EQUATOR Beverage Co 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. 3 EQUATOR BEVERAGE COMPANY Condensed Balance Sheets (Unaudited) As of March 31, 2026 and December 31, 2025 March 31, 2026 December 31, 2025 Assets Current Assets Cash $ 126,670 $ 219,457 Accounts and other receivables 418,856 349,822 Inventory 504,695 508,301 Supplier deposits 95,935 52,329 Prepaid expenses 57,133 61,137 Total Current Assets $ 1,203,289 $ 1,191,046 Total Assets $ 1,203,289 $ 1,191,046 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accrued expenses $ 189,936 $ 295,073 Related party loans 230,000 340,000 Total Current Liabilities 419,936 635,073 Commitments and Contingencies – Refer to Note 4 Stockholders’ Equity Common stock, 10,000,000 shares authorized at $ 0.001 par value 9,449,655 and 9,380,260 shares issued and outstanding, at March 31, 2026 and December 31, 2025, respectively 9,450 9,381 Additional paid-in capital 25,158,958 25,107,762 Accumulated deficit ( 24,385,055 ) ( 24,561,170 ) Total Stockholders’ Equity 783,353 555,973 Total Liabilities and Stockholders’ Equity $ 1,203,289 $ 1,191,046 The accompanying notes are an integral part of these condensed financial statements. F-1 EQUATOR BEVERAGE COMPANY Condensed Statements of Operations (Unaudited) For the Three Months Ended March 31, 2026 and 2025 2026 2025 Revenue $ 961,484 $ 817,748 Cost of Revenue 467,850 497,005 Gross Profit 493,634 320,743 Operating Expenses Selling, general , and administrative 419,331 231,178 Total Operating Expenses 419,331 231,178 Income from Operations 74,303 89,565 Interest Expense ( 6,361 ) ( 3,991 ) Other Income 112,292 - Income Before Provision for Income Taxes $ 180,234 $ 85,574 Provision for Income Taxes (net) – Refer to Note 8 ( 4,119 ) ( 1,540 ) Net Income $ 176,115 $ 84,034 Net Income Per Common Share, Basic and Diluted $ 0.02 $ 0.01 Weighted Average Number of Common Shares Outstanding, Basic and Diluted 9,439,914 9,109,752 The accompanying notes are an integral part of these condensed financial statements. F-2 EQUATOR BEVERAGE COMPANY Condensed Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2026 and 2025 2026 2025 Cash Flows from Operating Activities: Net income $ 176,115 $ 84,034 Adjustments to Reconcile Net Income to Net Cash Provided by / (Used in) Operating Activities: Restricted, non-trading common stock issued to directors and employees 72,900 840 Changes in Assets and Liabilities: A ccounts receivable ( 69,034 ) ( 68,849 ) I nventory 3,606 ( 266,536 ) S upplier deposits ( 43,606 ) 2,412 P repaid expenses 4,004 2,188 A ccounts payable and accrued expenses ( 105,137 ) 175,044 Net Cash Provided by / (Used in) Operating Activities 38,848 ( 70,867 ) Net Cash Provided by / (Used in) Financing Activities: Shares repurchased for cancellation ( 21,635 ) - Proceeds from related party loan - 193,000 Repayments of related party loan ( 110,000 ) ( 20,000 ) Net Cash Provided by / (Used in) Financing Activities ( 131,635 ) 173,000 Net Increase / (Decrease) in Cash and Cash Equivalents ( 92,787 ) 102,133 Cash and Cash Equivalents at Beginning of Period 219,457 22,799 Cash and Cash Equivalents at End of Period $ 126,670 $ 124,932 Supplemental Disclosure of Cash Flow Information: Cash Paid for Interest $ 6,361 $ 3,991 Summary of non-cash investing and financing activity: During the quarter ended March 31, 2026, the Company issued 90,000 shares of restricted , non-trading common stock to Glenn Simpson pursuant to the terms of his employment agreement. The shares had an aggregate fair value of $ 72,900 , based on the quoted OTC market price of the Company’s common stock on the grant date. The Company’s common stock price was $ 0.81 per share on November 17, 2025, the date the employment agreement was executed. During the quarter ended March 31, 2025, the Company issued 841 shares of restricted common stock to third-party service providers pursuant to marketing service agreements. The shares had an aggregate fair value of $ 840 . In accordance with the terms of the agreements, the number of shares issued was determined based on the volume weighted average price (“VWAP”) of the Company’s common stock for the applicable month, as published by the OTC. The accompanying notes are an integral part of these condensed financial statements. F-3 EQUATOR BEVERAGE COMPANY Condensed Statements of Changes in Stockholders’ Equity (Unaudited) For the Three Months Ended March 31, 2026 and 2025 Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Total Balance, December 31, 2025 9,380,260 $ 9,381 $ 25,107,762 $ ( 24,561,170 ) $ 555,973 Restricted, Non-Trading Common Stock issued to Directors and employees 9 0,000 90 72,810 72,900 Stock repurchased and returned to Treasury ( 20,605 ) ( 21 ) ( 21,614 ) ( 21,635 ) Net Income 176,115 176,115 Balance, March 31, 2026 9,449,655 $ 9,450 $ 25,158,958 $ ( 24,385,055 ) $ 783,353 Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Total Balance, December 31, 2024 9,109,317 $ 9,110 $ 24,937,573 $ ( 24,610,382 ) $ 336,301 Restricted, Non-Trading Common Stock issued to Directors, Employees and Unrelated Parties 841 1 839 - 840 Net Income - - - 84,034 84,034 Balance, March 31, 2025 9,110,158 $ 9,111 $ 24,938,412 $ ( 24,526,348 ) $ 421,175 The accompanying notes are an integral part of these condensed financial statements. F-4 EQUATOR BEVERAGE COMPANY Notes to Condensed Financial Statements (Unaudited) March 31, 2026 NOTE 1 – BUSINESS EQUATOR Beverage Company is a Delaware corporation engaged in the development, production, and distribution of beverage products. 