U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended:
OR
For the transition period from _______________ to _______________
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Postal Code) |
Registrant’s
telephone number:
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
On July 20, 2022, there were shares of the registrant’s common stock, par value $0.001, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
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 | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Supplier deposits | ||||||||
| Prepaid expenses | ||||||||
| Security deposit | ||||||||
| Total Current Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party loans | ||||||||
| SBA Loans | ||||||||
| Total Current Liabilities | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, shares authorized at $ par value, and shares issued and outstanding, at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
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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 | $ | $ | ||||||
| Cost of Revenue | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | ||||||||
| (Loss)/Income from Operations | ||||||||
| Other (Expense)/ Income | ( | ) | ||||||
| (Loss)/ Income Before Provision for Income Taxes | ( | ) | ||||||
| Benefit/(Provision) for Income Taxes | ||||||||
| Net Income/(Loss) | $ | ( | ) | $ | ||||
| Net Income/(Loss) per common share, basic and diluted | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying notes are an integral part of these condensed financial statements.
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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 | $ | $ | ||||||
| Cost of Revenue | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | ||||||||
| (Loss)/Income from Operations | ( | ) | ||||||
| Other (Expense)/ Income | ( | ) | ||||||
| (Loss)/ Income Before Provision for Income Taxes | ( | ) | ||||||
| Benefit/(Provision) for Income Taxes | ||||||||
| Net Income/(Loss) | $ | ( | ) | $ | ||||
| Net Income/(Loss) per common share, basic and diluted | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying notes are an integral part of these condensed financial statements.
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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) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock issued to directors and employees | ||||||||
| SBA Loan Forgiveness | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Increase in accounts receivable | ( | ) | ( | ) | ||||
| Increase in inventory | ( | ) | ( | ) | ||||
| Increase in supplier deposits | ||||||||
| (Increase)/Decrease in prepaid expenses and security deposit | ( | ) | ||||||
| Increase in accounts payable and accrued expenses | ||||||||
| Increase in accrued payroll to officers | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Net cash provided by/ (used in) financing activities: | ||||||||
| Proceeds from related party loan | ||||||||
| Repayments of from related party loan | ( | ) | ||||||
| Proceeds from options exercise | ||||||||
| Shares repurchased for cancellation | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of periods | $ | $ | ||||||
Summary
of non-cash investing and financing activity: During the six-month period ended June 30, 2022 the Company issued a total of
Restricted and Non-Trading shares with an implied value of $
The accompanying notes are an integral part of these condensed financial statements.
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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 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock issued to Directors and employees | ||||||||||||||||||||
| Stock repurchased and returned to Treasury | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||||||
| Stock issued to Directors and employees | ||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Stock repurchased and returned to Treasury | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock issued to Directors and employees | ||||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||||||
| Stock issued to Directors and employees | ||||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
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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.
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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
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
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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.
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 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 $
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
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As
of June 30, 2022, and June 30, 2021, the Company had
| Deferred Tax Asset as of June 30, | ||||||||||||
| Tax Rate | 2022 | 2021 | ||||||||||
| Federal | % | $ | $ | |||||||||
| State of New Jersey | % | $ | $ | |||||||||
| Total | $ | $ | ||||||||||
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 $
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 $
During the six months ended June 30, 2022, Mr. Simpson was issued 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 to shares. This was a reduction of in Authorized Shares. As of June 30, 2022 there are 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 shares, par value $, to shares, par value $. 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
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Restricted Stock Issuances
During the six months ended June 30, 2022, 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 shares of Restricted and Non-Trading shares at $per share. The total exercise value was $.
On February 4, 2022, the board of Directors approved the issuance of 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 shares of Restricted and Non-Trading Common Stock. Mr. Devlin and Ms. Cudia were each issued 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 shares of Restricted and Non-Trading Common Stock for the stock portion of his annual salary. Mr. Devlin was issued shares of Restricted and Non-Trading Common Stock as for continuing to serve as a Director of the Company. Ms. Cudia was issued 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 shares of its Restricted Common Stock from shareholders at a cost
of $
During the year ended December 31, 2021 the Company purchased shares of its Restricted Common Stock from shareholders at a cost of $. The shares were cancelled.
