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 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.

This prospectus (this “Prospectus”) relates to the resale or other disposition by the selling stockholder (the “Selling Stockholder”) identified in this Prospectus and its transferees of up to 125,947,397 shares of common stock, par value $0.00001 per share (our “Common Stock”), of Kona Gold Solutions, Inc., a Delaware corporation (“Kona Gold,” our “Company,” “we,” “our,” or “us”), consisting of (i) up to 105,947,397 shares of our Common Stock (the “Conversion Shares”) issuable upon conversion of secured convertible debentures (the “Debentures”) and up to 20,000,000 of shares of our Common Stock (the “Warrant Shares”) issuable upon exercise of a Warrant to Purchase Common Stock (the “Warrant”; and, together with the Debentures, the Conversion Shares, and the 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 May 14, 2020 (the “SPA”), in connection with a private placement. We agreed to register the Conversion Shares and Warrant Shares pursuant to the terms of the Registration Rights Agreement between the Selling Stockholder and us, dated as of May 14, 2020 (the “Registration Rights Agreement”). The Conversion Shares and Warrant Shares are being offered for resale by the Selling Stockholder.

The 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 Security Agreement by and among the Selling Stockholder, our wholly-owned subsidiaries, and us, dated May 14, 2020 (the “Security Agreement”). Initially, the Debentures are convertible at the lower of (i) the fixed conversion price, which is $0.05 per share, subject to adjustment (the “Fixed Conversion Price”), or (ii) 80% of the lowest daily volume weighted average price (“VWAP”) of our Common Stock during the 15 trading days immediately preceding the conversion date (the “Market Conversion Price”). The Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the 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 Debentures or exercise of the Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% percentage to 9.99% upon at least 65 days’ prior written notice to us.

The Warrant has a three-year term and is immediately exercisable at an exercise price of $0.05 per share, subject to adjustment. The Warrant is subject to an “exercise blocker” such that the Selling Stockholder cannot exercise any portion of the 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 Warrant or conversion of the Debentures that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% percentage to 9.99% upon at least 65 days’ prior written notice to us. See “Description of Securities-Private Placement Transaction” for a more detailed description of the private placement transaction and “Selling Stockholder” for additional information about the Selling Stockholder.

The Selling Stockholder may offer, sell, or distribute all or a portion of the Conversion Shares and Warrant Shares, the resales of which is registered hereby through public or private transactions and at prevailing market prices or at privately negotiated prices. The Selling Stockholder may retain underwriters, dealers, or agents from time to time. See “Plan of Distribution” for additional information about how the Selling Stockholder may sell the shares of our Common Stock being registered pursuant to this Prospectus. We will not receive any proceeds from the sales of these shares by the Selling Stockholder. We will receive proceeds from the exercises, if any, of the Warrant. We have agreed to bear the expenses relating to the Registration Statement of which this Prospectus forms a part.

Our Common Stock is quoted on the OTC Markets Group Inc.’s (the “OTCM”) OTCQB^® Venture Market (the “OTCQB”) under the symbol “KGKG.” On July 13, 2020, the last reported sales price for our Common Stock was $0.0331 per share. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”).

Investing in our Common Stock involves a high degree of risk. You should consider carefully the section entitled “Risk Factors” in this Prospectus beginning on page 5, as well as the other information contained in this Prospectus, before you invest.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

You should only rely on the information contained in this Prospectus or that we have referred you to. We have not, and the Selling Stockholder has not, 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 securities other than the shares of our Common Stock offered by this Prospectus. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of our Common Stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus nor any sale made in connection with this Prospectus means that the information contained in this Prospectus is correct after the date of this Prospectus. The information in this Prospectus is accurate only as of the date on the front cover of this Prospectus. Our business, financial condition, results of operations, and prospects may have changed since that date.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing in our Common Stock. You should carefully read and consider this entire Prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the accompanying financial statements and the related notes to the financial statements before making an investment decision. Unless we specify otherwise, all references in this Prospectus to “KGKG,” “Kona Gold,” our “Company,” “we,” “our,” and “us” refer to Kona Gold Solutions, Inc. and our subsidiaries.

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 36 states. Our products are available in a wide variety of stores, including convenience and grocery stores, smoke shops, and gift shops. In January 2019, we acquired Gold Leaf Distribution LLC, a Florida limited liability company and our wholly-owned subsidiary (“Gold Leaf”), to add the unique ability to control and focus entirely on our product line. Gold Leaf’s product line includes alkaline waters, beverages for kids, energy drinks, fruit flavored sodas, low carb lemonade, healthy aloe juice drinks, and CBD-infused jellybeans, 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.

We have three wholly-owned subsidiaries. Kona Gold, LLC (“Kona”), is a Delaware limited liability company formed in August 2015 that focuses on creating great 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, LLC (“HighDrate”), is a Florida limited liability company formed in January 2018 that focuses on the development and marketing of CBD-infused energy waters available in a variety of great 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.

Gold Leaf, is a Florida limited liability company formed in January 2019 that focuses on the distribution of premium beverages in key markets. These markets include over 300 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina.

Intellectual Property

We have two trademarks that are registered with the U.S. Patent and Trademark Office (“USPTO”) for use in the energy drink segment: “Kona Gold Hemp Energy Drinks” and “Highdrate.” We believe these are important assets for our brands and our business. On November 27, 2018, we also filed an application with the USPTO to register the trademark “Storm” for use in the energy drink segment.

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. 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.

The Private Placement

In May 2020, we completed a private placement transaction (the “Private Placement”) of the Debentures and the Warrant. The 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 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 Debentures or otherwise accelerates the maturity dates, as provided for in the Debentures). Interest is payable either in cash, or if certain Equity Conditions (as defined below) 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 Conversion Shares upon conversion of the Debentures to the converting holder of the 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 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 Debentures are convertible at the lower of the (i) Fixed Conversion Price or (ii) Market Conversion Price. The Debentures are subject to a “conversion blocker” such that the Selling Stockholder cannot convert any portion of the 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 Debentures or exercise of the Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% percentage 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 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 $0.05 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 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current conversion price of the 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 Debentures.

We also granted the Warrant to purchase up to an aggregate of 20 million shares of our Common Stock. The 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 Warrant Shares, or if an Event of Default (as defined below) has occurred and is continuing, then the holder may exercise the Warrant on a “cashless” basis. “Event of Default” means an event of default under the SPA or the Debentures.

The 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 Warrant. 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 Warrant.

The Warrant is subject to an “exercise blocker” such that the Selling Stockholder cannot exercise any portion of the 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 Warrant or conversion of the Debentures that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% percentage to 9.99% upon at least 65 days’ prior written notice to us.

See “Description of Securities-Private Placement Transaction” for a more detailed description of the transaction.

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. Our telephone number is (844) 714-2224. We maintain the following website addresses: www.konagoldhemp.com, www.highdrateme.com, and www.goldleafdist.com.

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

THE OFFERING

*Issuer:*		Kona Gold Solutions, Inc.

*Securities Being Offered by the Selling Stockholder:*		Up to 125,947,397 shares of our Common Stock, including: (i) up to 105,947,397 Conversion Shares and (ii) up to 20,000,000 Warrant Shares.

Offering Price:

The Selling Stockholder may offer, sell, or distribute all or a portion of the Conversion Shares and the Warrant Shares registered hereby either through public or private transactions at prevailing market prices or at negotiated prices. See “Plan of Distribution.”

Risk of Factors:

The Securities offered hereby involve a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” for a discussion of the factors you should consider carefully before making an investment decision.

Shares of our Common Stock Issued and Outstanding Prior to the Offering:

778,052,603 shares (1)

*Use of Proceeds:*		We will not receive any proceeds from the sale of the Securities by the Selling Stockholder. However, we will receive proceeds from any exercise of the Warrant; provided, that such exercise is not on a cashless basis. We have agreed to bear the expenses relating to the registration of the Securities of the Selling Stockholder. See “Use of Proceeds.”

*Trading Symbol:*		Our Common Stock is currently quoted on the OTCQB under the symbol “KGKG.”

(1)

Unless we indicate otherwise, the number of shares of our Common Stock outstanding is based on 778,052,603 shares of our Common Stock outstanding on July 14, 2020, and excludes the following: (i) 105,947,397 shares of our Common Stock issuable upon conversion of the Debentures; (ii) 20,000,000 shares of our Common Stock issuable upon exercise of the Warrant; (iii) 488,000 shares of our Common Stock issuable upon conversion of our Series B preferred stock (our “Series B Preferred Stock”); (iv) 140 shares of our Common Stock issuable upon conversion of our Series C preferred stock (our “Series C Preferred Stock”); (v) 500,000,000 shares of our Common Stock issuable upon conversion of our Series D preferred stock (our “Series D Preferred Stock”); (vi) 169,999,860 shares of our Common Stock that are issuable at some point in the future to Robert Clark, our Chief Executive Officer, which shares are related to certain accruals for compensation previously earned; and (vii) 650,000 shares of our Common Stock that are issuable upon conversion of our Series B Preferred Stock that are issuable at some point in the future to Robert Clark, our Chief Executive Officer, which shares are related to certain accruals for compensation previously earned.

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.

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 $1,990,976 at December 31, 2019, which included our net loss of $1,786,021 for the year ended December 31, 2019, as compared to an accumulated deficit of $1,202,193, which included net loss of $358,243 for year ended December 31, 2018. Our accumulated deficit was $2,264,412 for the three months ended March 31, 2020, which included our net loss of $591,936 for the three months ended March 31, 2020, compared to an accumulated deficit of $1,279,699 for the three months ended March 31, 2019, which included our net loss of $1,029,105 for the three months ended March 31, 2019. 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.

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, and future prevention and mitigation measures, have had an adverse impact on global economic conditions and are likely to have an adverse impact on consumer confidence and spending, which could materially adversely affect the supply of, as well as the demand for, our products. Uncertainties regarding the economic impact of COVID-19 are likely to result in sustained market turmoil, which could also negatively impact our business, financial condition, and cash flow.

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, may 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.

Additionally, 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. If our operations or productivity become, or continue to be, impacted throughout the duration of the COVID-19 outbreak and government-mandated closures, which 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.

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 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 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.

Our principal beverage products contain hemp, CBD, and ginseng. Increases in costs of these, or other, ingredients in our products could have a material adverse effect our profit margins, as well as 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 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 suppliers. Although we have not experienced significant problems with our suppliers, our 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 suppliers, we may be forced to find other suppliers. We may encounter difficulties in finding substitute suppliers in a timely manner, if at all, given the strict licensing requirements in the CBD industry and the limited number of suppliers 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 suppliers, which in turn would increase our costs. In addition, it is possible that the substitute 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.

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

All our distribution is run domestically. As a result, 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 brand and branded products and adversely affect our business.

We depend in large part on our brand 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 brand 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 two 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 or 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:

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 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.

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.

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.

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 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. See “Description of Business-Government Regulation and Compliance.”

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. See “Description of Business-Government Regulation and Compliance.”

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. 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, 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 (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 our suppliers may have a material adverse tax effect on us.

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 OTCM, under the symbol “KGKG,” there has been no material 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.

Moreover, there can be no assurance that the Selling Stockholder will sell any or all of its Conversion Shares or Warrant Shares and there may initially be a lack of supply of, or demand for, shares of our Common Stock. In the case of a lack of supply for shares of our Common Stock, the quoted price of our Common Stock may rise to an unsustainable level, particularly in instances where institutional investors may be discouraged from purchasing our Common Stock because they are unable to purchase a block of shares in the open market due to a potential unwillingness of the Selling Stockholder to sell the amount of shares at the price offered by such investors and the greater influence individual investors have in setting the trading price. In the case of a lack of demand for shares of our Common Stock, the quoted price of our Common Stock could decline significantly and rapidly at any time.

We intend to list shares of our Common Stock on a national securities exchange in the future; but, we do not now, and may not in the future, meet the initial listing standards of any national securities exchange, which often provides a more widely-traded and liquid market. Some, but not all, of the factors that may delay or prevent the listing of shares of our Common Stock on a national securities exchange include the following: our stockholders’ equity may be insufficient; 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; we may not be able to secure market makers for our Common Stock; and we may fail to meet other rules and requirements mandated by the several exchanges and markets to have our Common Stock listed. Should we fail to satisfy the initial listing standards of the national securities exchanges, 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, 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 a 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 quoted on the OTCQB and are not subject to the rules of a national securities exchange, such as the New York Stock Exchange, the 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.

We do not have a class of our securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Until we do, or we become subject to Section 15(d) of the Exchange Act, we will be a “voluntary filer.”

We are not currently required to file periodic reports with the SEC under Section 13(a) or Section 15(d) of the Exchange Act. Until we become subject to those reporting requirements, we are a “voluntary filer.” We are currently considered to be a non-reporting issuer under the Exchange Act. We will not be required to file reports under Section 13(a) or 15(d) of the Exchange Act until the earlier to occur of: (i) our registration of a class of securities under Section 12 of the Exchange Act, which would be required if we list a class of securities on a national securities exchange or if we meet the size requirements set forth in Section 12(g) of the Exchange Act, or which we may voluntarily elect to undertake at an earlier date or (ii) the effectiveness of this or any other registration statement under the Securities Act relating to our Common Stock through the end of our fiscal year in which that registration statement was declared effective by the SEC. Until we become subject to the reporting requirements of Section 13(a) of the Exchange Act, we will not become subject to the SEC’s proxy rules, and large holders of our capital stock will not be subject to beneficial ownership reporting requirements under Sections 13 or 16 of the Exchange Act and their related rules. As a result, our stockholders and potential investors may not have available to them as much or as robust information as they might have if and when we become subject to those requirements. In addition, if we do not voluntarily register (or are not required to register) a class of securities under Section 12 of the Exchange Act, and remain a “voluntary filer”, we could cease filing annual, quarterly, or current reports under the Exchange Act following the end of our fiscal year in which that registration statement was declared effective.

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 Prospectus also could be subject to wide fluctuations in response to the risk factors described in this Prospectus 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.

Once this registration statement on Form S-1 (this “Registration Statement”) has been declared effective, we will become subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC relating to public companies, through no earlier than the end of our fiscal year in this Registration Statement is declared effective. 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.

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 July 14, 2020, members of our management team beneficially owned approximately 49.23% of our outstanding shares of Common Stock; 100%, or 140 shares of our Series C Preferred Stock, each of which is convertible into one share of our Common Stock; and 100%, or 500,000 shares, of our Series D Preferred Stock, each of which is convertible into 1,000 shares of our Common Stock. As such, management owns approximately 52.1% of our voting power and controls us. As a result, management has the ability to control substantially all matters submitted to our stockholders for approval including:

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 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.

Our A&R Certificate of Incorporation authorizes 2,500,000,000 shares of our Common Stock, of which 778,052,603 are issued and outstanding as of July 14, 2020; 1,200,000 shares of our Series B Preferred Stock, of which 488,000 shares are issued and outstanding as of July 14, 2020; 250 shares of our Series C Preferred Stock, of which 140 shares are issued and outstanding as of July 14, 2020; and 500,000 shares of our Series D Preferred Stock, of which 500,000 shares are issued and outstanding as of July 14, 2020, for an aggregate of 988,140 issued and outstanding shares of our preferred stock as of July 14, 2020. 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.

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.

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:

The resale of shares of our Common Stock by the Selling Stockholder could adversely affect the prevailing market price of our Common Stock and may cause substantial dilution to our existing stockholders.

We are registering 125,947,397 shares of our Common Stock for resale by the Selling Stockholder, which include the 105,947,397 Conversion Shares that are issuable upon conversion of the Debentures and the 20,000,000 Warrant Shares issuable upon exercise of the Warrant. The number of shares ultimately offered for sale by the Selling Stockholder under this Prospectus is dependent upon the number of shares the Selling Stockholder elects to sell from time to time. Depending upon market liquidity at the time, sales of shares of our Common Stock issued upon the conversion and exercise of the Debentures and the Warrant, respectively, may cause the trading price of our Common Stock to decline. The Selling Stockholder may sell all, some, or none of the shares of our Common Stock that it holds or comes to hold upon the conversion of the Debentures and the exercise of the Warrant. Sales by the Selling Stockholder of shares of our Common Stock that it acquired upon the such conversion and exercise and sold under the Registration Statement, of which this Prospectus is a part, may result in dilution to the interests of other holders of our Common Stock. The sale of a substantial number of shares of our Common Stock by the Selling Stockholder in this offering, or the anticipation of such sales, could make it more difficult for us to sell our equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

This Prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for the forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. 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.

We will not receive any proceeds from the sale of the Conversion Shares or the Warrant Shares by the Selling Stockholder. We will receive proceeds from the exercise of the 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 Warrant would be $1,000,000. 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 Conversion Shares and Warrant Shares, including any brokerage commissions or costs of sale.

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 prevailing at the time of sale, varying prices determined 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 shares of our Common Stock being offered by the Selling Stockholder are issuable upon conversion of the Debentures and by the exercise of the Warrant. For additional information regarding the issuance of the Debentures and the grant of the Warrant, see “Description of Securities-Private Placement Transaction.” We are registering the resale of the Conversion Shares and Warrant Shares in order to permit the Selling Stockholder to offer them in the manners provided in this Prospectus for resale from time to time. Except as otherwise noted and except for the ownership of the Debentures issued and the Warrant granted pursuant to the SPA, 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 ownership of the shares of our Common Stock by the Selling Stockholder. The second column lists the number of shares of our Common Stock beneficially owned by the Selling Stockholder, based on its ownership of the Debentures and the Warrant, as of July 14, 2020, assuming conversion of all the Debentures and exercise of the Warrant held by the Selling Stockholder on that date, without regard to any limitations on conversions or exercise.

The third column lists the shares of our Common Stock being offered by this Prospectus by the Selling Stockholder.

In accordance with the terms of the Registration Rights Agreement with the Selling Stockholder, this Prospectus generally covers the resale of at least 125,947,397 shares of our Common Stock issuable to the Selling Stockholder pursuant to the SPA. Because the conversion price of the Debentures and the exercise price of the Warrant may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this Prospectus. The fourth column assumes the sale of all of the shares offered by the Selling Stockholder pursuant to this Prospectus.

