EQUATOR Beverage Co 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) EQUATOR BEVERAGE COMPANY (FORMERLY MOJO ORGANICS, INC.) Condensed Balance Sheets (Unaudited) As of June 30, 2022 and December 31, 2021 June 30, 2022 December 31, 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,725 $ 46,481 Accounts receivable, net 166,740 108,635 Inventory 328,811 234,566 Supplier deposits 28,000 28,000 Prepaid expenses 14,456 11,702 Security deposit 113 113 Total Current Assets $ 541,845 $ 429,497 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 116,165 $ 58,944 Related party loans 225,000 - SBA Loans - - Total Current Liabilities 341,165 58,944 STOCKHOLDERS’ EQUITY Common stock, 20,000,000 shares authorized at $ 0.001 par value, 15,678,502 and 15,548,790 shares issued and outstanding, at June 30, 2022 and December 31, 2021, respectively 15,679 15,549 Additional paid-in capital 23,713,652 23,745,449 Accumulated deficit ( 23,528,651 ) ( 23,390,445 ) Total Stockholders’ Equity 200,680 370,553 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 541,845 $ 429,497 The accompanying notes are an integral part of these financial statements. 1 EQUATOR BEVERAGE COMPANY (FORMERLY MOJO ORGANICS, INC.) Condensed Statements of Operations (Unaudited) For the Three Months Ended June 30, 2022 and 2021 2022 2021 Revenue $ 541,102 $ 614,279 Cost of Revenue 352,759 329,567 Gross Profit 188,343 284,712 Operating Expenses Selling, general and administrative 188,230 203,540 (Loss)/Income from Operations 113 81,172 Other (Expense)/ Income ( 2,940 ) - (Loss)/ Income Before Provision for Income Taxes ( 2,827 ) 81,172 Benefit/(Provision) for Income Taxes - - Net Income/(Loss) $ ( 2,827 ) $ 81,172 Net Income/(Loss) per common share, basic and diluted $ ( 0.00 ) $ 0.01 Weighted average number of common shares outstanding, basic and diluted 15,810,725 15,680,809 The accompanying notes are an integral part of these condensed financial statements. 2 EQUATOR BEVERAGE COMPANY (FORMERLY MOJO ORGANICS, INC.) Condensed Statements of Operations (Unaudited) For the Six Months Ended June 30, 2022 and 2021 2022 2021 Revenue $ 920,759 $ 1,018,045 Cost of Revenue 585,343 537,968 Gross Profit 335,416 480,077 Operating Expenses Selling, general and administrative 469,796 421,770 (Loss)/Income from Operations ( 134,380 ) 58,307 Other (Expense)/ Income ( 3,826 ) 35,508 (Loss)/ Income Before Provision for Income Taxes ( 138,206 ) 93,815 Benefit/(Provision) for Income Taxes - - Net Income/(Loss) $ ( 138,206 ) $ 93,815 Net Income/(Loss) per common share, basic and diluted $ ( 0.01 ) $ 0.01 Weighted average number of common shares outstanding, basic and diluted 15,658,344 15,494,002 The accompanying notes are an integral part of these condensed financial statements. 3 EQUATOR BEVERAGE COMPANY (FORMERLY MOJO ORGANICS, INC.) Condensed Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2022 and 2021 2022 2021 Cash flows from operating activities: Net income/(loss) $ ( 138,206 ) $ 93,815 Adjustments to reconcile net loss to net cash used in operating activities: Stock issued to directors and employees 136,073 110,470 SBA Loan Forgiveness - ( 35,508 ) Changes in assets and liabilities: Increase in accounts receivable ( 58,105 ) ( 145,672 ) Increase in inventory ( 94,245 ) ( 172,174 ) Increase in supplier deposits - - (Increase)/Decrease in prepaid expenses and security deposit ( 2,754 ) 8,447 Increase in accounts payable and accrued expenses 57,221 97,743 Increase in accrued payroll to officers - - Net cash used in operating activities ( 100,016 ) ( 42,879 ) Net cash provided by/ (used in) financing activities: Proceeds from related party loan 352,000 - Repayments of from related party loan ( 127,000 ) - Proceeds from options exercise 25,448 Shares repurchased for cancellation ( 193,188 ) - Net cash provided by financing activities 57,260 - Net decrease in cash and cash equivalents ( 42,756 ) ( 42,879 ) Cash and cash equivalents at beginning of period 46,481 50,233 Cash and cash equivalents at end of periods $ 3,725 $ 7,354 Summary of non-cash investing and financing activity: During the six-month period ended June 30, 2022 the Company issued a total of 960,054 Restricted and Non-Trading shares with an implied value of $ 161,521 to directors and officers to settle obligations payable. The accompanying notes are an integral part of these condensed financial statements. 4 EQUATOR BEVERAGE COMPANY (FORMERLY MOJO ORGANICS, INC.) Condensed Statements of Changes in Stockholders’ Equity (Unaudited) For the Three and Six Months Ended June 30, 2022 and 2021 Common Stock Additional Paid-In Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance, December 31, 2021 15,548,790 $ 15,549 $ 23,745,449 $ ( 23,390,445 ) $ 370,553 Stock issued to Directors and employees 681,750 682 111,323 - 112,005 Stock repurchased and returned to Treasury ( 375,000 ) ( 375 ) ( 100,875 ) - ( 101,250 ) Net loss - - - ( 135,379 ) ( 135,379 ) Balance, March 31, 2022 15,855,540 15,856 23,755,897 ( 23,525,824 ) 245,929 Stock issued to Directors and employees 119,250 119 23,949 - 24,068 Exercise of stock options 159,054 159 25,289 25,448 Stock repurchased and returned to Treasury ( 455,342 ) ( 455 ) ( 91,483 ) - ( 91,938 ) Net Loss - - - ( 2,827 ) ( 2,827 ) Balance, June 30, 2022 15,678,502 $ 15,679 $ 23,713,652 $ ( 23,528,651 ) $ 200,680 Common Stock Additional Paid-In Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance, December 31, 2020 15,305,120 $ 15,305 $ 23,644,945 $ ( 23,430,337 ) $ 249,913 Stock issued to Directors and employees 147,375 147 50,028 - 50,175 Net income - - - 12,643 12,643 Balance, March 31, 2021 15,452,495 15,452 23,714,973 ( 23,417,694 ) 312,731 Stock issued to Directors and employees 186,958 187 60,108 - 60,295 Net income - - - 81,172 81,172 Balance, June 30, 2021 15,639,453 $ 15,639 $ 23,775,081 $ ( 23,336,522 ) $ 454,198 The accompanying notes are an integral part of these condensed financial statements. 5 EQUATOR BEVERAGE COMPANY (FORMERLY MOJO ORGANICS, INC.) Notes to Condensed Financial Statements (Unaudited) June 30, 2022 NOTE 1 – BUSINESS Overview EQUATOR Beverage Company (formerly MOJO Organics, Inc.) (“MOJO”) is a Delaware corporation headquartered in Jersey City, NJ. The Company’s business is new product development, beverage production, marketing, distribution and the sale of beverages that are, 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 and Coconut Water + Pineapple Juice and USDA 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, third party partners and our broker network, and add new products and packaging including pH7 water (pH is a scale of acidity) and energy beverages which are the two largest sectors of the beverage industry. The Company packages its beverages in 100% recyclable, Eco-Friendly packaging. The packaging has a low impact on the environment when recycled. CURRENT OPERATIONS Sales and Distribution 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 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. 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. 6 Employees As of June 30, 2022, the Company had 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. EQUATOR Beverage Company (formerly MOJO Organics Inc) is headquartered in Jersey City, New Jersey and our internet site is www.EquatorBeverage.com. EQUATOR’s stock is traded on the OTC Markets under the symbol MOJO. On June 8, 2022, the Board of Directors and majority stockholder of the Company approved a change of name from MOJO Organics, Inc. to EQUATOR Beverage Company. This change of name was filed with the State of Delaware and became effective July 5, 2022. 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 and six months ended June 30, 2022 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, 2021 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, 2022, and June 30, 2021, the Company did no t 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, 2022 and 2021 was zero . 7 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 2022 or 2021. 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 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 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. There are no potentially dilutive securities that have been excluded from the computation of weighted average shares outstanding. Income Taxes The Net Operating Loss Carryforwards for federal taxes was $ 3,748,885 , at June 30, 2022 and $ 3,748,885 for the State of New Jersey. The Deferred Tax Assets for federal taxes was $ 787,266 at June 30, 2022 and $ 337,400 for the State of New Jersey. The total Deferred Tax Assets was $ 1,124,666 at June 30, 2022. 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, 2022, the Company’s Federal income tax payable and State Income Tax payable is zero . 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, 2022 and June 30, 2021. 8 As of June 30, 2022, and June 30, 2021, 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. SCHEDULE OF DEFERRED TAX ASSETS Tax Rate 2022 2021 Deferred Tax Asset as of June 30, Tax Rate 2022 2021 Federal 21 % $ 787,266 $ 783,269 State of New Jersey 9 % $ 337,400 $ 335,687 Total $ 1,124,666 $ 1,118,956 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 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, 2022, there are 33 months remaining on the Agreement. The Company’s liability on the remainder of the Agreement is $ 165,000 for the cash portion of Mr. Simpson’s salary, and 2,211,000 shares of non-trading, restricted Common Stock. During the six months ended June 30, 2022, 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. This was a reduction of 150,000,000 in Authorized Shares. As of June 30, 2022 there are 15,678,502 shares outstanding and no other classes of stock. On June 8, 2022, the Board of Directors of the Company approved a prospective amendment to the Fourth Article of the Company’s Articles of Incorporation to decrease the authorized common stock from 40,000,000 shares, par value $ 0.001 , to 