EQUATOR Beverage Co 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) MOJO ORGANICS, INC. Condensed Balance Sheets (Unaudited) As of June 30, 2021 and December 31, 2020 June 30, 2021 December 31, 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,354 $ 50,233 Accounts receivable, net 219,234 73,562 Inventory 346,345 174,171 Supplier deposits 24,000 24,000 Prepaid expenses 11,062 15,104 Security deposit 113 4,518 Total Current Assets $ 608,108 $ 341,588 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 153,910 56,167 Accrued payroll to related parties - - SBA Loans - 35,508 Total Current Liabilities 153,910 91,675 STOCKHOLDERS’ EQUITY Common stock, 40,000,000 shares authorized at $ 0.001 par value, 31,278,906 and 30,610,240 shares issued and outstanding, at June 30, 2021 and December 31, 2020, respectively 31,279 30,610 Additional paid in capital 23,759,441 23,649,640 Accumulated deficit ( 23,336,522 ) ( 23,430,337 ) Total Stockholders’ Equity 454,198 249,913 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 608,108 $ 341,588 The accompanying notes are an integral part of these financial statements. 1 MOJO ORGANICS, INC. Condensed Statements of Operations (Unaudited) For the Three Months Ended June 30, 2021 and 2020 2021 2020 Revenue $ 614,279 $ 437,878 Cost of Revenue 329,567 209,412 Gross Profit 284,712 228,466 Operating Expenses Selling, general and administrative 203,540 223,981 Income from Operations 81,172 4,485 Other Income - 2,219 Income Before Provision for Income Taxes 81,172 6,704 Provision for Income Taxes - ( 1,994 ) Net Income $ 81,172 $ 4,710 Net Income per common share, basic and diluted $ 0.00 $ 0.00 Weighted average number of common shares outstanding, basic and diluted 31,361,617 29,889,203 The accompanying notes are an integral part of these condensed financial statements. 2 MOJO ORGANICS, INC. Condensed Statements of Operations (Unaudited) For the Six Months Ended June 30, 2021 and 2020 2021 2020 Revenue $ 1,018,045 $ 877,867 Cost of Revenue 537,968 446,362 Gross Profit 480,077 431,505 Operating Expenses Selling, general and administrative 421,770 483,633 Income/(Loss) from Operations 58,307 ( 52,128 ) Other Income 35,508 2,219 Income/(Loss) Before Provision for Income Taxes 93,815 ( 49,909 ) Provision for Income Taxes - ( 1,994 ) Net Income/(Loss) $ 93,815 $ ( 51,903 ) Net Income/(Loss) per common share, basic and diluted $ 0.00 $ 0.00 Weighted average number of common shares outstanding, basic and diluted 30,988,004 29,690,570 The accompanying notes are an integral part of these condensed financial statements. 3 MOJO ORGANICS, INC. Condensed Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2021 and 2020 2021 2020 Cash flows from operating activities: Net income/(loss) $ 93,815 $ ( 51,903 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock issued to directors and employees 110,470 97,389 SBA Loan Forgiveness ( 35,508 ) Changes in assets and liabilities: Increase in accounts receivable ( 145,672 ) ( 21,540 ) Increase in inventory ( 172,174 ) ( 37,424 ) Increase in supplier deposits - ( 27,461 ) Decrease/(Increase) in prepaid expenses and security deposit 8,447 ( 3,720 ) Increase/(Decrease) in accounts payable and accrued expenses 97,743 ( 15,440 ) Increase/(Decrease) in accrued payroll to officers - ( 11,259 ) Net cash (used in)/provided by operating activities ( 42,879 ) ( 71,358 ) Net cash provided by/ (used in) financing activities: Proceeds from SBA Loan - 35,508 Shares repurchased for cancellation - ( 5,250 ) Net cash provided by/ (used in) financing activities - 30,258 Net (decrease)/increase in cash and cash equivalents ( 42,879 ) ( 41,100 ) Cash and cash equivalents at beginning of period 50,233 55,978 Cash and cash equivalents at end of periods $ 7,354 $ 14,878 Summary of non-cash investing and financing activity: During the six-month period ended June 30, 2021 the Company issued a total of 668,666 Restricted and Non-Trading shares with an implied value of $ 110,470 to directors and officers to settle obligations payable. The accompanying notes are an integral part of these financial statements. 