Under the terms of the Debentures and the Warrant, the Selling Stockholder cannot convert any portion of the Debentures or exercise any portion of the 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 conversion or exercise, excluding for purposes of such determination shares of our Common Stock issuable upon conversion of the Debentures or exercise of the 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 Conversion Shares or Warrant Shares in this offering. See “Plan of Distribution.”

The Selling Stockholder of the shares of our Common Stock and any of its respective pledgees, assignees, and successors-in-interest may, from time to time, sell any or all of its respective shares of our Common Stock on the OTCQB or any other stock exchange, market, or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling shares:

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 Conversion Shares and the Warrant Shares by the Selling Stockholder.

We agreed to keep this Prospectus effective until the earlier of (i) the date on which the Conversion Shares and the 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 Conversion Shares and the 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).

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.

We have authorized 2,500,000,000 shares of our Common Stock, par value of $0.00001 per share, of which 778,052,603 shares were issued and outstanding as of July 14, 2020. 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 July 14, 2020. The following table sets forth the authorized and issued and outstanding securities as of July 14, 2020:

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.

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 the 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.

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. Our Series B Preferred Stock has conversion rights, whereby each share of our Series B Preferred Stock is convertible into one share of our Common 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.

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.

Other than the Warrant granted in connection with the Private Placement, we do not have any other outstanding warrants. See “Private Placement Transaction” below for additional information regarding the Warrant.

In May 2020, we completed the Private Placement of the Debentures and the Warrant. The 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 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 Debentures or otherwise accelerates the maturity date, as provided for in the 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.

At our option, we have the right to redeem, in part or in whole, the outstanding principal and interest under the 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 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.

We also granted the Warrant to purchase up to an aggregate of 20 million shares of our Common Stock. The 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 Warrant Shares, or if an Event of Default has occurred and is continuing, then the holder may exercise the Warrant on a “cashless” basis.

Pursuant to the terms of the Registration Rights Agreement, we agreed to file a registration statement with the SEC registering for resale the Conversion Shares and the Warrant Shares within 45 calendar days following the closing of the Private Placement. 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.

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.

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.

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.

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.

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

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.

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.

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

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.

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.

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:

Any amendment, repeal, or modification of these provisions will be prospective only and would not affect any limitation on liability of a director for acts or omissions that occurred prior to any such amendment, repeal, or modification.

Our A&R Certificate of Incorporation also requires us to pay any expenses incurred by any director or officer in defending against any such action, suit, or proceeding in advance of the final disposition of such matter to the fullest extent permitted by law, subject to the receipt of an undertaking by or on behalf of such person to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified as authorized by our A&R Bylaws or otherwise. We have entered or will enter into indemnification agreements with each of our directors and executive officers. We believe that the limitation of liability provision in our A&R Bylaws facilitates our ability to continue to attract and retain qualified individuals to serve as directors and officers.

The transfer agent for our Common Stock is Action Stock Transfer at 2469 East Fort Union Boulevard, Suite 214, Salt Lake City, Utah 84121. The transfer agent’s telephone number is (801) 274-1088.

The table below sets forth the high and low closing prices of our Common Stock during the periods indicated, as reported by the OTCM. The market quotations reflect inter-dealer prices, without retail mark-up, markdown, or commissions and may not reflect actual transactions.

The closing bid price of our Common Stock as reported on July 13, 2020, was $0.0331 per share.

On July 14, 2020 there were approximately 90 holders of record of our Common Stock. This does not include an indeterminate number of persons who hold our Common Stock in brokerage accounts and otherwise in “street name.” As of such date, 778,052,603 shares of our Common Stock were issued and outstanding.

We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our Common Stock for the foreseeable future. Any future determination related to dividend policy will made at the discretion of our Board.

In general, under Rule 144 of the Securities Act, as currently in effect, a person (or persons whose shares are required to be aggregated), who is not our affiliate at any time during the preceding three months, and who has beneficially owned the relevant shares of our Common Stock for at least six months, 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; provided, that current public information about us is available 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 7,780,526 shares based on the number of shares of our Common Stock outstanding as of July 14, 2020, 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.

Sales of shares held by our affiliates that are not “restricted” are subject to such volume limitations, but are not subject to 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 affiliate of our Company at any time during the 90 days preceding a sale by such person, 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 shares of our Common Stock that our existing stockholders will elect to sell under Rule 144.

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

Because we may be deemed previously to have been a “shell 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 of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed 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 requirements of Rule 144(i) will apply regardless of holding period, restrictive legends on certificates for shares of our Common Stock cannot be removed except in connection with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Securities. Because under such circumstances our unregistered securities may not be sold pursuant to Rule 144 unless we continue to meet such requirements, any unregistered securities we issue will have limited liquidity unless we continue to comply with such requirements.

We were originally incorporated as CTA under the laws of the State of Nevada in Mach 1997. In October 2001, CTA entered into the Reorganization Plan with 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 in 2002. In 2004, PhaserTek Medical changed its name to UE Nevada. For purposes of changing UE Nevada’s state of incorporation, UE Nevada formed 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.

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 our products through resellers, our websites, and distributors that span across 36 states. Our products are available in wide variety of stores, including convenience and grocery stores, smoke shops, and gift shops.

We market four distinct product lines: hemp-infused energy drinks, CBD-infused energy water, CBD-infused high-alkaline H₂O, 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 that, pursuant to 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.

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.

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.

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

The energy drink industry continues grow every year with an estimated $8.25 billion in sales in the United States in 2018, and sales are expected to reach $10.91 billion by 2023. The energy drink by the name “Red Bull” dominated the industry in 2018, comprising approximately 35% of the energy drink market. In 2018, an energy drink by the name of “Monster,” increased its market share to approximately 26%. Finally, an energy drink by the name of “Rockstar” had a 2018 market share of approximately 2.5%.

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 nearly half of the energy drink sales in the United States in 2018, 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 $12.03 billion in sales in 2018, 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 21.9% of the market share in 2018.

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% from 2018 through 2022. Hemp Business Journal estimates that the hemp-derived CBD market will grow to a $1.3 billion market by 2022. The U.S. hemp market, which includes CBD, textiles, and hemp seed, is expected to lead the global market in 2020, 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.

The health and fitness industry, which includes food and beverages, saw consumer awareness drive trends towards health and wellness, plant-based, and clean-label products in 2019. We believe that conscious consumerism will continue to drive these trends in 2020. 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.

The global apparel market is projected to grow to $1.5 trillion dollars in 2020, 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.

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, the CBD beverage market was valued at $2.09 million, and is expected to reach $11.38 million by 2025 with a compounded annual growth rate of 27.4%. 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), CannTrust Holdings, Inc. (NYSE: CTST; TSX: TRST), HEXO Corp. (NYSE and TSX: HEXO), Tilray, Inc. (NASDAQ: 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.

We do not directly produce our hemp-infused energy drinks, Storm CBD-infused water, or HighDrate CBD-infused energy waters, 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 in our warehouses located in Greer, South Carolina and Melbourne, Florida.

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.

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 continually endeavor to develop back-up sources of supply for certain of the flavors and concentrates that we purchase from third-party suppliers, as well as to negotiate arrangements with our 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.

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 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 to our distribution partners in the United States. Our distributors consist of state-wide tier 1 distributors and regional small-to-medium size distributors.

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 two 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.

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.

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.

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.

Our sales strategy is to exploit the energy drink and water markets in 2020, with the groundwork that we laid out in 2019. 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.

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 two trademarks. One is for use of “Kona Gold Hemp Energy Drinks” in the energy drink segment. The second trademark is for the use of “Highdrate” in the energy drink segment. We have also applied for a trademark for “Storm” to use in the energy drink segment. We do not have any patents.

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.

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.

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.

Our facilities in the United States are subject to federal, state, and local environmental laws 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 that we are not subject to any material costs for compliance with any environmental laws.

Our products are subject to risks. While we have planned for these contingencies 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.

As of July 14, 2020, we employed a total of 9 persons, all of whom were employed on a full-time basis.

Many of our employees, including members of our management team, have been reporting to work remotely due to the COVID-19 pandemic, which has resulted in the closure of our offices in Florida. These employees have been returning slowly to our offices. Our warehouses operated as normal.

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

The following discussion and analysis of the results of operations and financial condition for the three months ended March 31, 2020 and 2019 and the years ended December 31, 2019 and 2018 should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere in this Prospectus. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” and “Description of Business” sections in this Registration Statement. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Prospectus 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 Prospectus to confirm forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including, but not limited to, uncertainties associated with the following:

The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this Prospectus. 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.

Three Months Ended March 31, 2020 compared to Three Months Ended March 31, 2019

As reflected in the accompanying financial statements, during the three months ended March 31, 2020, we incurred a net loss of $591,936 and used cash in operations of $253,196. As of March 31, 2020, we had a stockholders’ deficit of $2,264,412.

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

During the three months ended March 31, 2020, we reported net revenues of $209,140, which is a decrease of $67,751, or 23%, compared to the three months ended March 31, 2019. We attribute this decrease to the discontinuation of unfavorable distributor agreements in an effort to sign larger, more favorable agreements with reputable tier 1 and mid-size distributors and grocery chains. Distribution of our products pursuant to these agreements was impacted by unforeseen delays, as well as the COVID-19 pandemic at the end of the quarter. The COVID-19 pandemic not only impacted these new distribution agreements, but also delayed our launch of a variety of new products – drinks and non-drink line broadening items. We expect that revenue will increase in the second quarter of fiscal 2020 as the distribution related to many of these new agreements will come to fruition and we will be able to launch products. Despite the impact from COVID-19 on our revenues in early 2020, we still anticipate our revenues to grow throughout the remainder of the fiscal 2020.

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. We expect that the cost of sales will decrease as a direct correlation to increases in sales as the result of volume discounts with our suppliers.

During the three months ended March 31, 2020, we reported cost of revenues of $151,861, which is a decrease of $55,844, or 26%, compared to the three months ended March 31, 2019. This decrease is attributed to a reduction in the cost of product as a direct relation to an increase in purchase quantities, notwithstanding the decrease in sales between the periods.

Selling, general and administrative 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 by $226,953, or 54%, to $645,408 for the three months ended March 31, 2020, compared to $418,455 in the three months ended March 31, 2019. The increase in selling, general and administrative expenses was primarily due to a 61% increase in salaries and wages from the hiring of additional personnel, a 28% increase in legal and accounting fees; and a 9% increase in rent expenses for our office and warehouses.

Salaries and wages increased by $140,182, or 43%, to $469,099 in the three months ended March 31, 2020, compared to $328,917 for the three months ended March 31, 2019. This increase was the result of hiring additional personnel, which are essential and integral to our success. Legal and accounting fees increased by $63,846, or 3,778%, to $65,536 for the three months ended March 31, 2020, compared to $1,690 for the three months ended March 31, 2019. This increase was the result of incurring fees related to preparation of audits for our financial statements, which were integral to having our Common Stock approved for quotation on the OTCQB. Rent expenses increased by $20,502, or 160%, to $33,299 for the three months ended March 31, 2020, compared to $12,797 for the three months ended March 31, 2019. This increase was the result of our moving to a larger warehouse facility that was necessary due to our substantial growth.

As we expand our business, operations, and incur additional expenses associated with having our Common Stock quoted on the OTCQB and being required to file certain reports and other information with the SEC, we believe selling, general and administrative expenses will increase.

We incurred a net loss of $591,936 for the three months ended March 31, 2020, an increase of $237,430 compared to the previous three months ending March 31, 2019, which had a net loss of $354,506. This net loss is primarily due to the increase in selling, general and administrative expenses that are necessary for our growth.

Fiscal Year Ended December 31, 2019 compared to the Fiscal Year Ended December 31, 2018

Our business has grown rapidly since inception, and we anticipate that our business will continue to grow. This growth has been characterized by a substantial increase in our net revenues. For fiscal 2019, we had net revenues of approximately $1.6 million, a 960% increase as compared to fiscal 2018, which had net revenues of approximately $154,000. Our subsidiary, Kona, has three main revenue streams: product sales from online consumers, product sales through resellers, and product sales from distributors. Product sales include sales of our energy drinks, HighDrate CBD-infused energy waters, and apparel such as t-shirts and hats. In early 2019, we expanded our operations with the acquisition of a distribution center, which has provided an additional revenue stream, and additional products that complement our current product offering. Gold Leaf has one main revenue stream: product sales to convenience stores, grocery stores, or smoke and gift shops. Gold Leaf’s product sales include sales of our beverages, as well as beverages purchased for resale from several other beverage producers.

The increase in operations has required the expansion of human resources and investment in property and equipment. Our full-time head count grew from 2 employees at December 31, 2018 to 10 employees at December 31, 2019, which includes key employees such as sales representatives and key positions in our corporate office. We have experienced and expect to continue to experience substantial growth in our operations as we seek to expand with additional products and acquisitions that complement our current product offerings. The following is a more detailed discussion of our financial condition and results of operations for the period presented.

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 revenue source, as a percentage of total net revenues for the periods presented:

Growth in our net revenues from our 2018 fiscal year to our 2019 fiscal year resulted primarily from the growth in distributor revenue, which increased by 1,096%. However, all sources of revenue increased year-over-year with revenues, ranging from increase of 416% to 1096%, or an average increase of 960%.

We believe the increase in net revenues described above were the result of the relevance and quality of the distributers, the products, and key personnel that have both experience and key contacts in the beverage industry, which has increased the availability of our products to 36 states across the United States.

Cost of revenues consist primarily of expenses associated with the products sold to distributors and resellers and consumers, including product and shipping costs. Costs also include credit card fees, fees charged by Amazon.com, Inc., and other transaction fees related to processing consumer transactions. We expect that the cost of sales to increase as a direct correlation to the significant increases in sales year-over-year.

Cost of revenues for our 2019 fiscal year was approximately $1.3 million (or 81% of net revenues), which was an increase of approximately $1.2 million, or 937%, compared to our 2018 fiscal year, in which cost of revenues was approximately $127,000 (or 82% of net revenues). This increase is directly related to the 960% increase in net revenues in our 2019 fiscal year compared to our 2018 fiscal year. However, the cost of sales as a percentage of net revenues from our 2018 fiscal year to our 2019 fiscal year decreased by approximately 2%. This decrease is attributed to a reduction in the costs as a direct relation to increases in purchased quantities to meet sales demands.

We expect cost of sales as a percentage of net revenues to continue to decrease as our net revenues continue to increase due to a decrease in costs because of an increase in purchasing volume.

Selling, general and administrative (“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.

SG&A expenses increased by approximately $1.7 million (or 445%) to approximately $2.1 million in our 2019 fiscal year, from approximately $384,000 in our 2018 fiscal year. The increase in SG&A expenses was primarily due to a 40% increase in professional fees, a 38% increase in salaries and wages, and a 6% increase in advertising and promotion fees.

In our 2019 fiscal year, professional fees were approximately $811,000, compared to approximately $171,000 in our 2018 fiscal year, an increase of approximately $641,000, or 79%. This increase was the result of paying fees to contractors that provided services to us that were essential and integral to our success. Salaries and wages in our 2019 fiscal year were approximately $688,000, compared to $0 in our 2018 fiscal year, an infinite increase. This increase was the result of hiring key personnel, including sales representatives and management, to support our growth. In our 2019 fiscal year, advertising and promotion fees were approximately $125,000, an increase of approximately $99,000, or 79%, compared to approximately $26,500 in our 2018 fiscal year. This increase is primarily due to promotional and products samples provided to increase sales.

As we expand our business, operations, and incur additional expenses associated with being an SEC reporting company, we believe SG&A expenses will increase and may increase as a percentage of net revenues.

We incurred a net loss of approximately $1.8 million in our 2019 fiscal year, an increase of approximately $1.4 million, as compared to a net loss of approximately $358,000 in our 2018 fiscal year. This year-over-year increase in net loss is primarily due to the increase in SG&A expenses that are necessary for our growth. We expect that SG&A expenses will continue to increase as we expand and grow, possibly through acquisitions; however, we expect the growth in our business to provide future profits.

Since inception, we have financed our operations primarily through internally generated funds, private sales of stock, and the use of our lines of credit. In summary, our lines of credit as follows:

Our principle sources of liquidity are our cash and equivalents, as well as our lines of credit. At March 31, 2020, we had unused lines of credit for approximately $349,000. Our liquidity could be negatively affected by a decrease in demand for our products and services. In addition, we may make acquisitions that are complementary to our business and may need to raise additional capital through future debt or equity financing to the extent necessary to fund any such acquisitions or activities. Available financing may not be available at all or on terms favorable to us.

We have incurred operating losses since inception and have negative cash flow from operations since inception. As of March 31, 2020, we had a stockholders’ deficit of approximately $2.3 million and we incurred a net loss of approximately $592,000 during the three months ended March 31, 2020. We also utilized cash in operations of approximately $253,000 during the three months ended March 31, 2020. As a result, our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flow from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations.

Our 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.

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 issuance 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 business, the result of which would be that our stockholders would lose some or all of their investment. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Cash provided by or used in operating activities primarily consists of net income adjusted for certain non-cash items, including depreciation, amortization, stock-based compensation, and the effect of changes in working capital and other activities. Cash used in operating activities for the three months ended March 31, 2020 was $253,196 and consisted of a net loss of $591,936, adjustments for non-cash items of $347,418, and $8,678 used in working capital and other activities. Cash used in operating activities for the three months ended March 31, 2019 was $252,934 and consisted of a net loss of $354,506, adjustments for non-cash items of $279,001, and $177,449 used in working capital and other activities.

Cash used in investing activities for the three months ended March 31, 2020 of $21,618 was attributable to capital expenditures. Cash used in investing activities for the three months ended March 31, 2019 of $39,422 was attributable to capital expenditures.

Cash provided by financing activities for the three months ended March 31, 2020 of $257,120 was due to proceeds from lines of credit of approximately $260,120 and $3,000 was used to pay principal on a note payable. Cash provided by financing activities for the three months ended March 31, 2019 of $355,651 was due to proceeds from line of credit of $297,151 and proceeds from a note payable of $58,500.