On June 1, 2022, Mr. Simpson exercised options to purchase shares of Restricted and Non-Trading shares at $per share. The total exercise value was $.
On February 4, 2022, the Company adjusted the exercise price of the options granted to Mr. Simpson from $
On September 24, 2021, the Company extended the expiration date of the options granted to Mr. Simpson from April 6, 2022 to .
During the year ended December 31, 2021, Mr. Simpson exercised options to purchase shares of Restricted and Non-Trading shares at $ per share. The total exercise value was $ and this reduced the accrued salary payable to Mr. Simpson to $.
| Issued To | Expiration Date | Days to Expiration | Exercise Price | Options | ||||||||||||
| Outstanding, December 31, 2021 | Glenn Simpson | $ | ||||||||||||||
| Exercised, June 1, 2022 | Glenn Simpson | $ | ( | ) | ||||||||||||
| Outstanding, June 30, 2022 | Glenn Simpson | $ | ||||||||||||||
During the six months ended June 30, 2022 and 2021, compensation expense related to stock options was $. As of June 30, 2022, there was 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 $
On June 1, 2022, Mr. Simpson exercised stock options at an exercise price of $. The Company issued Restricted and Non-Trading shares of Common Stock in exchange for the total exercise price of $.
During the year ended December 31, 2021, Mr. Simpson exercised stock options at an exercise price of $. The Company issued Restricted and Non-Trading shares of Common Stock, and the accrued payroll owed to him was reduced by $.
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 $
NOTE 8 – SUBSEQUENT EVENTS
On July 19, 2022, FINRA approved the 1-for-2 reverse split and the decrease in Authorized shares from to 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.
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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 (“MDA”) 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. MDA 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, 2022 to 2021. | |
| ● | 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.
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COMPANY 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.
Results of Operations
Three Months Ended June 30, 2022 and 2021
Revenue
For the three months ended June 30, 2022, the Company reported revenue of $541,102 a decrease from revenue of $614,729 for the three months ended June 30, 2021. The decrease in revenue was due to fewer cases sold for the quarter ended June 30, 2022 compared to the same period last year. Some of the Company’s products were affected by production and shipping challenges during the first quarter of 2022 because of closures due to COVID-19.
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, 2022, cost of revenue was $352,760 or 65% of revenue. For the three months ended June 30, 2021, cost of revenue was $329,67 or 54% of revenue. The 11% increase in cost of revenue was due to higher costs of product costs, ocean freight and warehousing costs compared to the same period last year.
Operating Expenses
For the three months ended June 30, 2022, selling, general and administrative expenses was $188,229 a decrease of $15,311 from the three months ended June, 2021 of $203,540.
This decrease in operating expenses was primarily due to lower stock compensation expenses as a result of lower EQUATOR stock price. Compensation expenses decreased by $15,209 for the three months ended June 30, 2022 compared to the same period last year.
Six Months Ended June 30, 2022 and 2021
Revenue
For the six months ended June 30, 2022, the Company reported revenue of $920,759 a decrease of $97,286 from revenue of $1,018,045 for the six months ended June 30, 2021. The decrease in revenue was due to fewer cases sold in 2022 compared to the same period last year. Some of the Company’s products were affected by production and shipping challenges during the first six months of 2022 because of closures due to COVID-19 and congestions at the ports.
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, 2022, cost of revenue was $585,343 or 63% of revenue. For the six months ended June 30, 2021, cost of revenue was $537,968 or 53% of revenue. The 11% increase in cost of revenue was due to higher costs of product, ocean freight and warehousing costs compared to the same period last year.