4 MOJO ORGANICS, INC. Condensed Statements of Changes in Stockholders’ Equity (Unaudited) For the Six Months Ended June 30, 2021 Shares Amount Capital Deficit Equity Common Stock Additional Paid-In Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance, December 31, 2020 30,610,240 $ 30,610 $ 23,649,640 $ ( 23,430,337 ) $ 249,913 Stock issued to Directors and employees 668,666 669 109,802 - 110,470 Net Income - - - 93,815 93,815 Balance, June 30, 2021 31,278,906 $ 31,279 $ 23,759,442 $ ( 23,336,522 ) $ 454,198 The accompanying notes are an integral part of these financial statements. 5 MOJO ORGANICS, INC. Notes to Condensed Financial Statements (Unaudited) June 30, 2021 NOTE 1 – BUSINESS Overview MOJO Organics, Inc. (“MOJO” or the “Company”) is a Delaware Corporation headquartered in Jersey City, NJ. The Company engages in new product development, production, marketing, distribution and sales of beverage brands that are Non-GMO Project Verified. The Company’s flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produces Sparkling Coconut Water, Coconut Water + Mango Juice, Coconut Water + Pineapple Juice and Pure Organic Coconut Water. 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 improved broker network, and new products and packaging in 2021. The company predominantly 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. CURRENT OPERATIONS Sales and Distribution The Company’s flagship product is MOJO Pure Coconut Water. In addition to Pure Coconut Water, the Company produces Sparkling Coconut Water, Coconut Water + Mango Juice, Coconut Water + Pineapple Juice, and Pure Organic Coconut Water. 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 an improved broker network, and new products and packaging in 2021. 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. 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 for 2021. 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. 6 Employees As of June 30, 2021, the Company has two employees. The Company also uses the services of contractors, consultants and other third-parties. We contract with food brokers to represent our products to specific specialized sales channels. We utilize the services of direct sales and distribution companies that deliver and sell our products to their customers. We contract with manufacturing facilities to produce our products and outsource the storage and transportation of our products. CORPORATE HISTORY AND DEVELOPMENT The Company was incorporated in 2007 and began producing MOJO branded products in 2016. MOJO Organics Inc is headquartered in Jersey City, and our internet site is www.MojoOrganicsInc.com. MOJO’s stock is traded on the OTC Markets 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 three months ended June 30, 2021 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, 2020 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 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, 2021, and June 30, 2020, the Company did no t have any cash equivalents. 7 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, 2021 and 2020 was zero . Inventories Inventories, 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 2021 or 2020. 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. Costs incurred for sales incentives and discounts are accounted for as reductions in revenue. Deductions from Revenue Costs incurred for sales incentives and discounts are accounted for as reductions in revenue. These costs include payments to customers for performing merchandising activities on our behalf, including in store displays, promotions for new items and obtaining optimum shelf space. Shipping and Handling Costs Shipping and Handling Costs incurred to move finished goods from our sales distribution centers 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 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. The following potentially dilutive securities have been excluded from the computation of weighted average shares outstanding as they would have had an anti-dilutive impact on the Company’s net income/(loss) per common share: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE Expiration Days to Exercise As of June 30, Issued To Date Expiration Price 2021 2020 Shares underlying options outstanding Glenn Simpson 4/6/2022 296 $ 0.16 