As filed with the Securities and Exchange Commission on September 22, 2021[___], 2022.

Registration Statement No. 333-________333 -[____]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

Registration Statement under the Securities Act of 1933

KONA GOLD BEVERAGE, INC.

(Exact name of registrant as specified in its charter)

Kona Gold Beverage, Inc.

746 North Drive, Suite A

Melbourne, Florida 32934

(844(844)) 714-2224

(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive offices)

Robert Clark

Chairman of the Board, Chief Executive Officer, and President

746 North Drive, Suite A

Melbourne, Florida 32934

(844)714-2224

(Name, address, including zip code, and

telephone number, including area code, of agent for service)

With copy to:

Randolf W. Katz, Esq.

Clark Hill LLP

1055 West Seventh Street, 24^th Floor

Los Angeles, California 90017

(213) 417-5310

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 7(a)(2)(B) of the Securities Act. ☒

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

CALCULATION OF REGISTRATION FEE

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT, WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

The information in this preliminary Prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary Prospectus is subject to completion, is not an offer to sell securities, and it is not soliciting an offer to buy these securities, in any state where offers or sales are not permitted.

KONA GOLD BEVERAGE, INC.

Up to 340,677,266

[●] Shares of Common Stock,

This is a prospectus (this “Prospectus”)Pre-funded Warrants to Purchase

[●] Shares of Kona Gold Beverage, Inc., a Delaware corporation (“Kona Gold,” our “Company,” “we,” “our,” or “us”). It relatesCommon Stock and Warrants to the resale or other disposition by the selling stockholder (the “Selling Stockholder”) identified in this Prospectus and its transfereesPurchase

[●] Shares of up to 340,677,266Common Stock

We are offering [●] shares of common stock,Common Stock, par value $0.00001 per share, (ourand Warrants (“Common Stock Purchase Warrants”) to purchase [●] shares of Common Stock pursuant to this prospectus. Each whole Common Stock Purchase Warrant is exercisable to purchase one share of Common Stock at an assumed exercise price of $[●], will be exercisable upon issuance and will expire [five] years from the date of issuance. The shares of Common Stock and Common Stock Purchase Warrants will be issued and sold to purchasers in the ratio of one-to-one. Common Stock Purchase Warrants will be issued in book-entry form pursuant to a Warrant agency agreement between us and Action Stock Transfer Corporation as Warrant agent. This prospectus also relates to the offering of the shares of Common Stock issuable upon exercise of Common Stock Purchase Warrants.

We are also offering to certain purchasers whose purchase of shares of Common Stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of Common Stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, Pre-funded Warrants, in lieu of shares of Common Stock that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of Common Stock. Each Pre-funded Warrant will be exercisable for one share of Common Stock. The exercise price of each Pre-funded Warrant will be $0.00001 per share of Common Stock. The Pre-funded Warrants will be immediately exercisable and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. This offering also relates to the shares of Common Stock issuable upon exercise of any Pre-funded Warrants sold in this offering.

The shares of Common Stock and the accompanying Common Stock Purchase Warrants will be sold in units (each, a “Common Stock”Stock Unit”) and the Pre-funded Warrants and the accompanying Common Stock Purchase Warrants will be sold in units (each, a “Pre-funded Warrant Unit” and, together with the Common Stock Units, the “Units”), with each Common Stock Unit consisting of (i) upone share of Common Stock and one Common Stock Purchase Warrant to 240,677,266purchase one share of Common Stock and each Pre-funded Warrant Unit consisting of one Pre-funded Warrant and one Common Stock Purchase Warrant to purchase one share of Common Stock. For each Pre-funded Warrant Unit we sell, the number of Common Stock Units we are offering will be decreased on a one-for-one basis. The shares of Common Stock, Pre-funded Warrants, and Common Stock Purchase Warrants will be immediately separable on issuance. Each Common Stock Unit will be sold at a price of $[●] per Common Stock Unit (assuming a public offering price of $[●] per share of Common Stock representing the closing price of our Common Stock (the “August 2021 Conversion Shares”) issuable upon conversionson the OTCQB of secured convertible debentures (the “August 2021 Debentures”) and up to 100,000,000$[●] per share of shares of our Common Stock (the “August 2021 Warrant Shares”) issuable upon exerciseson [●], 2022, and giving effect to a Specific Reverse Split ratio of a Warrant to Purchase[●]. The final public offering price of each Common Stock (the “August 2021 Warrant”;Unit and together with the August 2021 Debentures, the August 2021 Conversion Shares, and the August 2021 Warrant Shares, the “Securities”). We issued, or will issue, the Securities to the Selling Stockholder pursuant to that certain Securities Purchase Agreement between the Selling Stockholder and us, dated as of August 20, 2021 (the “August 2021 SPA”), in connection with a private placement. We agreed to register the August 2021 Conversion Shares and August 2021 Warrant Shares pursuant to the terms of the Registration Rights Agreement between the Selling Stockholder and us, dated as of August 20, 2021 (the “August 2021 Registration Rights Agreement”). The August 2021 Conversion Shares and August 2021 Warrant Shares are being offered for resale by the Selling Stockholder.

The August 2021 Debentures are due 12 months from their respective issuance dates and are secured by all of our assets and the assets of each of our subsidiaries pursuant to that certain Amended and Restated Security Agreement by and among the Selling Stockholder, our wholly-owned subsidiaries, and us, dated August 20, 2021 (the “Amended and Restated Security Agreement”). Initially, the August 2021 Debentures are convertible at the lower of the (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the “Fixed Conversion Price”), or (ii) 75% of the lowest daily volume weighted average price (“VWAP”) of our Common Stock during the 15 trading days immediately preceding the conversion date, subject to adjustment (the “Market Conversion Price”).

The August 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the Fixed Conversion Price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Fixed Conversion Price of the August 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the August 2021 Debentures. The August 2021 Conversion Shares include shares of our Common Stock that we may issue from time to time upon conversions of the August 2021 Debentures in payment of then-outstanding principal and accrued interest. The allocation of the August 2021 Conversion Shares between principal and interest will depend on the dates of the various conversions of the August 2021 Debentures.

The August 2021 Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the August 2021 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversion (excluding, for purposes of such determination, shares of our Common Stock issuable upon conversion of the August 2021 Debentures or exercise of the August 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% “conversion blocker” to 9.99% upon at least 65 days’ prior written notice to us.

At our option, we have the right to redeem, in part or in whole, the outstanding principal and interest under the August 2021 Debentures prior to their respective maturity dates; provided, that, as of the date of the holder’s receipt of the redemption notice, (i) the VWAP of our Common Stock is less than the Fixed Conversion Price and (ii) there is no Equity Conditions failure. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as the 115% Redemption Premium. We must provide the holder 15 business days’ advance notice of our intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem plus the applicable Redemption Premium.

The August 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the Fixed Conversion Price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Fixed Conversion Price of the August 2021 Debentures. For example, if we issued 10,000,000 shares of our Common Stock at a price of $0.02 per share, and we had 872,772,803 shares of our Common Stock issued and outstanding prior to the issuance, then, in accordance with the terms of the August 2021 Debentures, the new Fixed Conversion Price would be $0.0297. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the August 2021 Debentures.

We also granted the August 2021 Warrant to purchase up to an aggregate of 100 million shares of our Common Stock. The August 2021 Warrant has a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If we fail to maintain an effective registration statement with the SEC covering the resale of the August 2021 Warrant Shares, or if an Event of Default has occurred and is continuing, then the holder may exercise the August 2021 Warrant on a “cashless” basis.

The August 2021 Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current exercise price of the August 2021 Warrant. For example, if we issued shares of our Common Stock at $0.02 per share, then the exercise price of each Common Stock Purchase Warrant offered hereunder will be determined through negotiations between us and the August 2021lead underwriter in the offering as well as by reference to the trading price of the shares of Common Stock on the OTCQB. The purchase price of each Pre-funded Warrant wouldUnit will be adjustedequal to $0.02 per share. Any stock splits, reverse stock splits, recapitalizations, mergers, combinationsthe price at which each Common Stock Unit is sold to the public in this offering, minus $0.00001, and asset sales, stock dividends, and similar events will also result in an adjustment of the exercise price of each Pre-funded Warrant will be $0.00001 per share of Common Stock.

On August [●], 2022, our board of directors (our “Board”) approved an Amendment to our Certificate of Incorporation to effect one or more reverse splits (the “Reverse Split”) of our outstanding shares of Common Stock and a concurrent reduction in our authorized capital (our “Charter Amendment”). We filed our Proxy Statement on Schedule 14A for a Special Meeting of our stockholders to obtain approval of our Charter Amendment and, more specifically, to grant our Board authorization, in its sole discretion, to effectuate one or more Reverse Splits during the August 2021 Warrant.succeeding 12 months at a specific ratio within a range from [one-for-250 to one-for-1,500], and the timing of any such Reverse Splits. Our Board has effected such Reverse Split at a ratio of [●] (the “Specific Reverse Split”) in connection with this offering and our intended listing of our shares of Common Stock on the Nasdaq Capital Market (“Nasdaq”); however, we cannot guarantee that the Specific Reverse Split will be sufficient for Nasdaq to approve our initial listing application.

Our Common Stock is quoted on the OTC Markets Group Inc.’s (the “OTCM”) OTCQB^® Venture Market (the “OTCQB”) under the symbol “KGKG.” On September 20, 2021, the last reported sales price forWe have applied to list our shares of Common Stock was $0.0157 per share.on Nasdaq under the trading symbol “KGKG”. The successful listing of our shares of Common Stock on Nasdaq is a condition of this offering. We are an “emerging growth company,”company” as defined inby the Jumpstart Our Business Startups Act (“JOBSof 2012 (the “JOBS Act”) and, as such, may electwe have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary – ImplicationsHowever, we have elected not to take advantage of Being an Emerging Growth Companythe extended transition period allowed for emerging growth companies for complying with new or revised accounting guidance as allowed by Section 107 of the JOBS Act and a Smaller Reporting Company.”Section 7(a)(2)(B) of the Securities Act. The [Common Stock Purchase Warrants] and the Pre-funded Warrants will not be listed on any national securities exchange or other nationally recognized trading system.

Investing in our Common Stocksecurities involves a high degree of risk. You should consider carefully the section entitledSee “Risk Factors” in this Prospectus beginning on page 4, as well as10.

We have granted the other information containedunderwriters the right to purchase up to an additional [●] shares of Common Stock and/or Common Stock Purchase Warrants to cover over-allotments, if any assuming an initial public offering price of $[●] per Unit. The underwriters can exercise this right at any time within [45] days after the date of this prospectus. In addition, we will issue to the underwriters Warrants to purchase a number of shares of Common Stock equal to an aggregate of [5.0]% of the shares of Common Stock and/or Pre-funded Warrants sold in this Prospectus before you invest.the offering. The exercise price of the underwriters’ Warrants is equal to [100]% of the offering price of the shares of Common Stock and/or Pre-funded Warrants offered hereby. The underwriters’ Warrants are exercisable beginning [six] months from the effective date of the offering, from time to time, in whole or in part, within [five] years commencing from the effective date of the offering.

NeitherThe underwriters expect to deliver the SEC nor any state securities commissionagainst payment on or about , 2022.

The Securities and Exchange Commission has not approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus.prospectus. Any representation to the contrary is a criminal offense.

The date of this [●]

Prospectus is ___________ __, 2021dated __________, 2022

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

This prospectus is part of a Registration Statement on Form S-1 that we filed with the SEC.

You should only rely onread this prospectus and the related registration statement carefully. This prospectus and registration statement contain important information containedyou should consider when making your investment decision. See “Where You Can Find More Information” in this Prospectus or thatprospectus.

Neither we have referred you to. We have not, andnor the Selling Stockholder has not,underwriters have authorized anyone to provide you with different information. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securitiesinformation other than the shares of our Common Stock offered bythat contained in this Prospectus. This Prospectus does not constitute an offer to sellprospectus or a solicitation of an offer to buy any shares of our Common Stock in any circumstances infree writing prospectus prepared by or on behalf of us or to which such offer or solicitation is unlawful. Neitherwe have referred you. We take no responsibility for and can provide no assurance as to the deliveryreliability of, this Prospectus nor any sale made in connection with this Prospectus meansother information that theothers may give to you. The information contained in this Prospectus is correct after the date of this Prospectus. The information in this Prospectusprospectus or any free writing prospectus is accurate only as of the date on the front cover of this Prospectus. Our business, financial condition, resultsprospectus or such free writing prospectus, regardless of operations,the time of delivery of this prospectus or any free writing prospectus.

We are offering to sell, and prospects mayseeking offers to buy, securities only in jurisdictions where offers and sales are permitted. Neither we nor the underwriters have changed sincetaken any action to permit a public offering of our securities or the possession or distribution of this prospectus in any jurisdiction where action for that date.purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

Except as noted information contained in this prospectus gives effect to a proposed 1-for-[●] Reverse Split (the “Specific Reverse Split”).

Except as otherwise indicated, references in this prospectus to “KGKG,” the “Company,” “we,” “us” and “our” refer to Kona Gold Beverage, Inc. and its consolidated subsidiaries.

PROSPECTUS SUMMARY

This summary highlights selectedcertain information contained elsewhere in this Prospectus.prospectus. This summary does not contain all of the information that you should consider before investing in our Common Stock.may be important to you. You should carefully read and carefully consider the following summary together with the entire prospectus, especially the “Risk Factors” section of this entire Prospectus, including “Risk Factors,” “Management’s Discussionprospectus and Analysis of Financial Condition and Results of Operations,” and the accompanyingour consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus before deciding to invest in our securities. For more information on our business refer to the financial“Business” section of this prospectus. Some of the statements before making an investment decision. Unless we specify otherwise, all references in this Prospectus to “KGKG,” “Kona Gold,” our “Company,” “we,” “our,”prospectus constitute forward-looking statements that involve risks and “us” refer to Kona Gold Beverage, Inc.uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the “Risk Factors” and our subsidiaries.other sections of this prospectus. See “Cautionary Note Regarding Forward-Looking Statements.”

Company Overview

We are a lifestyle company that specializes in developing hemp and cannabidiol (“CBD”) products in the functional beverage and fitness markets. Focusing on the hemp energy drink, CBD energy water, and CBD water markets, we believe that we have positioned ourselves as a premium lifestyle brand. We are currently selling products through resellers, our website, and distributors that span across 2912 states. Our products are available in a wide variety of stores, including convenience and grocery stores, smoke shops, and gift shops. We also distribute premium beverages and snacks to over 5001,700 grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina. In addition to distributing our own beverage products, we also distribute other products, including alkaline waters, beverages for kids, energy drinks, fruit flavoredfruit-flavored sodas, low-carb lemonade, healthy aloe juice drinks, snacks, and a variety of CBD-infused jellybeans,products, all of which complement our current product offerings.

Corporate Information

We were originally incorporated as Class-ique Talent Agency, Inc. (“CTA”), under the laws of the State of Nevada in March 1997. In October 2001, CTA entered into an Agreement and Plan of Reorganization (the “Reorganization Plan”) with PhaserTek, Inc., a Delaware corporation (“PhaserTek”), pursuant to which CTA acquired all of the outstanding shares of common stock of PhaserTek in exchange for shares of common stock of CTA, resulting in PhaserTek becoming a wholly-owned subsidiary of CTA. In accordance with the terms of the Reorganization Plan, CTA changed its name to PhaserTek Medical, Inc. (“PhaserTek Medical”) in 2002. In 2004, PhaserTek Medical changed its name to Union Equity, Inc. (“UE Nevada”). For purposes of changing UE Nevada’s state of incorporation, UE Nevada formed Union Equity, Inc. in the State of Delaware (“UE Delaware”) in 2004. Pursuant to Articles of Merger, in December 2004, UE Nevada merged with and into UE Delaware, the surviving company. In July 2015, we changed our name to Kona Gold Solutions, Inc. In October 2020, we changed our name to Kona Gold Beverage, Inc.

We have four wholly-owned subsidiaries: (i) Kona Gold, LLC (“Kona”), a Delaware limited liability company formed in August 2015; (ii) HighDrate, LLC (“HighDrate”), a Florida limited liability company formed in January 2018; (iii) S and S Beverage, Inc. (“S and S”), a Wisconsin corporation formed in June 2018 that we acquired in February 2021; and (iv) Gold Leaf Distribution LLC (“Gold Leaf”), a Florida limited liability company formed in January 2019.

Kona focuses on creating great tastinggreat-tasting and healthy hemp-infused energy drinks in the functional beverage market for those who lead an active lifestyle. Kona is a proud member of the Hemp Industries Association (“HIA”) and strives to promote the benefits of hemp seed in our products. The hemp seed in our energy drinks contains all 20 amino acids that are already found in the human body. For those leading a healthy lifestyle, hemp seed protein is considered to be a complete protein and is compatible with a variety of diets, including vegan and Kosher.

HighDrate focuses on the development and marketing of CBD-infused energy waters available in a variety of great tastinggreat-tasting flavors. HighDrate’s CBD-infused energy waters are geared to the fitness and wellness markets. Our CBD-infused energy waters are powered by the patented technology of Alkame Holdings Inc.’s wholly-owned subsidiary, Alkame Water Inc. (“Alkame”), which provides premium oxygenated alkaline water with natural antioxidants. All of our waters are infused with CBD.

S and S focuses on the development and marketing of Ooh La Lemin, which is a better-for-you lemonade that is available in still and sparkling and has no added sugar, is low in carbs, and has only 15 calories.or 10 calories, respectively. Ooh La Lemin lemonade is available in four flavors: (i) Original Lemonade, (ii) Blue Raspberry Lemonade, (iii) Peach Lemonade, and (iv) Strawberry Lemonade. Ooh La Lemin Sparkling is available in six flavors: (i) Original Lemonade, (ii) Cucumber Watermelon Lemonade, (iii) Blue Raspberry, (iv) Pineapple Mango, (v) Citrus Splash, and (vi) Huckleberry.

Gold Leaf focuses on the distribution of premium beverages and snacks, such as alkaline waters, beverages for kids, energy drinks, fruit flavoredfruit-flavored sodas, low-carb lemonade, healthy aloe juice drinks, snack products, as well as a variety of CBD-infused jellybeans,products, in key markets. These markets include over 5001,700 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

We qualify as an “emerging growth company,” as defined in the JOBS Act, enacted in April 2012. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including the option to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Prospectus, not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the “SOX Act”) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this Prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

We may take advantage of these provisions until the earliest to occur of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing 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 equity securities that is held by non-affiliates exceeds $700 million as of the prior June 30^th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, the JOBS Act provides that 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. We have irrevocably elected to “opt out” of this extended transition period. As a result, we will comply with new or revised accounting pronouncements as of public company effective dates.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates 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 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 Reports on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Intellectual Property

We have three trademarks that are registered with the U.S. Patent and Trademark Office (“USPTO”) for use in the Beverages Segment. One is for use of “Kona Gold Hemp Energy Drinks” in the Beverages Segment. The second trademark is for the use of “HighDrate” in the Beverages Segment. The third trademark is for the use of “OOH LA LEMIN” in the Beverages Segment. We have also applied for a trademark for “Storm” to use in the Beverages Segment. We do not have any patents.

Recent Developments

In January 2020, the World Health Organization (the “WHO”) announced a global health emergency because of a new strain of coronavirus (“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 our 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 our consumers and employees, all of which are uncertain and cannot be predicted. To date, COVID-19 has adversely impacted new product launches by Kona and HighDrate, Gold Leaf’s distribution of new product lines, and the commencement of new distribution contracts. Management is actively monitoring this situation and potential impacts on our financial condition, liquidity, and results of operations. See “Risk Factors” for additional information regarding certain risks associated with the COVID-19 pandemic. However, we acquired S and S during the COVID-19 pandemic and increased our product variety due to the acquisition.

The August 2021 Private Placement

Risk Factors

This Prospectus relates to the resale or other disposition by the Selling Stockholder and its transferees of up to 340,677,266 shares of our Common Stock, consisting of (i) up to 240,677,266 August 2021 Conversion Shares issuable upon conversions of the August 2021 Debentures and up to 100,000,000 August 2021 Warrant Shares issuable upon exercises of the August 2021 Warrant. In August 2021, we completed a private placement transaction (the “August 2021 Private Placement”) of the August 2021 Debentures and the August 2021 Warrant. The August 2021 Debentures mature 12 months from their respective issuance dates and are secured by all of our assets and the assets of each of our subsidiaries. The August 2021 Debentures accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the August 2021 Debentures or otherwise accelerates the maturity dates, as provided for in the August 2021 Debentures). Interest is payable either in cash, or if certain Equity Conditions (as defined in the August 2021 Debenture) are then satisfied, in shares of our Common Stock at the Market Conversion Price on the trading day immediately prior to the date paid. “Equity Conditions” means that each of the following conditions is satisfied: (i) on each day during the period beginning two weeks prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), all applicable shares of our Common Stock to be issued in connection with the event requiring determination are eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; (ii) on each day during the Equity Conditions Measuring Period, shares of our Common Stock are designated for quotation on the principal market and have not been suspended from trading on such exchange or market nor has delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then-effective minimum listing maintenance requirements of such exchange or market; (iii) during the Equity Conditions Measuring Period, we have delivered the August 2021 Conversion Shares upon conversions of the August 2021 Debentures to the converting holder of the August 2021 Debentures on a timely basis; (iv) any applicable shares of our Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the terms of the August 2021 Debentures and the rules or regulations of the primary market; (v) during the Equity Conditions Measuring Period, (A) no event of default as occurred or (B) no event that with the passage of time or the giving of notice has occurred that, by giving notice, would constitute an event of default; and (vi) we do not have any knowledge of any fact that would cause any applicable shares of our Common Stock to be issued in connection with the event requiring determination not to be eligible for sale without restriction and without the need for registration under any applicable or state securities laws.