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 of America (“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. The Company did not hold cash equivalents as of March 31, 2026 or December 31, 2025. Accounts and Other Receivables 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 March 31, 2026 and December 31, 2025 was zero. Other receivables consist of claims for recovery of tariffs previously paid on imported products. During the quarter ended March 31, 2026, the Company recorded a receivable of $ 112,292 related to expected refunds of certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”), following a February 20, 2026 United States Supreme Court ruling concerning such tariffs. The Company filed related claims with U.S. Customs and Border Protection (“CBP”). Management believes the receivable is recoverable; however, recovery remains subject to CBP review and approval. Inventory Inventory consists solely of finished goods and is stated at the lower of cost or net realizable value. Cost is determined using an average cost method which approximates first-in, first-out (“FIFO”). The Company evaluates inventory for excess or obsolescence and records valuation allowances when necessary. No such allowances were recorded during the quarter ended March 31, 2026 or December 31, 2025, as inventory turnover has been sufficient to support recoverability. Inventory in transit is included in inventory as of the last day of the reporting period when title transfers to the Company at the shipping point, in accordance with the Company’s contractual shipping terms. Revenue Recognition Revenue Recognition — the Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Revenue from product sales is recognized when control of the promised goods is transferred to the customer, which generally occurs upon shipment or delivery in accordance with the applicable shipping terms. Each sale is based on a customer purchase order. Collectively, the purchase order and the Company’s standard terms and conditions constitute the contract with the customer. The Company’s contracts generally include a single performance obligation, which is the delivery of products. The transaction price is the amount stated in the purchase order and reflects the consideration the Company expects to receive. The Company does not have material variable consideration, significant financing components, or multiple performance obligations. Payments are typically due within 30 days of delivery. For sales shipped FOB shipping point, control transfers upon shipment. For sales shipped FOB destination, control transfers upon delivery at the customer’s location. The Company has not historically experienced material returns and, accordingly, has not recorded a reserve for returns. F-5 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 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 income 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. Diluted earnings per share equals basic earnings per share because the Company has no potentially dilutive securities. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation . Compensation cost is measured at the grant-date fair value, based on the closing price of the Company’s common stock on the grant date, and is recognized over the requisite service period. Stock-based compensation expense is included in selling, general, and administrative expenses in the consolidated statements of operations. Income Taxes The Company accounts for income taxes using the asset-and-liability method in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for temporary differences between the financial-statement and tax bases of assets and liabilities and are measured using enacted tax rates expected to apply when such differences reverse. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that such assets will not be realized. As of March 31, 2026, the Company had deferred tax assets of $ 849,491 . As of March 31, 2025, the Company had deferred tax assets of $ 1,038,484 . The Company did not have any deferred tax liabilities as of March 31, 2026, or December 31, 2025. The Company recognizes interest and penalties related to income taxes, if any, as a component of income tax expense. As of March 31, 2026 and March 31, 2025 the Company had no accrued interest or penalties related to income taxes and is not currently under examination by any federal or state taxing authorities. F-6 Fair Value of Financial Instruments The carrying amounts of financial instruments, which include cash, accounts receivable, accounts payable , and accrued expenses , approximate their fair values due to their short-term nature. Recently Issued Accounting Pronouncements The Company evaluates new accounting pronouncements to determine their impact on the financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), which expands required segment disclosures. The Company adopted the guidance effective January 1, 2024. The adoption did not have a material impact on the Company’s financial statements other than expanded disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which enhances income tax disclosure requirements. The Company adopted the guidance effective January 1, 2024. The adoption did not have a material impact on the Company’s financial statements other than expanded disclosures. The adoption