318,108 505,608 8 Income Taxes The Net Operating Loss Carryforwards for federal taxes was $ 3,729,852 at June 30, 2021 and $ 3,729,852 for the State of New Jersey. The Deferred Tax Assets for federal taxes was $ 783,269 at June 30, 2021 and $ 335,687 for the State of New Jersey. The total Deferred Tax Assets was $ 1,118,956 at June 30, 2021. The Deferred Tax assets have been fully reserved by valuation allowances beyond that portion which is expected to offset current taxes. As of June 30, 2021, the Company’s Federal income tax payable at the corporate tax rate of 21 % would be $ 43,181 and State Income Tax payable at 9 % tax rate would be $ 18,506 if this had not been offset by the deferred tax assets. 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 no t have a deferred tax liability at June 30, 2021 and June 30, 2020. As of June 30, 2021 and June 30, 2020, the Company had no accrued interest or penalties because there were none. The Company had no Federal or State tax examinations in the past nor does it have any at the current time. Stock-Based Compensation The Company accounts for equity based transactions under the provisions of ASC Topic 718, “ Accounting for Stock-Based Compensation”. The ASC prescribes accounting and reporting standards for stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. ASC Topic 718 requires employee compensation expense to be recorded using the fair value method. Share based payment awards are measured at the month-end volume weighted average price (VWAP) of the equity instrument that an entity is obligated to issue when the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. 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. 9 NOTE 3 – COMMITMENTS AND CONTINGENCIES Employment Agreements Pursuant to the Amended and Restated Employment Agreement (“the Agreement”) dated April 6, 2017 date, Mr. Simpson is paid a salary of $ 5,000 per month in cash and the Company is obligated to grant 67,000 shares of non-trading, restricted Common Stock per month. Additionally, Mr. Simpson is entitled to an annual bonus comprised of cash and non-trading, restricted Common Stock based on the achievement of performance goals established by the Board of Directors of the Company and set forth in the Agreement. The cash bonus is established at $ 44,400 per year. The stock bonus is set at 200,000 shares of non-trading, restricted Common Stock per year through March 31, 2025. The term of the Agreement is through April 1, 2025. In the event that the Agreement is terminated for good reason, the Company shall pay Mr. Simpson any accrued but unpaid salary for services rendered to the date of termination, and an amount equal to the salary at the time of termination, payable for the remainder of the current term. As of June 30, 2021, there are 45 months remaining on the Agreement. The Company’s liability on the remainder of the Agreement is $ 225,000 for the cash portion of Mr. Simpson’s salary, and 3,203,700 shares of non-trading, restricted Common Stock. During the six months ended June 30, 2021, the Mr. Simpson was issued 402,000 Restricted and Non-Trading shares of Common Stock under the terms of the Agreement for the stock portion of his compensation. Refer to Note 4 – Restricted Stock Issuances. NOTE 4 – STOCKHOLDERS’ EQUITY In June 2021, the Company decreased its Authorized Shares from 190,000,000 to 40,000,000 shares. Currently, there are 31,278,906 shares outstanding and no other classes of stock. Restricted Stock Issuances During the six months ended June 30, 2021, 668,666 shares of Restricted and Non-Trading Common Stock were issued to Directors and Officers of the Company. These shares have full voting rights but are restricted for sale or transfer. The CEO exercised options to purchase 187,500 shares at $ 0.16 per share for a total exercise price of $ 30,000 which reduced the accrued salary payable to the CEO by the same amount. The CEO was also issued 402,000 shares of Restricted and Non-Trading Common Stock for the stock portion of his salary. 