For the three months ended March 31, 2020, there were no non-cash investing and financing activities. Non-cash investing and financing activities for the years ended December 31, 2019, and 2018 consisted of shares of our Common Stock that were returned to us with a fair market value of $186,000 and $1,025,000, respectively.

On October 10, 2016, we entered into a Membership Interest Purchase Agreement (the “Membership Interest Purchase Agreement”) with Elev8 Hemp LLC (“Elev8 Hemp”; then a wholly-owned subsidiary of ours) and Branded Legacy, Inc., formerly known as Elev8 Brands, Inc. and, prior to that, known as PLAD, Inc. (“Branded Legacy”), to sell 100% of the issued and outstanding membership interests of Elev8 Hemp to Branded Legacy in consideration of Branded Legacy’s issuance to us of 200,000,000 shares of its common stock, par value $0.00001.

On April 14, 2018, our Board declared a dividend to our stockholders of an aggregate of 51,396,608 shares of common stock of Branded Legacy. Our stockholders received one share of common stock of Branded Legacy for every 10 shares of our Common Stock held on the record date. After the payment of the dividend, we held 148,603,392 shares of common stock of Branded Legacy.

On March 6, 2018, we entered into a Securities Exchange and Settlement Agreement (the “First Exchange Agreement”) with Branded Legacy. Pursuant to the First Exchange Agreement, we exchanged the remaining 146,603,365 shares of common stock of Branded Legacy for 2,746,723 shares of its Series D preferred stock. The shares of Series D preferred stock were initially convertible into 164,803,380 shares of common stock of Branded Legacy.

On November 26, 2019, we entered into a second Securities and Exchange Agreement with Branded Legacy, whereby we exchanged the 2,746,723 shares of Branded Legacy’s Series D preferred stock for its 10-year, unsecured, non-convertible promissory note in our favor in the original principal amount of $1,500,000 (the “Branded Legacy Note”). All principal and accrued and unpaid interest on the Branded Legacy Note is payable, in full, on November 27, 2029.

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

The accounting policies that we follow are set forth in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020, as included in this Prospectus. These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the consolidated financial statements.

On January 1, 2019, we adopted the Financial Accounting Standards Board’s (“FASB”) ASU 2016-02, Leases (Topic 842), which requires an entity to recognize a liability and corresponding asset for leases that meet certain criteria. We present right-of-use assets resulting from leases separately from other assets as noncurrent, and amortized accordingly. The corresponding lease liabilities are presented separately from other liabilities on the accompanying balance sheets.

We recognize a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred. The amortization period for the right-of-use asset is from the lease commencement date to the earlier of the end of the lease term or the end of the useful life of the asset.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate or the risk-free rate with the election of the practical expedient. We have elected to use the risk-free rate.

Please refer to Note 13, Commitments and Contingencies, to our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020, for additional information related to our right-of-use assets and lease liabilities.

Kona Gold has three main revenue streams: product sales from online consumers, product sales through resellers, and product sales from distributors. Product sales include Kona Gold energy drinks, HighDrate CBD-infused energy waters, Storm CBD water, and apparel such as t-shirts and hats. In evaluating the timing of the transfer of control of products to distributors and resellers, 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 consumers, distributors, and resellers when products that do not require further services by us are shipped, when there are no uncertainties surrounding such purchaser’s acceptance, and when collectability is reasonably assured. Sales are made to distributors and resellers under terms allowing certain limited rights of return. Amounts billed to distributors and resellers 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.

Gold Leaf has one main revenue stream: product sales to convenience stores, grocery stores, and smoke and gift shops. Product sales include Kona Gold beverages and beverages purchased for resale from several other beverage producers. In evaluating the timing of the transfer of control of products to distributors and resellers, 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 distributor and reseller acceptance and when collectability is reasonably assured. Cash received by us prior to shipment is recorded as deferred revenue. Sales are made to distributors and resellers under terms allowing certain limited rights of return. Amounts billed to distributors and resellers 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.

On January 1, 2019, we adopted Accounting Standards Codification (“ASC”) Topic 606. ASC Topic 606 contains an overarching principle: we recognize revenue when we transfer goods or services to a distributor or reseller. The amount of revenue recognized represents the consideration to which the entity expects to be entitled.

Sales are made to distributors and resellers under terms allowing certain limited rights of return. We record an allowance and return for each quarter for three percent of total sales. We recorded sales returns and allowances for our 2019 and 2018 fiscal years of $51,159 and $0, respectively. We recorded sales returns and allowances for the first quarter of our 2020 and 2019 fiscal years of $44,965 and $ 7,909, respectively.

Accounts receivable are recorded at net realizable value. We determine provisions for uncollectible accounts, sales returns, and claims based upon factors including the credit risk and activity of specific distributors and resellers, historical trends, and other information. If we become aware of a specific distributor’s or reseller’s inability to meet its financial obligations, bad debt charges are recorded based on an overall assessment of past due accounts receivable outstanding. In the opinion of management, a provision was deemed necessary for uncollectible accounts.

The cost of inventory using the standard cost method, which approximates actual cost based on a first-in, first-out method. Our inventories are valued at the lower of cost or net realizable value. Our inventories consist almost entirely of finished and unfinished goods, and freight, which include CBD energy waters, hemp energy drinks, cans for production, and merchandise and apparel. We periodically evaluate and adjust inventories for obsolescence. In the opinion of management, no provision for obsolescence is deemed necessary. The shelf life of all beverage inventory is two years, and as of March 31, 2020, all inventory is current. At December 31, 2019, we had approximately $686,922 of product in inventory, which was an increase of $619,405, compared to $67,517 at December 31, 2018. At March 31, 2020, we had approximately $783,530 of product in inventory, which was an increase of $519,509, compared to $203,676 at March 31, 2019, and an increase of $96,608 compared to December 31, 2019. We expect the balance of inventory to increase in direct relation to the increase in sales that we expect. See Note 2, Summary of Significant Accounting Policies, Subsection F, Inventories, of our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020, included in this Prospectus for an additional description of our inventory that had a material effect on our consolidated financial statements.

Intangible assets represent both indefinite lived and definite lived assets. Trademarks are deemed to have definite useful lives and accordingly are amortized and are tested annually for impairment. See Note 2, Summary of Significant Accounting Policies, Subsection G, Goodwill and Intangible Assets, of our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020, included in this Prospectus for an additional description of intangible assets that had a material effect on our consolidated financial statements.

FASB’s ASC Topic 718, Stock Compensation (formerly, FASB Statement 123R), prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. We measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Fair value for restricted stock awards is valued using the closing price of our Common Stock on the date of grant. For our 2019 and 2018 fiscal years, we recognized stock-based compensation expense of $1,124,488, and $150,700, respectively. For the first quarters of our 2020 and 2019 fiscal years, we recognized stock-based compensation expense of $318,500 and $277,000, respectively. We had a balance in accrued stock-based compensation at December 31, 2019, and 2018 of $1,386,500 and $1,200,000, respectively. We had a balance in accrued stock-based compensation at March 31, 2020 and 2019 of $1,386,500 and $1,200,000, respectively. See Notes 6, Stock Based Compensation, of our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020 included in this Prospectus for an additional description of our stock-based compensation that had a material effect on our consolidated financial statements.

See Notes 8, Related Party Transactions, to our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020 included in this Prospectus for an additional description of related party transactions that had a material effect on our consolidated financial statements.

See Notes 2, Summary of Significant Accounting Policies, Subsection R, Recently issued accounting pronouncements, to our consolidated financial statements for the year ended December 31, 2019 and for the three months ended March 31, 2020 included in this Prospectus for a discussion of recent accounting pronouncements.

We currently lease approximately 4,500 square feet of corporate office and warehouse space located at 746 North Drive, Suite A, Melbourne, Florida 32934. The lease is for a five-year term, and expires on May 31, 2023. The initial monthly base rent was approximately $3,994, plus state taxes. The monthly base rent increases annually by three percent, beginning on June 1, 2019 and each June 1^stthereafter. During the lease year that commenced on June 1, 2020, our monthly base rent will be $4,114.

Through our subsidiary, Goldleaf, we also lease a 30,000 square foot warehouse and main distribution hub in Greer, South Carolina. The lease is for a 63-month term that commenced in May 2019. Beginning in May 2020, our monthly rent is approximately $13,225. We believe our office space, warehouse space, and distribution facility are sufficient to meet our current needs.

We may be subject to legal proceedings and claims which arise in the ordinary course of our business. Although occasional adverse decisions or settlements may occur, we believe that the final disposition of such matters should not have a material adverse effect on our financial position, results of operations, or liquidity.

As of the date of this Prospectus, we were not a party to any legal proceedings that could have a material adverse effect on our business, financial condition, or operating results. Further, to our knowledge, no other proceedings have been initiated or threatened against us.

All directors hold office for a one (1) year period and have been duly elected and qualified. Directors are elected at the annual meetings to serve for one-year terms or until his or her successor has been elected and qualified, or until his or her death, resignation, or removal. Each of our executive officers are appointed by and serves at the discretion of the Board.

Our directors and executive officers, their ages, positions held, and duration of such are as follows:

The following is a brief overview of the business experience of each of our directors and executive officers during at least the past five years, including their principal occupations or employment during the period, the name and principal business of the organization by which they were employed, and certain of their other directorships:

Robert Clark, Chief Executive Officer, President, Chairman of our Board, and Secretary

Robert Clark has served as our Chief Executive Officer, President, and the Secretary and the Chairman of the Board since August 2015. Since August 2015, Mr. Clark also serves as an Audit, Compensation, and Governance and Nominating Committee member. Prior to joining us, Mr. Clark was the Chief Executive Officer of Branded Legacy from 2012 through 2015. Mr. Clark obtained a Bachelor of Science degree from the School of Business at the University of Central Florida in 2003. We believe that Mr. Clark’s background in product development and design, along with more than 12 years of management experience, allows him to have a great understanding of all levels within a company and successfully bring new products to market qualifies him to serve on our Board.

Lori Radcliffe has served as our Chief Financial Officer since October 2019. Ms. Radcliffe has worked in the accounting field since 2007, most recently as a Senior Accountant at Berman Hopkins Wright & Laham, CPA’s and Associates from 2015 through 2019. Ms. Radcliffe obtained her Bachelor of Science in Business Administration in Accounting from the University of Central Florida in 2016 and her MS in Accounting from Liberty University in 2019.

Christopher Selinger has served as our Vice President of Sales since September 2018. Prior to joining us, Mr. Selinger served as the Southeast Operations Manager of Southeast Beverage Company from 2015 to 2017 and as the Southeast Regional Sales Manager at Calypso Brands (King Juice Company, Inc.) from 2009 to 2015. Mr. Selinger obtained his Associate of Science degree in 1991 from Midland Technical College. We believe that Mr. Selinger’s background in growing Calypso Brands into a national brand gives him a great understanding of all levels within a company such as ours and the methods successfully to bring new products to market.

Matthew Crystal has served as one of our independent directors since July 26, 2018. Mr. Crystal is also a member of our Audit Committee, Compensation Committee, and Governance and Nominating Committee. He has over 20 years of experience in direct response marketing, copywriting, and web development and specializes in technical training, marketing, presenting, and architectural marketing. Mr. Crystal is the Co-founder, and since 2014, has been the Vice President of Operations and is currently the Chief Operations Officer of Elite Marketing Pro, LLC, a global community of over 50,000 active small business entrepreneurs in more than 100 countries. Mr. Crystal graduated from Florida State University in 1994 with a Bachelor of Science degree. We believe that Mr. Crystal’s leadership and marketing experience qualifies him to serve as a director.

William Jeffrey Outlaw has served as an independent director of our Board since September 9, 2019. Mr. Outlaw also serves as a member of our Audit Committee Compensation Committee, and Governance and Nominating Committee. He has served as President of Calypso Brands at King Juice Company, Inc. since 2013. Mr. Outlaw has over 26 years of experience in the beverage industry, including both on the supplier and the distributor sides of the business, specializing in direct store delivery strategy routes to market. His experience includes financial marketing, sales experience in 35 countries and the United States, business development, and product development. His prior executive experience includes serving as general manager, executive vice president, and chief executive officer at Calypso Brands brings significant experience in the beverage industry qualifies him to serve as a director.

We believe that our directors should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties for us. Each director must represent the interests of all stockholders. When considering potential director candidates, our Board also considers the candidate’s character, judgement, diversity, age, and skills, including business literacy and experience in the context of our needs and the needs of our Board.

None of our director and executive officers has been involved in any of the following events during the past ten years:

There are no family relationships among any of our directors or executive officers.

None of our directors or executive officers was selected to serve in their respective roles pursuant to any arrangement or understanding between such director or executive officer and any person.

We have an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. Currently, we have two independent directors, Matthew Crystal and William Jeffrey Outlaw, each of whom meets the independent director requirements of The Nasdaq Stock Market LLC and the SEC. Both independent directors serve on the Audit Committee, Compensation Committee, and Governance and Nominating Committee. Robert Clark serves on the Audit, Compensation, and Governance and Nominating Committees. Each committee has the responsibilities described below.

On July 8, 2020, our Board adopted an audit committee charter (the “Audit Committee Charter”) to govern the Audit Committee. Currently, Messrs. Crystal, Outlaw, and Clark (Chairman) serve on the Audit Committee. As of the date of this Prospectus, none of the members qualifies as an “audit committee financial expert.”

The Audit Committee Charter requires that each member of the Audit Committee meet the independence requirements of The Nasdaq Stock Market LLC and the SEC and requires that the Audit Committee have at least one member that qualifies as an “audit committee financial expert.” We intend to identify potential new directors that can serve as Audit Committee members and satisfy these requirements. In addition to the enumerated responsibilities of the Audit Committee in the Audit Committee Charter, the primary function of the Audit Committee is to assist our Board in its general oversight of our accounting and financial reporting processes, audits of our financial statements, and internal control and audit functions. The Audit Committee Charter can be found online at https://konagoldhemp.com/media/pubco/Kona-Gold-Solutions-Audit-Committee-Charter.pdf.

On July 8, 2020, our Board approved and adopted a charter (the “Compensation Committee Charter”) to govern the Compensation Committee. Currently, Messrs. Crystal, Outlaw, and Clark (Chairman) serve as members of the Compensation Committee. Messrs. Crystal and Outlaw each meet the independence requirements of The Nasdaq Stock Market LLC and the SEC, qualify as a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and qualify as an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. In addition to the enumerated responsibilities of the Compensation Committee in the Compensation Committee Charter, the primary function of the Compensation Committee is to oversee the compensation of our executives, produce an annual report on executive compensation for inclusion in our proxy statement, if and when required by applicable laws or regulations, and advise our Board on the adoption of policies that govern our compensation programs. The Compensation Committee Charter may be found online at https://konagoldhemp.com/media/pubco/Kona-Gold-Compensation-Committee-Charter.pdf.

On July 8, 2020, our Board approved and adopted a charter (the “Nominating Committee Charter”) to govern the Governance and Nominating Committee (the “Nominating Committee”). Currently, Messrs. Crystal, Outlaw, and Clark (Chairman) serve as members of the Nominating Committee. The Nominating Committee Charter requires that each member of the Nominating Committee meets the independence requirements of Nasdaq and the SEC; however, currently only Messrs. Crystal and Outlaw qualify as independent. In addition to the enumerated responsibilities of the Nominating Committee in the Nominating Committee Charter, the primary function of the Nominating Committee is to determine the slate of director nominees for election to the board of directors, to identify and recommend candidates to fill vacancies occurring between annual stockholder meetings, to review our policies and programs that relate to matters of corporate responsibility, including public issues of significance to us and our stockholders, and any other related matters required by federal securities laws. The charter of the Nominating Committee may be found online https://konagoldhemp.com/media/pubco/Kona-Gold-Solutions-Nominating-Committee-Charter.pdf.

None of our executive officers serves as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board or Compensation Committee.

On July 8, 2020, our Board approved and adopted a Code of Ethics and Business Conduct for Directors, Senior Officers, and Employees (the “Code of Ethics”) that applies to all of our directors, officers, and employees, including our principal executive officer and principal financial officer. The Code of Ethics addresses such individuals’ conduct with respect to, among other things, conflicts of interests; compliance with applicable laws, rules, and regulations; full, fair, accurate, timely, and understandable disclosure by us; competition and fair dealing; corporate opportunities; confidentiality; protection and proper use of our assets; and reporting suspected illegal or unethical behavior. The Code of Ethics is available on our website at https://konagoldhemp.com/media/pubco/Kona-Gold-Solutions-Code-of-Ethics-and-Business-Conduct.pdf.

The following table provides certain summary information concerning compensation awarded to, earned by, or paid to the following “named executive officers,” for our 2019 and 2018 fiscal years:

We did not have any individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of the end of our 2019 fiscal year.

We did not have any option awards or stock awards outstanding as of December 31, 2019.

There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.

Resignation, Retirement, Other Termination, or Change in Control Arrangements

We have entered into an executive employment agreement with our Chief Executive Office, with our Chief Financial Officer, and with our Vice President of Sales. Other than these three agreements, that are discussed below, we have no contract, agreement, plan, or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement, or other termination of our directors or executive officers, or a change in control of our Company or a change in our directors’ or executive officers’ responsibilities following a change in control.

On August 12, 2015, we entered into an Employment Agreement (the “Clark Employment Agreement”) with Robert Clark as our Chief Executive Officer, President, and Secretary, and Chairman of our Board. On December 1, 2016, we entered into an Amendment to Employment Agreement (the “Clark Amendment”; and, together with the Clark Employment Agreement, the “Amended Clark Employment Agreement”). The term of the Amended Clark Employment Agreement expires on July 12, 2020 and automatically renews for subsequent six-month terms unless terminated with cause by us. Pursuant the Amended Clark Employment Agreement, Mr. Clark is entitled to receive compensation equal to $350,000 per year for services provided to us. In addition, pursuant to the terms of the Amended Clark Employment Agreement, he received 2,700,000 shares of our Series A Preferred Stock, 650,000 shares of our Series B Preferred Stock, 500,000 shares of our Series D Preferred Stock, and 200,000,000 shares of our Common Stock. Mr. Clark declined his compensation for our fiscal 2015, 2016, 2017, and 2018 years and declined all but $30,000 of his compensation for our 2019 fiscal year. None of such compensation has been accrued.

