EQUATOR Beverage Co 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock is currently quoted on the OTCQB under the symbol MOJO. For the period January 1, 2019 to December 31, 2020, the following table sets forth the high and low closing bid prices by quarter, based upon information obtained from inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions: High Low First Quarter 2020 $ 0.29 $ 0.06 Second Quarter 2020 $ 0.20 $ 0.07 Third Quarter 2020 $ 0.17 $ 0.06 Fourth Quarter 2020 $ 0.19 $ 0.07 First Quarter 2019 $ 0.20 $ 0.10 Second Quarter 2019 $ 0.45 $ 0.13 Third Quarter 2019 $ 0.27 $ 0.03 Fourth Quarter 2019 $ 0.32 $ 0.07 Holders As of December 31, 2020, there were 30,610,240 shares of Common Stock issued and outstanding held by 944 shareholders of record. Dividends The Company has not declared a cash dividend with respect to its Common Stock. Future payment of dividends is within the discretion of the Board of Directors and will depend on earnings, capital requirements, financial condition and other relevant factors. Recent Sales of Unregistered Securities, Use of Proceeds from Registered Securities There were no sales of unregistered securities during the years ended December 31, 2020 and 2019. Issuer Purchases of Equity Securities On January 23, 2020, the Company repurchased 25,000 shares of MOJO Restricted Common Stock from shareholders at a cost of $5,250 with an average purchase price of $0.21. The shares were cancelled. On December10, 2020, the Company repurchased 100,000 shares of MOJO Restricted Common Stock from shareholders at a cost of $9,800 with an average purchase price of $0.098. The shares were cancelled. Equity Compensation Plans 2012 Incentive Plan On February 18, 2019, the Company’s Board of Directors signed an unanimous consent to terminate the 2012 Incentive Plan, and it was resolved further that 70,000 options to purchase shares of Common Stock be converted into 70,000 shares of non-trading, restricted Common Stock. It also consented the CEO of the Company to exercise options to purchase 222,000 Restricted and Non-Trading shares of Common Stock at $0.255 per share. The total exercise price was $56,610 and this reduced the loan payable to the CEO by the same amount. There are no options outstanding from this plan as of December 31, 2020 and December 31, 2019. 2015 Incentive Plan The 2015 Incentive Plan was terminated by the Board of Directors on January 24, 2019. The 2015 Incentive Plan provided the Company with the ability to issue stock options, stock awards and/or restricted stock purchase offers for up to an aggregate of 1,500,000 shares of Common Stock. There are 505,608 options outstanding from this plan as of December 31, 2020, and 661,858 options were outstanding as of December 31, 2019. ITEM 6. SELECTED FINANCIAL DATA Not applicable. 5 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows: ● Significant Accounting Policies — Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. ● Results of Operations — Analysis of our financial results comparing the year ended December 31, 2020 to 2019. ● Liquidity and Capital Resources — Analysis of changes in our cash flows, and discussion of our financial condition and potential sources of liquidity. This report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this annual report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Significant Accounting Policies We have prepared our financial statements in conformity with accounting principles generally accepted in the United States, which requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. We base these significant judgments and estimates on historical experience and other applicable assumptions we believe to be reasonable based upon information presently available. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Actual results could materially differ from our estimates under different assumptions, judgments or conditions. All of our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements, included elsewhere in this Annual Report. We have identified the following as our significant accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions. We believe the following significant accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements: Use of Estimates — The financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 6 Fair Value of Financial Instruments — Our short-term financial instruments, including cash, accounts receivable, accounts payable and other liabilities, consist primarily of instruments without extended maturities. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. Recent Accounting Pronouncements In March 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-01, “Leases (Topic 842): Codification Improvements”. The ASC aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing essential information about leasing transactions. The Company has assessed that this pronouncement had no impact on the financial statements. Results of Operations Years Ended December 31, 2020 and 2019 Revenue For the year ended December 31, 2020, the Company reported revenue of $1,741,919 a decrease of $1,103 from revenue of $1,743,021 for the year ended December 31, 2019. The decrease in revenue was due to the COVID-19 pandemic which caused several channels of our business to be shut down. Cost of Revenue Cost of revenue includes finished goods purchase costs, production costs, raw material costs and freight in costs. Also included in cost of revenue are adjustments made to inventory carrying amounts, including markdowns to market. For the twelve months ended December 31, 2020, cost of revenue was $917,639 or 53% of revenue. For the twelve months ended December 31, 2019, cost of revenue was $908,408 or 52% of revenue. The 1% increase in cost of revenue was due to the packaging costs updates for old products and also for new products launched in 2020. 7 Operating Expenses For the year ended December 31, 2020, the selling, general and administrative expenses was $910,218 a decrease of $221,594 from the year ended December 31, 2019 of $1,131,812. This decrease in operating expenses was primarily due to lower compensation expenses coupled with lower marketing and selling expenses. Compensation expenses decreased by $145,036 compared to the same period last year. Marketing expenses decreased by $15,070 from the same period last year. Selling expenses were $428,110 for the year ended December 31, 2020 compared to $465,864 for the year ended December 31, 2019. This $37,754 decrease is attributable to the lower shipping expenses, broker fees and storage fees. Net Income/(Loss) For the year ended December 31, 2020, the net loss was ($83,719), a $213,980 improvement from a net loss of ($297,699) for the year ended December 31, 2019. Liquidity and Capital Resources Liquidity As of December 31, 2020, the Company had working capital of $249,913. Net cash used in operating activities was $26,203 for the year ended December 31, 2019, compared to net cash provided by operating activities for the year ended December 31, 2019 of $32,196. Net cash used in financing activities to repurchase 125,000 MOJO Restricted Common Stock at an average stock price of $0.1204 was $15,050 for the year ended December 31, 2020 compared to $750 for the year ended December 31, 2019. Working Capital Needs Our working capital requirements increase as demand grows for our products. During 2020 and 2019, the Company did not require additional funding. If the Company requires additional working capital during the next twelve months, it may seek to raise additional funds. Financing transactions may include the issuance of equity, debt securities and obtaining credit facilities. OFF BALANCE SHEET ARRANGEMENTS The Company had no off balance sheet arrangements as of December 31, 2020. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable.