EQUATOR Beverage Co 10-Q

ITEM 1A. RISK FACTORS In addition to the other information set forth in this report, you should consider the following factors, which could materially affect our business, financial condition or results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods. If we are unable to expand our operations in the marketplace, our growth rate could be negatively affected. Our success depends in part on our ability to grow our business. We have adopted and implemented a strategic plan to increase awareness of our products, secure additional distribution channels, and foster and strengthen our supply, manufacturing and distribution relationships. Our strategic plan includes addressing changes in the market. There can be no assurance that we will achieve the growth necessary to achieve our objectives. We could need additional capital in the future to expand our operations and execute our business objectives. Should we need additional capital to expand our operations, financing transactions may include the issuance of equity, debt securities, and credit facilities. The challenges of competing with other beverage companies could result in reductions to our revenue and operating margins. The nonalcoholic beverage segment of the beverage industry is competitive. We compete with numerous beverage companies, including those marketing similar products. All beverages’ companies are competing for stomach share on a daily basis which is approximately 64 oz. of fluid per day, per person. Our success depends on our ability to secure distribution channels for our products, our ability to make consumers aware of our products and the appeal of our products to consumers. Disruption of supply, increases in costs or shortages of ingredients could affect our operating results. Availability of supply and the prices charged by the producers of production inputs used in our products can be affected by a variety of factors, including the general demand by other buyers for the same fruits used by us in our products, and country politics and country economics in the area in which our fruit is grown. The quality of fruit we seek trades on a negotiated basis, depending on supply and demand at the time of the purchase. An increase in the price of any fruit that we use in our products will have a negative effect on our margins should we be unable to increase our sales price. Higher energy costs may increase the cost of transporting our supplies. Changes in emission rules for maritime vessels will likely increase costs of shipping our products. Conversely, lower fruit prices and lower energy prices will have a positive result on transport and packaging costs. 13 We use independent bottlers for the filling of our products and, as such, are subject to the bottler’s production and quality control. We use independent bottlers for the production of our products. Accordingly, we are dependent on the bottlers and their ability to meet production demands and to achieve product quality. We play an active role in the production of our beverages, which includes but is not limited to developing our formulations, maintaining control over the labeling and packaging of our beverages, and packaging and function of our packaging and correct FDA labeling. We also review and monitor the safety certifications of the factories including their status with the United States Food and Drug Administration. We also inspect the warehouses that our products are stored in, and monitor the trucking companies that deliver our goods. Litigation and publicity concerning food quality, health claims, and other issues could expose us to significant liabilities. The packaged food industry can be adversely affected by litigation and complaints from customers and government authorities resulting from product quality, health claims, allergens, illness, and injury. Adverse publicity about these allegations may negatively affect the Company, regardless of whether the allegations are true. In addition, the food industry has been subject to a number of claims based on the nutritional content of food products they sell, and disclosure and advertising practices. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot predict the ultimate outcome of any such proceedings. An unfavorable outcome will have an adverse impact on our business. In addition, any litigation or regulatory proceedings may result in substantial costs.