On October 7, 2019, we entered into an Employment Agreement (the “Radcliffe Employment Agreement”) with Lori Radcliffe, as our Chief Financial Officer. The term of the Radcliffe Employment Agreement is two years and automatically renews for subsequent one-year terms unless terminated with cause by us. Pursuant to the Radcliffe Employment Agreement, Ms. Radcliffe is entitled to receive annual compensation of $80,000 for the first year and $100,000 for the second year for services provided to us. In addition, on January 27, 2020, we issued to Ms. Radcliffe 5,000,000 restricted shares of our Common Stock pursuant to the terms of the Radcliffe Employment Agreement.

On September 1, 2018, we entered into an Employment Agreement (the “Selinger Employment Agreement”) with Christopher Selinger, as our Vice President of Sales. The term of the Selinger Employment Agreement is two years and automatically renews for subsequent one-year terms unless terminated with cause by us. Pursuant to the Selinger Employment Agreement, Mr. Selinger is entitled to receive annual compensation of $65,000 with an increase to annual compensation of $72,000 after six months of employment. We also agreed to pay $1 commission per case of certain of our beverage drinks during the term of the Selinger Employment Agreement; however, effective January 1, 2019, we amended the Selinger Employment Agreement (the “Selinger Amendment”) to no longer pay this commission. In addition, we issued to Mr. Selinger 10,000,000 shares of our Common Stock pursuant to the terms of the Selinger Employment Agreement, on September 7, 2018.

The table below summaries the compensation paid to our non-employee directors for the fiscal year ended December 31, 2019:

We have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board. Our Board may award special renumeration to any director understanding any special services on their behalf other than services ordinarily required of a director.

On July 24, 2018, we entered into an offer letter with Matthew Crystal as one of our Independent Directors (the “Crystal Agreement”). In consideration for Mr. Crystal’s services, we issued 500,000 restricted shares of our Common Stock to him. Mr. Crystal will serve as a director until the date upon which he is not re-elected or his earlier removal or resignation.

On September 8, 2019, we entered into an offer letter with William Jeffrey Outlaw as one of our Independent Directors (the “Outlaw Agreement”). In consideration for Mr. Outlaw’s services, we issued 10,000,000 restricted shares of our Common Stock to him. Mr. Outlaw will serve as a director until the date upon which he is not re-elected or his earlier removal or resignation.

For a description of the terms of any agreement or understanding, whether written or unwritten, between any officer or director and us concerning any type of compensation, whether present, deferred, or contingent, that will be based on or otherwise will relate to an acquisition, merger, consolidation, sale, or other type of disposition of all or substantially all assets of our Company, see the disclosures including in this “Executive and Director Compensation” section.

During our 2019 and 2018 fiscal years, we paid limited compensation to our employees, including executive and non-executive officers. Due to the size and scope of our business, and the amount of compensation, we did not have any employee compensation policies and programs to determine whether our policies and programs create risks that are reasonably likely to have a material adverse effect on us.

The following sets forth certain information, as of July 14, 2020, regarding the beneficial ownership of our Common Stock by (i) each of our directors, (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each person or entity who, to our knowledge, owns more than five percent of our Common Stock. The information reflects beneficial ownership, as determined in accordance with the SEC’s rules and generally includes voting or investment power with respect to our Common Stock, and is based on 778,052,603 shares of our Common Stock issued and outstanding as of July 14, 2020. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and the address for each person is 746 North Drive, Suite A, Melbourne, Florida 32934.

As of July 14, 2020, there were, to our knowledge, no persons are beneficial owners of greater than five percent of our Common Stock.

The following sets forth certain information, as of July 14, 2020, regarding the beneficial ownership of our Series B Preferred Stock by (i) each of our directors, (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each person or entity who, to our knowledge, owns more than five percent of our Series B Preferred Stock. The information reflects beneficial ownership, as determined in accordance with the SEC’s rules and are based on 488,000 shares of our Series B Preferred Stock issued and outstanding as of July 14, 2020. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and the address for each person is 746 North Drive, Suite A, Melbourne, Florida 32934.

The following sets forth certain information, as of July 14, 2020, regarding the beneficial ownership of our Series C Preferred Stock by (i) each of our directors, (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each person or entity who, to our knowledge, owns more than five percent of our Series C Preferred Stock. The information reflects beneficial ownership, as determined in accordance with the SEC’s rules and are based on 140 shares of our Series C Preferred Stock issued and outstanding as of July 14, 2020. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and the address for each person is 746 North Drive, Suite A, Melbourne, Florida 32934.

The following sets forth certain information, as of July 14, 2020, regarding the beneficial ownership of our Series D Preferred Stock by (i) each of our directors, (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each person or entity who, to our knowledge, owns more than five percent of our Series D Preferred Stock. The information reflects beneficial ownership, as determined in accordance with the SEC’s rules and are based on 500,000 shares of our Series D Preferred Stock issued and outstanding as of July 14, 2020. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and the address for each person is 746 North Drive, Suite A, Melbourne, Florida 32934.

We do not know of any arrangements that may, at a subsequent date, result in a change in control.

We follow ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. When and if we contemplate entering into a transaction in which any executive officer, director, nominee, or any family member of the foregoing would have a direct or indirect interest, regardless of the amount involved, the terms of such transaction are to be presented to our full Board (other than any interested director) for approval, and documented in the Board minutes.

Other than as disclosed below, we have had no related party transactions during the past two fiscal years.

We had the following outstanding notes payable during the period specified above:

Our Board is currently composed of three members – Messrs. Clark, Crystal, and Outlaw. Our Common Stock is not currently listed for trading on a national securities exchange and, as such, we are not subject to any director independence standards. However, we determined that two of our directors, Messrs. Crystal and Outlaw, qualify as independent directors. We determined that Mr. Clark, our Chairman and an executive officer, is not independent. We evaluated independence in accordance with the rules of The Nasdaq Stock Market LLC and the SEC and considered all relevant facts and circumstances in making this determination (including any relationships set forth in this Prospectus under the heading “Related Person Transactions”). Messrs. Clark, Crystal, and Outlaw serve on our Audit Committee, our Compensation Committee, and Governance and Nominating Committee.

The validity of our Common Stock and certain legal matters will be passed upon for us by Baker & Hostetler LLP, Orlando, Florida.

The consolidated financial statements of Kona Gold Solutions, Inc. and its subsidiaries as of December 31, 2019 and 2018, and for each of the two years in the period ended December 31, 2019, included in this Prospectus, which constitutes a part of this Registration Statement, have been so included in reliance upon the report of BF Borgers CPA PC (“BF Borgers”), an independent registered public accounting firm, appearing elsewhere herein and in this Registration Statement, given on said firm’s authority as experts in auditing and accounting. BF Borgers’ report includes an explanatory paragraph related to our ability to continue as a going concern.

We have filed with the SEC a Registration Statement on Form S-1 under the Securities Act regarding the shares of our Common Stock offered hereby. This Prospectus does not contain all of the information found in our Registration Statement, portions of which are omitted as permitted under the rules and regulations of the SEC. For further information regarding us and the securities offered by this Prospectus, please refer to our Registration Statement, including its exhibits and schedules. Statements made in this Prospectus concerning the contents of any contract, agreement, or other document filed as an exhibit to the registration statement are summaries of the terms of those documents. The Registration Statement, of which this Prospectus forms a part, including its exhibits and schedules, is available on the SEC’s web site at www.sec.gov.

After this Registration Statement has been declared effective by the SEC, we will be required to file periodic reports, proxy statements, and other information with the SEC. These documents may be accessed through the SEC’s web site at www.sec.gov.

You can obtain copies of any of the documents incorporated by reference in this Prospectus from us, or as described above, through the SEC’s website. Documents incorporated by reference are available from us, without charge, excluding all exhibits unless specifically incorporated by reference in the documents. You may obtain documents incorporated by reference in this Prospectus by writing to us at the following address: 746 North Drive, Suite A, Melbourne, Florida 32934, by emailing us at investorrelations@konagoldhemp.com, or by calling us at 844-714-2224. We also maintain a website, www.konagoldhemp.com, through which you can obtain copies of the documents that we have filed with the SEC. We use our web site as a channel of distribution for material company information. Important information, including financial information, analyst presentations, financial news releases, and other material information about us is routinely posted on and accessible at our web site. The information set forth on, or accessible from, our web site is not part of this Prospectus.

(Because the issuer is not currently subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, these interim financial statements (unaudited) were not subject to a review by the issuer’s independent registered public accounting firm.)

Kona Gold Solutions, Inc., a Delaware corporation (the “Company”), owns and operates a line of premier CBD lifestyle brand products. The Company is primarily focused on product development in the functional beverage sector. Kona Gold creates hemp infused products, which includes Hemp Energy Drinks, CBD Energy Water, and merchandise and apparel. Kona Gold LLC is a wholly-owned subsidiary of Kona Gold Solutions, Inc. which focuses on the creation of great tasting and healthy hemp-infused energy drinks in the functional beverage market for those who lead an active lifestyle. HighDrate LLC is a wholly-owned subsidiary of Kona Gold Solutions, Inc. which focuses on the development and marketing of CBD-infused energy waters geared towards the fitness and wellness markets. Gold Leaf LLC is a wholly-owned subsidiary of Kona Gold Solutions, Inc., which focuses on the distribution of premium beverages in key markets.

The accompanying consolidated financial statements are prepared on the accrual basis of accounting and in accordance with generally accepted accounting principles (“GAAP”) in the United States. Material intercompany balances and transactions have been eliminated in consolidation.

The board of directors of the Company, as provided by the Company’s bylaws, and in accordance with generally accepted accounting principles, has established a fiscal year end for accounting purposes for the Company. A fiscal year end of December 31 was designated by the board in its initial board meeting, and remains unchanged.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual events and results could differ from those assumptions and estimates.

For the purpose of reporting cash flows, the Company considers all unrestricted, highly liquid investments with an initial maturity of three months or less to be cash equivalents.

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of accounts payable, accrued liabilities, and notes payable approximate fair value given their short-term nature or effective interest rates. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted price in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarch is as follows:

Level 1 – quoted prices in active markets for identical assets or liabilities;

Level 2 – inputs other than Level 1 that are observable, either directly or indirectly; such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or inputs that are observable or an be corroborated by observable market data for substantially the full term of the assets or liabilities; or

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Accounts receivable are recorded at net realizable value. The Company determines provisions for uncollectible accounts, sales returns, and claims based upon factors including the credit risk and activity of specific customers, historical trends, and other information. In the circumstance that the Company becomes aware of a specific customer’s inability to meet its financial obligations, bad debt charges are recorded based on an overall assessment of past due accounts receivable outstanding. Bad debt in the months ending March 31, 2020, and 2019 was $0, respectively. Management will review annually, each subsidiary, to determine provisions and records an allowance as deemed necessary. In the opinion of management, a provision was deemed necessary for uncollectible accounts for Kona Gold LLC and no provision was deemed necessary for Gold Leaf LLC. The balance of allowance for Uncollectible Accounts as of March 31, 2020, and 2019, is $5,019 and $0, respectively.

The cost of inventory using the standard cost method, which approximates actual cost based on a first-in, first-out method. The Company’s inventories are valued at the lower cost or net realizable value. The Company’s inventories consist almost entirely of finished and unfinished goods, and freight, which include CBD Energy Waters, hemp energy drinks, cans for production, and merchandise and apparel. We periodically evaluate and adjust inventories for obsolescence. In the opinion of management, no provision for obsolescence is deemed necessary. The shelf life of all beverage inventory is two years, and as of March 31, 2020, and 2019, all inventory is current.

Property, plant and equipment are reported on the balance sheet at cost less accumulated depreciation. Assets with a useful life greater than one year and cost greater than $100 are capitalized. Maintenance and repairs are charged to expense as incurred.

Depreciation is provided using the straight-line method over the estimated useful lives of the asset as follows:

Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company has selected December 31 as the date to perform the annual impairment test.

Intangible assets represent both indefinite lived and definite lived assets. Trademarks are deemed to have definite useful lives of ten years, are amortized, and are tested annually for impairment. Intangible assets are reported on the balance sheet at cost less accumulated amortization. The Company has selected December 31 as the date to perform the annual impairment test.

Management has determined that, for the year ending December 31, 2019, there were no identifiable assets or liabilities; therefore, the implied fair value of goodwill is zero. Based on this assessment, goodwill was impaired by the full carrying amount of $61,000 at December 31, 2019, see Note 4. Management had determined no impairment of trademarks for the year ending December 31, 2019, see Note 4.

On January 1, 2019, the Company adopted the Financial Accounting Board’s issued ASU 2016-02 (Leases (Topic 842)), which requires an entity to recognize a liability and corresponding asset for leases that meet certain criteria. The Company presents right-of-use assets resulting from leases separately from other assets as noncurrent, and amortized accordingly. The corresponding lease liabilities are presented separately from other liabilities on the accompanying balance sheets.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred. The amortization period for the right-of-use asset is from the lease commencement date to the earlier of the end of the lease term or the end of the useful life of the asset.

Kona Gold, LLC has three main revenue streams from: product sales from online customers, product sales through resellers, and product sales from distributors. Product sales include Kona Gold Energy Drinks, HighDrate CBD-infused energy waters, and apparel such as t-shirts and hats. 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. The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services by the Company 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.

Gold Leaf, LLC has one main revenue stream: product sales to convenience stores, grocery stores, or smoke and gift shops. Product sales include Kona Gold beverage and beverages purchased for resale from several other beverage manufacturers. 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. The Company recognizes revenue from product sales to resellers when products that do not require further services by the Company are shipped or delivered, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash received by the Company 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.

On January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 606. ASC Topic 606 contains an overarching principle: The Company recognizes revenue when it transfers goods or services to a customer. The amount of revenue recognized represents the consideration to which the entity expects to be entitled.

Sales are made to customers under terms allowing certain limited rights of return. The Company records an allowance and return for each quarter for 3% of total sales. The Company recorded sales, returns and allowance at March 31, 2020, and 2019 of $44,965, and $7,909, respectively.

Cost of revenue consists primarily of expenses associated with the delivery and distribution of products and services. These include expenses related to direct procurement costs and shipping and handling costs. The Company bills shipping and handling fees charged to customers as part of sales and the associated expense as part of cost of sales. The costs are charged to cost of revenue in the same period that the associated revenue is earned.

The Company evaluates its long-lived assets for financial impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company evaluates the recoverability of long-lived assets used in operations by measuring the carrying amount of the assets against their estimated undiscounted future cash flows. If such evaluations indicated that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to fair values. Management completed an impairment review as of March 31, 2020 and determined long-lived assets were not impaired.

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, which clarifies the accounting and disclosure requirements for uncertainty in tax positions. It requires a two-step approach to evaluate tax positions and determine if they should be recognized in the financial statements. The two-step approach involves recognizing tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the financial statements. Management regularly reviews and analyzes all tax and has determined that no uncertain tax positions requiring recognition have occurred.

The Company has no recorded liabilities for uncertain tax positions as March 31, 2020, and 2019, respectively.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (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. The Company measures 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 the Company’s stock on the date of grant.

The Company expenses costs of advertising and promotions as incurred. The Company includes in advertising costs inventory given away as promotional merchandise or free samples to create sales. Advertising and promotion costs for the three months ended March 31, 2020 was approximately $12,347, which is included in selling, general and administrative expenses in the accompanying statements of income.

The Company maintain cash balances at financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and had determined the credit exposure to be negligible.

In accordance with accounting guidance now codifies as FASB ASC 260 (Earnings per Share), basic income (loss) per common share is calculated using the weighted average number of shares outstanding during the periods reported. Diluted earnings per share include the weighted average effect of all dilutive securities outstanding during the periods presented.

Diluted per-share loss is the same as basic per-share loss when there is a loss from continuing operations.

In February 2016, the Financial Accounts Board issued ASU 2016-02 (Leases (Topic 842)), which requires an entity to recognize a liability and corresponding asset for leases that meet certain criteria. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. The effect of this guidance on the financial statements of the Company has not been determined.

In June 2019, the FASB expanded the scope of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, to include share-based payment to nonemployees for goods and services. The accounting board said the amendments in Accounting Standards Update (“ASU”) No. 2019-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, align guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 505-50, Equity – Equity -Based Payments to Non-employees. The amendments in ASU No. 2019-07 apply “to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards,” the FASB said. The amended guidance does not cover stock compensation that is used to provide financing to the company that issued the shares or stock awards tied to a sale of goods or services as part of a contract accounted for according to ASC 606, Revenue From Contracts With Customers. The amendments are effective for public companies for fiscal years that begin after December 15, 2019, early adoption is permitted, but businesses are not permitted to use the guidance in ASU No. 2019-07 before they have implemented ASC 606. The effect of this guidance on the consolidated financial statements of the Company has not been determined.

Property, plant and equipment consisted of the following for the three months ended March 31:

Depreciation for the three months ended March 31, 2020, and 2019, was $26,874 and $2,001, respectively.

In April 2019, the Company acquired a reporting unit, which resulted in goodwill on the balance sheet. Goodwill may not be amortized. Instead, it is tested at least annually for impairment. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The fair value of goodwill can be measured only as a residual and cannot be measured directly. The methodology to determine an amount that achieves a reasonable estimate of the value of goodwill for purposes of measuring an impairment loss. That estimate is referred to as the implied fair value of goodwill.

At December 31, 2019, the Company’s reporting unit had a positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The Qualitative Assessment as outlined in ASC 350-20-35, an entity has an unconditional option to bypass the qualitative assessment and proceed directly to performing the first step of the goodwill impairment test.

The Quantitative Assessment is a two-step process as outlined in ASC 350-20-35 and is used to identify both the existence of impairment and the amount of impairment. The first step is to determine the fair value. If the carrying amount is greater zero and its fair value exceeds its carrying amount, then no impairment and step 2 is not necessary. If the carrying amount of the reporting unit exceeds the fair value, then it shall be measured for impairment in step 2. The amount of impairment loss recorded is the difference in the excess of the carrying amount over its fair value.