Operating Expenses
For the six months ended June 30, 2022, selling, general and administrative expenses was $469,796 an increase of $48,026 from the six months ended June 30, 2021 of $421,770.
This increase in operating expenses was primarily due to higher compensation expenses resulting from the one-time stock grant that was issued to the employees and directors of the Company. Compensation expenses increased by $42,343 for the six months ended June 30, 2022 compared to the same period last year. Director’s compensation also increased by $19,742 compared to the same period last year. This increase is offset by lower office expenses and marketing expenses.
Liquidity and Capital Resources
Liquidity
As of June 30, 2022, the Company had working capital of $200,680. Net cash used in operating activities was $100,016 for the six months ended June 30, 2022, compared to net cash used in operating activities for the six months ended June 30, 2021 of $42,879. Net cash provided by financing activities was $57,260 for the six months ended June 30, 2022 compared to zero for the six months ended June 30, 2021. Net cash was provided by financing activities of a related party loan and proceeds from the exercise of stock options, offset by cash used in financing activities to repurchase EQUATOR Restricted Common Stock for the six months ended June 30, 2022.
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Working Capital Needs
Our working capital requirements increase as demand grows for our products. During the six months ended June 30, 2022, the Company had net borrowings of $225,000. This was the direct result of supply chain delays in manufacturing and ocean transport times. In 2021, borrowings were zero. Should the Company require 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
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Not applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Under the supervision and with the participation of the Company’s senior management, consisting of the Company’s principal executive and financial officer and the Company’s principal accounting officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the Company’s principal executive and financial officer concluded, as of the Evaluation Date, that the Company’s disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
The management of EQUATOR Beverage Company (formerly MOJO Organics, Inc.) is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rule 13a-15(f)) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this evaluation, our officers concluded that, during the period covered by this annual report, our internal controls over financial reporting were not operating effectively.
As previously reported, the Company does not have an audit committee and is not currently obligated to have one. Management does not believe that the lack of an audit committee is a material weakness.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against the Company in all material aspects. We could from time to time become a party to various legal or administrative proceedings arising in the course of our business.
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.
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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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s Common Stock is currently quoted on the OTCQB under the symbol MOJO.
For the period January 1, 2021 to June 30, 2022, the following table sets forth the high and low closing bid prices by quarter, based upon information obtained from inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions:
| High | Low | VWAP* | Shares Traded | |||||||||||||
| Second Quarter 2022 | $ | 0.22 | $ | 0.14 | $ | 0.16 | 132,619 | |||||||||
| First Quarter 2022 | $ | 0.30 | $ | 0.16 | $ | 0.20 | 66,677 | |||||||||
| Fourth Quarter 2021 | $ | 0.36 | $ | 0.12 | $ | 0.22 | 213,837 | |||||||||
| Third Quarter 2021 | $ | 0.36 | $ | 0.20 | $ | 0.30 | 66,652 | |||||||||
| Second Quarter 2021 | $ | 0.42 | $ | 0.26 | $ | 0.32 | 250,218 | |||||||||
| First Quarter 2021 | $ | 2.00 | $ | 0.14 | $ | 0.42 | 732,864 | |||||||||
*Volume weighted average price
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Holders
As of June 30, 2022, there were 15,678,502 shares issued and outstanding. There were 906 shareholders of record.
Dividends
The Company has not declared a cash dividend with respect to its Common Stock. Future payment of dividends is within the discretion of the Board of Directors and will depend on earnings, capital requirements, financial condition and other relevant factors.
Recent Sales of Unregistered Securities, Use of Proceeds from Registered Securities
There were no sales of unregistered securities during the three months ended June 30, 2022 and 2021.
Issuer Purchases of Equity Securities
During the six months ended June 30, 2022, the Company repurchased 830,342 shares of EQUATOR Restricted Common Stock from shareholders at a total cost of $193,187. The shares were cancelled.
