EQUATOR Beverage Co 10-Q

ITEM 2. 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 quarter ended June 30, 2021 to 2020. ● 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 critical accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements: Use of Estimates — The financial statements are prepared in conformity with 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. 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. 12 COMPANY 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 natural, Non-GMO Project verified, and USDA Organic. 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. Results of Operations Three Months Ended June 30, 2021 and 2020 Revenue For the three months ended June 30, 2021, the Company reported revenue of $614,279 an increase of $176,401 from revenue of $437,878 for the three months ended June 30, 2020. The increase in revenue was primarily due to the strong sales for the MOJO Pure Organic Coconut Water 1Liter product coupled with an increase in cases sold for the other MOJO branded products. 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 three months ended June 30, 2021, cost of revenue was $329,567 or 53% of revenue. For the three months ended June 30, 2020, cost of revenue was $209,412 or 48% of revenue. The 5% increase in cost of revenue was due to higher ocean freight costs compared to the same period last year. Operating Expenses For the three months ended June 30, 2021, the selling, general and administrative expenses was $203,540 a decrease of $20,441 from the three months ended June 30, 2020 of $223,981. This decrease in operating expenses was primarily due to lower professional fees coupled with lower selling expenses. Professional fees decreased by $14,821 compared to the same period last year. Selling expenses were $98,774 for the three months ended June 30, 2021 compared to $105,131 for the three months ended June 30, 2021. This $6,357 decrease is attributable to the lower Amazon selling fees. Net Income For the three months ended June 30, 2021, the net income was $81,172, a $74,462 improvement from a net income of $4,710 for the three months ended June 30, 2020. 13 Six Months Ended June 30, 2021 and 2020 Revenue For the six months ended June 30, 2021, the Company reported revenue of $1,018,045 an increase from revenue of $877,867 for the six months ended June 30, 2020. The increase in revenue was primarily due to the strong sales for the MOJO Pure Organic Coconut Water 1Liter product coupled with an increase in cases sold for the other MOJO branded products. 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 six months ended June 30, 2021, cost of revenue was $537,968 or 52% of revenue. For the six months ended June 30, 2020, cost of revenue was $446,362 or 51% of revenue. The 1% increase in cost of revenue was due to higher costs of ocean freight compared to the same period last year. Operating Expenses For the six months ended June 30, 2021, the selling, general and administrative expenses was $421,770 a decrease of $61,863 from the six months ended June 30, 2020 of $483,633. This decrease in operating expenses was primarily due to lower compensation fees and professional fees coupled with lower selling expenses. Compensation expense decreased by $11,040 compared the same period last year. Professional fees decreased by $14,230 compared to the same period last year. Selling expenses were $197,427 for the six months ended June 30, 2021 compared to $220,079 for the three months ended June 30, 2021. This $22,651 decrease is attributable to the lower Amazon selling fees. Net Income For the six months ended June 30, 2021, the net income was $93,815, a $145,718 improvement from a net loss of ($51,903) for the six months ended June 30, 2020. Liquidity and Capital Resources Liquidity As of June 30, 2021, the Company had working capital of $454,198. Net cash used in operating activities was $42,879 for the six months ended June 30, 2021, compared to net cash used in operating activities for the six months ended June 30, 2020 of $71,358. Net cash used in financing activities was $0 for the six months ended June 30, 2021 compared to $5,250 Net cash used in financing activities to repurchase 25,000 MOJO Restricted Common Stock at an average stock price of $0.21 for the six months ended June 30, 2020. Working Capital Needs Our working capital requirements increase as demand grows for our products. During 2021 and 2020, 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 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS Not applicable.