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 September 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 Coconut Water. In addition to Coconut Water, the Company produces Sparkling Coconut Water, Coconut Water + Mango Juice, Coconut Water + Pineapple Juice and 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 September 30, 2021 and 2020 Revenue For the three months ended September 30, 2021, the Company reported revenue of $477,013 a decrease of $95,607 from revenue of $572,620 for the three months ended September 30, 2020. The decrease in revenue was primarily due to the lower sales of the MOJO branded products compared to the same period last year. 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 September 30, 2021, cost of revenue was $255,266 or 54% of revenue. For the three months ended September 30, 2020, cost of revenue was $302,817 or 53% of revenue. The 1% increase in cost of revenue was primarily due to higher ocean freight costs compared to the same period last year. Operating Expenses For the three months ended September 30, 2021, selling, general and administrative expenses was $223,571 a decrease of $3,227 from the three months ended September 30, 2020 of $226,798. This decrease in operating expenses was primarily due to lower office expenses coupled with a decrease in professional fees and marketing expenses. This decrease is offset by an increase in compensation expense. Office expenses decreased by $7,366 and professional fees decreased by $2,233 compared to the same period last year. Marketing expenses also decreased by $3,374 compared to the same period last year. Compensation expense for the three months ended September 30, 2021 increased by $9,140 for the three months ended September 30, 2020. 13 Nine Months Ended September 30, 2021 and 2020 Revenue For the nine months ended September 30, 2021, the Company reported revenue of $1,495,058 an increase from revenue of $1,450,587 for the nine months ended September 30, 2020. The increase in revenue was primarily due to the strong sales for the MOJO Organic Coconut Water 1Liter product. 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 nine months ended September 30, 2021, cost of revenue was $793,234 or 53% of revenue. For the nine months ended September 30, 2020, cost of revenue was $749,278 or 52% 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 nine months ended September 30, 2021, selling, general and administrative expenses was $645,341 a decrease of $65,091 from the nine months ended September 30, 2020 of $710,432. This decrease in operating expenses was primarily due to lower selling expenses and professional fees. Office expenses and marketing fees also decreased compared to the same period last year. Selling expenses decreased by $20,759 compared while professional fees decreased by $16,533 compared to the quarter ended September 30, 2020. Office expenses amounted to $17,230 for the nine months ended September 30, 2021 compared to $26,486 for the nine months ended September 30, 2021. Marketing fees decreased by $6,002 compared to the same period last year. Net Income For the nine months ended September 30, 2021, the net income was $91,991, a $98,894 improvement from a net loss of ($6,903) for the nine months ended September 30, 2020. Liquidity and Capital Resources Liquidity As of September 30, 2021, the Company had working capital of $387,244. Net cash provided by operating activities was $97,852 for the nine months ended September 30, 2021, compared to net cash used in operating activities for the nine months ended September 30, 2020 of $54,570. Net cash used in financing activities was $102,316 for the nine months ended September 30, 2021 compared to net cash provided by financing activities of $30,258 for the nine months ended September 30, 2020. Net cash was used in financing activities to repurchase MOJO Restricted Common Stock for the nine months ended September 30, 2021. 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 None 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS Not applicable