UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 20222023

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission File Number: 000-56230

 

KONA GOLD BEVERAGE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware 81-517512020-1915692
(State of incorporation) (I.R.S. Employer Identification No.)

746 North Drive, Suite A, Melbourne, Florida 32934
(Address of principal executive offices) (Zip Code)

 

(844) 714-2224

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock KGKG OTC Markets Group Inc.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “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☐
Non-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 ☐ No ☒

 

The number of shares of the issuer’s common stock, par value $0.0001 per share, outstanding as of August 8, 202221, 2023 was 1,781,156,8662,294,940,557.

 

 

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATIONF-2F-1
Item 1. Condensed Financial StatementsF-2F-1
Condensed Consolidated Balance Sheets – June 30, 20222023 (Unaudited) and December 31, 20212022F-2F-1
Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 20222023 and 20212022F-3F-2
Condensed Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited) for the three and six months ended June 30, 20222023 and 20212022F-4F-3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June, 30,2023 and 2022 and 2021F-5
Notes to Condensed Financial Statements (Unaudited)F-6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations1
Item 3. Quantitative and Qualitative Disclosures About Market Risk1314
Item 4. Controls and Procedures1314
PART II - OTHER INFORMATION1415
Item 1. Legal Proceedings1415
Item 1A. Risk Factors1415
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds1415
Item 3. Defaults Upon Senior Securities1415
Item 4. Mine Safety Disclosures1415
Item 5. Other Information1415
Item 6. Exhibits1516

 

Ii

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

KONA GOLD BEVERAGE, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

         
  

June 30,

2022

  

December 31,

2021

 
  (Unaudited)    
ASSETS        
CURRENT ASSETS        
Cash $6,188  $703,825 
Accounts receivable, net of allowance for doubtful accounts of $11,961 and $11,926, respectively  24,943   15,993 
Inventory, net of reserve for obsolescence of $150,000 and $150,000, respectively  1,189,913   574,811 
Prepaids  -   278,707 
Other current assets  59,834   30,373 
Total current assets  1,280,878   1,603,709 
         
NON-CURRENT ASSETS        
Property, plant and equipment, net  327,955   348,037 
Right-of-use asset, net  870,736   966,955 
Intangible property, net  71,078   75,955 
Deposits  15,125   15,125 
Total assets $2,565,772  $3,009,781 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
CURRENT LIABILITIES        
Accounts payable and accrued expenses $854,360  $541,123 
Accrued compensation  219,583   329,583 
Notes payable, net of discount of $99,031 and $0, respectively, current  198,332   7,974 
Notes payable - related parties, current  1,728,651   6,000 
Acquisition obligations, current  60,000   60,000 
Lease liabilities, current  224,162   213,837 
Convertible debt, net of discount of $815,270 and $2,150,067, respectively  84,730   849,933 
Derivative liability  833,000   2,121,000 
Total current liabilities  4,202,818   4,129,450 
         
NON-CURRENT LIABILITIES        
Notes payable - related parties, net of current  -   1,525,651 
Notes payable, net of current  22,219   25,338 
Acquisition obligations, net of current  606,731   615,317 
Lease liabilities, net of current  725,284   838,883 
Total liabilities  5,557,052   7,134,639 
         
COMMITMENTS AND CONTINGENCIES  -   - 
         
STOCKHOLDERS’ DEFICIT        
Preferred Stock, $.00001 par value, 5,700,250 shares authorized, 988,000 and 988,000 issued and outstanding, respectively  10   10 
Common Stock, $.00001 par value, 2,500,000,000 authorized, 1,709,122,945 and 1,004,709,546, issued and outstanding, respectively  17,091   10,047 
Common stock issuable (170,000,000 and 170,000,000 shares)  1,386,497   1,386,497 
Additional paid-in capital  16,855,382   10,778,761 
Accumulated deficit  (21,250,260)  (16,300,173)
Total stockholders’ deficit  (2,991,280)  (4,124,858)
Total liabilities and stockholders’ deficit $2,565,772  $3,009,781 

  June 30, 2023  December 31, 2022 
  (Unaudited)    
ASSETS        
CURRENT ASSETS        
Cash $97,158  $39,788 
Accounts receivable, net of allowance for doubtful accounts of $135,713 and $145,579, respectively  24,245   79,529 
Inventory, net of reserve for obsolescence of $80,000, respectively  551,758   859,179 
Other current assets  -   45,262 
Total current assets  673,161   1,023,758 
         
NON-CURRENT ASSETS        
Property, plant and equipment, net  306,078   348,064 
Right-of-use asset, net  464,408   762,464 
Intangible property, net  61,324   66,201 
Deposits  7,100   15,125 
Total assets $1,512,071  $2,215,612 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
CURRENT LIABILITIES        
Accounts payable and accrued expenses $1,643,459  $1,379,227 
Accrued compensation  219,583   137,083 
Notes payable, net of discount of $160,572 and $218,481, respectively, current  1,089,691   712,499 
Notes payable - related parties, current  1,872,651   1,785,651 
Notes payable      
Acquisition obligations, current  656,330   659,550 
Lease liabilities, current  187,589   209,685 
Convertible debt, net of discount of $269,114 and $183,940, respectively  688,962   411,060 
Total current liabilities  6,358,265   5,294,755 
         
NON-CURRENT LIABILITIES        
Notes payable, net of current  58,014   57,055 
Lease liabilities, net of current  332,622   629,197 
Total liabilities  6,748,901   5,981,007 
         
COMMITMENTS AND CONTINGENCIES  -   - 
         
STOCKHOLDERS’ DEFICIT        
Preferred Stock, $.00001 par value, 5,702,000 shares authorized, 989,000 and 988,000 issued and outstanding, respectively  10   10 
Common Stock, $.00001 par value, 10,500,000,000 authorized, 2,294,940,557 and 2,000,276,378, issued and outstanding, respectively  22,949   20,003 
Common stock issuable (169,998,860 shares)  1,386,489   1,386,497 
Additional paid-in capital  20,094,053   18,441,303 
Accumulated deficit  (26,740,331)  (23,613,208)
Total stockholders’ deficit  (5,236,830)  (3,765,395)
Total liabilities and stockholders’ deficit $1,512,071  $2,215,612 

 

See notes to condensed consolidated financial statementsstatements.

 

F-2F-1

 

KONA GOLD BEVERAGE, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 20222023 and 20212022

(Unaudited)

                 2023  2022  2023  2022 
 Three Months Ended Six Months Ended  Three Months Ended Six Months Ended 
 June 30,  June 30,  June 30,  June 30, 
 2022  2021  2022  2021  2023  2022  2023  2022 
 (unaudited) (unaudited) (unaudited) (unaudited)  (unaudited) (unaudited) (unaudited) (unaudited) 
                  
REVENUES, NET $1,173,398  $790,809  $2,168,529  $1,252,980  $929,519  $1,173,398  $2,204,416  $2,168,529 
COST OF REVENUES  885,517   686,706   1,735,393   1,000,571   742,687   885,517   1,729,546   1,735,393 
Gross profit  287,881   104,103   433,136   252,409   186,832   287,881   474,870   433,136 
                                
OPERATING EXPENSES                                
Selling, general and administrative expenses  1,031,515   644,052   1,970,851   1,212,732   927,718   1,031,515   2,201,679   1,970,851 
LOSS FROM OPERATIONS  (743,634)  (539,949)  (1,537,715)  (960,323)  (740,886)  (743,634)  (1,726,809)  (1,537,715)
OTHER INCOME (EXPENSE)                                
Interest expense  (156,459)  (64,956)  (587,354)  (1,195,866)  (309,371)  (156,459)  (602,962)  (587,354)
Financing costs  (286,000)  -   (286,000)  -   (126,000)  (286,000)  (289,000)  (286,000)
Change in the fair value of derivative liability  122,000  141,497   (1,671,000)  (124,369)  -   122,000   -   (1,671,000)
Gain (loss) on extinguishment of debt  (326,230)  -   (873,040)  -   (363,346)  (326,230)  (513,520)  (873,040)
Other income (expense)  1,798   (4,967)  5,022   (7,542)  5,037   1,798   5,168   5,022 
EIDL advance  -   95,161   -   95,161 
NET LOSS $(1,388,525) $(373,214) $(4,950,087) $(2,192,939) $(1,534,566) $(1,388,525) $(3,127,123) $(4,950,087)
                                
NET LOSS PER COMMON SHARES:                                
Basic and diluted $(0.00) $(0.00) $(0.00) $(0.00) $(0.00) $(0.00) $(0.00) $(0.00)
                                
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                                
Basic and diluted  1,560,391,543   805,263,473   1,363,761,068   805,263,473   2,231,011,986   1,560,391,543   2,156,953,058  $1,560,391,543 

See notes to condensed consolidated financial statementsstatements.

F-2

KONA GOLD BEVERAGE, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Three Months Ended June 30, 2023

(Unaudited)

 

  Shares  Amount  Shares  Amount  Shares  Amount  in Capital  Deficit  Deficit 
  Common Stock  Preferred Stock  Common Shares  Additional     Total 
  $.00001 Par  $.00001 Par  Issuable  Paid  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Shares  Amount  in Capital  Deficit  Deficit 
Balance March 31, 2023  2,139,440,557  $21,394   989,000  $10   169,998,860  $1,386,489  $19,252,920  $(25,205,765) $(4,544,952)
Common stock issued for conversion of convertible debt and accrued interest  127,500,000   1,275                   572,475       573,750 
Common stock issued for financing costs (LOC)  28,000,000   280                   125,720       126,000 
Warrants related to convertible notes                          137,669       137,669 
Warrants related to services rendered                          5,269       5,269 
                                     
Net loss  -   -   -   -   -   -   -   (1,534,566)  (1,534,566)

Balance June 30, 2023

(Unaudited)

  2,294,940,557  $22,949   989,000  $10   169,998,860  $1,386,489  $20,094,053  $(26,740,331) $(5,236,830)

Balance

  2,294,940,557  $22,949   989,000  $10   169,998,860  $1,386,489  $20,094,053  $(26,740,331) $(5,236,830)

For the Six Months Ended June 30, 2023

(Unaudited)

  Common Stock  Preferred Stock  Common Shares  Additional     Total 
  $.00001 Par  $.00001 Par  Issuable  Paid  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Shares  Amount  in Capital  Deficit  Deficit 
Balance December 31, 2022  2,000,276,378  $20,003   988,000  $10   169,999,860  $1,386,497  $18,441,303  $(23,613,208) $(3,765,395)
Balance  2,000,276,378  $20,003   988,000  $10   169,999,860  $1,386,497  $18,441,303  $(23,613,208) $(3,765,395)
Common stock issued for conversion of convertible debt and accrued interest  199,500,000   1,995                   886,755       888,750 
Common stock issued for financing costs (LOC)  28,000,000   280                   125,720       126,000 
Warrants related to convertible notes                          287,670       287,670 
Warrants issued for financing costs (ELOC)                          163,000       163,000 
Common stock issued upon cashless exercise of warrants  67,164,179   671                   (671)      - 
Preferred stock issued to a related party for common stock issuable          1,000   -   (1000)  (8)  185,008       185,000 
Warrants related to services rendered                          5,269       5,269 
Net loss  -   -   -   -   -   -   -   (3,127,123)  (3,127,123)

Balance June 30, 2023

(Unaudited)

  2,294,940,557  $22,949   989,000  $10   169,998,860  $1,386,489  $20,094,053  $(26,740,331) $(5,236,830)

Balance

  2,294,940,557  $22,949   989,000  $10   169,998,860  $1,386,489  $20,094,053  $(26,740,331) $(5,236,830)

F-3

 

 

KONA GOLD BEVERAGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Three Months Ended June 30, 2022

(Unaudited)

 

                                    
 Common Stock Preferred Stock Common Shares Additional     Total  Common Stock Preferred Stock Common Shares Additional     Total 
 $.00001 Par $.00001 Par Issuable Paid- Accumulated Stockholders’  $.00001 Par  $.00001 Par  Issuable  Paid-  Accumulated  Stockholders’ 
 Shares Amount Shares Amount Shares Amount in Capital Deficit Deficit  Shares  Amount  Shares  Amount  Shares  Amount  in Capital  Deficit  Deficit 
March 31, 2022  1,482,788,393  $14,828   988,000  $10   170,000,000  $1,386,497  $14,098,394  $(19,861,735) $     (4,362,006)  1,482,788,393  $14,828   988,000  $10   170,000,000  $1,386,497  $14,098,394  $(19,861,735) $(4,362,006)
Balance  1,482,788,393  $14,828   988,000  $10   170,000,000  $1,386,497  $14,098,394  $(19,861,735) $(4,362,006)
                                    
Common stock issued for conversion of convertible debt and accrued interest  225,334,552   2,253                   2,667,498       2,669,751   225,334,552   2,253                   2,667,498       2,669,751 
                                                                        
Common stock issued with employment agreement  1,000,000   10                   8,490       8,500   1,000,000   10                   8,490       8,500 
                                                                        
Warrants related to convertible notes                          81,000       81,000                           81,000       81,000 
                                                                        
Net loss  -    -    -    -    -    -        (1,388,525)  (1,388,525)  -   -   -   -   -   -   -   (1,388,525)  (1,388,525)
                                    
Balance June 30, 2022 (Unaudited)  1,709,122,945  $17,091   988,000  $10   170,000,000  $1,386,497  $16,855,382  $(21,250,260) $(2,991,280)  1,709,122,945  $17,091   988,000  $10   170,000,000  $1,386,497  $16,855,382  $(21,250,260) $(2,991,280)
Balance  1,709,122,945  $17,091   988,000  $10   170,000,000  $1,386,497  $16,855,382  $(21,250,260) $(2,991,280)

 

For the Six Months Ended June 30, 2022

(Unaudited)

 

 Common Stock Preferred Stock Common Shares Additional     Total  Common Stock Preferred Stock Common Shares Additional     Total 
 $.00001 Par $.00001 Par Issuable Paid- Accumulated Stockholders’  $.00001 Par $.00001 Par Issuable Paid- Accumulated Stockholders’ 
 Shares Amount Shares Amount Shares Amount in Capital Deficit Deficit  Shares Amount Shares Amount Shares Amount in Capital Deficit Deficit 
Balance December 31, 2021  1,004,709,546  $10,047   988,000  $10   170,000,000  $1,386,497  $10,778,761  $(16,300,173) $     (4,124,858) 1,004,709,546 $10,047 988,000 $10 170,000,000 $1,386,497 $10,778,761 $(16,300,173) $ (4,124,858)
Balance 1,004,709,546 $10,047 988,000 $10 170,000,000 $1,386,497 $10,778,761 $(16,300,173) $ (4,124,858)
                   
Common stock issued for conversion of convertible debt and accrued interest  678,413,399   6,784                   5,852,381       5,859,165  678,413,399 6,784         5,852,381   5,859,165 
                                                       
Common stock issued with note payable recorded as debt discount  25,000,000   250                   134,750       135,000  25,000,000 250         134,750   135,000 
                                                       
Common stock issued with employment agreement  1,000,000   10                   8,490       8,500  1,000,000 10         8,490   8,500 
                                                       
Warrants related to convertible notes                          81,000       81,000              81,000   81,000 
                                                       
Net loss  -    -    -    -    -    -    -    (4,950,087)  (4,950,087)  -    -  -   -   -   -   -   (4,950,087)  (4,950,087)
                            
Balance June 30, 2022 (Unaudited)  1,709,122,945  $17,091   988,000  $10   170,000,000  $1,386,497  $16,855,382  $(21,250,260) $(2,991,280)  1,709,122,945 $17,091  988,000 $10  170,000,000 $1,386,497 $16,855,382 $(21,250,260) $(2,991,280)
Balance  1,709,122,945 $17,091  988,000 $10  170,000,000 $1,386,497 $16,855,382 $(21,250,260) $(2,991,280)

 

For the Three Months Ended June 30, 2021

(Unaudited)

  Common Stock  Preferred Stock  Common Shares  Additional     Total 
  $.00001 Par  $.00001 Par  Issuable  Paid-  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Shares  Amount  in Capital  Deficit  Deficit 
March 31, 2021  825,726,839  $8,258   988,140  $10   170,000,000  $1,386,497  $6,964,898  $(11,099,761) $     (2,470,098)
Common stock issued for conversion of convertible debt and accrued interest  25,045,798   250                   508,924       509,174 
                                     
Net loss  -    -    -    -    -    -    -    (373,214)  (373,214)
Balance June 30, 2021 (Unaudited)  850,772,637  $8,508   988,140  $10   170,000,000  $1,386,497  $7,473,822  $(11,472,975) $(2,604,138)

For the Six Months Ended June 30, 2021

(Unaudited)

  Common Stock  Preferred Stock  Common Shares  Additional     Total 
  $.00001 Par  $.00001 Par  Issuable  Paid-  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Shares  Amount  in Capital  Deficit  Deficit 
Balance December 31, 2020  786,308,041  $7,863   988,140  $10   170,000,000  $1,386,497  $5,028,012  $(9,280,036) $     (2,857,654)
Common stock issued for conversion of convertible debt and accrued interest  55,464,596   555                   1,122,429       1,122,984 
                                     
Common stock issued for acquisition  9,000,000   90                   270,810       270,900 
                                     
Warrants related to convertible notes                          1,052,571       1,052,571 
                                     
Net loss  -    -    -    -    -    -    -    (2,192,939)  (2,192,939)
Balance June 30, 2021 (Unaudited)  850,772,637  $8,508   988,140  $10   170,000,000  $1,386,497  $7,473,822  $(11,472,975) $(2,604,138)

See notes to condensed consolidated financial statementsstatements.