During the year ended December 31, 2021, the Company repurchased 382,913 shares of EQUATOR Restricted Common Stock from shareholders at a total cost of $107,215. The shares were cancelled.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
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PART III
ITEM 7. DIRECTORS, EXECUTIVE OFFICER, AND CORPORATE GOVERNANCE
Executive Officer and Directors
Below are the names and certain information regarding our current executive officer and directors:
| Name | Age | Title | Appointed | |||
| Glenn Simpson | 70 | Chairman and CEO | October 27, 2011 | |||
| Jeffrey Devlin | 75 | Director | January 27, 2012 |
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Biographical information of each current officer and director is set forth below.
Glenn Simpson is Chairman of the Board of Directors and Chief Executive Officer of the Company. Mr. Simpson joined the Company in October 2011. He has extensive experience in the beverage industry. Mr. Simpson was Vice President and Chief Financial Officer of Coca-Cola Bottlers, Inc. in Uzbekistan from 1995 to 2000. His primary responsibilities included corporate strategy, supervision of bottling and distribution operations and facilities construction. His accomplishments included growing revenues from a base at $4 million to over $160 million annually. The company was awarded “Bottler of the Year” by The Coca-Cola Company for two consecutive years under his leadership based upon product quality and revenue growth. From 2009 to 2011, Mr. Simpson was engaged in beverage projects on a consulting basis in Russia and Afghanistan. Mr. Simpson is a Certified Public Accountant and holds an MBA from Columbia University School of Business.
Jeffrey Devlin has served on the Board of Directors of the Company since January 2012. Mr. Devlin has over 35 years of advertising and business development experience. Mr. Devlin currently serves as Chief Marketing Officer – Government, Advertising and Commerce at Deloitte Consulting LLP. He has held various other executive and creative positions over the course of his advertising career, including launching the introduction of Diet Coke for The Coca-Cola Company. Mr. Devlin currently serves on the board of directors of a number of private organizations, as well as on the board of directors of Location Based Technologies, Inc., a publicly traded company. Mr. Devlin received a Bachelor’s degree from Bethel University.
Board Committees
The Company has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations. Our two directors perform all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.
Shareholder Communications
Currently, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.
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Code of Ethics
We have adopted a written code of ethics (the “Code of Ethics”) that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To request a copy of the Code of Ethics, please make written request to our Company at 185 Hudson Street, Floor 25, Jersey City, New Jersey 07302.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes in that ownership with the SEC. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the three months ended June 30, 2022 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.
ITEM 8. EXECUTIVE COMPENSATION
The following table sets forth information concerning the total compensation paid or earned by each of our named executive officers (as defined under SEC rules).
| Name and Principal Position | Jan 1 to Jun 30 | Salary | ||||||
| Glenn Simpson, Chairman CEO | 2022 | $ | 67,922 | (1) | ||||
| 2021 | $ | 98,675 | (1) | |||||
(1) Pursuant his employment agreement (the “Simpson Agreement”), Mr. Simpson is paid a salary of $5,000 per month in cash and the Company is obligated to grant Mr. Simpson 33,500 shares of non-trading, restricted Common Stock per month. Pursuant to this agreement, Mr. Simpson is also entitled to an annual bonus comprised of cash and non-trading, restricted Common shares based on performance goals established by the Board of Directors of the Company. The cash bonus is established at $44,400 per year. The stock bonus is set at 100,000 shares of non-trading, restricted Common Stock per year through March 31, 2025.
During the six months ended June 30, 2022, 201,000 shares of Non-trading, Restricted Common Stock were issued to Mr. Simpson for the stock portion of his compensation. Mr. Simpson was also issued 350,000 shares of Non-Trading Restricted Common Stock as a one-time stock award.
During the six months ended June 30, 2021, 201,000 shares of Non-trading, Restricted Common Stock were issued to the Mr. Simpson for the stock portion of his compensation. During the year 2021, Mr. Simpson exercised stock options to purchase 93,750 non-trading, restricted shares for a total exercise price of $30,000. This reduced the accrued salary owed to him.