Initially, the August 2021 Debentures are convertible at the lower of the (i) Fixed Conversion Price or (ii) Market Conversion Price. The August 2021 Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the August 2021 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversions (excluding, for purposes of such determination, shares of our Common Stock issuable upon conversions of the August 2021 Debentures or exercises of the August 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% “conversion blocker” to 9.99% upon at least 65 days’ prior written notice to us.

At our option, we have the right to redeem, in part or in whole, the outstanding principal and interest under the August 2021 Debentures prior to their respective maturity dates; provided, that, as of the date of the holder’s receipt of the redemption notice, (i) the VWAP of our Common Stock is less than the Fixed Conversion Price, initially $0.03 per share and (ii) there is no Equity Conditions failure. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as a redemption premium equal to 15% of the outstanding principal amount being redeemed (the “Redemption Premium”). We must provide the holder 15 business days advance notice of our intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem plus the applicable Redemption Premium.

The August 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the Fixed Conversion Price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Fixed Conversion Price of the August 2021 Debentures. For example, if we issued 10,000,000 shares of our Common Stock at a price of $0.02 per share, and we had 872,772,803 shares of our Common Stock issued and outstanding prior to the issuance, then, in accordance with the terms of the August 2021 Debentures, the new Fixed Conversion Price would be $0.0297. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the August 2021 Debentures.

We also granted the August 2021 Warrant to purchase up to an aggregate of 100 million shares of our Common Stock. The August 2021 Warrant has a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If we fail to maintain an effective registration statement with the SEC covering the resale of the August 2021 Warrant Shares, or if an Event of Default (as defined below) has occurred and is continuing, then the holder may exercise the August 2021 Warrant on a “cashless” basis. “Event of Default” means an event of default under the SPA or the August 2021 Debentures.

The August 2021 Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current exercise price of the August 2021 Warrant. For example, if we issued shares of our Common Stock at $0.02 per share, then the exercise price of the August 2021 Warrant would be adjusted to $0.02 per share. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the exercise price of the August 2021 Warrant.

The August 2021 Warrant is subject to an “exercise blocker,” such that the Selling Stockholder cannot exercise any portion of the August 2021 Warrant that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such exercise (excluding, for purposes of such determination, shares of our Common Stock issuable upon exercises of the August 2021 Warrant or conversions of the August 2021 Debentures that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% “exercise blocker” to 9.99% upon at least 65 days’ prior written notice to us.

Pursuant to the terms of the August 2021 Registration Rights Agreement, we agreed to file a registration statement with the SEC registering for resale the shares of our Common Stock underlying the August 2021 Debentures and the August 2021 Warrant within 30 calendar days following the closing of the Private Placement.

Our Corporate Information

Our principal executive office is located at 746 North Drive, Suite A, Melbourne, Florida 32934. We also have a warehouse in Greer, South Carolina that serves as the main distribution center for Gold Leaf and Kona Gold, and a warehouse in Conway, South Carolina that serves as a secondary distribution center for Gold Leaf. Our telephone number is (844) 714-2224. We maintain the following website addresses: websites www.konagoldbeverage.com, www.konagoldhemp.com, www.highdrateme.com, www.drinklemin.com, and www.goldleafdist.com.www.goldleafdist.com.

Our Common Stock is quoted on the OTCQB under the symbol “KGKG.”The Offering

THE OFFERING

The number of shares of Common Stock to be outstanding after this offering is based on [●] shares of Common Stock outstanding as of [●], 2022, after giving effect to the Specific Reverse Split and excludes:

Unless otherwise indicated, all information in this prospectus reflects or assumes: (i) no exercise of the Common Stock Purchase Warrants or Warrants issued to the underwriters; and (ii) no exercise by the underwriters of their option to purchase up to an additional [●] shares of Common Stock and/or Pre-funded Warrants in this offering.

RISK FACTORS

Investing in our securities involves a high degree of risk. You should carefully consider and evaluate all of the information contained in this Prospectus and in the documents that we incorporate by reference into this Prospectus before you decide to purchase our securities. In particular, you should carefully consider and evaluate the risks and uncertainties described under the heading “Risk Factors” in this Prospectus. Any of the risks and uncertainties set forth in this Prospectus, as updated by annual, quarterly, and other reports and documents that we file with the SEC and incorporate by reference into this Prospectus could materially and adversely affect our business, results of operations, and financial condition, which in turn could materially and adversely affect the value of our securities. As a result, you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Cautionary Note Regarding Forward-Looking Statements.”

We have a limited operating history on which to judge our new business prospects and management.

We commenced operations in the beverage industry in 2015. Accordingly, we have only a limited operating history upon which to have to base an evaluation of our business and prospects. Operating results for future periods are subject to numerous uncertainties and we cannot assure you that we will achieve or sustain profitability. Our prospects must be considered in light of the risks encountered by companies in the early stage of development, particularly companies in new and rapid evolving markets. We cannot assure you that we will successfully address any of these risks.

We have incurred losses in recent years and may never achieve or maintain profitability.

We have had losses for several years and had an accumulated deficit of $11,472,974$21,250,260 at June 30, 2021,2022, which included our net loss of $2,192,939$4,950,087 for the six months ended June 30, 2021,2022, as compared to an accumulated deficit of $9,280,036 at December 31, 2020,$11,472,975, which included net loss of $2,192,939 for six months ended June 30, 2021 and our net loss of $3,125,595$7,020,127 for the year ended December 31, 2020, and an accumulated deficit of $6,154,441, which included net loss of $1,787,669 for year ended December 31, 2019.2021. We have implemented several initiatives intended to improve our revenues and reduce our operating costs with a goal of profitability. If we are unsuccessful in this regard, it will have a material adverse impact on our business, prospects, operating results, and financial condition. Our prior losses have had, and any future losses may continue to have, an adverse effect on our working capital. If we fail to generate revenue and become profitable, or if we are unable to fund our continuing losses, our stockholders could lose all or part of their investment.

Our recurring losses and significant accumulated deficit have raised substantial doubt regarding our ability to continue as a going concern.

We have experienced recurring operating losses over the last two years and have a significant accumulated deficit. We expect to continue to generate operating losses and consume significant cash resources for the foreseeable future. Without additional financing, these conditions raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to continue operations for the foreseeable future or realize assets and discharge liabilities in the ordinary course of operations. If we seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all. If we are unable to obtain sufficient funding, our business, prospects, financial condition, and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that our stockholders will lose all or a part of their investment.

We do not have sufficient working capital to fund our planned operations, and, as a result, we may need to raise additional capital in the future, which may not be available when needed, on acceptable terms or at all.

We have limited capital resources. To date, we have financed our operations entirely through equity investments by our management and other investors, the incurrence of debt, salary deferments, and stock issuance deferments, and we expect to continue to do so in the foreseeable future. During the yearsyear ended December 31, 20202021 and 2019,the six months ended June 30, 2022 (an 18-month period), we relied on aggregate of approximately $3.3$5.25 million from incurrence of debt, salary deferments, and stock issuance deferments, to fund our operations. Taking into account the saleOn July 28, 2022, we sold and issuance of a $1,500,000 debenture on August 20, 2021, and the sale and issuance of a $1,500,000 second debenture on upon the later of (i) the Securities Exchange Commission (“SEC”) declaring effective the registration statement or (ii) November 1, 2021, weissued an additional $595,000 debenture. We believe our current cash resources will fund up to 12three months   of our financial obligations and operations. Taking into account our planned activities and sources of capital, we believe that we will require approximately $1$[●] million to fund our financial obligations and operations for the next 12 months in excess of what we anticipate that we will generate from our operations. However, our estimates of our operating revenues and expenses and working capital requirements could be incorrect, and we may use our cash resources faster than we anticipate. Further, some or all of our ongoing or planned investments may not be successful and could further deplete our capital without immediate, or any, cash returns.

Until we can generate sufficient revenues to finance our cash requirements from our operations, which we may never do, we may need to increase our liquidity and capital resources by one or more measures, which may include, among others, reducing operating expenses, restructuring our balance sheet by negotiating with creditors and vendors, entering into strategic partnerships or alliances, or raising additional financing through the issuance of debt, equity, or convertible securities. Further, even if our near-term liquidity expectations prove correct, we may still seek to raise capital through one or more of these financing alternatives. However, we may not be able to obtain capital when needed or desired, on terms acceptable to us or at all.

Inadequate working capital would have a material adverse effect on our business and operations and could cause us to fail to execute our business plan, fail to take advantage of future opportunities, or fail to respond to competitive pressures or customer requirements. A lack of sufficient funding may also require us to significantly modify our business model and/or reduce or cease our operations. Furthermore, if we continue to issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience significant dilution, and the new equity or debt securities may have rights, preferences, and privileges that are superior to those of our existing stockholders. We may incur substantial costs in pursuing any future capital-raising transactions, including investment banking, legal and accounting fees, printing and distribution expenses, and other similar costs, which would reduce the benefit of the capital received from the transaction.

The COVID-19 pandemic could have a material adverse impact on our business, results of operations, and financial condition.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. In January 2020, the WHO declared the COVID-19 outbreak a “Public Health Emergency of International Concern.” This worldwide outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans intended to control the spread of the virus. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing businesses and facilities. These restrictions continued in fiscal year 2021 with continued outbreaks, and future prevention and mitigation measures, have had an adverse impact on global economic conditions and are likely to have ansubsequent adverse impact on consumer confidence and spending, which could materiallyand adversely affect the supply of, as well as the demand for, our products. Uncertainties regarding the economic impact of COVID-19 have and are likely to result in sustained market turmoil, which could also negatively impact our business, financial condition, and cash flow. For example, to date, COVID-19 has adversely impacted new product launches by Kona and HighDrate, Gold Leaf’s distribution of new product lines, and the commencement of new distribution contracts, all of which adversely affected our business, financial condition, and cash flow. However, we acquired S and S during the COVID-19 pandemic and increased our product variety due to the acquisition.acquisition, resulting in the commencement of distribution contracts.

Our co-packers source raw materials used in our products from suppliers located in the United States. The impact of COVID-19 on these suppliers, or any of our other suppliers, distributors and resellers, or transportation or logistics providers, have and may continue to negatively affect the price and availability of our ingredients and/or packaging materials and impact our supply chain. If the disruptions caused by COVID-19 continue for an extended period of time, our ability to meet the demands of our consumers may be materially impacted. To date, we have not experienced any reduction in the available supply of our products.products; however, we have been impacted by transportation and logistical delays. Additionally, at times during the COVID-19 pandemic, many of our employees, including members of our management team, have been working remotely as a result of the closure of our offices and warehouses in compliance with local and state regulations in response to the COVID-19 pandemic. To date, these employees have returned to our offices, and we are once again fully operational. Our warehouses operated as normal. If our operations or productivity become, or continue to be, impacted throughout the duration of the COVID-19 outbreak and government-mandated closures, those occurrences may negatively impact our business, financial condition, and cash flow. The extent to which the COVID-19 pandemic will further impact our business will depend on future developments and, given the uncertainty around the extent and timing of the potential future spread or mitigation and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our business at this time.

The extent of the effect of COVID-19 on our operational and financial performance will depend on future developments, including the duration, spread, and intensity of the outbreak, all of which are uncertain and difficult to predict, considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business. However, if the pandemic continues for a prolonged period, it could have a material adverse effect on our business, results of operations, financial condition, and cash flow and adversely impact the quoted price of our Common Stock on the OTCQB.over-the-counter market.

We sell our products in highly competitive markets, which results in pressure on our profit margins and limits our ability to maintain or increase the market share of our products.

The beverage business is a highly competitive and risky business, and is subject to significant competition and pricing pressures. We compete with many national, regional, and local businesses, many of which have more resources than we do. We could experience increased competition from existing or new companies in the energy and beverage market, which could create increasing pressures to grow our business. Competitors could offer products with prices that may match or are lower than the prices we offer. While we believe that the products we offer are generally competitive with those offered by other companies, continued pricing pressure or improvements in research and shifts in consumer preferences away from hemp-based beverages could adversely impact our consumer base or pricing structure and could have a material and adverse effect on our business, financial condition, results of operations, and cash flow.

Our future growth is largely dependent upon our ability to expand successfully into new markets and new distribution channels, as well as to attract new consumers to our products.

Our business operates in markets that are characterized by rapidly changing products, evolving industry standards, and potential new entrants. Our future success depends upon a number of factors, including our ability to expand our product offerings into new territories and locations throughout the United States, including having our products offered in national retail stores such as Costco, Walmart, and Target. We cannot provide any assurance that our products will be offered in any such national chain. Failure to expand our distribution network to include distributors with reach into national retail stores will have an adverse effect on our growth, which, in turn, could adversely affect our business, financial condition, results of operations, and cash flow.

Changes in consumer preferences and perceptions may lessen the demand for our products, which would reduce sales and harm our business.

We believe we are highly dependent upon positive consumer perceptions of the safety and quality of our products, as well as similar products distributed by other companies. Consumer perception of CBD or hemp products in particular can be substantially influenced by scientific research findings, national media attention, and other publicity about product use. Adverse publicity from these sources regarding the safety, quality, or efficacy of our products could harm our reputation and results of operations. If consumer preferences and perceptions of our products change, the resulting demand for our products could decrease, which could adversely affect our business, financial condition, and results of operations.

Increases in our costs materially affect our operating results.

Our principal beverage products contain hemp, CBD, and ginseng. Increases in costs of these, or other ingredients in our products paid by our co-packers, with respect to our Beverages Segment,Company, or our suppliers, with respect to our Distribution Segment,Subsidiary, and the costs of which are passed on to us, could have a material adverse effect on our profit margins, as well as on our business, financial condition, and operating results. Further, other factors, such as inflation, increased food costs, increased labor and employee benefit costs, and increased energy costs may adversely affect our operating costs and we may not be able to pass along any such increased costs to our consumers. Increases in costs could adversely affect our profitability and operating results.

We do not have long-term contracts with any of our co-packers or our suppliers, and as a result they could seek to increase prices significantly or fail to deliver.

We do not rely on written contracts or long-term arrangements with our co-packers or our suppliers. Although we have not experienced significant problems with our co-packers or our suppliers, as applicable, our co-packers or suppliers may implement significant price increases or may not meet our requirements in a timely fashion, if at all. If any undesirable issues occur with our current co-packers or suppliers, we may be forced to find other co-packers and suppliers. We may encounter difficulties in finding substitute co-packers in a timely manner, if at all, given the strict licensing requirements in the CBD industry and the limited number of co-packers that currently hold such licenses that are necessary to comply with federal law. We may not be able to obtain terms as favorable as those received from our current co-packers and suppliers, which in turn would increase our costs. In addition, it is possible that the substitute co-packers and suppliers may not have the necessary materials to meet our demand.

We must monitor our inventory and product mix against forecasted demand on a continuous basis. If we underestimate demand, we risk having inadequate supplies. We also face the risk of having too much inventory on hand that may reach its expiration date and become unsalable, and we may be forced to rely on markdowns or promotional sales to dispose of excess or slow-moving inventory. If we are unable to manage our supply chain effectively, our operating costs could increase and our profit margins could decrease, which could have a material adverse effect on our financial condition, operating results, and cash flow.

By virtue of the size of our operations, we may suffer from inflation-driven cost pressure and margin uncertainty and periodic shortages of raw materials and packaging.

Because of the size of our operations and the type of relationships that we have with our co-packers and suppliers, we are increasingly vulnerable to potentially unmanageable increases in the prices that we are charged, which increases we may not be able to pass on, directly or indirectly, in full to our customers, if at all. Further, by virtue of the supply chain issues that have arisen since the inception of the COVID-19 pandemic, we may not always be able to obtain raw materials or packaging materials for our products on the schedules that we require. This inflation-driven cost and margin uncertainty, coupled with raw materials and packaging materials issues could adversely affect our profitability and operating results.

Any prolonged disruption in the operations of any of our co-packing facilities could harm our business.

All of our distribution is managed domestically. Any prolonged disruption in the operations of any of these facilities, whether due to technical or labor difficulties, destruction or damage to the facility, real estate issues, or other reasons, could result in increased costs and reduced revenues and our profitability and prospects could be harmed.

We may not be able to manage our co-packing capabilities effectively, which may adversely affect our results of operations.

We must accurately forecast demand for all of our products in order to ensure that we have enough products available to meet the needs of our consumers. Our forecasts are based on multiple assumptions that may cause our estimates to be inaccurate and affect our ability to ensure that we have sufficient co-packing capacity to meet the demand for our products, which could prevent us from meeting increased consumer demand and harm our brand and our business. If we do not accurately align our co-packing capabilities with demand, our business, financial condition, and results of operations may be materially adversely affected.

If the ingredients used in our products are contaminated, alleged to be contaminated, or are otherwise rumored to have adverse effects, our results of operations could be adversely affected.

We, through our co-packers, buy ingredients from a variety of third-party suppliers. If these materials are alleged or prove to include contaminants that affect the safety or quality of our products or are otherwise rumored to have adverse effects, for any reason, we may sustain the costs of, and possible litigation resulting from, a product recall and need to find alternative ingredients, to delay production, or to discard or otherwise dispose of products, which could materially adversely affect our business, financial condition, and results of operations. In addition, even if product liability claims against us are not successful or are not fully pursued, these claims could be costly and time-consuming and could require our management to spend their time defending claims, rather than operating our business.

Our business depends, in part, on the sufficiency and effectiveness of our marketing.

Due to the competitive nature of our industry, we must effectively and efficiently promote and market our products through advertisements to sustain and improve our competitive position in our market. Marketing investments may be costly. In addition, we may, from time to time, change our marketing strategies and spending. We may also change our marketing strategies and spending in response to actions by our consumers, competitors, and other companies that produce and/or distribute beverage products. The sufficiency and effectiveness of our marketing are important to our ability to retain and improve our market share and margins. If our marketing is not successful or if we fail to implement sufficient and effective marketing or adequately respond to changes in industry marketing strategies, our business, financial condition, and results of operations may be adversely affected.

Loss of key personnel or our inability to attract and retain new qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

We have benefited substantially from the leadership and performance of our senior management, as well as other key employees. Our ability to grow our brand successfully hinges on our ability to retain our current management and key employees, and to attract and retain qualified personnel in the future. We cannot provide any assurance that we will be able to retain our personnel or attract new, qualified personnel. In addition, we do not maintain any “key person” life insurance policies. The loss of the services of members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives or divert management’s attention to seeking qualified replacements. If we are unable to attract or retain key personnel, our profitability and growth potential could be harmed.

We may not be able to protect our intellectual property adequately, which could harm the value of our brands and branded products and adversely affect our business.

We depend in large part on our brands and branded products and believe that they are very important to our business, as well as on our proprietary hemp-infused processes. We rely on a combination of trademarks, trade secrets, and similar intellectual property rights to protect our brands and branded products. The success of our business depends on our continued ability to use our existing trademarks in order to increase brand awareness and further develop our branded products in domestic markets. We own three trademarks that are registered with the USPTO and have another trademark registration pending in the United States. We may not be able to protect our trademarks adequately and our use of trademarks may result in liability for trademark infringement, trademark dilution, or unfair competition. We may from time to time be required to institute litigation to enforce our trademarks or other intellectual property rights, or to protect our trade secrets. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability, and prospects, regardless of whether we are able to successfully enforce our rights. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations, and financial condition.

We may be subject to product liability claims or regulatory actions if our products are alleged to have caused significant loss or injury.

We may be subject to product liability claims, regulatory action, and litigation if our products are alleged to have caused loss or injury or failed to include adequate instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances. Previously unknown adverse reactions resulting from consumption of CBD products alone or in combination with medications or other substances could also occur. In addition, the sale of any ingested product involves a risk of injury due to tampering by unauthorized third parties or product contamination. Our products may also be subject to product recalls, including voluntary recalls or withdrawals, if they are alleged to pose a risk of injury or illness, or if they are alleged to have been mislabeled, misbranded, or adulterated, or otherwise to be in violation of governmental regulations. A product liability claim or regulatory action against us could result in increased costs and could adversely affect our reputation and goodwill with our consumers generally. There can be no assurance that we will be able to obtain and maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or otherwise to protect against potential product liability claims could result in us becoming subject to significant liabilities that are uninsured and also could adversely affect our commercial arrangements with third parties.