 

F-4

 

 

KONA GOLD BEVERAGE, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 20222023 and 20212022

(Unaudited)

 

        
 

Six Months Ended

June 30,

 
 2022  2021  Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 
 (Unaudited) (Unaudited)  (Unaudited) (Unaudited) 
CASH USED IN OPERATING ACTIVITIES:                
Net loss $(4,950,087) $(2,192,939) $(3,127,123) $(4,950,087)
Adjustments to reconcile net loss to net cash provided by operations:                
Depreciation and amortization  44,250   20,503   45,951   44,250 
Right-of-use asset  96,219   74,261 
Change in allowance for doubtful accounts  (9,866)  35 
Change in inventory reserves  -   - 
Right-of-use asset amortization  49,786   96,219 
Amortization of debt discount  480,763   -   509,642   480,763 
Amortization of intangible assets  4,877   -   4,877   4,877 
Change in allowance for doubtful accounts  35   - 
Financing costs  286,000     
Preferred stock issued for common stock issuable  185,000   - 
Fair value of warrants issued for financing costs  289,000   286,000 
Fair value of warrants issued for services  5,269   - 
Loss on sale of property and equipment  (3,965)  - 
Loss on extinguishment of debt  873,040   -   498,207   873,040 
Loss on change in the fair value of derivative liabilities  1,671,000   - 
Interest expense related to warrants on convertible debt  -   1,052,571 
Loss on termination of operating lease  9,601   - 
Gain on change in fair value of derivative liabilities  -   1,671,000 
Common stock issued for compensation  8,500       -   8,500 
Common stock issued for acquisition  -   270,900 
Changes in operating assets and liabilities:                
Decrease (increase) in accounts receivable  (8,985)  (344,030)  65,150   (8,985)
Decrease (increase) in inventory  (615,102)  (92,447)  307,422   (615,102)
Decrease (increase) in prepaids  278,707   (10,244)  -   278,707 
Decrease (increase) in other current assets  (29,461)  (2,662)  45,262   (29,461)
Decrease (increase) in deposits  1,775   - 
Increase (decrease) in accounts payable and accrued expenses  450,365   180,716   511,860   450,365 
Increase (decrease) in accrued compensation  (110,000)  117,708   82,500   (110,000)
Increase (decrease) in derivative liability  -   124,369 
Increase (decrease) in lease liability  (99,476)  (74,261)  (55,608)  (99,476)
Net cash used in operating activities  (1,619,355)  (875,555)  (585,260)  (1,619,355)
                
CASH USED IN INVESTING ACTIVITIES:                
Purchase of property, plant and equipment  (24,168)  (26,247)
Changes in goodwill      (1,275,938)
Changes in intellectual property  -   (7,604)
Purchase of purchase property, plant and equipment  -   (24,168)
Net cash used in investing activities  (24,168)  (1,309,789)  -   (24,168)
                
CASH PROVIDED BY FINANCING ACTIVITIES:                
Changes in line of credit - related party  -   3,000 
Proceeds from note payable - related party  99,000   200,000 
Repayment of note payable - related party  (12,000)  (3,000)
Changes in acquisition obligations  (8,586)  624,360   (3,220)  (8,586)
Principal repayments of finance lease obligation  (3,798)  -   (1,939)  (3,798)
Proceeds from note payable – related party  200,000   - 
Payment of note payable – related party  (3,000)  (6,000)
Proceeds from notes payable  289,389   - 
Payments of notes payable  (3,119)  - 
Proceeds from notes payable, net of expenses  783,365   289,389 
Repayment of notes payable  (928,108)  (3,119)
Proceeds from convertible debentures payable, net of expenses  475,000   1,522,984   705,532   475,000 
Changes from PPP notes payable  -   22,326 
Net cash provided by financing activities  945,886   2,166,670   642,630   945,886 
Net cash decrease for period  (697,637)  (18,674)
Net cash increase (decrease) for period  57,370   (697,637)
Cash at beginning of period  703,825   113,168   39,788   703,825 
Cash at end of period $6,188  $94,494  $97,158  $6,188 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid for income taxes $-  $2,275  $-  $- 
Cash paid for interest $256  $34,941  $11,039  $256 
                
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Fair value of common shares issued as debt discount on note payable $135,000  $- 
Fair value of common shares issued on conversion of debentures and accrued interest $5,859,165  $- 
        
Recording of right of use asset and lease liability $-  $135,000 
Termination of right of use asset $248,270  $- 
Termination of operating lease liability $261,125  $- 
Note payable issued on termination of lease liability $16,206  $- 
Vendor line of credit reclassified to notes payable $247,629  $- 
Common shares issued on conversion of debentures and accrued interest $888,750  $5,859,165 
Fair value of warrants issued upon issuance of convertible notes $287,669  $- 
Derivative liability recorded on issuance of convertible note $

680,000

  $   $-  $680,000 

 

See notes to condensed consolidated financial statementsstatements.

 

F-5

 

 

KONA GOLD BEVERAGE, INC.


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 20222023 and 2021

(Unaudited)2022

 

NOTE 1 – BASIS OF PRESENTATIONOPERATIONS AND LIQUIDITYGOING CONCERN

 

The accompanying interim condensed consolidated financial statements ofCompany was formerly known as Kona Gold Beverages,Solutions, Inc. (the “Company”, “we”and in October 2020, changed its name to Kona Gold Beverage, Inc., “us”,a Delaware corporation (“Kona Gold,” the “Company,” “we,” “us,” or “our”), are unaudited, but in the opinion. As of management contain all adjustments, including normal recurring adjustments, necessary to present fairly our financial position at June 30, 2022,2023, the Company has three wholly-owned subsidiaries: Kona Gold LLC, a Delaware limited liability company (“Kona”), HighDrate LLC, a Florida limited liability company (“HighDrate”), and Gold Leaf Distribution LLC, a Florida limited liability company (“Gold Leaf”). Kona focuses on the resultsdevelopment and marketing of operationsfunctional and cash flows forbetter-for-you beverages: Ooh La Lemin Lemonades that are available in a variety of sparkling and non-sparkling flavors and Kona Gold Energy Drinks that are low-to-zero calorie functional beverages that are high in B vitamins, amino acids, and omegas. HighDrate focuses on the six months ended June 30, 2022,development and 2021. The balance sheet asmarketing of December 31, 2021, is derived from the Company’s audited financial statements.

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuantCBD-infused energy waters geared to the rulesfitness and regulationswellness markets. Gold Leaf focuses on the distribution of the Securitiespremium beverages and Exchange Commission regarding interim financial reporting. We believe that the disclosures containedsnacks in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on April 13, 2022.key markets, all of which complement our current product offerings.

 

The resultsCompany currently sells its products through resellers, the Company’s websites, and distributors that span across 18 states. The Company’s products are available in wide variety of operations forstores, including convenience and grocery stores, smoke shops, and gift shops.

As used herein, the six months ended June 30, 2022, are not necessarily indicative ofterms “Kona Gold,” the results of operations“Company,” “we,” “us,” or “our”, refer to be expected forKona Gold individually or, as the full fiscal year ending December 31, 2022.context requires, collectively with its subsidiaries on a consolidated basis.

 

Effects of COVID-19

 

In January 2020, the WHO announced a global health emergency because of a new strain of coronavirus (known as COVID-19) that originated in Wuhan, China and generated significant risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure. The COVID-19 pandemic is disrupting businesses and affecting production and sales across a range of industries, as well as causing volatility in the financial markets. The extent of the impact of the COVID-19 pandemic on the Company’s consumer demand, sales, and financial performance will depend on certain developments, including, among other things, the duration and spread of the outbreak and the impact on the Company’s consumers and employees, all of which are uncertain and cannot be predicted. Management is actively monitoring this situation and potential impacts on our financial condition, liquidity, and results of operations.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, duringin the six months ended June 30, 2022,2023, the Company recorded a net loss of $4,950,0873,127,123 and used cash in operations of $1,619,355585,260 and had a stockholders’ deficit of $2,991,2805,236,830 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. In addition, the Company’s independent registered public accounting firm, in its report on our December 31, 2022 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

At June 30, 2022,2023, the Company had cash on hand in the amount of $6,18897,158. Subsequent to June 30, 2022, the Company raised an additional $547,500 through the sale of a secured promissory note. The Company believes it has sufficient cash and working capital to sustain operations through October 31, 2022. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

 

F-6

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting and in accordance with generally accepted accounting principles (“GAAP”) in the United States.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in valuing warrant liabilities, and assumptions used in the determination of the Company’s liquidity.

Accounts Receivable

Accounts receivable are generally recorded at the invoiced amounts net of an allowance for expected losses. The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding.

The allowance for accounts receivable is established through a provision reducing the carrying value of receivables. At June 30, 2023 and December 31, 2022, the allowance was $135,713 and $145,579, respectively.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

 

Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer.

 

F-7

All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

 

The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

 

Sales are made to customers under terms allowing certain limited rights of return. The Company records an allowance and returnfor returns for each quarter for 3% of total sales. The Company recorded an allowance for sales return and allowance forat the three months ending June 30, 20222023 and 20212022 of approximately $36,70036,400 and $19,800, respectively, and the Company recorded sales return, and allowance for the six months ending June 30, 2022 and 2021 of approximately $71,800 and $57,41735,100, respectively, which is includednetted against revenue in the revenues, net of sales returns and allowances in the accompanying Condensed Consolidated Statements of Loss.

F-7

 

The following table presents our net revenues, by revenue source, and the period-over-period percentage change, for the period presented:

 

SCHEDULE OF NET REVENUES BY REVENUE

 

Three Months Ended

June 30,

    Three Months Ended June 30,    
 2022  2021     2023 2022    
Revenue Source Revenue  Revenue  % Change  Revenue Revenue % Change 
Distributors $219,790  $414,937   (47)% $119,143  $219,790   (46)%
Amazon and Walmart Marketplace  44,565   39,256   14%
Amazon  11,855   44,565   (73)%
Online Sales  13,709   21,843   (37)%  5,019   13,709   (63)%
Retail  927,614   328,848   182%  820,613   927,614   (12)%
Shipping  4,420   5,725   (23)%  989   4,420   (78)%
Sales Returns and Allowances  (36,700)  (19,800)  85%  (28,100)  (36,700)  (23)%
Net Revenues $1,173,398  $790,809   48% $929,519  $1,173,398   (21)%

 

 

Six Months Ended

June 30,

    Six Months Ended June 30,    
 2022  2021     2023 2022    
Revenue Source Revenue  Revenue  % Change  Revenue Revenue % Change 
Distributors $413,107  $672,873   (39)% $315,090  $413,107   (24)%
Amazon and Walmart Marketplace  80,089   77,759   3%
Amazon  24,918   80,089   (69)%
Online Sales  22,316   40,047   (44)%  10,254   22,316   (54)%
Retail  1,719,015   509,130   238%  1,916,696   1,719,015   11%
Shipping  5,802   10,588   (45)%  1,958   5,802   (66)%
Sales Returns and Allowances  (71,800)  (57,417)  25%  (64,500)  (71,800)  (10)%
Net Revenues $2,168,529  $1,252,980   73% $2,204,416  $2,168,529   2%

 

The following table presents our net revenues by product lines for the period presented:

 

 Three Months Ended
June 30,		     Three Months June 30,    
 2022  2021     2023 2022    
Product Line Revenue  Revenue  % Change  Revenue Revenue  % Change 
Hemp Energy Drinks $50,792  $113,434   (55)%
Energy Drinks $3,700  $50,792   (93)%
CBD Energy Waters  17,249   31,682   (46)%  18,738   17,249   9%
Lemonade Drinks  209,976   329,893   (36)%  113,579   209,976   (46)%
Apparel  47   1,027   (95)%  -   47   (100)%
Retail  927,614   328,848   182%  820,613   927,614   (12)%
Shipping  4,420   5,725   (23)%  989   4,420   (78)%
Sales returns and allowance  (36,700)  (19,800)  85%  (28,100)  (36,700)  (23)%
Net Revenues $1,173,398  $790,809   48% $929,519  $1,173,398   (21)%

  Six Months Ended
June 30,		    
  2022  2021    
Product Line Revenue  Revenue  % Change 
Hemp Energy Drinks $118,574  $201,926   (41)%
CBD Energy Waters  41,588   51,762   (20)%
Lemonade Drinks  354,238   535,733   (34)%
Apparel  112   1,258   (91)%
Retail  1,719,015   509,130   238%
Shipping  5,802   10,588   (45)%
Sales returns and allowance  (71,800)  (57,417)  25%
Net Revenues $2,168,529  $1,252,980   73%

F-8

 

  Six Months June 30,    
  2023  2022    
Product Line Revenue  Revenue  % Change 
Energy Drinks $12,356  $118,574   (90)%
CBD Energy Waters  21,431   41,588   (48)%
Lemonade Drinks  316,475   354,238   (11)%
Apparel  -   112   (100)%
Retail  1,916,696   1,719,015   11%
Shipping  1,958   5,802   (66)%
Sales returns and allowance  (64,500)  (71,800)  (10)%
Net Revenues $2,204,416  $2,168,529   2%

 

Loss per Common ShareAdvertising Costs

 

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common sharesAdvertising costs are excluded from the computation when their effect is antidilutive.expensed as incurred and are included in selling and marketing expense. Advertising costs aggregated $52,472

and $105,956

For the period ended for six months ending June 30, 2023 and 2022, and 2021, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:respectively.

SCHEDULE OF POTENTIAL DILUTIVE SECURITIES

         
  

June 30,

2022

  

June 30,

2021

 
Warrants  178,333,333   70,000,000 
Common stock equivalent of Series B Convertible Preferred Stock  488,000   488,000 
Common stock equivalent of Series C Convertible Preferred Stock  -   140 
Common stock equivalent of Series D Convertible Preferred Stock  500,000   500,000 
Common stock issuable  170,000,000   170,000,000 
Common stock on convertible debentures and accrued interest  161,707,234   80,508,648 
Total  511,028,567   321,496,788 

 

Stock Compensation Expense

 

The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

 

Advertising CostsLoss per Common Share

 

Advertising costsBasic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are expensed as incurred and are included in selling and marketing expense. Advertising costs forexcluded from the computation when their effect is antidilutive.

For the six months endedending June 30, 2023 and 2022, the calculations of basic and 2021, were $diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:

105,956

SCHEDULE OF POTENTIAL DILUTIVE SECURITIES

  

June 30,

2023

  

June 30,

2022

 
Warrants  394,575,211   178,333,333 
Common stock equivalent of Series B Convertible Preferred Stock  488,000   488,000 
Common stock equivalent of Series C Convertible Preferred Stock  1,000   - 
Common stock equivalent of Series D Convertible Preferred Stock  500,000,000   500,000,000 
Common stock issuable  169,998,860   170,000,000 
Restricted common stock  9,600,000   - 
Common stock on convertible debentures and accrued interest  528,932,727   161,028,567 
Total  1,603,595,798   511,028,567 
Anti-dilutive Shares  1,603,595,798   511,028,567 

F-9

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its financial assets and $liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. Accounting Standards Codification Section 820 defines the following levels of subjectivity associated with the inputs:

24,100, respectively.

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

 

Segments

During the 2022 fiscal year, the Company consolidated and restructured its operations. The Company now operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Concentrations

 

The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. Generally, the Company’s policy is to minimize borrowing costs by immediately applying cash receipts to borrowings against its credit facility. From time to time, however, the Company may be exposed to risk for the amounts of funds held in bank accounts in excess of the FDIC limit. To minimize the risk, the Company’s policy is to maintain cash balances with high quality financial institutions.

 

F-9

Gross sales. During the three and six months ended June 30, 2023 and 2022, the Company reported no customers that accounted for more than 10% of gross sales. During the three months ended June 30, 2021, the Company reported one customer represented 30% of the Company’s gross sales. During the six months ended June 30, 2022, the Company reported no customers that accounted for more than 10% of gross sales. During the six months ended June 30, 2021, the Company reported one customer represented 19% of the Company’s gross sales.

 

Accounts receivable. As of June 30, 2022,2023, the Company had one customeraccounts receivable from four customers that accounted forcomprised 21%, 21%, 15% and 10%, respectively, of its gross accounts receivable. As of December 31, 2021,2022, the Company had accounts receivable from two customers that comprised 6027% and 20%, respectively, of its gross accounts receivable.

 

Co-Packers. The raw materials used in the production of the Company’s products are obtained by the Company’s co-packers and consist primarily of materials such as the flavors, caffeine, sugars or sucralose, taurine, vitamins, CBD, and hemp seed protein contained in its beverages, the bottles in which its beverages are packaged, and the labeling on the outside of its beverages. These principal raw materials are subject to price and availability fluctuations. The Company currently relies on a few key co-packers, which in turn rely on a few key suppliers. The Company continually endeavors to have back-up co-packers, which co-packers would in turn depend on their third-party suppliers to supply certain of the flavors and concentrates that are used in the Company’s beverages. The Company is also dependent on these co-packers to negotiate arrangements with their existing suppliers that would enable the Company to obtain access to certain of such concentrates or flavor formulas under certain extraordinary circumstances. Additionally, in a limited number of cases, the Company’s co-packers may have contractual restrictions with their suppliers or the Company’s co-packers may need to obtain regulatory approvals and licenses that may limit the co-packers’ ability to enter into agreements with alternative suppliers. Contractual restrictions in the agreements the Company has with certain distributors may also limit the Company’s ability to enter into agreements with alternative distributors. The Company believes that a satisfactory supply of co-packers will continue to be available at competitive prices, although there can be no assurance in this regard. TheWith respect to Gold Leaf’s operations, the Company continually endeavors to contract with additional beverage vendors to ensure the Company has adequate inventory. The Company believes that a satisfactory supply of vendors will continue to be available at competitive prices, although there can be no assurance in this regard.

 

Purchases from vendors. During the sixthree months ended June 30, 2022,2023, the Company’s largest threetwo vendors accounted for approximately 3226%, 20%, and 1127% of all purchases, respectively. During the six monthsyear ended June 30, 2021,December 31, 2022, the Company’s largest four vendorsone vendor accounted for approximately 33%, 13%, 12%, and 1134% of all purchases, respectively.

 

Accounts payable. As of June 30, 2022, three2023, two vendors accounted for more than 10%10% the total accounts payable. The Company’s largest fourtwo vendors accounted for 1025%, 13% and 2118% of the total accounts payable, respectively. As of December 31, 2021, four2022, two vendors accounted for more than 10%10% the total accounts payable. The Company’s largest fourtwo vendors accounted for 20%, 14%, 1231%, and 1118% of the total accounts payable, respectively.

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. Accounting Standards Codification Section 820 defines the following levels of subjectivity associated with the inputs:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of capital lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

 

F-10

 

 

Segments

The Company operates in 1 segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics, nature of products and services, and procurement, manufacturing, and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.

 

Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

NOTE 3 – INVENTORY

 

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value, and net of reserves is comprised of the following:

 

SCHEDULE OF INVENTORY

        
 

June 30,

2022

 

December 31,

2021

  

June 30,

2023

  

December 31,

2022

 
Raw materials $219,683  $70,592  $158,390  $198,605 
Finished goods, net  970,230   504,219   393,368   660,574 
Total $1,189,913  $574,811  $551,758  $859,179 

 

At June 30, 20222023 and December 31, 2021,2022, inventory presented above is net of a reserve for slow moving and potentially obsolete inventory of $150,00080,000 and $150,000, respectively.

F-11

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

 

Property and equipment is comprised of the following:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

        
 

June 30,

2022

 

December 31,

2021

  

June 30,

2023

  

December 31,

2022

 
Furniture and Fixtures $77,154  $75,070  $78,944  $78,134 
Computers and Software  32,325   29,196   36,667   36,667 
Machinery & Equipment  116,754   108,799   121,158   118,003 
Vehicles  250,093   239,093   310,348   310,348 
Total cost  476,326   452,158   547,117   543,152 
Property, plant and equipment, gross  547,117   543,152 
Accumulated depreciation  (148,371)  (104,121)  (241,039)  (195,088)
Property, plant and equipment, net $327,955  $348,037  $306,078  $348,064 

 

Depreciation expensefor the six months ended June 30, 2023 and 2022, was $45,951 and $44,250 respectively, and is included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Loss Depreciation. For the six months ended June 30, 2022 and 2021, depreciation expense was $44,250 and $20,503, respectively.Loss.

NOTE 5 – ACQUISITION OF S AND S BEVERAGE, INC.