Management has determined that for the year ending December 31, 2019, there were no identifiable assets or liabilities; therefore, the implied fair value of goodwill is zero. Based on this assessment, goodwill was impaired by the full carrying amount of $61,000. As of March 31, 2020, the Company has $0 in goodwill.

Intangible asset consisted of the following for the three months ended March 31:

Estimated future amortization expense related to intangible assets as of March 31, 2020 is as follows:

For the three months ended March 31, the Company recognized stock-based compensation expense as follows:

The Company has a balance in accrued stock-based compensation at March 31, 2020, and 2019, of $1,386,500 and $1,200,000, respectively.

As of May 5, 2019, the Company is party to a revolving line of credit from a lender allowing for borrowings up to $400,000. The line of credit matures on May 5, 2022 and is reflected as non-current on the balance sheet. Advances under the line bear interest at the rate of 3.75 percent per annum. As of March 31, 2020, and 2019 the line of credit had a balance of $398,470, respectively; and accrued interest of $20,844 and $5,778, respectively.

The Company’s capital includes 4,988,000 shares of preferred stock as of March 31, 2020. The Board of Directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series.

The Company has authorized 4,000,000 shares of Series A Preferred Stock, par value of $0.00001 per share, of which 4,000,000 shares were issued and outstanding as of March 31, 2020. Shares of Series A Preferred Stock may be converted into shares of the Company’s common stock at a 1-to-1 ratio.

The Company has authorized 1,200,000 shares of Series B Preferred Stock, par value of $0.00001 per share, of which 488,000 were issued and outstanding as of March 31, 2020. Shares of Series B Preferred Stock may be converted into shares of the Company’s common stock at a 1-to-1,000 ratio. On July 12, 2018, the conversion ratio was amended, such that shares of Series B Preferred Stock may be converted into shares of the Company’s common stock at a 1-to-1 ratio.

The Company has authorized 3,300,000 shares of Series C Preferred Stock, par value of $0.00001 per share, of which no shares were issued and outstanding as of March 31, 2020. Series C Preferred Stock may be converted into shares of the Company’s common stock at a 1-to-1,000 ratio.

The Company has authorized 500,000 shares of Series D Preferred Stock, par value of $0.00001 per share, of which 500,000 shares were issued and outstanding as of March 31, 2020. Series D Preferred Stock may be converted into the Company’s common stock at a 1-to-1,000 ratio.

The Company has authorized 900,000,000 shares of common stock, par value of $0.00001 per share, of which 768,967,603 shares were issued and outstanding as of March 31, 2020.

On April 30, 2017, the Company entered into a subscription agreement with Joseph Thornburg (the “Thornburg Subscription Agreement”) for the sale and issuance of 29,866,668 shares of common stock for a subscription price of $75,000. As of the date of the Thornburg Subscription Agreement, the Company had previously issued 9,886,668 shares of common stock, resulting in a balance of 20,000,000 shares of common stock. On March 14, 2018, the Company issued the remaining 20,000,000 shares of common stock. The Company offered and sold the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) (in that the issuance of shares of common stock did not involve any public offering).

On October 1, 2015, the Company entered into a consulting agreement with Gone Green Inc. (“Gone Green”) for product development support and consulting services (the “Gone Green Agreement”). In connection with the Gone Green Agreement, on October 28, 2015, the Company issued 30,000,000 shares of common stock, which shares had a per-share fair market value of $0.015 based on the closing price of common stock on the issuance date as reported by the OTC Markets Group, Inc. (“OTCM”), or an aggregate fair market value of $450,000. On March 2, 2016, the Company issued an additional 40,000,000 shares of common stock, which shares had a per-share fair market value of $0.025 based on the closing price of common stock on the issuance date as reported by the OTCM, or an aggregate fair market value of $1 million. On May 16, 2016, the Company issued an additional 50,000,000 shares of common stock, which shares had a per-share fair market value of $0.0036 based on the closing price of the common stock on the issuance date as reported by the OTCM, or an aggregate fair market value of $180,000. On July 6, 2016, the Company entered into a Termination of Consulting Agreement with Gone Green (the “Termination GG Agreement”) because the product development support and consulting services were never provided. Pursuant to the Termination GG Agreement, in April 2018, Gone Green returned to the Company 120,000,000 shares of common stock that the Company previously issued, and the shares were cancelled.

The Company entered into a subscription agreement on June 29, 2016 with Matthew Nicoletti for the purchase of 50,000 shares of Series B Preferred Stock for a purchase price of $9,800. The shares of Series B Preferred Stock were convertible into 50,000,000 shares of common stock. On July 10, 2017, Mr. Nicoletti converted the shares of Series B Preferred Stock into 50,000,000 shares of common stock. The common stock had a fair market value of $0.012 per share at the date of conversion based on the closing price of the common stock as reported by the OTCM on the date of issuance. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock upon conversion of Series B Preferred Stock did not involve any public offering).

On April 10, 2018, the Company entered into a subscription agreement with Matthew Nicoletti for the sale and issuance of 106,000 shares of Series C Preferred Stock for a purchase price $106,000. The Company offered and sold the shares of Series C Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of Series C Preferred Stock did not involve any public offering).

Pursuant to the terms of a subscription agreement the Company entered into with Matthew Nicoletti in December 2017, the Company issued 110,000 shares of Series C Preferred Stock for a purchase price of $111,426. The shares were issued on July 18, 2018. The Company offered and sold the shares of the Series C Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of Series C Preferred Stock did not involve any public offering).

Pursuant to the terms of an Employment Agreement, dated September 1, 2018, between Christopher Selinger and the Company (the “Selinger Employment Agreement”), the Company issued to Mr. Selinger 10,000,000 shares of common stock, which shares had a per-share fair market value of $0.0136, based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

Pursuant to the terms of an Offer Letter with Matthew Crystal (the “Crystal Agreement”), the Company issued 500,000 shares of common stock to Matthew Crystal on September 7, 2018, as payment for his professional services to the Company, which shares, at the date of their issuance, had a per-share fair market value of $0.0136 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On November 16, 2018, Matthew Nicoletti converted 45,000 shares of Series C Preferred Stock into 45,000,000 shares of common stock. At the conversion date, the shares of common stock had a per-share fair market value of $0.0939, which was based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On February 11, 2019, Matthew Nicoletti converted 55,000 shares of Series C Preferred Stock into 55,000,000 shares of common stock. At the conversion date, the shares of common stock had a per-share fair market value of $0.0939840, which was based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On April 17, 2019, the Company issued 52,000,000 shares of common stock in connection with the conversion of 52,000 shares of Series C Preferred Stock by Quantum Capital Group LLC (“Quantum”). The shares of common stock, at the date of conversion, had a fair market value of $0.076 based on the closing price of common stock as reported by the OTCM on the date of issuance. We issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On March 18, 2019, the Company issued 58,000,000 shares of common stock in connection with the conversion of 58,000 of shares of Series C Preferred Stock by Quantum. The shares of common stock at the date of conversion had a per-share fair market value of $0.0785 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

The Company issued 100,000 shares of common stock to each of Jazmin Gonzalez and Michelle Motta on May 23, 2019, as an incentive bonus that, at the date of issuance, had a per-share fair market value of $0.131 based on the closing price of common stock on the date of issuance as reported by the OTCM. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of the shares of common stock did not involve any public offering). On November 7, 2019, the 100,000 shares that had been issued to Michelle Motta were forfeited to the Company and cancelled.

The Company entered into a sponsorship agreement with Ryan Dodd, a professional waterski jumper, on May 1, 2019 (the “Dodd Agreement”), and, in connection therewith, issued him 262,500 shares of common stock on May 23, 2019 At the date of issuance, the shares of common stock had a fair market value of $0.131 per share based on the closing price of common stock on the date of issuance as reported by the OTCM. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of the shares of common stock did not involve any public offering).

On June 13, 2019, the Company, through its wholly-owned subsidiary, HighDrate, entered into a Confidential Settlement Agreement (“the “Settlement Agreement”) with Tre Holdco Inc. (“Tre Holdco”). Pursuant to the Settlement Agreement, Tre Holdco assigned U.S. Trademark Reg. No. 5,351,770 for the mark “Highdrate” to the Company and, in exchange, the Company paid to Tre Holdco a cash payment in the amount of $22,500 and issued to Tre Holdco 500,000 shares of common stock. The shares were issued on June 17, 2019 and, on such date, the per-share fair market value, based on the closing price of common stock as reported by the OTCM, was $0.1185. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of the shares of common stock did not involve any public offering).

On July 15, 2019, the Company issued 106,000,000 shares of common stock in connection with the conversion of 106,000 shares of Series C Preferred Stock by Quantum. The shares of common stock had a per-share fair market value of $0.1081 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

Pursuant to the terms of an offer letter dated September 8, 2019, by and between William Jeffrey Outlaw and the Company, on July 30, 2019, the Company issued 10,000,000 shares of common stock to its independent director, William Jeffrey Outlaw, as payment for his services in that capacity. At the date of issuance, the per-share fair market value was $0.111 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

The Company issued 5,000,000 shares of common stock on April 3, 2020 to Paul O’Renick pursuant to an Employment Agreement dated October 1, 2019. At the date of issuance, the per-share fair market value was $0.0315 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

The Company issued 85,000 shares of common stock on April 3, 2020 to Ryan Dodd pursuant to a sponsorship agreement with Ryan Dodd. At the date of issuance, the per-share fair market value was $0.0315 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On July 5, 2017, the Company issued 5,000,000 shares of common stock to Stock Vest in connection with a contractor agreement. These shares had a fair market value of $0.0072 at the date of issuance, which was the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On August 14, 2017, the Company issued 500,000 shares of common stock to Azaliya Kaplunsky in connection with an independent contractor agreement between Ms. Kaplunsky and the Company, dated July 1, 2017. These shares had a fair market value of $0.0115 at the date of issuance, which was the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

On April 7, 2016, the Company issued 20,00,000 shares of common stock to Ryan Medico in connection with a contractor agreement. These shares had a fair market value of $0.014 at the date of issuance, which was the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering). On July 30, 2019, the 14,860,346 shares that had been issued to Ryan Medico were forfeited to the Company and cancelled.

The Company issued 30,000,000 shares of common stock on October 28, 2015 to Robert Clark pursuant to an Employment Agreement, dated August 12, 2015 (the “Clark Employment Agreement”), with Robert Clark and the Company. At the date of issuance, the per-share fair market value of the shares was $0.015 based on the closing price of common stock as reported by the OTCM on the date of issuance. Pursuant to the Clark Employment Agreement, the Company issued an additional 40,000,000 shares of common stock on March 2, 2016. At the date of issuance, the per-share fair market value of the shares was $0.0250 based on the closing price of common stock as reported by the OTCM on the date of issuance. Pursuant to the Clark Employment Agreement, the Company issued an additional 50,000,000 shares of common stock on May 16, 2016. At the date of issuance, the per-share fair market value of the shares was $0.0036 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering). The Company accrued 80,000,000 shares of common stock on December 31, 2016 that were not issued. At the date of accrual, the per-share fair market value of the shares was $0.0025 based on the closing price of common stock as reported by the OTCM on the date of issuance. On April 19, 2018, 40,000,000 shares were cancelled and returned to the Company for accrual by Mr. Clark. On July 31, 2019, an additional 50,000,000 shares were cancelled and returned to us for accrual.

On December 6, 2017, the Company issued 2,700,000 shares of Series A Preferred Stock to Robert Clark pursuant to the Clark Employment Agreement. These shares had a fair market value of $0.01 per share at the date of issuance. The Company issued the shares of Series A Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of Series A Preferred Stock did not involve any public offering).

On December 29, 2017, the Company issued 650,000 shares of our Series B Preferred Stock to Robert Clark pursuant to the Clark Employment Agreement. These shares had a fair market value of $0.06 at the date of issuance. The Company issued the shares of Series B Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of Series B Preferred Stock did not involve any public offering). On April 30, 2019, these shares were cancelled and returned to the Company for accrual by Mr. Clark.

The Company issued 500,000 restricted shares of Series D Preferred Stock to Robert Clark on January 24, 2018, as consideration for services rendered in fiscal 2017, which shares, at the date of issuance, had a fair market value of $0.0158 per share based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of Series D Preferred Stock were issued by us in a transaction not involving any public offering).

Pursuant to the terms of the Selinger Employment Agreement, the Company issued to Mr. Selinger 10,000,000 shares of common stock, which shares had a per-share fair market value of $0.0136, based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

The Company issued 5,000,000 shares of common stock on January 16, 2019 to Chad Webb pursuant to an Employment Agreement between Mr. Webb and the Company. At the date of issuance, the per-share fair market value of the shares was $0.0554 based on the closing price of common stock as reported by the OTCM on the date of issuance. The Company issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

We issued 5,000,000 shares of common stock on January 27, 2020 to Lori Radcliffe pursuant to the Radcliffe Employment Agreement with us. At the date of issuance, the per-share fair market value of the shares was $0.0637 based on the closing price of common stock as reported by the OTCM on the date of issuance. We issued the shares of common stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of common stock did not involve any public offering).

In January 2019, the Company entered into a sponsorship agreement with an athlete, whereby the Company paid monthly sponsorship fees of $1,250 per month for one year.

On May 23, 2019, the Company issued 262,500 restricted shares of common stock, for a sponsorship agreement signed in May 2019, with an athlete. This agreement includes a monthly sponsorship fee of $1,250 per month for one year.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Amounts recognized as right-of-use assets, net related to operating lease are included noncurrent assets in the accompanying balance sheets, while related lease liabilities are included in current portion of long-term debt and long-term debt. As of March 31, the right-of-use asset and lease liability related to the operating lease for the three months ended were as follows:

The future payments due under operating lease as of March 31, 2020 is as follows:

On April 14, 2018, the Board of Directors of Company declared a dividend to its stockholders of an aggregate of 51,396,608 shares of common stock of Branded Legacy. The Company’s stockholders received one share of common stock of Branded Legacy for every 10 shares of the Company’s common stock held on the record date. After the payment of the dividend, the Company held 148,603,392 shares of common stock of Branded Legacy.

On March 6, 2018, the Company entered into a Securities Exchange and Settlement Agreement (the “First Exchange Agreement”) with Branded Legacy. Pursuant to the First Exchange Agreement, the Company exchanged the remaining 146,603,365 shares of common stock of Branded Legacy for 2,746,723 shares of its Series D preferred stock. The shares of Series D preferred stock were initially convertible into 164,803,380 shares of common stock of Branded Legacy.

On November 26, 2019, the Company entered into a second Securities and Exchange Agreement with Branded Legacy, whereby the Company exchanged the 2,746,723 shares of Branded Legacy’s Series D preferred stock for its 10-year, unsecured, non-convertible promissory note in favor of the Company in the original principal amount of $1,500,000 (the “Branded Legacy Note”). All principal and accrued and unpaid interest on the Branded Legacy Note is payable, in full, on November 27, 2029.

As of December 31, 2019, and 2018, this investment is disclosed only and no asset is recorded on the accompanying balance sheets.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the three months ending March 31, 2030, the Company incurred a net loss of $591,936 and used cash in operations of $253,196 and had a stockholders’ deficit of $2,264,412 as of March 31, 2020. In the prior period of three months ending March 31, 2019, the Company incurred a net loss of $354,506 and used cash in operations of $252,954 and had a stockholders’ deficit of $1,279,699 as of March 31, 2019.

The Company attributes this decrease to the discontinuation of unfavorable distributor agreements in an effort to sign larger, more favorable agreements with reputable tier 1 and mid-size distributors and grocery chains. These contracts saw unforeseen delays and were additionally impacted by the COVID-19 pandemic at the end of the quarter. The COVID-19 pandemic not only impacted new contracts, but the delay in launching of products. The factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company expects that revenue will increase in the following quarter as many contracts will come to fruition and product launches are currently scheduled to occur. The Company recognizes that COVID-19 has had an impact on revenues in early 2020, but anticipates having a revenue projection of $6 to $8 million for the year ending December 31, 2020. In the year ending December 31, 2019, the Company incurred a net loss of $1,786,021 and used cash in operations of $1,228,699 and had a stockholders’ deficit of $1,990,976 as of December 31, 2019. In the year ending December 31, 2018, the Company incurred a net loss of $358,243 and used cash in operations of $265,311 and had a stockholders’ deficit of $1,202,193.

Since the year ending December 31, 2019, the Company has continued to gain market share in its respective markets. The Company saw a 960% growth in sales over the year ending December 31, 2018, and the Company has successfully expanded their operations to include Gold Leaf Distribution LLC. Furthermore, the Company has acquired key sales representatives.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and further implement a business plan. They do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The increase in operations has required the expansion of human resources and investment in property and equipment. The Company’s full-time head count has grown from 2 employees at December 31, 2018 to 10 employees at December 31, 2019, which includes key employees such as sales representatives and key positions in its corporate office. The Company has experienced and expect to continue to experience substantial growth in our operations as it seeks to expand the Company with additional products and acquisitions that complement its current product offering. Historically, the Company financed its operations primarily through stock purchase agreements, a line of credit, loan from a related party, and operations. The Company anticipates that ts primary capital source will be positive cash flow from operations going forward. Plans to expand market share require putting capital into marketing and advertising. The Company’s business plan includes additional sales representatives and distributors. In addition, management plans to increase liquidity and continue to increase funding for operations.

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or outstanding accounts receivable individually represented 10% or more of the Company’s total outstanding accounts receivable, as follows:

For the three months ending March 31, 2020, no customers individually represented 10% or more of the Company’s total revenue, and two customers accounted for 20%, or $36,099, of the outstanding accounts receivable. For the three months ending March 31, 2019, no customers individually represented 10% or more of the Company’s total revenue, and three customers accounted for 42%, or $44,730, of the outstanding accounts receivable.