Our annual and quarterly financial results are subject to significant fluctuations due to a variety of factors, many of which are beyond our control, which makes our results difficult to predict and could cause our results to fall short of expectations.

Our operating results can vary significantly from quarter-to-quarter and year-to-year depending on various factors, many of which are beyond our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our operating results in future quarters may fall below expectations. Each of the following factors may affect our operating results:

Consequently, our results of operations may decline quickly and significantly in response to changes in order patterns or rapid decreases in demand for our products. We anticipate that fluctuations in operating results will continue in the future; thus, our historical operating results may not be useful to you in predicting our future operating results.

We may require additional capital to finance our operations in the future, but that capital may not be available when it is needed and could be dilutive to existing stockholders.

We may require additional capital for future operations. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources: (i) cash provided by operating activities; (ii) available cash and cash investments; and (iii) capital raised through debt and equity transactions. Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only on unfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions, and a number of other factors, many of which are outside of our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to raise additional capital successfully at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our liquidity, financial condition, results of operations, and prospects. Further, if we raise capital by issuing stock, the holdings of our existing stockholders will be diluted.

If we raise capital by issuing debt securities, such debt securities would rank senior to our shares of common stock,Common Stock, $0.00001 par value per share (our “Common Stock”), upon our bankruptcy or liquidation. In addition, we may raise capital by issuing equity securities that may be senior to our Common Stock for the purposes of dividend and liquidating distributions, which may adversely affect the market price of our Common Stock. Finally, upon bankruptcy or liquidation, holders of our debt securities and shares of our preferred stock and our lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our Common Stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our Common Stock, or both.

The success of our new and existing products is uncertain.

We have committed, and expect to continue to commit, significant resources and capital to develop and market existing product enhancements and new products. These products are relatively untested, and we cannot assure you that we will achieve market acceptance for these products, or other new products that we may offer in the future. Moreover, these and other new products may be subject to significant competition with offerings by new and existing competitors. In addition, new products and enhancements may pose a variety of technical challenges and require us to attract additional qualified employees. The failure to develop and market these new products or enhancements successfully could seriously harm our business, financial condition, and results of operations.

Our business is dependent upon market acceptance by consumers.

We are substantially dependent on market acceptance of our products by consumers, our ability to change with consumer tastes, and to meet consumer needs with new products. If consumers do not accept our products, our sales and revenue will either fail to materialize or decline, resulting in a reduction in our operating income or possible increases in losses. Demand for CBD and hemp products is also influenced by the popularity of certain aesthetics, cultural and demographic trends, marketing and advertising expenditures, legality concerns, and general economic conditions. Because these factors can change rapidly, consumer demand also can shift quickly. The success of new product introductions depends on various factors, including product selection and quality, sales and marketing efforts, and timely production. We may not always be able to respond quickly and effectively to changes in consumer taste and demand due to the amount of time and financial resources that may be required to bring new products to market. The inability to respond quickly to market changes could have an impact on our expected growth potential and the growth potential of the market for CBD and hemp beverages. Even if this market develops, we may not succeed in our plan to become a category leader. Although we believe that our products in the United States are gaining better consumer acceptance, we cannot predict the future growth rate and size of this market.

If we are able to expand our operations, we may be unable to manage our future growth successfully.

If we are able to expand our operations in the United States, as planned, we may experience periods of rapid growth, which will require additional resources. Any such growth could place substantial strain on our management and our operational, financial, and other resources, and we will need to train, motivate, and manage current employees, as well as attract management, sales, finance and accounting, technical, and other professionals. In addition, we will need to expand the scope of our infrastructure and our physical resources. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with our business objectives and such growth could have a material adverse effect on our business and results of operations.

Any future litigation, or settlements resulting from legal proceedings relating to our business operations, could have a material adverse impact on our results of operations, and financial condition, and liquidity.

From time to time, we may be subject to allegations, and may be party to legal claims and regulatory proceedings, relating to our business operations. Such allegations, claims, and proceedings may be brought by third parties, including our consumers, employees, governmental or regulatory bodies, or competitors. Defending against such claims and proceedings, regardless of their merits or outcomes, is costly and time consuming and may divert management’s attention and personnel resources from our normal business operations, and the outcome of many of these claims and proceedings cannot be predicted. If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine, or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected. Our reputation could also be affected and such adverse litigation results or publicity may also negatively impact our business, financial condition, and results of operations.

Premiums for our insurance coverage may not continue to be commercially justifiable, and our insurance coverage may have limitations and other exclusions and may not be sufficient to cover our potential liabilities.

We have insurance to protect our assets, operations, and employees. While we believe our insurance coverage addresses all material risks to which we are exposed and is adequate and customary in our current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. No assurance can be given that such insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. In addition, insurance that is otherwise readily available, such as general liability, and directors’ and officers’ insurance, may become more difficult for us to find, and become more expensive, due to our CBD products. We cannot provide any assurance that we will be able to obtain such insurance in the future, or that the cost will be affordable to us. If we are unable to obtain such insurance, or if we were to incur substantial liability that was not covered by insurance or was in excess of policy limits, we may be prevented from entering into certain business sectors, our growth may be inhibited, and we may be exposed to additional risk and financial liabilities, which could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to the Regulation of Our Business and Products

We and our co-packers and suppliers are subject to extensive governmental regulation and may be subject to enforcement if we are not in compliance with applicable requirements.

We and our co-packers and suppliers are subject to a broad range of federal, state, and local laws and regulations that govern, among other issues, the testing, development, production, distribution, marketing, and post-market reporting of foods, including those that contain CBD. These include laws administered by the U.S. Food and Drug Administration (“FDA”), the U.S. Federal Trade Commission (“FTC”), the U.S. Department of Agriculture (“USDA”), and other federal, state, and local regulatory authorities. Because we market products that are regulated as food, we and the companies that co-pack our products are subject to the requirements of the Federal Food, Drug, and Cosmetic Act (“FDCA”) and regulations promulgated thereunder by the FDA. The statute and regulations govern, among other things, the production, composition, ingredients, packaging, labeling, and safety of beverages. The FDA requires that facilities that produce food products comply with a range of requirements, including hazard analysis and preventative controls regulations, current good manufacturing practices (“cGMPs”), and supplier verification requirements. Production facilities are subject to periodic inspection by federal, state, and local authorities. If we cannot successfully contract with co-packers for our products and if they cannot conform to our specifications and the strict regulatory requirements of the FDA and applicable state and local laws, they may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products, could result in their inability to continue to co-pack for us, or could result in a recall of our products that have already been distributed. If the FDA or other regulatory authority determines that we or they have not complied with the applicable regulatory requirements, our business, financial condition, and results of operations may be materially adversely impacted. If we do not comply with labeling requirements, including making unlawful claims about our products, we could be subject to public warning letters and possible further enforcement actions (which other companies distributing CBD products have faced).

Failure by us, our co-packers, or our suppliers to comply with applicable laws and regulations or to obtain and maintain necessary permits, licenses, and registrations relating to our operations could subject us to administrative and civil penalties, including fines, injunctions, recalls or seizures, warning letters, restrictions on the production or marketing of our products, or refusals to permit the import or export of products, as well as potential criminal sanctions, any or all of which could result in increased operating costs resulting in a material effect on our operating results and business.

The FDA has stated that it interprets the FDCA to prohibit the sale of food products that contain CBD. The FDA is currently evaluating a potential regulatory pathway for CBD products pursuant to its current authority; but, unless and until such changes are promulgated, the FDA and other federal and state regulatory authorities could take enforcement action to prevent us from marketing beverages with CBD, which could adversely impact our business, financial condition, and results of operations or cause us to halt product sales altogether.

Although hemp and CBD are no longer controlled substances subject to regulation by the U.S. Drug Enforcement Agency (the “DEA”), the FDA has stated publicly that it is nonetheless unlawful under the FDCA to introduce food containing CBD into interstate commerce. The FDCA prohibits the introduction or delivery for introduction into interstate commerce of any food that contains an approved drug or a drug for which substantial clinical investigations have been instituted and made public, unless a statutory exemption applies. The FDA has publicly stated its conclusion that none of the statutory exceptions has been met for CBD.

On May 31, 2019, the FDA held a public hearing to obtain scientific data and information about the safety, production, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds (such as CBD) to provide the FDA with information as it considers policy options related to the regulation of these products, particularly in light of the changes to the legal status of hemp enacted in the Agriculture Improvement Act of 2018 (the “2018 Farm Bill”). The FDA has also formed an internal working group to evaluate the potential pathways to market for CBD products, which could include seeking statutory changes from Congress or promulgating new regulations. If legislative action is necessary, such legislative changes could take years to finalize and may not include provisions that would enable us to produce, market, and/or sell our CBD products, and the FDA could similarly take years to promulgate new regulations. Additionally, while the FDA’s enforcement focus to date has primarily been on CBD products that are associated with therapeutic claims, the agency has recently issued warning letters to companies that market CBD products without such claims. There is an unquantifiable risk that the FDA could take enforcement action against us, our co-packers, or our suppliers, or those marketing similar products to us, which could limit or prevent us from marketing our products and have a material adverse impact on our business, financial condition, and results of operations. While the FDA announced on March 5, 2020 that it is currently evaluating a risk-based enforcement policy for CBD to provide more clarity to the industry and the public while the agency takes potential steps to establish a clear regulatory pathway, it remains unclear whether or when the FDA will ultimately issue such an enforcement policy.

Moreover, local, state, federal, and international CBD, hemp, and cannabis laws and regulations are rapidly changing and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance requirements or alteration of certain aspects of our business plan in the event that our CBD products become subject to new restrictions. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. It is also possible that regulations may be enacted in the future that will be directly applicable to our products. We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our activities in the hemp and CBD industry. The constant evolution of laws and regulations may require us to incur substantial costs associated with legal and compliance fees and ultimately require us to alter our business plan.

Our products contain CBD derived from hemp. The 2018 Farm Bill enacted a number of changes to the legal status of hemp and hemp products, including removal from the statutory list of controlled substances. However, implementation of the 2018 Farm Bill is ongoing, and there is still significant uncertainty regarding the legal status of hemp and hemp-based products under U.S. law.

Our products that contain CBD are subject to various state and federal laws regarding the production and sale of hemp-based products. Historically, the DEA had interpreted CBD to be subject to the Controlled Substances Act (the “CSA”) under the definition for “marijuana,” a Schedule I controlled substance. However, the 2018 Farm Bill removed “hemp,” from the definition of “marijuana.” “Hemp” is defined as the plant, Cannabis sativa L., and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (“THC”) concentration of not more than 0.3% on a dry weight basis. As a result of the enactment of the 2018 Farm Bill, and since we believe that the CBD contained in our products and the hemp from which it is derived meet the definition of “hemp,” we believe that our CBD products and the hemp from which they are derived are not Schedule I controlled substances under the CSA. However, there is a risk that we could be subject to enforcement action, including prosecution, if any of our products are determined not to meet the definition of “hemp” and to constitute “marijuana” under the CSA based on THC levels or other violations, which would have a negative impact on our business and operations.

In addition, the 2018 Farm Bill contained provisions that require the USDA, among other things, to promulgate a new regulatory framework that will govern the growth and cultivation of hemp, where hemp grown in compliance with the framework would be permitted in interstate commerce throughout the United States. On October 31, 2019, the USDA issued an interim final rule (“IFR”) establishing the regulations necessary for domestic hemp production, including provisions for the USDA to approve plans submitted by states and Native American tribes for the monitoring and regulation of hemp production at the state level. Effective March 22, 2021, The USDA issued the final rule, which creates the U.S. Domestic Hemp Production Program. The program provides requirements for maintaining records about the land where hemp is produced, testing the levels of total delta-9 tetrahydrocannabinol, disposing of non-compliant plants, licensing hemp producers, and ensuring compliance under the new program. The Agricultural Marketing Service (AMS), has been delegated authority to administer the U.S. Domestic Hemp Production Program. While the 2018 Farm Bill requires state and tribal plans to meet certain basic requirements as outlined in the IFR, nothing preempts or limits state or tribal laws that are more stringent than the 2018 Farm Bill, and the requirements for lawful hemp production will vary from state to state. We and our co-packers and suppliers must expend resources to monitor the evolving federal and state legal landscape for hemp production, and any violations of these laws, or alleged violations, could disrupt our business and result in a material adverse effect on our operations.

Within the United States, we and our co-packers and suppliers face a variety of state and local restrictions on the cultivation of hemp, and if state or local regulatory authorities take enforcement action to prevent us from selling our products, our business, financial condition, and results of operations could be materially adversely impacted.

The growth and cultivation of hemp is subject to a complex regulatory framework that is implemented and affected by multiple federal agencies, as well as state and local authorities. In 2014, four years prior to enacting the 2018 Farm Bill, Congress enacted the Agricultural Act of 2014 (the “2014 Farm Bill”) to allow for the limited growth and cultivation of industrial hemp under federal law. This statute allowed institutions of higher education and state departments of agriculture to grow and cultivate industrial hemp for agricultural or other academic research purposes, or for hemp to be grown under the auspices of a state agricultural pilot program, in states where such growth and cultivation is legal under state law. While the 2014 Farm Bill will be repealed after October 31, 2020, and although the 2018 Farm Bill created a pathway under which hemp and its derivatives, including CBD, would no longer be a Schedule I controlled substance under the CSA and would be protected from interference in interstate commerce, the USDA only recently issued the IFR that contains the regulatory framework that will govern the growth and cultivation of hemp, and, currently, several states continue to operate under the 2014 Farm Bill. Alongside the current federal regulatory developments, state and local authorities have enacted their own restrictions on the cultivation or sale of hemp or hemp-derived CBD, including laws that ban the cultivation or possession of hemp or any other plant of the cannabis genus and derivatives thereof, such as CBD. Currently, several states ban the cultivation and possession of hemp or CBD, while others have taken enforcement action against human food products that contain CBD, and states may enact new laws or regulations that prohibit or limit the sale of such products at any time. In the event of a change in federal or state laws and regulations that are adverse to our CBD products, we may be restricted or limited with respect to sale or distribution of those products, which could adversely impact our intended business plan with respect to such products.

The USDA has only recently issued the IFR and started accepting state and tribal hemp production plans for review, and it remains to be seen which states will submit their own regulatory plans for the cultivation of hemp and which will become subject to the USDA framework. The timing and content of state regulatory plans may impact our ability to obtain sufficient quantities of CBD at an acceptable price and on a timely basis. If our current co-packers and suppliers were to face increased regulation or be unable to continue to supply our business, we may be unable to fulfill orders for our products or find a suitable replacement co-packers and suppliers in a timely fashion or with comparable pricing. If our current co-packers or suppliers or any future co-packers or suppliers fail to comply with the applicable regulatory requirements, our business may suffer.

Changes in existing laws or regulations, including how such existing laws or regulations are enforced by federal, state, and local authorities, or the adoption of new laws or regulations may increase our costs and otherwise adversely affect our business, financial condition, and results of operations.

In addition to the legal framework applicable to hemp and CBD, the production and marketing of food products is highly regulated, and we and our co-packers and suppliers are subject to a variety of federal and state laws and regulations applicable to food. These laws and regulations apply to many aspects of our business, including the co-packing, packaging, labeling, distribution, advertising, sale, quality, and safety of our products. We could incur costs, including fines, penalties, and third-party claims, in the event of any violations of, or liabilities under, such requirements, including any competitor or consumer challenges relating to compliance with such requirements. For example, in connection with the marketing and advertising of our products, we could be the target of claims relating to false or deceptive advertising, including under the auspices of the FTC and state consumer protection statutes.

The regulatory environment in which we operate could change significantly and adversely in the future. The laws and regulations that apply to our products and business may change in the future and we may incur (directly or indirectly through our co-packers or suppliers) material costs to comply with current or future laws and regulations or any required product recalls. Any change in production, labeling, or marketing requirements for our products may lead to an increase in costs or interruptions in our production or raw material supply, either or both of which could adversely affect our operations and financial condition. For example, recent federal and state attention to the sale of CBD-containing products, and specifically food products that contain CBD, could result in standards or requirements that mandate changes to our current product ingredients, labeling, or marketing. New or revised government laws and regulations could significantly limit our ability to operate our business as it is currently being conducted, result in additional compliance costs, and, in the event of noncompliance, could lead to administrative or civil remedies, including fines, injunctions, withdrawals, recalls, or seizures and confiscations, as well as potential criminal sanctions.

Any such changes or actions by the FDA or other regulatory agencies could have a material adverse effect on our co-packers, our suppliers, and our business, financial condition, and results of operations.

Government scrutiny, warnings, and public perception could increase our costs of production and increase our legal and regulatory expenses, and if we are unable to comply with the applicable requirements for marketing beverages, we could face substantial civil and criminal penalties.

Producing, processing, labeling, packaging, storing, and distributing food products are activities that are subject to extensive federal, state, and local regulation. In the United States, these operations are regulated by the FDA and various state and local public health and agricultural agencies. The FDA Food Safety Modernization Act of 2011 provides direct recall authority to the FDA for food products and includes a number of other provisions that are designed to enhance food safety, including increased inspections by the FDA of domestic food facilities. Compliance with government regulation can be costly or may otherwise adversely affect our business. Moreover, failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions, which could in turn have a material adverse effect on our business, financial condition, and results of operations.

We operate in a highly regulated environment with constantly evolving legal and regulatory frameworks. Consequently, we are subject to heightened risk of legal claims, government investigations, or regulatory enforcement actions. Although we have implemented policies and procedures designed to ensure compliance with existing laws and regulations, there can be no assurance that our employees, temporary workers, contractors, or agents might not violate our policies and procedures. Moreover, a failure to maintain effective regulatory compliance policies and procedures could lead to violations, unintentional or otherwise, of laws and regulations. Legal claims, government investigations, or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws and regulations could subject us to civil and criminal penalties that could materially and adversely affect our product sales, reputation, financial condition, and operating results. In addition, the costs and other effects of defending potential and pending litigation and administrative actions against us may be difficult to determine and could materially adversely affect our business, financial condition, and results of operations.

Because there has been limited study on the effects of CBD, future nonclinical and clinical research studies and analysis of such studies by third parties, including government agencies, may lead to conclusions that dispute or conflict with our understandings and beliefs regarding the benefits, viability, safety, dosing, and social acceptance of CBD.

Research in the United States and internationally regarding the benefits, viability, safety, and dosing of isolated cannabinoids (such as CBD or THC) remains in relatively early stages. There have been few clinical trials on the benefits of CBD conducted on humans or animals, including studies focused on the consumption of CBD in foods.

Future research and clinical trials may draw opposing conclusions to statements contained in current articles, reports, and studies regarding CBD or could reach different or negative conclusions regarding the medical benefits, viability, safety, dosing, or other facts and perceptions related to CBD, which could adversely affect acceptance of CBD in foods and the demand for such products. Future research may also cause regulatory authorities to change how they enforce regulatory restrictions applicable to hemp and CBD. We cannot predict any negative research and clinical trial findings in the future that may have a material adverse impact on our business, financial condition, and results of operation.

Negative publicity from being in the hemp and CBD space could have a material adverse effect on our business, financial condition, and results of operations.

Hemp and marijuana are both varieties of the plant, Cannabis sativa L., except that hemp, as defined by federal law for exemption from Schedule I of the CSA, has a delta-9 THC concentration of not more than 0.3% on a dry weight basis. The same plant with a higher THC content is considered to be marijuana, which is legal for medical and recreational use under certain state laws, but which is not legal under federal law. The similarities between these plants can cause confusion, and our activities with hemp may be incorrectly perceived that we are involved in federally illegal marijuana activities.

Further, despite growing support for the cannabis industry and the legalization of marijuana in certain U.S. states, many individuals and businesses remain opposed to the cultivation and sale of cannabis and cannabis-derived products. Any negative publicity resulting from an incorrect perception that we operate in the marijuana space could result in a loss of current or future business. It could also adversely affect the public’s perception of us or our Common Stock and could lead to reluctance by new parties to do business with or to invest in us. We cannot assure you that additional business partners, including, but not limited to, financial institutions and distributors and resellers, will not attempt to end or curtail their relationships with us. Any such negative press or impacts to our business relationships could have a material adverse effect on our business, financial condition, and results of operations.

Our ability to deduct certain business expenses for income tax purposes is subject to uncertainty.

Section 280E of the Internal Revenue Code of 1986, as amended (the “Code”), prohibits the deduction of certain otherwise ordinary business expenses from carrying on any trade or business that consists of “trafficking” Schedule I or II controlled substances, as defined by the CSA. Under existing Internal Revenue Service guidance, the bulk of operating costs and general administrative costs of trades or businesses that are subject to Section 280E of the Code are not permitted to be deducted. Although the 2018 Farm Bill created a pathway under which hemp and its derivatives, including CBD, would no longer be a Schedule I controlled substance under the CSA, until the USDA implements regulations pursuant to the 2018 Farm Bill, we believe our ability to deduct certain ordinary business expenses requires compliance with the 2014 Farm Bill. We do not believe that Section 280E of the Code currently forbids our deduction of otherwise ordinary business expenses because we believe that we are in compliance with the 2014 Farm Bill and/or the products we sell are from co-packers and suppliers that are compliant with the 2014 Farm Bill. However, until the USDA promulgates regulations under the 2018 Farm Bill, governmentally determined non-compliance with the 2014 Farm Bill by us, our co-packers, or their suppliers may have a material adverse tax effect on us.