On January 21, 2021, the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. (“S and S”) and its shareholders and acquired all of the capital stock of S and S. In consideration thereof, the Company issued to them an aggregate of 9000000 restricted shares of Kona Gold Beverage, Inc.’s common stock (the “Acquisition Stock”). The Company did not grant them any registration rights in respect of the shares of Acquisition Stock. The Company also agreed to pay an aggregate of $1,050,000 (the “Aggregate Acquisition Payments”), the majority of which is allocated to certain creditors of S and S (including one of the S and S’s legacy shareholders) and approximately $89,249 was allocated and paid to the five S and S legacy shareholders on a pro rata basis. The Company paid approximately $400,000 of the Aggregate Acquisition Payments at the closing of the transaction. The remaining Aggregate Acquisition Payments are scheduled to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade (the product line of S and S that we have now branded as Ooh La Lemin) that we sell until the Aggregate Acquisition Payments have been paid in full. The acquisition obligation balance was $675,317 at December 31, 2021. During the six months ended June 30, 2022, the Company paid $8,586 of the remaining Aggregate Acquisition Payments, leaving an acquisition obligation balance of $666,731 at June 30, 2022, of which $60,000 is expected to be currently due.

Proforma information for the three and six month period ended June 30, 2022 has been omitted as the operations of S and S prior to the acquisition were de minimis. During the three months ended June 30, 2022, revenue of $209,861, loss from operations of $10,258, and $5,675 of net loss was attributable to S and S. During the six months ended June 30, 2022, revenue of $368,879, loss from operations of $95,923, and $89,116 of net loss was attributable to S and S.

 

NOTE 65 – INTANGIBLE ASSETS

 

Intangible asset consisted of the following:

 

SCHEDULE OF INTANGIBLE ASSET

         
  

June 30,

2022

  

December 31,

2021

 
       
Trademarks $85,340  $85,340 
Website development  12,200   12,200 
Accumulated amortization  (26,462)  (21,585)
Total Intangible Assets, net of amortization $71,078  $75,955 

F-12

  

June 30,

2023

  

December 31,

2022

 
Intangible Assets        
Trademarks $85,340  $85,340 
Website development  12,200   12,200 
Accumulated amortization  (36,216)  (31,339)
Total Intangible Assets, net of amortization $61,324  $66,201 

 

During the six months ended June 30, 20222023 and 2021,2022, the Company recorded amortization expense of $4,877 and $0, respectively. The following table summarizes the amortization expense to be recorded in future periods for intangible assets that are subject to amortization:

 

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

    
Year Ending Amortization  Amortization 
2022 (remaining) $4,877 
2023  9,754 
2023 (remaining)  $4,877 
2024  9,754    9,754 
2025  9,754    9,754 
2026  9,754    9,754 
2027   9,754 
Thereafter  27,185    17,431 
Total $71,078   $61,324 

F-11

 

NOTE 76 – NOTES PAYABLE – RELATED PARTIES

 

Notes payable with related parties consists of the following at June 30, 20222023 and December 31, 2021:2022:

 

SCHEDULE OF NOTES PAYABLE RELATED PARTY

         

June 30,

2023

  

December 31,

2022

 
 

June 30,

2022

 

December 31,

2021

      
     
Note payable – related party (a) $1,352,651  $1,352,651 
Note payable – related party (b)  200,000   - 
Note payable – related party (c)  125,500   125,500 
Note payable – related party (e)  50,500   53,500 
Note payable – related party (a) $1,352,651  $1,352,651 
Note payable – related party (b)  350,000   260,000 
Note payable – related party (c)  125,500   125,500 
Note payable – related party (d)  44,500   47,500 
Total notes payable – related parties  1,728,651   1,531,651  $1,872,651  $1,785,651 
Notes payable – related parties, current portion  (1,728,651)  (6,000)
Notes payable – related parties, net of current portion $-  $1,525,651 

 

(a)On April 4, 2019, the Company entered into an unsecured Line of Credit Agreement with Robert Clark. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $1,500,000. Advances under this line of credit bear interest at the rate of3.75 percent per annum. The line of credit matures on April 4, 20232024, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 20222023 and December 31, 2021,2022, outstanding principal was $1,352,651 and $1,352,651, respectively.
  
(b)On May 6, 2022, the Company entered into an unsecured Line of Credit Agreement with Robert Clark. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $300,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on May 6, 20232024, at which time all outstanding principal amounts and accrued interest are due and payable. During the period ended June 30, 2023, Mr. Clark made additional advances of $99,000, and $9,000 of that was repaid by the end of the period. At June 30, 2023 and December 31, 2022, the outstanding principal was $200,000350,000. and $260,000, respectively.
  
(b)(c)On August 29, 2019, the Company entered into an unsecured Line of Credit Agreement with Robert Clark. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $200,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on August 29, 20222023, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 20222023 and December 31, 2021,2022, outstanding principal was $125,500 and $125,500, respectively.
  
(c)(d)On February 19, 2019, the Company issued an unsecured Standard Promissory Note in Favor of Robert Clark, as lender, in the original principal amount of $70,000. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The note bears no interest. Principal payments of $500 per month commenced in March 2019, with final payment due in March 2021. On March 15, 2022, the Company issued an Amendment to the original issued Standard Promissory Note in Favor of Robert Clark for the remaining outstanding principal of $58,000. On April 3, 2023, the Company issued an Amendment to the original issued Standard Promissory Note in Favor of Robert Clark for the remaining outstanding principal of $46,000Principal payment of $500 per month, with final payment due in March 20232024. The outstanding principal balance of this note at December 31, 20212022 was $53,50047,500. During the six months ended June 30, 2022,2023, the Company made principal payments of $3,000, leaving an outstanding principal balance of $50,50044,500 at June 30, 2022.2023.

F-13

 

At December 31, 2021,2022, accrued interest on notes payable to related parties was $95,873153,959. During the six months ended June 30, 2022,2023, the Company added $27,03332,252 of additional accrued interest, leaving an accrued interest balance on the notes payable to related parties of $122,906186,211 at June 30,December 31, 2022. Accrued interest inis included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

F-12

NOTE 87 – NOTES PAYABLE

Notes payable consists of the following at June 30, 20222023 and December 31, 2021:2022:

SCHEDULE OF NOTES PAYABLE

  

June 30,

2022

  

December 31,

2021

 
       
Note payable (a) $30,193  $33,312 
Note payable (b)  39,389   - 
Note payable (c)  250,000   - 
Less debt discount (c)  (99,031)  - 
Total notes payable, net  220,551   33,312 
Notes payable, current portion  (198,332)  (7,974)
Notes payable, net of current portion $22,219  $25,338 

  

June 30,

2023

  

December 31,

2022

 
       
Note payable (a) $23,702  $26,994 
Note payable (b)  41,694   44,550 
Note payable (c)  39,343   40,103 
Note payable (d)  205,576   250,000 
Note payable (e)  418,567   626,388 
Note payable (f)  68,283   - 
Note payable (g)  137,278   - 
Note payable (h)  110,000   - 
Note payable (i)  247,629   - 
Note payable (j)  16,206   - 
Total notes payable  1,308,278   988,035 
Less debt discount  (160,572)  (218,481)
Total notes payable, net  1,147,706   769,554 
Notes payable, current portion  (1,089,692)  (712,499)
Notes payable, net of current portion $58,014  $57,055 

 

(a)On August 21, 2021, the Company financed the purchase of a vehicle for $34,763, after making a down payment of $20,000. The loan term is for 60 months, annual interest rate of 5.44%, with monthly principal and interest payments of $665, and secured by the purchased vehicle. At December 31, 2021,2022, the loan balance was $33,31226,994. During the six months ended June30, 2023, the Company made principal payments of $3,292, leaving a loan balance of $23,702 at June 30, 2023.

(b)On September 30, 2022, the Company financed the purchase of a vehicle for $46,576, after making a down payment. The loan term is for 60 months, annual interest rate of 9.44%, with monthly principal and interest payments of $980, and secured by the purchased vehicle. At December 31, 2022, the loan balance was $44,550. During the six months ended June 30, 2022,2023, the Company made principal payments of $3,1192,856, leaving a loan balance of $30,19341,694 at June 30, 2022, of which $7,974 was recorded as the current portion of loan payable on the accompanying Condensed Consolidated Balance Sheet.2023.

(b)(c)In April 2021, the Company entered into a Line of Credit Agreement with Wells Fargo Bank. The Line of Credit is personally guaranteed by Robert Clark, the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $42,000. Advances under this line of credit bear interest at the rate of 11.50 percent% per annum. The line of credit matures in 2023, at which time all outstanding principal amounts and accrued interest are due and payable. AtAs of June 30, 2023 and December 31, 2022, the outstanding principal was $39,38939,343 and $40,103, respectively, which was recorded as the current portion of loan payable on the accompanying Condensed Consolidated Balance Sheet.

(c)(d)On March 25, 2022, the Company entered into a secured debenture with an otherwise unaffiliated individual in the principal amount of $250,000. that was due on March 23, 2023. On March 23, 2023, the Company entered into a First Amendment to Secured Debenture (the “First Amendment”) to amend a Secured Debenture (the “Debenture”), dated as of March 25, 2022. The secured note payable matures onDebenture is amended and restated in its entirety with the following terms (i) maturity date was extended to March 24, 20232024; (ii) interest accrues on the outstanding principal at a rate equal to 12% per annum; (iii) monthly payments of principal and interest shall be made in the amount of $22,212, and bearsstarting April 24, 2023 until the maturity date, at which date the entirety of the balance of principal plus interest at the rate of 0.97 percent per annum.is due. The secured debenture is secured by nine (9) identified motor vehicles of the Company. At December 31, 2022, the outstanding balance of the secured debentures amounted to $250,000. During the six months ended June 30, 2023, the Company made principal payments of $44,424, leaving a loan balance of $ 205,576 at June 30, 2023.
In connection with the issuance of the original debenture in 2022, the Company issued to the lender 25 million shares of the Company’s common stock at a price of $0.004 per share. The Company determined the fair value of the 25 million shares was $135,000, which was recorded as a debt discount against the secured debenture. As of June 30,At December 31, 2022, the outstanding balance of the secured debentures amounted to $250,000 and the unamortized debt discount was $99,03131,531. During the six months ended June 30, 2023, the Company amortized debt discount of $31,531 to interest expense on the loan, leaving no remaining unamortized debt discount at June 30, 2023.
F-13

(e)

During the year ended December 31, 2022, the Company entered into secured non-interest-bearing advance agreements with unaffiliated third parties for the purchase of future receipts/revenues. Under the agreements, the Company received an aggregate lump sum payment of $561,957, and, in return, the purchaser received a secured right to collect a fix sum of future receipts/revenue of $798,456 to be collected by the Company. During the six months ended June 30, 2023, the Company entered into additional secured non-interest bearing advance agreements for which the Company received an aggregate lump sum payment of $501,000, and, in return, the purchaser received a secured right to collect a fix sum of future receipts/revenue of $597,500 to be collected by the Company. In accordance with the agreements, the Company agreed to sell, assign, and transfer to the purchaser of all the Company’s payments, receipts, settlements, and funds paid to or received by or for the account of the Company from time to time on and after the dates of the agreements in payment or settlement of the Company’s existing and future accounts, payment intangibles, credit, debit, and/or stored value card transactions, contract rights, and other entitlements arising from or relating to the payment of monies from the Company’s customers and/or other payors or obligors. The agreements require aggregate daily to weekly payments ranging from $1,291 to $1,958 The Company’s obligations under the agreements are secured by the assets described above, and guaranteed by Robert Clark, the Company’s Chief Executive Officer. As of December 31, 2022, the outstanding balance to be paid amounted to $626,388. During the six months ended June 30, 2023, the Company entered into additional agreements of $512,500, and made payments of $720,323, leaving an aggregate outstanding amount to be paid of $418,567 at June 30, 2023.

During the year ended December 31, 2022, upon execution of the advance and receipt of funds, the Company recorded the difference of $236,499 between the cash collected and the face amount of the obligation as a “note discount” and will amortize the “note discount” as interest expense over the life of the advance. At December 31, 2022, the unamortized “note discount” was $186,950. During the six months ended June 30, 2023, the recorded an additional unamortized “note discount” of $191,150 related to new advance agreements, and the Company amortized “note discount” of $259,059 to interest expense on the obligation. As of June 30, 2023, the unamortized “note discount” was $150,572.

 (f)On March 9, 2023, the Company entered into a Line of Credit Agreement with American Express National Bank. The Line of Credit is personally guaranteed by Robert Clark, the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $85,000. Advances under this line of credit bear interest at the rate of 19.32% per annum. The line of credit matures on September 9, 2024, at which time all outstanding principal amounts and accrued interest are due and payable. The line of credit requires minimum monthly payments of $5,572. At June 30, 2023, the outstanding principal was $68,283.

(g)On March 7, 2023, the Company entered into a Line of Credit Agreement with Celtic Bank. The Line of Credit is personally guaranteed by Robert Clark, the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $200,000. Advances under this line of credit bear interest at the rate of 35.90 percent per annum. The line of credit matures on March 7, 2024, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 2023, the outstanding principal was $137,278.

(h)On June 30, 2023, the Company entered into a note payable with IQ Financial, Inc. in the principal amount of $110,000, with an original issue discount of $10,000, resulting in net proceeds for $100,000. The note has no stated interest and is due on July 31, 2023. For so long as the note remains unpaid, the Company shall pay within two days of receipt of customer payments on specific customer invoices listed in the note payable.
The original issue discount of $10,000 was recorded as a debt discount against the note payable, leaving a $10,000 of remaining unamortized debt discount at June 30, 2023.

(i)On May 15, 2023, the Company entered into a Revolving Credit Agreement (the “Revolver”) with a vendor. The Revolver allows the Company to purchase goods from its vendor time to time. The unpaid principal balance of the Revolver may not exceed $250,000 through May 31, 2023, $225,000 through July 31, 2023, and $200,000 through $200,000 through December 31, 2023, at any one time. The Revolver has a maturity date of December 31, 2023 and bears no interest rate. At June 30, 2023, the outstanding balance of the Revolver was $247,629.
In connection with the issuance of the Revolver, the Company issued to the vendor 28 million shares of the Company’s common stock at a price of $0.0045 per share. The Company determined the fair value of the 28 million shares was $126,000, which was recorded as financing costs in the current portioncondensed consolidated statement of loan payable onoperations during the accompanying Condensed Consolidated Balance Sheets.six months ended June 30, 2023.

(j)On June 2, 2023, the Company entered into a note payable with RFMD-LLC in the principal amount of $16,206, with an interest rate of 8% per annum, and a maturity date of December 31, 2023. The note was issued in related to the termination of an operating lease (see Note 10). At June 30, 2023, the outstanding principal was $16,206. original issue discount of $10,000, resulting in net proceeds for $100,000. The note has no stated interest and is due on July 31, 2023. For so long as the note remains unpaid, the Company shall pay within two days of receipt of customer payments on specific customer invoices listed in the note payable.

At December 31, 2021, there was 02022 on item (d), accrued interest on the notes payable.payable was $1,874. During the six months ended June 30, 2022,2023, the Company added $6517,995 of additional accrued interest on item (d), leaving an$9,689 of accrued interest balance on the notes payable of $651item (d) at June 30, 2022.2023. Accrued interest inis included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

As of December 31, 2022, the unamortized debt discount was $218,481. During the six months ended June 30, 2023, the Company added $201,150 of debt discount related to the issuance of debentures, and amortized debt discount of $259,059 to interest expense on the loans. As of June 30, 2023, the unamortized debt discount was $160,652.

F-14

 

NOTE 98 – SECURED CONVERTIBLE DEBENTURES

 

Secured debentures that are payable to an otherwise unaffiliated third party consists of the following as of June 30, 20222023 and December 31, 2021:2022:

 SCHEDULE OF SECURED DEBENTURES PAYABLE TO RELATED PARTY

 

June 30,

2022

 

December 31,

2021

  

June 30,

2023

  

December 31,

2022

 
          
YA II PN, Ltd. $900,000  $3,000,000 
Mast Hill Note 1  204,457   595,000 
Mast Hill Note 2  467,912   - 
Mast Hill Note 3  230,000   - 
Mast Hill Note 4  55,707   - 
Mast Hill Note  55,707   - 
Less debt discount  (815,270)  (2,150,067)  (269,114)  (183,940)
Secured debentures, net $84,730  $849,933  $688,962  $411,060 

 

During the year ended December 31, 2021,Mast Hill

On July 28, 2022, the Company issued senior secured debentures to an otherwise unaffiliated third-party investor (the “Selling Stockholder”“Investor”) in the aggregate of $4,500,000595,000. The debentures are secured by all tangiblebear interest at a rate of 10% per annum, mature on July 28, 2023, and intangible assets of the Company and are alsois convertible into shares of our common stock at a conversion price of $0.030.0045 per share or ashare. If the Company issues subsequent equity instruments at an effective price per share amount equivalent to that is lower than the weighted average (amongconversion price of $0.0045 per shares, then the principalconversion price shall be reduced, at the option of the debentures) of 76.7%Holder, to a price equal to the Weighted Average Price (as defined), provided, further, that if the conversion price is equal to or less than $0.003, then the conversion price shall be reduced at the option of the lowest VWAPHolder to a price equal to the lower price. The senior secured debentures is secured by all of the Company’s common stock duringassets and the 15 trading days immediately precedingassets of each of its subsidiaries pursuant to the conversion date, whichever is lower. AsSecurity Agreement. The security interest granted to the ultimate determinationInvestor under the Security Agreement was subordinate to the continuing security interest that remains in effect pursuant to the previous grant of sharesa security interest in connection with a then outstanding debenture to be issued upon conversion of these debentures can exceed the current number of available authorized shares, we determined that the conversion features of these convertible debentures are not considered indexed to our Company’s own capital stockan earlier investor all tangible and characterized the fair value of the conversion features as derivative liability.intangible assets. In connection with the issuances of the debentures, the Company granted to the Selling StockholderInvestor warrants to purchase up to 150100 million shares of the Company’s common stock.stock, which expire on July 28, 2027. The warrants are exercisable at $0.030.0045 per share.Fifty million of the warrants will expire on February 10, 2024 and 100,000,0000 of the warrants will expire on August 20, 2024. As a result of these issuances and grants, we incurred the following (a) derivative liability of $3,982,000 related to the conversion feature of the debentures; (b) relative fair value of the warrants granted of $1,581,000223,000; and (c) and(b) original issue discounts of $195,00092,325 of the debentures for a total of $5,758,000315,325, of which $4,423,000was accountedallocated as debt discount and the remaining $1,335,000 as financing costs.discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2021,2022, the unamortized debt discount was $2,150,067183,940. During the six months ended June 30, 2023, the Company amortized debt discount of $157,662 to interest expense on the loan. As of June 30, 2023, the unamortized debt discount was $26,278.

 

As of December 31, 2022 the balance due under the obligation was $595,000. During the six months ended June 30, 2023, the Company converted $390,543 of principal and accrued interest into 199,500,000 shares of common stock with a fair value of $888,750 resulting in a loss on extinguishment of debt of $513,520. As of June 30, 2023, $204,247 was due under the note.