The Company had certain vendors that individually represented 10% or more of the Company’s inventory purchases, as follows:

For the three months ending March 31, 2020, the Company purchased 65% of the Company’s inventory from two vendors, of which $64,152 amount was due to these vendors. For the three months ending March 31, 2019, the Company purchased 95% of the Company’s inventory from two vendors, of which $0 amount was due to these vendors.

On April 3, 2020, the Company issued 85,000 restricted shares of common stock to a sponsored athlete in connection with his agreement. The fair market value at the date of issue was $0.0315.

On April 3, 2020, the Company issued 5,000,000 restricted shares of common stock to an employee in connection with his/her employment agreement. The fair market value at the date of issue was $0.0315.

We have audited the accompanying consolidated balance sheets of Kona Gold Solutions, Inc. as of December 31, 2019 and 2018, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 14 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kona Gold Solutions, Inc. (the “Company”), a Delaware Corporation, owns and operates a line of premier CBD lifestyle brand products. The Company is primarily focused on product development in the functional beverage sector. Kona Gold creates Hemp Infused products, which includes Hemp Energy Drinks, CBD Energy Water, and merchandise and apparel. Kona Gold LLC is a wholly-owned subsidiary of Kona Gold Solutions, Inc. which focuses on the creation of great tasting and healthy hemp infused energy drinks in the functional beverage market for those who lead an active lifestyle. HighDrate LLC is a wholly-owned subsidiary of Kona Gold Solutions, Inc. which focuses on the development and marketing of CBD infused energy waters geared towards the fitness and wellness markets. Gold Leaf LLC is a wholly-owned subsidiary of Kona Gold Solutions, Inc., which focuses on the distribution of premium beverages in key markets.

For the purpose of reporting cash flows, the Company considers all unrestricted, highly liquid investments with an initial maturity of three months or less to be cash equivalents.

Level 1 – quoted prices in active markets for identical assets or liabilities;

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Accounts receivable are recorded at net realizable value. The Company determines provisions for uncollectible accounts, sales returns, and claims based upon factors including the credit risk and activity of specific customers, historical trends, and other information. In the circumstance that the Company becomes aware of a specific customer’s inability to meet its financial obligations, bad debt charges are recorded based on an overall assessment of past due accounts receivable outstanding. Bad debt in the years ending December 31, 2019, and 2018, was $14,160 and $0, respectively. Management will review annually, each subsidiary, to determine provisions and records an allowance as deemed necessary. In the opinion of management, a provision was deemed necessary for uncollectible accounts for Kona Gold LLC and no provision was deemed necessary for Gold Leaf LLC..The balance of allowance for Uncollectible Accounts as of December 31, 2019 and 2018 is $5,019 and $0, respectively.

The cost of inventory using the standard cost method, which approximates actual cost based on a first-in, first-out method. The Company’s inventories are valued at the lower cost or net realizable value. The Company’s inventories consist almost entirely of finished and unfinished goods, and freight, which include CBD Energy Waters, hemp energy drinks, cans for production, and merchandise and apparel. We periodically evaluate and adjust inventories for obsolescence. In the opinion of management, no provision for obsolescence is deemed necessary. The shelf life of all beverage inventory is two years, and as of December 31 2019 and 2018, all inventory is current.

Depreciation is provided using the straight-line method over the estimated useful lives of the asset as follows:

Management has determined that for the year ending December 31, 2019, there were no identifiable assets or liabilities; therefore, the implied fair value of goodwill is zero. Based on this assessment, goodwill is impaired by the full carrying amount of $61,000, see Note 4. Management has determined no impairment of trademarks for the year ending December 31, 2019, see Note 4

Kona Gold, LLC has three main revenue streams from: product sales from online customers, product sales through resellers, and product sales from distributors. Product sales include Kona Gold Energy Drinks, Highdrate CBD infused energy waters, and apparel such as t-shirts and hats. 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. The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services by the Company 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.

Gold Leaf, LLC has one main revenue streams: product sales to convenience stores, grocery stores, or smoke and gift shops. Product sales include Kona Gold beverage and beverages purchased for resale from several other beverage manufacturers. 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. The Company recognizes revenue from product sales to resellers when products that do not require further services by the Company are shipped or delivered, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash received by the Company 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.

Sales are made to customers under terms allowing certain limited rights of return. The Company records an allowance and return for each quarter for 3% of total sales. The Company recorded sales, returns and allowance at December 31, 2019, and 2018, of $51,159 and $0, respectively.

The Company evaluates its long-lived assets for financial impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company evaluates the recoverability of long-lived assets used in operations by measuring the carrying amount of the assets against their estimated undiscounted future cash flows. If such evaluations indicated that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to fair values. Management completed an impairment review as of December 31, 2019 and 2018 and determined long-lived assets were not impaired.

The Company has no recorded liabilities for uncertain tax positions as of December 31, 2019 and 2018.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation (formerly, FASB Statement 123R), prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. The Company measures 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 the Company’s stock on the date of grant.

The Company expenses costs of advertising and promotions as incurred. The Company includes in advertising costs inventory given away as promotional merchandise or free samples to create sales. Advertising and promotion costs for the year ended December 31, 2019, and 2018, was approximately $125,000 and $26,500, respectively, which is included in selling, general and administrative expenses in the accompanying statements of income.

Diluted per share loss is the same as basic per share loss when there is a loss from continuing operations.

Depreciation for the years ended December 31, 2019, and 2018, was $56,937 and $2,987, respectively.

In April, 2019, the Company acquired a reporting unit in which resulted in goodwill. Goodwill shall not be amortized. Instead, goodwill shall be tested at least annually for impairment. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The fair value of goodwill can be measured only as a residual and cannot be measured directly. The methodology to determine an amount that achieves a reasonable estimate of the value of goodwill for purposes of measuring an impairment loss. That estimate is referred to as the implied fair value of goodwill.

Estimated future amortization expense related to intangible assets as of December 31, 2019 is as follows:

As of December 31, 2019, and 2018, the Company recognized stock-based compensation expense as follows:

The Company has a balance in accrued stock-based compensation at December 31, 2019, and 2018, of $1,386,500 and $1,200,000, respectively.

As of May 5, 2019, the Company is party to a revolving line of credit from a lender allowing for borrowings up to $400,000. The line of credit matures on May 5, 2022 and is reflected as non-current on the balance sheet. Advances under the line bear interest at the rate of 3.75 percent per annum. As of December 31, 2019, and 2018, the line of credit had a balance of $398,470 and $143,470, respectively; and accrued interest of $17,037 and $2,051, respectively.

The Company’s capital includes 4,988,000 and 5,909,000 shares of preferred stock as of December 31, 2019, and 2018, respectively. The Board of Directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series.

The Company has authorized 4,000,000 shares of preferred stock series A, with a par value of $.00001, of which 4,000,000 shares were issued and outstanding as of December 31, 2019, and 2018, respectively. Preferred Series A Stock shall be convertible to shares of the Corporation’s common stock at a 1 to 1 ratio.

The Company has authorized 1,200,000 shares of preferred stock series B, with a par value of $.00001, of which 488,000 were issued and outstanding as of December 31, 2019, and 2018, respectively. Preferred Series B Stock shall be convertible to shares of the Corporation’s common stock at a 1 to 1000 ratio. On July 12, 2018 an amendment was issued, in which Preferred Series B Stock shall be convertible to shares of the Corporation’s common stock at a 1 to 1 ratio.

The Company has authorized 3,300,000 shares of preferred stock series C, with a par value of $.00001, of which 55,000, and 0 were issued and outstanding as of December 31, 2019, and 2018, respectively. Preferred Series C Stock shall be convertible to the Corporation’s common stock at a 1 to 1000 ratio.

The Company has authorized 500,000 shares of preferred stock series D, with a par value of $.00001, of which 500,000 were issued and outstanding as of December 31, 2019, and 2018, respectively. Preferred Series D Stock shall be convertible to the Corporation’s common stock at a 1 to 1000 ratio.

The Company has authorized 900,000,000 shares of common stock with a par value of $.00001, of which 763,967,603 and 541,965,449 were issued and outstanding as of December 31, 2019, and 2018, respectively.

On January 24, 2018, the Company issued 500,000 shares of restricted Series D preferred stock to an executive of the Company as part of the executive’s compensation. These shares had a fair market value of $.0158 at the date of issuance.

February 1, 2018, the Company cancelled 8,000,000 shares of restricted common stock. These shares were originally issued January 16, 2016.

On March 6, 2018, the Company converted 55,000 restricted Series C preferred shares, originally issued December 22, 2018, into 55,000,000 shares of restricted common stock. These shares had a fair market value of $.016 at the date of conversion.

The Company entered into a subscription agreement on April 17, 2017 for 29,866,668 shares of restricted common stock. At the time of the agreement, 9,886,668 shares of restricted stock were previously issued to the shareholder. On March 14, 2018 the Company issued the remaining 20,000,000 shares.

On April 19, 2018, 120,000,000 shares of restricted common stock were returned to the Company. These shares were originally issued as part of an agreement for services; however, services were never rendered.

On April 19, 2018, 40,000,000 shares of restricted common stock were returned to the Company by an executive. These shares were originally issued to the executive as part of a compensation package, and the subsequent return of the restricted stock is accounted for by the Company as accrued compensation on the balance sheet.

The Company entered into a subscription agreement on April 10, 2018 for 106,000 shares of restricted Series C preferred stock. On July 1, 2018, these shares were issued.

The Company entered into a subscription agreement on December 22, 2017 for 110,000 shares of restricted Series C preferred stock. On July 18, 2018, these shares were issued.

As part of a settlement for compensation, the Company issued 10,000,000 shares of restricted common stock to an employee on September 7, 2018. These shares had a fair market value of $.0136 at the date of issue.

On September 7, 2018, the Company issued 500,000 shares restricted common stock as payment for professional services. These shares had a fair market value at the date of issue of $.0136.

The Company entered into a subscription agreement on March 17, 2017 for 100,000 shares of restricted Series C preferred stock, whereas the shares were convertible into 100,000,000 shares of common stock. On July 18, 2018, these shares were issued. On November 16, 2018, 45,000 these shares were converted into restricted common stock and had a fair market value of $.0939 at the date of conversion. The remaining 55,000 shares of Series C preferred stock were reissued.

As part of a settlement for compensation, the Company issued 5,000,000 shares of restricted common stock to an employee on January 16, 2019. These shares had a fair market value of $.0554 at the date of issue.

The Company entered into a subscription agreement on March 17, 2017 for 100,000 shares of restricted Series C preferred stock, whereas the shares were convertible into 100,000,000 shares of common stock. On July 18, 2018, these shares were issued. On November 16, 2018, 45,000 of these shares were converted into restricted common stock and had a fair market value of $.0939 at the date of conversion. The remaining 55,000 shares of Series C preferred stock were reissued. On February 11, 2019, the remaining 55,000 shares of Series C preferred stock were converted to restricted common stock and had a fair market value of $.84 at the date of conversion.

The Company entered into a subscription agreement on December 22, 2017 for 110,000 shares of restricted Series C preferred stock, whereas the shares were convertible into 110,000,000 shares of restricted common stock. On July 18, 2018, these shares were issued. On March 29, 2019, 58,000 of these shares were converted into 52,000,000 shares of restricted common stock and had a fair market value of $.08 on the date of conversion. On March 4, 2019, the 52,000 remaining shares of Series C preferred stock were converted into 52,000,000 shares of restricted common stock and had a fair market value of $.082 on the date of conversion.

On May 23, 2019, the Company issued 200,000 shares of restricted common stock to two (2) employees for employee appreciation. The fair market value at the date of issue was $.1310. On November 7, 2019, 100,000 of these shares were returned to the Company.

On May 23, 2019, the Company issued 262,500 shares of restricted common stock for a sponsorship agreement signed in May 2019, with an athlete. The fair market value at the date of issue was $.1310.

On June 13, 2019, the Company entered into a legal agreement for the purchase of the U.S. Trademark Reg. No. 5,351,770 for “Highdrate” for cash payment and 500,000 shares of restricted common stock On June 17, 2019, the Company issued those shares. The fair market value at the date of issue was $.1185.

The Company entered into a subscription agreement on April 10, 2018 for 106,000 shares of restricted Series C preferred stock, whereas the shares were convertible into 106,000,000 shares of restricted common stock. On July 1, 2018, these shares were issued. On July 15, 2019, the Company converted these shares of Series C Preferred Stock into shares of restricted common stock. The fair market value at the date of conversion was $.1081.

On July 30, 2019, the Company issued 10,000,000 shares of restricted common stock as payment for professional services. The fair market value at the date of issue was $.1110.

On July 30, 2019, 14,860,346 shares of restricted common stock were forfeited to the Company. These shares were originally for services rendered.

On July 31, 2019, 50,000,000 shares of restricted common stock were returned to the Company by an executive. These shares were originally issued to the executive as part of a compensation package, and the subsequent return of the restricted stock is accounted for by the Company as accrued compensation on the balance sheet.

On November 7, 2019, 100,000 shares of restricted common stock were forfeited to the Company by an employee. These shares were originally issued May 23, 2019.

Stock Vest was hired as an investor relations company at a charge of 5,000,000 restricted common stock at a par value of .00001.

Ryan Medico was issued 20,000,000 restricted common shares per his professional services agreement it with the Company at par value of .00001. Of these shares, 14,860,346 were forfeited to the Company.

Azaliya Latypova was issued 500,000 restricted common shares per his professional services agreement with the Company at par value of .00001.

Robert Clark was issued 200,000,000 restricted common shares of Kona Gold Solutions, Inc. at a cost basis value of .00001, 2,700,000 Series Preferred A issued at .00001, 650,000 Series Preferred B issued at .00001, and 500,000 Series Preferred D issued at .00001. This was issued per his employment agreement. 120,000,000 restricted shares of common stock and 650,000 shares of Series Preferred B stock have been returned to the Company. These shares are reflected in the accompanying consolidated balance sheets as accrued compensation.

On September 7, 2019, Christopher Selinger was issued 10,000,000 restricted common shares per his employment agreement with the Company at par value of .00001.

As part of a settlement for compensation, the Company issued 5,000,000 shares of restricted common stock to Chad Webb on January 16, 2019.

The Company issued 200,000 shares of restricted common stock to Jazmin Gonzalez and Michelle Motta for employee appreciation. 100,000 of these shares were forfeited to the Company by Michelle Motta.

In January 2019, the Company entered into a sponsorship agreement with an athlete, whereas, the Company pays monthly sponsorship fees of $1,250 per month for one year.

On May 23, 2019, the Company issued 262,500 shares of restricted common stock, par value $.00001, for a sponsorship agreement signed in May 2019, with an athlete. This agreement includes a monthly sponsorship fees of $1,250 per month for one year.

Amounts recognized as right-of-use assets, net related to operating lease are included noncurrent assets in the accompanying balance sheets, while related lease liabilities are included in current portion of long-term debt and long-term debt. As of December 31, 2019, and 2018, the right-of-use asset and lease liability related to the operating lease were as follows:

The future payments due under operating lease as of December 31, 2019 is as follows:

On April 14, 2018, as a result of this agreement, the Board of Directors of Kona Gold Solutions, Inc., declared and paid a stock dividend to Kona Gold Stockholders for a portion of the shares in Elev8 Hemp LLC. The declaration stated that for every 10 shares of Kona Gold common stock, one share of Elev8 Hemp would be distributed. The investment in Elev8 Hemp was reduced by 53,196,608 shares.

On March 6, 2019, Kona Gold Solutions, Inc. converted 146,803,365 shares of Elev8 Brands, Inc. common stock, par value $.00001, into 2,746,723 shares of Elev8 Brands Inc. Series D preferred stock.

On November 27, 2019, Kona Gold Solutions, Inc entered into an agreement with Elev8 Brands, Inc., whereas Eleve8 Brands, Inc. would receive all 2,746,723 shares of Ele8 Brands, Inc. Series D preferred stock for a non-convertible promissory note to Kona Gold Solutions, Inc. for $1,500,000 with payment due November 27, 2029.

As of December 31, 2019, and 2018, this investment is disclosed only and no asset is recorded on the accompanying balance sheets.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the year ended December 31, 2019, the Company incurred a net loss of $1,786,021 and used cash in operations of $1,228,699 and had a stockholders’ deficit of $1,990,976 as of December 31, 2019. In the prior year ending December 31, 2018, the Company incurred a net loss of $358,243 and used cash in operations of $265,311 and had a stockholders’ deficit of $1,202,193.

Since the prior year ending December 31, 2018, the Company has continued to gain market share in their respective markets. The Company saw a 1,800% growth in sales over the year ending December 31, 2018, and the Company has successfully expanded their operations to include Gold Leaf Distribution LLC. Furthermore, the Company has acquired key sales representatives. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Historically, we have financed our operations primarily through stock agreements, a line of credit, loan from a related party, and operations. We anticipate that our primary capital source will be positive cash flow from operations going forward. Plans to expand market share require putting capital into marketing and advertising. Kona Gold’s business plan includes additional sales representatives and distributors. In addition, management plans to increase liquidity and continue to increase funding for operations.

During the fiscal year ended December 31, 2018, the Company discovered a financial statement error for the year ended December 31, 2016 that caused an overstatement of accumulated deficit. The error was related to the recording of professional fees. In October of 2015, the Company entered into an agreement for consulting service, in which the consultant agreed to perform consulting work for the Company to be completed by August 2016 in exchange for 120,000,000 shares of restricted common stock. The Company issued 120,000,000 shares of restricted common stock in the first quarter of 2016. In July 2016, the consulting agreement was terminated and services were not rendered. The return of the 120,000,000 shares of restricted common stock were returned to the Company; however, the Company in error did not reverse the professional fees and common stock issuance as of December 31, 2016. The correction of prior period error resulted in decreased accumulated deficit by $1,630,000, and is reflected in the accompanying Balance Sheets and Statements of Stockholders’ Deficit.

For the year ended December 31, 2019, no customers individually represented 10% or more of the Company’s total revenue, and one customer accounted for 12%, or $19,471, of the outstanding accounts receivable. For the year ended December 31, 2018, one customer individually represented 16%, or $24,914, of the Company’s total revenue, and three customers accounted for 69%, or $27,822 of the outstanding accounts receivable.