Risks Related to an Investment in Our Common Stock

There is currently a limited public market for our Common Stock; a trading market for our Common Stock may never develop; and our Common Stock prices may be volatile and could decline substantially.

Although our Common Stock is quoted on the OTCQB, an over-the-counter quotation system maintained by the OTCM, under the symbol “KGKG,” there has been no materialis a limited public market for our Common Stock. In the over-the-counter market, our stockholders may find it more difficult to obtain accurate quotations as to the market value of their shares of our Common Stock and may find fewer buyers to purchase their stock and fewer market makers to support its price than if our Common Stock were listed on a national securities exchange, such as the New York Stock Exchange, the NYSE-American, or the Nasdaq Stock Market. As a result of these and other factors, investors may be unable to resell shares of our Common Stock at or above the price at which they purchased them, at or near quoted bid prices, or at all. Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future, and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our Common Stock as currency.

We intend to list shares of our Common Stock on a national securities exchange in the future;Nasdaq Stock Market; but, we do not now, and may not in the future, meet theits initial listing standards, of any national securities exchange, which often providesi.e., bid or closing price and stockholders’ equity. We expect, but can give no assurance, that, as a more widely-traded and liquid market. Some, but not all,result of the factorsSpecific Reverse Split, we will meet the bid or closing price standard. Further, we expect, but can give no assurance that, may delay or preventas a result of this offering, we will meet the listing of shares of our Common Stock on a national securities exchange include the following: our stockholders’ equity may be insufficient;standard. We believe that we currently meet the market value of our outstanding Common Stock may be too low; our net income from operations may be too low or not sustained for the requisite period of time; our Common Stock may not be sufficiently widely held;other initial listing standards, but can give no assurance that we may not be able to secure market makers for our Common Stock; and we may failwill continue to meet other rules and requirements mandated by the several exchanges and markets to have our Common Stock listed.each of them. Should we fail to satisfy the initial listing standards of the national securities exchanges,Nasdaq Stock Market, or if our Common Stock is otherwise rejected for listing and remains quoted on the OTCQB or is suspended by the OTCM from the OTCQB, the quoted price of our Common Stock could suffer and the trading market for our Common Stock may become less liquid and our Common Stock price may be subject to increased volatility.

Therefore, an active, liquid, and orderly trading market for our Common Stock may not initially develop or be sustained, which could significantly depress the public price of our Common Stock and/or result in significant volatility, which could affect your ability to sell your shares of our Common Stock. Even if an active trading market were to develop for our Common Stock were to be sustained, the market price of our Common Stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates, and market conditions in general could have a significant impact on the future market price of our Common Stock.

We are not subject to the rules of aNasdaq or any other national securities exchange requiring the adoption of certain corporate governance measures and, as a result, our stockholders do not have the same protections. We are

Because our Common Stock is quoted on the OTCQB, andwe are not subject to the rules of a national securities exchange, such as the New York Stock Exchange, the NYSE American,NYSE-American, or the Nasdaq Stock Market. National securities exchanges generally require more rigorous measures relating to corporate governance that are designed to enhance the integrity of corporate management. The requirements of the OTCQB afford our stockholders fewer corporate governance protections than those of a national securities exchange. Until we comply with such greater corporate governance measures, even though such compliance is not required by the OTCM for quotations of shares of our Common Stock on the OTCQB, our stockholders will have fewer protections, such as those related to director independence, stockholder approval rights, and governance measures that are designed to provide oversight of a corporation’s management by its board of directors.

Our Common Stock is currently subject to the “penny stock” rules; accordingly, it could adversely affect the market price of our Common Stock and increase your transaction costs to sell those shares.

The SEC has adopted Rule 3a51-1, which defines a “penny stock” as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Because the price of our Common Stock is less than $5.00 (and we do not meet any of the alternative exemptive criteria), our Common Stock is deemed to be a penny stock. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires that a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our Common Stock.

Our stock price has been extremely volatile, which could cause the value of an investment in our Common Stock to decline.

The market price of our Common Stock has been extremely volatile and could be subject to significant fluctuations due to changes in sentiment in the market regarding our operations or business prospects, among other factors. The public price of our Common Stock following the date of this Prospectusprospectus also could be subject to wide fluctuations in response to the risk factors described in this Prospectusprospectus and others beyond our control, including:

In addition, the stock market in general has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results, and financial condition.

Because we are a “smaller reporting company,” we will not be required to comply with certain disclosure requirements that are applicable to other public companies and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.

We are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. As a smaller reporting company, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to:

We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100 million plus we have any public common equity float or public float of more than $700 million. We also would not be eligible for status as smaller reporting company if we become an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company.

Sales by our stockholders of a substantial number of shares of our Common Stock in the public market could adversely affect the market price of our Common Stock.

A substantial portion of the total outstanding shares of our Common Stock may be sold into the market at any time. Some of these shares are owned by our executive officers and directors, and we believe that such holders have no current intention to sell a significant number of shares of our stock. If all of the major stockholders were to decide to sell large amounts of stock over a short period of time, such sales could cause the market price of our Common Stock to drop significantly, even if our business were doing well.

Requirements associated with being a reporting public company will require significant company resources and management attention.

From and after December 31, 2020, we became subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC relating to public companies. We are working with independent legal, accounting, and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as an SEC reporting company. These areas include corporate governance, internal control, internal audit, disclosure controls, and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal control over financial reporting. However, we cannot provide assurances that these and other measures we may take will be sufficient to allow us to satisfy our obligations as an SEC reporting company on a timely basis. Further, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

In addition, compliance with reporting and other requirements applicable to SEC reporting companies will create additional costs for us, will require the time and attention of management, and will require the hiring of additional personnel and legal, audit, and other professionals. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs, or the impact that our management’s attention to these matters will have on our business and operations.

Our management constitutes some of our largest stockholders, which will allow them to exert significant control over our business and affairs and have actual or potential interests that may depart from those of investors.

As of September 20, 2021,[●], 2022, members of our management team beneficially owned approximately 46.21% of our Common Stock. As of September 20, 2021, but assuming that all of the May 2020 Warrant Shares, February 2021 Conversion Shares that remain outstanding, February 2021 Warrant Shares, August 2021 Conversion Shares, and August 2021 Warrant Shares are issued and sold by the Selling Stockholder, members of our management team would beneficially own approximately 35.95%[●]% of our Common Stock. As a result, management has the virtual unfettered ability to control substantially all matters submitted to our stockholders for approval including (i) election of our Board; (ii) removal of any of our directors; (iii) amendment of our Amended and Restated Certificate of Incorporation (our “A&R Certificate of Incorporation”) or our Amended and Restated Bylaws (our “A&R Bylaws”); and (iii) adoption of measures that could delay or prevent a change in control or impede a merger, takeover, or other business combination involving us.

In addition, management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

Any investors will own a minority percentage of our Common Stock and will have minority voting rights.

Our preferred stock may have rights senior to those of our Common Stock, which could adversely affect holders of our Common Stock.

Our A&R Certificate of Incorporation gives our Board the authority to issue one or more additional series of our preferred stock without a vote or any action by our stockholders. Our Board also has the authority to determine the terms of those various series of our preferred stock, including price, preferences, and voting rights. The rights granted to holders of shares of our preferred stock in the future may adversely affect the rights of holders of shares of our Common Stock. Any such authorized series of preferred stock may have a liquidation preference – a pre-set distribution in the event of a liquidation of our Company – that would reduce the amount available for distribution to the holders of shares of our Common Stock or may have dividend rights superior to those provided to the holders of shares of our Common Stock, which could reduce the amount of available for distribution as dividends to holders of shares of our Common Stock. In addition, an authorized series of our preferred stock may have voting rights that are superior to the voting right of the holders of shares of our Common Stock.

We do not expect to pay any cash dividends in the foreseeable future.

We intend to retain our future earnings, if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our Common Stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, and such other factors as our Board deems relevant. Accordingly, investors may need to sell their shares of our Common Stock to realize a return on their investment, and they may not be able to sell such shares at or above the price paid for them.

We can sell additional shares of our Common Stock without approval of our stockholders and without offering shares to existing stockholders, which would result in dilution of existing stockholders’ interests in us and could depress our stock price.price.

Our A&R Certificate of Incorporation authorizes 2,500,000,000 shares of our Common Stock, of which 872,772,8031,781,156,866 are issued and outstanding as of September 20, 2021;the date of this prospectus; 1,200,000 shares of our Series B Preferred Stock, of which 488,000 shares are issued and outstanding as of September 20, 2021;the date of this prospectus; 250 shares of our Series C Preferred Stock, of which 140no shares are issued and outstanding as of September 20, 2021;the date of this prospectus; and 500,000 shares of our Series D Preferred Stock, of which 500,000 shares are issued and outstanding as of September 20, 2021,the date of this prospectus, for an aggregate of 988,140988,000 issued and outstanding shares of our preferred stock as of September 20, 2021,the date of this prospectus, which shares of issued and outstanding shares of our preferred stock are convertible into an aggregate of 500,488,140500,488,000 shares of our Common Stock. Although our Board intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then-existing stockholders in connection with any future issuance of our capital stock, the future issuance of additional shares of our Common Stock or preferred stock convertible into shares of our Common Stock would cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have a material effect on the market value of the shares. In addition, the exercise price of any convertible debt securities or the conversion price of any convertible equity securities we may sell and issue in the future could be significantly lower than the market price of our Common Stock on the respective issuance, exercise, or conversion date. Alternatively, we could issue equity securities at a significant discount to the market price of our Common Stock on the issuance date, the occurrence of any of such events could have a material adverse effect on the market price of our Common Stock.

Further, shares of our Common Stock do not have preemptive rights, which means that we can sell shares of our Common Stock to other persons without offering the holders of shares of our Common Stock, or the purchasers in this offering, the right to purchase their proportionate share of such offered shares. Therefore, any additional sales of our capital stock by us could dilute an existing stockholder’s ownership interest in us.

We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our Common Stock less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act, enacted in April 2012. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the SOX Act, reduced disclosure obligations regarding executive compensation in this Prospectusannual report and our periodic reports and proxy statements, and exemptions from ‘thethe requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years following the year in which we complete this offering, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our Common Stock that is held by non-affiliates to exceed $700 million as of the prior June 30^th, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as thatthose standards apply to private companies. We have irrevocably elected to “opt out” of this exemption and, therefore, we will adopt new or revised accounting standards at the time public companies adopt the new or revised accounting standards and, therefore, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standards.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the SOX, and reduced disclosure obligations regarding executive compensation in this Prospectusannual report and our periodic reports and proxy statements, to the extent we are required to make such filings. We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

Provisions in our A&R Certificate of Incorporation and A&R Bylaws and Delaware law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.

Provisions contained in our A&R Certificate of Incorporation and A&R Bylaws could make it more difficult for a third party to acquire us. Provisions in our A&R Certificate of Incorporation and A&R Bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our A&R Certificate of Incorporation authorizes our Board to determine the rights, preferences, privileges, and restrictions of unissued series of our preferred stock without any vote or action by our stockholders. Thus, our Board can authorize and issue shares of our preferred stock with voting or conversion rights that could dilute the voting power of holders of other series of our capital stock. These rights may have the effect of delaying or deterring a change of control of us. Additionally, our A&R Certificate of Incorporation and/or A&R Bylaws establish limitations on the removal of directors and on the ability of our stockholders to call special meetings and include advance notice requirements for nominations for election to our Board and for proposing matters that can be acted upon at stockholder meetings.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), which prohibits an “interested stockholder” owning in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which such stockholder acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

See “Description of Securities – Anti-Takeover Effects of Provisions of Our A&R Certificate of Incorporation, Our A&R Bylaws and Delaware Law.” These provisions could limit the price that certain investors might be willing to pay in the future for shares of our Common Stock.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our A&R Certificate of Incorporation provides that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the DGCL, our A&R Certificate of Incorporation provides that:

We previously effected a dividend distribution of common stockCommon Stock of Elev8 Hemp, as our wholly-owned subsidiary, and Branded Legacy, Inc., formerly known as Elev8 Brands, Inc. and, prior to that, known as PLAD, Inc. (“Branded Legacy”), which may have violated Section 5 of the Securities Act.

The shares of common stock of Branded Legacy that we distributed to our stockholders were not registered under the Securities Act, and we may not have fully complied with SEC Legal Bulletin No. 4, which requires a company to satisfy five conditions in connection with the spin-off. As a result, we may have violated Section 5 of the Securities Act in that we did not file a registration statement with the SEC and have the same declared effective by the SEC prior to distributing the shares of Branded Legacy common stock. In addition, it is possible that the SEC could commence an enforcement action against us. For additional information regarding the dividend distribution, see “Management’s Discussion and Analysis and Results of Operations – Liquidity and Capital Resources” for additional information.

Risks Related to Our Securities and this Offering

Our share price is likely to be volatile and the market price of our shares of Common Stock after this offering may drop below the price you pay.

You should consider an investment in our securities as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. You may be unable to sell your securities at or above the initial public offering price due to fluctuations in the market price of our shares of Common Stock arising from changes in our operating performance or prospects.. Some of the factors that may cause the market price of our shares of Common Stock to fluctuate or decrease below the price paid in this offering include:

In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit and divert the time and attention of our management, which could seriously harm our business.

Substantial future sales of our shares of Common Stock, or the perception that these sales could occur, may cause the price of our shares of Common Stock to drop significantly, even if our business is performing well.

A large volume of sales of our shares of Common Stock could decrease the prevailing market price of our shares of Common Stock and could impair our ability to raise additional capital through the sale of equity securities in the future. Even if a substantial number of sales of our shares of Common Stock does not occur, the mere perception of the possibility of these sales could depress the market price of our shares of Common Stock and have a negative effect on our ability to raise capital in the future.

While the shares of our Common Stock are currently quoted on the OTCQB, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and the related rules and regulations implemented by the SEC, or Nasdaq, will increase legal and financial compliance costs and will make some compliance activities more time consuming. We are currently evaluating these rules, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention from our other business activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. In connection with this offering, we will increase our directors’ and officers’ insurance coverage which will increase our insurance cost. In the future, it may be more expensive or more difficult for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

Under the corporate governance standards of Nasdaq, a majority of our Board and each member of our audit committee must be an independent director no later than the first anniversary of the completion of this offering. We may encounter difficulty in attracting qualified persons to serve on our Board and the audit committee, and our Board and management may be required to divert significant time and attention and resources away from our business to identify qualified directors. If we fail to attract and retain the required number of independent directors, we may be subject to the delisting of our shares of Common Stock from Nasdaq.

We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our shares of Common Stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years following the completion of this offering, although, if we have more than $1.07 billion in annual revenue, if the market value of our shares of Common Stock held by non-affiliates exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion of non-convertible debt over a three-year period before the end of that five-year period, we would cease to be an “emerging growth company” as of the following December 31. Investors could find our shares of Common Stock less attractive if we choose to rely on these exemptions. If some investors find our shares of Common Stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our shares of Common Stock and our share price may be more volatile. We have elected not to take advantage of the extended transition period allowed for emerging growth companies for complying with new or revised accounting guidance as allowed by Section 107 of the JOBS Act and Section 7(a)(2)(B) of the Securities Act.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our shares of Common Stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our shares of Common Stock.

We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” for up to five years following this offering. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation. We have elected not to take advantage of the extended transition period allowed for emerging growth companies for complying with new or revised accounting guidance as allowed by Section 107 of the JOBS Act and Section 7(a)(2)(B) of the Securities Act.

There is no public market for the Pre-funded Warrants or the Common Stock Purchase Warrants being offered by us in this offering.

There is no current public trading market for the Pre-funded Warrants or the Common Stock Purchase Warrants and we do not expect a market to develop. In addition, we do not intend to apply to list the Pre-funded Warrants [or the Common Stock Purchase Warrants] on the Nasdaq Stock Market or other nationally recognized trading system, including the QTCQB. Without an active market, the liquidity of the Pre-funded Warrants and [the Common Stock Purchase Warrants] will be limited, which may adversely affect their value.

Holders of Pre-funded Warrants or Common Stock Purchase Warrants purchased in this offering will have no rights as common stockholders until such holders exercise their Pre-funded Warrants or Common Stock Purchase Warrants and acquire our shares of Common Stock.

Until holders of Pre-funded Warrants or Common Stock Purchase Warrants acquire our shares of Common Stock upon exercise thereof, such holders will have no rights with respect to our shares of Common Stock underlying the Pre-funded Warrants and Common Stock Purchase Warrants. Upon exercise of the Pre-funded Warrants or Common Stock Purchase Warrants, the holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

The Pre-funded Warrants and the Common Stock Purchase Warrants are speculative in nature.

The Pre-funded Warrants and the Common Stock Purchase Warrants do not confer any rights of share of Common Stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of Common Stock at a fixed price for a limited period of time. Following this offering, the market value of the Pre-funded Warrants and the Common Stock Purchase Warrants, if any, is uncertain and there can be no assurance that the market value of the Pre-funded Warrants and the Common Stock Purchase Warrants will equal or exceed their imputed offering price. The Pre-funded Warrants [and the Common Stock Purchase Warrants] will not be listed or quoted for trading on any market or exchange. There can be no assurance that the market price of the shares of Common Stock will ever equal or exceed the exercise price of the Pre-funded Warrants or the Common Stock Purchase Warrants, respectively, and consequently, it may not ever be profitable for holders of the Pre-funded Warrants and the Common Stock Purchase Warrants to exercise them.

Our management team will have broad discretion to use the net proceeds from this offering and its investment of these proceeds may not yield a favorable return. They may invest the proceeds of this offering in ways with which investors disagree.

Our management team will have broad discretion in the application of the net proceeds from this offering and could spend or invest the proceeds in ways with which our stockholders disagree. Accordingly, investors will need to rely on our management team’s judgment with respect to the use of these proceeds. We intend to use the proceeds from this offering in the manner described under “Use of Proceeds.” The failure by management to apply these funds effectively could negatively affect our ability to operate and grow our business.

We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering. In addition, the amount, allocation and timing of our actual expenditures will depend upon numerous factors, including milestone payments received from our strategic partnerships and royalties received on sale of our approved product and any future approved product.

Accordingly, we will have broad discretion in using these proceeds. Until the net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.

Investors in this offering will pay a much higher price than the book value of our shares of Common Stock and therefore you will incur immediate and substantial dilution of your investment.

The initial public offering price will be substantially higher than the net tangible book value per share of Common Stock based on the total value of our tangible assets less our total liabilities immediately following this offering. Therefore, if you purchase securities in this offering, you will experience immediate and substantial dilution of approximately $[●] per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering at an assumed initial public offering price of $[●] per security. As at [●], 2022, and giving effect to the Specific Reverse Split, we have issued [●] outstanding stock options and [●] outstanding Warrants to acquire shares of Common Stock. To the extent these outstanding options and Warrants are ultimately exercised, you will experience further dilution. See “Dilution.”

An active trading market for our shares of Common Stock may never develop or be sustained.

We have applied to list our shares of Common Stock on Nasdaq. However, there has been a limited public trading market on the QTCQB. We cannot assure you that an active trading market for our shares of Common Stock will develop on Nasdaq or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our shares of Common Stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of our shares of Common Stock when desired, or the prices that you may obtain for your shares of Common Stock.

We cannot assure you that the market price of our shares of Common Stock will remain high enough to have the intended effect of complying with Nasdaq’s minimum price requirement.

In connection with this offering and the intended uplisting of our shares of Common Stock to Nasdaq, we have effected the Specific Reverse Split at a ratio that currently achieves the requisite increase in the market price of our shares of Common Stock to allow us to obtain Nasdaq approval of our initial listing application. However, there can be no assurance that the market price of our shares of Common Stock following the Specific Reverse Split will remain at the level required for continuing compliance with that requirement. It is not uncommon for the market price of a company’s shares of Common Stock to decline in the period following a Reverse Split. If the market price of our shares of Common Stock declines following the effectuation of the Specific Reverse Split, the percentage decline may be greater than would occur in the absence of a Reverse Split. In any event, other factors unrelated to the number of shares of Common Stock outstanding, such as negative financial or operational results, could adversely affect the market price of our shares of Common Stock and thus jeopardize our ability to meet or maintain the Nasdaq’s minimum price requirement. If we are unable to satisfy these requirements or standards, we would not be able to meet the initial listing application standards, which could cause us to terminate the offering. We can provide no assurance that any such action taken by us would allow our shares of Common Stock to be listed, stabilize the market price, or improve the liquidity of our Common Stock, prevent our Common Stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.

We might be unable to list our shares of Common Stock on Nasdaq, or the OTCQB may delist our Common Stock, which could limit investors’ ability to make transactions in our Common Stock and subject us to additional trading restrictions.