20,000,000 shares, par value $ 0.001 . On June 8, 2022, the majority stockholders approved the decrease in authorized shares amendment by written consent, in lieu of a special meeting of the stockholders. On June 8, 2022, the Board of Directors of the Company approved the prospective amendment to the Company’s Articles of Incorporation to effect a 1-for-2 reverse split of the Company’s Common Stock. On June 8, 2022, stockholders of the Company owning a majority of the Company’s outstanding voting stock approved the reverse stock split by written consent, in lieu of a special meeting of the stockholders. The decrease in authorized shares and reverse stock split was approved by FINRA on July 19, 2022 and effective July 20, 2022. All share and per share data has been retroactively adjusted to reflect the reverse stock split. 9 Restricted Stock Issuances During the six months ended June 30, 2022, 801,000 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 and transfer. On June 1, 2022, Mr. Simpson exercised his options to purchase 159,054 shares of Restricted and Non-Trading shares at $ 0.08 per share. The total exercise value was $ 25,449 . On February 4, 2022, the board of Directors approved the issuance of 525,000 shares of Restricted and Non-Trading Common Stock to Mr. Simpson, Mr. Devlin and Ms. Cudia for their continued service to the Company. Mr. Simpson was issued 350,000 shares of Restricted and Non-Trading Common Stock. Mr. Devlin and Ms. Cudia were each issued 87,500 shares of Restricted and Non-Trading Common Stock. The value of these shares was recorded as a component of compensation expense. Additionally, Mr. Simpson was issued 201,000 shares of Restricted and Non-Trading Common Stock for the stock portion of his annual salary. Mr. Devlin was issued 37,500 shares of Restricted and Non-Trading Common Stock as for continuing to serve as a Director of the Company. Ms. Cudia was issued 37,500 shares of Restricted and Non-Trading Common Stock for her annual stock bonus. The value of these shares was recorded as a component of compensation expense. Stock Purchased for Cancellation During the six months ended June 30, 2022 the Company purchased 830,342 shares of its Restricted Common Stock from shareholders at a cost of $ 193,187 . The shares were cancelled. During the year ended December 31, 2021 the Company purchased 382,913 shares of its Restricted Common Stock from shareholders at a cost of $ 765,826 . The shares were cancelled. NOTE 5 – STOCK OPTIONS On June 1, 2022, Mr. Simpson exercised options to purchase 159,054 shares of Restricted and Non-Trading shares at $ 0.16 per share. The total exercise value was $ 25,449 . On February 4, 2022, the Company adjusted the exercise price of the options granted to Mr. Simpson from $ 0.32 per share to $ 0.16 per share. On September 24, 2021, the Company extended the expiration date of the options granted to Mr. Simpson from April 6, 2022 to April 6, 2024 . During the year ended December 31, 2021, Mr. Simpson exercised options to purchase 93,750 shares of Restricted and Non-Trading shares at $ 0.32 per share. The total exercise value was $ 30,000 and this reduced the accrued salary payable to Mr. Simpson to $ 0 . The following table summarizes stock option activity: SCHEDULE OF STOCK OPTIONS ACTIVITY Issued To Expiration Date Days to Expiration Exercise Price Options Outstanding, December 31, 2021 Glenn Simpson 4/6/2024 827 $ 0.16 159,054 Exercised, June 1, 2022 Glenn Simpson 4/6/2024 $ 0.16 ( 159,054 ) Outstanding, June 30, 2022 Glenn Simpson 4/6/2024 $ 0.16 - During the six months ended June 30, 2022 and 2021, compensation expense related to stock options was $ 0 . As of June 30, 2022, there was no unrecognized compensation cost related to non-vested stock options. NOTE 6 – RELATED PARTY TRANSACTIONS During the six months ended June 30, 2022, Mr. Simpson lent $ 352,000 to the Company. As of June 30, 2022, the loan payable to Mr. Simpson was $ 225,000 . On June 1, 2022, Mr. Simpson exercised 159,054 stock options at an exercise price of $ 0.16 . The Company issued 159,054 Restricted and Non-Trading shares of Common Stock in exchange for the total exercise price of $ 25,449 . During the year ended December 31, 2021, Mr. Simpson exercised 93,750 stock options at an exercise price of $ 0.32 . The Company issued 93,750 Restricted and Non-Trading shares of Common Stock, and the accrued payroll owed to him was reduced by $ 30,000 . NOTE 7 – SBA LOANS “CARES ACT” In January 2021, the Company received the loan forgiveness decision from the SBA for the loan proceeds under the Paycheck Protection Program. The full amount of the loan amounting $ 35,508 was forgiven in January 2021. NOTE 8 – SUBSEQUENT EVENTS On July 19, 2022, FINRA approved the 1-for-2 reverse split and the decrease in Authorized shares from 40,000,000 to 20,000,000 shares. The market effective date is July 20, 2022. On July 5, 2022, the State of Delaware approved the Company’s name change to EQUATOR Beverage Company. 10