Mast Hill Debenture 2

On May 5, 2022,March 13, 2023, the Company issued similar debenturesan additional senior secured debenture to the Selling StockholderInvestor in the aggregate amount of $500,000475,000. The debentures beardebenture bears interest at a rate of 8%10% per annum, secured by all of the tangiblematures on March 13, 2024, and intangible assets of the Company and are alsois convertible into shares of the Company’sour common stock at a conversion price of $0.030.0045 per share or 80%share.

F-15

At our option, we have the right to redeem, in full, the outstanding principal and interest under the debenture prior to its maturity date; provided, that, as of the lowest daily volume weighted average price (“VWAP”date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). We must provide seven Trading Days’ (as such term is defined in the debenture) prior notice to the then-holder of the debenture of our intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the debenture prior to such redemption.

Further, commencing on May 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on May 10, 2023 for the cases sold during the 10month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a relevant month. The above-referenced seven trading days immediately preceding thedays’ prior notice and conversion date. As the ultimate determination of shares of common stockprovisions do not apply to be issued upon conversion of these debentures can exceed the current number of available authorized shares, the Company determined that the conversion features of these debentures are not considered indexed to the Company’s own stock and characterized the fair valueany of the conversion features as a derivative liability (see Note 10)mandatory redemption payments.

In connection with the issuances of thesethe debentures, the Company also granted to the selling stockholderInvestor warrants to purchase up to 8,333,33380 million shares of the Company’s common stock.stock, which expire on March 13, 2028. The warrants are exercisable at $0.030.0045 per share and will expire in three years from their grant date.share. As a result of these issuances the Companyand grants, we incurred the following (a) derivative liability of $680,000 related to the conversion feature of the debentures; (b) relative fair value of the warrants granted of $81,000150,000; and (c) and(b) original issue discountdiscounts and fees of $25,00074,000 of the debentures for a total of $786,000224,000, of which $500,000was accountedallocated as debt discount and the remaining $286,000 as financing costs.discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the six months ended June 30, 2022,2023, the Company amortized debt discount of $443,76410,839 to interest expense.expense on the loan. As of June 30, 2023, the unamortized debt discount was $213,161.

As of June 30, 2023, $467,912 was due under the note.  

Mast Hill Debenture 3

 

On April 25, 2023, the Company issued an additional senior secured debenture to the Investor in the aggregate of $230,000. The debenture bears interest at a rate of 10% per annum, matures on April 25, 2024, and is convertible into shares of our common stock at a conversion price of $0.0040 per share.

At our option, we have the right to redeem, in full, the outstanding principal and interest under the debenture prior to its maturity date; provided, that, as of the date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). We must provide seven Trading Days’ (as such term is defined in the debenture) prior notice to the then-holder of the debenture of our intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the debenture prior to such redemption.

Further, commencing on May 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on May 10, 2023 for the cases sold during the month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a relevant month. The above-referenced seven trading days’ prior notice and conversion provisions do not apply to any of the mandatory redemption payments.

In connection with the issuances of the debentures, the Company granted to the Investor warrants to purchase up to 43.6 million shares of the Company’s common stock, which expire on April 25, 2028. The warrants are exercisable at $0.0040 per share. As a result of these issuances and grants, we incurred the following (a) relative fair value of the warrants granted of $56,000; and (b) original issue discounts and fees of $28,000 of the debentures for a total of $84,300 which was allocated as debt discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the six months ended June 30, 2022,2023, the note holder converted principalCompany amortized debt discount of $2,600,000 15,243and accrued to interest expense on the loan. As of $137,128, or a total $2,737,128, into 678,413,399 shares of common stock with a fair value of $5,859,165. The Company followedJune 30, 2023, the general extinguishment model to record the conversions and settlement of the debt. As such, the Company removed the debt and accrued interest totaled $2,737,128, the related unamortized debt discount totaledwas $1,354,280 69,057at the date of conversion. In addition, the Company revalued the derivative related to the bifurcated conversion option to its fair value of $3,639,000 at the date of the conversion andremoved that amount. As a result, the Company recorded a loss on extinguishment of debt of $873,040.

 

As of December 31, 2021, the outstanding balance of the secured debentures amounted to $3,000,000, with an unamortized debt discount of $2,150,067, or a net balance of $849,933. As of June 30, 2022,2023, $230,000 was due under the outstanding balance of the secured debentures amounted to $900,000, with an unamortized debt discount of $815,270, or a net balance of $84,730. During the six months ended June 30, 2022, the Company amortized debt discount of $444,793 to interest expense.note.

 

F-15F-16

 

 

Mast Hill Debenture 4

On June 14, 2023, the Company issued an additional senior secured debenture to the Investor in the aggregate of $55,706. The debenture bears interest at a rate of 10% per annum, matures on June 14, 2024, and is convertible into shares of our common stock at a conversion price of $0.0040 per share.

At our option, we have the right to redeem, in full, the outstanding principal and interest under the debenture prior to its maturity date; provided, that, as of the date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). We must provide seven Trading Days’ (as such term is defined in the debenture) prior notice to the then-holder of the debenture of our intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the debenture prior to such redemption.

Further, commencing on July 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on July 10, 2023 for the cases sold during the month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a relevant month. The above-referenced seven trading days’ prior notice and conversion provisions do not apply to any of the mandatory redemption payments.

In connection with the issuances of the debentures, the Company granted to the Investor warrants to purchase up to approximately 20.9 million shares of the Company’s common stock, which expire on June 14, 2028. The warrants are exercisable at $0.0040 per share. As a result of these issuances and grants, we incurred the following (a) relative fair value of the warrants granted of $19,000; and (b) original issue discounts and fees of $8,457 of the debentures for a total of $27,457 which was allocated as debt discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the six months ended June 30, 2023, the Company amortized debt discount of $1,204 to interest expense on the loan. As of June 30, 2022, 2023, the unamortized debt discount was $161,707,23426,253.

As of June 30, 2023, $55,707 was due under the note.

As of June 30, 2023, no shares of common stock were potentially issuable under the conversion terms of the two partially converted outstanding debentures.

 

At December 31, 2021,2022, accrued interest on the convertible notes payable was $54,11025,756. During the six months ended June 30, 2022,2023, the Company added $77,78540,039 of additional accrued interest, and converted $137,12845,358 of accrued interest, into common stock, leaving an accrued interest balance on the convertible notes payable of $4,76720,437 at June 30, 2022.2023. Accrued interest inis included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

 

NOTE 10 – DERIVATIVE LIABILITY

The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. During fiscal year 2021, the Company issued convertible debentures, which, if converted into common stock, can potentially exceed the current number of available authorized shares of the Company (see Note 11). Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

As of June 30, 2022 and December 31, 2021,2022, the derivative liabilities were valued using the Binomial pricing model and/or Black Scholes pricing model with the following assumptions:

SCHEDULE OF DERIVATIVE LIABILITY

  

At

June 30,

2022

  

Remaining

2022

  

New

Derivative

2022

  

At

December 31,

2021

 
              
Stock Price $0.0086  $.0120  $

.0168

  $0.0052 
Exercise Price $0.0058  $.0062  $.0082  $0.0039 
Expected Life (Years)  0.85   0.34   

1.00

   0.74 
Volatility  171%  171%  132%  95%
Dividend Yield  0%  0%  

0

%  0%
Risk-Free Interest Rate  2.80%  1.72%  

2.16

%  0.39%
                 
Fair value:                
Conversion feature $833,000  $3,639,000  $

680,000

  $2,121,000 

The risk-free interest rateunamortized debt discount was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.$183,940

. During the six months ended June 30, 2022,2023, the Company recognized derivative liabilitiesadded $334,757 related to the issuance of secured debentures, and amortized debt discount of $680,000 250,583upon issuance to interest expense on the loans. As of additional secured convertible debentures (see Note 9),June 30, 2023, the unamortized debt discount was $269,114.

NOTE 9 – ACQUISITION OBLIGATION

On January 21, 2021, the Company entered into an Agreement and Plan of Merger with S and S and its shareholders and acquired all of the derivative liability balance was increased by $1,671,000, representingcapital stock of S and S. In consideration thereof, the change in theCompany issued to them an aggregate of nine million restricted shares of Kona Gold Beverage, Inc.’s common stock (the “Acquisition Stock”) of a fair value of the derivative liability from the respective prior period recorded as a component of other expenses$243,000. In addition, priorThe Company did not grant them any registration rights in respect of the shares of Acquisition Stock. The Company also agreed to pay an aggregate of $1,050,000 (the “Aggregate Acquisition Payments”), the majority of which is allocated to certain creditors of S and S (including one of the S and S’s legacy shareholders) and approximately $89,249 was allocated and paid to the conversionfive S and S legacy shareholders on a pro rata basis. The Company paid approximately $400,000 of certain notes payable, the derivative liability balance relatedAggregate Acquisition Payments at the closing of the transaction. The remaining Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled to be paid in monthly installments, in arrears on the embedded conversion featuretenth calendar day of these notes were revaluedeach month, commencing on March 10, 2021, at a rate equivalent to $3,639,0002.00 per case of Lemin Superior Lemonade (the product line of S and extinguished upon conversion.S that we have now branded as Ooh La Lemin) that we sell until the Aggregate Acquisition Payments have been paid in full. The balance payable under the obligation was $659,550 at December 31, 2022. During the period ended June 30, 2023, the Company paid $3,220 of the remaining derivative liabilities were revalued atAggregate Acquisition Payments, leaving an acquisition obligation balance of $833,000656,330 at June 30, 2022.

2023

F-17

NOTE 1110 – LEASE LIABILITIES

 

The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company leases its office and warehouse locations, and certain warehouse equipment. Leases with an initial term of 12 months or less are not included on the balance sheets.

F-16

Operating Leases

 

The Company leases approximately 4,500square feet of corporate office and warehouse space located at 746 North Drive, Suite A, Melbourne, Florida 32934. The lease is for a five-yearfive-year term and expires on May 31, 2023. The monthly base rent increases annually by 3 percent. In May 2023, the Company extended the lease through May 31, 2024. The initial monthly base rent was approximately $3,9944,628, plus state taxes. The monthly base rent increases annually by 3 percent.

 

The Company leases a 30,000 square foot warehouse and main distribution hub in Greer, South Carolina. The lease is for a 63-month term that commenced in May 2019 and expires on August 1, 2026. Beginning in April 2020, the Company’s monthly rent includes monthly base payments of $10,200, plus applicable monthly CAM fees (“Common Area Maintenance”). The monthly base rent increases annually by 2 percent.

The Company leases a 10,000 square foot distribution hubbuilding in Conway, South Carolina. The lease is for a 62-month termperiod that commenced in October 2021 and expires in November 2026.2026. The Company’s monthly rent is approximately $7,261 plus applicable monthly CAM fees (Common Area Maintenance). The monthly base rent increases annually by 1.5 percent. In October 2021, the Company recognized an operating lease right of use (“ROU”) asset and lease liability of $345,649, related to the Conway, South Carolina operating lease utilizing a present value rate of 10%.

On June 1, 2023, the Company entered into a lease termination agreement with its landlord for its building in Conway, South Carolina. The Company’s deposit of $7,500 was applied to outstanding rent, and the Company recorded the removal of its right-of-use asset of $248,270, and corresponding operating lease liability of $261,125 on June 1, 2023. Furthermore, the Company recorded a loss on termination of the lease of $9,601 during the six months ended June 30, 2023, which is included in selling, general and administrative expenses in the condensed consolidated statements of operations. The Company issued the Landlord a promissory note for $16,206, with interest at a rate of 8% per annum, and a maturity date of December 31, 2023. The lease agreement was terminated effective June 30, 2023.

 

Finance Leases

 

On March 17, 2020, the Company entered into a lease agreement for equipment. The finance lease is for a 62-month term that commenced in April 2020 and expires in March 2025. The agreement includes monthly payments of $676.

 

During the six months ended June 30, 20222023 and 2021,2022, lease costs totaled $152,84154,467 and $93,56949,210, respectively.

 

Our ROU asset balance was $966,955762,464 as of December 31, 2021.2022. During the six months ended June 30, 2022,2023, the Company recorded reductionamortization of ROU assets of $96,21949,786 related to its leases and removed an ROU asset of $248,270, resulting in an ROU asset balance of $870,736464,408 as of June 30, 2022.2023.

 

As of December 31, 2021,2022, lease liabilities totaled $1,052,720838,882, comprised of finance lease liabilities of $25,48117,824 and operating lease liabilities of $1,027,239821,058. During the six months ended June 30, 2022,2023, the Company made payments of $3,7981,939 against its finance lease liability, and $99,47655,608 against its operating lease liability and removed $261,125 against its terminated operating lease liability. As ofAt June 30, 2022,2023, lease liabilities totaled $949,446520,210, comprised of finance lease liabilities of $21,683 and operating lease liabilities of $927,763. At June 30, 2022,which the current portion of lease liabilities was $224,162187,589, leaving a long-term lease liabilities balance of $725,284332,622.

 

F-18

As of June 30, 2022,2023, the weighted average remaining lease terms for operating lease and finance lease are 4.141.75 years and 2.753.96 years, respectively. As of June 30, 2022,2023, the weighted average discount rate for operating lease is 10.00% and 2.09% for finance lease.

 

Future minimum lease payments under the leases are as follows:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS DUE UNDER OPERATING lEASES

Years Ending December 31, Amount 
2022 (remaining) $154,969 
2023  282,347 
2024  262,715 
2025  261,083 
2026 and thereafter  198,217 
Total payments  1,159,331 
Less: Amount representing interest  (209,885)
Present value of net minimum lease payments  949,446 
Less: Current portion  (224,162)
Non-current portion $725,284 

F-17

Years Ending December 31, Amount 
2023 (remaining) $119,970 
2024  197,491 
2025  170,059 
2026  113,790 
2027 and thereafter  - 
Total payments  601,310 
Less: Amount representing interest  (81,100)
Present value of net minimum lease payments  520,210 
Less: Current portion  (187,589)
Non-current portion $332,622 

NOTE 1211 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

The Company’s issued and outstanding preferred stock, par value $0.00001 per share, at June 30, 20222023 and December 31, 20212022 was 988,000989,000 and 988,000, respectively. The Board, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series.

 

Series A Preferred Stock

 

The Company had authorized 4,000,000 shares of Series A Preferred Stock, par value of $0.00001 per share (the “Series A Preferred Stock”), of which no shares were issued or outstanding at June 30, 20222023 and December 31, 2021,2022, respectively. Each share of Series A Preferred Stock, when outstanding, could have been converted into one share of Common Stock.

Series B Preferred Stock

 

The Company had authorized 1,200,000 shares of Series B Preferred Stock, par value of $0.00001 per share (the “Series B Preferred Stock”), of which 488,000 were issued and outstanding at June 30, 20222023 and December 31, 2021,2022, respectively. Each share of Series B Preferred Stock may be converted into one share of Common Stock.

 

Series C Preferred Stock

 

On July 8, 2020,February 13, 2023, the Company reducedincreased the authorized number of Series C Preferred Stock from 3,300,000250 to 2502,000 shares, par value $0.00001 per share (the “Series C Preferred Stock”), by filing a Certificate of Designation of the Preferences, Rights, and Limitations of the Series C Preferred Stock with the Secretary of State of the State of Delaware. TheOn July 8, 2020, the Company also amended the terms of the Series C Preferred Stock. Stock filed a Certificate of Designation of the Preferences, Rights, and Limitations of the Series C Preferred Stock with the Secretary of State of the State of Delaware. The holders of shares of the Series Preferred C Stock are now entitled to 2,000,000 votes for every share of our Series Preferred C Stock held. The holders of the Series Preferred C Stock are not entitled to receive dividends. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment will be made to the holders of any stock ranking junior to the Series C Preferred Stock, the holders of the Series C Preferred Stock will be entitled to be paid out of the Company’s assets an amount equal to $1.00 in the aggregate for all issued and outstanding shares of the Series C Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations, and the like with respect to such shares) (the “Preference Value”). After the payment of the full applicable Preference Value of each share of the Series C Preferred Stock, our remaining assets legally available for distribution, if any, will be distributed ratably to the holders of the Common Stock. The Series C Preferred Stock has conversion rights, whereby each share of the Series C Preferred Stock automatically converts into one share of Common Stock on the one-year anniversary of the issuance date.

 

The Company has authorized

250At June 30, 2023, 1,000 shares of Series C Preferred Stock of which 140 shares were issued and outstanding, and at December 31, 2020. In July 20212022, each share of the Series C Preferred Stock automatically converted into one share of Common Stock on the one-year anniversary of the issuance date. At June 30, 2022 and December 31, 2021, no shares of Series C Preferred Stock were issued and outstanding.

F-19

 

Series D Preferred Stock

 

The Company had authorized 500,000 shares of Series D Preferred Stock, par value of $0.00001 per share (the “Series D Preferred Stock”), of which 500,000 shares were issued and outstanding at June 30, 20222023 and December 31, 2021,2022, respectively. Each share of the Series D Preferred Stock may be converted into 1,000 shares of Common Stock.

 

Common Stock

 

On February 13, 2023, the Company increased the authorized number of shares of Common Stock from 2,500,000,000 to 10,500,000,000 shares, par value $0.00001 per share (the “Common Stock”), by filing a Certificate of Amendment to the amended and restated Certificate of Incorporation with the Secretary of State of the State of Delaware. The Company has authorized 2,500,000,00010,500,000,000 shares of the Common Stock, respectively, of which 1,709,122,9452,294,940,557 shares were issued and outstanding at June 30, 2022,2023, and 1,004,709,5462,000,276,378 shares were issued and outstanding at December 31, 2021.2022, respectively.

 

F-18

Equity Transactions

 

On April 1, 2022,During the six months ended June 30, 2023, the Company grantedissued an aggregate of 1,000,00028,000,000 shares of Common Stock to Peter Troy pursuant to that certain Employment Agreement dated October 1, 2021, by and between Mr. Troy and the Company. At the datefor payment of grant, the fair market value of the shares was $0.0085 per share based on the closing price of the Common Stock, for a total valuefinancing costs of $8,500126,000.

 

During the six months ended June 30, 2022,2023, the Company issued an aggregate of 678,413,399199,500,000 shares of Common Stock with a fair value of $5,859,165897,750 upon the conversion of $2,600,000390,543 of principal, and $137,12847,357 of accrued interest on its secured convertible debentures, at an average price of $0.00400.0022 resulting in a loss on extinguishment of debt of $549,850 (see Note 9)8).

 

During the six months ended June 30, 2022, and in connection with the issuance of the debenture, the Company issued to the lender 25,000,000 shares of the Company’s common stock at a price of $0.0040 per share (see Note 8). The fair value of the 25,000,000 shares issued was $135,000 and recorded as a debt discount in the accompanying condensed consolidated balance sheet.

During the six months ended June 30, 2021,2023, the Company issued an aggregate of 55,464,59667,164,179 shares of Common Stock on the cashless exercise of warrants.