We have applied to apply to list our shares of Common Stock on Nasdaq. In order to make a final determination of compliance with its listing criteria, Nasdaq may look to the first trading day’s activity and, particularly, the last bid price on such day. In the event the trading price for our shares of Common Stock drops below Nasdaq’s minimum bid or closing price requirements, Nasdaq could rescind our initial listing approval. If we fail to list the shares of Common Stock on Nasdaq, the liquidity for our shares of Common Stock would be significantly impaired, which may substantially decrease the trading price of our shares of Common Stock.

In addition, in the future, our Common Stock may fail to meet the continued listing requirements to be listed on Nasdaq. If Nasdaq delists our shares of Common Stock from trading on its exchange, we could face significant material adverse consequences, including:

Sales of a substantial number of our shares of Common Stock by our existing stockholders in the public market could cause our share price to fall.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our shares of Common Stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our shares of Common Stock could decline. Based on the number of shares of Common Stock outstanding as of , 2022, upon the closing of this offering, we will have outstanding a total of shares of Common Stock, assuming none of the Warrants issued in this offering are exercised and no sale of any Pre-funded Warrants. Of these shares, only the shares of Common Stock sold in this offering by us, plus any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable without restriction in the public market immediately following this offering, unless purchased by our affiliates. In connection with this offering, our officers, directors and significant stockholders have agreed to be subject to a contractual lock-up with the underwriters, which will expire 90 days after the date of this prospectus. The representatives, however, may, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

Shares of Common Stock that are either subject to outstanding options or are reserved for future issuance under our Equity Incentive Plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, any relevant lock-up agreements, and Rule 144 under the Securities Act of 1933, as amended, (the “Securities Act”). Additionally, shares of Common Stock that are issuable upon the exercise of outstanding Warrants to purchase shares of our Common Stock, and warrants to purchase shares of our Common Stock that may be granted in connection with the closing of this offering, will become eligible for sale in the public market to the extent permitted by the lock-up agreements and Rule 144 under the Securities Act, if the resale of which shares of Common Stock is not otherwise registered under the Securities Act. If these additional shares of Common Stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our shares of Common Stock could decline.

We do not expect to pay dividends in the future. As a result, any return on investment may be limited to the value of our Common Stock.

We do not anticipate paying cash dividends on our Common Stock in the foreseeable future. The payment of dividends on our Common Stock will depend on our earnings, financial condition and other business and economic factors as our Board may consider relevant. If we do not pay dividends, our shares of Common Stock may be less valuable because a return on an investment in our shares of Common Stock will only occur if our stock price appreciates.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Prospectus, including statements regarding our future financial position, business strategy and plans, objectives of management for future operations, and statements related to the expected effects on our business on our business from the COVID-19 pandemic, and other similar matters, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions described in “Risk Factors” and elsewhere in this Prospectus.

Other sections of this Prospectus may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a highly regulated, very competitive, and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or will occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We have an ongoing obligation to continually disclose material future changes in our Company and its operations.

MARKET, INDUSTRY AND OTHER DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our market position, market opportunity and market size, is based on information from various sources such as industry publications, on assumptions that we have made based on such data and other similar sources and on our knowledge of the markets for our products. These data involve a number of assumptions and limitations.

In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately $[●] million, based upon an assumed initial public offering price of $[●] per Common Stock Unit, without deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming none of the Warrants issued in this offering are exercised. If the underwriters exercise their over-allotment option to purchase additional shares and/or Pre-funded Warrants from us in full, we estimate that the gross proceeds will be approximately $[●] million without deducting underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase or decrease in the assumed initial public offering price of $[●] per Common Stock Unit would increase or decrease the net proceeds to us from this offering by approximately $[●] million, assuming the number of Common Stock Units and/or Pre-funded Warrant Units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of [●] in the number of securities offered by us would increase or decrease the net proceeds to us from this offering by approximately $[●] million, assuming the assumed initial public offering price remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

We are undertaking this offering in order to increase our liquidity and raise capital to broaden the market for our products, develop line extensions of our products, and increase our distribution operations, as well as for additional capital, capital expenditures and other general corporate purposes. We have not receive anyspecifically allocated the proceeds to those purposes as of the date of this prospectus. The precise amount and timing of the application of proceeds from the sale of securities will depend on our funding requirements and the August 2021 Conversion Shares or the August 2021 Warrant Shares by the Selling Stockholder. We will receive proceeds from our saleavailability and cost of the second of the August 2021 Debentures on later of (i) the SEC declaring effective the registration statement or (ii) November 1, 2021, in the amount of $1,440,000, net of the original issue discount of $60,000. We will receive proceeds from the exercise of the August 2021 Warrant, if exercised at all, as to which there can be no assurance. The maximum aggregate gross proceeds that we could receive from the full exercise of the August 2021 Warrant would be $3,000,000. We will bear all other costs, fees, and expenses incurred by us, or by the Selling Stockholder, in effecting the registration of the Securities covered by this Prospectus. The Selling Stockholder, however, will pay any other expenses incurred in selling the August 2021 Conversion Shares and August 2021 Warrant Shares, including any brokerage commissions or costs of sale.

DETERMINATION OF OFFERING PRICE

The Selling Stockholder will determine the price it may sell the Securities offered by this Prospectus, and such sales may be made at fixed prices, market prices prevailingfunds at the time of sale, varying prices determinedsale. Allocation of proceeds of a particular series of securities, or the principal reason for the offering if no allocation has been made, will be described in the applicable prospectus supplement or in any related free writing prospectus.

DIVIDEND POLICY

We have never paid any dividends on our shares of Common Stock or any of our other securities. We currently intend to retain any future earnings to finance the continued growth and development of our business and do not anticipate that we will declare or pay any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the time of sale, or at negotiated prices. We will not receive any proceeds from the sale of the Securities by the Selling Stockholder.

THE SELLING STOCKHOLDER

The sharesdiscretion of our Common Stock being offered byBoard and will be dependent upon our financial condition, results of operations, capital requirements, restrictions under any future indebtedness, and other factors the Selling Stockholder are issuable upon conversions of the August 2021 Debentures and by the exercises of the August 2021 Warrant. For additional information regarding the issuance of the August 2021 Debentures and the grant of the August 2021 Warrant, see “Description of Securities – Private Placement Transaction.” We are registering the resale of the August 2021 Conversion Shares and August 2021 Warrant Shares in order to permit the Selling Stockholder to offer them in the manners provided in this Prospectus for resaleBoard deems relevant from time to time. Except

CAPITALIZATION

The following table sets forth our cash as otherwise noted and except for the ownershipwell as capitalization as of the August 2021 Debentures issued and the August 2021 Warrant granted pursuantJune 30, 2022 after giving effect to the 2020 SPA,Specific Reverse Split:

You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus, and our financial statements and related notes thereto.

Each $1.00 increase (decrease) in the Selling Stockholder has not had any material relationship with us within the past three years.

The table below lists the Selling Stockholder and other information regarding the beneficial ownershipassumed combined public offering price of the shares of our$[●] per Common Stock Unit ($[●]), would increase (decrease) the pro forma amount of cash and cash equivalents, total stockholders’ equity and total capitalization by the Selling Stockholder. The second column listsapproximately $[●] million, assuming the number of shares of our Common Stock beneficially owned by the Selling Stockholder, based on its ownership of the August 2021 Debentures and the August 2021 Warrant, as of September 20, 2021, assuming conversion of all the August 2021 Debentures and exercise of the August 2021 Warrant held by the Selling Stockholder on that date, without regard to any limitations on conversions or exercises.

The third column lists the shares of our Common Stock beingUnits offered by us, as set forth on the cover page of this Prospectusprospectus, remains the same and without deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by the Selling Stockholder.

In accordance with the terms of the August 2021 Registration Rights Agreement with the Selling Stockholder, this Prospectus generally covers the resale of at least 340,677,266 shares of our Common Stock issuable to the Selling Stockholder pursuant to the August 2021 SPA. Because the conversion price of the August 2021 Debentures and the exercise price of the August 2021 Warrantus. We may be adjusted,also increase or decrease the number of shares that will actually be issued may be more or less thansecurities we are offering. Each increase (decrease) of [●] securities in the number of shares beingsecurities offered by this Prospectus.us would increase (decrease) the pro forma amount of cash and cash equivalents, total stockholders’ equity and total capitalization by approximately $[●], assuming that the assumed public offering price remains the same, and without deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The fourth column assumespro forma information discussed above is illustrative only and will be adjusted based on the sale of all of the shares offered by the Selling Stockholder pursuant to this Prospectus.

Under theactual public offering price and other terms of the August 2021 Debentures and the August 2021 Warrant, the Selling Stockholder cannot convert any portion of the August 2021 Debentures or exercise any portion of the August 2021 Warrant that would result in the Selling Stockholder, together with its affiliates, holding more than 4.99% of the then-outstanding shares of our Common Stock following such conversions or exercises, excluding for purposes of such determination shares of our Common Stock issuable upon conversions of the August 2021 Debentures or exercises of the August 2021 Warrant that have not been converted. The number of shares in the second column does not reflect this limitation. The Selling Stockholder may sell all, some or none of its August 2021 Conversion Shares or August 2021 Warrant Shares in this offering. See “Plan of Distribution.”offering determined at pricing.

The Selling Stockholder may also sell shares under Rule 144 under the Securities Act, if available, rather than under this Prospectus.

Broker-dealers engaged by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 2121; and, in the case of a principal transaction, a markup or markdown in compliance with FINRA Rule 2121.

In connection with the sale of shares of our Common Stock or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of our Common Stock in the course of hedging the positions they assume. The Selling Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities, which require the delivery to such broker-dealer or other financial institution of shares offered by this Prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this Prospectus (as supplemented or amended to reflect such transaction).

The Selling Stockholder and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute our Common Stock. In no event shall any broker-dealer receive fees, commissions, and markups which, in the aggregate, would exceed eight percent (8%).

We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the Selling Stockholder against certain losses, claims, damages, and liabilities, including liabilities under the Securities Act.

Because the Selling Stockholder may be deemed to be an “underwriter” within the meaning of the Securities Act, it will be subject to the Prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this Prospectus that qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this Prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the August 2021 Conversion Shares and the August 2021 Warrant Shares by the Selling Stockholder.

We agreed to keep this Prospectus effective until the earlier of (i) the date on which the August 2021 Conversion Shares and the August 2021 Warrant Shares may be resold by the Selling Stockholder without registration and without regard to any current public information requirements by reason of Rule 144(b)(i) under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this Prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the August 2021 Conversion Shares and the August 2021 Warrant Shares may not simultaneously engage in market making activities with respect to our Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our Common Stock by the Selling Stockholder or any other person. We will make copies of this Prospectus available to the Selling Stockholder and have informed it of the need to deliver a copy of this Prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

DESCRIPTION OF SECURITIES

General

The following summary includes a description of material provisions of our capital stock; however, the description does purport to be complete and is subject to, and is qualified by, our A&R Certificate of Incorporation, our Certificate of Designation of the Preferences, Rights, and Limitations of our Series B Convertible Preferred Stock, Certificate of Designation of the Preferences, Rights, and Limitations of our Series C Convertible Preferred Stock, our Certificate of Designation of the Preferences, Rights, and Limitations of our Series D Convertible Preferred Stock, and our A&R Bylaws, all of which are filed as exhibits to this Registration Statement of which this Prospectus is a part.

Authorized and Outstanding Securities

We have authorized 2,500,000,000 shares of our Common Stock, par value of $0.00001 per share, of which 872,772,803 shares were issued and outstanding as of September 20, 2021. We have authorized 10,000,000 shares of our preferred stock, par value of $0.00001, of which 988,140 shares were issued and outstanding as of September 20, 2021. The following table sets forth the authorized and issued and outstanding securities as of September 20, 2021:

Common Stock

The holders of shares of our Common Stock are entitled to one vote per share on all matters requiring a vote of the stockholders, including the election of directors. Holders of shares of our Common Stock do not have cumulative voting rights. Holders of shares of our Common Stock are entitled to share ratably in dividends, if any, as may be declared from time to time by our Board in its discretion from funds legally available therefor, subject to preferences that may be applicable to our preferred stock, if any, then outstanding. We have never declared any dividends and, at present, we have no plans to declare any dividends. In the event of a liquidation, dissolution, or winding up of the Company, the holders of shares of our Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities, subject to prior distribution rights of our preferred stock, if any, then outstanding. Our Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our Common Stock.

Preferred Stock

Our A&R Certificate of Incorporation authorizes our Board, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time one or more series of our preferred stock, par value $0.00001 per share, and to designate the rights, privileges, preferences, restrictions, and limitations of any given series of preferred stock. Accordingly, our Board, without stockholder approval, may issue shares of our preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of our Common Stock. The issuance of our preferred stock could have the2022] after giving effect of restricting dividends payable to holders of our Common Stock, diluting the voting power of our Common Stock, impairing the liquidation rights of our Common Stock, or delaying or preventing a change in control of us, all without further action by our stockholders.

Series A Preferred Stock

The holders of shares of our Series A Preferred Stock did not have voting rights and were not entitled to share ratably in dividends, if any, as could have been declared from time to time by our Board in its discretion from funds legally available therefor, subject to preferences that could have been applicable to our preferred stock, if any, then issued and outstanding. In the event of a liquidation, dissolution, or winding up of the Company, the holders of shares of our Series A Preferred Stock could have been entitled to share pro rata all assets remaining after payment in full of all liabilities, subject to prior distribution rights of our preferred stock, if any, then issued and outstanding. Our Series A Preferred Stock had conversion rights, whereby each share of our Series A Preferred Stock was convertible into one share of our Common Stock. On July 10, 2020, all then-issued and outstanding shares of our Series A Preferred Stock were converted. On July 13, 2020, we amended and restated our A&R Certificate of Incorporation, which had the effect of formally withdrawing the designation for our Series A Preferred Stock. Accordingly, our Series A Preferred Stock no longer exists as of the date hereof.

Series B Preferred Stock

The holders of shares of our Series B Preferred Stock do not have voting rights and are not entitled to share ratably in dividends, if any, as may be declared from time to time by our Board in its discretion from funds legally available therefor, subject to preferences that may be applicable to our preferred stock, if any, then issued and outstanding. In the event of a liquidation, dissolution, or winding up of our Company, the holders of shares of our Series B Preferred Stock are entitled to share pro rata $1.00 as a liquidation preference. Originally, each share of our Series B Preferred Stock had conversion rights, whereby each share of our Series B Preferred Stock was convertible into 1,000 shares of our Common Stock. On July 12, 2018, we amended the designation such that each share of our Series B Preferred Stock could then be converted into one share of our Common Stock.

Series C Preferred Stock

The holders of shares of our Series Preferred C Stock are entitled to 2,000,000, votes for every share of our Series Preferred C Stock held. The holders of our Series Preferred C Stock are not entitled to receive dividends. Upon any liquidation, dissolution, or winding up of our Company, whether voluntary or involuntary, before any distribution or payment will be made to the holders of any stock ranking junior to our Series C Preferred Stock, the holders of our Series C Preferred Stock will be entitled to be paid out of our assets an amount equal to $1.00 in the aggregate for all issued and outstanding shares of our 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 our Series C Preferred Stock, our remaining assets legally available for distribution, if any, will be distributed ratably to the holders of our Common Stock. Our Series C Preferred Stock has conversion rights, whereby each share of our Series C Preferred Stock automatically converts into one share of our Common Stock on the one-year anniversary of the issuance date. Prior to July 8, 2020, the Certificate of Designation for our Series C Preferred Stock provided for conversion rights, whereby each share of our Series C Preferred Stock was convertible into 1,000 shares of our Common Stock.

Series D Preferred Stock

The holders of shares of our Series D Preferred Stock have full voting rights and powers equal to the voting rights and powers of the holders of shares of our Common Stock. The holders of shares of our Series D Preferred Stock, voting as a separate class, are entitled to elect a majority of our directors. The holders of shares of our Common Stock and other classes and series of our capital stock, voting together as a single class, are entitled to elect our remaining directors. The holders of shares of our Series D Preferred Stock do not have any preferential dividend rights and are entitled to receive dividends, if any, only if, when, and as declared by our Board. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any stock ranking junior to our Series D Preferred Stock, the holders of our Series D Preferred Stock will be entitled to be paid out of our assets an amount equal to $1.00 in the aggregate for all issued and outstanding shares of Series D Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations, and the like with respect to such shares). After the payment of the full applicable Preference Value of each share of our Series D Preferred Stock, our remaining assets legally available for distribution, if any, will be distributed ratably to the holders of our Common Stock. Our Series D Preferred Stock has conversion rights, whereby each share of Series D Preferred Stock is convertible into 1,000 shares of our Common Stock.

May 2020 Warrant; February 2021 Warrant; August 2021 Warrant

Other than the May 2020 Warrant, the February 2021 Warrant, and the August 2021 Warrant granted in connection with the May 2020 Private Placement, the February 2021 Private Placement and the August 2021 Private Placement, respectively, we do not have any other outstanding warrants. See “Private Placement Transactions” below for additional information regarding the May 2020 Warrant, the February 2021 Warrant, and the August 2021 Warrant.

Options

We currently do not have any options outstanding.

May 2020 Private Placement Transaction

In May 2020, we completed the Private Placement of the May 2020 Debentures and the May 2020 Warrant. We sold and issued the First May 2020 Debenture and granted the May 2020 Warrant promptly after entering into the SPA. We sold and issued the Second May 2020 Debenture promptly after filing this Registration Statement initially. We sold and issued the Third May 2020 Debenture promptly after filing the Annual Report for the period ending December 31, 2020. The May 2020 Debentures mature 12 months from their respective issuance dates and are secured by all of our assets and the assets of each of our subsidiaries. The May 2020 Debentures accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the May 2020 Debentures or otherwise accelerates the maturity date, as provided for in the May 2020 Debentures). Interest is payable either in cash or, if certain Equity Conditions are then satisfied, in shares of our Common Stock at the Market Conversion Price on the trading day immediately prior to the date paid.

Initially, the May 2020 Debentures are convertible at the lower of the (i) Fixed Conversion Price or (ii) Market Conversion Price. The May 2020 Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the May 2020 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversion (excluding, for purposes of such determination, shares of our Common Stock issuable upon conversion of the May 2020 Debentures or exercise of the May 2020 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% “conversion blocker” to 9.99% upon at least 65 days’ prior written notice to us.

At our option, we have the right to redeem, in part or in whole, the outstanding principal and interest under the May 2020 Debentures prior to their respective maturity dates; provided, that, as of the date of the holder’s receipt of the redemption notice, (i) the lowest daily volume weighted average price (“VWAP”) of our Common Stock is less than the Fixed Conversion Price and (ii) there is no Equity Conditions failure. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as the Redemption Premium. We must provide the holder 15 business days’ advance notice of our intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem plus the applicable Redemption Premium.

The May 2020 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the Fixed Conversion Price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Fixed Conversion Price of the May 2020 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the May 2020 Debentures.

We also granted the May 2020 Warrant to purchase up to an aggregate of 20 million shares of our Common Stock. The May 2020 Warrant has a three-year term and is immediately exercisable at an exercise price of $0.05 per share, subject to adjustment. If we fail to maintain an effective registration statement with the SEC covering the resale of the May 2020 Warrant Shares, or if an Event of Default has occurred and is continuing, then the holder may exercise the May 2020 Warrant on a “cashless” basis.

The May 2020 Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current exercise price of the May 2020 Warrant. For example, if we issued shares of our Common Stock at $0.02 per share, then the exercise price of the May 2020 Warrant would be adjusted to $0.02 per share. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the exercise price of the May 2020 Warrant.

The May 2020 Warrant is subject to an “exercise blocker,” such that the Selling Stockholder cannot exercise any portion of the May 2020 Warrant that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such exercise (excluding, for purposes of such determination, shares of our Common Stock issuable upon exercise of the May 2020 Warrant or conversion of the May 2020 Debentures that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% “exercise blocker” to 9.99% upon at least 65 days’ prior written notice to us.

Pursuant to the terms of the May 2020 Registration Rights Agreement, we filed a registration statement with the SEC registering for resale the May 2020 Conversion Shares and the May 2020 Warrant Shares. All of the May 2020 Conversion Shares were sold pursuant to that Registration Statement. We also agreed, among other things, to indemnify the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by us in connection with the registration of the Securities held by the Selling Stockholder.

February 2021 Private Placement Transaction

On February 18, 2021, we completed the February 2021 Private Placement of the February 2021 Debentures and the February 2021 Warrant. We sold and issued the First February 2021 Debenture and granted the February 2021 Warrant promptly after entering into the February 2021 SPA. We sold and issued a “partial” Second February 2021 Debenture on May 6, 2021 in the original principal amount of $200,000. We will issue and sell the balance of the Second February 2021 Debenture in the original principal amount of $400,000 when this Registration Statement, which we are obligated to file, has been declared effective by the SEC. The February 2021 Debentures mature 12 months from their respective issuance dates and are secured by all of our assets and the assets of each of our subsidiaries. The February 2021 Debentures accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the February 2021 Debentures or otherwise accelerates the maturity date, as provided for in the February 2021 Debentures). Interest is payable either in cash or, if certain Equity Conditions are then satisfied, in shares of our Common Stock at the Market Conversion Price on the trading day immediately prior to the date paid.