The Company had certain vendors that individually represented 10% or more of the Company’s inventory purchases, as follows:

For the year ended December 31, 2019, the Company purchased 86% of the Company’s inventory from two vendors, of which no amount was due to these vendors. For the year ended December 31, 2018, the Company purchased 97% of the Company’s inventory from two vendors, of which no amount was due to these vendors.

On January 27^th, 2020, the Company issued 5,000,000 shares of restricted common stock, par value $.00001, to an employee per their agreement. The fair market value at the date of issue was $.0637.

The following table are our expenses to be incurred in connection with the offering described in this Registration Statement, all of which will be paid by us. The Selling Stockholder, however, will pay any other expenses incurred in selling the Securities, including any brokerage commissions or costs of sale. All of the amounts are estimated except for the SEC registration fee.

Our A&R Certificate of Incorporation, as may be further amended and restated and in effect from time to time, provides that our directors shall not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director.

Under the DGCL, our directors have a fiduciary duty to us that is not eliminated by this provision of our A&R Certificate of Incorporation and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available. This provision also does not affect our directors’ responsibilities under any other laws, such as federal securities laws or state or federal environmental laws.

Section 145 of the DGCL empowers a corporation to indemnify its directors and officers against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlements actually and reasonably incurred by them in connection with any action, suit, or proceeding brought by third parties by reason of the fact that they were or are directors or officers of the corporation, if they acted in good faith, in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe that their conduct was unlawful. The DGCL provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation’s bylaws, any agreement, a vote of stockholders or otherwise. Our A&R Certificate of Incorporation provides that, to the fullest extent permitted by Section 145 of the DGCL, we shall indemnify any person who is or was a director or officer of us, or is or was serving at our request as a director, officer, or trustee of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, against the expenses, liabilities, or other matters referred to in or covered by Section 145 of the DGCL.

Our A&R Bylaws provide that we will indemnify any person who was or is a party or threatened to be made a party to any proceeding by reason of the fact that such person is or was a director or officer of us or is or was serving at our request as a director, officer, or trustee of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise to the fullest extent permitted by the DGCL. In addition, we have entered into agreements with each of our directors and officers under which, among other things, we have agreed to indemnify the director or officer against expenses incurred in any proceeding, including any action by us, in which the director or officer was, is or is threatened to be made a party or a participant by reason of his or her status as a present or former director, officer, employee, or agent of us or, at our request, any other corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. At present, there is no pending litigation or proceeding involving any director or officer as to which indemnification will be required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

Section 145 of the DGCL also empowers a corporation to purchase insurance for its officers and directors for such liabilities. We maintain liability insurance for our officers and directors.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

On January 9, 2017, we issued 20,000,000 shares of our Common Stock to Nancy Holloway in connection with the partial conversion of a convertible note. Ms. Holloway converted approximately $200 of the note at a conversion price per share of $0.00001. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of our Common Stock issuable upon conversion did not involve any public offering). On August 12, 2017, Ms. Holloway returned these shares to us for cancellation and $200 was added back to the principal amount outstanding under the note.

On January 11, 2017, we issued 40,000,000 shares of our Common Stock for the partial conversion of a convertible note in the original principal amount of $73,468.20 held by Quantum Capital Group LLC (“Quantum”). Quantum converted approximately $400 in principal at a conversion price of $0.00001 per share. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of our Common Stock issuable upon conversion did not involve any public offering).

On January 27, 2017, we issued 1,000,000 shares of our Common Stock as payment to William Green for professional services. These shares had a fair market value at the date of issue of $0.0069 per share, which was the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock issued did not involve any public offering).

On April 12, 2017, we issued 50,000,000 shares of our Common Stock for the partial conversion of a convertible note in the original principal amount of $73,468.20 held by Quantum. Quantum converted approximately $500 in principal at a conversion price of $0.00001 per share. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock upon conversion did not involve any public offering). Quantum later returned these shares on June 21, 2017 and the shares were cancelled. The converted principal amount of $500 was added to the remaining principal balance of the convertible note.

On April 26, 2017, we issued 30,000,000 shares of our Common Stock in connection with the conversion of a convertible note in the original principal amount of $25,000 held by Joseph Thornburg. Mr. Thornburg converted the entire outstanding principal amount at a conversion price of $0.00083333 per share. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On July 5, 2017, we issued 5,000,000 shares of our Common Stock to Stockvest as payment for professional services. These shares had a fair market value at the date of issue of $0.0072 per share, which was based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On August 14, 2017, we issued 500,000 shares of our Common Stock to Azaliya Kaplunsky in connection with an independent contractor agreement between Ms. Kaplunsky and us, dated July 1, 2017. These shares had a fair market value of $0.014 at the date of issuance, which was the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On December 6, 2017, we issued 2,700,000 shares of our Series A Preferred Stock to Robert Clark pursuant to the Clark Employment Agreement. These shares had a fair market value of $0.01 per share at the date of issuance. We issued the shares of Series A Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Series A Preferred Stock did not involve any public offering).

On December 29, 2017, we issued 650,000 shares of our Series B Preferred Stock to Robert Clark pursuant to the Clark Employment Agreement. These shares had a fair market value of $0.06 at the date of issuance. We issued the shares of Series B Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Series B Preferred Stock did not involve any public offering).

We entered into a subscription agreement with Quantum on November 28, 2016 related to the purchase of 55,000 shares of our Series C Preferred Stock for a purchase price of $44,000, or a purchase price of approximately $0.80 per share. The shares of our Series C Preferred Stock were convertible into 55,000,000 shares of our Common Stock. On December 22, 2017, we issued the shares of our Series C Preferred Stock. We issued the shares of Series C Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Series C Preferred Stock did not involve any public offering).

On March 6, 2018, we issued 55,000,000 shares of our Common Stock upon the conversion of 55,000 shares of our Series C Preferred Stock to Quantum. The shares of our Common Stock on the date of issuance had a per-share fair market value of $0.016, which was based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of our Common Stock issuable upon conversion did not involve any public offering).

We issued 500,000 restricted shares of our Series D Preferred Stock to Robert Clark on January 24, 2018, as consideration for services rendered in fiscal 2017, which shares, at the date of issuance, had a fair market value of $0.0158 per share, which was based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of our Series D Preferred Stock were issued by us in a transaction not involving any public offering).

On April 30, 2017, we entered into a subscription agreement with Joseph Thornburg (the “Thornburg Subscription Agreement”) for the sale and issuance of 29,866,668 shares of our Common Stock for a subscription price of $75,000. As of the date of the Thornburg Subscription Agreement, we had previously issued 9,886,668 shares of our Common Stock, resulting in a balance of 20,000,000 shares of our Common Stock. On March 14, 2018, we issued the remaining 20,000,000 shares of our Common Stock. We offered and sold the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On October 1, 2015, we entered into a consulting agreement with Gone Green Inc. (“Gone Green”) for product development support and consulting services (the “Gone Green Agreement”). In connection with the Gone Green Agreement, on October 28, 2015, we issued 30,000,000 shares of our Common Stock, which shares had a per-share fair market value of $0.015 based on the closing price of our Common Stock on the issuance date as reported by the OTCM, or an aggregate fair market value of $450,000. On March 2, 2016, we issued an additional 40,000,000 shares of our Common Stock, which shares had a per-share fair market value of $0.025 based on the closing price of our Common Stock on the issuance date as reported by the OTCM, or an aggregate fair market value of $1 million. On May 16, 2016, we issued an additional 50,000,000 shares of our Common Stock, which shares had a per-share fair market value of $0.0036 based on the closing price of our Common Stock on the issuance date as reported by the OTCM, or an aggregate fair market value of $180,000. On July 6, 2016, we entered into a Termination of Consulting Agreement with Gone Green (the “Termination GG Agreement”) because the product development support and consulting services were never provided. Pursuant to the Termination GG Agreement, in April 2018, Gone Green returned to us the 120,000,000 shares of our Common Stock that we previously issued, and the shares were cancelled.

We entered into a subscription agreement on June 29, 2016 with Matthew Nicoletti for the purchase of 50,000 shares of our Series B Preferred Stock for a purchase price of $9,800. The shares of our Series B Preferred Stock were convertible into 50,000,000 shares of our Common Stock. On July 10, 2017, Mr. Nicoletti converted the shares of our Series B Preferred Stock into 50,000,000 shares of our Common Stock. Our Common Stock had a fair market value of $0.012 per share at the date of conversion based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock upon conversion of our Series B Preferred Stock did not involve any public offering).

On April 10, 2018, we entered into a subscription agreement with Matthew Nicoletti for the sale and issuance of 106,000 shares of our Series C Preferred Stock for a purchase price $106,000. We offered and sold the shares of our Series C Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Series C Preferred Stock did not involve any public offering).

Pursuant to the terms of a subscription agreement we entered into with Matthew Nicoletti in December 2017, we issued 110,000 shares of our Series C Preferred Stock for a purchase price of $111,926. The shares were issued on July 18, 2018. We offered and sold the shares of our Series C Preferred Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Series C Preferred Stock did not involve any public offering).

Pursuant to the terms of the Selinger Employment Agreement, we issued to Mr. Selinger 10,000,000 shares of our Common Stock, which shares had a per-share fair market value of $0.0136, based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

Pursuant to the terms of the Crystal Agreement, we issued 500,000 shares of our Common Stock to Matthew Crystal on September 7, 2018, as payment for his professional services to us, which shares, at the date of their issuance, had a per-share fair market value of $0.0136 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On November 16, 2018, Matthew Nicoletti converted 45,000 shares of our Series C Preferred Stock into 45,000,000 shares of our Common Stock. At the conversion date, the shares of our Common Stock had a per-share fair market value of $0.0939, which was based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On February 11, 2019, Matthew Nicoletti converted 55,000 shares of our Series C Preferred Stock into 55,000,000 shares of our Common Stock. At the conversion date, the shares of our Common Stock had a per-share fair market value of $0.0840, which was based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On April 17, 2019, we issued 52,000,000 shares of our Common Stock in connection with the conversion of 52,000 shares of our Series C Preferred Stock by Quantum. The shares of our Common Stock, at the date of conversion, had a fair market value of $0.076 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On March 18, 2019, we issued 58,000,000 shares of our Common Stock in connection with the conversion of 58,000 of shares of our Series C Preferred Stock by Quantum. The shares of our Common Stock at the date of conversion had a per-share fair market value of $0.0785 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

We issued 100,000 shares of our Common Stock to each of Jazmin Gonzalez and Michelle Motta on May 23, 2019, as an incentive bonus that, at the date of issuance, had a per-share fair market value of $0.131 based on the closing price of our Common Stock on the date of issuance as reported by the OTCM. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of the shares of our Common Stock did not involve any public offering). On November 7, 2019, the 100,000 shares that had been issued to Michelle Motta were forfeited to us and cancelled.

We entered into a sponsorship agreement with Ryan Dodd, a professional waterski jumper, on May 1, 2019 (the “Dodd Agreement”), and, in connection therewith, issued him 262,500 shares of our Common Stock on May 23, 2019 At the date of issuance, the shares of our Common Stock had a fair market value of $0.131 per share based on the closing price of our Common Stock on the date of issuance as reported by the OTCM. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of the shares of our Common Stock did not involve any public offering).

On June 13, 2019, we, through our wholly-owned subsidiary, HighDrate, entered into a Confidential Settlement Agreement (“the “Settlement Agreement”) with Tre Holdco Inc. (“Tre Holdco”). Pursuant to the Settlement Agreement, Tre Holdco assigned U.S. Trademark Reg. No. 5,351,770 for the mark “Highdrate” to us and, in exchange, we paid to Tre Holdco a cash payment in the amount of $22,500 and issued to Tre Holdco 500,000 shares of our Common Stock. The shares were issued on June 17, 2019 and, on such date, the per-share fair market value, based on the closing price of our Common Stock as reported by the OTCM, was $0.1185. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of the shares of our Common Stock did not involve any public offering).

On July 15, 2019, we issued 106,000,000 shares of our Common Stock in connection with the conversion of 106,000 shares of our Series C Preferred Stock by Quantum. The shares of our Common Stock had a per-share fair market value of $0.1081 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

Pursuant to the terms of the Outlaw Agreement, on July 30, 2019, we issued 10,000,000 shares of our Common Stock to our independent director, William Jeffrey Outlaw, as payment for his services in that capacity. At the date of issuance, the per-share fair market value was $0.111 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

We issued 5,000,000 shares of our Common Stock on January 27, 2020 to Lori Radcliffe pursuant to the Radcliffe Employment Agreement with us. At the date of issuance, the per-share fair market value of the shares was $0.0637 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

We issued 5,000,000 shares of our Common Stock on April 3, 2020 to Paul O’Renick pursuant to an Employment Agreement dated October 1, 2019. At the date of issuance, the per-share fair market value was $0.0315 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

We issued 85,000 shares of our Common Stock on April 3, 2020 to Ryan Dodd pursuant to the Dodd Agreement. At the date of issuance, the per-share fair market value was $0.0315 based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares of our Common Stock in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering).

On July 10, 2020, we issued 4,000,000 shares of our Common Stock upon the conversion of 4,000,000 shares of our Series A Preferred Stock to Robert Clark and Joseph Thornburg. The shares of our Common Stock on the date of issuance had a per-share fair market value of $0.0346, which was based on the closing price of our Common Stock as reported by the OTCM on the date of issuance. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of our Common Stock issuable upon conversion did not involve any public offering).

(1) To file, during any period in which offers or issuances are being made, a post-effective amendment to this registration statement:

(i) To include any Prospectus required by Section 10(a)(3) of the Securities Act;

(ii) To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each Prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or Prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or Prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or Prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act the information omitted from the form of Prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of Prospectus filed pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized in the City of Melbourne, State of Florida, on July 16, 2020.

Each of the undersigned hereby constitutes and appoints, Robert Clark and Lori Radcliffe, and each of them, his or her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post effective amendments) to this registration statement, or any related registration statement filed pursuant to Rule 462 under the Securities Act, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and desirable to be done in as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things that said attorneys-in-fact and agents or any of them, or their, his, or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Each of the undersigned has executed this power of attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated

Title of Class of Securities to be Registered	Amount to be Registered (1)		Proposed Maximum Offering Price Per Share (2)		Proposed Maximum Aggregate Offering Price (2)		Amount of Registration Fee

Common Stock, $0.00001 par value per share, issuable upon conversion of the Secured Convertible Debentures (3)		105,947,397	$	0.03	$	3,178,421.91	$	412.56
Common Stock, $0.00001 par value per share, issuable upon exercise of the Warrant (3)		20,000,000	$	0.03		600,000.00		77.88
Total		125,947,397	$	0.03	$	3,778,421.91	$	490.44

	●	the level of product and price competition;

	●	variations in the timing and volume of our sales;

	●	our ability to deliver products in a timely manner in sufficient volumes;

	●	our ability to recognize product trends;

	●	cash provided by operating activities;

	●	available cash and cash investments; and

	●	capital raised through debt and equity transactions.

	●	the number of shares of our Common Stock publicly owned and available for trading;

	●	industry trends and the business success of our competitors;

	●	actual or anticipated fluctuations in our quarterly financial and operating results and operating results that vary from the expectations of our management or of securities analysts and investors;

	●	our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future operating results;

	●	announcements of strategic developments, acquisitions, dispositions, financings, product developments, and other materials events by us or our competitors;

	●	regulatory and legislative developments related to our industry;

	●	litigation;

	●	general market conditions;

	●	other domestic macroeconomic factors unrelated to our performance;

	●	additions or departure of key personnel, including any major change in our Board of Directors (our “Board”) or management; and

	●	sales or expected sales of shares of our Common Stock by us, and our officers, directors, and significant stockholders.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

(1)	Represents the initial maximum number of shares offered by the selling stockholder named in this Registration Statement. Pursuant to Rule 416 of the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement also covers any additional shares of common stock, $0.00001 par value per share (our “Common Stock”), that may become issuable to prevent dilution resulting from stock splits, stock dividends, or similar transactions.
(2)	Estimated solely for purposes of calculating the amount of the registration fee in accordance with Rule 457(c) of the Securities Act and based on the average of the high and low prices per share of the registrant’s Common Stock as reported by the OTC Markets Group Inc.’s OTCQB^® Venture Market on July 13, 2020.
(3)	Represents the shares of Common Stock issuable upon conversion of the secured convertible debentures and upon exercise of the warrant, which were previously issued and granted, respectively, to the selling stockholder named herein in a private placement.

PROSPECTUS SUMMARY			1

RISK FACTORS			5

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			22

USE OF PROCEEDS			23

DETERMINATION OF OFFERING PRICE			23

SELLING STOCKHOLDER			23

PLAN OF DISTRIBUTION			24

DESCRIPTION OF SECURITIES			26

MARKET PRICE AND DIVIDEND INFORMATION			32

DESCRIPTION OF BUSINESS			33

MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS			42

DESCRIPTION OF PROPERTY			51

LEGAL PROCEEDINGS			51

MANAGEMENT			52

EXECUTIVE COMPENSATION			56

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			59

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE			63

LEGAL MATTERS			63

EXPERTS			63

WHERE YOU CAN FIND MORE INFORMATION			64

FINANCIAL STATEMENTS			F-1

	●	reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements, and registration statements;

	●	not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002; and

	●	reduced disclosure obligations for our annual and quarterly reports, proxy statements, and registration statements.

	●	We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

	●	We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.

	●	We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

	●	The rights conferred in our A&R Certificate of Incorporation are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees, and agents and to obtain insurance to indemnify such persons.

	●	We may not retroactively amend our A&R Certificate of Incorporation or indemnification agreement, if any, to reduce our indemnification obligations to directors, officers, employees, and agents.