of other recently issued accounting pronouncements is not expected to have a material impact on the Company’s financial statements. NOTE 3 – SEGMENT REPORTING Adoption of ASU 2023-07 Effective January 1, 202 4 , the Company adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments require enhanced disclosures regarding significant segment expenses, the title and role of the Chief Operating Decision Maker (“CODM”), and other segment items. The amendments were applied retrospectively to all periods presented. The adoption did not change the Company’s identification of its operating and reportable segment and did not have a material impact on the Company’s financial position, results of operations, or cash flows. Operating and Reportable Segment The Company operates as a single reportable segment. Chief Operating Decision Maker The Chief Executive Officer, who serves as CODM, evaluates performance and allocates resources based on consolidated financial information. Measure of Segment Profit The measure of segment profit used by the CODM is consolidated net income, consistent with the amount reported in the Company’s Statements of Operations. This measure is used to assess performance and determine resource allocation. The Company does not present additional segment-level measures of profit because no other measures are regularly reviewed by the CODM for decision-making purposes. Significant Segment Expenses In accordance with ASU 2023-07, the following expense categories are significant expenses that are regularly provided to the CODM and are included within operating expenses in the Statements of Operations: E-commerce fulfil l ment fees Freight and delivery expenses Compensation expenses These amounts are further described in Note 8, Selling, General, and Administrative Expenses. F-7 Other Segment Items Other segment items consist of the remaining operating expenses not separately disclosed above, together with interest expense and income tax expense (benefit), which are not individually reviewed by the CODM as separate components for purposes of evaluating segment performance. NOTE 4 – COMMITMENTS AND CONTINGENCIES Contingent Obligation Under Employment Agreement Pursuant to the Employment Agreement dated July 1, 2025, between the Company and Mr. Simpson, in the event Mr. Simpson’s employment is terminated by the Company without cause, he would be entitled to receive $ 712,500 in cash and 1,140,000 shares of the Company’s common stock. NOTE 5 – STOCKHOLDERS’ EQUITY The Company has authorized 10,000,000 shares of common stock having a par value of $ 0.001 . On October 20, 2025, the State of Delaware approved a 1-for-2 reverse stock split and a decrease in authorized shares from 20,000,000 to 10,000,000 shares. The decrease in authorized shares and reverse stock split was approved by FINRA on October 27, 2025. All share and per share data has been retroactively adjusted to reflect the reverse stock split. Restricted Stock Issuances The table below summarizes the restricted non-trading common stock awards during the quarters ended March 31, 2026 and 2025: Restricted Non-trading Common Stock Awards Officers and Directors January 1 to March 31 2026 2025 Price Shares Amount Price Shares Amount Q1 Q1 Glenn Simpson $ 0.81 90,000 $ 72,900 Glenn Simpson $ - - $ - Total 90,000 $ 72,900 Total - $ - The fair value of restricted , non-trading stock awards issued during the quarter ended March 31, 2026 was determined based on the closing market price of the Company’s common stock on the grant date. The restricted , non-trad ing stock awards vested immediately upon grant, and accordingly, the full fair value of $ 72,900 was recognized as stock-based compensation expense during the period in accordance with ASC 718. Such expense is included in selling, general , and administrative expenses in the accompanying statements of operations. See Note 2 for further information regarding the Company’s stock-based compensation policy. Stock Transactions During the quarter ended March 31, 2026, the Company issued 90,000 shares of restricted , non-trading common stock to Glenn Simpson pursuant to the terms of his employment agreement. The shares had an aggregate fair value of $ 72,900 , based on the quoted OTC market price of the Company’s common stock on the grant date. The Company’s common stock price was $ 0.81 per share on November 17, 2025, the date the employment agreement was executed. During the quarter ended March 31, 2025, the Company issued 841 shares of restricted common stock to third-party service providers pursuant to marketing service agreements. The shares had an aggregate fair value of $ 840 . In accordance with the terms of the agreements, the number of shares issued was determined based on the volume weighted average price (“VWAP”) of the Company’s common stock for the applicable month, as published by the OTC. During the quarter ended March 31, 2026, the Company repurchased 20,605 shares of its common stock from shareholders. The Company did no t repurchase any shares during the quarter ended March 31, 2025. F-8 NOTE 6 – RELATED PARTY TRANSACTIONS The Company engages in transactions with related parties in the ordinary course of business. Related parties include the Company’s directors, executive officers, and entities in which such individuals have a financial interest. During the quarter ended March 31, 2026, the Company issued 90,000 shares of restricted , non-trading