Initially, the February 2021 Debentures are convertible at the lower of the (i) February 2021 Fixed Conversion Price of $0.03 per share or (ii) the February 2021 Market Conversion Price. The February 2021 Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the February 2021 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversion (excluding, for purposes of such determination, shares of our Common Stock issuable upon conversion of the February 2021 Debentures or exercise of the February 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% “conversion blocker” to 9.99% upon at least 65 days’ prior written notice to us.

At our option, we have the right to redeem, in part or in whole, the outstanding principal and interest under the February 2021 Debentures prior to their respective maturity dates; provided, that, as of the date of the holder’s receipt of the redemption notice, (i) the VWAP of our Common Stock is less than the Fixed Conversion Price and (ii) there is no Equity Conditions failure. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as the 115% Redemption Premium. We must provide the holder 15 business days’ advance notice of our intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem plus the applicable Redemption Premium.

The February 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the Fixed Conversion Price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Fixed Conversion Price of the February 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the February 2021 Debentures.

We also granted the February 2021 Warrant to purchase up to an aggregate of 50 million shares of our Common Stock. The February 2021 Warrant has a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If we fail to maintain an effective registration statement with the SEC covering the resale of the February 2021 Warrant Shares, or if an Event of Default has occurred and is continuing, then the holder may exercise the February 2021 Warrant on a “cashless” basis.

The February 2021 Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current exercise price of the February 2021 Warrant. For example, if we issued shares of our Common Stock at $0.02 per share, then the exercise price of the February 2021 Warrant would be adjusted to $0.02 per share. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the exercise price of the February 2021 Warrant.

The February 2021 Warrant is subject to an “exercise blocker,” such that the Selling Stockholder cannot exercise any portion of the February 2021 Warrant that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such exercise (excluding, for purposes of such determination, shares of our Common Stock issuable upon exercise of the February 2021 Warrant or conversion of the February 2021 Debentures that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% “exercise blocker” to 9.99% upon at least 65 days’ prior written notice to us.

Pursuant to the terms of the February 2021 Registration Rights Agreement, we agreed to file this registration statement with the SEC registering for resale the shares of our Common Stock underlying the February 2021 Debentures and the February 2021 Warrant within 30 calendar days following the closing of the Private Placement. We have received a waiver of that time limit from the Selling Stockholder. We also agreed, among other things, to indemnify the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by us in connection with the registration of the Securities held by the Selling Stockholder.

August 2021 Private Placement Transaction

On August 20, 2021, we completed the August 2021 Private Placement of the August 2021 Debentures and the August 2021 Warrant. We sold and issued the first August 2021 Debenture and granted the August 2021 Warrant promptly after entering into the August 2021 SPA. We will issue and sell the second August 2021 Debenture in the original principal amount of $1,500,000, promptly upon the later of (i) the SEC declaring effective the Registration Statement or (ii) November 1, 2021. The August 2021 Debentures mature 12 months from their respective issuance dates and are secured by all of our assets and the assets of each of our subsidiaries. The August 2021 Debentures accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the August 2021 Debentures or otherwise accelerates the maturity date, as provided for in the August 2021 Debentures). Interest is payable either in cash or, if certain Equity Conditions are then satisfied, in shares of our Common Stock at the Market Conversion Price on the trading day immediately prior to the date paid.

Initially, the August 2021 Debentures are convertible at the lower of the (i) August 2021 Fixed Conversion Price of $0.03 per share or (ii) the August 2021 Market Conversion Price. The August 2021 Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the August 2021 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversion (excluding, for purposes of such determination, shares of our Common Stock issuable upon conversion of the August 2021 Debentures or exercise of the August 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% “conversion blocker” to 9.99% upon at least 65 days’ prior written notice to us.

At our option, we have the right to redeem, in part or in whole, the outstanding principal and interest under the August 2021 Debentures prior to their respective maturity dates; provided, that, as of the date of the holder’s receipt of the redemption notice, (i) the VWAP of our Common Stock is less than the Fixed Conversion Price and (ii) there is no Equity Conditions failure. We must pay an amount equal to the principal amount being redeemed plus outstanding and accrued interest thereon, as well as the 115% Redemption Premium. We must provide the holder 15 business days’ advance notice of our intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem plus the applicable Redemption Premium.

The August 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the Fixed Conversion Price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Fixed Conversion Price of the August 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the August 2021 Debentures.

We also granted the August 2021 Warrant to purchase up to an aggregate of 100 million shares of our Common Stock. The August 2021 Warrant has a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If we fail to maintain an effective registration statement with the SEC covering the resale of the August 2021 Warrant Shares, or if an Event of Default has occurred and is continuing, then the holder may exercise the August 2021 Warrant on a “cashless” basis.

The August 2021 Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current exercise price of the August 2021 Warrant. For example, if we issued shares of our Common Stock at $0.02 per share, then the exercise price of the August 2021 Warrant would be adjusted to $0.02 per share. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the exercise price of the August 2021 Warrant.

The August 2021 Warrant is subject to an “exercise blocker,” such that the Selling Stockholder cannot exercise any portion of the August 2021 Warrant that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such exercise (excluding, for purposes of such determination, shares of our Common Stock issuable upon exercise of the August 2021 Warrant or conversion of the August 2021 Debentures that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% “exercise blocker” to 9.99% upon at least 65 days’ prior written notice to us.

Pursuant to the terms of the August 2021 Registration Rights Agreement, we agreed to file this registration statement with the SEC registering for resale the shares of our Common Stock underlying the August 2021 Debentures and the August 2021 Warrant within 30 calendar days following the closing of the Private Placement. We have received a waiver of that time limit from the Selling Stockholder. We also agreed, among other things, to indemnify the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by us in connection with the registration of the Securities held by the Selling Stockholder.

Penny Stock Considerations

Our Common Stock is deemed to be “penny stock,” as that term is generally defined in the Exchange Act to mean an equity security with a per-share price of less than $5.00. Our shares of Common Stock, thus, will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 (excluding the value of the individual’s house) or an individual, who, in the two prior years had, and has a reasonable expectation that in the current year will have, an annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered to be an accredited investor. In addition, under the penny stock regulations, the broker-dealer is required to:

Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our Common Stock, which may affect the ability of the Selling Stockholder or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our Common Stock. In addition, the liquidity for shares of our Common Stock may be decreased, with a corresponding decrease in the price of those shares. Our shares of Common Stock are likely to be subject to such penny stock rules for the foreseeable future.

Anti-Takeover Effects of Provisions of Our A&R Certificate of Incorporation, Our A&R Bylaws, and Delaware Law

Some provisions of our A&R Certificate of Incorporation, our A&R Bylaws, and Delaware law could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that our stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that provide for payment of a premium over the market price for our shares of Common Stock.

These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Undesignated Preferred Stock

The ability of our Board, without action by our stockholders, to issue up to 9,011,860 shares of our undesignated preferred stock with voting or other rights or preferences solely as designated by our Board could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our Company.

Stockholder Meetings

Our A&R Bylaws provide that a special meeting of stockholders may be called only by the Chair of our Board, our Chief Executive Officer, our president, or a majority of the members of our Board.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our A&R Bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of our Board or a committee of our Board. Additionally, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders.

Removal of Directors

Our A&R Bylaws provide that a director may be removed from office by our stockholders with or without cause, upon the approval of the holders of at least a majority in voting power of the outstanding shares of stock entitled to vote in the election of directors.

Stockholders Not Entitled to Cumulative Voting

Our A&R Certificate of Incorporation does not permit stockholders to cumulate their votes in the election of directors.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the DGCL, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or, in certain cases, within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our Board.

Choice of Forum

Our A&R Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers (or affiliate of any of the foregoing) to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or of our A&R Certificate of Incorporation or our A&R Bylaws, or (iv) any other action asserting a claim arising under, in connection with, and governed by the internal affairs doctrine; provided, that the exclusive forum provisions will not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our A&R Bylaws described in the preceding sentence.

Amendment of the Provisions of our A&R Bylaws

Our A&R Bylaws provide that our Board has the power to make, amend, alter, or repeal our A&R Bylaws.

Amendment of Charter Provisions

Our A&R Certificate of Incorporation may be amended as provided for by Delaware law.

The provisions of Delaware law, our A&R Certificate of Incorporation, and our A&R Bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our Common Stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our Board and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Conflicts of Interest

Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors, or stockholders. Our A&R Bylaws provide that no contract or other transaction between us and one or more of our directors or any other corporation, firm, association, or entity in which one or more of our directors are directors or officers or are financially interested, will be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of our Board or one of its committees that authorizes, approves, or ratifies such contract or transaction or because his, her, or their votes are counted for such purpose, if: (i) the fact of such relationship or interest is disclosed or known to our Board or committee thereof that authorizes, approves, or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; (ii) the fact of such relationship or interest is disclosed or known to the stockholders entitled to vote and they authorize, approve, or ratify such contract or transaction by vote or written consent; or (iii) the contract or transaction is fair and reasonable to us at the time it is authorized by our Board, a committee thereof, or the stockholders. Conflicted or interested directors may be counted in determining the presence of a quorum at a meeting of our Board or a committee thereof that authorizes, approves, or ratifies such contract or transaction.

Limitation of Liability and Indemnification Matters

Our A&R Certificate of Incorporation limits the liability of our directors for monetary damages for breach of their fiduciary duty as directors, except to the extent such exemption or limitation thereof is not permitted under the DGCL and applicable law. Delaware law provides that such a provision may not limit the liability of directors:

For additional information regarding our capital structure, see “Description of Share Capital.”

DILUTION

Investors purchasing Common Stock Units and/or Pre-funded Warrant Units in this offering will experience immediate and substantial dilution in the as adjusted net tangible book value of their shares of Common Stock. Dilution in as adjusted net tangible book value represents the difference between the assumed public offering price per Unit and the as adjusted net tangible book value per share of Common Stock immediately after the offering.

The historical net tangible book value of our shares of Common Stock as of [June 30, 2022] was $[●] or $[●] per share after giving effect to the Specific Reverse Split. Historical net tangible book value per share of Common Stock represents our total tangible assets (total assets, less intangible assets) fewer total liabilities divided by the number of shares of Common Stock outstanding as of that date after giving effect to the Specific Reverse Split.

After giving effect to the sale of Common Stock Units in this offering (assuming no Pre-funded Warrant Units are sold in this offering and excluding the shares of Common Stock issuable upon the exercise of the Common Stock Purchase Warrants being offered in this offering) at the assumed offering price of $[●] per Common Stock Unit ($[●] per Common Stock Unit) (which is based on $[●] per share of Common Stock which is the closing price of our shares of Common Stock on the OTCQB on [September [●], 2022], giving effect to a Reverse Splits ratio of one-for-[●]), and without deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of[June 30, 2022 would have been $[●], or $[●] per share. The assumed offering price may not be the final price of the Offering and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing. This amount represents an immediate increase in net tangible book value of $[●] per share to our existing stockholders and an immediate dilution in net tangible book value of approximately $[●] per share to new investors purchasing our shares of Common Stock in this offering. We determine dilution by subtracting the net tangible book value per share after the offering from the amount of cash that a new investor paid for a Common Stock Unit.

The following table illustrates this dilution on a per share basis after giving effect to the Specific Reverse Split:

If the underwriters exercise their option to purchase [●] additional shares of Common Stock and/or Common Stock Purchase Warrants, the as adjusted net tangible book value of our shares of Common Stock after this offering would be $[●] or $[●] per share representing an immediate increase in net tangible book value of approximately $[●] per share to existing stockholders and an immediate dilution of $[●] per share to the investors in this offering, without deducting the underwriting discount and estimated offering expenses payable by us.

The number of shares of Common Stock to be outstanding after this offering is based on [●] shares of Common Stock outstanding as of September [●], 2022 after giving effect to the Specific Reverse Split, and excludes:

Any amendment, repeal,The above discussion reflects the one-for-[●] Specific Reverse Split of our issued and outstanding shares of Common Stock, options and Warrants and the corresponding adjustment of all stock option and Warrant exercise prices per share.

To the extent that outstanding options or modificationWarrants are exercised, you may experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these provisions willsecurities may result in further dilution to our stockholders.

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 years ended December 31, 2021 and 2020 should be prospective onlyread in conjunction with the financial statements and wouldrelated notes and the other financial information that are included elsewhere in this Annual 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 limitationforward-looking statements made by us, or on liabilityour 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 director for actsnumber 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 omissionsoral statements that occurred priorare “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 amendment, repeal, or modification.statements are based are assumptions concerning uncertainties, including, but not limited to, uncertainties associated with the following:

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.

Results of Operations

Overview

Our A&R Certificatebusiness has grown rapidly since inception in 2015, and we anticipate that our business will continue to grow significantly. In the year ended December 31, 2021, the Company saw an increase in growth compared to fiscal year 2020, 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. The Company acquired S and S in early 2021, which increased our product variety, resulting in the commencement of Incorporation also requires us to pay any expenses incurrednew distribution contracts. In the prior fiscal year 2020, the Company had unforeseen delays in signing more favorable agreements with larger, reputable tier 1 and mid-size distributors and grocery chains and we were additionally impacted by any director or officer in defending against any such action, suit, or proceeding in advancethe COVID-19 pandemic during the fiscal year. The COVID-19 pandemic delayed our launch of a variety of new products during most of the final disposition2020 fiscal year – drinks and non-drink line broadening items.

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 our energy drinks, our HighDrate CBD-infused energy waters, and our apparel, such matteras t-shirts and hats. In early 2021, we broadened our product line to include Ooh La Lemin lemonade. 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 increase in fiscal year 2022 compared to fiscal year 2021, 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 anticipate 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.

Year ended December 31, 2021 compared to Year ended December 31, 2020

Overview

As reflected in the accompanying financial statements, during the year ended December 31, 2021, we incurred a net loss of approximately $7.0 million and used cash in operations of approximately $2.7 million, compared to a net loss of approximately $3.1 million and use of cash in operations of approximately $1.4 million for the year ended December 31, 2020. As of December 31, 2021, we had a stockholders’ deficit of approximately $4.1 million.

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

Revenue

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

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

During the year ended December 31, 2021, we reported net revenues of approximately $2.5 million, which is an increase of approximately $1.6 million, or approximately 172%, compared to net revenues of approximately $910,200 for the year ended December 31, 2020. An increase of approximately $536,300 of our revenue is attributable to increased product sales, while our retail revenue increased in net revenue by approximately $1.1 million. We attribute the increase in sales of our products to our current distributors and new distributors, who had been, and whose clients had been, affected by COVID-19. We saw that those distributors had resumed a more normalized business practice and we and they saw fewer COVID-19 pandemic-related distribution impacts. Additionally, we broadened our product line to include Ooh La Lemin lemonade through an acquisition in early 2021, which resulted in signing more favorable agreements with larger, reputable tier 1 and mid-size distributors and grocery chains. The significant increase in our retail revenue is attributed to customers, who had been, and whose clients had been, affected by COVID-19. We also saw here that retail sales and distribution had resumed a more normalized practice and we and they saw fewer COVID-19 pandemic-related impacts. Additionally, the Company attributes the increase to our retail revenue to an increase in the Company’s sales team and the addition of a second distribution hub. We expect that our product revenue will increase in fiscal year 2022 compared to fiscal year 2021, we anticipate as 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 fullest extent permitted by law, subjectprocessing 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.

During the year ended December 31, 2021, we reported cost of revenues of approximately $2.14 million, which is an increase of approximately $1.5 million, or approximately 228%, compared to approximately $654,200 for the year ended December 31, 2020. This increase is attributed to an increase in sales in both our products and retail distribution in 2021, compared to the receiptprior year period. The cost of revenues increase was larger than the increase in revenues. This is primarily attributed to increased costs 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 undertakingincreased cost of revenues in fiscal year 2022, primarily due to an anticipated increase in revenues. 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.

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 year ended December 31, 2021, to $3.4 million from $2.6 million, an increase of $769,055 over the same period last year. The increase was driven by or on behalfincreased operating expenses associated with our acquisition of such personSand S, advertising and marketing, travel expenses, and licensing and filing fees, partially offset by lower legal settlements and stock compensation. We expect that as we expand our business operations, SG&A expenses will continue to repay all amounts so advanced if it shall ultimately beincrease.

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.

Impairment of Goodwill

Impairment of goodwill for the year ended December 31, 2021 was $1.3 million. In December 2021, we determined that such personour goodwill asset was impaired and recorded an impairment charge accordingly. (See Note 5 to the accompanying consolidated financial statements). No similar activity occurred during the current year period.

Other Income and Expenses

Other expense for the year ended December 31, 2021 was $2.6 million, as compared to other expense of $766,821 for the year ended December 31, 2020. The change in balance was due to the recording of financing costs of $1,335,000, a loss on extinguishment of debt of $1,056,732, offset by a gain on forgiveness of PPP loans of $212,648 during the year ended December 31, 2021, all of which did not exist in the prior year period. Additionally, we realized the change in the fair value of derivative liability of $910,866, and the change in interest expense of $563,419, as compared to the prior year period.

Net Loss

We incurred a net loss of approximately $7.0 million for the year ended December 31, 2021, an increase of approximately $3.9 million compared to the previous year ending December 31, 2020, in which we incurred a net loss of approximately $3.1 million. This net loss is primarily due to our increase in gross profit, offset by increased SG&A expenses, the impairment of goodwill charge associated with our 2021 acquisition, and the increase in other expenses, as discussed above.

Three Months ended June 30, 2022 compared to Three Months ended June 30, 2021

Overview

As reflected in the accompanying financial statements, during the three months ended June 30, 2022, we incurred a net loss of approximately $1,388,525, compared to a net loss of approximately $373,214 for the three months ended June 30, 2021.

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

Revenue

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

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

During the three months ended June 30, 2022, we reported net revenues of approximately $1,173,398, which is an increase of approximately $382,589, or approximately 48%, compared to net revenues of approximately $790,809 for the three months ended June 30, 2021. An increase of approximately $598,881 of our revenue is attributable to increased retail revenue, while our product sales decreased in net revenue by approximately $216,292. 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. We attribute the decrease in product sales to certain delays in production of a new 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. We expect that our product revenue will increase in the remaining fiscal year 2022 compared to fiscal year 2021, and we do not entitledanticipate further delays. Additionally, the Company hired additional sales personnel to be indemnifiedlead sales efforts as authorizedthe 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.

During the three months ended June 30, 2022, we reported cost of revenues of approximately $885,517, which is an increase of approximately $198,811, or approximately 29%, compared to approximately $686,706 for the three months ended June 30, 2021. This increase is attributed to an increase in sales in both our products and retail distribution in 2022, compared to the prior year period. The cost of revenues increase was less than the increase in revenues. This is primarily attributed to increased 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 increased cost of revenues in the remaining fiscal year 2022, primarily due to an anticipated increase in revenues. 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.

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, to approximately $1,031,515 from approximately $644,052, an increase of approximately $387,463 over the same period last year. The increase was driven by increased operating expenses associated with hiring additional sales employees, advertising and marketing, travel expenses, legal and accounting fees, rent related to an additional distribution warehouse, vehicle and shipping expenses, and partially offset by lower professional fees. We expect that, as we expand our A&R Bylawsbusiness 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, 2022 was approximately $644,891, as compared to other income of approximately $166,735 for the three months ended June 30, 2021. The change was attributable to the increase in interest expense of approximately $91,503 related to increased debt levels and debt amortization, the decrease in the change in the fair value of derivative liabilities of approximately $19,497, a loss on debt extinguishment of approximately $326,230, and financing costs of $286,000, which did not occur in the prior year period, all of which changes are non-cash expenses.

Net Loss

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

Six Months ended June 30, 2022 compared to Six Months ended June 30, 2021

Overview

As reflected in the accompanying financial statements, during the six months ended June 30, 2022, we incurred a net loss of approximately $4,950,087 and used cash in operations of approximately $1,619,355, compared to a net loss of approximately $2,192,939 and used cash in operations of approximately $875,555 for the six months ended June 30, 2021. As of June 30, 2022, we had a stockholders’ deficit of approximately $2,991,280.

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

Revenue

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

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

During the six months ended June 30, 2022, we reported net revenues of approximately $2,168,529, which is an increase of approximately $915,549, or otherwise. approximately 73%, compared to net revenues of approximately $1,252,980 for the six months ended June 30, 2021. An increase of approximately $1,209,999 of our revenue is attributable to increased retail revenue, while our product sales decreased in net revenue by approximately $294,450. 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. We attribute the decrease in product sales to certain delays in production of a new 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. We expect that our product revenue will increase in the remaining fiscal year 2022 compared to fiscal year 2021, and we do not anticipate further delays. 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.