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Outstanding Option Awards at June 30
The following table sets forth information regarding stock options held by executive officers at June 30.
| Option awards | ||||||||||||||
| Name | Year | Common Stock underlying exercisable options | Expiration date | Exercise price | ||||||||||
| Glenn Simpson | 2022 | - | 4/6/2024 | $ | 0.16 | |||||||||
| 2021 | 159,054 | 4/6/2024 | $ | 0.16 | ||||||||||
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 expiring an April 6, 2022 to April 6, 2024.
Option Exercises in 2022 and 2021
On June 1, 2022, Mr. Simpson exercised options to purchase 159,054 Restricted and Non-Trading shares at $0.16 per share. The total exercise value was $25,449.
On May 19, 2021, Mr. Simpson exercised options to purchase 46,875 Restricted and Non-Trading shares at $0.32 per share. The total exercise value was $15,000 and this reduced the accrued salary payable to Mr. Simpson to $0.
On March 24, 2021, Mr. Simpson exercised options to purchase 46,875 Restricted and Non-Trading shares at $0.32 per share. The total exercise value was $15,000 and this reduced the accrued salary payable to Mr. Simpson to $0.
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Director Compensation
The non-employee director did not receive cash compensation for serving as such, for serving on committees (if any) of the Board of Directors or for special assignments. Board members are not reimbursed for expenses incurred in connection with attending meetings.
ITEM 9. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to the beneficial ownership of our Common Stock known by us as of June 30, 2022 by:
| ● | each director; | |
| ● | each named executive officer; and | |
| ● | all directors and executive officers as a group. |
Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our Common Stock owned by them, except to the extent such power may be shared with a spouse.
| Name | Shares | Percent of Common Stock(1) | ||||||
| Glenn Simpson | 7,099,892 | 45 | % | |||||
| Chairman and CEO | ||||||||
| Diane Cudia | 416,667 | 3 | % | |||||
| Corporate Controller | ||||||||
| Jeffrey Devlin | 405,643 | 3 | % | |||||
| Director | ||||||||
| All Officers and Directors as a group (3 persons) | 7,922,202 | 51 | % | |||||
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options currently exercisable or convertible, or exercisable or convertible within 60 days of June 30, 2022 are deemed outstanding for computing the percentage of the person holding such option but are not deemed outstanding for computing the percentage of any other person. |
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PART IV
ITEM 10. EXHIBITS
Financial Statement Schedules
The financial statements of EQUATOR Beverage Company (formerly MOJO Organics, Inc). are listed on the Index to Financial Statements on this quarterly report on Form 10-Q beginning on page F-1.
The following Exhibits are being filed with this Quarterly Report on Form 10-Q:
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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| (1) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the Securities and Exchange Commission (the “SEC”) on May 18, 2011. |
| (2) | Incorporated by reference to the Registrant’s Registration Statement on Form SB-2 as an exhibit, numbered as indicated above, filed with the SEC on December 19, 2007. |
| (3) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on May 4, 2011. |
| (4) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on January 4, 2012. |
| (5) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on October 31, 2011. |
| (6) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on April 2, 2013. |
| (7) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on February 1, 2013. |
| (8) | Incorporated by reference to the Registrant’s Current Report on Form 10-K as an exhibit, numbered as indicated above, filed with the SEC on September 24, 2013. |
| (9) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on October 23, 2015. |
| (10) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on July 1, 2021. |
| (11) | Incorporated by reference to the Registrant’s Current Report on Form 8-K as an exhibit, numbered as indicated above, filed with the SEC on July 20, 2022. |
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EQUATOR BEVERAGE COMPANY (formerly MOJO Organics, Inc.) | ||
| Dated: July 20, 2022 | By: | /s/ Glenn Simpson |
Glenn Simpson Chief Executive Officer and Chairman (Principal Executive and Principal Financial Officer) | ||
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