2023 Equity Purchase Agreement

Pursuant to an Equity Purchase Agreement (the “Purchase Agreement”) dated as of March 30, 2023 (the “EPA”), the Company (i) agreed to sell to the same entity with whom we had entered into the Securities Purchase Agreement dated as of March 13, 2023 up to $5,000,000.00 (the “Maximum Commitment Amount”) of shares of our Common Stock (the “Put Shares”) and (ii) granted to that Investor a fair valueCommon Stock Purchase Warrant (the “Warrant”) that is exercisable for the purchase of $up to an aggregate of 1,122,98456,000,000 uponshares (the “Warrant Shares”) of our Common Stock.

Upon the conversionterms and conditions set forth in the Purchase Agreement, the Company has the right, but not the obligation, to direct the Investor, by delivery to the Investor of $1,100,000a Put Notice from time to time, to purchase shares of principal,our Common Stock (i) in a minimum amount not less than $25,000.00 and $22,882(ii) in a maximum amount up to the lesser of accrued interest on its secured convertible debentures, at an average price(a) $500,000.00 or (b) 150% of $0.0204the Average Daily Trading Value of our Common Stock (as defined in the Purchase Agreement). At any time and from time to time through and including March 30, 2025 (the “Commitment Period”), except as provided in the Purchase Agreement, the Company may deliver a Put Notice to the Investor.

 

F-20

During

The Commitment Period commences on the six months ended JuneExecution Date, and ends on the earlier of (i) the date on which the Investor shall have purchased Put Shares pursuant to the Purchase Agreement equal to the Maximum Commitment Amount, (ii) March 30, 2021,2025, (iii) written notice of termination by the Company issued to the Investor (which shall not occur during any Valuation Period or at any time that the Investor holds any of the Put Shares), (iv) the Registration Statement for the Put Shares is no longer effective after its initial effective date, or (v) the date that, pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors.

9,000,000

We also granted the Warrant to purchase up to an aggregate of the 56,000,000 Warrant Shares. The Warrant has a five-year term and is immediately exercisable at an exercise price of $0.0045 per share, subject to adjustment and is exercisable by the then-holder on a “cashless” basis. The Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of its Common Stock withor common stock equivalents at a price lower than the then-current exercise price of the Warrant. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will result in an equitable adjustment of the exercise price of the Warrant and, in certain circumstances, the number of Warrant Shares. The Warrant is subject to an “exercise blocker,” such that the Investor cannot exercise any portion of the Warrant that would result in the Investor and its affiliates holding more than 4.99% of the then-issued and outstanding shares of Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common Stock issuable upon exercise of the Warrant or Put Notice that had not then been exercised, respectively). The fair value of the warrants was determined to be $270,900163,000 forand was recorded as a finance cost in the acquisitionstatement of S and S.operations.

NOTE 12 – SHARE BASED COMPENSATION

 

Common Stock Issuable

 

On August 12, 2015, the Company entered into an Employment Agreement with Robert Clark (the “Clark Employment Agreement”). On December 1, 2016, the Company entered into an Amendment to Employment Agreement (the “Clark Amendment”; and, together with the Clark Employment Agreement, the “Amended Clark Employment Agreement”). Pursuant to the terms of the Amendment Clark Employment Agreement, the Company agreed to issue, among other securities, 200,000,000 shares of the Common Stock. Immediately, Mr. Clark decided to defer receipt of 80,000,000 of such shares; thus leaving 120,000,000 shares of the Common Stock to be issued to him.

 

The 120,000,000 shares of the Common Stock were issued to Mr. Clark, as follows: (i) on October 28, 2015, the Company issued 30,000,000 of such shares; (ii) on March 2, 2016, the Company issued 40,000,000 of such, and (iii) on Mary 16, 2016, the Company issued 50,000,000 of such shares. On April 19, 2018, (i) 40,000,000 shares were cancelled and returned to the Company, and on July 31, 2019, (ii) an additional 50,000,000 shares were cancelled and returned to the Company. Accordingly, as of December 31, 2019, the Company owed to Mr. Clark an aggregate of 170,000,000169,999,860 shares to be reissued to him upon his request pursuant to the terms of the oral agreement with him which were valued at $1,386,497 based on their fair value at the date of grant. The amounts are reflected as common sharesstock issuable balance atas of June 30, 20222023 and December 31, 2021 were $1,386,497.2022.

 

Issuance of Class C Preferred Stock to a related party

On February 16, 2023, we issued 1,000 shares of our Series C Preferred Stock to Robert Clark, CEO and major shareholder. The Company determined the fair value of the shares was $185,000 using a monte carlo valuation method. We issued these shares of common stock pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act as not involving a public offering.

F-21

Summary of Warrants

A summary of warrants for the six months ended June 30, 2022,2023 is as follows:

SCHEDULE OF SUMMARY OF WARRANTS

    Weighted     Weighted 
 Number Average  Number Average 
 of Exercise  of Exercise 
 Warrants  Price  Warrants Price 
Balance outstanding, December 31, 2021  170,000,000  $0.03 
Balance outstanding, December 31, 2022  278,333,333   0.0223 
Warrants granted  8,333,333   0.03   203,406,057   0.0042 
Warrants exercised  -   -   (87,164,179)  0.0149 
Warrants expired or forfeited  -   -   -   - 
Balance outstanding, June 30, 2022  178,333,333  $0.03 
Balance exercisable, June 30, 2022  178,333,333  $0.03 
Balance outstanding, June 30, 2023  394,575,211  $0.0146 
Balance exercisable, June 30, 2023  394,575,211  $0.0146 

 

F-19

Information relating to outstanding warrants at June 30, 2022,2023, summarized by exercise price, is as follows:

SCHEDULE OF OUTSTANDING WARRANTS

   Outstanding  Exercisable 
Exercise Price Per Share  Shares  

Life

(Years)

  

Weighted

Average

Exercise Price

  Shares  

Weighted

Average

Exercise Price

 
$0.0030 - 0.0048   236,241,878   4.68  $0.0043   236,241,878  $0.0043 
$0.03   158,333,333   1.01  $0.03   158,333,333  $0.03 
     394,575,211   3.21  $0.0146   394,575,211  $0.0146 

   Outstanding  Exercisable 
Exercise Price Per Share  Shares  

Life

(Years)

  

Weighted

Average

Exercise Price

  Shares  

Weighted

Average

Exercise Price

 
$0.03   158,333,333   2.01  $0.03   158,333,333  $0.03 
$0.05   20,000,000   0.87  $0.05   20,000,000  $0.02 
     178,333,333   1.89  $0.03   178,333,333  $0.03 

Based on the fair market value of $0.00860.0022 per share on June 30, 2022,2023, there was no intrinsic value attributed to both the outstanding and exercisable warrants at June 30, 2022.2023.

In connection with the issuance of senior convertible secured debentures on May 2, 2022March 13, 2023 (see Note 9)8), the Company granted warrants with a relative fair value of $103,000285,000 to purchase up to an aggregate of 8,333,33380,000,000 shares of the Common Stock. Each warrant has a three-yearfive-year term from issuance and is immediately exercisable at an exercise price of $0.030.0045 per share, subject to adjustment. The relative fair value of these optionswarrants at grant date was approximately $103,000285,000, which was determined using a Black-Scholes-Merton option pricing model with the following assumptions: fair value of our stock price of $0.01800.0044 per share, the expected term of three years, volatility of 132257%, dividend rate of 0%, and risk-free interest rate of 2.163.88%.

In connection with the issuance of 2023 Equity Purchase Agreement on March 30, 2023 (see Note 11), the Company granted warrants to purchase up to an aggregate of 56,000,000 shares of the Common Stock. Each warrant has a five-year term from issuance and is immediately exercisable at an exercise price of $0.0045 per share, subject to adjustment. The fair value of these warrants at grant date was $165,000, which was determined using a Black-Scholes-Merton option pricing model with the following assumptions: fair value of our stock price of $0.0044 per share, the expected term of three years, volatility of 257%, dividend rate of 0%, and risk-free interest rate of 3.88%.

In connection with the issuance of senior convertible secured debentures on April 25, 2023 (see Note 8), the Company granted warrants with a relative fair value of $89,000 to purchase up to an aggregate of 43,600,000 shares of the Common Stock. Each warrant has a five-year term from issuance and is immediately exercisable at an exercise price of $0.0040 per share, subject to adjustment. The relative fair value of these warrants at grant date was $89,000, which was determined using a Black-Scholes-Merton option pricing model with the following assumptions: fair value of our stock price of $0.0028 per share, the expected term of three years, volatility of 233%, dividend rate of 0%, and risk-free interest rate of 3.62%.

In connection with the issuance of senior convertible secured debentures on June 14, 2023 (see Note 8), the Company granted warrants with a relative fair value of $37,000 to purchase up to an aggregate of 20,889,945 shares of the Common Stock. Each warrant has a five-year term from issuance and is immediately exercisable at an exercise price of $0.0030 per share, subject to adjustment. The relative fair value of these warrants at grant date was $37,000, which was determined using a Black-Scholes-Merton option pricing model with the following assumptions: fair value of our stock price of $0.0024 per share, the expected term of three years, volatility of 232%, dividend rate of 0%, and risk-free interest rate of 4.37%.

In connection with a broker that is assisting the Company in its financing transactions, the Company granted warrants to purchase up to an aggregate of 2,916,112 shares of the Common Stock. Each warrant has a five-year term from issuance and is immediately exercisable at an weighted average exercise price of $0.0043 per share, subject to adjustment. The fair value of these warrants at grant date was $5,269, which was determined using a Black-Scholes-Merton option pricing model with the following assumptions: fair value of our stock price of $0.0026 per share, the expected term of three years, volatility of 225%, dividend rate of 0%, and weighted average risk-free interest rate of 3.28%.

NOTE 13 – SUBSEQUENT EVENTS

Subsequent to June 30, 2022,Cashless Conversion of Secured Convertible Debentures

On July 10, 2023, the Company issued an aggregate of 72,033,92140,000,000 shares of Common Stock to Mast Hill upon the conversion of $300,00085,151 of principal, and $2,5422,849 of accrued interest on its secured convertible debentures, at an averageexercise price of $0.00420.0021 (see Note 9). We issued these shares of common stock pursuant to the exception from registration provided by Section 3(a)(9) of the Securities Act, we did not receive any funds resulting from the conversions as we had received funds from Mast Hill Fund from the secured debentures that we sold in July 2022.

F-22

 

August 2023 Security Purchase Agreement

Pursuant to a Securities Purchase Agreement dated July 28, 2022as of August 8, 2023 (the “SPA”), the Company, completed a private placement of a Senior Secured Promissory Note (the “Senior Note”) with an initial principal amount of $595,00063,000 and the grant of a common stock purchase Warrant (the “Warrant”) that is exercisable for the purchase of up to an aggregate of 100,000,00028,600,000 million shares (the “Warrant Shares”) of itsour Common Stock with an otherwise unrelateda third-party investor (the “Investor”). In addition, to secure the Company’sour obligations to the Investor under the Senior Note, the Companywe also entered into a Security Agreement (the “Security Agreement”) with and in favor of the Investor. The Company’sOur subsidiaries are also parties to the Security Agreement.

The transactions contemplated by the SPA were consummated on July 29, 2022August 8, 2023 (the “Issue Date”). Upon the funding, the Companywe sold and issued the Senior Note and granted the Warrant. Pursuant to the SPA, the purchase price for the Senior Note was $595,00063,000, less $92,3256,220 in fees, which consisted of an 812%% “original issue discount” of $47,5001,890, due diligence and structuring fees of $38,325, and $6,5002,500 for the Investor’s legal fees.

The Senior Note is due 12 months from its issuance date and is secured by all of the Company’sour assets and the assets of each of itsour subsidiaries pursuant to the Security Agreement. The security interest granted to the Investor under the Security Agreement is subordinate to the continuing security interest that remains in effect pursuant to the previous grant of a security interest in connection with a still-outstanding debenture to an earlier investor. Initially, the Senior Note is convertible into shares of the Company’sour Common Stock (the “Conversion Shares”) at a fixed conversion price of $0.00450.003 per share, subject to adjustment due to merger, consolidation, exchange of shares, recapitalization, reorganization, or similar event as set forth in the Senior Note (the “Conversion Price”). The Senior Note contains an adjustment provision that, subject to certain exceptions, reduces the conversion price if the Company issueswe issue shares of itsour Common Stock or common stock equivalents at a price lower than the then-current Conversion Price of the Senior Note. Upon any stock splits, reverse stock splits, distributions, stock dividends, or other similar event, the Investor will be entitled to participate in such an event on an “as converted” basis. The Senior Note is subject to a “conversion blocker” such that the Investor cannot convert any portion of the Senior Note that would result in the Investor and its affiliates holding more than 4.994.99%% of the then-issued and outstanding shares of the Company’sour Common Stock following such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable upon conversion of the Senior Note or exercise of the Warrant that had not then been converted or exercised, respectively). The Investor does not have the right to convert the Senior Note until six months after the Issue Date. The Senior Note accrues interest at an annual rate equal to 1012%% and is due and payable on its maturity date (or sooner if the Investor converts the Senior Note or otherwise accelerates the maturity date, as provided for in the Senior Note). Interest is payable in cash on the maturity date or, in shares of the Common Stock at the then-current Conversion Price if the Investor converts the Senior Note or otherwise accelerates the maturity date, as provided for in the Senior Note.

F-19

At our option, the Company haswe have the right to redeem, in full, the outstanding principal and interest under the Senior Note prior to its maturity date; provided, that, as of the date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. The CompanyWe must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). The CompanyWe must provide seven Trading Days’ (as such term is defined in the Senior Nate)Note) prior notice to the then-holder of the Senior Note of itsour intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the Senior Note prior to such redemption.

Further, commencing on May 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on May 10, 2023 for the cases sold during the month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a relevant month. However, if we have made a per-case redemption payment to the holder pursuant to the terms of the “Mast Hill Debenture 2”, then, for such month, the mandatory payment under this Senior Note is waived. The Companyabove-referenced seven trading days’ prior notice and conversion provisions do not apply to any of the mandatory redemption payments.

We also granted the Warrant to purchase up to an aggregate of the 100,000,00028,600,000 Warrant Shares. The Warrant has a five-year term and is immediately exercisable at an exercise price of $0.00450.003 per share, subject to adjustment and is exercisable by the then-holder on a “cashless” basis.

The Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if the Company issueswe issue shares of itsour Common Stock or common stock equivalents at a price lower than the then-current exercise price of the Warrant. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will result in an equitable adjustment of the exercise price of the Warrant and, also, in certain circumstances, the number of Warrant Shares. The Warrant is subject to an “exercise blocker,” such that the Investor cannot exercise any portion of the Warrant that would result in the Investor and its affiliates holding more than 4.994.99%% of the then-issued and outstanding shares of the Company’sour Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common Stock issuable upon exercise of the Warrant or conversion of the Senior Note that had not then been exercised or converted, respectively).

F-20F-23

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition for the three and six months ended June 30, 20222023 and 20212022 should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere in this Quarterly Report. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” and “Description of Business” sections in this Annual Report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Annual Report and other filings with the SEC, reports to our stockholders, and news releases. All statements that express expectations, estimates, forecasts, or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.

We undertake no obligation to update or revise any of the forward-looking statements after the date of this Annual Reports to confirm forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including, but not limited to, uncertainties associated with the following:

 ●Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
   
 ●Our failure to earn revenues or profits;
   
 ●Volatility or decline of our stock price;
   
 ●Potential fluctuation in our financial results;
   
 ●Rapid and significant changes in markets;
   
 ●Litigation with or legal claims and allegations by outside parties;
   
 ●Impacts from the COVID-19 pandemic; and
   
 ●Insufficient revenues to cover operating costs.

The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.

1

Results of Operations

Overview

Our business has grown rapidly since inception in 2015, and we anticipate that our business will continue to grow significantly. In the threesix months ended June 30, 2022,2023, the Company saw ana slight increase in growth compared to the same period of the prior year period, as distribution by our current distributors and new distributors, who were, and whose clients were, affected by COVID-19 had resumed and saw fewer COVID-19 pandemic-related distribution impacts.period. The Company acquired S and S Beverage, Inc. (“S and S”), in early 2021, which increasedcontinues to increase our product variety, resulting in the commencement of new distribution contracts.contracts, and expand our footprint as a national brand.

We derive our revenue from sales of our products to online consumers, to resellers, and to distributors, Product sales to resellers include sales to convenience stores, grocery stores, and smoke and gift shops that complement our current product offering. Product sales to distributors include fourour Ooh La Lemin lemonade, our energy drinks, and our HighDrate CBD-infused energy waters, and our apparel, such as t-shirts and hats. In early 2021, we broadened our product line to include Ooh La Lemin lemonade.waters. We also distribute our products and other companies’ products at retail. In late 2021, we expanded our distribution operations with the addition of a second distribution center.

We have experienced and expect to continue to experience substantial growth in our operations as we seek to expand through additional products and acquisitions that complement our current product offerings. We expect that revenue will continue to increase in fiscal year 20222023 compared to fiscal year 2021,2022, as distribution by our current distributors, who were, and whose clients were, affected by COVID-19 has resumed and we expect to see fewer COVID-19 pandemic-related distribution impacts for fiscal year 2022. Based on those expectations, we now anticipatethe Company anticipates signing more favorable agreements with larger, reputable tier 1 and mid-size distributors, big box stores, and grocery chains. The following is a more detailed discussion of our financial condition and results of operations for the period presented.

Impact of Inflation

Recent inflationary trends have led to a moderate increase in some of the costs to produce and ship our products. To date, we have not passed the increases in those costs to our consumers. Continued prolonged periods of inflationary pressure on some or all of those costs could have a material adverse effect on our profit margins from sales of those products or could require us to increase prices for those products, which could reduce consumer demand for those products.

Three Months ended June 30, 20222023 compared to Three Months ended June 30, 20212022

Overview

As reflected in the accompanying financial statements, during the three months ended June 30, 2022,2023, we incurred a net loss of approximately $1,388,525,$1.5 million, compared to a net loss of approximately $373,214$1.4 million for the three months ended June 30, 2021.2022. As of June 30, 2023, we had a stockholders’ deficit of approximately $5.2 million.

The following is a more detailed discussion of our financial condition and results of operations for the period presented, along with prior periods.