During the six months ended June 30, 2022, we reported cost of revenues of approximately $1,735,393, which is an increase of approximately $734,822, or approximately 73%, compared to approximately $1,000,571 for the six months ended June 30, 2021. This increase is attributed to an increase in sales in both our products and retail distribution in 2022, compared to the prior year period. The cost of revenues increase was comparable to the increase in revenues for the same period. We expect that we will continue to see an increased cost of revenues in the remaining fiscal year 2022, primarily due to an anticipated increase in revenues. 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.

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 six months ended June 30, 2022, to approximately $1,970,851 from approximately $1,212,732, an increase of approximately $939,336 over the same period last year. The increase was driven by increased operating expenses associated with hiring additional sales employees, advertising and marketing, travel expenses, legal and accounting fees, rent related to an additional distribution warehouse, vehicle and shipping expenses, and partially offset by lower professional fees. 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, 2022 was approximately $3,412,372, as compared to other expense of approximately $1,232,616 for the six months ended June 30, 2021. 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, a loss on debt extinguishment of approximately $873,040, and financing costs of $286,000, which did not occur in the prior year period, all of which changes are non-cash expenses.

Net Loss

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

Liquidity and Capital Resources

Going Concern

We have entered or will enter into indemnification agreements with eachincurred 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 directors and executive officers. We believe that the limitation of liability provision in our A&R Bylaws facilitatescontinuation 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 attract and retain qualified individualsseek additional debt or equity financing to serve as directors and officers.continue our operations.

Transfer AgentOur consolidated financial statements have been prepared on a going concern basis, which implies we may not continue to meet our obligations and continue our operations for the next fiscal year. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow. Refer to auditors going concern.

There is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The transfer agentissuance of additional equity securities by us would result in a significant 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 Common Stock is Action Stock Transfer at 2469 East Fort Union Boulevard, Suite 214, Salt Lake City, Utah 84121.business, the result of which would be that our stockholders would lose some or all of their investment. The transfer agent’s telephone number is (801) 274-1088.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.

MARKET PRICE AND DIVIDEND INFORMATIONNotes Payable with Related Parties

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

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.

Notes Payable

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

At December 31, 2021, there was no accrued interest on the notes payable. During the six months ended June 30, 2022, the Company added $651 of additional accrued interest, leaving an accrued interest balance on the notes payable of $651 at June 30, 2022. Accrued interest in included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

Secured Convertible Debentures

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

During the year ended December 31, 2021, the Company issued secured debentures to an otherwise unaffiliated third-party investor (the “Selling Stockholder”) in the aggregate of $4,500,000. The debentures are secured by all tangible and intangible assets of the Company and are also convertible into shares of our common stock at a conversion price of $0.03 per share or a per share amount equivalent to the weighted average (among the principal of the debentures) of 76.7% of the lowest VWAP of the Company’s common stock during the 15 trading days immediately preceding the conversion date, whichever is lower. As the ultimate determination of shares 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 stock and characterized the fair value of the conversion features as derivative liability. In connection with the issuances of the debentures, the Company granted to the Selling Stockholder warrants to purchase up to 170 million shares of the Company’s common stock. The warrants are exercisable at $0.03 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; and (c) and original issue discounts of $195,000 of the debentures for a total of $5,758,000, of which, $4,423,000 was accounted as debt discount and the remaining $1,335,000 as financing costs. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2021, the unamortized debt discount was $2,150,067.

On May 5, 2022, the Company issued similar debentures to the Selling Stockholder in the aggregate amount of $500,000. The debentures bear interest at a rate of 8% per annum, secured by all of the tangible and intangible assets of the Company and are also convertible into shares of the Company’s common stock at a conversion price of $0.03 per share or 80% of the lowest daily volume weighted average price (“VWAP”) of Common Stock during the 10 trading days immediately preceding the conversion date. As the ultimate determination of shares of common stock 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 value of the conversion features as a derivative liability (see Note 10). In connection with the issuances of these debentures, the Company also granted to the selling stockholder warrants to purchase up to 8,333,333 shares of common stock. The warrants are exercisable at $0.03 per share and will expire in three years from their grant date. As a result of these issuances, the Company 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; and (c) and original issue discount of $25,000 for a total of $674,000, of which, $500,000 was accounted as debt discount and the remaining $152,000 as financing costs. The debt discount is being amortized to interest expense over the term of the corresponding debentures. During the year ended December 31, 2021, the Company amortized debt discount of $443,793 to interest expense.

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, the Company recorded a loss on extinguishment of debt of $873,040.

As of September 20,December 31, 2021, our Common Stock is quotedthe 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, the outstanding balance of the secured debentures amounted to $900,000, with an unamortized debt discount of $849,933, 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.

As of June 30, 2022, 161,707,234 shares of common stock were potentially issuable under the conversion terms of the two partially converted outstanding debentures.

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

Cash Flows

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

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, 2022 was approximately $1,619,355 and consisted of a net loss of approximately $4,950,087, 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, and approximately $113,952 used in working capital and other activities.

Investing Activities

Cash used in investing activities for six months ended June 30, 2022 was approximately $24,168 and was attributable to capital expenditures.

Financing Activities

Cash provided by financing activities for six months ended June 30, 2022 was approximately $945,886 and was comprised of proceeds from a notes payable of $964,389, offset by payment on our line of credit to related party of $3,000, payments of our acquisition obligations of $8,586, payment of our note payable of $3,119, and payment of finance lease obligations of $3,798.

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 symbol “KGKG.”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 table below setsaccounting policies that we follow are set forth the high and low closing pricesin Note 2, Summary of Significant Accounting Policies, of our Common Stock duringconsolidated financial statements for the periods indicated, as reported byperiod ended June 30, 2022. These accounting policies conform to accounting principles generally accepted in the OTCM. The market quotations reflect inter-dealer prices, without retail mark-up, markdown, or commissionsUnited States, and may not reflect actual transactions.have been consistently applied in the preparation of the consolidated financial statements.

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:

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.

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 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.

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 as reported on September 20, 2021, was $0.0157 per share.the date of grant. For our three and six months ending June 30, 2022, we recognized $85,000 of stock-based compensation expense. We recognized no stock-based compensation during the prior year period. See Note 13, Share-Based Compensation, of our consolidated financial statements for the six months ended June 30, 2022, for an additional description of our stock-based compensation that had a material effect on our consolidated financial statements.

HoldersEmerging Growth Company Status

On September 20, 2021, there were approximately 96 holdersApril 5, 2012, the JOBS Act, was enacted. The JOBS Act provides that, among other things, an “emerging growth company” can take advantage of recordan extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of our Common Stock. This does not includesome accounting standards until those standards would otherwise apply to private companies. As an indeterminate numberemerging growth company, we have irrevocably elected to take “opt out” of persons who hold our Common Stock in brokerage accountstaking advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, otherwise in “street name.” Asas a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such date, 872,772,803 shares of our Common Stock were issued and outstanding.

Dividendsstandards is required for non-emerging growth public companies on a case-by-case basis.

We currently intend to retain all available fundsrely on certain of the other exemptions and any future earningsreduced reporting requirements provided by the JOBS Act. As an emerging growth company, we are not required to, support our operations and finance the growth and development of our business. We do not intend to pay cash dividendsamong other things, (i) provide an auditor’s attestation report on our Common Stock forsystem of internal controls over financial reporting pursuant to Section 404(b), and (ii) comply with any requirement that may be adopted by the foreseeable future. Any future determination relatedPublic Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to dividend policy will made at the discretion of our Board.auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis).

Rule 144 – Generally

In general, under Rule 144We 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 Securities Act, as currentlycompletion of this offering, (b) in effect, a person (or persons whose shareswhich we have total annual gross revenues of at least $1.07 billion, or (c) in which we are requireddeemed to be aggregated), who is not our affiliate at any time duringa “large accelerated filer” under the preceding three months, and who has beneficially ownedrules of the relevant sharesSEC, which means the market value of our Common Stock for at least six months, includingcommon shares that is held by non-affiliates exceeds $700 million as of the holding period of any prior owner other than onelast day of our affiliates, would be entitled to sell an unlimited number of shares of our Common Stock into the public markets; provided, that current public information about us is availablesecond quarter, and after owning such shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares of our Common Stock into the public markets without restriction.

A person who may be deemed an “affiliate” of us or who was our affiliate at any time during the preceding three months, and who has beneficially owned restricted securities for at least six months, including the affiliates, is entitled to sell within any three-month period, a number of shares that does not exceed the greater of: (1) 1% of the then-outstanding shares of our Common Stock, which equals approximately 872,772,803 shares based on the number of shares of our Common Stock outstanding as of September 20, 2021, or (2) if and when our Common Stock is listed on a national securities exchange, the average weekly trading volume of our Common Stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144.we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

SalesWe are also a “smaller reporting company” meaning that the market value of sharesour 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 affiliates that are not “restricted” are subjectannual revenue was less than $100 million during the most recently completed fiscal year. We may continue to such volume limitations, but are not subject tobe a smaller reporting company after this offering if either (i) the holding period requirement. Sales under Rule 144 by our affiliates are also subject to certain requirements as to the manner of sale, notice, and availability of current public information about us. A person who is not deemed to have been our affiliatemarket value of our Company at any timestock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the 90 days preceding a sale by such person,most recently completed fiscal year and who has beneficially owned the restricted shares for at least one year, is entitled to sell such shares under Rule 144 without regard to any of the restrictions described above. We cannot estimate the number of sharesmarket value of our Common Stock that our existing stockholders will elect to sell under Rule 144.

Rule 144 – Restrictions on the Use of Rule 144stock held by Shell Companies or Former Shell Companies

Becausenon-affiliates is less than $700 million. If we may be deemed previously to have beenare a “shellsmaller reporting company” under such circumstances sales of our securities pursuant to Rule 144 under the Securities Act may not be made unless, among other things, 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.

Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies to our consolidated financial statements for the period ended June 30, 2022 for a proposed sale, we are subject todiscussion of recent accounting pronouncements.

BUSINESS

Corporate Overview – Formation, Corporate Changes and Material Mergers and Acquisitions

We were originally incorporated as Class-ique Talent Agency, Inc. (“CTA”), under the reporting requirements of Section 13 or 15(d)laws of the Exchange ActState of Nevada in March 1997. In October 2001, CTA entered into an Agreement and have filedPlan of Reorganization (the “Reorganization Plan”) with PhaserTek, Inc., a Delaware corporation (“PhaserTek”), pursuant to which CTA acquired all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports. Because, as a possible former shell company, the reporting requirementsoutstanding shares of Rule 144(i) will apply regardlessCommon Stock of holding period, restrictive legends on certificatesPhaserTek in exchange for shares of our Common Stock cannot be removed exceptof CTA, resulting in connectionPhaserTek becoming a wholly-owned subsidiary of CTA. In accordance with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirementsterms of the Securities. Because under such circumstancesReorganization Plan, CTA changed its name to PhaserTek Medical, Inc. (“PhaserTek Medical”) in 2002. In 2004, PhaserTek Medical changed its name to Union Equity, Inc. (“UE Nevada”). For purposes of changing UE Nevada’s state of incorporation, UE Nevada formed Union Equity, Inc. in the State of Delaware (“UE Delaware”) in 2004. Pursuant to Articles of Merger, in December 2004, UE Nevada merged with and into UE Delaware, the surviving company. In July 2015, we changed our unregistered securities may not be sold pursuantname to Rule 144 unlessKona Gold Solutions, Inc. In October 2020, we continuechanged our name to meet such requirements, any unregistered securities we issue will have limited liquidity unless we continue to comply with such requirements.

DESCRIPTION OF THE BUSINESSKona Gold Beverage, Inc.

CompanyWe have four wholly-owned subsidiaries: (i) Kona Gold, LLC (“Kona”), a Delaware limited liability company formed in August 2015; (ii) HighDrate, LLC (“HighDrate”), a Florida limited liability company formed in January 2018; (iii) S and S Beverage, Inc., (“S and S”), a Wisconsin corporation formed in June 2018 that we acquired in February 2021; and (iv) Gold Leaf Distribution LLC (“Gold Leaf”), a Florida limited liability company formed in January 2019.

Business Overview

We are a lifestyle company that specializes in developing premier hemp and CBD products in the functional beverage and fitness markets. Focusing on the hemp energy drink, CBD energy water, and CBD water markets, we believe that we have positioned ourselves as a premium lifestyle brand.

We currently sell Kona, HighDrate, and S and S products through resellers, our websites, and distributors that span across 2712 states. Our products are available in a wide variety of stores, including convenience and grocery stores, smoke shops, and gift shops. Gold Leaf also distributes our own products, as well as products purchased for resale from several other beverage manufacturers. These premium beverages and snacks are available in more than 6001,700 grocery stores, convenience stores, smoke shops, vape shops, and specialty stores.

Reportable Segments

We have two reportable segments:

Product Lines

Within our beverages segment,Company, we market five distinct product types:lines: hemp-infused energy drinks, CBD-infused energy water, CBD-infused high-alkaline water, low carb and low calorielow-calorie lemonade, and apparel with our trademark logo.

Our hemp-infused energy drink is available in both regular and sugar-free options. These energy drinks are infused with organic hemp protein powder and contain essential vitamins and ingredients that give consumers a natural energy boost. Hemp protein contains no gluten and is compatible with a variety of diets, including vegan and Kosher. Our hemp energy drinks are available in eight flavors: classic hemp, platinum hemp, sugar-free hemp, cherry vanilla, bubble gum, candy apple, cotton candy, and pink grapefruit.

HighDrate’s CBD-infused energy water is great tasting, sugar-free, and powered by Alkame’s patented technology, which uses its advanced water treatment to create a premium oxygenated alkaline water with natural antioxidants. Alkame believes based on a double-blind placebo, peer-backed research project that it conducted, its technology can boost the immune system and physical performance. HighDrate’s CBD-infused energy water contains 80 mg of caffeine and 10 mg of CBD. We believe that CBD aids the body’s endocannabinoid system in neuroprotection, stress recovery, immune balance, and homeostatic regulation. HighDrate’s CBD-infused energy water is available in six flavors: watermelon, kiwi strawberry, tropical coconut, Georgia peach, sour apple, and blue island punch.

S and S’sS focuses on the development and marketing of Ooh La Lemin, which is a better-for-you lemonade that is available in still and sparkling and has no added sugar, is low in carbohydrates,carbs, and has only 15 or 10 calories, andrespectively. Ooh La Lemin lemonade is available in four flavors: (i) Original Lemonade, (ii) Blue Raspberry Lemonade, (iii) Peach Lemonade, and (iv) Strawberry Lemonade. Ooh La Lemin Sparkling is available in six flavors: (i) Original Lemonade, (ii) Cucumber Watermelon Lemonade, (iii) Blue Raspberry, (iv) Pineapple Mango, (v) Citrus Splash, and (vi) Huckleberry.

Our product “Storm” is a high-alkaline CBD-infused water. This water is also powered by Alkame’s patented technology, which uses its advanced water treatment to create a premium oxygenated alkaline water with natural antioxidants. Storm high-alkaline CBD water contains 20 mg of CBD.

We also sell branded apparel. We use only high-quality textiles and specialty inks and foils, which provide consumers with a premium fit and feel. We currently offer shirts, tanks, hats, and towels for sale. Revenues generated from sales of our apparel historically has represented approximately less than 1% of our gross annual sales.

Distributors and Resellers

Our markets include over 1,700 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina. In addition to distributing the Company’s own beverage products, the Company also distributes other products, including alkaline waters, beverages for kids, energy drinks, fruit-flavored sodas, low-carb lemonade, healthy aloe juice drinks, snack products, and a variety of CBD-infused products, all of which complement the Company’s current product offerings.

We sell our products primarily to beverage distributors and resellers, retail grocery, smoke shops and specialty stores, wholesalers, merchandisers, convenience stores, and beverage services. We focus on sales to consumers in the functional beverages sector that lead an active lifestyle and need a balance that will meet their needs of providing their minds and bodies with a focused boost and quick recovery. Our beverages support consumers that lead a healthy lifestyle based on choices made about daily habits by providing products that provide a healthy alternative in their beverage choices. A healthy lifestyle can result in consumers feeling fit and energetic and can reduce their risk for disease. We believe our products help consumers stay hydrated, revitalized, aided in stamina, and allow for faster recovery. Hemp protein contains no gluten and is compatible with a variety of diets, including vegan and Kosher. The hemp seed protein contained in our energy drinks is a great protein that contains all 20 amino acids found in the human body.

We also distribute premium beverages and snacks in key markets through our wholly-owned subsidiary, Gold Leaf. Gold Leaf distributes our products as well as products purchased for resale from several other beverage manufacturers. The distributed products include alkaline waters, beverages for kids, energy drinks, fruit flavored sodas, low-carb lemonade, healthy aloe juice drinks, snack products, and a variety of CBD-infused jellybeans,products, all of which complement our current product offerings.

Industry Overview

Our distributors and resellers and consumers span across several industries, including energy drinks, hemp or CBD drinks, health and fitness, and apparel.

Energy Drinks

The energy drink industry continues grow every year with an estimated $12$14 billion in sales in the United States in 2020,2021, and sales are expected to reach $53 billion globally. The energy drink by the name “Red Bull” dominated the industry in 2020, comprising approximately 25% of the energy drink market. In 2020, an energy drink by the name of “Monster,” market share was approximately 15%.

The introduction of “Red Bull” in 1997, and the many other energy drinks that followed in its footsteps, has helped turn the energy drink industry into significant choice of consumers in the overall beverage industry. The rise of “Red Bull” and “Monster,” which accounted for 40 percent of the energy drink sales in the United States in 2020, has resulted in the energy drink industry rivaling the coffee industry. Energy drinks have an average of 200 mg of caffeine, which is equivalent to about two cups of coffee. The liquid and dry coffee industry accounted for approximately $102.5 billion in sales in 2019, which grew from $4.1 billion dollars in 2003. Starbucks Corporation was the sales leader of the coffee industry with approximately 40% of the market share in 2018, followed by Dunkin’ Brands Inc. with 40% of the market share in 2019.

Hemp or CBD Drinks

The HIA reported that the 2018 Farm Bill poised to restore industrial hemp to nationwide legal production for the first time since World War II, offering vast opportunities for the industry and investment in a market expected to triple in four years. With the removal of hemp from federal prohibition under the CSA, the total hemp industry is expected to grow 18.4%16.8% from 20182022 through 2022.2030. Hemp Business Journal estimates that the hemp-derived CBD market will grow to a $1.3$16.75 billion market by 2022.2030. The U.S. hemp market, which includes CBD, textiles, and hemp seed, is expected to lead the global market in 2020,2022, representing approximately 32% of the global market. This growth is fueled by the public’s growing demand for CBD products. The 2018 Farm Bill aims the industry to accelerate and establish itself as a global hemp powerhouse led by hemp-derived CBD, and establishes legal production for CBD.

Health and Fitness

The health and fitness industry, which includes food and beverages, saw consumer awareness drive trends towardsto health and wellness, plant-based, and clean-label products in 2019 and 2020.2021. We believe that conscious consumerism will continue to drive these trends in 2021.2022. We believe that consumers are making food and beverage choices based on their personal definition of health. Further, we believe that consumers are looking for healthy alternatives to obtain relief from pain and anxiety, and that CBD has become a viable option because it balances the mind and body. Women have traditionally been early adapters of health and wellness trends and CBD-infused products, food, and beverages have been recognized by women to have a connection between happiness and health.

Apparel

The global apparel market is projected to grow to $1.5 trillion dollars in 2020,2021, compared to $1.3 trillion in 2015. Brand names and logos for leading energy drink companies such as Monster and Rockstar can be found on men’s and women’s apparel around the world; however, the biggest apparel companies not affiliated with energy drinks control the majority of the market. Energy drink apparel is not expected to be a large contributor to the apparel industry.

Competition

The beverage industry is highly competitive. The principal areas of competition are pricing, packaging, and developing new products and flavors, as well as highly intensive promoting and marketing strategies. Our products compete with a wide range of drinks produced by a relatively large number of companies, many of which have substantially greater financial, marketing, and distribution resources than we do. Important factors affecting our ability to compete successfully include brand and product image, taste and flavor of products, trade and consumer promotions, rapid and effective development of new and unique cutting-edge products, attractive and different packaging, brand exposure, and marketing, as well as pricing. We also rely on our beverage distributors to allocate more attention to our products than those of our competitors, provide stable and reliable distribution, and secure adequate shelf space in retail outlets. Competitive pressures in the “alternative,” energy, coffee, and “functional” beverage categories could cause our products to maintain or to lose market share or we could experience price erosion, which could have a material adverse effect on our business and results of operations.