common stock to its Chief Executive Officer pursuant to a stock-based compensation arrangement. The shares vested immediately upon grant and had an aggregate fair value of $ 72,900 , determined based on the quoted OTC market price of the Company’s common stock on the grant date. The stock price was $ 0.81 on November 17, 2025 , when the employment agreement was signed. The full amount was recognized as stock-based compensation expense during the period and is included in selling, general , and administrative expenses in the accompanying statements of operations. The Company did not have comparable stock-based compensation transactions with related parties during the quarter ended March 31, 2025. On October 1, 2025, EQUATOR Beverage Company (the “Company”) entered into a loan agreement with Glenn Simpson (the “Lender”), who is considered a related party. Pursuant to the agreement, the Lender provided the Company with a loan in the principal amount of $ 340,000 . The loan bears interest at a rate of 9.25 % per annum, calculated on the outstanding principal balance. The Company is required to make monthly payments consisting of (i) principal in the amount of $ 10,000 and (ii) accrued interest on the remaining unpaid balance. Payments commenced on October 1, 2025, and continue on a monthly basis until the loan is fully repaid. The Company may prepay all or a portion of the outstanding balance at any time without penalty. Prepayments are applied first to accrued interest and then to principal. In the event of default, defined as a failure to make a required payment within 15 days of its due date, the Lender has the right to declare the entire outstanding balance, together with accrued interest, immediately due and payable. The Company believes that the terms of this loan, including the interest rate and repayment structure, are comparable to those that could have been obtained from unaffiliated third parties. As of March 31, 2026, the loan payable to Mr. Simpson was $ 230,000 , which was a decrease of $ 110,000 from the December 31, 2025 balance of $ 340,000 . NOTE 7 – SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (SG&A) Selling, General, and Administrative ("SG&A") expenses consist of all costs related to the general operation of the Company, excluding direct production costs. SG&A expenses include costs such as sales and marketing expenses, including e-commerce fulfi l lment fees, salaries, office expenses, shipping and handling costs, and other overhead costs necessary to support the Company's core business activities. The table below presents the material components of SG&A expenses as a percentage of total SG&A expenses for the quarters ended March 31, 2026 and 2025: March 31, 2026 March 31, 2025 E-commerce Fulfi l lment Fees 33 % 38 % Freight and Delivery Expenses 9 % 9 % Compensation Expenses 20 % 29 % F-9 NOTE 8 – INCOME TAXES The Company’s income tax provision consists of current and deferred components. For the three months ended March 31, 2026, the Company recorded current tax expense of $ 68,650 , offset by a deferred tax benefit of $ 64,531 , resulting in a net income tax expense of $ 4,119 . The table below shows the details of the Net Operating Loss Carryforward and Deferred Tax Assets as of March 31, 2026 and 2025: 2026 2025 Net Operating Loss Carryforward, January 1 $ 3,062,416 $ 3,549,884 Taxable Income, January 1 to March 31 228,834 85,574 Net Operating Loss Carryforward, March 31 $ 2,833,582 $ 3,464,310 Federal Deferred Tax Asset, January 1 643,108 745,476 Federal Tax Expense as of March 31 (21% Tax Rate) ( 48,055 ) ( 17,971 ) Federal Deferred Tax Asset, March 31 $ 595,053 $ 727,505 State of New Jersey Deferred Tax Asset, January 1 275,033 318,681 State of New Jersey Tax Expense as of March 31 (9% Tax Rate) ( 20,595 ) ( 7,702 ) State of New Jersey Deferred Tax Asset, March 31 $ 254,438 $ 310,979 Total Deferred Tax Asset, March 31 $ 849,491 $ 1,038,484 Total Tax Expense $ 68,650 $ 25,673 The table below shows the reconciliation of Net Income per Books to Taxable Income: 2026 2025 Net Income before Taxes $ 180,234 $ 85,574 Stock Awards 48,600 - Taxable Net Income $ 228,834 $ 85,574 NOTE 9 – OTHER INCOME Other income for the quarter ended March 31, 2026 totaled $ 112,292 and primarily reflects non-recurring tariff-related recoveries recognized during the period, including recoveries associated with favorable legal and regulatory developments. In accordance with U.S. GAAP, this amount is presented within other income . NOTE 10 – SUBSEQUENT EVENTS On April 20, 2026, the Company adopted an Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. These documents are filed as Exhibits 3.1 and 3.2 to this report. The Company has evaluated subsequent events through the date the financial statements were issued. Subsequent to quarter end, the U.S. government announced the repeal of the 10 % worldwide tariff previously imposed on imported goods. During the period, the Company incurred tariff-related payments associated with this tariff. Management believes these tariffs were improperly assessed and is evaluating potential reimbursement or recovery opportunities. To the extent the Company receives repayment of these amounts, such recovery would result in an increase to net income in the period the reimbursement is recognized. The Company repaid $ 10,000 of a loan made by Mr. Simpson. The remaining balance of the loan was $ 220,000 as of May 1 3 , 2026. F-10