21

Revenue

The following table presents our net revenues, by revenue source, and the period-over-period percentage change, for the period presented:

  

Three Months Ended
June 30,

    
  2022  2021    
Revenue Source Revenue  Revenue  % Change 
Distributors $219,790  $414,937   (47)%
Amazon and Walmart Marketplace  44,565   39,256   14%
Online Sales  13,709   21,843   (37)%
Retail  927,614   328,848   182%
Shipping  4,420   5,725   (23)%
Sales Returns and Allowances  (36,700)  (19,800)  85%
Net Revenues $1,173,398  $790,809   48%

  Three Months Ended
June 30,		    
  2023  2022    
Revenue Source Revenue  Revenue  % Change 
Distributors $119,143  $219,790   (46)%
Amazon  11,855   44,565   (73)%
Online Sales  5,019   13,709   (63)%
Retail  820,613   927,614   (12)%
Shipping  989   4,420   (78)%
Sales Returns and Allowances  (28,100)  (36,700)  (23)%
Net Revenues $929,519  $1,173,398   (21)%

The following table presents our net revenues by product lines for the periodsperiod presented:

 

Three Months Ended

June 30,

    Three Months June 30,    
 2022  2021     2023 2022    
Product Line Revenue  Revenue  % Change  Revenue Revenue  % Change 
Hemp Energy Drinks $50,792  $113,434   (55)%
Energy Drinks $3,700  $50,792   (93)%
CBD Energy Waters  17,249   31,682   (46)%  18,738   17,249   9%
Lemonade Drinks  209,976   329,893   (36)%  113,579   209,976   (46)%
Apparel  47   1,027   (95)%  -   47   (100)%
Retail  927,614   328,848   182%  820,613   927,614   (12)%
Shipping  4,420   5,725   (23)%  989   4,420   (78)%
Sales returns and allowance  (36,700)  (19,800)  85%  (28,100)  (36,700)  (23)%
Net Revenues $1,173,398  $790,809   48% $929,519  $1,173,398   (21)%

During the three months ended June 30, 2022,2023, we reported net revenues of approximately $1,173,398,$929,519, which is an increasea decrease of approximately $382,589,$243,879, or approximately 48%21%, compared to net revenues of approximately $790,809$1.2 million for the three months ended June 30, 2021. An increase2022. A decrease of approximately $598,881$107,001 of our revenue is attributable to increaseddecreased retail revenue, while our product salesremaining net revenue decreased in net revenue by approximately $216,290. We attribute the significant increase in retail revenue to attaining a larger percentage of the territory in which the Company distributes, including the addition of a third distribution hub in late fiscal 2021 and the hiring of additional employees to service this territory. $136,878. We attribute the decrease in product salesretail revenue to a loss of a vendor that we purchase certain products from and the subsequent loss in distribution to customers that we sold those products to. We attribute the decrease in remaining net revenue to delays in production of a newthe Company’s product line and existing product lines, as well as to a change-over in our customer mix from the prior period due to a non-repetitive, regional, one-off customer relationship in the prior period and a different regional customer imposing slotting fees in the current period (which fees we declined to pay). We anticipate that the rollout of our drink products with a national retailer will commence late in the third quarter. Additionally, the Company experienced delays in the rebranding of our hemp product line and the subsequent production.line. We expect that our productremaining net revenue will increase in the remaining fiscal year 20222023 compared to fiscal year 2021, and we do not anticipate further delays.2022. Additionally, the Company hired additional sales personnel to lead sales efforts as the Company expands into new territories and the Company anticipates signing more favorable agreements with larger, reputable tier 1 and mid-size distributors, big box stores, and grocery chains. In addition, we anticipate that our retail revenue will continue to increase as we broaden our customer base with increased distribution to additional grocery and convenience chains.

Cost of Revenues

Cost of revenues consists primarily of expenses associated with products sold to distributors and resellers, including product and shipping costs. Costs also include credit card fees, fees incurred for sales that occur on Amazon.com, and other transaction fees related to the processing of consumer transactions. Typically, we expect that the cost of revenues will increase as a direct correlation to increases in sales. Thus, our cost of revenues increases on an absolute basis versus on a percentage of sales basis. At the same time, when sales increase, thereby increasing our orders with our co-packers, our cost of products decreases because of the volume discounts we receive from our co-packers.

2

During the three months ended June 30, 2022,2023, we reported cost of revenues of approximately $885,517,$742,689, which is an increasea decrease of approximately $198,837,$142,830, or approximately 29%16%, compared to approximately $686,706$885,517 for the three months ended June 30, 2021.2022. This increasedecrease is attributed to an increasethe decrease in sales in both our products and retail distribution in 2022,2023, compared to the prior year period. The cost of revenues increasedecrease was less than the increasedecrease in revenues. This is primarily attributed to increaseddecreased costs in the prior period in obtaining our ingredients for our products, for production of our products, and for shipping our products. We expect that we will continue to see an increasedcomparable cost of revenues to the revenues in the remaining fiscal year 2022, primarily due to an anticipated increase in revenues.2023. In addition, as the cost of shipping our products continues to remain elevated, we also anticipate increased costs for obtaining our ingredients for our products, increased costs for production of our products, and increased costs of shipping our products. We continue to seek alternative methods to reduce costs for production and the cost of shipping our products in fiscal year 2022.2023.

3

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses (“SG&A”) expenses consist primarily of professional fees, salaries and wages, advertising, rent, travel expenses, sponsorships, and general office and administrative expenses related to maintaining our facilities. Selling, general and administrative expenses increased in the three months ended June 30, 2022,2023, to approximately $1,031,515$927,719 from approximately $644,052, an increase$1,031,515, a decrease of approximately $387,463$103,796 over the same period last year. The increasedecrease was driven by increaseddecreased operating expenses associated with hiring additional sales employees,lower advertising and marketing, travel expenses,costs, legal and accounting fees, rentexpense related to an additional distribution warehouse,corporate activity, and rent, vehicle, and shipping expenses associated with closing one of our distribution facilities and partially offset by lower professional fees.salaries and wages. We expect that, as we expand our business operations, SG&A expenses will continue to increase.

We expect that as we expand our business operations and continue to incur additional corporate-related expenses associated with our status as a fully registered issuer with the SEC under the Securities Exchange Act of 1934, SG&A expenses will continue to increase.

Other Income and Expenses

Other expense for the three months ended June 30, 20222023 was approximately $644,891,$790,680, as compared to other incomeexpense of approximately $166,735$644,891 for the three months ended June 30, 2021.2022. The change was attributable to the increasedecrease in interest expense of approximately $91,503$152,912 related to increaseddecreased debt levels and debt amortization, the decrease in the change in the fair value of derivative liabilities of approximately $19,497,$122,000, a decrease in the loss on debt extinguishment of approximately $326,230,$34,116 and was offset with the recording of financing costs of $286,000,approximately $160,000 in the current period, which did not occur in the prior year period, all of which changes are non-cash expenses.period.

Net Loss

We incurred a net loss of approximately $1,388,525$1.5 million for the three months ended June 30, 2022,2023, an increase of approximately $1,015,311$143,041 compared to the prior year period in which we incurred a net loss of approximately $373,214. The three month$1.4 million. This net loss is primarily due to increased gross profit offset by increased SG&A expenses and thea slight increase in other expenses and offset by a slight decrease in SG&A expenses, as discussed above.

Six Months ended June 30, 20222023 compared to SixThree Months ended June 30, 20212022

Overview

As reflected in the accompanying financial statements, during the six months ended June 30, 2022,2023, we incurred a net loss of approximately $4,975,087$3.1 million and used cash in operations of approximately $1,619,355,$585,260, compared to a net loss of approximately $2,192,939$4.9 million and useduse of cash in operations of approximately $875,555$1.6 million for the six months ended June 30, 2021.2022. As of June 30, 2022,2023, we had a stockholders’ deficit of approximately $2,991,280.$5.2 million.

The following is a more detailed discussion of our financial condition and results of operations for the period presented, along with prior periods.

43

Revenue

The following table presents our net revenues, by revenue source, and the period-over-period percentage change, for the period presented:

 Six Months Ended June 30,     Six Months Ended June 30,    
 2022  2021     2023 2022    
Revenue Source Revenue  Revenue  % Change  Revenue Revenue % Change 
Distributors $413,107  $672,873   (39)% $315,090  $413,107   (24)%
Amazon and Walmart Marketplace  80,089   77,759   3%
Amazon  24,918   80,089   (69)%
Online Sales  22,316   40,047   (44)%  10,254   22,316   (54)%
Retail  1,719,015   509,130   238%  1,916,696   1,719,015   11%
Shipping  5,802   10,588   (45)%  1,958   5,802   (66)%
Sales Returns and Allowances  (71,800)  (57,417)  25%  (64,500)  (71,800)  (10)%
Net Revenues $2,168,529  $1,252,980   73% $2,204,416  $2,168,529   2%

The following table presents our net revenues by product lines for the periodsperiod presented:

 Six Months Ended June 30,     Six Months June 30,    
 2022  2021     2023 2022    
Product Line Revenue  Revenue  % Change  Revenue Revenue  % Change 
Hemp Energy Drinks $118,574  $201,926   (41)%
Energy Drinks $12,356  $118,574   (90)%
CBD Energy Waters  41,588   51,762   (20)%  21,431   41,588   (48)%
Lemonade Drinks  354,238   535,733   (34)%  316,475   354,238   (11)%
Apparel  112   1,258   (91)%  -   112   (100)%
Retail  1,719,015   509,139   238%  1,916,696   1,719,015   11%
Shipping  5,802   10,588   (25)%  1,958   5,802   (66)%
Sales returns and allowance  (71,800)  (57,417)  25%  (64,500)  (71,800)  (10)%
Net Revenues $2,168,529  $1,252,980   73% $2,204,416  $2,168,529   2%

During the six months ended June 30, 2022,2023, we reported net revenues of approximately $2,168,529,$2.204 million, which is an increase of approximately $915,549,$35,887, or approximately 73%2%, compared to net revenues of approximately $1,252,980$2.169 million for the sixthree months ended June 30, 2021.2022. An increase of approximately $1,209,999$197,681 of our revenue is attributable to increased retail revenue, while our product salesremaining net revenue decreased in net revenue by approximately $294,450.$161,794. We attribute the significant increase in retail revenue to obtaining larger retail chains, and attaining a larger percentage of the territory in which the Company distributes, including the addition of a third distribution hub in late fiscal 2021 and the hiring of additional employees to service this territory.distributes. We attribute the decrease in product salesremaining net revenue to certain delays in production of a newthe Company’s product line and existing product lines, as well as to a change-over in our customer mix from the prior period due to a non-repetitive, regional, one-off customer relationship in the prior period and a different regional customer imposing slotting fees in the current period (which fees we declined to pay). We anticipate that the rollout of our drink products with a national retailer will commence late in the third quarter. Additionally, the Company experienced delays in the rebranding of our hemp product line and the subsequent production.line. We expect that our productremaining net revenue will increase in the remaining fiscal year 20222023 compared to fiscal year 2021, and we do not anticipate further delays.2022. Additionally, the Company hired additional sales personnel to lead sales efforts as the Company expands into new territories and the Company anticipates signing more favorable agreements with larger, reputable tier 1 and mid-size distributors, big box stores, and grocery chains. In addition, we anticipate that our retail revenue will continue to increase as we broaden our customer base with increased distribution to additional grocery and convenience chains.

Cost of Revenues

Cost of revenues consists primarily of expenses associated with products sold to distributors and resellers, including product and shipping costs. Costs also include credit card fees, fees incurred for sales that occur on Amazon.com, and other transaction fees related to the processing of consumer transactions. Typically, we expect that the cost of revenues will increase as a direct correlation to increases in sales. Thus, our cost of revenues increases on an absolute basis versus on a percentage of sales basis. At the same time, when sales increase, thereby increasing our orders with our co-packers, our cost of products decreases because of the volume discounts we receive from our co-packers.

4

During the six months ended June 30, 2022,2023, we reported cost of revenues of approximately $1,735,393,$1.7 million, which is an increasea decrease of approximately $734,822,$5,847, or approximately 73%0%, compared to approximately $1,000,571$1.7 for the six months ended June 30, 2021.2022. This increase is attributed to an increase in sales in both our products and retail distribution in 2022, comparedcomparable to the prior year period. The cost of revenues increasedecrease was comparableless than the decrease in revenues. This is primarily attributed to the increasedecreased costs in revenuesobtaining our ingredients for the same period.our products, for production of our products, and for shipping our products. We expect that we will continue to see an increasedcomparable cost of revenues to the revenues in the remaining fiscal year 2022, primarily due to an anticipated increase in revenues.2023. In addition, as the cost of shipping our products continues to remain elevated, we also anticipate increased costs for obtaining our ingredients for our products, increased costs for production of our products, and increased costs of shipping our products. We continue to seek alternative methods to reduce costs for production and the cost of shipping our products in fiscal year 2022.2023.

5

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses (“SG&A&A”) expenses consist primarily of professional fees, salaries and wages, advertising, rent, travel expenses, sponsorships, and general office and administrative expenses related to maintaining our facilities. Selling, general and administrative expenses increased in the six months ended June 30, 2022,2023, to approximately $1,970,851 $2.2 million from approximately $1,212,732,$2.0, an increase of approximately $939,336 $230,829 over the same period last year. The increase was driven by increased operating expenses associated with hiring additional sales employees, advertisingprofessional fees, and marketing, travel expenses, legal and accounting fees, rent related to an additional distribution warehouse, vehicle and shipping expenses,expired product and partially offset by lower professional fees.advertising, shipping expenses, travel expenses, legal fees, and rent associated with the closing of one of distribution warehouses. We expect that, as we expand our business operations, SG&A expenses will continue to increase.

We expect that as we expand our business operations and continue to incur additional corporate-related expenses associated with our status as a fully registered issuer with the SEC under the Securities Exchange Act of 1934, SG&A expenses will continue to increase.

Other Income and Expenses

Other expense for the six months ended June 30, 20222023 was approximately $3,412,372,$1.4 million, as compared to other expense of approximately $1,232,616$3.4 million for the six months ended June 30, 2021.2022. The change was attributable to the decrease in interest expense of approximately $608,512 related to our debt levels and debt amortization, the increase in the change in the fair value of derivative liabilities of approximately $1,546,631,$1.7 million, which did not occur in the current period, and a decrease in the loss on debt extinguishment of approximately $873,040,$359,520, and was offset with increase in in the recording of financing costs of $286,000, which did not occurapproximately 3,000, and an increase in the prior year period, allinterest expense of which changes are non-cash expenses.approximately $15,608 related to increased debt levels and debt amortization.

Net Loss

We incurred a net loss of approximately $4,950,087$3.1 million for the six months ended June 30, 2022, an increase2023, a decrease of approximately $2,757,148$1.8 million compared to the prior year period in which we incurred a net loss of approximately $2,192,939.$5.0 million. This decrease in net loss is primarily due to increase in gross profit, offset by increased SG&A expenses and the increasea significant decrease in other expenses, as discussed above.

Liquidity and Capital Resources

Going Concern

We have incurred operating losses since inception and have negative cash flow from operations since inception. As of June 30, 2022, we had a stockholders’ deficit of approximately $2,991,280 and we incurred a net loss of approximately $4,950,087 during the six months ended June 30, 2022. We also utilized cash in operations of approximately $1,619,355 during the six months ended June 30, 2022. As a result, our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flow from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations.

Our consolidatedThe accompanying financial statements have been prepared on a going concern basis, which implies we maycontemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, in the six months ended June 30, 2023, the Company recorded a net loss of $3,127,123 and used cash in operations of $585,260 and had a stockholders’ deficit of $5,236,830 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. In addition, the Company’s independent registered public accounting firm, in its report on our December 31, 2022 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The ability of the Company to meet our obligationscontinue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue our operations foras a going concern.

5

At June 30, 2023, the next fiscal year.Company had cash on hand in the amount of $97,158. The continuation of ourthe Company as a going concern is dependent upon ourits ability to obtain necessary debt or equity financing to continue operations until we beginit begins generating positive cash flow. Refer to auditors going concern.

There is noNo assurance can be given that we will ever be profitable or that debt or equityany future financing will be available or, if available, that it will be on terms that are satisfactory to usthe Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuancecase of additional equity securities by us would result in a significantdebt financing or cause substantial dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business, as planned, and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders, would lose somein case or all of their investment. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.equity financing.

6

Notes Payable with Related Parties

Notes payable with related parties consists of the following at June 30, 2022 and December 31, 2021:

  

June 30, 2022

  

December 31, 2021

 
       
Note payable – related party (a) $1,352,651  $1,352,651 
Note payable – related party (b)  200,000   - 
Note payable – related party (c)  125,500   125,500 
Note payable – related party (e)  50,500   53,500 
Total notes payable – related parties  1,728,651   1,531,651 
Notes payable – related parties, current portion  (1,728,651)  (6,000)
Notes payable – related parties, net of current portion $-  $1,525,651 

(a)On April 4, 2019, the Company entered into an unsecured Line of Credit Agreement with Robert Clark. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $1,500,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on April 4, 2023, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 2022 and December 31, 2021, outstanding principal was $1,352,651 and $1,352,651, respectively.
(b)On May 6, 2022, the Company entered into an unsecured Line of Credit Agreement with Robert Clark. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $300,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on May 6, 2023, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 2022 the outstanding principal was $200,000.
(b)On August 29, 2019, the Company entered into a unsecured Line of Credit Agreement with Robert Clark. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $200,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on August 29, 2022, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 2022 and December 31, 2021, outstanding principal was $125,500 and $125,500, respectively.
(c)On February 19, 2019, the Company issued an unsecured Standard Promissory Note in Favor of Robert Clark, as lender, in the original principal amount of $70,000. Mr. Clark is the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The note bears no interest. Principal payments of $500 per month commenced in March 2019, with final payment due in March 2021. On March 15, 2022, the Company issued an Amendment to the original issued Standard Promissory Note in Favor of Robert Clark for the remaining outstanding principal of $58,000. Principal payment of $500 per month, with final payment due in March 2023. The outstanding principal balance of this note at December 31, 2021 was $53,500. During the six months ended June 30, 2022, the Company made principal payments of $3,000, leaving an outstanding principal balance of $50,500 at June 30, 2022.

At December 31, 2021, accrued interest on notes payable to related parties was $95,873. During the six months ended June 30, 2022, the Company added $27,033 of additional accrued interest, leaving an accrued interest balance on the notes payable to related parties of $122,906 at June 30, 2022. Accrued interest in included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

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Notes Payable

Notes payable consists of the following at June 30, 20222023 and December 31, 2021:2022:

 

June 30, 2022

 

December 31, 2021

  

June 30,

2023

  December 31,
2022		 
          
Note payable (a) $30,193  $33,312  $23,702  $26,994 
Note payable (b)  39,389   -   41,694   44,550 
Note payable (c)  250,000   -   39,343   40,103 
Less debt discount (c)  (99,031)  - 
Note payable (d)  205,576   250,000 
Note payable (e)  418,567   626,388 
Note payable (f)  68,283   - 
Note payable (g)  137,278   - 
Note payable (h)  110,000   - 
Note payable (i)  247,629   - 
Note payable (j)  16,206   - 
Total notes payable  1,308,278   988,035 
Less debt discount  (160,572)  (218,481)
Total notes payable, net  220,551   33,312   1,147,706   769,554 
Notes payable, current portion  (198,332)  (7,974)  (1,089,692)  (712,499)
Notes payable, net of current portion $22,219  $25,338  $58,014  $57,055 

(a)On August 21, 2021, the Company financed the purchase of a vehicle for $34,763, after making a down payment of $20,000. The loan term is for 60 months, annual interest rate of 5.44%, with monthly principal and interest payments of $665, and secured by the purchased vehicle. At December 31, 2021,2022, the loan balance was $33,312.$26,994. During the six months ended June30, 2023, the Company made principal payments of $3,292, leaving a loan balance of $23,702 at June 30, 2023.
(b)On September 30, 2022, the Company financed the purchase of a vehicle for $46,576, after making a down payment. The loan term is for 60 months, annual interest rate of 9.44%, with monthly principal and interest payments of $980, and secured by the purchased vehicle. At December 31, 2022, the loan balance was $44,550. During the six months ended June 30, 2022,2023, the Company made principal payments of $3,119,$2,856, leaving a loan balance of $30,193$41,694 at June 30, 2022, of which $7,974 was recorded as the current portion of loan payable on the accompanying Condensed Consolidated Balance Sheet.2023.
 (b)
(c)

In April 2021, the Company entered into a Line of Credit Agreement with Wells Fargo Bank. The Line of Credit is personally guaranteed by Robert Clark, the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $42,000. Advances under this line of credit bear interest at the rate of 11.50 percenthf 11.50% per annum. The line of credit matures in 2023, at which time all outstanding principal amounts and accrued interest are due and payable. AtAs of June 30, 2023 and December 31, 2022, the outstanding principal was $39,389,$39,343 and $40,103, respectively, which was recorded as the current portion of loan payable on the accompanying Condensed Consolidated Balance Sheet.