10 Advisory Services On October 3, 2013, the Company entered into an agreement for strategic business advisory services, public relations services and investor relations services with Ian Thompson from Carricklee House, Strabane, Northern Ireland. In connection with this agreement, the Company issued 167,204 shares of restricted Common Stock and recorded consulting fees of $ 501,612 during 2013, which was the fair market value of the stock on the date of issue. The stock is vested; however, it is restricted from trading. Ian Thompson was also issued 200,000 shares of restricted Common Stock, which was to vest quarterly based upon the Company reaching certain market capitalization and revenue goals, in addition to providing the above services, with the last tranche vesting on June 30, 2014. Consulting fees amounting to $ 105,000 and $ 280,000 were recorded in 2014 and 2013, respectively, related to the 200,000 shares of Common Stock. Throughout the term of the agreement, the Company requested that Ian Thompson to render performance under the agreement and to provide evidence of same. Ian Thompson failed to perform in all material respects under the terms of the agreement and refused to provide evidence. On June 27, 2014, the Company terminated the agreement. Empire Stock Transfer, Inc, the Company’s transfer agent was directed to process cancellation requests regarding the certificates listed below. The Board of Directors approved the Company’s irrevocable agreement to indemnify the Transfer Agent for all loss, liability or expense in carrying out the authority and direction contained on the terms of the Unanimous Written Consent to terminate the Thompson Agreement. The Transfer Agent shall maintain the right to uphold the transfer in the event of forgery. (Ian Thompson has not complied with the Company’s demand to have the physical certificates returned.) SCHEDULE OF CANCELLATION OF SHARES Certificate No(s) Registered To No. of Shares CANCELLED No. of Shares 605 Ian Thompson 50,000 CANCELLED 50,000 606 Ian Thompson 50,000 CANCELLED 50,000 607 Ian Thompson 50,000 CANCELLED 50,000 608 Ian Thompson 50,000 CANCELLED 50,000 610 Ian Thompson 167,204 CANCELLED 167,204 NOTE 5 – STOCK OPTIONS Stock Option Activity On May 19, 2021, Mr. Simpson exercised options to purchase 93,750 Restricted and Non-trading shares at $ 0.16 per share. The total exercise value was $ 15,000 and this reduced the accrued salary payable to the CEO by the same amount. On March 24, 2021, Mr. Simpson exercised options to purchase 93,750 Restricted and Non-trading shares at $ 0.16 per share. The total exercise value was $ 15,000 and this reduced the accrued salary payable to the CEO by the same amount. The following table summarizes stock option activity under the Plans: SCHEDULE OF STOCK OPTIONS ACTIVITY Issued To Expiration Date Days to Expiration Exercise Price Options Outstanding, December 31, 2020 Glenn Simpson 4/6/2022 461 $ 0.16 505,608 Exercised Glenn Simpson 4/6/2022 296 0.16 ( 187,500 ) Exercisable, June 30, 2021 Glenn Simpson 4/6/2022 296 $ 0.16 318,108 During the six months ended June 30, 2021 and 2020, compensation expense related to stock options was $ 0 . As of June 30, 2021, there was no unrecognized compensation cost related to non-vested stock options. NOTE 6 – RELATED PARTY TRANSACTIONS On March 24, 2021 the CEO of the Company exercised 93,750 stock options at an exercise price of $ 0.16 . The Company issued 93,750 Restricted and Non-Trading shares of Common Stock, and the accrued payroll owed to him was reduced by $ 15,000 . On May 19, 2021 the CEO of the Company exercised 93,750 stock options at an exercise price of $ 0.16 . The Company issued 93,750 Restricted and Non-Trading shares of Common Stock, and the accrued payroll owed to him was reduced by $ 15,000 . As of June 30, 2021, the Company owes the CEO $ 19,000 for a non-interest bearing loan. This was subsequently paid in July. NOTE 7 – SBA LOANS “CARES ACT” On May 5, 2020, the Company received loan proceeds in the amount of $ 35,508 under the Paycheck Protection Program (“PPP”). On December 18, 2020, the Company applied for the loan forgiveness for the loan proceeds amounting $ 35,508 under the Paycheck Protection Program. The Company received the loan forgiveness decision from the SBA in January 2021. The full amount of the loan proceeds amounting $ 35,508 was forgiven. 11