Security	Authorized Securities		Issued and Outstanding Securities
Common Stock		2,500,000,000		778,052,603
Series B Preferred Stock		1,200,000		488,000
Series C Preferred Stock		250		140
Series D Preferred Stock		500,000		500,000

	2020 Price Range						2019 Price Range				2018 Price Range
	High			Low			High		Low		High		Low

First Quarter	$	0.0710		$	0.0260		$	0.0900	$	0.0780	$	0.0170	$	0.0155
Second Quarter	$	0.0257		$	0.0505		$	0.1110	$	0.1150	$	0.0120	$	0.0116
Third Quarter	$	0.0330	(1)	$	0.0365	(1)	$	0.0812	$	0.0760	$	0.0162	$	0.0130
Fourth Quarter	$	-		$	-		$	0.0475	$	0.0375	$	0.0940	$	0.0851

	Year Ended December 31,
	2018					2019
Revenue Source	Revenue		% Change			Revenue			% Change

Distributors	$	109,921		360	%	$	1,315,007			1096	%
Amazon		19,362		266	%		133,787			591	%
Online Sales		18,039		150	%		93,124			416	%
Gold Leaf Distribution		-		-			70,555			-
Shipping		6,680		176	%		70,339			953	%
Sales Returns and Allowances		-		-			(51,159	)		-
Net Revenues	$	154,002		297	%	$	1,631,653			960	%

	Year Ended December 31,
Revenues	2018			2019
Distributors and Resellers		71	%		81	%
Amazon		13	%		8	%
Online Sales		12	%		6	%
Gold Leaf Distribution		0	%		4	%
Shipping		4	%		4	%
Sales Returns, and Allowances		-			-3	%

	For the Three Months Ended March 31, 2020

Net cash used in operating activities	($	253,196	)
Net cash used in investing activities	($	21,618	)
Net cash provided by financing activities	$	257,120

	Total Amount Available		Interest Rate (per annum)			Balance as of March 31, 2020

Kona Gold Line of Credit #1 – Related Party	$	1,500,000		3.75	%	$	1,232,151
Kona Gold Line of Credit #2	$	400,000		3.75	%	$	398,470
Gold Leaf Line of Credit – Related Party	$	200,000		3.75	%	$	120,120

Name	Age	Position	Date First Elected or Appointed
Robert Clark	43	Chief Executive Officer, President, Chairman of our Board, and Secretary	August 12, 2015
Lori Radcliffe	47	Chief Financial Officer	October 7, 2019
Christopher Selinger	49	Vice President of Sales	September 1, 2018
William Jeffrey Outlaw	50	Independent Director	September 9, 2019
Matthew Crystal	49	Independent Director	July 26, 2018

Name and Principal Position	Fiscal Year	Salary ($)			Bonus ($)		Stock Awards ($)			Options Awards ($)		All Other Compensation ($)		Total ($)
Robert Clark, CEO, President, Chairman, and Secretary (1)	2019	$	350,000	(3)	$	-	$	-		$	-	$	-	$	350,000	(3)
	2018	$	350,000	(3)	$	-	$	-		$	-	$	-	$	350,000	(3)

Lori Radcliffe, CFO (2)	2019	$	18,222		$	-	$	-		$	-	$	-	$	18,222

Christopher Selinger, VP Sales (4)	2019	$	67,833		$	-	$			$	-	$	-	$	67,833
	2018	$	18,958		$	-	$	136,000	(5)	$	-	$	-	$	154,958

(1)	Robert Clark, our Chairman, is not included in this table as he was an employee and, thus, received no compensation for his services as a director. The compensation received by Mr. Clark as an employee is disclosed in the Summary Compensation Table above.
(2)	For valuation assumptions on stock awards, please refer to Note 2, Summary of Significant Accounting Policies, Subsection N, Stock based compensation to the Consolidated Financial Statements for the year ended December 31, 2019 included in this Prospectus. The disclosed amounts reflect the fair value of the stock awards that were earned during fiscal year ended December 31, 2019 and in accordance with FASB ASC Topic 718.
(3)	Appointed Independent Director on July 24, 2018.
(4)	Appointed Independent Director on July 30, 2019.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)			Percent Owned			Amount and Nature of Beneficial Ownership After Completion of the Offering (1)			Percent Owned After Completion of the Offering
Robert Clark, CEO		687,750,000	(2)		47.47	%		687,750,000			43.70	%

Lori Radcliffe, CFO		5,000,000			*			5,000,000			*

Christopher Selinger, VP of Sales		10,000,000			1.29	%		10,000,000			1.11	%

William Jeffrey Outlaw, Independent Director		10,000,000			1.29	%		10,000,000			1.11	%

Matthew Crystal, Independent Director		500,000			*			500,000			*

All executive officers and directors as a group (5 persons)		713,250,000	(3)		49.23	%		713,250,000	(3)		45.32	%

YAII PN, Ltd. (4)		125,947,397	(5)		13.93	%		0			*

(2)	Includes 17,100,000 shares of our Common Stock held. Also includes: (i) 650,000 shares of our Common Stock issuable upon conversion of 650,000 shares of our Series B Preferred Stock that are accrued, but not currently issued to Mr. Clark, (ii) 140 shares of our Common Stock issuable upon conversion of 140 shares of our Series C Preferred Stock; (iii) 500,000,000 shares of our Common Stock issuable upon conversion of 500,000 shares of Series D Preferred Stock; and (iv) 169,999,860 shares of our Common Stock that are accrued and owing to Mr. Clark but which shares are not currently issued and outstanding. The 650,000 shares of Series B Preferred Stock (convertible into 650,000 shares of our Common Stock) and the 169,999,860 shares of our Common Stock were previously issued to Mr. Clark; however, he returned them to us with the understanding that the shares would be re-issued to Mr. Clark in the future; thus, the shares of our Common Stock could be issued to Mr. Clark within 60 days of the date of this Prospectus.

(3)	Includes all of the shares beneficially owned by our executive officers and directors.

(4)	YAII PN, Ltd. is a Cayman Island exempt company. YAII PN, Ltd. Is managed by Yorkville Advisors Global, LP. Investment decisions for Yorkville Advisors Global, LP are made by Mark Angelo, its portfolio manager. The address of such holder is 1012 Springfield Avenue, Mountainside, NJ 07092

(5)	Includes the Conversion Shares and Warrant Shares. Notwithstanding the number of shares of Common Stock and the percentage ownership thereof disclosed in this table, the Debentures and the Warrant are each subject to a “conversion blocker” and an “exercise blocker,” respectively, such that YAII PN, Ltd. cannot (i) convert any portion of the Debentures into Conversion Shares and (ii) exercise any portion of the Warrant into “Warrant Shares,” if such action would result in YAII PN, Ltd. and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversion or exercise, as applicable.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percentage Beneficially Owned
Robert Clark, CEO		650,000 (1)		57.1	%

Lori Radcliffe, CFO		-		-

Christopher Selinger, VP of Sales		-		-

William Jeffrey Outlaw, Independent Director		-		-

Matthew Crystal, Independent Director		-		-

All executive officers and directors as a group (5 persons)		650,000		57.1	%

Beneficial owner of more than 5%

Steven Bauer (2)		66,000		13.5	%

Blake Bolin (3)		25,000		5.1	%

Roger A. Eagan Jr. (4)		80,000		16.4	%

Terry L. Landers (5)		150,000		30.7	%

Judith A. Wilt (6)		150,000		30.7	%

(1)	These shares of Series B Preferred Stock were previously issued to Mr. Clark. However, Mr. Clark returned them to us with the understanding that the shares would be re-issued to him in the future; thus, the shares of Series B Preferred Stock may be issued to Mr. Clark within 60 days of the date of this Prospectus.
(2)	Mr. Bauer’s address is 7837 Penswood Street, Charlotte, North Carolina 28277.
(3)	Mr. Bolin’s address is 1971 NE 7th Street, Ocala, Florida 34470.
(4)	Mr. Eagan’s address is 7837 Pemswood Street, Charlotte, North Carolina 28277.
(5)	Mr. Landers’ address is 390 North Wickham Road, Suite F, Melbourne, Florida 32935.
(6)	Ms. Wilt’s address is 390 North Wickham Road, Suite F, Melbourne, Florida 32935.

Note (1)	Issuance Date	Original Borrowing Amount		Interest Rate			Maturity Date	Largest Outstanding Balance since January 1, 2018		Outstanding Balance as of March 31, 2020
Long-term Loan – Kona Gold	October 31, 2018	$	20,000		0	%	April 4, 2021	$	20,000	$	13,000
Line of Credit – Kona Gold	April 4, 2019	$	1,500,000		3.75	%	April 4, 2021	$	1,232,151	$	1,232,151
Line of Credit – Gold Leaf	August 29, 2019	$	200,000		3.75	%	August 29, 2021	$	120,120	$	120,120
Long-term Loan – Gold Leaf	February 19, 2019	$	70,000		0	%	March 15, 2021	$	70,000	$	64,000

Consolidated Financial Statements of Kona Gold Solutions, Inc.
Unaudited Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	F-2
Unaudited Consolidated Statements of Income for the three months ended March 31, 2020 and 2019	F-3
Unaudited Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2020	F-4
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	F-5
Notes to the Consolidated Financial Statements	F-6

Report of Independent Registered Public Accounting Firm	F-21
Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018	F-22
Consolidated Statements of Income for the years ended December 31, 2019 and 2018	F-23
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2019 and 2018	F-24
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018	F-25
Notes to the Consolidated Financial Statements	F-26

	March 31,			December 31,
ASSETS	2020			2019
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	18,529		$	71,233
Accounts receivable, net of allowance for doubtful accounts of $5,019 and $0, respectively		58,057			91,968
Other receivables		14,876			-
Inventory		783,530			203,676
Prepaids		-			8,531
Other current assets		5,186			14,746
Total current assets		880,178			390,154
NON-CURRENT ASSETS
Property, plant and equipment, net		154,306			69,369
Right-of-use asset, net		321,147			-
Intangible property, net		75,619			-
Deposit		6,500			-
Total non-current assets		557,572			69,369
Total assets	$	1,437,750		$	459,523

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	113,708		$	6,893
Credit card payables		12,681			7,144
Current note payable - related party		12,000			12,000
Current lease liability		71,946			-
Accrued stock compensation		1,386,500			1,200,000
Accrued liabilities		20,898			6,064
Total current liabilities		1,617,733			1,232,101
NON-CURRENT LIABILITIES
Line of credit		398,470			398,470
Line of credit - related party		1,352,271			42,151
Note payable - related party, net of current		65,000			66,500
Lease liability, net of current		268,688			-
Total liabilities		3,702,162			1,739,222

COMMITMENTS AND CONTINGENCIES (NOTE 13)

STOCKHOLDERS' DEFICIT
Preferred Stock Series A, $.00001 par value, 5,000,000 shares authorized, 4,000,000 issued, and outstanding, respectively		40			40
Preferred Stock Series B, $.00001 par value, 1,200,000 shares authorized, 488,000 and 1,138,000 issued and outstanding, respectively		5			5
Preferred Stock Series C, $.00001 par value, 3,300,000 shares authorized, 0 and 271,000 issued, and outstanding, respectively		-			8
Preferred Stock Series D, $.00001 par value, 500,000 shares authorized, 500,000 issued, and outstanding, respectively		5			5
Common Stock, $.00001 par value, 900,000,000 authorized, 763,967,603 and 541,965,449 issued, and outstanding, respectively		7,690			6,600
Additional paid-in capital		4,474,225			3,436,569
Accumulated deficit		(6,746,377	)		(4,722,926	)
Total stockholders' deficit		(2,264,412	)		(1,279,699	)
Total liabilities and stockholders' deficit	$	1,437,750		$	459,523

	2020			2019

REVENUES, NET OF SALES, RETURNS, AND ALLOWANCES	$	209,140		$	271,840
COST OF REVENUES		151,861			204,164
Gross profit		57,279			67,676

OPERATING EXPENSES
Selling, general and administrative expenses		645,408			418,455
Income (Loss) from operations		(588,129	)		(350,779	)
Other income / (expense)
Interest expense		(3,807	)		(3,727	)
Net Income (Loss)	$	(591,936	)	$	(1,029,105	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic and diluted		752,369,148			526,590,449

NET LOSS PER COMMON SHARES:
Basic and diluted	$	(0.00	)	$	(0.00	)

	Common Stock $.00001 Par						Preferred Stock $.00001 Par						Additional Paid			Accumulated			Total Stockholders'
	Shares			Amount			Shares			Amount			in Capital			Deficit			Deficit

Balance December 31, 2016		452,965,449		$	4,529.65			1,788,000		$	18		$	4,327,685		$	(4,585,044	)	$	(252,811	)
Shares of Stock Cancelled		(70,000,000	)		(700	)								(495,300	)					(496,000	)
Common Stock Issued in Exchange for Services		6,500,000			65									49,835						49,900
Common Stock Issued for Loan Payments (Includes Loss on Conversion)		110,000,000			1,100									606,900						608,000
Common Stock Issued for Stock Agreements		30,000,000			300									24,700						25,000
Preferred Stock Issued for Compensation								3,350,000			34			62,087						62,120
Preferred Stock Issued for Stock Agreements								105,000			1			43,999						44,000
Preferred Stock Conversion to Common Shares		50,000,000			500			(50,000	)		(1	)		599,500						600,000
Capital Contributions														41,849						41,849
Dividends Paid																				-
Net Income (loss)																	(1,055,133	)		(1,055,133	)
Balance December 31, 2017		579,465,449		$	5,795			5,193,000		$	52		$	5,261,255		$	(5,640,177	)	$	(373,076	)
Shares of Stock Cancelled		(48,000,000	)		(480	)								(1,024,520	)					(1,025,000	)
Common Stock Issued in Exchange for Services		500,000			5									6,795						6,800
Common Stock Issued for Stock Agreements		20,000,000			200									99,800						100,000
Preferred Stock Conversion to Common Shares		100,000,000			1,000			(100,000	)		(1.00	)		(999	)					-
Common Stock Issued for Compensation		10,000,000			100									135,900						136,000
Preferred Stock Issued for Compensation								500,000			5.00			7,895						7,900
Preferred Stock Issued for Stock Agreements								316,000			3.16			303,423						303,426
Changes in Correction of Prior Period Errors		(120,000,000	)		(1,200	)								(1,628,800	)		1,630,000			-
Net Income (loss)																	(358,243	)		(358,243	)
Balance December 31, 2018		541,965,449		$	5,420			5,909,000		$	59		$	3,160,748		$	(4,368,420	)	$	(1,202,193	)
Preferred Stock Conversion to Common Shares		113,000,000			1,130			(113,000	)		(1.13	)		(1,129	)					0
Common Stock Issued for Compensation		5,000,000			50									276,950						277,000
Net Income (loss)																	(1,029,105	)		(1,029,105	)
Balance March 31, 2019		659,965,449		$	6,600			5,796,000		$	58		$	3,436,570		$	(5,397,525	)	$	(1,954,297	)
Shares of Stock Cancelled		(64,860,346	)		(649	)		(650,000	)		(6.50	)		(185,846	)					(186,501	)
Common Stock Issued in Exchange for Services		10,000,000			100									799,900						800,000
Common Stock Issued in Exchange for Trademark		500,000			5									59,245						59,250
Common Stock Issued for Sponsorship Agreements		262,500			3									34,385						34,388
Preferred Stock Conversion to Common Shares		271,000,000			2,710			(271,000	)		(2.71	)		(2,707	)					0
Common Stock Issued for Compensation		5,100,000			51									290,049						290,100
Net Income (loss)																	(1,786,021	)		(1,786,021	)
Balance December 31, 2019		763,967,603		$	7,640			4,988,000		$	50		$	4,155,775		$	(6,154,441	)	$	(1,990,976	)
Common Stock Issued for Compensation		5,000,000			50									318,450						318,500
Net Income (loss)																	(591,936	)		(591,936	)
Balance March 31, 2020		768,967,603		$	7,690			4,988,000		$	50		$	4,474,225		$	(6,746,377	)	$	(2,264,412	)

	2020			2019
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income	$	(591,936	)	$	(354,506	)
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and Amortization		28,918			2,001
Common Stock Issued for Compensation		318,500			277,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		(27,690	)		(57,514	)
Decrease (increase) in other receivable		-			-
Decrease (increase) in inventory		(96,608	)		(136,159	)
Decrease (increase) in prepaids		-			27,603
Decrease (increase) in intercompany transactions		-			100
Decrease (increase) in other current assets		(1,723	)		(12,384	)
Increase (decrease) in accounts payable		122,977			(9,014	)
Increase (decrease) in credit card payable		7,317			5,906
Increase (decrease) in accrued expenses		3,586			4,013
Increase (decrease) in lease liability		(16,537	)		-
Net cash provided by (used in) operating activities		(253,196	)		(252,954	)

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(21,618	)		(39,422	)
Net cash provided by (used in) investing activities		(21,618	)		(39,422	)

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Changes in note payable - related party		(3,000	)		58,500
Changes in line of credit - related party		260,120			42,151
Changes line of credit		-			255,000
Net cash provided by (used in) financing activities		257,120			355,651
Net cash increase for period		(17,694	)		63,275
Cash at beginning of period		36,223			7,958
Cash at end of period	$	18,529		$	71,233

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares of Common Stock Returned		-			-
	$	-		$	-

	Estimated useful lives (in years)
Furniture and fixtures	7
Machinery and equipment	7
Vehicles	5
Computer equipment	5 - 7

	2020		2019
CBD Energy Water	$	234,864	$	14,193
Hemp Energy Drink		411,030		182,797
Storm CBD Water		35,767		-
Merchandise and Apparel		12,977		6,686
Unfilled Cans		22,371		-
Other Inventory		66,521		-
Total Inventory	$	783,530	$	203,676

	2020			2019
Trademark	$	81,750		$	-
Less: Accumulated Amortization		(6,131	)		-
	$	75,619		$	-

2020	$	6,131
2021		8,175
2022		8,175
2023		8,175
2024		8,175
Thereafter		36,788
	$	75,619

	2020		2019
Employee stock awards	$	318,500		277,000
Non-employee stock awards
	$	318,500	$	277,000

	2020			2019
Right-of-use asset	$	358,527		$	-
Amortization of right-of-use asset		(37,380	)		-
Right-of-use asset, net	$	321,147		$	-

Operating lease liability
Current portion of long-term lease		71,946		$	-
Long-term lease		268,688			-
Total operating lease liability	$	340,634		$	-