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(d)
(c)

On March 25, 2022, the Company entered into a secured debenture with an otherwise unaffiliated individual in the principal amount of $250,000. The secured note payable matures$250,000 that was due on March 23, 2023. On March 23, 2023, the Company entered into a First Amendment to Secured Debenture (the “First Amendment”) to amend a Secured Debenture (the “Debenture”), dated as of March 25, 2022. The Debenture is amended and restated in its entirety with the following terms (i) maturity date was extended to March 24, 2024; (ii) interest accrues on the outstanding principal at a rate equal to 12% per annum; (iii) monthly payments of principal and interest shall be made in the amount of $22,212, starting April 24, 2023 and bearsuntil the maturity date, at which date the entirety of the balance of principal plus interest at the rate of 0.97 percent per annum.is due. The secured debenture is secured by nine (9) identified motor vehicles of the Company. At December 31, 2022, the outstanding balance of the secured debentures amounted to $250,000. During the six months ended June 30, 2023, the Company made principal payments of $44,424, leaving a loan balance of $ 205,576 at June 30, 2023.

In connection with the issuance of the original debenture in 2022, the Company issued to the lender 25 million shares of the Company’s common stock at a price of $0.004 per share. The Company determined the fair value of the 25 million shares was $135,000, which was recorded as a debt discount against the secured debenture. At December 31, 2022, the unamortized debt discount was $31,531. During the six months ended June 30, 2023, the Company amortized debt discount of $31,531 to interest expense on the loan, leaving no remaining unamortized debt discount at June 30, 2023.
(e)

During the year ended December 31, 2022, the Company entered into secured non-interest-bearing advance agreements with unaffiliated third parties for the purchase of future receipts/revenues. Under the agreements, the Company received an aggregate lump sum payment of $561,957, and, in return, the purchaser received a secured right to collect a fix sum of future receipts/revenue of $798,456 to be collected by the Company. During the six months ended June 30, 2023, the Company entered into additional secured non-interest bearing advance agreements for which the Company received an aggregate lump sum payment of $501,000, and, in return, the purchaser received a secured right to collect a fix sum of future receipts/revenue of $597,500 to be collected by the Company. In accordance with the agreements, the Company agreed to sell, assign, and transfer to the purchaser of all the Company’s payments, receipts, settlements, and funds paid to or received by or for the account of the Company from time to time on and after the dates of the agreements in payment or settlement of the Company’s existing and future accounts, payment intangibles, credit, debit, and/or stored value card transactions, contract rights, and other entitlements arising from or relating to the payment of monies from the Company’s customers and/or other payors or obligors. The agreements require aggregate daily to weekly payments ranging from $1,291 to $1,958 The Company’s obligations under the agreements are secured by the assets described above, and guaranteed by Robert Clark, the Company’s Chief Executive Officer. As of December 31, 2022, the outstanding balance to be paid amounted to $626,388. During the six months ended June 30, 2023, the Company entered into additional agreements of $512,500, and made payments of $720,323, leaving an aggregate outstanding amount to be paid of $418,567 at June 30, 2023.

During the year ended December 31, 2022, upon execution of the advance and receipt of funds, the Company recorded the difference of $236,499 between the cash collected and the face amount of the obligation as a “note discount” and will amortize the “note discount” as interest expense over the life of the advance. At December 31, 2022, the unamortized “note discount” was $186,950. During the six months ended June 30, 2023, the recorded an additional unamortized “note discount” of $191,150 related to new advance agreements, and the Company amortized “note discount” of $259,059 to interest expense on the obligation. As of June 30, 2022,2023, the unamortized “note discount” was $150,572.

(f)On March 9, 2023, the Company entered into a Line of Credit Agreement with American Express National Bank. The Line of Credit is personally guaranteed by Robert Clark, the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $85,000. Advances under this line of credit bear interest at the rate of 19.32% per annum. The line of credit matures on September 9, 2024, at which time all outstanding principal amounts and accrued interest are due and payable. The line of credit requires minimum monthly payments of $5,572. At June 30, 2023, the outstanding principal was $68,283.
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(g)

On March 7, 2023, the Company entered into a Line of Credit Agreement with Celtic Bank. The Line of Credit is personally guaranteed by Robert Clark, the Company’s President, Chief Executive Officer, Secretary, and Chairman of the Board. The agreement established a revolving line of credit in the amount of up to $200,000. Advances under this line of credit bear interest at the rate of 35.90 percent per annum. The line of credit matures on March 7, 2024, at which time all outstanding principal amounts and accrued interest are due and payable. At June 30, 2023, the outstanding principal was $137,278.

(h)On June 30, 2023, the Company entered into a note payable with IQ Financial, Inc. in the principal amount of $110,000, with an original issue discount of $10,000, resulting in net proceeds for $100,000. The note has no stated interest and is due on July 31, 2023. For so long as the note remains unpaid, the Company shall pay within two days of receipt of customer payments on specific customer invoices listed in the note payable.
The original issue discount of $10,000 was recorded as a debt discount against the note payable, leaving a $10,000 of remaining unamortized debt discount at June 30, 2023.
(i)On May 15, 2023, the Company entered into a Revolving Credit Agreement (the “Revolver”) with a vendor. The Revolver allows the Company to purchase goods from its vendor time to time. The unpaid principal balance of the Revolver may not exceed $250,000 through May 31, 2023, $225,000 through July 31, 2023, and $200,000 through $200,000 through December 31, 2023, at any one time. The Revolver has a maturity date of December 31, 2023 and bears no interest rate. At June 30, 2023, the outstanding balance of the secured debentures amountedRevolver was $247,629.
In connection with the issuance of the Revolver, the Company issued to $250,000 and the unamortized debt discountvendor 28 million shares of the Company’s common stock at a price of $0.0045 per share. The Company determined the fair value of the 28 million shares was $99,031,$126,000, which was recorded as financing costs in the current portioncondensed consolidated statement of loanoperations during the six months ended June 30, 2023.
(j)On June 2, 2023, the Company entered into a note payable with RFMD-LLC in the principal amount of $16,206, with an interest rate of 8% per annum, and a maturity date of December 31, 2023. The note was issued in related to the termination of an operating lease (see Note 10). At June 30, 2023, the outstanding principal was $16,206. original issue discount of $10,000, resulting in net proceeds for $100,000. The note has no stated interest and is due on July 31, 2023. For so long as the accompanying Condensed Consolidated Balance Sheets.note remains unpaid, the Company shall pay within two days of receipt of customer payments on specific customer invoices listed in the note payable.

At December 31, 2021, there was no2022 on item (d), accrued interest on the notes payable.payable was $1,874. During the six months ended June 30, 2022,2023, the Company added $651$7,995 of additional accrued interest on item (d), leaving an$9,689 of accrued interest balance on the notes payable of $651item (d) at June 30, 2022.2023. Accrued interest inis included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

As of December 31, 2022, the unamortized debt discount was $218,481. During the six months ended June 30, 2023, the Company added $201,150 of debt discount related to the issuance of debentures, and amortized debt discount of $259,059 to interest expense on the loans. As of June 30, 2023, the unamortized debt discount was $160,652. 

Secured Convertible Debentures

Secured debentures that are payable to an otherwise unaffiliated third party consists of the following as of June 30, 20222023 and December 31, 2021:2022:

 

June 30, 2022

 

December 31, 2021

  

June 30,

2023

  

December 31,

2022

 
          
YA II PN, Ltd. $900,000  $3,000,000 
Mast Hill Note 1  204,457   595,000 
Mast Hill Note 2  467,912   - 
Mast Hill Note 3  230,000   - 
Mast Hill Note 4  55,707   - 
Less debt discount  (790,270)  (2,150,067)  (269,114)  (183,940)
Secured debentures, net $109,730  $849,933  $688,962  $411,060 

8

During the year ended December 31, 2021,Mast Hill

On July 28, 2022, the Company issued senior secured debentures to an otherwise unaffiliated third-party investor (the “Selling Stockholder”“Investor”) in the aggregate of $4,500,000.$595,000. The debentures are secured by all tangiblebear interest at a rate of 10% per annum, mature on July 28, 2023, and intangible assets of the Company and are alsois convertible into shares of our common stock at a conversion price of $0.03$0.0045 per share. If the Company issues subsequent equity instruments at an effective price per share orthat is lower than the conversion price of $0.0045 per shares, then the conversion price shall be reduced, at the option of the Holder, to a per share amount equivalentprice equal to the weighted average (amongWeighted Average Price (as defined), provided, further, that if the principalconversion price is equal to or less than $0.003, then the conversion price shall be reduced at the option of the debentures) of 76.7% ofHolder to a price equal to the lowest VWAPlower price. The senior secured debentures is secured by all of the Company’s common stock duringassets and the 15 trading days immediately precedingassets of each of its subsidiaries pursuant to the conversion date, whichever is lower. AsSecurity Agreement. The security interest granted to the ultimate determinationInvestor under the Security Agreement was subordinate to the continuing security interest that remains in effect pursuant to the previous grant of sharesa security interest in connection with a then outstanding debenture to be issued upon conversion of these debentures can exceed the current number of available authorized shares, we determined that the conversion features of these convertible debentures are not considered indexed to our Company’s own capital stockan earlier investor all tangible and characterized the fair value of the conversion features as derivative liability.intangible assets. In connection with the issuances of the debentures, the Company granted to the Selling StockholderInvestor warrants to purchase up to 170100 million shares of the Company’s common stock.stock, which expire on July 28, 2027. The warrants are exercisable at $0.03$0.0045 per share. Twenty million of the warrants will expire on May 14, 2023, 50 million of the warrants will expire on February 10, 2024, and 100,000,000 of the warrants will expire on August 20, 2024. As a result of these issuances and grants, we incurred the following (a) derivative liability of $3,982,000 related to the conversion feature of the debentures; (b) relative fair value of the warrants granted of $1,581,000;$223,000; and (c) and(b) original issue discounts of $195,000$92,325 of the debentures for a total of $5,758,000, of$315,325 which $4,423,000 was accountedallocated as debt discount and the remaining $1,335,000 as financing costs.discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2021,2022, the unamortized debt discount was $2,150,067.$183,940. During the six months ended June 30, 2023, the Company amortized debt discount of $157,662 to interest expense on the loan. As of June 30, 2023, the unamortized debt discount was $26,278.

As of December 31, 2022 the balance due under the obligation was $595,000. During the six months ended June 30, 2023, the Company converted $390,543 of principal and accrued interest into 199,500,000 shares of common stock with a fair value of $888,750 resulting in a loss on extinguishment of debt of $513,520. As of June 30, 2023, $204,247 was due under the note.

Mast Hill Debenture 2

On May 5, 2022,March 13, 2023, the Company issued similar debenturesan additional senior secured debenture to the Selling StockholderInvestor in the aggregate amount of $500,000.$475,000. The debentures beardebenture bears interest at a rate of 8%10% per annum, secured by all of the tangiblematures on March 13, 2024, and intangible assets of the Company and are alsois convertible into shares of the Company’sour common stock at a conversion price of $0.03$0.0045 per share or 80%share.

At our option, we have the right to redeem, in full, the outstanding principal and interest under the debenture prior to its maturity date; provided, that, as of the lowest daily volume weighted average price (“VWAP”date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). We must provide seven Trading Days’ (as such term is defined in the debenture) prior notice to the then-holder of the debenture of our intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the debenture prior to such redemption.

Further, commencing on May 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on May 10, 2023 for the cases sold during the 10month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a relevant month. The above-referenced seven trading days immediately preceding thedays’ prior notice and conversion date. As the ultimate determination of shares of common stockprovisions do not apply to be issued upon conversion of these debentures can exceed the current number of available authorized shares, the Company determined that the conversion features of these debentures are not considered indexed to the Company’s own stock and characterized the fair valueany of the conversion features as a derivative liability (see Note 10). mandatory redemption payments.

In connection with the issuances of thesethe debentures, the Company also granted to the selling stockholderInvestor warrants to purchase up to 8,333,33380 million shares of the Company’s common stock.stock, which expire on March 13, 2028. The warrants are exercisable at $0.03$0.0045 per share and will expire in three years from their grant date.share. As a result of these issuances the Companyand grants, we incurred the following (a) derivative liability of $546,000 related to the conversion feature of the debentures; (b) relative fair value of the warrants granted of $81,000;$150,000; and (c) and(b) original issue discountdiscounts and fees of $25,000$74,000 of the debentures for a total of $674,000, of$224,000 which $500,000 was accountedallocated as debt discount and the remaining $152,000 as financing costs.discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the yearsix months ended December 31, 2021,June 30, 2023, the Company amortized debt discount of $443,793$10,839 to interest expense.expense on the loan. As of June 30, 2023, the unamortized debt discount was $213,161.

As of June 30, 2023, $467,912 was due under the note.

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Mast Hill Debenture 3

On April 25, 2023, the Company issued an additional senior secured debenture to the Investor in the aggregate of $230,000. The debenture bears interest at a rate of 10% per annum, matures on April 25, 2024, and is convertible into shares of our common stock at a conversion price of $0.0040 per share.

At our option, we have the right to redeem, in full, the outstanding principal and interest under the debenture prior to its maturity date; provided, that, as of the date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). We must provide seven Trading Days’ (as such term is defined in the debenture) prior notice to the then-holder of the debenture of our intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the debenture prior to such redemption.

Further, commencing on May 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on May 10, 2023 for the cases sold during the month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a relevant month. The above-referenced seven trading days’ prior notice and conversion provisions do not apply to any of the mandatory redemption payments.

In connection with the issuances of the debentures, the Company granted to the Investor warrants to purchase up to 43.6 million shares of the Company’s common stock, which expire on April 25, 2028. The warrants are exercisable at $0.0040 per share. As a result of these issuances and grants, we incurred the following (a) relative fair value of the warrants granted of $56,000; and (b) original issue discounts and fees of $28,000 of the debentures for a total of $84,300 which was allocated as debt discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the six months ended June 30, 2022, the Selling Stockholder converted principal of $2,600,000 and accrued interest of $137,128, or a total $2,737,128, into 678,413,399 shares of common stock with a fair value of $5,859,165. The Company followed the general extinguishment model to record the conversions and settlement of the debt. The debt and accrued interest totaled $2,737,128, the related unamortized debt discount totaled $790,270, and the shares issued were measured at their respective fair value upon conversion which amounted to $5,859,165. In addition, the bifurcated conversion option derivatives, after a final mark-up to $3,639,000, were also removed. As a result,2023, the Company recorded a loss on extinguishment of debt of $873,040.

As of December 31, 2021, the outstanding balance of the secured debentures amounted to $3,000,000, with an unamortizedamortized debt discount of $2,150,067, or a net balance of $849,933.$15,243 to interest expense on the loan. As of June 30, 2022,2023, the outstanding balance of the secured debentures amounted to $900,000, with an unamortized debt discount was $69,057.

As of $790,270,June 30, 2023, $230,000 was due under the note.

Mast Hill Debenture 4

On June 14, 2023, the Company issued an additional senior secured debenture to the Investor in the aggregate of $55,706. The debenture bears interest at a rate of 10% per annum, matures on June 14, 2024, and is convertible into shares of our common stock at a conversion price of $0.0040 per share.

At our option, we have the right to redeem, in full, the outstanding principal and interest under the debenture prior to its maturity date; provided, that, as of the date of the then-holder’s receipt of the redemption notice, there has not been an Event of Default. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a $750 administrative fee (the “Redemption Amount”). We must provide seven Trading Days’ (as such term is defined in the debenture) prior notice to the then-holder of the debenture of our intent to make a redemption. If such notice of redemption is received six months after the Issue Date, the then-holder has the right to convert any or all of such to-be-prepaid amount into shares of our Common Stock in accordance with the conversion provisions of the debenture prior to such redemption.

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Further, commencing on July 10, 2023, and continuing on the tenth day of each calendar month thereafter, we are required to redeem an amount equivalent to the sum of $2.00 for each 12-count case of our beverages that we sell in the ordinary course, calculated two months in arrears. Accordingly, the first redemption payment is due and payable on July 10, 2023 for the cases sold during the month of March, 2023. Mandatory redemption payments are based upon revenues recognized by us in accordance with US GAAP for each such month, rather than upon the receipt by us of funds received from sales during a net balancerelevant month. The above-referenced seven trading days’ prior notice and conversion provisions do not apply to any of $109,730.the mandatory redemption payments.

In connection with the issuances of the debentures, the Company granted to the Investor warrants to purchase up to approximately 20.9 million shares of the Company’s common stock, which expire on June 14, 2028. The warrants are exercisable at $0.0040 per share. As a result of these issuances and grants, we incurred the following (a) relative fair value of the warrants granted of $19,000; and (b) original issue discounts and fees of $8,457 of the debentures for a total of $27,457 which was allocated as debt discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the six months ended June 30, 2022,2023, the Company amortized debt discount of $444,793$1,204 to interest expense.

expense on the loan. As of June 30, 2022, 161,707,2342023, the unamortized debt discount was $26,253.

As of June 30, 2023, $55,707 was due under the note.

As of June 30, 2023, no shares of common stock were potentially issuable under the conversion terms of the two partially converted outstanding debentures.

At December 31, 2021,2022, accrued interest on the convertible notes payable was $54,110.$25,756. During the six months ended June 30, 2022,2023, the Company added $77,785$40,039 of additional accrued interest, and converted $137,128$45,358 of accrued interest, into common stock, leaving an accrued interest balance on the convertible notes payable of $4,767$20,437 at June 30, 2022.2023. Accrued interest inis included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

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As of December 31, 2022, the unamortized debt discount was $183,940. During the six months ended June 30, 2023, the Company added $334,757 related to the issuance of secured debentures, and amortized debt discount of $250,583 to interest expense on the loans. As of June 30, 2023, the unamortized debt discount was $269,114.

