0.06 201,000 $ 11,792 - $ - - - Jeffrey Devlin $ 0.06 37,500 2,200 Diane Cudia $ - - - Diane Cudia $ - - - Total 201,000 $ 122,610 Total 238,500 $ 13,992 Q2 Q2 Glenn Simpson $ 0.42 201,000 $ 84,420 Glenn Simpson $ 0.10 201,000 $ 22,110 - $ - - - Jeffrey Devlin $ 0.10 37,500 4,125 Diane Cudia $ 0.41 75,000 30,750 Diane Cudia $ - - - Total 276,000 $ 115,170 Total 238,500 $ 26,235 Grand Total 477,000 $ 237,780 Grand Total 477,000 $ 40,227 Stock Purchased for Cancellation During the six months ended June 30, 2024, the Company did not purchase any shares of its Common Stock from shareholders. During the year ended December 31, 2023, the Company purchased 401,269 shares of its Common Stock from shareholders at a cost of $ 51,814 . NOTE 5 – RELATED PARTY TRANSACTIONS Mr. Simpson lent funds to the Company for a revolving loan with a principal amount up to $ 300,000 . The loan bears a 6 % simple interest per year. The principal and any accrued interest are due and payable on demand, and the Company has the right to pay back the loan in full or make payments without penalty. As of June 30, 2024, the loan payable to Mr. Simpson was $ 316,000 . As of June 30, 2023, the loan payable to Mr. Simpson was $ 290,000 . F-10 Table of contents