Our energy products have entered an already crowded market, and we aware of both our strengths and shortcomings as we compete in the energy drink market. Our energy products are part of niche industry that includes CBD, hemp seed, organic, and lifestyle, which we believe separates our energy drinks from others in the market. Within the global CBD beverage market, sales are expected to grow at a faster rate than conventional energy drinks. In 2018,2020, the CBD beverage market was valued at $2.09 million,$3.4 billion, and is expected to reach $11.38 million$14.6 billion by 20252026 with a compounded annual growth rate of 27.4%27.5%. Combined with the THC-infused beverage market, the CBD Beverage Market is expected to reach $1.4 billion in the United States alone by 2025. The Alkaline Water Company, Inc. (NASDAQ and TSXV: WTER), HEXO Corp. (NYSE(NASDAQ and TSX: HEXO), Tilray, Inc. (NASDAQ:(NASDAQ and TSX: TLRY), and Canopy Growth Corporation (NYSE: CGC; TSX: WEED) are prominent players in the CBD beverage market.

We compete not only for consumer preference, but also for maximum marketing and sales efforts by multi-brand licensed bottlers, brokers, and distributors and resellers, many of which have a principal affiliation with competing companies and brands. Our products compete with all liquid refreshments and in many cases with products of much larger and, in many cases better financed competitors. Our energy drinks compete directly with Red Bull, Monster, and Rockstar. We also compete with smaller companies.

Co-Packing

We do not directly produce our hemp-infused energy drinks, Storm CBD-infused waters, HighDrate CBD-infused energy waters, or Ooh La Lemin, lemonade, but instead outsource the production of our products with our specifications to third-party bottlers and co-packers. We use co-packers to produce our beverage products. The co-packers are responsible for the production and packaging of the finished products, including the procurement of all required ingredients and packaging materials. We have partnered with multiple co-packers in the United States to provide fulfillment of our products from quality, low-cost sources. These partners are integral to our success, providing, we believe, the ability to scale as needed. We store all of our products, except for Ooh La Lemin, in our warehouses located in Greer, South Carolina and Melbourne, Florida. Ooh La Lemin is stored in our co-packer’s warehouse.

Our ability to estimate demand for our products is imprecise, particularly with new products, and may be less precise during periods of rapid growth, particularly in new markets. If we materially underestimate demand for our products, are unable to secure sufficient ingredients or raw materials, including, but not limited to, aluminum cans, plastic bottles, caps, labels, flavors, juice concentrates, coffee, tea, dietary ingredients, other ingredients, and certain sweeteners, are unable to procure adequate packing arrangements, or are unable adequately or timely to ship our products, we might not be able to satisfy demand on a short-term basis. That short-term supply inability may also result in a longer-term reduction in orders for our products.

Raw Materials and Suppliers

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

Quality Control

All quality control is handled by our co-packers. To date, we have not had any quality issues with our products. In the future, if any quality issues were to arise, we expect that we would resolve them with the specific co-packer involved or engage a new co-packer for our products.

Distribution

Distribution patterns in the energy drink and water industries are such that large buying groups dictate what products are used in their channels. Working with these large buying groups could open large distribution channels that could potentially supply our product offerings in several market segments. We have distribution agreements with each distributor with which we partner that distributes our products. Our distribution agreements are for a one-year term and typically automatically renews unless the distributor or we terminate the agreement. We ship product directly from our distribution center in South Carolina, or our warehouse in Florida, or directly from our co-packers to our distribution partners in the United States. Our distributors consist of state-wide tier 1 distributors and regional small-to-medium size distributors.

Business Strategy

We have pursued specific and definable market segments with a multi-tiered, multi-channel approach. We have leveraged our products with direct sales and a distribution strategy using established beverage distributors. We are pursuing direct-ship opportunities, such as grocery stores and convenient stores, which would allow us to ship product to one location where the direct-ship store could then self-distribute our product to its multiple retail locations. We also continue to focus on our online presence by selling our products on popular e-commerce websites, such as Amazon.com, where we ship bulk product to its warehouse and Amazon handles all product fulfillment. Finally, we operate twothree e-commerce websites, where we sell directly to consumers in the United States. We continue to look to online retail markets and additional established distributors for revenue growth.

Marketing Strategy

Our sales and marketing strategy for all of our beverage products is to focus on developing brand awareness through image enhancing programs and product samplings. We use our branded vehicles and other promotional vehicles at events, where we offer samples of our products to consumers. We utilize “push-pull” methods to enhance shelf and display space exposure in sales outlets (including racks, coolers, and barrel coolers), advertising, in-store promotions, and in-store placement of point-of-sale materials to encourage demand from consumers for our products. We also support our brands with prize promotions, price promotions, competitions, endorsements from selected public and sports figures, sports personality endorsements, sampling and sponsorship of selected athletes, teams, series, bands, esports, causes, and events. In-store posters, outdoor posters, social media (directly and through our sponsorships and endorsements), and coupons may also be used to promote our brands.

We believe that one of the keys to success in the beverage industry is differentiation, making our brands and products visually appealing and distinctive from other beverages on the shelves of retailers. We review our products and packaging on an ongoing basis and, where practical, endeavor to make them different and unique. The labels and graphics for many of our products are redesigned and refreshed from time to time in order to maximize their visibility and identification, wherever they may be placed in stores, which we continue to reevaluate from time to time.

Promotion Strategy

Public relations and industry media have helped in our over-all market awareness plans. Our announcements of distribution partnerships have assisted in identifying new partners to distribute our products. We believe that announcing these partnerships in industry specific media help expand market awareness of our products. Feature articles and product reviews have also helped launch and support brand awareness. We include our products in industry specific buying guides, which has assisted in creating new relationship with distributors and retail outlets. Finally, we focus on creating products that we believe taste great and use attractive branding with our labels and other materials to catch consumers’ attention either in person at a retail store or online on a website.

Pricing Strategy

We strive to set the pricing of products at levels that are competitive with leaders in each respective market segment. We offer industry-standard discounts to distributors and retailers. We do not typically include quantity discounts but such discounts may be negotiated with major buying groups.

Sales Strategy

Our sales strategy is to exploit the energy drink and water markets in 2021,2022, with the groundwork that we laid out in 2020.2020 and 2021. We believe that tradeshows will play a major role in creating market awareness of our brands. Currently, our energy drinks are available for sale on Amazon.com, Inc.’s website, the largest internet-based retailer in the United States.

Our sales and marketing strategy for all our beverages is to focus our efforts on developing brand awareness through image enhancing programs and product sampling. We use our branded vehicles and other promotional vehicles at events where we offer samples of our products to consumers. We utilize “push-pull” methods to enhance shelf and display space exposure in sales outlets (including racks, coolers, and barrel coolers), advertising, in-store promotions, and in-store placement of point-of-sale materials to encourage demand from consumers for our products. We also support our brands with prize promotions, price promotions, competitions, endorsements from selected public and sports figures, sports personality endorsements, sampling and sponsorship of selected athletes, teams, series, bands, esports, causes, and events. In-store posters, outdoor posters, social media (directly and through our sponsorships and endorsements) and coupons may also be used to promote our brands.

We believe that one of the keys to success in the beverage industry is differentiation, making our brands and products visually appealing and distinctive from other beverages on the shelves of retailers. We review our products and packaging on an ongoing basis and, where practical, endeavor to make them different and unique. The labels and graphics for many of our products are redesigned and refreshed from time to time to maximize their visibility and identification, wherever they may be placed in stores, which we continue to reevaluate from time to time.

Intellectual Property

Our policy is to protect our intellectual property through, among other things, a combination of trade secrets, know-how, and trademarks. We have taken measures to protect our trade secrets and know-how, to the extent possible. We have three trademarks. One is for use of “Kona Gold Hemp Energy Drinks” registered in the Beverages Segment.Company’s name. The second trademark is for the use of “HighDrate” registered in the Beverages Segment.Company’s name. The third trademark is for the use of “OOH LA LEMIN” registered in the Beverages Segment. We have also applied for a trademark for “Storm” to use in the Beverages Segment.Company’s name. We do not have any patents.

Government Regulation and Compliance

The production, distribution, and sale in the United States of many of our products are subject to various U.S. federal and state regulations, including, but not limited to: the FDCA; the Occupational Safety and Health Act; various environmental statutes; the Safe Drinking Water and Toxic Enforcement Act of 1986 (“California Proposition 65”); and a number of other federal, state, and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, marketing, labeling, and ingredients of such products.

Further, the regulation of food products in the United States, including products containing CBD, is complex, multi-faceted, and currently undergoing significant change. The FDA, the FTC, the USDA, and other regulatory authorities at the federal, state, and local levels extensively regulate, among other things, the research, development, testing, composition, production, import, export, labeling, storage, distribution, promotion, marketing, and post-market reporting of foods, including those that contain CBD. We, along with our third-party suppliers, co-packers, and third-party bottlers, are required to navigate a complex regulatory framework. The various federal, state, and local regulations regarding foods containing CBD are evolving, and we continue to monitor those developments. However, we cannot predict the timing, scope, or terms of any new or revised state, federal or local regulations relating to animal foods containing CBD.

Regulation of Hemp and CBD

Historically, the DEA regulated CBD, pursuant to the CSA, which establishes a framework of controls over certain substances, depending on whether they are classified in one of five risk-based schedules. Schedule I substances are the most stringently controlled, as they have been determined to have a high potential for abuse, there are no currently accepted medical uses in the United States, and there is a lack of accepted safety for use of the substance under medical supervision. The CSA classifies “marijuana” as a Schedule I controlled substance and previously defined “marijuana” to include all parts of the cannabis plant, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound mixture, salt, derivative, mixture, or preparation of the plant, its seeds, or its resin (with a few exceptions, such as mature stalks of the plant and seeds incapable of germination). Pursuant to this definition, the DEA interpreted CBD to fall within the statutory definition of “marijuana” as a compound or derivative of the cannabis plant.

In February 2014, Congress enacted the 2014 Farm Bill to allow for the limited growth and cultivation of industrial hemp, which was defined as including all parts of the cannabis plant, whether growing or not, with a delta-9 THC concentration of not more than 0.3% on a dry weight basis. This statute also allowed, as permitted by state law, the growing and cultivating of industrial hemp under the auspices of a state agricultural pilot program and by institutions of higher education and state departments of agriculture.

In December 2018, Congress enacted the 2018 Farm Bill to allow more broadly for the production of hemp pursuant to state and tribal plans overseen by the USDA. The 2018 Farm Bill amended the statutory definition of “marijuana” under the CSA specifically to exclude “hemp”, which is defined as any part of the cannabis plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 THC concentration of not more than 0.3% on a dry weight basis. Under this definition, as long as CBD meets the statutory definition of “hemp,” then it is no longer a Schedule I controlled substance under the CSA. However, the 2018 Farm Bill did not modify the FDCA and specifically preserved the FDA’s authority to regulate products containing cannabis or cannabis-derived compounds, such as CBD, pursuant to the FDCA.

Under the 2018 Farm Bill framework, states and Native American tribes may submit to the USDA, through the relevant state department of agriculture, a plan under which the state or Native American tribe will monitor and regulate the production of industrial hemp. For those states that do not have an approved state plan, the production of hemp will be subject to a USDA established plan, although states retain the ability to prohibit hemp production within their borders. On October 31, 2019, the USDA issued the IFR to implement the 2018 Farm Bill, which established the required regulatory framework governing commercial hemp production in the United States. The USDA has begun reviewing hemp production plans submitted by state and tribal governments, although several states have informed the USDA that they will continue to operate under their 2014 Farm Bill pilot programs for the time being. Pursuant to the 2018 Farm Bill, the 2014 Farm Bill will remain effective until October 31, 2020 (one year after the date of publication of the IFR). In addition, no state or Native American tribe may prohibit the transportation or shipment of hemp or hemp products produced in accordance with the 2018 Farm Bill through the state or territory, as applicable. The USDA has interpreted this provision also to apply to interstate transportation of hemp that complies with the 2014 Farm Bill through October 31, 2020. Effective March 22, 2021, The USDA issued the final rule, which creates the U.S. Domestic Hemp Production Program. The program provides requirements for maintaining records about the land where hemp is produced, testing the levels of total delta-9 tetrahydrocannabinol, disposing of non-compliant plants, licensing hemp producers, and ensuring compliance under the new program. The Agricultural Marketing Service (AMS), has been delegated authority to administer the U.S. Domestic Hemp Production Program.

FDA Regulation of Foods

The FDA regulates foods under the FDCA and its implementing regulations. The FDCA defines “food” as articles used for food or drink for people or animals, which includes products that are intended primarily for nutritional use, taste, or aroma and the components of such products. The FDA also imposes certain requirements on foods relating to their composition, production, labeling, and marketing. Among other items, the facilities in which our products and ingredients are produced must register with the FDA, comply with cGMPs and comply with a range of food safety requirements.

Although foods are not required to obtain premarket approval from the FDA, any substance that is added to or is expected to become a component of food must be used in accordance with a food additive regulation, unless it is generally recognized as safe (“GRAS”) under the conditions of its intended use. A food may be adulterated if it uses an ingredient that is neither GRAS nor an approved food additive, and that food may not be legally marketed in the United States. The FDA has confirmed that the use of cannabis or cannabis-derived compounds in food products is subject to these food additive requirements. At this time, there are no approved food additive petitions or regulations for any cannabis-derived food additive and, while the FDA has issued a “no questions” response to certain GRAS notifications for hemp seed products, these GRAS determinations do not encompass hemp and CBD products more generally.

Additionally, the FDCA prohibits the introduction or delivery for introduction into interstate commerce of any food that contains an approved drug for which substantial clinical investigations have been instituted and made public (unless certain exceptions apply). Under this prohibition, the FDA has stated that foods that contain CBD are adulterated because CBD is an active ingredient in an FDA-approved drug that was the subject of substantial clinical investigations before it was marketed as a food, and that none of the exceptions applies.

Although the FDA has stated that it interprets the FDCA to prohibit the introduction or delivery for introduction into interstate commerce of any food into which CBD has been added and has taken enforcement action against marketers of certain CBD products (some in collaboration with the FTC), the FDA is in the process of evaluating its regulatory approach to products containing cannabis and cannabis-derived compounds. The FDA has formed an internal working group to evaluate the issue and on May 31, 2019 held a public hearing to obtain scientific data and information about the safety, producing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds. The hearing featured extensive discussion from a variety of stakeholders regarding the use of hemp and CBD in FDA-regulated products, including foods. At the hearing, FDA stated that, while it does not have a policy of enforcement discretion with respect to any CBD products, the agency’s biggest concern is the marketing of products that puts the health and safety of consumers at risk, such as those claiming to prevent, diagnose, mitigate, treat, or cure serious diseases in the absence of requisite drug approvals.

Further, on March 5, 2020, the FDA issued a report to Congress that was required under the 2018 Farm Bill in which the agency announced that it is currently evaluating a risk-based enforcement policy for CBD to provide more clarity to the industry and the public while the agency takes potential steps to establish a clear regulatory pathway. Although it is unclear whether or when the FDA will ultimately issue such an enforcement policy, the agency reemphasized that it will continue to take action against unlawful CBD products that pose a risk of harm to the public, including products with therapeutic claims; products that include contaminants such as heavy metals, THC, and other harmful substances; products associated with false statements, such as omitted ingredients and incorrect statements about the amount of CBD; and products marketed to vulnerable populations, such as infants and children.

The labeling of foods is regulated by both the FDA and state regulatory authorities. FDA regulations require proper identification of the product, a net quantity statement, a statement of the name and place of business of the producer or distributor, and proper listing of all of the ingredients in order of predominance by weight. The FDA may classify some of our products differently than we do and may impose more stringent regulations, which could lead to possible enforcement action.

Under the FDCA, the FDA may require the recall of a food product if there is a reasonable probability that the product is adulterated or misbranded, and the use of or exposure to the product will cause serious adverse health consequences or death. In addition, food producers may voluntarily recall or withdraw their products from the market. If the FDA believes that our products are adulterated, misbranded, or otherwise marketed in violation of the FDCA, the agency may take further enforcement action, including:

Legislation may be introduced in the United States at the federal, state, and municipal level in respect of each of the subject areas. Public health officials and health advocates are increasingly focused on the public health consequences associated with obesity, especially as it affects children, and are seeking legislative change to reduce the consumption of sweetened beverages. There also has been an increased focus on caffeine content in beverages.

The FDA revised regulations with respect to serving size information and nutrition labeling on food and beverage products, including requirements to disclose the amount of added sugars in such products. In December 2018, the USDA promulgated regulations requiring that, by January 1, 2022, the labels of certain bioengineered foods must include a disclosure that the food is bioengineered. We may incur significant costs to alter our existing packaging materials to comply with these and other new regulations. Additionally, these new regulations may impact, reduce, or otherwise affect the purchase and consumption of our products by consumers.

Proposals to limit or restrict the sale and/or advertising of energy drinks to minors or persons below a specified age, to restrict the venues in which energy drinks can be sold, or to restrict the use of the Supplemental Nutrition Assistance Program (formerly food stamps) to purchase energy drinks have been raised or enacted in certain states, counties, and municipalities throughout the United States. Any such limitations or restrictions could adversely affect our business, financial condition, or results of operations.

We also may in the future be affected by other existing, proposed, and potential future regulations or regulatory actions, any of which could adversely affect our business, financial condition, and results of operations. Changes in government regulation, or failure to comply with existing regulations, could adversely affect our business, financial condition, and results of operations.

Environmental ComplianceRevenue 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:

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 facilitiesrevenue 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.

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 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 United Statesaccompanying 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 subjectacquired. 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, 2022, we recognized $85,000 of stock-based compensation expense. We recognized no stock-based compensation during the prior year period. See Note 13, Share-Based Compensation, of our consolidated financial statements for the six months ended June 30, 2022, 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 federal, state,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, local environmental lawsas 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.

We intend to rely on certain of the other exemptions and regulations. Compliance with these provisions has not had, nor do we expect such compliance will have, any material adverse effect upon our capital expenditures, net income, or competitive position. We believe thatreduced reporting requirements provided by the JOBS Act. As an emerging growth company, we are not subjectrequired to, any material costs for complianceamong 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 environmental laws.

Insurance

Our products are subjectrequirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to risks. While we have planned for these contingenciesthe auditor’s report providing additional information about the audit and have purchased insurance to address potential liabilities associated with product production, there can be no assurance that all potential liabilities will be covered by insurance or that the insurance coverage will be adequate.

Employeesfinancial statements (auditor discussion and analysis).

We believewill remain an emerging growth company until the people who work for us are criticalearlier to our continued success. Asoccur of September 20, 2021, we employed a total of 14 persons, all of whom were employed on a full-time basis. We strive to attract and retain qualified personnel; however, due to(1) the size and scopelast day of our business,fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we do not have any formal human capital strategies.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.

ManyWe are also a “smaller reporting company” meaning that the market value of our employees, including membersstock held by non-affiliates plus the proposed aggregate amount of our management team, were reportinggross proceeds to work remotely due to the COVID-19 pandemic, which resulted in the closure of our offices in Florida for a period of time. These employees have returned slowly to our offices, and we are once again fully operational. Our warehouses operated as normal.

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

KONA GOLD BEVERAGE, INC.

The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2020 and 2019 should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere herein. 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 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 numbersmaller reporting company after this offering if either (i) the market value of factors, including those set forth underour stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,”most recently completed fiscal year and “Descriptionthe market value of Business” sections herein. We use words suchour 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 “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,”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 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 herein and other filings with the SEC, reportsemerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies to our stockholders,consolidated financial statements for the period ended June 30, 2022 for a discussion of recent accounting pronouncements.

BUSINESS

Corporate Overview – Formation, Corporate Changes 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 wordsMaterial Mergers 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.Acquisitions

We undertake no obligation to update or revise anywere originally incorporated as Class-ique Talent Agency, Inc. (“CTA”), under the laws of the forward-looking statements afterState of Nevada in March 1997. In October 2001, CTA entered into an Agreement and Plan of Reorganization (the “Reorganization Plan”) with PhaserTek, Inc., a Delaware corporation (“PhaserTek”), pursuant to which CTA acquired all of the dateoutstanding shares of this Registration Statement 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 associatedCommon Stock of PhaserTek in exchange for shares of Common Stock of CTA, resulting in PhaserTek becoming a wholly-owned subsidiary of CTA. In accordance with the following:terms of the Reorganization Plan, CTA changed its name to PhaserTek Medical, Inc. (“PhaserTek Medical”) in 2002. In 2004, PhaserTek Medical changed its name to Union Equity, Inc. (“UE Nevada”). For purposes of changing UE Nevada’s state of incorporation, UE Nevada formed Union Equity, Inc. in the State of Delaware (“UE Delaware”) in 2004. Pursuant to Articles of Merger, in December 2004, UE Nevada merged with and into UE Delaware, the surviving company. In July 2015, we changed our name to Kona Gold Solutions, Inc. In October 2020, we changed our name to Kona Gold Beverage, Inc.

We have four wholly-owned subsidiaries: (i) Kona Gold, LLC (“Kona”), a Delaware limited liability company formed in August 2015; (ii) HighDrate, LLC (“HighDrate”), a Florida limited liability company formed in January 2018; (iii) S and S Beverage, Inc., (“S and S”), a Wisconsin corporation formed in June 2018 that we acquired in February 2021; and (iv) Gold Leaf Distribution LLC (“Gold Leaf”), a Florida limited liability company formed in January 2019.