Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows:

	·	Significant Accounting Policies - Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
	·	Results of Operations - Analysis of our financial results comparing the quarter ended September 30, 2025 to September 30, 2024.
	·	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, headquartered in Jersey City, NJ, is a Delaware corporation that specializes in developing, producing, distributing, and marketing new beverage products.

Our beverages have been certified Non-GMO Project Verified and USDA Organic, and we offer nonalcoholic ready-to-drink options. In addition, we have a line of sparkling energy beverages. Our beverages can be found in North America, the Caribbean, and Bermuda.

We are committed to sustainability and use 100% recyclable, eco-friendly packaging that has a minimal impact on the environment. Furthermore, our products are plant-based, renewable, and eco-friendly.

Coconut water is nature's super hydration drink for skin and body. In each 11 oz serving, there are five essential electrolytes totaling 1043 mg more than other sports drinks. It is a fast rehydration recovery drink which performs faster than water. Coconut water has natural nutrients for skin and hair and vitamins B & C natural - not added. Coconut water is plant based and renewable; great for vegan, kosher, paleo keto and low carb diets. All this comes with a fresh crisp coconut taste. There are no preservatives in this coconut water and it is packaged in an eco-friendly container.

Results of Operations

Three Months Ended September 30, 2025 and 2024

Revenue

For the quarter ended September 30, 2025, the Company reported revenue of $1,184,589 an increase of $122,944 or 12% from revenue of $1,061,645 for the quarter ended September 30, 2024. The increase in revenue was due to strong demand for all products during the third quarter of 2025.

Cost of Revenue

Cost of revenue includes finished goods purchase costs and freight in costs.

For the quarter ended September 30, 2025, cost of revenue was $607,191 or 51% of revenue, a decrease of 15 percentage points from the same period in 2024. For the quarter ended September 30, 2024, cost of revenue was $704,370 or 66% of revenue. The decrease in in cost of revenue was primarily due to a decrease in ocean freight costs during the third quarter of 2025 compared to the same period in 2024.

Operating Expenses

Operating expenses for the quarter ended September 30, 2025 were $408,700 compared to $335,716 for the same period in 2024 excluding restricted, non-trading stock awards issued to officers, directors and unrelated parties.

During the quarter ended September 30, 2025, 201,000 shares of restricted, non-trading common stock were issued to officers, directors and employees compared to 269,250 shares issued to officers, directors and employees during the same period in 2024.

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Nine Months Ended September 30, 2025 and 2024

Revenue

For the nine months ended September 30, 2025, the Company reported revenue of $3,104,914 an increase of $557,294 or 22% from revenue of $2,547,620 for the nine months ended September 30, 2024. The increase in revenue was due to strong demand for all products during the third quarter of 2025.

Cost of Revenue

Cost of revenue includes finished goods purchase costs and freight in costs.

For the nine months ended September 30, 2025, cost of revenue was $1,733,885 or 56% of revenue, compared to $1,577,278 or 62% or revenue from the same period in 2024.

Operating Expenses

Operating expenses for the nine months ended September 30, 2025 were $948,923 compared to $863,544 for the same period in 2024 excluding restricted, non-trading stock awards issued to officers, directors and unrelated parties.

During the nine months ended September 30, 2025, 201,841 shares of restricted, non-trading common stock were issued to an unrelated party and to officers, directors and employees compared to 507,750 shares issued to officers, directors and employees during the same period in 2024.

Liquidity and Capital Resources

Liquidity

As of September 30, 2025, the Company had working capital of $490,308 compared to $360,121 for the same period in 2024. Net cash used in operating activities was $55,551for the nine months ended September 30, 2025, an $80,310 decrease compared to net cash used in operating activities for the nine months ended September 30, 2024 of $135,861. Net cash provided by financing activities was $44,000 for the nine months ended September 30, 2025 compared to $80,000 net cash provided by financing activities for the same period in 2024. Net cash provided by financing activities was used for operations for the nine months ended September 30, 2025.

Working Capital Needs

Our working capital requirements increase as revenue grows for our products. During the nine months ended September 30, 2025, the Company's borrowings ranged from $99,000 to $460,000. The balance of the loan on September 30, 2025 was $399,000. During the nine months ended September 30, 2024, borrowings ranged from $230,000 to $408,000. Should the Company require additional working capital during the next twelve months, it may seek to raise additional funds. Financing transactions may include debt securities and obtaining credit facilities.

OFF BALANCE SHEET ARRANGEMENTS

None