Cash Flows

In summary, our use of cash has been as follows:

 

For the Six Months Ended

June 30, 2022

  For the Six
Months Ended
June 30, 2023		 
Net cash used in operating activities $(1,619,356) $(585,260)
Net cash used in investing activities $(24,168) $- 
Net cash provided by financing activities $945,886  $642,629 

Operating Activities

Cash provided by or used in operating activities primarily consists of net income adjusted for certain non-cash items, including depreciation, amortization, financing costs, changes in allowance for doubtful accounts, loss on extinguishment of debt, and the change in the fair value of our derivative liabilities, stock-based compensation, and the effect of changes in working capital and other activities. Cash used in operating activities for the six months ended June 30, 20222023 was approximately $1,619,355$585,260 and consisted of a net loss of approximately $4,950,087,$3.1 million, adjustments for non-cash items, depreciation, amortization, financing costs, loss on extinguishment of debt, loss on the change in fair value of derivative liabilities, and stock based compensation, which in the aggregate total approximately $3,464,684,$1,583,502, and approximately $113,952$958,352 used in working capital and other activities.

Investing Activities

Cash used in investing activities for six months ended June 30, 20222023 was approximately $24,168 and was attributable to capital expenditures.nil.

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Financing Activities

Cash provided by financing activities for six months ended June 30, 20222023 was approximately $945,886$642,629 and was comprised of proceeds from a notes payable of $964,389,$783,365, proceeds from related party of $99,000, and proceeds from convertible debentures payable of $712,620, offset by paymentpayments on our line of credit to related party of $3,000,$12,000, payments of our acquisition obligations of $8,586,$3,220, payment of our note payable of $3,119,$935,196, and payment of finance lease obligations of $3,798.$1,939.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies that we follow are set forth in Note 2, Summary of Significant Accounting Policies, of our consolidated financial statements for the periodquarter ended June 30, 2022.2023. These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the consolidated financial statements.

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Revenue Recognition and Deferred Revenue

We sell our products, which includes our hemp energy drink, CBD energy water, CBD water, and logo apparel, to online customers or through resellers and distributors. In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products. We recognize revenue from product sales to customers, distributors, and resellers when products that do not require further services by us are shipped, when there are no uncertainties surrounding customer acceptance, and when collectability is reasonably assured. Sales are made to customers under terms allowing certain limited rights of return. Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products sold.

We also sell our products, and beverages purchased for resale from several other beverage manufacturers, to convenience stores, grocery stores, and smoke and gift shops. In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products. We recognize revenue from product sales to resellers when products that do not require further services by us are shipped or delivered, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash received by us prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return. Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products sold.

We recognize revenue in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC Topic 606”). The underlying principle of ASC Topic 606 is to recognize revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. To apply these principles, ASC Topic 606 outlines a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:

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 1.Identifying the contract(s) or agreement(s) with a customer;
 2.Identifying the separate performance obligations in the contract or agreement;
   
 3.Determining the transaction price;
   
 4.Allocating the transaction price to the separate performance obligations in the contract or agreement; and
   
 5.Recognizing revenue as each performance obligation is satisfied.

Pursuant to ASC Topic 606, we recognize revenue when performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control, including the risks and rewards of ownership. With respect to us, performance is deemed to occur upon shipment or delivery of products to our customers based on the written contract terms, which is also when control is transferred.

Our revenue earned is recognized when we satisfy a single performance obligation by transferring control of our products to a customer. We have determined that disaggregated revenue by net sales by revenue source would be meaningful and allow investors to understand our business activities, historical performance, or future prospects. Disaggregated sales by revenue source, which includes sales to distributors, online sales, sales through Amazon, and distribution sales. This is the same information used by our Chief Operating Decision Maker for evaluating the financial performance of our operations and making resource decisions. We also sell merchandise and apparel that comprises approximately 1% of our gross annual sales, and solely exists to promote our beverages. Merchandise and apparel sales are included with the gross sales for our one operating segment.

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During the prior year, the Company consolidated and restructured its operations. The Company now operates in one segment for the manufacture and distribution of our products and those of otherwise unrelated beverage products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities inin: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Stock-Based Compensation

FASB’s ASC Topic 718, Stock Compensation (formerly, FASB Statement 123R), prescribes accounting and reporting standards for all stock-based payment transactions in which employee and non-employee services are acquired. We measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Fair value for restricted stock awards is valued using the closing price of our Common Stock on the date of grant. For our three and six months ending June 30, 2023 and 2022, we recognized $85,000 of stock-based compensation expense. We recognized no stock-based compensation during the prior year period.expense. See Note 13,12, Share-Based Compensation, of our consolidated financial statements for the six months ended June 30, 2022,2023, for an additional description of our stock-based compensation that had a material effect on our consolidated financial statements.

Emerging Growth Company Status

On April 5, 2012, the JOBS Act, was enacted. The JOBS Act provides that, among other things, an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. As an emerging growth company, we have irrevocably elected to take “opt out” of taking advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies on a case-by-case basis.

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We intend to rely on certain of the other exemptions and reduced reporting requirements provided by the JOBS Act. As an emerging growth company, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b), and (ii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis).

We will remain an emerging growth company until the earlier to occur of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenues of at least $1.07 billion, or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common shares that is held by non-affiliates exceeds $700 million as of the last day of our second quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies to our consolidated financial statements for the period ended June 30, 20222023 for a discussion of recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure control and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2022,2023, the period covered in this Report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2022,2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no other material pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

We know of no material proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None that has not been previously disclosed in a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following exhibits are filed with or incorporated by reference into this Quarterly Report.

3.1Amended and Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
3.2Amended and Restated By-Laws is incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
3.3Certificate of Designation of the Preferences, Rights, and Limitations of the Series B Preferred Stock is incorporated herein by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
3.4Certificate of Designation of the Preferences, Rights, and Limitations of the Series C Preferred Stock is incorporated herein by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
3.5Certificate of Designation of the Preferences, Rights, and Limitations of the Series D Preferred Stock is incorporated herein by reference to Exhibit 3.5 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
3.6Certificate of Amendment to Amendment and Restated Certificate of Incorporation, is incorporated herein by reference to Exhibit 3.6 of Amendment No. 1 to the Company Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.

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3.7Certificate of Amendment to the amended and restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.7 of the Company’s Current Report on Form 8-K, filed with the SEC on February 17, 2023.
3.8Certificate of Amendment to the amended and restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.8 of the Company’s Current Report on Form 8-K, filed with the SEC on February 17, 2023.
4.1Form of Debenture is incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
4.2Warrant is incorporated herein by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.

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4.3Form of Stand-alone Debenture is incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-1 (File No.333-239883), filed with the SEC on December 14, 2020.
  
4.4Form of Secured Convertible Debenture of the registrant sold and issued to YAII PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.4 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.
  
4.4aForm of Secured Convertible Debenture of the registrant sold and issued to YAII PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.4a of the Company’s Quarterly Current Report on Form 10-Q, filed with the SEC on November 15, 2021.
  
4.5Form of Warrant of the registrant granted to YAII PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.
4.6Form of Secured Convertible Debenture of the registrant sold and issued to YAII PN, Ltd., effective August 23, 2021 is incorporated herein by reference to Exhibit 4.6 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
4.7Form of Warrant of the registrant granted to YAII PN, Ltd., effective August 23, 2021 is incorporated hereinhere8in by reference to Exhibit 4.7 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
4.8Form of Secured Convertible Debenture of the registrant sold and issued to YAII PN, Ltd., effective May 4, 2022 is incorporated herein by reference to Exhibit 4.8 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022.
  
4.9Form of Warrant of the registrant granted to YAII PN, Ltd., effective May 4, 2022 is incorporated herein by reference to Exhibit 4.9 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022.
  
4.10Form of Secured Convertible Senior Note of the registrant sold and issued to Mast Hill Fund, L.P., dated July 28, 2022 is incorporated herein by reference to Exhibit 4.10 of the Company’s Current Report on Form 8-K, filed with the SEC on August 3, 2022.
  
4.11Form of Warrant of the registrant granted to Mast Hill Fund, L.P., dated July 28, 2022 is incorporated herein by reference to Exhibit 4.11 of the Company’s Current Report on Form 8-K, filed with the SEC on August 3, 2022.
  
4.12Form of Secured Convertible Senior Note of the registrant sold and issued to Mast Hill Fund, L.P., for a transaction that closed and funded on March 15, 2023 is incorporated herein by reference to Exhibit 4.12 of the Company’s Current Report on Form 8-K, filed with the SEC on March 21, 2023.
��
4.13Form of Warrant of the registrant granted to Mast Hill Fund, L.P., for a transaction that closed and funded on March 15, 2023 is incorporated herein by reference to Exhibit 4.13 of the Company’s Current Report on Form 8-K, filed with the SEC on March 21, 2023.
4.14Form of Warrant of the registrant granted to Mast Hill Fund L.P., dated March 30, 2023 is incorporated herein by reference to Exhibit 4.14 of the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2023.
4.15Form of Secured Convertible Senior Note of the registrant sold and issued to Mast Hill Fund, L.P., for a transaction that closed and funded on April 28, 2023 is incorporated herein by reference to Exhibit 4.15 of the Company’s Current Report on Form 8-K, filed with the SEC on May 1, 2023.
4.16Form of Warrant of the registrant granted to Mast Hill Fund, L.P., for a transaction that closed and funded on April 28, 2023 is incorporated herein by reference to Exhibit 4.16 of the Company’s Current Report on Form 8-K, filed with the SEC on May 1, 2023.

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10.1Securities Purchase Agreement by and between the Company and YAII PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.2Registration Rights Agreement by and between the Company and YAII PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.3Independent Contractor Agreement by and between Kona Gold LLC and OPTN Companies Inc., dated April 15, 2020 is incorporated herein by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.4Board of Directors Offer Letter between the Company and Matthew Crystal, dated July 24, 2018 is incorporated herein by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.

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10.5Board of Directors Offer Letter between the Company and William Jeffrey Outlaw, dated September 3, 2019 is incorporated herein by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.6Form of Distribution Agreement is incorporated herein by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.7Membership Interest Purchase Agreement by and among Elev8 Hemp LLC, PLAD, Inc., and the Company, dated October 10, 2016, is incorporated herein by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.8Securities Exchange and Settlement Agreement by and between Elev8 Brands, Inc., and the Company, dated March 6, 2018, is incorporated herein by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.9Securities Exchange and Settlement Agreement by and between Elev8 Brands, Inc., and the Company, dated November 26, 2019 is incorporated herein by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.10Employment Agreement by and between Christopher Selinger and the Company, dated September 1, 2018 is incorporated herein by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.

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10.11Lease Agreement by and between Kona Gold, LLC and Hay Investment Properties, Inc., dated June 1, 2018 is incorporated herein by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.12Triple Net Lease Agreement by and between Gold Leaf Distribution, LLC and 3090 S. Hwy 14, LLC, dated May 22, 2019 is incorporated herein by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.13Lease Modification Agreement by and between Gold Leaf Distribution, LLC and 3090 S. Hwy 14, LLC, dated April 21, 2020 is incorporated herein by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.14Line of Credit Agreement by and between Robert Clark and Gold Leaf Distribution, LLC, dated August 29, 2019 is incorporated herein by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.15Line of Credit Agreement by and between Robert Clark and Kona Gold, LLC, dated April 4, 2019 is incorporated herein by reference to Exhibit 10.15 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.16Line of Credit Agreement by and between Matthew Nicoletti and Kona Gold, LLC, dated May 5, 2018 is incorporated herein by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.17Standard Promissory Note issued by Gold Leaf Distribution in favor of Robert Clark, dated February 19, 2019 is incorporated herein by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.18Standard Promissory Note issued by Kona Gold, LLC in favor of Robert Clark, dated January 15, 2019 is incorporated herein by reference to Exhibit 10.18 of Amendment No. 1 to the Company Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.

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10.19Employment Agreement by and between the Company and Robert Clark, dated August 12, 2015 is incorporated herein by reference to Exhibit 10.19 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.

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10.20Employment Agreement by and between the Company and Lori Radcliffe, dated October 8, 2019 is incorporated herein by reference to Exhibit 10.20 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.20aEmployment Agreement Amendment by and between the Company and Lori Radcliffe, dated September 14, 2021 is incorporated herein by reference to Exhibit 10.20a of the Company’s Registration Statement on Form S-1, filed with the SEC on September 22, 2021.
  
10.21Amendment to Employment Agreement by and between the Company and Robert Clark, dated December 1, 2016 is incorporated herein by reference to Exhibit 10.21 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.22Agreement by and between the Company and Ryan Dodd, dated May 1, 2019 is incorporated herein by reference to Exhibit 10.22 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.23Amendment to Employment Agreement by and between Christopher Selinger and Kona Gold Solutions, Inc., dated May 1, 2020 is incorporated herein by reference to Exhibit 10.23of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.24Amendment to Employment Agreement by and between Christopher Selinger and the Company, dated January 1, 2019 is incorporated herein by reference to Exhibit 10.24 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.25Security Agreement by and between the Company and YAII PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.26Line of Credit and Security Agreement Modification Agreement by and between Kona Gold LLC and Robert Clark, dated April 1, 2020 is incorporated herein by reference to Exhibit 10.26 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
  
10.27Line of Credit and Security Agreement Modification Agreement by and between Gold Leaf Distribution LLC and Robert Clark, dated April 1, 2020 is incorporated herein by reference to Exhibit 10.27 of the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.

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10.28Terms of Oral Agreement between the Company and Robert Clark is incorporated herein by reference to Exhibit 10.28 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
  
10.29Waiver Agreement by and between the Company and YAII PN, Ltd., dated October 14, 2020, is incorporated herein by reference to Exhibit 10.29 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
10.30Paycheck Protection Promissory Note issued in favor of Wells Fargo Bank, N.A. dated May 4, 2020, is incorporated herein by reference to Exhibit 10.30 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
  
10.31Paycheck Protection Promissory Note issued in favor of Wells Fargo Bank, N.A. dated May 4, 2020, is incorporated herein by reference to Exhibit 10.31 of Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.

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10.32Securities Purchase Agreement by and between the Company and YAII PN, Ltd., dated November 30, 2020, is incorporated herein by reference to Exhibit 10.32 to the Company’s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on December 14, 2020.
  
10.33Form of Securities Purchase Agreement between the registrant and YAII PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.28 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.
  
10.34Form of Registration Rights Agreement by and between the registrant and YAII PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.29 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.
  
10.35Form of Amended and Restated Security Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.30 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.
  
10.36Form of Intellectual Property Security Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.31 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.
  
10.37Form of Amended and Restated Global Guaranty Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.32 of the Company’s Current Report on Form 8-K, filed with the SEC on February 18, 2021.

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10.38Form of Securities Purchase Agreement between the registrant and YAII PN, Ltd., for a transaction that closed and funded on August 23, 2021 is incorporated herein by reference to Exhibit 10.38 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
10.39Form of Registration Rights Agreement by and between the registrant and YAII PN, Ltd., for a transaction that closed and funded on August 23, 2021 is incorporated herein by reference to Exhibit 10.39 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
10.40Form of Second Amended and Restated Security Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed and funded on August 23, 2021 is incorporated herein by reference to Exhibit 10.40 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
10.41Form of Intellectual Property Security Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed and funded on August 23, 2021 is incorporated herein by reference to Exhibit 10.41 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
10.42Form of Second Amended and Restated Global Guaranty Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed and funded on August 23, 2021 is incorporated herein by reference to Exhibit 10.42 of the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2021.
  
10.43Agreement of Lease by and between Gold Leaf Distribution, LLC and RFMD-SC, LLC, dated August 30, 2021 is incorporated herein by reference to Exhibit 10.43 of the Company’s Registration Statement on Form S-1, filed with the SEC on September 22, 20212021..
  
10.44Form of Securities Purchase Agreement between the registrant and YAII PN, Ltd., for a transaction that closed and funded on May 4, 2022 is incorporated herein by reference to Exhibit 10.44 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022.

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10.45Form of Security Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed and funded on May 4, 2022 is incorporated herein by reference to Exhibit 10.45 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022.
  
10.46Form of Intellectual Property Security Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed and funded on May 4, 2022 is incorporated herein by reference to Exhibit 10.46 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022.

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10.47Form of Global Guaranty Agreement of the registrant and its subsidiaries in favor of YAII PN, Ltd., for a transaction that closed and funded on May 4, 2022 is incorporated herein by reference to Exhibit 10.47 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022.
  
10.48Form of Securities Purchase Agreement between the registrant and Mast Hill Fund, L.P., for a transaction that closed and funded on July 29, 2022 is incorporated herein by reference to Exhibit 10.48 of the Company’s Current Report on Form 8-K, filed with the SEC on August 3, 2022.
  
10.49Form of Security Agreement of the registrant and its subsidiaries in favor of Mast Hill Fund, L.P., for a transaction that closed and funded on July 29, 2022 is incorporated herein by reference to Exhibit 10.49 of the Company’s Current Report on Form 8-K, filed with the SEC on August 3, 2022.
10.50Revenue Purchase Agreement between the registrant and NewCo Capital Group VI, LLC, effective as of September 30, 2022 is incorporated herein by reference to Exhibit 10.50 of the Company’s Amended Registration Statement on Form S-1 (File No.: 333-267199), filed with the SEC on October 14, 2022.
10.51Revenue Purchase Agreement between the registrant and Cobalt Funding Solutions effective as of November 2, 2022 is incorporated herein by reference to Exhibit 10.51 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022, filed with the SEC on November 14, 2022.
10.52Equity Purchase Agreement between the registrant and Mast Hill Funds L.P., dated as of March 30, 2023 is incorporated herein by reference to Exhibit 10.52 of the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2023.
10.53Registration Rights Agreement between the registrant and Mast Hill Funds L.P., dated as of March 30, 2023 is incorporated herein by reference to Exhibit 10.53 of the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2023.
10.54Form of Securities Purchase Agreement between the registrant and Mast Hill Fund, L.P., for a transaction that closed and funded on March 15, 2023 is incorporated herein by reference to Exhibit 10.52 of the Company’s Current Report on Form 8-K, filed with the SEC on March 21, 2023.
10.55Form of Security Agreement of the registrant and its subsidiaries in favor of Mast Hill Fund, L.P., for a transaction that closed and funded on March 15, 2023 is incorporated herein by reference to Exhibit 10.53 of the Company’s Current Report on Form 8-K, filed with the SEC on March 21, 2023.
10.56Form of Securities Purchase Agreement between the registrant and Mast Hill Fund, L.P., for a transaction that closed and funded on April 28, 2023 is incorporated herein by reference to Exhibit 10.56 of the Company’s Current Report on Form 8-K, filed with the SEC on May 1, 2023.
10.57Form of Security Agreement of the registrant and its subsidiaries in favor of Mast Hill Fund, L.P., for a transaction that closed and funded on April 28, 2023 is incorporated herein by reference to Exhibit 10.57 of the Company’s Current Report on Form 8-K, filed with the SEC on May 1, 2023.
  
21.1List of subsidiaries of the registrant is incorporated herein by reference to Exhibit 21.1 of the Company’s Annual Report on Form 10-K, filed with the SEC on April 15, 2021.
  
31.1*Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
31.2*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  
32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  
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
  
104Cover Page Interactive Data File (embedded within the Inline XBRL document)
  
 *Filed herewith

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 KONA GOLD BEVERAGE, INC.
   
August 12, 202221, 2023By:/s/ Robert Clark
  

Robert Clark

Chief Executive Officer

   
August 12, 202221, 2023By:/s/ Lori Radcliffe
  

Lori Radcliffe

Chief Financial Officer

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